West African Resources Limited (ABN 70 121 539 375) Annual Financial Report for the year ended 30 June 2012 West African Resources Limited (ABN 70 121 539 375) CORPORATE INFORMATION Directors Francis Harper (Non-Executive Chairman) Richard Hyde (Managing Director) Simon Storm Stephen Ross Company Secretary Simon Storm Registered Office and Principal place of business Unit 14 531 Hay Street Subiaco, WA 6008 Ph: +61 (8) 9481 7344 Fax: +61 (8) 9481 7355 Website www.westafricanresources.com Local Office Rue : 27-02 ; Villa n°8-Porte n°595 Arrondissement de Nongr-Maassom, 06 BP 10400 Ouagadougou 06 Burkina Faso Ph +226 50 36 95 32 Auditors Stantons International Level 2 1 Walker Ave West Perth WA 6005 Ph: +61 (8) 9481 3188 Fax: +61 (8) 9321 1204 Solicitors Allion Legal Level 2 50 Kings Park Road West Perth WA 6005 Tel: +61 (8) 9216 7100 1 2012 FINANCIAL YEAR HIGHLIGHTS Highlights During the year ended 30 June 2012, West African Resources Limited made significant progress with the discovery of Sartenga and development of Moktedu, both part of the Boulsa Project in Burkina Faso. Highlights included: • Discovery of significant gold-copper-molybdenum mineralisation at Sartenga including:- - 72.8m at 1.08g/t Au and 0.48% Cu, including 21m at 2.31g/t Au and 1.09% Cu - 20m at 1.97g/t Au and 0.15% Cu, including 4m at 6.86 g/t Au and 0.27% Cu - 45.5m at 0.49g/t Au, 0.30% Cu, 315ppm Mo, including 15.5m at 0.68 g/t Au, 0.45% Cu, 407ppm Mo - 113m at 0.52g/t Au, 0.20% Cu, 85ppm Mo, including 39m at 0.87 g/t Au, 0.40% Cu, 148ppm Mo • High-grade results from Moktedu Prospect including:- - 20m grading 5.27 g/t Au including 8m grading 11.63 g/t Au , from 8m • Increased landholding to 6,370km2, making the Company the largest ASX-listed landholder in Burkina Faso • Successful commissioning of four new drilling rigs, two auger and two multipurpose (RC-diamond rigs), bringing the Company’s fleet in Burkina Faso to six rigs, and more than 30 vehicles and mobile plant Photo: Drill core from 68m depth in SDH001 showing strong silicification and copper oxide mineralisation 2 Chairman's Address Dear Fellow Shareholder, The past 12 months have been exceptionally exciting ones for West African Resources Limited (WAF). Burkina Faso is on the cusp of a mining boom, accounting for nearly a quarter of greenstone belt exposure in West Africa, and WAF is the largest landholder in Burkina Faso listed on the Australian Securities Exchange. With 30 contiguous permits covering 6,370 square kilometres over 200km strike of greenstone, WAF has reported excellent results from its exploration efforts since its listing on the ASX in June 2010. To date the most exciting of these is the copper-gold discovery at the Sartenga Prospect, which we announced in June 2012. WAF acquired 100 per cent ownership of Sartenga in June 2011. Our exploration of the permit returned intersections including 72.8 metres at 1.08 grams per tonne gold and 0.48% copper, which included a high- grade zone of 21m at 2.31g/t gold and 1.09% copper from 51m. The prospect has now become the Company’s main focus, as the width and consistency of copper-gold mineralisation and its location in the centre of a high tenor auger-gold anomaly are very exciting. The WAF management team has now fast-tracked drilling at Sartenga with the aim of delivering a maiden resource estimate for it as well as our Moktedu prospect by the end of 2012. A share placement, after the reporting period ended, that raised $4.4 million is accelerating an intensive exploration effort. We look forward to seeing the results of this hard work and focus. The level of hands-on experience in West Africa held by the WAF team has been crucial to the results we have achieved across our prospects. In Burkina Faso we have a local exploration, drilling and support team of more than 50 people, and we are committed to the training and development of our local workforce. We can be confident that the strength in our team will continue to place us in good stead. In addition to this, the fact that we have our own fleet of six drilling rigs – three auger rigs, one rotary air blast (RAB) rig and two multi-purpose reverse circulation (RC) and diamond rigs – is another great asset for the Company. This allows us to save considerable costs in exploration as well as giving us flexibility to undertake drilling on our own schedule. Our Managing Director, Richard Hyde, is committed to keeping operational costs as low as possible to maximise shareholder value. This strong financial leadership means we have $7 million in hand to fund our 2012-13 exploration program and beyond, which will provide further significant results at Sartenga as well as across our prospects. I thank Richard and his team as well as other staff for their considerable work over the past year, and I thank our shareholders for your support during this time. I believe we can look forward to a very exciting year ahead. Francis Harper CHAIRMAN 3 Managing Director's Address I am very proud to look back on 2012 and reflect on what West African Resources has achieved across its portfolio in Burkina Faso during this time. We have completed over 240,000m since listing the company in 2010 including over 130,000m in the 2011-12 field season. In addition, we expanded our landholding to 6,370 square kilometres through the granting of a further 12 exploration permits over the past year. Our copper-gold discovery at the Sartenga announced in June was extremely exciting, particularly given it came just a year after we acquired the permit. We have now turned our focus to this prospect. All previous drilling undertaken at Sartenga will be re-analysed for base metals, and we are confident of completing a maiden resource estimate for Sartenga before 2012 is through. The year also saw positive exploration results from the Moktedu and Meguet prospects, which are also part of the Boulsa Gold Project, along with Sartenga. In recent months, we have undertaken drilling at Moktedu, which is next to Orezone’s Bomboré deposit, to test high-grade gold mineralisation up to 150m deep, which followed up aircore, RC and diamond drilling previously completed. Auger drilling has extended the Moktedu anomaly to more than 10km. We will also complete a maiden resource estimate for this prospect in 2012. Over the coming months we have plans to step up our exploration program significantly. We will drill Sartenga to more than 400m depth, to provide a further understanding of our discovery. We plan to complete pattern drilling at Moktedu, to follow up an earlier result of 20m at 5g/t gold, which was returned from an area close to Bomboré. It looks to be a very busy time in the months ahead, and I am confident we will have a pipelinet of good news to report. Richard Hyde MANAGING DIRECTOR 4 REVIEW OF OPERATIONS West African Resources Limited Introduction During the year ended 30 June 2012, the West African completed more than 130,000m of auger, rotary air blast (RAB), aircore, reverse circulation (RC) and diamond drilling. The Company was also successful in acquiring exploration permits to bring its total area under licence in Burkina Faso to 6,370km2. A comprehensive exploration and drilling season including a target of 180,000m is planned for 2012-13. This work will include drilling out the Sartenga Discovery, with initial diamond core drilling to 500m depth to test sulphide extensions beneath significant intercepts drilled during the 2011-12 field season. Work will also focus on drilling the Moktedu Prospect at depth. Regional auger and RAB drilling will also be on-going through to July 2013, with more than 3,000km2 of new ground to undergo first pass exploration. All field supplies for the 2012-13 field season have been purchased and shipped to Burkina Faso. With an aggressive exploration program planned for 2012-13, we will provide our shareholders with regular news regarding the development of our prospects throughout the coming field season. West African is targeting an initial resource statement in December 2012. 5 REVIEW OF OPERATIONS West African Resources Limited Sartenga Most of the Company’s exploration focus since December 2011 was focused on the Sartenga discovery. Sartenga is located in the northwest corner of the Company’s 100%-owned Boulsa Project. Last year West African announced Sartenga as a new gold discovery with an anomaly some 6.2km in strike length by up to 1.4km width. However further early drilling has indicated significant copper mineralisation as well as gold. Our exploration team completed infill auger sampling on a 200m by 50m grid in December 2011, with first-pass aircore drilling starting at the end of January 2012. Diamond drilling commenced in April 2012 and was in-progress until the wet-season halted work in July 2012. First pass aircore drilling returned significant gold-copper results (Figure 1, Section 7) including with the first diamond core hole, SDH001, also returning significant results including:- - SAC0119 57m at 0.88 g/t Au and 0.44 % Cu - SDH001 72.8m at 1.08 g/t Au and 0.48 % Cu - including 21m at 2.31 g/t Au and 1.09 % Cu Step out aircore drilling immediately returned strong gold-copper results (Figure 1, Section 6, 8, and 9 ) including:- - SAC0239 36m at 0.41 g/t Au and 0.41 % Cu from 8m - including 4m at 0.25 g/t Au and 0.77 % Cu - SAC0263 32m at 0.22 g/t Au and 0.63 % Cu from 8m - including 16m at 0.17 g/t Au and 1.03 % Cu - SAC0342 60m at 0.49 g/t Au, 0.16 % Cu - SAC0350 20m at 1.97 g/t Au, 0.15 % Cu - Including 4m at 6.86 g/t Au, 0.27 % Cu Deeper diamond and RC drilling on Section 7 returned gold-copper-molybdenum mineralisation from fresh drill core confirming the source for the wide-spread shallow gold and copper oxide mineralisation.