2011 - Central Asia Resources

2011Annual ReportTABLE OF CONTENTSCORPORATE DIRECTORY............................................................................................................... 2CHAIRMAN’S ADDRESS ................................................................................................................ 3OPERATIONS REPORT ................................................................................................................... 4DIRECTORS’ REPORT .................................................................................................................... 8AUDITOR’S INDEPENDENCE DECLARATION ................................................................................. 24CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ........................................................ 25CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................ 26CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................. 27CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................ 29NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................ 30DIRECTORS’ DECLARATION ......................................................................................................... 73INDEPENDENT AUDIT REPORT .................................................................................................... 74ASX ADDITIONAL INFORMATION ................................................................................................ 76CORPORATE GOVERNANCE STATEMENT ..................................................................................... 79

2011Annual ReportOPERATIONS REPORTOperations reportOverviewAustralian-based gold explorer Central Asia Resources Limited (ASX: CVR) is focused on developing its projectsin Kazakhstan, Central Asia.The company holds four licence areas in Kazakhstan. These include four prospects with JORC Resources, all ofwhich have exploration upside, and areas of significant prospectivity based on extensive exploration duringSoviet times. The licence areas are within recognised gold belts, and close to operating mines andinfrastructure.Central Asia Resources commenced mining at our flagship project, Dalabai in September 2011. Processingbegan in December with gold production commencing in March 2012.Altyntas is the Company's largest prospect. Exploration and testwork undertaken in 2011 and 2012demonstrates the ore body's suitability for both heap leach and carbon-in-pulp / carbon-in-leach (CIP/CIL)treatment. The company is exploring multiple paths towards commercialisation.Resources and ReservesTable 1 - Global Resources4

2011Annual ReportOPERATIONS REPORTTable 2- Summary of Mineral Resources Estimated Reported according to JORC Category and DepositThe information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled byDuncan Greenaway who is employed by Central Asia Resources Limited. Mr. Greenaway is a Member of The Australasian Institute ofMining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit underconsideration and to the activity which he is undertaking to qualify 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. Greenaway consents to the inclusion inthe report of the matters based on information in the form and context in which it appears. Statements regarding Central Asia Resources’plans with respect to its mineral properties are forward-looking statements. There can be no assurance that Central Asia Resources’ plansfor development of its mineral properties will proceed as currently expected. There can also be no assurance that Central Asia Resources’will be able to confirm the presence of additional mineral deposits, that any mineralisation will prove to be economic or that a mine willsuccessfully be developed on any of Central Asia Resources’ mineral properties.DalabaiAcquired in 2008, Dalabai has been the Company’s focus for the past two years as a rapid target to developheap leach operation.The project is being developed to mine and process 25,000 ounces of gold and 550,000 ounces of silver peryear for, initially, 2.7 years. Continued exploration is expected to significantly extend the life of mine. CentralAsia Resources commenced gold production at Dalabai in March 2012.During the year, total Indicated and Inferred Resources for Dalabai increased 28% to 3.98Mt at 0.97g/t gold(0.2g/t cut-off) for 124,000 ounces of gold. A significant shallow, high-grade portion of the resource wasdefined which, using a cut-off grade of 2g/t gold, gives 419,000t at 4.23g/t for 57,000 ounces.In October 2011, Central Asia Resources announced it would spend $500,000 on exploration at Dalabai as partof the $1 million exploration programme. The Dalabai drill program is designed to maintain and potentiallyincrease the currently-established mine life.Central Asia Resources reported in November that its first month of mining at Dalabai had exceededexpectations, reaching the target ore mining rate of 1,200 tonnes per day within two weeks. Ore being minedand crushed was also above expectations, averaging a grade of 1.96 g/t gold (predicted 1.77 g/t), and the finesaveraged 2.14 g/t.Processing at Dalabai began in December and was completed to the point where heap leaching couldcommence.In December, mineral processing licences for purchase, storage and use of cyanide, were received as expected,however changes to regulations in Kazakhstan to tighten controls over industrial chemicals resulted in atemporary shortage of cyanide in the country. This meant Central Asia Resources’ order was delayed until lateJanuary 2012.Mining ceased in late December as a consequence of the harsh winter but crushing and stacking continuedwith stockpiled ore and ore partially processed by previous operators. Approximately 75,000 tonnes at about1.5 g/t Au has been stacked and is being processed while the company progresses towards its target of160,000 tonnes of material on the heap.5

2011Annual ReportOPERATIONS REPORTThe current resource at Dalabai is primarily from three out of eight identified ore zones, with drilling toincrease the known resource from the other zones and mine life. The north-east part of the licence area wasacquired in 2010 and a regional exploration programme to identify potential mineralisation is planned for2012.BizheBizhe is a 246sq km licence less than 20km from Dalabai, and is being initially evaluated to provide additionalfeed for the processing facility there.In October 2011, Central Asia Resources announced it would spend $200,000 on exploration at Bizhe as part ofa $1 million exploration program. The drilling is designed to test the grade, extent and continuity of one of twoknown mineralised zones on the 246km² licence area identified by encouraging trenching results.This program has been completed at Bizhe, with eight diamond drill holes totalling approximately 860 metresand drill hole depth varying from 70m to 140m.AltyntasAltyntas is our largest prospect with an Indicated and Inferred resource of approximately 600,000 ounces ofgold. Exploration and testwork is planned in 2012 to increase this resource and to prepare for developmentand production commencing in 2013.Altyntas testwork confirms it's suitability for both heap leach and CIP/CIL processing. The company is exploringvarious alternative strategies to reach the shortest path to commercialisation.Further drilling and testwork is required to increase the confidence in and size of the ore zone. Central AsiaResources spent $300,000 on exploration at Altyntas during Q4 2011 as part of a $1 million explorationprogram.Figure 1 - Altyntas Deposit6

2011Annual ReportOPERATIONS REPORTKepken and KengirKepken and Kengir are in the same region as Altyntas but are notpart of the company’s current strategic plan.Kepken has a 438,000-ounce gold resource with 264,000 ouncesof Indicated Resources and 174,000 ounces of Inferred Resources.Kengir has a 125,000-ounce gold resource, with 56,000 ounces ofIndicated resources and 69,000 ounces of Inferred resources at acut-off grade of 0.5g/t gold.Figure 2 - Project location mapCorporateDuring the year, the Company raised a total of $13,159,474 through the issue of 377,752,872 shares to fundthe development of Dalabai and exploration of its prospects. The Company also appointed several seniormanagement personnel including Mrs Angela Pankhurst as Managing Director, Mr Chris Campbell-Hicks asCountry Manager Kazakhstan, Mr Duncan Greenaway as Chief Operating Officer and Ms Michelle Kong as ChiefFinancial Officer and Company Secretary.On 6 February 2012, the Company advised the resignation of Managing Director Mrs Angela Pankhurst and adecision to close the Company’s Perth office and move administration operations to Kazakhstan. Guy, Earl ofWarwick and Mr Robin Gill are jointly acting as Managing Director until the Company finds a suitable candidateto take on the role.The Company also announced the resignation of Ms Michelle Kong as Chief Financial Officer and CompanySecretary and the appointment of Ms Zhanna Tazhibayeva as Chief Financial Officer and Mr Michael Michael asNon-Executive Director and Acting Company Secretary.On 9 February 2012, the Company announced it would place 80,000,000 ordinary fully paid shares at 2.5 centseach to professional and sophisticated investors to raise $2 million. Proceeds from the placement will be usedto fund the ramp-up of gold processing at Dalabai as the Company progresses to near-term positive cash flow.It will also fund exploration at Central Asia Resources’ Bizhe and Altyntas projects.On 24 February, the Company commenced production at Dalabai. Once fully operational, the Company intendsto produce 25,000 ounces of gold per year and 550,000 ounces of silver per year at Dalabai.Guy, Earl of WarwickChairmanCentral Asia Resources Limited7

2011Annual ReportDIRECTORS’ REPORTDirectors’ ReportYour Directors submit their report for the Company (“Company” or “Parent”) and its subsidiaries (together“the Consolidated Entity”) for the year ended 31 December 2011.DirectorsThe names and details of the Company's directors in office during the financial year and until the date of thisreport are as follows. Directors were in office for this entire year unless otherwise stated.Guy, Earl of Warwick Chairman & Joint Acting Managing Director (Appointed 6 February 2012, formerly Non-Executive Director)Experience and expertiseGuy, Earl of Warwick, has over 20 years’ experience in mining, manufacturing and real estate. He is a foundingshareholder and past Chairman of Windimurra Vanadium Limited. He is presently a principal of the Istanaresort in Thailand and has exploration interests in Africa.Other current listed company directorships in AustraliaNoneFormer listed company directorships in last 3 years in AustraliaWindimurra Vanadium LimitedInterests in shares and options53,994,315 Ordinary Shares in Central Asia Resources Limited2,500,000 OptionsRobin Gill Joint Acting Managing Director (Appointed 6 February 2012, formerly Non-Executive Director)Experience and expertiseMr Robin Gill has 30 years' experience in development, production, operations and marketing in theinternational petroleum industry, including management and executive roles with both multi-national andindependent oil and gas companies. He was the Managing Director for the Middle East and North Africa ofDynergy Global Liquids, based in Houston, and Chief Executive of Danagaz WLL, a natural gas developmentcompany based in the Arabian Gulf.Other current listed company directorships in AustraliaNoneFormer directorships in last 3 years in AustraliaNoneInterests in shares and options3,657,143 Ordinary Shares in Central Asia Resources Limited2,500,000 Options8

2011Annual ReportDIRECTORS’ REPORTErulan Kanapyanov Executive DirectorExperience and expertiseMr Erulan Kanapyanov is a businessman in Kazakhstan. Over his 40 year career, he has held numerous seniorexecutive and Board positions in industries as varied as property development, geological exploration andmining. He is the President of Kazakhstan-Australia Limited. He is a director of the companies which hold thenon-controlling interest in all of Central Asia Resources Ltd’s Kazakhstani subsidiaries.Other current listed company directorships in AustraliaNoneFormer listed company directorships in last 3 years in AustraliaNoneInterests in shares and options2,900,000 Ordinary Shares in Central Asia Resources Limited5,500,000 OptionsPhilippe Reiser Non-Executive DirectorExperience and expertiseMr Phillippe Reiser has over 30 years' experience in Private Banking. In 1993, he created Compagnie Privée deGestion Primatrust SA in Geneva, Switzerland, a multi family office company. He is also active as a member ofseveral Boards of Directors outside Australia.Other current listed company directorships in AustraliaNoneFormer directorships in last 3 years in AustraliaNoneInterests in shares and options126,400,952 Ordinary Shares in Central Asia Resources Limited2,500,000 OptionsMichael Michael Non-Executive Director and Acting Company Secretary (Appointed 16 and 24 February 2012respectively)Experience and expertiseMr Michael Michael has many years of experience in founding, developing and operating businesses inexecutive and non-executive roles. He is currently chairman of both Metaliko Resources Limited; an ASX listedKalgoorlie focussed gold explorer and Unison Holdings Limited; a design and construct contractor specialised inmining infrastructure. Previously, he served as a Director of a London based property developer Multiplex MBSLimited, and as a Director of Kinetiko Energy Limited; an ASX listed coal seam gas explorer operating in SouthAfrica.9

2011Annual ReportDIRECTORS’ REPORTOther current listed company directorships in AustraliaMetaliko Resources LimitedFormer directorships in last 3 years in AustraliaKinetiko Energy LimitedInterests in shares and options1,000,000 Ordinary Shares in Central Asia Resources LimitedNil OptionsAngela Pankhurst Managing Director (Appointed 1 February 2011, resigned 3 February 2012)Experience and expertiseMrs Angela Pankhurst is an experienced director with a background in corporate governance and finance whohas been an executive director of the Company prior its listing on the ASX. She is a Chartered Accountant withcompany secretarial, management and accounting experience in mining and other industries. Previously,Angela was the financial controller and company secretary of Mount Gibson Iron Limited and EnviroGoldLimited during their exploration and early development phases.Other current listed company directorships in AustraliaNoneFormer directorships in last 3 years in AustraliaEnviroGold Limited (currently PanTerra Gold Limited)Interests in shares and options1,500,000 Ordinary Shares in Central Asia Resources Limited9,400,000 OptionsJason Stirbinskis Managing Director (Resigned 31 January 2011)Experience and expertiseMr Jason Stirbinskis has worked as a geologist in the resource and finance sectors from Greenfield miningoperations to IT telecommunication and finance industry projects over a 20 year history. Previously he hasworked with or consulted to Newcrest Mining, Goldsworthy Mining, Placer Dome, Woodside Energy, WorsleyAlumina and many others.Other current listed company directorships in AustraliaTectonic Resources LimitedFormer directorships in last 3 years in AustraliaNone10

2011Annual ReportDIRECTORS’ REPORTInterests in shares and options1,000,000 Ordinary Shares in Central Asia Resources LimitedNil OptionsCompany SecretaryMichael Michael Acting Company Secretary (Appointed 24 February 2012)Mr Michael Michael will take on the role as Acting Company Secretary for a period of 60 days whilst thecompany seeks a suitable permanent candidate.Michelle Kong Company Secretary (Appointed 27 July 2011, resigned 15 February 2012)Ms Michelle Kong is a member of the Certified Practising Accountants of Australia with more than 10 years’experience in finance and accounting.Ingrid Laudzevics Company Secretary (Appointed 17 February 2011, resigned 27 July 2011)Ms Ingrid Laudzevics is an experienced Company Secretary who has fulfilled the role for a number of listed andunlisted companies.Winnie Lai Company Secretary (Resigned 17 February 2011)Ms Winnie Lai is a member of the Certified Practising Accountants of Australia and a member of the Instituteof Chartered Secretaries and Administrators.Principal Activities and Review of OperationsDuring 2011, the Consolidated Entity focused on the development of its Dalabai Project. The Companyreported in November that its first month of mining at Dalabai had exceeded expectations, reaching the targetore mining rate of 1,200 tonnes per day within two weeks. Ore being mined and crushed was also aboveexpectations, averaging a grade of 1.96 g/t gold (predicted 1.77 g/t), and the fines averaged 2.14 g/t.Refer to the Operations Report for further details.Executive Appointments during the YearMrs Angela Pankhurst was appointed as Managing Director and has been an Executive Director of theCompany since the listing on the ASX. She is a Chartered Accountant with a background in corporategovernance and finance and an in-depth knowledge of the Company’s business in Kazakhstan.Mr Duncan Greenaway was appointed Exploration Manager and later Chief Operation Officer. He has morethan 35 years of wide-ranging, international experience in exploration, mining and contract drilling throughoutAustralasia, southern Africa and Eastern Europe. His experience includes 22 years in gold exploration andproduction.Mr Chris Campbell-Hicks was appointed as Country Manager Kazakhstan and has more than 30 years’experience in all aspects of gold processing from design and supervision of test work programs to staffing,plant commissioning and post commissioning optimisation.Ms Michelle Kong was appointed Chief Financial Officer and Company Secretary. She is a Certified PractisingAccountant with more than 10 years of experience in finance and accounting, working for large accountingfirms and multi-national companies listed on the Australian, Canadian and London Stock Exchanges. She waspreviously Group Finance Manager for Mirabela Nickel Limited and Norilsk Nickel.11

2011Annual ReportDIRECTORS’ REPORTFinancial Position and ProspectsThe net assets of the Consolidated Entity at balance date were $22,387,961 (2010: $11,842,121).Capital RaisingThe Company raised a total of $13,159,474 through the issue of 377,752,872 shares to fund the developmentof Dalabai and exploration of its prospects. It also issued 108,413,763 options exercisable at 3.5c on or before19 May 2014 to directors and an employee, and as payment in relation to the capital raising and loansreceived.Significant Changes in the State of AffairsSignificant changes in the state of affairs of the Consolidated Entity during the financial year were as detailedabove and in the Operations Report.In the opinion of the Directors, there were no other significant changes in the state of affairs of theConsolidated Entity that occurred during the financial year under review not otherwise disclosed in this reportor in the financial statements.Significant Events after the Balance DateThere were significant changes in the Company subsequent to balance date. In January, Mr DuncanGreenaway was promoted to Chief Operating Officer, with Mr Chris Campbell-Hicks completing his contract asCountry Manager Kazakhstan.In February 2012, Central Asia Resources advised the resignation of Managing Director Mrs Angela Pankhurstand a decision to close the Company’s Perth office and move administration operations to Kazakhstan. Guy,Earl of Warwick and Mr Robin Gill are jointly acting as Managing Director until the Company finds a suitablecandidate to take on the role.Mr Gill is an engineer with many years of experience in project management and production operations. Hehas taken control of Central Asia Resources’ operations and will remain in Kazakhstan until first productiontargets at the Company’s Dalabai gold processing facility, along with other restructuring objectives, areachieved.The Company also announced the resignation of Ms Michelle Kong as Chief Financial Officer and theappointment of Ms Zhanna Tazhibayeva as Chief Financial Officer and Mr Michael Michael as Non-ExecutiveDirector and Acting Company Secretary.Ms Tazhibayeva has previously worked for global investment bank JP Morgan and petroleum company AgipKCO while her most recent position was with Kazakhstan-based pharmacy group Amity Retail. She is multilingualand is fluent in English, Russian and German. Her knowledge of the language and familiarity with localregulations and operating environment will enhance and improve business efficiency in Kazakhstan.Mr Michael has many years of practical experience in founding, developing and operating business inexecutive and non-executive roles, many of which have been from start-up. He is currently chairman of bothMetaliko Resources Limited and Unison Holdings Limited.In addition to this, the Company announced in February that it would place 80,000,000 ordinary fully paidshares at 2.5 cents each to professional and sophisticated investors to raise $2 million.Proceeds from the placement will be used to fund the ramp-up of gold processing at Dalabai as theConsolidated Entity progresses to near-term positive cash flow. It will also fund exploration at Central AsiaResources’ Bizhe and Altyntas projects.12

2011Annual ReportDIRECTORS’ REPORTOn 24 February, the Company commenced production at Dalabai. Once fully operational, the ConsolidatedEntity intends to produce 25,000 ounces of gold per year and 550,000 ounces of silver per year at Dalabai.Likely Developments and Expected ResultsOther than as referred to in this report, any further information as to the likely developments in the operationsof the Consolidated Entity and likely results of those operations would, in the opinion of the Directors, bespeculation and not in the best interest of the Consolidated Entity.Environmental Regulation and PerformanceThe Consolidated Entity through its subsidiaries in Kazakhstan is subject to environmental regulationsapplicable to license areas in that country. There have not been any known significant breaches of anyenvironmental regulations during the year under review and up until the date of this report.Meetings of DirectorsThe numbers of meetings Directors were eligible to attend during the period and the number of meetingsattended by each Director was as follows:Eligible Directors’ Meetings Directors’ Meetings AttendedG Warwick 7 7A Pankhurst 7 7P Reiser 7 6R Gill 7 7E Kanapyanov 7 7J Stirbinskis - -Remuneration Report (Audited)This remuneration report outlines the director and executive remuneration arrangements of the Company andthe Consolidated Entity in accordance with the requirements of the Corporations Act 2001 and its Regulations.For the purposes of this report, Key Management Personnel (“KMP”) of the Consolidated Entity are defined asthose persons having authority and responsibility for planning, directing and controlling the major activities ofthe Company and the Consolidated Entity, directly or indirectly, including any director (whether executive orotherwise) of the Parent company, and includes the five executives in the Parent and the Consolidated Entityreceiving the highest remuneration.For the purposes of this report, the term ‘executive’ encompasses the managing director, senior executives,general managers and secretaries of the Parent and the Consolidated Entity.Remuneration PhilosophyThe performance of the Company depends upon the quality of its directors and executives. To prosper, theCompany must attract, motivate and retain highly skilled directors and executives.To this end, the Company embodies the following principles in its remuneration framework, to the extentapplicable at this stage of the Company’s development:• provide competitive rewards to attract high calibre executives; and13

2011Annual ReportDIRECTORS’ REPORT• link executive rewards to shareholder value.The remuneration of executives and directors is not directly linked to Company performance. Options grantedto KMP’s are not linked to performance but are issued to align management’s interests to shareholder wealth.Details of KMP including the top remunerated executives of the Parent and the Consolidated Entity are set outbelow.Non-Executive Directors Executive Directors ExecutivesPhillippe Reiser Guy, Earl of Warwick – Chairman /Acting Joint Managing DirectorDuncan Greenaway – ChiefOperating Officer (appointed 29June 2011 as Exploration Managerand promoted 31 January 2012)Michael Michael (appointed 16February 2012 as Non-ExecutiveDirector and Acting CompanySecretary on 24 February 2012)Robin Gill – Acting Joint ManagingDirectorZhanna Tazhibayeva – ChiefFinancial Officer (appointed 14February 2012)Erulan KanapyanovAngela Pankhurst – ManagingDirector (appointed 1 February2011, resigned 3 February 2012)Jason Stirbinskis – ManagingDirector (resigned 31 January2011)Michelle Kong – Chief FinancialOfficer and Company Secretary(appointed 29 June & 27 July 2011respectively and resigned 15February 2012 and remains oncontract until 30 March 2012)Chris Campbell Hicks – CountryManager KZ (appointed 17 January2011, resigned 31 January 2012)Ingrid Laudzevics – CompanySecretary (appointed 17 February2011, resigned 27 July 2011)Winnie Lai – Company Secretary(resigned 17 February 2011)Jay Piner – Group Accountant(resigned 30 April 2011)Performance of the Consolidated EntityThe performance of the Consolidated Entity is as follows:Year Ended31 Dec 2011Year Ended31 Dec 2010Year Ended31 Dec 2009Year Ended31 Dec 2008$ $ $ $Loss before tax (3,753,971) (2,153,479) (7,249,103) (1,369,986)Basic loss per share (cents) (0.71) (0.92) (4.12) (2.07)Diluted loss per share (cents) (0.71) (0.92) (4.12) (2.07)Share Price 0.03 0.03 0.05 0.1614

2011Annual ReportDIRECTORS’ REPORTRemuneration StructureIn accordance with best practice corporate governance, the structure of executive and non-executive directorremuneration is separate and distinct.Executive RemunerationThe Company aims to reward executives with a level and mix of remuneration commensurate with theirposition and responsibilities within the Consolidated Entity so as to:• align the interests of executives with those of shareholders; and• ensure total remuneration is competitive by market standards.In determining the level and make-up of executive remuneration, the Board may engage external consultantsas needed to provide independent advice.Remuneration may consist of the following key elements:• Fixed remuneration (base salary, superannuation and non-monetary benefits);• Variable remuneration:o Short Term Incentive (“STI”); ando Long Term Incentive (“LTI”).Fixed RemunerationFixed remuneration is reviewed annually.Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of formsincluding cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosenwill be optimal for the recipient without creating undue cost for the Consolidated Entity.Variable RemunerationCash bonuses are designed to reward key management personnel for meeting or exceeding their operationalobjectives and are paid at the discretion of the Board.The objective of a LTI plan is to reward executives in a manner that aligns remuneration with the creation ofshareholder wealth. As such, LTI grants are only made to executives who are able to influence the generationof shareholder wealth and thus have an impact on the Consolidated Entity’s performance against the relevantlong term performance hurdle.LTIs have been granted to executives in the form of share options under the Employee Share Option Planwhich was approved by Shareholders on 29 May 2009 and 18 July 2011. The options are not subject to anyperformance hurdles as the Company is not yet at a stage where meaningful hurdles can be developed.Further details of the share options can be found in note 23 Share-based payment plans.The existing remuneration structure is presently not linked to the Consolidated Entity’s performance (otherthan share price) or other targets although it is the intention of the Board to link the remuneration toshareholder value in the future consistent with the remuneration philosophy.Non-Executive Director RemunerationThe Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attractand retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directorsshall be determined from time to time by a general meeting. The latest determination was at the Annual15

2011Annual ReportDIRECTORS’ REPORTGeneral Meeting held on 22 November 2007 which approved a maximum aggregate remuneration of $200,000per year.The amount of aggregate remuneration sought to be approved by shareholders and the fee structure isreviewed annually. The Board may consider advice from external consultants as well as the fees paid to nonexecutivedirectors of comparable companies when undertaking the annual review process.Each non-executive director receives a base fee of $40,000 for being a director of the Consolidated Entity. Anadditional fee of $10,000 is also paid to the Chairman. This remuneration has been paid in cash.At the annual general meeting held on 18 July 2011 the shareholders approved a grant of options to nonexecutivedirectors. The Company acknowledges that the grant of options to non-executive directors iscontrary to recommendation 8.2 of the Corporate Governance Principles and recommendations. However, theBoard considers the issue of options to be reasonable in the circumstances given the need to properly rewardthe non-executive directors for the time and effort they have committed to the Company, whilst maintaining acash reserve. Further details of the options issued can be found in note 23 Share based payment plans.The non-executive directors do not receive retirement benefits other than statutory superannuationpayments. The non-executive directors are eligible to take part in long term incentives as approved at theAnnual General Meeting held on 18 July 2011.Hedging of Equity AwardsThe Company prohibits executives from entering into arrangements to protect the value of unvested LTIawards. The prohibition includes entering into contracts to hedge their exposure to options awarded as part oftheir remuneration package.Employment ContractsThe key terms of employment contracts or agreements with KMP are:Mr Robin Gill, Joint Acting Managing Director, entered into an employment contract on 6 February 2012 for 12months, with the option to extend the contract for a further 12 months. The contract is capable of terminationwith one month notice by either party. All expenses properly incurred during the course of business will bereimbursed.Guy, Earl of Warwick, Joint Acting Managing Director entered into an employment contract on 6 February2012 for 12 months, with the option to extend the contract for a further 12 months. The contract is capable oftermination with one month notice by either party. All expenses properly incurred during the course ofbusiness will be reimbursed.Mr Duncan Greenaway, Chief Operation Officer, entered into an employment contract on 29 June 2011. Thecontract is unlimited in term but capable of termination with no termination clause. All expenses properlyincurred during the course of business will be reimbursed. As part of the contract, Mr Greenaway is entitled toparticipate in the Consolidated Entity’s bonus and incentive schemes.Ms Zhanna Tazhibayeva, Chief Financial Officer, entered into an employment contract on 14 February 2012.The contract is unlimited in term but capable of termination with three months’ notice by either party. TheConsolidated Entity retains the right to terminate the contract immediately, by making payments equal tothree months’ pay in lieu of notice. All expenses properly incurred during the course of business will bereimbursed.Mrs Angela Pankhurst, Managing Director, entered into an employment contract on 1 February 2011. Thecontract is unlimited in term but capable of termination with no termination clause. As part of the contract,Mrs Pankhurst is entitled to participate in the Consolidated Entity’s bonus and incentive schemes. All expenses16

2011Annual ReportDIRECTORS’ REPORTproperly incurred during the course of business will be reimbursed. Mrs Pankhurst resigned from theConsolidated Entity on 3 February 2012.Ms Michelle Kong, Chief Financial Officer and Company Secretary, entered into an employment contract on 29June 2011. The contract is unlimited in term but capable of termination with three months’ notice by eitherparty. The Consolidated Entity retains the right to terminate the contract immediately, by making paymentsequal to three months’ pay in lieu of notice. All expenses properly incurred during the course of business willbe reimbursed. As part of the contract, Ms Kong is entitled to participate in the Consolidated Entity’s bonusand incentive schemes. Ms Kong resigned from the Consolidated Entity on 15 February 2012 and remains oncontract until 30 March 2012.Mr Chris Campbell Hicks, Country Manager Kazakhstan, entered into an employment contract on 17 January2011, with option to extend the contract for a further 2 years. Included in the contract is a performance bonus,and the provision of an apartment, car and driver in Almaty, Kazakhstan; and two return flights from Almaty,Kazakhstan to Perth, Western Australia and return to Perth, Western Australia on cessation of engagement.Mr Campbell is entitled to participate in the Consolidated Entity’s bonus and incentive schemes. Mr Campbell-Hicks resigned from the Consolidated Entity on 31 January 2012.Mr Jason Stirbinskis, Managing Director, entered into a 3 year term employment contract from 1 May 2008.The contract is capable of termination with six months’ notice by either party. The Consolidated Entity retainsthe right to terminate the contract immediately, by making payments equal to six months’ pay in lieu of notice.All expenses properly incurred during the course of business will be reimbursed. Mr Stirbinskis is entitled toparticipate in the Consolidated Entity’s bonus and incentive schemes. Mr Stirbinskis resigned on 31 January2011.Mr Jay Piner, Senior Group Accountant, entered into a 1 year term employment contract from 1 January 2011.The contract is capable of termination with two weeks’ notice and payment of not more than 3 monthsequivalent annual salary and 9% superannuation on such event. All expenses properly incurred during thecourse of business will be reimbursed. Mr Piner resigned on 30 April 2011.17

2011Annual ReportDIRECTORS’ REPORTRemuneration of key management personnel and highest paid executives of the Company and The Consolidated Entity for the year ended 31 December 2011Short-term Short-term Post-EmploymentShare BasedPaymentBase Fee Other 11 Superannuation OrdinarySharesShare BasedPaymentOptionsTotalPerformanceRelatedPercentageComprisingOptions$ $ $ $ $ $ $ $DirectorA Pankhurst 1 203,915 - 18,636 - 96,915 319,466 - 30.34%E Kanapyanov 2 41,409 137,949 - - 59,226 238,584 - 24.82%G Earl of Warwick 39,261 - 3,014 - 26,921 69,196 - 38.91%R Gill 29,998 - - - 26,921 56,919 - 47.30%P Reiser 29,998 - - - 26,921 56,919 - 47.30%J Stirbinskis 3 43,081 - 3,877 - (29,051) 17,907 - n/aKey Management PersonnelC Campbell-Hicks 4 171,774 - 15,460 - 237,581 424,815 - 55.93%D Greenaway 5 123,846 - 11,146 - - 134,992 - -M Kong 6 89,583 - 8,063 - - 97,646 - -I Laudzevics 7 22,596 - 2,034 - - 24,630 - -J Piner 8 42,844 - 3,856 - - 46,700 - -W Lai 9 - 3,500 - - - 3,500 - -Total 838,305 141,449 66,086 - 445,434 1,491,274 - 29.87%See following page for notes18

2011Annual ReportDIRECTORS’ REPORTRemuneration of key management personnel and highest paid executives of the Company and The Consolidated Entity for the year ended 31 December 2010Short-term Short-term Post-EmploymentShare BasedPaymentShare BasedPaymentBase Fee Other 11 Superannuation Ordinary Shares OptionsTotalPerformanceRelatedPercentageComprisingOptions$ $ $ $ $ $ $ $DirectorA Pankhurst 1 149,353 15,690 13,158 - 4,501 182,702 - 2.46%E Kanapyanov 2 40,000 108,724 - - - 148,724 - -G Earl of Warwick 39,206 - 4,785 - - 43,991 - -R Gill 40,000 - - - - 40,000 - -P Reiser 40,000 - - - - 40,000 - -J Stirbinskis 3 250,000 - 22,500 - (13,943) 258,557 - n/aKey ManagementC Campbell-Hicks 4 - - - - - - - -J Piner 8 76,875 - 6,919 - - 83,794 - -I Laudzevics 7 - - - - - - - -W Lai 9 - 33,580 - - - 33,580 - -Total 635,434 157,994 47,362 - (9,442) 831,348 - n/aSee following page for notes19

2011Annual ReportDIRECTORS’ REPORTRemuneration Options: Granted and Vested During the Year (Consolidated)DirectorGrant DateNumberGrantedDuring theYearFair ValuePer Optionat GrantDateValue ofOptionsGrantedDuring theYearExercisePrice perOptionExpiry DateFirst ExerciseDateLast ExerciseDateVested During The Year¢ $ ¢ Number %G Earl of Warwick 18-Jul-11 2,500,000 1.077 26,921 3.50 19-May-14 18-Jul-11 19-May-14 2,500,000 100%R Gill 18-Jul-11 2,500,000 1.077 26,921 3.50 19-May-14 18-Jul-11 19-May-14 2,500,000 100%A Pankhurst 10 18-Jul-11 9,000,000 1.077 96,915 3.50 19-May-14 18-Jul-11 19-May-14 9,800,000 98%P Reiser 18-Jul-11 2,500,000 1.077 26,921 3.50 19-May-14 18-Jul-11 19-May-14 2,500,000 100%E Kanapyanov 18-Jul-11 5,500,000 1.077 59,226 3.50 19-May-14 18-Jul-11 19-May-14 5,500,000 100%Key Management PersonnelC Campbell-Hicks 4 19-May-11 9,000,000 2.640 237,581 3.50 19-May-14 19-May-11 19-May-14 9,000,000 100%Total 31,000,000 474,485 31,800,000Notes for previous pages1 Appointed 1 February 2011, resigned 3 February 2012. Other income paid is consulting fees paid to a related party and includes fees paid for company secretarial and accounting services.2 Other income paid is consulting fees paid to a related party and includes fee for in country activities.3 Resigned 31 January 2011.4 Appointed 17 January 2011, resigned 31 January 2012.5 Appointed 29 June 2011.6 Appointed 29 June 2011, resigned 15 February 2012.7 Appointed 17 February 2011, resigned 27 July 2011.8 Resigned 30 April 2011.20

2011Annual ReportDIRECTORS’ REPORT9 Resigned 17 February 2011.10 The options vested during the year represent 98% of total options granted to Angela Pankhurst, including 9,000,000 options granted with no vesting conditions and 400,000 optionsvested which were granted in 2008 and 400,000 options vested which were granted in 2009.11 Other short term benefits does not include amount of insurance contract premiums paid of $12,993 for insurance of directors and officers as this cannot be allocated on an individualbasis and covers all directors and officers appointed during the year.Terms and Conditions for options granted and vested during the yearFor details on new options granted, valuation of options, including models and assumptions used. Refer to note 23.No options were exercised during the year.3.9 million options were forfeited during the year.There were no changes to the terms and conditions of options previously granted. Refer to note 23.End of Audited Remuneration Report21

2011Annual ReportDIRECTORS’ REPORTInsurance of OfficersThe Company has entered into deeds of access and indemnity with each Director. These deeds provide accessto documentation and indemnification against liability for loss suffered, as a result of any act or omission, tothe extent permitted by the Corporations Act 2001, from conduct of the Company’s business.The Company has paid premiums for cover until 31 March 2012. The cover insures all the Directors of theCompany against costs incurred in defending proceedings except for conduct involving:• a wilful breach of duty; or• a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of theCorporations Act 2001.The total amount of insurance contract premiums paid was $12,993. This amount has not been included inDirectors’ and Executives’ remuneration.DividendsNo dividends were paid during the year and no recommendation is made as to the payment of dividends.Non-Audit ServicesNo non-audit services were provided by the Consolidated Entity's auditor, Ernst & Young.Lead-Auditor’s Independence DeclarationThe lead auditor’s independence declaration is set out on page 24 and forms part of the Directors’ Report forthe financial year ended 31 December 2011.Earnings Per ShareThe basic loss per share for the Consolidated Entity is as follows:Year Ended31 Dec 2011Year Ended31 Dec 2010$ $Basic loss per share (cents) (0.71) (0.92)Diluted loss per share (cents) (0.71) (0.92)Share Price 0.03 0.03Share OptionsAs at 24 March 2012, unissued shares of the Company under options are:Exerciseprice ¢Expiry dateNumber ofoptions40.0 28-Feb-13 200,00060.0 28-Feb-13 200,0003.5 19-May-14 108,413,763Balance 108,813,763Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company.22

2011Annual ReportDIRECTORS’ REPORTEmployeesThe Consolidated Entity had 158 employees as at 31 December 2011 (2010: 45).Signed in accordance with a resolution of the Directors.Guy, Earl of WarwickChairman / Joint Acting Managing DirectorPerth, 30 March 201223

Auditor’s Independence Declaration to the Directors of Central AsiaResources LimitedIn relation to our audit of the financial report of Central Asia Resources Limited for the financial yearended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions ofthe auditor independence requirements of the Corporations Act 2001 or any applicable code ofprofessional conduct.Ernst & YoungR A KirkbyPartnerPerth30 March 2012RK:SS:CAR:003Liability limited by a scheme approvedunder Professional Standards Legislation

2011Annual ReportCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEConsolidated Statement of Comprehensive IncomeFor The Year Ended 31 December 2011Consolidated31 Dec 2011 31 Dec 2010Notes $ $RevenueInterest 138,850 25,238138,850 25,238Other IncomeSub-lease rental income - 35,524Foreign exchange gain - 4,816Other income - 811138,850 66,389Loss on disposal of assets (4,615) (1,502)Foreign exchange loss (54,478) -Depreciation (184,490) (77,851)Finance costs (306,725) (12,754)Legal and professional expenses (592,938) (644,146)Occupancy costs (133,271) (220,312)Employee expenses (1,893,177) (974,821)General administration (665,684) (256,631)Other expenses (128,217) (54,217)Loss Before Income Tax (3,824,745) (2,175,845)Income Tax Expense 8 - -Net Loss for the Year (3,824,745) (2,175,845)Net Loss Attributable to:Non-controlling interest (70,774) (22,366)Members of the Parent (3,753,971) (2,153,479)Other Comprehensive Loss for the YearNet foreign currency translation 815,340 (1,599,086)Total Comprehensive Loss for the Year (3,009,405) (3,774,931)Comprehensive Net Loss Attributable To:Non-controlling interest (73,879) (28,474)Members of the Parent (2,935,526) (3,746,457)(3,009,405) (3,774,931)Basic and diluted loss per share for the period attributableto ordinary equity holders (cents per share)16 (0.71) (0.92)The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes25

2011Annual ReportCONSOLIDATED STATEMENT OF FINANCIAL POSITIONConsolidated Statement of Financial PositionAs At 31 December 2011Consolidated31 Dec 2011 31 Dec 2010Notes $ $Current AssetsCash and cash equivalents 3 1,107,859 1,033,304Trade and other receivables 4 1,374,073 317,572Inventories 5 745,339 5,984Total Current Assets 3,227,271 1,356,860Non-Current AssetsExploration and evaluation expenditure 6 7,625,048 10,771,125Property, plant and equipment and mine properties 9 15,716,554 529,523Financial assets 10 53,089 44,112Total Non-Current Assets 23,394,691 11,344,760Total Assets 26,621,962 12,701,620Current LiabilitiesTrade and other payables 11 1,026,316 389,194Provisions 12 160,385 50,908Borrowings 13 2,599,836 3,380Total Current Liabilities 3,786,537 443,482Non-Current LiabilitiesProvisions 12 446,619 411,792Borrowings 13 845 4,225Total Non-Current Liabilities 447,464 416,017Total Liabilities 4,234,001 859,499Net Assets 22,387,961 11,842,121EquityContributed equity 14(a) 40,940,819 29,212,432Reserves 14(b) (3,405,136) (6,050,439)Accumulated losses (15,200,543) (11,446,572)Parent interest 22,335,140 11,715,421Non-Controlling Interest 15 52,821 126,700Total Equity 22,387,961 11,842,121The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.26

2011Annual ReportCONSOLIDATED STATEMENT OF CHANGES IN EQUITYConsolidated Statement of Changes in EquityFor The Year Ended 31 December 2011ConsolidatedIssuedCapitalForeignCurrencyReserveOptionReserveEquityReserveAccumulatedLossesNon-ControllingInterest$ $ $ $ $ $ $At 1 January 2011 29,212,432 (5,168,498) 94,387 (976,328) (11,446,572) 126,700 11,842,121Net loss for the period - - - - (3,753,971) (70,774) (3,824,745)Other comprehensiveincome- 818,445 - - - (3,105) 815,340Total comprehensiveincome/(loss), net of tax- 818,445 - - (3,753,971) (73,879) (3,009,405)Transactions with ownersin their capacity asowners:Share based payments - - 1,826,858 - - - 1,826,858Shares issued 13,159,474 - - - - - 13,159,474Share issue costs (1,431,087) - - - - - (1,431,087)At 31 December 2011 40,940,819 (4,350,053) 1,921,245 (976,328) (15,200,543) 52,821 22,387,961The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.TotalEquity27

2011Annual ReportCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor The Year Ended 31 December 2010ConsolidatedIssuedCapitalForeignCurrencyReserveOptionReserveEquityReserveAccumulatedLossesNon-ControllingInterest$ $ $ $ $ $ $At 1 January 2010 25,195,408 (3,575,520) 95,475 (976,328) (9,293,093) 155,174 11,601,116Net loss for the period - - - - (2,153,479) (22,366) (2,175,845)Other comprehensiveincome- (1,592,978) - - - (6,108) (1,599,086)Total comprehensiveincome/(loss), net of tax- (1,592,978) - - (2,153,479) (28,474) (3,774,931)Transactions with ownersin their capacity asowners:Share based payments - - 18,912 - - - 18,912Shares issued 4,087,286 - (20,000) - - - 4,067,286Share issue costs (70,262) - - - - - (70,262)At 31 December 2010 29,212,432 (5,168,498) 94,387 (976,328) (11,446,572) 126,700 11,842,121The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.TotalEquity28

2011Annual ReportCONSOLIDATED STATEMENT OF CASH FLOWSConsolidated Statement of Cash FlowsFor The Year Ended 31 December 2011Consolidated31 Dec 2011 31 Dec 2010Notes $ $Cash Flows Used In Operating ActivitiesReceipts - 47,897Payment to suppliers and employees (1,703,130) (1,871,387)Net Cash Flows Used In Operating Activities 7 (1,703,130) (1,823,490)Cash Flows Used In Investing ActivitiesInterest received 138,850 25,238Exploration & evaluation (3,144,877) (2,408,558)Purchase of plant and equipment & mine properties (10,646,726) (373,383)Net Cash Flows Used In Investing Activities (13,652,753) (2,756,703)Cash Flows From Financing ActivitiesEquipment lease payments (3,380) (3,380)Interest expense (7,243) (1,530)Proceeds from borrowings 3,057,104 -Repayment of borrowings (57,104) -Proceeds from issue of securities 13,159,474 4,067,286Share issue costs (720,283) (70,262)Net Cash Flows From Financing Activities 15,428,568 3,992,114Net Increase /(Decrease) in Cash and Cash Equivalents 72,685 (588,079)FX on cash and cash equivalents 1,870 83,279Cash and cash equivalents at the beginning of the period 1,033,304 1,538,104Cash and Cash Equivalents at End of Period 3 1,107,859 1,033,304The above Statement of Cash flows should be read in conjunction with the accompanying notes.29

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the consolidated financial statements1. Corporate InformationCentral Asia Resources Limited is a listed public company limited by shares and registered and domiciled inAustralia. The address of the registered office is 283 Rokeby Road, Subiaco 6008, Western Australia. Thefinancial report of Central Asia Resources Limited (the “Company”) and its subsidiaries (together the“Consolidated Entity”) for the year ended 31 December 2011 was authorised for issue in accordance with aresolution of the directors on 30 March 2012. Central Asia Resources Limited is a company limited by sharesincorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.The nature of the operations and principal activities of the Consolidated Entity are described in the Directors'Report.2. Summary of Significant Accounting PoliciesTable of contents(a) Basis of preparation(b) Going concern(c) Compliance with IFRS(d) Significant accounting judgements, estimates and assumptions(e) Changes in accounting policies and disclosures(f) New Accounting Standards and Interpretations(g) Basis of consolidation(h) Business combinations(i) Operating segments(j) Foreign currency translation(k) Cash and cash equivalents(l) Trade and other receivables(m) Inventories(n) Investments and other financial assets(o) Property, plant and equipment & mine properties and development expenditure(p) Exploration & evaluation expenditure(q) Leases(r) Impairment of non-financial assets other than goodwill and indefinite life intangibles(s) Trade and other payables(t) Borrowings(u) Provisions and employee benefits(v) Share-based payment transactions(w) Contributed equity(x) Revenue recognition(y) Income tax and other taxes(z) Earnings per share(aa) Comparatives30

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(a) Basis of preparationThe financial report is a general purpose financial report, which has been prepared in accordance with therequirements of the Corporations Act 2001, Australian Accounting Standards and other authoritativepronouncements of the Australian Accounting Standards Board. The financial report has also been preparedon a historical cost basis.The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unlessotherwise stated.(b) Going concernThe Consolidated Entity held cash on hand and on deposit as at 31 December 2011 of $1,107,859. As at 31December 2011, the Consolidated Entity has a net working capital deficit of $559,266 and the ConsolidatedEntity incurred a loss of $3,753,971. At 31 December 2011, the Consolidated Entity held net assets of$22,387,961. Net cash outflows from operations and investing activities for 2011 were $15,355,883.On 9 February 2012, the Company announced it would place 80,000,000 ordinary fully paid shares at 2.5 centseach to professional and sophisticated investors to raise $2 million of which $1.6 million has been received.While the Consolidated Entity expects existing cash resources to be sufficient to meet its obligations for thenext 12 months and therefore has prepared the financial report on the basis that the Consolidated Entity willcontinue to meet its commitments and can continue normal business activities and realise assets and settleliabilities in the ordinary course of business, there exists uncertainty should there be a delay in the productionof and cash receipts from the sales of gold and silver or decreases in the budgeted recovery of gold and silver.Notwithstanding the above matters, the directors believe that the Consolidated Entity will be able to continueas a going concern as:(i) Subsequent to year end, in March 2012, the Consolidated Entity began production of gold and silverat its Dalabai project; and(ii) Previous laboratory test work has supported the budgeted recovery rate of gold and silver from theConsolidated Entity’s production processes.Should the Consolidated Entity be unable to materially achieve the matters set out above, there is uncertaintyas to whether the Consolidated Entity will be able to meet its debts as and when they fall due, and thuscontinue as a going concern.The financial statements do not include any adjustments relating to the recoverability and classification ofrecorded assets amounts, nor do the amount or classification of liabilities that might be necessary should theConsolidated Entity not be able to continue as a going concern.(c) Compliance with IFRSThe financial report also complies with International Financial Reporting Standards (IFRS) as issued by theInternational Accounting Standards Board.(d) Significant accounting judgements, estimates and assumptionsThe preparation of the Consolidated Entity’s consolidated financial statements requires management to makejudgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingentliabilities at the date of the consolidated financial statements and reported amounts of revenues and expensesduring the reporting period. Estimates and assumptions are continuously evaluated and are based onmanagement’s experience and other factors, including expectations of future events that are believed to bereasonable under the circumstances. However, actual outcomes can differ from these estimates.In particular, information about significant areas of estimation uncertainty considered by management inpreparing the consolidated financial statements is described below.31

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSMine rehabilitation (Note 12)The Consolidated Entity assesses its mine rehabilitation provisions annually. Significant estimates andassumptions are made in determining the provision for mine rehabilitation as there are numerous factors thatwill affect the ultimate liability payable. These factors include estimates of the extent and costs ofrehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflationrates and discount rates. These uncertainties may result in future actual expenditure differing from theamounts currently provided. The provision at reporting date represents management’s best estimate of thepresent value of the future rehabilitation costs required. Changes to estimated future costs are recognised inthe statement of financial position by either increasing or decreasing the rehabilitation liability and relatedasset if the initial estimate was originally recognised as part of an asset. Any reduction in the rehabilitationliability and therefore any deduction from the related asset may not exceed the carrying amount of that asset.If it does, any excess over the carrying value is taken immediately to profit or loss.If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to thecarrying value of the asset, the entity is required to consider whether this is an indication of impairment of theasset as a whole and test for impairment. If, for mature mines, the revised mine assets net of rehabilitationprovisions exceeds the recoverable value, that portion of the increase is charged directly to expense. Forclosed sites, changes to estimated costs are recognised immediately in profit or loss. Also, rehabilitationobligations that arose as a result of the production phase of a mine, should be expensed as incurred.Ore reserve and resource estimatesOre reserves are estimates of the amount of ore that can be economically and legally extracted from theConsolidated Entity’s mining properties. The Consolidated Entity estimates its ore reserves and mineralresources based on information compiled by appropriately qualified persons relating to the geological data onthe size, depth and shape of the ore body, and requires complex geological judgments to interpret the data.The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates,commodity prices, future capital requirements, and production costs along with geological assumptions andjudgments made in estimating the size and grade of the ore body. Changes in the reserve or resourceestimates may impact upon the carrying value of exploration and evaluation assets, mine properties, property,plant and equipment, provision for rehabilitation, recognition of deferred tax assets, and depreciation andamortisation charges.Exploration and evaluation expenditure (Note 6)The application of the Consolidated Entity’s accounting policy for exploration and evaluation expenditurerequires judgment in determining whether it is likely that future economic benefits are likely either fromfuture exploitation or sale. The determination of a Joint Ore Reserves Committee (JORC) resource is itself anestimation process that requires varying degrees of uncertainty depending on sub-classification and theseestimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policyrequires management to make certain estimates and assumptions about future events or circumstances, inparticular whether an economically viable extraction operation can be established. Estimates and assumptionsmade may change if new information becomes available. If, after expenditure is capitalised, informationbecomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written offin profit or loss in the period when the new information becomes available.Impairment of assetsThe Consolidated Entity assesses each cash generating unit annually to determine whether any indication ofimpairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount ismade, which is considered to be the higher of the fair value less costs to sell and value in use. Theseassessments require the use of estimates and assumptions such as long-term commodity prices, discountrates, future capital requirements, exploration potential and operating performance. Fair value is determinedas the amount that would be obtained from the sale of the asset in an arm’s length transaction betweenknowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value ofestimated future cash flows arising from the continued use of the asset, which includes estimates such as thecost of future expansion plans and eventual disposal, using assumptions that an independent marketparticipant may take into account. Cash flows are discounted to their present value using a pre-tax discount32

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSrate that reflects current market assessments of the time value of money and the risks specific to the asset.Management has assessed its cash generating units as being an individual mine site, which is the lowest levelfor which cash inflows are largely independent of those of other assets.Contingent liabilities (Note 21)By their nature, contingencies will only be resolved when one or more uncertain future events occur or fail tooccur. The assessment of contingencies inherently involves the exercise of significant judgment and estimatesof the outcome of future events.Recovery of deferred tax assets (Note 8)Judgment is required in determining whether deferred tax assets are recognised on the statement of financialposition. Deferred tax assets, including those arising from unutilised tax losses, require management to assessthe likelihood that the Consolidated Entity will generate taxable earnings in future periods, in order to utiliserecognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows fromoperations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows andtaxable income differ significantly from estimates, the ability of the Consolidated Entity to realise the netdeferred tax assets recorded at the reporting date could be impacted.Additionally, future changes in tax laws in the jurisdictions in which the Consolidated Entity operates couldlimit the ability of the Consolidated Entity to obtain tax deductions in future periods.(e) Changes in accounting policy and disclosuresThe accounting policies adopted are consistent with those of the previous financial year except as follows:The Consolidated Entity has adopted the following new and amended Australian Accounting Standards andAASB Interpretations as of 1 January 2011:- ASB 124 Related Party Disclosures (amendment) effective 1 January 2011- AASB 132 Financial Instruments: Presentation (amendment) effective 1 February 2010- AASB Int 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011- Improvements to AASBs (May 2010)The adoption of the standards or interpretations is described below:AASB 132 Financial Instruments: Presentation (Amendment)The AASB issued an amendment that alters the definition of a financial liability in AASB 132 to enable entitiesto classify rights issues and certain options or warrants as equity instruments. The amendment is applicable ifthe rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equityinstruments, to acquire a fixed number of the entity’s own equity instruments for a fixed amount in anycurrency. The amendment has had no effect on the financial position or performance of the ConsolidatedEntity because the Consolidated Entity does not have these type of instruments.AASB 124 (Revised) Related Party DisclosuresThe revised AASB 124 simplifies the definition of a related party, clarifying its intended meaning andeliminating inconsistencies from the definition, including:(a) The definition now identifies a subsidiary and an associate with the same investor as related parties ofeach other.(b) Entities significantly influenced by one person and entities significantly influenced by a close member ofthe family of that person are no longer related parties of each other.(c) The definition now identifies that, whenever a person or entity has both joint control over a second entityand joint control or significant influence over a third party, the second and third entities are related toeach other.A partial exemption is also provided from the disclosure requirements for government-related entities. Entitiesthat are related by virtue of being controlled by the same government can provide reduced related partydisclosures.33

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSImprovements to AASBsIn May 2010, the AASB issued its third omnibus of amendments to its standards, primarily with a view toremoving inconsistencies and clarifying wording. There are separate transitional provisions for each standard.The adoption of the following amendments resulted in changes to accounting policies, but no impact on thefinancial position or performance of the Consolidated Entity.- AASB 3 Business Combinations: The measurement options available for non-controlling interest (NCI) wereamended. Only components of NCI that constitute a present ownership interest that entitles their holder toa proportionate share of the entity’s net assets in the event of liquidation should be measured at either fairvalue or at the present ownership instruments’ proportionate share of the acquiree’s identifiable netassets. All other components are to be measured at their acquisition date fair value.- The amendments to AASB 3 are effective for annual periods beginning on or after 1 July 2011. TheConsolidated Entity, however, adopted these as of 1 January 2011 and changed its accounting policyaccordingly as the amendment was issued to eliminate unintended consequences that may arise from theadoption of AASB 3.- AASB 7 Financial Instruments — Disclosures: The amendment was intended to simplify the disclosuresprovided by reducing the volume of disclosures around collateral held and improving disclosures byrequiring qualitative information to put the quantitative information in context.- AASB 101 Presentation of Financial Statements: The amendment clarifies that an entity may present ananalysis of each component of other comprehensive income maybe either in the statement of changes inequity or in the notes to the financial statements.Other amendments resulting from Improvements to AASBs to the following standards did not have any impacton the accounting policies, financial position or performance of the Consolidated Entity:- AASB 3 Business Combinations (Contingent consideration arising from business combination prior toadoption of AASB 3 (as revised in 2008)- AASB 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards)- AASB 127 Consolidated and Separate Financial Statements.(f) New Accounting Standards and InterpretationsStandards issued but not yet effective up to the date of issuance of the Consolidated Entity’s financialstatements are listed below. This listing is of standards and interpretations issued, which the ConsolidatedEntity reasonably expects to be applicable at a future date. The Consolidated Entity intends to adopt thosestandards when they become effective. The Consolidated Entity has not yet assessed the impact the changeswill have on the financial statements.AASB 9 Financial InstrumentsAASB 9 includes requirements for the classification and measurement of financial assets resulting from the firstpart of Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement(AASB 139 Financial Instruments: Recognition and Measurement).These requirements improve and simplify the approach for classification and measurement of financial assetscompared with the requirements of AASB 139. The main changes from AASB 139 are described below.(a) Financial assets are classified based on (1) the objective of the entity’s business model for managing thefinancial assets; (2) the characteristics of the contractual cash flows. This replaces the numerouscategories of financial assets in AASB 139, each of which had its own classification criteria.(b) IFRS 9 allows an irrevocable election on initial recognition to present gains and losses on investments inequity instruments that are not held for trading in other comprehensive income. Dividends in respect ofthese investments that are a return on investment can be recognised in profit or loss and there is noimpairment or recycling on disposal of the instrument.(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition ifdoing so eliminates or significantly reduces a measurement or recognition inconsistency that would arisefrom measuring assets or liabilities, or recognising the gains and losses on them, on different bases.34

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAASB 2009 – 11 Amendments to Australian Accounting Standards arising from AASB 9These amendments arise from the issuance of AASB 9 Financial Instruments that sets out requirements for theclassification and measurement of financial assets. The requirements in AASB 9 form part of the first phase ofthe International Accounting Standards Board’s project to replace IAS 39 Financial Instruments: Recognitionand Measurement.This Standard shall be applied when AASB 9 is applied.AASB 1054 - Australian Additional DisclosuresThis standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of the AASB andFRSB.This standard, with AASB 2011-1 relocates all Australian specific disclosures from other standards to one placeand revises disclosures in the following areas:(a) Compliance with Australian Accounting Standards(b) The statutory basis or reporting framework for financial statements(c) Whether the financial statements are general purpose or special purpose(d) Audit fees(e) Imputation creditsAASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)The requirements for classifying and measuring financial liabilities were added to AASB 9. The existingrequirements for the classification of financial liabilities and the ability to use the fair value option have beenretained. However, where the fair value option is used for financial liabilities the change in fair value isaccounted for as follows:• The change attributable to changes in credit risk are presented in other comprehensive income (OCI)• The remaining change is presented in profit or lossIf this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes incredit risk are also presented in profit or loss.AASB 119 Employee BenefitsThe main change introduced by this standard is to revise the accounting for defined benefit plans. Theamendment removes the options for accounting for the liability, and requires that the liabilities arising fromsuch plans is recognized in full with actuarial gains and losses being recognized in other comprehensiveincome. It also revised the method of calculating the return on plan assets.Consequential amendments were also made to other standards via AASB 2011-10.AASB 10 Consolidated Financial StatementsAASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidatedand Separate Financial Statements dealing with the accounting for consolidated financial statements andInterpretation 112 Consolidation – Special Purpose Entities.The new control model broadens the situations when an entity is considered to be controlled by another entityand includes new guidance for applying the model to specific situations, including when acting as a managermay give control, the impact of potential voting rights and when holding less than a majority voting rights maygive control.AASB 12 Disclosure if Interests in Other EntitiesAASB 12 includes all disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associatesand structures entities. New disclosures have been introduced about the judgements made by management todetermine whether control exists, and to require summarised information about any joint arrangements,associates and structured entities and subsidiaries with non-controlling interests.35

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAASB 2011 – 7 Amendments to Australian Accounting Standards arising from the Consolidation and JointArrangement StandardsConsequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments inAssociates as a result of the adoption of AASB 10 Consolidated Financial Statements, AASB 11 JointArrangements and AASB 12 Disclosure of Interests in Other Entities.AASB 13 Fair Value MeasurementAASB 13 establishes a single source of guidance under Australian Accounting Standards for determining thefair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, butrather, provides guidance on how to determine fair value under Australian Accounting Standards when fairvalue is required or permitted by Australian Accounting Standards. Application of this definition may result indifferent fair values being determined for the relevant assets. AASB 13 also expands the disclosurerequirements for all assets or liabilities carried at fair value. This includes information about the assumptionsmade and the qualitative impact of those assumptions on the fair value determined.AASB 2011 – 8 Amendments to Australian Accounting Standards arising from the Fair Value MeasurementStandardConsequential amendments to existing Australian Accounting Standards as a result of the adoption of AASB 13Fair Value Measurement.AASB 2011 – 9 Amendments to Australian Accounting Standards -Presentation of Items of OtherComprehensive IncomeThe main change resulting from the amendments relates to the Statement of Comprehensive Income and therequirement for entities to group items presented in other comprehensive income on the basis of whetherthey are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). Theamendments do not remove the option to present profit or loss and other comprehensive income in twostatements.The amendments do not change the option to present items of OCI either before tax or net of tax. However, ifthe items are presented before tax then the tax related to each of the two groups of OCI items (those thatmight be reclassified to profit or loss and those that will not be reclassified) must be shown separately.(g) Basis of consolidationSubsequent to 1 January 2010The consolidated financial statements comprise the financial statements of Central Asia Resources Limited andits subsidiaries and special purpose entities as at and for the period ended 31 December each year (theConsolidated Entity).Subsidiaries are all those entities over which the Consolidated Entity has the power to govern the financial andoperating policies so as to obtain benefits from their activities. The existence and effect of potential votingrights that are currently exercisable or convertible are considered when assessing whether the ConsolidatedEntity controls another entity.Special purpose entities are those entities over which the Consolidated Entity has no ownership interest but ineffect the substance of the relationship is such that the Consolidated Entity controls the entity so as to obtainthe majority of benefits from its operation.The financial statements of the subsidiaries are prepared for the same reporting period as the parentcompany, using consistent accounting policies. In preparing the consolidated financial statements, allintercompany balances, transactions, unrealised gains and losses resulting from intra-group transactions anddividends have been eliminated in full.Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained bythe Consolidated Entity and cease to be consolidated from the date on which control is transferred out of theConsolidated Entity.36

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSInvestments in subsidiaries held by Central Asia Resources Limited are accounted for at cost in the separatefinancial statements of the parent entity less any impairment charges. Dividends received from subsidiaries arerecorded as a component of other revenues in the separate income statement of the parent entity, and do notimpact the recorded cost of the investment. Upon receipt of dividend payments from subsidiaries, the parentwill assess whether any indicators of impairment of the carrying value of the investment in the subsidiary exist.Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverableamount, an impairment loss is recognised.The acquisition of subsidiaries which are businesses are accounted for using the acquisition method ofaccounting. The acquisition method of accounting involves recognising at acquisition date, separately fromgoodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in theacquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition datefair values.The difference between the above items and the fair value of the consideration (including the fair value of anypre-existing investment in the acquiree) is goodwill or a discount on acquisition.After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposeof impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated toeach of the Consolidated Entity’s cash-generating units that are expected to benefit from the combination,irrespective of whether other assets or liabilities of the acquiree are assigned to those units.Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of,the goodwill associated with the operation disposed of is included in the carrying amount of the operationwhen determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance ismeasured based on the relative values of the operation disposed of and the portion of the cash-generatingunit retained.Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensiveincome and are presented within equity in the consolidated statement of financial position, separately fromthe equity of the owners of the parent.Losses are attributed to the non-controlling interest even if that results in a deficit balance.A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for asan equity transaction.If the Consolidated Entity loses control over a subsidiary, it:• Derecognises the assets (including goodwill) and liabilities of the subsidiary• Derecognises the carrying amount of any non-controlling interest• Derecognises the cumulative translation differences, recorded in equity• Recognises the fair value of the consideration received• Recognises the fair value of any investment retained• Recognises any surplus or deficit in profit or loss• Reclassifies the parent's share of components previously recognised in other comprehensive income toprofit or loss, or retained earnings, as appropriatePrior to 1 January 2010Certain of the above mentioned requirements were applied on a prospective basis. The following differences,however, are carried forward in certain instances from the previous basis of consolidation:• Acquisitions of non-controlling interests, prior to 1 January 2010, were accounted for using the parententity extension method, whereby, the difference between the consideration and the book value of theshare of the net assets acquired was recognised in goodwill.• Losses incurred by the Consolidated Entity were attributed to the non-controlling interest until thebalance was reduced to nil. Any further excess losses were attributed to the parent, unless the noncontrollinginterest had a binding obligation to cover these. Losses prior to 1 January 2010 were notreallocated between Non-Controlling Interest and the parent shareholders.37

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS• Upon loss of control, the Consolidated Entity accounted for the investment retained at its proportionateshare of net asset value at the date control was lost. The carrying value of such investments at 1January 2010 have not been restated.(h) Business combinationsWhen the Consolidated Entity acquires a business, it assesses the financial assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economic conditions, theConsolidated Entity’s operating or accounting policies and other pertinent conditions as at the acquisitiondate. This includes the separation of embedded derivatives in host contracts by the acquiree.If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previouslyheld equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.Any contingent consideration to be transferred by the acquirer will be recognised at fair value at theacquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to bean asset or liability will be recognised in accordance with AASB 139 either in profit or loss or as a change toother comprehensive income. If the contingent consideration is classified as equity, it should not beremeasured until it is finally settled within equity.Subsequent to 1 January 2010Business combinations are accounted for using the acquisition method. The consideration transferred in abusiness combination shall be measured at fair value, which shall be calculated as the sum of the acquisitiondate fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to formerowners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interestin the acquiree. For each business combination, the acquirer measures the non-controlling interest in theacquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisitionrelatedcosts are expensed as incurred.Prior to 1 January 2010In comparison to the above-mentioned requirements, the following difference applied:Business combinations were accounted for using the purchase method. Transaction costs directly attributableto the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known asminority interest) was measured at the proportionate share of the acquiree's identifiable net assets.Business combinations achieved in stages were accounted for in separate steps. Any additional acquired shareof interest did not affect previously recognised goodwill. The goodwill amounts calculated at each stepacquisition were accumulated.When the Consolidated Entity acquired a business, embedded derivatives separated from the host contract bythe acquirer were not reassessed on acquisition unless the business combination resulted in a change in theterms of the contract that significantly modified the cash flows that otherwise would have been requiredunder the contract.Contingent consideration was recognised if, and only if, the Consolidated Entity had a present obligation, theeconomic outflow was more likely than not and a reliable estimate was determinable. Subsequentadjustments to the contingent consideration were adjusted against goodwill.(i)Operating segmentsAn operating segment is a component of an entity that engages in business activities from which it may earnrevenues and incur expenses (including revenues and expenses relating to transactions with other componentsof the same entity), whose operating results are regularly reviewed by the entity's chief operating decisionmaker to make decisions about resources to be allocated to the segment and assess its performance and forwhich discrete financial information is available. This includes start up operations which are yet to earnrevenues. Management will also consider other factors in determining operating segments such as theexistence of a line manager and the level of segment information presented to the board of directors.38

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOperating segments have been identified based on the information provided to the chief operating decisionmakers — being the board of directors.The Consolidated Entity aggregates two or more operating segments when they have similar economiccharacteristics, and the segments are similar in each of the following respects:• Nature of the products and services• Nature of the production processes• Type or class of customer for the products and services• Methods used to distribute the products or provide the services, and if applicable• Nature of the regulatory environmentOperating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately.However, an operating segment that does not meet the quantitative criteria is still reported separately whereinformation about the segment would be useful to users of the financial statements.Information about other business activities and operating segments that are below the quantitative criteria arecombined and disclosed in a separate category for “all other segments”.(j) Foreign currency translation(i) Functional and presentation currencyBoth the functional and presentation currency of Central Asia Resources Limited is Australian dollars ($). TheKazakhstan subsidiaries' functional currency is the Tenge (KZT) which is translated to the presentation currency(see below for consolidated reporting).(ii) Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the exchangerates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currenciesare retranslated at the rate of exchange ruling at the reporting date.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using theexchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreigncurrency are translated using the exchange rates at the date when the fair value was determined.(iii) Translation of the Consolidated Entity Companies’ functional currency to presentation currencyThe results of the Kazakhstan subsidiaries are translated into Australian Dollars (presentation currency) at anaverage rate for the year. Assets and liabilities are translated at exchange rates prevailing at reporting date.Exchange variations resulting from the translation are recognised in the foreign currency translation reserve inequity.On consolidation, exchange differences arising from the translation of the net investment in Kazakhstansubsidiaries are taken to the foreign currency translation reserve. If a Kazakhstan subsidiary were sold, theproportionate share of exchange differences would be transferred out of equity and recognised in thestatement of comprehensive income.(k) Cash and cash equivalentsCash and cash equivalents in the statement of financial position comprise cash at bank and in hand and shorttermdeposits with an original maturity of three months or less that are readily convertible to known amountsof cash and which are subject to an insignificant risk of changes in value.For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cashequivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interestbearingloans and borrowings in current liabilities on the statement of financial position.39

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(l)Trade and other receivablesTrade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less an allowance for impairment.Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debtsthat are known to be uncollectible are written off when identified. An impairment provision is recognisedwhen there is objective evidence that the Consolidated Entity will not be able to collect the receivable.Financial difficulties of the debtor, default payments or debts more than 60 days overdue are consideredobjective evidence of impairment. The amount of the impairment loss is the receivable carrying amountcompared to the present value of estimated future cash flows, discounted at the original effective interestrate.(m) InventoriesInventories are stated at the lower of cost and net realisable value. Net realisable value represents estimatedselling price in the ordinary course of business less any further costs expected to be incurred to completionand disposal. Cost is determined on a weighted average basis and includes all costs incurred in the normalcourse of business including direct material and direct labour costs and an allocation of production overheads,depreciation and amortisation and other costs incurred in bringing each product to its present location andcondition.Quantities of broken ore and concentrate stocks are assessed primarily through surveys and assays.Inventories are categorised as follows:• Broken ore: ore stored in an intermediate state that has not yet passed through all the stages ofproduction;• Concentrate: products and materials that have passed through all stages of the production process; and• Stores, spares and consumables: materials, goods or supplies (including energy sources) to be eitherdirectly or indirectly consumed in the production process.(n) Investments and other financial assetsInvestments and financial assets within the scope of AASB 139 Financial Instruments: Recognition andMeasurement are categorised as either financial assets at fair value through profit or loss, loans andreceivables, held-to-maturity investments, or available-for-sale financial assets. The classification depends onthe purpose for which the investments were acquired or originated. Designation is re-evaluated at eachreporting date, but there are restrictions on reclassifying to other categories.When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not atfair value through profit or loss, directly attributable transaction costs.Recognition and derecognitionAll regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that theConsolidated Entity commits to purchase the asset. Regular way purchases or sales are purchases or sales offinancial assets under contracts that require delivery of the assets within the period established generally byregulation or convention in the market place. Financial assets are derecognised when the right to receive cashflows from the financial assets has expired or when the entity transfers substantially all the risks and rewardsof the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, itderecognises the asset if it has transferred control of the assets.(i) Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturity are classified as heldto-maturitywhen the Consolidated Entity has the positive intention and ability to hold to maturity.Investments intended to be held for an undefined period are not included in this classification. Investmentsthat are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. Thiscost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative40

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSamortisation using the effective interest method of any difference between the initially recognised amountand the maturity amount.This calculation includes all fees and points paid or received between parties to the contract that are anintegral part of the effective interest rate, transaction costs and all other premiums and discounts. Forinvestments carried at amortised cost, gains and losses are recognised in profit or loss when the investmentsare derecognised or impaired, as well as through the amortisation process.(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. Such assets are carried at amortised cost using the effective interest rate method.Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired.These are included in current assets, except for those with maturities greater than 12 months after balancedate, which are classified as non-current.(o) Property, plant and equipment & mine propertiesPlant and equipment is stated at historical cost less accumulated depreciation and any accumulatedimpairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when thecost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost isrecognised in the carrying amount of the plant and equipment as a replacement only if it is eligible forcapitalisation. All other repairs and maintenance are recognised in profit or loss as incurred.Land and buildings are measured at historical cost, less accumulated depreciation on buildings and anyimpairment losses recognised.Capitalised work in progress will not be depreciated until it is transferred into the relevant categories.Depreciation is calculated of the specific assets as follows:• Land — not depreciated• Capitalised Work In Progress – not depreciated• Mine properties & development expenditure – units of production basis over the Life of Mine• Buildings — straight-line basis over 13 years• Plant and equipment — straight-line basis over 4 to 9 years• Leased equipment — straight-line basis over 5 years• Motor vehicles — straight-line basis over 4 to 9 yearsThe assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, ateach financial year end.DerecognitionAn item of property, plant and equipment is derecognised upon disposal or when no further future economicbenefits are expected from its use or disposal.Mine propertiesOnce the technical feasibility and commercial viability of the extraction of mineral resources in a particulararea of interest become demonstrable, the exploration and evaluation assets attributable to that area ofinterest are reclassified as mine properties and disclosed as a component of property, plant and equipment. Alldevelopment costs subsequently incurred within that area of interest are capitalised and carried at cost.Amortisation of capitalised mine properties is provided on the unit-of-production method resulting in anamortisation charge proportional to the depletion of the economically recoverable mineral resources. Costsare amortised from the commencement of commercial production.(p) Exploration & evaluation expenditureExploration and evaluation costs related to an area of interest are carried forward only when rights of tenureto the area of interest are current and provided that one of the following conditions is met:41

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS• such costs are expected to be recouped through successful development and exploitation of the area ofinterest, or alternatively by its sale; or• exploration and/or evaluation activities in the area of interest have not yet reached a stage which permitsa reasonable assessment of the existence or otherwise of economically recoverable reserves, and activeand significant operations in, or in relation to, the area are continuing.Costs carried forward in respect of an area of interest that is abandoned are written off in the period in whichthe decision to abandon is made.(q) LeasesThe determination of whether an arrangement is or contains a lease is based on the substance of thearrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specificasset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specifiedin an arrangement.(i) the Consolidated Entity as a lesseeFinance leases, which transfer to the Consolidated Entity substantially all the risks and benefits incidental toownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased assetor, if lower, at the present value of the minimum lease payments. Lease payments are apportioned betweenthe finance charges and reduction of the lease liability so as to achieve a constant rate of interest on theremaining balance of the liability. Finance charges are recognised in finance costs in profit or loss.Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and thelease term if there is no reasonable certainty that the Consolidated Entity will obtain ownership by the end ofthe lease term.Operating lease payments are recognised as an operating expense in the statement of comprehensive incomeon a straight-line basis over the lease term. Operating lease incentives are recognised as a liability whenreceived and subsequently reduced by allocating lease payments between rental expense and reduction of theliability.(ii) the Consolidated Entity as a lessorLeases in which the Consolidated Entity retains substantially all the risks and benefits of ownership of theleased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease areadded to the carrying amount of the leased asset and recognised as an expense over the lease term on thesame basis as rental income. Contingent rents are recognised as revenue in the period in which they areearned.(r) Impairment of non-financial assets other than goodwill and indefinite life intangiblesNon-financial assets other than goodwill and indefinite life intangibles are tested for impairment wheneverevents or changes in circumstances indicate that the carrying amount may not be recoverable.Central Asia Resources Limited conducts an annual internal review of asset values, which is used as a source ofinformation to assess for any indicators of impairment. External factors, such as changes in expected futureprocesses, technology and economic conditions, are also monitored to assess for indicators of impairment. Ifany indication of impairment exists, an estimate of the asset's recoverable amount is calculated.An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverableamount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For thepurposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets(cash-generating units). Non-financial assets other than goodwill that suffered an impairment are tested forpossible reversal of the impairment whenever events or changes in circumstances indicate that theimpairment may have reversed.42

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(s)Trade and other payablesTrade and other payables are carried at amortised cost and due to their short-term nature they are notdiscounted. They represent liabilities for goods and services provided to the Consolidated Entity prior to theend of the financial year that are unpaid and arise when the Consolidated Entity becomes obliged to makefuture payments in respect of the purchase of these goods and services. The amounts are unsecured and areusually paid within 30 days of recognition.(t) BorrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less directlyattributable transaction costs.After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised costusing the effective interest method. Fees paid on the establishment of loan facilities that are yield related areincluded as part of the carrying amount of the loans and borrowings.Borrowings are classified as current liabilities unless the Consolidated Entity has an unconditional right to defersettlement of the liability for at least 12 months after the reporting date.Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. anasset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalisedas part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowingcosts consist of interest and other costs that an entity incurs in connection with the borrowing of funds. TheConsolidated Entity does not currently hold qualifying assets but, if it did, the borrowing costs directlyassociated with this asset would be capitalised (including any other associated costs directly attributable to theborrowing and temporary investment income earned on the borrowing).(u) Provisions and employee benefitsProvisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.When the Consolidated Entity expects some or all of a provision to be reimbursed, for example under aninsurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement isvirtually certain. The expense relating to any provision is presented in the statement of comprehensive incomenet of any reimbursement.Provisions are measured at the present value of management's best estimate of the expenditure required tosettle the present obligation at the reporting date. The discount rate used to determine the present valuereflects current market assessments of the time value of money and the risks specific to the liability. Theincrease in the provision resulting from the passage of time is recognised in finance costs.Restructuring provisionsRestructuring provisions are only recognised when general recognition criteria provisions are fulfilled.Additionally, the Consolidated Entity needs to follow a detailed formal plan about the business or part of thebusiness concerned, the location and number of employees affected, a detailed estimate of the associatedcosts, and appropriate time line. The people affected have a valid expectation that the restructuring is beingcarried out or the implementation has been initiated already.Employee leave benefits(i) Wages, salaries, annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leaveexpected to be settled within 12 months of the reporting date are recognised in respect of employees' servicesup to the reporting date. They are measured at the amounts expected to be paid when the liabilities are43

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSsettled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured atthe rates paid or payable.(ii) Long service leaveThe liability for long service leave is recognised and measured as the present value of expected futurepayments to be made in respect of services provided by employees up to the reporting date using theprojected unit credit method. Consideration is given to expected future wage and salary levels, experience ofemployee departures, and periods of service. Expected future payments are discounted using market yields atthe reporting date on national government bonds with terms to maturity and currencies that match, as closelyas possible, the estimated future cash outflows.Rehabilitation provisionRehabilitation includes mine closure and restoration costs which include the costs of dismantling anddemolition of infrastructure or decommissioning, the removal of residual material and the remediation ofdisturbed areas specific to the site. Provisions are recognised at the time that the environmental disturbanceoccurs.The provision is the best estimate of the present value of the future cash flows required to settle therestoration obligation at the reporting date, based on current legal requirements and technology. Futurerestoration costs are reviewed annually and any changes are reflected in the present value of the restorationprovision at the end of the financial year.The amount of the provision for future rehabilitation costs is capitalised as an asset and recognised inproperty, plant and equipment and is depreciated over the useful life of the mineral resource. The unwindingof the effect of discounting on the provision is recognised as a finance cost.(v) Share-based payment transactionsEquity settled transactionsThe Consolidated Entity provides benefits to its employees in the form of share-based payments, wherebyemployees render services in exchange for shares or rights over shares (equity-settled transactions).There is one Employee Share Option Plan (ESOP), which provides benefits to directors and other KMP.The cost of these equity-settled transactions with employees is measured by reference to the fair value of theequity instruments at the date at which they are granted. The fair value is determined by an external valuerusing a Black-Scholes model, further details of which are given in note 23.In valuing equity-settled transactions, no account is taken of any vesting conditions, other than (if applicable):• Non-vesting conditions that do not determine whether the Consolidated Entity or Company receivesthe services that entitle the employees to receive payment in equity or cash• Conditions that are linked to the price of the shares of Central Asia Resources Limited (marketconditions)The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, overthe period in which the performance and/or service conditions are fulfilled (the vesting period), ending on thedate on which the relevant employees become fully entitled to the award (the vesting date).At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensiveincome is the product of:(a) The grant date fair value of the award(b) The current best estimate of the number of awards that will vest, taking into account such factors asthe likelihood of employee turnover during the vesting period and the likelihood of non-marketperformance conditions being met(c) The expired portion of the vesting periodThe charge to the statement of comprehensive income for the period is the cumulative amount as calculatedabove less the amounts already charged in previous periods. There is a corresponding entry to equity.44

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSEquity-settled awards granted by Central Asia Resources Limited to employees of subsidiaries are recognised inthe parent's separate financial statements as an additional investment in the subsidiary with a correspondingcredit to equity. As a result, the expense recognised by Central Asia Resources Limited in relation to equitysettledawards only represents the expense associated with grants to employees of the parent. The expenserecognised by the Consolidated Entity is the total expense associated with all such awards.Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awardsvest than were originally anticipated to do so. Any award subject to a market condition or non-vestingcondition is considered to vest irrespective of whether or not that market condition or non-vesting condition isfulfilled, provided that all other conditions are satisfied.If a non-vesting condition is within the control of the Consolidated Entity, Company or the employee, thefailure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control ofneither the Consolidated Entity, Company nor employee is not satisfied during the vesting period, any expensefor the award not previously recognised is recognised over the remaining vesting period, unless the award isforfeited.If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the termshad not been modified. An additional expense is recognised for any modification that increases the total fairvalue of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured atthe date of modification.If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and anyexpense not yet recognised for the award is recognised immediately. However, if a new award is substitutedfor the cancelled award and designated as a replacement award on the date that it is granted, the cancelledand new award are treated as if they were a modification of the original award, as described in the previousparagraph.The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation ofdiluted earnings per share (see note 16).(w) Contributed equityOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares oroptions are shown in equity as a deduction, net of tax, from the proceeds.(x) Revenue recognitionRevenue is recognised and measured at the fair value of the consideration received or receivable to the extentit is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliablymeasured. The following specific recognition criteria must also be met before revenue is recognised:(i) Interest revenueRevenue is recognised as interest accrues using the effective interest method. This is a method of calculatingthe amortised cost of a financial asset and allocating the interest income over the relevant period using theeffective interest rate, which is the rate that exactly discounts estimated future cash receipts through theexpected life of the financial asset to the net carrying amount of the financial asset.(ii) Rental revenueRental revenue from investment properties is accounted for on a straight-line basis over the lease term.Contingent rental income is recognised as income in the periods in which it is earned.(y)Income tax and other taxesCurrent tax assets and liabilities for the current period are measured at the amount expected to be recoveredfrom or paid to the taxation authorities based on the current period's taxable income. The tax rates and taxlaws used to compute the amount are those that are enacted or substantively enacted at the reporting date.45

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCurrent income tax relating to items recognised directly in equity is recognised in equity and not in the incomestatement. Management periodically evaluates positions taken in the tax returns with respect to situations inwhich applicable tax regulations are subject to interpretation and establishes provisions where appropriate.Deferred income tax is provided on all temporary differences at the reporting date between the tax bases ofassets 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 orliability 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;• When the taxable temporary difference is associated with investments in subsidiaries, associates orinterests in joint ventures, and the timing of the reversal of the temporary difference can be controlledand 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 unusedtax credits and unused tax losses, to the extent that it is probable that taxable profit will be available againstwhich the deductible temporary differences and the carry-forward of unused tax credits and unused tax lossescan be utilised, except:• When the deferred income tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combination and, at thetime of the transaction, affects neither the accounting profit nor taxable profit or loss; and• When the deductible temporary difference is associated with investments in subsidiaries, associates orinterests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it isprobable that the temporary difference will reverse in the foreseeable future and taxable profit will beavailable against which the temporary difference can be utilized.The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part of thedeferred income tax asset to be utilised.Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to theextent 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 yearwhen the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted at the reporting date.Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set offcurrent tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the sametaxable entity and the same taxation authority.Tax consolidation legislationCentral Asia Resources Limited has no wholly-owned Australian controlled entities to tax consolidate with.Other taxesRevenues, expenses and assets are recognised net of the amount of GST/VAT except:• When the GST/VAT incurred on a purchase of goods and services is not recoverable from the taxationauthority, in which case the GST/VAT is recognised as part of the cost of acquisition of the asset or aspart of the expense item as applicable• Receivables and payables, which are stated with the amount of GST/VAT includedThe net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part ofreceivables or payables in the statement of financial position.Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flowsarising from investing and financing activities, which is recoverable from, or payable to, the taxation authorityis classified as part of operating cash flows.46

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCommitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, thetaxation authorities.(z) Earnings per shareBasic earnings per share is calculated as net profit attributable to members of the parent, adjusted to excludeany costs of servicing equity (other than dividends) and preference share dividends, divided by the weightedaverage number of ordinary shares, adjusted for any bonus element.Diluted earnings per share is calculated as net profit 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 thathave been recognised as expenses; and• Other non-discretionary changes in revenues or expenses during the period that would result from thedilution of potential ordinary shares, divided by the weighted average number of ordinary shares anddilutive potential ordinary shares, adjusted for any bonus element.(aa) ComparativesWhere applicable, comparatives have been adjusted to present them on the same basis as the current periodfigures.47

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS3. Cash and Cash EquivalentsConsolidated31 Dec 2011 31 Dec 2010$ $Cash held in Australia 1 :- Australian Dollars 729,081 439,031- United States Dollars 174,324 464,734Cash held in Kazakhstan 2 :- Kazakhstan Tenge 204,221 91,146- United States Dollars 233 38,393Total cash at bank 1,107,859 1,033,3041. Held in at call accounts with Westpac Bank2. Held in at call accounts with CenterCreditBank in Kazakhstan4. Trade and Other ReceivablesConsolidated31 Dec 2011 31 Dec 2010$ $GST receivable 12,197 4,928Prepayments 253,801 150,793Other receivables 1 1,108,075 161,8511,374,073 317,5721. Other receivables consist of claimable federal and state taxes incurred during the construction of the Dalabai project. Itis anticipated that these taxes will be offset against future federal and state taxes payable in the next 12 months.5. InventoriesConsolidated31 Dec 2011 31 Dec 2010$ $Broken ore – cost 316,312 -Stores, spares and consumables – cost 429,027 5,984745,339 5,984Inventories comprise broken ore stocks and stores, spares and consumables. Stores, spares and consumables representmaterials and supplies consumed in the production process. All stocks have been calculated as the lower of cost and netrealisable value, with net realisable value for broken ore stocks representing the estimated selling price in the ordinarycourse of business less any further costs expected to be incurred in respect of such disposal.48

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS6. Exploration and Evaluation ExpenditureConsolidated31 Dec 2011 31 Dec 2010$ $Opening balance at beginning of period 10,771,125 10,413,358Additions 3,144,877 2,156,136Transferred to development (4,400,741) -Foreign exchange movement (1,890,213) (1,798,369)Closing balance at end of year 7,625,048 10,771,125The recoverability of the carrying amount of the exploration and evaluation assets is dependent of the successfuldevelopment and commercial exploitation, or alternatively, sale of the respective areas of interest.7. Reconciliation of Net Loss After Tax to Net Cash From OperationsConsolidated31 Dec 2011 31 Dec 2010$ $Net loss after tax (3,824,745) (2,175,845)Less:Interest income classified as investing activity (138,850) (25,238)Add:Loss on disposal of assets 4,615 1,502Interest expense and lease payments classified asfinancing activity7,243 4,910Share based payment expense 1,826,858 18,912Depreciation expense 184,490 77,851Change in assets/liabilities:(Increase)/Decrease in trade and other receivables (1,056,501) 11,562(Increase)/Decrease in inventory (739,355) 2,573Decrease in other assets 69,433 37,046Increase in trade and other payables 1,963,682 223,237Net cash flow used in operating activities (1,703,130) (1,823,490)49

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS8. Income TaxConsolidated31 Dec 2011 31 Dec 2010$ $A reconciliation between tax expense and the product of accounting loss before income tax multiplied by theCompany’s statutory income tax rate is as follows:Accounting loss before income tax (3,824,745) (2,175,845)At the Company’s statutory income tax rate of 30% (2010: 30%) (1,147,423) (652,754)Tax effect of non-deductible items - -Tax effect of amounts which are non assessable(deductible) in calculating taxable income14,689 3,511(1,132,734) (649,243)Movement in unrecognised temporary differences (49,526) (45,356)Foreign tax rate adjustment 138,396 59,614Current period tax losses for which no deferred tax assethas been recognised1,043,864 634,985Income tax expense reported in the statement ofcomprehensive income- -Movement in unrecognised temporary differences related to items charged directly toequity:Capital raising costs - (50,787)Other - 6,884Movement in unrecognised temporary differences - 43,903Income tax expense reported in other comprehensive income - -Unrecognised deferred tax assets:Carry forward revenue tax losses 2,348,911 1,576,298Carry forward foreign tax losses 531,918 260,667Capital asset tax cost base 10,390 10,390Capital raising costs 411,451 125,054Accruals and provisions 56,392 35,655Borrowing expenses 21 38Legal fees 17,195 23,1213,376,278 2,031,223Unrecognised deferred tax liabilities:Prepayments 545 -Borrowings 121,063 1,050No income tax is payable by the Consolidated Entity.121,608 1,05050

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIncome Tax lossesThe Consolidated Entity has:• $7,829,703 (2010 : $5,254,327) of Australian tax losses; and• $2,659,592 (2010: $1,303,337) foreign tax losses.Foreign losses of the Consolidated Entity exist in 20% (Kazakhstan) tax regimes.Estimated future income tax benefits arising from income tax losses are not brought to account at reportingdate as realisation of the benefit is not regarded as probable.The Corporate tax rate in Australia is 30% (2010: 30%). The Corporate tax rate in Kazakhstan is 20% for nonsubsurfaceusers and a progressive rate applies to subsurface users.The future income tax benefit will only be obtained if:(a) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to berealised;(b) The conditions for deductibility imposed by tax legislation continue to be applied with; and(c) No changes in tax legislation adversely affect the company in realising the benefit.The Company has no franking credits as at 31 December 2011.9(a). Property, Plant and Equipment & Mine PropertiesConsolidated31 Dec 2011 31 Dec 2010$ $Capitalised work in progress – at cost 5,879,224 257,900Less accumulated depreciation - -5,879,224 257,900Mine properties & development expenditure – at cost 7,343,331 -Less accumulated depreciation - -7,343,331 -Machinery and equipment – at cost 2,482,132 303,675Less accumulated depreciation (226,571) (92,694)2,255,561 210,981Office equipment – at cost 98,274 46,117Less accumulated depreciation (38,194) (27,325)60,080 18,792Land and Buildings – at cost 201,421 63,385Less accumulated depreciation (23,063) (21,535)178,358 41,85051

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS9(b). Reconciliation of Carrying Amounts at the Beginning and End of the PeriodConsolidatedCapital WorkIn ProgressMine Properties &DevelopmentExpenditureMachinery &EquipmentOfficeEquipmentLand &Buildings$ $ $ $ $ $1 January 2011 257,900 - 210,981 18,792 41,850 529,523Additions 5,575,069 2,724,877 2,156,231 54,078 136,471 10,646,726Disposals - - (1,066) (2,659) (1,080) (4,805)Transferred from explorationand evaluation expenditure- 4,400,741 - - - 4,400,741Depreciation for the period - - (154,553) (17,720) (12,217) (184,490)Write-back on depreciation - - 24,222 7,241 11,269 42,732Foreign exchange movement 46,255 217,713 19,746 348 2,065 286,12731 December 2011 5,879,224 7,343,331 2,255,561 60,080 178,358 15,716,554TotalConsolidatedCapital WorkMachinery &OfficeLand &TotalIn ProgressEquipmentEquipment 1Buildings$ $ $ $ $1 January 2010 - 214,861 22,123 43,460 280,444Additions 257,900 88,626 10,800 16,055 373,381Depreciation for the period - (59,210) (12,819) (5,822) (77,851)Foreign exchange movement - (33,296) (1,312) (11,843) (46,451)31 December 2010 257,900 210,981 18,792 41,850 529,5231. Office equipment with a carrying value of $4,225 (2010: $7,605) is pledged as security for borrowings as disclosed in note 13.52

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS9(c). Impairment testing of the assetsThe Consolidated Entity performed its annual impairment test as at 31 December 2011. The ConsolidatedEntity considers the relationship between its market capitalisation and its book value, among other factors,when reviewing for indicators of impairment. As at 31 December 2011, the market capitalisation of theConsolidated Entity was below the book value of its equity, indicating a potential impairment of these assets.The recoverable amount of these assets have been determined based on a value in use calculation using cashflow projections from financial budgets approved by senior management covering a four year period. The pretaxdiscount rate applied to cash flow projections is 16.5% with gold price used ranging from US$1,435 toUS$1,844 per oz and silver price used ranging from US$28 to US$39 per oz and recovery rate of 55%. As aresult of this analysis, management did not identify impairment for these assets.Key assumptions used in value in use calculationsThe calculations of value in use for these assets are most sensitive to the following assumptions:• Discount rates• Price of gold and silver• Recovery rateDiscount rates - Discount rates represent the current market assessment of the risks specific to these assets,taking into consideration the time value of money and individual risks of the underlying assets that have notbeen incorporated in the cash flow estimates. The discount rate calculation is based on the specificcircumstances of the Consolidated Entity and is derived from its weighted average cost of capital (WACC). TheWACC takes into account both debt and equity. The cost of equity is derived from the expected return oninvestment by the Consolidated Entity’s investors. The cost of debt is based on the borrowings theConsolidated Entity is obliged to service. The beta factors are evaluated annually based on publicly availablemarked data.Price of gold and silver - Estimates of the average price of gold and silver are obtained from publishedforecasts from reputable brokers. In the absence of publicly available forecasts, past gold and silver pricemovements are used as an indicator of future price movements.Recovery rate - The recovery rate of 55% has been used. Management assesses this recovery rate in relation tothe industry average of similar operations in the region. Notwithstanding this, management believes that thisposition is conservative given that recovery rates obtained from laboratory test work has indicated betterrecovery and will expect this to be achieved with the result of steady improvement.With regard to the assessment of value in use of these assets, management believes that no reasonablypossible change in any of the above key assumptions would cause the carrying value to materially exceed itsrecoverable amount.10. Financial AssetsConsolidated31 Dec 2011 31 Dec 2010$ $Rehabilitation fund 1 43,808 34,831Security bond 9,281 9,28153,089 44,1121. The Consolidated Entity is required under Kazakhstan legislation to deposit fixed amounts to a trust account forpayment of future rehabilitation expenses by periodic cash contributions to a trust account in Kazakhstan to ensurefunds are available for post exploration and mining operations land rehabilitation.53

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS11. Trade and Other PayablesConsolidated31 Dec 2011 31 Dec 2010$ $Employee liabilities 77,274 238,065Trade creditors 1 947,657 62,488Other creditors and accruals 2 1,385 88,6411,026,316 389,1941. Trade creditors are non-interest bearing and are normally settled on 30 day terms.2. Other creditors and accruals are non-interest bearing.12. ProvisionsConsolidated31 Dec 2011 31 Dec 2010$ $CurrentSocial commitment 1 44,230 24,599Annual leave entitlements 116,155 26,309160,385 50,908Non-currentSocial commitment 1 249,750 411,792Provision for rehabilitation 196,869 -446,619 411,7921. The Consolidated Entity’s mining license and contract includes a requirement for payments totalling US$355,000(A$348,929) at balance date exchange rate, over the life of the project, to the social development of the region inwhich the Dalabai project is located, US$145,028 has been paid up to 31 December 2011. The amount provided forrepresents the Consolidated Entity’s best estimate of the discounted future cash out flow at balance date.13. Borrowings31 Dec 2011 Lease Equipment 1 Millstar Loan 2 Total$ $ $Current 3,380 2,596,456 2,599,836Non-Current 845 - 845Total 4,225 2,596,456 2,600,68154

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS31 Dec 2010 Lease Equipment 1 Millstar Loan 2 Total$ $ $Current 3,380 - 3,380Non-Current 4,225 - 4,225Total 7,605 - 7,6051. The lease agreement is related to the office equipment lease, which is repayable in 60 fixed monthly instalments at afixed rate of 9.06% per annum.2. The loan from Millstar is a A$3.0 million facility that is non-interest bearing, unsecured and is repayable in full on 31December 2012. This loan is initially recognised at fair value of the consideration received and is subsequentlymeasured at amortised cost using the effective interest method. As part of the borrowing, 50,487,237 options wereissued to Millstar. Details are included at Note 23.14(a). Contributed EquityConsolidatedConsolidated31 Dec 2011 31 Dec 2010Number ofNumber of$SharesShares$Paid up capitalIssued ordinary capital 673,163,156 43,581,374 295,410,284 30,421,900Capital raising costs - (2,640,555) - (1,209,468)673,163,156 40,940,819 295,410,284 29,212,432Movements in ordinary shares on issueBeginning of the period 295,410,284 29,212,432 177,435,510 25,195,408Ordinary shares issued 377,752,872 13,159,474 117,974,774 4,087,286Capital raising costs - (1,431,087) - (70,262)Balance at end of period 673,163,156 40,940,819 295,410,284 29,212,432Ordinary shares issued during the period were a result of:- placement of 20,610,020 ordinary shares at 3.2 cents per share on 27 January 2011 which raised $659,473;- placement of 28,571,457 ordinary shares at 3.5 cents per share on 26 May 2011 which raised $1,000,001; and- issue of 328,571,395 ordinary shares at 3.5 cents per share on 26 May 2011 which raised $11,500,000.Terms and Conditions of Contributed Equity- Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, toparticipate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up onshares held.- Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.- Ordinary shares are fully paid and have no par value.Capital Management- When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to obtainoptimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capitalstructure that ensures the lowest cost of capital available to the Company.55

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS- The Consolidated Entity monitors the adequacy of capital by analysing cash flow forecasts over the term of the life ofmine for each of its projects.- Appropriate capital levels are maintained to ensure that all approved expenditure programs are adequately funded. Thisfunding is derived from equity and borrowings.The Consolidated Entity is not subject to any externally imposed capital requirements.14(b). ReservesForeignCurrencyReserveConsolidatedOptionReserveEquityReserve$ $ $ $At 1 January 2010 (3,575,520) 95,475 (976,328) (4,456,373)Total comprehensiveincome/(loss), net of tax(1,592,978) - - (1,592,978)Shares issued - (20,000) - (20,000)Share based payment - 18,912 - 18,912At 31 December 2010 (5,168,498) 94,387 (976,328) (6,050,439)Total comprehensiveincome/(loss), net of tax818,445 - - 818,445Shares issued - - - -Share based payment - 1,826,858 - 1,826,858At 31 December 2011 (4,350,053) 1,921,245 (976,328) (3,405,136)Total- The foreign currency reserve is used to record exchange differences associated with subsidiaries with functionalcurrencies different from the presentation currency.- The option reserve is used to recognise the vesting charge of options granted to Directors as remuneration.- The equity reserve is used to record the difference between the carrying value of non-controlling interests and theconsideration paid, where there has been an acquisition involving non-controlling interests. The reserve is attributable tothe equity of the parent.15. Non-Controlling InterestConsolidated31 Dec 2011 31 Dec 2010$ $Opening balance 126,700 155,174Share of foreign exchange movement (3,105) (6,108)Non-Controlling interest portion of loss for the period (70,774) (22,366)52,821 126,700Ownership interests are disclosed at Note 17.56

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS16. Loss Per ShareThe following reflects the information used in calculating basic anddiluted loss per share:Consolidated31 Dec 2011 31 Dec 2010$ $Net loss attributable to ordinary equity holders (3,753,971) (2, 153,479)Weighted average number of ordinary shares for basic and diluted lossper share 1 529,816,378 233,587,944Loss per share (cents per share) (0.71) (0.92)1. 109,413,763 options on issue can potentially dilute basic earnings per share in the future but were not included in thecalculation of dilutive earnings per share because they are anti-dilutive for the period as their inclusion would decreasethe loss per share.17. Related Party Disclosures(a) Directors and Key Management PersonnelDisclosures relating to Directors and KMP remuneration are set out in the Directors’ Report.Consolidated31 Dec 2011 31 Dec 2010$ $Short-term employee benefits 979,754 793,428Post employment benefits 66,086 47,362Share-based payment/(write back of share-based payment) 445,434 (9,442)1,491,274 831,348Equity Transactions with Directors and Key Management Personnel (Consolidated)All equity transactions with KMP other than those arising from the exercise of remuneration options havebeen entered into under terms and conditions no more favourable than those the Consolidated Entity wouldhave adopted if dealing at arm's length.Shares are held both directly and indirectly by Directors/KMP.57

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSShareholdings held by Directors/KMP and their Related EntitiesBalance at1 January2011AcquiredDuring thePeriodDisposedDuring thePeriodGranted asRemunerationBalance at31 December2011Number Number Number Number NumberDirectorsA Pankhurst 1 1,500,000 - - - 1,500,000E Kanapyanov 2,900,000 - - - 2,900,000G Warwick 42,565,744 14,285,714 (2,857,143) - 53,994,315R Gill 800,000 2,857,143 - - 3,657,143P Reiser 126,400,952 - - - 126,400,952J Stirbinskis 2 1,309,656 - (309,656) - 1,000,000Key Management PersonnelC Campbell-Hicks 3 - 2,000,000 - - 2,000,000D Greenaway 4 438,416 438,416M Kong 5 - - - - -I Laudzevics 6 20,000 - (20,000) - -J Piner 7 626,300 478,571 (604,871) - 500,000W Lai 8 - - - - -Total 176,122,652 20,059,844 (3,791,670) - 192,390,826See following page for notesBalance at1 January 2010AcquiredDuring thePeriodDisposedDuring thePeriodGranted asRemunerationBalance at31 December2010Number Number Number Number NumberDirectorsJ Stirbinskis 2 1,109,656 200,000 - - 1,309,656A Pankhurst 1 1,500,000 - - - 1,500,000P Reiser 63,200,476 63,200,476 - - 126,400,952R Gill 400,000 400,000 - - 800,000G Warwick 20,078,044 22,487,700 - - 42,565,744E Kanapyanov 2,900,000 - - - 2,900,000Key Management PersonnelC Campbell-Hicks 3 - - - - -I Laudzevics 6 20,000 - - - 20,000J Piner 7 626,300 - - 626,300W Lai 8 - - - - -Total 89,834,476 86,288,176 - - 176,122,652See following page for notes58

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSOption holdings held by Directors/KMP and their Related EntitiesBalance at1 January2011AcquiredDuring thePeriodForfeited /ExpiredDuring thePeriodGranted asRemunerationBalance at31 December2011Number Number Number Number NumberDirectorsA Pankhurst 1 1,200,000 - (200,000) 9,000,000 10,000,000E Kanapyanov - - - 5,500,000 5,500,000G Warwick - - - 2,500,000 2,500,000R Gill - - - 2,500,000 2,500,000P Reiser - - - 2,500,000 2,500,000J Stirbinskis 2 3,700,000 - (3,700,000) - -Key Management PersonnelC Campbell-Hicks 3 - - - 9,000,000 9,000,000Total 4,900,000 - (3,900,000) 31,000,000 32,000,000See following page for notesBalance at1 January 2009AcquiredDuring thePeriodForfeited /ExpiredDuring thePeriodGranted asRemunerationBalance at31 December2010Number Number Number Number NumberDirectorsJ Stirbinskis 2 3,700,000 - - - 3,700,000A Pankhurst 1 1,200,000 - - - 1,200,000Total 4,900,000 - - - 4,900,000Notes for previous pages1 Appointed 1 February 2011, resigned 6 February 2012.2 Resigned 31 January 2011.3 Appointed 17 January 2011, resigned 31 January 2012.4 Appointed 29 June 2011.5 Appointed 29 June 2011, resigned 15 February 2012.6 Appointed 17 February 2011, resigned 27 July 2011.7 Resigned 30 April 2011.8 Resigned 17 February 2011.59

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(b) Transactions with Related PartiesSubsidiaries:The consolidated financial statements include the financial statements of Central Asia Resources Limited andits subsidiaries as per the following table:NameCountry ofIncorporationEquity (%) Investment ($)31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010Golden Eagle Investment British VirginResources LimitedIslands100% 100% 1,463,271 1,463,271Moonstone Holdings Ltd 1 Jersey 100% 100% 2,760,000 2,760,000Palmerston Ltd 1British VirginIslands100% 100% 240,000 240,000Altyn-Tas LLP 2 Kazakhstan 95% 95% 28,299 28,299Altynsaigeo LLP Kazakhstan 90% 90% 405,911 405,911Buguty-Palm LLP 3 Kazakhstan 60% 60% - -Onzhas LLP Kazakhstan 90% 90% 1,915,047 1,915,047Zhetysugeomining LLP 4 Kazakhstan 90% 90% 1,135 1,135Palm-ES LLP 5 Kazakhstan 100% 100% - -1. Investment held by Golden Eagle Investment Resources Limited.2. Investment held by Moonstone Holdings Ltd.3. Investment held by Palmerston Ltd.4. Investment held 100% by Onzhas LLP.5. Palm-ES was acquired in the year for nil consideration.(c) Transactions with Related PartiesThe following totals are related party transactions which occurred during the year. These transactions were onnormal commercial terms and conditions unless otherwise stated and exclude expense reimbursements.Consolidated EntitySales Purchases Other Transactions31 Dec201131 Dec201031 Dec201131 Dec201031 Dec201131 Dec2010$ $ $ $ $ $Director relatedWestern Ventures ConsultingPty Ltd 1 - - - 15,690 - -Kazakhstan-Australia LLP 2 - - 137,949 108,724 14,749 -60

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSConsolidatedParent31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010$ $ $ $Trade and Other ReceivablesKazakhstan-Australia LLP 2 100,176 - - -Trade and Other PayablesKazakhstan-Australia LLP 2 - 24,599 - 24,599All payables are unsecured, and settled by cash.1. Western Ventures Consulting Pty Ltd (WVCPL) provided Company secretarial, accounting and administrative services,of which Ms Pankhurst is the sole shareholder and Director, on the same basis as WVCPL provides those services toother entities.2. Kazakhstan-Australia LLP, an entity related to Mr Kanapyanov, provides consulting services in Kazakhstan.18. Capital and Other Expenditure CommitmentsExploration and Development CommitmentsCommitments in relation to the Consolidated Entity’s licenses are determined by work programs agreed withthe government, on the signing of the license agreement and then on an annual basis. Work programamendments can be applied for, if required.Under the agreed exploration and development work programs, the estimated commitment required to bepaid over the next three years is:< 1 Year >1 Year < 5 Years Total$ $ $1,731,620 5,181,689 6,913,308Lease CommitmentsOperating lease commitments – the Consolidated Entity as lesseeOn 1 August 2010 the Company entered into a property lease agreement to secure office space for a minimumof 2 years to 31 July 2012.The lease requires a minimum fixed 4% annual rent increase, with an annual market revaluation.61

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFuture minimum rentals payable under non-cancellable operating leases are:Consolidated31 Dec 2011 31 Dec 2010$ $Within one year 20,983 43,269More than one and less than five years - 25,24020,983 68,509Finance lease commitments – the Consolidated Entity as lesseeConsolidated31 Dec 2011 31 Dec 2010$ $Office Equipment LeaseWithin one year 4,910 4,910More than one and less than five years 1,228 6,138Total minimum lease payment 6,138 11,048Less amounts representing finance charges (1,913) (3,443)Present value of minimum lease payments 4,225 7,605Included in the financial statements as:Current borrowing 3,380 3,380Non-current borrowing 845 4,2254,225 7,60519. Segment ReportingFor management purposes, the Consolidated Entity has been organised into one main operating segment,exploration and development for gold and other minerals. The Consolidated Entity operates in onegeographical location, being Kazakhstan, where the exploration and development activities are conducted. Allof the company’s activities are interrelated, and financial information is reported to the Board (Chief OperatingDecision Makers) as a single segment. Accordingly, all significant operating decisions are based upon analysisof the Consolidated Entity as one segment. The financial results from this segment are equivalent to thefinancial statements of the Consolidated Entity as a whole.At 31 December 2011 there was only one segment within the Consolidated Entity. Since the ConsolidatedEntity is moving to production in 2012, Dalabai will be treated as a separate segment for the year ended 31December 2012.62

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSInformation about geographical areas(i) Geographical location of non-current assets31 Dec 2011 31 Dec 2010$ $Australia 33,713 23,077Kazakhstan 23,360,978 11,399,141Total 23,394,691 11,422,218(ii)RevenueInterest revenue of $138,850 (2010: $25,238) was earned in Australia. The interest was earned primarily fromone financial institution.20. Significant Events After the Balance DateThere were significant changes in the Company subsequent to balance date. In January, Mr DuncanGreenaway was promoted to Chief Operating Officer, with Mr Chris Campbell-Hicks completing his contract asCountry Manager Kazakhstan.In February 2012, Central Asia Resources advised the resignation of Managing Director Mrs Angela Pankhurstand a decision to close the Company’s Perth office and move administration operations to Kazakhstan. Guy,Earl of Warwick and Mr Robin Gill are jointly acting as Managing Director until the Company finds a suitablecandidate to take on the role.Mr Gill is an engineer with many years of experience in project management and production operations. Hehas taken control of Central Asia Resources’ operations and will remain in Kazakhstan until first productiontargets at the Company’s Dalabai gold processing facility, along with other restructuring objectives, areachieved.The Company also announced the resignation of Ms Michelle Kong as Chief Financial Officer and theappointment of Ms Zhanna Tazhibayeva as Chief Financial Officer and Mr Michael Michael as Non-ExecutiveDirector and Acting Company Secretary.Ms Tazhibayeva has previously worked for global investment bank JP Morgan and petroleum company AgipKCO while her most recent position was with Kazakhstan-based pharmacy group Amity Retail. She is multilingualand is fluent in English, Russian and German. Her knowledge of the language and familiarity with localregulations and operating environment will enhance and improve business efficiency in Kazakhstan.Mr Michael has many years of practical experience in founding, developing and operating business inexecutive and non-executive roles, many of which have been from start-up. He is currently chairman of bothMetaliko Resources Limited and Unison Holdings Limited.In addition to this, the Company announced in February that it would place 80,000,000 ordinary fully paidshares at 2.5 cents each to professional and sophisticated investors to raise $2 million of which $1,600,000 hasbeen received to date.Proceeds from the placement will be used to fund the ramp-up of gold processing at Dalabai as the Companyprogresses to near-term positive cash flow. It will also fund exploration at Central Asia Resources’ Bizhe andAltyntas projects. On 24 February, the Company commenced commencement of production at Dalabai.63

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS21. Contingent LiabilitiesThere are no contingent liabilities for the Consolidated Entity of which the Directors are aware.22. Financial Risk ManagementThe Consolidated Entity is focused on the exploration and commercial exploitation of gold and silver inKazakhstan. As such, the Consolidated Entity is exposed to the following risks:• Credit risk;• Interest rate risk;• Foreign currency risk; and• Liquidity risk.The Consolidated Entity does not enter into or trade in financial instruments, including derivative financialinstruments for speculative purposes. The use of financial instruments and the overall risk managementstrategy of the Consolidated Entity is governed by the Board of Directors and is primarily focussed on ensuringthe Consolidated Entity is able to finance its business plans.Credit RiskCredit risk is the risk a counter party will default on its contractual obligations resulting in a financial loss to theConsolidated Entity. The Consolidated Entity’s maximum exposure is equal to the carrying amount of itsfinancial assets and trade and other receivables which comprise cash, receivables, security deposits and loansas at 31 December 2011.The Consolidated Entity’s short-term cash surplus are invested and held at major banks with optimal creditratings, resulting in exposure to standard financial system risk.No current receivables are past due or impaired.Interest Rate RiskInterest rate risk is the risk that a fair value or future cash flow of a financial instrument will fluctuate becauseof changes in underlying cash rate.Interest rates on financial liabilities are fixed until maturity.Other financial assets that are not listed below have not been included as they are not interest bearing and aretherefore not subject to interest rate risk.Consolidated31 Dec 2011 31 Dec 2010$ $Financial AssetsFloating rateCash and cash equivalents 716,157 429,750Security bond 9,281 9,281725,438 439,031The following table summarises the sensitivity of the fair value of financial instruments held at balance date,following a movement in underlying cash interest rates with other variables held constant. The 1% (2010: 2%)sensitivity is based on reasonably possible changes over a financial year, using the observed range of historicalrates for the preceding 5 year period.64

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSConsolidated31 Dec 2011 31 Dec 2010$ $+1% (2010: +2%)Profit Increase 7,254 8,781Foreign Currency RiskThe Consolidated Entity’s exposure to foreign currency risk at the reporting date was as follows, based onnotional amounts:Consolidated 31 Dec 2011AUD KZT USD TotalCash 729,081 204,221 174,557 1,107,859Trade and other receivables 46,204 1,327,870 - 1,374,074Borrowings (2,600,681) - - (2,600,681)Trade and other payables (233,280) (791,261) (1,775) (1,026,316)Net balance sheet exposure (2,058,676) 740,830 172,783 (1,145,064)Consolidated 31 Dec 2010AUD KZT USD TotalCash 439,031 91,146 503,127 1,033,304Trade and other receivables 24,006 215,155 - 239,162Borrowings (7,605) - - (7,605)Trade and other payables (164,704) (216,843) (7,647) (389,194)Net balance sheet exposure (290,728) 89,458 495,480 875,667The following significant exchange rates (A$) applied during the period:Average RateReporting Date Spot Rate31 Dec 2011 31 Dec 2010 31 Dec 2011 31 Dec 2010KZT 149.1624 133.6060 148.1150 152.0380USD 1.0319 0.9199 1.0174 1.0163Sensitivity analysisA 10 per cent strengthening of the A$ against the following currencies at 31 December would have increased/(decreased) other comprehensive income and profit or loss by the amounts shown below. This analysisassumes that all other variables, in particular interest rates, remain constant. The analysis is performed on thesame basis for the periods ended 31 December 2010.65

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAUDOtherComprehensiveIncomeProfit or Loss31 Dec 2011USD - (15,708)KZT - (67,348)31 Dec 2010USD - (45,044)KZT - (8,133)A 10% weakening of the A$ against the above currencies at 31 December would have had the equal butopposite effect on the above currencies to the amounts shown above, on the basis that all other variablesremain constant.Significant assumptions used in the foreign currency exposure sensitivity analysis include:• Reasonably possible movements in foreign exchange rates were determined based on a review of recentmovements and consideration of economic climate;• The reasonably possible movement of 10% was calculated by consideration of the A$ average rate movingbetween an achieved high/low rates of approximately 0.9973/1.0770 respectively;• The translation of the net assets in subsidiaries with a functional currency other than AUD has not beenincluded in the sensitivity analysis as part of the equity movement; andLiquidity RiskLiquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financialliabilities.Management of liquidity risk is achieved through adoption of policies to maintain sufficient available fundingto meet its commitments. The need for available funds is monitored through the maintenance of future rollingcash forecasts.The following table illustrates the contractual maturities of the Consolidated Entity financial liabilities:Consolidated 31 Dec 2011 31 Dec 2010< 1 Year 1 to 5 > 5 Total < 1 Year 1 to 5 > 5 TotalYears YearsYears Years$ $ $ $ $ $Trade andother payables1,026,316 - - 1,026,316 389,194 - - 389,194Provisions 160,385 369,157 77,462 607,004 50,908 411,792 - 462,700Loans andborrowings2,599,836 845 - 2,600,681 3,380 4,225 - 7,605Total 3,786,537 370,002 77,462 4,234,001 443,482 416,017 - 859,49966

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNet Fair ValuesThe carrying amount of financial assets and financial liabilities recorded in the financial statementsapproximate their fair values.23. Share Based Payment PlansRecognised share based payment expensesThe expense recognised for services received during the year is shown in the table below:Consolidated31 Dec 2011 31 Dec 2010$ $Employment related expense 445,434 18,912Option PlansThe Company issued share options to a senior employee, directors, placement agent and lender, Millstar topurchase shares in the entity. The terms and conditions of the current grants are as follows, whereby alloptions are delivered by physical delivery of shares:Grant Date Grantees Number ofInstrumentOutstanding at 31Dec 2011Vesting ConditionsExpiry Date ofOptions06-Aug-08 Director’s Option 200,000 1.567 years of service 28-Feb-1206-Aug-08 Director’s Option 200,000 2.567 years of service 28-Feb-1329-May-09 Director’s Option 200,000 0.756 years of service 28-Feb-1229-May-09 Director’s Option 200,000 1.756 years of service 28-Feb-1329-May-09 Director’s Option 200,000 2.756 years of service 28-Feb-1419-May-11 Employee Option 9,000,000 No vesting conditions 19-May-1419-May-11Placement AgentOption26,926,526 No vesting conditions 19-May-1419-May-11 Millstar Option 50,487,237 No vesting conditions 19-May-1418-Jul-11 Directors’ Options 22,000,000 No vesting conditions 19-May-14Total Share Options 109,413,763The fair value of services received in return for share options granted during the year is based on the fair valueof share options granted, measured using the binomial option-pricing model (unless otherwise stated) with thefollowing inputs:67

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSEmployee OptionGranted on 19May 2011Placement AgentOption Granted on19 May 2011Directors’ OptionMillstar Option2011 4 2011Granted on 19 May Granted on 18 JulyFair value at 2.640 cents 2.640 cents 1.328 cents 1.077 centsShare price 5.0 cents 5.0 cents 5.0 cents 3.0 centsExercise price 3.5 cents 3.5 cents 3.5 cents 3.5 centsExpected volatility 1 85% 85% N/A 85%Option life 2 3 years 3 years 3 years 2.84 yearsExpected dividends Nil Nil Nil NilRisk-free interest 3 5.0% 5.0% N/A 4.28%Discount rate 4 N/A N/A 12.0% N/A1. Expressed as weighted average volatility used in the modelling under binomial option-pricing model2. Expressed as weighted average life used in the modelling under binomial option-pricing model3. Based on national government bonds4. Recognised at fair value of the consideration received and is measured at amortised cost using the effective interestmethod68

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSThe summaries of the options granted under the plan are as follows:31 December 2011Grant Date Expiry Date Exercise Price Balance at Startof YearGranted Duringthe YearExercisedDuring the YearCancelled /ForfeitedDuring the YearBalance at Endof the YearExercisable at End ofthe Year$ Number Number Number Number Number Number06-Aug-08 28-Feb-11 $0.30 850,000 - - (850,000) - -06-Aug-08 28-Feb-12 $0.50 800,000 - - (600,000) 200,000 200,00006-Aug-08 28-Feb-13 $0.60 800,000 - - (600,000) 200,000 200,00029-May-09 28-Feb-12 $0.25 850,000 - - (650,000) 200,000 200,00029-May-09 28-Feb-13 $0.40 800,000 - - (600,000) 200,000 200,00029-May-09 28-Feb-13 $0.60 800,000 - - (600,000) 200,000 -19-May-11 19-May-14 $0.035 - 86,413,763 - - 86,413,763 86,413,76318-Jul-11 19-May-14 $0.035 - 22,000,000 - - 22,000,000 22,000,0004,900,000 108,413,763 - (3,900,000) 109,413,763 109,213,763Weighted average exercise price, ¢ 43.83 3.50 - 43.01 3.90 3.7969

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS31 December 2010Grant Date Expiry Date Exercise Price Balance at Startof YearGranted Duringthe YearExercisedDuring the YearCancelled /ForfeitedDuring the YearBalance at Endof the YearExercisable atEnd of the Year$ Number Number Number Number Number Number06-Aug-08 28-Feb-11 $0.30 850,000 - - - 850,000 850,00006-Aug-08 28-Feb-12 $0.50 800,000 - - - 800,000 800,00006-Aug-08 28-Feb-13 $0.60 800,000 - - - 800,000 -29-May-09 28-Feb-12 $0.25 - 850,000 - - 850,000 850,00029-May-09 28-Feb-13 $0.40 - 800,000 - - 800,000 -29-May-09 28-Feb-13 $0.60 - 800,000 - - 800,000 -2,450,000 2,450,000 - - 4,900,000 2,500,000Weighted average exercise price, ¢ 46.33 41.33 - - 43.83 34.7070

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSRange of Exercise Price and Weighted Average Remaining Contractual LifeThe Option outstanding at 31 December 2011 have an exercise price in the range of $0.035 to $0.60 and aweighted remaining contractual life of 2.37 years (2010: 1.64 years).Weighted Average Fair ValueThe weighted average fair value of options granted during 2011 was 1.71 cents (2010: no options weregranted).Option pricing modelEquity-settled transactionsThe fair value of the services received in return for share options granted are measured by reference to the fairvalue of share options granted. The estimate of the fair value of the services received is measured based onthe binomial option-pricing model. The contractual life of the option is used as an input into the model.Expectations of exercise are incorporated into the binomial option-pricing model.24. Auditor’s RemunerationConsolidated31 Dec 2011 31 Dec 2010$ $The Auditor of Central Asia Resources Limited is Ernst & Young.Amounts received or due and receivable by the company auditors for an audit of thefinancial report of the entity:Australia 94,240 198,846Kazakhstan 33,917 30,639128,157 229,48525. Employee ExpensesConsolidated31 Dec 2011 31 Dec 2010$ $Short-term employee benefits 1,378,315 908,547Post employment benefits 69,428 47,362Share-based payment 445,434 18,9121,893,177 974,82171

2011Annual ReportNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS26. Information Relating To Central Asia Resources LimitedParent31 Dec 2011 31 Dec 2010$ $Current Assets 949,609 927,771Total Assets 26,900,122 13,104,219Current Liabilities 2,875,025 194,393Total Liabilities 2,875,869 198,618Issued Capital 40,940,819 29,212,432Reserves 1,921,245 94,387Accumulated losses (18,837,811) (16,401,218)24,024,253 12,905,601Loss of the Parent Entity (2,436,592) (2,711,451)Total Comprehensive Loss of the Parent (2,436,592) (2,711,451)The parent:- Has no contingent assets or liabilities.- Has not provided any guarantees.- Has arranged a funding package for its continuing operations (refer Note 2b)72

2011Annual ReportDIRECTORS’ DECLARATIONDIRECTORS’ DECLARATIONFor The Year Ended 31 December 2011In accordance with a resolution of the Directors of Central Asia Resources Limited, I state that:1. In the opinion of the directors:a. The financial statements and notes of Central Asia Resources Limited for the financial year ended31 December 2011 are in accordance with the Corporations Act 2011, including:i. Giving a true and fair view of its financial position as at 31 December 2011 andperformanceii. Complying with Accounting Standards (including the Australian AccountingInterpretations) and the Corporations Regulations 2001b. The financial statements and notes also comply with International Financial Reporting Standards asdisclosed in Note 2.c. Subject to matters disclosed in Note 2(b) there are reasonable grounds to believe that the Companywill be able to pay its debts as and when they become due and payable2. This declaration has been made after receiving the declarations required to be made to the Directors inaccordance with section 295A of the Corporations Act 2001 for the financial year ended 31 December2011.On behalf of the boardGuy, Earl of WarwickChairmanPerth, 30 March 201273

Independent auditor's report to the members of Central Asia ResourcesLimitedReport on the financial reportWe have audited the accompanying financial report of Central Asia Resources Limited which comprisesthe consolidated statement of financial position as at 31 December 2011, the consolidated statement ofcomprehensive income, the consolidated statement of changes in equity and the consolidated statementof cash flows for the year then ended, notes comprising a summary of significant accounting policies andother explanatory information, and the directors' declaration of the consolidated entity comprisingCentral Asia Resources Limited and the entities it controlled at the year's end or from time to time duringthe financial year.Directors' responsibility for the financial reportThe directors of the company are responsible for the preparation of the financial report that gives a trueand fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and forsuch internal controls as the directors determine are necessary to enable the preparation of the financialreport that is free from material misstatement, whether due to fraud or error. In Note 2, the directorsalso state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, thatthe financial statements comply with International Financial Reporting Standards.Auditor's responsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted ouraudit in accordance with Australian Auditing Standards. Those standards require that we comply withrelevant ethical requirements relating to audit engagements and plan and perform the audit to obtainreasonable assurance about whether the financial report is free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial report. The procedures selected depend on the auditor's judgment, including the assessmentof the risks of material misstatement of the financial report, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal controls relevant to the entity's preparation andfair presentation of the financial report in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity'sinternal controls. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the financial report.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.IndependenceIn conducting our audit we have complied with the independence requirements of the Corporations Act2001. We have given to the directors of the company a written Auditor’s Independence Declaration, acopy of which is included in the directors’ report.RK:SS:CAR:002Liability limited by a scheme approvedunder Professional Standards Legislation

2OpinionIn our opinion:a. the financial report of Central Asia Resources Limited is in accordance with the Corporations Act2001, including:igiving a true and fair view of the consolidated entity's financial position as at 31 December2011 and of its performance for the year ended on that date; andii complying with Australian Accounting Standards and the Corporations Regulations 2001;andb. the financial report also complies with International Financial Reporting Standards as disclosed inNote 2(c).Report on the remuneration reportWe have audited the Remuneration Report included in the directors’ report for the year ended 31December 2011. The directors of the company are responsible for the preparation and presentation ofthe Remuneration Report in accordance with section 300A of the Corporations Act 2001. Ourresponsibility is to express an opinion on the Remuneration Report, based on our audit conducted inaccordance with Australian Auditing Standards.OpinionIn our opinion the Remuneration Report of Central Asia Resources Limited for the year ended 31December 2011, complies with section 300A of the Corporations Act 2001.Material uncertainty regarding continuation as a going concernWithout qualification to the opinion expressed above, attention is drawn to the following matter. As aresult of the matters described in Note 2(b), there is material uncertainty whether the consolidated entitywill be able to continue as a going concern and therefore whether it will pay its debts as and when they falldue and realise its assets and extinguish its liabilities in the normal course of business and at the amountsstated in the financial report. The financial report does not include any adjustments relating to therecoverability and classification of recorded asset amounts or to the amounts and classification ofliabilities that might be necessary should the consolidated entity not continue as a going concern.Ernst & YoungR A KirkbyPartnerPerth30 March 2012RK:SS:CAR:002

2011Annual ReportASX ADDITIONAL INFORMATIONASX Additional InformationFor The Year Ended 31 December 2011Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in thisreport is as follows. The information is current as at 27 March 2012.(a) Twenty Largest ShareholdersThe names of the twenty largest holders of quoted Shares are:Listed Ordinary SharesNumber ofSharesPercentage ofOrdinarySharesRE-RESOURCES & ENERGIES SA 125,600,952 17.25NOJOOD HOLDING COMPANY WLL 63,720,040 8.75HILLBROW INVESTMENTS LIMITED 42,895,370 5.89HSBC CUSTODY NOMINEES AUSTRALIA LIMITED 29,488,184 4.05HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3 22,571,429 3.10CITICORP NOMINEES PTY LIMITED 16,364,583 2.25J P MORGAN NOMINEES AUSTRALIA LIMITED 15,000,000 2.06NATIONAL NOMINEES LIMITED 14,568,759 2.00SURFBOARD PTY LTD 9,646,572 1.33EQUITY TRUSTEES LIMITED 9,173,143 1.26RL HOLDINGS PTY LTD 8,600,000 1.18MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 8,275,000 1.14TAURUS CORPORATE SERVICES PTY LTD 8,000,000 1.10HILLBROW INVESTMENTS LTD 7,098,945 0.98ROMAN RESOURCE MANAGEMENT PTY LTD 6,858,968 0.94MR MICHAEL SIMON BEVILACQUA + MRS SALLY CLAUDIA BEVILACQUA 6,500,000 0.89SHAIKH DUAIJ SALMAN MUBARAK ALKHALIFA 6,285,714 0.86KOLLEY PTY LTD 5,930,358 0.81FOSTER WEST SECURITIES PTY LTD 5,734,424 0.79BARRIJAG PTY LTD 5,714,286 0.78418,026,727 57.4176

2011Annual ReportASX ADDITIONAL INFORMATION(b) Twenty Largest Option HoldersThe names of the twenty largest holders of Options are:Number ofOptionsListed OptionsPercentage ofOptionsMillstar Holding SA Panama 50,487,237 46.40%Roman Resource Management Pty Ltd 10,097,447 9.28%Angela Pankhurst 9,400,000 8.64%Chris Campbell-Hicks 9,000,000 8.27%Francis Harper 8,414,540 7.73%Jeanette Richardson 8,414,539 7.73%Erulan Kanapyanov 5,500,000 5.05%Philippe Reiser 2,500,000 2.30%Robin Gill 2,500,000 2.30%Guy Warwick 2,500,000 2.30%(c) Substantial Shareholders108,813,763 100.00%The names of Substantial Shareholders who have notified the Company in accordance with section 671B of theCorporations Act 2001 are:Listed Ordinary SharesNumber ofSharesPercentage ofOrdinarySharesPhilippe Reiser 126,400,952 18.78Earl of Warwick 53,994,315 8.0277

2011Annual ReportASX ADDITIONAL INFORMATION(d) Distribution of Equity SecuritiesThe number of Shareholders, by size of holding, in each class of Share are:Number ofHoldersOrdinary SharesNumber ofShares1 - 1,000 13 2581,001 - 5,000 7 24,4725,001 - 10,000 56 480,37110,001 - 100,000 351 15,581,410100,001 and over 441 708,876,645868 727,963,156The number of Shareholders holding less than a marketable parcel ofShares are:84 601,601(e) Voting RightsOrdinary sharesOn a show of hands, every ordinary shareholder present in person, or by proxy, attorney or representative hasone vote.On a poll, every shareholder present in person, or by proxy, attorney or representative has one vote for anyshare held by the shareholder.78

2011Annual ReportCORPORATE GOVERNANCE STATEMENTCorporate Governance StatementThe board of Directors is responsible for the corporate governance of Central Asia Resources Limited (the‘Company’). The Company operates in accordance with the corporate governance principles as set out by theASX corporate governance council and required under ASX listing rules.As the framework of how the Company carries out its duties and obligations, the Board has considered theeight principles of corporate governance as set out in the ASX Corporate Governance Principles andRecommendations with 2010 Amendments, 2nd Edition (the ‘Principles’).The eight principles of corporate governance are:1. Lay solid foundations for management and oversight;2. Structure the Board to add value;3. Promote ethical and responsible decision-making;4. Safeguard integrity in financial reporting;5. Make timely and balanced disclosure;6. Respect the rights of shareholders;7. Recognise and manage risk; and8. Remunerate fairly and responsibly.There are a number of recommendations in the Principles with which the Company does not comply due tothe size of the Company and the Board, and its practical management requirements. A summary of thePrinciples and those recommendations with which the Company does not comply are detailed at the end ofthis statement.The Company is in the process of reviewing and updating all governance policies and charters which will bemade available on the Company’s website www.centralasia.com.au.Principle 1 – Lay Solid Foundations or Management and OversightCompanies should establish and disclose the respective roles and responsibilities of Board and management.Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated tosenior executives and disclose those functions.The Board is responsible for the governance of the Company. The role of the Board is to provide overallstrategic guidance and effective oversight of management.The Board delegates to the Managing Director responsibility for implementing the Company’s strategicdirection and managing the Company’s day to day operations.Recommendation 1.2: Companies should disclose the process for evaluating the performance of seniorexecutives.The Managing Director is responsible for assessing the performance of the key executives within the Company.The basis of evaluation of senior executives will be on agreed performance measures.79

2011Annual ReportCORPORATE GOVERNANCE STATEMENTPrinciple 2 – Structure the Board to Add ValueCompanies should have a Board of an effective composition, size and commitment to adequately discharge itsresponsibilities and duties. The Company’s board size and composition is subject to limits imposed by theCompany’s constitution, which provides for a minimum of 3 directors and a maximum of 10.Recommendation 2.1: A majority of the Board should be independent directors.The membership and structure of the Board is selected to provide the Company with the most appropriatedirection in the areas of business controlled by the Company. The Board considers that the individuals on theBoard can, and do, make quality and independent judgments in the best interests of the Company on allrelevant issues.The Board currently consists of 5 members, 4 non-independent. Two members are non-executive.The Directors in office at the date of this statement are:Guy, Earl of WarwickErulan KanapyanovRobin GillPhilippe ReiserMichael MichaelExecutive ChairmanExecutive DirectorExecutive DirectorNon-Executive DirectorNon-Executive Director (Independent)The Board considers that the composition of the Board is appropriate given the size and development of theCompany.Refer to the Director’s report for details of each director’s profile.Recommendation 2.2: The chair should be an independent director.Recommendation 2.3: The roles of the chair and managing director should not be exercised by the sameindividual.The Chairman of the Company is Guy, Earl of Warwick. The Chairman is not classed as an independent directoras he has a substantial shareholding in the Company and is currently acting as Joint Managing Director. Thisdoes not impact on his ability to oversee or assist the executives and their management of the Company.Recommendation 2.4: The Board should establish a nomination committee.The Board has not established a nomination committee. The Board, as a whole, deals with areas that wouldnormally fall within the Charge of the Nomination Committee.Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, itscommittees and individual directors.The Board undertakes ongoing self-assessment and review of its performance and of the performance of theChairman and Individual Directors.80

2011Annual ReportCORPORATE GOVERNANCE STATEMENTPrinciple 3 – Promote Ethical and Responsible Decision-makingCompanies should actively promote ethical and responsible decision-making.Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of thecode as to:• the practices necessary to maintain confidence in the company’s integrity;• the practices necessary to take into account their legal obligations and the reasonable expectations oftheir stakeholders; and• the responsibility and accountability of individuals for reporting and investigating reports of unethicalpractices.The Company is committed to Directors and employees maintaining high standards of behaviour, businessethics and integrity as well as ensuring that activities are in compliance with the letter and spirit of both thelaw and Company policies.Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or asummary of that policy.Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achievinggender diversity set by the board in accordance with the diversity policy and progress towards achieving them.Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees inthe whole organisation, women in senior executive positions and women on the board.The Company embraces diversity, with a focus on female participation, as a significant proportion of womenwithin the Company are currently holding senior executive positions in Australia and Kazakhstan. Diversity isnot limited to gender, age, ethnicity and/or cultural backgrounds.Principle 4 – Safeguard Integrity in Financial ReportingCompanies should have a structure to independently verify and safeguard the integrity of their financialreporting.Recommendation 4.1: The Board should establish an audit committee.Recommendation 4.2: The audit committee should be structured so that it:• consists of only non-executive directors;• consists of a majority of independent directors;• is chaired by an independent chair, who is not chair of the Board; and• has at least three members.The Board has not yet established an Audit Committee. The Board, as a whole, deals with areas that wouldnormally fall within the Charge of the Audit Committee.Recommendation 4.3: The audit committee should have a formal charter.The Board has not yet established a formal charter for an Audit committee.81

2011Annual ReportCORPORATE GOVERNANCE STATEMENTPrinciple 5 – Make Timely and Balanced DisclosureCompanies should promote timely and balanced disclosure of all material matters concerning the company.Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASXListing Rule disclosure requirements and to ensure accountability at a senior executive level for that complianceand disclose those policies or a summary of those policies.The Company has obligations under the Corporations Act and ASX Listing Rules to keep the market fullyinformed of information which may have a material effect on the price or value of its securities. The Companydischarges these obligations by releasing information to ASX in the form of an ASX release or disclosure inother relevant documents (e.g. the Annual Report).Principle 6 – Respect the Rights of ShareholdersCompanies should respect the rights of shareholders and facilitate the effective exercise of those rights.Recommendation 6.1: Companies should design a communications policy for promoting effectivecommunication with shareholders and encouraging their participation at general meetings and disclose theirpolicy or a summary of that policy.The Company is committed to the promotion of investor confidence by ensuring that trade in its securitiestakes place in an efficient, competitive and informed market. The Board Charter recognises the importance offorthright communication as a key plank in building shareholder value and that to prosper and achieve growththe Company must (among other things) earn the trust of employees, customers, suppliers, communities andsecurity holders by being forthright in its communications and consistent in its fulfilment of obligations.Shareholders will be provided with the following reports and communications:• Annual Report;• Notice of Annual General Meeting; and• any other documents which the Board deems appropriate.At the Annual General Meeting of the Company, Shareholders will be encouraged to ask questions of theBoard and the Company’s Auditor.The Company commits to dealing fairly, transparently and openly with both current and prospectiveshareholders using available channels and technologies to reach and communicate promptly.Principle 7 – Recognise and Manage RiskCompanies should establish a sound system of risk oversight and management and internal control.Recommendation 7.1: Companies should establish policies for the oversight and management of materialbusiness risks and disclose a summary of those policies.Management determines the Company’s risk profile and is responsible for overseeing and approving riskmanagement strategy and policies, internal compliance and internal control.The Board oversees an ongoing assessment of the effectiveness of risk management and internal complianceand control.Recommendation 7.2: The Board should require management to design and implement the risk managementand internal control system to manage the company’s material business risks and report to it on whether those82

2011Annual ReportCORPORATE GOVERNANCE STATEMENTrisks are being managed effectively. The Board should disclose that management has reported to it as to theeffectiveness of the Company’s management of its material business risks.The responsibility for undertaking and assessing risk management and internal control effectiveness isdelegated to management. Management is required by the Board to report back on the efficiency andeffectiveness of risk management.Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executiveofficer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act isfounded on a sound system of risk management and internal control and that the system is operatingeffectively in all material respects in relation to financial reporting risks.The Managing Director and the Chief Financial Officer confirm in writing to the Board that the financial reportsof the Company for the financial period:• present a true and fair view, in all material respects, of the company’s financial condition and operationalresults and are in accordance with relevant accounting standards;• the above statement is founded on a sound system of risk management and internal compliance andcontrol which implements the policies adopted by the Board; and• the company’s risk management and internal compliance and control system is operating efficiently andeffectively in all material respects.Principle 8 – Remunerate Fairly and ResponsiblyCompanies should ensure that the level and composition of remuneration is sufficient and reasonable and thatits relationship to performance is clear.Recommendation 8.1: The Board should establish a remuneration committee.The Board has not established a remuneration committee. The Board, as a whole, deals with areas that wouldnormally fall within the Charge of the Remuneration Committee.Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’remuneration from that of executive directors and senior executives.Directors’ and Senior Executives’ remuneration is aligned to the long-term interests of Shareholders within anappropriate control framework.Further information on directors’ and executives’ remuneration is set out in the directors’ report.83

2011Annual ReportCORPORATE GOVERNANCE STATEMENTDeparture from Best Practice RecommendationsFrom 1 January 2011 to 31 December 2011, the Company complied with each of the Eight Essential CorporateGovernance Principles and Best Practice Recommendations published by the ASX Corporate GovernanceCouncil, other than the recommendations specified in the table below.Recommendation Notification of Departure Explanation from Departure2.1 A majority of the Board arenot independent directors.2.2 & 2.3 The chair is not anindependent director.The roles of the chair andmanaging director should notbe exercised by the sameindividual.2.4 The Board has not establisheda nomination committee.4.1, 4.2 & 4.3 The Board has not establishedan audit committee.8.1 The Board has not establisheda remuneration committee.The Board believes that the individuals on the Boardcan, and do, make quality and independentjudgements in the best interests of the Company on allrelevant issues.The Chairman is not classed as an independent directorbecause of the size of his shareholding and he iscurrently acting as Joint Management Director. Thisdoes not impact on his ability to oversee or assist theexecutives and their management of the Company.The whole Board carries out the duties which wouldotherwise be undertaken by the nominationcommittee. The need for a nomination committee willbe reviewed annually.The whole Board carries out the duties which wouldotherwise be undertaken by an audit committee. Theneed for an audit committee and formal charter will bereviewed annually.The whole Board carries out the duties which wouldotherwise be undertaken by the remunerationcommittee. The need for a remuneration committeewill be reviewed annually.84

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