for personal use only 2007 - australian securities exchange · chairman's review 4...

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Highlights

i Electrometal Technologies Limited Annual Report 2007

Profi t was $633,850, the second consecutive annual profi t.

Sales increased by 48% to $9.87 million.

Operating and investing cash fl ow was negative $1.36 million, due in part to

investment in inventories, plant and equipment. Additionally, there are timing

differences between cash infl ows and outfl ows related to our sales revenue

and cost of sales.

Cash on hand was signifi cantly increased to $7.65 million at year-end after

receipt of $5.2 from the rights issue in April 2007.

The parent company order book at year end was only $0.30 million. However,

by the end of March 2008, it had increased by $1.35 million after our new

Q1, 2008 sales.

The Kurion (51% owned by Electrometals) order book for delivery in 2008 is

$1.65 million at the end of the fi rst quarter 2008.

New orders for 2007 totalled $5.56 million, down from $7.95 million in

2006.

Electrometals has commenced some diversifi cation of its technology portfolio

by the acquisition of Kurion Technologies Ltd, a UK-based waste water

treatment company.

The company continued to expand its international distribution network.

The company advanced investigations into establishing a new DBOO

(Develop, Build, Operate & Own) business to establish an in-house metals

production business.

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Contents

Electrometal Technologies Limited Annual Report 2007 1

Electrometals – Exporting technology around the world, growing our business . . . .

Electrometals is an Australian company with increasing international operations, exporting its leading-edge metals recovery technology

to a worldwide market in the mining, environmental clean-up and metals processing industries.

Through tailoring our technology to specifi c applications in these industries, we have proved successful in demonstrating a value

proposition to our customers which enables them to improve their effi ciency, reprocess and reduce waste products, reduce toxic

emissions and improve fi nancial returns, both from existing operations and from greenfi eld projects.

Our plans to substantially grow our international distribution network and associated business are underway, building on the platform

of success established in recent years. This plan for growth embraces organic growth of our core business, growth and technology

diversifi cation by acquisition, as well as extension of our business to ownership and operation of our own metal production facilities.

Our primary objective

for shareholders while respecting the needs ofour customers, employees and other stakeholders

is to create and delivervalueSection 1

Highlights i

Chairman’s Review 2

Review of Operations 6

Directors’ report 13

Corporate Governance Statement 24

Section 2

Income Statement 28

Balance Sheet 29

Statement of Changes in Equity 30

Cash Flow Statement 31

Notes to the Financial Statements 32

Directors’ Declaration 59

Independent Audit Report 60

Shareholder Information 62

Corporate Directory 64

EMEW® Silver Doré Cathode, Mexico

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Chairman's Review

2 Electrometal Technologies Limited Annual Report 2007

In 2007, Electrometals recorded our second consecutive annual profi t which, at $633,850, followed our maiden profi t of $812,430 for

2006. While our 2007 profi t was less than for 2006, our sales were up year on year by 48% at $9.87 million. The reduced profi t from

signifi cantly increased revenue is a refl ection of undertaking discretionary expenditure on matters related to the development of our

business for the future. I shall explain this in more detail later.

There was a signifi cant increase in our working capital during 2007, provided from a rights issue, well supported by our shareholders and

by the underwriter, a party introduced by our Deputy Chairman, Mr Greg Melgaard.

While there are signifi cant challenges still in front of our company, the board and I are of the opinion that Electrometals is well set for

growth, substantially along the path which we set out some years ago:

organic growth of our core business• diversifi cation of our technology portfolio by acquisition• ownership and operation of our own metal production facilities.•

I thank our shareholders for their fi nancial support during 2007 and I also thank our staff, management and my fellow directors for their

hard work and support.

Following are some illustrations of our recent fi nancial performance for the fi ve years commencing the year ended 31 December 2003.

For the year ended 31 December 2007, our revenue of $9.87 million was 21 times greater than the corresponding revenue of $0.46 million

for 2003, just fi ve years ago. While most of our revenue is derived from the sale of new, one-off EMEW® plants, our recent revenue from

the sale of spare parts has grown at a greater rate than total revenue, to more than $500,000 in 2007. There is scope to develop further

this after-sales spare parts and service business.

Results

The 2007 year produced our second consecutive annual profi t, as illustrated below.

It is reasonable to expect that, with the substantial increase in revenue for 2007, our profi t for 2007 should have been greater than for

2006. However, as outlined in our rights issue prospectus in March 2007, upon raising the new capital our plan was to commence

expenditure on activities which are planned to produce long-term benefi ts which in the short term will reduce our net profi t.

$10

$8

$6

$4

$2

$0

2003

2004

2005

2006

20

07

Revenue (A$ Millions)

$1.0

$0.5

$0.0

-$0.5

-$1.0

-$1.5

-$2.0

-$2.5

-$3.0

2003

2004

2005

2006

20

07

Results (A$ Millions)

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Chairman's Review


Order Book

During the last fi ve years, our order book at year-end has increased signifi cantly, except for the year ended 31 December 2007, as

illustrated below. Since the end of 2007, new orders for 2008 to date total $1.35 million and we remain optimistic that we will book more

sales as 2008 develops.

Annual Orders

There is always a time difference between when we receive a commitment from our customers to purchase an EMEW® product and

when we book revenue associated with the manufacture and delivery of that product. Consequently, we have always recorded our

annual orders (new sales contracts entered into during the year) as illustrated below:

It is clear that our annual orders are still “lumpy”, not unusual for a growing business where the principal business is the sale of capital

goods. We are working on expanding our international distribution network and other aspects of our business development in order to

improve on the regularity of our new sales.

$4.0

$3.5

$3.0

$2.5

$2.0

$1.5

$1.0

$0.5

$0.0

Dec.

200

3

Dec.

200

4

Dec.

200

5

Dec.

200

6

Dec. 2

00

7

Mar

. 200

8

Order Book (A$ Millions)

$9

$8

$7

$6

$5

$4

$3

$2

$1

$0

2003

2004

2005

2006

20

07

Annual Orders (A$ Millions)

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Chairman's Review


The 2007 capital raising and our plan for growth

In April 2007, we completed a new equity capital raising of $5.2 million net, through a 1 for 2 rights issue. This new capital was raised for

the purpose of funding the growth of our business, including some diversifi cation into complementary businesses and possible DBOO

(develop, build, own and operate) opportunities, where we can invest directly in ownership and operation of EMEW® plants for our own

fi nancial benefi t.

After completing the capital raising, we commenced work on a number of fronts. While this will be covered more completely in the Review

of Operations, I am pleased to summarise our progress. We have:

expanded our international distribution network, by adding to our staff in Canada and Europe.•

undertaken product development work, particularly by completing the engineering on the fi rst stage of our automated harvester for •

EMEW® plate (or cathode) plants.

conducted technical and other scoping studies on the feasibility of using EMEW® to produce premium-valued high-purity copper •

from commonly available cheap sources of copper. This work has shown encouraging technical success and the work is ongoing,

particularly on marketing the product.

entered into an agreement on heads of terms for the acquisition, initially of 51% (with an option to acquire the balance of the shares) in •

a water and other waste treatment company, Kurion Technologies Limited, in Daventry, UK. After appropriate due diligence studies in

2007, the fi rst stage of this acquisition was announced to our shareholders on 25 February 2008.

Kurion provides opportunities for growth, both by technology diversifi cation and through the marriage of Kurion technology to EMEW®,

in a wide range of waste treatment applications in industries such as:

automotive and aerospace ▪petrochemical ▪pharmaceutical ▪

electronics ▪metal fi nishing ▪waste management ▪

conducted process development work to extend the application of EMEW® to provide additional marketing opportunities. This has •

been particularly aimed at extending our ability to treat a range of copper refi nery bleed streams, so that we can offer a complete

solution to our customers to:

de-copperise the electrolyte by producing LME grade copper cathode ▪remove the nickel by producing high-grade nickel cathode ▪control arsenic in the refi nery electrolyte by electrowinning copper-arsenic powder in a stable recyclable form ▪

This process development work is building on the sale and installation of a 720-cell EMEW® plant for Hudbay Minerals Inc at its White

Pine copper refi nery in Michigan, USA, where the EMEW® plant recovers high-grade copper from the refi nery bleed stream. This

plant was successfully commissioned in the early part of 2008.

In addition, we undertook process development work for the application of EMEW® to:

SX-EW copper mines ▪IX-EW, where EMEW® can be used to improve effi ciency, by reducing the size of the IX (ion exchange) pre-treatment process, ▪before presenting the solution to an EMEW® plant to recover the metal

The fi rst two IX-EMEW® plants were sold, one in partnership with Fenix Hydromet to a customer in Australia, to recover copper from

waste run-off waters at a mine site, the other in partnership with Kurion Technologies in the UK, to recover copper and nickel from

waste industrial products.

In addition, highly successful pilot demonstrations were undertaken at a large SX-EW copper mine in Peru. The owners of this mine

are now considering investment in an EMEW® plant to improve production.

Finally, in the context of our plan for growth, I should draw your attention to a brief analysis of our plant installed base and part of our

available market. The illustrations opposite give a breakdown according to the major international geographic sectors.

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Chairman's Review


These illustrations show that our business is very international, with comparatively little potential in Australia. Consequently, our plan for

growth must include international expansion, in an increasingly competitive world, where recruiting and managing good people, to build

on the platform of good people who we already have in our group, continues to be a challenge. Our installed base is heavily weighted

towards the Americas, which is where we chose to put our early emphasis on marketing. Without neglecting growth in the Americas,

we now must build our resources in Asia and EMEA, which has commenced.

Asia

9% of installed base

EMEA


EMEW® Installed base by value and geographic distribution

Americas


Copper Refineries

Geographic distribution of our market for treating refinery

bleed streams

Asia

32% of market size

Americas

36% of market size

EMEA

36% of market size

SX-EW Copper mines

Geographic distribution of estimated available market

Americas

70% of market size

Asia

7% of market size

EMEA

23% of market size

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Review of Operations


EMEW® plants supplied

During 2007, three new plants were supplied:

One to recover silver and gold powder to a customer in Mexico•

One to recover copper cathode (or plate) from a copper refi nery bleed stream for a customer in the USA•

One to recover copper cathode from leached oxidised copper ore for a customer at a mine site in Zambia•

Only the copper plate plant delivered to the USA was installed in 2007. This plant was successfully commissioned in February 2008.

The other plants delivered in 2007 are expected to be installed during 2008.

Our installation crews also completed the installation of a silver powder plant and silver plate plant at a silver mine in Mexico. These

plants were manufactured and delivered in 2006, but their installation had been delayed by our customer. The plants were partially

commissioned in the fi rst part of 2008 but, following delays related to other equipment unrelated to the EMEW® plant, fi nal commissioning

is expected late in the fi rst half of 2008. Silver powder has been successfully produced, but with only limited continuous operation, the

powder plant operation has not been optimised yet.

The raw silver powder to be produced by this powder plant will be re-dissolved in a concentrated cyanide solution, before being further

refi ned in the EMEW® plating plant, by producing electrolytic silver doré. As part of the commissioning process, some impure silver

concentrate produced from the existing Merrill Crowe plant at the mine was re-dissolved in cyanide solution before being electrowon in

the EMEW® plating plant. This trial produced good quality silver doré. In particular, substantial impurities such as copper and zinc were

removed from the process and excluded from the EMEW doré. This process is being tested at this mine as a replacement for the present

practice of smelting the Merrill Crowe silver concentrate, or the EMEW® raw silver powder. While these tests have been interrupted by

the stalled commissioning process, to date the process has been successful.

Apart from the plants delivered and commissioned as described above, one other plant was completed and shipped, and three other

plants were substantially manufactured, all for delivery in the fi rst quarter of 2008.

These plants were:

A plating plant to recover nickel and copper from waste products. The waste products are to be leached for the production of a •

purifi ed Ni-rich or Cu-rich electrolyte, after processing through an IX (ion exchange) plant. The product digestion and IX plant were

supplied by Kurion Technologies Limited, which also integrated the IX and EMEW® plants, to form the full plant for production of

high-quality nickel cathode.

A retro-fi t upgrade of a high production powder plant to produce silver powder from a nitrate solution for a customer in India.•

A copper plating plant to produce saleable copper cathode from copper-rich mine waste water at a mine site in Queensland, where •

the run-off waste has fi rst been treated in an IX plant to pre-concentrate the copper and purify the solution.

A copper plating plant to expand the copper production capacity at an SX-EW copper mine in Chile, by processing the bleed stream •

from the existing electrowinning (EW) plant. Based on pilot plant trials completed in 2006, the EMEW® plant will extract copper

from the bleed stream which, in normal SX-EW practice, would be recycled to the leach circuit and so delay the production of its

contained copper.

There were no plants manufactured or delivered by companies within the De Nora group under the terms of our licensing agreements

with these companies. While these licence agreements remain on foot, De Nora has substantially discontinued activities for the sale and

supply of small EMEW® plants for industrial applications.

Sales and marketing

Electrometals international sales and marketing efforts were further expanded during 2007, as we develop our international distribution

network. We continue to distribute our EMEW® plants through direct channels and through indirect channels, with a limited number of

active agents.

Our sales and marketing people are mostly engineers and metallurgists, who together provide a range of services, including:

Direct sales and marketing•

Technical support services to defi ne the best use of EMEW® in the customer’s fl ow sheet•

Defi nition of the value proposition for the customer•

Presentations to the customer both for direct sales and to assist our agents•

In addition, most of these skilled people are capable of conducting pilot and laboratory scale demonstrations and test work, a vital part

of our selling process. This work is supplemented by test work in our laboratory, where our senior chemist and staff undertake test work

and problem solving. From time to time, our laboratory staff is called upon to undertake laboratory scale tests and pilot demonstrations

at our customers’ plant sites, to apply their special skills to our selling process.

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The Electrometals international distribution network now has people based in

Australia ▪Canada ▪USA ▪Mexico ▪

India ▪Italy ▪Chile ▪

Through whom we divide our efforts into three longitudinally divided regions

Americas ▪Asia and Australasia ▪Europe, Middle East and Africa (EMEA) ▪

It is our plan to continue to add resources to this distribution network.

After-sales service

At present, our after-sales service and spare parts business depends on this same group of people and our agents. It is our plan

to expand this part of our business, which will ultimately be undertaken by dedicated personnel. In particular, we propose to offer

preventative maintenance and other general maintenance services. Some of these services can be linked to the automated control of

our plants, interlinked with operational data recording and remote downloading of this data through the internet. We have undertaken

successful trials of specialized hardware and software, using our pilot plants, while conducting demonstrations at our customers’

operations, in preparation for the future offer of these services.

Process development

While our distribution network has grown, our sales and marketing efforts are still focused on a limited number of EMEW® applications,

where we have defi ned attractive technical and fi nancial outcomes for our customers. We have, however, undertaken considerable

EMEW® process development during 2007, to enable EMEW® to provide a total solution to some our customers’ needs.

The principal process development work undertaken in 2007 was:

The recovery of Ni cathode plate and Cu-As powder from copper refi ning bleed streams. This work supplements the EMEW® •

removal of high-grade copper from these refi nery bleed streams.

The recovery of copper cathode (plate) from electrolytes which have fi rst been concentrated or purifi ed by ion exchange (IX) •

process.

The recovery of copper from various streams in SX-EW (solvent extraction – electrowinning) copper mines.•

It is very pleasing to see the results of this process development work, which has given us confi dence that we can expand our marketing

horizons.

Copper refi nery bleed streams

Copper refi neries embody the fi nal stage of the process of mining, smelting and refi ning of copper to produce high-grade copper

cathode, which in turn is used by copper fabricators to make the many products which are required for domestic and industrial use.

Some copper refi neries source copper from recycled scrap and waste.

While many of the natural and introduced impurities which occur in the copper are removed during the mining and smelting stage, some

of these impurities come through into the electrorefi ning stage, either by design or because these impurities are best dealt with during the

electrorefi ning process. In any case, some of these impurities are managed by tapping off a bleed stream, which continuously controls

the build-up of the impurities and so guarantees the quality of the cathode copper produced.

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720 cell EMEW® plant, White Pine Refi nery, Michigan, USA.

Copper Refi nery Bleed Streams - Copper

EMEW® copper cathode harvested during

commission of the White Pine Plant -

99.99% Cu, within ASTM International

B115-00 Grade 1A Standard.

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The EMEW® system has unique process advantages which can lead to a substantial fi nancial benefi t for the copper refi nery. In

particular, EMEW® can be used to:

Decopperise the bleed stream, producing high-grade copper•

Recover nickel metal as high-grade Ni or nickel-cobalt cathode•

Control the arsenic build-up by producing Cu-As powder, a stable form of copper arsenate which can be recycled through a copper •

smelter for its copper or its copper-arsenic value, depending upon the requirement of the smelter.

The Electrometals EMEW® process can produce substantial value for the customer. Each electrorefi nery has particular needs and the

individual EMEW® value proposition must be determined by our technical people in conjunction with the refi nery staff.

While Cu-As powder (sludge) is already produced at copper refi neries, EMEW® Cu-As powder can be produced in a closed system,

where the production of toxic arsine gas is both minimised (or excluded) and contained and the EMEW® Cu-As powder is automatically

harvested. There are potentially substantial workplace health and safety benefi ts, as well as fi nancial benefi ts, by using EMEW® in this

way.

To date, our process development work on treating copper electrorefi nery bleed streams has advanced to the stage where we have:

Sold and successfully commissioned a large plant to decopperise a bleed stream of a refi nery in the USA•

Run a successful nickel pilot plant at another copper refi nery in the USA to produce a saleable Ni cathode•

Produced Cu-As powder at laboratory scale, both in our Gold Coast laboratory and on site at a customer’s copper refi nery.•

Early in 2008, we will be conducting a pilot plant scale test of the Cu-As powder process at the Freeport-McMoRan (formerly Phelps

Dodge) copper refi nery in El Paso, Texas.

During 2008, it is our expectation that we will be in a position to offer a full suite of process options to copper electrorefi neries, so that

a great deal more value can be extracted from their bleed streams. It is our aim to be able to offer a complete solution for this often

problematic part of the copper production process.

It is interesting to note that, in this present phase of unprecedented demand for commodities, supply demands in the copper production

chain are causing changes. One of these changes is that the industry is being forced to deal with greater amounts of arsenic contamination

in the primary copper concentrate coming from the mines, in order to meet production demands. Since 2003, the amount of arsenic in

concentrate has more than doubled and there are increasing efforts to deal with this in the smelting and electrorefi ning stages. It is our

expectation that EMEW® can be part of the solution to this challenge.

IX–EMEW®

The IX (ion exchange) process has the ability to both concentrate and purify metal-rich solutions, such that the dissolved metals may

be recovered in a valuable form, or stabilised for landfi ll. When IX is combined with EMEW®, the valuable metal produced is standard

cathode metal, such as copper, nickel or cadmium, which can be sold to metal fabricators. Since EMEW® has a greater economic

operating range than conventional electrowinning (EW), there can be a better integration between IX and EMEW® than IX- EW, which

may produce a better economic outcome for the customer.

During 2007, trials were conducted at pilot scale in Australia in conjunction with Fenix Hydromet, and at laboratory scale in the UK with

Kurion Technologies. The Australia project was to make copper cathode from low-grade, copper-rich waste water at a mine site in

Queensland, primarily for environmental clean up. The trials were successful and combined IX and EMEW® plants were subsequently

sold to the customer. The IX plant was supplied by Fenix Hydromet.

In the UK, the target metals were copper and nickel, where laboratory scale IX–EMEW® tests were successful. This led to a sale of

combined IX–EMEW® plants, including a leach circuit to dissolve solid metal–rich industrial waste. The leach plant and IX plant were

supplied by Kurion Technologies, which is responsible for integrating the plants to produce the fi nal metal cathode products.

It is expected that the successful integration of IX–EMEW® will open up additional marketing opportunities for EMEW®, where the

fi nancial benefi ts of both IX and EMEW® are enhanced.

SX–EW EMEW® Assist

Our technical people have recognised an opportunity to apply EMEW® technology to extracting copper from a number of copper–rich

streams in the SX–EW process. SX–EW (Solvent Extraction followed by Electrowinning) is a modern method of producing copper metal

at the mine site, by treating acid-soluble copper using hydrometallurgy. About 18-20% of the world copper production comes from SX-

EW mines. As part of our process development, we engaged an SX–EW expert consultant in Santiago, Chile, to help defi ne the technical

benefi ts of using EMEW®.

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EMEW® Nickel Cathode from a copper refi nery bleed stream, USA, produced during pilot plant trails.

EMEW® copper + copper arsenate powder

Copper Refi nery Bleed Streams - Nickel

Copper - Arsenic

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Through one of our agents in Chile, Blumos, we were engaged to undertake a pilot test program at Tintaya, a large SX-EW copper mine in

Peru. These tests were completed late in 2007, where high-quality copper cathode was produced by depleting the copper from the process

streams. We have been invited to submit a proposal in the fi rst quarter of 2008 for the installation of EMEW® at the Tintaya mine.

While each SX–EW mine has its own particular operating circumstances, in general it is clear that EMEW® can assist the production of

copper from existing process streams, by increasing the output by 2-8%, with a modest capital expenditure and low operating costs.

Some test work had been done on this SX –EW EMEW® Assist concept previously in Chile, which led to the sale in 2007 of a small

EMEW® plant to ENAMI, a corporation owned by the Chilean Government. This plant will be delivered in early 2008, which will establish

an EMEW® reference site for this process in Chile.

There is a signifi cant market for SX–EW EMEW® Assist, which will be part of our future marketing strategy.

It is very pleasing to see the extent to which our technical people have extended our know-how into new areas with signifi cant

markets. While our EMEW® technology is the basic building block for our business, the know-how which our technical experts

have is the real driver for our business success.

Laboratory test work and pilot plant operations

We continued to offer these services to our customers, both at our Gold Coast base in Australia and at our customers’ sites. During

2007, such work was conducted in Australia, Poland, Germany, UK, Canada, USA, Mexico, India, Taiwan, and Namibia.

In addition, Electrometals funded laboratory test work on specialised process development work at an outside laboratory in Montreal,

Canada, as part of our DBOO (develop, build, own and operate) investigations for the production of very high purity copper. The work

included EMEW® laboratory test work on purifi ed electrolyte produced as part of this test work.

Research and development

During 2007, our automated harvester project was advanced to the completion of the detailed engineering phase for the novel part of

this harvester. We are now in a position to manufacture a prototype, but this will be delayed until a sale opportunity is in the offi ng. In

addition, a number of improvements were made to our plant design and materials used.

DBOO – Develop, build, own and operate

As part of the commitment made at the time of our capital-raising early in 2007, during this year we have been prospecting more for

DBOO opportunities. There are three main drivers behind this approach:

Our customers often benefi t from a very high return on investment for EMEW® capital expenditure.•

There are opportunities to apply EMEW® to solid and liquid waste products, where the extraction of valuable metals from this waste •

is ‘non-core’ to the waste producer and so, even though this waste may have intrinsic value, it can have a negative value to the

producer. This can create a value for an outside party such as Electrometals.

There are possible projects which have scale and longevity of the kind which, under the right fi nancial arrangements, may have a •

transformational fi nancial benefi t to Electrometals, with the ability to allow our company to grow to a new level. Judicious application

of our technology and know-how to these opportunities is an exciting prospect for our future.

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During 2007, our DBOO work covered two main areas:

Laboratory test work in Montreal, in association with joint venture partners NeoFerric Technologies, to undertake “proof of concept” •

work to produce very high-purity copper (99.999 and 99.9999%, ie 5N or 6N) in a simple process, using inexpensive feedstock.

This work was successful. Our parallel marketing studies have both confi rmed opportunities to sell such high-purity copper at a

substantial premium and also uncovered complexities in the market which we are now studying further.

We expect that high-purity copper can be produced at a very competitive price by combining some of the NeoFerric know-how with

Electrometals’ EMEW® technology. However, our next step is to work with a major consumer of high-purity copper to investigate a

possible off-take agreement. It is apparent that the market for high-purity copper is a closed market and we will be required to work

through some possible consumers, to establish some technical and commercial bench marks.

Compiling information on metal–rich waste products, particularly in North America, where our technology and know-how may be •

applied to recover these metals economically. These studies have covered solid and liquid industrial waste, as well as waste in the

mining industry, where it is apparent that EMEW® may provide both commercial and environmental benefi ts.

Some excellent opportunities are apparent, but these are both at an early stage and are also commercial in confi dence until we progress

them further.

High-grade (99.999%) EMEW® Copper Cathode, TintayaPilot Plant Operations, Tintaya, Peru

SX-EW Bleed Streams

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Directors' Report


Your directors present their report on the group consisting of Electrometals Technologies Limited (“the company”) and the entities it

controlled at the end of, or during the year ended 31 December 2007.

Directors

All directors held offi ce for the entire fi nancial year and remain as directors as at the date of this report. Details of their names,

qualifi cations, experience and special responsibilities are set out below, as well as details of other listed company directorships held in

the last three years.

R E Keevers BSc FAusIMM(CP) Chairman and CEO.

Appointed 13 June 2002.

Appointed Chairman 1 February 2004, acting CEO from 22 June 2004 and CEO from 3 August 2005. A qualifi ed and experienced

geologist, Mr Keevers is an independent company director and has been a consultant to public companies on technical and fi nancial

matters. He previously spent over 10 years as executive director of an Australian share brokerage fi rm and was for many years an

exploration manager with Newmont in Australia.Other directorships: Kings Minerals NL Appointed 13.12.2007

Pacrim Energy Limited Appointed 13.11.1992 Resigned 15.2.2007

Zicom Group Limited Appointed 22.11.2004 Resigned 27.9.2007

R G Melgaard BSc BEc MBA Deputy Chairman and non-executive director.

Appointed 20 December 2004. Chairman of the remuneration committee and member of the audit committee.

Mr Melgaard was appointed Deputy Chairman on 23 April 2007. He is a non-executive director with additional responsibilities, assisting

the CEO in specifi c areas of the company’s initiatives. He has extensive business interests in London and is Managing Director of

Palmaris Capital Plc and Chairman of Semper Holdings Limited, as well as holding positions in several other companies.Other directorships: Palmaris Capital Plc Appointed 1.6.2000

Eclipse Venture Capital Trust 3 Plc Appointed 21.8.2005

Eclipse Venture Capital Trust 4 Plc Appointed 21.8.2005

Perseverance Corporation Ltd Appointed 21.4.2004 Resigned 24 4.2007

G A Marshall BE MAICD Non-executive director.

Appointed 22 May 2002. Chairman of the audit committee and member of the remuneration committee.

Mr Marshall has 20 years corporate experience in Australia, Europe and North America, working with such organisations such as Philips

Electronics, British Airways Engineering and Compaq Computers. An independent director, he has worked with many private and

public companies, focusing on business improvement, strategy, fi nancial and business development. He is a former partner of Price

Waterhouse and has held CEO and general management positions with Healthcare of Australia, Rothmans Holdings and Orica.Other directorships: Nanosonics Limited Appointed 28.9.2005 Resigned 21.12.2007

B L Kelly BCom(Qld) CPA FAIM FAICD JP(Qual) Non-executive director.

Appointed 6 January 2006. Member of the audit committee.

Mr. Kelly has over 35 years experience in the minerals and resources sector in Australia, Asia, the United Kingdom, Europe and South

America. He has held senior executive roles with the Thiess group, MIM Holdings Limited and WMC Limited, with particular emphasis on

commercial, marketing and business development functions. He has since consulted on strategy and governance to major corporations

in the minerals, energy and technology sectors. Mr. Kelly has served on boards in Australia, Austria, Germany and Japan.Other directorships: Queensland Ores Limited Appointed 19.2.2008

J Bastoni Non-executive director.

Appointed 27 August 2003. Member of the remuneration committee.

Mr Bastoni has over 20 years experience in the printing, publishing and electrical manufacturing industries in Australia, holding directorships

and managerial positions. He is presently Group Operations and Business Development Manager of the largest printing group in

Australia. He has broad experience in sales, administration, planning, estimating, scheduling and production in the print industry. Other directorships: Nil.

Interests in the shares and options of the company

At the date of this report, interests of the directors in the shares and options of Electrometals Technologies Limited were:

Ordinary shares Preference shares Listed options Unlisted options

R E Keevers 2,781,597 - 463,600 1,200,000

G A Marshall 330,000 - 55,000 -

J Bastoni 7,500 - 1,250 -

R G Melgaard 23,664,679 - 2,750,000 -

B L Kelly 165,000 - 27,500 -

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Company secretaries

The following acted as company secretaries for the entire year:

Colin Barker BCom ACISAppointed 3 August 2005, Mr Barker is a Chartered Secretary and has a bachelor of commerce degree. He has 20 years experience in

the role of company secretary with companies listed on the Australian Securities Exchange.

Ian Millard FCA FAICDAppointed 27 May 2004, Mr Millard is a Fellow of the Institute of Chartered Accountants and was formerly a partner in a major accounting

fi rm.

Dividends

No dividends were declared or paid since the end of the previous year. Directors do not recommend payment of a dividend.

Principal Activities

The principal continuing activities of the group during the year comprised the design, testing, manufacture, marketing and selling of the

company’s proprietary EMEW® electrowinning equipment. The nature of these activities did not change signifi cantly during the year.

Employees

The group employed 27 people as at 31 December 2007 (2006: 22).

Operating and fi nancial review

A review of the operations of the group is set out in the preceding section of this annual report. This review, together with the Chairman’s

Review and the sections “Signifi cant changes in the state of affairs” and “Events subsequent to the end of the fi nancial year”, provide a

review of activities. Summarised operating results are as follows:

2007 $

2006 $

Sales 9,874,038 6,649,344

Less: Cost of sales and consumables (6,816,502) (4,046,003)

3,057,536 2,603,341

Other income 498,197 118,486

Total income 3,555,733 2,721,827

Less: Expenses (2,921,883) (2,015,189)

Operating profi t / (loss) before income tax 633,850 706,638

Income tax benefi t - 105,792

Net profi t / (loss) for the period 633,850 812,430

Earnings per share 2007 (cents)

2006(cents)

Basic and diluted earnings/(loss) per ordinary share 0.33 0.59

Shareholder returns

Directors are pleased to report that the improved performance of the company has started to provide returns to shareholders via capital

growth resulting from an increase in earnings per share and an increase in the company’s share price (although this has diminished in

the recent share market downturn) with the market capitalisation of the company increasing commensurately.

31.12.2007 31.12.2006 31.12.2005 31.12.2004 31.12.2003 31.12.2002

Share price 8.8c 7.8c 5.0c 5.2c 7.8c 10.0c

Shares on issue 204,357,579 133,022,809 133,022,809 124,222,809 108,022,809 63,431,176

Capitalisation $m 17.98 10.38 6.65 6.46 8.43 6.34

EPS (cents) 0.33 0.59 (0.31) (1.21) (3.33) (0.82)

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Review of fi nancial condition

Liquidity and capital resourcesThe consolidated cash fl ow statement illustrates that there has been an increase in cash and cash equivalents in the year ended 31

December 2007 of $3.84 million (2006: $1.40 million). The most signifi cant infl ow was derived from funds raised in the pro-rata issue in

April 2007, which raised $5.20 million. This was offset by a cash outfl ow from operations of $1.47 million, largely due to $2.1 million in

deferred income (advance contract payments) at 31 December 2006.

Assets and capital structure

2007$

2006$

Debts:Trade and other payables 1,532,300 829,034

Redeemable preference shares 133,333 133,333

Cash and short-term deposits (7,650,548) (3,813,696)

Net debt (5,984,915) (2,851,329)

Total equity 8,543,656 2,718,150

Total capital employed 2,558,741 (133,179)

The group is therefore well-funded, with substantial cash on hand and no loan debt. The board has no plans at present to gear the group

through accessing loan funds.

Share issues during the yearThe company made a fully underwritten 1 for 2 pro-rata issue in April 2007, which raised $5.2 million and resulted on the issue of

66,511,404 additional ordinary shares and 33,255,702 listed options exercisable at 14c by 18 April 2011. A further 4,323,241 shares

were issued to the underwriter in satisfaction of the underwriting fee. The intended uses of the funds were set out in the prospectus for

the issue and, overall, are designed to facilitate the expansion of the company. In addition, 500,125 shares were issued during the year

following the exercise of options.

Capital expenditureThere has been a small increase in capital expenditure in 2007, compared to 2006 ($341,789 in 2007 versus $307,899 in 2006). In both

years, the majority of the expenditure was refl ected in the construction of pilot plants, by which the company’s EMEW® electrowinning

technology is demonstrated on site to potential customers.

Treasury policyThe group’s treasury function is managed primarily by the Financial Controller in conjunction with the Chief Executive Offi cer. The

treasury function operates within the overall supervision of the board of directors, who review current cash fl ow forecasts at each board

meeting. Forward currency hedging is undertaken wherever considered advantageous on certain large-scale imports of components.

Risk management

The group takes a proactive approach to risk management. The board is responsible for ensuring that risks and opportunities are

identifi ed on a timely basis and that the group’s objectives and activities are aligned with the risks and opportunities identifi ed by the

board. The group believes that it is crucial for all board members to be part of this process and, as such, the board has not established

a separate risk management committee. The board as a whole examines issues and risks identifi ed.

The board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks

identifi ed by the board. These include:

Strategy meetings involving board members and executives, designed to evaluate alternatives and formulate the overall company •

strategy.

Implementation of operating plans, budgets and cashfl ow forecasts approved by the board and the monitoring of progress against •

budget, including the establishment and monitoring of KPIs of both a fi nancial and non-fi nancial nature.

The review at each board meeting of specifi c business risks, including for example overall insurance matters and occupational health •

and safety.

Statement of compliance

This operating and fi nancial review is based on the guidelines in The Group of 100 Incorporated publication Guide to the Review of

Operations and Financial Condition.

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Signifi cant changes in the state of affairs

Signifi cant changes in the affairs of the group during the fi nancial year under review have been as follows:

1. On 13 August 2007, the company announced to the Australian Securities Exchange that it has received a Queensland Supreme

Court claim for approximately $3 million in relation to an EMEW® plating and powder electrowinning plant supplied in 2002 to the

Chilean company Molibdenos y Metales S.A. (“Molymet”). Electrometals intends to vigorously defend the action and believes it

will be successful; the potential fi nancial exposure cannot be assessed at the date of this report.

2. Group revenue for 2007 increased 48% over 2007 to $9.87 million, however the group result of $633,850 for the 2007 year was

less than the 2006 result of $812,430, after appointing additional staff to implement its growth strategy and after allowing for R&D

and bad debt writedowns.

In the opinion of the directors, all other signifi cant changes in the state of affairs of the group that occurred during the fi nancial year under

review have been disclosed elsewhere in this report.

Signifi cant events after the balance date

1. On 25 February 2008, the company announced to the Australian Securities Exchange that it has purchased a 51% shareholding

in Kurion Technologies Limited, a U.K. company which markets a wide range of environmental, reprocessing and recycling

applications and technologies, some of which are complementary to the EMEW® electrowinning technology marketed by

Electrometals. The initial consideration for the purchase was $400,000. and this may increase by up to $100,000, depending on

operating results for the year ended 31 December 2008. Electrometals will also provide additional loan funds to enable Kurion

to pursue specifi c business opportunities. Accounting standard AASB 3 requires that disclosure be made of the amounts

recognised at the acquisition date for the acquiree’s assets and liabilities, together with an assessment of their fair value. Kurion

is a private company, whose accounts have not been audited previously and, while satisfactory due diligence was carried out in

respect of recent accounts, fi nancial accounts as at the date of purchase are not yet available. However, as an indication, the

purchase price of $400,000 should be considered almost entirely as representing goodwill.

2. On 26 February 2008, the company announced the sale of an EMEW® electrowinning plant worth $887,000 to a Taiwanese

customer.

On 26 March 2008, the company announced the sale of an EMEW® electrowinning plant worth $445,000 to a USA customer, as 3.

well as the inclusion in group revenue of approximately $1,650,000 in anticipated revenue from Kurion Technologies, representing

Kurion work in hand at the date of purchase.

At the date of this report the directors are not aware of any matters or circumstances which have arisen since 31 December 2007 that

have signifi cantly affected or may signifi cantly affect:

the operations of the group in the fi nancial years subsequent to 31 December 2007, or1. the results of those operations, or2. the state of affairs of the group in the fi nancial years subsequent to 31 December 2007.3.

Likely developments and expected results

Electrometals is actively marketing EMEW® plants both directly and through agents and partners, as referred to in the review of

operations. The company has on hand suffi cient working capital for the group to continue and grow its business during 2008, should

the opportunities present themselves. At present, there are some uncertainties concerning the world economic environment through

the remainder of 2008 and perhaps beyond. Should our sales fall short of expectation, then the company may have to take measures to

reduce operating costs. The company continues to investigate avenues for direct investment in metals processing projects incorporating

the company’s EMEW® technology. At the date of writing this report, no fi rm commitments in this area have been made.

Environmental regulation and performance

The group is not subject to any specifi c environmental licensing requirements in relation to its operations. There have been no known

environmental breaches by the group.

Share options

At the date of this report, there are 33,255,577 listed options and 6,800,000 unlisted options on issue (the same as 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, options to acquire 500,125 fully paid ordinary shares in the company were exercised.

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Indemnifi cation and insurance of key management personnel

During or since the fi nancial year, the company has paid premiums amounting to $17,025 in respect of a contract insuring key management

personnel of the company, including all directors, the company secretaries and senior managers, against costs incurred in defending civil

or criminal proceedings that may be brought against them in their capacity as key management personnel of the company. The liability

cover is $10,000,000.

Meetings of directors

The number of meetings of the directors (including meetings of committees of directors) held during the year ended 31 December 2007;

the number of meetings attended by each director are as follows:

Meetings of Committees

Board meetings Audit Remuneration

Number of meetings held: 15 3 2

Attendance:

R E Keevers 15 * *

G A Marshall 15 3 2

R G Melgaard 14 3 2

J Bastoni 15 * 2

B L Kelly 15 3 *

* Not a member of the relevant committee during the year.

Committee membership

At the date of this report, the company has two board committees, an audit committee and a remuneration and nominations committee.

Members acting on the committees of the board during the year were:

Audit Remuneration

G A Marshall (Chairman) R G Melgaard (Chairman)

R G Melgaard G A Marshall

B L Kelly J Bastoni

Retirement, election and continuation in offi ce of directors

Mr Keevers, as CEO, is not subject to retirement by rotation.

Mr Bastoni retires by rotation and, being eligible, offers himself for re-election at the next annual general meeting.

Mr Melgaard, Mr Marshall and Mr Kelly continue in offi ce.

Auditor

Ernst and Young continue in offi ce in accordance with section 327 of the Corporations Act. No non-audit services were provided by

Ernst & Young during the fi nancial year. We have obtained the following independence declaration from our auditors:

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Remuneration report (Audited)

This remuneration report outlines the director and executive remuneration arrangements of the company and the group in accordance

with the requirements of the Corporations Act 2001 and its regulations. It also provides the remuneration disclosures required by

paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party Disclosures, which have been transferred to the Remuneration report in

accordance with Corporations Regulation 2M.6.04. For the purposes of this report, key management personnel (KMP) of the group are

defi ned as those persons having authority and responsibility for planning, directing and controlling the major activities of the company

and the group, directly and indirectly, including any director (whether executive or otherwise) of the parent company, and includes the

fi ve executives in the parent and group receiving the highest annual remuneration. For the purposes of this report, the term “executive”

encompasses the chief executive, senior executives, general managers and company secretaries of the parent and group.

Remuneration committee

The company has a remuneration committee which undertakes the role of reviewing and determining the remuneration of executives and

executive directors. Remuneration of non-executive directors is determined by the committee within the maximum amount approved by

the shareholders from time to time. The remuneration committee assesses the appropriateness of the nature and amount of executive

remuneration on a periodic basis, by reference to relevant employment market conditions, with the overall objective of ensuring maximum

stakeholder benefi t from the retention of a high-quality, high-performing director and executive team.

Remuneration philosophy

The key principle of Electrometals’ remuneration policies is to ensure that remuneration is set at levels that will attract, motivate, reward and

retain personnel to improve business results, having regard to the company’s fi nancial performance and fi nancial position. Remuneration

is reviewed annually to ensure executive pay is competitive with the market.

Non-executive director remuneration

ObjectiveThe board seeks to aggregate remuneration at a level that provides the company with the ability to attract and retain directors of the

highest calibre, while incurring a cost that is acceptable to shareholders.

StructureThe constitution of Electrometals and the ASX listing rules specify that the aggregate remuneration of non-executive directors is

determined from time to time by a general meeting of shareholders. The latest determination was at the annual general meeting held on

30 May 2006, when shareholders approved an aggregate remuneration of $120,000. The amount of aggregate remuneration sought to

be approved by shareholders is reviewed annually and the board of directors refers to the level of fees paid to non-executive directors of

comparable companies when undertaking the annual review process. Each non-executive director currently receives a fee of $32,700

and there are no additional fees for serving on board committees. There are no arrangements put in place by the company to facilitate

non-executive directors acquiring shares in the company and they do not receive retirement benefi ts or participate in any incentive

programs. The remuneration of non-executive directors for the 2007 and 2006 years is detailed in tables 1 and 2 of this report.

Executive remuneration

ObjectiveThe group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within

the group, so as to:

Reward executives for group and individual performance•

Align the interests of executives with those of shareholders•

Ensure total remuneration in competitive by market standards•

StructureIn determining the level and make-up of executive remuneration, the remuneration committee reviews market conditions and remuneration

levels at comparable companies. The company has entered into a detailed contract of employment with the Chief Executive Offi cer.

Due to the uncertainty of the group’s growth in recent years, the majority of executive remuneration has been fi xed. The payment of

cash bonuses is not based on any individual or group fi nancial performance benchmark being met; they are paid at year-end, based

on an assessment by the CEO and remuneration committee of the individual’s contribution during the year and a general consideration

of the group’s sales, results and orders. As set out under the heading “Shareholder returns” earlier in this report, fi nancial results have

improved substantially in 2006 and 2007 compared to prior years, however the remuneration structure of key management personnel

will remain essentially fi xed until the company can be more assured that its progress can be sustained, therefore at this stage there is no

formal correlation between remuneration policy and company performance.

Remuneration consists of the following key elements:

Fixed remuneration - Base salary, superannuation and non-monetary benefi ts;• Variable remuneration - short-term incentive (STI)•

- long-term incentive (LTI)

The proportion of fi xed remuneration and variable remuneration (potential short-term and long-term incentives) for each executive is set

out in table 1.

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Fixed remuneration

ObjectiveFixed remuneration is reviewed annually by the remuneration committee, entailing a review of company and individual performance,

relative comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. There are

no guaranteed base salary increases fi xed in the contract of any executive.

StructureCurrently, all executive fi xed remuneration is by salary package only, with an election to apportion this between salary and superannuation

in the form of salary sacrifi ce. It is intended that the structure should be optimal for the recipient without creating undue cost for the

group. The fi xed remuneration component of executives is detailed in table 1.

Variable remuneration – short-term incentive (STI).

ObjectiveThe nature of the company’s trading, consisting of large, one-off sales of electrowinning plants, with extended lead times, does not lend

itself easily to setting monthly or annual performance benchmarks, and no specifi c targets have been established. Payment of bonuses

is not based on any individual or group fi nancial performance benchmark being met; they are paid at year-end, based on an assessment

by the CEO and remuneration committee of the individual’s contribution during the year and a general consideration of the group’s sales,

results and orders. However, should the company continue the trend set in 2006 and 2007 and continue to trade profi tably and expand

its operations, it is anticipated there will be the opportunity to implement performance benchmarks.

STI bonuses for 2007 and 2006 fi nancial yearsNo STI bonuses linked to key performance indicators were paid during 2007 or 2006. Bonuses paid as a result of an assessment by the

CEO and the remuneration committee are set out in tables 1 and 2.

Variable remuneration – long-term incentive (LTI)

ObjectiveThe objectives of the LTI plan are to (a) reward executives and other staff in a manner that aligns remuneration with the creation of

shareholder wealth and (b) reward staff for their continued loyalty. As such, LTI grants delivered in the form of share options issued under

the company’s employee share option plan are made to (a) executives who are able to infl uence the generation of shareholder wealth

and thus have an impact on the group’s performance in the long-term and (b) staff who remain with the company for an extended period

of time.

StructureLTI grants to staff in the form of share options are decided by the remuneration committee. There is no qualifying period, no performance

hurdle and there are no specifi c conditions as to length of option or vesting period laid down in the rules of the employee share option

plan. Options will typically be granted for fi ve years at a specifi c exercise price, vesting in four annual equal tranches, with the fi rst tranche

vesting up to 12 months after the date of grant. Where an option holder ceases employment prior to the options vesting, the options are

forfeited. If the options are vested at the time of cessation of employment, the option holder has 30 days after the last day of employment

to exercise the options, unless the cessation of employment is due to death or disability.

Employment contracts

Chief Executive Offi cerThe CEO, Mr Keevers, is employed under a contract which covered an initial two-year period from 1 July 2005 and has been extended

for another two years until 30 June 2009. Under the terms of the contract:

Fixed remuneration is $250,000, with variable remuneration being up to an additional 50%, or $125,000.•

Notice of termination is six months by either the company or Mr Keevers, with the company to give pay in lieu, unless the termination •

is due to serious misconduct.

At the start of the contract in 2005, Mr Keevers received 1,200,000 options exercisable at 5c, with 25% vesting immediately and the •

remaining 75% vesting in three equal annual tranches.

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Key management personnel

The following persons were key management personnel of the group during the fi nancial year:

Directors R E Keevers Chairman and CEO

R G Melgaard Deputy Chairman and non-executive director

G A Marshall Non-executive director

J Bastoni Non-executive director

B L Kelly Non-executive director

Executives I D Ewart Senior Process Engineer & President, Electrometals Canada

R D Burling Engineering Manager Appointed 20 August 2007

M G Ross Engineering Manager Resigned 30 June 2007

K G Powell General Manager, Sales and Marketing

M J Brown Senior Metallurgist

R A Palmer Senior Process Chemist

T Stapurewicz Senior Metallurgist

C C Barker Company Secretary and Financial Controller

Details of remuneration

Details of the aggregate remuneration of key management personnel of the group are set out in the following table. Except for the CEO,

Mr Keevers, none of the key management personnel has a formal contract with the group, notice of termination is one month’s notice by

either party and there are no termination payments beyond those specifi ed by law.

Table 1: Remuneration for the year ended 31 December 2007

Short-term Post employment Long-term

Share-base

Name Salary and

fees

$

Cash

bonus

$

Non-

monetary

benefi ts

$

Superannuation

$

Retirement

benefi ts

$

Long

service

leave

$

Options

$

Total Percentage

Performance

Related

%

Non-executive directors

R G Melgaard 58,333 - - 5,250 - - - 63,583

G A Marshall 28,333 - - 2,550 - - - 30,883

J Bastoni 28,333 - - 2,550 - - - 30,883

B L Kelly 13,333 - - 17,550 - - - 30,883

Sub-total 128,332 - - 27,900 - - - 156,232

Executive directors

R E Keevers 180,000 50,000 - 70,000 - - 6,820 306,820 18.52

Other key management personnel

I D Ewart 158,592 17,301 - - - - 7,117 183,010 13.34

R L Burling1 48,777 - - 4,390 - - 2,343 55,510 4.22

M G Ross2 68,514 10,000 - 34,316 - - 419 113,249 9.20

K G Powell 99,431 15,000 - 27,614 - - 4,509 146,554 13.31

M J Brown 106,449 3,460 2,967 - - - 1,630 114,506 4.45

R A Palmer 85,202 7,000 - 7,720 - - 4,424 104,346 10.95

T Stapurewicz 91,454 4,385 - - - - 1,630 97,469 6.17

C C Barker 88,073 - 7,926 - - 522 96,521 0.54

Sub-total 926,492 107,146 2,967 151,966 - - 29,414 1,217,985

Total 1,054,824 107,146 2,967 179,866 - - 29,414 1,374,217

1 Appointed 20 August 20072 Resigned 30 June 2007

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Table 2: Remuneration for the year ended 31 December 2006

Name Salary and

fees

$

Cash

bonus

$

Non-

monetary

benefi ts

$

Superannuation

$

Retirement

benefi ts

$

Long-

term

incentive

plans

$

Share-

based

payments

$

Total

$

Percentage

Performance

related

Non-executive directors

R G Melgaard 25,000 - - 2,250 - - - 27,250

J Bastoni 25,000 - - 2,250 - - - 27,250

G A Marshall 25,000 - - 2,250 - - - 27,250

B L Kelly 25,000 - - 2,250 - - - 27,250

Sub-total 100,000 9,000 109,000

Executive directors

R E Keevers 180,000 - - 70,000 - - 14,597 264,597 5.52

Other key management personnel

I D Ewart 130,147 10,000 - - - - 11,938 152,085 14.42

K G Powell 102,628 - - 11,372 - - 11,938 125,938 9.48

M G Ross 115,596 - - 10,404 - - 11,938 137,938 8.65

R A Palmer 67,431 - - 6,069 - - 7,641 81,141 9.42

C C Barker 81,193 - - 7,307 - - - 88,500

Sub-total 676,995 10,000 - 105,152 - - 58,052 850,199

Total 776,995 10,000 - 114,152 - - 58,052 959,199

Table 3: Compensation options – granted and vested during the 2007 year (consolidated)

Name Granted Fair

value per

option

at grant

date

Exercise

price per

option

Expiry date First exercise

date

Last exercise

date

Number

vested

%

vested

Executives

I D Ewart 500,000 125,000 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

125,000 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

125,000 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

125,000 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

R L Burling 1,200,000 300,000 3.57c 10c 31.8.2012 30.6.2008 31.8.2012 - -

300,000 3.57c 10c 31.8.2012 30.6.2009 31.8.2012 - -

300,000 3.57c 10c 31.8.2012 30.6.2010 31.8.2012 - -

300,000 3.57c 10c 31.8.2012 30.6.2011 31.8.2012 - -

K G Powell 100,000 25,000 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

25,000 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

25,000 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

25,000 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

M J Brown 250,000 62,500 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

R A Palmer 300,000 75,000 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

75,000 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

75,000 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

75,000 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

T Stapurewicz 250,000 62,500 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

62,500 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

C C Barker 80,000 20,000 3.38c 12c 31.8.2012 30.6.2008 31.8.2012 - -

20,000 3.38c 12c 31.8.2012 30.6.2009 31.8.2012 - -

20,000 3.38c 12c 31.8.2012 30.6.2010 31.8.2012 - -

20,000 3.38c 12c 31.8.2012 30.6.2011 31.8.2012 - -

Total 2,680,000 - -

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Directors' Report


Table 3: Compensation options – granted and vested during the 2006 year (consolidated)

Name Granted Fair

value per

option

at grant

date

Exercise

price per

option

Expiry date First exercise

date

Last exercise

date

Number

vested

%

vested

Directors

R E Keevers 1,200,000 300,000 1.7c 5c 30.5.2010 21.6.2006 30.5.2010 300,000 100

300,000 1.7c 5c 15.9.2010 15.9.2006 15.9.2010 300,000 100

300,000 2.1c 5c 15.9.2011 15.9.2007 15.9.2011 - -

300,000 2.4c 5c 15.9.2012 15.9.2008 15.9.2012 - -

Executives -

I D Ewart 1,000,000 500,000 1.7c 5c 30.5.2010 15.9.2006 30.5.2010 500,000 100

250,000 2.0c 5c 30.5.2011 15.9.2007 30.5.2011 - -

250,000 2.2c 5c 30.5.2011 15.9.2008 30.5.2011 - -

K G Powell 1,000,000 500,000 1.7c 5c 30.5.2010 15.9.2006 30.5.2010 500,000 100

250,000 2.0c 5c 30.5.2011 15.9.2007 30.5.2011 - -

250,000 2.2c 5c 30.5.2011 15.9.2008 30.5.2011 - -

M G Ross 1,000,000 500,000 1.7c 5c 30.5.2010 15.9.2006 30.5.2010 500,000 100

250,000 2.0c 5c 30.5.2011 15.9.2007 30.5.2011 - -

250,000 2.2c 5c 30.5.2011 15.9.2008 30.5.2011 - -

R A Palmer 640,000 320,000 1.7c 5c 30.5.2010 15.9.2006 30.5.2010 320,000 100

160,000 2.0c 5c 30.5.2011 15.9.2007 30.5.2011 - -

160,000 2.2c 5c 30.5.2011 15.9.2008 30.5.2011 - -

Total 4,840,000 2,420,000

Table 4: Options granted as part of remuneration

Value of options

granted during the

year

Value of options

exercised during the

year

Value of options

lapsed during the year

Total value of options

granted, exercised

and lapsed during the

year

Remuneration

consisting of options

for the year %

R E Keevers - - - - 2.22

I D Ewart 16,900 - - 16,900 3.89

R L Burling 42,840 - - 42,840 4.22

M G Ross - 22,500 17,500 40,000 0.37

K G Powell 3,380 - - 3,380 3.08

M J Brown 8,450 - - 8,450 1.42

R A Palmer 10,140 - - 10,140 4.24

T Stapurewicz 8,450 - - 8,450 1.67

C C Barker 2,704 - - 2,704 0.54

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

_______________ _______________

R E Keevers B L Kelly

Chairman Director

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Corporate Governance Statement


The board of directors of Electrometals Technologies Limited is responsible for the corporate governance of the group. The board

guides and monitors the business and affairs of Electrometals Technologies Limited on behalf of the shareholders, by whom they are

elected and to whom they are accountable. The table below summarises the company’s compliance with the recommendations of the

Corporate Governance Council.

Recommendation

1.1 Formalise and disclose the functions reserved to the board and those delegated to management. Yes Page 25

2.1 A majority of the board should be independent directors. Yes Page 25

2.2 The chairperson should be an independent director. No Note 1

2.3 The roles of chairperson and chief executive offi cer should not be exercised by the same individual. No Note 2

2.4 The board should establish a nomination committee Yes Page 20

3.1 Establish a code of conduct to guide directors, the chief executive offi cer (or equivalent), the chief fi nancial

offi cer (or equivalent) and any other key executives as to:

the practices necessary to maintain confi dence in the company’s integrity•

the responsibility and accountability of individuals for reporting and investigating reports of unethical • practices.

Yes Page 27

3.2 Disclose the policy concerning trading in company securities by directors, offi cers and employees. Yes

4.1 Require the chief executive offi cer (or equivalent) and the chief fi nancial offi cer (or equivalent) to state in

writing to the board that the company’s fi nancial reports 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.

Yes Page 27

4.2 The board should establish an audit committee. Yes Page 25

4.3 Structure the audit committee so that it consists of:

only non-executive directors;•

a majority of independent directors;•

an independent chairperson, who is not chairperson of the board;•

at least three members.•

Yes Page 26

4.4 The audit committee should have a formal charter. Yes Website

5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure

requirements and to ensure accountability at a senior management level for that compliance.

Yes Website

6.1 Design and disclose a communications strategy to promote effective communication with shareholders and

encourage effective participation at general meetings.

Yes Website

6.2 Request the external auditor to attend the annual general meeting and be available to answer shareholder

questions about the conduct of the audit and the preparation and content of the auditor’s report.

Yes

7.1 The board or appropriate board committee should establish policies on risk oversight and management. Yes Page 26

7.2 The chief executive offi cer (or equivalent) and the chief fi nancial offi cer (or equivalent) should state to the board

in writing that:

the statement given in accordance with best practice recommendations 4.1 (the integrity of fi nancial • statements) is founded on a sound system of risk management and internal compliance and control which

implements the policies adopted by the board;

the company’s risk management and internal compliance and control system is operating effi ciently and • effectively in all material respects.

Yes Page 27

8.1 Disclose the process for performance evaluation of the board, its committees and individual directors, and

key executives.

Yes Page 27

9.1 Provide disclosure in relation to the company’s remuneration policies to enable investors to understand (i) the

costs and benefi ts of those policies and (ii) the link between remuneration paid to directors and key executives

and corporate performance.

Yes Page 27

9.2 The board should establish a remuneration committee. Yes Page 25

9.3 Clearly distinguish the structure of non-executive directors’ remuneration from that of executives. Yes Page 19

9.4 Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in

plans approved by shareholders.

Yes Page 20

10.1 Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate

stakeholders.

Yes Website

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Notes on recommendations

1. Refer to the section headed “Chairman” below.

2. Refer to the section headed “Chairman” below.

Electrometals Technologies’ corporate governance practices were in place throughout the year ended 31 December 2007.

Chairman

The Electrometals constitution states that “the directors must elect one of their number as chairman of their meetings and determine the

period of offi ce of the chairman”. Our Chairman, Richard Keevers, cannot be construed as an independent director at the date of this

report. Mr Keevers took on the role of Acting Chief Executive Offi cer in 2004 and, in August 2005, took on the role of CEO full-time. It

has not been considered necessary to consider the appointment of a lead independent director, but the board has appointed a Deputy

Chairman, Mr Greg Melgaard, to assist the Chairman and undertake specifi c tasks as designated from time to time. The board has

agreed on the responsibilities and division between Chairman, Deputy Chairman and CEO.

Structure of the board

The skills, experience and expertise relevant to the position of director held by each director in offi ce at the date of this annual report

are set out in the Directors’ Report. Directors of Electrometals Technologies Limited are considered to be independent when they are

independent of management and free from any business or other relationship that could materially interfere with (or could reasonably be

perceived to materially interfere with) the exercise of their unfettered and independent judgement. In the context of director independence,

“materiality” is considered from both the group and individual director perspective, and involving a determination of both quantitative and

qualitative measurements.

In accordance with the defi nition of independence above, and the materiality thresholds set, the following directors of Electrometals

Technologies are considered to be independent:

Name PositionG A Marshall Non-executive director



There are procedures in place, agreed by the board, to enable directors in furtherance of their duties to seek independent professional

advice at the company’s expense.

The term in offi ce held by each director at the date of this report is as follows:

Name Term in offi ceR E Keevers 5 years

R G Melgaard 3 years

G A Marshall 5 years

J Bastoni 4 years

B L Kelly ̀ 2 years

Board functions and committees

The board seeks to identify the shareholder expectations, as well as regulatory and ethical expectations and obligations. In addition,

the board is responsible for identifying areas of signifi cant business risk and ensuring arrangements are in place to adequately manage

those risks. To ensure the board is well equipped to discharge its responsibilities, it has established guidelines for the nomination and

selection of directors and for the operation of the board.

The responsibility for the operation and administration of the company is delegated by the board to the CEO and the executive management

team. The board ensures that these personnel are appropriately qualifi ed and experienced to discharge their responsibilities and that there

are procedures in place to assess their performance. Whilst the board retains full responsibility for guiding and monitoring the company, in

discharging its stewardship it makes use of two committees. Specialist committees are able to focus on a particular responsibility and provide

informed feedback to the board.

To this end, the board has established the following committees:

Audit•

Remuneration and nominations•

The roles and responsibilities of these committees are discussed in this corporate governance statement.

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The board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identifi ed by the

board. The board has a number of mechanisms in place to ensure this is achieved, including:

Board approval of a strategic plan designed to meet stakeholders’ needs and manage business risk•

Ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the continued growth and success •

of the group

Implementation of budgets by management and monitoring progress against budget via the establishment and reporting of both fi nancial •

and non-fi nancial key performance indicators.

Other functions reserved to the board include:

Approval of the annual and half-yearly fi nancial reports•

Approving and monitoring the progress of major capital expenditure, capital management and acquisitions.•

Ensuring that any signifi cant business risks that arise are identifi ed, assessed, appropriately managed and monitored•

Reporting to shareholders•

Trading policy

Under the company’s securities trading policy, a director or staff member must not trade in any securities of the company at any time when they

are in possession of unpublished, price-sensitive information. Before any trading, the CEO must give approval. Notwithstanding this, directors

and executives are not permitted to trade in the company’s securities within 30 days prior to the announcement of half-year or full-year results.

As required by the ASX listing rules, the company notifi es the ASX of any transaction in the company’s securities conducted by directors.

Audit committee

The board has established an audit committee, which operates under a charter approved by the board. It is the responsibility of the board to

ensure that an effective internal control framework exists within the group. This includes internal controls to deal with both the effectiveness

and effi ciency of signifi cant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of

fi nancial information, as well as non-fi nancial considerations such as the benchmarking of operational key performance indicators. The board

has delegated to the audit committee the responsibility for establishing and maintaining a framework of internal control and ethical standards.

The committee also provides the board with additional assurance regarding the reliability of fi nancial information for inclusion on the fi nancial

reports. All members of the audit committee are non-executive directors.

The members of the audit committee during the year were:

G A Marshall (Chairman)•

R G Melgaard•

B L Kelly•

Qualifi cations of the audit committee membersMr Marshall is a former partner of Price Waterhouse and has signifi cant experience at board and management level with a number of large

companies. Mr Melgaard has extensive experience at board level, as chairman, managing director and non-executive director. Mr Kelly is a

CPA, with international experience at board and executive level in the minerals and resources sector.

For details on the number of meetings of the audit committee held during the year and the attendees at those meetings, refer to the Directors’

Report.

Risk

The board has primary responsibility for determining the company’s risk profi le and for overseeing and approving risk management strategy

and policies, internal compliance and internal control. The company’s process of risk management and internal compliance and control

includes:

Establishing the company’s goals and objectives, then implementing and monitoring strategies and policies to achieve them•

Continuously identifying and measuring risks that might impact upon the achievement of the company’s goals and objectives, and •

monitoring the environment for emerging factors and trends that affect those risks

Formulating risk management strategies to manage identifi ed risks, and designing and implementing appropriate risk management policies •

and internal controls

Monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and •

controls, including an annual assessment of the effectiveness of risk management and internal compliance and control.

CEO and CFO certifi cation

The Chief Executive Offi cer and the Chief Financial Offi cer have provided a written statement to the board that:

Their view provided on the company’s fi nancial report is founded on a sound system of risk management and internal compliance and •

control, which implements the fi nancial policies adopted by the board, and

The company’s risk management and internal compliance and control system is operating effectively in all material respects.•

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Remuneration and Nominations Committee

The board is responsible for determining and reviewing compensation arrangements for the directors themselves, the CEO 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 remuneration committee links the nature and amount of executive directors’ and offi cers remuneration 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 high-quality management to the company, and•

Performance incentives that allow executives to share in the company’s success.•

For a full discussion of the company’s remuneration philosophy and framework and the remuneration received by directors and executives in

the current year, refer to the Remuneration Report, which is contained within the Directors’ Report.

There is no scheme to provide retirement benefi ts to non-executive directors.

At the date of this statement, the remuneration and nominations committee comprises three independent non-executive directors:

R G Melgaard (Chairman)•

G A Marshall•

J Bastoni•

Performance

The performance of the board and key executives is reviewed regularly against both measurable and qualitative indicators. During the

reporting period, the remuneration committee conducted performance evaluations that involved an assessment of each key executive’s

performance against specifi c and measurable qualitative and quantitative performance criteria. The performance criteria against which

executives are assessed are aligned with the fi nancial and non-fi nancial objectives of Electrometals.

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Income Statement


For the year ended 31 December 2007

Consolidated Parent

Note 2007$

2006$

2007$

2006$

Plant sales 9,139,568 6,070,844 9,139,568 6,070,844

Spare parts sales 487,762 266,848 487,762 266,848

Equipment rentals - 2,564 - 2,564

Laboratory and engineering fees 223,368 274,985 140,242 235,283

Royalties 23,340 34,103 23,340 34,103

Total sales 9,874,038 6,649,344 9,790,912 6,609,642

Cost of sales 2(w) (6,816,502) (4,046,003) (6,750,756) (3,977,507)

Gross profi t 3,057,536 2,603,341 3,040,156 2,632,135

Other income

Interest 452,689 118,286 452,689 118,286

Discounts 445 200 445 200

Net foreign exchange gain 45,063 - 11,393 306

Total income 3,555,733 2,721,827 3,504,683 2,750,927

Expenses

Marketing expenses (66,830) (158,566) (66,830) (158,566)

Occupancy expenses (262,893) (162,751) (262,893) (162,751)

Administrative expenses (1,930,202) (1,538,960) (1,493,327) (1,226,679)

Other expenses 6 (661,958) (154,632) (1,178,958) (494,942)

Finance costs 6 - (280) - (280)

Profi t before income tax 633,850 706,638 502,675 707,709

Income tax benefi t / (expense) 7 - 105,792 - 105,792

Net profi t for the year 633,850 812,430 502,675 813,501

(cents) (cents)

Basic and diluted earnings per share 9 0.33 0.59

The above income statement should be read in conjunction with the accompanying notes.

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Balance Sheet


As at 31 December 2007

Consolidated Parent

Note 2007$

2006$

2007$

2006$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 10 7,650,548 3,813,696 7,654,141 3,805,057

Trade and other receivables 11 1,088,460 1,054,683 1,035,505 1,054,644

Inventories 12 777,333 184,042 777,333 184,042

Prepayments 64,048 157,344 62,396 155,996

TOTAL CURRENT ASSETS 9,580,389 5,209,765 9,529,375 5,199,739

NON-CURRENT ASSETS

Receivables 13 28,409 31,821 28,409 31,821

Investments in subsidiaries 14 - - - -

Plant & equipment 15 694,137 466,296 659,917 446,754

Goodwill and other intangible assets 16 - 109,612 - 109,612

TOTAL NON-CURRENT ASSETS 722,546 607,729 688,326 588,187

TOTAL ASSETS 10,302,935 5,817,494 10,217,701 5,787,926

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 17 1,532,300 829,034 1,525,354 783,067

Deferred income 18 76,250 2,135,757 76,250 2,135,757

Provisions 19 126,049 104,241 115,282 101,096

TOTAL CURRENT LIABILITIES 1,734,599 3,069,032 1,716,886 3,019,920

NON-CURRENT LIABILITIES

Provisions 20 24,680 30,312 24,680 30,312

TOTAL NON-CURRENT LIABILITIES 24,680 30,312 24,680 30,312

TOTAL LIABILITIES 1,759,279 3,099,344 1,741,566 3,050,232

NET ASSETS 8,543,656 2,718,150 8,476,135 2,737,694

EQUITY

Issued capital 23 33,320,788 28,116,262 33,320,788 28,116,262

Foreign currency translation reserve 24 (38,837) 5,273 - -

Employee equity benefi ts reserve 24 89,292 58,052 89,292 58,052

Accumulated losses 24 (24,827,587) (25,461,437) (24,933,945) (25,436,620)

TOTAL EQUITY 8,543,656 2,718,150 8,476,135 2,737,694

The above balance sheet should be read in conjunction with the accompanying notes.

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Statement of Changes in Equity


For the year ended 31 December 2007

CONSOLIDATEDOrdinary

shares

Preference

shares

Foreign

currency

translation

reserve

Employee

equity

benefi ts

reserve

Accumulated

losses

Total

$ $ $ $ $ $

At 1 January 2006 28,018,469 133,333 - - (26,273,867) 1,877,935

Profi t / (loss) for the period - - - - 812,430 812,430

Issue of share capital - - - - - -

Additions to reserves - - 5,273 58,052 - 63,325

Share issue expenses (35,540) - - - - (35,540)

At 31 December 2006 27,982,929 133,333 5,273 58,052 (25,461,437) 2,718,150

Profi t / (loss) for the period - - - - 633,850 633,850

Issue of share capital 5,691,789 - - - - 5,691,789

Additions to reserves - - (44,110) 31,240 - (12,870)

Share issue expenses (487,263) - - - - (487,263)

At 31 December 2007 33,187,455 133,333 (38,837) 89,292 (24,827,587) 8,543,656

PARENT

Ordinary

shares

Preference

shares

Equity

benefi ts

reserve

Accumulated

losses

Total

$ $ $ $ $

At 1 January 2006 28,018,469 133,333 - (26,250,121) 1,901,681

Profi t / (loss) for the period - - - 813,501 813,501

Issue of share capital - - - - -

Additions to reserves - - 58,052 - 58,052

Share issue expenses (35,540) - - - (35,540)

At 31 December 2006 27,982,929 133,333 58,052 (25,436,620) 2,737,694

Profi t / (loss) for the period - - - 502,675 502,675

Issue of share capital 5,691,789 - - - 5,691,789

Additions to reserves - - 31,240 - 31,240

Share issue expenses (487,263) - - - (487,263)

At 31 December 2007 33,187,455 133,333 89,292 (24,933,945) 8,476,135

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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Cash Flow Statement


for the year ended 31 December 2007

Consolidated Parent

Note 2007$

2006$

2007$

2006$

Cash fl ows from operating activities

Receipts from customers (including GST) 7,692,092 7,524,486 7,655,071 7,485,429

Payments to suppliers and employees (including

GST)(9,227,897) (5,793,049) (8,694,020) (5,430,380)

Interest and other costs of fi nance paid - (280) - (280)

Sundry other income 445 200 445 200

Tax refund received 63,063 42,729 63,063 42,729

Net operating cash infl ow / (outfl ow) 25 (1,472,297) 1,774,086 (975,441) 2,097,698

Cash fl ows from investing activities

Interest received 451,753 106,355 451,753 106,355

Investment in R&D – pilot plant (1,242) (109,612) (1,242) (109,612)

Payment for plant and equipment (330,651) (324,217) (310,652) (318,997)

Net investing cash infl ow / (outfl ow) 119,860 (327,474) 139,859 (322,254)

Cash fl ows from fi nancing activities

Proceeds from issue of shares 5,345,930 - 5,345,930 -

Share issue costs (155,343) (39,094) (155,343) (39,094)

Loan to subsidiary - - (517,314) (292,416)

Net fi nancing cash infl ow / (outfl ow) 5,190,587 (39,094) 4,673,273 (331,510)

Net increase / (decrease) in cash held 3,838,150 1,407,518 3,837,691 1,443,934

Net foreign exchange differences (1,298) 19,229 11,393 306

Cash at the beginning of the fi nancial year 3,813,696 2,386,949 3,805,057 2,360,817

Cash at the end of the fi nancial year 10 7,650,548 3,813,696 7,654,141 3,805,057

The above cash fl ow statement should be read in conjunction with the accompanying notes.

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Notes to the Financial Statements


1. CORPORATE INFORMATION

The annual report of Electrometals Technologies Limited (the company) for the year ended 31 December 2007 was authorised for issue

in accordance with a resolution of directors on 28 March 2008.

Electrometals Technologies is a company limited by shares incorporated and domiciled in Australia, having its registered offi ce and

principal offi ce at 28 Commercial Drive, Ashmore 4214, Queensland. The company’s ordinary shares are publicly traded on the Australian

Securities Exchange. The nature of the operations and principal activities of the group are described in note 5.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Table of contentsBasis of preparation

Compliance with Australian IFRS(a)

New accounting standards and interpretations(b)

Basis of consolidation(c)

Business combinations(d)

Segment reporting(e)

Foreign currency translation(f)

Cash and cash equivalents(g)

Trade and other receivables(h)

Inventories(i)

Derivative fi nancial instruments and hedging(j)

Property, plant and equipment(k)

Leases(l)

Impairment of non-fi nancial assets other than goodwill(m)

Goodwill and intangibles(n)

Pensions and other post-employment benefi ts(o)

Trade and other payables(p)

Provisions and employee benefi ts(q)

Share based payment transactions(r)

Convertible non-cumulative redeemable preference shares(s)

Contributed equity(t)

Revenue Recognition(u)

Income tax and other taxes(v)

Earnings per share(w)

Basis of preparation

The fi nancial report is a general-purpose fi nancial report, which has been prepared in accordance with the requirements of the Corporations

Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The

fi nancial report has been prepared on a historical cost basis, except for any derivatives. The fi nancial report is presented in Australian

dollars.

(a) Compliance with IFRS

The fi nancial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS).For

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(b) New accounting standards and interpretations

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been

adopted by the group for the annual reporting period ending 31 December 2007. These are outlined in the table below:

Reference Title Summary Application

date of

standard*

Impact on Group fi nancial report Application

date for

Group*

AASB

2007-1

Amendments to

Australian Accounting

Standards arising from

AASB Interpretation 11

[AASB 2]

Amending standard issued

as a consequence of AASB

Interpretation 11 AASB 2 –

Group and Treasury Share

Transactions.

1 March

2007

This is consistent with the Group’s

existing accounting policies for

share-based payments, so the

amendments are not expected to

have any impact on the Group’s

fi nancial report.

1 January

2008

AASB

2007-3

Amendments to



AASB 8

[AASB 5, AASB, AASB

6, AASB 102, AASB 107,

AASB 119, AASB 127,

AASB 134, AASB 136,

AASB 1023 & AASB

1038]

Amending standard issued

as a consequence of AASB 8

Operating Segments.

1 January

2009

AASB 8 is a disclosure standard

so will have no direct impact on the

amounts included in the Group’s

fi nancial statements. However

the amendments may have an

impact on the Group’s segment

disclosures as segment information

included in internal management

reports is more detailed than is

currently reported under AASB 114

Segment Reporting.

1 January

2009

AASB

2007-4

Amendments to



ED 151 and Other

Amendments

[AASB 1, 2, 3, 4, 5, 6, 7,

102, 107, 108, 110, 112,

114, 116, 117, 118, 119,

120, 121, 127, 128, 129,

130, 131, 132, 133, 134,

136, 137, 138, 139, 141,

1023 & 1038]

Amendments arising as a

result of the AASB decision

that, in principle, all options

that currently exist under

IFRSs should be included

in the Australian equivalents

to IFRSs and additional

Australian disclosures

should be eliminated, other

than those now considered

particularly relevant in

the Australian reporting

environment.

1 July

2007

These amendments are expected

to reduce the extent of some

disclosures in the Group’s fi nancial

report.

1 January

2008

AASB

2007-5**

Amendments to


Standard – Inventories

Held for Distribution by

Not-for-Profi t Entities

[AASB 102]

This Standard makes

amendments to AASB 102

Inventories.

1 July

2007

This amendment only relates to

not-for-profi t entities and as such

is not expected to have any impact

on the Group’s fi nancial report.

1 January

2008

AASB

2007-6

Amendments to



AASB 123

[AASB 1, AASB 101,

AASB 107, AASB 111,

AASB 116 & AASB 138

and Interpretations 1

& 12]

Amending standard issued as

a consequence of revisions to

AASB 123 Borrowing Costs.

1 January

2009

The amendments to AASB 123

require that all borrowing costs

associated with a qualifying asset

be capitalised. The Group has no

borrowing costs associated with

qualifying assets and as such the

amendments are not expected to

have any impact on the Group’s

fi nancial report.

1 January

2009

AASB

2007-7

Amendments to


Standards

[AASB 1, AASB 2,

AASB 4, AASB 5,

AASB 107 & AASB 128]

Amending standards for

wording errors, discrepancies

and inconsistencies.

1 July

2007

The amendments are minor and

do not affect the recognition,

measurement or disclosure

requirements of the standards.

Therefore the amendments are not

expected to have any impact on

the Group’s fi nancial report.

1 January

2008

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date of

standard*


date for

Group*

AASB

2007-8

Amendments to



AASB 101

Amending standard issued as

a consequence of revisions

to AASB 101 Presentation of

Financial Statements

1 January

2009

The amendments are expected

to only affect the presentation of

the Group’s fi nancial report and

will not have a direct impact on

the measurement and recognition

of amounts under the current

AASB 101. The Group has not

determined at this stage whether

to present the new statement of

comprehensive income as a single

or two statements.

1 January

2009

AASB 8 Operating Segments New standard replacing

AASB 114 Segment

Reporting, which adopts a

management approach to

segment reporting.

1 January

2009

Refer to AASB 2007-3 above. 1 January

2009

AASB 101

(revised)

Presentation of Financial

Statements

Introduces a statement of

comprehensive income.

Other revisions include

impacts on the presentation

of items in the statement

of changes in equity, new

presentation requirements

for restatements or

reclassifi cations of items

in the fi nancial statements,

changes in the presentation

requirements for dividends

and changes to the titles of

the fi nancial statements.

1 January

2009


2009

AASB 123

(revised)

Borrowing Costs The amendments to AASB

123 require that all borrowing

costs associated with a

qualifying asset must be

capitalised.

1 January

2009


2009

AASB 1004

(revised)**

Contributions This standard contains the

original requirements on

contributions from AASB

1004 as issued in July 2004,

as well as the requirements

on contributions from AASs

27, 29 and 31 substantively

unamended (with some

exceptions).

1 July

2008


2009

AASB 1050** Administered Items This standard contains

the requirements for the

disclosure of administered

items from AAS 29,

substantively unamended

(with some exceptions).

1 July

2008


2009

AASB

Interpretation

4

(revised)

Determining whether an

Arrangement contains a

Lease

The revised Interpretation

specifi cally scopes out

arrangements that fall

within the scope of AASB

Interpretation 12.

1 January

2008


2008For

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date of

standard*


date for

Group*

AASB

Interpretation

11

AASB 2 – Group

and Treasury Share

Transactions

Addresses whether certain

types of share-based

payment transactions with

employees (or other suppliers

of good and services) should

be accounted for as equity-

settled or as cash-settled

transactions under AASB

2. It also specifi es the

accounting in a subsidiary’s

fi nancial statements for

share-based payment

arrangements involving equity

instruments of the parent.

1 March

2007


2008

AASB

Interpretation

13

Customer Loyalty

Programmes

Deals with the accounting

for customer loyalty

programmes, which are used

by companies to provide

incentives to their customers

to buy their products or use

their services.

1 July

2008

The Group does not have any

customer loyalty programmes and

as such this interpretation is not

expected to have any impact on

the Group’s fi nancial report.

1 January

2009

AASB

Interpretation

14

AASB 119 – The Limit

on a Defi ned Benefi t

Asset, Minimum Funding

Requirements and their

Interaction

Aims to clarify how to

determine in normal

circumstances the limit on

the asset that an employer’s

balance sheet may contain in

respect of its defi ned benefi t

pension plan.

1 January

2008

The Group does have a defi ned

benefi t pension plan and as such

this interpretation may have an

impact on the Group’s fi nancial

report. The Group has not yet

determined the extent of the

impact, if any.

1 January

2008

* designates the beginning of the applicable annual reporting period unless otherwise stated

** only applicable to not-for-profi t / public sector entities

Adoption of new accounting standardThe Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1

January 2007. The adoption of this standard has only affected the disclosure in these fi nancial statements. There has been no affect on

profi t and loss or the fi nancial position of the entity.

(c) Basis of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of Electrometals Technologies Limited and its subsidiaries (as

outlined in note 26) as at 31 December each year (“the group”).

Subsidiaries are all those entities over which the group has the power to govern the fi nancial and operating policies so as to obtain benefi ts

from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when

assessing whether a group controls another entity. The fi nancial statements of subsidiaries are prepared for the same reporting period

as the parent company, using consistent accounting policies.

In preparing the consolidated fi nancial statements, all intercompany balances and transactions, income and expenses and profi ts and

losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the group and cease to be consolidated from the date

on which control is transferred out of the group. Investments in subsidiaries held by Electrometals Technologies Limited are accounted

for at cost in the separate fi nancial statements of the parent entity.

The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves

allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed

at the date of acquisition (see note (d)). Minority interests not held by the group are allocated their share of profi t after tax in the income

statement and are presented within equity in the consolidated balance sheet, separately from parent shareholders’ equity.

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(d) Business combinations

The purchase method of accounting is used to account for all business combinations, regardless of whether equity instruments or other

assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of

exchange, plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value

of the instruments is their published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments

are recognised directly in equity.

Except for non-current assets or disposal groups classifi ed as held for sale (which are measured at fair value less costs to sell), all identifi able

assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the

acquisition date. The excess of the cost of the business combination over the net fair value of the group’s share of identifi able net assets

acquired is recognised as goodwill. If the cost of the acquisition is less than the group’s share of the net fair value of the identifi able net

assets of the subsidiary, the difference is recognisable as a gain in the income statement, but only after a reassessment of the identifi cation

and measurement of the net assets acquired.

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at

the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could

be obtained from an independent fi nancier under comparable terms and conditions.

(e) Segment reporting

A business segment is a distinguishable component of the entity that is engaged in providing products or services that are subject to risks

and returns that are different to those of other operating business segments. Management has assessed the reportable business segments

under AASB 114 Segment Reporting and have determined that, on adoption of AASB 8 Segment Reporting (applicable from 1 January

2009), additional operating segments will most likely be reported. A geographical segment is a distinguishable component of the entity that

is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different

than those of segments operating in other economic environments.

(f) Foreign currency translation

(i) Functional and presentation currencyThe functional and presentation currency of both Electrometals Technologies Limited and its Australian subsidiaries is Australian dollars

($). The Canadian subsidiary’s functional currency is Canadian dollars which are translated to the presentation currency (see below).

(ii) Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance

sheet date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date

of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the

date when the fair value was determined.

(iii) Translation of group companies functional currency to presentation currencyThe results of the Canadian subsidiary are translated into Australian Dollars and its assets and liabilities are translated at exchange rates

prevailing at balance date. Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in

equity. On consolidation, exchange differences arising from the translation of the net investment in the Canadian subsidiary are taken to

the foreign currency translation reserve. If the Canadian subsidiary were sold, the proportionate share of exchange differences would be

transferred out of equity and recognised in the income statement.

(g) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity

of three months or less that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes

in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defi ned above, net

of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the

balance sheet.

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(h) Trade and other receivables

Trade receivables, which generally have 30-60 days terms, are recognised initially at fair value and subsequently measured at amortised

cost using the effective interest method, less an allowance for impairment. The likelihood of collecting trade receivables is reviewed on

an ongoing basis at 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, default payments or debts more than 60 days overdue 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.

(i) Inventories

Inventories including raw materials, work in progress and fi nished goods are valued at the lower of cost and net realisable value. Costs

incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials: Purchase cost on a fi rst-in, fi rst-out basis. The cost of purchase comprises the purchase price, import duties and other

taxes (other than those subsequently recoverable by the entity from the taxing authorities), transport, handling and other costs directly

attributable to the acquisition of raw materials. Volume discounts and rebates are included in determining the cost of purchase.

Finished goods and work-in-progress: Cost of direct materials and labour and a proportion of variable and fi xed manufacturing

overheads based on normal operating capacity. Costs are assigned on the basis of weighted average costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated

costs necessary to make the sale.

(j) Derivative fi nancial instruments and hedging

The group uses derivative fi nancial instruments to hedge its exposure to foreign exchange risks from operational activities. The company

does not hold or issue derivative fi nancial instruments for trading purposes. Derivative fi nancial instruments are initially recognised in

the fi nancial statements at fair value. Subsequent to initial recognition, the gain or loss on remeasurement is recognised in the income

statement. Hedge accounting is not applied. The fair value of derivative fi nancial instruments is determined by reference to quoted

market prices at balance sheet date. If a quoted price is not available, the fair value is the estimated amount payable or receivable to

terminate the instrument at balance sheet date, taking into account available market information.

(k) Property, plant and equipment

Plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. 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 profi t and loss as incurred. Depreciation is calculated

using the diminishing value method, which has been applied at the following rates:

Computer equipment 40%

Motor vehicles 20%

Other machinery and equipment 20%

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

De-recognitionAn item of property, plant and equipment is derecognised upon disposal or when no further future economic benefi ts are expected from

its use or disposal.

(l) 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 the right to use the asset.

Group as a lesseeThe group has no fi nance leases in place. Operating lease payments are recognised as an expense in the income statement on a

straight-line basis over the lease term. The group has received no operating lease incentives.

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(m) Impairment of non-fi nancial assets other than goodwill

Intangible assets that have an indefi nite useful life are not subject to amortisation and are tested for impairment annually, or more

frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever

events or changes in circumstances indicate the carrying value may not be recoverable.

Electrometals Technologies Limited conducts an internal review of asset values on a periodic basis, which is used as a source of

information to assess for any indicators of impairment. External factors, such as changes in expected future processes, technology and

economic conditions, are also monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of the

asset’s recoverable amount is calculated.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable

amount is the higher of an asset’s fair value less costs to sell 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 assessments of the time value of money

and the risks specifi c to the asset. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there

are separately identifi able cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets (cash-

generating units). Non-fi nancial assets other than goodwill that suffered impairment are tested for possible reversal of the impairment

whenever events or changes in circumstances indicate that the impairment may have reversed.

(n) Goodwill and intangibles

GoodwillGoodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over

the group’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment

testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group’s cash-generating units,

or groups of cash-generating units, that are expected to benefi t from the synergies of the combination, irrespective of whether other

assets or liabilities of the group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which

the goodwill relates.

When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment

loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that

unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when

determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values

of the operation disposed of and the portion of the cash-generating unit retained.

Impairment losses recognised for goodwill are not subsequently reversed.

Research and development costsResearch costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised

only when the group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or

sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefi ts, the availability

of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during

its development. Following the initial recognition of the development expenditure, the cost model is applied, requiring the asset to be

carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised

over the period of expected benefi t from the related project.

The carrying value of an intangible assets arising from development expenditure is tested for impairment annually when the asset is not

yet available for use, or more frequently when an indication of impairment arises during the reporting period.

PatentsPatent costs are recognised as an expense in the income statement as and when they are incurred.F

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(o) Pensions and other post-employment benefi ts

The group makes payments to external superannuation funds under the compulsory superannuation contribution scheme, as required

by law and as directed by employees. These contributions are recognised as an expense in the income statement as and when they

are incurred.

(p) Trade and other payables

Trade and other payables are carried at amortised cost and, due to their short term nature, they are not discounted. They represent

liabilities for goods and services provided to the group prior to the end of the fi nancial year that are unpaid and arise when the group

becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and

are usually paid within 30 days of recognition.

(q) Provisions and employee benefi ts

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.

When 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. The expense relating to any provision is presented

in the income statement net of any reimbursement.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation

at the balance sheet date using a discounted cash fl ow methodology. The risks specifi c to the provision are factored into the cash fl ows

and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the

time value of money is material, provisions are discounted using a current pre-tax rate that refl ects the time value of money and the risks

specifi c to the liability. The increase in the provision resulting from the passage of time is recognised in fi nance costs.

Employee Leave Benefi ts(i) Wages, salaries, annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefi ts, annual leave and accumulating sick leave expected to be settled

within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured

at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the

leave is taken and are measured at the rates paid or payable.

(ii) Long service leaveThe liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect

of services provided by employees up to the reporting date, using the projected unit credit method. Consideration is given to expected

future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted

using market yields at the reporting date on national government bonds with terms of maturity and currencies that match, as closely as

possible, the estimated future cash outfl ows.

(r) Share-based payment transactions

Equity-settled transactionsThe group provides benefi ts to employees (including key management personnel) in the form of share-based payments, whereby

employees render services in exchange for shares or rights over shares (‘equity-settled transactions’). The plan in place is called the

Employee Share Option Plan (ESOP), under which eligible employees are entitled to received benefi ts.

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the

date at which they are granted. The fair value is determined by an external valuer using a Black Scholes model, further details of which

are given in note 28. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to

the price of the shares of Electrometals Technologies Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the

performance and/or service conditions are fulfi lled (the vesting period), ending on the date on which the relevant employees become fully

entitled to the award (the vesting date).For

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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 on 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 on 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.

Equity-settled awards granted by Electrometals to employees of subsidiaries are recognised in the parent’s separate fi nancial statement

as an additional investment in the subsidiary with a corresponding credit to equity. As a result, the expense recognised by Electrometals

in relation to equity-settled awards only represents the expense associated with grants to employees of the parent. The expense

recognised by the group is the total expense associated with all such awards.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally

anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition

is fulfi lled, provided that all other conditions are satisfi ed.

If 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. An

additional expense is recognised for any modifi cation that increases the total fair value of the share-based payment arrangement, or is

otherwise benefi cial to the employee, as measured at the date of modifi cation. If an equity-settled award is cancelled, it is treated as if it

had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new

award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and

new award are treated as if they were a modifi cation of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is refl ected as additional share dilution in the computation of diluted earnings per share

(see note 9).

(s) Contributed equity and preference shares

Ordinary and preference shares are classifi ed as equity. Incremental costs directly attributable to the issue of new share or options are

shown in equity as a deduction, net of tax, from the proceeds.

(t) Revenue

Revenue is recognised and measured at the fair value of the consideration received or receivable 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:

(i) Sale of electrowinning plants, laboratory testing and on-site pilot programsRevenue from the contracts for the supply of electrowinning plants, laboratory testing and on-site pilot programs is recognised by

reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of

total estimated labour hours for each contract. Where the contract outcome cannot be measured reliably, revenue is recognised only to

the extent of the expenses recognised that are recoverable.

(ii) Sale of spare partsRevenue is recognised when the signifi cant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred

or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the

buyer at the time of delivery of goods to the customer.

(iii) Interest incomeRevenue is recognised as interest accrues, using the effective interest method. This is a method of calculating the amortised cost of a

fi nancial assets and allocating the interest over the relevant period, using the effective interest rate, which is the rate that exactly discounts

estimated future cash receipts through the expected life of the fi nancial asset to the net carrying amount of the fi nancial asset.For

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(u) Income tax and other taxes

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to

the taxation authorities based on the current period’s taxable income. 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 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:

when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not •

a business combination and that, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; or

when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the •

timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse

in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax

losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the

carry-forward of unused tax assets and unused tax losses can be utilised, except:

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

liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor

taxable profi t or loss; or

when the deductible temporary difference is associated with investments in subsidiaries, associates and interests in joint ventures, •

in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the

foreseeable future and taxable profi t will be available against which the temporary difference can be utilised.

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 utilised. Unrecognised

deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent it has become probable future

taxable profi t will allow the deferred tax to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised

or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against

current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Other taxesRevenues, expenses and assets are recognised net of the amount of GST, except that:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is •

recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables, which are stated with the amount of GST included.•

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the

balance sheet. Cash fl ows are included in the Cash Flow Statement on a gross basis and the GST component of cash fl ows arising from

investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority, is classifi ed as part of operating cash

fl ows. Commitments and contingencies are disclosed net of the GST recoverable from, or payable to, the taxation authority.

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(v) Earnings per share

Basic earnings per share is calculated as net profi t attributable to members of the parent, adjust to exclude any costs of servicing equity

(other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any

bonus element.

Diluted earnings per share is calculated as net profi t attributable to members of the parent, adjusted for:

costs of servicing equity (other than dividends) and preference share dividends;•

the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; •

and

other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary •

shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(w) Change in presentation of Cost of Sales

The group has amended the presentation of the Income Statement to include within Cost of Sales only those projects where revenue

was derived. Other projects, such as research and development undertaken, testing programs with no revenue and costs such as

travel associated with assessing specifi c sales opportunities, have been expensed in the Income Statement under “Other expenses”.

Consequently, the gross margins for both the parent company and the group have been increased by $406,169 for 2007 and $79,556

for the 2006 comparative fi gures.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The group’s principal fi nancial instruments comprise receivables, payables, cumulative convertible redeemable preference shares, cash

and short-term deposits and derivatives. The group manages its exposure to key fi nancial risks, specifi cally interest rate risk and

currency risk, in accordance with the group’s fi nancial risk management policy. The objective is to support the delivery of the group’s

fi nancial targets whilst protecting and enhancing future fi nancial security. The group enters into derivative transactions, consisting of

forward currency contracts, the purpose being to manage the currency risk arising from the group’s operations. The group does not

trade in derivatives. The derivatives entered into provide economic hedges, but do not qualify for hedge accounting.

The main risks arising from the group’s fi nancial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The

group uses different methods to measure and manage different types of risk to which it is exposed. These include monitoring the levels

of exposure to interest rate and foreign exchange risk, and assessments of market forecasts for interest rates and foreign exchange rates.

Ageing analyses and monitoring of specifi c credit allowance are undertaken to manage credit risk, liquidity risk is monitored through the

development of future rolling cashfl ow forecasts which are tabled and reviewed at each board meeting.

Primary responsibility for identifi cation and control of fi nancial risks rests with the board of directors, however the day-to-day management

of these risks is under the control of the Chief Executive Offi cer in conjunction with the Financial Controller. The board reviews and agrees

the strategy for managing future cash fl ow requirements and projections, however the management of hedging cover of foreign currency

(comprising solely euros and US dollars) and interest rate risk is undertaken by the Chief Executive Offi cer and Financial Controller.

Risk exposures and responses

Interest rate riskThe group’s exposure to market interest rates relates primarily to the group’s funds held on term deposit. The level of these deposits is

disclosed in note 10. The group has no debt obligations. At balance date the group had the following mix of fi nancial assets and liabilities

exposed to Australian variable interest rate risk that are not designated in cash fl ow hedges:

Consolidated Parent

Financial assets 2007$

2006$

2007$

2006$

Cash and cash equivalents 7,650,548 3,813,696 7,654,141 3,805,057

The group’s policy is to place funds on interest-bearing term deposit that are surplus to immediate requirements. The group’s interest

rate exposure is reviewed near the maturity date of term deposits, to assess whether more attractive interest rates are available without

increasing risk. The following sensitivity analysis is based on the interest rate exposures in existence at balance sheet date:

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At 31 December 2007, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profi t and equity would have been

affected as follows:

Judgements of reasonably possible movements Post tax profi t Higher / (lower)

EquityHigh / (lower)

2007$

2006$

2007$

2006$

Consolidated

+ 1% (100 basis points) 68,000 20,000 68,000 20,000

-0.5% (50 basis points) (34,000) (10,000) (34,000) (10,000)

Parent

+ 1% (100 basis points) 68,000 20,000 68,000 20,000

-0.5% (50 basis points) (34,000) (10,000) (34,000) (10,000)

The movements in profi t and equity are due to higher/(lower) interest income from cash balances.

Foreign currency riskThe group’s sales are almost entirely to overseas customers and it also sources components from overseas. For sales, the contracts are

usually denominated in Australian dollars, therefore the foreign exchange risk is effectively passed to the customer. For the purchase of

overseas components, no forward exchange cover is obtained for small items, as the cost cannot be justifi ed. For larger purchases, an

assessment is made at the time the invoice is received whether to obtain forward currency cover, having regard to recent and anticipated

currency movements.

At 31 December 2007, the group had the following exposure to foreign currency that is not designated in cash fl ow hedges:

Consolidated Parent

Financial liabilities 2007$

2006$

2007$

2006$

Trade and other payables 329,158 29,162 329,158 29,162

The group also has, as outlined in note 21, forward currency contracts designated as cash fl ow hedges that are subject to fair value

movements through equity and profi t and loss respectively, as foreign exchange rates move. At 31 December 2007, the group had hedged

57% of its foreign currency purchases that are fi rm commitments, extending to February 2008.

The following sensitivity is based on foreign currency risk exposures in existence at the balance sheet date:

At 31 December 2007, had the Australian dollar moved, as illustrated in the table below, with all other variables held constant, post tax profi t and equity would have

been affected as follows:

Judgements of reasonably possible movements Post tax profi t Higher / (lower)

EquityHigh / (lower)

2007$

2006$

2007$

2006$

Consolidated

AUD/All currencies + 10% 75,961 2,916 75,961 2,916

AUD/All currencies - 5% (37,980) (1,458) (37,980) (1,458)

Parent

AUD/All currencies + 10% 75,961 2,916 75,961 2,916

AUD/All currencies - 5% (37,980) (1,458) (37,980) (1,458)

The movements in profi t in 2007 are more sensitive in 2007 than in 2006 due to the higher level of payables in foreign currency at balance

date.

Management believes the balance date risk exposures are representative of the risk exposure inherent in the fi nancial instruments.

Price riskThe group’s exposure to commodity price risk is minimal and not material.

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Credit riskCredit risk arises from the fi nancial assets of the group, which comprise cash and cash equivalents, trade and other receivables and

derivative instruments. The group’s exposure to credit risk arises from the potential default of the counterparty, with a maximum

exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. The group

does not hold any derivatives to offset its credit exposure.

The group trades for the most part with recognised creditworthy third parties and, as such, collateral is not requested nor is it the group’s

policy to securitise its trade and other receivables. However, the group has a policy of seeking a substantial deposit on the sale of its

electrowinning plants, to cover outlays on materials and components required when the manufacture of a plant begins. Receivable

balances are monitored on an ongoing basis, with the result that the group’s exposure to bad debts is minimised. Term deposits funds

are placed with major fi nancial institutions to minimise the risk of default of counterparties.

Liquidity riskThe group’s objective is to maintain suffi cient funds to fi nance its current operations and additional funds to ensure its long-term survival

in the event of a business downturn. The group has no fi nance facilities in place, therefore is dependent currently on shareholder funds

and surpluses derived from operations. The table below refl ects all contractually fi xed pay-offs and receivables for settlement resulting

from recognised fi nancial assets and liabilities, including derivative fi nancial instruments as of 31 December 2007. For derivative fi nancial

instruments, the market value is presented, whereas for the other obligations the respective undiscounted cash fl ows for the upcoming

fi scal years are presented. There are no fi nancial assets or liabilities without a fi xed amount or timing existing at 31 December 2007. The

remaining contractual maturities of the group’s and parent entity’s fi nancial liabilities are:

Consolidated Parent

2007$

2006$

2007$

2006$

6 months or less 1,532,300 829,034 1,525,354 783,067

Maturity analysis of fi nancial assets and liabilities based on management’s expectationTrade payables and other fi nancial liabilities mainly originate from the fi nancing of assets used in ongoing operations such as property,

plant, equipment, and investments in working capital, e.g. inventories and trade receivables. These assets are considered in the group’s

overall liquidity risk. To monitor existing fi nancial assets and liabilities as well to enable an effective controlling of future risk, Electrometals

Technologies Limited has established ongoing risk reporting covering its business that refl ects expectations of management of expected

settlement of fi nancial assets and liabilities.

Fair valueThe methods for estimating fair value are outlined in the relevant notes to the fi nancial statements.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the fi nancial statements requires management to make judgements, estimates and assumptions that affect the

reported amounts in the fi nancial statements. Management continually evaluates its judgements and estimates in relation to assets,

liabilities, contingent liabilities, revenues and expenses. Management bases its judgements and estimates on historical experience and

on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values

of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different

assumptions and conditions.

Management has identifi ed the following critical accounting policies for which signifi cant judgements, estimates and assumptions are

made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect fi nancial

results or the fi nancial position reported in future periods. Further details of the nature of these assumptions and conditions may be

found in the relevant notes to the fi nancial statements.

(i) Signifi cant accounting judgements

Operating lease commitments – group as lesseeThe group has entered into commercial property leases for properties from which its operations are carried out. The group has

determined that it has none of the signifi cant risks and rewards of ownership of these properties and has thus classifi ed the leases as

operating leases.

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Impairment of non-fi nancial assets other than goodwillThe group assesses impairment of all assets at each reporting date by evaluating conditions specifi c to the group and to the particular

asset that may lead to impairment. These include product and manufacturing performance, technology, economic and political

environments and future product expectations. If an impairment trigger exists, the recoverable amount of the asset is determined. An

impairment loss has been recognised in this fi nancial period.

Revenue recognitionRevenue recognition on contracts for the supply of electrowinning plants, laboratory testing and on-site pilot programs is based on

percentage completion, measured by actual hours versus budgeted hours.

Capitalised development costsDevelopment costs are only capitalised by the group when it can be demonstrated that the technical feasibility of completing the

intangible asset is valid so that the asset will be available for use or sale.

TaxationThe 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 unrecouped 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 dependant on the generation of suffi cient future taxable

profi ts.

(ii) Signifi cant accounting estimates and assumptions

Impairment of goodwill and intangibles with indefi nite useful livesThe group determines whether goodwill and intangibles with indefi nite useful lives are impaired at least on an annual basis. This requires

an estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash fl ow methodology, to which

the goodwill and intangibles with indefi nite useful lives are allocated.

Share-based payment transactionsThe group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the

date at which they are granted. The fair value is determined by an external valuer using a Black Scholes model, with the assumptions

detailed in note 28. 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.

Make good provisionsNo provision has been made for the present value of anticipated costs of future restoration of leased premises, as the likely costs are

not considered to be material.

Estimation of useful lives of assetsThe estimation of the useful lives of assets has been based on historical experience as well as manufacturers’ warranties (for plant and

equipment), lease terms (for leased equipments) and turnover policies (for motor vehicles). In addition, the condition of the assets is

assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered

necessary.

If the useful lives of assets were shortened by 20% for each asset, the fi nancial effect on consolidated depreciation expense for the

current fi nancial year and the next four years would not be material:

Depreciation charges are included in note 6.

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5. SEGMENT INFORMATION

During the year, the group’s activities consisted solely of manufacturing equipment in Australia for the metals processing industry.

6. Expenses

Consolidated Parent

2007$

2006$

2007$

2006$

(a) Other expenses

Net foreign exchange differences - (30,690) - -

Bad debts written off (63,944) (11,443) (63,944) (11,443)

Provision for doubtful debts (50,364) (11,055) (567,364) (382,055)

Development costs writedown (110,854) - (110,854) -

Inventory writedown (30,625) (21,888) (30,625) (21,888)

Research and development written off (329,713) - (329,713) -

Test programs written off (76,458) (79,556) (76,458) (79,556)

(661,958) (154,632) (1,178,958) (494,942)

(b) Finance costs

Interest expense - (280) - (280)

(c) Depreciation included in income statement

Depreciation (110,125) (59,999) (102,551) (51,732)

(d) Operating lease payments

Minimum operating lease payments (303,965) (162,751) (303,965) (162,751)

(e) Employee benefi ts expense

Wages and salaries (2,085,273) (1,346,190) (1,765,100) (1,155,601)

Superannuation contributions (247,104) (116,393) (247,104) (116,393)

Share-based payment expense (31,240) (58,052) (31,240) (58,052)

Other employee benefi ts expense (8,554) (57,318) (8,554) (57,318)

(2,372,171) (1,577,953) (2,051,998) (1,387,364)

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7. INCOME TAX

Major components of income tax expense for the years ended 31 December 2007 and 2006 are:

Income statement

Current income tax

Current income tax benefi t

R&D costs tax concession refunded

-

-

-

105,792

-

-

-

105,792

For the years ended 31 December 2007 and 2006, a reconciliation of income tax expense applicable to accounting loss before income

tax at the statutory income rate as compared to income tax expense at the group’s effective income tax rate is as follows:

Accounting profi t / (loss) before income tax 633,850 706,638 502,675 707,709

Income tax at statutory rates 30% (190,155) (211,991) (150,803) (212,313)

Expenditure not allowable for income tax purposes (9,372) (17,416) (9,372) (17,416)

R&D costs tax concession - 105,792 - 105,792

Benefi t of tax not previously brought to account 199,527 229,407 160,175 229,729

Income tax benefi t in income statement - 105,792 - 105,792

The directors estimate that the potential deferred tax asset (net) as at 31 December 2007 not brought to account is $6,888,668 (2006:

$7,054,939) at the income tax rate of 30%. The majority of this benefi t comprises unused tax losses brought forward from previous

years, being $6,647,966 (2006: $6,841,856).

The benefi t of tax losses available for offset against future taxable income will only be obtainable if:

(i) The company derives future assessable income of a nature and of an amount suffi cient to enable the benefi t from the

deduction for the losses to be realised;

(ii) The company continues to comply with the conditions for deductibility imposed by tax legislation; and

(iii) No changes in tax legislation adversely affect the company in realising the benefi t from the deduction for the losses.

8. DIVIDENDS PAID AND PROPOSED

The company has not declared or paid any dividends. Due to past losses incurred by the company, there are no franking credits

available for the subsequent fi nancial year.

9. EARNINGS PER SHARE

Consolidated

2007$

2006$

(a) Earnings used in calculating earnings per share

For basic and diluted earnings per share

Net profi t 633,850 812,430

Adjustment for preference shares (21,333) (21,333)

612,517 791,097

(b) Weighted average number of ordinary shares for basic earnings per share

Weighted average number of ordinary shares for basic

earnings per share

184,679,475 133,022,809

Effect of dilution

Share options 1,870,769 590,592

Preference shares - -

Weighted average number of ordinary shares adjusted for the

effect of dilution186,550,244 133,613,401

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Information on the classifi cation of securities:

Options(a) Options granted to employees (including key management personnel) as described in note 28 are considered as potential ordinary shares and have been included in the determination of diluted earnings per share to the extent they are dilutive. These options were not included in the determination of basic earnings per share.

Preference shares(b) The redeemable preference shares as described in note 22 are considered to be potential ordinary shares, but they have not been included in the determination of diluted earnings per share because they are anti-dilutive.

10. CURRENT ASSETS – CASH AND CASH EQUIVALENTS

Consolidated Parent

2007$

2006$

2007$

2006$

Cash at bank and on hand 150,548 213,696 154,141 205,057

Short-term deposits 7,500,000 3,600,000 7,500,000 3,600,000

7,650,548 3,813,696 7,654,141 3,805,057

Reconciliation to cash fl ow statementThe above fi gures correspond to the cash and cash equivalents shown in the cash fl ow statement.

11. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES

Trade debtors – other persons/corporations 412,211 919,398 366,106 918,754

Less: provision for doubtful debts (114,308) (63,944) (114,308) (63,944)

297,903 855,454 251,798 854,810

Related parties receivables – subsidiaries - - 1,256,918 739,605

Less: provision for doubtful debts - - (1,256,000) (739,000)

- - 918 605

Unbilled accrued revenue 770,245 122,675 770,245 122,675

Other 20,312 76,554 12,544 76,554

1,088,460 1,054,683 1,035,505 1,054,644

Allowance for impairment loss(a) Trade receivables are not interest-bearing and are generally on 30-60 days terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss arising from non-recoverability of certain debtors aggregating to $114,308 has been recognised by the group and by the company in the current year (2006: $22,498). Movements in the provision for impairment loss were as follows:

Other persons/corporations – 1 January 63,944 52,889 63,944 52,889

Charge for the year 114,308 22,498 114,308 22,498

Amounts written off (63,944) (11,443) (63,944) (11,443)

Closing balance 114,308 63,944 114,308 63,944

Related parties – 1 January - - 739,000 368,000

Charge for the year - - 517,000 371,000

Closing balance - - 1,256,000 739,000

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other

balances will be received when due.

Related party receivables(b) For terms and conditions of related party receivables, refer to note 26.

Fair value and credit risk(c) Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.

Foreign and interest rate risk(d) Detail regarding foreign exchange and interest rate risk is disclosed in note 3.

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12. CURRENT ASSETS – INVENTORIES

Consolidated Parent

2007$

2006$

2007$

2006$

Raw materials and stores - at cost 661,609 168,550 661,609 168,550

Finished goods 115,724 15,492 115,724 15,492

777,333 184,042 777,333 184,042

Inventories recognised as an expense for the year ended 31 December 2007 totalled $4,447,767 (2006: $2,711,086) for the group and

$4,430,094 (2006: $2,650,857) for the company. This expense has been included in the cost of sales line item as a cost of inventories.

Inventory writedowns recognised as an expense totalled $30,625 (2006: $21,888) for both the group and the company.

13. NON-CURRENT ASSETS – RECEIVABLES

Deposits 28,409 31,821 28,409 31,821

The deposits are held in relation to the company’s offi ce accommodation, workshop space and power supply. All amounts are (a)

receivable in Australian dollars and are not considered past due or impaired.

The fair values are the same as the carrying values.(b)

The interest rate and credit risks are not material.(c)

14. NON-CURRENT ASSETS – INVESTMENTS IN SUBSIDIARIES

Investments in controlled entities

At cost (note 26)

- - 562,500 562,500

Less: Provision for diminution in value - - (562,500) (562,500)

- - - -

15. NON-CURRENT ASSETS – PLANT & EQUIPMENT

Reconciliation of carrying amounts at the beginning and end of the period:(a)

Opening carrying amount, net of accumulated depreciation

and impairment

466,296 237,759 446,754 201,217

Additions 341,789 307,899 321,789 302,679

Disposals (6,075) (5,410) (6,075) (5,410)

Depreciation expense (note 6 (c)) (110,125) (59,999) (102,551) (51,732)

Foreign currency exchange difference 2,252 (13,953) - -

Carrying amount at the end of the year, net of accumulated

depreciation and impairment694,137 466,296 659,917 446,754

Carrying amounts if plant and equipment were measured at cost less accumulated depreciation and impairment:(b)

Plant & equipment at cost 957,456 786,145 878,417 736,310

Plant & equipment under construction 158,935 - 158,935 -

Less: accumulated depreciation and impairment (422,254) (319,849) (377,435) (289,556)

Net carrying amount 694,137 466,296 659,917 446,754

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16. NON-CURRENT ASSETS – INTANGIBLE ASSETS

Reconciliation of carrying amounts at the beginning and end of the year(a)

Consolidated Parent

2007$

2006$

2007$

2006$

Opening carrying amount, net of accumulated amortisation and

impairment

109,612 - 109,612 -

Additions – automated harvester 1,242 109,612 1,242 109,612

Amortisation (110,854) (110,854)

Closing carrying amount, net of accumulated amortisation and

impairment

- 109,612 - 109,612

Gross carrying amount

Development costs – automated harvester

110,854 109,612 110,854 109,612

Goodwill 589,975 589,975 - -

Less: Accumulated amortisation (700,829) (589,975) (110,854) -

Net carrying amount - 109,612 - 109,612

Description of the group’s intangible assets and goodwill(b) (i) Development costs

Development costs are carried at cost less accumulated amortisation and accumulated impairment losses. The amortisation

has been recognised in the income statement in the line item “other expenses”.

(ii) Goodwill

After initial recognition, goodwill measured on a business combination is measured at cost less any accumulated impairment losses.

Goodwill is not amortised, but is subject to impairment testing on an annual basis or whenever there is an indication of impairment.

17. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES

Trade payables 1,105,852 261,452 1,098,906 224,815

Accruals 426,448 567,582 426,448 558,252

1,532,300 829,034 1,525,354 783,067

Due to the short-term nature of these payables, the carrying value is assumed to approximate fair value.(a) For terms and conditions applying to related party payables, refer to note 26.(b)

Information regarding interest rate, foreign exchange and liquidity risk exposure in set out in note 3.(c)

18. CURRENT LIABILITIES – DEFERRED INCOME

Progress billings for contracts in progress 151,630 4,038,223 151,630 4,038,223

Less: revenue recognised (75,380) (1,902,466) (75,380) (1,902,466)

76,250 2,135,757 76,250 2,135,757

Revenue in advance represents payments on contracts received in advance of being taken up in the profi t and loss on a percentage

completion basis. The carrying amount is assumed to approximate fair value.

19. CURRENT LIABILITIES – PROVISIONS

Employee benefi ts – Annual leave 126,049 104,241 115,282 101,096

Movement in provision

Opening balance 104,241 58,358 101,096 54,967

Arising during the year 145,645 116,832 119,753 105,632

Utilised (123,837) (70,949) (105,567) (59,503)

Closing balance 126,049 104,241 115,282 101,096

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20. NON-CURRENT LIABILITIES – PROVISIONS

Employee benefi ts – Long service leave 24,680 30,312 24,680 30,312

Movement in provision

Opening balance 30,312 19,128 30,312 19,128

Arising during the year 6,540 13,066 6,540 13,066

Utilised - - - -

Relinquished (12,172) (1,882) (12,172) (1,882)

Closing balance 24,680 30,312 24,680 30,312

21. DERIVATIVE FINANCIAL INSTRUMENTS

Current liabilities

Nominal value of forward currency contracts 430,457 - 430,457 -

Derivative fi nancial instruments in the form of foreign currency contracts are used by the group in the normal course of business in order to hedge

exposure to fl uctuations in foreign currency exchange rates. They are specifi cally used to fi x the purchase cost of fi rm orders placed for overseas-

sourced manufacturing components, with the contracts usually being 60 days or less. The group does not trade in these derivative fi nancial

instruments. Although the forward currency contracts are matched against forecast inventory purchases, the company has chosen not to adopt

hedge accounting and any gain or loss on the contracts attributable to the hedged risk is taken directly to the Income Statement.

Forward currency contracts – cash fl ow hedgesThe cash fl ows are expected to occur within 60 days from 1 January 2008 and the profi t or loss within cost of sales will be affected over

the next few months as the inventory is either used in production or sold. At balance date, the details of the outstanding contracts are:

Notional amounts Average exchange rate

2007$

2006$

2007$

2006$

Buy euros / sell Australian dollars

Consolidated and parent 430,457 - 0.5901 -

22. CUMULATIVE REDEEMABLE CONVERTIBLE PREFERENCE SHARES

The 8% cumulative redeemable convertible preference shares were issued in 1998. Holders of the preference shares are entitled to receive

a cumulative fi xed preferential dividend at the rate of 8% per annum on the issue price (40c), but have no further right to participate in profi ts

or losses of the company, whether surplus or otherwise. The company shall not redeem the preference shares before June 2008 and any

redemption shall be from profi ts that would otherwise be available for dividends, or out of the proceeds of a fresh issue of shares made for

the purpose of the redemption. The preference shareholders do not have the right to have the shares redeemed; they may convert each

preference share into an ordinary share at any time by giving written notice to the company and, when converted, all unpaid arrears of dividends

in respect of the converted shares are deemed to be cancelled. The cumulative dividend on preference shares not recognised at 31 December

2007 is $203,339 (2006: $182,006).

Consolidated Parent

2007$

2006$

2007$

2006$

Balance 133,333 133,333 133,333 133,333

Due to the conditions attaching to the preference shares, their maturity date is uncertain. Their carrying value is therefore considered

to be their fair value.

23. CONTRIBUTED EQUITY

Issued and paid up capital: Shares2007

Shares2006

$2007

$2006

Fully paid ordinary shares 204,357,579 133,022,809 33,187,455 27,982,929

Fully paid 8% cumulative redeemable convertible preference

shares (see note 22)

666,667 666,667 133,333 133,333

205,024,246 133,689,476 33,320,788 28,116,262

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Movement in shares on issue

Date Detail Number $

1.1.2006 Balance* 133,689,476 28,151,802

Share issue expenses - (35,540)

31.12.2006 Balance* 133,689,476 28,116,262

10.4.2007 Non-renounceable pro rata issue @ 8c per share 66,511,404 5,320,912

10.4.2007 Underwriter’s shares 4,323,241 345,859

Share issue expenses - (486,063)

19.7.2007 Conversion of options 500,000 25,000

Share registry expenses - (1,200)

14.12.2007 Conversion of options 125 18

31.12.2007 Balance* 205,024,246 33,320,788

* Includes 666,667 fully paid 8% cumulative redeemable convertible preference shares.

The ordinary shares do not have a par value. Ordinary shares have the right to receive dividends as declared and, in the event of winding up

the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held. Ordinary shares

entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Capital management(a) When managing capital, management’s objective is to ensure the group 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 group. As the market is constantly changing, management may return capital to shareholders, issue new shares, sell assets to reduce debt or vary any dividends paid to shareholders. No dividends have been paid in 2007 or 2006, and there are no current plans to pay dividends. Management has no current plans to issue further shares on the market.

Currently, the company has no loan debt, only trade and other payables, therefore a gearing ratio has not been calculated.

The group is not subject to any externally imposed capital requirements.

24. RETAINED EARNINGS AND RESERVES

(a) Movements in retained earnings were as follows:

Consolidated Parent

2007$

2006$

2007$

2006$

Balance 1 January (25,461,437) (26,273,867) (25,436,620) (26,250,121)

Net profi t / (loss) 633,850 812,430 502,675 813,501

Balance 31 December (24,827,587) (25,461,437) (24,933,945) (25,436,620)

(b) Movement in foreign currency translation reserve:

Balance 1 January 5,273 - - -

Increase / (decrease) (44,110) 5,273 - -

Balance 31 December (38,837) 5,273 - -

(c) Movement in employee equity benefi ts reserve

Balance 1 January 58,052 - 58,052 -

Share-based payment 31,240 58,052 31,240 58,052

Balance 31 December 89,292 58,052 89,292 58,052

(d) Nature and purpose of reserves

Employee equity benefi ts reserveThe employee equity benefi ts reserve is used to record the value of share-based payments to employees, including key management

personnel, as part of their remuneration. Refer to note 28 for details.

Foreign currency translation reserveThe foreign currency translation reserve is used to record foreign exchange differences arising from the translation of the fi nancial

statements of foreign subsidiaries.

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25. CASH FLOW STATEMENT RECONCILIATION

Reconciliation of the net profi t / (loss) after tax to net operating cash fl ows:

Net profi t / (loss) after tax 633,850 812,430 502,675 813,501

Adjustments for:

Depreciation 110,125 59,999 102,551 51,732

Net loss on disposals of plant and equipment 6,075 5,410 6,075 5,410

Development costs written off 110,854 - 110,854 -

Share-based payments expense 31,240 58,052 31,240 58,052

Interest received (451,753) (106,355) (451,753) (106,355)

Changes in assets and liabilities

Decrease (increase) in inventories (593,290) 31,454 (593,290) 31,454

Decrease (increase) in debtors and prepayments 12,567 (715,733) 66,101 (714,827)

(Decrease) increase in creditors and provisions (1,322,064) 1,608,958 (773,664) 1,939,166

GST on investing and fi nancing cash fl ows 35,163 19,871 35,163 19,871

Foreign exchange movement (45,064) - (11,393) (306)

Net cash fl ow (outfl ow) from operating activities (1,472,297) 1,774,086 (975,441) 2,097,698

26. RELATED PARTIES INFORMATION

GroupThe group consists of Electrometals Technologies Limited and the following subsidiaries:

Name Incorporated in Class of shares

Holding % Holding %

2007 2006

Electrometals Canada Inc. Canada Ordinary 100 100

Materials Research Pty Ltd Australia Ordinary 100 100

Mallonbury Pty Ltd Australia Ordinary 97.4 97.4

Electrometals Technologies Limited is the ultimate parent entity of the group. With the exception of Electrometals Canada Inc, the

subsidiaries have not been consolidated because each is dormant and the investment in each is not material. There has been no

acquisition or disposal of subsidiaries in the last two years.

Transactions between Electrometals Technologies Limited and companies in the group during the years ended 31 December 2007 and

2006 consisted of:

Loans were advanced to Electrometals Canada Inc. during the current and previous fi nancial years. The advances are interest free, •

unsecured and with no fi xed repayment terms.

Administration and accounting services have been provided to Electrometals Canada Inc. free of charge during the current and •

previous fi nancial years.

Other related party transactions

A substantial shareholder, Industrie de Nora S.p.A., and its related companies, has received or become entitled to receive benefi ts for the

supply of goods and services. Electrometals also provided goods and services to De Nora. Amounts paid or payable totalled $1,976,930

(2006: $573,471) and amounts received or receivable totalled $62,272 (2006: $39,142). Balance payable at year-end: $678,943 (2006:

Nil). Balance receivable at year-end: $12,368 (2006: $12,956).

Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made in arm’s length transactions, both at normal market prices and on normal terms.

Outstanding balances at the end of the year are unsecured and interest-free; settlement occurs in cash. In the year ended 31 December 2007,

the group has not made any allowance for doubtful debts relating to amounts owed by related parties.

Key management personnel

Details relating to key management, including remuneration paid, are included in note 27.

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27. KEY MANAGEMENT PERSONNEL

Details of key management personnel(a)

Directors R E Keevers Chairman and CEO

R G Melgaard Deputy Chairman and non-executive director

G A Marshall Non-executive director



Executives I D Ewart Senior Process Engineer

R L Burling Senior Mechanical Engineer appointed 20.8 2007

M G Ross Senior Mechanical Engineer resigned 30.6.2007

K G Powell General Manager, Sales and Marketing

M J Brown Senior Metallurgist

R A Palmer Senior Process Chemist

T Stapurewicz Senior Metallurgist

C C Barker Company Secretary & Financial Controller

Compensation of key management personnel(b)

Consolidated Parent

2007$

2006$

2007$

2006$

Short-term employee benefi ts 1,161,970 786,995 876,168 646,848

Non-monetary benefi ts 2,967 - - -

Post-employment benefi ts 179,866 114,152 179,866 114,152

Share-based payments 29,414 58,052 20,667 46,114

1,374,217 959,199 1,076,701 807,114

Electrometals Technologies Limited has applied the option under Corporations Amendments Regulation 2006 to transfer key management

personnel remuneration disclosures required by AASB 124 Related Party Disclosures Aus 25.4 to Aus 25.7.2 to the Remuneration report

section of the Directors’ Report.

These transferred disclosures have been audited.

Shareholdings of key management personnel (consolidated)(c)

The number of ordinary shares in the company held by key management personnel of the group and their related parties are set out

below. Key management personnel and their related parties who held no shares during the year are not included.

2007 Balance at start of the year Acquisitions / (disposals) Balance at year-end

Name Directly Indirectly Directly Indirectly Directly Indirectly

Directors

R E Keevers 1,529,398 325,000 764,699 162,500 2,294,097 487,500

G A Marshall - 220,000 - 110,000 - 330,000

J Bastoni - 5,000 - 2,500 - 7,500

R G Melgaard 11,000,000 2,284,021 12,664,679 1,142,010 23,664,679 3,426,031

B L Kelly 110,000 - 55,000 - 165,000 -

Executives

I D Ewart 26,625 - - - 26,625 -

R A Palmer 40,000 - - 40,000 -

Total 12,706,023 2,834,021 13,484,378 1,417,010 26,190,401 4,251,031

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2006 Balance at start of the year Acquisitions / (disposals) Balance at year-end

Name Directly Indirectly Directly Indirectly Directly Indirectly

Directors

R E Keevers 1,529,398 325,000 - - 1,529,398 325,000

G A Marshall - 100,000 - 120,000 - 220,000

J Bastoni - 5,000 - - - 5,000

R G Melgaard 11,000,000 2,284,021 - - 11,000,000 2,284,021

B L Kelly - - 110,000 - 110,000 -

Executives

I D Ewart 26,625 - - - 26,625 -

R A Palmer 40,000 - - 40,000 -

Total 12,596,023 2,714,021 110,000 120,000 12,706,023 2,834,021

Option holdings of key management personnel (consolidated)(d) 500,000 shares were issued during the year on exercise of remuneration options by key management personnel. Options over

ordinary shares in the company provided as remuneration to key management personnel during the year and the numbers held

during the year by key management personnel of the group, including their personally-related entities, are set out below:

2007

Name

Balance at the start of

the year

Granted as remuneration

Options exercised

Other net changes

Balance at the end of the year

Exercisable Not exercisable

Directors

R E Keevers 1,200,000 - - - 1,200,000 900,000 300,000

Executives

I D Ewart 1,000,000 500,000 - - 1,500,000 750,000 750,000

R L Burling - 1,200,000 - - 1,200,000 - 1,200,000

M G Ross 1,000,000 - (500,000) (500,000) - - -

K G Powell 1,000,000 100,000 - - 1,100,000 750,000 350,000

M J Brown - 250,000 - - 250,000 - 250,000

R A Palmer 640,000 300,000 - - 940,000 480,000 460,000

T Stapurewicz - 250,000 - - 250,000 - 250,000

C C Barker - 80,000 - - 80,000 - 80,000

Total 4,840,000 2,680,000 (500,000) (500,000) 6,520,000 2,880,000 3,640,000

2006

Name

Balance at the start of

the year

Granted as remuneration

Options exercised

Balance at the end of the

year

Exercisable Not exercisable

Directors

R E Keevers - 1,200,000 - 1,200,000 600,000 600,000

Executives

I D Ewart - 1,000,000 - 1,000,000 500,000 500,000

K G Powell - 1,000,000 - 1,000,000 500,000 500,000

M G Ross - 1,000,000 - 1,000,000 500,000 500,000

R A Palmer - 640,000 - 640,000 320,000 320,000

Total - 4,840,000 - 4,840,000 2,420,000 2,420,000

In a release to the Australian Securities Exchange on 23 November 2007, the company announced its intention to seek approval from

shareholders to issue a further 800,000 options to the Chairman and CEO, Mr Keevers.For

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28. SHARE-BASED PAYMENT PLANS

Recognised share-based payment expenses(a)

The expense relating to the equity-settled share-based payment (and taken as a separate component of equity) at 31 December

2007 is $31,240 (2006: $58,052). The share-based payment plan is described below. There have been no cancellations or

modifi cations to the plan during 2007 or 2006.

Share options are granted to executives and staff under the Employee Share Option Plan, whose introduction was approved (b)

by shareholders at the annual general meeting on 30 May 2006 and which came into effect on 1 June 2006. Under the plan,

each option entitles the holder, while employed by the company and during the option exercise period, to acquire one new listed

ordinary share in the company at the option price. Subsequently, 6,600,000 options have been issued to executives and staff

under the plan. Separately, shareholders have also approved the issue of 1,200,000 options to the Chairman and CEO, Mr RE

Keevers.

Summary of options granted under the Employee Share Option Plan arrangements and via shareholder approval. The following (c)

table illustrates the number and weighted average exercise price (WAEP) of, and movements in, share options issued during the

year.

2007 Number 2007 WAEP 2006 Number 2006 WAEP

Outstanding at the beginning of the year 4,840,000 5c - -

Granted during the year 2,960,000 11c 4,840,000 5c

Forfeited during the year (500,000) 5c - 5c

Exercised during the year (500,000) 5c - -

Expired during the year - - - -

Outstanding at the end of the year 6,800,000 8c 4,840,000 5c

The outstanding balance at 31 December 2007 is represented by:

Exercise price Number Vesting date Exercise by

2,640,000 5c 1,320,000 15.9.2006 30.5.2010

5c 660,000 15.9.2007 30.5.2011

5c 660,000 15.9.2008 30.5.2011

1,200,000 5c 300,000 21.6.2006 30.5.2010

5c 300,000 15.9.2006 15.9.2010

5c 300,000 15.9.2007 15.9.2011

5c 300,000 15.9.2008 15.9.2012

1,760,000 12c 440,000 30.6.2008 31.8.2012

12c 440,000 30.6.2009 31.8.2012

12c 440,000 30.6.2010 31.8.2012

12c 440,000 30.6.2011 31.8.2012

1,200,000 10c 300,000 30.6.2008 31.8.2012

10c 300,000 30.6.2009 31.8.2012

10c 300,000 30.6.2010 31.8.2012

10c 300,000 30.6.2011 31.8.2012

6,800,000

Weighted average remaining contractual life(d)

The weighted average remaining contractual life for the share options outstanding as at 31 December 2007 is 3.72 years (2006:

3.97 years).

The range of exercise prices for options outstanding at the end of the year was 5c – 12c (2006: 5c).(e)

The weighted average fair value of options granted during the year was 3.5c (2006: 1.9c).(f)

Option pricing model(g)

The fair value of the all the equity-settled share options granted is estimated as at the date of grant using a binomial model taking

into account the terms and conditions on which the options were granted.

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The following table details the inputs to the model:

Expected volatility (%) 65

Risk-free interest rate (%) 6.50

Expected life of option (years) 4.89 years

Weighted average options exercise price 11c

Weighted average share price at grant date 7c

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.

The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also not

necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

The fair value of cash-settled options is measured at grant date using a binomial option pricing model and taking into account the

terms and conditions upon which the instruments were granted. The services received and a liability to pay for those services are

recognised over the expected vesting period. Until the liability is settled, it is remeasured at each reporting date, with changes in

fair value recognised in profi t and loss.

29. COMMITMENTS

Consolidated Parent

2007$

2006$

2007$

2006$

Operating lease commitments

Payable as follows:

Not later than one year 212,966 223,693 212,966 223,693

Later than one year but not later than fi ve years 174,894 283,379 174,894 283,379

387,860 507,072 387,860 507,072

These lease commitments relate to offi ce space, workshop space and equipment rentals used in the group’s operations at Ashmore in

Queensland. Leases are normally for 1-3 years, with a 1-2 year option.

30. CONTINGENCIES

Legal claim

On 13 August 2007, the company announced to the Australian Securities Exchange that it has received a Queensland Supreme Court

claim for approximately $3 million in relation to an EMEW® plating and powder electrowinning plant supplied in 2002 to the Chilean

company Molibdenos y Metales S.A. (“Molymet”). Electrometals intends to vigorously defend the action and believes it will be successful.

The potential fi nancial exposure cannot be assessed at the date of this report.

31. EVENTS AFTER THE BALANCE DATE

On 25 February 2008, the company announced to the Australian Securities Exchange that it has purchased a 51% shareholding in

Kurion Technologies Limited, a U.K. company which markets a wide range of environmental, reprocessing and recycling applications

and technologies, some of which are complementary to the EMEW® electrowinning technology marketed by Electrometals. The initial

consideration for the purchase was $400,000. and this may increase by up to $100,000, depending on operating results for the year ended

31 December 2008. Electrometals will also provide additional loan funds to enable Kurion to pursue specifi c business opportunities.

Accounting standard AASB 3 requires that disclosure be made of the amounts recognised at the acquisition date for the acquiree’s assets

and liabilities, together with an assessment of their fair value. Kurion is a private company, whose accounts have not been audited previously

and, while satisfactory due diligence was carried out in respect of recent accounts, fi nancial accounts as at the date of purchase are not yet

available. However, as an indication, the purchase price of $400,000 should be considered almost entirely as representing goodwill.

On 26 February 2008, the company announced the sale of an EMEW® electrowinning plant worth $887,000 to a Taiwanese customer.

On 26 March 2008, the company announced the sale of an EMEW® electrowinning plant worth $445,000 to a USA customer, as well as

the inclusion in group revenue of approximately $1,650,000 in anticipated revenue from Kurion Technologies, representing Kurion work in

hand at the date of purchase.

At the date of this report the directors are not aware of any other matters or circumstances which have arisen since 31 December 2007

that have signifi cantly affected or may signifi cantly affect:

the operations of the group in the fi nancial years subsequent to 31 December 2007, or(1).

the results of those operations, or(2).

the state of affairs of the group in the fi nancial years subsequent to 31 December 2007.(3).

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32. REMUNERATION OF AUDITORS

Amounts received, or due and receivable by Ernst & Young for:

Audit or review of the fi nancial reports of the parent company 80,310 63,321 80,310 63,321

Other non-audit services 3,090 - 3,090 -

83,400 63,321 83,400 63,321

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Directors' Declaration


In accordance with a resolution of the directors of Electrometals Technologies Limited, we state that:

1. In the opinion of the directors:

(a) the fi nancial statements, notes and the additional disclosures in the directors’ report designated as audited, of the company

and the group are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company and the group’s fi nancial position as at 31 December 2007 and of their

performance for the year ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations 2001; and

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

payable.

2. This declaration has been made after receiving the declarations required to be made to directors in accordance with section 295A

of the Corporations Act 2001 for the fi nancial year ended 31 December 2007.

On behalf of the board

_______________ _______________

R E Keevers B L Kelly

Chairman Director

Ashmore, Gold Coast

28 March 2008

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Independent Auditor's Report


19 23

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Corporate Directory


The shareholder information set out below was applicable as at 7 March 2008.

1. Distribution of equity securities

Ordinary share capital(i)

204,357,579 fully paid ordinary shares are held by 1,618 individual holders. All issued ordinary shares carry one vote per

share and carry the right to dividends

Preference share capital(ii)

666,667 8% cumulative convertible redeemable preference shares are held by 2 individual shareholders. All issued

cumulative convertible redeemable preference shares are convertible at the option of the shareholder into ordinary shares

at any time, on the basis of one ordinary share for every one preference share held. Each preference share currently

carries one right to vote.

(iii) Options

33,255,577 listed options are held by 294 individual option holders.

2. The number of shareholders, by size of holding, in each class are:

Fully paidordinary shares

Preference shares Listed options

1 to 1,000 680 - 54

1,001 to 5,000 209 - 62

5,001 to 10,000 157 - 31

10,001 to 100,000 402 - 126

100,001 to (max) 170 2 21

1,618 2 294

Holders of less than a marketable parcel 938 N/A 180

3. Twenty largest holders of quoted securities – ordinary shares

Shares held Percentage

Equitas Nominees Pty Ltd <Group C a/c> 40,520,174 19.83

Industrie De Nora SpA 32,350,000 15.83

R G Melgaard 23,664,679 11.58

Grange Nominees Limited 6,500,000 3.18

Ganesh Holdings International Ltd 6,287,500 3.08

Northside Demolition Pty Ltd 4,739,250 2.32

Pegmont Mines Limited 4,710,408 2.30

Liz Claiborne Pty Ltd <R&M Gibson Super Fund a/c> 4,073,961 1.99

Equitas Nominees Pty Ltd <Group A a/c> 3,426,031 1.68

Denman Investments Limited 3,358,379 1.64

RHead Investments Pty Ltd <RHead Super Fund a/c> 2,780,480 1.36

R E Keevers 2,294,097 1.12

Baraline Pty Ltd 2,100,000 1.03

Bas Finance Pty Ltd 1,828,628 0.89

T M Landy 1,698,658 0.83

A P Bray & T M Bourne 1,620,000 0.79

A J Berrick 1,511,000 0.74

Davmin Pty Ltd 1,500,000 0.73

Wildfl ower Pty Ltd 1,100,000 0.54

K E & J M Richards 1,025,375 0.50

Total 147,088,620 71.96Total on issue 204,357,579

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4. Twenty largest holders of quoted securities - options

Options held Percentage

Equitas Nominees Pty Ltd <Group C a/c> 14,348,449 43.15


R G Melgaard 2,750,000 8.27

RHead Investments Pty Ltd <RHead Super Fund a/c> 877,803 2.64

Northside Demolition Pty Ltd 789,875 2.37

Pegmont Mines Limited 785,068 2.36

Liz Claiborne Pty Ltd <R&M Gibson Super Fund a/c> 678,994 2.04

Equitas Nominees Pty Ltd <Group A a/c> 571,005 1.72

R E Keevers 382,350 1.15

Tartwin Pty Ltd 225,000 0.67

K B O’Connell & S H Van Emmerick 217,500 0.65

U Muco 200,000 0.60

C Chin 155,193 0.47

R Maciej 150,000 0.45

Woolsthorpe Investments Limited 136,645 0.41

D L & L E Goode <the Goode Super Fund A/C> 134,500 0.40

I P Randall 128,819 0.39

Wildfl ower Pty Ltd 125,000 0.38

D J MacDougall 125,000 0.38

P A C Rice <Rice Retirement Fund a/c> 124,888 0.38

Total 28,297,756 85.09Total on issue 33,255,577

5. Substantial shareholders

Name Shares held Percentage

Waverton Holdings Limited 40,520,174 19.76


R G Melgaard 23,664,679 11.54

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Current directors

RE Keevers GA Marshall RG Melgaard

J Bastoni BL Kelly

Company Secretaries

Colin Barker Ian Millard

Principal offi ce and registered offi ce

28 Commercial Drive, Ashmore Qld 4214, Australia

Telephone: +61-7-5526-4663 Facsimile: +61-7-5527-0299

E-mail: [email protected] Website: www.electrometals.com.au

Overseas offi ces

Kurion Technologies Limited43 Brunel Close, Drayton Fields Industrial Estate, Daventry, Northamptonshire NN11 8RB, United Kingdom

Telephone: +44-1327-876600 Facsimile: +44-1327-705131

Website: www.kurion.co.uk

Electrometals Canada Inc#205-3689 East 1st Avenue, Vancouver BC V5M 1C2, Canada

Telephone: +1-604-320-0333 Facsimile: +1-604-320-0336

Auditors

Ernst & YoungLevel 5, Waterfront Place

1 Eagle Street

Brisbane Qld 4000

Telephone: (07) 3011-3333 Facsimile: (07) 3011-3344

Banker

National Australia Bank

2 Classic Way

Burleigh Waters Qld 4220

Share Registry

Computershare Investor Services Pty Ltd

Level 19, CPA Building

307 Queen Street

Brisbane Qld 4000

Telephone: (07) 3237-2100 Facsimile: (07) 3229-9860

Solicitors

DLA Phillips Fox

1 Eagle Street

Brisbane Qld 4000

Stock Exchange Listing

Electrometals Technologies ordinary shares are listed on the Australian Securities Exchange (ASX Code: EMM)For

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