Albidon Annual - London Stock Exchange · Limited for over four years and with the commencement of...

Albidon Annual Report 2008

From exploration to operation

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Directors R. Potts - ChairmanJ. Shaw - Deputy-ChairmanD. Rogers - Managing DirectorP. ChapmanV. ChitaluA. CookeC. De Guingand

Company Secretary

N. Day

Registered Offi ce

3/F Barclays HouseWickhams CayRoad Town, TortolaBritish Virgin Islands

Principal Place of Business

Level 1, 62 Colin StreetWest Perth, WA 6005, Australia

Share Register

Computershare Investor Services Pty Limited452 Johnston StreetAbbotsford, Victoria 3067, Australia

Albidon Limited shares are listed on the Australian Stock Exchange (ASX) and the Alternative Investment Market (AIM) of the London Stock Exchange

Solicitors

Blakiston & Crabb1202 Hay StreetWest Perth, WA 6005, Australia

Auditors

Ernst & Young11 Mounts Bay RoadPerth, WA 6000, Australia

Website

www.albidon.com

ARBN

107 288 755

AIM Nominated Advisor

RFC Corporate Finance LimitedLevel 8, 250 St Georges TerracePerth, WA 6000 Australia

AIM Broker

Numis Securities LimitedLondon Stock Exchange Building5th Floor, 10 Paternoster SquareLondon EC4M 7LT United Kingdom

ASX Broker and Corporate Advisor

RBC Capital MarketsLevel 46, 2 Park StreetSydney, NSW 2000 Australia

AIM Code: ALDASX Code: ALB

Corporate Directory

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Contents02 Letter From The Chairman

04 Managing Director’s Report

06 Strategy and Objectives

07 The East Africa Nickel Belt

08 Munali Nickel Project, Zambia

17 Uranium Projects, Zambia

20 Botswana Nickel Projects

22 Tanzania Nickel Projects

26 Tunisia Zinc Projects

29 Financial Report

79 Corporate Governance Report

84 Additional Shareholder Information

87 Tenement Schedule

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The Munali Project has made considerable progress during the year, and by the time you read this message, the project is expected to be producing nickel concentrate.

The Enterprise Mine at Munali came into production three months ahead of schedule and within the revised capital cost estimate.

This result is due to a sustained effort by the entire team and the ongoing assistance of the relevant Zambian government departments and local community. Albidon is now one of a very rare breed - a new greenfi elds nickel mining company.

The Company’s exploration programmes have made signifi cant progress this year with very encouraging results from our 100% owned Sunnyside nickel project in Botswana.

The joint venture with BHP Billiton at Songea in Tanzania has defi ned a number of quality new nickel drill targets, while in Tunisia the joint venture with Zinifex has yielded encouraging results in the form of high grade zinc drill intersections.

Albidon’s joint venture with African Energy Resources Limited to explore and exploit the uranium prospects on our tenements in Zambia has resulted in a positive Pre-Feasibility Study for consideration by the boards of both companies.

I have been the Chairman of Albidon Limited for over four years and with the commencement of production at Munali and the encouraging results from the ongoing exploration programme, it is now time for me to stand down and hand over to a new Chairman who will lead Albidon through the next phase of its growth and development.

To this end John Shaw joined the board in February 2008 and will take over as Non-Executive Chairman after I resign at the AGM on 29th May 2008.

I am very proud to have worked with the Albidon team and I wish Dale and John, the board, and the Albidon team all the very best for the future.

Dick Potts

Chairman

Letter from the ChairmanOnce again I am pleased to report that this has been a great year for Albidon as we progress towards our goal of being a nickel producer while continuing substantial programmes aimed at maintaining a pipeline of new development projects.

ALB ID O N L IM I TE D A NNU AL RE PORT 200 8

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Highlights of 2007 include:

• Development of the underground access at the Enterprise Mine, with ore intersected two months ahead of schedule.

• By the date of this report construction of the Munali concentrator was approximately 95% complete, with fi rst concentrate production on track for April 2008, several months ahead of schedule.

• Establishment of Munali site infrastructure has been largely completed, including site access roads, grid power and standby facilities, water supply, offi ce accommodation, storage and other buildings to support the mining operations.

• Completion of project fi nancing, including up to $80 million in senior debt from Barclays Capital and the European Investment Bank, $20 million in subordinated debt from offtake partner Jinchuan Group in addition to our equity funding from shareholders.

• Hedging contracts have been concluded on very attractive terms (average $10.71/lb) for approximately 25% of the expected nickel production from Munali over the period from June 2009 to June 2013. The hedging locks in strong operating margins while providing approximately 75% exposure to cash nickel prices.

• An initial resource estimate was prepared for the Voyager deposit at Munali, which holds the potential to expand production rates and/or project life that is currently based on only the Enterprise deposit.

• Completion of a positive Pre-Feasibility Study on the Njame and Gwabe uranium deposits in Zambia by our joint venture partner African Energy Resources.

• Confi rmation of several new mineralised uranium prospects in both the Chirundu and Kariba Valley joint ventures in Zambia, with drilling anticipated in 2008.

• Discovery of nickel sulphide mineralisation at the Sunnyside prospect within the Company’s large tenement package to the south of Selebi-Phikwe, Africa’s premier nickel mining district.

• Confi rmation of high priority new nickel targets for drilling at the Songea joint venture with BHP Billiton in Tanzania.

• Drilling success with Zinifex on the Nefza JV in Tunisia, with the intersection of high grade zinc mineralisation in the historical Bou Aouane mining district.

The team established in 2006 to develop the Munali Project was further strengthened during the year with the appointment of several highly experienced construction, mining, processing and commercial personnel to facilitate the development of the project. A strong emphasis has been maintained on recruiting an optimal blend of Zambian staff and expatriates.

With fi rst concentrate production at Munali expected two months ahead of schedule early in the second quarter of 2008, a substantial effort through the coming year will be directed towards optimising the mining and concentrator fl ow sheet. Opportunities will be examined for expansion of production, while at the same time assessing process improvements to increase metal recoveries.

Specifi cally, the upgrading of the newly completed mill to increase production and the application of Dense Media Separation techniques (DMS) will be reviewed, along with a Scoping Study for the development of the Voyager deposit to the north of the Enterprise Mine. Substantial exploration programmes will be maintained in the coming year with the aim of further increasing the nickel resource base at Munali.

Community development activities in the broader district around Munali were expanded during 2007, with an acceleration of the Relocation Action Plan, expansion of the Malaria Rollback programme, assistance with education facilities and emergency relief initiatives. Additional initiatives will be implemented in the coming year, including the establishment of a mobile clinic to improve the health of the local community in the Munali district.

The development of the Munali Project provides Albidon with a powerful platform for growth of the Company, by utilising our cash fl ow and unique positioning in Africa. The period ahead will see an increased effort directed at evaluating growth options through alliances and possible merger activity.

On the exploration front, the recent discovery of nickel mineralisation at Albidon’s Sunnyside project in Botswana, combined with the new drill targets generated by JV partner BHP Billiton at Songea in Tanzania once again demonstrate the potential that is being unlocked on the Company’s extensive tenement holdings in Africa. It is anticipated that drilling and other activities on these projects will be accelerated in the coming year.

Managing Director’s ReportDear Shareholder, In the past year Albidon has largely completed the transformation from junior explorer to nickel mining company. The Company is now poised to join the ranks of an exclusive group, an independent producer of high quality nickel concentrates from a new greenfi elds mining project.

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In uranium, our efforts in 2007 were rewarded with a positive Pre-Feasibility Study completed by JV partner African Energy Resources on the Njame and Gwabe deposits in Zambia. At the time of this report the boards of both companies are reviewing the way forward for these projects.

The Company’s only project in North Africa also received a boost during the year with high grade zinc mineralisation being intersected at Nefza by our joint venture partner Zinifex, who is funding and operating the project. Additional drilling is planned for 2008.

I welcome Mr. John Shaw to our Board of Directors as Chairman-elect and would like to acknowledge and thank our outgoing Chairman, Mr. Richard Potts for his efforts and direction over the past four years.

On behalf of the Board of Directors and myself, I would like to thank our shareholders for your ongoing support, which has placed the Company in a strong position for growth. I also thank the entire Albidon team for its hard work and commitment in advancing all our projects throughout the past year.

I believe the quality and scope of Albidon’s projects, combined with our talented and dedicated team, will continue to deliver positive results for Shareholders during the coming year.

Dale Rogers

Managing Director

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A LB IDON OP ERAT IONS REV I EW

ObjectivesAlbidon’s key objective is to maximise return and value for shareholders. The Company intends to achieve this by operating responsibly in the interests of all stakeholders and building a profi table mining company with continued commitment to exploration.

StrategyOur strategy is to continue to create value through project development, exploration, including joint venture partnerships and strategic investments.

The Company will continue to exploit its competitive advantage in nickel across Africa, without being constrained by it. We will look to take advantage of good quality investments and opportunities providing further diversifi cation by geography and commodity.

Maintaining a strong project pipeline is essential to achieving organic growth of the Company. Evaluation of opportunities will include merger and acquisition activity given our current transformation into a producer. Albidon will seek opportunities for project acquisitions or corporate mergers which will provide investment in cost competitive projects.

Growth will also be achieved through expansion of operations and exploration. We are currently looking at expansion plans for Munali, including expansion of the plant and current resources and reserves. In exploration we continue to work on programmes focused in the most promising areas of our substantial African tenement holdings.

We continue to derive strategic advantage from our proprietary geoscientifi c database and place priority on utilising the latest exploration technology. In addition, we continue to work with our joint venture partners and are looking for new partners which fi t with our strategic growth plans.

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Recent discoveries and improved geological models have highlighted the nickel and platinum potential of several areas within southern and eastern Africa. These have resulted from the recognition of extensive mafi c-ultramafi c intrusion complexes typical of those that contain nickel sulphide mineralisation elsewhere in the world.

Albidon has established a large tenement holding in this important geological province, which is termed the East Africa Nickel Belt and extends for over 2,000 km throughout eastern and southern Africa. The Company believes this region has potential for further discovery of large nickel deposits, yet is relatively unexplored by comparison with other parts of the world with similar geology.

Historically high nickel prices, the discovery and development of the Munali Project and the recently announced doubling of the mineral resource at Xstrata’s Kabanga deposit to over 1.3 million tonnes of contained nickel, has led to increased competitor activity in this region. Albidon, through its large tenement holdings, proprietary databases and operational experience is well positioned to remain at the forefront of this exploration drive.

A number of Albidon’s nickel prospects illustrate the benefi ts of this strategic positioning. For example: the Company’s recent delineation of new nickel geochemical anomalies and conductor targets in highly prospective geology at Songea in Tanzania; and recent drilling confi rmation of the discovery of nickel sulphide mineralisation at Sunnyside in Botswana.

The East Africa Nickel Belt

Albidon project locations in the East Africa Nickel Belt

Albidon project locations in Africa

1. Nefza Zn-Pb and Cu-Au Project, Tunisia

2. Haffouz Zn Project, Tunisia

3. Luwumbu PGM Ni Project, Tanzania

4. Songea Ni-PGM Project, Tanzania

5. Mpemba Ni-PGM Project, Malawi

6. Munali Nickel Project, Zambia

7. Maitengue Ni Project, Botswana

8. Sunnyside Ni Project, Botswana

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Malawi

Botswana

Tanzania

Bushveld Platinum Province

Lake Victoria Goldfi eld

Selebi-Phikwe Nickel District1,300,000 tonnes of Ni metal (BCL)

Kabanga Nickel Deposit1,200,000 tonnes of Ni metal (Barrick-Xstrata)

Mibango Ni-PGM (IMX-Lonmin)

Luwumbu PGM-NiIMX-Albidon

Sunnyside Ni

EAST AFRICA NICKEL BELT

Copperbelt

Malawi

Zambia

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Zambia UraniumAlbidon - African Energy JV

Maitengwe NiAlbidon - IAMGOLD JV

WitwatersprandGoldfi eld

Songea Ni-PGMAlbidon - BHP Billiton JVMunali Ni Mine

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Munali Nickel ProjectThe Munali nickel deposit is located approximately 60km south of Lusaka in southern Zambia. The project is well served by road, rail and power infrastructure as well as water supplies. Munali is 100% owned by Albidon. The project currently comprises two deposits, the Enterprise deposit, also referred to as the Munali Phase 1 project, and the Voyager deposit.

Development of the Enterprise nickel deposit commenced in September 2006 following a positive Bankable Feasibility Study (‘BFS’) and receipt of the necessary government permits and approvals. The project is scheduled for commissioning in April 2008.

The Enterprise project will produce approximately 10,000 - 10,500 pa of nickel in concentrate from a 1,200,000 tpa underground mining operation involving straightforward extraction methods and conventional processing technology. Enterprise forms the initial part of the Munali growth strategy, targeted to economically exploit the other identifi ed lower grade nickel deposits at Munali through the effective application of additional process technology such as Dense Media Separation (‘DMS’).

The Munali Project is one of only a very few new nickel sulphide developments planned worldwide in the next few years. The project will deliver a high quality bulk concentrate into a market characterised by strong demand and limited supply. Munali is expected to be low on the cost curve of nickel producers, with a fi nal direct cash operating cost of approximately US$3 per pound of nickel in concentrate.

A highlight of 2007 was the Offi cial Ground-Breaking Ceremony for the Munali project by His Excellency Levy Mwanawasa SC, the President of Zambia in the company of many distinguished guests from the diplomatic, political, commercial and

local communities in Zambia, as well as Albidon’s project partners.

The following paragraphs summarise the progress on key elements of project construction, as well as the Relocation Action Plan (‘RAP’), through the course of 2007. This section of the report also includes an indicative timetable for completion of the Munali Nickel Project.

Site Infrastructure

Construction of site infrastructure was commenced at Munali and substantial progress was made during the year. Key developments include the establishment of the following major infrastructure components:

• Road construction and perimeter fencing are complete;

• Construction of accommodation blocks, offi ces, stores and security buildings are close to completion;

• Construction of the concentrator, tailings facility and supporting ground works are progressing on schedule and due for completion in April 2008;

• The permanent water supply to the concentrator is complete and has been tested;

• 4 MVA diesel power generator sets are currently on site supporting construction, with the long term dedicated sub-station currently in testing phase; and

• The underground support infrastructure is in place.

Mine Development

As at the date of this report (31 March 2008) the Enterprise decline has advanced to the fi rst and second sublevels of the orebody, with the ore being intersected two months ahead of schedule. It is clear from the underground exposures that there is potential for mining additional mineralisation in the hangingwall. A major campaign is planned for 2008 to defi ne the extent of hangingwall ore and to assess the economics of extracting it.


Zambia ProjectsMunali Nickel Project, Uranium Exploration Projects

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Over the next ten years, the Munali Project will deliver high quality nickel concentrate into a market characterised by strong demand and a limited supply.

PROJECT OU TLOOK

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ALB IDON OP ERAT IONS REV I EW - Z AM B IA PROJECTS

All underground equipment is currently on site or on its way to site. This will complete the equipment ramp up required for fi rst stope ore production in June 2008 and a sustainable production rate of 1.2 mtpa by the end of 2008.

The initial project, Munali phase 1, is based solely on the Indicated portion of the Enterprise Resource which is located at the southeast corner of the Munali Intrusion. The present project design does not rely on, but can be modifi ed to accommodate, possible future production from the Inferred Resource portion of the Enterprise Deposit.

From the outset, mine design and planning have been undertaken to allow maximum fl exibility in project development, in particular expansion of mine production. Following completion

of commissioning by mid-2008 it is expected that optimisation of the project and expansion of production will be a major focus for the Munali team.

The Enterprise mine is an underground operation accessed via a 25m deep ‘boxcut’ excavation leading to a nominal 5.0m x 5.5m twin decline at a gradient of 1 in 7. The mine design utilises highly mechanised up-hole benching and long-hole open stope mining methods, resulting in effi cient ore extraction and low mining costs.

These mining methods allow for mining from the top down which maximises early production of ore. Cleaning and hauling methods are also highly mechanised with applied tele-remote loading techniques in support of the drive for zero tolerance on safety. The principal mining contractor is Byrnecut Mining International Limited, a group that is highly experienced in these mining methods and operating in Africa.

Mineral Resources for Enterprise

and Voyager Nickel Deposits

Drilling was continued throughout 2007 with the objective of providing better detail of the mining reserve at Enterprise for the start-up of production, and also to provide an initial resource estimate for the Voyager deposit which is located some 600m to the north of Enterprise. Current published Indicated and Inferred Resources for the deposits at a revised cutoff grade of 0.6% Ni are as follows:

Enterprise Deposit:

9.1Mt @ 1.23% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3 g/t Pt.

Voyager Deposit: 1.2Mt @ 0.9% Ni, 0.1% Cu, 0.05% Co, 0.7g/t Pd, 0.4g/t Pt.

Total Resource:

10.3Mt @ 1.2% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3g/t Pt.

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ALB IDON OPERAT IONS REV I EW - Z AMB IA PROJECTS

This amounts to a current metal inventory at Munali of 123,500 tonnes of Ni and 246,800 ounces of platinum group metals (‘PGM’). Over 70% of this total resource has been classifi ed in the Indicated Resource category under the JORC Code.

Revised long term commodity price assumptions have lowered the cut-off from 0.7% to 0.6% Ni.

Construction of Munali Concentrator

The ore will be processed through a conventional fl otation concentrator, comprising a simple crushing and grinding circuit, rougher, scavenger and cleaner fl otation cells, followed by concentrate and tailings thickeners, producing a high grade nickel, copper, cobalt and PGM concentrate for sale to the Jinchuan Group of China for smelting.

Construction of the Munali concentrator is being directed by GRD Minproc and as at the time of this report the construction of the overall process plant was 95% complete. All major equipment items have been delivered to site in preparation for fi nal assembly, including the ball mills, crusher components, fl otation cells, concentrate fi lter and prefabricated pipes and platework.

It is anticipated that fi rst concentrate will be produced in the second quarter of 2008. Following an initial ramp-up period through 2008, production will comprise approximately 10,000 to 10,500 tonnes of Ni, 1,650 tonnes of Cu, more than 480 tonnes of Co and 18,000 ounces of PGM in concentrate per annum.

Scoping studies are underway to assess the potential for further improvements to the process fl ow circuit. These studies include: mining at lower cutoff grade and head grade of ore; and optimisation of material fl ow.

The objective is to increase the mineable resource and annual production output, and to maximise metal recoveries.

Indicative specifi cations for nickel concentrate product from the Enterprise Deposit are as follows:

Ni: 13%; Cu: 2%; Co: 0.7%; Pt: 1.9g/t; and Pd: 7.9g/t.

In addition, the concentrate is free of deleterious element impurities and also has low MgO content and a high Fe/MgO ratio, features that are particularly attractive for operators of fl ash-furnace type nickel smelters.

Offtake partner Jinchuan Group is currently assessing the feasibility of building a smelter in southern Africa and if this eventuates there may be scope to further optimise the project by increasing metal recoveries and concentrate tonnages by reducing the grade of metals in concentrate.

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Capital Costs

Albidon has successfully managed the construction of the Munali Nickel Project to be delivered ahead of time and with a capital cost increase of ~25% realised for the project to date when compared to the estimate developed in the Bankable Feasibility Study in 2006.

The increase in costs is attributable to the continuing escalation of costs in the mining industry worldwide. Cost increases cover all facets of the project, including raw materials, equipment, labour, power and fuel.

This area of cost management will receive close attention through 2008 and beyond.

Offtake Agreement

An Offtake Agreement was signed in December 2006 with Jinchuan Group, China’s largest producer of nickel, cobalt and platinum group metals and a major producer of copper. The offtake arrangements include substantial project funding commitments from Jinchuan, as detailed below.

Project Funding

The Munali project is being funded by a mix of debt and equity as follows:

Equity funding: US$40 million was raised from Albidon shareholders, US$15 million from Jinchuan Group and US$10 million from ZCCM Investment Holdings plc.

Debt fi nancing: up to US$80 million of senior debt is being provided by Barclays Capital and the European Investment Bank as joint lead arrangers for the project. The Jinchuan Group will provide an additional US$20 million in subordinated debt.

Milestones2006 2007 2008

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Regulatory approvals

Feasibility study

Concentrator design

Procurement of long lead time items

Construction management contract awarded

Engineering, procurement and design of major items

Mining contractor mobilisation to site

Structural steelwork and platework fabrication

Procurement and delivery of ball mills to site

Mill & process plant construction

First ore production from development areas

First ore into concentrator

Key Milestones and Forward Programme

Completed Ahead of Schedule

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Environmental Management at Munali

The Munali Project is being constructed and operated in accordance with the Equator Principles and the conditions and guidelines approved by the Environmental Council of Zambia.The Environmental Management Plan (“EMP”) is currently in draft format and is scheduled to be submitted for approval in April 2008. Environmental programmes are already in place in support of the EMP and environmental audits have been conducted with satisfactory results.

Relocation and Community

Development Plan

The Relocation Action Plan (‘RAP’) is a key component of the overall Munali project. The RAP is the result of a detailed Social Impact Assessment undertaken as part of the Bankable Feasibility Study and it has as its primary objective the comfortable

resettlement of members of the Munali community that formerly occupied areas that will be physically affected by the operations.

Planning for, and implementation of the RAP has involved continuous close consultation with the local community and its representatives. The Company particularly wishes to acknowledge the high level of support and cooperation it has received from the Munali community and the people throughout the Southern Province of Zambia.

Phase 2 of the RAP program is now complete and an additional 18 households are in the process of being re-located. Phase 2 included the establishment of road infrastructure, water boreholes, a local brick factory, cement brick houses and preparing maize and other product fi elds in support of the traditional culture of the surrounding community.

Phase 3 is scheduled to start in mid-April 2008 and the company has decided to train and employ the local community as the RAP construction team. The programme is fully supported by the community, the traditional leaders, local and central government.

The community development programme is also scheduled to start early in 2008 and will include the HIV/AIDS awareness and prevention programme and the Malaria Rollback programme, already implemented in December 2007. Initiatives such as a mobile clinic in conjunction with the government unit and the construction of a skills training centre are scheduled in the programme.

During the recent fl oods in the Southern Province region, the Company assisted the fl ood victims in local communities through the provision of food and other needs.

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Long-section looking west to illustrate the underground mining blocks and decline access at Enterprise (left) and Voyager (to the right).

Malaria Rollback Programme

The Malaria Rollback programme started in October 2007 with the assistance of government support groups and has focused mainly on the following initiatives to date:

• Spraying of houses and buildings on site and community villages against mosquitos to a radius of 25 kilometers;

• Providing free testing to all employees, contractors and the community; and

• Providing free anti-malaria treatment to employees, contractors and the community through the establishment of a mobile clinic taking the service to the villages.

This effort has reduced the level of recorded malaria cases and the programme is scheduled to continue with the input and support of local leaders and government.

Munali Growth Strategy

A number of initiatives have commenced to investigate options for the future growth of Munali.

A Scoping Study is underway to examine development options for the Voyager deposit which could either increase the annual production rate at Munali or alternatively could extend the life of the project beyond 10 years. Additional drilling will be undertaken in 2008 with the objective of locating more ore between Enterprise and Voyager and down-dip of both deposits.

The Company has recently approved an upgrade to the concentrator to increase production from the project to 10,000 - 10,500 tonnes of nickel in concentrate per annum. The concentrator capacity will be upgraded to 1,200,000 tpa. Capital costs for the upgrade are estimated at US$2.5 million and the upgrade will be funded from cash reserves.

The application of Dense Media Separation (DMS) at Munali is currently being investigated through a Scoping Study. Preliminary testwork shows that Munali Enterprise ore performs well when subjected to DMS. The use of the DMS process will potentially allow the profi table processing of lower grade nickel ores, thereby increasing overall contained nickel tonnes. The application of a lower cut off grade will require a re-focus on the exploration potential of the Munali Intrusion.

This exploration refocus will include the Enterprise Mine and Voyager resource, as well as targets to the north of Voyager such as Intrepid (previously known as the North West Target) and Defi ant. Enterprise, Voyager and Intrepid will be subject to additional drilling programmes in 2008 to update the resource defi nition.

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Exploration for Additional Nickel

Resources in the Munali Project

As mentioned above, drilling continued at Enterprise and Voyager in 2007 and was successful in increasing the confi dence in the Enterprise resource and in providing an initial resource estimate for the Voyager deposit. This programme will be continued in 2008 with the objective of locating additional ore between these two deposits and also down-dip.

Drilling will also be directed at assessing the resource potential of the Intrepid and Defi ant target areas in the northern part of the Munali Intrusion, based on the fact that the geological setting of the mineralisation intersected along the southwestern side of the Munali Intrusion is consistent, with the same controls on nickel sulphides over the entire length of the intrusion (over 2.5km).

The exploration programme for 2008 will include ground electromagnetic surveys aimed at locating new zones of mineralisation to the north of the Munali Intrusion, based on structural geological work that suggests the Intrusion may plunge in a northerly direction.

Exploration drilling in the northwest portion of the Munali Intrusion near the Intrepid and Defi ant exploration targets indicates a north-western plunge to the Munali intrusion. Ground EM is planned to cover the potential extension of the Munali intrusion to the northwest. Ongoing drilling and scoping work are planned for the Intrepid Target as potential sources of additional ore for the Munali plant.

Revised mapping at Munali has updated the geologic map of the Munali Gabbro.

Zambia Regional

Nickel-Copper Exploration

An evaluation of the Munali Fault Zone was initiated in the second quarter of 2006, commencing with an electromagnetic (VTEM) survey on a 60km corridor along the fault. This survey identifi ed a number of conductive targets which were systematically evaluated through reconnaissance geological mapping and, where warranted, by geochemical

Geologic cross section of Munali showing mineralisation

Geological map of the Munali Gabbro showing Enterprise, Voyager, Intredpid and Defi ant

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soil sampling. The results generally indicated prospectivity for sediment hosted copper mineralisation rather than for mafi c to ultrarmafi c hosted nickel.

These programmes led the Company to focus exploration efforts in the Chikani area, approximately 25km to the south of Munali. Three reconnaissance diamond drill holes drilled in 2006 identifi ed a zone of approximately 35m drilled width containing sulphide bearing black shales with copper bearing sulphides. This appears to be the source of the copper anomalism in the stream and soil sampling. Ongoing work is focused on evaluating the potential for sediment hosted copper style targets similar to the Copperbelt.

Further interpretation of regional data led to the recognition of three additional major fault structures, as well as the south-easterly continuation of the Munali Fault. An extensive programme of stream sediment sampling to evaluate these four structures was commenced in 2006 and completed in 2007 with 1,575 stream sediment samples collected during the 2007 survey.

Drainages with copper values greater than 50ppm copper are clustered in the Chikani and Luwanya areas. This is the current focus of ongoing fi eld work. Anomalous drainages were fi eld checked and locations for grid soil sampling were selected in the Chikani and Luwanya areas. Approximately 2,400 soil samples were collected in late 2007 and the results are currently being evaluated. This will form the basis for the evaluation of drill targets in 2008.

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information contained in this report has been presented in accordance with the JORC Code and references to “Indicated”, “Inferred Resources” and “Probable Ore Reserves” are to those terms as defi ned in the JORC Code.

Information in this report relating to exploration results and mineral resources is based on data compiled by Mike Dunbar (a consultant to the Company and full time employee of the Mitchell River Group) and John Schloderer (an employee of

the Company), who are both members of The Australasian Institute of Mining and Metallurgy. Mike Dunbar and John Schloderer both have suffi cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person under the 2004 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Mike Dunbar and John Schloderer consent to the inclusion of the data in the form and context in which it appears.

Uranium Projects

Albidon and African Energy Resources Limited have entered into an agreement for the exploration and development of a number of uranium prospects that have been identifi ed on Albidon’s tenements in Zambia.

Under the Agreement A$500,000 was spent by African Energy within two years to maintain an option to enter a Joint Venture on one or more project areas, following which African Energy has, to date, nominated three projects for farm-in, the Chirundu, Kariba Valley and Luano Valley Joint Ventures.

African Energy may earn a 30% interest in each of these project areas selected by it for farm-in by expending A$1 million on the selected project area, and may then proceed to earn a 70% interest by drilling up a JORC Indicated Resource and completing a Pre-Feasibility Study. African Energy has earned an initial 30% interest in the Chirundu Joint Venture and is still earning a 30% interest in the Kariba Valley and Luano Valley JVs.

Chirundu Joint Venture

The key projects comprising the Chirundu JV are the Njame and Gwabe uranium deposits, located approximately 80km south-east of Lusaka, the capital of Zambia. African Energy Resources has earned an initial 30% equity interest in the project and is earning a 70% equity interest by completing the Chirundu Pre-Feasibility Study for possible development of the Njame and Gwabe deposits.

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Location of major regional faults and the stream sediment geochemical surveys on the Munali Project

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Location of Chirundu, Kariba Valley and Luano Valley JV Projects showing known uranium occurences

Location of the Chirundu JV Project showing Gwabe and Njame uranium deposits

Njame Uranium Deposit

Drilling in 2007 has enabled an updated estimate for the Njame deposit.

The total Inferred Resource is now 8.8Mt @ 340 ppm U3O8 for 3,000t U3O8 (6.6 Mlb). This resource is concentrated in the Njame North deposit, with contributions from the Njame East and Njame Central deposits shown in the table.

Gwabe Deposit

Based on drilling completed in 2007 a resource estimate has been completed for the Gwabe project: Inferred Resource of 4.2 Mt @ 267ppm U3O8 for 2.5 Mlb of contained U3O8 (1,120 tonnes) at a 100ppm lower cut-off grade. The resource estimate methodology and classifi cation complies with the JORC Code and has been independently reviewed by Coffey Mining Pty Ltd.

The Gwabe uranium deposit is located in Karoo-aged sediments and is 20km along strike from the Njame deposit. Uranium mineralization at Gwabe is hosted in oxidized, coarse grained sandstones, grits and pebble

Deposit Inferred Resource Contained U3O

8

Njame North 6.5 Mt @ 355 ppm U3O8 2,300t (5.1 Mlb)

Njame East 1.1 Mt @ 340 ppm U3O8 375t (0.8 Mlb)

Njame Central 1.2 Mt @ 270 ppm U3O8 325t (0.7 Mlb)

Njame Total 8.8 Mt @ 340 ppm U3O

8 3,000t (6.6 Mlb)

Interpreted geological cross section of the Njame uranium deposit

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conglomerates which overlie a non-mineralised, reduced silty-shale horizon. The mineralisation dips gently to the south-east and is located close to the surface, at between 3m and 29m depth.

The Albidon-African Energy Resources Joint Venture is currently evaluating the potential for economically viable mining and uranium processing at the Njame and Gwabe deposits as part of the Chirundu Pre-Feasibility Study. With the increased Inferred Resource at Njame, the total Inferred Resource for the Chirundu project is now 4,120t U3O8 (9.1 Mlb U3O8). The Pre-Feasibility Study is expected to be fi nalised by the end of the fi rst quarter of 2008, with a decision to proceed to a full Bankable Feasibility Study (BFS) in the second quarter. The Pre-Feasibility Study is based on mining a number of deposits and trucking uranium-loaded resin from these to a central processing plant.

Kariba Valley Joint Venture

Exploration continued at the Chisebuka and Namakande uranium prospects in the Kariba Valley JV, in addition to an initial reconnaissance programme covering an extensive area to the south-west of the Munyumbwe and Chisebuka uranium prospects. This area was evaluated through airborne radiometric surveying in November 2007.

Chisebuka Prospect

Rock-chip sampling in 2007 confi rmed the presence of high-grade uranium mineralisation at surface with 11 of 46 samples exceeding 100ppm U3O8. A programme of RC drilling on a nominal 400m x 100m grid was undertaken to test these anomalies. Signifi cant assays are listed in the table below.

Mineralisation at Chisebuka occurs in two parallel zones over at least 800m of strike in the northern zone and at least 400m in the southern zone within coarse-grained sandstones interpreted to be part of the Karoo-aged Escarpment Grit Formation that hosts the Njame and Gwabe uranium deposits. Both zones remain open along strike to the northeast. Drilling at Chisebuka is expected to recommence in the second or third quarter of 2008. The Chisebuka uranium prospect is situated 75 km to the south-west of the Njame uranium deposit.

Namakande Prospect

Reconnaissance geological mapping, geochemical sampling, rock-chip sampling and gamma-ray scintillometer surveys were completed over a number of previously identifi ed ground radiometric anomalies at Namakande. Uranium mineralisation has been confi rmed at 5 out of 6 targets, with peak values up to 1,150 ppm U3O8 in rock samples and up to 326 ppm U3O8 in soil samples. Additional soil sampling and geological validation will be undertaken in 2008, with drilling as warranted.

Luano Valley Joint VentureAfrican Energy Resources formally nominated a third joint venture project with Albidon Limited in November 2007. The Luano Valley JV includes parts of two large scale prospecting licenses owned by Albidon containing Karoo sediments located in central Zambia. Exploration will commence in 2008.

Information in this report relating to exploration results and mineral resources is based on data compiled by Frazer Tabeart (an employee and Managing Director of African Energy Resources Limited), who is a member of The Australasian Institute of Mining and Metallurgy. Frazer Tabeart has suffi cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person under the 2004 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Frazer Tabeart consents to the inclusion of the data in the form and context in which it appears.

19


Interpreted geological cross section of the Gwabe uranium deposit

Signifi cant uranium assays from Chisebuka drilling:

CHI007 7m @ 445 ppm U3O8 from 11mincluding 2m @ 762 ppm U3O8 from 11mand 2m @ 642 ppm U3O8 from 16m

CHI004 2m @ 740 ppm U3O8 from 66m






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Selebi-Phikwe Nickel Project

The main target in this project is the Selebi-Phikwe style of massive nickel sulphide mineralisation, and gabbro-hosted mineralisation such as Phoenix and Selkirk in the Tati district near Francistown, north-eastern Botswana.

The Selebi-Phikwe Project comprises 21 contiguous Prospecting Licences (PLs) covering approximately 11,262 sq km in the eastern part of the Central District of Botswana. The Project covers prospective ground to the south of the Selebi-Phikwe Nickel Mining District and includes several Ni-Cu occurrences. These include the Lipadi Hill, Sunnyside and Kgwedi nickel prospects.

Exploration has targeted both massive sulphide and disseminated styles of nickel mineralisation. Ground geophysics was completed on all the prospects with ground EM over the Sunnyside and Lipadi prospects and IP over Sunnyside and Kgwedi. Grid-based soil sampling was also completed over the Sunnyside and the Kgwedi targets with historical soil data available over Lipadi.

The Sunnyside and Kgwedi prospects are located close to the Sunnyside Shear Zone which is a major geological structure located in the southern part of the Selebi-Phikwe tenement package. This zone extends for many tens of kilometres. Because this structure contains a number of known nickel sulphide occurrences, two large areas along the Sunnyside Shear Zone were selected for an airborne electromagnetic (VTEM) survey in addition to selected coverage over the Lipadi prospect. Approximately 4,300 line kilometres were fl own. The survey was completed


Botswana ProjectsSelebi-Phikwe Nickel Project

Location map of the Selebi-Phikwe Nickel Project in Botswana

Location of Sunnyside drill holes on interpreted EM conductors

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ALB IDON OPERAT IONS REV I EW - BOTSWANA PROJECTS

in March 2008 and data processing is under way. Drilling is planned in2008 on targets generated from interpretation of the airborne survey.

The ground EM survey at Sunnyside identifi ed a 600m x 400m strong conductor within an IP anomaly that extends for approximately 1.7 km and is coincident with anomalous copper and nickel values in soils. A 16-hole drill program was initiated in December 2007 and 6 drillholes have been completed to date, with assays pending. Matrix sulphides and metre-scale intervals of massive sulphides were intersected in drillholes ALB-002 and ALB-004. A portable XRF analyser confi rmed the visual identifi cation of nickel sulphide in the drillcore and assay results are pending.

A substantial drilling programme will be continued in 2008 if the nickel assays from the initial drillholes are confi rmed to be signifi cant.

The Lipadi Hill prospect in the eastern part of the Botswana tenement package was last explored in the 1970’s and yielded signifi cant nickel intercepts in drilling and trenching. A ground EM survey has been completed and an IP survey is underway on this target. Drilling at Lipadi is planned for 2008.

The third priority target within the Selebi-Phikwe tenement package is the Kgwedi nickel prospect. Ground IP was completed at Kgwedi and an east-west trending IP target was identifi ed extending for approximately 1600m. Four reconnaissance drillholes are planned as an initial test of the Kgwedi prospect in 2008.

22

Songea Nickel ProjectThe Songea Project is located in southwest Tanzania and forms part of the Albidon-BHP Billiton Exploration Cooperation Agreement. BHP Billiton has nominated fi ve Prospecting Licences, covering 838 sq km, as a Target under the terms of the Exploration Cooperation Agreement, and can proceed to earn a 30% interest in the project by completing expenditure of at least US$5 million.

Additional Prospecting Licences in Albidon’s Tanzania portfolio will be evaluated by the Company’s geologists in 2008.

A systematic stream sediment geochemical survey undertaken by an Albidon-BHP Billiton team led to the identifi cation of signifi cant nickel and copper anomalies in three areas within the Songea Project Area (Kitai South, Mabinga Prospect, Liparamba Prospect), with peak values of up to 582 ppm Ni and up to 176 ppm Cu.

A VTEM airborne electromagnetic survey covering the Songea Project in southwest Tanzania was completed by BHP Billiton in late 2007. The survey totalled 3,016 line kilometres covering 414 sq km over several prospective mafi c-ultramafi c intrusion complexes. The survey was undertaken to follow up the signifi cant Ni and Cu anomalies identifi ed in the previous stream sediment geochemical sampling.

The VTEM survey has delineated a number of conductor anomalies at both the Liparamba and Mbinga Prospect areas. Of these, the high priority late-time EM conductor targets at the Liparamba and Mbinga Prospects are located mostly within or near the contacts of the prospective intrusion rocks covered by the EM survey.

Several of the EM conductors are coincident with nickel and copper geochemical anomalies defi ned by soil and/or drainage geochemical sampling.


Tanzania ProjectsSongea Nickel Project, Luwumbu Platinum - Nickel Project

Albidon project locations in southern Tanzania

Liparamba EM targets on magnetics with the interpreted contact of the target intrusion

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Albidon’s large portfolio of nickel projects in Botswana and Tanzania continues to deliver high quality drill targets.

PROJECT OU TLOOK

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ALB IDON OP ERAT IONS REV I EW - TAN ZAN I A PROJECTS

At Liparamba one of the conductors is coincident with a geochemical anomaly defi ned by assay values of up to 3,500ppm Ni (0.35% Ni) in soil samples.

At Mbinga, one group of conductor targets is closely associated with a Ni-Cu soil geochemical anomaly located within an embayment at the eastern contact of the Mbinga Intrusion.

Several of the Ni-Cu anomalies are accompanied by Co, Pt and Pd anomalies, supporting the interpretation that the Ni-Cu anomalies refl ect nickel sulphide mineralisation. The soil geochemical sampling areas, which have been limited to date, will now be extended on the basis of the latest results.

The geology of both the Liparamba and Mbinga prospect areas is highly prospective. The Liparamba target is a noritic intrusion, with a diameter of several kilometres. Mineralogical studies have confi rmed the presence of the nickel sulphide mineral pentlandite within gabbro-norite and olivine gabbro rocks close to the southwestern contact of the intrusion.

The Mbinga prospect area is interpreted to represent a multi-chamber norite-troctolite intrusion measuring 9km x 6km in size. Nickel sulphide has also been confi rmed in outcrop samples near the eastern embayment area at Mbinga.

The geology of the norite and troctolite rocks at Mbinga-Liparamba is similar to that at Vale Inco’s large nickel sulphide orebody at Voisey’s Bay in eastern Canada.

Detailed soil geochemical sampling will be undertaken over all the priority EM conductor targets and to extend the small areas covered to date. This work will be accompanied by detailed analysis and interpretation of the EM data, and these two datasets will then be combined with the aim of defi ning drill targets. It is anticipated that drilling will commence in mid-2008.

Luwumbu Platinum- Nickel ProjectThe Luwumbu Project is situated in the Livingstone Mountains of southwest Tanzania and is owned 90% by IMX Resources (formerly Goldstream Mining NL) and 10% by Albidon. In June 2003 an agreement was signed whereby Lonmin plc had the right to earn a 70% interest in the project by sole funding a Feasibility Study on an Indicated Mineral Resource.

Mbinga EM targets on magnetics with the interpreted contact of the target intrusion

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On February 15, 2008 Lonmin announced their withdrawal from the Luwumbu Farm-in Agreement effective 31 March 2008. Lonmin had until 31 March 2009 to complete an indicated resource to earn a 51% interest in the Luwumbu tenements. Lonmin’s withdrawal at this stage means it has not earned an interest and the rights to the Luwumbu tenements remain with IMX Resources (ASX:IXR) 90% and Albidon Limited 10%

Exploration for Platinum Group Metals (“PGM”) has been carried out by Lonmin at Luwumbu since 2003. It is believed that the Luwumbu tenements have potential for other metals including nickel, but with the Lonmin-funded exploration being essentially PGM focussed, little targeting of other metals has occurred. The planned programme for 2008, subject to

approval by the IMX Resources-Albidon joint venture company, Tausi Mining Pty Ltd, will be to:

• Evaluate in more detail the enormous volume of data generated from the diamond drilling and auger sampling gathered over the past fi ve years in the Nkenja area in the northern part of the project;

• Review the potential of the northern, central and southern portions of the tenement area for metals other than PGM; and

• Depending on the results of the initial review, further geological fi eldwork, sampling and airborne geophysics may be contemplated.

The work undertaken by Lonmin during the period it was funding the project focused almost entirely on PGM’s in

the Nkenja area, which comprises a relatively small portion of the tenements. Despite the outstanding intersection from the 2005 drill hole NDH014 of 16.14m @ 5.36g/t 2PGM+Au (Pt+Pd+Au) including 1.67m @ 26.82g/t 2PGM+Au, the substantial drilling program at Nkenja in the last two fi eld seasons has failed to locate further economic mineralisation.

The Luwumbu area contains a number of mafi c and ultramafi c intrusions, potential host rocks for nickel and platinum deposits, in a zone that is at least 160km in length. This area of southwest Tanzania has the most extensive outcrop of rocks interpreted to form part of the same geological province as the host rocks to the large Kabanga nickel deposit in the northwest of the country.

A LB IDON OPERAT IONS REV I EW - TANZAN I A PROJECTS

26

Joint Venture with Zinifex Limited

Albidon and Zinifex signed an option and joint venture agreement in December 2006 for the exploration and development of the Company’s projects in Tunisia. The joint venture agreement involves: Zinifex making a staged series of cash payments totalling US$1 million; a minimum initial exploration expenditure commitment of US$1.3 million within 12 months; expenditure of an additional $6 million to earn a 51% interest; and, expenditure of a further US$5 million to earn a 70% interest, at which time Albidon may elect to fund its 30% interest.

The Nefza Project is located in north-western Tunisia between the Atlas Mountains and the Mediterranean Sea. The project is covered by an Exploration Permit over an area of 3,069 sq km about 80 km to the west of Tunis and is served by excellent infrastructure.

The licence contains large areas of carbonate rocks containing signifi cant zinc-lead prospects that supported substantial past mining operations, and a series of volcanic and intrusive rocks that are associated with signifi cant gold-copper mineralisation.


Tunisia ProjectsNefza Zinc-lead and Gold-copper Projects,Haffouz Zinc Projects.

Signifi cant drill intersections for the Sidi Bou Aouane and El Haouaria Prospects.

Hole From (m) To (m) Width (m) Pb % Zn % Cut-Off Zn%

BADD003 5.00 41.00 36.00 0.16 3.69 0.50Including 15.00 29.50 14.50 0.37 8.01 1.50and 21.40 29.50 8.10 0.60 11.70 2.00

BADD006 99.00 155.70 56.70 1.05 1.58 0.50Including 99.00 120.35 21.35 1.72 2.36 1.50

EHDD001 128.40 146.40 18.00 0.78 2.30 0.50

Notes: BADD003 includes complete core loss (from 20.5-21.4m and from 29.4-33m) which is assigned zero grade.

Location of Nefza and Haffouz Zinc Projects, Tunisia

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From mid 2005, Albidon embarked on an evaluation of the zinc-lead potential of the Nefza licence area with the aim of prioritising targets for geophysical surveys and drill testing. The key results of work to date are:

• Recognition of the potential for large ‘carbonate-replacement’ zinc deposits of similar character to the large Jinding deposit in Yunnan, China (approx. 140Mt @ 8% Zn, 1.5% Pb).

• Substantial amounts of near-surface mineralisation remain at some of the old zinc mines, most signifi cantly at Bou Aouane.

• Extensive Zn-Pb anomalies defi ned by stream sediment and soil sampling, identifying target areas related to major structures in zones extending from known deposits.

Fieldwork in 2007 focused on geophysical surveys (IP and gravity) along the main prospect trends with additional detailed mapping and geochemical sampling. Eleven drillholes were completed at Bou Aouane and one drillhole at El Haouria.

The objective of the drilling programme was to confi rm the thickness and grade of zinc mineralisation reported in previous drilling at Khatkhadha and to provide reconnaissance drill coverage of the adjoining area. The programme was directed towards locating zinc mineralisation where grade is controlled by a favourable combination of fault structures and geology.

Drill hole BADD003 was drilled within the reported Khatkhadha mineralisation and intersected 5.5m at 3.9% Zn and 0.1% Pb from 15m down hole, and 8.1m @ 11.7% Zn and 0.6% Pb from 21.4m down hole. These intervals are separated by 1.4m of core loss (see table). The drill results support the

A LB IDON OPERAT IONS REV I EW - TUN IS I A PROJECTS

High priority target areas and other zinc prospects within the Nefza Project

Khatkhadha mineralised area, old mine workings and drill holes at the Bou Aouane Zinc Prospect.

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28

reports of a remnant mineralised body at Khatkhadha. The mineralisation is near-surface and may be accessed by an open pit were a suffi cient resource defi ned. Additional drilling is planned within the Khatkhadha mineralised area in 2008.

Drill hole BADD006 intersected 56.7m @ 1.6% Zn and 1.1% Pb (from 99m), including 21.3 m @ 2.4% Zn and 1.7% Pb. This confi rms that zinc-lead mineralisation at Bou Aouane is laterally extensive. Further drilling would be required to assess the thickness, grade and continuity of the system.

Drilling at the EL Haouaria prospect commenced in late 2007 and one hole was completed. EHDD001 intersected 11.35m (135.65-146.4) @ 2.3% Zn. There appears to have been little exploration away from the outcropping mineralisation that was mined at El Haouaria. The style and setting of mineralisation (‘stratabound’) are similar to Bou Aouane and hold the potential for discovery of more substantial and higher grade resources than recorded in the historical reports.

Continued drilling is planned on the Nefza licence for 2008 to test the Sidi Driss, Gantra, Bou Aouane and El Haouaria prospects.

Haffouz Zinc ProjectsThe Haffouz Projects are located in central Tunisia, about 200 km by road from Tunis. The projects are located within the Haffouz permit application area covering 434 sq km. The application area contains carbonate rocks hosting signifi cant Zn-Pb oxide and sulphide mineralisation which supported old mining operations at Jebel Trozza, Jebel Touila and Loridga.

The permit has signifi cant potential for secondary zinc-oxide mineralisation, comparable to the Skorpion deposit in Namibia and the Mae Sod deposit in Thailand. At Jebel Trozza, previous drilling carried out by Albidon in 2002 intersected signifi cant zinc oxide mineralisation, with a best result of 6.08m @ 17% Zn (although core recovery was only 2.38m for this section of the drill hole).

As a follow up, 432.2m of drilling was completed in 2005 to test the near-surface zinc oxide potential north of the previous drilling. Signifi cant zinc oxide mineralisation was intersected in the target position, with a best result of 2.65m at 7.7% Zn from 59.9m in JTD006.

The sulphide target at Jebel Touila was tested by 546.3m of drilling during 2005, down-plunge of old mine workings in the axial zone of a fault-controlled fold-structure. TOD002 intersected 4m at 6.5% Zn and 1.1% Pb from 171.6m including 0.8m at 26.4% Zn and 4.8% Zn. The follow-up hole was abandoned due to poor ground conditions, but the results confi rmed the existence of high-grade stratabound-replacement zinc mineralisation of an economically attractive style.

Exploration work is planned to recommence in 2008 with completion of geophysical surveys (IP and gravity) and additional geochemical sampling and mapping to defi ne drill targets.

A LB IDON OP ERAT IONS REV I EW - T U N I S I A PROJECTS

29

ALB IDON L IM I TE D

Financial Reportfor the year ended 31 December 2007

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Contents

Directors’ report 31

Auditor’s independence declaration 40

Consolidated income statement 42

Consolidated balance sheet 43

Consolidated cash fl ow statement 44

Consolidated statement of changes in shareholder’s equity 45

Notes to the fi nancial statements 46

1. General information 462. Summary of signifi cant accounting policies 463. Financial risk management 524. Critical accounting judgements and key sources of estimation uncertainty 585. Segment information 606. Revenue and expenses 617. Income tax expense 628. Loss per share 639. Trade and other receivables 6310. Inventories 6411. Other fi nancial assets 6412. Prepayments 6413. Cash and cash equivalents 6414. Plant and equipment 6515. Mine properties and exploration expenditure 6616. Trade and other payables 6717. Other fi nancial liabilities 6718. Provisions 6719. Share capital and reserves 6820. Share based payments 6921. Interest in joint ventures 7222. Investments in subsidiaries 7323. Available for sale investments 7324. Commitments 7425. Related party transactions 7526. Contingent assets and liabilities 7627. Events after the balance sheet date 76

Directors’ declaration 77

Independent auditor’s report 78

31

DirectorsThe names and details of the Company’s directors in offi ce during the fi nancial year and until the date of this report are as follows. Directors were in offi ce for this entire period unless otherwise stated.

Mr. Richard (Dick) Potts

Non-Executive Chairman

ARSM, Bsc Mining Engineering, FIMM, FAusIMM, CEng (Age: 63)

Mr. Potts has 42 years experience in the minerals industry and has worked in Zambia, South Africa, Oman, UK and Australia. He is a mining engineer by profession and has had broad experience across the minerals spectrum from exploration to fi nished product. He has held senior management or consulting positions with a number of mining companies including Rio Tinto, Pasminco and Mount Isa Mines. He is currently a non-executive Director of Copper Strike Limited, Mintails Limited, Indophil NL and Riversdale Mining Limited.

Mr. Potts’ experience includes overall management responsibility for a large integrated base metal mine-concentrator-smelter facility and extensive involvement in due diligences, operational reviews, technical reviews and feasibility studies. He has also worked in the area of business development with responsibility for strategic and business planning, mine to market optimisation, logistics and major project management.

Mr. Potts spent the formative part of his life in Zambia and South Africa and has a good understanding of the requirements to bring projects into operation in southern Africa.

Mr. John Shaw

Non-Executive Deputy Chairman

BSc (Geological Engineering), FAusIMM, MCIM, FAICD, MAIME (Age: 68)– Appointed 28 February 2008

John Shaw has over 40 years experience in exploration, development and operations of open cut and underground mines. He previously was Vice President of the Australian operations of Placer Dome Asia Pacifi c Limited and Managing Director of Kidston Gold Mines. His responsibilities included operations at Kidston, Big Bell, Granny Smith, Osborne and Misima.

Mr. Shaw is a former Chairman of Gallery Gold Limited, Lodestone Exploration Limited, Tri Origin Minerals Limited and Zimbabwe Platinum Mines Limited, and was involved with the development of the Mupane Gold Mine in NE Botswana. Mr. Shaw is a non-executive Director of IAMgold Corporation and Discovery Metals Ltd.

Mr. Dale Rogers

Managing Director

B.Eng. (Hons) Mining (Age: 44)

Mr. Rogers is a mining engineer by profession with over 20 years experience in both underground and open pit mining, processing and smelting operations. Mr. Rogers has a broad range of experience in the base metals, gold and diamond industries.

His experience has included management roles at WMC Resources’ (now BHP Billiton’s) operations in Kambalda, Kalgoorlie, Mt. Keith and their Kalgoorlie smelter in Western Australia. Subsequent to this Mr. Rogers was responsible for the management of several gold mining operations. In 2002 he formed his own consulting group to provide advice on mining operations, management services, feasibility studies, due diligence and acquisitions.

More recently Mr. Rogers was a member of the Reliance Mining team that successfully developed the Beta-Hunt nickel project, culminating in the takeover of Reliance by Consolidated Minerals, completed a due diligence and provided advice to Avoca Resources for their purchase of the Higginsville Project in Western Australia and completed the scoping study for Albidon on the Munali Nickel Project.

Mr. Alasdair Cooke

Executive Director

BSc (Hons) University of Western Australia (Age: 43)

Mr. Cooke is a founding director and shareholder of the company. He is a qualifi ed geologist with 20 years of experience in the resources industry throughout Australia and internationally including eight years spent with BHP Minerals Business Development Group and over ten years managing public resource companies.

Mr. Cooke is a founding partner of the Mitchell River Group, which over the past eight years has established a number of successful resource companies, including ASX listed Sally Malay Mining Ltd. (operating the Sally Malay and Lanfranchi nickel projects in Australia), ASX listed Mirabela Nickel Ltd. (developing the Santa Rita Nickel Project in Brazil) and ASX listed African Energy Resources Ltd. (developing uranium projects in Africa). Mr. Cooke is a former director of Sally Malay Mining Ltd. and is also currently an executive director for African Energy Resources Ltd., Energy Ventures Ltd., Exco Resources Ltd. and Oval Biofuels Ltd.

Directors’ ReportYour Directors present their report on the Consolidated Entity consisting of Albidon Limited and the entities it controlled at the end of, or during, the year ended 31 December 2007.

F INANC I A L REPORT FOR THE YEAR ENDED 31 DECEMBER 2007

32

Directors’ Report (continued)

Mr. Paul Chapman

Executive Director

BComm, ACA, Grad. Dip. Tax, CFTP(Snr), MAICD, SA Fin (Age: 49)– Appointed 18 April 2007

Mr. Chapman is a chartered accountant with over 20 years resource industry experience gained in Australia and the US. He has worked in a number of commodity businesses including gold, nickel, manganese, bauxite/alumina and oil/gas.

Mr. Chapman has held executive roles in public companies of various sizes. He is non-executive chairman of ASX listed uranium explorer Encounter Resources Ltd., gold and copper explorer Rex Minerals Ltd. and gold producer Silver Lake Resources Ltd. His main focus will be on commercial management and business development.

Mr. Christopher John

Gilbert De Guingand

Non-Executive Director

FCPA. Principal, Mineral Commerce Services Pty Ltd. (Age: 75)

Mr. De Guingand has had a long career in the mining industry, having been involved in fi nancial or marketing roles as an executive, trader, director or consultant. He has held senior management positions in fi nance and marketing of non-ferrous metals and iron ore for CRA and Metals Exploration Limited (now QNI) for over 20 years.

In 1982 he formed his own consultancy Mineral Commerce Services Pty Ltd. (MCS). MCS advises on the marketing and logistic aspects of projects involving base metals (including nickel, copper, zinc and cobalt), phosphate rock, fertilizers, iron, chrome and manganese ores. MCS manages the shipment of nickel concentrates for several companies and Mr. De Guingand has extensive knowledge of nickel processes and refi ned nickel products. Mr. De Guingand is currently non-executive chairman of Sally Malay Mining Limited.

Mr. Valentine Chitalu


MPhil, BAcc, FCCA (Age: 43)– Appointed 18 April 2007

Mr. Chitalu is a Zambian with a 20-year career in the fi elds of private equity, privatisation, merchant banking, corporate fi nance, accounting, auditing, development economics, capital markets and business development in transitional economies. He has previously held positions with CDC Capital Partners London and Zambia offi ces, Zambia Privatisation Agency and KPMG Peat Marwick, London offi ce.

Mr. Chitalu has a signifi cant interest in private sector development in Africa and is extensively networked in East and Southern Africa. He is currently a non-executive director of African Energy Resources Ltd. and has been Chairman of Albidon’s wholly owned subsidiary Albidon Zambia Limited since 2005.

Mr. Michael Brook


BSc (Hons) Uni. of Wales (Mining Geology) MAusIMM, MIMM, Chartered Eng. (UK) (Age: 49) – Resigned 24 May 2007

Mr. Brook is a geologist who has worked in Australia, North America and Africa. He was employed by Mt. Isa Mines Limited (MIM) (now Xstrata) from 1982 to 1992 including the position of Chief Geologist at MIM’s copper mining operations and he also worked as part of a project team on the Ernest Henry deposit. After Mount Isa, Mr. Brook worked for 9 years as a resources analyst with institutional broking fi rm JB Were & Son, specialising in the research of emerging resource companies.

In 2001 Mr. Brook joined AFL Management and is now an executive director of AFL Management Limited, the company that supplies investment advice and management services to AFL, Albidon’s largest shareholder.

Mr. Brook resigned as a Director of the Company on 24 May 2007.

F IN AN C I A L REPORT FOR THE YEAR ENDED 3 1 DECEMBER 2007

33

Mr. Craig Burton


Bjuris, LLB University of Western Australia MICD (Age: 44) - Resigned 15 May 2007

Mr. Burton has extensive business experience in venture capital. He has a track record of providing fi nancial and corporate backing to start up projects and technical teams, with a particular interest in the resources and energy sectors.

Over the last 16 years Mr. Burton has been a co-founder, substantial shareholder and director of sixteen public listings of new projects. The projects include the nickel, copper-gold, oil and gas, mining services, agribusiness and renewable energy sectors. The public listings include the Australian Stock Exchange, London AIM market and the Toronto Stock Exchange.

Mr. Burton is a principal of Verona Capital, a private venture capital group. He is currently a director of Mirabela Nickel Limited, Wildhorse Energy Limited, Exco Resources Ltd, Capital Drilling Limited, Rewards Group Limited, Matra Petroleum plc and Livingstone Petroleum Ltd. He is a member of the Australian Institute of Company Directors.

Mr. Burton resigned as a Director of the Company on 15 May 2007.

Dr. Donal Windrim

Executive Director

BSc (Hons) Trinity College Dublin, PhD Australian National University (Age: 50) – Resigned 31 October 2007

Dr. Windrim has 25 years’ experience in the international mineral exploration and mining industry, principally in Australia and Africa. He has conducted exploration for a range of base metals, principally nickel, in North and South America, Europe, India, Africa and Australia. He has previously held technical or management positions with Elf Aquitaine and BHP Minerals International (now BHP Billiton Limited). Dr Windrim was until recently a director of African Energy Resources Ltd.

Dr. Windrim’s efforts in the past eight years have been directed at generating and developing mineral exploration projects based on his extensive knowledge of the geology and prospectivity of the regions of Africa targeted by Albidon. This work combined with the Company’s exploration database formed the basis of the Company’s current projects.

Dr. Windrim resigned as a Director of the Company on 31 October 2007 however he continues to be involved with Albidon as a consultant, providing advice on exploration strategy and business development.


34


The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the fi nancial year are:

Director A B

Mr. Richard Potts 9 9

Mr. Dale Rogers 9 9

Mr. Craig Burton 1 2

Mr. Alasdair Cooke 9 9

Dr. Donal Windrim 6 6

Mr. Christopher De Guingand 8 9

Mr. Paul Chapman 7 7

Mr. Valentine Chitalu 6 7

Mr. Michael Brook 1 2

A Number of meetings attendedB Number of meetings held during that time the Director held offi ce during the year

The number of Audit Committee meetings and number of meetings attended by its members during the fi nancial year are:

Member A B



Mr. Valentine Chitalu 1 1

Mr. Nicholas Day 3 3

A Number of meetings attendedB Number of meeting held during that time the Director held offi ce during the year

The number of Remuneration Committee meetings and number of meetings attended by its members during the fi nancial year are:

Member A B



Mr. Michael Brook 3 3

Mr. Richard Potts 3 3

Mr. Nicholas Day 6 6

A Number of meetings attendedB Number of meetings held during that time the Director held offi ce during the year

Director and Committee Meetings

35

Principal ActivitiesThe principal activity of the Consolidated Entity during the period was the exploration, evaluation and development of mineral interests.

The operating loss after income tax for the twelve months ended 31 December 2007 was US$2,205,075 (2006 US$2,667,634).

Group Highlights(i) Munali Nickel Project

In February 2007 a power supply agreement was signed between Albidon and ZESCO Limited (the Zambian state energy company) to cover the total power requirements of the Munali Project for a ten-year period.

In April 2007, the Company entered into forward contracts for 9,020 tonnes of nickel over the period from June 2009 to December 2013. The level of hedging represents approximately 15% of the Munali Project’s expected payable nickel from production.

The formal ground-breaking ceremony to launch the Munali Project was held on 3 April 2007, at which His Excellency the President of Zambia, Levy Patrick Mwanawasa SC, was guest of honour.

In April 2007 fi nancing agreements were signed with the Jinchuan Group Limited of China to provide US$20 million in subordinated debt funding for the Munali Project and 4,190,992 new ordinary shares were issued to Jinchuan at AU$1.55 per share to raise US$5 million.

In May 2007 the European Investment Bank and Barclays Capital formally approved a senior debt fi nance facility of up to US$60 million for the Munali Project.

In August 2007 the Company announced the appointment of Mr. Eben Swanepoel as Chief Executive Offi cer of Albidon Zambia Limited reporting to the Managing Director of Albidon Limited. Mr. Swanepoel will be responsible for building the Munali implementation team and delivering the project on schedule and on budget.

In October 2007 the Company announced the engagement of Byrnecut Mining International Limited as the mining contractor for the Munali Nickel Project. Byrnecut will expedite underground mine development at Munali to reach initial production in mid 2008.

In November 2007 the Company announced that following a detailed review of the Munali project, costs through to positive cash fl ow were expected to increase by approximately 24% to US$124m.

In December 2007 the Company completed a placement with Jinchuan Group Limited (“Jinchuan”) and ZCCM Investments Holdings plc (“ZCCM-IH”) to raise US$25 million at a price of US$2.95 (AU$3.35/£1.45) per share. The Company also secured a further US$20 million in fi nancing from Barclays Capital (“Barclays”) on the same terms as the initial tranche of senior debt funding. 400,000 unlisted options exercisable at AU$2.81 expiring on or before 1 February 2011 were allocated to Barclays in part consideration for the fi nancing arrangements.

This funding from Jinchuan, ZCCM-IH and Barclays fulfi lled the remaining funding required for development of the Munali Nickel Project in Zambia and ensures, going forward, Albidon retains suffi cient funds for exploration, increased drilling programmes and business development activities.

In December 2007 the Company announced an initial Inferred Resource estimate of 1.2Mt @ 0.9% Ni and 1.1g/t of platinum group metals (“PGM”) had been completed for the Voyager deposit at Munali. The Voyager deposit contains 11,500 tonnes of Ni and 43,800 ounces of PGM. The total Indicated and Inferred Resource for the Munali Project has now been increased to 10.3Mt @ 1.2% Ni and 0.9g/t for 123,500 tonnes of Ni and 286,800 ounces of PGM.

In January 2008 the Company announced that the main ore zone at the Munali Nickel Project had been intercepted in the underground development, two months ahead of schedule. Following a review of the construction schedule for the Munali concentrator the forecast date for fi rst ore into the mill was brought forward to mid-April 2008.

(ii) Exploration Projects

In September 2007 the board of joint venture partner African Energy Resources Ltd. approved a Pre-feasibility study to evaluate the commercial development of uranium mineralisation at the Njame deposit and Gwabe prospect in the Chirundu project, Zambia. Albidon currently owns a 70% interest in the Chirundu project.

In December 2007 the Company announced initial assay results from RC drilling at the Chisebuka Uranium Project had confi rmed the presence of signifi cant grades and thicknesses of near-surface uranium mineralisation.


Review and Results of Operations

36

Review and Results of Operations (continued)


In December 2007 an initial resource estimate by joint venture partner African Energy Resources Ltd. was completed for the Gwabe uranium deposit in the Chirundu joint venture project. Inferred Resource of 4.2 million tonnes at 267ppm U3O8 (– 100 ppm U3O8 cut-off) for 1,120 tonnes of U3O8 (2.5 Mlb U3O8).

The Njame Deposit contains an additional 8.8 Mt @ 340ppm U3O8 for 3,000 tonnes of U3O8 (6.6 Mlb (U3O8), bringing the project total to 4,120t (9.1 Mlb) of U3O8. The Pre-Feasibility Study for the Chirundu uranium project was due for completion at the end of the fi rst quarter 2008.

An the Songea nickel project in Tanzania a number of high priority targets were defi ned by coincident geophysical and geochemical anomalies within highly prospective geology. Joint venture partner BHP Billiton is currently sole-funding the exploration programme and plans to commence drilling in the second quarter of 2008.

In Tunisia, drilling at Khatkhadha in the historic Bou Aouane zinc mining area intersected a best result of 8.1m @ 11.7% Zn. Additional drilling is planned for 2008.

(iii) Corporate Activities

In February 2007, 250,000 unlisted options were exercised at AU$0.60 each for total proceeds of AU$150,000 (US$118,000).

In April 2007, 600,000 unlisted options were exercised at AU$0.60 each for total proceeds of AU$360,000 (US$296,000).

On 18 April 2007 Mr. Valentine Chitalu was appointed as Non-Executive Director, and Mr. Paul Chapman as Executive Director to the board of Albidon Limited.

On 23 April 2007, 350,000 unlisted options (exercisable at AU$2.60 on or before 20 May 2010) were allocated to key personnel on the Munali Project in Zambia.

In May 2007, 698,000 unlisted options were exercised at AU$0.60 each for total proceeds of AU$418,800 (US$341,000).

In May 2007, 50,000 unlisted options (exercisable at AU$1.05 on or before 30 June 2009) lapsed due to the termination of an employee contract in accordance with the terms and conditions of the unlisted options given to employees.

On 15 May 2007 Mr. Craig Burton resigned as a Director of the Company.

On 24 May 2007 Mr. Michael Brook resigned as a Director of the Company.

On 29 May 2007, Messrs Chapman and Chitalu were allocated 200,000 unlisted options each (exercisable at AU$2.60 on or before 20 May 2010).

On 29 May 2007, 150,000 unlisted options (exercisable at AU$1.70 on or before 1 December 2009) were allocated to key personnel.

On 29 May 2007, 1,200,000 unlisted options (exercisable at AU$2.10 on or before 27 February 2010) were allocated to Mr. Dale Rogers.

In June 2007, 1,250,000 unlisted options were exercised at AU$0.60 each for total proceeds of AU$750,000 (US$628,000).

On 21 June 2007, Mr. Dale Rogers was issued with 400,000 shares at a purchase price of AU$0.75 each.

On 13 July 2007, 250,000 unlisted options exercisable at AU$3.14 expiring on or before 27 July 2010 and 50,000 unlisted options exercisable at AU$2.60 expiring on or before 20 May 2010 were allocated to key personnel.

On 13 July 2007, 200,000 unlisted options exercisable at AU$2.80 expiring on or before 12 July 2010 were allocated to key personnel.

On 26 July 2007, 300,000 unlisted options exercisable at AU$2.97 expiring on or before 27 July 2010 were allocated to key personnel.

On 3 August 2007 the Company announced that it had satisfi ed all material conditions precedent required for initial drawdown by Senior Lenders under the facility agreement and that fi rst drawdown on the Jinchuan subordinated loan had taken place.

On 22 August 2007, 600,000 unlisted options exercisable at AU$2.23 expiring on or before 1 September 2010 were allocated to key personnel.

On 31 October 2007 Dr. Donal Windrim resigned as a Director of the Company. He continues to be involved with the Company as a consultant, providing advice on exploration strategy and new business development.

On 30 November 2007,

• 295,000 unlisted options exercisable at AU$3.22 expiring on or before 1 November 2009 were allocated to key personnel.

• 350,000 unlisted options exercisable at AU$2.88 expiring on or before 31 December 2010 were allocated to key personnel.



The Company advised that, subject to Shareholder approval, Mr. Dale Rogers, Managing Director, would be allocated 500,000 unlisted options exercisable at AU$3.22 expiring on or before 1 December 2011.

37

On 21 December 2007, 400,000 unlisted options exercisable at AU$2.81 expiring on or before 1 February 2011 were allocated to Barclays Capital.

In December 2007,

• 258,900 unlisted options were exercised at AU$0.60 each for total proceeds of AU$155,300 (US$135,900).

• 250,000 unlisted options were exercised at AU$0.75 each for total proceeds of AU$187,500 (US$164,700).

• 50,000 unlisted options (exercisable at AU$2.60 on or before 20 May 2010) lapsed due to the termination of an employee contract in accordance with the terms and conditions of the unlisted options given to employees.

• 50,000 unlisted options (exercisable at AU$1.05 on or before 30 June 2009) lapsed due to the termination of contract in accordance with the terms and conditions of the unlisted options given to contractors.

(iv) Signifi cant events after the

balance date

In January 2008, as part of the funding arrangements negotiated in December 2007, the Company received a second instalment of US$5 million from ZCCM Investments Holdings plc (“ZCCM-IH”) to complete the transaction whereby the Company issued 3,389,831 shares at AU$3.35/US$2.95 cents each to ZCCM-IH to raise US$10 million.

In February 2008 the Company completed the fi nal issue of 5,084,746 shares at AU$3.35/US$2.95 cents each to the Jinchuan Group to raise US$15 million.

In February 2008, as part of the funding arrangements negotiated in December 2007, the Company forward hedged 2,274 tonnes of nickel in addition to its original 9,020 tonnes hedged in April 2007. Total nickel now hedged is 11,294 tonnes which represents approximately 25% of the nickel in concentrate expected to be produced from the Munali Nickel Project over the hedging period.

On 25 February 2008, 100,000 unlisted options exercisable at AU$3.25 expiring on or before 1 February 2011 were allocated to key personnel.

On 17 March 2008, the Company advised that subject to Shareholder approval, Mr. John Shaw, Deputy Chairman, would be allocated 300,000 unlisted options exercisable at AU$3.47 expiring on or before 30 June 2011.


38


Remuneration PolicyAlbidon Limited aims to ensure that the level and composition of remuneration of its Directors and Executives is suffi cient and reasonable for the sector in which the Company operates. Albidon Limited has adopted a remuneration policy to attract and retain talented and motivated personnel in order to achieve enhanced performance of the Company. A Remuneration Committee has been implemented to report all proposed arrangements to the Board. The Board is responsible for determining and reviewing compensation arrangements for the Directors and the Executive team.

(i) Executive Directors

The remuneration of Albidon Limited’s Executive Directors comprises some or all of the following elements: fi xed salary; short term incentive bonus based on performance; long term incentive share and/or option scheme; and other benefi ts including employment insurances and superannuation contributions. In relation to the payment of bonuses, share options and other incentive amounts, discretion is exercised by the Board having regard to the overall performance of the Company and of the relevant individual during the period.

(ii) Non-Executive Directors

Albidon Limited’s Non-Executive Directors are remunerated with a cash fee. There is currently no scheme to provide performance based bonuses or retirement benefi ts to Non-Executive Directors. Non-Executive Directors typically do not participate in equity or option schemes of the Company, however given Albidon Limited’s size, focused nature of business and shareholding structure, issues of share options to Non-Executive Directors have previously been, and may in the future be, approved by shareholders to enhance overall shareholder wealth creation.

Remuneration ReportThe remuneration report outlines the remuneration arrangements which were in place during the year, and remain in place as at the date of this report.

The details of Directors’ remuneration for the year are as follows:

US$

Directors Cash Super- Directors Shares Options Total

Salary annuation Fees

Non-Executive Chairman Mr. Richard Potts - - 65,250 - - 65,250

Non-Executive Mr. Michael Brook - - 10,004 - - 10,004Mr. Christopher De Guingand - - 43,918 - - 43,918Mr. Craig Burton - - 12,548 - - 12,548Mr. Valentine Chitalu - - 37,644 - 107,481 145,125

Executive Mr. Dale Rogers 286,933 16,789 - 799,717 792,965 1,896,404Dr. Donal Windrim 221,962 19,977 - - - 241,939Mr. Alasdair Cooke 52,597 4,734 35,553 - - 92,884Mr. Paul Chapman 89,355 9,189 23,005 - 86,186 207,735

OptionsAt the date of this report, the number of options over un-issued ordinary shares of the Company, held by each Director of the Company is as follows:

Director Options Exercise Price (AU$) Expiry Date

Mr. Dale Rogers 1,200,000 0.75 1 December 2008 1,200,000 2.10 27 February 2010

Mr. Valentine Chitalu 100,000 1.05 30 June 2009 200,000 2.60 20 May 2010

Mr. Paul Chapman 200,000 2.60 20 May 2010

39

The relevant interest of each Director in the share capital, as notifi ed by the Directors to the Australian Stock Exchange and AIM market of the London Stock Exchange, at the date of this report is as follows:

Director Ordinary Shares

Mr. Richard Potts 530,000

Mr. Dale Rogers 350,000

Mr. Alasdair Cooke 5,000,000

Mr. Christopher De Guingand 400,000

Mr. Paul Chapman -

Mr. Valentine Chitalu -

Mr. John Shaw -

(i) Alasdair Cooke directly and through director related entities, owned 5,000,000 shares.(ii) Richard Potts directly and through a superannuation fund owned 530,000 shares.(iii) Christopher De Guingand directly and through director related entities, owned 400,000 shares.(iv) Dale Rogers directly owned 350,000 shares.


Directors’ Interests

Likely Developments and Expected ResultsThe Company will pursue activities consistent with its corporate objective and those of its joint venture partners.

Further information about likely developments in the operations of the Company and the expected results of those operations in the future fi nancial years has not been included in this report because disclosure would be likely to result in unreasonable prejudice to the Company.

Environmental Regulation and PerformanceThe Group holds licences issued by the relevant environmental protection authorities of the various countries in which the Group operates. There have been no signifi cant known breaches of the Consolidated Entity’s licence conditions.

Share OptionsUnissued Shares

As at the date of this report, there were 7,301,100 unissued ordinary shares under options (7,003,100 at the reporting date). Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.

Shares issued as a result of the exercise of options

During the fi nancial year, option holders have exercised options to acquire 3,306,900 fully paid ordinary shares in Albidon Limited at a weighted average exercise price of AU$0.61 per share.

Indemnifi cation and Insurance of Directors and Offi cersThe Company has paid a premium and other charges for a Directors and Offi cers Liability policy for the benefi t of the Directors, Secretary and Executive Offi cers of the Company. The policy prohibits the disclosure of the nature of liability insured and the amount of premium paid.

40


Auditor’s Independence Declaration to the Directors of Albidon LimitedIn relation to our audit of the fi nancial report of Albidon Limited for the year ended 31 December 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements or any applicable code of professional conduct.

Ernst & Young

V W Tidy

Partner, Perth, 31 March 2008

Auditor’s Independence DeclarationThe directors have received the following declaration from the auditor of Albidon Limited.

41

Shares

Total Shares 164,642,469

Share Options

Unlisted options (expiring 30 Jun 2008 AU$0.75) 150,000Unlisted options (expiring 30 Jun 2008 AU$0.60) 56,100Unlisted options (expiring 1 Dec 2008 AU$0.75) 1,200,000Unlisted options (expiring 30 Jun 2009 AU$1.05) 500,000Unlisted options (expiring 20 May 2010 AU$2.60) 350,000Unlisted options (expiring 27 Feb 2010 AU$2.10) 1,200,000Unlisted options (expiring 1 Dec 2009 AU$1.70) 150,000Unlisted options (expiring 20 May 2010 AU$2.60) 400,000Unlisted options (expiring 27 Jul 2010 AU$3.14) 250,000Unlisted options (expiring 12 Jul 2010 AU$2.80) 200,000Unlisted options (expiring 27 Jul 2010 AU$2.97) 300,000Unlisted options (expiring 1 Sep 2010 AU$2.23) 600,000Unlisted options (expiring 1 Nov 2009 AU$3.22) 295,000Unlisted options (expiring 1 Dec 2011 AU$3.22) 400,000Unlisted options (expiring 31 Dec 2010 AU$2.88) 350,000Unlisted options (expiring 31 Dec 2010 AU$2.97) 100,000Unlisted options (expiring 1 Feb 2011 AU$2.81) 400,000Unlisted options (expiring 1 Feb 2011 AU$3.25) 100,000

Total Options

7, 01,1000

This report is made in accordance with a resolution of the Directors.

Dale Rogers

Managing Director

Perth31 March 2008


Capital Structure as at 31 March 2008

42


2007 2006

Notes US$ US$

Continuing Operations Revenue 6(a) 1,326,638 732,557Other income 6(b) 2,886,159 1,187,845Staff costs 6(c) (4,946,944) (1,573,431)Depreciation and amortisation (110,362) (38,940)Exploration & evaluation expenditure (395,942) (1,588,001)Other expenses 6(d) (964,624) (1,387,664)

Loss before income tax (2,205,075) (2,667,634)Income tax expense 7(a) - -

Loss for the year (2,205,075) (2,667,634)

Loss attributable to equity holders of the parent (2,205,075) (2,667,634)

Loss per share (expressed in US cents per share) - basic 8 (1.44) (2.46) - diluted 8 (1.44) (2.46)

The accompanying notes form part of the Financial Report.

Consolidated income statement

43

2007 2006

Notes US$ US$

Assets Current assets

Trade and other receivables 9 4,175,383 826,626Inventories 10 106,912 -Other fi nancial assets 11 254,415 401,758Prepayments 12 698,257 129,384Cash and cash equivalents 13 16,365,129 38,276,017

Total current assets 21,600,096 39,633,785

Non-current assets Plant and equipment 14 51,206,397 266,734Mine properties & development 15 51,510,067 20,841,917Deferred tax asset 7(d) 3,790,608 -

Total non–current assets 106,507,072 21,108,651

Total assets 128,107,168 60,742,436

Liabilities Current liabilities Trade and other payables 16 18,321,041 1,579,575Other fi nancial liabilities 17 76,749 -Provisions 18(a) 366,592 97,461

Total current liabilities 18,764,382 1,677,036

Non-current liabilities Interest bearing loans and borrowings 3(e) 33,733,809 -Financial derivative liabilities 3(f) 15,162,431 -Provisions 18(b) 445,598 -

Total non-current liabilities 49,341,838 -

Total liabilities 68,106,220 1,677,036

Net assets 60,000,948 59,065,400

Equity Capital and reserves attributable to the Company’s equity holders Issued capital 19 1,560,659 1,481,680Share premium reserve 19 75,450,585 67,793,071Capital raising costs 19 (3,275,182) (3,234,599)

Share capital 73,736,062 66,040,152Share capital to be issued 27(i) 5,000,000 -Option premium reserve 20 2,828,746 1,017,471Hedging reserve 3(f) (11,366,562) -Accumulated loss (10,197,298) (7,992,223)

Total shareholders’ equity 60,000,948 59,065,400

The accompanying notes form part of the Financial Report.

F I NANC I A L REPORT FOR THE YEAR ENDED 31 DECEMBER 2007

Consolidated balance sheet

44


2007 2006

US$ US$

Cash fl ows from/(used in) operating activities Payment to suppliers (1,707,092) (3,319,433)Payment to employees (1,864,190) (726,963)Interest and other revenue received 1,592,425 736,580

Net cash fl ows used in operating activities (1,978,857) (3,309,816)

Cash fl ows from/(used in) investing activities Purchase of property, plant and equipment, and mine development (63,275,156) (203,269)Borrowing and transaction costs (3,554,040) -Payment to suppliers (exploration) (4,293,728) (11,782,959)Repayments from other entities 404,282 419,600

Net cash fl ows used in investing activities (70,718,642) (11,566,628)

Cash fl ows from/(used in) fi nancing activities Proceeds from issue of ordinary shares 11,936,775 45,837,797Share issue transaction costs (40,582) (1,603,963)Proceeds from loans 36,000,000 -

Net cash fl ows from fi nancing activities 47,896,193 44,233,834

Net (decrease)/increase in cash and cash equivalents (24,801,306) 29,357,390

Effects of exchange rate changes 2,890,418 1,183,822Cash and equivalents at beginning of the period 38,276,017 7,734,805

Cash and equivalents at end of the period 16,365,129 38,276,017

Consolidated cash fl ow statement

45

For the year ended 31 December 2007

Option Hedging Capital

Issued Share Premium Derivative Raising Shares to Accumulated

Capital Premium Reserve Reserve Costs be issued (Loss) Total

US$ US$ US$ US$ US$ US$ US$ US$

At 1 January 2007 1,481,680 67,793,071 1,017,471 - (3,234,599) - (7,992,223) 59,065,400

Fair value of hedging adjustment net of tax - - - (11,366,562) - - - (11,366,562)

Total income and

expense for the period

recognised in equity - - - (11,366,562) - - - (11,366,562)

Net loss from ordinary activities - - - - - - (2,205,075) (2,205,075)

Total income and

expense for the year - - - (11,366,562) - - (2,205,075) (13,571,637)

Shares issued 45,910 5,207,004 - - (30,331) - - 5,222,583Shares to be issued - - - - - 5,000,000 - 5,000,000Share based payments - 799,717 1,811,275 - - - - 2,610,992Exercise of options 33,069 1,650,793 - - (10,252) - - 1,673,610

At 31 December 2007 1,560,659 75,450,585 2,828,746 (11,366,562) (3,275,182) 5,000,000 (10,197,298) 60,000,948

For the year ended 31 December 2006

Option Hedging Capital

Issued Share Premium Derivative Raising Shares to Accumulated

Capital Premium Reserve Reserve Costs be issued (Loss) Total

US$ US$ US$ US$ US$ US$ US$ US$

At 1 January 2006 893,680 22,543,274 455,882 - (1,630,637) - (5,324,589) 16,937,610

Fair value of hedging adjustment net of tax - - - - - - - -

Total income and

expense for the period

recognised in equity - - - - - - - -Net loss from ordinary activities - - - - - - (2,667,634) (2,667,634)

Total income and

expense for the year - - - - - - (2,667,634) (2,667,634)

Shares issued 536,500 44,232,176 - - (1,603,962) - - 43,164,714Share based payments - - 561,589 - - - - 561,589Exercise of options 51,500 1,017,621 - - - - - 1,069,121

At 31 December 2006 1,481,680 67,793,071 1,017,471 - (3,234,599) - (7,992,223) 59,065,400


Consolidated statement of changes in shareholders’ equity

46


1. General informationThe consolidated fi nancial statements of Albidon Limited for the year ended 31 December 2007 were authorised for issue in accordance with a resolution of the Directors dated 31 March 2008.

Albidon Limited (“the Company”) is a Company incorporated in the British Virgin Islands, on 11 April 2000 whose shares are publicly traded. Its registered place of business is Level 1, 62 Colin Street, West Perth, Western Australia 6005.

The principal activities of the Company and its subsidiaries (“the Group”) are described in note 5.

The Group had two hundred and ninety three employees as at 31 December 2007 (fi fteen employees as at 31 December 2006).

2. Summary of signifi cant accounting policiesa) Basis of preparation

The consolidated fi nancial statements of Albidon Limited and all its subsidiaries contained in this report have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) in effect as at balance date.

The functional currency of the Company and each of the subsidiaries is US dollars. This represents the currency of the primary economic environment in which the Company and each of the subsidiaries operates.

The consolidated fi nancial statements have been prepared on a historical cost basis, except for available-for-sale fi nancial assets and derivative fi nancial instruments which are measured at fair value.

Recently issued or amended International Accounting Standards not yet effective and not adopted for the

year ended 31 December 2007, are not expected to result in signifi cant accounting policy changes.

(i) Changes in accounting policies

The accounting policies adopted are consistent with those of the previous fi nancial year, except for the adoption of amending standards mandatory for annual periods beginning on or after 1 January 2007.

(ii) Adoption of new International

Financial Reporting Standards

The Group has reviewed the following new and revised standards in light of the Group’s existing accounting policies:

• IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinfl ationary Economies

• IFRIC 8 Scope of IFRS2

• IFRIC 9 Reassessment of Embedded Derivatives

• IFRIC 10 Interim Financial Reporting and Impairment

No material differences arose between the above standards and the Group’s existing accounting policies.

In addition the Group has adopted IFRS 7 Financial Instruments: Disclosures which is effective for annual reporting periods beginning on or after 1 January 2007, and the consequential amendments to IAS 1 Presentation of Financial Statements.

The adoption of these standards has only affected method of disclosure in the Financial Statements. There has been no effect on the income statement or the balance sheet of the Group.

b) Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of Albidon Limited and its subsidiaries for the year ended 31 December 2007. The fi nancial statements of subsidiaries are prepared for the same reporting period as the parent Company,

using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions, including unrealised profi ts arising from intra-group transactions, have been eliminated in full.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. All subsidiaries have been owned by the Group since their date of incorporation.

c) Foreign currency translation

Initial recognition of a foreign currency transaction is recorded in the functional currency at the spot rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the rate of exchange ruling at the balance sheet date. All exchange differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the date of the original transactions.

d) Exploration and evaluation

expenditure

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

(i) the expenditures are expected to be recouped through successful development and exploitation or sale of the area of interest; or

(ii) activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise

Notes to the Financial Statements

47

of economically recoverable reserves and active and signifi cant operations in, or in relation to, the area of interest are continuing.

Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the income statement.

All capitalised exploration and evaluation expenditure is monitored for indications of impairment on a cash generating unit basis. The cash generating unit shall not be larger than the area of interest. If suffi cient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount, the capitalised expenditure which is not expected to be recovered is charged to the income statement.

e) Mine properties and development

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are fi rst tested for impairment and then reclassifi ed from exploration and evaluation expenditure to mine property and development assets.

The carrying amounts of mine properties and development are depreciated, following the commencement of production, to their estimated residual value over the estimated useful lives of the specifi c assets concerned, or the estimated life of the associated mine or mineral lease, if shorter.

f) Cash and cash equivalents

For the purposes of the consolidated cash fl ow statement, cash and cash equivalents consist of cash at bank and in hand and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

g) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment.

The ability to collect trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectible are written off when identifi ed. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Financial diffi culties of the debtor or default payments are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash fl ows, discounted at the original effective interest rate.

h) Trade and other payables

Liabilities for trade creditors and other payables are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group.

i) Revenue

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:

Interest

Revenue is recognised as the interest accrues (using the effective interest rate method, that is the rate that directly discounts estimated future cash receipts through the expected life of the fi nancial asset) to the net carrying amount of the fi nancial asset.

j) Taxes

(i) Income tax

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

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except where:

• the deferred income tax liability arises from goodwill recognised or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be recognised except where:

• the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of


48

Notes to the Financial Statements (continued)


an asset or liability on a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary difference can be recognised

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be recognised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that apply to the period when the asset is recognised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

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

(ii) Goods and Services Tax and

Value Added Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) and value added tax (VAT), except where the amount of GST/VAT incurred is not recoverable from the relevant tax authority. In these circumstances the GST/VAT is recognised as a part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated with the amount of GST/VAT included. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as a current asset or liability in the balance sheet.

k) Interest in joint ventures

The Group’s interest in its joint ventures is accounted for by proportionate consolidation, which involves recognising a proportionate share of the joint ventures’ assets, liabilities, income and expenses with similar items in the consolidated fi nancial statements on a line-by-line basis.

l) Impairment of assets

Assets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (cash generating units).

m) Other fi nancial assets

The Group classifi es its fi nancial assets in the following categories: loans and receivables, and available for sale. The classifi cation depends on the purpose for which the fi nancial assets were acquired. Management determines the classifi cation of its fi nancial assets at initial recognition.

(i) Loans and receivables

Loans and receivables are non derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. Such assets are carried at the amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are de-recognised or impaired. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classifi ed as non-current assets. Loans and receivables are included in receivables in the balance sheet.

(ii) Available-for-sale fi nancial assets

Available-for-sale fi nancial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classifi ed in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of fi nancial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash fl ows from the investments have expired or have been transferred and the Group has transferred substantially

49

all risks and rewards of ownership. Available-for-sale fi nancial assets are subsequently carried at fair value with gains or losses recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gains or losses previously reported in equity are recognised in the income statement.

n) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility.

Borrowings are removed from the balance sheet when the obligation specifi ed in the contract is discharged, cancelled or expired. The difference between the carrying amount of a fi nancial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses.

Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

o) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding borrowings during the year.

p) Derivative fi nancial instruments

and hedging

The Group uses derivative fi nancial instruments to provide an economic hedge of exposures to nickel prices. Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objectives and strategies for undertaking the hedge. The documentation includes identifi cation of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair values or cash fl ows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair values or cash fl ows.

Testing to ensure that a hedge is effective on both a retrospective and prospective basis is undertaken at each fi nancial reporting period (at least semi-annually) from inception until contract

maturity or until the hedge is closed out. A minimum of 30 data points is used for regression analysis and if the testing falls within the 80:125 range, the hedge is considered highly effective and continues to be designated as a cash fl ow hedge.

Hedges that meet the strict criteria for hedge accounting are accounted for as follows:

Cash fl ow hedges are hedges of the Group’s exposure to variability in cash fl ows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction and that could affect profi t or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects profi t or loss, such as when hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-fi nancial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-fi nancial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to the income statement.


50



q) Segment information

Revenues and expenses are attributable to geographical areas based on the location of the assets producing or incurring those revenues and expenses.

r) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in the income statement as incurred.

Depreciation is calculated on a straight line basis over the shorter of the useful life of the asset or the life of mine. The estimated useful lives of the assets used in the calculation are as follows:

Plant and equipment - over 2.5 to 10 years

Motor vehicles - over 4 years

The carrying value of items of plant and equipment are reviewed for impairment either annually or when events or changes in circumstances indicate the carrying value may not be recoverable (whichever is earlier). If any such indication exists and where the carrying values of an asset exceed its estimated recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

The recoverable amount of plant and equipment is the greater of net selling price and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessment of the time value of money and the risks specifi c to the asset.

For an asset that does not generate largely independent cash infl ows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.

The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each fi nancial year end.

s) Provisions for decommissioning

and restoration costs

The Group is required to decommission and rehabilitate mines and processing sites at the end of their producing lives to a condition acceptable to the relevant authorities.

The expected cost of any approved decommissioning or rehabilitation programme, discounted to its net present value, is provided when the related environmental disturbance occurs. The cost is capitalised when it gives rise to future benefi ts, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of closure. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision for the expected cost is included in fi nancing expenses. Expected decommissioning and rehabilitation costs are based on the discounted value of the estimated future cost of detailed plans prepared for each site. Where there is a change in the expected decommissioning and restoration costs, the value of the provision and any related asset are adjusted and the effect is recognised in

the income statement on a prospective basis over the remaining life of the operation.

t) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain of being received. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and where appropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

u) Share-based payment transactions

Employees (including Directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the Binomial model, further details of which are given in note 20. In valuing equity-settled transactions, no account is taken of any performance conditions, other than a condition linked to the price of the shares of Albidon Limited (‘market conditions’).

51

At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of:

(i) the grant date fair value of the award;

(ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and

(iii) the expired portion of the vesting period.

The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the years in which the performance conditions are fulfi lled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date refl ects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Group at that date, will ultimately vest.

No expense is recognised for awards that do no ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfi ed, provided that all other performance conditions are satisfi ed.

Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not been modifi ed. In addition, an expense is recognised for any increase in the value of the transaction as a

result of the modifi cation, as measured at the date of modifi cation.

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

The dilutive effect of outstanding options is refl ected as additional share dilution in the computation of earnings/loss per share (see note 8).

v) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefi ts incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefi ts of ownership of the asset are classifi ed

as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

w) Contributed equity

Issued and paid up capital is recognised at the fair value of the consideration received by the Company and is split between issued capital (par value) and share premium reserve. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

x) Employee benefi ts

Provision is made for employee benefi ts accumulated as a result of employees rendering services up to the reporting date. These benefi ts include wages and salaries and annual leave. Employee benefi ts expenses are recognised in the income statement on a net basis in their respective categories.

Contributions made by the Group to employee superannuation funds are charged as an expense when incurred.

y) Earnings per share

Basic earnings per share (“EPS”) is calculated by dividing the net profi t attributable to members of the parent entity for the reporting period, after excluding any costs of servicing equity (other than ordinary shares and converting preferences shares as ordinary shares for EPS calculation purposes), by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of fi nancing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus issue.


52



3. Financial risk management(a) Financial risk management objectives and policies

The Group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse effects and ensure that net cash fl ows are suffi cient to support the delivery of the Group’s fi nancial targets whilst protecting future fi nancial security. The Group continually monitors and tests its forecast fi nancial position against these objectives and in general will undertake hedging activity only when necessary to ensure the objectives are achieved.

The Group’s activities expose it to a variety of fi nancial risks; market, credit and liquidity. These risks are managed under Board approved directives through the Finance Committee. The Groups principal fi nancial instruments, other than derivatives, comprise interest-bearing debt, cash and short term deposits. Other fi nancial instruments include trade receivables and trade payables, which arise directly from operations.

It is, and has been throughout the period under review, Group policy that no speculative trading in fi nancial instruments be undertaken.

(b) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Zambian kwacha and the Australian dollar.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency. The risk is measured by regularly monitoring, forecasting and performing sensitivity analysis on the Group’s fi nancial position.

The fi nancial instruments denominated in Zambian kwachas and Australian dollars are as follows:

Zambian kwacha Australian dollar

2007 2006 2007 2006

ZMK 000’s ZMK 000’s AU$ AU$

Financial assets Cash & cash equivalents 2,438,215 638,713 663,233 33,314,841Trade receivables 12,260,367 2,274,111 414,552 361,036

14,698,582 2,912,824 1,077,785 33,675,877

Financial liabilities Trade payables 6,118,382 213,953 1,655,340 741,847

6,118,382 213,953 1,655,340 741,847

Net exposure 8,580,200 2,698,871 (577,555) 32,934,030

53

(ii) Commodity price risk

The Group’s future revenue forecasts are exposed to commodity price fl uctuations, in particular nickel prices.

A hedging programme was placed in April 2007 in conjunction with the terms of the debt funding agreement for the Munali project. The Group entered into forward contracts for 9,020 tonnes of nickel over the period from June 2009 to December 2013. The level of hedging represents approximately 15% of the Munali project’s expected payable nickel from production.

The following table summarises the sensitivity of the fair value of the fi nancial instruments held at balance sheet date to movement in the price of nickel with all other variables held constant. The 10% sensitivity is based on reasonably possible changes, over a fi nancial year, using the observed range of actual historical prices for the preceding fi ve year period.

Impact on profi t Impact on equity

2007 2006 2007 2006

US$ US$ US$ US$

Post-tax gain/(loss) Nickel forward price +10% (74,350) - (19,999,839) -Nickel forward price -10% 95,514 - 19,999,839 -

(iii) Interest rate risk

The Group’s main interest rate risk arises from long-term borrowings in relation to the Munali project. Borrowings issued at variable rates expose the Group to cash fl ow interest rate risk. Interest rate risk on cash and short term deposits is not considered to be a material risk due to the short term nature of these fi nancial instruments.

During 2007 and 2006, the Group’s borrowings at variable rate were denominated in US Dollars. The Group analyses its interest rate exposure on a dynamic basis and where appropriate simulates various scenarios taking into consideration refi nancing, renewal of existing positions, alternative fi nancing and hedging options.


(b) Market risk (continued)

(i) Foreign exchange risk (continued)

The following table summarises the sensitivity of fi nancial instruments held at the balance sheet date to movements in the exchange rate of the Zambian kwacha and Australian dollar to the US dollar, with all other variables held constant. The 5% sensitivity is based on reasonably possible changes, over a fi nancial year, using the observed range of actual historical rates for the preceding fi ve year period.

Impact on profi t Impact on equity

2007 2006 2007 2006

US$ US$ US$ US$

Post-tax gain/(loss) ZMK/USD +5% 110 29 - -ZMK/USD -5% (110) (29) - -AUD/USD +5% (17,702) 908,704 - -AUD/USD -5% 17,702 (908,704) - -

The Group has not entered into forward foreign exchange contracts. Natural hedges are utilised wherever possible to offset foreign currency liabilities.

54



(iii) Interest rate risk (continued)

The fi nancial instruments exposed to interest rate risk are as follows:

2007 2006

US$ US$

Financial liabilities Interest bearing loans and borrowings (36,469,472) -

(36,469,472) -

As all these borrowings are related to a long-term qualifying development project, the Munali operation, the interest costs are capitalised in accordance with the policy outlined in note 2(o). Therefore the impact on Group profi t is nil.

The effective interest rates on fi nancial assets and liabilities as at 31 December 2007 were as follows:

2007

Weighted Fixed Floating Non-interest

average interest rate interest rate bearing Total

Notes interest rate US$ US$ US$ US$

Financial assets

Cash assets 13 3.17% - 16,365,129 - 16,365,129Security deposits 5.78% - 254,141 - 254,141Current receivables 9 - - 4,175,383 4,175,383Other fi nancial assets 11 - 274 - 274

- 16,619,544 4,175,383 20,794,927

Financial liabilities Payables 16 - - 18,321,041 18,321,041Interest bearing loans and borrowings 3(e) 8.43% - 33,733,809 - 33,733,809Other fi nancial liabilities - - 76,749 76,749

- 33,733,809 18,397,790 52,131,599

The effective interest rates on fi nancial assets and liabilities as at 31 December 2006 were as follows:

2006

Weighted Fixed Floating Non-interest

average interest rate interest rate bearing Total

Notes interest rate US$ US$ US$ US$

Financial assets

Cash assets 13 5.14% - 38,276,017 - 38,276,017Security deposits 5.63% - 181,539 11,388 192,927Current receivables 9 - - 826,626 826,626Loans to other entities 11 7.00% 208,830 - - 208,830

208,830 38,457,556 838,014 39,504,400

Financial liabilities Payables 16 - - 1,579,575 1,579,575

- - 1,579,575 1,579,575

55

(c) Liquidity risk

The Group’s liquidity position is managed to ensure that suffi cient funds are available to meet its fi nancial commitments in a timely and cost effective manner.

Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash fl ow. The table below refl ects a balanced view of cash infl ows and outfl ows and shows the implied risk based on those values. Loan obligations, trade payables and other fi nancial liabilities originate from the fi nancing of assets used in the Group’s ongoing operations. These assets are considered in the Group’s overall liquidity risk.

Management continually reviews the Group liquidity position including cash fl ow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels. Note 3(e) details the repayment obligations in respect of the amount of the facilities and derivatives utilised.

Year ended 31 December 2007

< 6 6-12 1-5 > 5

months months years years Total

US$ US$ US$ US$ US$

Financial assets

Cash and cash equivalents 16,365,129 - - - 16,365,129Trade and other receivables 4,175,383 - - - 4,175,383Other fi nancial assets - 254,415 - - 254,415

20,540,512 254,415 - - 20,794,927

Financial liabilities Trade and other payables 18,321,041 - - - 18,321,041Interest bearing loans and borrowings - - 30,144,000 6,325,472 36,469,472Financial derivative liabilities - - 15,162,431 - 15,162,431Other fi nancial liabilities 76,749 - - - 76,749

18,397,790 - 45,306,431 6,325,472 70,029,693

Net maturity 2,142,722 254,415 (45,306,431) (6,325,472) (49,234,766)

Year ended 31 December 2006

< 6 6-12 1-5 > 5

months months years years Total

US$ US$ US$ US$ US$

Financial assets

Cash and cash equivalents 38,276,017 - - - 38,276,017Trade and other receivables 826,626 - - - 826,626Other fi nancial assets - 401,758 - - 401,758

39,102,643 401,758 - - 39,504,401

Financial liabilities

Trade and other payables 1,579,575 - - - 1,579,575Interest bearing loans and borrowings - - - - -Financial derivative liabilities - - - - -Other fi nancial liabilities - - - - -

1,579,575 - - - 1,579,575

Net maturity 37,523,068 401,758 - - 37,924,826


56



(d) Credit risk

The Group’s maximum exposure to credit risk at the reporting date in relation to each class of recognised fi nancial assets is the carrying amount of those assets as indicated in the consolidated balance sheet. The Group does not have any signifi cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

(e) Financing facilities

Secured loans

2007 2007 2007 2006

Facility Unused Used Used

US$ US$ US$ US$

Non-current

Senior debt facility (i) 60,000,000 44,000,000 16,000,000 -Subordinated debt facility (ii) 24,480,000 4,010,528 20,469,472 -

84,480,000 48,010,528 36,469,472 -Less: transaction costs - - (2,735,663) -

84,480,000 48,010,528 33,733,809 -

(i) The Group has arranged a senior debt facility of up to US$60 million with the European Investment Bank and Barclays Capital to partially fund the development of the Munali project. The funding is secured against the assets of the project and the loans are repayable over scheduled instalments to December 2013. Interest rates are variable based on the London Inter-bank Offered Rate (LIBOR). Interest is paid quarterly. The facilities are subject to various covenants and a negative pledge restricting the amount of future secured borrowings. Neither the covenants nor the negative pledge have been breached at any time during the reporting period.

(ii) A subordinated debt facility of US$20 million plus accruing interest has been arranged with Jinchuan Group Limited in conjunction with the senior debt facility. The funding is secured against the assets of the project and the loan is repayable over scheduled instalments to June 2014. Interest rates are variable based on LIBOR with interest paid at the end of the drawdown period. The facilities are subject to various covenants and a negative pledge restricting the amount of future secured borrowings. Neither the covenants nor the negative pledge have been breached at any time during the reporting period.

In the event of a default the Common Terms Agreement relating to the funding of the Munali project gives precedent to the senior debt over the subordinated debt. Repayment obligations in respect of the amount of facilities utilised are as follows:

2007 2006

US$ US$

Due

No later than one year - -Later than one year but no later than two years 6,606,000 -Later than two years but no later than three years 7,846,000 -Later than three years but no later than four years 7,846,000 -Later than four years but no later than fi ve years 7,846,000 -Later than fi ve years 6,325,472 -

36,469,472 -

57

(f) Derivative instruments

Commodity prices

The Group’s future revenues are exposed to commodity prices, particularly LME nickel prices. The Group may from time to time enter into commodity price derivative instruments to manage this exposure.

Notional Fair value

Instrument amount Rate Expiry Hedge type 2007 2006

$US $US

Nickelforward sale Sell Receive Cash fl ow hedge - Manages 1,148t US$11.92 - 12.01/lb 2009 risk from anticipated 3,587,877 - 1,968t US$11.79 - 11.91/lb 2010 production from the 1,282,637 - 1,968t US$11.66 - 11.78/lb 2011 Munali project (3,577,626) - 1,968t US$11.52 - 11.64/lb 2012 (7,065,204) - 1,968t US$11.39 - 11.51/lb 2013 (9,390,115) -

(15,162,431) -

Hedging reserve

The hedging reserve represents hedging gains and losses recognised on the effective portion of cash fl ow hedges. The cumulative deferred gain or loss on the hedge is recognised in profi t or loss when the hedged transaction impacts the profi t or loss, or is included as a basis adjustment to the non-fi nancial hedged item, consistent with the applicable accounting policy.

2007 2006

US$ US$

Balance at beginning of the year - -Loss recognised on cash fl ow hedges: Forward sale of nickel (15,162,431) -Income tax related to loss recognised in equity 3,790,608 -Transferred to profi t and loss: Ineffective portion on cash fl ow hedges 5,261 -Income tax related to amounts transferred to profi t and loss - -

Balance at end of the year (11,366,562) -

(g) Fair values

The Directors have performed a review of the fi nancial assets and liabilities as at 31 December 2007 and have concluded that the fair value of those assets and liabilities are not materially different to book values. The methods and assumptions used to estimate the fair value of fi nancial instruments were:

(i) Cash

The carrying amount is fair value due to the liquid nature of these assets.

(ii) Receivables/payables

Due to the short term nature of these fi nancial rights and obligations, their carrying values are estimated to represent their fair values.

(iii) Other fi nancial liabilities and derivative fi nancial instruments

Fair value is established by using market accepted valuation techniques.

(iv) Interest bearing liabilities

As the liabilities carry variable interest rate, the carrying amount is the fair value.


58



4. Critical accounting judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimations (see below), that the directors have made in the process of applying the entity’s accounting policies and that have the most signifi cant effect on the amounts recognised in fi nancial statements.

(i) Signifi cant accounting judgements

(a) Taxation

The Group’s accounting policy for taxation requires management’s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences, are recognised only

where it is considered more likely than not that they will be recovered, which is dependent on the generation of suffi cient future taxable profi ts. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future.

Assumptions about the generation of future taxable profi ts and repatriation of retained earnings depend on management’s estimates of future cash fl ows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.

(b) Determination of mineral resources

and ore reserves

The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates, deferred stripping costs and provisions for decommissioning and restoration. Albidon Limited estimates its

mineral resources and ore reserves in accordance with the Albidon Limited policy for the Reporting of Mineral Resources and Ore Reserves. This policy requires that the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 (the ‘JORC code’) be used as a minimum standard. The information on mineral resources and ore reserves were prepared by or under the supervision of Competent Persons as defi ned in the JORC code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code.

There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation may change signifi cantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated.

(ii) Signifi cant accounting estimates

and assumptions

(a) Impairment of capitalised

exploration and evaluation

expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future

59

legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profi ts and net assets will be reduced in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profi ts and net assets will be reduced in the period in which this determination is made.

(b) Impairment of capitalised mine

development expenditure

The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level of proved, probable and inferred mineral resources, future technological changes that could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, profi ts and net assets will be reduced in the period in which this determination is made.

(c) Impairment of property,

plant and equipment

Property, plant and equipment is reviewed for impairment if there is any indication that the carrying amount may not be recoverable. Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being the net present value of expected future cash fl ows of the relevant cash generating unit) and ‘fair value less costs to sell’. In determining value in use, future cash fl ows are based on:

• estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confi dence of economic extraction;

• future production levels;

• future commodity prices; and

• future cash costs of production and capital expenditure.

Variations to the expected future cash fl ows, and the timing thereof, could result in signifi cant changes to any impairment losses recognised, if any, which could in turn impact future fi nancial results.

(d) Provisions for decommissioning

and restoration costs

Decommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditure is incurred at the end of a mine’s life. In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of infl ation.

The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates.

Changes to any of the estimates could result in signifi cant changes to the level of provisioning required, which would in turn impact future fi nancial results

(e) Fair value of derivatives and other

fi nancial instruments

The directors use their judgement in selecting an appropriate valuation technique for derivative fi nancial instruments. Assumptions are made based on quoted market rates adjusted for specifi c features of the instrument.

(f) Share-based payment transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the Binomial model, further details of which are given in note 20. In valuing equity-settled transactions, no account is taken of any performance conditions, other than a condition linked to the price of the shares of Albidon Limited (‘market conditions’).

The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.


60



5. Segment informationThe Group operates in one principal area of activity, namely exploration and development of base metal tenements, and two principal geographical areas, namely Australia (head offi ce) and Africa (operations).

Geographical segments Australia Africa Consolidated

Year to 31 December 2007 US$ US$ US$

Revenue Other 1,326,638 - 1,326,638

Result Segment result (3,466,819) 1,261,744 (2,205,075)

(Loss)/profi t before related income tax expense (3,466,819) 1,261,744 (2,205,075)Income tax expense - - -

Net (loss)/profi t (3,466,819) 1,261,744 (2,205,075)

Assets and liabilities

Segment assets 9,440,831 118,666,337 128,107,168 Segment liabilities 1,449,637 66,656,583 68,106,220

Other segment information

Capital expenditures Mining assets - 81,549,145 81,549,145 Administration assets 169,903 - 169,903Non-cash expenses

Depreciation (48,222) (62,140) (110,362) Share-based payments expense (2,610,993) - (2,610,993) Unrealised/realised foreign exchange gains/(losses) 1,154,922 1,481,237 2,636,159

Geographical segments Australia Africa Consolidated

Year to 31 December 2007 US$ US$ US$

Revenue

Other 732,557 - 732,557

Result

Segment result (518,966) (2,148,668) (2,667,634)

(Loss) before related income tax expense (518,966) (2,148,668) (2,667,634)Income tax expense - - -

Net (loss) (518,966) (2,148,668) (2,667,634)

Assets and liabilities

Segment assets 38,157,287 22,585,149 60,742,436Segment liabilities 796,393 880,643 1,677,036

Other segment information

Capital expenditures

Mining assets - 11,776,153 11,776,153 Administration assets 124,740 - 124,740Non-cash expenses Depreciation (28,017) (10,923) (38,940) Share-based payments expense (561,589) - (561,589) Unrealised/realised foreign exchange gains/(losses) 1,705,845 (522,023) 1,183,822

61

6. Revenue and expenses 2007 2006

US$ US$

(a) Revenue Interest on bank balances 1,320,466 702,716 Interest on loans to related parties 6,172 29,841

1,326,638 732,557

(b) Other income Foreign exchange gain 2,636,159 1,183,822 Other 250,000 4,023

2,886,159 1,187,845

(c) Staff costs Salaries and personnel expenses 2,084,377 886,759 Superannuation expenses 104,264 54,538 Share based payments 2,610,993 561,589 Consultant expenses 147,310 70,545

4,946,944 1,573,431

(d) Other expenses Advisory and audit fees 158,078 324,541 Travel expenses 248,382 235,007 Printing, stationery and advertising expenses 140,298 199,174 Occupancy and insurance expenses 133,301 186,905 Information technology and communications expenses 151,800 171,032 Company secretarial expenses 86,771 121,156 General administration expenses 40,733 149,849 Movement in fair value of ineffective portion of hedging derivatives 5,261 -

964,624 1,387,664


62



7. Income tax expense 2007 2006

US$ US$

(a) Income tax expense

Current tax - - Deferred tax - relating to origination and reversal of temporary differences - -

Income tax expense - -

(b) Amounts charged or credited directly to equity 3,790,608 -

(c) Numerical reconciliation between tax expense recognised in the income statement

and tax expenses calculated per the statutory income tax rate Accounting loss before income tax (2,205,075) (2,667,634) At the Group’s statutory income tax rate (661,523) (800,290) Foreign tax rate adjustment (27,405) 23,036 Share options expenses 783,298 168,477 Foreign exchange gains and other translation adjustments (785,147) (355,147) Unrecognised tax losses 690,777 963,924

Income tax expense - -

(d) Recognised deferred tax assets and liabilities 2007 2006

Current tax Deferred tax Current tax Deferred tax

US$ US$ US$ US$

Opening balance - - - -Charged to income - - - -Charged to equity - 3,790,608 - -

Closing balance - 3,790,608 - -

Tax expense in income statement - -

Amounts recognised in the balance sheet - Deferred tax asset 3,790,608 - - Deferred tax liability - -

3,790,608 -

2007 2006

US$ US$

Deferred tax at 31 December relates to: Deferred tax assets - Tax losses 3,790,608 -

Gross deferred tax assets 3,790,608 -

Set off deferred tax assets - -

Net deferred tax assets 3,790,608 -

63

8. Loss per share(i) Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year.

(ii) Diluted

Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary shareholders by the weighted number of ordinary shares outstanding during the year adjusted for the effects of dilutive options.

The following table refl ects the income and share data used in the basic and diluted earnings per share computations:

2007 2006

US$ US$

Basic

Loss attributable to equity holders of the Company (2,205,075) (2,667,634)Weighted average number of ordinary shares in issue 153,207,438 108,453,205

Basic loss per share (US cents per share) (1.44) (2.46)

Diluted Loss used to determine diluted loss per share (2,205,075) (2,667,634)Weighted average number of ordinary shares for diluted loss per share 153,207,438 108,453,205

Diluted loss per share (US cents per share) (1.44) (2.46)

Weighted average number of ordinary shares for basic loss per share 153,207,438 108,453,205Effect of dilution - share options - -

Weighted average number of ordinary shares adjusted for the effects of dilution 153,207,438 108,453,205

Since the reporting date and before the completion of these fi nancial statements the following transactions occurred:

In January 2008, the Company issued 3,389,831 shares at AU$3.35/US$2.95 cents each to ZCCM Investments Holdings plc.

In February 2008 the Company issued 5,084,746 shares at AU$3.35/US$2.95 cents each to the Jinchuan Group Limited.

On 25 February 2008, 100,000 unlisted options exercisable at AU$3.25 expiring on or before 1 February 2011 were allocated to key personnel.

On 17 March 2008, the Company advised that subject to Shareholder approval Mr. John Shaw, Deputy Chairman, would be allocated 300,000 unlisted options exercisable at AU$3.47 expiring on or before 30 June 2011.

Share options are considered as anti-dilutive as their inclusion would reduce the loss per share.

9. Trade and other receivables 2007 2006

Notes US$ US$

Trade receivables 809,006 30,049GST/VAT receivables 3,321,530 679,440Related entity receivables 25 44,847 117,137

4,175,383 826,626

Trade and other receivables are non-interest bearing and have repayment terms within one year.


64



10. Inventories 2007 2006

US$ US$

Stores and materials - at cost 106,912 -Work in progress - at cost - -Finished goods - at cost - -Finished goods - at net realisable value - -

106,912 -

Stores and materials consist of consumable stores and are valued at weighted average cost.

11. Other fi nancial assets

2007 2006

Notes US$ US$

Security and term deposits 254,141 192,652Loan to other entities (i) 25 - 208,830Other 274 276

254,415 401,758

(i) The loan to Mr. Brian Rudd (acting for the Capital Drilling group) represented the balance loaned for the purchase of a Schramm 685 drilling rig. The rig was being used at the Company’s Munali site in Zambia. This rig was owned and operated by Mr. Rudd and held under trust by Albidon Zambia Limited. The loan bore an interest rate of 7%. The loan was repaid during 2007.

12. Prepayments 2007 2006

US$ US$

Prepayments 698,257 129,384

13. Cash and cash equivalents 2007 2006

US$ US$

Bank balances 16,328,589 38,245,672Other cash and cash equivalents 36,540 30,345

16,365,129 38,276,017

Weighted average interest rate 3.17% 5.14%

Committed undrawn borrowing facilities 48,010,528 -

65

14. Plant and equipment(a) Reconciliation of carrying amounts at the beginning and end of the period

Assets under Plant and Motor

construction equipment vehicles Total

US$ US$ US$ US$

At 1 January 2007, net of accumulated depreciation - 256,905 9,829 266,734

Additions 49,242,594 182,985 41,924 49,467,503 Reclassifi ed from mine properties and development 1,582,522 - - 1,582,522Depreciation charge for the period - (103,978) (6,384) (110,362)

At 31 December 2007, net of accumulated depreciation 50,825,116 335,912 45,369 51,206,397

at 31 December 2007 Cost 50,825,116 490,290 63,387 51,378,793Accumulated depreciation - (154,378) (18,018) (172,396)

Net carrying amount 50,825,116 335,912 45,369 51,206,397

Assets under Plant and Motor

construction equipment vehicles Total

US$ US$ US$ US$

At 1 January 2006, net of accumulated depreciation - 87,204 15,200 102,404

Additions - 200,544 - 200,544Depreciation charge for the period - (30,843) (5,371) (36,214)

At 31 December 2006, net of accumulated depreciation - 256,905 9,829 266,734

at 31 December 2006

Cost - 307,305 21,463 328,768Accumulated depreciation - (50,400) (11,634) (62,034)

Net carrying amount - 256,905 9,829 266,734

Contractual commitments (see note 24) for the acquisition of property, plant and equipment at 31 December 2007 were US$15,057,500 (2006: US$4,136,925).

(b) Property, plant and equipment pledged as security for liabilities

Property, plant and equipment with a carrying value of US$50,864,320 (2006 nil) is pledged as security for non-current liabilities as disclosed in note 3(e).


66



15. Mine properties and exploration expenditure(a) Mine properties and development

2007 2006

US$ US$

Mine properties and development - pre-production

Opening at beginning of the period 20,841,917 -

Transferred from exploration and evaluation expenditure - 15,664,158Pre-production exploration 4,293,728 1,827,852Additions 27,956,944 3,349,907Reclassifi ed to plant and equipment (1,582,522) -

Closing at end of the period 51,510,067 20,841,917

Mine properties and development expenditure relates to the Munali project.

The Munali nickel deposit is located approximately 60km south of Lusaka in southern Zambia. The project is served by road, rail and power infrastructure as well as water supplies. The deposit was discovered in 1969 and was held by a number of owners prior to its acquisition by the Group in September 2002. The tenement covers an area of 737 sq km.

In accordance with the Company’s policy for exploration and evaluation expenditures, once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are fi rst tested for impairment and then reclassifi ed from exploration and evaluation expenditure to mine property and development.

(b) Mine properties and development pledged as security for liabilities

Mine properties and development with a carrying value of US$51,064,069 (2006 nil) are pledged as securities for non-current liabilities as disclosed in note 3(e).

(c) Borrowing costs capitalised

In 2007 borrowing costs of US$903,713 were capitalised to mine properties and development (2006: nil).

16. Trade and other payables 2007 2006

US$ US$

Trade and other payables 12,511,244 1,179,717Accrued expenses 5,809,797 399,858

18,321,041 1,579,575

Trade payable and accruals are non-interest bearing and have repayment terms within one year.

67

17. Other fi nancial liabilities 2007 2006

US$ US$

Zinifex Limited imprest account 76,749 -

76,749 -

Under the terms of the Tunisian joint venture agreement with Zinifex Limited (see note 21), Zinifex have various cash expenditure commitments. These cash expenditures are processed through Albidon’s payment systems on an imprest basis whereby Zinifex provide cash ahead of the occurrence of the expenditure. The above balance represents funding in the account at the balance sheet date in relation to future expenditure on the Tunisian joint venture.

18. Provisions(a) Current

2007 2006

US$ US$

Employee entitlements and salaries 366,592 97,461

366,592 97,461

Employee entitlements relate to annual leave amounts outstanding at 31 December. Employees are entitled to four weeks annual leave per year.

(b) Non current

2007 2006

US$ US$

Provision for restoration 445,598 -

445,598 -

Movement in the provisions recognised in the balance sheet are as follows Opening provision - -Movement during the year 445,598 -

Provisions as at 31 December 445,598 -

The Group has recognised a provision for restoration related to the anticipated future costs of decommissioning and restoring mining and processing facilities at the Munali operations. These costs are subject to potentially signifi cant uncertainties (see note 4 (ii) (d)). The costs are expected to be incurred at the end of Munali’s mine life.


68



19. Share capital and reserves(a) Ordinary shares

Authorised Issued, called up

and fully paid

Number US$ Number US$

Ordinary shares of US$0.01 each 5,000,000,000 50,000,000 156,065,892 73,736,062

Balance 31 December 2005 89,368,000 21,806,317

Issued through private placement 14,150,000 9,857,385Capital raising costs - (343,535)Issued to African Lion on exercise of options 5,000,000 1,000,000Issued through private placement 39,500,000 34,911,291Capital raising costs - (1,260,428)Issued to contractor on exercise of options 150,000 69,120


Issued through private placement (i) 4,190,992 5,000,000Capital raising costs - (28,280)Issued to employees and contractors on exercise of options 3,306,900 1,683,862Capital raising costs - (10,252)Issued to Mr. Dale Rogers (ii) 400,000 1,052,632Capital raising costs - (2,050)


Shares to be issued (iii) 5,000,000

78,736,062

Represented by:

Capital

Share Share raising

Capital premium costs Total

US$ US$ US$ US$

1,560,659 75,450,585 (3,275,182) 73,736,062

(i) On 12 April 2007, the Company issued 4,190,992 shares to Jinchuan Group Ltd. through a placement at AU$1.55/US$1.19 per share.

(ii) On 21 June 2007, following Shareholder approval, Mr. Dale Rogers was issued with 400,000 shares at a purchase price of AU$0.75 each. The closing market price on that day was AU$3.11.

(iii) In December 2007 the Company completed a placement with ZCCM Investments Holdings plc (“ZCCM-IH”) to raise US$10 million at a price of US$2.95 (AU$3.35/£1.45) per share. As part of the conditions of the placement ZCCM-IH agreed to pay in two equal instalments of US$5 million in December 2007 and January 2008. Both these instalments were received and the shares were issued on 31 January 2008.

Ordinary shares have the right to receive dividends as declared and in the event of a winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held.

69

(b) Options

Information relating to details of options issued, exercised and lapsed during the fi nancial year and options outstanding at the end of the fi nancial year is set out in Note 20.

(c) Capital management

The Company’s Capital Management policy and objectives are consistent with previous periods.

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefi ts for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Company did not pay a dividend during 2007, nor has any dividend been proposed up to the reporting date.

The Group is not subject to any externally imposed capital requirements. The Company issued shares subsequent to the year end as disclosed in Note 27(i). Management has no current plans to issue further shares on the market.

(d) Nature and purpose of reserves

Share premium reserve

The share premium reserve represents the premium received compared to par value for shares issued.

Option premium reserve

The option premium reserve is used to record the value of option based payments provided to employees, contractors and others. Refer to note 20 for further details.

Hedging reserve

The hedging reserve represents hedging gains and losses recognised on the effective portion of cash fl ow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the profi t or loss, or is included as a basis adjustment to the non-fi nancial hedged item, consistent with the applicable accounting policy.

20. Share based paymentsThe option premium reserve is used to record the options issued as share based payments in accordance with the accounting policy set out in Note 2(u).

Option premium reserve US$

Balance 31 December 2005 455,882

Issued to Directors, employees and contractors 561,589

Balance 31 December 2006 1,017,471

Issued to Directors, employees and contractors 1,811,275

Balance 31 December 2007 2,828,746


70



20. Share based payments (continued)Set out below are summaries of options granted in 2007 and 2006:

2007

Balance Vested and

Granted Exercised Lapsed at the end exerciseable

Exercise Expiry Opening during during the during of the at the end of

price Grant date date balance the year year the year year the year

AU$0.60 (i) 12/02/2004 30/06/2007 1,850,000 - (1,850,000) - - -AU$0.60 (i) 11/05/2004 30/06/2007 500,000 - (500,000) - - -AU$0.60 (i) 29/03/2005 30/06/2008 300,000 - (198,000) - 102,000 102,000AU$0.60 (i) 20/07/2005 30/04/2008 300,000 - (300,000) - - -AU$0.60 (i) 11/11/2005 30/06/2007 100,000 - (100,000) - - -AU$0.75 (i) 22/11/2005 30/06/2008 400,000 - (250,000) - 150,000 150,000AU$0.60 (i) 08/05/2006 30/06/2008 165,000 - (108,900) - 56,100 56,100AU$0.75 (ii) 13/07/2006 01/12/2008 1,200,000 - - - 1,200,000 800,000AU$1.05 (i) 19/10/2006 30/06/2009 600,000 - - (100,000) 500,000 200,000AU$2.60 (iii) 23/04/2007 20/05/2010 - 350,000 - - 350,000 100,000AU$2.10 (iv) 29/05/2007 27/02/2010 - 1,200,000 - - 1,200,000 200,000AU$1.70 (v) 29/05/2007 01/12/2009 - 150,000 - - 150,000 75,000AU$2.60 (i) 29/05/2007 20/05/2010 - 400,000 - - 400,000 -AU$3.14 (i) 13/07/2007 27/07/2010 - 250,000 - - 250,000 -AU$2.60 (v) 13/07/2007 20/05/2010 - 50,000 - (50,000) - -AU$2.80 (i) 13/07/2007 12/07/2010 - 200,000 - - 200,000 -AU$2.97 (i) 26/07/2007 12/07/2010 - 300,000 - - 300,000 -AU$2.23 (i) 22/08/2007 01/09/2010 - 600,000 - - 600,000 -AU$3.22 (v) 30/11/2007 01/11/2009 - 295,000 - - 295,000 -AU$3.22 (v) 30/11/2007 01/12/2011 - 400,000 - - 400,000 -AU$2.88 (i) 30/11/2007 31/12/2010 - 350,000 - - 350,000 -AU$2.97 (v) 30/11/2007 31/12/2010 - 100,000 - - 100,000 -AU$2.81 (vi) 21/12/2007 01/02/2011 - 400,000 - - 400,000 -

5,415,000 5,045,000 (3,306,900) (150,000) 7,003,100 1,683,100

Weighted average exercise price AU$0.67 AU$2.58 AU$0.61 AU$1.53 AU$2.06 AU$1.05

2006

Balance Vested and

Granted Exercised Lapsed at the end exerciseable

Exercise Expiry Opening during during the during of the at the end of

price Grant date date balance the year year the year year the year

AU$0.20 (vii) 23/10/2003 30/06/2007 5,000,000 - (5,000,000) - - -AU$0.60 (i) 12/02/2004 30/06/2007 2,000,000 - (150,000) - 1,850,000 1,233,333AU$0.60 (i) 11/05/2004 30/06/2007 500,000 - - - 500,000 333,333AU$0.60 (i) 29/03/2005 30/06/2008 300,000 - - - 300,000 200,000AU$0.60 (i) 20/07/2005 30/04/2008 300,000 - - - 300,000 100,000AU$0.60 (i) 11/11/2005 30/06/2007 100,000 - - - 100,000 33,333AU$0.75 (i) 22/11/2005 30/06/2008 400,000 - - - 400,000 133,333AU$0.60 (i) 08/05/2006 30/06/2008 500,000 - - (335,000) 165,000 -AU$0.75 (ii) 13/07/2006 01/12/2008 - 1,200,000 - - 1,200,000 200,000AU$1.05 (i) 19/10/2006 30/06/2009 - 600,000 - - 600,000 -

9,100,000 1,800,000 (5,150,000) (335,000) 5,415,000 2,233,333

Weighted average exercise price AU$0.38 AU$0.80 AU$0.21 AU$0.60 AU$0.67 AU$0.61

71

20. Share based payments (continued)(i) These options vest in three equal annual tranches, each subject to completion of a full year of service with the Company.

(ii) These options vest in six equal tranches, each subject to a different vesting condition as follows:

a. 200,000 immediately on issue.b. 200,000 on completion of the Munali Feasibility Study;c. 200,000 on completion of debt and equity fi nancing for the Munali Project;d. 200,000 on the commencement of commercial mining at the Munali Project;e. 200,000 on the fi rst US$50 million of sales or the market capitalisation of the Company reaching AU$150 million; andf. 200,000 on three years of service or the next US$100 million of sales or the market capitalisation of the Company

reaching AU$200 million.

(iii) These options vest in four equal annual tranches, each subject to completion of a full year of service with the Company.

(iv) These options vest in six equal tranches, each subject to a different vesting condition as follows:

a. 200,000 to vest on continued employment by Mr. Dale Clark Rogers up to 31 December 2007;b. 200,000 to vest on continued employment by Mr. Dale Clark Rogers up to 31 December 2008;c. 200,000 to vest on continued employment by Mr. Dale Clark Rogers up to 31 December 2009;d. 200,000 to vest on the Mechanical Completion where it occurs on or prior to 31 July 2008;e. 200,000 to vest on the occurrence of Mechanical Completion where it is on budget (within 5% of budgeted

development costs for the 2007 and 2008 annual budgets); andf. 200,000 to vest on the occurrence of Economic Completion where it occurs on or prior to 30 June 2009.

(v) These options vest in two equal annual tranches, each subject to completion of a full year of service with the Company.

(vi) These options vest on a time basis in three equal annual tranches. They were granted to Barclays Capital in relation to the funding arrangements entered into in December 2007.

(vii) These options vested at grant date

All options granted carry no dividend or voting rights. Upon a takeover bid for the Company all unvested options vest. The Company does not have an Employee Share Plan. The following table lists the inputs to the binomial model used for calculating the option expense for the year ended 31 December 2007 and 2006.

Share price Exercise Risk-free Volatility Useful life

Grant date at grant date price interest rate factor (years) Expiry date

08/05/2006 0.68 0.55 5.70% 50% 2.60 30/06/200813/07/2006 0.68 1.05 5.70% 50% 2.60 01/12/200819/10/2006 1.34 2.60 5.97% 53% 2.69 30/06/200923/04/2007 3.10 2.10 6.19% 54% 3.03 20/05/201029/05/2007 3.10 1.70 6.22% 54% 2.75 27/02/201029/05/2007 3.10 2.60 6.22% 54% 2.50 01/12/200929/05/2007 3.10 3.14 6.22% 54% 2.97 20/05/201013/07/2007 3.15 2.60 6.22% 56% 3.00 12/07/201013/07/2007 3.15 2.80 6.22% 55% 2.85 20/05/201013/07/2007 2.86 2.97 6.21% 56% 3.00 12/07/201026/07/2007 2.86 2.23 6.21% 55% 3.01 27/07/201022/08/2007 2.10 3.22 6.53% 57% 3.03 01/09/201030/11/2007 2.65 3.22 5.88% 50% 1.92 01/11/200930/11/2007 2.65 2.88 5.88% 50% 4.01 01/12/201130/11/2007 2.65 2.97 5.88% 50% 3.08 30/12/201030/11/2007 2.65 2.81 5.88% 50% 3.08 30/12/201021/12/2007 3.15 2.81 6.02% 49% 3.12 01/02/2011

The expected volatility was determined by using a historical sample of the daily share price movement percentages over the useful life. The resultant expected volatility therefore refl ects the assumption that historical volatility is refl ective of future trends, which may not necessarily be the actual outcome.

The weighted average remaining contractual life for the share options outstanding as at 31 December 2007 is 2.25 years (2006: 1.24 years). The weighted average fair value of options granted during the year was AU$1.16 (2006: AU$0.51).


72



21. Interest in joint venturesAlbidon and BHP Billiton Limited

Albidon and BHP Billiton Limited (“BHP Billiton”), previously WMC Resources Exploration Pty Limited, entered into an agreement in October 2004 for the exploration and development of a number of Albidon’s nickel projects in east Africa.

BHP Billiton has elected to proceed to the earn-in stage of the agreement in respect of several tenements at Songea in Tanzania. Through sole funding of agreed exploration programmes, BHP Billiton may earn a 30% interest in this project by expending US$5 million, inclusive of the amounts expended on the project area during the initial period.

BHP Billiton may complete a Pre-feasibility Study (including a JORC Measured Resource) on the Songea project to earn a 70% interest. Albidon may then elect to fund its 30% share of project expenditures, or may reduce to a 20% equity interest in return for BHP Billiton funding the fi rst US$10 million of a Bankable Feasibility Study.

Albidon and

African Energy Resources Limited

Albidon Limited and Energy Ventures Limited (“EVE”) entered into an agreement in October 2005 for the exploration and development of a number of uranium and coal prospects that have been identifi ed on Albidon’s tenements in Zambia. The exploration programme is funded and managed by African Energy Resources Limited (“AFR”), which is owned as to approximately 70% by EVE.

Having met the initial expenditure requirement of AU$500,000 within 2 years, AFR has elected to enter into joint ventures with Albidon on three nominated project areas, Chirundu, Kariba and Luano. AFR has earned an equity interest of 30% in the Chirundu JV and is currently completing a Pre-feasibility Study on a JORC Indicated Resource to earn a 70% interest. On each of the Kariba and Luano joint ventures AFR is funding initial exploration programmes to earn a 30% interest.

Albidon and Zinifex Limited

In December 2006 Albidon and Zinifex Limited (“Zinifex”) entered into an agreement in respect of zinc projects in Tunisia. Under the key terms of the agreement Zinifex will make staged cash payments to Albidon of US$1 million, with an initial payment of US$250,000, and a minimum commitment of US$1.3 million of expenditure. Zinifex has now completed this expenditure within the required 12 month period. The US$250,000 was received during the year and is included in other income in the income statement.

Zinifex may earn a 51% interest in the projects by spending a total of US$6 million on exploration within 3 years, and making a further cash payment of US$750,000. No interest will be earned by Zinifex in the projects until this time. The minimum initial committed expenditure of US$1.3 million is credited towards the earn-in, however the cash payments of US$1 million are not included as project expenditures.

Zinifex may earn a total interest of 70% by spending an additional US$5 million within two years. Thereafter Albidon may elect to contribute to project expenditures in proportion to its 30% interest or may sell its interest for cash plus a retained royalty.

Albidon and MM Mining plc

In October 2007 Albidon and MM Mining plc (‘MMM’) entered into an agreement for the exploration and development of the Mpemba nickel project in Malawi. Under the agreement MMM will sole-fund initial exploration expenditure of US$200,000 within 12 months, and may then earn a 75% interest by expending an additional $US1.2 million within 4 years. Thereafter Albidon may elect to contribute to project expenditures in proportion to its 25% interest or may convert this to a 3% NSR royalty.

Apart from the balance on the Zinifex imprest account (see note 17) the Group has no recognised assets, liabilities, outstanding commitments or contingent liabilities in relation to these joint ventures.

73

22. Investments in subsidiariesThe consolidated fi nancial statements include the fi nancial statements of Albidon Limited and the subsidiaries listed in the following table:

% Equity interest

Country of 31 December 31 December

incorporation 2007 2007

Albidon Zambia Limited Zambia 100 100Tumbili Ventures Limited Tanzania 100 100Albidon Africa Limited British Virgin Islands 100 100Albidon Malawi Limited Malawi 100 100Albidon Mocambique Limitada (i) Mozambique 100 100Albidon Australia Pty Ltd Australia 100 100Albidon Botswana Pty Ltd Botswana 100 100Albidon Exploration Limited Zambia 100 100Albidon (UK) Ltd United Kingdom 100 100

(i) Shares held by subsidiary undertaking.

23. Available for sale investments 2007 2006

US$ US$

At fair value: Investment in Tausi Mining Pty Limited (Luwumbu JV) - -

Albidon owns 10% of equity in Tausi Mining Pty Limited, a company incorporated in Western Australia. The wholly owned subsidiary of Tausi Mining Pty Limited, namely Tausi Minerals Company Limited, holds project tenements in Tanzania. These tenements are subject to a joint venture arrangement (“the Luwumbu joint venture”). The asset is carried at fair value and as such, recorded at nil.

F I NANC I A L REPORT FOR THE YEAR ENDED 31 DECEMBER 2007

74



24. CommitmentsAs at 31 December 2007 the Group had the following commitments:

(a) Albidon tenement commitments:

(i) Exploration:

Commitment on licenses requiring expenditures within 2 years : US$383,505Commitment on licenses requiring expenditures within 3 years : US$201,132

(b) Other:

At the balance sheet date the following commitments existed in relation to the development of the Munali Project.

Not later the 1 year

Commitment $US

Plant construction 6,743,300Flotation cells and thickeners 1,230,700Mill crusher, feeder and conveyor equipment 1,070,800Grinding equipment & construction 1,790,900Insurance spares 959,100Plant piping 797,300Power 2,170,700Reagent plant modules 294,700

Total 15,057,500

These commitments have not been provided for in the fi nancial statements.

75

25. Related party transactionsThe following transactions were carried out with related parties:

Directors’ interests

Mitchell River Group Pty Ltd., an entity associated with Messrs Cooke, Burton and Windrim provides offi ce space and administrative staff, facilities and services to the Company, the costs of which are then reimbursed by the Company. For the year ended 31 December 2007, these costs totalled US$600,130 (2006: US$532,094). During the year the Company recharged Mitchell River Group Pty Ltd. the total of US$84,285 (2006: US$35,366) for rent and shared overheads. At 31 December 2007 US$8,240 (2006: US$19,318) was owing to the Company.

Hartree Pty Ltd., a mining consulting fi rm of which Mr. Alasdair Cooke is a director, has received fees of US$25,887 (2006: US$19,671) in respect of database access, fi eld equipment rental and offi ce cost recovery provided to the Company in the ordinary course of business.

In 2005 the Company made a loan of US$865,527 to Mr. Brian Rudd (acting for the Capital Drilling group) for the purchase of a drilling rig, which was paid off during 2007. US$208,830 had been outstanding at 31 December 2006. US$6,172 interest was charged to the loan balance during 2007 (2006: US$31,028). The rig is owned and operated by Brian Rudd and was held under trust by Albidon Zambia Limited. Mr. Rudd and Capital Drilling are experienced operators of drilling services in Africa. The rig has been used at the Company’s Munali site in Zambia. The loan bore an interest rate of 7% pa. Mr. Craig Burton has a 25% equity interest in the Capital Drilling group.

African Energy Resources Ltd., a uranium exploration fi rm of which Dr. Donal Windrim and Mr. Alasdair Cooke are directors, has been invoiced for the year ended 31 December 2007 US$133,951 (2007: USD$112,008) in respect of operating costs recovery provided by the Company in the ordinary course of business. At 31 December 2007 US$38,107 (2006: US$97,819) was owing to the Company.

Mineral Commercial Services Pty Ltd. (MCS), a consulting fi rm of which Mr. Chris De Guingand is a director, has received fees of US$51,865

(2006: US$110,166) in respect of services provided to the Company in the ordinary course of business. At 31 December 2007 the Company owed MCS US$1,500 (2006: nil).

At 31 December 2007 US$198,900 (2006: US$216,969) was owed to Peregrine Pty Ltd., a mining consulting fi rm of which Mr. Dale Rogers is a director, in relation to services provided before Mr. Rogers became a Director of the Company.

All of the above transactions were entered into on normal commercial terms.

Directors

The Directors of the Company during the year, and up to the date of this report, were as follows:

Dale Rogers Craig Burton Alasdair Cooke Donal Windrim Michael Brook Richard (Dick) PottsChristopher De GuingandPaul ChapmanValentine ChitaluJohn Shaw


Compensation of key management personnel of the Group

2007 2006

US$ US$

Short term employee benefi ts 878,770 573,097Post employment pension and medical benefi ts 50,689 35,945Termination benefi ts - -Share-based payments 1,786,348 325,560

Total compensation paid to key management personnel 2,715,807 934,602

76


25. Related party transactions (continued)Directors’ options

AU$ Number Exercise price Expiry date Fair value

2006 - Issued to Directors 1,200,000 0.75 01/12/2008 567,0002006 - Issued to Directors 100,000 1.05 30/06/2009 57,5302007 - Issued to Directors 1,200,000 2.10 27/02/2010 1,833,3252007 - Issued to Directors 400,000 2.60 20/05/2010 542,075

Fair value represents the total expense which will be reported in the income statement over the vesting period of the respective options.

26. Contingent assets and liabilitiesThere are no identifi ed contingent assets or liabilities as at balance date or up to the date of this report.

27. Events after the balance sheet date(i) Share capital issues

In January 2008, as part of the funding arrangements negotiated in December 2007, the Company received a second instalment of US$5 million from ZCCM Investments Holdings plc (“ZCCM-IH”) to complete the transaction whereby the Company issued 3,389,831 shares at AU$3.35/US$2.95 cents each to ZCCM-IH to raise US$10 million. The fi rst instalment payment was received in December 2007 and is included as “Share capital to be issued” in the Balance Sheet at 31 December 2007.

In addition, in February 2008 the Company completed the fi nal issue of 5,084,746 shares at AU$3.35/US$2.95 cents each to the Jinchuan Group Limited to raise US$15 million.

The funds raised will be used to help fund the development of the Munali Nickel Project in Zambia and will also ensure Albidon retains suffi cient funds for exploration, increased drilling and business development activities.

(ii) Hedging

As part of the funding arrangements negotiated in December 2007, in February 2008 the Company forward hedged 2,274 tonnes of nickel in addition to its original 9,020 tonnes hedged in April 2007. Total nickel now hedged is 11,294 tonnes which represents approximately 25% of the nickel in concentrate expected to be produced from the Munali Nickel Project over the hedging period. The weighted average hedge prices per year for all of the hedged nickel are:

2009 2010 2011 2012 2013

Average hedge price (US$ per tonne) 28,095 26,328 23,516 21,215 19,383Nickel tonnes hedged 1,934 2,340 2,340 2,340 2,340

(iii) Options

On 25 February 2008, 100,000 unlisted options exercisable at AU$3.25 expiring on or before 1 February 2011 were allocated to the key personnel.

On 17 March 2008, the Company advised that subject to Shareholder approval Mr. John Shaw, Deputy Chairman, would be allocated 300,000 unlisted options exercisable at AU$3.47 expiring on or before 30 June 2011.

Apart from the above there has not arisen in the interval between the end of fi nancial period and the date of these fi nancial statements any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect signifi cantly the operations of the entity, the results of these operations, or the state of affairs of the entity, in future fi nancial periods.

77


In accordance with a resolution of the board of Directors of Albidon Limited, I state that:

In the opinion of the Directors:

a) the fi nancial statements and notes of the Consolidated Entity:

i. give a true and fair view of the fi nancial position as at 31 December 2007 and the performance for the year ended on that date of the Consolidated Entity; and

ii. comply with International Financial Reporting Standards,

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

On behalf of the Board

Dale Rogers

Director

31 March 2008

Directors’ Declaration

78

Independent auditor’s report to the members of Albidon LimitedWe have audited the accompanying fi nancial report of Albidon Limited and the entities it controlled (the “Group”) during the year ended 31 December 2007, which comprises the consolidated balance sheet as at 31 December 2007 and the consolidated income statement, consolidated statement of changes in equity and cash fl ow statement for the year ended on that date, a summary of signifi cant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the fi nancial report in accordance with International Financial Reporting Standards. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the fi nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

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

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

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

Independence

In conducting our audit we have met the independence requirements of Australian and International professional ethical pronouncements.

Auditor’s Opinion

In our opinion the consolidated fi nancial report presents fairly, in all material respects, the fi nancial position of the Group as of 31 December 2007, and of its fi nancial performance and cash fl ows for the year then ended in accordance with International Financial Reporting Standards

Ernst & Young

V W Tidy

Partner, Perth, 31 March 2008


Independent auditor’s report to the members of Albidon Limited

79

ALB IDON L IM I TED ANNUAL REPORT 2008

Corporate Governance ReportThis statement outlines the main corporate governance practices in place throughout the fi nancial year, which comply with the Australian Stock Exchange (“ASX”) and Alternative Investment Market of the London Stock Exchange (“AIM”), unless otherwise stated.

The Company’s Corporate Governance Statement is now structured with reference to the Corporate Governance Council’s principles and recommendations, which are as follows:

• Lay solid foundations for management and oversight.

• Structure the Board to add value.

• Promote ethical and responsible decision making.

• Safeguard integrity in fi nancial reporting.

• Make timely and balanced disclosure.

• Respect the rights of shareholders.

• Recognise and manage risk.

• Encourage enhanced performance.

• Remunerate fairly and responsibly.

• Recognise the legitimate interests of stakeholders.

The Company’s Board of Directors has reviewed the recommendations. In a limited number of instances, the Company may determine not to meet the standard set out in the recommendations, largely due to same recommendations being considered by the Board to be unduly onerous for a company of this size.

Board of DirectorsRole of the Board

The primary role of the Board of Directors is the protection and enhancement of long-term shareholder value.

To fulfi l this role, the Board is responsible for the overall corporate governance of the Company including formulating its strategic direction, approving and monitoring capital expenditure, setting remuneration, appointing, removing and creating succession policies for Directors and senior Executives, establishing and monitoring the achievement of management’s goals and ensuring the integrity of internal control and management information systems. It is also responsible for monitoring fi nancial and other reporting.

Board processes

The Board has established a framework for the management of the Company including, a system of internal control, a business risk management process and the establishment of appropriate ethical standards.

The Company is engaged in exploration, evaluation and development of mining interests. The critical skills required by

the Board in pursuing the Company’s business plan at this relatively early stage of its development are expert geological, exploration and evaluation project management skills, project development skills and strong fi scal management skills. In addition, each Director is charged with having a thorough understanding of, and responsibility for, the protection of the rights of the Company and its shareholders.

The Board has these skills and as the Company progresses will review the Board composition as and when complimentary skills are required.

The Board presently comprises four Non-Executive Directors, two Executive Directors and the Managing Director. Christopher De Guingand, Richard Potts John Shaw and Valentine Chitalu are Independent Directors at this time.

The Directors meet frequently, both formally and informally, to ensure a mutually thorough understanding of the Company’s business and all the Company’s policies of corporate governance are adhered to. The agenda for meetings is prepared in conjunction with the Chairman, Managing Director and Company Secretary and is circulated in advance.

The term in offi ce held by each Director in offi ce at the date of the Annual Report is as follows:

Name Term in Offi ce

Mr. A Cooke 7 Years

Mr. R Potts 5 Years

Mr. C De Guingand 5 Years

Mr. D Rogers 3 Years

Mr. V Chitalu 1 year

Mr. P Chapman 1 year

Mr. J Shaw 3 months

80

Director education

The Company has a formal process to educate new Directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning the performance of Directors. Directors are given access to and encouraged to participate in continuing education opportunities to update and enhance their skills and knowledge.

Independent professional advice and

access to company information

Each Director has the right of access to all relevant Company information and to the Company’s Executives and, subject to prior consultation with the Chairman, may seek independent professional advice from a suitably qualifi ed advisor at the Company’s expense. The Director must consult with an advisor suitably qualifi ed in the relevant fi eld and obtain the Chairman’s approval of the fee payable for the advice before proceeding with the consultation. A copy of the advice received by the Director is made available to all other Board members.

Independence

Corporate Governance Council Recommendation 2.1 requires a majority of the Board to be Independent Directors. The Corporate Governance Council defi nes independence as being free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of unfettered and independent judgement. In accordance with this defi nition four Directors, Mr. Christopher De Guingand, Mr. Richard Potts, Mr. John Shaw and Mr. Valentine Chitalu are considered to be independent.

The Board considers that the majority of the Board is independent in accordance with Recommendation 2.1. Directors having a confl ict of interest in relation to a particular item of business must and do absent themselves from the Board Meeting before commencement of discussion on the topic.

Recommendation 9 states that Non-Executive Directors should not receive options or bonus payments. The Company intends to continue its policy of awarding options or other securities to Non-Executive Directors as it considers this to be a reasonable and appropriate method of assisting in attracting and retaining suitably skilled Board members.

Nomination Committee

Recommendation 2.4 requires listed entities to establish a Nomination Committee. During the period ended 31 December 2007, the Company did not have a separate Nomination Committee. The duties and responsibilities typically delegated to such a committee are considered to be the responsibility of the full Board, given the size and nature of the Company’s activities. The Board does not believe that any marked effi ciencies or enhancements would be achieved by the creation of a separate Nomination Committee. The Board has reviewed its policy on nominations and incorporates below its summarised policy.

Factors considered for a new

candidate include:

• The skills required for appointment to the Board.

• How differing skills are represented on the Board.

• Processes for the identifi cation of suitable candidates for the Board.

• The time commitment required by a Director to effectively discharge duties.

• The number of existing Directorships and other commitments that the candidate may have.

• Assessment of the ‘independence’ of the candidate.

• The extent to which the appointee is likely to work constructively with the existing Directors and contribute to the overall effectiveness of the Board.

The following procedure is followed in selecting and appointing a new Director:

• Utilise personal networks or external consultants to identify potential candidates.

• Assess appropriateness of candidate with consideration to the above points.

• Determine the terms, conditions, responsibilities and expectations of the new position.

• Non-Executive Directors should be appointed for specifi c terms subject to re-election and to the ASX and AIM Listing Rules and Corporations Act provisions concerning removal of a Director.

• Ultimate decisions about who is elected to the Board are to be made by the shareholders.

• Ensuring that the new Board member is inducted and that they have every opportunity to increase their knowledge about the Company to ensure that they can participate in an effective manner to the Board deliberations.

A LB ID O N L IM I TE D A NNU AL RE PORT 200 8

Corporate Governance Report (continued)

81


Continuous disclosure policyThe Company is required to immediately inform the ASX and AIM once it becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

Therefore to meet this obligation the Company undertakes to:

• Notify the ASX and AIM immediately when it becomes aware of any information that a reasonable person would expect to have a material effect on the price and value of the Company’s securities, unless that information is not required to be disclosed under the listing rules.

• Disclose notifi cations to the ASX and AIM on the Company website following confi rmation of the publishing of the information by the ASX and AIM.

• Not respond to market speculation or rumour unless the ASX or AIM considers it necessary due to there being, or likely to be, a false market in the Company’s securities.

The Company Secretary is responsible for coordinating the disclosure requirements. To ensure appropriate procedure all Directors, offi cers and employees of the Company coordinate disclosures through the Company Secretary, including:

• Media releases

• Analyst briefi ngs and presentations and

• The release of reports and operational results.

Information that has not been disclosed via ASX and AIM announcement that might be considered share price sensitive will not be discussed with any external parties, except for third parties bound by confi dentiality

agreements and or clauses with the Company. Discussions with external parties will only occur following an ASX and AIM announcement. All written materials containing new price sensitive information to be used in briefi ng media, investors and analysts will be notifi ed to the ASX and AIM prior to the commencement of that briefi ng.

In reviewing the content of analysts’ reports and profi t forecasts, the Company will correct factual inaccuracies or historical matters.

Information is communicated to

shareholders as follows:

• The annual report is distributed to all shareholders (unless a shareholder has specifi cally requested not to receive the document), including relevant information about the operations of the Company during the year, changes in the state of affairs and details of future developments. The audited annual fi nancial report is lodged with the Australian Securities and Investment Commission and the ASX and AIM.

• The half-yearly report contains summarised fi nancial information and a review of the operations of the Company during the period. The half-year reviewed fi nancial report is lodged with the Australian Securities and Investment Commission and the ASX and AIM, and sent to any shareholder who requests it.

• Quarterly reports are prepared in accordance with ASX listing rules.

• Proposed major changes in the Company which may impact on share ownership rights are submitted to a vote of shareholders.

• All announcements made to the market and related information are placed on the Company’s website after they are released to the ASX and AIM, including regular updates on operations.

• The full texts of notices of meetings and associated explanatory material are placed on the Company’s website.

All of the above information is made available on the Company’s website. Copies of all presentations made by the Company in a public forum are posted on the website. The majority of the information is also e-mailed to all shareholders who lodge their e-mail contact details with the Company.

The external auditor is requested to attend the Annual General Meeting to answer any questions concerning the audit and the auditor’s report.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identifi cation with the Company’s strategy and goals. Important issues are presented to the shareholders as single resolutions.

The shareholders are responsible for voting on the appointment of Directors, approval of the maximum amount of Directors’ fees and the granting of options and shares to Directors.

Share trading policyThe Company has established a policy that imposes certain restrictions on Directors, senior management and other employees trading in the Company’s securities. The policy has been adopted to prevent trading in contravention of the insider trading provisions of the Corporations Act 2001, in particular when Company personnel are in possession of price-sensitive information.

In general, trading in the Company’s securities is prohibited:

• whilst in possession of unpublished price sensitive information;

• where offi cers are engaging in the business of active dealing;

• two months before the release of the Company’s half yearly or annual report to the ASX and AIM

82

• one month before the release of the Company’s quarterly report to the ASX and AIM; and

• two weeks before lodgement and during the period that a disclosure document including a prospectus is open for applications except to the extent that a Director or employee is applying for securities pursuant to that disclosure document.

The Company holds a register of employees that maintain share holdings and any sales must be referred to the Managing Director or Chairman.

Confl ict of InterestIn accordance with the Corporations Act and the Company’s constitution Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially confl ict with those of the Company. Where the Board believes that a signifi cant confl ict exists the Director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered.

Remuneration and performance assessmentRemuneration Committee

Recommendation 9.2 requires listed entities to establish a Remuneration Committee. During the year ended 31 December 2007, the Company had a separate Remuneration Committee.

Remuneration Committee members are:

• Christopher De Guingand (Chairman)

• Richard Potts

• Nicholas Day

Remuneration policies

Remuneration of the Directors are formalised in service agreements. The Remuneration Committee is responsible for determining and reviewing compensation arrangements for the Directors themselves the Managing Director and the Executive team.

It is the Company’s objective to provide maximum stakeholder benefi t from the retention of a high quality board and Executive team by remunerating Directors and key Executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Board links the nature and amount of Executive Directors’ and offi cers’ emoluments to the Company’s fi nancial and operational performance. The expected outcomes of the remuneration structure are:

• Retention and motivation of key Executives

• Attraction of quality management to the Company

• Performance incentives which allow Executives to share the rewards of the success of the Company

Remuneration of Non-Executive Directors is determined by the Board with reference to comparable industry levels and, specifi cally for Directors’ fees, within the maximum amount approved by shareholders.

In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of the Company and the performance of the individual during the period. There is no scheme to provide retirement benefi ts to Non-Executive Directors.

Performance

The performance of the Board and key Executives is reviewed regularly against both measurable and qualitative indicators. The performance criteria against which Directors and Executives are assessed is aligned with the fi nancial and non-fi nancial objectives of the Company. Directors whose performance is consistently unsatisfactory may be asked to retire.

Risk managementOversight of the risk

management system

The Board takes a proactive approach to risk management. The Board is responsible for oversight of the processes whereby the risks, and also opportunities, are identifi ed on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identifi ed by the Board. This oversight encompasses operational, fi nancial reporting and compliance risks.

The Company believes that it is crucial for all Board members to be a part of the process, and as such the Board has not established a separate risk management committee.

The Board oversees the establishment, implementation and annual review of the Company’s risk management policies as part of the Board approval process for the strategic plan, which encompasses the Company’s vision and strategy, designed to meet stakeholder’s needs and manage business risks.


Corporate Governance Report (continued)

83


Internal control framework

The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework that deals with:

• Financial reporting - there is a comprehensive budgeting system with an annual budget, updated on a regular basis and approved by the Board. Monthly actual results are reported against these budgets.

• Investment appraisal - the Company has clearly defi ned guidelines for capital expenditure including annual budgets, detailed appraisal and review procedures, levels of authority and due diligence requirements where businesses or assets are being acquired or divested.

• Quality and integrity of personnel - the Company’s code of conduct is detailed in an approved induction manual. Formal appraisals are conducted annually for all employees.

Audit and compliance policyThe Board imposes stringent policies and standards to ensure compliance with all corporate fi nancial and accounting standards. Where considered appropriate, the Company’s external auditors, professional advisors and management are invited to advise the Board on these issues and the Board meets quarterly to consider audit matters prior to statutory reporting.

The Company requires that its auditors must not carry out any other major area of service to the Company and should have expert knowledge of both Australian and international jurisdictions.

Recommendation 4.3 requires listed entities to have an Audit Committee consisting of only Non-Executive Directors, a majority of independent Directors, an independent Chairman, who is not Chairman of the board and at least three members. Recommendation 4.4 requires the Audit Committee to have a formal charter.

The Company does not currently comply with the Recommendations. During the year ended 31 December 2007, the Company had a separate Audit Committee.

Audit Committee members are:

• Christopher De Guingand (Chairman)

• Valentine Chitalu

• Nicholas Day

Due to the small size of the Board the Audit Committee consists of two Non-Executive Directors both of whom are independent. The Chairman of the Board is not the Chairman of the Audit Committee.

The Audit Committee consists of members with fi nancial expertise and detailed knowledge and experience of the mineral exploration, evaluation and development business. It advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Company.

The Audit Committee will meet with the Company’s external auditors, independent of the Managing Director, at least twice a year.

The Managing Director and the Chief Financial Offi cer declared in writing to the Board that the Company’s fi nancial reports for the year ended 31 December 2007 present a true and fair view, in all material respects, of the Company’s fi nancial condition and operational results and are in accordance with relevant accounting standards. This statement is required annually.

The external audit lead audit partner is rotated every 7 years and will be rotated off during 2011.

Ethical standardsAll Directors and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

Health, safety, environment and heritage protection policy The Company is committed to compliance with all relevant laws and regulations and continual assessment of its operations to ensure protection of the environment, the community and the health and safety of its employees.

The Company has adopted a policy and maintains appropriate procedures to ensure that all Company activities are carried out in compliance with safety regulations, in a culture where the safety of personnel is paramount and which recognises environmental sustainability and respect for cultural and heritage issues as essential requirements for all its activities. Procedures are maintained to govern the activity of employees and contractors to ensure that the objectives of this policy are met.

The Company is committed to working in accordance with World Bank Standards.

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Stock exchange listingAlbidon Limited shares are listed on the Australian Stock Exchange Limited (‘ASX’) and Alternative Investment Market (‘AIM’) of the London Stock Exchange. The Company’s ASX code is ALB and its AIM code is ALD.

Substantial and Signifi cant Shareholders

Total number of voting shares in Albidon Ltd.

in which the substantial and signifi cant

shareholders and its associates hold Percentage of

Name of ordinary shareholder relevant interests number of voting shares

1 Lion Selection (Group) 33,800,000 20.53%2 Jinchuan Group, Ltd. 9,275,738 5.63%3 Donal Windrim 7,500,000 4.56%4 Commonwealth Bank (Institutional Group) 7,310,023 4.44%5 BlackRock Advisors (Institutional Group) 5,739,452 3.49%6 Emerging Markets Management, L.L.C. 5,056,108 3.07%7 Alasdair Cooke 5,000,000 3.04%

Substantial Shareholding is defi ned under section 671B of the Australian Corporations Act and ASX listing rules, as a relevant interest of not less that 5% of the total votes attached to the voting shares in the company.

Signifi cant Shareholding is defi ned in the AIM listing rules as a shareholder of 3% or more of the total votes attached to the voting shares in the company.

Class of shares and voting rightsAt 31 March 2008 there were 1,294 holders of 162,642,469 ordinary fully paid shares in the Company. The voting rights attaching to the ordinary shares and depositary interests over ordinary shares are:

a. Each shareholder is entitled to vote and may vote in person or by proxy, attorney or representative with the exception of depositary interest holders.

b. On a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote: and

c. On a poll, every person present who is a shareholder or proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share.

d. While depositary interest holders have the right to vote on a poll (whereupon proxies previously lodged can be counted) they are not able to personally vote on a show of hands. Depositary interest holders wishing to attend personally and vote at a shareholder meeting must convert their depositary interests into certifi cated shares prior to the meeting. The depositary interest holder should contact Computershare in Australia or the United Kingdom in advance to fi nd out how long the conversion process will take.


Additional Shareholder Information

85


Distribution of security holders

Number of shares held Number of shareholders Number of option holders

1-1,000 267 -1,001-5,000 555 -5,001-10,000 197 -10,001-100,000 203 15100,001 and over 72 15

Total 1,294 30

Listing of 20 largest shareholders

Name of ordinary shareholder Number of shares held Percentage of shares held

1 Lion Selection (Group) 33,800,000 20.53%2 Jinchuan Group, Ltd. 9,275,738 5.63%3 Donal Windrim 7,500,000 4.56%4 Commonwealth Bank (Institutional Group) 7,310,023 4.44%5 BlackRock Advisors (Institutional Group) 5,739,452 3.49%6 Emerging Markets Management, L.L.C. 5,056,108 3.07%7 Alasdair Cooke 5,000,000 3.04%8 Robert Disbrow 4,872,650 2.96%9 Universal-Investment-Gesellschaft mbH 4,526,562 2.75%10 Fidelity (Institutional Group) 4,256,734 2.59%11 RBC (Institutional Group) 4,211,500 2.56%12 AXA (Institutional Group) 3,964,941 2.41%13 Genesis Investment Management, LLP 3,524,621 2.14%14 TD Waterhouse (Broker Group) 3,482,416 2.12%15 ZCCM Investments Holdings plc 3,389,831 2.06%16 Millhouse Holdings 2,660,462 1.62%17 Craig Burton 2,500,000 1.52%18 Jupiter Asset Mgt (Institutional Group) 2,499,954 1.52%19 Independent Asset Management Pty. Ltd. 2,400,000 1.46%20 Standard Life Investments (Institutional Group) 2,000,000 1.21%

Total 117,970,972 71.65%

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Distribution of security holdersSecurities Name of holders Number held

Options exercisable at AU$0.75 on or before 30 Jun 2008 Grant Osborne 150,000

Options exercisable at AU$0.60 on or before 30 Jun 2008 David Chapman 56,100

Options exercisable at AU$0.75 on or before 1 Dec 2008 Dale Rogers 1,200,000

Options exercisable at AU$1.05 on or before 30 Jun 2009 Olivia Woodland 150,000

Options exercisable at AU$1.05 on or before 30 Jun 2009 Michael Dunbar 150,000

Options exercisable at AU$1.05 on or before 30 Jun 2009 Valentine Chitalu 100,000

Options exercisable at AU$1.05 on or before 30 Jun 2009 Brian Kennedy 50,000

Options exercisable at AU$1.05 on or before 30 Jun 2009 Sixtus Mulenga 50,000

Options exercisable at AU$2.60 on or before 20 May 2010 Phil Higgins 50,000

Options exercisable at AU$2.60 on or before 20 May 2010 Grant Osborne 100,000

Options exercisable at AU$2.60 on or before 20 May 2010 Nicholas Day 200,000

Options exercisable at AU$2.60 on or before 20 May 2010 Valentine Chitalu 200,000

Options exercisable at AU$2.60 on or before 20 May 2010 Paul Chapman 200,000

Options exercisable at AU$1.70 on or before 1 Dec 2009 Shaun Vokes 50,000

Options exercisable at AU$1.70 on or before 1 Dec 2009 Eamon Byrne 50,000

Options exercisable at AU$1.70 on or before 1 Dec 2009 Davies Simbaya 50,000

Options exercisable at AU$2.10 on or before 27 Feb 2010 Dale Rogers 1,200,000

Options exercisable at AU$2.80 on or before 12 Jul 2010 Colyn Louw 200,000

Options exercisable at AU$3.14 on or before 12 Jul 2010 James Dean 50,000

Options exercisable at AU$2.97 on or before 27 Jul 2010 Berteale Brown 300,000

Options exercisable at AU$2.23 on or before 1 Sep 2010 Eben Swanepoel 600,000

Options exercisable at AU$3.14 on or before 12 Jul 2010 Sonja Felderhof 200,000

Options exercisable at AU$2.88 on or before 30 Dec 2010 Stephen Kerr 100,000

Options exercisable at AU$2.88 on or before 30 Dec 2010 Gerhardus Bezuidenhout 100,000

Options exercisable at AU$2.88 on or before 30 Dec 2010 Rudolf Reyneke 50,000

Options exercisable at AU$2.88 on or before 30 Dec 2010 Jacob Banda 50,000

Options exercisable at AU$2.88 on or before 30 Dec 2010 Hennie Sealie 50,000

Options exercisable at AU$3.22 on or before 1 Nov 2009 Colyn Louw 230,000

Options exercisable at AU$3.22 on or before 1 Nov 2009 Eben Swanepoel 210,000

Options exercisable at AU$3.22 on or before 1 Nov 2009 John Schloderer 105,000

Options exercisable at AU$3.22 on or before 1 Nov 2009 Nicholas Day 100,000

Options exercisable at AU$3.22 on or before 1 Nov 2009 Sixtus Mulenga 50,000

Options exercisable at AU$2.81 on or before 1 Feb 2011 Barclays Capital 400,000

Options exercisable at AU$2.97 on or before 30 Dec 2010 Ken Masogo 50,000

Options exercisable at AU$2.97 on or before 30 Dec 2010 Aliport Ngoma 50,000

Options exercisable at AU$3.25 on or before 1 Feb 2011 Sonja Felderhof 100,000

Cash usageSince the time of listing on ASX, the entity has used its cash and assets in a form readily converted to cash that it had at the time of admission to the offi cial list of ASX in a manner which is consistent with its business objectives.


Additional Shareholder Information (continued)

87


Project Holder Licence number Albidon interest

Malawi

Bimbili River+ Albidon (Malawi) Limited EPL 130/2003 100%

Zambia

Munali Albidon Zambia Ltd. LML.54 100%Masuku Albidon Zambia (Exploration) Ltd. PLLS 193 100%Muvuma Hills Albidon Zambia (Exploration) Ltd. PLLS 199 100%Zimba North Albidon Zambia (Exploration) Ltd. PLLS 183 100%Zimba South Albidon Zambia (Exploration) Ltd. PLLS 183 100%Sinazeze Albidon Zambia (Exploration) Ltd. PL 245 100%Mugoto Albidon Zambia (Exploration) Ltd. PL 250 100%Namwala Albidon Zambia (Exploration) Ltd. PL 248 100%Lunsemfwa Albidon Zambia (Exploration) Ltd. PL 247 100%Chilonga Albidon Zambia (Exploration) Ltd. PL 260 100%Kamoto West Albidon Zambia (Exploration) Ltd. PL 246 100%Kamoto Central Albidon Zambia (Exploration) Ltd. PL 246 100%Kamoto East Albidon Zambia (Exploration) Ltd. PL 246 100%

Tanzania

Kitai South++ Tumbili Ventures Ltd. PL 2433/2004 100%Mbinga North++ Tumbili Ventures Ltd. PL 4155/2007 100%Mbinga South++ Tumbili Ventures Ltd. PL 4153/2007 100%Mbinga Central Tumbili Ventures Ltd. PL 4156/2007 100%Mbinga West++ Tumbili Ventures Ltd. PL 4154/2007 100%Mbinga Liparamba++ Tumbili Ventures Ltd. PL 2434/2004 100%Mhangaji Tumbili Ventures Ltd. PL 2435/2004 100%Pitu River East Tumbili Ventures Ltd. PL 2405/2003 100%Pitu River West Tumbili Ventures Ltd. PL 4839/2007 100%Kitai North Tumbili Ventures Ltd. PL 4157/2007 100%Simanjaro Central Tumbili Ventures Ltd. PL 4664/2007 100%Simanjaro East Tumbili Ventures Ltd. PL 4847/2007 100%Mahenge East Tumbili Ventures Ltd. PL 4164/2007 100%Kanoawale South Tumbili Ventures Ltd. PL 4237/2007 100%Luwumbu Tausi Minerals Company Limited PL2337/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2339/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2338/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2340/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2342/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2341/2003 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited R-617 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2765/2004 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2766/2004 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2767/2004 10% Benefi cial InterestLuwumbu Tausi Minerals Company Limited PL2861/2004 10% Benefi cial Interest

Tenement schedule

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Project Holder Licence Number Albidon Interest

Tunisia

Fernana-Nefza Albidon Tunisia Ltd. N/A 100%Haffouz +++ Zinifex Australia Ltd. N/A 100% Botswana

Tsamaya Albidon (Botswana) Pty Ltd. PL41/2004 100%Ramokgwebane Albidon (Botswana) Pty Ltd. PL89/2007 100%Kolobeng-Otse Albidon (Botswana) Pty Ltd. PL8/2004 100%Taung-Otse Albidon (Botswana) Pty Ltd. PL9/2004 100%Nywane-Otse Albidon (Botswana) Pty Ltd. PL10/2004 100%Tsetsebjwe Albidon (Botswana) Pty Ltd. PL38/2004 100%Topisi Albidon (Botswana) Pty Ltd. PL34/2004 100%Sefophe Albidon (Botswana) Pty Ltd. PL36/2004 100%Moralane Albidon (Botswana) Pty Ltd. PL35/2004 100%Mathathane Albidon (Botswana) Pty Ltd. PL37/2004 100%Baines Drift Albidon (Botswana) Pty Ltd. PL39/2004 100%Chokana Albidon (Botswana) Pty Ltd. PL76/2004 100%Zanzibar Albidon (Botswana) Pty Ltd. PL77/2004 100%Albertina Albidon (Botswana) Pty Ltd. PL78/2004 100%Pilikwe Albidon (Botswana) Pty Ltd. PL79/2004 100%Maunatlala Albidon (Botswana) Pty Ltd. PL21/2005 100%Selophale Albidon (Botswana) Pty Ltd. PL22/2005 100%Susulela River Albidon (Botswana) Pty Ltd. PL23/2005 100%Lerala Albidon (Botswana) Pty Ltd. PL24/2005 100%Gootau Albidon (Botswana) Pty Ltd. PL25/2005 100%Parr’s Halt Albidon (Botswana) Pty Ltd. PL26/2005 100%Shakwe Albidon (Botswana) Pty Ltd. PL27/2005 100%Radisele Albidon (Botswana) Pty Ltd. PL28/2005 100%

+ This tenement is the subject of a Heads of Agreement Joint Venture with MM Mining++ Subject to BHP Billiton Co-operation Agreement +++ Subject to an earn-in Agreement with Albidon

ALB ID O N L IM I TED A NNU AL RE PORT 200 8

Tenement schedule (continued)

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Directors R. Potts - ChairmanJ. Shaw - Deputy-ChairmanD. Rogers - Managing DirectorP. ChapmanV. ChitaluA. CookeC. De Guingand

Company Secretary

N. Day

Registered Offi ce

3/F Barclays HouseWickhams CayRoad Town, TortolaBritish Virgin Islands

Principal Place of Business

Level 1, 62 Colin StreetWest Perth, WA 6005, Australia

Share Register

Computershare Investor Services Pty Limited452 Johnston StreetAbbotsford, Victoria 3067, Australia

Albidon Limited shares are listed on the Australian Stock Exchange (ASX) and the Alternative Investment Market (AIM) of the London Stock Exchange

Solicitors

Blakiston & Crabb1202 Hay StreetWest Perth, WA 6005, Australia

Auditors

Ernst & Young11 Mounts Bay RoadPerth, WA 6000, Australia

Website

www.albidon.com

ARBN

107 288 755

AIM Nominated Advisor

RFC Corporate Finance LimitedLevel 8, 250 St Georges TerracePerth, WA 6000 Australia

AIM Broker

Numis Securities LimitedLondon Stock Exchange Building5th Floor, 10 Paternoster SquareLondon EC4M 7LT United Kingdom

ASX Broker and Corporate Advisor

RBC Capital MarketsLevel 46, 2 Park StreetSydney, NSW 2000 Australia

AIM Code: ALDASX Code: ALB

Corporate Directory

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Albidon Annual Report 2008

From exploration to operation

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Albidon Annual - London Stock Exchange · Limited for over four years and with the commencement of...

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