Straits Resources Limited Annual Report 2009

Straits Annual Report 2009 Straits Resources Limited ACN 056 601 417 Level 1, 35 Ventnor Avenue West Perth WA 6005 T: (08) 9480 0500 F: (08) 9480 0520 www.straits.com.au Annual General Meeting

The Seventeenth Annual General Meeting of Straits Resources Limited will be held at 12:30 pm on Monday 30 November 2009 at the Celtic Club, 48 Ord Street, West Perth, Western Australia. Highlights Financial Profit after tax (before minorities) of $38.0 million. Profit of $259.0 million recorded on the sale of the 60% interest in Straits Bulk & Industrial Pty Ltd. Unfranked final dividend of 30 cents per share paid on 21 September 2009. Cash on hand at 30 June 2009 of $223.0 million, not including restricted cash of $22.0 million as security on performance bonds. $80.0 million convertible note issue placed with Standard Chartered Private Equity Limited. A gearing ratio of 9%. Repayment of $58.0 million corporate debt. Operations & Exploration Tritton copper production of 24,000 t. Whim Creek copper production of 10,000 t. Mt Muro production of 49,000 ounces of gold and 304,300 ounces of silver. Air core drilling programme at Goldminco’s Temora project in New South Wales extended the mineralised system significantly and the system is still open along strike. Drilling commenced at Tritton Deeps. Corporate Strategic coal alliance formed with the PTT Group, via the sale of a 60% interest in Straits’ wholly owned subsidiary Straits Bulk & Industrial Pty Ltd for US$335.0 million. Divestments of non-core assets proceeding. Sebuku boundary rezoning announced in August 2009. Way forward cleared for Straits to claim US$115 million performance payment from the PTT Group. Strategy Our business strategy is to establish In April 2009 we took the opportunity In assessing new projects we intend Straits Resources Limited as a growth to realise value from our coal business, to create value by using geological focussed diversified resources group. This whilst retaining exposure to that business assessment to identify undervalued includes growing our metals business with through a retained 40% interest in PTT resource potential. We will apply our skills solid cash flows, and a pipeline of project Asia Pacific Mining Pty Ltd. Consequent and capital to creating additional value by opportunities in addition to our profitable upon the partial realisation of our coal converting resource potential into mineable and growing coal business. We intend to assets, our aim is to grow Straits’ metals reserves. Our business philosophy is to remain aggressively growth orientated. business to match the size and profitability target large, regional sized geological that we created in our coal investments. opportunities and to focus on projects that Straits has a successful track record have the potential to be scaleable to a size of defining, acquiring and developing To achieve this, as well as advancing that is internationally relevant. resource assets. Over the past three projects from our existing portfolio, we will years we gave emphasis to the growth of look to both expand Straits’ asset base by Straits’ coal business and we were very acquisition and to divest assets that are successful in growing this business into considered “non-core”. We are currently a world class coal producer. Straits Asia reviewing our portfolio of metals assets Resources Limited alone had a market and we believe there is considerable capitalisation of $1.7 billion at the end of latent value which can be unlocked over June 2009. time by the application of capital and geological expertise. 5 year Summar y

Year 6 Months to Year December Year December Year December June 2009 June 2008 2007 2006 2005 Profitability Mining activities and other $’000 215,040 398,183 358,042 455,975 243,768 Metals distribution $’000 352,483 1,101,968 3,330,223 504,850 - Total Revenue $’000 567,523 1,507,018 3,694,224 960,825 243,768

Gross Profit $’000 (131,571) 126,271 45,093 107,334 92,967 Operating profit/(loss) after tax attributable to members of $’000 (42,107) (5,995) (16,110) 34,219 45,660 Straits Resources Limited

Earnings profit/(loss) per share Cents (17.9) (2.6) (8.44) 21 32 (undiluted)

Cash Flow Cash flow from operations $’000 188,793 173,016 (6,273) 11,370 35,590

Balance Sheet Total shareholders’ equity $’000 873,798 1,043,692 900,887 435,709 204,029 Net asset backing per share $ 3.57 4.48 3.98 2.28 1.26

Ratios Return on shareholders’ funds % (10) (1) (4) 14 32

Debt/(Debt + Equity) excluding % 9 47 33 6 18 trade finance debt

Production Sebuku coal mine t’000 2,564 1,960 3,436 3,495 3,000 Jembayan coal mine t’000 5,271 2,498 - - - Whim Creek copper mine t 10,089 6,037 15,339 14,800 8,746 Tritton copper mine t 24,111 8,372 18,549 23,088 19,296 Mt Muro gold mine Au oz 48,850 21,728 45,748 47,452 13,361 Ag oz 304,360 68,786 349,833 350,378 72,982

Market Capitalisation Share price at 30 June 2009 & $ 2.11 6.84 6.60 3.53 2.36 31 December 2005 - 2008 Shares on issue (fully paid) Million 245.54 232.89 225.88 190.86 161.66 Market capitalisation $’M 518.1 1,593.0 1,490.8 673.7 381.5

Notes 1. Years 2005 through to 2009 have been prepared on the basis of Australian equivalents to International Financial Reporting Standards. 2. Year 2009 excludes discontinued operation information for profitability. 2 Straits Annual Report 1

1 3 5 7 9 11 13 15 16 17 18 19 21 23 25 27 31 51 52 54 148 149 151 152

Design by Chameleon Creative This publication is printed using vegetable-based inks on paper that is chlorine free and This publication is printed using vegetable-based inks on paper that is chlorine free sustainable forestry. from sourced Straits Overview Statement Chairman’s Review Officer’s Chief Executive

Finance Alliance Strategic Coal Base Metals Precious Metals Metals Distribution Exploration Human Resources & Safety Occupational Health Environment Community Relations Statement Mineral Resource Ore Reserve Statement Corporate Governance Report Directors’ Independence Declaration Auditor’s Report Auditor’s Independent Report and Financial Statements The Financial To Notes Declaration Directors’ Shareholder Information Glossary Corporate Directory Contents

Overview Straits is an ASX 200 diversified resources company focussed on generating strong and sustainable earnings for its shareholders from a portfolio of resource projects and investments.

Based in Perth, Straits has a management team with an impressive track record of advancing resource projects through to full production. Straits controls and operates the Tritton copper mine in New South Wales, the Hillgrove antimony/gold mine, also in New South Wales (operations currently suspended), the Mt Muro gold mine in Indonesia, and the Whim Creek copper mine in Western Australia. The Whim Creek copper mine is expected to reach the end of its life in late 2009. In addition, Straits has an outstanding portfolio of mining investments, development projects and exploration ground throughout Australia and Indonesia. Straits also owns GfE, a speciality metals (noble alloys) European based distribution business, and Magontec, a producer of high quality magnesium alloys with plants in Germany and China.

1 Straits Annual Report 2 Metals Distribution for the GfE and revenue Group dropped Magontec businesses in cutbacks severe the after sharply following industries related steel the Thethe global financial crisis. is still depressed, market in Europe markets US and Asian the however, starting to show signs of are Metal sales volumes for recovery. 2009 year half first the in Magontec to compared 63% down were the first half of 2008 due to sharp declines starting in November 2008. of showing signs Sales volumes are improvement. Exploration activities exploration Significant being undertaken by Straits. are In June an important exploration at was commenced programme the resource/ to increase Tritton Nyngan the within inventory reserve Muro Mt the At district. copper gold mine, work is well advanced to commence geophysical and drill testing of identified fertile gold increasing of aim the with structures of the field. A inventory the resource tenement large in programme drilling held by Straits’ subsidiary, areas Goldminco Corporation, in the Lachlan Fold Belt of New South extended an revealed has Wales, mineralised system which is still Australia,South In strike. along open excellent offers project Torrens the potential to find an Olympic Dam a strategic style deposit. Further, underway with is currently review to all Straits’ exploration respect potential of aim the with assets assets non-core any of divestment the Group. from

Mt Muro sold 48,367oz of gold and Mt Muro A 297,558oz of silver for the year. was ore eluvial of amount significant near mill sources from processed to supplement a as time this during main hard the current from vein ore gold Pre-mining mine, Tasat. rock million 2 exceeds now inventory was exploration while and ounces, to due years recent in curtailed roots grass constraints, financial exploration has historically been very in generating targets and effective resources gold delivering and reserves. Precious Metals Precious Base Metals 30 June 2009 In the year-ending 34,200 total a produced Straits This comprised tonnes of copper. in copper of tonnes 23,713 of tonnes ofconcentrate and 398 and Tritton, from cement copper cathode10,089 tonnes of copper Throughput Whim Creek. from was completed expansion at Tritton taking annual during the year, installed capacity to 1.4 Mtpa. went operations Creek, Whim At downsizing of number a through stages during the year as the in operations mining ceased project has Straits Recently 2008. October been have terms that announced Creek) (Whim Straits sell to agreed Resources Venturex to Ltd Pty Limited, and that an option into for had been entered agreement SX-EW the sale of the Whim Creek Limited. plant to Finders Resources Straits commissioned the in plant demonstration Hillgrove the September quarter of 2008. tonnes 745 produced plant The but the of antimony for the year, been have produced quantities In levels. design below significantly August 2009 Straits announced a processing of suspension temporary activities to investigate the technical issues, the cost, and time necessary plant required the implement to water process modifications to treat viable commercially achieve and levels. production As announced on 23 March 2009, March As announced on 23 Straits in interest 60% a sold Straits Ltd to a whollyBulk & Industrial Pty PTT Publicowned subsidiary of “PTT (the (PTT) Limited Company PTT is a diversified Transaction”). companies energy of group exploration gas and oil in engaged gas transmission and production, and energy trading and processing, PTT distribution segments. retail 28% accounts for approximately of total market capitalisation on Thailand. of Exchange Stock the was Ltd Pty Industrial & Bulk Straits the holding company for Straits’ Brunei coal exploration interests, Madagascan coal exploration and Straits’ 45.6% interests in the Singapore shareholding Straits listed Exchange Securities Straits Limited. Resources Asia coal of team a transferred also has Purvis Martin by headed executives Straits to Officer Executive Chief as Bulk & Industrial Pty Ltd as part of Straits Bulk the PTT Transaction. been since has Ltd Pty Industrial & PTT Asia Pacific Mining renamed Pty Ltd. Straits still maintains a coal energy to exposure significant in interest 40% remaining its through PTT Asia Pacific Mining Pty Ltd. The total cash consideration for the in Straits’ sale of a 60% interest Straits subsidiary owned wholly was Ltd Pty Industrial & Bulk US$335 million, including a deferred to up of payment performance been recently has It million. US$115 Indonesian the that announced Government has now formally of rezoning completed a process South Kalimantan land use across to Straits for way the clears that performance claim the deferred payment of US$115 million. Pursuant to the PTT Transaction, created Straits and the PTT Group at aimed alliance coal strategic a significant internationally an growing coal business based on the coal PTT Asia held through interests Pacific Mining Pty Ltd. Straits retains and Board a 40% ownership interest participation in the coal venture. Strategic Coal Alliance Overview Chairman’s Statement

Dear Shareholder, In what has been an extremely challenging year in one of the most significant financial downturns in history, I am pleased to report that Straits has weathered the storm well.

A company transforming transaction Resources Limited an option for it to Straits declared for the year ended was completed in April 2009 when acquire the SX-EW plant for $5 million 30 June 2009, a special 30 cents per Straits announced the formation of a of shares in that company. Further, fully paid ordinary share unfranked strategic alliance with Asian energy in August 2009, Straits agreed to final dividend based on the recent PTT major, the PTT Group, via the sale of a sell (subject to due diligence, now Transaction. This dividend was paid on 60% interest in Straits’ wholly owned completed, and a formal sale and 21 September 2009. subsidiary, Straits Bulk & Industrial Pty purchase agreement) the other Whim The future outlook for Straits is very Ltd for up to US$335 million in cash. Creek assets, including the Salt positive. Straits today has exposure Creek and Balla Balla copper-zinc The PTT Group is a diversified energy to a large and expanding thermal projects and associated tenements, group that accounts for approximately coal business and is the owner of to Venturex Resources Limited, for 28% of total market capitalisation on the a relatively immature but emerging shares in that company. Stock Exchange of Thailand. Straits Bulk base and precious metals business. & Industrial Pty Ltd has been renamed At the Hillgrove antimony/gold mine In addition, Straits has a sizable PTT Asia Pacific Mining Pty Ltd and its near Armidale in New South Wales exploration portfolio, investments most significant holding is the 45.6% in commissioning commenced in in a range of companies, a metals Singapore listed Straits Asia Resources 2008, however production has been distribution business and significant Limited. Straits still maintains significant hampered by a number of technical cash resources. Our strong balance exposure to energy coal through its issues, including issues with process sheet position, coupled with an remaining 40% interest in PTT Asia water treatment management and the experienced management team and Pacific Mining Pty Ltd. interface between the leaching and a successful track record places electrowinning sections of the plant. us in a good position to look at all Production from the Tritton copper mine In August 2009 processing activities at opportunities to grow a large and in the 12 months to June 2009 was Hillgrove were temporarily suspended successful minerals company. 24,111 tonnes of copper (in concentrate to fully investigate the technical issues, and as cement). Straits completed the The business strategy for Straits is a the cost and the time necessary plant expansion at Tritton to 1.4 Mtpa growth focussed, diversified producer to implement the required plant throughput (equivalent to 35,000 tonnes with solid cash flows, and a pipeline of modifications to achieve commercially of copper cement in concentrate). As project and exploration opportunities. viable production levels. the financial crisis took hold in late In addition, Straits will focus on the 2008 the underground mine expansion On the general economic front, Company’s asset portfolio providing a through the development of declines to notwithstanding an apparent upturn in mix of stable and mature business units the Murrawombie and Larsens/North economic conditions, risks of further with a base level of reliable earnings. East ore bodies was suspended. periods of weakness and volatility remain. The forecast for commodity The Whim Creek SX-EW copper mine markets in the medium to long term in Western Australia produced 10,089 remains robust with prices for many tonnes of copper cathode for export in products expected to remain above 2009. Mining at Whim Creek ceased in long term averages. Coal and copper late 2008 and currently the operation Alan Good market fundamentals look particularly is harvesting the remaining copper Chairman tight and these being the two most in heaps. It is anticipated that Whim important commodities for your 30 September 2009 Creek will close the SX-EW plant in late Company, bodes well for the future. 2009. Straits has granted to Finders 3 Straits Annual Report 4 Chief Executive Officer’s Review

The year in review will be remembered for unprecedented volatility in the financial and commodity markets. Overall it was a year of two distinct halves. The proposed demerger of our coal assets was cancelled due to the collapse of financial markets and lack of shareholder support at that time.

In response to the change in external Straits Asia Resources Limited Sales from the Whim Creek copper environment Straits moved quickly operates the Sebuku and Jembayan mine totalled 10,089 tonnes of copper to reduce expenditure, stabilise coal mines in Indonesia. During the 12 cathode in the 12 months to June our businesses and shore up our month period, these mines produced 2009. It is anticipated that Whim Creek balance sheet. Decisive action was a total of 7.8 Mt of coal and recorded will close the SX-EW plant in late 2009. required in an environment that put sales of 8.1 Mt. Target production from In August 2009 Straits agreed terms unprecedented pressure on cash Straits Asia Resources Limited is 12.0 - with Venturex Resources Limited to sell flows and balance sheets of mining 13.0 Mt for the 2010 calendar year. all of the issued capital of Straits (Whim companies, in particular those Creek) Pty Ltd (excluding the SX-EW Production from the Tritton copper exposed to base metals. plant which is subject to an option mine totalled 24,111 tonnes of copper to purchase agreement with Finders On the corporate front, the group (in concentrate and as copper cement) Resources Limited) and the Salt Creek refinanced US$300 million debt at for the 12 months to June 2009. Cash and Balla Balla copper-zinc projects Straits Asia Resources Limited, and costs (excluding treatment costs and and associated tenements. With the repaid $58 million of corporate debt. refining costs) for the year totalled due diligence completed, the parties Trade finance facilities associated with US$1.09 per pound and were less than are now in the process of constructing the Varomet Group were significantly US$1.00 per pound in the six months a formal sale and purchase agreement. reduced and Straits’ balance sheet was to June 2009. In 2008 the processing strengthened through support from plant at Tritton was expanded to an In 2009 production from Mt Muro the Standard Chartered Private Equity annual throughput rate of 1.4 Mtpa, exceeded 50,000 gold equivalent Limited Convertible Note. enabling production capacity of ounces. A business plan is currently 35,000 tpa copper in concentrates. under consideration to access ore The restructure of the coal business In addition, development began sources in the Serujan East and Soan further strengthened Straits’ balance on two new underground declines areas. As a consequence of this sheet whilst leaving the Company to access the Larsens/North East plan, future production is expected to significant annuity and growth exposure and the Murrawombie ore bodies. increase and cash costs are expected through a coal alliance with a very In late 2008 development of these to be reduced. credible and large partner being the declines was suspended due to the PTT Group. At the Hillgrove antimony, gold and copper price collapse. The copper tungsten mine near Armidale in cementation process at Tritton has Operations New South Wales, commissioning proved successful and a small upgrade commenced in 2008. However, Straits still maintains significant is planned. In the 12 months to June production was hampered by a number exposure to bulk commodities through 2009, 398 wet tonnes of cement of technical issues including process its remaining 40% interest in PTT Asia were produced. Pacific Mining Pty Ltd, which in turn water treatment management and the holds a 45.6% interest in Singapore interface between the leaching and listed Straits Asia Resources Limited. electrowinning sections of the plant.

5 Straits Annual Report 6 The Company’s most significant asset The Company’s 40% ownership continues to be our Mining Pty Ltd, in PTT Asia Pacific capital and ongoing installed where is expected to conversion resource and dividends. deliver further growth to is expected Additional growth the pre-development come from and exploration opportunities in Madagascar and Brunei. Straits is in a unique and an position, from unprecedented historic perspective, to deliver growth to This is expected for shareholders. world in the coincide with recovery industrial base and financial markets over the coming years. commodities core in the right are We being energy coal, copper and and a have asset diversity gold. We our balance sheet to support strong aspirations. I would like to extend my gratitude our and thanks to our shareholders, employees, suppliers, service providers support for their and fellow directors 12 during a very volatile and difficult months. support has allowed Straits to Your environment this recent emerge from shape, and we strong in a relatively all for their expect to be able to reward ongoing support. Milan Jerkovic Chief Executive Officer 30 September 2009 Outlook to maintain an Straits is well positioned supported profile, growth aggressive stable and more by an increasing, maturing earnings base. long Straits’ purpose is to create through term value for shareholders development, acquisition discovery, natural operation of and the efficient investment to Ongoing resources. and strengthen maintain restructure, base metals and gold the Group’s production operations and improve platforms and lengthen earnings 2010. will continue through profiles a undertaking Straits is currently re- to simplify and portfolio review focus its balance sheet. The aim is fewer core Straits around to re-focus opportunities, which may involve streamline assets to divesting non-core the asset portfolio. Over the next 12 months, the Company operating will concentrate on its core copper base metal asset, the Tritton has mine. An exploration programme the resource been initiated to increase the base at and around and reserve mine. The operation has the Tritton in production capability to increase the short term to 35,000 tpa copper in base concentrate once the resource and financial return is compelling. Exploration on several large and scaleable opportunities will continue. The focus initially will be targets in South Australia and the Lachlan fold in the latter belt of New South Wales, our subsidiary case through Goldminco Corporation. While operating and corporate activities generated significant cash flow for the the performance was materially Group, impacted by non cash losses and to impairment charges, primarily related the collapse of base metals prices. the end of the financial year all Towards stable and operating businesses were acceptable operating cash flows were and improving. of significant net cash As a result 2009 financial year generated from activities, Straits has been able to special a 30 cents per share declare dividend which was paid on 21 September 2009. At year end our balance sheet is with significant net cash at the strong, corporate level. Financial Performance During 2009 the mine produced and produced During 2009 the mine antimony metal, sold 745 tonnes of has so far been however the operation forecasts unable to meet production due to a number of issues in the plant plant. Consequently, processing suspended temporarily operations were in August 2009 to fully investigate the technical issues, the costs, and the time necessary to implement the to achieve plant modifications required levels. viable production commercially the Group, to the Varomet In regard GfE business is dependent on a of the steel foundry global recovery markets, while and non-ferrous performance will be future Magontec’s in the highly contingent on a recovery automotive sector. focus continues to be a strong There on exploration at all operations in and the resource to increase order with bases and to assist reserve and the establishment of effective sustainable business plans. Review of Operations & Activities: Finance

Results As a result of the financial reporting period change for the Group in 2008, the financial statements have been prepared for the 12 month financial period to 30 June 2009 with comparatives for the six month financial period to 30 June 2008.

GfE - Dusseldorf (Germany) MAGONTEC - Bottrop (Germany) MAGONTEC - Xian (China)

Balikpapan

Hillgrove

Metals Distribution

7 Straits Annual Report -

- 2.5 4.9 5.9 ( 7.9) ( 7.2) 31.0 (6.0) 60.2 25.0 45.5 8 8 (12.9) (20.5) $m June 2008June Six Months 7.9 0.9 80.1 85.2 38.0 (42.1) (19.7) (14.5) 216.3 (34.6) (44.2) (23.7) 259.0 $m (178.3) 2009 Full Year

Net (Loss)/Profit after Tax and Minorities Profit from 60% disposal of PTT APM GfE and Magontec and GfE Base metals – Whim Creek Tritton – Precious metals – Mt Muro Fx losses Profit is attributable to: Equity holders of Straits Straits share of PTT APM profits (post disposal) * operation from discontinued Profit Other Net Profit from operating activities Impairment and exploration write downs Profit after tax Minority interest * includes a deferred tax liability component of $60 million on the uplift in the fair value of the remaining 40% investment in PTT APM. Financial Position net asset position at 30 June 2009 was The Group’s 40% investment in PTT $873.8 million. The remaining APM held by Straits has been fair valued at $235 million in PTT as part of the deconsolidation of Straits’ interest in the APM. The nominal carrying value of this interest $113 million. The net assets of the was previously Group discontinued operation on disposal amounted to $626.9 million. has share Net tangible asset backing per ordinary $2.34 at 30 June 2008 to $3.20 at 30 from increased June 2009. in cash for the period net increase The continuing Group’s was $72.5 million comprising operating cash outflows of $3.4 million, investing cash inflows of $127.6 million, financing activities of $51.7 million and an outflow from of $30.4 million. exchange revaluations adverse foreign $223.0 were At 30 June 2009, Straits’ cash resources cash (30 June 2008: million and $22 million of restricted $162.0 million and $4.6 million). - 1.5 41.6 16.7 19.0 26.4 45.0 (9.8) (3.8) 113.2 114.7 113.0 (20.6) 1,102.0 1,215.0 $m $m June 2008June June 2008June Six Months Six Months 3.6 60.7 93.9 56.8 (2.0) (8.8) 567.5 215.0 352.5 (32.1) (62.8) 592.5 472.4 (14.4) (14.4) $m $m (120.1) 2009 2009 Full Year Full Year

the financial period. States Dollar in the last quarter of Australian Dollar against the United the appreciating 2009 to June 2009. March of 15.6% from An increase TOTAL EBITDA TOTAL Profit from discontinued operations from discontinued Profit Total EBITDA continuing operation - Tritton - (including hedges) Other Base metals - Whim Creek Precious metals - Mt Muro Metals distribution - Hillgrove - Total salesTotal revenue Metals distribution EBITDA - Tritton - Precious metals - Mt Muro Sales revenue from mining activities Base metals - Whim Creek Sales Revenue The Group recorded a profit before minorities and after before a profit recorded The Group period to June 2009 of tax for the financial reporting minorities and before with a profit $38.0 million compared period after tax of $25.0 million for the 6 month reporting to June 2008. pricing was impacted by the provisional The result of $25 on copper revenue adjustments downwards million, impairment losses of $178.2 million, and gain on sale of discontinued operations net of tax $259.0 million, of $53.7 million exchange revaluations adverse foreign and a loss of $44.9 million on hedge accounting of the original hedges paid out in December 2007. Earnings before interest, tax, depreciation, amortisation depreciation, tax, Earnings interest, before and (EBITDA) and non cash costs for impairment $472.4 million exploration write-downs amounted to following: (2008: $114.7) million, made up of the The June 2009 financial result for the Group was impacted by the following key factors: key the following by was impacted the Group for result financial 2009 The June • period; copper price during the weakness in the the volatility and • Mining Pty Ltd); PTT Asia Pacific Ltd (renamed and Industrial Pty in Straits Bulk a 60% interest The disposal of • now finished; hedges period of the original Tritton over the delivery accounting losses of hedge the recognition • and Solar Salt project; mine and the Yannarie mine, Hillgrove taken at the Tritton the impairment loss • Strategic Coal Alliance

The PTT Group is a diversified group Straits Asia has installed infrastructure of companies engaged in oil and capable of handling 19 Mtpa of coal gas exploration and production, gas and its goal is to reach that level transmission and processing, energy of production in the medium term. trading and retail distribution segments. Recently, the Indonesian Government PTT Public Company Limited (PTT) is completed a process of rezoning land Thailand’s largest public company and use across South Kalimantan. This accounts for approximately 28% of clears the way for Straits Asia to apply total market capitalisation on the Stock for permits to proceed with its plans to Exchange of Thailand. develop coal resources located in its northern lease areas, adjacent to the About the PTT Asia Pacific Mining Sebuku mine. strategic coal alliance During 2008/09 Straits Asia pursued an Straits maintains a 40% interest in aggressive and successful resource and PTT APM pursuant to the terms of the reserve inventory build up at Jembayan PTT APM Global Coal Co-Investment and Sebuku. As at 31 December 2008 Shareholders Agreement. Two Straits Jembayan has a total JORC compliant directors, Mr Milan Jerkovic and Mr measured and indicated resource of Michael Gibson, are board members 171 Mt and an inferred resource of 83 of PTT APM and also remain as board Mt with a proved and probable reserve members of Straits Asia. of 112 Mt. Sebuku as at 31 December The assets of PTT APM currently comprise: 2008 had a JORC compliant measured and indicated resource of 87 Mt and • A 45.6% interest in Singapore an inferred resource of 294 Mt, with a Securities Exchange listed proved and probable reserve of 11 Mt. Straits Asia (market capitalisation This provides a total JORC compliant Strategic coal alliance with the US$1.691 billion as of 15 coal resource base of 636 Mt and a PTT Group September 2009) reserve base of 121 Mt from both the In March 2009 Straits announced the • Brunei Coal Prospect Jembayan and Sebuku operations. (Refer to Straits Asia Resources Annual formation of a strategic alliance with • Madagascar Coal Project Asian energy major, the PTT Group Report 2008 for the Resource and of Thailand, via the sale of a 60% • Yannarie Solar Salt Project Reserve JORC statements). interest in our wholly owned subsidiary, Overview Sebuku mine produced 2.5 Mt in the Straits Bulk & Industrial Pty Ltd (SBI) 12 months to June 2009. Production in for up to US$335 million in cash to a Straits Asia – PTT APM – 45.6% 2010 and 2011 will be determined by wholly owned subsidiary of the PTT Straits Asia was founded by Straits and the timing for the boundary approvals. Public Company Limited (the PTT still holds the distinction of being the first Transaction). The PTT Transaction was Jembayan has performed in line with pure coal company to be listed on the completed on 28 April 2009. Straits’ best expectations when it Singapore Securities Exchange. Since was acquired in December 2007. SBI was the holding company for first listing on 3 November 2006, Straits The integration process proceeded Straits’ Brunei coal exploration interests, Asia has generated profits (net after tax) very satisfactorily and Jembayan’s Madagascan coal exploration interests, of US$245.5 million and paid US$120.6 production of 5.3 Mt in the 12 months the Yannarie Solar Salt Project, and of million in dividends. to June 2009 is a record. Straits Asia Straits’ shareholding in the Singapore Straits Asia produced 7.8 Mt of coal is targeting a total 5.3 Mt of production Securities Exchange listed Indonesian in the 12 months to June 2009 and from the Jembayan and Sebuku mines coal company, Straits Asia Resources achieved sales of 8.1 Mt of coal. for the six months to December 2009. Limited (Straits Asia). As part of the PTT Transaction, Straits has also The strategy for Straits Asia is to pursue Installed capacity of the mines has been transferred a team of coal executives organic growth through the ongoing increased to 8 Mtpa at Sebuku and 11 headed by Martin Purvis to SBI. SBI development of the Sebuku and Mtpa at Jembayan. has been renamed PTT Asia Pacific Jembayan operations, and to assess Operating costs were again impacted by Mining Pty Ltd (PTT APM). Straits still opportunities for continued growth high diesel fuel prices, resulting from high maintains significant exposure to energy through the acquisition of additional coal crude oil prices and general inflationary coal through its remaining 40% interest related investments. pressures throughout the industry. in PTT APM.

9 Straits Annual Report 10 Ministerial Reserve TR70-5350 andMinisterial Reserve TR70-5350 Australian West the by aside set salt solar prospective for Government and gypsum developments. Outlook and Growth Strategy Outlook and Growth Straits allowed Transaction PTT The coal the from value some realise to to developed successfully it assets an internationally and significant scale At the same time, the profitability. alliance of the strategic coal creation to Straits allows Group PTT the with to these maintain a significant exposure ownership its 40% coal assets through of PTT APM. The operations at Jembayan and Sebuku have existing installed capacity of 19 Mtpa and the medium term that target of Straits Asia is to reach than double (more level of production The PTT Group production). current Straits Asia Straits’ vision to see shares to that target and potentially reach above significantly expand production at growth organic that rate, both from Sebuku and Jembayan and potentially alliance other acquisitions. The from a more provides with the PTT Group Asia can which Straits solid base from those targets. reach and with the Withprofile, its growth outlook for coal markets being quite positive, the cash generating capacity of Straits Asia is very positive. Upon its 19 Mtpa Straits Asia reaching a “see- target, Straits will retain through participation” through PTT APM, which would be equivalent to 3.5Mtpa of coal production. Straits anticipates that dividend income from Straits Asia, which will be passed the PTT APM joint venture through will be a significant source company, of income for Straits that will continue ambitions for to fund Straits’ growth its 100% owned businesses. The Brunei and Madagascar interests as strategic held by PTT APM remain to potentially large regional exposures coal development opportunities. still under These opportunities are consideration, but their potential is significant and Straits’ 40% interest to these is an exciting exposure assets. growth

Yannarie Solar Salt Project, Solar Salt Project, Yannarie Australia Western PTT APM – 100% Environmental the 2008 July In Authority (EPA) Protection recommended to the Minister for the recommended Salt Solar Yannarie the that Environment should not be approved. Project An appeal was submitted to the EPA’s the against Convenor, Appeals in August 2008. recommendation, was information supporting Additional Appeals The 2009. March in provided to the Convenor has submitted a report result a As Environment. the for Minister the Minister of the appeals process has returned the for the Environment to the EPA Solar Salt Project Yannarie for further assessment. convinced the PTT APM remains represents Project Salt Solar Yannarie development sustainable significant a environmental social, of range a with and economic benefits. The proposed entirely fact, in is, project this for location designated Temporary within an area Brunei Coal Exploration 35% PTT APM – Joint Venture with venture joint a in is APM PTT the to explore Far East Energy (FEE) APM PTT Brunei. of potential coal has a right to earn a 70% interest. a Memorandum FEE has secured the Bruneiof Understanding with Government to determine the coal The programme potential of the region. and mapping is based on regional sampling of coal outcrops. the for The mapping programme in finalised was region Temborang the June 2009 quarter with a number is mapped. FEE of coal outcrops continuing with detailed mapping in regions prospective more the of districts. The the Belait and Tutong is being finalised drilling programme for the granting of in readiness licenses. prospecting been company has The joint venture established with a branch office Labour quotas in Brunei. registered for over will be applied for the project the following month. Activities will slow over the September 2009 quarter with the commencement of the Muslim fasting and festive period (Ramadan and Idul Fitri).

Minerals Limited APM) PTT (now SBI 2008, January In in Red Island a 33.5% interest acquired option an and Minerals Limited (RIM) by exercise a 100% interest to acquire in interest an has RIM option. that of coal tenements in the Sakoa coalfield This option exercise in Madagascar. determination the by calculated is price standards JORC to resource ore the of to study feasibility a of drafting the and resources coal the whether evaluate could be within the lease areas exploited. commercially on focused has date to year Drilling with areas, Sakamena and Sakoa the throughout intersected being coal seams are Although more these areas. being intersected at Sakamena, they thinner than those at Sakoa. The are average coal thickness at Sakamena over six-seven seams, is four metres at Sakoa to 12 metres compared in dipping is Coal seams. three over is It 30°. and 20° between at areas all extensions northern the drill to planned in the fourth quarter 2009. at Vohibory have date some 16,000 metres To samples 3,300 some and drilled been taken. Sample analysis in South Africa is ongoing. As part of the feasibility work being undertaken, various environmental currently are and planning approvals being sought, and discussions being held with the Ministry of are and the Ports Authority Transport development. project regarding will APM PTT that expected not is It its of exercise the on decision any make 100% of RIM before option to acquire the end of the first quarter 2010. Madagascar Coal Project PTT APM – 33.5% Red Island The market outlook for 2009 andThe market outlook forecast with favourable remains 2010 demand growth, continuing strong supplycombined with ongoing expected to result constraints, which are conditions.in continuing tight market indirect Straits’ 2009 June of end the At an had Asia Straits in 18.2% of holding of ~$300 million. implied market value 2009 June 30 ending year the During $31.6 totalling dividends received Straits Straits Asia. million from Base Metals

Production - Tritton

June Year 6 mths to June December Year 2009 2008 2007

Development Metres 7,372 3,821 4,393 Tonnes 932,532 343,606 680,439 Ore Mined Grade (%) 2.72 2.53 3.10 (Tritton) Cu Tonnes 25,404 8,685 21,100 Tonnes 921,116 406,672 733,638 Ore Milled Grade (%) 2.74 2.21 2.69 Cu Tonnes 25,187 8,971 19,764 Recovery % 94.11 93.27 93.85 Tonnes 95,026 33,282 74,445 Cu % 24.95 25.15 24.92 Au g/tonne 0.89 0.96 1.17 Concentrate Ag g/tonne 53.24 62.14 52.37 Cu Tonnes 23,713 8,372 18,549 Au Ounces 2,717 1,028 2,806 Ag Ounces 162,668 66,490 125,336

The throughput expansion of the Tritton has the capacity to achieve processing plant was successfully an annual production rate of 35,000 commissioned (2 x verti mills, 2 x tonnes of copper metal annually in the wemco flotation cells and an enlarged near future. Opportunities for increase TRITTON tailings thickener) during the first half in production are currently being of the reporting period. During the reviewed and the recommencement Production second half of the reporting period, of the Murrawombie and North East Tritton mine production realised a continued optimisation of the plant satellite mines and the commissioning steady production rate in the first half of highlighted name plate production of a Pastefill Plant will have the potential 2009 as the mine development moved design parameters being reached to substantially increase ore recovery. and sustained. deeper. Mine development focussed WHIM CREEK on establishing level development well Outlook ahead of stoping in the broader, lower The Whim Creek copper mine is ore zone. The mine has been able to Straits considers the region as having located between Karratha and Port achieve a steady increase in production significant geological potential, and Hedland and was commissioned in mid through the second half of 2008 and the continues to be positive concerning the 2005 utilising a solvent extraction and first half of 2009. Target ore tonnes were long term growth potential of Tritton. electrowinning (SX-EW) plant. achieved in the December 2008 quarter There has been a strong focus on The operation went through a number and feed grades have continued to near-mine exploration to prove up of stages of downsizing during the stabilise in line with expectations. additional copper resources. Utilising year, as the project ceased mining The fall in copper price in October 2008 deep looking electromagnetic surveys operations in October 2008. and geophysical techniques, a resulted in a decision to suspend mine As part of the staged decommissioning number of significant new targets have development and production activities of the oxide leaching operations, Straits been identified. An intensive drilling at the Murrawombie and North East has sold an option to purchase the Whim programme has been initiated to satellite mines. These two mines are Creek SX-EW plant to Finders Resources evaluate those targets. This exploration currently under care and maintenance Limited (Finders), with the option to be programme is on-going. in preparation for resuming production exercised by Finders between 1 October when they are able to be mined In addition to the near-mine exploration 2009 and 31 March 2010. Finders intend economically. programme, in-mine deep diamond to relocate the processing plant to its drilling has confirmed the down dipping heap leach project on the Indonesian extensions of the main Tritton orebody, island of Wetar. clearly demonstrating the potential to 11 significantly increase the mine life. Straits Annual Report 0.87 0.95 12 16,752 15,339 15,563 970,765 2,196,680 1,922,201 2007 Whim Creek December December Year 0.89 0.90 6,739 6,037 6,050 230,372 733,262 1,032,329 2008 6 mths to June Mine development continued at the Metz Syndicate deposit. The owner operator mining activities continue to perform successfully and at low unit cost. Some of the mining and curtailed exploration activities were the December 2008 quarter from of the issues in recognition onwards in the processing being addressed plant. Stoping activities at Syndicate with now well underway, are development commencing into the adjacent lode. Outlook On 18 August 2009, Straits announced processing of suspension temporary a is It mine. Hillgrove the at activities will activities processing that anticipated initially be suspended to fully investigate the technical issues, the cost, and time necessary to implement the required process treat to modifications plant water and achieve commercially levels. During the viable production employees of group core a suspension, metallurgical continue to retained be will investigations, underground development and exploration. 0.95 0.94 13,119 10,198 10,089 864,424 430,090 1,384,879 2009 June Year Contained metal (t) Waste movement (bcm) Ore mined (t) Grade (copper %) Ore crushed (dry) (t) Grade (copper %) Copper Copper production (t) Copper sold (t) caption here • Image on left: appropriate at Hillgrove This image: Gold Pour The residual oxide and sulphide mineral oxide and sulphide The residual and Salt Creek at Whim resources in the assets now included are Creek The potential being sold to Venturex. base of these the resource to improve high, given assets is considered Straits’ past exploration success. The with combination of these resources in assets of Venturex the copper-zinc is considered to Whim Creek proximity of for the creation potential real to offer concentrate copper-zinc a commercial operation. producing HILLGROVE Production Demonstration Plant was The Hillgrove the September commissioned through quarter of 2008. Commissioning was successful in consistently producing high quality antimony metal, but also physical bottle-necks and revealed technical complexity that had not been for in the design adequately catered phase, which limited total production. in the December Following review quarter of 2008, further capital was plant to invested in the processing physical bottle-necks and remove some of the technical issues. address While some modifications to the plant have been made, issues still remain water treatment, process with effective the flotation configuration and the interface between leaching and electrowinning. Production for the following periods was as follows: for the following periods was as follows: Production Outlook operations utilising the Processing in cease to expected are plant SX-EW late 2009 with the impending sale of that At Finders. to plant process the will copper of tonnes 54,240 some time, original with line in produced been have of 6.63 Mt at 1.00% Cu, reserves ore 66,790 tonnes of contained copper and copper. 56,773 tonnes of recoverable Mining operations were based on based Mining operations were and Mons Cupri the Whim Creek, both pits, mining Mons Cupri West Overall oxide and chalcocite ores. approximately mining rates delivered of at a grade 860,000 tonnes of ore Mining operations were 0.94% copper. suspended in October 2008 due to economic conditions. Crushing and stacking operations 1.4 Mt of ore approximately delivered to the leach pads at an average grade of 0.95% copper. Re-mining (of the heaps to improve to ore) and acid contact percolation was suspended late in 2008, but in April 2009 to maximise re-started the newer oxide ore from recoveries that was stacked late in 2008. The solvent extraction plant continued the year, to perform well throughout and the wash stage was converted to a “series parallel” extraction stage better to compensate for and provide management of the falling pregnant after leach solution grade that resulted crushing and stacking ceased. Salt the in continued activities Exploration until October 2008. Some region Creek 2007 the through identified targets the of confirmed were geophysics programme drilling, however preliminary through untested.further targets remain Production On 20 August 2009, Straits On 20 August 2009, of the announced, in anticipation operations, cessation of processing terms with Venturex it had agreed Limited (Venturex) Resources assets. (ASX:VXR) to sell the remaining With Straits due diligence completed, now in the process are and Venturex of constructing a formal sale and agreement. purchase Precious Metals

MT MURO June Year 6 mths to June December Year The Mt Muro gold-silver mine is located 2009 2008 2007 in central Kalimantan, Indonesia on the Island of Borneo. Overburden mined (bcm) 2,666,907 1,343,161 1,690,287

Activities on the mine involve the mining Ore mined (dmt) 622,100 277,428 359,470 of vein and eluvial gold silver ore from a number of regionally located open pit Ore feed to plant (dmt) 652,050 213,284 376,179 mines, with ore being trucked to the 1.7 Gold grade (g/t) 2.62 3.37 3.95 Mtpa centrally located carbon in pulp and Merrill Crowe processing plant, Silver grade (g/t) 24.55 16.46 38.20 where gold and silver dore is produced. Gold recovery (%) 88.70 92.30 93.60 The identification and mining of remnant and previously unmined Silver recovery (%) 60.20 60.20 71.30 satellite resources near the plant Gold production (oz) 48,850 21,728 45,748 continued into 2009. These supplementary sources of ore proved Silver production (oz) 304,360 68,786 349,833 useful in allowing the mill to remain significantly utilized, albeit at the cost of Integral to this plan is the decision to lower grades from eluvial material. Outlook recapitalise the mining and transport During the reporting period mining was Significant capital works on the plant fleet and moving to owner operated undertaken at the Tasat, Icah, Sukang, were undertaken in the 2009 reporting mining during the second half of 2009. West Permata, Anak Dua, Maantung, period, including the installation and Under this plan, it is expected that Gerantung, Luit Bawa, Serukau and commissioning of a coal fired power in excess of 68,000 gold equivalent Arong Maan mines, mining both eluvial station delivering 2.6 MW to mitigate ounces will be produced in the next material and primary vein material. In the future diesel fuel price risk. financial year at an average target cash case of Tasat, ore to the run of mine pad Extensive review and mine planning operating cost of approximately US$620 is via road haulage and a roll on – roll off was conducted during the 2009 per ounce and reducing thereafter. ferry that crosses the Barito River. reporting period with a view to Mt Muro remains an operating gold mine Mt Muro sold 48,367 ounces of gold determining the future development in one of the most prospective gold and 297,558 ounces of silver for the and operation of Mt Muro. As a result magmatic arcs in Asia, with an extensive 2009 financial year. A significant amount of this work, Straits has committed to installed capital base. Pre-mining gold of eluvial ore was processed from a production and capitalisation plan inventory now exceeds 2 million ounces, near mill sources during this time as a based around the cutback and mining and while exploration was curtailed in supplement to vein ore from main hard of the Serujan open pit, mining of the recent years due to financial constraints, rock mine, Tasat. The reduced grade Berinjin / Merindu eluvial deposits grass roots exploration has historically that resulted was the primary reason for and development and operation of been very effective in generating targets the reduced operating recoveries when the Soan deposit, which is forecast and delivering gold resources and compared to previous performance. to deliver 320,000 recovered gold equivalent ounces over a minimum five reserves. Some 600,000 ounces of gold Unit cash operating costs increased year time frame. was discovered during the period 2003 during the reporting period, primarily to 2006. from processing higher volumes of Access to the Berinjin / Merindu The chemical and structural controls lower grade material relative to previous eluvials has been negotiated with that determine gold accumulation at years and from a significant increase the Indonesian Government as part Mt Muro are now well understood in the price of diesel fuel as a result of of a strategy of increasing local and Straits is about to embark on the earlier removal of the Indonesian involvement. Ore will be mined on a an extensive induced polarisation Government fuel subsidy. contract basis by the local government mining company and delivered to the programme to provide deeper visibility processing plant on commercial rates. within the various structural corridors. A Memorandum of Understanding has This should deliver the next generation been executed to this effect and final of future ounces to support Mt Muro’s agreements are well advanced. longer term inventory build-up.

13 This image: appropriate caption here... Straits Annual Report

14 Metals Distribution

GfE-MIR GmbH MAGONTEC Background Background GfE-MIR GmbH specialises in Magontec is a global supplier in marketing and supplying alloys and the area of magnesium remelting related products for the steel, foundry technology. Modern highly efficient and non-ferrous industries. With more plants in Europe and China all have the than 90 years experience servicing necessary potential to make Magontec the steel, foundry and non-ferrous the leading supplier worldwide. industries with alloys and related Magontec offers innovative solutions products, GfE-MIR has maintained a on a contractual basis which surpass reputation for its innovation, the quality defined standards. This enables of its products and level of service Magontec’s customers to create provided to its customers. Further safe, future oriented and competitive information on GfE can be found at products and services. Magontec www.gfe-mir.de. was formed in 1953 with its head office in Bottrop Germany. Magontec Overview operates two plants, one in Bottrop GfE’s group revenue dropped sharply Germany and one in Xian China with after the severe cutbacks in the steel total magnesium alloy annual capacity related industries following the global of 36,000 tonnes. As at 30 June 2009 financial crisis. Total revenue for the Magontec employed 231 people in year ended June 2009 was US$182.1 Germany and China. million (2008: US$236.2 million). Overview As a consequence the group has implemented a cost cutting programme After the sharp market decline in aimed at reducing the overall cost the automotive industry, starting in by 15% on a year by year basis. November 2008, Magontec’s metal These programmes are expected to sales volumes in the first half year 2009 continue to produce annual savings as were down 63% compared to the first Germany emerges from its recession half of 2008. It appears however, that and investor and consumer confidence the bottom of the market has been improves. The market in Europe is still reached and sales volumes have now down. However, the Asian and US started to show signs of improvement. markets are starting to show some Revenue for Magontec was US$84.2 signs of recovery. GfE has a US$45 million for the year ended June 2009 million trade finance facility which (2008: US$99.6 million). at year-end was drawn to US$28.9 million. This facility is used to fund the Outlook business working capital and is backed Magontec’s future performance will be by receivables and inventories within highly contingent on general economic the GfE-MIR Group. recovery globally, in particular from the Outlook automotive sector. At the time of writing there were signs that after a significant GfE’s performance is highly contingent fall in production during late 2008, on a recovery of the steel, foundry and activity has “bottomed” out in Germany non-ferrous markets globally. GfE is and there have been signs of recovery considered a “non-core” asset within in China. Magontec is expected to be Straits and medium-term, Straits will be retained within Straits’ portfolio. looking to divest this business.

15 Straits Annual Report 16 Goldminco Corporation 59% as at 30 June 2009 Goldminco (TSX:GCP) is a junior minerals exploration company in Canada with headquarters registered Perth. Goldminco holds over in West of exploration kilometres 2,000 square tenements in the highly prospective Lachlan Fold Belt of New South Wales. predominately The tenements are 100% owned and operated by Goldminco and have a range of active for gold and porphyry copper- projects gold. At 30 June 2009, Straits holds 59% of the equity in approximately Goldminco. A substantial diamond drill programme planned to commence later in 2009 will test for further extensions to the known located within predominately resources tenement package. the Temora Torrens, South Australia Straits Torrens, earning 70% iron-oxide Straits is exploring for systems in the highly copper-gold of Stuart Shelf region prospective Project). South Australia (Torrens is between Joint Venture The Torrens NL (ASX:ARE) Argonaut Resources and Straits (Straits earning 70%). The is located near the Project Torrens eastern margin of South Australia’s of Gawler Craton, within 50 kilometres Carapateena copper- Cominco’s Teck from gold discovery and 75 kilometres Olympic Dam mine. BHP Billiton’s The overlapping Native Title claim with the issue has been progressed, new Kokatha Uwankara claim being lodged with the Federal Court. Straits both in discussion with is currently the State Government and the new the access to progress claimant group matter. Exploration 70% to 84.27%. A revised remnant remnant revised 70% to 84.27%. A model has been completed resource This Nickel Project. for the Greenvale has defined an inferred resource of 37.7 million tonnes at 0.8% resource grade of Ni and 0.05% Co at a cut-off 0.5% Ni. Exploration activities at Hillgrove have Exploration activities at Hillgrove been limited to definition and near mine exploration drilling at the Metz mineralised system. Further work is being planned to gain a full understanding of the geological potential. Only four of the 200 known systems have been evaluated to any significant regional extent. Therefore, and mine upside exists at Hillgrove. Hillgrove, New South Wales 100% New South Wales Hillgrove, A systematic review of the Girilambone of the Girilambone A systematic review in progress. mineral field is currently is to better The aim of the review understand the known mineralised systems and to assess newly been targets that have discovered principles geological first derived from and geophysical targeting. A plan exploration around to re-launch is currently the Girilambone project being developed and will commence during the second half of 2009. The Girilambone field collectively is a very well endowed and extensively mineralised copper district. Straits upside is considerable believes there the extensions of known through and the discovery of new mineralised systems. New LandTEM and IP Geophysical surveys have been commissioned to mine site and the Tritton test around the corridor between the Girilambone North and Murrawombie mineralisation. expected during the third Results are quarter 2009. BASE METALS 100% New South Wales Tritton, Straits has a Joint Venture with Straits has a Joint Venture Exploration Ltd (a wholly Resource Mining owned subsidiary of Resource Corporation Ltd) (ASX:RMC) in the nickel laterite historical Greenvale mine and the Lucknow laterite cobalt deposits. During the year Straits from in the project its interest increased Three Rivers, Queensland 84% Rivers, Three Exploration activities at Mt Muro Exploration activities at Mt Muro have continued with the evaluation of historical targets within the Indo Work Kencana, Contract of Muro (IMK CoW). The newly discovered targets at Lahung and Untu prospects have been elevated to the level of drill testing. With on site of the arrival circulation a track mounted reverse drill-rig these targets will be drill tested quarter 2009. Straits during the third continues to believe that the IMK to an excellent exposure CoW offers favourable geological setting extremely with a significant number of fertile gold likely which are bearing structures to host additional high grade, low sulphidation epithermal vein systems. the field is now from production Total two million gold equivalent approaching ounces. PRECIOUS METALS Kencana, - Indo Muro Mt Muro Kalimantan Indonesia 100% The 2008/2009 financial year has been The 2008/2009 financial the resources a very trying time in high level sector with an extremely prevalent of uncertainty and volatility financial markets. As in the world’s a has taken such the Straits Group to exploration approach measured and programmes expenditure A considerable the year. throughout amount of work has been completed projects in consolidating current an to recommence in preparation exploration programme. aggressive In addition, Straits has been actively assessing new opportunities to grow base metals business. the Group’s Human Resources

Straits considers employees to be its As a result of the temporary greatest asset and is committed to suspension of processing activities at developing work environments in the the Hillgrove mine, 99 employees were corporate office and in the business made redundant on 18 August 2009. units in which all employees can make There were also redundancies at Tritton a positive contribution to the success due to suspension of the expansion, at of the Company. Whim Creek due to cessation of mining and at the corporate office as a result Straits has adopted the following of disbanding the “in-house” projects values in managing our people: and engineering group. • we create training, development and opportunities for individuals to Our Strategies realise their potential Straits has implemented strategies • we treat our people with fairness which have been effective in attracting and dignity and retaining staff and successfully • we communicate frankly and reducing staff turnover. These openly with our employees strategies include:

• we recognise and reward individual • introduction of financial incentives to performance retain key operations staff • we proactively seek to maintain workplaces where employees are • introducing workplace agreements happy and want to contribute to which incorporate career paths and the success of the Company recognition of skills, performance and service in salary payments • we act with integrity in all our dealings • becoming an “employer of choice” in the mining industry by maintaining Our Manpower competitive employment conditions and having the reputation as a As of June 2009 Straits employed “good company to work for” almost 1,800 staff and full-time contractors in Australia, Indonesia, • making the effort to recruit Germany and China. personnel from the local areas in The distribution of personnel is which Straits operates, and provide as follows: these personnel with development and training. Development programmes range from awarding Location Staff Full-time Contractors Total tertiary scholarships, traineeships and apprenticeships through Corporate 47 1 48 to conducting “on job training” for individuals to gain nationally 141 5 146 Hillgrove recognised accreditation and Tritton 76 148 224 qualifications. Whim Creek 33 7 40 Mt Muro 541 447 988 GfE 72 - 72 Magontec 196 35 231 Total 1,106 643 1,749

17 Straits Annual Report 18 Understanding the potential for Understanding the suitable health risks and establishing integral to are mitigation measures journey the success of our towards OHS performance. improving to develop also required Operations are and maintain emergency response plans and undertake drills to test to emergencies. capability to respond A Health, Safety and Environment the Health, based on audit programme Management Safety and Environment and the Safety Performance Standards This has been developed. Standards determines how well our sites are implementing the risk based system This audit a safe workplace. to provide with is an annual process, programme internalaudit teams drawn from and external resources. mines and Whim Creek Both Mt Muro aimed developed specific programmes and safety behaviour at improving will Similar programmes awareness. be developed for all operations in the upcoming year to compliment their existing programmes. Occupational Occupational Health & S afet y An integrated Health Safety and System Management Environmental that is based on Australian Standard AS4360 enables continuous supported in OHS. This is improvement by specific Safety Performance high control to assist sites to Standards risk activities. These assist managers and to meet legislative requirements corporate objectives. These standards have been translated into Bahasa Indonesia so that all our employees can understand these requirements. are The Corporate Standards supported by site specific risk assessments. These risk assessments developed by interdisciplinary are teams experienced in each task onsite identified can be so the best controls and implemented. Straits is committed to providing a to providing Straits is committed its employees, safe workplace for and the contractors, visitors they live and community within which in improvement operate. Continuous Occupational Health and Safety (OHS) is fundamental to Straits. Environment

Straits is committed to a high standard of environmental performance for all projects and operations. An integrated Health Safety and Environmental Management System, based on the International Standard ISO 14001, is used to drive continuous improvement in environmental performance. This is supported by specific Environmental Performance Standards. This sets a framework to assist managers of projects and operations to meet legislative requirements, regulatory commitments and corporate objectives.

OPERATIONS Tritton Copper Mine The Tritton copper mine has implemented the key findings of an energy audit. The energy audit meets the requirements of the Commonwealth Government’s Energy Efficiency Opportunities (EEO) programme. The outcome of the energy audit has been reported to the government and public (on the Straits website) as part of the EEO programme. Straits has implemented substantial programmes to improve surface and groundwater quality. The complete removal of a potentially acid forming waste rock dump eliminated a possible source of pollution. Work on these programmes will continue during the upcoming year.

19 Whim Creek Copper Mine PROJECTS Stakeholder comments have been The water quality in the Yandan main received on the Mine Closure Plan pit has dramatically improved. During for the Whim Creek copper mine. a flood event in February 2009 all These will be incorporated into future samples from the nearby Suttor River revisions. Progressive rehabilitation met the government’s water quality has been adopted from the start criteria. Further works are planned of operations with encouraging to ensure that the pit water quality vegetation regrowth. Remediation remains at an acceptable level. works have also started to ensure that groundwater quality meets the agreed closure criteria. Mt Muro Gold Mine Progressive rehabilitation has been undertaken on previous mined out areas at Mt Muro gold mine and environmental control systems upgraded. An application for environmental approval for the disposal of tailings in the mined out Permata pit is being prepared. Hillgrove Antimony and Gold Mine At the Hillgrove antimony and gold mine, significant environmental improvements have continued. Straits has conducted stabilization works on the historic Bakers Creek waste rock dump. A water recycling system has been established to reuse contaminated water previously discharged to the environment. The visual amenity of the Hillgrove village has been improved by planting over 1,000 trees. Straits has also been involved in coordinated action with local landholders to control feral animals. Straits Annual Report

20 Community Relations

Straits continues to seek and pursue Whim Creek Community The Mine Closure Plan was finalised ways to enhance and improve the with involvement from all relevant core drivers of the local community’s Straits has continued to maintain stakeholders including local indigenous economic and social development strong relationships with all groups, authorities and land owners. in areas such as, but not limited stakeholders by engaging in open to, education, health, training and dialogue and informed consent. Straits Hillgrove Community believes there is a clear link between employment, cultural heritage, local The strong commitment to community successfully managing community commerce and environment. involvement was again demonstrated in activities and the Company’s business 2009 with Straits continuing to support Straits strives to build enduring success. Community focus is a diverse range of local charities, clubs relationships with all our communities maintained in accordance with Straits’ and groups. Specific sponsorships that are characterised by mutual Community and Heritage Policy. respect, active partnership and long included the Hillgrove Progress term commitment. By having sound Straits has continued to consult Association, Chandler Primary School, relationships with our communities, with relevant parties, including Kids with Cancer Charity, Westpac Straits demonstrates the Company’s landholders, indigenous groups and Rescue Helicopter and several local commitment and capability as a government departments regarding sporting clubs. the mine closure plan and land access “good neighbour” within the areas in Regular community meetings were agreements. which Straits operates. This requires held in Hillgrove to keep the local understanding the issues and needs Straits was the major sponsor for the residents abreast of the changes and of different stakeholders, as well as 2008 Police Legacy Bike Ride. This is improvements onsite and to ensure proactive engagement within an annual bike ride from Karratha to that an open path of communication the community. Broome to raise funds for Police Legacy. was maintained at all times. Effectively contributing to communities Straits was also one of the sponsors of Normal operations were temporarily demonstrates Straits’ understanding the prestigious Cossack Art Awards, suspended at Hillgrove in August 2009 of the socio-economic factors and the which is an acclaimed event involving and as a result 99 employees were communities’ visions for the future. many local indigenous artists, as well as made redundant. A media release was Straits’ operations are part of the invited artists Australia wide. So popular issued, and within Hillgrove village a letter local community, which is inclusive has the exhibition become for indigenous explaining the changes was distributed of both local indigenous and non and non indigenous art, it has featured via letter box drop to the residents. the works of some of Australia’s most indigenous people and includes our Straits made arrangements with celebrated artists including Ken Done, employees, contractors, farmers Centrelink to hold special information Pro Hart, Robert Juniper, Jack Absalom, and pastoralists. Straits sources sessions for employees who were John Borrack, Wim Boissevain and locally a diverse range of goods, made redundant, and worked closely Bevan Pooraar-Hayward. materials and services to sustain our with the New England Institute of operations and to make an important This year at the Cossack Art Awards, TAFE to ensure that those employees contribution to local businesses. Straits sponsored Category 2 awards enrolled in traineeships through All on-ground development works with the winning artist being Clifton the mine were able to complete or are implemented to minimise the Mack of Roebourne. His winning continue those qualifications. Straits risk of impact to significant cultural painting is hung in Straits’ Corporate also liaised with other New South sites as a first principle. If in the Office West Perth. Wales government agencies regarding support for employees. rare circumstance a proposed An ANZAC Day memorial service development may need to proceed was again held at the Whim Creek that may compromise a site of cultural Hotel. The service and breakfast significance, full engagement with were well attended by the workforce, key local stakeholders is conducted. local pastoralists, tourists and local If a suitable resolution is identified, members from the Lockyer family, subject to statutory approvals, fair and some of whom are honoured at the reasonable compensation is provided, memorial for their service in World Wars together with management procedures I and II. to protect any further impacts to sites within the region.

21 Straits Annual Report 22 A health programme providing providing A health programme for local treatment medical free fogging communities and malaria villages. machines for three Education, being monthly donations for local teachers and schools, and English training for schools and governments.regency Economic development for local contractors and “outsourcing” activities to local industry, non-core including the establishment of a environmental accredited government waste disposal company. and stock fish seed Providing vegetable seed for local communities. • • • • Straits continues to work with local authorities to educate relevant communities on safety and legal issues usage, local to mine road related mining and illegal access to mine areas These educational and processing. continue through programmes publications, specialist visitation Straits and Straits’ staff. programmes also participated in a number of local and state government exhibitions employment local industry, promoting and investment. Other activities include: Straits values its relationship with Straits values its relationship and stakeholders the local region it draws the majority of which from to be an and is proud its workforce, integral part of the community. Mt Muro Community Mt Muro for Straits social programmes communities are surrounding continuing, with the main purpose of community self-reliance increasing alternative plantings and through crop co-operative money saving schemes. Ongoing support is given to for local programmes apprenticeship them with four students, providing months training which contributes to part of their work experience. This experience at Straits’ gold mine operations involves 34 students from various high schools. Straits has actively been involved and supported the local community was promoted 2009. Tritton throughout at the Agricultural Expo and the Nyngan Show with an information stall Sponsorship staff. attended by Tritton to “A Day on the has been provided Races, Tomlin Bogan”, Duck Creek School, a ‘sister city’ in China, the Expo the Agriculture Nyngan Show, and all junior sporting bodies in the local area. A golf charity day was held by Straits going to local junior with proceeds the from sporting clubs. Children Hermidale Public School participated which programme in a rehabilitation site. In was carried out at the Tritton a donation return the school received to travel to enabling the children Canberra for an excursion. Local the with involved been has Straits Aboriginal Lands Council and attends their meetings in Nyngan. Tritton Community Tritton involvement with Straits has a strong an excellent creating the community, in the townships of relationship and Girilambone. Nyngan, Hermidale Mineral Resource Statement

Region Project Cut-off Commodity Measured Indicated Inferred Total

Tonnes (kt) 3,120 5,078 1,717 9,915 Tritton Underground Variable Cu (%) 2.6 2.3 1.9 2.3 Tonnes (kt) 800 3,100 3,900 Tritton Murrawombie 1.00% Cu Cu (%) 1.60 1.70 1.68 Au (g/t) 0.2 0.4 0.4 Tonnes (kt) 1,100 700 1,800 Tritton North Variable Cu (%) 2.3 2.1 2.3 Tonnes (kt) 3,120 6,978 5,517 15,615 Grand Total (Tritton Operations) Variable Cu (%) 2.6 2.2 1.8 2.2

Tonnes (kt) 140 98 376 614 In Situ Leachable 0.35% Cu Cu (%) 1.2 0.5 0.5 0.7 Whim Creek Tonnes (kt) 6,970 6,970 Stockpiles Leachable Variable Cu (%) 0.2 0.2 Tonnes (kt) 7,110 98 376 7,584 Grand Total (Whim Creek Operations) Variable Cu (%) 0.3 0.5 0.5 0.3

Whim Creek Sulphides

Region Project Cut-off Commodity Measured Indicated Inferred Total

Tonnes (kt) 572 585 131 1,288 Cu (%) 1.4 0.8 0.2 1.0 0.4%4 Pb (%) 0.2 0.1 0.4 0.2 Whim Creek Whim Creek Sulphides Cu Eq Zn (%) 0.5 0.4 2.3 0.6 Au (g/t) 0.1 0.04 0.3 0.1 Ag (g/t) 4.8 4.2 10.2 5.1 Tonnes (kt) 3,094 2,487 2,260 7,841 Cu (%) 0.8 0.7 0.5 0.7 0.4%4 Pb (%) 0.4 0.3 0.2 0.3 Whim Creek Mons Cupri Sulphides Cu Eq Zn (%) 1.0 0.7 0.5 0.7 Au (g/t) 0.1 0.1 0.1 0.1 Ag (g/t) 18.7 12.8 10.0 14.3 Tonnes (kt) 1,705 127 1,832 Cu (%) 1.5 0.1 1.4 1.0%4 Pb (%) 1.1 2.6 1.2 Whim Creek Salt Creek Sulphides Cu Eq Zn (%) 3.6 6.5 3.8 Au (g/t) 0.2 0.2 0.2 Ag (g/t) 42.3 66.6 44.0 Tonnes (kt) 3,666 4,777 2,518 10,961 Cu (%) 0.9 1.0 0.4 0.8 Pb (%) 0.4 0.5 0.3 0.4 Whim Creek Total Sulphides Variable4 Zn (%) 0.9 1.7 0.9 1.2 Au (g/t) 0.1 0.1 0.1 0.1 Ag (g/t) 16.5 22.3 12.8 18.2

23 Straits Annual Report 60 55 1.3 1.5 2.7 1.3 1.2 4.6 4.9 0.8 2.0 2.8 2.2 0.3 0.3 0.5 3.5 0.2 2.4 691 37.7 27.3 0.04 0.04 0.05 36.7 24 4,100 4,910 9,700 5,085 5,836 14,610 37,000 14,000 142,000 Total Total Total

1.1 1.1 1.4 1.0 1.8 0.1 1.3 5.0 0.8 5.3 2.4 0.3 0.5 3.8 0.2 189 910 17.0 22.1 32.9 0.05 0.04 33.2 4,100 9,100 1,677 1,866 2,910 2,000 37,000 121,000 Inferred Inferred Inferred

1.3 1.5 1.3 1.3 4.5 4.3 4.8 2.9 2.8 0.8 0.4 3.4 0.5 0.2 282 0.03 0.05 30.0 40.3 60.2 7,700 2,915 2,633 4,000 4,900 11,700 21,000 Indicated Indicated Indicated Mineral Resources are Inclusive of Ore Reserves. Discrepancies in summations will occur due to rounding. Whim Creek Project Cu equivalent calculations are based on copper price of US$3.60/lb and zinc price of US$1.05/lb. Hillgrove Project Au Equivalent calculations are based on a gold price of AUD$1,000/oz, an antimony price of AUD$5,500/t and a tungsten price of AUD$20,000. Hillgrove, “Other” represents resources from the following mining centres Metz, Brackins Spur, Bakers Creek, Smiths-Freehold and Eleanora. Temora porphyry copper-gold resources for copper equivalent are based on copper price US$3.67/lb and gold price US$874/oz.

2. 3. 4. 5.  6.  7. 60 2.1 1.6 5.7 2.0 5.0 3.8 2.2 3.2 775 220 0.04 0.06 1,055 Measured Measured Measured

Commodity Commodity Commodity W (%) Sb (%) Au (g/t) Sb (%) W (%) Tonnes (kt)Tonnes Tonnes (kt)Tonnes Au (g/t) Sb (%) (kt)Tonnes Au (g/t) Tonnes (kt)Tonnes Au (g/t) Sb (%) Au (g/t) Tonnes (kt)Tonnes Cu (%) Ag (g/t) Au (g/t) Au (g/t) (kt)Tonnes Ag (g/t) Tonnes (kt)Tonnes Au (g/t) Tonnes (kt)Tonnes Au (g/t) Tonnes (kt)Tonnes Au (g/t) Ag (g/t) Tonnes (kt)Tonnes Au (g/t) Tonnes (kt)Tonnes Tonnes (Mt)Tonnes Ni (%) Co (%)

5.

5. 7. Cut-off Cut-off Cut-off Variable Au Eq 3.0 g/t Variable Variable 0.5 % Ni Variable Variable 0.5 g/t Au 0.5 g/t Au 0.3 g/t Au Cu Eq 0.25% Project Project Project

6. The information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Peter Storey, Executive General Manager – Business Development & Technical Services, who is a member of the Australian Institute of Mining and Metallurgy. StoreyMr. is a full-time employee of Straits Resources Limited and has sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. StoreyMr. consents to the inclusion in the report of the matters based on their information in the form and context in which it appears. Mineral Resource Notes: 1. Other Stockpiles Syndicate Greenvale Tailings In Situ In Discovery Ridge Yandan Bald Hill Temora Temora Projects Region Region Region Three Rivers (Straits’ share 84.27%) Hillgrove Grand Total (Hillgrove Operations) Mt Muro Goldminco Corporation (Straits’ share 59%) Drummond Basin Grand Total (Mt Muro Operations) Nickel Cobalt Laterite Precious Metals Precious Antimony/Gold O re Reser ve Statement

Copper

Region Project Cut-off Commodity Proved Probable Total Tonnes (kt) 1,200 4,200 5,400 Tritton Underground 1.00% Cu Cu (%) 2.6 2.1 2.2 Murrawombie Tonnes (kt) - 300 300 Tritton 1.00% Cu Underground Cu (%) - 1.7 1.7 Tritton North Tonnes (kt) - 900 900 1.00% Cu Underground Cu (%) - 1.9 1.9 Tonnes (kt) 1,200 5,500 6,700 Grand Total (Tritton Operations) Cu (%) 2.6 2.0 2.1 Cu recovered (t) 29,000 105,000 134,000

Region Project Cut-off Commodity Proved Probable Total Tonnes (kt) 6,970 - 6,970 Whim Creek Leachable Stockpiles Variable Cu (%) 0.2 - 0.2 Cu recovered (t) 5,500 - 5,500

Sulphides

Region Project Cut-off Commodity Proved Probable Total Tonnes (kt) 410 170 580 Cu (%) 1.6 1.4 1.5 Pb (%) 0.1 0.1 0.1 Whim Creek Open Pit 0.7% CuEq Zn (%) 0.5 0.4 0.5 Au (g/t) - - - Ag (g/t) 1.9 1.6 1.8 Tonnes (kt) 1,350 450 1,800 Cu (%) 1.2 1.1 1.1 Whim Creek Pb (%) 0.7 0.8 0.7 Mons Cupri Open Pit 0.7% CuEq Sulphides Zn (%) 1.7 1.7 1.7 Au (g/t) 0.2 0.1 0.2 Ag (g/t) 25 20 24 Tonnes (kt) - 1,400 1,400 Cu (%) - 1.3 1.3 Salt Creek Open Pit Pb (%) - 1.0 1.0 and Underground Variable Zn (%) - 3.5 3.5 Au (g/t) - 0.2 0.2 Ag (g/t) - 34 34 Tonnes (kt) 1,760 2,060 3,820 Cu (%) 1.3 1.3 1.3 Pb (%) 0.5 0.9 0.7 Zn (%) 1.4 2.8 2.1 Au (g/t) 0.1 0.2 0.1 Grand Total (Whim Creek Sulphides) Ag (g/t) 20 28 24 Cu recovered (t) 20,300 23,700 44,100 Pb recovered (t) 8,200 16,000 24,200 Zn recovered (t) 18,400 43,800 62,200 Au recovered (oz) 5,200 7,900 13,100 Ag recovered (oz) 880,000 1,460,000 2,340,000 25 Straits Annual Report 62 60 1.7 1.9 4.0 3.5 4.4 2.0 2.9 2.4 2.2 100 400 0.01 0.02 0.03 0.04 26 2,100 1,800 2,260 40,000 210,000 222,000 2,900,000 Total Total - - - - 62 1.7 1.8 2.7 4.4 4.2 2.3 3.5 100 200 0.01 0.02 0.02 2,100 1,800 2,000 33,000 207,000 210,000 2,900,000 Probable Probable ------0 - - - 60 2.4 2.0 3.0 2.5 2.2 3.2 260 200 0.05 0.05 0.04 7,000 15,000 Proved Proved The average metallurgical recoveries expected for the Whim Creek Sulphides are for 91% copper, 87% for lead, 75% for zinc, 72% for gold and 78% for silver. Whim Creek Project Cu equivalent calculations are based on a copper price of US$1.05/lb. of price zinc and US$3.60/lb Syndicate reserves based on mining shapes with an external dilution estimate of 10% and a mining recovery of 98%. Hillgrove Project Au Equivalent calculations are based on a gold price of AUD$1,000/oz , an antimony price of AUD$5,500/t and a tungsten price of AUD$20,000. Hillgrove, “Other” Resources represents the Metz, Brackins Spur, Bakers Creek, centres. Smiths-Freehold and Eleanora mining Metallurgical recoveries for Hillgrove operations are based on 92% for antimony, 76% for gold and 40% for tungsten. Mt Muro open pit reserves are based on Whittle Four-X optimised pit shells. Mining dilution and recovery have been estimated at 10% and 95% Mt reserves been reportedMuro underground have respectively. against mining shapes with an additional allowance of 5% mining dilution and 95% mining recovery. Metallurgical recoveries are based on recovery91% for gold and 70% recovery for silver. W (%) W (%) W (%) W (%) Sb (%) Sb (%) Sb (%) Sb (%) 6. 7. 8. 9. 10. 11. 12. Ag (g/t) Au (g/t) Au (g/t) Au (g/t) Au (g/t) Au (g/t) Tonnes (kt)Tonnes Tonnes (kt)Tonnes Tonnes (kt)Tonnes Tonnes (kt)Tonnes Tonnes (kt)Tonnes W recovered (t) Commodity Commodity Sb recovered (t) Ag recovered (oz) Au recovered (oz) Au recovered (oz) Cut-off Cut-off Variable Variable Variable 5.0g/t AuEq Project Project Mt Muro Open Pit and Underground Other Mine Areas Surface Stockpiles Syndicate Underground Region Region Mineral Resources are Inclusive of Ore Reserves. Discrepancies in summations will occur due to rounding. Tritton Reserves calculated by creating mining shapes around a nominal 1% copper resource. Unplanned dilution has been estimated to be 5% and a metallurgical recovery of 93.5% has been used to calculate copper metal recovered. Whim Creek Sulphide open cut reserves have been calculated based on designs around Whittle Four-X optimised pit shells. Mining dilution and mining recovery have been estimated at 5% and 95% respectively. For the and reported been created shapes have reserves inclusive underground mining of dilution. The information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Mr Peter Storey, Executive General Manager – Business Development Services & Technical who is a member of the Australasian Institute of Mining and Metallurgy. Mr Storey is a full-time employee of Straits Resources Limited and has sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”. Mr Storey consents to the inclusion in the report of the matters based on their information in the form and context in it appears. which Mt Muro Grand Total (Hillgrove Operations) Hillgrove 2. 3. 4. 5. Ore Ore reserve Notes: 1. Precious Precious Metals Antimony/Gold Corporate Governance

The directors of Straits believe that Role Performance Review of effective corporate governance Broadly, the key responsibilities of the Senior Executives improves company performance, Board are: Information on the process for enhances corporate social responsibility evaluating the performance of senior and benefits all stakeholders. • setting the strategic direction of the Company with management, executives can be found in the Governance practices are not a static Directors’ Report. set of principles, and the Company and monitoring management’s assesses its governance practices implementation of that strategy; Principle 2 – Structure the Board on an ongoing basis. Changes and • evaluating, approving and to Add Value improvements are made in a substance monitoring major capital Board Members over form manner, which appropriately expenditure, capital management reflects the changing circumstances of and all major corporate Details of Board members, their the Company as it grows and evolves. transactions; experience, expertise, qualifications, Accordingly, the Board has established term in office and independence status a number of practices and policies to • approving the annual operating are set-out in the start of the Directors’ ensure that these intentions are met and budget, annual shareholders’ report Report. and annual financial accounts; that all shareholders are fully informed The following Board changes occurred about the affairs of the Company. • appointing, monitoring, managing during the year: The Company has a corporate the performance of, and if necessary terminating, the • Mr Alastair Morrison was appointed governance section on the website as a non-executive director on 2 at www.straits.com.au. The section employment of the Chief Executive Officer; February 2009 and a member of includes details on the Company’s the Audit Committee on 4 May governance arrangements and copies • approving and monitoring the 2009. of relevant policies and charters. Company’s risk management framework; and • Mr Martin Purvis resigned as a ASX Corporate Governance director and Chief Operating Officer Principles and Recommendations • ensuring compliance with the of the Company on 28 April 2009. The Company has adopted the Corporations Act 2001, ASX listing rules and other relevant regulations. • Mr Richard Ong Chui Chat resigned second edition of the ASX Corporate as a non-executive director on 4 Governance Council’s Principles of Delegation May 2009. Good Corporate Governance and Best The Board Charter sets out the Board’s Practice Recommendations released • Mr Michael Gibson was appointed as delegation of responsibility to allow an executive director on 4 May 2009. on 2 August 2007 (ASX Principles). the Chief Executive Officer and the A description of the Company’s main executive management team to carry The structure of the Board does not corporate governance practices is on the day-to-day operations and comply with ASX Recommendation set out below. All these practices, administration of the Company. The 2.1 as a majority of the directors are unless otherwise stated, were in place Board Charter supports all delegations not independent. Currently, the Board for the entire year. This disclosure is of responsibility by formally defining consists of five directors of which Dr in accordance with ASX Listing Rule the specific functions reserved for the Garry Lowder and Mr Alan Good are 4.10.3. Board and its Committees, and those considered independent within the Principle 1 – Lay Solid matters delegated to management. The ASX’s definition. Foundations for Management Chief Executive Officer is accountable The Board believes the current and Oversight to the Board for the authority that is structure is appropriate at this stage of delegated by the Board. The Board operates in accordance with the Company’s activities. Mr Jerkovic broad principles set out in its Charter, All directors and key executives has a significant shareholding in the which is available from the Corporate reporting to the Chief Executive Company. Mr Morrison is Managing Governance section of the Company’s Officer of the Company have been Director of Standard Chartered Private website. The Board has previously given formal letters of appointment Equity Limited which has an $80 million adopted a Board Charter. outlining key terms and conditions of convertible note with the Company. their appointment. The Board believes the shareholding and convertible notes align Messrs Jerkovic’s and Morrison’s interests with those of other shareholders, and provides effectiveness in

27 Straits Annual Report 28 Principle 4 – Safeguard Integrity Principle 4 – Safeguard in Financial Reporting Audit Committee The Audit Committee members are Dr Lowder and Mr Good who are independent non-executive directors, and Mr Morrison, a non-executive in who joined the Committee director May 2009. All members of the Audit Committee an financially literate and have are the understanding of appropriate industries in which the Company Mr Good, has operates. One member, qualifications and experience relevant by virtue of being a former partner of a major accounting firm. All other details of the members’ qualifications and number of meetings held can be found Report. in the Directors’ adopted has previously The Board a formal Audit Committee Charter. The Charter sets out the roles of the Audit and responsibilities Committee and contains information for the selection, on the procedures of the appointment and rotation A full copy of the Audit external auditor. the Committee Charter is available from Corporate Governance section of the website. Company’s CommitteeAudit the of composition The basis ongoing an on assessed be will Board overall in light of the Company’s and strategic direction. structure annual the attends auditor external The to available is and meeting general questions about the answer shareholder preparation the and audit the of conduct and content of the audit report. This is a restriction over and above This is a restriction to not trade in the requirement securities when in the Company’s information. possession of inside Securities Trading The Company’s Policy is consistent with ASX Principle 3. A copy of the Securities Trading the Corporate Policy is available from Governance section of the Company’s website. Principle 3 – Promote Ethical and Principle 3 – Promote Responsible Decision Making Code of Conduct adopted a has previously The Board formal Corporate Code of Conduct. A copy of the Code is made available to all employees of the Company. basic certain This Code expresses principles that the Company and employees should follow in all dealings They should to the Company. related show the highest business integrity in their dealings with others, including the confidentiality of other preserving peoples’ information, and should business in conduct the Company’s with law and principles of accordance good business practice. A copy of the Corporate Code of Conduct can be found at the the website under Company’s Corporate Governance section. Policy Securities Trading Policy has A formal Securities Trading been in place since May 2004. The the requirements Policy reinforces of the Corporations Act 2001 in to insider trading, as certain relation persons”) key executives (“restricted trading in the from prevented are two weeks prior shares Company’s to the announcement of the quarterly, half-yearly and the full-year reports. Independent Advice of the Company is entitled to A director advice seek independent professional to, legal, (including, but not limited advice) at the accounting and financial expense on any matter Company’s connected with the discharge of his in accordance or her responsibilities, and subject to with the procedures, the conditions set out in the Board’s Charter. Performance Evaluation Board an overall has implemented The Board each where appraisal process Board the Board’s separately reviews director reviewed have performance. Directors performance for the year the Board’s ended 30 June 2009. exercising independent judgement exercising performance of and challenging the management. of In determining the independence to the has regard the Board directors independence criteria as set out in the the extent that it is ASX Principles. To to consider necessary for the Board refers the Board issues of materiality, and for qualitative to the threshold quantitative materiality as adopted by the Board and contained in the Board which is disclosed in full on Charter, website. The Board the Company’s assesses independence at the time of monitors and appointment of directors as and the independence of directors when appropriate. various has also formalised The Board disclosure trading, securities on policies and codes of conduct, which assist governance a stronger in providing These framework for the Company. in addition to the Company’s are the Corporations under requirements Act 2001 and ASX Listing Rules. composition and structure Board the as and when will be reviewed and strategic directions Company’s activities change. The Company will the appointment of only recommend where to the Board additional directors it believes the expertise and value added outweighs the additional cost. Nomination Committee The Company does not comply with is ASX Recommendation 2.4 as there no separate Nomination Committee. comprises of five Given the Board it has been decided that directors, to be gained no efficiencies are there forming a separate Nomination from Board Committee. The current that members carry out the roles would otherwise be undertaken by a Nomination Committee and each matters excludes himself from director in which he has a personal interest. attendances Details of director Audit Committee and at Board, Remuneration Committee meetings are Report. detailed in the Directors’ Corporate Governance

Principle 5 – Make Timely and Principle 6 – Respect the Rights Principle 7 – Recognise and Balanced Disclosure of Shareholders Manage Risk Continuous Disclosure Shareholder Communication Risk Assessment and Management The Board has previously adopted Strategy The Company does not have a Risk a formal Disclosure Policy outlining The Board has previously adopted a Management Committee. Given the procedures for compliance with ASX formal Shareholder Communication current size of the Company and continuous disclosure requirements. A Guidelines and Policy. Board, the directors believe there are copy of the Disclosure Policy is available no efficiencies in forming a separate All information disclosed to the ASX is from the Corporate Governance section committee and the Board as a whole, posted on the Company’s website as of the Company’s website. performs this role. soon as it is disclosed to the ASX. When The Policy is based upon the analysts are briefed on the aspects of The Company does not have a single Company’s desire to promote fair the Company’s operations, the material specific risk management policy, but markets, honest management and used in the presentation is released to rather, financial and operating risks are full and fair disclosure. The disclosure the ASX and posted on the Company’s addressed through approved policies requirements must be complied with in website. Procedures have also been and procedures covering treasury, accordance with their spirit, intention established for reviewing whether any financial, contract management, safety and purpose. price sensitive information has been and environmental activities of the inadvertently disclosed, and if so, this Company. Further, the Company’s The purpose of the Policy is to: information is released to the market. Audit Committee covers compliance, • summarise the Company’s monitoring and assessing key financial In addition, the Company seeks to disclosure obligations; risk areas which include that Straits has: provide opportunities for shareholders • explain what type of information to participate through electronic • an effective financial risk needs to be disclosed; means. Initiatives to facilitate this management system in place, include making available on the including for macro risks; • identify who is responsible for Company’s website all Company • an effective internal control system disclosure; and announcements, media briefings, in place; and • explain how individuals of the details of Company meetings and both Company can contribute. press releases and financial reports • a system in place for unusual and/ for the last eight years. The website is or high risk transactions. The Company Secretary has been currently being updated. nominated as the person responsible The Audit Committee assesses for communications with the ASX. This The external auditor attends the annual these systems. role includes responsibility for ensuring general meeting and is available Key controls have been identified compliance with the continuous to respond to questions about the for each business, and accounting disclosure requirements in the ASX conduct of the audit and content of the processes with an internal controls Listing Rules and overseeing and co- independent audit report. framework developed. The internal ordinating information disclosure to the A full copy of the Shareholder audit function has been outsourced to ASX, analysts, brokers, shareholders, Communication Guidelines and Policy is an audit firm and a programme will be the media and the public. available from the Corporate Governance implemented for the 2010 year. Also, section of the Company’s website. a Hedging Committee and a Treasury Committee have been established. In addition to external financial audits, the Company’s operations in Australia and overseas are also subjected to annual

29 Straits Annual Report 30 Principle 8 – Remunerate Fairly Principle 8 – Remunerate and Responsibly Remuneration Committee an established The Company has Remuneration Committee which comprises of Dr Lowder and Mr Good. The Remuneration Committee year times during the met three to discuss the Company’s annual review performance and remuneration size, Given the Company’s process. believes a two-member the Board to satisfactorily committee is sufficient and effectively perform the functions of a Remuneration Committee. The Company considers it appropriate that only independent directors are members of the Remuneration both Committee, and in this regard, independent directors are members of the Remuneration Committee. On balance, the preferred composition of the Remuneration Committee is for it to be solely comprised of independent directors. adopted has previously The Board a formal Remuneration Committee A full copy of the charter Charter. the Corporate is available from Governance section of the website. Company’s Non-Executive Director Remuneration are Non-executive directors by way of director’s remunerated compulsory fees. Apart from superannuation entitlements, non- not eligible are executive directors termination or resignation, to receive benefits. nor any staff retirement, the Company’s financial reports are are financial reports the Company’s and fair a true complete and present of the material respects, in all view, operational and condition financial of the Company and Group, results relevant with accordance in are and and accounting standards; that the above system was founded on a sound system of financial risk management and internal compliance and control and which implements the policies and the adopted by the Board risk management Company’s and internal is operating control in all and effectively efficiently material respects. external safety and environmental external safety and environmental The standards. audits to Australian an insurance Company engages firm as part of the Company’s brokering of the coverage for annual assessment results assets and risks. The insured of all the various audits and insurances to the Board reported assessments are at least annually. Financial Reporting The integrity of Straits’ financial a sound system upon relies reporting of risk management and control. the and The Chief Executive Officer made the have Chief Financial Officer following certifications to the Board: • • believes that it has a The Board understanding of the thorough that they are key risks and Company’s A copy being managed appropriately. Risk Management of the Company’s the Statement is available from Corporate Governance section of the website. Company’s Directors’ Report

The directors present their report together with the financial statements of Straits Resources Limited and its controlled entities (‘the consolidated entity’) for the twelve months to 30 June 2009. Directors The directors of the Company in office during the financial year and up to the date of this report are:

Special Appointed / Director Experience Classification Responsibilities Resigned Alan James Good Chartered Accountant with over 30 years Non-Executive Appointed Independent B.Com (UWA), F.C.A. involvement in the mining industry. Mr Good Chairman; July 2005 was a partner of PricewaterhouseCoopers Chairman of (PwC) for over 20 years specialising in providing Remuneration Appointed Chairman corporate advisory and audit services and was Committee; the Managing Partner of the Perth office for over 23 May 2007 6 years. Mr Good retired from PwC in 2003 Member of Audit and now has a number of non executive board Committee. positions. Age 61. Other Listed Public Company Directorships: Non-executive chairman of CMA Corporation Limited, having joined its board in July 2005.

Milan Jerkovic Mr Jerkovic is a qualified geologist with Chief Executive Appointed Executive B. App Sc (Geology), postgraduate qualifications in Mining and Officer August 1999 Mineral Economics. Mr Jerkovic has over 25 Postgraduate Diploma years experience in the mining industry involving (Mineral Economics), resource evaluation, operations, financing, Postgraduate Diploma acquisition, project development and general (Mining), management. Mr Jerkovic is a director of Straits Asia Resources Limited, and was previously M.Aus.I.M.M., Chairman of Tritton Resources Limited and M.A.I.C.D. previously a director of Hargraves Resources Limited. Mr Jerkovic has held positions with WMC, BHP and Nord Pacific. Age 47.

Garry George Lowder Geologist with over 40 years experience Non-Executive Appointed Independent Ph.D (U.C. Berkeley), in research, mineral exploration and senior Director; March 1997 B.Sc (Hons) (Syd), management, in both the mining industry and Chairman of Audit state government. Credited with key roles in F.Aus.I.M.M, Committee; several major ore discoveries. Former Director M.A.I.C.D General of the New South Wales Department Member of of Mineral Resources, where he established the Remuneration Discovery 2000 exploration incentive programme. Committee. Age 65. Other Listed Public Company Directorships: Chairman of Malachite Resources Limited since February 1997.

31 Straits Annual Report 32 Classification Not Independent Executive Executive Executive Appointed / Resigned Appointed February 2009 Appointed May 2009 Appointed May 2009 Appointed May 2003; Resigned 4 May 2009 Appointed July 2005; Resigned 28 April 2009 Special Responsibilities Non-Executive Director; Member of Audit Committee Executive Director Non- Executive Director Chief Operating Officer Experience Mr Morrison is a founder Managing Director of Mr Morrison is a founder Managing Director He joined Private Equity. Chartered Standard in April 2002, after 20 years Chartered Standard private equity the leading European at 3i Group, for 3i Asia Pacific. he was Director house, where Asia-Pacific operations He co-founded 3i’s run an investment in 1997, having previously team in London focusing on buy-outs and expansion financing. Mr Morrison has investment a wide range of industries in experience across in and Asia. He holds an M.A. degree Europe Politics, Philosophy and Economics and M.Phil Oxford in Management Studies from degree Age 52. University. Mr Gibson holds a degree in Arts and Law from in Arts and Law from Mr Gibson holds a degree Macquarie University and a Masters of Law He was a of Sydney. the University from degree law partner for 12 years with a leading Australian companies firm, specialising in advising resource on major mine acquisitions and disposals, and development of mining and joint ventures Mr Gibson is also a projects. infrastructure Securities of Singapore non-executive director Limited. Exchange listed Straits Asia Resources Age 46. Mr Ong is a qualified Marine Civil Engineer with over 20 years experience operating in South East Asia in construction, marine engineering, exploration. business development and resource and by the Singapore Ong is well regarded Mr. Indonesian business community and provides to its strategic advice to Straits in relation in South East Asia. Mr Ong is a director interests of Straits Asia and Chief Executive Officer Limited. Age 60. Resources Qualified mining engineer with more than 22 Qualified mining engineer with more industry years experience in the resources in South working in senior management roles Africa, Indonesia and Australia. Mr Purvis is an of Straits Asia Resources executive director Limited. Age 48. Director William Edward William Edward Alastair Morrison M.A Oxon M.Phil Oxon Michael George Gibson B.A LLB LLM Richard Ong Chui Chat Richard Martin David Purvis B.Sc (Hons) Mining Engineering (Leeds University UK) Company Secretary Mark Hands – B.Juris, LLB. and General Counsel. Mr Hands has over as Company Secretary 2008 Limited in March Mr Hands joined Straits Resources 10 years experience as a Company Secretary. Directors’ Report

Principal Activities Events Subsequent to It is anticipated that processing Balance Date activities will initially be suspended to The principal activities of the fully investigate the technical issues, consolidated entity during the financial Apart from the matters disclosed the cost, and the time necessary year were the production and sale of below, there has not arisen in the to implement the required plant coal, copper and gold, the exploration interval between the end of the modifications to achieve commercially for copper, coal and gold, and metals financial year and the date of this viable production levels. distribution. Other than the foregoing report, any matter or circumstance and as referred to on pages 7 to 30, that has significantly affected or may (c) Whim Creek Mine there were no significant changes in significantly affect the operations of the As previously announced, mining those activities during the financial year. consolidated entity; the results of those operations at Whim Creek have operations; or the state of affairs of Dividends ceased. Whim Creek continues to the consolidated entity in subsequent produce copper from its existing heaps. There was no interim dividend paid financial years. during the year. Since year end the On 20 August 2009, Straits (a) Deferred payment consideration on directors have declared an unfranked announced, in anticipation of the disposal of discontinued operation. final/special dividend for the year ended cessation of processing operations, 30 June 2009 of 30 cents per fully paid The total cash consideration for the sale it has agreed terms with Venturex ordinary share. The dividend payment of a 60% interest in Straits’ wholly owned Resources Limited (Venturex) to sell: was made on 21 September 2009. subsidiary Straits Bulk and Industrial Pty (i) all the issued capital of Straits Ltd included a deferred performance (Whim Creek) Pty Ltd, the Review of Operations and payment of up to US$115 million. This beneficial owner of the Whim Future Developments related to certain matters in connection Creek Mine, and all associated with reserve upgrades in relation to the A review of the operations and financial exploration tenements including Sebuku mine located on Sebuku Island, position of the consolidated entity the sulphide resources at South Kalimantan, Indonesia, controlled during the financial year, including Whim Creek Mons Cupri, and and operated by Straits Asia Resources details of the results of operations, the Whim Creek Hotel, but Limited (Straits Asia). changes in the state of affairs and the excluding the SX-EW plant, likely developments in the operations of On 17 August 2009, Straits Asia which is subject to an option the consolidated entity in subsequent announced that the Indonesian to purchase agreement with financial years, are set out on Government has now formally Finders Resources Limited; and pages 7 to 30. completed a process of rezoning land (ii) the Salt Creek and Balla Balla use across South Kalimantan that Other than as referred to in this copper-zinc projects and clears the way for Straits to claim the report, further information as to likely associated tenements. developments in the operations of the deferred performance payment of consolidated entity and the likely results US$115 million. The consideration for the acquisition is: of those operations would, in the (b) Hillgrove Mine (i) 106 million fully paid Venturex opinion of the directors, be speculative shares at a deemed value of 7.5 On 18 August 2009, Straits announced and/or prejudice the interest of the cents per share ($8 million) on a temporary suspension of processing consolidated entity. completion of the transaction; activities at its Hillgrove mine in and Armidale, NSW. (ii) fully paid ordinary Venturex While the plant has produced saleable shares or cash to the equivalent antimony metal to LME specifications value of $3 million based on a for the past 12 months, the quantities share price of 30 day VWAP produced have been significantly below preceding Venturex formally design levels due to a number of issues committing to a “Decision to in the processing plant. While some Mine”. rectifications to the plant have been made, issues still remain with effective With the due diligence completed, waste water treatment, the flotation the parties are now in the process configuration and the interface between of constructing a formal sale and leaching and electrowinning. purchase agreement.

33 Straits Annual Report - - - - - 3 3 34 Attended 6,250 6,250 - - - - - 3 3 97,500 Remuneration Held 340,000 174,500 612,000 Number Committee Meetings - - - - - 3 3 Number of Shares Issued Number of Shares Attended Meetings - - - - - 3 3 Held Audit Committee $3.98 $1.75 $2.58 $3.98 Issue Price 8 6 2 15 13 15 15 Exercise Price Exercise Attended 8 2 16 15 14 16 16 Held Directors Meetings Directors (iv) (v) (i) (i) (iii) (ii) Mr Ong resigned as a non-executive director on 4 May 2009 as a non-executive director Mr Ong resigned of the Company on 28 April 2009 and Chief Operating Officer as an executive director Mr Purvis resigned February 2009 and was appointed to the on 2 Mr Morrison was appointed as a non-executive director Audit Committee on 4 May 2009 2009 on 4 May Mr Gibson was appointed as an executive director Both Mr Jerkovic and Mr Purvis attended Audit Committee Meetings by invitation Milan Jerkovic Date Options Granted Expiry Date 23 December 2009 14 January 2007 11 January 2011 Garry Lowder Martin Purvis Alan Good Michael Gibson 21 December 2011 Richard Ong Chui Richard Chat Alastair Morrison No option holder has any right under the options to participate in any other share options to participate in any other share No option holder has any right under the issue of the Company or of any other entity. of Options Issued on the Exercise Shares issued during the twelve months to of Straits were shares The following ordinary of options granted under the Straits Resources 30 June 2009 on the exercise Plan. Option Limited Employee Share Shares Under Option Shares are option as at the date of this report of Straits under shares Unissued ordinary as follows: The issue price was paid to convert these options to shares. The issue price was paid to convert these Meetings of Directors and Committee meetings during the financial at Board The attendance of directors as follows: year were (ii) (iii) (iv) (v) (i) Standard Chartered Private Equity Chartered Standard Dividend declared Environmental Regulations Environmental subject are operations The Company’s to various Commonwealth, State and international relevant environmental air ranging from in areas regulations waste emission and water quality, impact and disposal, environmental and assessments, mine rehabilitation water access to, and use of ground In particular, and/or surface water. to required some operations are conduct certain activities under the legislation protection environmental and development consents of the jurisdiction in which they operate, legal and such licences and project obligations, include requirements site. specific to the relevant of any not aware are The directors of the Company’s material breaches licences and all mining and exploration activities have been undertaken in compliance with the relevant regulations. environmental Subsequent to 30 June 2009, the an unfranked final/ declared directors special dividend for the year ended 30 June 2009 of 30 cents per fully The aggregate share. paid ordinary amount of the dividend to be paid out at 30 June 2009, but profits of retained as a liability at year end, not recognised is $73.663 million. The dividend was paid on 21 September 2009. (d) Limited (SCPEL) Straits On 11 September 2009, will not receive announced as SCPEL dividend to be the 30 cents per share paid on 21 September 2009, a revision of the conversion price and the issuer of the price in respect redemption the anti-dilution under notes is required terms of the note agreement. The new conversion price is now (previously $1.3044 per share and the issuer $1.45 per share) per price is now $1.9791 redemption $2.20 per share). (previously share If converted, the total number of notes would convert to 61,139,221 fully paid ordinary shares in Straits 55,000,000). (previously (e) Directors’ Report

Directors and Officers Indemnity The Board of directors has considered the position and, in accordance The Constitution of the Company with the advice received from the provides that the Company “must audit committee, is satisfied that the indemnify, to the fullest extent provision of the non-audit services is permitted by law each director, compatible with the general standard secretary or assistant secretary of the of independence of auditors imposed Company and may indemnify to the by the Corporations Act 2001. The fullest extent permitted by law such directors are satisfied the provision of other officers of the Company as the non-audit services by the auditor, as directors determine, for all losses or set out in Note 37 to the accounts, liabilities incurred in the performance of did not compromise the auditor the person’s duties.” independence requirements of the The Company has paid a premium Corporations Act 2001 for the following and other charges for a Directors and reasons: Officers Liability insurance policy for the • all non-audit services have been benefit of the directors, secretary and reviewed by the audit committee executive officers of the Company. The to ensure they do not impact the policy prohibits the disclosure of the impartiality and objectivity of nature of the liabilities insured and the the auditor; amount of premium paid. • none of the services undermine Loans to Directors the general principles relating to auditor independence as set out in Milan Jerkovic has an interest free loan Professional Statement F1, including of $200,000. reviewing or auditing the auditor’s own work, acting in a management Proceedings on Behalf of or decision-making capacity for the the Company company, acting as advocate for the No proceedings have been brought company or jointly sharing economic or intervened in on behalf of the risk and rewards. Company with leave of the Court A copy of the auditor’s independence under section 237 of the Corporations declaration as required under section Act 2001 in the financial year or at the 307C of the Corporations Act 2001 is date of this report. set out on page 51.

Non-audit Services Rounding of Amounts to Nearest The Company may decide to employ Thousand Dollars the auditor on assignments additional The Company is of a kind referred to to their statutory audit duties where in Class Order 98/0100 issued by the the auditor’s experience and expertise Australian Securities and Investments with the Company and/or consolidated Commission, relating to the rounding entity are important. off of amounts in the Directors’ Report Details of the amounts paid or payable and financial report. Amounts in the to the auditor (PricewaterhouseCoopers) Directors’ Report and financial report for audit and non-audit services have been rounded off to the nearest provided during the year are set out in thousand dollars in accordance with Note 37 to the accounts. that Class Order.

35 Straits Annual Report 36 32 45.7 2005 381.5 42 per cent 42 per cent 21 34.2 2006 673.7 54 per cent 119 per cent (8) 2007 (16.1) 1,490.9 82 per cent 287 per cent (6.0) (2.6) 2008^ 1,593.0 4 per cent 305 per cent 2009 (42.1) (17.9) 518.1 35 per cent (70 per cent) Position 1 May 2009) (from Chief Financial Officer & Investments Executive General Manager Corporate Affairs Executive General Manager Eastern Operations & Employment Relations Services & Technical Executive General Manager Business Development $’M $’M cents per cent per cent 2 1 Principles used to determine the nature and amount of remuneration and amount the nature Principles used to determine Details of remuneration Service agreements compensation Share-based Additional information Principles used to determine the nature and amount of remuneration and amount of remuneration Principles used to determine the nature James Carter David Greenwood Laing Richard Peter Storey Name Net profit (loss) after tax Net profit Earnings per share TSR per cent - cuml Market capitalisation TSR - year on year (1) Total Shareholder Return (TSR) – measured as the change in share price at the end of period plus dividends paid, from opening share price. opening share plus dividends paid, from price at the end of period Return as the change in share Shareholder (TSR) – measured (1) Total 2005. as change from (2) TSR measured this period is for the 6 months ended 30 June 2008. financial year-end ^ Due to a change in the Group The objective of the Company’s executive reward framework is to ensure reward for performance is competitive and reward framework is to ensure executive reward The objective of the Company’s of strategic objectives with achievement The framework aims to align executive reward delivered. for the results appropriate of value for shareholders. and the creation in recommendations and provides of directors to the Board The Company has a Remuneration Committee that reports to market and senior executives, having regard terms of compensation and incentive plan arrangements for directors is a particular emphasis on performance There conditions and the performance of the individuals and the consolidated entity. years. year and incentives for future of the Company in the current 4 periods is set out below: financial year and the previous financial performance in the current A summary of the Company’s A All of the above persons were key management personnel during the year ended 30 June 2009. Set out on pages 39 to 41 key management personnel during the year ended 30 June 2009. Set out All of the above persons were be disclosed pursuant must whose remuneration Group and the Company of the executives highest remunerated the five are to the Corporations Act 2001. Remuneration Report Remuneration the following main headings: is set out under report The remuneration A B C D E by section 308(3C) of the Corporations has been audited as required report this remuneration in The information provided Act 2001. Key Management Personnel set out on are the period, including experience, qualification and special responsibilities of the Company during Directors pages 31 and 32. (see pages 31 and 32) and those of the Company defined as the directors are Group The key management personnel of the (see below). to the Chief Executive Officer directly executives that report Directors’ Report

The performance of the Company’s total shareholder return relative to a number of ASX Accumulation Indexes is shown graphically below:

(4 April 2000 to 28 September 2009)

Source: IRESS

The indexes provided for comparison Executive Pay cost of living adjustments. The Board are the S&P/ASX Small Resources considers the structures of executives’ Accumulation Index, the S&P/ASX 200 Remuneration packages are based packages are at levels to maintain Resources Accumulation Index and the around a combination of the following: and keep what the Board believes is a S&P/ASX 200 Accumulation Index. • Cash salary and benefits; talented and capable senior executive team. In the current competitive labour Compensation for directors and • Short-term incentive; environment the Board is pleased to executives are set at levels to attract report that the executive team has and retain a strong team to manage • Long-term incentive by participation continued to experience little turnover. and oversee the Company’s activities. in the Company’s Executive Share Base salaries for executive directors for This has been particularly important Acquisition Plan (ExSAP); the 2009 financial year were frozen, as in the current competitive labour • Superannuation. they agreed to forego their contractual environment for skills and experience in CPI adjustment. Base salaries for the resources industry. The framework Cash salary and benefits executives for the 2009 financial year provides a mix of fixed cash and short were also frozen. term incentives, and longer-term Senior executives undergo a incentives through participation in performance appraisal from the Chief Benefits include motor vehicle the Company’s equity programmes. Executive Officer each year. When allowances as well as the notional As executives gain seniority with the reviewing a senior executive’s package calculation on interest free loans. Group, the balance of this mix shifts to (including discretionary cash bonus), a higher proportion of “at risk” rewards considerations taken into account and long term incentives. are the performance of the individual and the Company during the year, comparisons with industry surveys and

37 Straits Annual Report 38 Details of remuneration Details of remuneration B of the Details of the remuneration the key management directors, and specified personnel of the Group executives of the Company and the set out in the following are Group tables. Elements of remuneration and equity are to STI’s relating based on personal and Company performance and determined by the Remuneration Committee. Directors and Directors non-executive directors and Fees and payments to directors the reflect non-executive directors and made on, demands which are of, the directors. the responsibilities non-executive reviews The Board annually. fees and payments directors’ at any The Chairman is not present of to determination discussions relating his own remuneration. are fees Non-executive directors’ non- determined within an aggregate limit, fee pool executive directors’ annum. per $700,000 currently is which In respect of executive directors, of executive directors, In respect issues of equity will be approved at the Company General Meetings of from time to time. The current of the Company is to issue approach on the equity to executive directors same terms and conditions and pursuant which to the seeks ExSAP, to a long term incentive. provide Option and share acquisition plans when discretion its uses Board The or deciding on the allocation of shares shares ExSAP of allocation The rights. the during executives to rights or meaningful on based was year financial align and incentivise will that allotment with those of interests the executive’s an been has There shareholders. other options and rights shares, of allocation over a period of years and the Board executives the encourages that believes of short- balance to have an appropriate term and long-term outlooks on the performance. Company’s The senior executives of the Company may be invited to participate in the for The ExSAP provides ExSAP. long term incentives for the senior executives, with rights being vested to when service and performance shares met. The performance are hurdles that the criteria required hurdle return total shareholder Company’s than the 50 be equal to or greater returns of total shareholder percentile of the S&P/ASX 300 Metals and Mining Index at the expiry of a three the year period and which compares against its performance Company’s The rights have converted peer group. no longer are and there to shares in continuing performance hurdles to these rights, but the shares relation conditions and subject to escrow are held subject to a lien in favour of are the Company. Short-term incentive payments Short-term incentive (STI) an bonus payments are Discretionary which at risk element of remuneration, executives of the may be paid to senior generally STI payments are Company. capped at between 15 per cent and 30 per cent of base salary depending The payment of any STI on seniority. is determined based on a combination annual performance of the executive’s appraisal and the performance of the Company as a whole. Table 1 Key Management Personnel of Straits Resources Limited

Post- Long-term Share based 2009 Short-term benefits employment benefits payments

Cash Non- Long Amortised salary Short-term cash Superan- Service Sub- Vested over 3 and fees incentive benefits nuation Leave Total this year years 000’s (A) (B) (C) (D) (E) (F) (F) Total Directors Milan Jerkovic Chief Executive Officer 1,080 90 162 135 36 1,503 393 208 2,104 Michael Gibson^(ii) Executive Director Corporate 700 54 54 87 18 913 249 18 1,180 Martin Purvis(i) Chief Operating Officer 583 54 42 73 19 771 241 94 1,106 Alan Good Non-Executive Chairman 200 - 37 20 - 257 - - 257 Garry Lowder Non-executive Director 180 - 57 18 - 255 - - 255 Richard Ong Chui Chat(iii) Non-Executive Director 101 - - - - 101 - - 101 Alastair Morrison(iv) Non-executive Director ------sub-total 2,844 198 352 333 73 3,800 883 320 5,003 Other Key Management Personnel Peter Storey^ EGM Business Development 390 17 69 49 10 535 104 8 647 Rodney Griffith^ GM – Projects(NSW) 285 13 15 36 6 355 76 5 436 David Greenwood^ EGM – Corporate Affairs & Investments 263 12 37 33 7 352 70 5 427 Jeremy Taylor^ (v) GM - Technical Services 219 12 16 27 6 280 70 5 355 James Carter^(vi) Chief Financial Officer 58 - - 7 2 67 - - 67 sub-total 1,215 54 137 152 31 1,589 320 23 1,613 Totals by category 4,800 485 104 5,389 1,203 343 6,935

2008 (6 months) Directors Milan Jerkovic 540 125 44 68 18 795 - 30 825 Martin Purvis 350 75 11 44 11 491 - 6 497 Alan Good 100 - 11 10 - 121 - - 121 Garry Lowder 90 - 15 9 - 114 - - 114 Richard Ong Chui Chat 55 - - - - 55 - - 55 sub-total 1,135 200 81 131 29 1,576 - 36 1,612 Other Key Management Personnel Michael Gibson* 350 75 11 44 9 489 546 - 1,035 Peter Storey* 195 - 18 24 5 242 219 - 461 Rhett Brans* 157 - 11 19 4 191 219 - 410 Jeremy Taylor* 132 20 5 16 3 176 219 - 395 David Greenwood* 88 26 10 11 2 137 218 - 355 Nigel Johnson 133 20 4 5 97 259 - - 259 sub-total 1,055 141 59 119 120 1,494 1,421 - 2,915 Totals by category 2,671 250 149 3,070 1,421 36 4,527

39 Straits Annual Report - 67 114 410 121 427 257 647 259 497 461 825 255 355 355 395 436 1,180 1,106 2,104 1,579 1,035 1,002 5,474 8,413 2,915 1,932 Total 6,481 2,559 40 ------5 6 8 5 5 18 94 30 23 36 36 208 320 343 (F) years over 3 Amortised Amortised ------76 70 70 payments 241 218 219 219 219 249 104 546 469 393 390 320 390 Share based Share (F) 1,811 1,672 1,421 1,352 Vested Vested this year - 67 114 176 121 612 913 191 137 242 771 257 491 259 255 795 352 280 355 535 489 1,110 1,503 2,133 1,494 1,589 3,627 6,398 4,809 Sub- Total - - - - - 5 4 3 9 7 6 2 2 6 11 18 13 18 19 10 97 31 20 36 42 93 124 162 120 (E) Long Leave Service benefits Long-term Long-term - - 9 5 7 8 11 19 18 16 10 24 73 87 27 20 49 33 36 44 44 68 119 135 152 139 258 333 485 (D) Post- nuation Superan- employment - - 5 4 11 11 11 11 15 15 18 16 10 37 27 37 42 57 29 54 44 69 59 110 162 137 379 (C) cash Non- benefits ------17 12 12 13 75 75 26 20 20 54 54 90 54 125 141 234 296 494 434 5,789 3,207 (B) incentive Short-term - Short-term benefits Short-term 58 88 90 219 157 132 767 133 195 180 100 328 285 700 263 350 350 540 583 200 390 (A) 1,080 1,215 3,510 1,055 1,408 Cash salary and fees

(iii)

^

(iv)

^(ii) ^

^ (v) ^(vi)

(i) ^ 000’s Rhett Brans * * Taylor Jeremy Alan Good Garry Lowder Peter Storey * Peter Storey sub-total Other Key Management Personnel Michael Gibson * Richard Ong Chui Chat Ong Richard David Greenwood Non-Executive Director Michael Gibson Martin Purvis Executive Director Corporate

David Greenwood * David Greenwood Nigel Johnson sub-total by category Totals Chief Financial Officer Martin Purvis Directors Milan Jerkovic Chief Executive Officer 2009 James Carter GM - Technical Services GM - Technical Chief Operating Officer EGM – Corporate Affairs & Investments EGM Business Development Rodney Griffith GM – Projects (NSW) Other Key Management Personnel Peter Storey sub-total Non-executive Director Totals by category Totals 2008 (6 months) Directors Ong Chui Chat Richard sub-total Garry Lowder Non-executive Director Alan Good Non-Executive Chairman Jeremy Taylor Jeremy Milan Jerkovic Alastair Morrison Table 2 Key Management Personnel of the Group and Specified Executives Group Personnel of the Key Management 2 Table Directors’ Report

Notes to Tables 1 and 2: ^ Denotes one of the five highest remunerated executives of the Straits Group during the year ended 30 June 2009 as required to be disclosed under the Corporations Act 2001. * Denotes one of the five highest remunerated executives of the Straits Group during the period ended 30 June 2008 as required to be disclosed under the Corporations Act 2001. (i) Martin Purvis ceased to be a director on 28 April 2009. (ii) Michael Gibson was appointed a director on 4 May 2009. Before this appointment he was the Company’s Executive Director Legal & Corporate Development. Amounts shown above include all Mr Gibson’s remuneration during the reporting period, whether as a director or as other key management personnel. Amounts received in his position as a director amounted to $464,893, made up of cash salary and fees of $116,667, short-term incentive of $54,000, non-monetary benefits of $8,961, superannuation of $14,583, long-term benefits of $3,835 and shares of $266,847. (iii) Richard Ong Chui Chat ceased to be a director on 4 May 2009. His shares were issued by Straits Asia Resources Limited (SARL), a subsidiary of Straits Resources Limited, and approved by Straits Asia Resources Limited shareholders on 30 April 2009. The remuneration paid by SARL have been excluded from disclosures. (iv) Alastair Morrison was appointed a non-executive director on 2 February 2009 and has not received any salary or fees to 30 June 2009. (v) Jeremy Taylor resigned on 29 April 2009. (vi) James Carter was appointed Chief Financial Officer on 1 May 2009. (A) Includes cash salary, directors’ fees, remote area and expatriate living allowances and annual leave payouts. (B) Discretionary cash bonuses were paid on 12 and 15 February 2009 except for Richard Ong Chui Chat who was paid on 15 March 2009. (C) Includes car, travel, housing, medical, phone plus applicable fringe benefits tax payable on benefits. In addition, the non-cash benefits include the notional calculations of the benefits of the interest free loan provided calculated at an estimated market interest rate based on the average value of the loans as set out in Note 36. (D) Superannuation payable in accordance with applicable legislation. (E) Long Service Leave vested with applicable legislation. There were no termination benefits paid to key management personnel. (F) The total value of options and ExSAP shares included in remuneration is calculated in accordance with Accounting Standard AASB 2 and AASB 119. This required the following: • The assessed fair value at grant date of options is allotted equally over the period from grant date to vesting date, and the amount is included in the remuneration disclosed above. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. • The total value of options and ExSAP shares that vested in the 2009 financial year includes the modification value for the rights issued to Milan Jerkovic and Martin Purvis from the May 2008 AGM and the November 2008 AGM which converted to shares in April 2009. The modification value is calculated in accordance with AASB 2 Share Based Payments and the difference between the valuation of the rights at modification date and the valuation of the shares converted from the rights is expensed immediately and treated as non cash benefit in the period. • This represents all rights converted to ExSAP shares. No other shares were issued.

The model inputs for rights granted during the period ended 30 June 2009

$1.16 rights issued November 2008 Exercise price $1.16 Grant date 20 November 2008 Expiry date 17 October 2011 Underlying share price $0.13 Expected price volatility of Company’s shares 40 per cent Expected dividend yield Nil per cent Risk-free interest rate 4.25 per cent Attributed fair value $0.013

The model inputs for shares granted following the conversion of rights during the period ended 30 June 2009 included:

$7.37 shares $7.37 shares $1.16 shares $1.16 shares issued April 2009 issued April 2009 issued April 2009 issued April 2009 Exercise price $7.37 $7.37 $1.16 $1.16 Grant date 28 April 2009 30 April 2009 28 April 2009 30 April 2009 Expiry date 28 April 2012 30 April 2012 28 April 2012 30 April 2012 Underlying share price $1.293 $1.332 $1.293 $1.332 Expected price volatility of Company’s 45 per cent 45 per cent 45 per cent 45 per cent shares Expected dividend yield 8 per cent 8 per cent 8 per cent 8 per cent Risk-free interest rate 2.97 per cent 3.07 per cent 2.97 per cent 3.07 per cent Attributed fair value $0.013 $0.015 $0.485 $0.515

41 Straits Annual Report - - - - 42 1% 3% 51% 45% 38% 60% 48% 2008 - - - 21% 17% 18% 19% 23% 29% 29% 30% At risk – equity 2009 - - - - - 5% 7% 7% 12% 12% 23% Garry Lowder, Non-Executive Director service a Mr Garry Lowder entered The on 1 November 2006. agreement a does not contemplate agreement appointment fixed term for Mr Lowder’s director’s The gross as a director. set for the year at $180,000 fees are together with superannuation and the of other benefits approved provision (spouse travel). A salary by the Board is undertaken on the anniversary review of the date of the service agreement. may be The service agreement terminated by either party by providing months written notice and there three is no set extension arrangement in the service agreement. 2008 - - - incentive 4% 4% 5% 3% 3% 3% 3% 19% 2009 At risk – short-term At risk – short-term - - 87% 44% 55% 45% 85% 33% 39% 100% 100% 2008 76% 73% 78% 67% 52% 79% 65% 80% 100% 100% 100% Milan Jerkovic, Chief Executive Officer service a Mr Milan Jerkovic entered for on 1 November 2006 agreement is no set years. There a term of three extension arrangement contained in Company The the service agreement. in currently and Mr Jerkovic are the negotiations and expect to renew by 1 November 2009. Mr agreement of a base package consists Jerkovic’s salary of $1,080,000, superannuation, allowance for motor vehicle and by of other benefits approved provision (spouse travel and telephone the Board expenses). The service agreement for an at risk variable also provides annual short-term incentive, subject to of the Remuneration recommendation of the Board Committee and approval Mr Jerkovic is eligible to of directors. an early termination payment receive misconduct or (other than for gross serious illness) amounting to three year base salary and months current superannuation per year of service up to a maximum of 36 months. Mr base salary is reviewed Jerkovic’s by the Remuneration Committee in Base salary November each year. takes into account cost of living review performance of the individual increases, and Company performance. Fixed remuneration 2009

Service agreements David Greenwood Rodney Griffith Jeremy Taylor Jeremy James Carter Garry Lowder Michael Gibson Other Key Management Personnel Peter Storey Martin Purvis Alan Good Chui Chat Ong Richard Directors Milan Jerkovic Name C Remuneration and other terms of employment for the Chief Executive of Corporate Executive Director Officer, Development and certain other key formalised management personnel are The major in service agreements. to relating of the agreements provisions set-out below. are remuneration Alan Good, Non-Executive Chairman a service Mr Alan Good entered on 1 November 2006. The agreement does not contemplate a agreement appointment fixed term for Mr Good’s fees were The director’s as a director. set at $110,000 per annum, together with superannuation and the provision by the of other benefits approved (spouse travel). On 23 May Board 2007 Mr Good was appointed Non- Executive Chairman and his salary was to $200,000, together with increased 10 per cent superannuation and the of other benefits approved provision (spouse travel). A salary by the Board is undertaken on the anniversary review of the date of the service agreement. may be The service agreement terminated by either party by providing months written notice and there three is no set extension arrangement in the service agreement. The relative proportions of remuneration received that are linked to performance and those that are fixed are as follows: fixed are those that are linked to performance and are that received of remuneration proportions The relative Directors’ Report

Michael Gibson, Executive Director Alastair Morrison, David Greenwood, Executive Corporate Development Non-Executive Director General Manager - Corporate Affairs Mr Michael Gibson entered into a Mr Alastair Morrison does not have & Investments service agreement on 6 August 2007 a service agreement and is not paid Mr David Greenwood entered into an for a term of three years. There is director’s fees. It is a condition of executive employment agreement on no set extension arrangement in the the Convertible Note Subscription 1 December 2008. Mr Greenwood’s service agreement. However, after Agreement for the placement of the package consists of a base salary of 30 months from entering into the $80 million convertible note with $263,000, superannuation, provision service agreement the parties expect Standard Chartered Private Equity for a motor vehicle, an at risk variable to enter into negotiations in good Limited (SCPEL) that the Board annual short-term incentive of up faith concerning the extension of the appoint a person nominated by to 15% of base salary, eligibility to agreement. Mr Gibson’s package SCPEL to the Board of the Company. be allocated shares under ExSAP consists of a base salary of $700,000, This condition remains while SCPEL and the provision of spouse travel. superannuation, allowance for a motor has 17,000,000 convertible notes Mr Greenwood is also covered by vehicle, and provision of other benefits or at least that number of shares in the Company’s Group Life Plan approved by the Board (spouse the Company which were issued and Salary Continuance Plan. Mr travel and telephone expenses) and upon conversion of the 17,000,000 Greenwood is eligible to receive a an at risk variable annual short-term convertible notes, provided those termination payment (other than for incentive, subject to recommendation shares, together with any other shares gross misconduct or serious illness) of the Remuneration Committee and held by SCPEL, represent at least 5% amounting to six months current approval of the Board of directors. Mr of the issued shares of the Company. year salary and one months current Gibson is eligible to receive an early year salary per year of service up Mr Morrison was appointed a Director termination payment (other than for to a maximum of 24 months. Mr on 2 February 2009. gross misconduct or serious illness) Greenwood’s base salary is reviewed in amounting to the greater of 12 months James Carter, Chief Financial Officer October each year. Base salary review current year salary, or three months Mr James Carter entered into an takes into account a range of factors current year salary per year of service executive employment agreement including performance of the individual up to a maximum of 36 months. Mr on 1 May 2009. Mr Carter’s package and Company performance. Gibson’s base salary is reviewed by the consists of a base salary of $350,000, Peter Storey, Executive General Remuneration Committee in November superannuation, provision for a motor each year. Base salary review takes Manager – Business Development & vehicle, an at risk variable annual short- Technical Services into account cost of living increases, term incentive of up to 15% of base Mr Peter Storey entered into an performance of the individual and salary and eligibility to be allocated executive employment agreement Company performance. shares under ExSAP. Mr Carter is also on 1 December 2008. Mr Storey’s covered by the Company’s Group Mr Gibson was appointed a Director on package consists of a base salary of Life Plan and Salary Continuance 4 May 2009. $390,000, superannuation, provision Plan. Mr Carter is eligible to receive a for a motor vehicle, an at risk variable termination payment (other than for annual short-term incentive of up to gross misconduct or serious illness) 15% of base salary and eligibility to amounting to six months current year be allocated shares under ExSAP. salary and one months current year Mr Storey is also covered by the salary per year of service up to a Company’s Group Life Plan and Salary maximum of 24 months. Mr Carter’s Continuance Plan. Mr Storey is eligible base salary is reviewed in October to receive a termination payment (other each year. Base salary review takes into than for gross misconduct or serious account a range of factors including illness) amounting to six months current performance of the individual and year salary and one months current Company performance. year salary per year of service up to a maximum of 24 months. Mr Storey’s base salary is reviewed in October each year. Base salary review takes into account a range of factors including performance of the individual and Company performance.

43 Straits Annual Report 44 Jeremy Taylor, General Manager - General Taylor, Jeremy Services Technical into an entered Taylor Mr Jeremy on 1 agreement executive employment package Taylor’s December 2008. Mr consisted of a base salary of $263,000, a motor for superannuation, provision vehicle, an at risk variable annual short- term incentive of up to 15% of base salary and eligibility to be allocated was Mr Taylor under ExSAP. shares Group by the Company’s also covered Life Plan and Salary Continuance was eligible to receive Plan. Mr Taylor a termination payment (other than for illness) misconduct or serious gross year amounting to six months current year salary and one months current salary per year of service up to a maximum of 24 months. Mr Taylor’s in base salary was to be reviewed The base salary October each year. of took into account a range review factors including performance of the individual and Company performance. as General Manager resigned Mr Taylor Services on 29 April 2009. – Technical 2007 Mr Ong entered a On 23 May 2007 Mr Ong entered of in respect new service agreement Chief Executive his appointment as Straits Asia. The service of Officer years. is for a term of three agreement is no set extension arrangement There contained in the service agreement, entering after 30 months from however, parties the into the service agreement expect to enter negotiations in good faith concerning the extension of the package consists Mr Ong’s agreement. of a base salary of S$700,000, and a fully maintained motor vehicle and of other benefits approved provision and (spouse travel by the Board telephone expenses). The service for an also provides agreement at risk variable annual short-term incentive, subject to recommendation of the Remuneration Committee and of directors. of the Board approval an early Mr Ong is eligible to receive termination payment (other than for illness) misconduct or serious gross year current months amounting to three base salary per year of service up to a maximum of 36 months. Mr Ong’s Asia’s by Straits base salary is reviewed Remuneration Committee in December also agreement Mr Ong’s each year. for 1,000,000 includes provision at a price of $1.15 (the volume shares weighted average price of Straits Asia for the five days prior to the shares to execution of the service agreement) be issued under the terms of Straits acquisition plan. executive share Asia’s as Non-Executive Mr Ong resigned Limited of Straits Resources Director on 4 May 2009. Key Management Personnel who Key Management year during the financial resigned Martin Purvis, Chief Operating Officer a service Mr Martin Purvis entered for a on 1 November 2006 agreement package years. Mr Purvis’ term of three consisted of a base salary of $700,000, superannuation, allowance for motor benefits of other vehicle and provision (spouse by the Board approved travel and telephone expenses). The for also provided service agreement an at risk variable annual short-term incentive, subject to recommendation of the Remuneration Committee and Mr of directors. of the Board approval an early Purvis was eligible to receive termination payment (other than for illness) misconduct or serious gross current months amounting to three year base salary and superannuation per year of service up to a maximum of 36 months. Mr Purvis’ base salary by the Remuneration was reviewed Committee in November each year. into took The base salary review account cost of living increases, performance of the individual and the Company performance. Operating Chief as resigned Purvis Mr of the Company on 28 April 2009. Officer Ong Chui Chat, Richard Non-Executive Director a service Ong entered Mr Richard on 1 November 2006. The agreement did not contemplate a fixed agreement as a appointment term for Mr Ong’s fees were director’s The gross director. set for the year at $110,000 together of other benefits with the provision (spouse travel by the Board approved and telephone expenses). Mr Ong’s was ended on 30 May 2009 agreement and the Board from with his resignation was paid to 31 May 2009. Directors’ Report

D Share-based compensation Share-based compensation Options are granted under the Straits Resources Limited Employee Option Plan which was approved by shareholders at the 2005 Annual General Meeting. Staff eligibility to participate in the plan is at the discretion of the Board. The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as follows:

Value per option at Grant date Expiry date Exercise price Date vested and exercisable grant date 31 May 2003 31 May 2008 59.80 cents 50 per cent after 31 May 2004; $0.1292 50 per cent after 31 May 2005. 18 December 2003 18 December 2008 $1.13 50 per cent after 18 December 2004; $0.2350 50 per cent after 18 December 2005. 28 May 2004 28 May 2009 98.74 cents 50 per cent after 28 May 2005; $0.2050 50 per cent after 28 May 2006. 23 December 2004 23 December 2009 $1.75 50 per cent after 23 December 2005; $0.2647 50 per cent after 23 December 2006. 6 May 2005 6 May 2010 $1.82 50 per cent after 6 May 2006; $0.2631 50 per cent after 6 May 2007. 22 November 2005 22 November 2010 $2.65 50 per cent after 22 November 2006; $0.7800 50 per cent after 22 November 2007. 11 January 2006 21 December 2010 $2.58 50 per cent after 21 December 2006; $0.7100 50 per cent after 21 December 2007. 14 January 2007 21 December 2011 $3.98 50 per cent after 21 December 2007; $0.9172 50 per cent after 21 December 2008.

Options are granted under the plan Share-based compensation - Share-based compensation – for no consideration. Exercise of the employee share executive share acquisition options is subject to the following acquisition scheme plan (“ExSAP”) restrictions: A scheme under which shares may be The ExSAP was reapproved, with • No options can be exercised in the issued by the Company to employees amendments, at the Company’s first year; for no cash consideration was Annual General Meeting in May • 50 per cent can be exercised in the approved by shareholders at the 2000 2008. Amendments to the plan were second year; Annual General Meeting. All Australian approved again at the Company’s resident employees are eligible to Annual General Meeting in November • 100 per cent can be exercised after participate in the scheme. 2008. The purpose of the plan is to the second year; and attract, retain, motivate and reward Under the scheme eligible employees executive employees. • Options granted under the plan carry may be offered up to $1,000 worth no dividend or voting rights. of fully paid ordinary shares in the The plan operates by allowing Company annually for no cash participants to obtain rights to shares The exercise price of options is based on consideration. The market value of in the Company at market price. The the weighted average price at which the shares issued under the scheme, rights are subject to performance Company’s shares are traded on the ASX measured as the weighted average hurdles and if met, are vested, with during the five trading days immediately market price of the previous five trading the Company providing an interest free before the options are granted. days, is recognised in the balance loan. A holding lock is then placed over sheet as share capital and the income the shares in the Company until the statement as a share based payment. loan is repaid in full. Shares issued under the scheme may not be sold until the earlier of three years after issue or cessation of employment.

45 Straits Annual Report ------46 2008 $0.013 $0.015 $0.485 $0.515 the year Value per option at Value grant date 340,791 340,791 340,791 2009 505,356 369,299 1,509,399 1,209,399 2,565,930 Number of share rights vested during Number of share ------2008 700,000 300,000 Date vested and exercisable Vested and exercised and exercised Vested 28 April 2009 Vested and exercised and exercised Vested 30 April 2009 Vested and exercised and exercised Vested 28 April 2009 Vested and exercised and exercised Vested 28 April 2009 during the year 340,791 340,791 340,791 2009 505,356 369,299 1,209,399 1,209,399 1,865,930 Number of share rights granted Number of share Exercise price Exercise $7.37 $7.37 $1.1576 $1.1576 Expiry date 28 April 2012 30 April 2012 28 April 2012 30 April 2012 Name Michael Gibson Other key management personnel of the consolidated entity David Greenwood Rodney Griffith Laing Richard Peter Storey Taylor Jeremy Grant date 28 April 2009 Martin Purvis 30 April 2009 of Straits Directors Milan Jerkovic 28 April 2009 30 April 2009 Shares provided on exercise of remuneration options of remuneration on exercise provided Shares or options to any director of remuneration of the exercise as a result Company provided in the shares no ordinary were There Limited. key management personnel of Straits Resources Equity instrument disclosures relating to key management to key management relating Equity instrument disclosures as remuneration Rights provided of Straits Resources to each director as remuneration in the Company provided Details of rights converted to ExSAP shares Further information on set out below. are Limited and each of the key management personnel of the consolidated entity set out in Note 48. and rights are ExSAP shares As a result of the PTT Transaction the Remuneration Committee exercised its discretion under the ExSAP rules to allow under the ExSAP rules to allow its discretion exercised the Remuneration Committee of the PTT Transaction As a result period. subject to conditions including an escrow to issued shares, rights issued under ExSAP to convert Straits has a lien 17 October 2008 respectively. 8 May 2008 and years from is three shares period for the above The escrow lock over such shares. with a holding over the shares The performance hurdle criteria required that the Company’s total shareholder return be equal to or greater than the 50 be equal to or greater return total shareholder that the Company’s criteria required The performance hurdle year period and Index at the expiry of a three of the S&P/ASX 300 Metals and Mining returns of total shareholder percentile to no longer subject are Rights converted to shares against its peer group. performance the Company’s which compares of the Company. held subject to a lien in favour conditions and are to escrow subject but are performance hurdles, and will not be entitled to with the plan rules, accordance the loan in to repay a participant only require The Company may is no other risk to There held by that participant. of the participant other than the plan shares to any assets have recourse the participant. as follows: period are during the reporting Details of vesting of ExSAP rights to shares Directors’ Report

E Additional information

Details of remuneration

Cash bonusa Equityb Financial Minimum Maximum years in total value of total value of Year which equity grant yet to grant yet to Name Paid Forfeited granted Vested Forfeited may vest vest vest Milan Jerkovic 100 per cent na 2008 100 per cent - - nil 510,972 100 per cent na 2009 100 per cent - - - - Martin Purvis 100 per cent na 2008 100 per cent - - nil 220,534 100 per cent na 2009 100 per cent - - - - Alan Good - na ------Richard Ong 100 per cent na 2008 100 per cent - - - - Chui Chat 100 per cent na 2009 100 per cent - - - - Garry Lowder - na ------Michael Gibson 100 per cent na 2008 100 per cent - - - - 100 per cent na 2009 100 per cent - - - - Alastair Morrison - na ------Peter Storey - na 2008 100 per cent - - - - 100 per cent na 2009 100 per cent - - - - Jeremy Taylor 100 per cent na 2008 100 per cent - - - - 100 per cent na 2009 100 per cent - - - - James Carter - na ------David Greenwood 100 per cent na 2008 100 per cent - - - - 100 per cent na 2009 100 per cent - - - - Rodney Griffith - na 2008 - - - - - 100 per cent na 2009 100 per cent - - - - (a) Cash bonuses were paid on 12 and 15 February 2009, with the exception of Richard Ong Chui Chat which was paid on 15 March 2009 by Straits Asia Resources Limited. (b) The grant date for each share based payment was 30 April 2009 for Milan Jerkovic and 28 April 2009 for Martin Purvis.

47 Straits Annual Report 48 ------$ D date Value at lapse Value ------$ C date Value at exercise at exercise Value $ B date 197,76 3 197,76 3 214,307 701,823 668,815 293,262 1,093,447 Value at grant Value A equity 19 per cent 29 per cent 30 per cent 23 per cent 18 per cent 17 per cent 21 per cent consisting of Remuneration The percentage of the value of remuneration consisting of options and ExSAP shares, based on the value of options and ExSAP shares expensed during the based on the value of options and ExSAP shares ExSAP shares, consisting of options and of the value of remuneration The percentage period. current with AASB 2 and AASB 119) or option (determined in accordance the value of a share granted during the period reflects The value of options and ExSAP shares granted. times the number of options or shares less loan was repaid share or ExSAP the close of business on the date the option exercised price at date has been determined by the share The value at exercise price or ExSAP subscription price. the option exercise and that lapsed during the period because a vesting condition was not satisfied. The granted as part of remuneration The value at lapse date of options that were the condition was satisfied. value is determined at the time of lapsing, but assuming Jeremy Taylor Jeremy David Greenwood Rodney Griffith Directors of Straits Directors Milan Jerkovic Martin Purvis Michael Gibson Other Key Management Personnel Peter Storey (A) (B) (C) (D) Value of Rights and ExSAP shares issued of Rights and ExSAP shares Value Directors’ Report

Shares held by key management personnel

Balance at Issued and Balance at Name 1 July 2008 Acquired* Disposed 30 June 2009 Directors Milan Jerkovic 4,204,667 2,565,930 (1,400,000) 5,370,597 Martin Purvis 1,030,865 1,509,399 (10,438) 2,529,826 Alan Good 13,564 - - 13,564 Richard Ong Chui Chat 1,781,047 - - 1,781,047 Garry Lowder 600,000 - - 600,000 Michael Gibson 700,000 1,209,399 - 1,909,399 Alastair Morrison - - - - Other key management personnel Peter Storey 232,193 435,356 - 6 67,5 49 Jeremy Taylor 235,000 340,791 - 575,791 James Carter 10,100 - - 10,100 David Greenwood 135,427 340,791 - 476,218 Richard Laing 236,064 340,791 - 576,855 *Issued and acquired shares include issues through ExSAP and acquisitions on the open market. There are no options or rights held by key management personnel. All rights were converted to ExSAP shares in 2009 for all key management personnel.

Signed in accordance with a resolution of the directors.

M Jerkovic Director Perth 30 September 2009

49 Straits Annual Report

50 Auditor’s Independence Declaration

51 Independent Audit Report Straits Annual Report

52 Independent Audit Report Continued

36 to 49

53 Straits Annual Report 54 55 56 57 58 61 148 Page

Balance sheets and expense income Statements of recognised Cash flow statements Notes to the financial statements declaration Directors’ Financial report Income statements Contents Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at is timely, the use of the internet, that our corporate reporting Through we have ensured available reports and other information are financial releases, All press minimum cost to the company. on our website: www.straits.com.au. A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and its principal activities is included in the review of the consolidated entity’s A description of the nature not part of this on pages 31 to 49, both of which are report and in the directors’ operations and activities on pages 7 to 30 report. financial Straits Resources Limited Straits Resources Avenue Level 1, 35 Ventnor 6005. WA Perth West Straits Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Limited is a company limited by shares, Straits Resources office and principal place of business is: Its registered This financial report covers both the separate financial statements of Straits Resources Limited as an individual entity and report covers both the separate financial statements of Straits Resources This financial Limited and its the consolidated entity consisting of Straits Resources the consolidated financial statements for currency. in the Australian report is presented subsidiaries. The financial

Straits Resources Limited ABN 22 056 601 417 Financial Report - 30 June 2009 Income Statements For the year ended 30 June 2009

Straits Resources Limited Income statements For the year ended 30 June 2009

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Notes $'000 $'000 $'000 $'000

Revenue from continuing operations Sales revenue 2 567,523 1,215,002 - - Other revenue from ordinary activities 2 6,146 816 63,756 6,083 573,669 1,215,818 63,756 6,083

Other income 3 1,402 244 885 -

Expenses Cost of goods sold 4 (724,593) (1,209,538) - - Other expenses from ordinary activities Marketing (1,215) (423) - - Exploration expense 4 (14,619) (21,899) (371) (2,713) Administration and support expense 4 (26,742) (28,895) (27,068) (34,172) Other 4 (53,377) 3,829 (24,734) (25,439) Impairment loss 4 (161,727) - (225,439) - Finance costs 4 (14,347) (10,640) (5,192) (2,777) Share of profit from associates 7,915 - - - Loss before income tax (413,634) (51,504) (218,163) (59,018)

Income tax benefit 5 107,383 16,338 7,669 18,931 Loss from continuing operations (306,251) (35,166) (210,494) (40,087)

Profit from discontinued operations after tax 13 344,294 60,195 514,228 - Profit/(loss) for the year 38,043 25,029 303,734 (40,087)

(Loss)/Profit is attributable to: Equity holders of Straits Resources Limited (42,107) (5,995) 303,734 (40,087) Minority interest 80,150 31,024 - - 38,043 25,029 303,734 (40,087)

Cents Cents Earnings per share for loss attributable to the ordinary equity holders of the company: Basic earnings per share 47 (17.9) (2.6) Diluted earnings per share 47 (17.9) (2.6)

Cents Cents Earnings per share for loss from continuing operations attributable to the ordinary equity holders of the company: Basic earnings per share 47 (164.1) (28.6) Diluted earnings per share 47 (164.1) (28.6)

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

61

55 Straits Annual Report ) 56 ------45 652 1,815 4,312 1,033 1,078 88,883 70,076 26,472 58,105 12,659 60,717 ( 108,946 429,501 443,314 612,423 443,314 183,986 796,409 203,214 352,017 353,095 443,314 612,423 551,706 2008 $'000 y 30 June Balance sheets ------As at 30 June 2009 23 200 708 1,752 5,734 9,965 1,899 1,112 Parent entit 46,200 74,423 74,446 430,718 124,397 754,394 166,362 739,100 313,711 754,394 218,496 957,596 128,756 203,202 754,394 739,100 210,066 527,922 2009 Straits Resources Limited $'000 30 June - - 250 750 658 399 8,850 2,333 1,909 29,796 17,492 74,314 67,096 98,555 51,017 47,063 73,043 19,166 96,563 10,906 429,501 210,998 196,092 845,100 709,549 543,950 377,924 198,590 623,463 720,026 543,950 368,536 161,999 175,332 195,314 notes. 2008 g $'000 1,043,690 1,219,766 1,763,716 1,043,690 30 June in y - 94 250 500 711 226 3,666 9,508 1,685 6,301 3,924 5,876 8,128 Consolidated 22,117 15,396 64,228 99,012 59,281 75,373 71,935 35,454 95,989 430,718 135,098 401,329 867,501 873,802 444,051 242,415 680,164 137,027 113,386 250,413 873,802 123,432 440,127 222,961 112,823 2009 1,124,215 $'000 30 June 62 ) ) )

a b a ( ( (

9 8 24 30 19 25 26 29 23 28 32 17 21 34 15 16 22 27 20 14 11 12 10 12 33 33(b) 18 18 unction with the accompan Notes j y the equit g t s s liabilitie liabilitie g g y liabilities liabilities g g , plant and equipmen y

ible assets g ables

y Current tax liabilities Provisions Other current liabilities Deferred tax liabilities Provisions Exploration and evaluation Deferred tax assets Intan Non-interest bearin Reserves Mine properties in use Interest bearin Total equity The above balance sheets should be read in con EQUITY Contributed equit Retained profits Parent entity interest Propert Total non-current liabilities Total liabilities Net assets Minority interest Total current liabilities Non-current liabilities Interest bearin Total non-current assets Total assets LIABILITIES Current liabilities Derivative financial instruments method Total current assets Non-current assets Receivables Investments accounted for usin Other financial assets Pa Non-current assets classified as held for sale 13 Non-interest bearin ASSETS Current assets Cash and cash equivalents Receivables Other financial assets Derivative financial instruments Inventories

As at 30 June 2009 Balance Sheets Balance Statements of Recognised Income and Expense For the year ended 30 June 2009

Straits Resources Limited Statements of recognised income and expense For the year ended 30 June 2009

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Cash flow hedges, net of tax 36,078 10,505 - - Other financial assets, net of tax (7,191) 4,597 (671) (234) Actuarial gain on retirement benefit obligation, net of tax (9) 435 - - Exchange differences on translation of foreign operations 14,806 (42,994) - - Exchange differences on translation of discontinued operations 115,999 - - - Net income/(expense) recognised directly in equity 159,683 (27,457) (671) (234) Profit/(loss) for the period 38,043 25,028 303,734 (40,087) Total recognised income and expense for the year 197,726 (2,429) 303,063 (40,321)

Total recognised income and expense for the period is attributable to: Members of Straits Resources Limited 58,205 (14,016) 303,063 (40,321) Minority interest 139,521 11,587 - - 197,726 (2,429) 303,063 (40,321)

The above statements of recognised income and expense should be read in conjunction with the accompanying notes.

57 63 Straits Annual Report ) 58 ) ) ) ) ------54 83 80 ( ( 428 414 1,821 3,781 2,829 4,322 2,321 ( ( 59,018 15,255 25,133 ( (17,125) 2008 $'000 30 June y 6 months to ) ) ) ) ) ) ) ) ) ) ------12 ( 447 241 748 885 694 ( ( ( ( 1,455 1,198 1,200 4,340 ( ( 25,275 19,745 31,623 24,731 398,457 ( ( 2009 225,439 616,620 $'000 Cash flow statements ( Parent entit 30 June ear ended 30 June 2009 y Straits Resources Limited Straits Resources ) ) ) ) ) ) ) ) ) ------85 ( 245 ( 1,075 1,954 9,482 5,070 3,829 4,247 4,120 For the ( ( ( ( 15,596 23,146 20,490 82,141 20,751 10,015 37,629 ( ( ( 115,847 173,016 2008 $'000 30 June 6 months to

) ) ) ) ) ) ) ) - - - 558 314 ( 1,530 1,979 1,287 7,915 1,402 2,848 ( ( ( ( 10,963 64,624 12,406 91,658 36,781 46,668 49,369 42,795 13,178 ( ( 192,166 188,793 161,727 592,471 178,836 ( 2009 $'000 30 June Consolidated 64 g s s s able s f y s value of related f costs g s g t in activities o y g / losse activities ) men financial asset g y g es settled g ains (g assets and liabilities excludin x in inventorie in trade and other receivable g in trade and other pa in provisions e ) ) ) ) g /loss from associates ) before ta increase increase ) ( ( decrease decrease profit ( ( ( ee share based pa

/Loss on sale of fixed assets es in operatin loss y /Loss held for tradin ) ( ) g loan for exploration expenditure y

Profit Gain Profit/ Increase/ Share of Emplo Net cash inflow from operatin discontinued operation Net cash inflow (outflow) from operating activities discontinued operations Decrease/ Tax paid ( Impairment loss ( Depreciation and amortisation Finance costs Profit from discontinued operation Dividends received part Provision for diminution of carr Unrealised exchan Unrealised treatment and refinin Increase/ Profit on sale of available-for-sale investment Interest received Interest paid Chan Decrease/ Exploration expenditure written of Derivative losses on hed Cash flows from operatin

For the year ended 30 June 2009 Cash Flow Statements Cash Flow Statements For the year ended 30 June 2009 (continued)

Straits Resources Limited Cash flow statements For the year ended 30 June 2009 (continued)

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Notes $'000 $'000 $'000 $'000

Cash flows from investing activities Proceeds from sale of property, plant and equipment - 504 26 49 Payments for property, plant and equipment (90,776) (58,161) (1,764) (1,821) Proceeds from sale of investment in subsidiary 307,881 84,529 307,881 - Payments for investments in shares and other securities (7,187) - (687) - Payments for exploration expenditure (13,412) (18,029) - - Proceeds from sale of investment in shares and other securities net of transaction costs 1,176 47 898 - Cash outflow on sale of subsidiary (101,723) - - - Payments for security deposits - (30) - - Dividends received 31,623 - 31,623 4,322 Payments (to)/from subsidiaries - - (155,525) 26,671 Net cash inflow from investing activities discontinued operations (132,933) (12,679) - - Net cash inflow (outflow) from investing activities (5,351) (3,819) 182,452 29,221

Cash flows from financing activities Proceeds from borrowings 1,500 77,547 1,500 77,547 Proceeds from issue of convertible note net of transaction costs 77,781 - 77,781 - Repayment of borrowings (109,568) (182,673) (62,144) (40,650) Proceeds from issues of shares 25 2,145 25 2,145 Proceeds from issues of shares - minority interest 867 - - - Lease payments (857) (160) (686) 59 Restricted cash (21,441) 1,999 (21,441) 2,000 Dividends paid to company's shareholders - (4,654) - (4,654) Net cash (outflow) from financing activities of discontinued operation (69,891) (5,202) - - Net cash (outflow) from financing activities (121,584) (110,998) (4,965) 36,447

Net increase/(decrease) in cash and cash equivalents 61,858 58,199 177,934 48,543 Cash and cash equivalents at the beginning of the financial period 161,999 102,623 60,717 12,314 Effects of exchange rate changes on cash and cash equivalents (30,377) 6,495 (28,585) (306) Effects of exchange rate changes on cash and cash equivalents discontinued operation 29,481 (5,318) - - Cash and cash equivalents at end of year 8 222,961 161,999 210,066 60,551

The above cash flow statements should be read in conjunction with the accompanying notes.

65

59 Straits Annual Report 60 61 76 77 77 79 81 85 86 87 89 90 91 94 97 98 98 99 114 115 116 116 119 101 103 104 105 106 106 107 108 108 108 122 126 126 127 131 132 133 135 136 136 138 140 140 141 142 143 145 Page

Summary of significant accounting policies Summary of significant Revenue Other income Expenses Income tax expense Financial risk management and judgements Critical accounting estimates Current assets - Cash and cash equivalents Current assets - Receivables Current assets - Inventories fair value through profit or loss Current assets - Other financial assets at Derivative financial instruments sale and discontinued operation Non-current assets classified as held for Non-current assets - Receivables for using the equity method Non-current assets - Investments accounted Non-current assets - Other financial assets and equipment plant Non-current assets - Property, development and mine properties Non-current assets - Exploration and evaluation, Non-current assets - Deferred tax assets Non-current assets - Intangible assets Current liabilities - Payables Current liabilities - Interest bearing liabilities Current liabilities - Non Interest bearing liabilities Current liabilities - Provisions Current liabilities - Current tax liabilities Current liabilities - Other current liabilities Non-current liabilities - Interest bearing liabilities liabilities Non-current liabilities - Non interest bearing Non-current liabilities - Deferred tax liabilities Non-current liabilities - Provisions obligations Non-current liabilities - Retirement benefit Contributed equity Reserves and retained profits Minority interest Dividends Key management personnel disclosures Remuneration of auditors Contingencies Commitments Related party transactions Subsidiaries Deed of cross guarantee Investments in associates Interests in jointly controlled assets Events occurring after the balance sheet date Non-cash investing and financing activities Earnings per share Share-based payments Segment information

Notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

Contents of The Notes To The Financial Statements Notes To The Financial Statements 30 June 2009

Straits Resources Limited Notes to the financial statements 30 June 2009

1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Comparative information has been reclassified and repositioned where appropriate to enhance comparability with current year disclosures. The financialfinancia statements include separate financial statements for Straits Resources Limited as a parent entity and the consolidated entity consisting of Straits Resources Limited and its subsidiaries. While the current period is for the year ended 30 June 2009, the comparative period is for the 6 months ended 30 June 2008. The financial reporting period of the Group was changed from a calendar year end to a financial year end in the prior period. The comparative period was prepared for the six month financial period to 30 June 2008.

(a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, including Australian Accounting Interpretations and the Corporations Act 2001. The presentation currency used in this financial report is Australian dollars. Compliance with IFRSs Australian Accounting Standards include AIFRSs. Compliance with AIFRSs ensures that the consolidated financial statements and notes, and the financial statements and notes of Straits Resources Limited comply with International Financial Reporting Standards (IFRSs). Early adoption of standards The Group has elected to apply the following pronouncements to the annual reporting period beginning 1 July 2008: • AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASSB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 Revised accounting standards for business combinations and consolidated financial statements were issued in March 2008 and are operative for annual reporting periods beginning on or after 1 July 2009, but may be applied earlier. The Group has applied the revised standards early. This includes applying the pronouncements to the comparatives in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. No adjustments were required for any of the above interpretations. Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale investments and financial assets and liabilities (including derivative financial instruments) at fair value through profit and loss. Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 7.

61 67 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation AASB 127 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. This is consistent to the Group’s previous accounting policy.

The standard also specifies the accounting when control is lost. Any remaining interest in the entity must now be remeasured to fair value and a gain or loss is recognised in profit or loss. This is different to the entity’s previous accounting policy where remaining interests were measured at proportionate share of consolidated carrying amount.

Lastly, dividends received from investments in subsidiaries, after 1 July 2009 are recognised as revenue even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a result of the dividend payment. Under the entity’s previous policy, these dividends would have been deducted from the cost of the investment.

The changes were implemented prospectively from 1 July 2008. During the year a gain was recognised for the fair value measurement of the remaining non-controlling interest that the entity retained following loss of control in the consolidated entity. The details of the transaction is disclosed in note 13.

The remaining non-controlling interest was recognised at $234,500,000, its fair value at the date of sale. Under the previous accounting policy this gain would not have been recorded and the remaining investment would have been measured at cost. (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Straits Resources Limited (''parent entity'') as at 30 June 2009 and the results of all subsidiaries for the 12 months then ended. Straits Resources Limited and its subsidiaries together are referred to in these financial statements as the Group or as the consolidated entity. Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between consolidated companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. Minority interests in the results and equity of subsidiaries are shown separately in the consolidated Income Statement and Balance Sheet respectively. The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interest results in gains and losses for the Group that are recorded in equity. Purchases from minority interests result in an intangible asset, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary. (i) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. (refer to note 43). The consolidated entity's share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Straits Annual Report When the consolidated entity's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the consolidated entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

68 62 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation (continued) Unrealised gains on transactions between the consolidated entity and its associates are eliminated to the extent of the consolidated entity's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. (ii) Jointly controlled assets The proportionate interests in the assets, liabilities and expenses of a joint venture activity have been incorporated in the financial statements under the appropriate headings. Details of the joint ventures are set out in note 44.

(c) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the consolidated entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financiafinancial statements are presented in Australian dollars, which is Straits Resources Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary financial assets such as equities classified as available-for-sale financial assets are included in the fair value reserve in equity. (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

(d) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Sales revenue comprises of revenue earned from the provision of products to entities outside the company. Sales revenue is recognised when the product is suitable for delivery and:

(i) risk has been passed to the customer;

(ii) the quantity of the product can be determined with reasonable accuracy;

(iii) the product has been despatched to the customer and is no longer under the physical control of the company;

(iv) the selling price can be determined with reasonable accuracy. Concentrate sales revenue represents gross proceeds receivable from the customer. Concentrate sales are initially recognised at estimated sales value when the product is delivered. Adjustments are made for variations in metal price, assay, weight and currency between the time of delivery and the time of final settlement of sales proceeds.

69 63 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) (i) Interest income Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. (ii) Dividend Dividends are recognised as revenue when the right to receive payments is established.

(e) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(f) Trade receivables Trade receivables and other receivables are recorded at fair value based on estimated amounts due less any provision for impairment. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

(g) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in Straits Annual Report equity. Tax consolidation legislation Straits Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. The head entity, Straits Resources Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

70 64 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) In addition to its own current and deferred tax amounts, Straits Resources Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group.

(h) Leases Leases of property, plant and equipment where the controlled entity has substantially all the risks and rewards of ownership are classified as finance leases (note 17). Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in current and non-current interest bearing liabilities. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Operating lease payments are charged to the income statements in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets.

(i) Business combinations The purchase method of accounting is used to account for all business combinations, except for business combinations involving entities or businesses under common control. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. AASB 3 (revised) continues to apply the acquisition method to business combinations, but with some significant changes. All payments to purchase a business are now recorded at fair value at the acquisition date. Contingent payments classified as debt are subsequently remeasured through the income statement. Under the Group’s previous policy, contingent payments were only recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of acquisition. Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and therefore included in goodwill. Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. This decision is made on an acquisition-by-acquisition basis. Under the previous policy, the non-controlling interest was always recognised at its share of acquiree's net assets. If the Group recognises acquired deferred tax assets after the initial acquisition accounting there will no longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the Group’s net profit after tax.

The changes were implemented prospectively from 1 July 2008 and has no impact on the entity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group's share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statements, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of cash 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 financier under comparable terms and conditions.

71 65 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) (j) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non financial assets other than goodwill that have previously been impaired, are reviewed for possible reversal of impairment each reporting date.

(k) Inventories Mining inventories of raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Metals trading or distribution inventories are recorded at their mark-to-market value when such a value is observable. If no market price is available inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The changes in the market value, where applicable, are accounted for in the income statement.

(l) Non-current assets (or disposal groups) held-for-sale and discontinued operations Non-current assets (or disposal groups) are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held-for-sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held- for-sale continue to be recognised. Non-current assets classified as held-for-sale and the assets of a disposal group classified as held-for-sale are presented separately from the other assets in the balance sheets. The liabilities of a disposal group classified as held-for-sale are presented separately from other liabilities in the balance sheets. A discontinued operation is a component of the entity that has been disposed of or is classified as held-for-sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statements. Straits Annual Report

72 66 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets Classification The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re- evaluates this designation at each reporting date. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading which are acquired principally for the purpose of selling in the short term with the intention of making a profit. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. (ii) Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet (notes 9 and 14). (iii) Available-for-sale investments Available-for-sale investments, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Recognition and derecognition Purchases and sales of investments are recognised on trade-date which is the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When securities classified as available-for sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. Subsequent measurement Loans and receivables are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. Fair value The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances. Impairment The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale investments, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

73 67 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(n) Derivatives and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 12. Movements in the hedging reserve in shareholders' equity are shown in note 33. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Where financial instruments are used to hedge economically the movements in the fair values of inventories that are stated at market values, hedge accounting is applied and any gain or loss on the instruments is set against any loss or gain from the movement in the fair value of such inventories. The net effect is presented in the income statement. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within 'sales'. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (iii) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

(o) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for

long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair Straits Annual Report value for the remaining financial instruments. The fair value of forward exchange and commodity contracts is determined using forward exchange market rates at the balance sheet date. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

74 68 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due to the short-term nature of trade receivables.

(p) Property, plant and equipment All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an item of property, plant and equipment also includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation on mine property, plant and equipment (excluding land) is calculated on a unit-of-production basis so as to write off the cost of each asset in proportion to the depletion of the proved and probable mineral reserves, or on a straight line basis over the estimated useful life of the asset if the assets useful life is less than the life of mine. Land is not depreciated. Depreciation on other property, plant and equipment is calculated on a straight line basis to write off the net cost over its expected useful life to the consolidated entity. The expected useful lives are as follows: - Buildings 20 years - Plant and equipment 6 - 20 years - Computer equipment 3 - 5 years - Furniture and fittings5years - Leased motor vehicles 3 - 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(j)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(q) Exploration and evaluation expenditure Exploration and evaluation expenditure is carried forward in the financial statements, in respect of areas of interest for which the rights of tenure are current and where:

(i) such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; or

(ii) exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and while active and significant operations in, or in relation to, the area are continuing. Exploration expenditure incurred that does not satisfy the policy stated above is expensed in the period in which it is incurred. Exploration expenditure that has been capitalised which no longer satisfies the policy stated above is written off in the period in which that decision is made. Upon commencement of mining activities, deferred exploration and development expenditure is reclassified to mine properties and then amortised in accordance with the accounting policy for mine properties as detailed in note (r) below. The net carrying value of each area of interest is reviewed regularly and, to the extent to which this value exceeds its recoverable value, that excess is provided for or written off in the year in which this is determined.

(r) Pre-development properties Pre-development properties represent the acquisition costs and/or accumulation of exploration and evaluation expenditure in respect of areas of interest in which economically recoverable reserves have been identified but for which mine development has not commenced.

75 69 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) No amortisation is provided in respect of pre-development properties until they are reclassified as "Mine Properties" following a decision to develop the mine.

(s) Mine properties Mine properties represent the acquisition costs and/or accumulation of exploration, evaluation and development expenditure in respect of areas of interest in which mining has commenced. When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production. Amortisation is provided on a unit of production basis so as to write off the cost in proportion to the depletion of the proved and probable mineral reserves.

(t) Deferred mining expenditure (i) Open cut operations Certain mining costs, principally those that relate to the stripping of waste and which relate to future economically recoverable ore to be mined, have been capitalised and included in the balance sheet as deferred mining. These costs are deferred or taken to the cost of production as the case may be, so that each tonne of ore mined bears the average costs of waste removal per tonne of ore, as determined by the waste to ore ratio derived from the current pit design and incurs the associated variable contract mining costs specific to the production area from which that ore is mined. The waste to ore ratio and the remaining life of the mine are regularly assessed by the Directors and senior management to ensure the carrying value and rate of deferral is appropriate. (ii) Underground operations Certain mining costs, principally those that relate to levels of development which are expected to be used for shorter periods than the mine life have been capitalised and included in the balance sheet. These costs are deferred based on the percentage of level development metres unmined and taken to the cost of production as level development metres are mined.

(u) Financial guarantee contracts Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee. Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

(v) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(w) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Straits Annual Report Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses.

76 70 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non- convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(x) Provisions Provisions for legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. The Group has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment. Under AASB 116 Property, Plant and Equipment, the cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period. AASB 137 Provisions, Contingent Liabilities, and Contingent Assets requires a provision to be raised for the present value of the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. The estimated costs are discounted using a pre-tax discount rate that reflects the time value of money. The discount rate must not reflect risks for which future cash flow estimates have been adjusted.

(y) Employee benefits (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non- accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. (ii) Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits 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. 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 to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Retirement benefit obligations Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of a defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is determined by reference to the market yields at the balance sheet date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The calculation is performed annually by a qualified actuary using the projected unit credit method.

77

71 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur. (iv) Share-based payments Share-based compensation benefits are provided to employees via the Straits Resources Limited Employee Option Plan (ESOP) and Executive Employee Share Scheme (ExSAP). Information relating to these schemes is set out in note 48. The fair value of options granted under the Straits Resources Limited Employee Option Plan (ESOP) is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital. Share based compensation under the Executive Share Acquisition Plan (ExSAP) is measured as the value of the option inherent within shares issued under this plan and is expensed over the vesting period of the shares with a corresponding credit to the Share-based Payments Reserve. As the employee becomes entitled to the shares the Share-based Payments Reserve is decreased with a corresponding increase in equity. (v) Termination Benefits Liabilities for termination benefits, not in connection with the acquisition of an entity or operation, are recognised when a detailed plan for the terminations has been developed and a valid expectation has been raised in those employees affected that the terminations will be carried out. The liabilities for termination benefits are recognised in other creditors unless the amount or timing of the payments is uncertain, in which case they are recognised as provisions. Liabilities for termination benefits expected to be settled within 12 months are measured at the amounts expected to be paid when they are settled. Amounts expected to be settled more than 12 months from the reporting date are measured as the estimated cash outflows, discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future payments, where the effect of discounting is material. Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

(z) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

(aa) Dividends Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.

(ab) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required Straits Annual Report to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(ac) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing net profit after income tax attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

78 72 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued) (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(ad) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is a distinguishable component of an entity that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(ae) Intangible assets An intangible asset is only recognised if (a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group and (b) the cost of the asset can be measured reliably. (i) Goodwill All business combinations are accounted for by applying the purchase method. Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the fair value of the Group's share of the net identifiable assets acquired and is stated at cost less impairment losses. Goodwill is considered to have an indefinite useful life and is tested for impairment annually, or more frequently if events of changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Where the fair value of the net identifiable assets acquired exceed the cost of acquisition, the excess is recognised as an immediate gain in the income statement. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Group's investment in each country of operation by each primary reporting segment (note 49). (ii) Metals distribution relationships Customer relationships, in relation to the metals distribution business, acquired as part of a business combination are recognised separately from goodwill. The customer relationships are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based on a straight line basis over their estimated useful lives, which is currently 10 years. (iii) Other intangible assets Other intangible assets that are acquired are stated at cost, less accumulated amortisation and impairment losses. If they arise from a business combination they are stated at fair value at the date of the acquisition. They have a finite useful economic life and amortisation is calculated on the straight line basis over the shorter of estimated useful lives and period of contractual right.

(af) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June, 2009 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below. (i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8(effective from 1 January 2009) AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a 'management approach' to reporting on the financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Group will not apply the revised standard early. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, it will not affect any of the amounts recognised in the financial statements.

79 73 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(af) New accounting standards and interpretations (continued) (ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 (effective from 1 January 2009) The revised AASB 123 has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the financial report of the Group, as the Group does already capitalise borrowing costs relating to qualifying assets. (iii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 (effective from 1 January 2009) The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. The Group will not apply the revised standard early. (iv) AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations (effective from 1 January 2009) AASB 2008-1 clarifies that vesting conditions are service conditions and performance conditions only and that other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group will apply the revised standard from 1 July 2009, but it is not expected to affect the accounting for the Group's share-based payments. (v) Improvements to Australian Accounting Standards. AASB 2008-5 and 2008-6 In July 2008, the AASB issued a number of improvements to existing Australian Accounting Standards Standards. The Group will apply the revised standards from 1 January 2009 except for some changes to AASB 5 Non current Assets Held- for-Sale and Discontinued Operations regarding the sale of the controlling interest in a subsidiary which will apply from 1 July 2009. The Group does not expect that any adjustments will be necessary as the result of applying the revised rules. In July 2008, the AASB issued a number of improvements to existing Australian Accounting Standards. The Group will apply the revised standards from 1 January 2009 except for some changes to AASB 5 Non current Assets Held-for-Sale and Discontinued Operations regarding the sale of the controlling interest in a subsidiary which will apply from 1 July 2009. The Group does not expect that any adjustments will be necessary as the result of applying the revised rules. (vi) AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective from 1 January 2009) In July 2008, the AASB issued a number of improvements to existing Australian Accounting Standards Standards. The Group will apply the revised standards from 1 January 2009. On initial application, the entity will need to make adjustments to disclosures for each of the amendments. The Group does not expect that any adjustments will be necessary as the result of applying the revised rules. (vii) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective from 1 July 2009) The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International Financial Reporting Standards are part of the IASB's annual improvements project published in May 2008. They clarify that all of a subsidiary's assets and liabilities are classified as held-for-sale if a partial disposal sale plan results in loss of control. Relevant disclosures should be made for this subsidiary if the definition of a discontinued operation is met. The Group will apply the amendments prospectively to all partial disposals of subsidiaries from 1 July 2009. (viii) AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation (effective from 1 October 2008) AASB-I 16 clarifies which foreign currency risks qualify as hedged risk in the hedge of a net investment in a foreign operation and that hedging instruments may be held by any entity or entities within the group. It also provides guidance on how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item. The Group will apply the interpretation prospectively from 1 July 2009. There will be no impact for the Group or parent entity. Straits Annual Report (ix) AASB 2008-8 Amendment to IAS 39 Amendment to Australian Accounting Standards - Eligible Hedged Items (effective from 1 July 2009) AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will not apply the amended standard early. It is not expected to have a material impact on the Group's financial statements.

80 74 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

1 Summary of significant accounting policies (continued)

(af) New accounting standards and interpretations (continued) AASB 2008-8 amending AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. The Group will apply the amended standard from 1 July 2009. It is not expected to have a material impact on the Group's financial statements. (x) AASB Interpretation 17 Distribution of Non-cash Assets to Owners and AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17 (effective from 1 July 2009) AASB-I 17 applies to situations where an entity pays dividends by distributing non-cash assets to its shareholders. These distributions will need to be measured at fair value and the entity will need to recognise the difference between the fair value and the carrying amount of the distributed assets in the income statements on distribution. This is different to the Group's current policy which is to measure distributions of non-cash assets at their carrying amounts. The interpretation further clarifies when a liability for the dividend must be recognised and that it is also measured at fair value. The Group will apply the interpretation prospectively from 1 July 2009.

(ag) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(ah) Rounding of amounts The company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

81

75 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

2 Revenue

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

From continuing operations Sales revenue Mining activities 215,040 113,034 - - Metals distribution 352,483 1,101,968 - - 567,523 1,215,002 -- Other revenue Management fees 1,938 103 6,548 1,234 Interest 2,857 483 24,891 526 Dividends - - 31,623 4,323 Other revenue from ordinary activities 1,351 230 694 - 573,669 1,215,818 63,756 6,083

A portion of the Group's revenue from mining activities in foreign currencies and copper revenue is cash flow hedged. The amounts disclosed above for revenue from mining activities include the effective amount of the derivatives that are used to hedge foreign currency and copper revenue. The amount offset against revenue is:

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Forward currency and copper contracts - cash flow hedged 14,852 (17,334) - - Closed out copper hedge contracts expensed over the delivery period of the original hedges * (44,942) (16,417) - - (30,090) (33,751) - -

* During December 2007, the Group closed out the hedge contracts for its Tritton minesite operations, totalling a loss of $61.4 million. These were recognised against revenue over the delivery period of the original hedges (from February 2008 to January 2009). Straits Annual Report

82 76 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

3 Other income

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Net gain on disposal of property, plant and equipment - 159 - - Fair value gains on other financial assets held for trading (note 11) 1,402 - 885 - Fair value gain on derivative contracts - 85 - - 1,402 244 885 -

4 Expenses

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Loss before income tax includes the following specific expenses:

Cost of production Mining activities 309,249 111,070 - - Metals distribution 351,694 1,073,589 - - Total cost of production 660,943 1,184,659 - -

Depreciation Plant and equipment 20,759 7,152 - -

Amortisation Mine properties 42,101 17,332 - - Intangibles - customer relations 790 395 - - Total amortisation 42,891 17,727 - -

Total cost of goods sold 724,593 1,209,538 - -

Exploration costs Exploration expenditure incurred 2,213 1,409 371 392 Exploration expenditure written off 12,406 20,490 - 2,321 14,619 21,899 371 2,713

Finance costs Interest and finance charges paid/payable 13,820 10,015 5,192 2,777 Unwinding of discounts on provisions 527 625 - - 14,347 10,640 5,192 2,777 Profit/(loss on sale of fixed assets Plant and equipment 558 (4,247) (12) (83) Other Net foreign exchange losses/(gains) 53,377 (3,829) 24,734 25,439

77 83 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

4 Expenses (continued)

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Rental expense relating to operating leases Minimum lease payments 3,017 1,453 825 272 Total rental expense relating to operating leases 3,017 1,453 825 272

Administration and support Asia 3,760 5,455 - - Australia 14,705 14,027 27,068 34,172 Europe/China 8,277 9,413 - - 26,742 28,895 27,068 34,172

Employee benefits 69,078 37,152 12,591 6,980

Impairment Tritton mine 133,000 - - - Hillgrove mine 22,144 - - - GfE Germany 6,583 - - - Whim Creek mine - - - -

Intra-group loans written down Tritton mine - - 99,975 - Hillgrove mine - - 45,178 - GfE Germany - - 21,343 - Whim Creek - - 52,868 - Exploration - - 6,075 - 161,727 - 225,439 -

The Directors have reviewed the carrying amount of assets across the Group and have written down intangibles in the holding company of the GfE business, plant and equipment and mine properties in the carrying value of assets for Tritton mine and Hillgrove mine as appropriate.

The write down of goodwill and intangibles for customer relationships for the GfE business is as a consequence of the downturn in the German steel industry during the period as a result of the global financial crisis. The impairment write downs for the Tritton mine have arisen as a consequence of the fall in metal prices during the period. The impairment write downs for the Hillgrove mine have arisen as a consequence of the technical issues which are being investigated during the temporary suspension of processing activities. The parent entity reflects intra-group loans that have been written down in the parent to reflect the carrying amount of the net assets for the group after taking into account the effects of the underlying asset impairments. For consolidation purposes, a total of $19,240,157 (2008: $6,440,000) in administration costs were reallocated to the following cost categories - cost of goods sold $16,825,985 (2008: $5,078,000), marketing costs $689,763 (2008: $389,000) and exploration costs $1,724,408 (2008: $973,000). Straits Annual Report Administration and support expenses include personnel costs, property expenses, share based payments, investor relations, exchange losses, professional services fees including legal fees, audit costs, tax and due diligence fees. Personnel at the corporate offices in Australia, Indonesia and Europe provide technical, financial, treasury and commercial services to the Group's operations.

84 78 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

5 Income tax expense

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 (a) Income tax expense Current tax 134,954 30,035 106,202 (4,244) Deferred tax 5,811 (10,052) (11,597) (8,316) (Over)/under provided in prior periods 28 (7,403) 116 (6,371) 140,793 12,580 94,721 (18,931)

Deferred income tax (benefit) expense included in income tax expense comprises: (Increase)/decrease in deferred tax assets (note 19) (18,188) (4,583) (11,790) (8,316) Increase/(decrease) in deferred tax liabilities (note 29) 23,999 (5,469) 193 - 5,811 (10,052) (11,597) (8,316)

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit/(loss) from continuing operations before income tax expense (413,634) (51,504) (218,163) (59,018) Profit from discontinuing operations before income tax expense 592,470 89,111 616,620 - Profit before income tax expense 178,836 37,607 398,457 (59,018)

Tax at the Australian tax rate of 30% (2008 - 30%) 53,651 11,282 119,537 (17,705) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Depreciation and amortisation 493 130 - - Non deductible expenses 14,604 4,632 365 4,620 Non assessable foreign dividend - - (9,487) (1,297) Non deductible loss on intercompany loan write down - - 67,632 - Fair value adjustments relating to disposal of discontinued operations 59,942 - (24,067) - Share-based payments 437 1,135 437 1,135 Elimination of tax benefit on pre-acquisition minority interest in Tritton Resources Pty Ltd (898) 8 - - Sundry items 5 (420) - 687 Non deductible items from discontinued operations $12,727 (June 2008: $2,335) made up of: - non deductible expenses 16,969 2,864 - - - tax incentive of overseas subsidiary (7,531) (529) - - - withholding tax - dividend from subsidiaries 23,065 - - - - changes in tax rates (19,776) - - - Non assessable gain on intra-group loan write down - - (59,812) - 140,961 19,102 94,605 (12,560)

Difference in overseas tax rates (196) 881 - - (Over)/under provision in prior periods 28 (7,403) 116 (6,371) (168) (6,522) 116 (6,371)

Income tax expense/(benefit) 140,793 12,580 94,721 (18,931)

85 79 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

5 Income tax expense (continued) Income tax expense/(benefit) attributable to: Loss from continuing operations (107,383) (16,338) (7,669) (18,931) Profit from discontinued operations 248,176 28,918 102,390 - 140,793 12,580 94,721 (18,931)

The income tax expense on the profit from discontuned operations is fully offset with the utilisation of tax losses. Refer note 25

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

(c) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity Net deferred tax - debited/(credited) directly to equity (Notes: 19 and 29) (223) 1,555 (288) (101) Straits Annual Report

86 80 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

6 Financial risk management The Group's activities expose it to market risk (including currency risk, commodity price risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and commodity contracts to hedge certain risk exposures. Financial risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange, commodity price risks and ageing analysis for credit risk. There has been no change to the Group's exposure to market risks or the manner in which it manages and measures the risk. The parent entity is not exposed to commodity price risk.

(a) Market risk (i) Foreign exchange risk Generally, forward contracts and options are used to manage certain foreign exchange risk. The Group's and parent entity's currency exposure based on the information provided to key management is mainly in cash and cash equivalents, receivables, loans and forward exchange contracts. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency. The majority of these exposures are generated by commodity sales contracts which are typically denominated in United States dollars, as well as associated receivables. As at 30 June 2009 the Group also had a US$78 million denominated other financial asset relating to the deferred payment obligation from the sale of a 60% interest in SBI. Further information on this transaction can be found in note 13. The Group operates internationally and is exposed to foreign exchange arising from various foreign currency exposures, primarily with respect to the US$. Additional foreign exchange risk arises from exposure to the Euro and South African Rand. The parent entity is exposed to foreign exchange risk with respect to related party US$ loans. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on revenue. At 30 June 2009, had the Australian dollar weakened/strengthened by 10% against these foreign currencies with all other variables held constant, the Group's post-tax profit for the period would have been $15,016,000 higher/lower (2008: $6,800,000 higher/lower), mainly as a result of foreign exchange gains/losses on translation of cash and cash equivalents, interest bearing loans, receivables and payables denominated in foreign currencies. Equity would have been $15,016,000 higher/lower (2008: $6,800,000 higher/lower) had the Australian dollar weakened/strengthened by 10% against the US dollar, arising mainly from cash and cash equivalents. For the method used to manage the foreign exchange risk refer to note 12 (a). (ii) Interest rate risk Interest rate risk arises as a result of the repricing of investments and borrowings and is affected by the length of the repricing period. The significance and management of the risks to the Group and the parent entity are dependant on a number of factors including:

• interest rates (current and forward) and the currencies that the borrowings are drawn;

• level of cash, liquid investments and borrowings and their term;

• maturity dates of investments and borrowings;

• proportion of investments and borrowings that are fixed rate or floating rate. The risk is managed by the Group and parent entity by maintaining an appropriate mix between fixed and floating rate borrowings.

The Group's convertible notes are carried at amortised cost. The notes are therefore not subject to interest rate risk as defined in AASB 7 Financial Instruments. The risk is measured using market and cash flow forecasting.

87 81 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

6 Financial risk management (continued) At 30 June 2009, if interest rates had changed by -/+ 50 basis points from the weighted average year-end rates with al other variables held constant, post-tax profit for the year would have been $565,000 lower/higher (2008: $764,000 higher/lower), mainly as a result of lower/higher interest from cash and cash equivalents. Equity would have been $565,000 lower/higher (2008: $764,000 higher/lower) mainly as a result of an increase/decrease from cash and cash equivalents. The exposure of the Group's and parent entity's interest bearing liabilities at balance sheet date that have exposure to interest rate changes at the contractual repricing dates are as follows: Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

6 months or less 58,208 376,721 - 57,566 6 - 12 months 1,073 1,203 708 539 1 - 5 years 2,135 2,333 1,185 1,033 Over 5 years - - - - 61,416 380,257 1,893 59,138

(iii) Commodity price risk Commodity price risk is the risk of financial loss resulting from movements in the price of the Group's commodity inputs and outputs. The Group is exposed to commodity price risk arising from revenue derived from sales of copper, gold, silver and antimony. This risk is managed through contractual arrangements with customers and use of derivative instruments such as forward and option contracts. For a subsidiary company, copper price risk has been minimised by fixing the short term future sales with the offtaker. At 30 June 2009, had copper commodity prices weakened/strengthened by 5% with all other variables held constant, the Group's post-tax profit for the year would have been $260,000 lower/higher (2008: $199,000 lower/higher), mainly as a result of lower/higher copper prices affecting trade debtors. Equity would have been $260,000 lower/higher (2008 $199,000 lower/higher) had the copper price weakened/strengthened by 5% mainly as a result of copper prices affecting trade debtors. For the method used to measure the commodity price risk refer note 12 (a). Straits Annual Report

88

82 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

6 Financial risk management (continued) (iv) Summarised sensitivity analysis The following table summarises the sensitivity of the Group’s and parent entity's financial assets and financial liabilities to foreign exchange risk, commodity price risk and interest rate risk.

Commodity price risk Foreign exchange risk Interest rate risk -5% +5% -10% +10% -50 basis pts +50 basis pts 30 June 2009 Profit Equity Profit Equity Profit Equity Profit Equity Profit Equity Profit Equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Consolidated (260) (260) 260 260 15,016 15,016 (15,016) (15,016) (565) (565) 565 565 Parent - - - - 18,784 18,784 (18,784) (18,784) (729) (729) 729 729

Commodity price risk Foreign exchange risk Interest rate risk -5% +5% -10% +10% -50 basis pts +50 basis pts 30 June 2008 Profit Equity Profit Equity Profit Equity Profit Equity Profit Equity Profit Equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Consolidated (199) (199) 199 199 6,800 6,800 (6,800) (6,800) 764 764 (764) (764) Parent - - - - 5,930 5,930 (5,930) (5,930) (6) (6) 6 6

(b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the group. Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to trade customers, including outstanding receivables and committed transactions. The Group and parent entity has no significant concentrations of credit risk. The Group and parent entity have policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and, where necessary is effectively eliminated or substantially reduced by using bank and insurance instruments to secure payment for materials supplied and sold. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group and parent entity have policies that limit the amount of credit exposure to any one financial institution. The parent entity credit risk for receivables is generally exposed to the underlying performance of the net assets of the controlled entities. The age analysis of trade receivables past due but not impaired is disclosed in note 9. The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are also disclosed in note 9. The carrying amount of financial assets recorded in the financial statements are grossed up for any allowances for impairment, representing the Group's and parent entity's maximum exposure to credit risk. Credit risk further arises in relation to financial guarantees given to certain parties, refer to note 42.

(c) Liquidity risk Prudent liquidity risk management implies maintaining at all times sufficient cash, liquid investments and committed credit facilities to meet the Group's and parent entity's commitments as they arise. Liquidity risk management covers daily, short term and long term needs. The appropriate levels of liquidity are determined by both the nature of the Group’s and parent entity's business and its risk profile. To the extent the Group and parent entity has liabilities on its cash flow hedges, the Group and parent entity expects to produce sufficient copper from its two copper operations to deliver into its committed hedge contracts. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Investments classified as held for trading or available for sale are fair valued by comparing to the published price quotation in an active market.

89

83 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

6 Financial risk management (continued) The fair value of investments in unlisted subsidiaries is determined using valuation techniques as part of the value-in-use cash generating units impairment testing. The Group uses various methods including sensitivity analysis and makes assumptions that are based on market conditions in relation to foreign exchange, commodity prices and interest rates existing at each balance date. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. Refer to note 27 (f) for the carrying amounts and fair values of borrowings at balance date. Maturity of financial liabilities The following tables detail the Group's and parent entity's remaining contractual maturity for its financial liabilities and derivatives (refer note 27 for financing facilities). The amounts presented represent the future undiscounted principal and interest cash flows. Other than the convertible notes (refer note 27), there are no nominal changes between the contractual maturity and the carrying amount of the financial liability on the balance sheet. At 30 June 2009 Less than 1 Between 1 and year 5 years $'000 $'000 Group Non-Derivative Financial Liabilities Non-interest bearing 64,478 500 Variable interest rate instruments 58,208 798 Convertible notes 3,190 89,320 Lease and hire purchase liabilities 1,073 1,337 Derivative Financial Liabilities Forward currency contracts 94 -

Parent Non-Derivative Financial Liabilities Non-interest bearing 126,296 - Convertible notes 3,190 89,300 Lease and hire purchase liabilities 708 1,185

At 30 June 2008 Less than 1 Between 1 and year 5 years $'000 $'000

Group Forward foreign exchange contracts - cash flow hedges Non-Derivative Financial Liabilities Non-interest bearing 196,342 750 Variable interest rate instruments 405,729 791 Lease and hire purchase liabilities 1,203 1,542 Derivative Financial Liabilities Forward currency contracts 1,999 -

Parent

Non-Derivative Financial Liabilities Straits Annual Report Non-interest bearing 292,097 - Variable interest rate instruments 57,566 - Lease and hire purchase liabilities 539 1,033

90 84 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

6 Financial risk management (continued) (e) Other price risks The Group and parent entity is exposed to equity price risks arising from equity investments. Equity investments are held both for strategic and trading purposes. The Group and parent entity does not actively trade these investments. Equity price sensitivity The sensitivity analysis below has been determined on the exposure to equity price risks at the reporting date. At reporting date, if the inputs to the valuation model had been 10% higher/lower while all other variables were held constant: - net profit for the Group would increase/decrease by $568,971 (2008: nil) and the parent would increase/decrease by $77,805 (2008: nil) as a result of the changes in fair value of other financial assets held for trading. - available-for-sale investments revaluation reserve for the Group would increase/decrease by $148,487 (2008: $1,239,000) and the parent would increase/decrease by $86,371 (2008: $129,000) mainly as a result of the changes in fair value of available-for-sale shares.

7 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on management's historical experience and knowledge of relevant facts and circumstances at that time. The Straits’ Group makes estimates and judgments concerning the future. The resulting accounting estimates and judgments may differ from the related actual results and may have a significant effect on the carrying amounts of assets and liabilities within the next financial year and on the amounts recognised in the financial statements. Information on such estimates and judgments is contained in the accounting policies and/or notes to the financial statements. (i) Reserve estimates Reserves are estimates of the amount of product that can be economically and legally extracted from the Group's properties. In order to calculate reserves, estimates and assumptions are required about a range of geological, technical and economic factors. Estimating the quality and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgements and calculations to interpret the data. The Group is required to determine and report ore reserves in Australia under the principles incorporated in the Australasian Code for Reporting of Mineral Resources and Ore Reserves December 2004, known as the JORC Code. The JORC Code requires the use of reasonable investment assumptions to calculate reserves. As the economic assumptions used to estimate reserves change from period to period, and as additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Group's financial results and financial position in a number of ways, including the following: - determination of ore reserves - recognition of deferred tax on mineral rights and exploration recognised in acquisitions - deferred mining expenditure and capitalisation of underground development costs - units of production method of depreciation and amortisation (ii) Exploration and evaluation expenditure Expenditure which does not form part of the Cash Generating Units assessed for impairment has been carried forward in accordance with Note 1 (q) on the basis that exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in relation to the area are continuing. Exploration expenditure incurred that does not satisfy the policy stated above is expensed in the period in which it is incurred. Exploration expenditure that has been capitalised which no longer satifies the policy stated above is written off in the period in which the decision is made.

85 91 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

7 Critical accounting estimates and judgements (continued) (iii) Estimation for the provision for rehabilitation and dismantling Provision for rehabilitation and dismantling property, plant and equipment is estimated taking into consideration facts and circumstances available at the balance sheet date. This estimate is based on the expenditure required to undertake the rehabilitation and dismantling, taking into consideration time value. (iv) Impairment of property, plant and equipment, deferred exploration and development expenditure and mine properties The Group reviews for impairment of property, plant and equipment, deferred exploration and development expenditure and mine properties in accordance with the accounting policy stated in note 1(o) to 1(s). With the exception of deferred exploration, the recoverable amount of these assets has been determined based on higher of the assets' fair value less costs to sell and value in use. These calculations require the use of estimates and judgements. (v) Impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(ae). Goodwill is allocated to cash generating units for the purpose of impairment testing. Each of those cash generating units represents the Group's investment in each country of operation by each primary reporting segment, refer note 49. (vi) Income taxes Judgement is required in determining the provision for income taxes. The Group recognises liabilities of anticipated tax based on estimates of taxes due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made. (vii) Valuation of assets and liabilities in business combinations Management has applied estimates and judgements in order to determine the value of assets, liabilities and contingent liabilities acquired by way of business combinations. The value of assets, liabilities and contingent liabilities recognised at acquisition date are disclosed at fair value on acquisition. In determining the fair value management has utilised valuation methodologies including discounted cash flow analysis and adjusted market value analysis. The assumptions made in performing the valuation include assumptions as to discount rates, foreign exchange rates, commodity prices, timing of development of mine properties, capital costs and future operating cost. (viii) Available for sale financial assets Management has applied estimates and judgements in order to determine the fair value of the deferred performance criteria. In determining the fair value management has made assumptions as to discount rates, estimated probability of achieving the performance criteria, foreign exchange rates and risk. (ix) Fair value of investment in associate Managment has assessed the value of its remaining 40% interest in PTT APM by reference to the fair value of net asset values associated with the underlying assets held.

8 Current assets - Cash and cash equivalents

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Cash at bank and on hand 76,282 141,999 63,387 40,717 Deposits at call 146,679 20,000 146,679 20,000 222,961 161,999 210,066 60,717 Straits Annual Report

(a) Cash at bank and on hand Cash at bank accounts are interest bearing attracting normal market interest rates. As funds are held with AA/Aa1 to A/A1 credit rated financial institutions (as per S&P/Moody's ratings) there is no counterparty credit risk of funds held.

92 86 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

8 Current assets - Cash and cash equivalents (continued)

(b) Fair value The carrying amount for cash and cash equivalents equals the fair value.

9 Current assets - Receivables

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Trade debtors 55,269 132,417 1,715 42 Other debtors 13,330 20,505 3,341 169 Intercompany tax receivable - - 13,513 6,816 Amount owing by wholly owned entities - - 502,549 559,190 Provision for impairment of receivables - (423) (15,255) (15,255) Prepayments 5,328 18,033 - 16 Restricted cash* 22,062 4,600 22,059 617 Interest receivable - 200 - 111 95,989 175,332 527,922 551,706

* Restricted cash relates to cash held on deposit for security against bank guarantess which mature on 30 September 2009. Refer to note 38

(a) Provision for impairment of receivables The average credit period on sales is within 30 days. No interest is charged on trade receivables. Movements in the provision for impairment of receivables are as follows:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Balance at beginning of the period (423) (342) (15,255) (165) Provision for impairment recognised during the period - (198) - (15,188) Receivables written off during the period as uncollectible - 117 - 98 Derecognition on disposal of discontinued operation 423 - - - - (423) (15,255) (15,255)

The other debtors within receivables do not contain impaired assets and are not past due. Based on the credit history of these other debtors, it is expected that these amounts will be received when due.

(b) Past due but not impaired Financial assets that are neither past due or impaired are trade receivables with companies with a good collection track record with the Group. Where financial assets are past due but not impaired, the Group has assessed that the credit quality of these amounts have not changed and the amounts are still considered recoverable. The age analysis of trade receivables past due but not impaired is as follows:

87 93 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

9 Current assets - Receivables (continued)

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

0 to 3 months 14,077 49,287 - - 3 to 6 months 935 4,524 - - Over 6 months 134 712 - - 15,146 54,523 - -

The carrying amount of trade and other receivables approximate their fair values.

(c) Foreign exchange risk Refer to note 14 for an analysis of Group's exposure to foreign currency risk in relation to trade and other receivables.

(d) Fair value risk Due to the short-term nature of current receivables, their carrying amount is assumed to approximate their fair value. (e) Credit risk Information concerning the credit risk of both current and non-current receivables is set out in the non-current receivables note 14. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. The Group does not hold any collateral as security. Refer to note 6 for more information on the risk management policy of the Group. (h) Commodity price risk Refer to note 6 for an analysis of the sensitivity of trade debtors to commodity price risk. Straits Annual Report

94 88 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

10 Current assets - Inventories

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Mining inventories Raw materials - at cost - 9,188 - - - at net realisable value 330 - - - Production supplies - at cost 15,086 15,701 - - Work in progress - at cost - 45,785 - - - at net realisable value 29,204 - - - Finished goods - at cost - 13,077 - - - at net realisable value 411 - - - Metals distribution inventories Finished goods - mark to market 67,792 111,563 - - 112,823 195,314 - -

Write-downs of inventories to net realisable value recognised as an expense during the period ended 30 June 2009 amounted to $42,425,000 (2008: $nil).

89 95 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

11 Current assets - Other financial assets at fair value through profit or loss

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Equity securities listed on Australian Stock Exchange (ASX listed companies) 8,128 - 1,112 - Canadian listed equity securities - 10,906 - - 8,128 10,906 1,112 -

Changes in fair values of other financial assets at fair value through profit or loss are recorded in other income or other expense in the income statement. All other financial assets at fair value through profit or loss are denominated in the Australian currency. For an analysis of the sensitivity to foreign exchange risk, refer to note 6.

(a) Risk exposoure Information about the Group's and the parent entity's exposure to price risk is provided in note 6. (b) Classification The carrying amounts of the above financial assets are classified as follows:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Held for trading 8,128 10,906 1,112 - Straits Annual Report

96 90 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

12 Derivative financial instruments

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Current assets Forward currency contracts at fair value 226 399 - - Total current derivative financial instrument assets 226 399 - -

Current liabilities Net forward currency, copper contracts and option copper contracts - cash flow hedges 94 1,909 - - Total current derivative financial instrument liabilities 94 1,909 - -

Net 132 (1,510) - -

(a) Instruments used by the Group The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates and to movements in the price of copper in accordance with the Group's financial risk management policies (refer to note 6). The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. When the cash flows occur, the Group adjusts the initial measurement of the component recognised in the income statement by the related amount deferred in equity. The potential risk of counterparties to meet their obligations under the respective contracts of maturity, exposes the Group and counterparties to credit risk. This risk arises on forward exchange contracts with unrealised gains and losses. When the resulting asset is measured at fair value, the maximum exposure to risk at the reporting date will equal the carrying amount.

(i) Forward exchange contracts - cash flow hedges The majority of the Group's revenue is denominated in United States dollars as are a large portion of its operating costs.

In order to protect against exchange rate movements, as they impact on the Whim Creek and Tritton copper operations, the Group has entered into forward exchange contracts to sell US dollars.

91 97 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

12 Derivative financial instruments (continued) At the balance sheet date, the details of outstanding forward foreign exchange contracts are: Whim Creek Copper Operation

Buy Australian dollars Sell US dollars Forward contracts A$/US$ rate 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000

Maturity 2009 - 17,500 - 0.7710

Tritton Copper Operation

Buy Australian dollars Sell US dollars Forward contracts A$/US$ rate 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000

Maturity 2009 - 18,202 - 0.7113 2010 12,500 - 0.7969 -

Amounts disclosed above represent currency sold measured at the contracted rate. (ii) Copper forward and option contracts - cash flow hedges The Group has exposure to copper commodity prices. Anticipated copper sales are forecast after considering reserve calculations, mine production schedules and contractual commitments. Copper forward and option contracts are used to manage the price risk with the objective of ensuring more predictable revenue cash flows. At the balance sheet date, the details of outstanding copper forward and option contracts are:

Whim Creek Copper Operation Quantity hedged tonnes Average price US$/tonne 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Maturity Forward copper contracts 2009 - 3,400 - 6,056 Purchased put options 2009 2,800 5,750 Sold call options 2009 - 2,800 - 6,765

Tritton Copper Operation Quantity hedged tonnes Average price US$/tonne Straits Annual Report 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Maturity Purchased put options 2009 - 8,150 - 6,743

98 92 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

12 Derivative financial instruments (continued) The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to the extent that the hedge is effective, and reclassified into profit and loss when the hedged item is recognised in the income statement. The ineffective portion is recognised in the income statement immediately. In the twelve months ended 30 June 2009 there were no ineffective portion of hedges transferred to profit and loss (2008: gain of $85,000 included in other income). (b) Risk exposures For an analysis of the sensitivity of derivatives to interest rate, foreign exchange and commodity price risk refer to note 6. (c) Metals distribution (i) Forward exchange contracts at fair value through profit and loss The forward exchange contracts are designated as a fair value hedge: a hedge of the exposure to changes in fair value of a recognised asset. The gain or loss from remeasuring the foreign exchange hedging instrument at fair value is recognised directly in profit or loss. Unrealised (loss)/gain from the change in fair value of forward foreign exchange contracts at fair value through profit and loss recognised as part of costs of production during the period is nil (2008: ($315,000)) and recognised as part of finance costs during the period nil (2008: $549,000). (ii) Forward metal contracts at fair value through profit and loss The contracts are recognised at their fair value (marked to market) on the basis of a valuation technique which encompasses regulated exchange prices, estimated market premiums (for brand and location), contract prices, contract premiums and estimated costs directly associated with the execution of the purchase and sales, such as freight costs, interest costs, and commissions. The forward metal contracts are designated as a financial asset at fair value through profit or loss where any gain or loss arising from a change in the fair value is recognised directly in profit or loss. Unrealised gain/(loss) from the change in fair value of forward foreign exchange contracts at fair value through profit and loss recognised as part of costs of production during the period is nil (2008: $181,000).

13 Non-current assets classified as held for sale and discontinued operation

(a) Non-current assets classified as held for sale

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Plant and equipment 3,924 - - -

On 1 June 2009, Straits announced it had granted an option to Finders Resources Limited to purchase the Whim Creek SX- EW Plant. The plant is included within the base metals segment assets.

93 99 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

13 Non-current assets classified as held for sale and discontinued operation (continued)

(b) Discontinued operation

(i) Description On 23 March 2009, Straits announced it had agreed to enter into a strategic alliance with Asian energy major, the PTT Group of Companies (PTT) via the sale of a 60% interest in its wholly owned subsidiary, Straits Bulk and Industrial Pty Ltd (discontinued operation) for up to US$335 million in cash to a wholly owned subsidiary of PTT Public Company Limited. Straits Bulk and Industrial Pty Ltd subsequently changed its name to PTT Asia Pacific Mining Pty Ltd (PTT APM). The financial close of its strategic co-investment alliance with PTT via the sale of a 60% interest in the disposal group was completed on 28 April 2009. The disposal group is reported in this financial report as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Further information is set out in note 49 - segment information. Straits Annual Report

100 94 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

13 Non-current assets classified as held for sale and discontinued operation (continued)

(ii) Financial performance and cash flow information The financial performance and cash flow information presented are for the ten months ended 28 April 2009 (2009 column) and the 6 months ended 30 June 2008. Consolidated Parent entity 6 months to 6 months to 28 April 30 June 28 April 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Revenue 687,384 290,856 - - Expenses (466,632) (201,743) - - Profit before income tax 220,752 89,113 - -

Less Income tax expense 75,434 28,918 - - Profit after income tax of discontinued operation 145,318 60,195 - -

Impairment loss on Straits Salt Pty Ltd prior to disposal (12,312) - - - Gain on sale of the discontinued operation before income tax 384,030 - 417,247 - Gain on loan forgiven on disposal of discontinued operation 199,373 - Less income tax expense * (172,742) - (102,392) -

Profit from discontinued operation after tax 344,294 60,195 514,228 -

* includes a deferred tax liability component of $60,000 ($'000) on the uplift in the fair value of the remaining 40% investment in PTT APM. - -

Net cash inflow from operating activities 192,166 82,141 - - Net cash inflow (outflow) from investing activities (2009 includes an inflow of $307,881($'000) from the sale of the discontinued operation) 174,948 (12,629) 31,263 4,322 Net cash (outflow) from financing activities (69,891) (5,318) - - Net increase in cash generated by the discontinued operation 297,223 64,194 31,263 31,6234,322

(iii) Details of the sale of the discontinued operation Consideration received or receivable: Cash 311,426 311,426 Fair value of performance payment on disposal of 60% of PTT APM 110,711 110,711 Total disposal consideration 422,137 422,137

Fair value of retained 40% investment in associate includes a goodwill component of $122 million 234,500 - Carrying amount of the Group's net assets sold* (280,000) - Transaction costs (4,919) (4,890) Gain on sale before income tax 371,718 417,247

Income tax expense (112,800) (112,800) Gain on sale after income tax 258,918 304,447

101 95 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

13 Non-current assets classified as held for sale and discontinued operation (continued) The total cash consideration of up to US$335 million (approx A$422 million) comprises an upfront completion payment of $311,426,000 (US$220 million), received on the 28 April 2009, and a performance payment of up to $162,843,387 (US$115 million) payable post completion. (refer note 16 - Non current assets - other financial assets.) The performance payment relates to certain matters in connection with reserve upgrades in relation to the mine located on Sebuku island, South Kalimantan, Indonesia controlled and operated by Straits Asia Resources Limited (SAR) or as otherwise agreed between PTT and SRL. (refer note 45 - Events occurring after the balance sheet date.) * The $280 million represents the Group's share of the carrying amounts of assets and liabilities deconsolidated as at 28 April 2009. This represents the 47.1% holding in SAR and the 100% holding in Straits Bulk and Industrial and Straits Salt Pty Ltd. The carrying amounts of assets and liabilities for the deconsolidated Group as at the date of sale (28 April 2009) were:

Consolidated 28 April 30 June 2009 2008 $'000 $'000

Current assets Cash and cash equivalents 101,723 91,171 Receivables 148,941 277,504 Inventories 13,899 12,405 Available for sale investments - 10,906 Non current assets Receivables 29 - Investments in associates 50,923 51,017 Available for sale investments 4,676 2,050 Mine properties 609,301 468,206 Exploration 28,118 24,171 Property plant and equipment 183,893 69,014 Deferred tax assets 3,183 3,138 Intangible assets 69,885 60,766 Total assets 1,214,571 1,070,348

Current liabilities Trade payables 122,378 100,826 Interest bearing liabilities 171,807 229,264 Income tax payable 16,499 25,792 Provisions 4,000 1,260 Non current liabilities Interest bearing liabilities 172,676 - Deferred tax liabilities 97,615 78,548 Provisions 2,697 1,739 Total liabilities 587,672 437,429

Net assets 626,899 632,919 Straits Annual Report

102 96 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

14 Non-current assets - Receivables

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Related party receivables Receivable from employee 200 200 200 200 Other receivables 254 283 - 452 Cash restricted 257 175 - - 711 658 200 652

(a) Impaired receivables and receivables past due None of the non-current receivables are impaired or past due but not impaired.

(b) Fair values The fair values are equal to carrying values for the non-current receivables. (c) Foreign currency risk The carrying amounts of the Group's and parent entity’s current and non-current receivables are denominated in the following currencies:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

US Dollar 37,149 125,471 75,823 70,495 Euro 20,876 34,415 - - South-African Rand 4,345 5,785 - - Swiss Franc 149 81 - - Chinese Renminbi 3,829 3,439 - - British Pound 279 642 - - Australian Dollar 30,073 6,157 452,299 481,863 96,700 175,990 528,122 552,358 Current receivables 95,989 175,332 527,922 551,706 Non-current receivables 711 658 200 652 96,700 175,990 528,122 552,358

For an analysis of the sensitivity of trade and other receivables to foreign exchange risk refer to note 6.

(d) Credit risk There is minimal exposure to credit risk at the reporting date for each class of receivables mentioned above. The Group does not hold any collateral as security. Refer to note 6 and note 9 for more information on the risk management policy of the Group. The parent entity credit risk for receivables is generally exposed to the underlying performance of the net assets of the controlled entities. (e) Interest rate risk All current and non current receivables in 2009 and 2008 are non interest bearing and therefore have no exposure to interest rate risk.

97 103 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

15 Non-current assets - Investments accounted for using the equity method

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Shares in associates (note 43) 242,415 51,017 - - 242,415 51,017 - -

(a) Shares in associates Investments in associates are accounted for in the consolidated entity financial statements using the equity method of accounting. (refer to note 43).

16 Non-current assets - Other financial assets

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Fair value of performance payment on disposal of 60% of PTT APM 96,891 - 96,891 - Listed available-for-sale investments 2,121 8,850 1,234 1,839 Share in subsidiaries - - 68,237 68,237 99,012 8,850 166,362 70,076

Risk exposures All other financial assets are denominated in the Australian currency except for the fair value of the deferred payment on the disposal of 60% of PTT APM, which is denominated in the US currency. For an analysis of the sensitivity to foreign exchange risk, refer to note 6. None of the financial assets are either past due or impaired. The carrying value of all other financial assets are equal to their fair value. Refer note 6 and 7. Straits Annual Report

104 98 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

17 Non-current assets - Property, plant and equipment Leased Freehold Freehold Plant and plant & Consolidated land buildings equipment equipment Total $'000 $'000 $'000 $'000 $'000

1 January 2008 Cost 1,664 45,881 253,220 4,893 305,658 Accumulated depreciation - (30,037) (142,261) (1,864) (174,162) Net book amount 1,664 15,844 110,959 3,029 131,496

Period ended 30 June 2008 Opening net book amount 1,664 15,844 110,959 3,029 131,496 Exchange differences (86) (678) (3,932) (34) (4,730) Additions 325 2,274 46,192 661 49,452 Disposals - (35) (4,130) (82) (4,247) Transfers to mine properties in use - 8,296 42,256 - 50,552 Depreciation charge - (2,892) (8,072) (561) (11,525) Closing net book amount 1,903 22,809 183,273 3,013 210,998

At 30 June 2008 Cost 1,903 58,275 327,544 5,327 393,049 Accumulated depreciation - (35,466) (144,271) (2,314) (182,051) Net book amount 1,903 22,809 183,273 3,013 210,998

Leased Freehold Freehold Plant and plant & Consolidated land buildings equipment equipment Total $'000 $'000 $'000 $'000 $'000

Period ended 30 June 2009 Opening net book amount 1,903 22,809 183,273 3,013 210,998 Disposal of net carrying value discontinued operations - (9,317) (59,357) (339) (69,013) Exchange differences 169 923 77 - 1,169 Impairment write down --(38,790) - (38,790) Additions 403 2,876 42,937 1,224 47,440 Disposals --(417) (141) (558) Transfer to assets held for sale --(3,924) - (3,924) Transfer from mine properties in use - - 9,664 - 9,664 Depreciation charge - (3,129) (17,753) (1,006) (21,888) Closing net book amount 2,475 14,162 115,710 2,751 135,098

At 30 June 2009 - Cost 2,475 44,379 238,547 5,700 291,101 Accumulated depreciation - (30,217) (122,836) (2,950) (156,003) Net book amount 2,475 14,162 115,711 2,750 135,098

99 105 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

17 Non-current assets - Property, plant and equipment (continued) Leased Plant and plant & Parent entity equipment equipment Total $'000 $'000 $'000

At 1 January 2008 Cost 2,931 2,437 5,368 Accumulated depreciation (1,423) (945) (2,368) Net book amount 1,508 1,492 3,000

Period ended 30 June 2008 Opening net book amount 1,508 1,492 3,000 Additions 1,407 416 1,823 Disposals - (83) (83) Depreciation charge (108) (320) (428) Closing net book amount 2,807 1,505 4,312

At 30 June 2008 Cost 3,213 2,668 5,881 Accumulated depreciation (406) (1,163) (1,569) Net book amount 2,807 1,505 4,312

Leased Plant and plant & Parent entity equipment equipment Total $'000 $'000 $'000

Period ended 30 June 2009 Opening net book amount 2,807 1,505 4,312 Additions 1,659 1,103 2,762 Disposals - (141) (141) Depreciation charge (509) (690) (1,199) Closing net book amount 3,957 1,777 5,734

At 30 June 2009 Cost 4,872 3,484 8,356 Accumulated depreciation (915) (1,707) (2,622) Net book amount 3,957 1,777 5,734

(a) Leased assets Plant and equipment includes the following amounts where the Group is a lessee under a finance lease:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008

$'000 $'000 $'000 $'000 Straits Annual Report

Leased assets Cost 5,700 5,327 3,484 2,668 Accumulated depreciation (2,950) (2,314) (1,707) (1,163) Net book amount 2,750 3,013 1,777 1,505

106 100 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

17 Non-current assets - Property, plant and equipment (continued)

(b) Non-current assets pledged as security Refer to note 27 for information on non-current assets pledged as security by the parent entity and its controlled entities.

(c) Impairment loss The directors of Straits have reviewed the carrying value of all its assets and have recorded impairment for plant and equipment for Hillgrove of $22,144,000 and Tritton of $16,646,000, based on recoverable amount determined as their value-in-use and applying a discount rate of 10%. Refer note 4.

18 Non-current assets - Exploration and evaluation, development and mine properties

(a) Exploration and evaluation

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Opening balance 98,555 163,785 - 2,321 Disposal of net carrying value discontinued operations (24,171) - - - Expenditure incurred 13,412 18,823 - - Expenditure written off * (12,406) (20,490) - (2,321) Transfer to mine properties in use (2,719) (62,306) - - Foreign currency translation (736) (1,257) - - Closing balance 71,935 98,555 - -

Net book value of asset 71,935 98,555 - -

101 107 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

18 Non-current assets - Exploration and evaluation, development and mine properties (continued)

(b) Mine Properties in use

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Mine properties in use - cost Opening balance 844,822 855,068 - - Disposal of discontinued operations (511,292) - - - Transfer to property, plant and equipment (9,664) (50,552) - - Transfer from exploration 2,720 62,306 - - Mine properties written off - (599) - - Mine properties impaired (153,931) - - - Expenditure during the period 43,337 35,003 - - Foreign currency translation 3,039 (56,404) - - Closing balance 219,031 844,822 - -

Accumulated depreciation

Opening balance (135,273) (113,034) - - Amortisation for the period (41,946) (28,948) - - Amortisation written out from impairment 37,577 - - - Foreign currency translation 957 6,709 - - Less: disposal of discontinued operation 43,086 - - - Closing balance (95,599) (135,273) - -

Net book value 123,432 709,549 - -

* Exploration expenditure written off: during the period, Straits reviewed its capitalised exploration expenditure and the non- core exploration expenditure has been written off in line with Group accounting policy. Straits Annual Report

108 102 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

19 Non-current assets - Deferred tax assets

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Fixed assets - - 840 300 Provisions 5,330 5,137 - 706 Investment at cost - - 11,692 - Foreign exchange 9,247 7,999 9,350 8,739 Mine properties 14,588 - - - Sundry 62 - (404) - Tax losses 24,363 85,016 22,730 97,244 53,590 98,152 44,208 106,989

Amounts recognised directly in equity Cash flow hedges - 16,292 - - Available-for-sale investments 445 - 68 - Transaction costs 2,339 2,339 2,271 2,271 56,374 116,783 46,547 109,260

Set-off of deferred tax liabilities of parent entity pursuant to set-off provisions (54,689) (49,687) (347) (314) Net deferred tax assets 1,685 67,096 46,200 108,946

Deferred tax assets to be recovered within 12 months - 43,611 - 28,389 Deferred tax assets to be recovered after more than 12 months 1,685 23,485 46,200 80,557 1,685 67,096 46,200 108,946

Movements: Balance at the begining of the period 67,096 96,606 108,946 87,248 Adjustment on adoption of DTA/DTL net off for the Australian group (note 1) (3,601) (45,627) (90) - Amounts recognised in the income statement 18,188 4,583 11,790 8,316 Utilisation of tax losses (74,514) - (74,514) - (Debited)/credited to equity (2,346) (1,555) 68 101 Disposal of subsidiary (3,138) - - - Under provision in prior periods (note 5) - 6,179 - 6,371 Tax losses recognised - 6,910 - 6,910 Closing balance at 30 June 2009 1,685 67,096 46,200 108,946

The gain on sale from discontinued operations has been offset by tax losses of the Australian tax consolidated Group amounting to $248 million.

103 109 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

20 Non-current assets - Intangible assets Metals distribution Consolidated Goodwill relationships Other Total $'000 $'000 $'000 $'000

1 January 2008 Cost 94,173 7,900 1,113 103,186 Accumulated amortisation and impairment - (921) - (921) Net book amount 94,173 6,979 1,113 102,265

Period ended 30 June 2008 Opening net book amount 94,173 6,979 1,113 102,265 Refund from prior business acquisition (19,524) --(19,524) Exchange differences on translation of foreign operations (9,260) - (43) (9,303) Amortisation charge - (395) - (395) Closing net book amount 65,389 6,584 1,070 73,043

As at 30 June 2008 Cost 65,389 7,900 1,070 74,359 Accumulated amortisation and impairment - (1,316) - (1,316) Net book amount 65,389 6,584 1,070 73,043

Metals distribution Consolidated Goodwill relationships Other Total $'000 $'000 $'000 $'000

Period ended 30 June 2009 Opening net book amount 65,389 6,584 1,070 73,043 Asset disposed of through discontinued operations (60,766) --(60,766) Acquisition of subsidiary ---- Exchange differences on translation of foreign operations 817 - 176 993 Impairment write down (790) (5,794) - (6,584) Amortisation charge - (790) (20) (810) Closing net book amount 4,650 - 1,226 5,876

As at 30 June 2009 Cost 4,650 - 1,353 6,003 Accumulated amortisation and impairment - - (127) (127) Net book amount 4,650 - 1,226 5,876

During the year: Impairment of intangibles The Directors of Straits have reviewed the carrying value of all its assets. As a result of the review of the Group's carrying value for intangible assets, an impairment charge has been recorded against goodwill of $790,000 in relation to the acquisition of the GfE noble alloys business and metals distribution customer relationships of $5,794,000.

The recoverable amount of goodwill is determined based on value-in-use calculations used for impairment testing by the Straits Annual Report Group. The goodwill relates to the metals distribution segment.

110 104 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

20 Non-current assets - Intangible assets (continued) The impairment review process involved discounting the net cashflow from revenue and expenditure items associated with each business unit to calculate a net present value (NPV) against which the carrying book value of the assets were compared. In order to determine the net cashflows associated with the non-mining operations, commodity prices and fx rate assumptions were used, in addition to an assumption on the price earnings ratio applicable to earnings of the business unit. For consistency with prior years, forecast cashflows were for six years with a discount rate of 10% and a price earnings multiple of 5 applied to the post tax earnings in the final forecast year.

21 Current liabilities - Payables

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Trade payables 64,181 192,391 2,788 2,437 Intercompany tax payable - - 121,186 85,055 Other payables 47 3,701 423 1,391 64,228 196,092 124,397 88,883

(a) Foreign currency risk The carrying amounts of the Group's and parent entity's trade and other payables are denominated in the following currencies:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

US Dollar 21,827 123,377 - - Euro 17,372 29,607 - - South-African Rand 2,002 376 - - Swiss Franc 165 4 - - Chinese Renminbi 4,966 7,899 - - British Pound 35 329 - - Other 1 6 - - Australian Dollar 17,860 34,494 124,397 88,883 64,228 196,092 124,397 88,883

(b) Risk exposure Information about the Group's and the parent entity's exposure to foreign exchange risk is provided in note 6. Due to the short-term nature of current payables, their carrying amount is assumed to approximate their fair value.

111 105 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

22 Current liabilities - Interest bearing liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Secured Bank loans 60 286,764 - 57,500 Lease and hire purchase liabilities 1,073 1,203 708 539 Trade finances 58,148 89,891 - - Total secured current interest bearing liabilities 59,281 377,858 708 58,039

Unsecured Other - 66 - 66 Total unsecured current interest bearing liabilities - 66 - 66

Total current interest bearing liabilities 59,281 377,924 708 58,105

Details of the security relating to each of the secured liabilities and further information on bank loans are set out in note 27.

(a) Risk exposures Details of the Group’s exposure to interest rate changes and foreign currency risk on interest bearing liabilities are set out in note 27.

(b) Fair value disclosures Details of the fair value of interest bearing liabilities for the Group are set out in note 27.

23 Current liabilities - Non Interest bearing liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Secured Non interest bearing - Bogan Shire Loan 250 250 - -

Secured loan The shire loan is provided to a Group subsidiary company. The loan is repayable over 4 years, is interest free and is secured by a floating charge over the assets of the Group subsidiary company. Straits Annual Report

112 106 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

24 Current liabilities - Provisions

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Provisions - employee benefits 5,485 12,469 1,148 1,366 Provision for rehabilitation 2,719 922 - - Other provisions 1,304 4,101 604 449 9,508 17,492 1,752 1,815

(a) Rehabilitation Provision is made for the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. The estimated costs are discounted using a pre-tax discount rate that reflects the time value of money and it does not reflect risks for which future cash flow estimates have been adjusted.

(b) Other Provision is made for the estimated cost of similar obligations based on the likelihood that an outflow will be required for settlement, even if the likelihood of an obligation is small.

(c) Movements in provisions Movements in each class of provision during the financial period, other than employee benefits, are set out below:

Provision for Other rehabilitation provisions Total $'000 $'000 $'000 Consolidated - 2009 Current Carrying amount at start of period 922 4,101 5,023 (Reduction in provisions)/additional provisions recognised 1,797 (2,468) (671) - derecognition of discontinued operation - (329) (329) Carrying amount at end of period 2,719 1,304 4,023

Other provisions $'000

Parent 2009 Current Carrying amount at start of year 449 - additional provisions recognised 155 Carrying amount at end of year 604

113 107 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

25 Current liabilities - Current tax liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Income tax 3,666 29,796 - -

The gain on sale from discontinued operations has been offset by tax losses of the Australian tax consolidated Group amounting to $248 million.

26 Current liabilities - Other current liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Related party payables - - 1,899 203,214

27 Non-current liabilities - Interest bearing liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 Secured Bank loans 798 791 - - Lease and hire purchase liabilities 1,337 1,542 1,185 1,033 Total secured non-current interest bearing liabilities 2,135 2,333 1,185 1,033

Unsecured Convertible notes 73,238 - 73,238 - Total non-current borrowings 75,373 2,333 74,423 1,033 Straits Annual Report

114 108 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued)

(a) Secured liabilities and assets pledged as security The total secured liabilities (current and non-current) are as follows: Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Bank overdrafts and bank loans 858 287,555 - 57,500 Lease liabilities 2,410 2,745 1,893 1,572 Trade finance 58,148 89,891 - - Total secured liabilities 61,416 380,191 1,893 59,072

Residential housing loans provided to a subsidiary are secured over the residential properties. This loan has no recourse to the parent entity or other members of the Straits Group. Trade finance facilities provided to certain companies in the metals distribution group, are secured by a floating charge over inventories and certain cash deposits. These facilities have no recourse to the parent entity or other members of the Straits Group outside the metals distribution group of companies. The carrying amounts of assets pledged as security for current and non-current borrowings are:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Notes $'000 $'000 $'000 $'000

Current Floating charge Cash and cash equivalents 8 - 69,733 - 60,717 Receivables 9 15,225 65,539 - 1,863 Inventories 10 58,822 171,566 - - Available-for-sale financial assets 11 - 10,906 - - Fixed charge - - - - Cash and cash equivalents - - - - Total current assets pledged as security 74,047 317,744 - 62,580

Non-current First mortgage Freehold land and buildings 17 3,476 2,787 - - Receivables - non-current - 1,874 - 652 3,476 4,661 - 652

Finance lease Plant and equipment 17 2,531 2,674 1,777 1,505 Floating charge Related party loans 14 - 312,427 - - Available-for-sale financial assets - 2,504 - 1,839 Mine properties and deferred mining 12 - 226,445 - - Plant and equipment - 131,622 - 2,808 Total non-current assets pledged as security 6,007 680,333 1,777 6,804

Total assets pledged as security 80,054 998,077 1,777 69,384

109 115 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued)

(b) Convertible notes

On 29 January 2009, the parent entity (Straits) issued 55,000,000 4% convertible notes (CN) for a face value $79.8 million to Standard Chartered Private Equity Limited (SCPEL). The issue comprised of a first tranche of $48.6m and a second tranche of $31.2m. The notes are convertible into ordinary shares of the parent entity, at the option of the holder, or repayable on 29 January 2013. The conversion rate is 1 share for each note held, which is based on the market price per share at the date of the issue of the notes ($1.45). The convertible notes are presented in the balance sheet as follows: As SCPEL will not receive the 30 cent per share dividend that was paid on 21 September 2009, a revision of the conversion price and the issuer redemption price in respect of the convertible notes is required under the anti-diluton terms of the CN Agreement. Refer note 45 Unless previously redeemed or converted, the notes will be redeemed on the maturity date by paying to SCPEL an amount which represents an internal rate of return of 8%, per annum.

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Face value of notes issued 79,750 - - - Transaction costs (1,965) - - - Other equity securities (5,350) - - - 72,435 - - -

Interest expense Interest expense 803 Interest paid - - - - Non-current liability 73,238 - - -

Interest expense is calculated by applying the effective interest rate of 6.99% to the liability component. The interest accrues to the liability over the term of the notes to equal the face value of the notes at conversion.

(c) Lease and hire purchase liabilities Certain vehicles and equipment acquired by the Group are funded by finance leases and hire purchase provided by a number of financial institutions. The leases are generally for a term of three years and are secured by the assets being financed. Straits Annual Report

116 110 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued)

(d) Financing arrangements The Group and the parent entity had access to the following borrowing facilities at the reporting date:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Floating rate Bank overdraft - 100 - 100 Bank loan facilities - 328,976 - 100,000 Trade finance facilities 74,310 123,836 - - Bank project finance loan facilities and residential housing loans 858 876 - - 75,168 453,788 - 100,100

Used at balance date Bank loan facilities - 286,476 - 57,500 Trade finance facilities 58,148 89,891 - - Bank project finance loan facilities and residential housing loans 858 791 - - 59,006 377,158 - 57,500

Unused at balance date Bank overdrafts - 100 - 100 Bank loan facilities - 42,500 - 42,500 Trade finance facilities 16,162 33,945 - - Bank project finance loan facilities and residential housing loans - 85 - - 16,162 76,630 - 42,600

111 117 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued) (i) Credit standby arrangements The Company has a $22 million bank guarantee facility which matured on 30 September 2009. The Company previously had a bank loan facility of $100m. This was fully repaid during the year. Trade finance facilities to support the metals distribution business are subject to annual review. The average interest rate on funds drawn on the secured facilities is at an average interest rate cost of LIBOR +250 basis points. The trade finance facility has assets pledged as security as per (b) above. (ii) Bank residential housing loans The residential housing loans totalling $857,947 (original principal $900,000) are repayable over 25 years at a current interest rate of 5.74%.

(e) Interest rate risk exposures The following table sets out the Group’s exposure to interest rate risk, including the contractual repricing dates and the effective weighted average interest rate by maturity periods. Exposures arise from liabilities bearing variable interest rates.

2009 Floating Non Total interest interest rate bearing $'000 $'000 $'000

Bank overdrafts and loans (notes 22 and 27) 858 - 858 Trade finance (note 22) 58,148 - 58,148 Trade and other creditors (note 27) - 64,228 64,228 59,006 64,228 123,234

Weighted average interest rate %4.1 %-

2008 Floating Non Total interest interest rate bearing $'000 $'000 $'000

Bank overdrafts and loans (notes 22 and 27) 287,555 - 287,555 Trade and other creditors (note 22) - 196,092 196,092 Trade finance (note 27) 89,891 - 89,891 377,446 196,092 573,538

Weighted average interest rate %4.0 %- Straits Annual Report

118 112 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued)

(f) Fair value The carrying amounts and fair values of borrowings at balance date are: 30 June 30 June 2009 2008 Carrying Carrying Group amount Fair value amount Fair value $'000 $'000 $'000 $'000

On-balance sheet Non-traded financial liabilities Bank loans 858 858 287,555 287,555 Trade finance 58,148 58,148 89,891 89,891 Convertible notes 73,238 78,588 -- Lease and hire purchase liabilities 2,410 2,410 2,745 2,745 134,654 140,004 380,191 380,191

30 June 30 June 2009 2008 Carrying Carrying Parent entity amount Fair value amount Fair value $'000 $'000 $'000 $'000

On-balance sheet Non-traded financial liabilities Bank loans --57,500 57,500 Convertible notes 73,238 78,588 -- Lease liabilities 1,893 1,893 1,572 1,572 75,131 80,481 59,072 59,072

(i) On-balance sheets The fair value of interest bearing liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates or liabilities with similar risk profiles. (ii) Off-balance sheets Certain controlled entities have potential financial liabilities which may arise from certain contingencies disclosed in note 36. As explained in this note, no material losses are anticipated in respect of any of those contingencies.

113 119 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

27 Non-current liabilities - Interest bearing liabilities (continued)

(g) Foreign exchange risk exposure For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to note 6. The carrying amounts of the Group's borrowings are denominated in the following currencies: Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 US Dollar 14,265 297,384 - - Euro 33,564 13,193 - - South-African Rand 8,503 6,703 - - Chinese Renminbi 1,815 1,522 - - Australian Dollar 76,507 61,389 75,131 59,072 134,654 380,191 75,131 59,072

28 Non-current liabilities - Non interest bearing liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Secured Non interest bearing - Bogan Shire loan 500 750 - - 500 750 - -

Secured loan The shire loan is provided to a Group subsidiary company. The loan is repayable over 4 years, is interest free and is secured by a floating charge over the assets of the subsidiary company. Straits Annual Report

120 114 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

29 Non-current liabilities - Deferred tax liabilities

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000 The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Fixed assets (4,398) 10,142 - - Inventories 1,425 138 - - Mineral rights 11,172 108,488 - - Investment in associate and shares in listed companies 61,535 - - - Sundry 283 2,597 347 95 70,017 121,365 347 95

Amounts recognised in equity Available-for-sale investments 68 2,636 - 219 Total deferred tax liabilities 70,085 124,001 347 314

Set-off deferred tax liabilities pursuant to set-off provisions (54,689) (49,687) (347) (314)

Net deferred tax liabilities 15,396 74,314 - -

Deferred tax liabilities to be settled within 12 months 2,349 2,735 - - Deferred tax liabilities to be settled after more than 12 months 13,047 71,579 - - 15,396 74,314 - -

Movements: Balance at the begining of the period 74,314 127,012 - - Adjustment on adoption of DTA/DTL nett off for the Australian group (3,601) (45,627) (90) - Charged to the income statement (note 5) 23,999 (5,469) 193 - (Credited)/debited to equity (2,569) - (219) - Under/(over) provision in prior years 28 (1,602) 116 - Disposal of subsidiary (76,775) - - - Closing balance at 30 June 15,396 74,314 - -

115 121 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

30 Non-current liabilities - Provisions

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Provisions - employee benefits 6,453 5,529 23 45 Provision for rehabilitation and dismantling 15,664 13,637 - - 22,117 19,166 23 45

Included in provisions - employee benefits is a defined benefit plan held by a subsidiary's controlled entity, with a net liability of $5,029,000.

Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below:

Provision for Rehabilitation and Dismantling $'000 Consolidated - 2009 Non-current Carrying amount at start of period 13,637 Additional provisions recognised 4,197 Derecognition of SBI group (2,697) Unwinding of discounts on provisions 527 Carrying amount at end of period 15,664

Rehabilitation and dismantling Provision is made for the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. The estimated costs are discounted using a pre-tax discount rate that reflects the time value of money and it does not reflect risks for which future cash flow estimates have been adjusted. Provision is made for the estimated costs of dismantling and removing the item of plant and equipment and restoring the site on which it is located.

31 Non-current liabilities - Retirement benefit obligations

(a) Superannuation plan Two subsidiaries of the Varomet Holdings Limited Group, Magontec GmbH and GFE-MIR GmbH, have a plan with a defined benefit section and a defined contribution section. The defined benefit section provides lump sum benefits based on years of service and final average salary. The defined contribution section receives fixed contributions from the two subsidiaries of Varomet Holdings Limited Group and their legal or constructive obligation is limited to these contributions. The following sets out details in respect of the defined benefit section only.

(b) Balance sheet amounts Straits Annual Report The amounts recognised in the balance sheet are determined as follows:

122 116 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

31 Non-current liabilities - Retirement benefit obligations (continued)

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Present value of the defined benefit obligation 6,933 6,365 - - Fair value of the defined benefit plan assets (713) (598) - - 6,220 5,767 - - Unrecognised past service costs - (166) - - Net liability in the balance sheet 6,220 5,601 - -

(c) Categories of plan assets The major categories of plan assets are as follows:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Cash 713 598 - - Other assets - - - - 713 598 - - (d) Reconciliations

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Reconciliation of the present value of the defined benefit obligation, which is partly funded: Balance at the beginning of the period 6,365 7,370 - - Current service cost 200 90 - - Interest cost 447 195 - - Contributions by plan participants - (36) - - Actuarial (gains) and losses (80) (596) - - Foreign currency exchange rate changes 373 (517) - - Benefits paid (372) (141) - - Balance at the end of the year 6,933 6,365 - -

117 123 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

31 Non-current liabilities - Retirement benefit obligations (continued)

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Reconciliation of the fair value of plan assets: Balance at the beginning of the period 598 485 - - Expected return on plan assets 36 11 - - Actuarial gains and (losses) (7) 79 - - Foreign currency exchange rate changes 32 (6) - - Contributions by Group companies 79 36 - - Benefits paid (25) (7) - - Balance at the end of the year 713 598 - -

(e) Amounts recognised in income statement The amounts recognised in the income statement are as follows:

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Current service cost 92 90 - - Interest cost 220 195 - - Expected return on plan assets 36 (58) - - Total included in employee benefits expense 348 227 - -

Actual return on plan assets 20 (21) - -

(f) Amounts recognised in statements of recognised income and expense

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Actuarial gain recognised in the period 9 435 - -

Cumulative actuarial gains recognised in the statement Straits Annual Report of recognised income and expense 199 517 - -

124 118 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

31 Non-current liabilities - Retirement benefit obligations (continued)

(g) Principal actuarial assumptions The principal actuarial assumptions used (expressed as weighted averages) were as follows:

Consolidated Parent 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008

Discount rate %6.2 %6.4 %- %- Expected return on plan assets %2.5 %3.4 %- %- Future salary increases %2.4 %2.9 %- %-

The expected rate of return on assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories.

(h) Employer contributions Employer contributions to the defined benefit section of the plan are based on recommendations by the plan’s actuary.

32 Contributed equity

Consolidated and parent Consolidated and parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Shares Shares $'000 $'000

(a) Share capital Ordinary shares (b),(c) Issued and paid up capital 218,710,310 217,614,310 430,718 429,501 ExSAP loans - contributed equity 26,834,115 15,275,000 - - 245,544,425 232,889,310 430,718 429,501

Total contributed equity - parent entity 430,718 429,501

119 125 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

32 Contributed equity (continued)

(b) Movements in ordinary share capital: Number of Issue Date Details Notes shares price $'000

01/01/08 Opening balance 225,882,308 396,349 16/01/08 Options exercised (e) 2,500 $3.98 10 16/01/08 Options exercised (e) 5,500 $3.98 22 22/01/08 Options exercised (e) 40,000 $2.58 103 22/01/08 Options exercised (e) 5,000 $3.98 20 22/01/08 Shares issued for consideration of JV exploration tenements Salt Creek (c) 60,339 $6.63 400 22/01/08 Shares issued in consideration for acquisition of Red Island Minerals Ltd (c) 4,654,811 $6.15 28,627 20/02/08 Options exercised (e) 7,500 $3.98 30 14/03/08 Options exercised (e) 1,250 $3.98 5 19/03/08 ExSAP issue (d) 2,020,000 $5.82 - 14/04/08 Options exercised (e) 18,000 $2.58 46 14/05/08 Options exercised (e) 1,250 $3.98 5 30/05/08 Options exercised (e) 7,000 $2.58 18 30/05/08 Options exercised (e) 3,750 $3.98 15 30/05/08 Options exercised (e) 3,750 $3.98 15 30/05/08 Options exercised (e) 10,000 $2.58 26 30/05/08 Options exercised (e) 1,250 $3.98 5 23/06/08 Options exercised (e) 2,500 $3.98 10 30/06/08 Shares issued for consideration of JV exploration tenements Salt Creek (e) 162,602 $7.38 1,200 30/06/08 ESOP shares option value transferred from share-based payments reserve for the 2008 financial year. - $- 90 30/06/08 ExSAP shares option value of employee loans transferred from share-based payments reserve for the 2008 financial year. - $- 588 30/06/08 ExSAP share loans repaid during the 2008 financial year (d) - $- 1,917 - $- - 30/06/08 Balance 429,501

11/07/08 Options exercised 5,000 $3.98 20 3/09/08 Options exercised (e) 1,250 $3.98 5 3/12/08 Shares issued to Alliance Contracting for consideration of payment for the mining contract at Whim Creek (c) 363,701 $1.30 473 13/01/09 Shares issued to Alliance Contracting for consideration of payment for the mining contract at Whim Creek (c) 489,923 $1.02 500 27/02/09 Shares issued to Alliance Contracting for consideration of payment for the mining contract at Whim Creek 236,126 $0.90 213 28/04/09 ExSAP issue (d) 1,509,399 - 30/04/09 ExSAP issue (d) 10,049,716 - 30/06/09 ExSAP shares option value of employee loans Straits Annual Report transferred from share-based payments reserve for the 2009 financial year. - $ 6 30/06/09 Balance 245,544,425 430,718

126 120 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

32 Contributed equity (continued)

(c) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote for each fully paid ordinary share held (pro-rated in the case of partly paid shares). Upon a poll each holder of ordinary shares is entitled to one vote for each fully paid share held (pro-rated in the case of partly paid shares).

(d) Employee share scheme and Executive Share Acquisition Plan (ExSAP) The ExSAP plan was approved at the company's Annual General Meeting in May 2002. The purpose of the plan is to attract, retain, motivate and reward key executive employees. Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 48.

(e) Options Information relating to the Straits Resources Limited Employee Option Plan, including details of options issued, exercised and lapsed during the financial period and options outstanding at the end of the financial period, is set out in note 48.

(f) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of its capital structure comprising equity, debt and cash. The Group reviews the capital structure on a semi-annual basis. As part of this review the Group considers the cost of capital and the risks associated with each class of capital. Based on recommendations from the Group, the Group will balance its overall capital structure through the payment of dividends, new share issues, new debt or the refinancing or repayment of existing debt. The Group also reviews its gearing level. The Group's gearing ratio is calculated as net debt to net debt plus equity. Net debt is total interest bearing liabilities less cash and cash equivalents (excluding any restricted cash). Equity is equity as shown in the balance sheet (including minority interests). The gearing ratios at 30 June, 2009 and 30 June, 2008 were as follows:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 Notes $'000 $'000 $'000 $'000

Total interest bearing liabilities 134,655 380,257 75,132 59,138 Less: cash and cash equivalents 8 (222,961) (161,999) (210,066) (60,717) Net debt (88,306) 218,258 (134,934) (1,579) Total equity 873,798 1,043,692 754,393 443,313 Net debt plus equity 785,492 1,261,950 619,459 441,734

Gearing ratio %N/A 1 7 % %N/A A %N/

The Group's overall strategy remains unchanged from 2008.

121 127 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

33 Reserves and retained profits (continued)

33 Reserves and retained profits

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

(a) Reserves Available-for-sale investments revaluation reserve (1,039) 6,152 (159) 512 Hedging reserve - cash flow hedges 158 (35,920) - - Share-based payments reserve 11,443 9,993 9,644 8,194 Foreign currency translation reserve 4,498 (28,392) - - Asset revaluation reserve 285 25,176 - - Warrant option reserve 651 651 - - Convertible notes option reserve 5,350 - 5,350 - Capital reserve 14,108 390,876 (4,870) (21,365) 35,454 368,536 9,965 (12,659)

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Available-for-sale investments revaluation reserve Balance at the beginning of the period 6,152 1,555 512 746 Revaluation - gross (4,659) 6,548 (864) (334) Sale of shares transfer to net loss - gross (5,614) 19 (95) - Deferred tax 3,082 (1,970) 288 100 Balance 30 June (1,039) 6,152 (159) 512

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Hedging reserve - cash flow hedges Balance at the beginning of the period (35,920) (46,425) - - Revaluation - gross 21,450 48,755 - - Transfer to net loss - gross 30,090 (33,751) - - Deferred tax (15,462) (4,499) - - Balance 30 June 158 (35,920) - - Straits Annual Report

128 122 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

33 Reserves and retained profits (continued)

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Share-based payments reserve Balance at the beginning of the period 9,993 6,890 8,194 5,091 Option expense 1,456 3,781 1,456 3,781 Transfer to share capital (options exercised) (6) (678) (6) (678) Balance 30 June 11,443 9,993 9,644 8,194

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Foreign currency translation reserve Balance at the beginning of the period (28,392) (4,834) - - Currency translation differences arising during the year 15,434 (23,558) Exchange differences on translation discontinued operation 56,006 - - - Derecognition on sale of SBI group (38,568) - - - Transfer to retained earnings from foreign operations 18 - - - Balance 30 June 4,498 (28,392) - -

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Asset revaluation reserve Balance at the beginning of the period 25,176 25,176 - - Transfer to retained earnings on impairment writedown (24,891) - - - Balance 30 June 285 25,176 - -

123 129 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

33 Reserves and retained profits (continued)

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Warrant option reserve Balance at the beginning of the period 651 651 - - Balance 30 June 651 651 - -

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Convertible note option reserve Balance at the beginning of the period - - - - Convertible note issue 5,350 - 5,350 - Balance 30 June 5,350 - 5,350 -

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Movements: Capital reserve Balance at the beginning of the period 390,876 289,997 (21,365) (21,365) Partial sale of interest in subsidiary - 100,879 - - Transfer of capital reserve amount to retained earnings on disposal of discontinued operation (376,768) - 16,495 - Transfer from retained earnings - - - - Balance 30 June 14,108 390,876 (4,870) (21,365) Straits Annual Report

130 124 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

33 Reserves and retained profits (continued)

(b) Retained profits Movements in retained profits were as follows:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Balance at the beginning of the period 47,063 57,277 26,472 71,213 Net profit for the year (42,107) (5,995) 303,734 (40,087) Dividends - (4,654) - (4,654) Other (27) 435 - - Prior dilution gains recognised upon disposal of 60% of SBI 376,768 - (16,495) - Asset revaluation reserve transferred on impairment writedown 24,891 - - - Reclassification of prior year minority interest (5,259) - - - Balance at the end of the period 401,329 47,063 313,711 26,472

(c) Nature and purpose of reserves (i) Available-for-sale investments revaluation reserve Changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as available-for-sale financial assets, are taken to the available-for-sale investments revaluation reserve, as described in note 1(m). Amounts are recognised in profit and loss when the associated assets are sold or impaired. (ii) Hedging reserve - cash flow hedges The hedging reserve is used to record gains or losses on hedging instruments in a cash flow hedge that are recognised directly in equity, as described in note 1(n). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss. (iii) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of equity instruments issued to employees. (iv) Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in note 1(c). The reserve is recognised in profit and loss when the net investment is disposed of. (v) Asset revaluation reserve The asset revaluation reserve is used to record increments on the revaluation of non current assets which arise from increases in ownership interests in controlled entities. (vi) Warrant option reserve The warrant option reserve is used to record warrants issued through a subsidiary company. (vii) Convertible note option reserve The convertible note option reserve is used to record the convertible equity feature of the notes which is separated from the liability component. (viii) Capital reserve The capital reserve is used to record differences arising between the amounts paid or received on acquisition or divestment transactions with minority interests as such transactions are accounted for by the company as equity transactions between shareholders. Based on the economic entity approach to these transactions, the consolidated group before and after these transactions remains unchanged and no gain or loss is recognised in the income statement. As part of the disposal of discontinued operations, the amount from prior periods relating to divestment transactions with minority interests was transferred to retained earnings for the Group.

131 125 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

34 Minority interest

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Interest in: Share capital 12,781 186,416 - - Reserves 484 (24,456) - - Retained profits (6,964) 36,630 - - 6,301 198,590 - -

35 Dividends

Parent 30 June 30 June 2009 2008 $'000 $'000

(a) Ordinary shares Unfranked final dividend for the year ended 31 December 2007 of 2 cents per fully paid share paid on 23 May 2008 - 4,654

Parent 30 June 30 June 2009 2008 $'000 $'000

(b) Dividends not recognised at year end

Since year end the directors have recommended the payment of an unfranked dividend for the year ended 30 June 2009 of 30 cents per fully paid ordinary share. The dividend was paid on 21 September 2009. The aggregate amount of the dividend paid out of retained profits at 30 June 2009 but not recognised as a liability at year end, is: 73,663 -

Parent 30 June 30 June 2009 2008 $ $

Franking credits available for subsequent financial years based on a tax rate of 30% (2008 - 30%) 2,606,818 2,606,818

- - Straits Annual Report 2,606,818 2,606,818 The above amounts represent the balance of the franking account as at the end of the 2008 and 2009 financial periods.

132 126 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

36 Key management personnel disclosures

(a) Directors Details of directors are disclosed in the Directors' Report. (b) Key management personnel compensation

Consolidated Consolidated Parent Parent 2009 2008 2009 2008 Short term employee benefits 5,789 3,207 4,800 2,671 Long term employee benefits 124 162 104 149 Post employment benefits 485 258 485 250 Share based payments 2,015 1,847 1,546 1,457

Total 8,413 5,474 6,935 4,527

Detailed remuneration disclosures are provided in sections A to D of the Remuneration Report on pages 45 to 55.

(c) Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options The company's detailed equity instrument disclosures appear in the directors' report. The relevant information can be found in section D of the Remuneration Report on pages 53 to 55. (ii) Option holdings There are no options over ordinary shares in the company held during the financial period by any director of Straits Resources Limited or other key management personnel of the Group, including their personally related parties.

133 127 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

36 Key management personnel disclosures (continued) (iii) Share holdings The numbers of shares in the company held during the financial period by each director of Straits Resources Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2009 Balance at the Balance at start of the Issued and the end of period acquired* Disposed the period Directors Ordinary shares Milan Jerkovic 4,204,667 2,565,930 (1,400,000) 5,370,597 Martin David Purvis 1,030,865 1,509,399 (10,438) 2,529,826 Alan Good 13,564 - - 13,564 Richard Ong Chui Chat 1,781,047 - - 1,781,047 Garry George Lowder 600,000 - - 600,000 Michael Gibson 700,000 1,209,399 - 1,909,399

Other key management personnel Ordinary shares

Peter Storey 232,193 435,356 - 667,549 Jeremy Taylor 235,000 340,791 - 575,791 David Greenwood 135,427 340,791 - 476,218 Jim Carter 10,100 - - 10,100 Rod Griffith 226,055 369,299 - 595,354 Rick Laing 236,064 340,791 - 576,855

Balance at the Balance at start of the Issued and the end of period acquired* Disposed the period 2008

Directors Ordinary shares Milan Jerkovic 4,204,667 - - 4,204,667 Martin David Purvis 1,030,865 - - 1,030,865 Alan Good 13,564 - - 13,564 Richard Ong Chui Chat 1,781,047 - - 1,781,047 Garry George Lowder 601,064 - (1,064) 600,000 Other key management personnel of the Group Ordinary shares Michael Gibson 400,000 300,000 - 700,000 Peter Storey 112,193 120,000 - 232,193 Jeremy Taylor 115,000 120,000 - 235,000 Rhett Brans 116,491 120,000 - 236,491 David Greenwood 425,000 120,000 (409,573) 135,427 Nigel Johnson 375,000 - (375,000) -

*Issued and acquired shares included issues through

ExSAP and acquisition on the open market. Straits Annual Report

134 128 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

36 Key management personnel disclosures (continued)

(d) Loans to key management personnel Details of loans made to directors of Straits Resources Limited and other key management personnel of the consolidated entity, including their personally related entities, are set out below.

(i) Aggregates for directors and other key management personnel 2009 Number in Balance at Interest paid Balance at Group at the the start of and payable Interest not the end of the end of the the period for the period charged period period $$$$ Directors* 12,385,560 - 9,606 24,715,561 4 Other key management personnel 4,723,825 - - 6,919,825 5

*The variance in the opening balance is due to the inclusion of Mr Gibson share loan of $3,340,000 for 1,909,399 shares. Mr Gibson was appointed director on 4 May 2009. 2008 Number in Balance at Interest paid Balance at Group at the the start of and payable Interest not the end of the end of the the period for the period charged period period $$$$ Directors 9,097,370 - 7,113 9,045,360 3 Other key management personnel 3,989,495 - - 6,980,455 5

(ii) Individuals with loans above $100,000 during the financial year

2009 Highest Balance at Interest paid Balance at indebtedness the start of and payable Interest not the end of the during the the period for the period charged period period $$$$$ Directors M Jerkovic 5,416,750 - 9,609 12,735,751 12,735,751 M Purvis 2,998,560 - - 6,609,560 6,609,560 R Ong Chui Chat 630,050 - - 630,050 630,050 Michael Gibson 3,340,200 - - 4,740,200 4,740,200 Other key management personnel Peter Storey 778,220 - - 1,363,220 1,363,220 Jeremy Taylor 1,148,095 - - 1,542,595 1,542,595 David Greenwood 745,620 - - 1,140,120 1,140,120 Rod Griffith 913,570 - - 1,341,071 1,341,071 Rick Laing 1,138,320 - - 1,532,820 1,532,820

129 135 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

36 Key management personnel disclosures (continued)

2008 Highest Balance at Interest paid Balance at indebtedness the start of and payable Interest not the end of the during the the period for the period charged period period $$$$$ Directors M Jerkovic 5,448,250 - 7,113 5,416,750 5,448,250 M Purvis 3,011,370 - - 2,998,560 3,011,370 R Ong Chui Chat 637,750 - - 630,050 637,750 Other key management personnel Nigel Johnson 1,347,750 - - - 1,347,750 Michael Gibson 1,604,000 - - 3,340,200 3,350,000 Peter Storey 311,550 - - 778,220 780,250 Rhett Brans 273,210 - - 968,320 971,610 David Greenwood - - - 745,620 747,510 Jeremy Taylor 452,985 - - 1,148,095 1,151,385

Loans outstanding at the end of the year include a non interest bearing unsecured loan to Mr M. Jerkovic, a director of Straits Resources Limited, for $200,000 which was made for a period of seven years and is repayable in full on 17 February 2011. The amounts shown for interest not charged in the tables above represent the difference between the amount paid and payable for the year and the amount of interest that would have been charged on an arms length basis. All other secured loans to directors are interest free limited recourse loans advanced for the acquisition of shares under the terms of the Executive Share Acquisition Plan as approved by shareholders at the annual general meeting on 5 May 2005. The above ExSAP loans have not been recognised in the financial statements under AIFRS as they are accounted for as employee options as outlined in note 1(y)(iv). Certain employees of Straits transferred to Straits Bulk & Industrial Pty Ltd now renamed PTT Asia Pacific Mining Pty Ltd on 29 April 2009.

Some of these transferees had Straits ExSAP shares with loans attached (“participants”). These loans remain with Straits and until the loan is repaid in full a holding lock is placed over the shares. For Key Management Personnel these are non recourse loans. Straits is not entitled to have recourse to any assets of the participant other than the ExSAP shares held by that participant.

(e) Other transactions with key management personnel Mr Garry Lowder is a director and chairman of Malachite Resources Limited, a public company listed on the Australian Stock Exchange in which the Company holds 5.5 percent. Alastair Morrison, the global co-head of SCPEL was appointed a non-executive director on 2 February 2009 and has not received any salary or fees to 30 June 2009 Straits Annual Report

136 130 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

37 Remuneration of auditors During the period the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

Consolidated Parent 6 months to 30 6 months to 30 30 June June 30 June June 2009 2008 2009 2008 $ $ $ $

(a) Assurance services Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports and other audit work under the Corporations Act 2001 718,476 578,150 657,997 578,150 Related practices of PricewaterhouseCoopers Australian firm 104,944 252,291 - - Non-PricewaterhouseCoopers audit firms for the audit or review of financial reports of any entity in the Group 524,150 530,303 - - Total remuneration for audit services 1,347,570 1,360,744 657,997 578,150

Other assurance services PricewaterhouseCoopers Australian firm Assurance services 11,950 25,021 11,950 25,021 Advisory services 153,006 34,097 44,780 34,097 Controls enhancement review 88,045 78,775 88,045 78,775 Group restructuring services 51,500 31,800 51,500 31,800 Related practices of PricewaterhouseCoopers Australian firm Assurance services 71,423 - - - Advisory services 20,229 - 20,229 - Non-PricewaterhouseCoopers firm Total remuneration for other assurance services 396,153 169,693 216,504 169,693

Total remuneration for assurance services 1,743,723 1,530,437 874,501 747,843

(b) Taxation services PricewaterhouseCoopers Australian firm Tax compliance and advisory services, including review of company income tax returns 507,077 350,545 491,996 334,231 Related practices of PricewaterhouseCoopers Australian firm Tax compliance and advisory services, including review of company income tax returns 21,069 31,202 - - Non related PricewaterhouseCoopers tax firms Tax compliance and advisory services 414,638 89,827 167,212 - Total remuneration for taxation services 942,784 471,574 659,208 334,231

It is the Group’s policy to employ the auditors on assignments additional to their statutory audit duties where their expertise and experience with the Group are important. These assignments are principally for taxation advice.

137 131 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

38 Contingencies

The Group has contingent liabilities at 30 June 2009 in respect of: Guarantees (a) Bank guarantees issued, including performance bonds for work commitments on mining and mineral exploration tenements, for the parent company and certain of its subsidiaries totalled $19,881,091 (June 2008: $14,020,283). The bank guarantee facility for the parent company totals $22,000,000 and is secured by cash deposits. (b) Straits Resources Limited, Straits Mining Pty Ltd, Straits Exploration (Australia) Pty Ltd, Straits (Whim Creek) Pty Ltd, Straits Gold Pty Ltd, Straits Hillgrove Gold Pty Ltd, and Straits Indo Gold Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. c) In prior years, PT Indo Muro Kencana (PT IMK) as owned by previous owners, was served with legal proceedings commenced on behalf of 29 persons claiming to have been operating local community mining within the Contract of Work Area prior to 1987 when PT IMK took possession of the mine site. The claim is made for loss of improvements on the land of about US$ 40,000 but also includes a very broad ambit claim totalling Rp 100 billion (approximately US$10.8 million). The claim is under appeal by the plaintiffs in the Supreme Court, having been unsuccessful in both the District Court and High Court. PT IMK and its lawyers believe that the ambit claim is lacking any legal basis and that there are strong grounds to defend the claims. Management is therefore confident that the Supreme Court will uphold the lower court's decision. No adjustments relating to these uncertainties have been included in the financial statements. No material losses are anticipated in respect of any of the above contingent liabilities. d) A controlled entity PT IMK currently has a number of tax disputes outstanding with the Indonesian Tax Office (“ITO”) arising from tax audits in respect of corporate income tax, withholding tax and VAT covering a number of years. The assessed amounts, net of cash paid and outstanding refunds that remain in dispute total $5,078,716 (US$4,097,000). In addition, management have provided $4,491,137 (US$3,623,000) for non recoverability against other receivables to reflect current legal and taxation advice. Appeals in respect of all disputed assessments have been lodged with the Tax Court and these are being vigorously pursued. Given the current differences of opinion with the ITO in respect of these matters, it is not possible to predict at this time the ultimate outcome of these matters. Straits Annual Report

138 132 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

39 Commitments Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Property, plant and equipment Payable: Within one year 3,090 9,435 - - Later than one year but not later than five years 708 244 - - 3,798 9,679 - -

(a) Exploration and mining leases

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable: Within one year 4,984 7,074 - - Later than one year but not later than five years 11,834 15,077 - - Later than five years 18,406 20,595 - - 35,224 42,746 - -

Operating leases

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 1,176 3,026 507 490 Later than one year but not later than five years 390 1,173 395 598 1,566 4,199 902 1,088

Commitments not recognised in the financial statements 1,566 4,199 902 1,088

133 139 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

39 Commitments (continued) Finance leases

Consolidated Parent entity 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Commitments in relation to finance leases are payable as follows: Within one year 1,288 1,322 852 663 Later than one year but not later than five years 1,354 1,718 1,267 1,130 Minimum lease payments 2,642 3,040 2,119 1,793

Less: future finance charges (231) (295) (226) (221) Recognised as a liability 2,411 2,745 1,893 1,572

Total lease liabilities 2,411 2,745 1,893 1,572

Representing lease liabilities: Current (note 22) 1,073 1,203 708 539 Non-current (note 27) 1,337 1,542 1,185 1,033 2,410 2,745 1,893 1,572 Straits Annual Report

140 134 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

40 Related party transactions

(a) Parent entity The ultimate controlling entity and Australian parent entity within the Group is Straits Resources Limited.

(b) Subsidiaries Interests in subsidiaries are set out in note 41.

(c) Transactions with related parties The following transactions occurred with related parties:

Consolidated Parent 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $ $ $'000 $'000

Loans to related parties Loans advanced to: Balance at beginning of the year - - 566,006 514,249 Loans advanced - - 155,125 51,757 Loans written down - - (225,439) - Intercompany debtors - - 1,363 - Intercompany tax receivables movements - - 6,687 - - - 503,742 566,006

Loans from related parties Loans advanced from: Balance at beginning of the year - - 288,268 227,754 Loans advanced - - - 60,514 Loans forgiven on disposal of discontinued operation - - (199,373) - Intercompany tax payables movements - - 34,189 - - - 123,084 288,268

Dividend revenue - - 31,623 4,323

Superannuation contributions Contributions to superannuation funds on behalf of employees 2,586 1,731 1,238 740 Tax consolidation legislation Tax losses assumed from wholly-owned tax consolidated entities - - 24,933 2,666 Other transactions Management fees charged to subsidiaries - - 6,548 1,234

(d) Key management personnel Disclosures relating to key management personnel are set out in note 36.

135 141 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

41 Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): Country of Name of entity incorporation Class of shares Equity holding 2009 2008 Straits Mining Pty Ltd and its subsidiaries Australia Ordinary 100 100 Girilambone Copper Company Pty Ltd Australia Ordinary 100 100 Tritton Resources Pty Ltd Australia Ordinary 100 100 Straits Exploration (Australia) Pty Ltd Australia Ordinary 100 100 Straits (Whim Creek) Pty Ltd Australia Ordinary 100 100 Straits Gold Pty Ltd and its subsidiaries Australia Ordinary 100 100 Straits (Hillgrove) Gold Pty Ltd Australia Ordinary 100 100 Straits Indo Gold Pty Ltd and its subsidiaries Australia Ordinary 100 100 Muro Offshore Pty Ltd and its subsidiaries Australia Ordinary 100 100 PT Indo Muro Kencana Indonesia Ordinary 99 99 Kalteng Emas Pte Ltd Singapore Ordinary 100 100 PT Borneo Emas Perkasa Indonesia Ordinary 100 100 Kalteng Minerals Pte Ltd Singapore Ordinary 100 100 Indo Muro Pty Ltd Australia Ordinary 100 100 Straits Mine Management Pty Ltd and its subsidiaries Australia Ordinary 100 100 Varomet Holdings Limited Cyprus Ordinary 100 100 Magontec Gmbh Germany Ordinary 100 100 Magontec Xi'an Co. Ltd China Ordinary 100 100 GFE-MIR AG and its subsidiary Switzerland Ordinary 100 100 Varomet Metalchimica SrL Italy Ordinary 100 100 GFE-MIR GmbH and its subsidiary Germany Ordinary 100 100 Varomet Poland (SPZOD) Poland Ordinary 100 100 Varomet SA (Proprietary) Limited South Africa Ordinary 100 100 Varomet Trading (Shanghai) Ltd China Ordinary 100 100 Neural Mining Solutions Pty Ltd Australia Ordinary 100 100 Goldminco Corporation Limited * Canada Ordinary 59 55 Straits Mining Pty Ltd and Straits Resources Limited hold 26% and 74% respectively of the ordinary share capital of Tritton Resources Pty Ltd. Straits Exploration (Australia) Pty Ltd and Straits Gold Pty Ltd hold 8.5% and 50.7% respectively of the ordinary share capital of Golminco Corporation Limited. *The reporting date of Goldminco Corporation Limited is 31 March. Straits Mining Pty Ltd, Straits Exploration (Australia) Pty Ltd, Straits (Whim Creek) Pty Ltd, Straits Gold Pty Ltd, Straits Indo Gold Pty Ltd, and Straits (Hillgrove) Gold Pty Ltd have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information refer to note 42.

42 Deed of cross guarantee Straits Resources Limited, Straits Mining Pty Ltd, Straits Exploration (Australia) Pty Ltd, Straits (Whim Creek) Pty Ltd,

Straits Gold Pty Ltd, Straits (Hillgrove) Gold Pty Ltd and Straits Indo Gold Pty Ltd are parties to a deed of cross guarantee Straits Annual Report under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee that are controlled by Straits Resources Limited, they also represent the ‘Extended Closed Group’.

136 142 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

42 Deed of cross guarantee (continued) Set out below is a condensed consolidated income statement and a summary of movements in consolidated retained profits for the year ended 30 June 2009 of the Closed Group consisting of Straits Resources Limited, Straits Mining Pty Ltd, Straits Exploration (Australia) Pty Ltd, Straits (Whim Creek) Pty Ltd, Straits Gold Pty Ltd, Straits (Hillgrove) Gold Pty Ltd, and Straits Indo Gold Pty Ltd. Straits Bulk & Industrial Pty Ltd, Straits Salt Pty Ltd and Tritton resources Pty Ltd all exited the closed group during the financial year 2009. The comparative numbers have been adjusted to reflect the exit accordingly. 6 months to 30 June 30 June 2009 2008 $'000 $'000 Condensed income statement Profit before income tax 393,581 (80,891) Income tax (expense)/benefit (75,564) 16,737 Profit for the year 318,017 (64,154) Summary of movements in consolidated retained profits Retained profits at the beginning of the financial period (11,012) 69,637 Profit after income tax expense 318,017 (64,154) Derecognition on disposal of discontinued operation - (16,495) Retained profits at the end of the financial year 307,005 (11,012)

Set out below is a consolidated balance sheet as at 30 June 2008 of the Closed Group. 30 June 30 June 2009 2008 $'000 $'000

Current assets Cash and cash equivalents 210,068 60,719 Receivables - (6,284) Inventories 19,359 36,271 Inter-company receivables 287,031 64,127 Available-for-sale investments 1,111 - Other 3,924 - Total current assets 521,493 154,833

Non-current assets Receivables 245 652 Investments in subsidiaries 88,053 85,360 Financial assets - available for sale investments 99,013 6,800 Property, plant and equipment 70,384 72,452 Exploration expenditure 33,804 31,865 Mine properties 38,853 61,194 Pre-development property - 8,015 Deferred tax assets 64,585 113,501 Total non-current assets 394,937 379,839

Total assets 916,430 534,672

137 143 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

42 Deed of cross guarantee (continued) Current liabilities Payables 16,273 24,713 Interest bearing liabilities 708 58,162 Derivative financial instruments - 8,020 Current tax liabilities 1,457 - Provisions 4,174 3,813 Total current liabilities 22,612 94,708

Non-current liabilities Interest bearing liabilities 74,423 1,033 Derivative financial instruments - 615 Deferred tax liabilities 23,749 18,495 Provisions 51,903 5,415 Other 1,222 1,222 Total non-current liabilities 151,297 26,780

Total liabilities 173,909 121,488

Net assets 742,521 413,184

Equity Contributed equity 430,718 429,501 Reserves 4,798 (21,802) Retained profits 307,005 5,485 Total equity 742,521 413,184

43 Investments in associates

(a) Carrying amounts

Upon disposal of 60% of the shareholding in Straits Bulk and Industrial Pty Ltd, Straits Resources Limited retains a 40% investment in this company.

Straits Bulk and Industrial Pty Ltd has since changed its name to PTT Asia Pacific Mining Pty Ltd.

Name of company Principal Ownership Carrying value Parent entity activity interest 30 30 June June 30 June 30 June 2009 2008 2009 2008 % % $'000 $'000

PTT Asia Pacific Mining Pty Ltd Mining 40 - 242,415 - - -

The above associate is incorporated in Australia. Straits Annual Report The reporting period for the associate is a calendar year to better align with its peer goup of coal mining companies for the associate's major investment in its subsidiary Straits Asia Resources Limited.

144 138 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

43 Investments in associates (continued)

Consolidated 30 June 30 June 2009 2008 $'000 $'000 (b) Movements in carrying amounts Carrying amount at the beginning of the financial year 51,017 - Share of acquisition investment in Red Island Minerals Ltd - 51,362 Share of loss after income tax - (345) Fair value of remaining 40% investment 234,500 - Share of profit after income tax 7,915 - Disposal of associate in discontinued operation (51,017) - Carrying amount at the end of the financial year 242,415 51,017

(c) Summarised financial information of associates

The Group's share of the results of its principal associates and its aggregated assets and liabilities are as follows: Group's share of: Ownership Interest Assets Liabilities Revenues Profit % $'000 $'000 $'000 $'000 2009 PTT Asia Pacific Mining Pty Ltd 40 456,570 233,695 72,083 7,915 456,570 233,695 72,083 7,915

2008 Red Island Minerals Ltd 33.5 4,069 120 273 345 4,069 120 273 345

There are no contingent liabilities of the associate at the end of the period for which the parent company is severally liable. The reported revenues are for post disposal being May and June 2009.

139 145 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

44 Interests in jointly controlled assets

Name and principal activity % Interest % Interest Held during Held during the year the year 2009 2008 Kokomo scandium (earned 20%) located in Queensland. Principal activity scandium exploration. - - Three Rivers (earned 84%) located in Queensland. Principal activity gold exploration. - - Torrens (earn in 70%) located in South Australia. Principal activity copper and gold exploration. - -

The expenditure incurred on the above interests is included in capitalised exploration expenditure.

45 Events occurring after the balance sheet date (a) Deferred payment consideration on disposal of discontinued operation The total cash consideration for the sale of a 60% interest in Straits wholly owned subsidiary Straits Bulk and Industrial Pty Ltd included a deferred performance payment of up to US$115 million relating to certain matters in connection with reserve upgrades in relation to the mine located on Sebuku island, South Kalimantan, Indonesia, controlled and operated by Straits Asia Resources Limited (SAR). On 17 August 2009, SAR announced that the Indonesian government had formally completed a process for re-zoning land use across South Kalimantan. The government decree for South Kalimantan includes a significant area within SAR's Sebuku coal concession that was previously restricted from mining. That land has now been re-zoned as production forest and is therefore available for mining. The SAR announcement clears the way for Straits to claim the deferred performance payment of US$115 million. (b) Hillgrove Mine On 18 August 2009, Straits announced a temporary suspension of processing activities at its Hillgrove Mine in Armidale NSW. While the plant has produced saleable antimony metal to LME specifications for the past 12 months, the quantities produced have been significantly below design levels due to a number of issues in the processing plant. While some rectifications to the plant have been made, issues still remain with effective waste water treatment, the flotation configuration and the interface between leaching and electrowinning. It is anticipated that processing activities will initially be suspended for up to 6 months to fully investigate the technical issues, the cost, and the time required to implement the required plant modifications to achieve commercially viable production levels. Straits Annual Report

146 140 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

45 Events occurring after the balance sheet date (continued) (c) Whim Creek Mine As previously announced mining operations at Whim Creek have ceased. Whim Creek continues to produce copper from its existing heaps. On 20 August 2009, Straits announced in anticipation of the cessation of processing operations it has agreed terms with Venturex Resources Limited (Venturex) to sell: (i) all the issued capital of Straits (Whim Creek) Pty Ltd, the beneficial owner of the Whim Creek Mine and all associated exploration tenements including the sulphide resources at Whim Creek Mons Cupri, and the Whim Creek Hotel but excluding the SX-EW plant which is subject to an option to purchase agreement with Flinders Resources Limited; and (ii) the Salt Creek and Balla Balla copper-zinc projects and associated tenements. The consideration for the acquisition is: (i) 106 million fully paid Venturex shares at a deemed value of 7.5 cents per share ($8 million) on completion of the transaction, and (ii) fully paid ordinary Venturex shares or cash to the equivalent value of $3 million based on a share price of 30 day VWAP preceding Venturex formally committing to a "Decision to Mine". (d) Convertible notes On 11 September 2009, Straits announced as Standard Chartered Private Equity Limited will not receive the 30 cent per share dividend to be paid on the 21 September 2009, a revision of the conversion price and the issuer redemption price in respect of the notes is required under the anti-dilution terms of the note agreement. The new conversion price is now $1.3044 per share (previously $1.45 per share) and the issuer redemption price is now $1.9791 per share (previously $2.20 per share). If converted, the total number of notes would now convert to 61,139,221 fully paid ordinary shares in Straits (previously 55,000,000).

46 Non-cash investing and financing activities

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Salt Creek share issue * - 1,600 - 1,600 Conversion of options to shares issued to Sempra - - - - Acquisition of a controlling interest in the Jembayan coal operation by a subsidiary satisfied by shares - - - - Acquisition of 33.5% interest in the issued share capital of Red Island Minerals Ltd * - 28,627 - 28,627 Alliance contracting share issue* 1,186 - - - 1,186 30,227 - 30,227

* Further details of these transactions are in note 32.

141 147 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

47 Earnings per share

(a) Reconciliation of earnings used in calculating basic and diluted earnings per share

Consolidated 6 months to 30 June 30 June 2009 2008 $'000 $'000

Basic and diluted earnings per share Loss from continuing operations (306,251) (35,166) Profit from discontinued operations attributable to minority interests (80,150) (31,024) Profit from continuing operations attributable to the ordinary equity holders of the company used in calculating basic earnings per share (386,401) (66,190) Profit from discontinued operation 344,294 60,195 Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share (42,107) (5,995)

(b) Weighted average number of shares used as the denominator

Consolidated 30 June 30 June 2009 2008 Number Number

Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share 235,348,581 231,249,334 Adjustments for calculation of diluted earnings per share: Options 60,810 370,378 Convertible notes 55,000,000 - Weighted average number of ordinary shares and potential ordinary shares used as the 290,409,391 231,619,712 denominator in calculating diluted earnings per share (i) Options Options granted to employees under the Straits Resources Limited Employee Option Plan (ESOP) are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 48. (ii) Convertible notes Convertible notes issued during the year are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share from their date of issue. The notes have not been included in the determination of basic earnings per share. Details relating to the notes are set out in note 27. Straits Annual Report

148 142 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

48 Share-based payments

(a) Employee Option Plan The establishment of the Straits Resources Limited Employee Option Plan (ESOP) was approved by shareholders at the 2002 annual general meeting. Staff eligible to participate in the plan is at the discretion of the board. Options are granted under the plan for no consideration. Options are granted for a five year period, and 50% of each new tranche is exercisable after each of the first two anniversaries of the date of grant. Entitlements to the options are vested as soon as they become exercisable. The performance hurdle for exercise of options is met if the Company's percentage increase in its share price exceeds the percentage increase in the ASX Small Resources Index from the date the options were granted. Options granted under the plan carry no dividend or voting rights. The exercise price of options is based on the weighted average price at which the company’s shares are traded on the Australian Stock Exchange during the five trading days immediately before the options are granted. Set out below are summaries of options granted under the plan: Balance at Granted Exercised Expired Balance at Exercisable Expiry Exercise start of the during the during the during the end of the at end of Grant Date date price year year year year year the year Number Number Number Number Number Number

Consolidated and parent - June 2009 17/12/03 18/12/08 $1.1300 7,500 - - (7,500) -- 22/12/04 23/12/09 $1.7500 97,500 - - - 97,500 97,500 11/01/06 11/01/11 $2.5800 340,000 - - - 340,000 340,000 14/01/07 21/12/11 $3.9800 180,750 - (6,250) - 174,500 174,500 Total 625,750 - (6,250) (7,500) 612,000 612,000

Weighted average exercise price $2.84 $- $3.98 $1.13 $2.85 $2.85

Balance at Granted Exercised Expired Balance at Exercisable Expiry Exercise start of the during the during the during the end of the at end of Grant Date date price year year year year year the year Number Number Number Number Number Number

Consolidated and parent - June 2008 17/12/03 18/12/08 $1.1300 7,500 - - - 7,500 7,500 22/12/04 23/12/09 $1.7500 97,500 - - - 97,500 97,500 11/01/06 11/01/11 $2.5800 415,000 - (75,000) - 340,000 340,000 14/01/07 21/12/11 $3.9800 212,500 - (31,750) - 180,750 180,750 Total 732,500 - (106,750) - 625,750 625,750

Weighted average exercise price $2.86 $- $3.00 $- $2.84 $2.84

Fair value of options granted The assessed fair value at grant date of options is allotted equally over the period from grant date to vesting date. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

149

143 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

48 Share-based payments (continued) There were no options granted for the 12 month financial year to 30 June 2009 or the 6 months financial period ended 30 June 2008.

(b) Executive Share Acquisition Plan (ExSAP) The ExSAP plan was reapproved, with amendments, at the company’s Annual General Meeting in May 2008. Amendments to the plan were approved again at the Company’s Annual General Meeting in November 2008. The purpose of the plan is to attract, retain, motivate and reward executive employees. The plan operates by allowing participants to obtain rights to shares in the Company at market price. The rights, are subject to performance hurdles and if met are vested with the Company providing an interest free loan. A holding lock is then placed over the shares in the Company until the loan is repaid in full. The performance hurdle criteria was if the Company’s shares total shareholder return is equal to or greater than the 50 percentile of total shareholder returns of the S&P/ASX 300 Metals and Mining Index at the expiry of a three year period. The rights have since converted to shares and there are no longer continuing performance hurdles in relation to the rights. The Company may only require a participant to repay the loan in accordance with the plan rules, and will not be entitled to have recourse to any assets of the participant other than the plan shares held by that participant. There is no other risk to the participant.

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

Consolidated Parent entity 6 months to 6 months to 30 June 30 June 30 June 30 June 2009 2008 2009 2008 $'000 $'000 $'000 $'000

Options issued under employee option plan - 223 - 105 Shares issued under employee share scheme and the Executive Share Acquisition Plan * 1,530 4,224 1,455 3,676 1,530 4,447 1,455 3,781

* Includes an amount issued by a subsidiary company Goldminco Corporation during the period of $75,000 (June 2008: nil) Straits Annual Report

150 144 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

49 Segment information

(a) Description of segments Business segments The consolidated entity is organised on a global basis into the following divisions by product and service type. Base Metals Consists of the Whim Creek copper mine, Hillgrove mine and the Tritton copper mine. Precious Metals Consists of the Mt Muro gold and silver mine operated by PT Indo Muro Kencana in Indonesia. Metals Distribution Consists of the Varomet Holdings Limited group of companies, a non-ferrous metal and noble alloy products distribution business. The Group's business segments are Base Metals, Precious Metals, Metals Distribution and Other (not material to be classified as a separate segment). Other includes greenfield exploration not specifically attributable to an operating mine. Geographical segments The Group operates in a number of geographical areas: Australia The home country of the parent entity. Activities are principally copper mining, project development and exploration activities. South East Asia Principal activities in this region comprise the Mt Muro gold operation. Europe/China Metals distribution.

(b) Segment results Included in the June 2009 segment results is the discontinued operation segment relating to the disposal of the SBI group of companies. The comparative segment result has also been reclassified to reflect the disposal.

145 151 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

49 Segment information (continued)

(c) Primary reporting format - business segments Inter- Total segment Precious Metals continuing Discontinued eliminations/ 30 June 2009 Base Metals metals Distribution Other operations operation unallocated Consolidated $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Sales to external customers 154,366 60,674 352,483 - 567,523 687,290 - 1,254,813 Total sales revenue 154,366 60,674 352,483 - 567,523 687,290 - 1,254,813 Shares of net profit of associates (note (43)) - - - 7,915 7,915 94 - 8,009 Other revenue/income 574 - 375 1,804 2,753 - - 2,753 Unallocated revenue ------4,795 4,795 Total segment revenue/income 154,940 60,674 352,858 9,719 578,191 687,384 4,795 1,270,370

Segment result (299,317) (19,235) (18,180) (5,841) (342,573) 592,470 249,897 Unallocated revenue less unallocated expenses (71,061) Profit before income tax 178,836 Income tax expense (140,793) Net profit for the year 38,043

Segment assets 296,177 50,624 140,071 1,084,324 1,571,196 - (448,894) 1,122,302 Unallocated assets 1,913 Total assets 1,124,215

Segment liabilities 386,329 101,052 51,956 6,027 545,364 - (448,894) 96,470 Unallocated liabilities 153,943 Total liabilities 250,413

Investments in associates (note (15)) - - - 242,415 242,415 - - 242,415

Acquisitions of property, plant and equipment, intangibles and other non- current segment assets 88,698 8,657 1,997 4,835 104,187 - - 104,187

Depreciation and amortisation expense 51,897 7,943 3,584 1,201 64,625 - - 64,625

Impairment of assets (note 20) 155,144 - 6,583 - 161,727 - - 161,727 Straits Annual Report

152

146 Notes To The Financial Statements 30 June 2009 (Continued)

Straits Resources Limited Notes to the financial statements 30 June 2009 (continued)

49 Segment information (continued) Inter- Total segment Precious Metals continuing Discontinued eliminations/ 30 June 2008 Base Metals metals distribution Other operations operation unallocated Consolidated $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Sales to external customers 86,588 26,446 1,101,968 - 1,215,002 285,149 - 1,500,151 Total sales revenue 86,588 26,446 1,101,968 - 1,215,002 285,149 - 1,500,151 Shares of net loss of associates - - - - - (345) - (345) Other revenue 242 1 - 180 423 2,414 - 2,837 Unallocated revenue - - - - - 3,637 638 4,275 Total segment revenue/income 86,830 26,447 1,101,968 180 1,215,425 290,855 638 1,506,918

Segment result (10,116) (5,391) 10,279 (11,289) (16,517) 89,111 - 72,594 Unallocated revenue less unallocated expenses (34,985) Loss before income tax 37,609 Income tax benefit (12,580) Net loss for the year 25,029

Segment assets 436,301 53,242 213,017 317,933 1,020,493 1,180,930 (488,960) 1,712,463 Unallocated assets 51,253 Total assets 1,763,716

Segment liabilities 49,293 11,974 157,175 471,774 690,216 118,732 (488,960) 319,988 Unallocated liabilities 400,038 Total liabilities 720,026

Investments in associates - - - - - 51,017 - 51,017

Acquisitions of property, plant and equipment and other non-current segment assets 62,095 3,794 589 4,330 70,808 32,469 - 103,277

Depreciation and amortisation expense 16,965 4,119 1,186 428 22,698 18,168 - 40,866

(b) Secondary reporting format - geographical segments

Acquisitions of property, plant and equipment and Segment revenues from other non-current segment sales to external customers Segment assets assets 30 June 30 June 30 June 30 June 30 June 30 June 2009 2008 2009 2008 2009 2008 $'000 $'000 $'000 $'000 $'000 $'000

Australia 160,230 41,635 676,931 591,476 93,533 67,722 South East Asia 742,100 356,548 293,039 848,336 6,455 33,477 Europe/China 352,484 1,101,968 152,332 272,650 4,199 2,078 1,254,814 1,500,151 1,122,302 1,712,462 104,187 103,277

Unallocated assets 1,795 47,297 Total assets 1,124,097 1,759,759

153

147 Straits Annual Report 148 9 30 June 2009 Directors' declaration Corporations Act 2001, and Straits Resources Limited and other mandatory 7 with the are in accordance 5 to 14 55 to 147 5 Corporations Regulations 2001 Corporations Regulations 154 Related Party Disclosures and the Corporations Regulations 2001; Corporations Act 2001. professional reporting requirements; and and of their performance for the financial periodand of their performance on that date; and ended c

(i) Standards, the complying with Accounting (ii) of the company’s giving a true and fair view consolidated entity's and as at 30 June 200 financial position due and payable; and Standard AASB 124 Group identified in note 42 will be able to meet any or liabilities to which they obligations note 42 are, or may become, Group identified in subject by virtue of the deed of cross guarantee described in note 42. describedsubject by virtue of the deed of cross guarantee in r

In the directors’ opinion: (a) statements and notes set out on pages the financial Perth 30 September 2009 Milan Jerkovi Directo (c) report comply45 to 47 of the directors’ with Accounting on pages the audited remuneration disclosures set out (d) are reasonable at the date of this declaration, there the Extended Closedgrounds to believe that the members of (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become The directors have been declarations given the by by the chief executive officer and chief financial officer as required This declaration is made in accordance with a resolution of theThis declaration is made in accordance with directors. section 295A of the Director’s Declaration Director’s Shareholder Information

Fully Paid Employee Ordinary Shares Options

Issued Capital 245,544,425 612,000

Distribution of Holders

1 - 1,000 1,351 - 1,001 - 5,000 2,405 31 5,001 - 10,000 858 4 10,001 - 100,000 858 13 100,001 and over 115 - 5,587 48

Shareholders holding less 437 - than a marketable parcel Minimum $500.00 parcel

Shareholder information as at 15 September 2009

Substantial shareholders as at 15 September 2009

Ordinary Shares % Issued Capital Mr Gerald AD Keet 13,789,927 5.62%

Voting Rights At a general meeting, 1) on a show of hands, every member present has one vote; and 2) on a poll, every member present has one vote for each share held by the member and in respect of which the member is entitled to vote except in respect of partly paid shares, each of which will confer on a poll only a fraction of one vote which the amount paid up on the share bears to the total issue price of the share.

149 Straits Annual Report 150 0.66 0.71 0.78 0.82 0.95 0.99 1.06 1.09 1.27 1.96 1.98 2.03 2.21 2.77 3.41 3.93 4.02 9.56 % 13.47 18.20 1,611,788 1,735,603 1,909,399 2,020,283 2,332,093 2,419,826 2,605,770 2,669,027 3,111,921 4,816,994 4,855,737 4,974,659 5,424,266 6,789,760 8,364,140 9,647,741 9,882,963 Number 23,471,395 33,078,959 44,700,935

Citicorp Nominees Pty Limited (CFSIL CFS WS Small Comp A/c) Mr Chui Chat Ong Mr Michael Gibson RBC Dexia Investor Services Australia Nominees Pty Limited RBC Dexia Investor Services Australia Queensland Investment Corporation Mr Martin David Purvis Bond Street Custodians Limited (Taurus Resources TST A/c) Resources Custodians Limited (Taurus Bond Street Cogent Nominees Pty Limited (SMP A/c) Cogent Nominees Pty Limited (SMP Argo Investments Limited Mr Milan Jerkovic Merrill Lynch (Australia) Nominees Pty Limited (Berndale (Australia) Nominees Pty Limited A/c) Merrill Lynch AMP Life Limited Cogent Nominees Pty Limited Bond Street Custodians Limited Bond Street Merrill Lynch (Australia) Nominees Pty Limited Merrill Lynch ANZ Nominees Limited Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited HSBC Custody Nominees (Australia) J P Morgan Nominees Australia Limited J P Morgan Nominees National Nominees Limited National Nominees Name

20. 19. 18. 17. 16. 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Fully Paid Ordinary Shares Fully Paid Ordinary Top Twenty Shareholders Twenty Top

Continued Shareholder Information Shareholder Glossary

In this Annual Report the following terms have the following meanings unless the context otherwise requires:

$ or A$ Australian dollar Ag Silver ASX Australian Stock Exchange Au Gold Board Board of Directors of Straits Resources Limited Company Straits Resources Limited Cu Copper for the year 12 months to 30 June 2009 Fx Foreign exchange g Gramme Goldminco Goldminco Corporation Group Straits Resources Limited and its subsidiaries kt Thousands of metric tonnes M Million oz Ounces PTT APM PTT Asia Pacific Mining Pty Ltd PTT Group PTT Public Company Limited and its subsidiaries Sb Antimony SBI Straits Bulk & Industrial Pty Ltd Straits Straits Resources Limited Straits Asia Straits Asia Resources Limited t Metric tonnes US United States of America US$ United States Dollar Varomet Group Varomet Holdings Limited and its subsidiaries

151 Straits Annual Report 152 Non-Executive Chairman Chief Executive Officer Non-Executive Director Non-Executive Director Executive Director Chief Financial Officer Services General Manager Finance & Management & Investments Affairs Executive General Manager Corporate General Manager Projects General Manager Exploration Executive General Manager Eastern Operations & Employee Relations Development & Executive General Manager Business Services Technical Mine Resident Manager – Tritton Mine Resident Manager – Whim Creek Gold Mine Resident Manager – Mt Muro Mine Resident Manager – Hillgrove

Milan Jerkovic Garry Lowder Alastair Morrison Michael Gibson Company Secretary Mark Hands Senior Management James Carter Gail Campbell David Greenwood Rodney Griffith Ivan Jerkovic Laing Richard Peter Storey Operations & Projects Michael Hanlon Harry Holle Garry Kielenstyn Nic Earner Directors Alan Good Corporate Directory Corporate Corporate Directory Continued

Registered and Head Office Share Registry Level 1 Computershare Registry Services Pty Ltd 35 Ventnor Avenue Level 2, 45 St George’s Terrace WEST PERTH WA 6005 PERTH WA 6000 Tel: (08) 9480 0500 Tel: (08) 9323 2000 Fax: (08) 9480 0520 Fax: (08) 9323 2033

Website Stock Exchange Listing www.straits.com.au ASX Limited - ASX Code – SRL

Auditors Lawyers PricewaterhouseCoopers Corrs Chambers Westgarth Chartered Accountants Woodside Plaza QV1, 250 St George’s Terrace 240 St George’s Terrace PERTH WA 6000 PERTH WA 6000

153 Annual General Meeting

The Seventeenth Annual General Meeting of Straits Resources Limited will be held at 12:30 pm on Monday 30 November 2009 at the Celtic Club, 48 Ord Street, West Perth, Western Australia. Straits Resources Limited Annual Report 2009

Straits Annual Report 2009 Straits Resources Limited ACN 056 601 417 Level 1, 35 Ventnor Avenue West Perth WA 6005 T: (08) 9480 0500 F: (08) 9480 0520 www.straits.com.au