Empire Resources Limited Annual Report 2011

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FY2011 Annual Report · Empire Resources Limited

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EMPIRE RESOURCES LIMITED AND CONTROL L ED ENT IT Y ABN 32 092 471 513

FOR THE YEAR ENDED 30 JUNE 20 1 1

Empire Resources Limited is a Perth
based copper and gold focused explorer
with deposits in Western Australia.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 1

ANNUAL REPORT
TABL E OF CONTENTS

PAGE
1. Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC
2. Highlights of 2010-2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Corporate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8. Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9. Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10. Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11. Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12. Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
13. Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14. Auditor’s Independence Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
15. Corporate Governance Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
16. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

1. COR POR ATE DIRECTOR Y

DIRECTORS
Tom Revy BAppSc – Chairman
David Sargeant BSc – Managing Director
Adrian Jessup BSc(Hons) – Executive Director

MANAGEMENT
David Ross BSc(Hons) MSc –
Exploration Manager

COMPANY SECRETARY
Simon Storm BCom, BCompt(Hons), CA, FCIS

REGISTERED and PRINCIPAL OFFICE
53 Canning Highway
Victoria Park 6100
Western Australia
Phone +61 (0)8 9361 3100
Facsimile +61 (0)8 9361 3184
Email info@resourcesempire.com.au
Website www.resourcesempire.com.au
ABN 32 092 471 513

SHARE REGISTRY
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross 6153
Western Australia

AUDITOR
HLB Mann Judd
Level 4
130 Stirling Street
Perth 6000
Western Australia

STOCK EXCHANGE LISTING
The Company is listed on the
Australian Stock Exchange Limited.
Home Exchange Perth
ASX Code: Shares ERL

Page IFC

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

HIGHLIGHTS OF 2010-2011:

> Company trebles land holding at the Yuinmery copper–gold project

to 227km2 gaining numerous new drill targets

> Excellent copper grades intersected at the A Zone prospect,

Yuinmery: 5m @ 2.6% Cu, 0.44g/t Au

> Flotation testwork on the Just Desserts, Yuinmery mineralization

gives >95% recovery for copper and >85% for gold

> 110m wide zone of platinum group metal mineralization

discovered at the Constantine prospect, Yuinmery

> Company enters into a $2 million cash + royalty sale agreement

for the Penny’s Find gold project

> Farm out of Troy Creek copper project completed

> Government co-funding of $125,000 awarded to the Company for

drilling at its Yuinmery and Wynne projects.

SUBS EQUE NT TO 30 J UNE 2011

> Further high grade copper intersections at the A Zone prospect,

Yuinmery confirm it is a major mineralized system: 5m @ 4.4% Cu
within 19m @ 1.85% Cu and 4m @ 4.7% Cu within 7m @ 3.2% Cu

> High grade zinc mineralization intersected for the first time at
Yuinmery. Drilling at A Zone intersects 3m @ 8.2% Zn within
8m @ 4.0% Zn

> Drilling beneath the Smith Well gossan at Yuinmery intersects

8m @ 1.4% Cu, 0.2g/t Au

> Drilling reinforces the view Yuinmery could be a major VMS

system with strong similarities to Golden Grove

> Prospecting has extended the outcropping strike length of base

metal gossans at the Wynne project to seven kilometres

COR PORA TE OBJECT IVES

The Company’s long term
objective is to become a successful
mining house by participation in
the discovery and development of
one or more world-class mineral
deposits.

The short term objective is to
enhance value and obtain a cash
flow from the Company’s existing
tenements in Australia which have
potential for copper, gold and
PGM deposits. This value may be
realized by delineating reserves and
commencing mining operations,
entering into significant farm-
out or royalty arrangements or
acquiring new opportunities to
provide an early cash flow.

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 1

4. CHAIR MAN’S R EPO RT

Dear Shareholders

We certainly live in interesting times.

Markets are never simple to predict even at the best of times other than to say good times follow bad times and bad
times follow good. It is difficult to ignore the European sovereign debt issues and the US fiscal gridlock situation, and
the impact they have had on global equity and debt markets over the last 12 months.

The fundamentals, however, are often overlooked during these times. Emerging markets have rapidly become the key
driver of global commodity demand since the emerging markets’ crisis of the late nineties. According to recent research
by Morgan Stanley Smith Barney, emerging markets drive commodity markets, representing 70% of current base metals
demand and all growth, despite the fall in their equity markets. This demand reflects positively on both current and
long term commodity prices and especially on base metals.

Empire’s focus on becoming a base metal producer remains strong and, in the last 12 months, the Company has
successfully tested and drilled existing and newly identified areas at its Yuinmery project. The option to acquire the La
Mancha ground adjoining Empire’s tenements during the year provides Empire shareholders with a major land position
in the highly prospective base metal rich Youanmi greenstone belt. Geophysical, drilling and preliminary metallurgical
activities undertaken during the year at both A Zone and Just Desserts, add to our belief that the Company is well
positioned to rapidly grow its current resource base and potentially reach its objective of near term cash flow. Many of
the project targets remain open both laterally and at depth, and drilling is likely to focus on these areas over the next 12
months.

On other activities, Empire has continued with exploration programs and strategies to identify medium to long term
growth for shareholders. During the year, the Company secured a $7 million strategic exploration joint venture
agreement on its Troy Creek Project which, together with the Penny’s Find deal with Brimstone Resources, provides
shareholders further exposure to advanced copper and gold assets.

The Wynne and Constantine projects remain part of the Company’s future growth targets. Through the ‘Western
Australian Government’s Exploration Incentive Scheme’ Empire was successful in applying for a total of $125,000 in
funding grants for these two projects. Securing this funding supports management’s view of the highly prospective
nature of both the Wynne copper and Constantine nickel/PGM projects.

The significant outcomes achieved this year are a direct result of the commitment and efforts demonstrated by our staff
and contractors who, on behalf of all shareholders, I would like to thank. I trust that as we make the transition from
explorer to developer, all stakeholders will continue to show the same support during what should be exciting times
ahead.

Thomas Revy
Chairman

REGISTERED and PRINCIPAL OFFICE
53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street)
Phone +618 9361 3100 Fax +618 9361 3184

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

REVIEW OF OP ERATIONS

Empire Resources Ltd is a copper and gold focused
exploration company.

Since listing in February 2007, the Company has made
three significant copper and/or gold discoveries in Western
Australia and announced JORC compliant resources for
two of these discoveries.

At the Penny’s Find project near Kalgoorlie in 2007, the
Company located a near surface high grade gold deposit
which has a JORC compliant resource estimated at 314,000
tonnes @ 5.2g/t Au. It is likely further drilling at depth
would upgrade this resource.

Following exploration success during 2007 and 2008, the
Company announced a copper–gold resource for the Just
Desserts prospect at the Yuinmery project, 80km southwest
of Sandstone, WA. This initial resource has been estimated
at 1,070,000 tonnes @ 1.8% Cu and 0.8g/t Au at a 1% Cu
cutoff. Continued drilling will likely upgrade this resource
and locate additional resources at other nearby prospects
such as A Zone.

In the latter part of 2008 a discovery of high grade copper
sulphide mineralization was made at the large Troy Creek
project, 180km northeast of Wiluna in Western Australia.
Drill intersections to date at the Main Gossan prospect have
consisted of 36m @ 0.8% Cu which included 2m @ 4.7% Cu
and 3m @ 2.0% Cu; 8m @ 1.5% Cu and 4m @ 3.0% Cu.

The Wynne base metal project is located 260km northeast
of Carnarvon in Western Australia. Surface sampling has
identified highly anomalous base metal gossans outcropping
over a 7km strike length which represent immediate drill
targets.

Empire Resources Ltd has a 28% interest in FYI Resources
Ltd, who owns the large Yarlarweelor uranium project
125km north of Meekatharra, WA which shows potential
to host large tonnages of primary uranium mineralization.
To date limited drilling within a 5km long zone of
anomalous uranium radioactivity has returned up to 35m @
503ppm U3O8 including 5m @ 1,069ppm U3O8, 8m @ 708ppm
U3O8 and 7.8m @ 588ppm U3O8.

Figure 1. Project location map

REGISTERED and PRINCIPAL OFFICE

53 Canning Highway, Victoria Park WA 6100 (cnr Taylor Street)

Phone +618 9361 3100 Fax +618 9361 3184

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 3

Yuinmery (WA):
Copper-Gold – Zinc – PGM Project
(100% interest and option to earn over 82% interest
on adjoining tenements)

The Yuinmery copper-gold project is situated 475km
northeast of Perth, WA. It lies within the Archaean
Youanmi greenstone belt and covers a synclinal
sequence of chloritised felsic tuffaceous rocks with
interbedded sulphide bearing chert horizons. Copper-
gold mineralization, previously identified from a
number of prospects at Yuinmery, is of volcanogenic
massive sulphide (VMS) style similar in nature to
orebodies currently being mined at Golden Grove
and Jaguar in Western Australia. It occurs as massive
sulphides associated with chert exhalite horizons, as
matrix sulphides in lapilli tuff, and associated with
mafic and ultramafic intrusions.

At one of the Yuinmery prospects, Just Desserts,
drilling during 2007-2008 intersected high grade
copper–gold zones with assays such as 23m @ 2.7% Cu,
1.3g/t Au; 14m @ 2.6% Cu, 1.9g/t Au; 13m @ 2.6% Cu,

1.7g/t Au; 6m @ 3.8% Cu, 12.9g/t Au and 10m @ 4.2%

Cu, and 6.0g/t Au.

Based on the above drilling an indicated + inferred
JORC resource of 1,070,000 tonnes @ 1.8% Cu,
0.8g/t Au was estimated for the Just Desserts prospect
and reported on in the March 2009 Quarterly. This
resource lies between 50 and 250 metres below surface
and is open at depth. Elsewhere in the world deposits
of this style of mineralization commonly occur in
clusters and have been mined to great depths.

In September 2010 the Company announced it had
entered into an option agreement with La Mancha
Resources Ltd to purchase an interest in its tenements
surrounding the Just Desserts resource (see Figure
3). This agreement trebled the Company’s tenement
holding to 227km2 and positions it as a major land
holder in the base metal rich but underexplored
Youanmi Greenstone Belt. An airborne EM survey
completed by La Mancha over their tenements
identified numerous untested conductive zones
considered by Empire to be prospective for base metal
sulphide mineralization (see Figure 5).

During the past year the Company has undertaken
RAB, RC and diamond drilling programs, surface and
downhole electromagnetic (EM) surveys and Induced
Polarisation (IP) surveys at Yuinmery testing fourteen
different prospects on both Empire’s and La Mancha’s
tenements. Twenty one holes totalling 4,208m of RC
drilling, three holes, 774m of diamond drilling and 151
holes, 6,771m of RAB drilling were completed during
the year.

A ZONE

RC drilling at A Zone, located 1.3km north of Just
Desserts, has intersected significant copper–gold and
zinc mineralization reinforcing the view Yuinmery
hosts a major VMS system. Just prior to the end of
year, drilling intersected 5m @ 2.6% Cu, 0.4g/t Au, and
subsequently, 5m @ 4.4% Cu, 0.4g/t Au within 19m @
1.9% Cu, 0.3g/t Au; 4m @ 4.7% Cu, 0.5g/t Au within 7m
@ 3.2% Cu, 0.3g/t Au and 3m @ 8.2% Zn within 8m @
4.0% Zn.

The copper–gold and zinc mineralization at A Zone
occurs in two horizons which dip eastwards and
plunge to the north (see Figure 7). Ongoing RC and
diamond drilling is planned to expand on the known
mineralization and enable calculation of an initial
resource.

JUST DESSERTS

Diamond drilling at Just Desserts confirmed the
mineralization continues at depth with intersections
of 2m @ 1.8% Cu, 0.3g/t Au, 4g/t Ag and 0.2m @ 5.2%
Cu, 15g/t Au, 50g/t Ag at a vertical depth of 300m.
These intersections are thought to have intersected
the top edge of the south-easterly plunging copper-
gold mineralization (see Figure 6). Further drilling
is planned down plunge from the currently defined
resource and also within the resource itself to upgrade
inferred resources to indicated.

Initial metallurgical testwork on the Just Desserts
copper–gold resource produced positive results with
flotation tests on the mineralization giving >95%
recovery for copper and >85% for gold.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

CONSTANTINE

OTHER PROSPECTS

At the Constantine prospect RC and RAB drilling
intersected large widths of low grade platinum –
palladium and nickel mineralization in mafic rocks,
assaying up to 80m @ 0.49g/t Pt+Pd and 0.22% Ni. The
mineralization, which ocurs in two zones up to 110m
in combined width, is associated with a prominent
magnetic horizon traceable under cover for at least
13km along strike. This magnetic horizon forms part
of a major layered mafic – ultramafic intusive complex
in the Youanmi Greenstone Belt.

Preliminary metallurgical testwork confirmed a high
percentage of the PGMs at Constantine are hosted
in sulphide minerals which are amenable to simple
flotation separation.

Surface prospecting 3.5km south of Constantine
on the same magnetic horizon located further
samples over a 500m strike length containing
highly anomalous platinum, palladium, nickel and
copper values. The Company applied for and was
successful in receiving funding of $50,000 under the
Western Australian Government’s Incentive Scheme
Co-Funded Drilling Program to drill one diamond
hole in this area in the coming year.
RAB drilling on lines 0.5 to 1km apart along 4km
strike length of the magnetic horizon has confirmed it
is continuously mineralized with low grade PGMs, the
richest sections being the area mentioned above and
Constantine.

RC drilling of a strong EM anomaly at the YC14
prospect located just south of C Zone, intersected 7m
of massive pyrite mineralization which assayed 5m @
0.5% Cu, 1.0g/t Au.

Subsequent to year end, RC drilling beneath the
Smith Well gossan also intersected 8m @ 1.4% Cu,
0.2g/t Au. Follow up drilling is planned for both these
prospects.

RC and/or diamond drilling at the B Zone, Trajan,
Augustus, YC3, 4, 5 and 11 prospects intersected
zones of weak copper and/or zinc mineralization
associated with chloritised pyritic tuffs and
volcanogenic sediments. Subsequent downhole EM
surveys located strong off hole conductors at the
Augustus, YC4, YC5 and YC11 prospects which will
be investigated in the coming year.

RC drilling of the YC 6 and 12 prospects did not
intersect anything to explain the surface EM anomalies
while RAB drilling at the Nine Mile Well prospect,
located 6km southeast of Just Desserts, likewise did
not locate any significant base or precious metal
values.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 5

Figure 2.

Figure 3.

Figure 4.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Figure 5.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 7

Figure 6.

Figure 7.

Figure 8.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Penny’s Find (WA):
Gold Project – 60% interest

The Penny’s Find project, situated in the Eastern
Goldfields of Western Australia, lies 50km northeast
of Kalgoorlie and 30km from the Kanowna Belle
Gold Mine. Within mining lease M27/156, gold
mineralization is associated with quartz veining
developed at or near a sheared contact between basalt
and sediments.

The Company has previously outlined a gold resource
at Penny’s Find of 314,000 tonnes @ 5.18g/t Au
down to a vertical depth of 150m below surface.
The mineral resource estimate is summarized in the
following table:

PENNY’S FIND MINERAL RESOURCE

Category

Tonnes Grade* Grade* Grade*

Cu%

Au g/t

Ag g/t

1%Cu cutoff

Indicated

104,000 1.65

Inferred

966,000 1.84

TOTAL

1,070,000 1.82

1.5%Cu cutoff Indicated

46,000 2.11

Inferred

536,000 2.34

TOTAL

582,000 2.33

0.86

0.77

0.78

1.14

0.92

0.93

1.32

2.12

2.06

1.58

2.68

2.61

*High assays have been cut to 9%Cu, 20g/tAu and 10g/tAg.

Resource modelling consultants Datageo calculated a
JORC compliant in situ resource estimate, utilising all
drill hole information available on Prospecting Licence
P57/1215 up to the end of June 2008.

The resource grade was estimated using ordinary
kriging based on the drill hole data composited
down hole to 1m intervals within constraining shapes
representing the mineralization. Assumed specific
gravity values used were: transitional 2.7t/m3; fresh
3.2t/m3.

Competent Persons Statement

The information is this report concerning the Mineral Resources
for the Penny’s Find Deposit and the Just Desserts Deposit at
Yuinmery have been estimated by Mr Peter Ball B.Sc who is a
director of DataGeo Geological Consultants and is a member of
the Australasian Institute of Mining and Metallurgy (AusIMM).
Mr Ball has sufficient experience which is relevant to the styles of
mineralization and types of deposit under consideration and qualifies
as a Competent Person as defined in the 2004 Edition of the
“Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves”. Mr Ball consents to the inclusion in
the public release of the matters based on his information in the form
and context in which it appears.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

E MPIRE RESOURCES LIMITED A ND CONT ROLL ED ENT IT Y ABN 32 092 471 513

FOR THE YEAR ENDED 3 0 JUNE 201 1

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 17

FINANCIAL STATEMENTS

Empire Resources Limited
Directors' Report

Directors’ Report

Your directors submit their report on Empire Resources Limited and its controlled entity for the financial year ended 30
June 2011.

DIRECTORS

The company’s directors in office during the financial period and until the date of this report are as follows. Directors
were in office for the entire period unless otherwise stated.

Tom Revy - Chairman (Non-Executive) – BAppSc. Grad Dip Bus.

Mr Revy is a mining professional with in excess of 28 years experience in the mining industry to date including
operations, process design and commissioning, technical and general management, business development, project
and company evaluation and corporate management. Countries where extensive work has been undertaken include
Australia, PNG, Southern and Central Africa, Central and South America and China.

David Sargeant - Managing Director - BSc. MAusIMM

Mr Sargeant – who holds a Bachelor of Science degree in economic geology from the University of Sydney – has
more than 40 years experience as a geologist, consultant and company director. As such, he has been involved in
numerous mineral exploration, ore deposit evaluation and mining development projects and is a member of AusIMM
and the Geological Society of Australia.

During his career, Mr Sargeant has held a range of senior positions, including that of senior geologist with Newmont
Pty Ltd and senior supervisory geologist with Esso Australia Ltd at the time of the Harbour Lights Gold Mine discovery
and development. Further, Mr Sargeant was the first chief geologist at Telfer Gold Mine during exploration,
development and production at that project. In addition, he was exploration manager for the Adelaide Petroleum NL
group of companies, manager of resources development for Sabminco NL and a technical director of Western Reefs
Limited during the period in which that company became a successful producer at the Dalgaranga Gold Project.

Mr Sargeant has been a director of the following listed companies during the past three years.

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Adrian Jessup - Executive Director - BSc. MAusIMM

Mr Jessup also holds a Bachelor of Science degree (with honours) in economic geology from the University of Sydney
and has more than 40 years continuous experience as a geologist, company director and consultant involved in
mineral exploration, ore deposit evaluation and mining. He is a member of AusIMM, the Geological Society of
Australia and the Australian Institute of Geoscientists.

For the last 16 years, Mr Jessup has operated a geological consulting company. During that time, he was a founding
director of Sylvania Resources Limited and remained on the board for two years. Prior to that, Mr Jessup was
managing director of Giralia Resources NL for eight years, from the company's inception in 1987. Previously, he had
worked for AMAX Exploration Inc., as a senior geologist and as regional manager in charge of that company's mineral
exploration in Western Australia.

Mr Jessup has been a director of the following listed companies during the past three years.

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MANAGEMENT
Simon Storm - Company Secretary – BCom. BCompt(Hons). CA, FCIS

Mr Storm is a Chartered Accountant with over 27 years of Australian and international experience in the accounting
profession and commerce. He commenced his career with Deloitte Haskins & Sells in Africa then London before
joining Price Waterhouse in Perth.

He has held various senior finance and/or company secretarial roles with listed and unlisted entities in the banking,
resources, construction, telecommunications and property development industries. In the last 9 years he has provided

Page 18

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited
Directors' Report

consulting services covering accounting, financial and company secretarial matters to various companies in these
sectors.

David Ross – Exploration Manager – BSc(Hons). MSc. MAusIMM

Mr Ross holds a Bachelor of Science degree (with honours) in geology from Aberdeen University, Scotland and a
Master of Science degree in economic geology from McMaster University in Canada. He is a member of the AusIMM,
the Geological Society of Australia and the Australian Institute of Geoscientists.

With over 25 years experience as an exploration geologist in Western Australia his career has seen him involved with
numerous mineral exploration, ore deposit evaluation and mine development projects for both gold and base metals.
He has held senior geologist positions with Brunswick NL and Giralia Resources and was geological superintendent
for Australian Resources at the Gidgee Gold Mine. Most recently he held the position of chief geologist with De Grey
Mining Ltd where he was instrumental in the discovery of the Orchard Well VMS deposits.

PRINCIPAL ACTIVITIES

During the period the principal activities of the Company consisted of mineral exploration and evaluation of properties
in Australia. There has been no significant change in these activities during the financial period.

Dividends

No dividends have been paid during the period and no dividends have been recommended by the directors.

Result for the Financial Period

Loss from ordinary activities after provision for income tax was $1,907,860 (2010: $522,353)

REVIEW OF OPERATIONS

During the year, the Company continued exploration activities at its various exploration projects:

YUINMERY: Advanced Copper–Gold project WA (100% interest)

- Entered into an option agreement to purchase over 75% interest in an extra 149 square km of tenements adjoining
Empire’s;
- dril ling at the Just Desserts prospect intersects mineralization down plunge from existing resource and reinforces
that Yuinmery could be a major VMS copper-gold system;

- initial metallurgical testwork of Just Desserts mineralization confirms positive expectations for favourable recoveries;

- drilling at A Zone prospect 2km north of Just Desserts prospect intersects encouraging copper and zinc grades;

- drilling continues at other targets for copper and gold;

- widespread low grade platinum- palladium-nickel mineralisation identified 7km north east of Just Desserts
prospect; and

- awarded $50,000 under the Western Australian Government’s Incentive Scheme Co-Funded Drilling Program. The
grant will be used to fund a diamond drilling program during the next financial year.

PENNY’S FIND: Gold project WA (60% interest)

- Sale of Penny’s Find project for up to $2 million cash plus royalty;

- Brimstone Resources Ltd has paid an initial $500,000, is continuing to earn into the project and has taken over
management of exploration; and

- planning to develop an open pit has commenced.

TROY CREEK: Copper-Gold-PGM project WA (100% interest)

- Farmout offer for Troy Creek project accepted from Zodiac Resources. Zodiac to spend $3 million to earn a 55%
interest over a 5 year period; and

- Zodiac to manage and carry out an initial reverse circulation (RC) drill programme early in the next financial year.

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 19

Empire Resources Limited
Directors' Report

WYNNE (WA): Copper Project- 100% interest

- awarded $75,000 under the Western Australian Government’s Incentive Scheme Co-Funded Drilling Program; and

- grant will be used to fund a RC drilling program planned during the next financial year.

YARLARWEELOR (WA): Uranium project (28% indirect interest)

- the project owner, FYI Resources Limited, completed further detailed airborne radiometric and magnetic surveys
over the entire area; and

- also completed a RAB drilling program consisting of thirty six holes totalling 1,306 metres testing a number of
uranium, thorium and magnetic anomalies.

CORPORATE

- company raised $2.78 million in capital, before costs, through a series of placements during the December 2010

- 9.4 million shares and 5 million shares were issued in October and November 2010 respectively, at 6.4 cents.

- further placement was completed in December 2010 of 15.7 million shares at 12 cents.

In the opinion of the Directors there were no other significant changes in the state of affairs of the Company.

REMUNERATION REPORT (AUDITED)

This report details the amount and nature of remuneration of each director of the Company and the executives
receiving the highest remuneration.

Remuneration Policy

The principles used to determine the nature and amount of remuneration are applied through a remuneration policy
which ensures the remuneration package properly reflects the person’s duties and responsibilities and that the
remuneration is competitive in attracting, retaining and motivating people of the highest quality.

The remuneration policy, setting the terms and conditions for the executive directors has been developed by the
board after seeking professional advice and taking into account market conditions and comparable salary levels for
companies of a similar size and operating in similar sectors.

The remuneration policy is to provide a fixed remuneration component. The board believes that this remuneration
policy is appropriate given the stage of development of the Company and the activities which it undertakes and is
appropriate in aligning Directors’ objectives with shareholder and businesses objectives.

The remuneration framework has regard to shareholders’ interests in the following ways:

•

Focuses on sustained growth as well as focusing the directors on key non-financial drivers of value, and

Attracts and retains high calibre directors.

The remuneration framework has regard to directors’ interests in the following ways:

•

Rewards capability and experience,

Reflects competitive reward for contributions to shareholder growth,

Provides a clear structure for earning rewards, and

Provides recognition for contribution.

Non-executive directors

The board policy is to remunerate non-executive directors at market rates for comparable companies for time,
commitment and responsibilities. The Board determines payments to the non-executive director and reviews their
remuneration annually, based on market practice, duties and accountability. Independent external advice is sought
when required. The maximum aggregate amount of fees that can be paid to directors is subject to approval by
shareholders at a General Meeting. Fees for non-executive directors are not linked to the performance of the Group.
However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the
Company and may receive options.

Page 20

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited
Directors' Report

The Directors have resolved that non-executive director’s fees will be $30,000 per annum for the Chairman, inclusive
of statutory superannuation contributions. Shareholders have approved aggregate remuneration for all non-executive
directors at an amount of $100,000 per annum. Where applicable, superannuation contributions of 9% are paid on
these fees as required by law.

Share-based compensation

To ensure that the Company has appropriate mechanisms to continue to attract and retain the services of Directors
and Employees of a high calibre, the Company has established the Empire Resources Limited Share Plan (“SP”) and
the Empire Resources Option Plan.

The Directors consider the plans are an appropriate method to:

a) reward Directors and Employees for their past performance;
b) provide long-term incentives to participate in the Company’s future growth;
c) motivate Directors and Employees and generate loyalty in Employees; and
d) assist to retain the services of valuable Employees.

The value attributed to the share based compensation for the year is as follows:

Directors
Mr T Revy

Mr D Sargeant

Mr A Jessup

Specified
Executives
Mr S Storm

Year
granted

2010

2007

2010

2007

2010

100%

2007
2010

100%
-

Vested
%

Forfeited %

Financial years in
which
shares/options
may vest

Total value of
grant vested
$

Minimum total
value of grant yet
to vest
$

Maximum total
value of grant
yet to vest
$

-
-

2010-13

2008-11

2010-13

2008-11

2010-13

2008-11
2010-13

104,441

69,627

48,739
-

7,500

-
7,500

7,500

-
7,500

A
Remuneration
consisting of
shares

B
Value at issue
date
$

C
Value at exercise
date
$

D
Value at lapse
date
$

E
Total of
columns B-D
$

Directors
Mr T Revy

Mr D Sargeant
Mr A Jessup
Specified Executives
Mr S Storm

0%
5%
5%

10%

-
-
-

-
61,500
41,000
-
28,700

-
-
-
-
-

-
61,500
41,000

28,700

A =

B =

C =

D =

The percentage of the value of remuneration consisting of shares, based on the value of shares expensed
during the current year.
The value at issue date calculated in accordance with AASB 2 Share-based Payment of shares issued
during the year as part of remuneration.
The value at exercise date of shares that were issued as part of remuneration and were exercised during
the year, being the intrinsic value of the shares at that date.
The value at lapse date of shares that were issued as part of remuneration and that lapsed during the year.
Lapsed shares refer to shares that vested but expired due to the term of the loan expiring.

No shares were issued during the year upon the exercise of options.

Page 20

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 21

Empire Resources Limited
Directors' Report

Executives
Executive Directors receive either a salary plus superannuation guarantee contributions as required by law, currently
set at 9%, or provide their services via a consultancy arrangement. Directors do not receive any retirement benefits.
Individuals may, however, choose to sacrifice part of their salary to increase payments towards superannuation.
Options are not issued as part of remuneration for long term incentives.

All remuneration paid to directors and executives is valued at cost to the Company and expensed.

Compensation of Key Management Personnel for the year ended 30 June 2011.

The following table discloses the remuneration of the Key Management Personnel (Directors and executive officers)
of the Company. The information in this table is audited.

Short-term
Benefits

Post-
employment
benefits

Share-based
payments

Directors

Specified Directors
Non-Executive
Mr T Revy 2

Mr A Griffin 1

Executive

Mr D Sargeant

Mr A Jessup3

Total Specified Directors

Specified Executives

Mr S Storm

Total Specified
Executives

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

Directors
Fees

Consulting
Fees

Total

Value of shares
& options

Total

30,000

15,000

30,000

15,000

180,000

164,000

140,000

108,000

320,000

164,000

140,000

108,000

350,000

30,000

272,000

302,000

37,800

34,800

37,800

34,800

37,800

34,800

37,800

34,800

2,500

32,500

15,034

23,209

38,209

31,511

211,511

34,848

198,848

21,841

161,841

23,243

131,243

55,852

405,852

81,334

383,334

16,039

53,839

16,280

51,080

16,039

53,839

16,280

51,080

1 Resigned 8 January 2010
2 Appointed 8 January 2010
3 Reduced fee whilst acting as an executive officer for FYI Resources Ltd for 5 months

Page 22

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited
Directors' Report

Employment contracts

– Mr D Sargeant

By agreement dated 24 October 2009, the Company and Kirkdale Holdings Pty Ltd (ACN 009 096 388) ('Kirkdale')
agreed the terms and conditions under which Kirkdale would provide the services of Mr Sargeant as Managing
Director of the Company.

The agreement has:
(a)
(b)

(c)

a term of three years;
requires the payment to Kirkdale of a fee of $15,000 (GST excl) per month (increasing by 10% each year)
and reimbursement of expenses;
provisions requiring the payment of a termination benefit of 50% of the amount due on termination of the
agreement.

– Mr A Jessup

By agreement dated 24 October 2009, the Company and Murilla Exploration Pty Ltd (ACN 068 277 190) ('Murilla')
agreed the terms and conditions under which Murilla would provide the services of Mr Jessup as an executive officer
of the Company.

The agreement has:
(a)
(b)

(c)

a term of three years;
requires the payment to Murilla of a fee of $15,000 (GST excl) per month (increasing by 10% each year) and
reimbursement of expenses;
provisions requiring the payment of a termination benefit of 50% of the amount due on termination of the
agreement.

Directors may be paid additional fees for special duties or services outside the scope of the ordinary duties of a
Director. Directors will also be reimbursed for all reasonable expenses incurred in the course of their duties.

End of Remuneration Report.

Share Options

At the date of this report unissued ordinary shares of the Company under option are:

Grant Date

Date of
Expiry

Exercise
Price $

2-Jun-10
25-Jun-10
9-Aug-11

2-Jun-13
25-Jun-13
9-Aug-14

0.15
0.14
0.09

Number
under
Option

8,227,729
2,700,000
1,500,000

12,427,729

Directors’ Interest

The relevant interest of each director in the shares and options over shares issued by the Company at the date of this
report is as follows:

Director

Mr T Revy
Mr D Sargeant
Mr A Jessup

Company Performance

Number of Ordinary Shares
Indirect

Direct

Number of Options

Direct

Indirect

-
-
722,222

710,000
6,100,000
1,345,333

500,000
-
-

-
500,000
500,000

Comments on performance are set out in the review of operations.

Significant Changes in the State of Affairs

There were no other significant changes in the state of affairs of the Company other than those noted in the review of
operations.

Page 22

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 23

Empire Resources Limited
Directors' Report

Likely Developments and Expected Results

Disclosure of likely developments in the operations of the Company and the expected results of those operations in
future financial years, and any further information, has not been included in this report because, in the reasonable
opinion of the Directors to do so would be likely to prejudice the business activities of the Company.

Environmental Regulation

The Company’s operations were subject to environmental regulations under both Commonwealth and State
legislation in relation to its exploration activities.

The directors are not aware of any breaches during the period covered by this report.

Meetings of Directors

The following table sets out the number of meetings of the Company’s directors held during the period ended 30 June
2011 and the number of meetings attended by each director.

Director

Mr Thomas Revy
Mr David Sargeant
Mr Adrian Jessup
A - meetings attended
B - meetings held whilst a director

Directors’ Meetings
B
5
5
5

A
5
5
5

As at the date of this report the Company has not formed any committees as the directors consider that at present the
size of the Company does not warrant such. Audit, corporate governance, director nomination and remuneration
matters are all handled by the full board.

Proceedings on Behalf of the Company
No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of the proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section
237 of the Corporations Act 2001.

Indemnification and Insurance of Directors and Officers

Indemnification
The Company has agreed to indemnify current directors and officers and past directors and officers against all
liabilities to another person (other than the Company or a related body corporate), including legal expenses that may
arise from their position as directors and officers of the Company and its controlled entity, except where the liability
arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full
amount of any such liabilities, including costs and expenses.

Insurance
The directors have not included details of the amount of the premium paid in respect of the directors’ and officers’
liability insurance contracts, as such disclosure is prohibited under the terms of the contract.

Events subsequent to reporting date

No matter or circumstance has arisen, since the end of the financial year, which significantly affected, or may
significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in
subsequent financial years.

Non-audit Services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Group are important.

Details of the amounts paid or payable to the auditor (HLB Mann Judd) for audit and non-audit services provided
during the year are set out below.

Page 24

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited
Directors' Report

During the period, the following fees were paid or payable for services
provided by the auditors of the parent entity HLB Mann Judd, its related
practices and non-related audit firms:
Assurance Services
HLB Mann Judd (Current Auditor)
1. Audit services

Audit and review of financial reports and other audit work under the
Corporations Act 2001
Total remuneration for audit services
2. Other assurance services

Tax related

Total remuneration for other assurance services

Total remuneration for assurance services

Auditors Independence Declaration

Consolidated

Year ended
30 June 2011
$

Year ended
30 June 2010
$

19,025

18,500

19,025

18,500

Section 307C of the Corporations Act 2001 requires the company’s auditors, HLB Mann Judd, to provide the directors
with a written Independence Declaration in relation to their audit of the financial report for the year ended 30 June
2011. This written Auditor’s Independence Declaration is attached to the Auditor’s Independent Audit Report to the
members and forms part of this Director’s Report.

Signed in accordance with a resolution of Directors.

_________________
D Sargeant
Managing Director
Perth, Western Australia
8 September 2011

Page 24

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 25

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011

EMPIRE RESOURCES LIMITED

Revenue from continuing operations

Depreciation expense
Exploration expense
Employee benefits expense
Management fee expense
Directors fees
Accounting expense
Consultancy expense
Share-based payment
ASX expense
Corporate relations expense
Insurance expense
Other expenses
Share of loss of equity accounted investees

Loss before income tax
Income tax benefit
Net loss for the year

Other comprehensive income
Share of comprehensive loss of equity accounted investees

Income tax relating to components of other comprehensive
income
Other comprehensive loss for the year, net of tax
Total comprehensive loss for the year

Loss per share for loss from continuing operations
attributable to the ordinary equity holders of the
Company
Basic and diluted loss per share (cents per share)

Consolidated

Note

2011
$

2010
$

3
3

523,311

1,534,161

(20,691)
(1,575,018)
(27,215)
(315,254)
(30,000)
(58,073)
(26,825)
(108,270)
(17,127)
(48,203)
(15,639)
(139,124)
(253,754)

(2,111,882)

204,022
(1,907,860)

(139,664)

-
(139,664)
(2,047,524)

(23,577)
(1,147,416)
(20,032)
(254,772)
(30,000)
(48,265)
(6,658)
(113,909)
(15,415)
(27,134)
(15,482)
(110,695)
(243,159)

(522,353)

-
(522,353)

-
-
(522,353)

(1.65)

(0.61)

The above Statement of Comprehensive Income
should be read in conjunction with the accompanying notes.

Page 26

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

EMPIRE RESOURCES LIMITED

STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2011

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Total Current Assets

NON-CURRENT ASSETS

Investments accounted for using the equity method

Plant and equipment

Total Non-Current Assets

TOTAL ASSETS

LIABILITIES

CURRENT LIABILITIES

Trade and other payables

Total Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

Consolidated

Note

2011

2010

1,781,147

310,855

2,092,002

863,227

23,691

886,918

595,674

70,861

666,535

1,256,645

34,427

1,291,072

2,978,920

1,957,607

297,851

130,106

297,851

130,106

2,681,069

1,827,501

14,516,700

847,444

(12,683,075)

11,723,878

739,174

(10,635,551)

2,681,069

1,827,501

The above Statement of Financial Position
should be read in conjunction with the accompanying notes.

Page 26

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 27

EMPIRE RESOURCES LIMITED

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011

Balance at 1 July 2009
Shares issued during the year
Options issued during the year
Equity issue expenses
Loss for the year
Balance at 30 June 2010

Balance at 1 July 2010
Shares issued during the year
Options issued during the year
Equity issue expenses
Loss for the year
Other comprehensive loss for the year
Balance at 30 June 2011

Consolidated Group

Issued Capital
$

Accumulated
Losses
$

Option Reserve
$

Total
$

10,269,731
1,539,691
-
(85,544)

-
11,723,878

11,723,878
2,977,700
-
(184,878)
-
-
14,516,700

(10,113,198)
-
-
-

(522,353)
(10,635,551)

(10,635,551)
-
-
-
(1,907,860)
(139,664)
(12,683,075)

625,265
-
113,909
-

-
739,174

739,174
-
108,270
-
-
-
847,444

781,798
1,539,691
113,909
(85,544)

(522,353)
1,827,501

1,827,501
2,977,700
108,270
(184,878)
(1,907,860)
(139,664)
2,681,069

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes

Page 28

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

10.

EMPIRE RESOURCES LIMITED

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011

Cashflows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received

Consolidated

Note

2011
$

2010
$

-
(683,871)
41,932

11,000
(537,650)
24,357

Net cash used in operating activities

6(i)

(641,939)

(502,293)

Cash Flows from Investing Activities
Purchase of plant and equipment
Sale of prospect
Exploration and evaluation expenditure

(9,955)
500,000
(1,453,408)

-
-
(1,167,660)

Net cash used in investing activities

(963,363)

(1,167,660)

Cash Flows from Financing Activities
Proceeds from issue of equity securities
Equity securities issue costs

2,977,700
(186,925)

1,539,691
(83,497)

Net cash provided by financing activities

2,790,775

1,456,194

Net increase / (decrease) in cash held
Cash at the beginning of the financial year

1,185,473
595,674

(213,759)
809,433

Cash at the end of the financial year

1,781,147

595,674

The above Statement of Cash Flows should be read in conjunction
with the accompanying notes.

Page 28

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 29

11.

Notes to the Financial Statements 30 June 2011

Empire Resources Limited

Statement of Significant Accounting Policies

The financial report covers the consolidated entity of Empire Resources Limited (“Empire”) and its controlled
entity and Empire as an individual parent entity. Empire is a listed public company limited by shares,
incorporated and domiciled in Australia.

(a)

Basis of Preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards,
Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001. It is prepared on the basis of historical costs. The
financial report is presented in Australian dollars.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated
financial report, comprising the financial statements and notes thereto, complies with the International Financial
Reporting Standards (IFRS).

The financial report was authorised for issue by the Board on 8 September 2011.

The following is a summary of the material accounting policies adopted by the Group in the preparation of the
financial report. The accounting policies have been consistently applied by the controlled entity and are
consistent with those in the June 2010 financial report.

(b)

Going Concern

As disclosed in the Statement of Comprehensive Income, the Group recorded operating losses of $1,907,860
(2010: $522,353) and as disclosed in the Statement of Cash Flows, the Group recorded cash outflows from
operating activities of $641,939 (2010: $502,293) and investing activities of $963,363 (2010: $1,167,660) and a
cash inflow from financing activities of $2,790,775 (2010: $1,456,194). Cash flows from financing activities
arose from capital raisings that are disclosed in Note 11(a). After consideration of these financial conditions, the
Directors have assessed the following matters in relation to the adoption of the going concern basis of
accounting by the Group:



The Group has successfully completed capital raisings during the year as disclosed in Note 11(a) and has
the ability to continue doing so on a timely basis, pursuant to the Corporations Act 2001, as is budgeted to
occur in the twelve month period from the date of this financial report;
The Group has net current assets of $1,794,151 (2010: $536,429) at balance date and expenditure
commitments for the next 12 months of $344,299 (2010:$752,054), as disclosed in Note 14 (ii), and
retains the ability to scale down its operations to conserve cash, in the event that the capital raisings are
delayed or partial; and
The company and Group have the ability, if required, to undertake mergers, acquisitions or restructuring
activity or to wholly or in part, dispose of interests in mineral exploration and development assets.

Due to the above matters, the Directors believe that it is reasonably foreseeable that the company and Group
will continue as a going concern and that it is appropriate that this basis of accounting be adopted in the
preparation of the financial statements.

(c)

Basis of Consolidation

A controlled entity is any entity that Empire Resources Limited has the power to control the financial and
operating policies of the entity so as to obtain benefits from its activities.

A list of the controlled entity is contained in Note 8 to the financial statements. The controlled entity has a June
financial year end.

All inter-company balances and transactions between entities in the consolidated group, including any
unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have
been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where a controlled entity enters or leaves the consolidated group during the year, their operating results are
included/excluded from the date control was obtained or until the date control ceased.

Page 30

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Statement of Significant Accounting Policies (continued)

Business Combinations
Business combinations occur where control over another business is obtained and results in the consolidation
of its assets and liabilities. All business combinations, including those involving entities under common control,
are accounted for by applying the purchase method. The purchase method requires an acquirer of the business
to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent
liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as
the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control
together with costs directly attributable to the business combination. Any deferred consideration payable is
discounted to present value using the entity’s incremental borrowing rate.

(d)

Investment in associated entities

The Group’s investment in its associate is accounted for using the equity method of accounting in the
consolidated financial statements, after initially being recognised at cost. The associate is an entity in which the
Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the consolidated statement of financial
position at cost plus post-acquisition changes in the Group's share of net assets of the associate. Goodwill
relating to an associate is included in the carrying amount of the investment and is not amortised. After
application of the equity method, the Group determines whether it is necessary to recognise any additional
impairment loss with respect to the Group’s net investment in the associate. Goodwill included in the carrying
amount of the investment in associate is not tested separately, rather the entire carrying amount of the
investment is tested for impairment as a single asset. If an impairment is recognised, the amount is not
allocated to the goodwill of the associate.

The consolidated statement of comprehensive income reflects the Group's share of the results of operations of
the associate, and its share of post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends
receivable from associates are recognised in comprehensive income as a component of other income.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any
unsecured long-term receivable and loans, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The balance dates of the associate and the Group are identical and the associate's accounting policies conform
to those used by the Group for like transactions and events in similar circumstances.

(e)

Plant and Equipment

Plant and equipment is measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant & equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from those assets. Recoverable amount is assessed on the basis of the expected net cash
flows which will be received from the asset’s employment and subsequent disposal. The expected net cash
flows have been discounted to their present values in determining recoverable amounts.

Depreciation is calculated on the straight line basis and is brought to account over the estimated useful lives of
all plant and equipment from the time the asset is held ready for use. The depreciation rates used are:

Office furniture
Office computer equipment
Motor vehicles

15-33%
33%
20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount
is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing
proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive
income. When revalued assets are sold, amounts included in the revaluation reserve relating to the assets are
then transferred to accumulated losses.

Page 30

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 31

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

(f)

Statement of Significant Accounting Policies (continued)

Income Tax

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary difference and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the company’s subsidiaries and associates operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
 when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability

in a transaction that is not a business combination and that, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or

 when the taxable temporary difference is associated with investments in subsidiaries, associates or

interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be
utilised, except:
 when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss; or

 when the deductible temporary difference is associated with investments in subsidiaries, associates or

interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.

(g)

Cash & Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown
within short-term borrowings in current liabilities on the Statement of Financial Position.

(h)

Acquisition of Assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether shares or other
assets are acquired. Cost is determined as the fair value of the assets given up at the date of the acquisition

Page 32

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Statement of Significant Accounting Policies (continued)

plus costs incidental to the acquisition. Transaction costs arising on the issue of equity instruments are
recognised directly in equity.

(i)

Impairment of assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the
recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is
compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is
expensed to the statement of comprehensive income.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.

(j)

Financial Instruments

Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the
related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured
as set out below.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are stated at amortised cost using the effective interest rate method.

Available-for-sale financial assets
Available for sale financial assets include any financial assets not included in the above categories. Available-
for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair
value are taken directly to equity.

Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payments and amortisation.

Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are
applied to determine the fair value for all unlisted securities, including recent arm’s length transactions,
reference to similar instruments and option pricing models.

Impairment
At each reporting date, the Company assesses whether there is objective evidence that a financial instrument
has been impaired. In the case of available-for sale financial instruments, a prolonged decline in the value of
the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised
in the statement of comprehensive income.

(k)

Exploration and Development Expenditure

Exploration, evaluation and acquisition costs are written off in the year they are incurred. Development costs
are capitalised. Amortisation is not charged on costs carried forward in respect of areas of interest in the
development phase until production.

(l)

Employee Entitlements

Salaries, wages and annual leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within twelve months of the reporting date are recognised in other creditors in respect to
employees’ services up to the reporting date and are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and
measured at the rates paid or payable.

Page 32

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 33

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Statement of Significant Accounting Policies (continued)

Equity settled transactions

The Group provides benefits to employees (including senior executives) of the Group in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity-
settled transactions).

There are currently two plans in place to provide these benefits:



the Employee Share Option Plan (ESOP), which provides benefits to directors and senior executives; and
the Employee Share Loan Plan (ESLP), which provides benefits to all employees, excluding senior
executives and directors.


The cost of these equity-settled transactions with employees is measured by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an external valuer
using a Black Scholes model, further details of which are given in Note 18. In valuing equity-settled
transactions, no account is taken of any performance conditions, other than conditions linked to the price of the
shares of Empire Resources Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each balance date until vesting date
reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of
equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as
at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only
conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms
had not been modified. In addition, an expense is recognised for any modification that increases the total fair
value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the
date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for
the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and
new award are treated as if they were a modification of the original award, as described in the previous
paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share (see Note 5).

The Group expenses equity-settled share-based payments such as share and option issues after ascribing a
fair value to the shares and/or options issued. The fair value of option and share plan issues of option and
share plan shares are recognised as an expense together with a corresponding increase in the share based
payments reserve or the share option reserve in equity over the vesting period. The proceeds received net of
any directly attributable transaction costs are credited to share capital when options are exercised.

The value of shares issued to employees financed by way of a non recourse loan under the employee Share
Plan is recognised with a corresponding increase in equity when the company receives funds from either the
employees repaying the loan or upon the loan termination, pursuant to the rules of the share plan. All shares
issued under the plan with non recourse loans are considered, for accounting purposes, to be options.

(m)

Trade Receivables

All trade receivables are recognised at the amounts receivable as they are due for settlement no more than 30
days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off. An allowance for doubtful debts is raised where some doubt as to collection exists.

Page 34

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Statement of Significant Accounting Policies (continued)

(n)

Trade creditors

These amounts represent liabilities for goods and services provided to the Company prior to the end of the
financial period and which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition.

(o)

Recoverable Amount of Non-current Assets

The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and
outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written
down to its recoverable amount. Where net cash inflows are derived from a group of assets working together,
recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying
amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable
amount write-down occurs. The expected net cash flows used in determining recoverable amount are not
discounted to their present value.

(p)

Leases

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating
leases under which the lessor effectively retains substantially all such risks and benefits

Operating lease payments are charged as expenses in the periods in which they are incurred, as this
represents the pattern of benefits derived from the leased assets.

(q)

Revenue Recognition

Amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised as follows:

(i)

Interest

Interest earned is recognised as and when it is receivable, including interest which is accrued and is readily
convertible to cash within two working days. Accrued interest is recorded as part of other debtors.

(ii)

Sundry income

Sundry income is recognised as and when it is receivable. Income receivable, but not received at balance
date, is recorded as part of other debtors.

(r)

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as
part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the
Statement of Financial Position are shown inclusive of GST.

(s)

Critical accounting estimates and judgements

The directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future events
and are based on current trends and economic data, obtained both externally and within the group.

Key Estimates — Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may
lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is
determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of
key estimates.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an external valuer
using a Black Scholes model, using the assumptions detailed in Note 18.

Page 34

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 35

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Statement of Significant Accounting Policies (continued)

The Group measures the cost of cash-settled share-based payments at fair value at the grant date using the
Black and Scholes formula taking into account the terms and conditions upon which the instruments were
granted, as discussed in Note 18.

This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability
is re-measured to fair value at each balance date up to and including the settlement date with changes in fair
value recognised in profit or loss.

(t)

Adoption of new and revised standards

Changes in accounting policies on initial application of Accounting Standards

In the year ended 30 June 2011, the Group has reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant to its operations and effective for the current annual
reporting period.

It has been determined by the Group that there is no impact, material or otherwise, of the new and revised
Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting
policies.

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet
effective for the year ended 30 June 2011. As a result of this review the Directors have determined that there is
no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and,
therefore, no change necessary to Group accounting policies.

(u)

Segment Reporting

Operating segments are now reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Board of Empire Resources Ltd.

The Group operates only in one business and geographical segment being predominantly in the area of
mineral exploration in Western Australia. The Group considers its business operations in mineral exploration
to be its primary reporting function.

(v)

Earnings per share

Basic earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the
weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted for:



costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have
been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the
dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.



(w)

Parent Entity Financial Information

The financial information for the parent entity, Empire resources Limited disclosed in Note 22 has been
prepared on the same basis as the Group.

Page 36

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Revenue

Revenue
Interest received
Sale of tenement
Other income

Loss from ordinary activities

Loss before income tax

The loss from ordinary activities before income tax
has been determined after:

(a) Expenses

Depreciation

Consolidated

2011
$

2010
$

68,766
454,545
-

24,357
1,499,804
10,000

523,311

1,534,161

Consolidated

2011
$

2010
$

20,691

23,577

Exploration costs written off

1,575,018

1,147,416

Page 36

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 37

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

(a)

Income tax

Income tax recognised in loss

No income tax is payable by the parent or consolidated group as they both recorded losses for income tax
purposes for the year.

(b)

Numerical reconciliation between income tax expense and the loss before income tax.

Loss before tax

Income tax benefit at 30% (2010:30%)
Tax effect of:
- deductible capital raising expenditure
- non deductible expenditure
- deductible temporary differences
- share based payment
- gain on sale of tenement
Deferred tax asset not recognised
Previously unrecognised tax losses now recouped
to reduce current tax expense
R&D tax offset payment from prior year
Income tax benefit attributable to loss from
ordinary activities before tax

Consolidated

2011
$

2010
$

(2,111,882)

(522,353)

633,565

156,706

45,204
(76,686)
3,981
(32,481)
-
(573,583)

-
204,022

204,022

35,484
(236,294)
(2,291)
(34,173)
(242,868)
-

323,436
-

Tax losses attributable to members of the group -
revenue

8,975,065

7,063,124

Potential tax benefit at 30%
Deferred tax asset asset not booked
Amounts recognised in statement of
comprehensive income
-employee provisions
-other
-R&D tax offset
Amounts recognised in equity
- share issue costs

2,692,520

2,118,937

2,160
6,150
-

4,061
7,725
204,022

48,676

50,013

Net unrecognised deferred tax asset at 30%

2,749,506

2,384,758

A deferred tax asset attributable to income tax losses has not been recognised at balance date as the
probability criteria disclosed in Note 1(f) is not satisfied and such benefit will only be available if the conditions
of deductibility also disclosed in Note 1(f) are satisfied.

Page 38

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Loss per share

Basic and diluted loss per share (cents per share)

Consolidated

2011
Cents

2010
Cents

(1.65)

(0.61)

Loss used in the calculation of basic EPS

(1,907,860)

(522,353)

Weighted average number of shares outstanding
during the year used in calculations of basic loss
per share

115,668,524

85,856,572

Diluted loss per share has not been disclosed as it
is not materially different from basic loss per share

Cash and cash equivalents

Consolidated Group
2011
2010
$
$

Cash at bank and in hand

1,781,147

595,674

1,781,147

595,674

(i) Reconciliation of cash flow from operations with loss after income tax

Loss after income tax
Sale of tenement
Depreciation
Share based payments expense
Exploration expenditure written off
Income tax benefit
Share of loss of equity accounted investees

Changes in assets and liabilities, net of the effects
of purchase of subsidiaries:
(Increase)/decrease in trade and other receivables

(Decrease)/increase in trade and other payables

(Decrease)/increase in employee benefits

Consolidated Group
2011
2010
$
$

(1,907,860)
(454,545)
20,691
108,270
1,453,408
(204,022)
253,754
(730,304)

(522,353)
(1,499,804)
23,577
113,909
1,167,660
-
243,159
(473,852)

(69,406)

(53,904)

166,984
(9,213)

24,422
1,041

Net cash outflow from operating activities

(641,939)

(502,293)

Page 38

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 39

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Trade and other Receivables

Current

Trade receivables
Other receivables

Consolidated Group
2011
2010
$
$

26,360
284,495

310,855

36,090
34,771

70,861

Provision for Impairment of Receivables

Current trade receivables are non-interest bearing and generally on 30 day terms. A provision for impairment
is recognised when there is objective evidence that an individual trade receivable is impaired.

Investments

(a) Investments accounted for using the Equity Method

Consolidated Group
2010
$

2011
$

Reconciliation of movements in investments
accounted for using the equity method:

Balance at 1 July
Acquisitions
Share of loss since acquistion
Movement in investment's reserves
Balance at 30 June

1,256,645
-
(253,754)
(139,664)
863,227

-
1,499,804
(243,159)
-
1,256,645

Name of entity

Principal activity

Associated entity

Ownership interest

Published fair value

2011

2010

2011

2010

Country of
incorporation

FYI Resources Ltd

Mineral exploration

Australia

28%

32%

985,617 1,353,559

Page 40

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Investments (continued)

Summarised financial information of associates:

Financial position
Total assets
Total liabilities
Net assets
Group’s share of associates’ net assets
Financial performance
Total revenue
Total loss for the year
Group’s share of associate’s profit/(loss)

Group’s share of associate’s compehensive loss
Capital commitments and contingent liabilities of
associate:
Share of capital commitments incurred jointly with
other investors
Share of contingent liabilities incurred jointly with
other investors

Consolidated Group

2011

2010

3,689,651
169,589
3,520,062
985,617

50,709
(867,439)
(253,754)

(139,664)

4,678,120
450,124
4,227,996
1,353,559

29,645
(1,223,518)
(243,159)

370,570

406,534

(b) Investments in subsidiary

Controlled entity

Parent Entity:
Empire Resources Limited
Subsidiary of Empire Resources Limited:

Torrens Resources Pty Ltd

Percentage
Owned
2011

Percentage
Owned
2010

100

Country of
incorporation

Australia

Page 40

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 41

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

Plant & equipment

Plant and Equipment
Cost
Accumulated depreciation

Motor Vehicles
Cost
Accumulated depreciation

Consolidated Group
2011
2010
$
$

37,153
(27,618)
9,535

90,217
(76,061)
14,156

27,198
(25,069)
2,129

90,217
(57,919)
32,298

Total Plant and Equipment

23,691

34,427

Movements in the carrying amounts of each class of property, plant & equipment at
the beginning and end of the current financial period is as set out below:

Plant and Equipment

Balance at the beginning of year
Additions
Depreciation expense
Carrying amount at the end of the year

Motor Vehicles

Balance at the beginning of year
Additions
Depreciation expense
Carrying amount at the end of the year

10. Trade and other payables

Trade payables and accruals
Employee benefits

Consolidated Group
2011
2010
$
$

2,129
9,955
(2,549)
9,535

32,298
-
(18,142)
14,156

7,563
-
(5,434)
2,129

50,441
-
(18,143)
32,298

Consolidated Group
2011
2010
$
$

283,827
14,024
297,851

106,869
23,237
130,106

Page 42

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

11.

Issued capital

(a) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company
in proportion to the number of and amounts paid on the shares.

On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to
one vote, and upon a poll each share is entitled to one vote.

127,295,921 (2010: 97,195,921) fully paid ordinary
shares

(i) Ordinary shares - number

At 1 July 2010
Shares issued - 10,750,000 on 14 August 2009 at
$0.05 Sophisticated investors
Shares issued - 1,850,000 on 24 November 2009
at $0.05 Sophisticated investors
Shares placement - 4,450,000 on 23 December
2009 at $0.075
Shares placement - 8,227,729 on 12 May 2010 at
$0.07
Share placement - 9,400,000 on 13 October 2010
at $0.062
Share placement
2010 at $0.062
Share placement
2010 at $0.12

- 5,000,000 on 26 November

- 15,700,000 on 7 December

Consolidated Group
2011
2010
$
$

14,516,700

11,723,878

Consolidated Group
2011
2010
No.
No.

97,195,921

71,918,192

10,750,000

1,850,000

4,450,000

8,227,729

9,400,000

5,000,000

15,700,000

Balance at 30 June 2011

127,295,921

97,195,921

Page 42

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 43

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

11. Issued capital (continued)

(ii) Ordinary shares – value

- 15,700,000 on 7 December

- 5,000,000 on 26 November

Consolidated Group
2011
2010
$
$

11,723,878

10,269,731

582,800

310,000

1,884,000

200,900
(184,878)
14,516,700

537,500

92,500

333,750

575,941

-
(85,544)
11,723,878

Note 1 - In May 2008, 2,450,000 shares were issued under the Company's share plan and the loans were
repaid pursuant to the share plan in May 2011.

(b) Options

As at 30 June 2011 (30 June 2010: 13,927,729) the Company had the following options on issue over
ordinary shares:-

Grant Date

Date of
Expiry

Exercise
Price $

Number
under
Option

2-Jun-10
25-Jun-10

2-Jun-13
25-Jun-13

0.15
0.14

8,227,729
2,700,000

10,927,729

Page 44

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

12. Reserves

Reserves

847,444

739,174

Consolidated Group
2011
2010
$
$

Reserves comprise the following:

Options reserve

Balance as at start of financial year

Share-based payment

739,174

108,270

625,265

113,909

Balance as at end of the financial year

847,444

739,174

Details of certain components of the option reserve arising as a consequence of equity based payments are
included in Note 18.

13. Financial risk management

The Group’s financial situation is not complex. It’s activities may expose it to a variety of financial risks in the
future: market risk (including currency risk and fair value interest rate risk), credit risk, liquidity risk and cash
flow interest rate risk. At that stage the Group’s overall risk management program will focus on the
unpredictability of the financial markets and seek to minimise potential adverse effects on the financial
performance of the Group.

Risk management is carried out under an approved framework covering a risk management policy and internal
compliance and control by management. The Board identifies, evaluates and approves measures to address
financial risks.

The Group hold the following financial instruments:

Financial assets
Cash and cash equivalents
Trade and other receivables

Financial liabilities
Trade and other payables

Consolidated Group
2011
2010
$
$

1,781,147
310,855

595,674
70,861

2,092,002

666,535

297,851

130,106

Page 44

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 45

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

13. Financial risk management (continued)

(a) Market risk

Cash flow and fair value interest rate risk

The Group’s main interest rate risk arises from cash deposits to be applied to exploration and development of
areas of interest. Deposits at variable rates expose the Group to cash flow interest rate risk. Deposits at fixed
rates expose the Group to fair value interest rate risk. During 2011 and 2010, the Group’s deposits at variable
rates were denominated in Australian Dollars.

As at the reporting date, the Group had the following variable rate deposits and there were no interest rate
swap contracts outstanding:

2011
Weighted
average
interest rate
%

2010
Weighted
average
interest rate
%

Balance
$

1,622,503
158,644

Balance
$
537,828
57,846

5.1%

1,781,147

3.0%

595,674

Deposit
Other cash available
Net exposure to cash flow interest
rate risk

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into
the renewal of existing positions.

Sensitivity – Consolidated and Parent entity

During 2011, if interest rates had been 1% higher or lower than the prevailing rates realised, with all other
variables held constant, there would be an immaterial change in post-tax profit for the year. Equity would not
have been impacted.

(b) Credit risk

The Group has no significant concentrations of credit risk. Cash transactions are limited to high credit quality
financial institutions.

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures on outstanding receivables and committed transactions. In
relation to other credit risk areas management assesses the credit quality of the customer, taking into account
its financial position, past experience and other factors.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as
summarised at the beginning of this note.

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an
adequate amount of committed credit facilities and the ability to close-out market positions. The Group
manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. The Group will aim at maintaining flexibility in funding by accessing
appropriate committed credit lines available from different counterparties where appropriate and possible.
Surplus funds when available are generally only invested in high credit quality financial institutions in highly
liquid markets.

Financing arrangements

The Consolidated and parent entity has no borrowing facilities.

Page 46

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

13. Financial risk management (continued)

30 June 2011

Financial Assets:

Cash & cash equivalents

Trade and other receivables

Total Financial Assets

Financial Liabilities:

Trade and other payables

Short-term borrowings

Total financial liabilities

30 June 2010

Financial Assets:

Cash & cash equivalents

Trade and other receivables

Total Financial Assets

Financial Liabilities:

Trade and other payables

Short-term borrowings

Total financial liabilities

Fixed Interest Rate Maturing

Weighted
Average
Effective
Interest Rate

Floating

Interest Rate Within Year

1 to 5 Years
$

Over 5 Years
$

Non-interest
bearing
$

Total
$

5.1%

1,761,147

20,000

1,761,147

20,000

1,781,147

310,855

2,092,002

297,851

Fixed Interest Rate Maturing

Weighted
Average
Effective
Interest Rate

Floating

Interest Rate Within Year

1 to 5 Years

Over 5 Years

Non-interest
bearing

Total

3.0%

575,674

20,000

575,674

20,000

70,861

595,674

70,861

666,535

130,106

Maturities of financial assets and liabilities

The note above analyses the Consolidated and parent entity's financial liabilities. These liabilities comprise
trade and other payables, are non interest bearing and will mature within 12 months. The amounts disclosed
are the contractual undiscounted cash flows. There are no derivatives.

Page 46

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 47

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

13. Financial risk management (continued)

Maturity analysis of financial assets and liability based on management’s expectation

Year ended 30 June 2011

<6 months

6-12 months

1-5 years

>5 years

Total

Consolidated
Financial assets
Cash & cash equivalents
Trade & other receivables

Financial liabilities
Trade & other payables

Net maturity

(d) Fair value estimation

1,781,147
310,855
2,092,002

297,851

1,794,151

-
-
-

- 1,781,147
-
310,855
- 2,092,002

297,851

- 1,794,151

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or
for disclosure purposes.

The fair value of financial instruments that are not traded in an active market (for example, investments in
unlisted subsidiaries) is determined using valuation techniques or cost (impaired if appropriate). The Group
uses a variety of methods and makes assumptions that are based on market conditions existing at each
balance date.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values due to their short-term nature.

14. Capital and Leasing Commitments

(i) Operating Lease Commitments

Non-cancellable operating leases contracted for
but not capitalised in the financial statements

Payable - minimum lease payments
- not later than 12 months
- between 12 months and 5 years
- greater than 5 years

The company entered into an operating lease on 1
August 2007 for office space it occupies in Victoria
Park. The term of the lease is 3 years and expired
on 1 August 2010. The lease was renewed for a
further 3 years to 31 July 2013.

Consolidated

2011
$

2010
$

53,069
55,881
-
108,950

48,493
102,136
-
150,629

Page 48

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

14. Capital and Leasing Commitments (continued)

(ii) Expenditure commitments contracted for:

Exploration Tenements
tenure to
In order to maintain current rights of
exploration tenements, the Company is required to
outlay
the minimum
expenditure requirements. These obligations are
not provided for in the financial statements and are
payable:

to meet

rentals

and

- not later than 12 months
- between 12 months and 5 years
- greater than 5 years

15. Directors and other key management personnel

(i) Details of Key Management Personnel

Chairman – non-executive
Mr T Revy (from 8 January 2010)

Managing Director
Mr D Sargeant (from 13 April 2000)

Executive director
Mr A Jessup (from 15 August 2003)

Company Secretary
Mr S Storm (from 30 April 2007)

(ii) Compensation of Key Management Personnel

Short-term employee benefits
Post-employment benefits
Share-based payments

Consolidated

2011

2010

344,299
1,377,196
-
1,721,495

752,054
3,008,216
-
3,760,270

Consolidated

2011
$

387,800
-
71,891
459,691

2010
$

336,800
-
97,614
434,414

The company has taken advantage of the relief provided by AASB 2008-4 Amendments to Australian
Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities, and has transferred
the detailed remuneration disclosures to the directors’ report. The relevant information can be found in the
Remuneration Report on pages 20 to 23.
Remuneration Report on pages 3 to 6.

(iii) Equity instrument disclosures relating to directors and other key management personnel

Shareholdings
The number of ordinary shares in the Company held during the year by each director and other key
management personnel, including their personally related entities or associates, are set out below.

Page 48

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 49

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

15. Directors and other key management personnel (continued)

2011 Shareholdings of Key Management Personnel

Directors

Mr T Revy
Mr D Sargeant
Mr A Jessup

Specified Executives

Mr S Storm

Balance at the
start of the
period

Issued under
share plan

On exercise of
options

Net change other

Balance at the
end of the
period

350,000
6,100,000
2,067,555
8,517,555

350,000
350,000

-
-
-
-

-
-

-
-
-
-

-
-

360,000
-
-
360,000

710,000
6,100,000
2,067,555
8,877,555

-
-

350,000
350,000

2010 Shareholdings of Key Management Personnel

Directors

Balance at the
start of the
period

Issued under
share plan

On exercise of
options

Net change other

Balance at the
end of the
period

Mr A Griffin 1
Mr T Revy 2
Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

1 Resigned 8 January 2010
2 Appointed 8 January 2010

500,000

6,100,000

2,067,555

8,667,555

350,000

500,000

350,000

6,100,000

2,067,555

9,017,555

350,000

All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares,
have been entered into on an arms length basis.

Page 50

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

15. Directors and other key management personnel (continued)

Option holdings

Details of shares issued as remuneration can be found in the remuneration report.

The number of options over ordinary shares in the Company held during the reporting period by each director
and key management personnel, including their personally related entities, are set out below.

2011 Option holdings of Key Management Personnel

Directors

Mr T Revy
Mr D Sargeant
Mr A Jessup

Specified Executives

Mr S Storm

Balance at
the start of
the period

500,000
500,000
500,000
1,500,000

500,000
500,000

Issued

Expired

Net change other

Balance at
the end of the
period

Vested and
exercisable at 30
June 2011

-
-
-
-

-
-

-
-
-
-

-
-

-
-
-
-

-
-

500,000
500,000
500,000
1,500,000

500,000
500,000

-
-
-
-

-
-

2010 Option holdings of Key Management Personnel

Directors

Balance at
the start of
the period

Issued

Expired Net change other

Balance at
the end of
the period

Vested and
exercisable at 30
June 2010

Mr A Griffin 1
Mr T Revy 2

Mr D Sargeant

Mr A Jessup

Specified Executives

Mr S Storm

500,000

- 1,500,000

500,000

1,500,000

500,000

Page 50

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 51

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

16. Related Parties

Directors and specified executives

Disclosures relating to the remuneration and shareholdings of directors and specified executives are set out in
the Directors’ Report and Note 15 respectively.

Other transactions with directors, their associates and director related entities are as follows:

Amounts paid to companies associated with certain
Directors for management services
Kirkdale Holdings Pty Ltd - Mr D Sargeant

Murilla Exploration Pty Ltd - Mr A Jessup

Mr T Revy

Total

Amounts payable to Directors for Directors Fees

Mr T Revy
Mr A Griffin

Consolidated

2011
$

2010
$

180,000

140,000

22,500
342,500

7,500
-
7,500

164,000

108,000

-
272,000

15,000
15,000
30,000

The following table provides the total amount of transactions that were entered into with related parties for the
relevant financial year:

Related party

Consolidated
Associate:
FYI Resources Ltd

Reimbursement
of Expenditure
Related Parties
$

Amounts owed
by Related
Parties as at 30
June
$

Amounts
Owed to
Related
parties as at
30 June
$

Revenue from
Related Parties
$

2011
2010

-
1,509,804

103,604
172,538

26,360
36,090

-
-

Associate
The Group has a 28% interest in FYI Resources Limited (2010: 32%).

Page 52

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

17. Remuneration of auditors

The auditor of Empire Resources Ltd is HLB Mann Judd.

Consolidated

2011
$

2010
$

Amounts received or due and receivable by HLB
Mann Judd for:

Audit or review of the financial reports of the
Company

19,025

18,500

Amounts received or due and receivable by HLB
Mann Judd audit firms:
Other services

18. Share Based Payments

19,025

18,500

(a) Employee share plan
The Company has established an employee share plan, which is also available to Directors, known as the
2008 Empire Resources Limited Employee Share Plan and was approved by shareholders on 28 November
2007.

The issue price for Shares offered under the Plan is at the discretion of the Board, provided that the issue price
is not less than 1% below the weighted average sale price of Shares sold through ASX during the one week
period up to and including the offer date.

A Director or Employee who is invited to subscribe for Shares under the Plan may also be invited to apply for a
loan up to the amount payable in respect of the Shares accepted, on the following terms:

a) Loans must be made solely to the Participant or their nominee and in the name of either the Participant or
their nominee as the case may be.

b) The principal amount outstanding under a Loan will be interest free.

c) Any loan made available to a Participant shall be applied by the Company directly toward payment of the
issue price of the Shares to be acquired under the Plan.

d) the term of the loan shall be three (3) years from the date of issue of the Shares

e) The Company retains a lien over each share acquired pursuant to the loan until such time as the loan is
repaid.

Set out below is a summary of shares issued to Directors and employees under the Empire Resources
Employee Share Plan:

Consolidated entity – 30 June
2011

Balance at
start of period

Issued during
year

Loan repaid
during year

Expercised
during year

Balance at
end of year

Exercisable at
end of year

Issue date

Expiry date

Number

12 May 2008

12 May 2011

2,450,000

Weighted average exercise price

$0.188

$0.082

Page 52

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 53

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

18.

Share Based Payments (continued)

(b) Option plan

The Company has established an option share plan, which is also available to directors, employees and some
consultants, known as the 2010 Empire Resources Option Plan and was approved by shareholders on 25
June 2010.

The following table illustrates the number and weighted average exercise prices of and movements in share
options issued during the year:

2011

2010

Weighted
average
exercise
price

$0.14
-
-
-
-
$0.14

Number

2,700,000
-
-
-
-
2,700,000

Weighted
average
exercise
price

-
$0.14
-
-
-
$0.14

Number

-
2,700,000
-
-
-
2,700,000

Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year

Exercisable at the end of the year

A corporate goal must be met before the options may be exercised: The corporate goal that has been set is
the Company’s market capitalisation reaching $10.77 million (which was the market capitalisation of the
Company at 1 December 2009 plus 50%) and remaining at that level for 50 contiuously traded ASX Business
Days.

The fair value of the equity-settled share options is estimated as at the date of grant using the Black and
Scholes model taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the model used for the year ended 30 June 2011:

Grant Date

Expiry
date

Exercise
price

Vesting
Period

Fair value
at grant
date of
options

Expected
Volatility Option life

Dividend
yield

Risk-free
interest
rate

Grant
date
share
price

Key
Management
Personnel
options
Employee
options
Consultant
options

25-Jun-10 25-Jun-13

$0.14

25-Jun-13

$0.02

107%

3 years

25-Jun-10 25-Jun-13

$0.14

25-Jun-13

$0.02

107%

3 years

25-Jun-10 25-Jun-13

$0.14

25-Jun-13

$0.02

107%

3 years

4.57% $0.04

Page 54

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

18.

Share Based Payments (continued)

Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expense were as follows:

Shares issued under employee share plan
Options issued

19. Segment Information

Consolidated

2011
$
$

2010
$
$

94,770
13,500
108,270

113,724
185
113,909

The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a “management
approach” under which segment information is presented on the same basis as that used for internal
reporting purposes.
Operating segments are now reported in a manner that is consistent with the internal reporting provided to
the chief operating decision maker. The chief operating decision maker has been identified as the Board of
Empire Resources Ltd.
Consistent with prior year, the Group operates only in one business and geographical segment being
predominantly in the area of mining and exploration in Australia. The Group considers its business
operations in mineral exploration to be its primary reporting function.

20. Contingent assets

Penny's Find
In September 2010, the Company entered into a staged sale agreement for the Penny’s Find gold project with
Brimstone Resources Limited (Brimstone). At the election of Brimstone, the sale consideration comprises
either:

• Staged cash payments totalling $2.0 million for a 100% interest of the Penny’s Find project. A royalty will also
be payable on gold produced in excess of the current JORC resource of 52,500 ozs gold.

• Staged cash payments totalling $0.5 million together with exploration and development expenditure of up to
$3 million for an 80% interest in the Penny’s Find project. Any additional development costs associated with
the Company's residual 20% interest will carried by Brimstone and repayable from the proceeds of future gold
production.

An initial $500,000 (GST inclusive) payment has been made by Brimstone during the year to earn a 40%
interest in the project. Brimstone must then continue funding exploration and development work by expending
up to $3 million by 31st December 2013 to earn an 80% interest in the project. After expending $1.5 million by
December 2012, Brimstone can elect to purchase 100% of the project for $1.5 million plus a

2% gross royalty on gold produced in excess of the current JORC resource of 52,500 ozs gold. The royalty
would only apply when the gold price is above A$700/oz and would not exceed A$50 per ounce of gold
recovered.

Troy Creek
During the March 2011 quarter, the Company finalised an agreement with unlisted Sydney based company,
Zodiac Resources Ltd, whereby Zodiac may earn a 55% interest by spending $3 million on exploration within
three years and earn a 75% interest by spending an additional $4 million on exploration and development
within 5 years. Zodiac will have the option to acquire a 100% interest in the Troy Creek project within five years
of commencement of the joint venture for a purchase price of $5 million – this amount being separate to the
joint venture commitments.

21. Events after the Balance Date

Since 30 June 2011 there has not been any matter or circumstance not otherwise dealt with in the financial
report that has significantly affected or may significantly affect the Company.

Page 54

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 55

Empire Resources Limited

Notes to the Financial Statements 30 June 2011

22. Parent Entity Financial Information

The individual financial statements for the parent entity show the following aggregate amounts:

ASSETS

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Total Current Assets

NON-CURRENT ASSETS

Trade and other receivables

Financial assets

Plant and equipment

Total Non-Current Assets

TOTAL ASSETS

LIABILITIES

CURRENT LIABILITIES

Trade and other payables

Total Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

Loss before income tax expense

Income tax benefit
Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Parent Entity

2011

2010

1,781,147

310,855

2,092,002

595,674

70,861

666,535

863,227

23,691

886,931

1,256,645

34,427

1,291,072

2,978,933

1,957,607

297,851

130,106

297,851

130,106

2,681,082

1,827,501

14,516,700

847,444

11,723,878

739,174

(12,683,062)

(10,635,551)

2,681,082

1,827,501

(2,111,869)

204,022

(139,664)

(2,047,511)

(522,353)

Page 56

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

12.

DIRECTORS’ DECLARATION

1. In the directors’ opinion:

(a)

the financial statements and notes set out on pages 26 to 56 are in accordance with the Corporations Act
the financial statements and notes set out on pages 9 to 39 are in accordance with the Corporations Act
2001 including:

(i)

(ii)

complying with Australian Accounting Standards (including the Australian Accounting
Interpretations), the Corporations Regulations 2001, professional reporting requirements and
other mandatory requirements; and

giving a true and fair view of the Consolidated entity’s financial position as at 30 June 2011
and of its performance for the financial year ended on that date; and

(b)

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable; and

(c)

the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.

2. The directors have been given the declarations by the Chief Executive Officer and the Chief Financial
Officer required by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011.

This declaration is made in accordance with a resolution of the directors.

___________________
David Sargeant
Managing Director

Perth, Western Australia
8 September 2011

Page 56

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 57

13.

INDEPENDENT AUDITOR’S REPORT

To the members of Empire Resources Limited

Report on the Financial Report

We have audited the accompanying financial report of Empire Resources Limited (“the company”),
which comprises the statement of financial position as at 30 June 2011, the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows for the
year then ended, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors’ declaration for the consolidated entity. The consolidated entity
comprises the company and the entities it controlled at the year’s end or from time to time during the
financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error.

In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101:
Presentation of Financial Statements that the consolidated financial report complies with International
Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
An audit also includes evaluating the appropriateness
effectiveness of the company’s internal control.
of accounting policies used and the reasonableness of accounting estimates made by the directors,
as well as evaluating the overall presentation of the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

Page 58

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

INDEPENDENT AUDITOR’S REPORT (continued)

Matters relating to the electronic presentation of the audited financial report
This auditor’s report relates to the financial report and remuneration report of Empire Resources
Limited for the financial year ended 30 June 2011 included on Empire Resources Limited’s website.
The company’s directors are responsible for the integrity of the Empire Resources Limited website.
We have not been engaged to report on the integrity of this website. The auditor’s report refers only to
the financial report and remuneration report identified in this report. It does not provide an opinion on
any other information which may have been hyperlinked to/from the financial report. If users of the
financial report are concerned with the inherent risks arising from publication on a website, they are
advised to refer to the hard copy of the audited financial report and remuneration report to confirm the
information contained in this website version of the financial report.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.

Auditor’s Opinion

In our opinion:

(a)

the financial report of Empire Resources Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011

and of its performance for the year ended on that date; and

(b)

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1(a).

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2011. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the Remuneration Report of Empire Resources Limited for the year ended 30 June
2011 complies with section 300A of the Corporations Act 2001.

HLB MANN JUDD
Chartered Accountants

Perth, Western Australia
8 September 2011

N G NEILL
Partner

Page 58

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 59

14.

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Empire Resources Limited for the year ended 30
June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions
of:

the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and

b) any applicable code of professional conduct in relation to the audit.

Perth, Western Australia
8 September 2011

N G NEILL
Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

Page 60

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

15.

CORPORATE GOVERNANCE PRINCIPLES

Introduction

Empire Resources Limited ("Company") has made it a priority to adopt systems of control and accountability as the basis
for the administration of corporate governance. Some of these policies and procedures are summarised in this
statement. To the extent that they are applicable, and given its circumstances, the Company adopts the Eight Essential
Corporate Governance Principles and Best Practice Recommendations ('Recommendations') published by the Corporate
Governance Council of the ASX.

Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate
statements reporting on the adoption of the recommendation. Where, after due consideration, the Company's corporate
governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption
of its own practice, in compliance with the "if not, why not" regime.

As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of additional
corporate governance structures will be afforded further consideration.

DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES

Summary Statement

Recommendation

If not, why not

Recommendation

ASX Principles and
Recommendations

If not, why not

ASX Principles
ASX Principles
and
and
Recommendations
Recommendations

Refer (a) below

4.3

Refer (a) below

4.4³

n/a

√

Refer (a) below

5.1

Refer (h) below

Refer (b) below

5.2

n/a

Refer (b) below

6.1

Refer (i) below

Refer (b) below

6.2

n/a

Refer (c) below

7.1

Refer (j) below

Refer (d) below

7.2

n/a

Refer (e) below

7.3

√

Refer (k) below

Refer (f) below

7.4

n/a

Refer (g) below

8.1

Refer (l) below

Refer (f) below

8.2

Refer (c) below

8.3

n/a

1.1

1.2

1.3

2.1

2.2

2.3

2.4

2.5

2.6

3.1

3.2

3.3

4.1

4.2

n/a

Page 60

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 61

(a)

Principle 1 Recommendation 1.1, 1.2 and 1.3

Notification of Departure

Empire has not formally disclosed the functions reserved to the Board and those delegated to senior executives. The
appointment of non-executive directors to the Board is not formalised in writing by way of a letter or other agreement.

Explanation for Departure:

The Board recognises the importance of distinguishing between the respective roles and responsibilities of the Board
and management. The Board has established an informal framework for the management of the Company and the roles
and responsibilities of the Board and management. Due to the small size of the Board and of the Company, the Board do
not think that it is necessary to formally document the roles of Board and management as it believes that these roles are
being carried out in practice and are clearly understood by all members of the Board and management. The Board is
responsible for the strategic direction of the Company, establishing goals for management and monitoring the
achievement of these goals, monitoring the overall corporate governance of the Company and ensuring that Shareholder
value is increased. The Company has two executives, being the Managing Director and an executive Director. The
Managing Director is responsible for ensuring that the Company achieves the goals established by the Board.

The appointments of non-executive directors are formalised in accordance with the regulatory requirements and the
Company’s constitution.

(b)

Principle 2 Recommendations 2.1, 2.2, 2.3

Notification of departure

The Company does not have a majority of independent directors, with only one of the 3 Board members being
independent.

Explanation for departure

The Board considers that the current composition of the Board is adequate for the Company's current size and
operations and includes an appropriate mix of skills and expertise relevant to the Company's business. The current
Board structure presently consists of the independent non-executive chairman, Mr Thomas Revy, the managing director
(Mr David Sargeant) and one executive director (Mr Adrian Jessup), both of whom are not independent. The Company
considers that each of the directors possess skills and experience suitable for building the Company. It is the Board's
intention to appoint another independent director as and when the size and complexity of its operations changes and a
suitable candidate is identified.

(c)

Principle 2 Recommendation 2.4 and Principle 4 Recommendations 4.1, 4.2, 4.3, 4.4

Notification of Departure

Separate nomination and audit committees have not been formed.

Explanation for Departure

The Board considers that the Company is not currently of a size, or its affairs of such complexity, that the formation of
separate or special committees is justified at this time. The Board as a whole is able to address the governance aspects
of the full scope of the Company's activities and ensure that it adheres to appropriate ethical standards.

In particular, the Board as a whole considers those matters that would usually be the responsibility of an audit committee
and a nomination committee. The Board considers that, at this stage, no efficiencies or other benefits would be gained by
establishing a separate audit committee or a separate nomination committee.

(d)

Principle 2 Recommendation 2.5

Notification of Departure

Empire does not have in place a formal process for evaluation of the Board, its committees, individual directors and key
executives.

Explanation for Departure

Evaluation of the Board is carried out on a continuing and informal basis. The Company will put a formal process in place
as and when the level of operations of the Company justifies this.

(e)

Principle 2 Recommendation 2.6

Companies should provide the information indicated in the Guide to Reporting on Principle 2.

Disclosure:

Skills, Experience, Expertise and term of office of each Director

A profile of each director containing their skills, experience, expertise and term of office is set out in the Directors' Report.

Page 62

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Identification of Independent Directors

The independent director of the Company during the Reporting Period is disclosed in (b) above.

Independence is measured having regard to the relationships listed in Box 2.1 of the Principles & Recommendations.

Statement concerning availability of Independent Professional Advice

To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain
independent professional advice to properly discharge the responsibility of their office as a director then, provided the
director first obtains approval for incurring such expense from the Chair, the Company will pay the reasonable expenses
associated with obtaining such advice.

Nomination Matters

The full Board sits in its capacity as a Nomination Committee.

Performance Evaluation

During the Reporting Period the performance evaluations for the Board and individual directors did occur in accordance
with the disclosed process in Recommendation 2.5.

Selection and Reappointment of Directors

The Board considers the balance of independent directors on the Board as well as the skills and qualifications of
potential candidates that will best enhance the Board's effectiveness.

Each director other than the managing director must retire from office no later than the longer of the third annual general
meeting of the company or 3 years following that director’s last election or appointment. At each annual general meeting
a minimum of one director or a third of the total number of directors must resign. A director who retires at an annual
general meeting is eligible for re-election at that meeting. Reappointment of directors is not automatic.

(f)

Principle 3 Recommendation 3.1, 3.3

Notification of Departure

Empire has not established a formal code of conduct.

Explanation for Departure:

The Board considers that its business practices, as determined by the Board and key executives, are the equivalent of a
code of conduct.

(g)

Principle 3 Recommendation 3.2

Companies should establish a policy concerning trading in company securities by directors, senior executives and
employees, and disclose the policy or a summary of that policy.

Disclosure:

The board has adopted a policy which prohibits dealing the Company's securities by directors, officers and employees
when those persons possess inside information. The policy prohibits short term or speculative trading of the Company's
securities. The policy provides that permission be obtained from the Chairman prior to trading.

(h)

Principle 5 Recommendation 5.1, 5.2

Notification of Departure

Empire has not established written policies and procedures designed to ensure compliance with ASX Listing Rule
disclosure requirements and accountability for compliance.

Explanation for Departure

The Directors have a long history of involvement with public listed companies and are familiar with the disclosure
requirements of the ASX listing rules.

The Company has in place informal procedures that it believes are sufficient for ensuring compliance with ASX Listing
Rule disclosure requirements and accountability for compliance. The Board has nominated the Managing Director and
the Company Secretary as being responsible for all matters relating to disclosure.

Page 62

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 63

(i)

Principle 6 Recommendation 6.1, 6.2

Notification of Departure

Empire has not established a formal Shareholder communication strategy.

Explanation for Departure

While the Company has not established a formal Shareholder communication strategy, it actively communicates with its
Shareholders in order to identify their expectations and actively promotes Shareholder involvement in the Company. It
achieves this by posting on its website copies of all information lodged with the ASX. Shareholders with internet access
are encouraged to provide their email addresses in order to receive electronic copies of information distributed by the
Company. Alternatively, hard copies of information distributed by the Company are available on request.

(j)

Principle 7 Recommendation 7.1, 7.2

Notification of Departure

Empire has an informal risk oversight and management policy and internal compliance and control system.

Explanation for Departure

The Board does not currently have formal procedures in place but is aware of the various risks that affect the Company
and its particular business. Section 8 of the prospectus dated 7 November 2006 provides a summary of the relevant risk
factors that may affect the Company. As the Company develops, the Board will develop appropriate procedures to deal
with risk oversight and management and internal compliance, taking into account the size of the Company and the stage
of development of its projects.

(k)

Principle 7 Recommendation 7.3

The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the
Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations
Act is founded on a sound system of risk management and internal control and that the system is operating effectively in
all material respects in relation to financial reporting risks.

Disclosure:

The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) have provided a declaration to
the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is
founded on a sound system of risk management and internal control and that the system is operating effectively in all
material respects in relation to financial risk.

(l)

Principle 8 Recommendations 8.1

Notification of departure

Empire does not have a formal remuneration policy and has not established a separate remuneration committee.
Directors and management may receive options or shares.

Explanation for Departure

The current remuneration of the Directors is disclosed in the Directors’ Report. Non-executive Directors receive a fixed
fee for their services and may also receive options or shares. The issue of options or shares to non-executive Directors
may be an appropriate method of providing sufficient incentive and reward while maintaining cash reserves.
Due to the Company's early stage of development and small size, it does not consider that a separate remuneration
committee would add any efficiency to the process of determining the levels of remuneration for the Directors and key
executives. The Board believes it is more appropriate to set aside time at specified Board meetings each year to
specifically address matters that would ordinarily fall to a remuneration committee. In addition, all matters of
remuneration will continue to be in accordance with regulatory requirements, especially in respect of related party
transactions; that is, none of the Directors will participate in any deliberations regarding their own remuneration or related
issues.

Page 64

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

16.

ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is
as follows. The information is current as at 6 October 2011.

(a) Distribution of shares

The numbers of shareholders, by size of holding are:

Category (size of holding)

1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over

Number
of Holders

23
77
140
411
223
874

The number of shareholdings held in less than marketable parcels is 120.

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

SHAREHOLDERS

RBJ NOM PL
KIRKDALE HLDGS PL
AGENS PL
MEEKAL PL
ANKAA SPRINGS PL
A N SUPER PL
BLAMNCO TRADING PL
TRONES INV PL
SUHARITDUMRONG SUKHON

1 WESTORIA RESOURCE INV LTD
2
3
4
5
6
7
8
9
10
11 H WALLACE-SMITH & CO PL
12 D W SARGEANT PL
13 CANARY PL
14 HOLDREY PL
15 MCCUBBING BRIAN
16
LENNARD JUDITH BARRETT-
17
FIRST FARLEY PL
18 COLTRANGE PL
19 MARTINI 5 PL
20 DRAPER NICHOLAS S + M J

Number of
shares held % Holding

3,698,571
3,313,306
3,300,000
3,275,806
3,098,333
3,056,160
3,000,000
3,000,000
2,800,000
2,268,500
2,110,000
2,000,000
2,000,000
1,907,776
1,900,000
1,700,000
1,700,000
1,527,677
1,470,000
1,310,000
48,436,129

2.60%
2.33%
2.32%
2.30%
2.18%
2.15%
2.11%
2.11%
1.97%
1.59%
1.48%
1.41%
1.41%
1.34%
1.34%
1.19%
1.19%
1.07%
1.03%
0.92%
34.04%

Page 64

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 65

Listing has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian
Stock Exchange Limited except for the following which are not quoted by virtue of restriction agreements.

Quoted shares on ASX and total issued share capital

142,295,921

(d) Voting rights

All shares carry one vote per unit without restriction.

(e) Unlisted options

Unlisted options (Ex Price 13.7 cents; Exp 25 June 2013)

2,700,000

Unlisted options (Ex Price 15 cents; Exp 2 June 2013)

Unlisted options (Ex Price 9 cents; Exp 9 August 2014)

8,227,729

1,500,000

Page 66

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

INTERESTS IN MINING AND EXPLORATION TENEMENTS
as 30 September 2011

PROJECT

TENEMENT

INTEREST

REMARKS

Application not yet granted
Application not yet granted
Application not yet granted

TROY CREEK

PENNY'S FIND

YUINMERY

E69/1729
E69/2357
E69/2358
E69/2485
E69/2869
E69/2870
P69/45

E27/410
E27/420
M27/156
P27/1713
P27/1714
P27/1715
P27/1716
P27/1717
P27/1718
P27/1719
P27/1720
P27/1721
P27/1722
P27/1723
P27/1724
P27/1725
P27/1726
P27/1727
P27/1728
P27/1729
P27/1730
P27/1731
P27/1814
P27/1922
P27/1923
P27/1962
P27/2007
P27/2008

M57/265
P57/1214
P57/1215
P57/1216
P57/1217
E57/735
E57/766
E57/783
E57/840

45%
45%
45%

45%

60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%

100%
100%
100%
100%
100%
100%
100%
100%
100%

Page 66

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

Page 67

PROJECT

YUINMERY
OPTION

WYNNE

TENEMENT

INTEREST

REMARKS

E57/514
E57/524
E57/681
P57/1130
P57/1131

E08/1979
E08/2275

Option for 82% Interest
Option for 82% Interest
Option for 82% Interest
Option for 82% Interest
Option for 82% Interest

100%

Application not yet granted

Page 68

EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

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EMPIRE RESOURCES LIMITED – ANNUAL REPORT 2011

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E
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2
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