interim financial report for the half-year ended 30 …

(ACN 076 318 173)

INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED

30 JUNE 2011

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Indophil Resources NL Interim Financial Report

Contents Corporate information 1 Directors’ report 2 Statement of comprehensive income 6 Statement of financial position 7 Statement of changes in equity 8 Statement of cash flows 9 Notes to the financial statements 10 Directors’ declaration 14 Independent auditor’s review report 15

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Corporate Information Directors Brian Phillips Chairman (Non-Executive) Richard Laufmann Chief Executive Officer and Managing Director Tony Robbins Director (Executive) Kyle Wightman Director (Non-Executive) Anita Krauser Company Secretary Principal and Registered Office Indophil Resources NL Level 3 411 Collins Street Melbourne VIC 3000 Australia Telephone +61 3 8620 5800 Facsimile +61 3 8620 5888 Postal Address PO Box 600 Collins Street West Melbourne VIC 8007 Australia Website www.indophil.com Regional Office Level 3, L & F Building 107 Aguirre Street Legaspi Village Makati City, Manila The Philippines Auditors Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia SyCip Gorres Velayo & Co 6760 Ayala Avenue Makati City, Manila The Philippines

Solicitors/Attorneys Australia Freehills Level 42 101 Collins Street Melbourne VIC 3000 Australia Baker & McKenzie Level 19 181 Williams Street Melbourne VIC 3000 Australia The Philippines Fortun Narvasa & Salazar 23

rd Floor,

Multinational Bancorporation Centre 6805 Ayala Avenue Makati City, Manila The Philippines Share Registry Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia Bankers Australia and New Zealand Banking Group Limited 388 Collins Street Melbourne VIC 3000 Australia Enquiries Gavan Collery Manager Corporate Affairs Indophil Resources NL Telephone +61 3 8620 5800 Email: [email protected] Or (general) [email protected] All currencies are in Australian dollars unless stated otherwise

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Directors’ report Your directors submit their report for the half-year ended 30 June 2011.

Directors The names of the Company’s directors in office during the half-year and until the date of this report are set out below. Directors held office for the entire period unless otherwise stated. B Phillips Non-Executive Chairman R Laufmann Chief Executive Officer and Managing Director T Robbins Executive Director K Wightman Non-Executive Director

Review and results of operations The Group recorded a net profit after tax of $0.742m for the half-year compared to a net profit after tax of $6.714m for the corresponding period last year. At 30 June 2011, the Group held $150.985m in cash balances compared with the balance of $32.160m held at 31 December 2010. The increase in cash was due to receipt of $148.550m (before associated transaction costs of $8.259m) raised under the Institutional Entitlement and Institutional Placement Offer which closed 9 June 2011. Exclusivity Agreement with San Miguel Corporation (San Miguel) Following a Share Placement linked to a binding exclusivity period with San Miguel entered into in October 2010, Indophil and San Miguel mutually agreed to extend the exclusivity by one month to complete further due diligence. The exclusivity period ended on 10 February 2011. Capital Raising On 6 June 2011, the Company entered into a trading halt to facilitate an equity raising as announced on 8 June 2011. As disclosed in the Company’s Prospectus dated 8 June 2011, the pro rata accelerated non-renounceable offer (comprising an Institutional Entitlement Offer and Retail Entitlement Offer, collectively the Offer), offered up to 471 million new shares in the Company at an Offer Price of $0.35 per share. Eligible shareholders were offered the right to acquire 1 New Share in the Company for every 1 Existing Share held at the Record Date of 14 June 2011. The Offer also included an Institutional Placement of up to 70 million New Shares at the Offer Price. The Company successfully raised $148.550m (before transaction costs) under the Institutional Entitlement and Institutional Placement Offer which closed on 9 June 2011. The allotment of New Shares under this Offer commenced trading on the ASX on 17 June 2011. The Retail Entitlement Offer, which closed on 7 July 2011, successfully raised a further $34.846m, increasing the total gross proceeds raised to $183.396m (before transaction costs) under the equity raising. Total New Shares issued following the raising, including the Institutional Placement, was 523.993 million Indophil ordinary shares. In accordance with clause 2.12 of the Prospectus, the Company elected to place a portion of the Retail Shortfall Shares following the close of the Retail Offer, which was not underwritten. The allotment of New Shares under the Retail Offer commenced trading on the ASX on 15 July 2011. The Company will use the funds raised primarily to fund the expenditure in respect of continued development of the Tampakan Copper-Gold Project in the Southern Philippines and to fund working capital requirements, including corporate expenses.

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Directors’ report (continued) Review and results of operations (continued) Tampakan Copper-Gold Project The Company continued to fund its 37.5% share of exploration, feasibility and development expenditure on the Tampakan Project, through the project’s operating arm, Sagittarius Mines Inc. (SMI). Xstrata Copper (Xstrata), on behalf of SMI, manages the technical studies for the Tampakan Project. SMI’s main focus for 2011 is Phase 2 of a Continued Development Program which includes: business case value enhancement opportunities, environmental and social impact assessments, environmental compliance certificate (ECC) application, free prior informed consent and receipt of major local, provincial and national government consents. Environmental Impact Assessment (EIA) The EIA studies for the mine have been completed. The draft Mine Environmental Impact Statement (EIS) and draft Environmental Social Impact Assessment (ESIA) present the results of the extensive EIA studies undertaken by Philippine and international experts which conform with national and international environmental regulations, guidelines and best practices. Public disclosure of the draft mine EIS commenced in June 2011 with briefings to stakeholders. SMI plans to conduct approximately 50 briefing sessions covering 1,200 stakeholders. This will be followed be a series of public meetings. The draft mine EIS will then be reviewed and updated following the consultation process before being used to support the formal ECC application process. The EIAs for the port/power station and the transportation corridor for the concentrate pipeline and power transmission are progressing. A resettlement study program has commenced and will be a major focus for the remainder of 2011. The intent is to improve significantly the confidence in the process, cost and schedule of the resettlement plan ahead of the final investment decision. As disclosed in the Company’s Prospectus, SMI has informed the Company that activity levels and associated funding requirements for the remainder of 2011 and 2012 are likely to be deferred as a result of the potential for resettlement and land acquisition impacting the timing of final investment decision and commencement of construction expenditure. Environment Code Ban on Open Pit Mining in South Cotabato In June 2010, the South Cotabato provincial council (the jurisdiction in which the Tampakan deposit is located) approved a new Environment Code that includes a ban on open pit mining. The Code took effect in October 2010. The national government has stated in writing that the ban is contrary to national law and must be amended in accordance with national law which allows open pit mining. The Philippine President and his relevant national Minister (Secretary) have both expressed support for minerals development in the Philippines and the need for the open pit issue to be resolved. However, to date the Environment Code and the section pertaining to a provincial ban on open pit mining remain in place. In accordance with its obligations under the Environment Code, the new provincial government has prepared Implementing Rules and Regulations (IRRs) which have been signed off by the provincial governor. Consultation on the draft mine EIS is considered to be an important contributing factor to ongoing efforts that seek review and amendment of the Environment Code prohibition on open pit mining. The Company remains confident that this issue will be satisfactorily resolved. In the meantime, field and study work continues on the Tampakan Project.

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Directors’ report (continued) Review and results of operations (continued) Tampakan Production Profile The Tampakan Project has strong potential as a large, long-life, low-cost open pit producer of copper and gold. - 5th largest undeveloped copper resource globally (based on contained copper equivalent).

- The Mining Project Feasibility Study (MPFS) confirms that Tampakan is a world-class copper and gold development opportunity.

- Highlights of the MPFS include:

- Long-life (minimum 17 years) open pit, with potential for extension.

- Average planned annual production over the first 17 years of 375,000 tonnes of copper and 360,000 ounces of gold.

- Average planned annual production over the first five years of 450,000 tonnes of copper and 435,000 ounces of gold.

- Capital requirements of US$5.9 billion (Indophil 37.5% share US$2.2 billion).

- Low life-of-mine (17 years) C1 cash cost (net of gold by-product credits) in bottom quartile of global producers.

- Low stripping ratio of 1:1.19 (ore:waste). Other Exploration The Group’s Itogon Gold Project in Northern Luzon commenced a drilling program at the end of 2010. Latest drill results were released in the Company’s June 2011 quarterly report issued to the ASX on 25 July 2011. The program is testing shallow positions as well as lateral and depth extensions of the Frog and Taka Barr vein systems. The Group continues to manage its remaining exploration programs in Northern and Southern Luzon and Central Mindanao. In addition, the Group is in discussions with prospective partners regarding its 25% interest in the Manat Gold Project located in Eastern Mindanao. Employee Option Plan (EOP) The Company resolved to implement a new EOP to act as an incentive scheme for current and future employees. The Company issued 614,000 options to employees who are not directors on 4 August 2011, at an exercise price of $0.41 expiring 3 April 2014. The terms of the EOP may be found on the Company’s website (www.indophil.com). Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (unless otherwise stated) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies. F

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Directors’ report (continued) Auditor’s Independence Declaration We have obtained the following independence declaration from our auditors, Ernst & Young.

Signed in accordance with a resolution of the directors.

BM Phillips Chairman Melbourne, 23 August 2011

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Statement of comprehensive income

Consolidated For the half-year ended 30 June Note 2011

$000 2010 $000

Interest income 4,186 2,794

Other 32 34

Revenue 4,218 2,828

Administration (1,477) (1,983)

Corporate (843) (1,148)

Depreciation (37) (47) Exchange fluctuations 307 9 Exploration and evaluation (126) (333) Operating lease payments (136) (122) Superannuation payments (150) (129) Share of (loss)/profit of an associate 5 (1,014) 242 Reversal of provisions - 7,428

Expenses (3,476) 3,917

Profit before income tax 742 6,745

Income tax expense - (31)

Profit after income tax 742 6,714 Other comprehensive income for the period, net of tax - -

Total comprehensive income for the half-year, net of tax

742 6,714

Earnings per share for profit attributable to the ordinary equity holders of the parent:

Cents Cents

Basic profit per share 0.15 1.61

Diluted profit per share 0.15 1.60

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Statement of financial position

Consolidated As at Note 30 June

2011 $000

31 Dec 2010 $000

ASSETS

Current assets

Cash and cash equivalents 4 150,985 32,160

Other receivables 984 197

Prepayments 179 186

Total current assets 152,148 32,543

Non-current assets

Other financial assets 2,673 2,658

Investment in associate 5 213,753 193,421

Exploration and evaluation assets 5,754 5,007 Plant and equipment 39 61

Total non-current assets 222,219 201,147

Total assets 374,367 233,690

LIABILITIES

Current liabilities

Trade and other payables 689 726

Provisions 300 367

Income tax payable - -

Total current liabilities 989 1,093

Non-current liabilities

Trade and other payables 3,695 3,988

Provisions 60 57

Total non-current liabilities 3,755 4,045

Total liabilities 4,744 5,138

Net assets 369,623 228,552

EQUITY

Equity attributable to equity holders of the Parent

Contributed equity 6 361,401 221,053

Retained earnings 7,024 6,023

Reserves 1,198 1,476

Total equity 369,623 228,552

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Statement of changes in equity

Attributable to equity holders of the Consolidated Entity

Contributed Equity

$000

Retained Earnings

$000

Reserve

$000

Total Equity

$000

Balance at

1 January 2010 175,847 3,716 3,176 182,739


-

6,714

-

6,714

Transactions with owners in their capacity as owners

Transaction cost on shares issued - - 246 246

Shares issued 1,219 - - 1,219

Transfer of exercised options 1,810 - (1,810) -

As at 30 June 2010 178,876 10,430 1,612 190,918

Balance at

1 January 2011 221,053 6,023 1,476 228,552


- 742 - 742

Transactions with owners in their capacity as owners

Transaction costs on shares issued (8,259) - - (8,259)

Shares issued (i) 148,550 - - 148,550

Transfer of exercised/expired options 19 259 (278) -

Shares issued – Indophil Employee Share Plan

38

-

-

38

As at 30 June 2011 361,401 7,024 1,198 369,623

Note: (i) As reported to the ASX on 17 June 2011, 424.430m shares were issued under the Institutional

Entitlement and Institutional Placement Offer.

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Statement of cash flows

Consolidated For the half-year ended 30 June Note 2011

$000 2010 $000

Cash flows from operating activities

Interest received 654 833

Payments to suppliers and employees (3,106) (3,090)

Income tax paid - -

Net cash flows used in operating activities (2,452) (2,257)

Cash flows from investing activities

Purchase of plant and equipment (14) (5)

Exploration and evaluation (702) (333)

Advances to associate entity (18,001) (17,625) Acquisition costs re additional shares in SMI - (27) Prepayment – advances to Anvil Philippines Mining Ventures Inc. - (358)

Net cash flows used in investing activities (18,717) (18,348)

Cash flows from financing activities

Proceeds from rights issue, net of fees 139,943 - Proceeds from exercise of options 38 1,219

Net cash flows from financing activities 139,981 1,219

Net increase/(decrease) in cash and cash equivalents 118,812 (19,386)

Net foreign exchange differences 13 2

Cash and cash equivalents at the beginning of the period 32,160 36,059

Cash and cash equivalents at the end of the period 4 150,985 16,675

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Notes to the financial statements For the half-year ended 30 June 2011 1. Basis of preparation and accounting policies Basis of preparation This general purpose condensed financial report for the half-year ended 30 June 2011 has been prepared in accordance with AASB 134 ‘Interim Financial Reporting’ and the Corporations Act 2001. The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. It is recommended that the half-year financial report be read in conjunction with the annual report for the financial year ended 31 December 2010 and be considered together with any public announcements made by the Company during the half-year ended 30 June 2011 in accordance with the continuous disclosure obligations of the ASX listing rules. The accounting policies and methods of computation are the same as those adopted in the most recent annual financial report. Going concern The accounts have been prepared on a going concern basis. A summary of the Group’s outstanding commitments at 30 June 2011 are disclosed in Note 7. As highlighted in Note 7, there is some uncertainty in relation to the timing and magnitude of Sagittarius Mines Inc., (SMI) expenditure requirements in 2012. SMI has informed the Company that activity levels and associated SMI funding requirements for the remainder of 2011 and 2012 are likely to be deferred, in which case it is expected that the proceeds received from the recent equity raising will provide sufficient funds until the end of 2012. No budgets have been approved by the SMI Board beyond 2011. Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and the functional currency of the majority of the entities within the Group. Changes in accounting policy The following amending standards have been adopted from 1 January 2011. Adoption of these standards did not have any effect on the financial position or performance of the Group. AASB 124(Revised) Related Party Disclosures (December 2009)

AASB 2010-4 Further amendments to Australian Accounting Standards arising from the Annual Improvements Project (AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13)

AASB 2010-5 Amendments to Australian Accounting Standards (AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042)

The Group has not elected to early adopt any other new standards or interpretations that are issued but not yet effective.

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Notes to the financial statements (continued)

For the half-year ended 30 June 2011 2. Significant accounting judgements, estimates and assumptions In applying the Group’s accounting policies, management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements were outlined in the 31 December 2010 Annual Financial Report. Further to that, no significant changes in judgements, estimates and assumptions have been observed at 30 June 2011, with the exception of matters described below. In June 2010, the South Cotabato provincial council (the jurisdiction in which the Tampakan deposit is located) approved a new Environment Code that includes a ban on open pit mining. The Code took effect in October 2010. The national government has stated in writing that the ban is contrary to national law and must be amended in accordance with national law which allows open pit mining. The Philippine President and his relevant national Minister (Secretary) have both expressed support for minerals development in the Philippines and the need for the open pit issue to be resolved. However, to date the Environment Code and the section pertaining to a provincial ban on open pit mining remain in place. The Company remains confident that this issue will be resolved. In the meantime, field and study work continues unabated on the Tampakan Project. Given that the open pit mining ban in South Cotabato is contrary to national law, management do not consider that this event provides objective evidence that the carrying value of the Groups interest in the Tampakan Project has been adversely affected at 30 June 2011.

3. Segment information The Group operates solely in the mining exploration industry, and to date has only one flagship project, the Tampakan Copper-Gold Project. With the Group’s other mining tenements in the Philippines, additional segments may be disclosed in the future. The Group determines its operating segments by reference to internal reports that are reviewed and used by the executive management team (the chief operating decision maker) in assessing performance and in determining the allocation of resources. The executive management team currently receive consolidated balance sheet and profit and loss information that is prepared in accordance with Australian Accounting Standards. 4. Cash and cash equivalents

Consolidated

30 June 2011 $000

31 Dec 2010 $000

Cash in hand 6 5

Cash at bank 4,379 5,734

Short-term deposits 146,600 26,421

150,985 32,160

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For the half-year ended 30 June 2011 5. Investment in associate The following table sets out the composition of the carrying value of the Group’s interest in its associate SMI as at 30 June 2011 and 31 December 2010:

Consolidated

30 June 2011 $000

31 Dec 2010 $000

Cost

Opening balance 193,421 150,954

Acquisition costs re additional shares in SMI - 28

Net advances during the period 21,346 45,833

Share of net loss for the period (1,014) (3,394)

Carrying value 213,753 193,421

Share of associate’s statement of financial position

Beneficial interest 37.50% 37.50%

Current assets 1,889 836

Non-current assets 141,151 125,417

Current liabilities (3,627) (6,569)

Non-current liabilities (149,903) (129,160)

Net assets (10,490) (9,476)

6. Contributed equity

Ordinary Shares Ordinary Shares

30 June 2011

Number

31 Dec 2010

Number

30 June 2011 $000

31 Dec 2010 $000

Balance at the start of the period Parent Entity 471,445,763 419,027,937 222,353 177,735

Movements in contributed equity for the financial year

Issue of shares pursuant to:

Issue of shares under Institutional Entitlement and Placement Offer (net of transaction costs)

424,429,577 - 140,291 -

Issue of placement shares to San Miguel - 48,016,960 - 41,295

Exercise of employee options/ performance rights - 4,400,866 - 1,219

Transfer from reserves - - 19 2,104

895,875,340 471,445,763 362,663 222,353

Less employee share plan (1,912,445) (1,969,613) (1,262) (1,300)

Balance at the end of the period Consolidated Entity 893,962,895 469,476,150 361,401 221,053

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For the half-year ended 30 June 2011 7. Commitments The following is a summary of Tampakan Project capital commitments as at 30 June 2011: Capital commitments Consolidated

30 June 2011 $000

31 Dec 2010 $000

Committed expenditure for the Tampakan Project

July – December 2011 21,336 -

Phase 2 of the Tampakan Project Continued Development Plan for January to December 2011 was approved by Sagittarius Mines Inc. in January 2011. Indophil has met cash calls totalling $18.001m for the period January – June 2011. No budgets have been approved by the SMI Board beyond this period. The SMI budget for 2012 remains uncertain. Expenditure requirements previously forecast by SMI have not been approved and are expected to be deferred as a result of potential for resettlement and land acquisition impacting the timing of a final investment decision and the commencement of construction expenditure. Indophil’s share of the previously forecast SMI budget for 2012 was $159.6 million. It is expected that the majority of any significant expenditure for 2012 will be incurred after final investment decision and not before the second half of 2012. There are no other changes to commitments disclosed in the most recent annual financial report. 8. Contingent liabilities There are no other changes to contingent liabilities as disclosed in the most recent annual financial report.

9. Events after the balance date As reported to the ASX on 14 July 2011, 99.563m New Shares were issued under the Retail Entitlement Offer. The Retail Entitlement Offer successfully raised a further $34.846m, increasing the total gross proceeds raised to $183.396m under the equity raising. In accordance with clause 2.12 of the Prospectus, the Company elected to place a portion of the Retail Shortfall Shares following the close of the Retail Offer, which was not underwritten. The allotment of New Shares under the Retail Offer commenced trading on the ASX on 15 July 2011. As announced on 4 August 2011, the Company issued 614,000 options under a new Employee Option Plan (EOP) to employees who are not directors. Details of the EOP may be found on the Company’s website (www.indophil.com).

10. Dividends paid and proposed No dividends were paid during the half-year (2010: Nil) and no dividend is proposed to be paid at 30 June 2011 (2010: Nil).

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Directors’ declaration In accordance with a resolution of the directors of Indophil Resources NL, I state that: In the opinion of the directors: (a) The financial statements and notes of the consolidated entity are in accordance with the

Corporations Act 2001, including:

(i) giving a true and fair view of the financial position as at 30 June 2011 and the performance for the half-year ended on that date of the consolidated entity; and

(ii) complying with Accounting Standards AASB 134 Interim Financial Reporting and the

Corporations Regulations 2001. (b) There are reasonable grounds to believe that the Company will be able to pay its debts as

and when they become due and payable.

On behalf of the Board BM Phillips Chairman Melbourne, 23 August 2011

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Independent Auditor’s Review Report

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Independent Auditor’s Review Report (continued)

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interim financial report for the half-year ended 30 …

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