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ANNUAL REPORT 2011

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Share RegistryComputershareLevel 5, 115 Grenfell StreetAdelaide SA 5000

Telephone (within Australia) 1300 305 232

Telephone (outside Australia) +61 (3) 9415 4657

AuditorsDeloitte Touche Tohmatsu11 Waymouth StreetAdelaide SA 5000

LawyersWatsons Lawyers60 Hindmarsh SquareAdelaideSA 5000

ASXThe Company’s fully paid ordinary shares are quoted on ASX. The ASX code is PNX.

Corporate directory

Australian Business Number 67 127 446 271

Country of Incorporation Australia

Board of DirectorsGraham Spurling ChairmanPaul Dowd Managing Director and CEOPeter Watson Non-executive DirectorDavid Hillier Non-executive Director

Company SecretaryPeta Marshman

Principal Administrative OfficeLevel 1, 135 Fullarton RdRose ParkSA 5067

Telephone +61 (8) 8364 3188

Facsimile +61 (8) 8364 4288

Registered OfficeLevel 1135 Fullarton RdRose ParkSA 5067

Telephone +61 (8) 8364 3188

Facsimile +61 (8) 8364 4288

Contact [email protected]

Website www.phoenixcopper.com.au

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1PHOENIX COPPER LIMITED | ANNUAL REPORT 2011

Chairman’s Letter 2

Overview 3

Operations and Exploration Report 7

Mineral resources and ore reserves 15

Directors’ Report 16

Remuneration Report 22

Corporate Governance Statement 29

Auditor’s Independence Declaration 33

Financial Statements 34

Directors’ Declaration 61

Independent Audit Report to Members 62

Additional Shareholder Information 64

Contents

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2 PHOENIX COPPER LIMITED | ANNUAL REPORT 2011

Chairman’s Letter

Dear Shareholder,

I would like to report on the events of this past year.

The operations at our Mountain of Light mine at Leigh Creek proved to be far more challenging than we considered at the time of purchase. The technical and economic assumptions based on previous existing geological data proved to be inaccurate. We have persevered with the operation for a sufficient period to truly test its potential and to build a realistic data base for utilisation at this and other potential sites.

We are disappointed that we have been unable to establish a viable operation that would partly fund exploration. However with our new operational history based on actual experience, it is now appropriate that we complete a thorough feasibility study to determine whether the application of our new parameters will result in an economically sound mining venture. This study, to be completed early in 2012, will be verified by an on site testwork program.

It continues to be our belief that the corporate model that we have developed can distinguish us from many of our peers. Our model consists of a mix of assets that will establish us as a producer, a developer and an explorer for copper, gold, and copper/ gold—not simply just another junior explorer. Our modelling and testwork of the Leigh Creek ore types is aimed at verifying the economics of the project.

Other copper assets, wholly owned by Phoenix Copper, are at advanced stages of exploration and Lorna Doone is available for development. Their development will be subjected to rigorous assessment based on our experience at Mountain of Light.

Regarding the Burra region, the significant IP anomaly along strike to the north west of the Monster Mine (Burra North Prospect) is an exciting exploration opportunity and, together with the prospect at Yorke Peninsula, will be the primary areas of exploration focus in the coming year. As an explorer, Phoenix Copper is fortunate to hold some extremely prospective land under 100% controlled Exploration Licences from Burra to Kapunda and on the Yorke Peninsula. Since the discovery of the Hillside deposit by Rex Minerals Limited (Rex), the Yorke Peninsula has attracted a great deal of excitement and investment. On 27 July 2011 Rex announced a resource of 1.5Mt Copper and 1.4Moz Gold. Phoenix Copper and Wellington Exploration Pty Ltd (a wholly owned subsidiary of Phoenix Copper) own Exploration Licences immediately adjacent to the Rex tenements. The tenements encompassed by our Exploration Licences display similar characteristics to Moonta-style mineralisation and the mineralisation at Hillside, Prominent Hill and Carapateena.

This highly prospective area of Yorke Peninsula will be the primary focus of our exploration efforts. The potential outcomes could be transformational for the Company.

Thank you for your support so far. Your Board and management maintain confidence in Phoenix Copper’s exciting future.

Yours sincerely

Graham SpurlingC H A I R M A N

26 September 2011

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1 GENERALThe nature of the business of Phoenix Copper Limited (Phoenix Copper or the Company) includes mining and processing operations within granted mining leases, held by its wholly-owned subsidiary Leigh Creek Copper Mine Pty Ltd (LCCM) and exploration within its granted mining leases and exploration licenses, all within South Australia.

2 LEIGH CREEK OPERATIONSCompletion of the acquisition of LCCM was achieved on 23 July 2010.

The operation is a heap leach process and involves preparing the mined ore by crushing, and removing the “fines” through screening. The resultant “coarse” material is then stacked onto prepared compacted and lined “pads” where the ore is then irrigated with a dilute acid solution to leach the contained copper into solution.

The product produced is a copper cement and is subject to an off-take agreement with Adchem (Australia) Pty Ltd, (Adchem), a company based in Burra and adjacent to Phoenix Copper’s exploration base for its Spalding/Burra tenements. Mining is by conventional open pit methods and was conducted by mining contractor personnel, under Phoenix Copper management and direction. Two pits, Rosmann East and Paltridge South, were mined during the period of operations.

Production of copper cement began at the end of August 2010 and the first product sale was on 15 September 2010.

Overview

Figure 1 Phoenix Copper Limited tenure July 2011.

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3 TENEMENTSPhoenix Copper (and through Wellington Exploration Pty Ltd – its wholly owned subsidiary), holds 20 ELs (Exploration Licenses), covering 4,405km2 and three MLs (Mining Leases), covering 572Ha, a total area of tenements in excess of 4,411km2 in the historically significant and highly prospective Burra, Kapunda, Leigh Creek and Yorke Peninsula regions of South Australia as shown in the following table and Figure 1.

4 PERMITTING

Lorna Doone Mining Lease ML5498, was renewed during the period and now has an expiry date of 17 January 2016.

Exploration Licence No Exploration Licence name Area (sq km) Grant date Registered holder

BURRA GROUP 2,3374226 Burra Central 86 24/02/2009 Phoenix Copper 100%3604 Burra West 69 25/07/2006 Phoenix Copper 100%3716 Burra North 300 6/03/2007 Phoenix Copper 100%4233 Mongolata 283 10/03/2009 Phoenix Copper 100%4032 Mount Bryan 116 21/01/2008 Wellington Exploration 100%3549 Princess Royal 314 1/05/2006 Phoenix Copper 100%4419 Red Banks 396 21/01/2010 Phoenix Copper 100%4476 Hallett Hill 80 27/04/2010 Phoenix Copper 100%4504 The Gums 160 31/05/2010 Phoenix Copper 100%3971 Anabama 465 5/11/2007 Phoenix Copper 100%4711 Burra Creek Plain 68 29/03/2011 Phoenix Copper 100%

YORKE PENINSULA GROUP 8024031 Minlaton 547 21/01/2008 Wellington Exploration 100%4312 Koolywurtie 255 30/09/2009 Phoenix Copper 100%

SPALDING GROUP 489 3686 Spalding 157 2/01/2007 Phoenix Copper 100%4362 Mt Tinline 123 4/11/2009 Phoenix Copper 100%4370 Washpool 209 10/11/2009 Phoenix Copper 100%

EUDUNDA GROUP 7774291 Bagot Well 71 5/08/2009 Phoenix Copper 100%4503 Australia Plains 222 31/05/2010 Phoenix Copper 100%3451 Bagot Well North 142 15/11/2005 Phoenix Copper 100%3972 Tarnma 342 5/11/2007 Phoenix Copper 100%

Total ELs 4,405

Mining Lease No Mining Lease Name Area (Ha) Grant date Registered holder

LEIGH CREEK GROUP 572ML 5467 Mountain of Light 250 16/10/1987 LCCM 100%ML 5741 Mount Coffin 200 3/06/1991 LCCM 100%ML 5498 Lorna Doone 122 18/01/19881 LCCM 100%

Total all tenements 4,411 sq km

1 Mining Lease ML5498 was renewed during the period and now has an expiry date of 17 January 2016.

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5 DISCOVERIES DURING THE PERIOD

Yorke Peninsula Project(see Figures 1, 2 and 3 and Operations and Exploration Report section 2.2)

Thirteen broad exploration target zones defined from construction of a 3D unconstrained inversion model of the regional aeromagnetic data.

Burra Project(see Figures 1 and 4 and Operations and Exploration Report section 2.3)

Significant copper and gold mineralisation in Reverse Circulation (RC) drilling at Princess Royal including:

Copper PCRC007 – 6.8m @ 3.7% Cu from 0.84m and

Gold PCRC021 – 7.0m @ 2.5g/t Au from 4.0m

Mongolata Project(see Figures 1 and 9 and Operations and Exploration Report section 2.6)

Zones of high copper anomalism were found in Field Portable X-Ray Fluorescence Analysis (FPXRF) around the rim of a strong magnetic high in central EL3971.

Spalding Project(see Figures 1, 6 and 7 and Operations and Exploration Report section 2.4)

A Rotary Air Blast (RAB) drilling program around the old Wheal Sarah copper mine 10km north west of Spalding. Encouraging results included; PCRB0070 – 5m @ 0.61%Cu.

Eudunda Project(see Figures 1, 8 and 9 and Operations and Exploration Report section 2.5)

FPXRF analysis continued and zones of most interest found in sampling to date are at Tarnma in the south west of EL3972 and in the north west of EL4626, and at Bagot Well in central EL4291.

Leigh Creek Project(see Figures 1, 10 and 11 and Operations and Exploration Report section 2.7)

Lorna Doone -ML5498

A program of close spaced FPXRF analysis was undertaken over ML5498. Significant anomalism was detected away from the planned pits.

Mount Coffin -ML5741

A program of close spaced FPXRF analysis confirmed the presence of copper around the historic workings, extended this into areas along strike and also identified new areas of interest.

6 SUMMARY OF EXPLORATION UNDERTAKEN ON PHOENIX COPPER TENEMENTS DURING THE PERIOD969m of reverse circulation drilling was completed.

3,811m of RAB drilling was completed.

38,619 FPXRF analyses taken of soils.

3,811 FPXRF analyses taken on RAB samples with checks and standards.

Bud Norris, Field Assistant at the Burra office.

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507 RAB drill samples sent to the laboratory for copper assay.

969 RC drill samples sent to the laboratory for copper and gold assay.

7 CASH AT HANDCash at Hand as at 30 June 2011 was approximately $1.1 million.

8 ACQUISITIONS DURING THE PERIODApart from LCCM which is reported below, there were no mining leases acquired during the year. Exploration license EL4711 “Burra Creek Plain” was applied for and granted during the year.

LCCMCompletion of the acquisition of LCCM was achieved on 23 July 2010 and the assets subject to the purchase included:

ML 5467 Mountain of Light 250Ha

ML 5741 Mount Coffin 200Ha

ML 5498 Lorna Doone 122Ha

9 CAPITAL RAISEDDuring the financial year Phoenix Copper raised a total of $7,078,930 as follows:

Share purchase plan issuing 2,400,000 ordinary shares at 16c per share on 7 July 2010

Placement issuing 11,875,000 ordinary shares at 16c per share on 23 July 2010

Placement issuing 2,000,000 ordinary shares at 16c per share on 30 July 2010

Placement issuing 6,896,552 ordinary shares at 29c per share on 15 October 2010

Placement issuing 1,724,138 ordinary shares at 29c per share on 1 December 2010

Placement issuing 7,053,320 ordinary shares at 28c per share on 11 March 2011

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Operations and Exploration Report

1 OPERATIONS – LEIGH CREEKCompletion of the acquisition of LCCM was achieved on 23 July 2010, when ownership and control of LCCM passed to Phoenix Copper.

The product produced by LCCM is a copper cement and is subject to an off-take agreement with Adchem (Australia) Pty Ltd, (Adchem), a company based in Burra and adjacent to Phoenix Copper’s exploration base for its Spalding/Burra tenements.

Production of copper cement began at the end of August 2010 and the first product sale was on 15 September 2010.

All mining, crushing and stacking operations at Mountain of Light (MoL) were completed. The leaching of copper continues and it is estimated that all production will cease by November 2011.

1.1 MiningMining for the 11 month period since completion of the acquisition of LCCM was confined to Rosmann East and Paltridge South. Oxide copper ore remains in the Rosmann East pit with sulphide copper beneath the remaining oxide copper resource.

Paltridge South pit was developed and mined to remove all available copper ore down to the level of the water table, where mining ceased.

All mining and crushing/screening activities have been curtailed and modest revenue continues to be generated from existing heap leach pads, which are likely to be depleted of available copper by end-November 2011.

1.2 ProcessingAfter purchase completion, the operation was released from “care-and-maintenance” and the leach pad area and the plant extensively refurbished, with a previously-owned filter press installed. Mined ore was placed onto a Run-of-Mine (ROM) stockpile, reclaimed from the ROM and presented for crushing and screening to reject “fines” material, considered unsuitable for leaching. The remaining coarse ore was stacked onto heaps on specially prepared pads for leaching by dilute acid solution. During the period a new leach pad was constructed, ore stacked on all three pads and placed under irrigation for leaching of copper product.

Copper dissolved in the acid solution was then recovered into a copper cement product produced through an iron exchange process, with thin section, high quality scrap steel, in a Kennecott Cone reactor.

A wet analytical laboratory has been operating at MoL since late 2010 and provided pH, acid concentrations, copper and other analyses for the heap leach operations.

A sample preparation laboratory to prepare all samples, including drill cuttings, ore blast holes, and rock samples was completed during the period.

Additionally, the on-site facility provides an analytical service for MoL and most of Phoenix Copper’s future exploration sampling.

1.3 Production Annual

Copper cement product produced

Wet weight

Dry weight

Contained Cu t

% H2O Cu% wet

Cu% dry

Total to 30 June 2011

508.1 378.2 300.62 25.6% 59.2% 79.5%

2 Sales during the period were 293.97 tonnes of copper contained in product.

2 EXPLORATION

2.1 OverviewWith the purchase of LCCM, Phoenix Copper’s exploration activities were broken into six projects (see Figure 1).

significant primary copper or copper/gold resource similar to Moonta or Hillside was the main focus of activity.

concentrated on exploring for and proving up near surface copper carbonate and oxide resources to feed a potential second treatment facility at Burra.

exploring for and proving up gold and uranium resources

areas, exploring for and proving up near surface copper carbonate and oxide resources to feed the Mountain of Light treatment facility and exploring for deep large tonnage copper resources.

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2.2 Yorke Peninsula Project(Figures 1 and 2)

2.2.1 Highlights

Completion of a 3D unconstrained inversion model of the regional aeromagnetic data.

Exploration target zones defined.

Deep seated anomalies seen to persist through all rock to a depth of 800m present the highest priority targets.

Evaluation of the geological settings and geophysical techniques used by others to find, target and delineate known Iron-Oxide-Copper-Gold-Uranium (IOCGU) deposits completed.

Most prospective targets are for “Hillside” or “Moonta” style mineralisation.

Planned a “VTEM,” (Versatile Time-Domain Electro-Magnetics), airborne electromagnetic survey using a helicopter platform to map possible mineralisation associated with inferred geological structures.

Applied for “PACE Targeting 2011” funding for the planned “VTEM” air-borne geophysical survey.

2.2.2 Strategy and Prospectivity

Phoenix Copper’s Minlaton (EL4031) and Koolywurtie (EL4312) tenements which cover an area ~802km2 on the west coast of the Yorke Peninsula remain almost unexplored. These tenements overly metasomatised Hiltaba suite rocks, disrupted by major faults, less than 30km from, and neighbouring, the Hillside deposit,

Phoenix Copper is greatly encouraged by the developments in geological, geophysical and structural understanding and modelling by Rex Minerals Limited (Rex) on the Yorke Peninsula and its subsequent exploration successes and resource discoveries, recently announced.

Phoenix Copper has recently completed a review of its data on both exploration licenses (EL4031 and EL4312) that adjoin and partly surround the tenements owned by Rex and determined striking similarities (including trace levels of nickel and copper sulphides in historic drillholes at the Balgowan Prospect) to those areas that host both the Hillside deposit and the Moonta Copper field.

Structure(Figure 3)

Rex’s Hillside Deposit is hosted in the Pine Point Fault. Mineralisation at Moonta is mainly hosted in north east trending faults and shears.

After extensive review of the available geophysical data by Phoenix Copper and a consultant geophysicist it has been concluded that Phoenix Copper’s Yorke Peninsula tenements host:

Structures that appear contemporaneous and splay off the Pine Point Fault.

A structure that is interpreted as the south western extension of the Pine Point Fault.

North east trending and other significant structures that disrupt the Hiltaba Suite in Phoenix Copper’s exploration licenses.

2.2.3 Exploration during the year on Phoenix Copper’s Yorke Peninsula tenure

3D Model of Aeromagnetic Data

A 3D unconstrained inversion model of the regional aeromagnetic data over Phoenix Copper’s project was completed during the period. The data was modelled in 200m cubes identifying targets with good strike and depth extent, estimates of depth to the magnetic anomalies, and providing data to re-evaluate the geological setting (See Figure 3). Thirteen broad targets (T1-T13) were identified for drill testing in the northern tenement block, four of these T9-11 and T13 are deep targets but the remainder occur within 50-100m of the surface.

Targets of the highest priority are those deep seated anomalies that are seen to persist through all 800m of the data e.g. T12 in Figure 3. These are considered the most prospective for “Hillside” or “Moonta” style mineralisation.

Figure 2 Phoenix Copper tenure relative to Olympic Domain IOCGU deposits.

AUSTRA L IA

SOUTHAUSTRALIA

Prospective area forIOCGU depositsCariewerloo Basin

IOCGU mines & major prospects

Adelaide Geosyncline

Torrens Hinge Zone

Phoenix Copper Tenements

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The 3D modelling of the regional aeromagnetics has provided a greater degree of targeting confidence and, combined with a planned airborne electro-magnetics survey, will allow drill collars to be precisely located. It is notable that Rex defined high priority drill targets based on coincident magnetic and electro-magnetic data3. The planned airborne electro-magnetics survey will map massive sulphides associated with inferred structures to depths of 200m targeted using the regional magnetics.

2.2.4 Yorke Peninsula and the Olympic Domain(Figure 2)

An outstanding exploration opportunity is presented (if the Company’s current rights issue is successful), in what has become a new copper/gold province within the Olympic Domain (see Figure 2), with the discoveries of Prominent Hill, Carapateena, and now, Hillside, to complement Olympic Dam – one of the world’s most prominent orebodies. The recent discovery of the Hillside deposit by Rex has confirmed that the Olympic Domain extends south from Prominent Hill, Olympic Dam and Carapateena to the Yorke Peninsula. The style of these deposits is known as Iron Oxide-Copper-Gold-Uranium (IOCGU). Exploration success in these types of geological environments can transform a junior explorer to a significant mining company.

The giant Olympic Dam, deposit contains over 78 million tonnes of copper and 90 million ounces of gold4 – amongst the richest orebodies in the world.

At June 2009 Oz Mineral’s Prominent Hill was reported as containing a total of 2.5 million tonnes of copper and over 3 million ounces of gold in the copper mineral resource.5

Rex recently announced a mineral resource containing 1.5 million tonnes of copper and 1.4 million ounces of gold.6

The Company’s Yorke Peninsula tenements, Minlaton (EL4031) and Koolywurtie (EL4312) are contiguous, and Koolywurtie bounds, the tenements held by Rex. In the north they are in close proximity to the Moonta-Wallaroo region, generally known as the “Copper Triangle” which is an historic mining region that produced >355,000 tonnes of copper and 64,000 ounces of gold.7

3 Rex - ASX and Media Release: 17 September, 2009

4 (9080 Mt at 0.87% Cu, 0.28 kg/tU3O8, 0.31 g/t Au, 1.5 g/t Ag) - Resource data from PIRSA, July 2011, South Australia’s Major Operating Mines and Mineral Development Projects Resource Estimates and Production Statistics.

5 Prominent Hill Mineral Resource Statement - 30 June 2009, (189.7 Mt at 1.32% Cu, 0.5 g/t Au, 3.1 g/t Ag).

6 Rex Minerals Limited Hillside Resource Upgrade (217 Mt at 0.7% Cu and 0.2g/t Au) - Resource data from PIRSA, July 2011, South Australia’s Major Operating Mines and Mineral Development Projects Resource Estimates and Production Statistics.

7 Keeling,J.L. and Hartley,K.L. Poona and Wheal Hughes Cu Deposits, Moonta, South Australia, CRC/LME PIRSA SA.

Phoenix Copper has therefore carefully modelled exploration target types similar to Moonta-Wallaroo and IOCGU style deposits, not simply because of the close proximity of these deposits, but because the “signatures” for these deposits (structure, geology, magnetics and gravity) (see Table 1), generally persist at Minlaton (EL4031) and Koolywurtie (EL4312)tenements. In the two northern blocks the cover sequence is generally thin and will allow relatively shallow and low-cost drilling. Table 1 provides a comparison of the prospectivity for IOCG/IOCGU (Hillside) and Moonta-Wallaroo style deposits within Minlaton (EL4031) and Koolywurtie (EL4312).

A 3D unconstrained inversion model of the regional aeromagnetic data over Phoenix Copper’s project was completed during the period to end-June 2011. The data identified targets with strong magnetic signatures; good strike and depth extent.

Thirteen broad exploration target areas (T1-T13) have been defined from modelling the regional geophysical data, historic geochemical sampling and recent Field Portable X-Ray R Fluorescence (FPXRF) analyses. Four of these T9-11 and T13 are deep targets but the remainder are interpreted to occur within 50-100m of the surface.

The 3D modelling of magnetics has given broad exploration targets and combined with a planned airborne EM survey, will provide sufficient information to precisely locate drill collars on Phoenix Copper’s Yorke Peninsula tenements.

Figure 3 3D model of regional aeromagnetic data with drill targets in white T1-T13.

3D model of anomaly T2

3D model of anomaly T13

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Table 1: Prospectivity Comparison

Feature Hillside –Moonta Phoenix

Structure Rex’s Hillside Deposit is hosted in the Pine Point Fault.

Mineralisation at Moonta is mainly hosted in north east trending faults and shears.

After review of geophysical data it has been concluded that EL4031 and EL4312 host:

North East trending structures that appear to splay off the Pine Point Fault,

A structure that is interpreted as the south western extension of the Pine Point Fault, and

Other significant structures that disrupt the Hiltaba Suite.

Geology Rex’s Hillside Deposit is hosted in sheared “Skarn” amongst granitic and gabbroic rocks(3rd March 2010 REX Minerals Update Hillside 4400N section).

At Moonta mineralisation is hosted in faulted sheared porphyry.

The northern block of EL4031 hosts magnetite rich meta-somatite at Balgowan, (possibly similar to the Skarns at Hillside)and EL4031 and EL4312 host Hiltaba suite granitic and gabbroic rocks (hosts to mineralisation at Olympic Dam, Carapateena and Prominent Hill) in both the northern and southern parts of the tenements.

Circular magnetic features interpreted to be granites and porphyries similar to those found at Moonta and Wallaroo occur in EL4031 and EL4312.

Magnetics Rex uses this as an important exploration tool and Hillside has a very strong magnetic signature.

EL4031 and EL4312 have many high intensity magnetic anomalies. Priority will be given to anomalies interpreted to be deep seated from 3D Modelling (See Figure 3).

Gravity Rex has undertaken systematic gravity surveying over areas of interest and initially gave high priority to those areas with coincident gravity and magnetic anomalies.

Phoenix Copper has only broad spaced gravity data but once magnetic targets are better prioritised with airborne EM, ground gravity surveys may ensue.

Target type Iron Oxide-Copper-Gold-Uranium (IOCGU). IOCGU deposits such as Olympic Dam, Prominent Hill, Carapateena and Hillside; and Moonta and Wallaroo copper gold deposits which are situated in the Olympic IOCGU Domain (see Figure 2) and display magnetic signatures similar to those seen in Phoenix Copper’s Yorke Peninsula tenements.

Conclusion Exploration success in these tenements could be potentially transformational for the Company as evidenced by Hillside 1.5Mt Cu and 1.4Moz Au (see above) and Moonta-Wallaroo with recorded production of 0.36Mt Cu and 62Koz Au (see footnote 5). The programme is aimed at discovery of repetitions of these occurrences.

2.2.5 Planned Airborne EM Survey – VTEM Survey

Phoenix Copper considers that an airborne EM survey is required to assist in drill target definition.

Phoenix Copper plans to undertake a helicopter–borne Versatile Time-domain Electromagnetic (VTEM) geophysical survey to test for significant Cu-Au mineralisation in Hiltaba suite rocks – considered by Phoenix Copper to be the ideal geological environment.

VTEM is a cost effective technique to cover large areas. EM techniques have assisted in the discovery of mineralisation comprising the Poona and Wheal Hughes deposits.8 An airborne electromagnetic survey over the northern tenements is therefore considered an effective geophysical exploration technique.

Phoenix Copper has applied for “PACE Targeting 2011” funding to assist in undertaking this survey.

2.2.6 Drill Target Identification

Drill targets will be defined from both a revised 3D magnetic model, and the VTEM survey. Targets with coincident 3D magnetic and VTEM anomalism will be considered the highest priority for drilling.

It is anticipated that once crops have been harvested in December 2011, drill locations would be available for drilling in February/March 2012, subject to arranging access with landholders and the satisfactory completion of the current rights issue.

8 Keeling,J.L. and Hartley,K.L. Poona and Wheal Hughes Cu Deposits, Moonta, South Australia, CRC/LME PIRSA SA.

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2.3 Burra Project(Figures 1 and 4)

2.3.1 Burra North Prospect – EL4226

A program of diamond drilling has been planned to test the historic IP anomaly generated in the 1960s by the precursor to PIRSA’s Geological Survey9 (see Figure 4). The Monster Mine is within an area reserved from the operation of the Mining Act 1971 (SA) (Mining Act) and is excluded from EL4226 (see yellow outlined area in figure 4), but is important as it is an indicator of the potential of the Burra North Prospect.

Malachite, Azurite and Chalcocite occur in gossanous/quartz/breccia hydrothermal veins and on joint surfaces and fracture planes in and between the veins and host dolomite.

Excellent copper and significant gold assay results were returned including:

Copper PCRC007 - 6.8m@ 3.7% Cu from 0.84m

PCRC028 - 12.0m@ 2.1% Cu from 12.0m, and

Gold PCRC021 - 7.0m @ 2.5g/t Au from 4.0m,

PCRC043 - 24.0m@ 1.4g/t Au from 0.0m.

Figure 4 SA Dept of Mines IP Anomalies generated 1963-67

Figure 5 Drillhole location plan Princess Royal. Previous diamond drillholes (green), RC holes (red).

Metallurgical leach test work that was to be undertaken at AMMTEC in Perth to confirm whether the deposit is amenable to low cost heap leach will now be conducted at the MoL mine site at Leigh Creek. The material will undergo relevant metallurgical test work that will simulate a range of beneficiation and leaching processes likely to be relevant to the ores, if mined. The aim of this work is to devise a process that optimises the recovery of copper from this copper carbonate ore body that can be used in resource estimation modelling.

A resource estimate is being undertaken.

2.3.3 Drill Program Statement

Holes were all drilled with a RC drill rig and drilled dipping at -60 degrees. Holes collars were surveyed. Rock chip and soil from the drillholes was collected in plastic bags at one metre intervals through a sample splitter and placed in calico bags for analysis. Analysis of 4kg samples was carried out by a commercial Laboratory for acid soluble copper and gold. Data aggregation for this report was generally based on laboratory assays of intersections over 0.3% Cu.

2.3.2 Princess Royal Prospect – EL3459

A program of RC drilling was undertaken at Princess Royal 10km south east of Burra to assist in producing a Resource Statement by infilling existing RAB and diamond drilling near the surface. Forty-four holes for 969m were completed (PCRC001 – PCRC044) on seventeen cross sections, see Figure 5.

9 PIRSA – Report Book - RB6300130 Taylor Dec 1966

Hay Bales

3

-60 degress toward 240400m deep

1Sum

p 1


2


308,000 mE

6,271,000 mN

6,273,000 mN 307,000 mE

6,272,000 mN

MonsterMine

1960s IP Anomalies

BURRA NORTHPROSPECT

ProposedDrillSection

BURRA

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Table 2 FPXRF Copper Results for selected holes with significant (>0.3%Cu) intersections

Hole Id GDA94N-‐Z54 GDA94E-‐Z54 Azi mag Azi grid Dip Depth From Width Grade % Cu

Inc. from Width Grade % Cu

LAB %Cu

PCRB0066 6296500 271270 83 90 -60 48 0 1.0 0.40

PCRB0070 6296450 271283 100 107 -60 30 2.0 9.0 0.50 3.0 1.0 1.10 0.95

PCRB0075 6296425 271260 20 27 -60 30 13.0 3.0 0.31 14.0 1.0 0.44 0.34

PCRB0076 6296410 271258 20 27 -60 70 22 3.0 0.56 23.0 1.0 1.54 1.65

PCRB0097 6296700 271320 93 100 -60 42 29.0 4.0 0.45 30.0 1.0 1.10 0.84

PCRB0115 6297015 271410 83 90 -60 39 29 3.0 0.30

Future work will concentrate on defining where major structures disrupt the dolerite then drill testing stratigraphic parallel and cross cutting trends.

2.4 Spalding Project(Figures 1, 6 and 7)

2.4.1 Washpool Prospect

A RAB drilling program designed to test widespread copper anomalism reported in FPXRF analyses to the east and north of the historic Wheal Sarah workings was completed at Washpool on EL4370, nine kilometres NW of Spalding, (see Figures 6 and 7). FPXRF analyses confirmed with lab assays of drill cuttings report widespread, low grade enrichment of Cu, with zones of higher grade mineralisation encountered in some holes.

Significant copper has been identified in analyses of RAB chips from Washpool drilling program.

PCRB0070 - 9m @ 0.50% Cu including 1m @ 1.10% Cu (Lab acid soluble 5m @ 0.61% Cu including 1m @ 0.95% Cu)

PCRB0076 - 3m @ 0.56% Cu including 1m @ 1.54% Cu (Lab acid soluble 3m @ 0.60% Cu including 1m @ 1.65% Cu)

PCRB0097 - 4 m @ 0.45% Cu including 1m @ 1.10% Cu (Lab acid soluble 4m @ 0.34% Cu including 1m @ 0.84% Cu)

One hundred and one holes (PCRB0061-161) for a total of 3811 metres were completed in this program mainly concentrated along the eastern edge and northern arcuate hinge zone of a folded doleritic unit with overlying associated elevated surface FPXRF Cu analyses(See Figure 7).

Four holes were drilled near the Wheal Sarah workings to test for along strike extensions of previously mined east west trending mineralisation seen in the historic workings.

The program was designed to provide information on the grade of copper underlying surface FPXRF anomalies. These holes represent the first exploration drilling conducted in the

area since the South Australian Department of Mines drilled three diamond holes in 1967. This drilling provides important lithological and assay information for further exploration in the area.

The results are encouraging with visible malachite and primary sulphides seen in a number of drillholes in and adjacent to doleritic units (see Table 2).

2.4.2 Drill Program Statement

These were the first holes in the Wheal Sarah area and the first since 1967 in the northern Spalding Inlier. Collar locations were based on surface geochemical sampling using FPXRF. Holes were drilled with a Rotary Air Blast rig and were collared with PVC. Holes dipped at -60 degrees and were not surveyed. Rock chip and soil from the drillholes was collected in plastic bags at 1 metre intervals with ~4kg samples being collected by PVC spear and placed in calico bags for analysis. Analysis of 4kg samples was initially carried out by Field Portable X-Ray Fluorescence, with samples of prospective strata then being assayed in the Laboratory for acid soluble copper. Data aggregation for this report was generally based on FPXRF assays of intersections over 0.3 % Cu.

Figure 6 Rotary air blast drilling at Washpool.

Figure 7 RAB collars and contoured FPXRF Cu assays Washpool.

273,000mE

6,296,000 mN

272,000mE

6,299,000 mN

6,297,000 mN

6,298,000 mN

271,000mE

COSTEAN

WHEAL SARAH

PCRB061PCRB075

PCRB078

PCRB085 PCRB094

PCRB103PCRB117

PCRB118PCRB135

PCRB137

PCRB140

PCRB147PCRB156

PCRB161

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2.5 Eudunda Project(Figures 1, 8 and 9)

2.5.1 Tarnma EL3972, Bagot Well EL4291, Bagot Well North EL4626 and Australia Plains EL4503

2304 FPXRF analyses were taken on the Eudunda tenements Tarnma EL3972, Bagot Well EL4291, Bagot Well North EL4626 and Australia Plains EL4503 during the period. The bulk of these analyses were taken over the interpreted north trending fault in central EL4291 Bagot Well (See Figures 8 and 9).

Previous exploration (by others) in this area had concentrated on geochemical sampling and drilling of the stratigraphic unit hosting the Kapunda ore body to the south. This work had proven unsuccessful and in this recent program of FPXRF analyses Phoenix Copper’s aim was to test the northern extension of the structure that is adjacent to mineralisation at Kapunda for near surface copper carbonate ore and deeper copper sulphide mineralisation that may have been transported in this structural conduit. A copper anomaly over 1km in length was identified between 6204000N and 6206000N (See Figure 9).

This represents a drill target to test for both near surface copper carbonate ore and/or deeper copper sulphide mineralisation. It is intended that this target would be tested with RAB drilling across the strike of known anomalism.

Figure 8 Geochemical analyses Cu over magnetic intensity Bagot Well Prospect EL4291.

2.6 Mongolata Project(Figures 1 and 9)

2.6.1 Redbanks EL4419, Anabama EL3971 and The Gums EL4504

FPXRF analysis continued on the five tenements east of the range at Mongolata. 2864 analyses were taken during the period, taking the total to 27,064. Areas targeted this period included magnetic anomalies defined by Normandy Mining Limited in the late 1990s to early 2000s and geophysical uranium anomalies defined from Radiometrics (See Figure 9).

The results of recent FPXRF surveys in Anabama (EL 3971) have shown subtle geochemical anomalism (Cu, Fe) associated with a major north north-east trending magnetic high visible in TMI imagery (Tropical Rainfall Measuring Mission (TRMM) Microwave Imager [TMI]). Current sampling is providing additional cross-strike lines of FPXRF assays to test the coherence of the subtle geochemical response and provide information for further exploration in the area. The results of FPXRF surveys in The Gums (EL 4504) are less encouraging with no coherent zones of elevated Cu reported in the areas surveyed to date. Whilst extensive FPXRF sampling has been carried out in the northern and eastern portions of Redbanks (EL 4419), to date limited sampling has occurred in the western portion closest to the range front. The assay data collected to date along the Eastern Road highlights some zones with elevated Cu.

Figure 9 Targets generated from the FPXRF analysis and geophysical interpretation of magnetic, radiometric and gravity data sets on the Burra, Spalding, Eudunda and Mongolata Projects.

MongolataProject

EudundaProject

BurraProject

SpaldingProject

MongolataProspect

ArdincapleProspect

Princess RoyalProspect

Burra NorthProspect

Burra Creek PlainProspect

RedbanksProspect

Black HillProspect

ApoingaProspect

KarkultoProspect

TarnmaProspect

Bagot WellProspect

WashpoolProspect

EL3971S

EL4370e

EL4233w

300,000mE

350,000mE

6,200,000 mN

6,250,000 mN

6,300,000 mN

BURRA

SPALDING

EL4233e

EL4419

EL4370w

EL4362 EL4226

EL3604

EL4476

EL3716

EL4626

EL4291

EL4504

EL4711

EL3686

EL4032

EL3549

EL4503

EL3972

EL3971

Copper ppm

>160 80-160 40-80 20-40 <20

Uranium targets

Gold targets

Copper Targets

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2.7 Leigh Creek Project

(Figures 1, 10 and 11)

2.7.1 ML5467 – Mountain of Light

Mining commenced during the year.

2.7.2 ML5498 – Lorna Doone

During the period Phoenix Copper undertook a program of close spaced FPXRF analysis over the full extent of ML5498, see Figure 10. The program aimed to determine whether additional surface copper anomalism existed outside the planned open pit areas. Significant anomalism was detected away from the immediate planned pits which will need to be drill tested in the future.

Geological mapping of surface outcropping mineralisation at Lynda and Lorna Doone was carried out to better determine the likely dip of the orebodies. This is to assist in the geological “wire-framing” of the ore zone in Vulcan software to allow ore block modelling to be completed as part of the feasibility study for Lynda and Lorna Doone.

Results of exploration undertaken by Zurich Resources Pty Ltd (co-funded by Phoenix Copper), over Phoenix Copper’s ML5498 (host to the Lynda and Lorna Doone prospects), returned encouraging results and support a model for intrusion of copper rich mafic-intermediate magmas.

Figure 10 ML5498 FPXRF sampling contoured for Cu over satellite image with previously planned (by others) pit outlines in RED.

Figure 11 Mt Coffin FPXRF data.

2.7.3 Mount Coffin – ML5741

A program of close spaced FPXRF analysis over the full extent of ML5741 (See Figure 11) confirmed the presence of copper around the historic workings and extended into areas along strike now identified as new areas of interest.

264,000mE

264,500mE

265,000mE

6,621,500 mN

6,620,000 mN

6,620,500 mN

6,621,000 mN

262,500mE

263,000mE

263,500mE

ELSIEADAIR

WESTJUBILEE

MOUNTCOFFIN

SOUTH ADAIR

Copper ppm

>160 80-160 40-80 20-40 <20

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Mineral Resources and Ore Reserves

As at 30 June 2010 - Nil

As at 1 September 2011

INDICATED RESOURCES10

Tenement Deposit Cut-‐off Tonnage Grade % copper Tonnes copper contained

ML5467 MOUNTAIN OF LIGHT

Paltridge North >0.3% 890,000 0.83% 7,400

>0.4% 710,000 0.96% 6,800

>0.5% 570,000 1.1% 6,200

Rosmann East >0.3% 128,000 0.78% 1,000

>0.4% 100,000 0.88% 900

>0.5% 77,000 1.0% 800

ML5498 LYNDHURST

Lorna Doone >0.3% 840,000 0.75% 6,300

>0.4% 620,000 0.90% 5,600

>0.5% 460,000 1.00% 4,600

Lynda >0.3% 1,000,000 0.72% 7,200

>0.4% 750,000 0.84% 6,300

>0.5% 580,000 0.96% 5,600

TOTALS ML5467 & ML5498

>0.3% 2,900,000 0.77% 22,000

>0.4% 2,200,000 0.90% 19,500

>0.5% 1,700,000 1.0% 17,000

Competent Person’s StatementThe information in this report that relates to Mineral Resources is based on and accurately reflects information compiled by Mr Mark Manly and Mr Paul Dowd, who are both employees of Phoenix Copper Limited. Mr Manly is a Member and Mr Dowd is a Fellow of the Australasian Institute of Mining and Metallurgy and both have sufficient experience relevant to the style of mineralisation and the type of deposits under consideration and to the activity which they are undertaking to qualify as a Competent Persons as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Manly and Mr Dowd consent to the inclusion in this report of the matters based on their information in the form and context in which it appears.

The information in this report that relates to Exploration Targets or Results is based on and accurately reflects information compiled by Mr Mark Manly. Mr Manly has sufficient experience relevant to the style of mineralisation and the type of deposits 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 Exploration Results, Mineral Resources and Ore Reserves”. Mr Manly consents to the inclusion in this report of the matters based on his information in the form and content in which it appears.

10 Any apparent multiplication mismatches are due to post computation rounding to two significant figures.

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Directors’ Report

THE DIRECTORS OF PHOENIX COPPER PRESENT THEIR REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011 (THE FINANCIAL YEAR).


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DirectorsThe names and details of Phoenix Copper’s Directors in office during and since the end of the Financial Year are as follows.

Graham G SpurlingC H A I R M A N

Appointed 27 September 2007

Graham Spurling has a Bachelor of Technology and Mechanical Engineering from the University of Adelaide and a Masters in Automotive Engineering from the Chrysler Institute in Detroit (USA). He received the Melbourne Business School Award in 1995 for International Business and received the Centenary of Federation Medal Award for Service to Industry. He is a decorated former Major in the Australian Army Reserve. Graham Spurling spent seven years as Managing Director and CEO of Mitsubishi Motors Australia in Adelaide before moving to the United States to become President and CEO of GNB Technologies in Atlanta then President and CEO of Pacific Dunlop Holdings (USA) Inc. In the three years immediately prior to 30 June 2011 Graham Spurling held the following directorships of other listed companies for the following periods:

Non-executive director, Dexion Limited from 19 February 2004 to 25 August 2010.

Paul J DowdM A N A G I N G D I R E C T O R A N D C H I E F E X E C U T I V E O F F I C E R


Paul Dowd has over 40 years experience in the mining industry, in Australia and many overseas countries. This experience includes executive management roles, including, Vice President of Newmont Mining Corporation’s Australian and New Zealand Operations and Managing Director of Newmont Australia Limited and as a senior public servant – head of the resources and petroleum department in the Kennett Government of Victoria. He is currently Chairman of the Board of the SA Mineral Resources & Heavy Engineering Skills Centre, Council Member of the PB Australia Pacific Advisory Board, non-executive director of Northgate Minerals Corporation, a TSX listed company, and its two Australian (non-listed) subsidiaries and non-executive director of Oz Minerals Limited. Paul Dowd is also a board member of the Sustainable Minerals Institute, the University of Queensland, a member of the Mineral Resources Sector Advisory Council of the CSIRO and a SA Training and Skills Commissioner. In the three years immediately prior to 30 June 2011 Paul Dowd held the following directorships of other listed companies for the following periods:

Non-executive director, Buka Gold Limited from 1 June 2006 to 26 August 2009;

Non-executive chairman, Adelaide Resources Ltd from 14 August 2006 to 30 June 2010;

Non-executive director, Regis Resources Ltd from 31 July 2006 to 4 May 2009;

Non-executive director, Northgate Minerals Corporation (TSX Listed) since 4 November 2008; and

Non-executive director, Oz Minerals Limited since 23 July 2009.

Peter WatsonN O N - E X E C U T I V E D I R E C T O R


Peter Watson studied Law at Melbourne University and graduated with honours. He has practiced law for over 40 years, specialising in commercial, corporate, resources and trade practices law. He is admitted to practice in South Australia, New South Wales, Victoria and Western Australia as well as the High Court of Australia. For over 20 years Peter Watson was a partner in the national law firm now known as Norton Rose. During that time he established, and for four years managed, its Perth office. He also managed its Melbourne office for two years. In 1996 Peter Watson joined Andersen Legal as its first Melbourne partner and in 1999 was recruited by Normandy Mining Limited as its group legal counsel and a group executive. Following the takeover of Normandy by Newmont Mining Corporation Peter Watson returned to private practice and founded the successful boutique law firm Watsons Lawyers. Peter Watson is a member of the board of trustees of the Bethlehem Griffiths Research Foundation (a medical research charitable foundation) and a non-executive director of Lawson Gold Limited (an ASX listed gold exploration company) and Felton Grimwade and Bosisto’s Pty Ltd (a manufacturer and supplier of eucalyptus products and over the counter therapeutic products). In the three years immediately prior to 30 June 2011 Peter Watson held the following directorships of other listed companies for the following periods:

Non-executive director, Lawson Gold Limited since it listed on ASX on 5 August 2010.

David HillierN O N - E X E C U T I V E D I R E C T O R


Mr Hillier is a chartered accountant and has more than 30 years experience in commercial aspects of the resources industry. Until recently Mr Hillier was Chairman of Buka Gold Limited which successfully identified a number of gold anomalies in the Maryborough Basin in Queensland, an area not previously considered prospective for gold. In addition, throughout 2008 he worked as Chief Financial Officer and subsequently as an executive director of Buka Gold’s major shareholder based in London. Between 1989 and 2002, Mr Hillier held a range of senior executive positions in the Normandy Mining Limited Group of companies and was Chief Financial Officer of Normandy for six of these years. He has served as Chairman and as a director of a number of public companies in the mining and exploration field. He is currently non-executive Chairman of Lawson Gold Limited. In the three years immediately prior to 30 June 2011 David Hillier held the following directorships of other listed companies for the following periods:

Non-executive Chairman, Lawson Gold Limited since it listed on ASX on 5 August 2010;

Executive Chairman, Buka Gold Limited from its listing on ASX on 10 October 2005 to 26 August 2009, Non-executive director of Buka Gold Limited from 26 August 2009 to 17 November 2009; and

Non-executive director of Mineral Securities Limited from April 2009 to July 2009.

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Company Secretary

Peta Marshman

Peta Marshman is a qualified lawyer and also has a Bachelor of Economics.

Interests in the Shares and Options of the CompanyAs at the date of this Report, the interests of the Directors in the shares and options of Phoenix Copper are as follows:

Graham Spurling, Chairman

Graham Spurling has a direct interest in 500,000 unlisted Options exercisable at $0.25 any time on or before 11 February 2013 and an indirect interest in 710,084 Shares.

Paul Dowd, Managing Director and Chief Executive Officer

Paul Dowd has a direct interest in one million Performance Rights under Phoenix Copper’s Employee Performance Rights Plan. Subject to the satisfaction of certain vesting conditions these Performance Rights will result in the issue to Paul Dowd (or his nominee), for no consideration, of one million Shares. Paul Dowd also has an indirect interest in:

543,750 Shares;

500,000 unlisted Options exercisable at $0.25 any time on or before 11 February 2013; and

1,500,000 Performance Shares, the terms of which are set out in the Remuneration Report.

Peter Watson, Non-executive Director

Peter Watson has a direct interest in:

623,750 Shares; and

500,000 unlisted Options exercisable at $0.25 any time on or before 11 February 2013

and an indirect interest in 4,000,000 Shares.

David Hillier, Non-executive Director

David Hillier has an indirect interest in 150,000 Shares.

Dividends and DistributionsNo dividends or distributions were paid to members during the Financial Year and none were recommended or declared for payment.

Principal Activities The principal activities of the Group during the Financial Year comprised mineral exploration and copper cement production.

Review of OperationsThe net result of operations for the group for the year was a loss after income tax of $6,944,215 (2010: $583,795).

The Company completed the acquisition of Leigh Creek Copper Mine Pty Ltd (LCCM) on 23 July 2010 with ownership and control of LCCM, along with the associated Mountain of Light copper heap leaching operations and three Mining Leases transferring to Phoenix Copper Limited (PNX). After purchase completion, the operation was released from care and maintenance with PNX undertaking refurbishment of the existing leach pads and plant. Mining operations were recommenced at the Rosmann East pit, with newly mined

material being crushed and screened to present the resultant classified course ore for stacking onto leach pads and placement under irrigation for leaching of copper product. In addition to mining of the Rosmann East pit, additional ore was sourced from the Paltridge South pit which was developed and mined during the year. To support the recommenced operations, a new leach pad was constructed during the year.

All mining, crushing and stacking operations at Mountain of Light were completed prior to the end of the year with the leaching of stacked ore continuing through the first half of 2011/12.

Total sales of copper cement product for the year under an off-take agreement with Adchem (Australia) Pty Ltd was approximately 294t contained copper, generating revenues of $2.1M.

With the acquisition of LCCM, the Company now has exploration activities directed to six projects:

the Yorke Peninsula project; where exploration for a significant primary copper or copper/gold resource similar to Moonta or Hillside is the main focus of activity,

the Burra, Spalding and Eudunda projects; where work is concentrated on exploring for and proving up near surface copper carbonate and oxide resources to feed a potential second treatment facility at Burra,

the Mongolata project; where work is concentrated on exploring for and proving up gold and uranium resources,

the Leigh Creek project; where work is concentrated on two areas, exploring for and proving up near surface copper carbonate and oxide resources to feed the Mountain of Light treatment facility and exploring for deep large tonnage copper resources.

During the year a 3D unconstrained inversion model of the regional aeromagnetic data for the Yorke Peninsula project was completed with exploration targets subsequently defined. Deep seated anomalies that were seen to persist at depth are the highest priority targets. A planned “VTEM” (Versatile Time-Domain Electro-Magnetics) airborne electromagnetic survey using a helicopter platform to map possible mineralisation associated with inferred geological structures, which is the subject of a PACE funding application, is scheduled to occur during 2011/12.

At Burra, a program of Reverse Circulation (RC) drilling was undertaken at Princess Royal EL3459 to assist in producing a Resource Statement by infilling existing Rotary Air Blast (RAB) and diamond drilling near the surface. Forty four holes for 969m were completed with significant copper and gold mineralisation encountered including 6.8m @ 3.7% Cu from 0.84m, and 7.0m @ 2.5g/t Au from 4.0m.

Zones of high copper anomalism were found in Field Portable X-Ray Fluorescence Analysis (FPXRF) around the rim of a strong magnetic high in central EL3971 at the Mongolata project.

At the Spalding project a RAB drilling program around the old Wheal Sarah copper mine 10km north west of Spalding was undertaken with encouraging acid soluble results including 5m @ 0.61% Cu.

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FPXRF analysis continued during the year at the Eudunda project with zones of most interest found in sampling performed at Tarnma in the south west of EL3972, in the north west of EL4626 and at Bagot Well in central EL4291.

At the Leigh Creek project, a program of close spaced FPXRF analysis was conducted with significant anomalism detected away from the current planned pits at Lorna Doone ML5498, and the confirmation of the presence of copper around the historic workings at Mount Coffin ML5741 which extended into areas along strike along with the identification of new areas of interest.

On 9 June 2011, PNX provided a market update to the Australian Securities Exchange in respect of issues encountered in ramping up production activities at the Mountain of Light operation. These included:

at least three significant rain events causing major operating disruption,

the mining contractors’ basis of pricing proving to be uneconomic,

a lack of reliable historical process data to assist with process diagnostics and improvements,

a leach cycle of nearer to 120 days than the previously estimated 90 days,

delays in the receipt of laboratory assays resulting in more recently stacked material generally proving to be low grade in comparison with the grade estimated from historical drill data and visual ore spotting,

high acid conditioning of newly stacked material failing to produce sustained increases in the pregnant liquor grade as a result of the low copper grade stacked.

As a consequence, the Company has recorded a net operating loss from its Mountain of Light operations of $2.85M for the financial year, which when aggregated with normal corporate expenditures to support the business has resulted in an operating loss of $4.67M for the Group. Directors also took the decision to raise a charge for impairment against the Mountain of Light assets of $1.63M and to write-down the carrying value of exploration expenditure on a number of tenements by $0.65M, thereby resulting in an overall recorded loss for the financial year of $6.944M.

Significant Changes in the State Of AffairsThe significant changes in the state of affairs of the Group during the Financial Year were as follows:

the raising of $704,000, and issue of 4,400,000 Shares, under a non-renounceable share purchase plan and additional share subscriptions from three investors;

the acquisition of all of the shares in the capital of Leigh Creek Copper Mine Pty Ltd (LCCM), the holder of Mining Leases ML5467, ML5741 and ML5498;

the placement of 11,875,000 Shares to Long Fortune Limited for $1,900,000 to fund recommencement of the mining and production operations at Leigh Creek;

the issue of 6,250,002 Shares and 1,250,000 unlisted Options to creditors of LCCM to settle and discharge the debt owed by LCCM to those creditors (in connection with Phoenix Copper’s acquisition of all of the issued shares in the capital of LCCM);

the acquisition of EL3451, EL3971 and EL3972;

the commencement of copper cement production on 31 August 2010;

the appointment of Nick Harding as chief financial officer on 1 September 2010 and of David Hillier as non-executive Director on 17 September 2010;

Paul Dowd’s employment (as Managing Director and chief executive officer) becoming full time as from 1 September 2010;

the adoption by the Board of an Employee Performance Rights Plan (in place of the Employee Share Option Plan) on 17 September 2010;

the placement of a total of 8,620,690 Shares and 2,873,563 unlisted Options in two tranches (on 15 October 2010 and 1 December 2010 respectively) to strategic New Zealand investors to raise a total of $2,500,000 (before issue costs);

the issue and allotment of 750,000 unlisted Options exercisable at $0.28 and expiring on 31 October 2011 to a contractor of the Company as part consideration for their services

the placement of 7,053,320 Shares and 2,351,102 unlisted Options on 11 March 2011, to raise up to $1,974,930 before expenses;

the issue of 500,000 unsecured Convertible Notes to Talis SA, a Company registered with the Registry of Commerce and Companies of Paris under No. 404 387 748 on 23 June 2011, for $500,000 in subscription monies;

the issue of 202,000 Shares on exercise of 202,000 employee Options; and

the release from voluntary escrow of 500,000 Shares.

Other than the above, there was no significant change in the state of affairs of the consolidated entity during the financial year.

Significant Events Subsequent to Balance DateThe matters or circumstances that have arisen since 30 June 2011 which have significantly affected or may significantly affect:

the Group’s operations in future financial years;

the results of those operations in future financial years; or

the Group’s state of affairs in future financial years,

are as follows:

the cessation on 13 June 2011 of mining activities and on 24 June 2011 of crushing, screening and ore stacking activities at the Mountain of Light (MoL) project and the commencement of a financial and technical review in connection with the future mining of the Paltridge North orebody;

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the issue of a further 250,000 unsecured Convertible Notes to Talis SA on 7 September 2011, for $250,000 in subscription monies;

the release from voluntary escrow of 15,000,001 Shares; and

the conversion of 750,000 unsecured Convertible Notes by Talis SA resulting in the issue of 8,392,693 Shares on 23 September 2011.

Other than the above, there has not been any matter or circumstance that has occurred subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Likely Developments The Group expects to continue to produce copper cement from its Mountain of Light project and to deliver that project into its Supply Agreement with Adchem (Australia) Pty Ltd from the existing stockpiled ore in heap leach pads, although this source of copper will be exhausted some time toward the end of 2011.

Mining activities were suspended from 13 June 2011 and crushing, screening and stacking of ore onto heap leach pads was suspended 24 June 2011. Resumption of mining, crushing, screening and stacking of ores is dependent upon the satisfactory results of an internal financial and technical review of the Paltridge North orebody. Independent laboratories will also be utilised for some of the test work.

Two other mining leases are owned by LCCM and ML5498 is the subject of a previously advised Indicated Resource. A Mining and Rehabilitation Plan (MARP) is required before development work can commence at the Lorna Doone and Lynda deposits within ML5498. Work has commenced on the preparation of this draft MARP to allow development of these deposits, once the studies regarding Paltridge North at MoL are concluded and the results are proven to be satisfactory. All deposits within the Leigh Creek/Lyndhurst area are planned to be developed as satellite deposits and will be subject to beneficiation at the “pit rim” to produce a higher grade ore for campaigned trucking to the central “hub” of processing at MoL.

The Group also expects to continue a comprehensive and systematic exploration programme within its existing tenements. All the tenements are in South Australia and it is not contemplated at this time to consider opportunities elsewhere.

Environment Regulation and PerformanceThe Group continues to meet all environmental obligations across its tenements. Despite a number of significant rain events, no reportable incidents occurred during the Financial Year.

Options, Performance Shares, Performance Rights and Convertible NotesDuring the Financial Year and to the date of this Directors’ Report, the Company issued and allotted the following Options:

1,250,000 unlisted Options exercisable at $0.275 and expiring on 29 July 2015;

2,873,563 unlisted Options exercisable at $0.35 and expiring on 15 April 2012;

750,000 unlisted Options exercisable at $0.28 and expiring on 31 October 2011; and

2,351,102 unlisted Options exercisable at $0.35 and expiring on 11 March 2013.

As at the date of this Report, the Company has the following Options on issue:

1,500,000 unlisted Options exercisable at $0.25 and expiring on 11 February 2013;

5,500,000 unlisted Options exercisable at $0.25 and expiring on 25 January 2013;

250,000 unlisted Options exercisable at $0.25 and expiring on 18 June 2013;

500,000 unlisted Options exercisable at $0.25 and expiring on 11 September 2013;

750,000 unlisted Options exercisable at $0.10 and expiring on 15 March 2014;



1,250,000 unlisted Options exercisable at $0.275 and expiring on 29 July 2015;

2,873,563 unlisted Options exercisable at $0.35 and expiring on 15 April 2012;

750,000 unlisted Options exercisable at $0.28 and expiring on 31 October 2011; and

2,351,102 unlisted Options exercisable at $0.35 and expiring on 11 March 2013.

202,000 Shares were issued during the Financial Year as a result of the exercise of 202,000 Options.

As at the date of this Report, the Company also has on issue:

1,500,000 unlisted Performance Shares which automatically convert (in tranches of 500,000 shares each) to ordinary shares, when Shares trade for five consecutive ASX trading days at or above 40 cents, 60 cents and 80 cents respectively; F

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1,100,000 Performance Rights under Phoenix Copper’s Employee Performance Rights Plan which, subject to the satisfaction of certain vesting conditions, will result in the issue for no consideration 1,100,000 Shares; and

500,000 unsecured Convertible Notes, each of which:

»

»quarterly in arrears, by either cash or the number of Shares equal to the accrued but unpaid interest divided by 80% of the volume weighted average closing price on ASX over the preceding 30 trading days, at the option of the Company);

»

»

»

»to participate in the future issues of securities or the distribution of dividends by the Company to its Shareholders prior to conversion;

»(unless redeemed or converted earlier in accordance with the terms of issue);

»of Shares equal to the face value of the Convertible Note divided by 80% of the volume weighted average closing price on ASX over the 30 trading days immediately preceding (but not including) the conversion date; and

»end of each calendar quarter at the face value of the Convertible Note, subject to the following interest premiums for early redemption:

¬ if redeemed on 30 September 2011, additional interest calculated on the face value of the Convertible Note at 4.0% per annum, accrued daily from the issue date to the redemption date;

¬ if redeemed on 31 December 2011, additional interest calculated on the face value of the Convertible Note at 3.0% per annum, accrued daily from the issue date to the redemption date; and

¬ if redeemed on 31 March 2012, additional interest calculated on the face value of the Convertible Note at 2.0% per annum, accrued daily from the issue date to the redemption date.

Option holders, Performance Share holders, Performance Rights holders and convertible note holders do not have any right, by virtue of Options, Performance Shares, Performance Rights or Convertible Notes, to participate in new issues of Shares offered to Shareholders.

Indemnification and Insurance of Directors and OfficersPhoenix Copper entered into a Deed of Access, Insurance and Indemnity with each of the Directors on 12 November 2007 or, in the case of David Hillier, 22 September 2010. Under the terms of these Deeds, the Company has undertaken, subject to restrictions in the Corporations Act, to:

indemnify each Director in certain circumstances;

advance money to a Director for the payment of any legal costs incurred by a Director in defending legal proceedings before the outcome of those proceedings is known (subject to an obligation by the Director to repay any money advanced if the costs become costs in respect of which the Director is not entitled to be indemnified under the Deed);

maintain Directors’ and Officers’ insurance cover (if available) in favour of each Director whilst they remain a director of Phoenix Copper and for a run out period after ceasing to be such a director; and

provide each Director with access to Board papers and other documents provided or available to the Director as an officer of Phoenix Copper.

Throughout the Financial Year Phoenix Copper has had in place and paid premiums for insurance policies, with a limit of liability of $10 million, indemnifying Directors and officers of the Company against certain liabilities incurred in the conduct of business or in the discharge of their duties as Directors or officers. The contracts of insurance contain confidentiality provisions that preclude disclosure of the premium paid.

Directors’ attendance at MeetingsThirteen Board meetings were held during the Financial Year. Graham Spurling and Peter Watson attended all of those meetings. David Hillier was appointed a Director on 17 September 2010 and attended all Board meetings held on and from that date. Paul Dowd attended twelve of the thirteen Board meetings.

Two Audit Committee meetings were held during the Financial Year. All of the Directors attended both of these meetings, Paul Dowd attending by invitation.

Auditors’ Independence DeclarationThe auditor’s independence declaration is included on page 33.

Non-Audit ServicesThe following non-audit services were provided to the Group by the Group’s auditor, Deloitte Touche Tohmatsu, during the Financial Year:

Assistance in the preparation of annual tax return and associated tax advice of $14,576.

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

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This Report outlines the remuneration arrangements in place for the Directors, Company Secretary and senior management of the Group.

Where this report refers to the ‘Grant Date’ of Shares, Options or Performance Rights, the date mentioned is the date on which those Shares, Options or Performance Rights were agreed to be issued (whether conditionally or otherwise) or, if later, the date on which key terms of the Shares, Options or Performance Rights (e.g. subscription or exercise price) were determined.

Director and senior management details

The following persons acted as Directors of the Company during or since the end of the Financial Year:

Graham Spurling (Chairman)

Paul Dowd (Managing Director and Chief Executive Officer)

Peter Watson (Non-executive Director)

David Hillier (Non-executive Director)

The person acting as Company Secretary is Peta Marshman.

The following persons acted as “senior management” of the Company during or since the end of the Financial Year:

Mark Manly (Chief Geologist)

Nick Harding (Chief Financial Officer)

James Fox (General Manager – Mountain of Light Copper Mine)

Relationship between the remuneration policy and Company performance

The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the four years to 30 June 2011.

30 June 2011 30 June 2010 30 June 2009 30 June 2008

Revenue $2,100,766 - - -

Net loss before tax $6,916,327 $576,256 $578,272 $406,350

Net loss after tax $6,944,215 $583,795 $785,701 $518,354

Share price on listing on ASX - - - $0.20

Share price at start of the Financial Year $0.16 $0.07 $0.12 -

Share price at end of the Financial Year $0.10 $0.16 $0.07 $0.12

Basic earnings per share ($0.0814) ($0.0105) $(0.0143) $(0.017)

Diluted earnings per share ($0.0814) ($0.0105) $(0.0143) $(0.017)

No dividends have been declared during the Financial Year and the Directors do not recommend the payment of a dividend in respect of the Financial Year.

There is no link between the Company’s performance and the setting of remuneration except as discussed below in relation to the Managing Director’s Performance Shares and Performance Rights and Options for Directors and certain employees.

Remuneration Report

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Remuneration Philosophy

The performance of the Group depends on the quality of its Directors and employees and therefore the Group must attract, motivate and retain appropriately qualified industry personnel. The Group embodies the following principles in its remuneration framework:

provide competitive rewards to attract and retain high calibre executives, Directors and employees;

link executive rewards to Shareholder value (by the granting of Performance Shares or Options);

link reward with the strategic goals and performance of the Company; and

ensure total remuneration is competitive by market standards.

The Company does not currently have a policy on trading in derivatives that limit exposure to losses resulting from Share price decreases applicable to Directors and employees who receive part of their remuneration in securities of the Company.

Remuneration Policy

The Company does not have a separately established remuneration committee. The full Board acts as the Company’s remuneration committee. The Board is responsible for determining and reviewing remuneration arrangements for the non-executive Directors, the Managing Director, Company Secretary and senior management. The Board assesses the appropriateness of the nature and amount of remuneration of such persons on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from retention of a high quality Board and executive team. External advice on remuneration matters is sought whenever the Board deems it necessary.

The remuneration of the non-executive Directors and Company Secretary is not dependent on the satisfaction of a performance condition. The Managing Director has a direct or indirect interest in Performance Shares, Options and Performance Rights, the terms of which are set out below. The non-executive Directors and the Chief Geologist have interests in Options and Shares, the terms of which are set out below. The General Manager – Mountain of Light Copper Mine has a direct interest in Performance Rights.

Non-Executive Director Remuneration

The Board seeks to set remuneration of non-executive Directors at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is appropriate at this stage of the Company’s development.

As Chairman, Graham Spurling is entitled to receive $75,000 per annum inclusive of superannuation and Peter Watson and David Hillier are each entitled to receive $30,000 and $40,000 per annum respectively inclusive of superannuation. Non-executive Directors are entitled to be paid reasonable travelling, accommodation and other expenses incurred as a consequence of their attendance at meetings of Directors and otherwise in the execution of their duties as Directors. Non-executive Directors are also entitled to additional remuneration

for extra services or special exertions, in accordance with the Company’s Constitution. There are no schemes for retirement benefits other than superannuation for non-executive Directors.

Summary details of remuneration for non-executive Directors are given in the table below. Their remuneration is not dependent on the satisfaction of a performance condition. The maximum aggregate remuneration of non-executive Directors, other than for extra services or special exertions, is presently set at $500,000 per annum.

Managing Director Remuneration

The Company aims to reward the Managing Director with a level and mix of remuneration commensurate with his position and responsibilities within the Company to:

align the interests of the Managing Director with those of Shareholders;

link reward with the strategic goals and performance of the Company; and

ensure total remuneration is competitive by market standards.

Paul Dowd joined Phoenix Copper in 2007 as its inaugural Managing Director. He was originally employed on a part-time basis. Until 1 June 2010 Paul Dowd was contracted to devote 2.5 days per week on average to his role as Managing Director of Phoenix Copper. This was increased to 3.5 days per week on average on 1 June 2010. With Phoenix Copper’s transition to producer and explorer resulting from the acquisition of LCCM, Paul Dowd was engaged as Managing Director and Chief Executive Officer on a full time basis with effect from 1 September 2010. Paul Dowd is now employed on a part-time basis at four days per week from 1 July 2011.

Until 1 September 2010, Paul Dowd was entitled to be paid $2,000 per day worked (exclusive of GST but inclusive of superannuation), pro-rata for part days of less than eight hours. He was also entitled to reimbursement of expenses and additional remuneration for extra services or special exertions, in accordance with the Company’s Constitution. Paul Dowd was entitled to 20 days unpaid annual leave and 10 days unpaid sick leave per annum.

The term of Paul Dowd’s employment as Managing Director and Chief Executive Officer is from 1 September 2010 until 30 June 2012 (Initial Term). During the Initial Term Paul Dowd must find, appoint and develop a person, satisfactory to the Board, as his replacement. This person must have commenced employment by 31 March 2012 to ensure an efficient handover. If Paul Dowd’s replacement is not appointment before 30 June 2012 he and the Board will discuss alternative arrangements regarding shortening or extending the Initial Term (as appropriate in the circumstances).

Paul Dowd’s employment with the Company may be terminated on three months written notice, or on summary notice if he:

is charged with any criminal offence or is guilty of any other conduct which, in the reasonable opinion of the Board, is prejudicial to the interests of the Company;

is negligent in the performance of his duties;

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is incapacitated from performing his duties as Managing Director by illness or injury for a period of two consecutive months;

materially breaches any term of his contract of employment and this is not remedied within 14 days of notice of the breach to him by the Company;

materially contravenes any share dealing code relating to Shares; or

is the subject of, or causes the Company to be the subject of, a material penalty or serious reprimand imposed by any regulatory authority.

From 1 September 2010 Paul Dowd was paid a monthly cash salary inclusive of Government mandated superannuation contributions of $550,000 per annum.

From 1 July 2011, Paul Dowd’s salary has reduced to $275,000 per annum inclusive of Government mandated superannuation contributions with a reduction to four days per week as agreed with the Board. He continues to be entitled to reimbursement of expenses and additional remuneration for extra services or special exertions, in accordance with Phoenix Copper’s Constitution.

The Board agreed, on 17 September 2010, to grant Paul Dowd one million Performance Rights. The issue of one million Shares, for no consideration, on the vesting of those Performance Rights was approved by shareholders at the 2010 annual general meeting. The Performance Rights will vest as follows:

a) 500,000 of the Performance Rights (T1 Rights) on 31 July 2012; and

b) the remaining 500,000 Performance Rights (T2 Rights) within 30 days the earlier of:

i. the 2011/2012 Profit (as defined below) being determined; and

ii. Phoenix Copper having made a discovery or discoveries of mineralisation internally estimated, to the satisfaction of the Board, to contain, or to contain in the aggregate, 125,000 tonnes of contained copper or equivalent in other metals determined in the usual way (in addition to the resources announced by Phoenix Copper prior to 1 September 2010).

The T1 Rights will lapse if Mr Dowd ceases to be the Managing Director of Phoenix Copper before 30 June 2012 (unless the Board agrees otherwise as a result of Mr Dowd’s replacement being appointed before 31 March 2012).

The T2 Rights will lapse if the 2011/2012 profit is not more than $4.5 million or the Board (acting reasonably) believes that a profit of at least that amount is not sustainable for at least the following two years; unless in the meantime Phoenix Copper has made a discovery or discoveries of mineralisation internally estimated, to the satisfaction of the Board, to contain, or contain in the aggregate, 125,000 tonnes of contained copper or equivalent in other metals determined in the usual way (in addition to the resources announced by Phoenix Copper prior to 1 September 2010).

The 2011/2012 profit and profit for the following two years refer to:

a) the actual consolidated net profit before interest and tax of Phoenix Copper for the financial year commencing 1 July 2011 determined after adding back all exploration expenditure (other than in mine geology for grade control purposes) and 40% of all administration expenses taken into account in determining that consolidated net profit; and

b) the Board’s reasonable estimate of that net profit for the two following financial years.

The Performance Rights issued to Paul Dowd have been issued under Phoenix Copper’s Employee Performance Rights Plan adopted by the Board on 17 September 2010. Details of that Plan are set out in note 19 to the financial statements.

From 1 September 2010 Paul Dowd is entitled to 20 days paid annual leave and 10 days paid sick leave per annum. Only annual leave is cumulative.

1,500,000 Performance Shares were issued to Paul Dowd’s nominee on 11 February 2008. The Performance Shares:

confer on the holder the right to receive notices of general meetings and financial reports and accounts of Phoenix Copper that are circulated to Shareholders;

confer on the holder the right to attend general meetings of shareholders of Phoenix Copper;

do not entitle the holder to vote on any resolutions proposed at a general meeting of Shareholders;

do not entitle the holder to any dividends;

do not confer on the holder any right to participate in the surplus profits or assets of Phoenix Copper upon winding up of Phoenix Copper;

are not transferable; and

will not be quoted on ASX or any other stock exchange.

If at any time the issued capital of Phoenix Copper is reorganised, a Performance Share may be treated in accordance with the ASX Listing Rules at the time of reorganisation.

500,000 of the Performance Shares will automatically convert into one (1) Share each on each of the following events occurring:

Shares trading for five consecutive ASX trading days at $0.40 or greater;

Shares trading for five consecutive ASX trading days at $0.60 or greater;

Shares trading for five consecutive ASX trading days at $0.80 or greater.F

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Upon conversion of a Performance Share, Phoenix Copper will issue the holder with a new holding statement for the relevant number of Shares. The Shares into which Performance Shares will convert will rank equally in all respects with existing Shares. Within seven days after conversion Phoenix Copper must apply for official quotation on ASX of the Shares arising from conversion.

As at the date of this Report none of the Performance Shares have converted. Any Performance Shares which have not otherwise converted to Shares by 11 February 2013, or the date which is 6 months after the date on which Paul Dowd ceases to be employed by Phoenix Copper, shall automatically convert in total to one Share.

Company Secretary Remuneration

During the year Peta Marshman provided Company Secretary services to the Company and its subsidiaries as a contractor. The Company paid Peta Marshman $62,046 (2010: $40,975) (exclusive of GST) for her services during the Financial Year. The Company Secretary has a direct interest in 112,500 Shares.

Chief Financial Officer Remuneration

Nick Harding was appointed Chief Financial Officer on 1 September 2010 on a part time contractor (2 days per week) basis. The contract under which his services are provided includes a fee equivalent salary of $110,000.

Chief Geologist Remuneration

Mark Manly was appointed Chief Geologist of Phoenix Copper on 10 March 2008, on a full time basis. Mark Manly’s current salary is $210,000 per annum inclusive of the government mandated superannuation contributions. He is entitled to 20 days paid annual leave and 10 days paid sick leave per annum.

As part of Mark Manly’s employment package, he has been issued with the following Options:

250,000 Options issued on 19 June 2008, exercisable at $0.25 and expiring on 18 June 2013;

500,000 Options issued on 12 September 2008 exercisable at $0.25 and expiring on 11 September 2013; and

750,000 Options issued on 16 March 2009 exercisable at $0.10 and expiring on 15 March 2014.

Mark Manly’s employment with the Company may be terminated upon one month’s written notice or on summary notice if he:



is incapacitated from performing his duties as Chief Geologist by illness or injury for a period of two consecutive months;




General Manager – Mountain of Light Copper Mine Remuneration

James Fox was appointed General Manager of Phoenix Copper’s Mountain of Light Copper Mine on 1 May 2011, on a salary of $235,440 per annum inclusive of government mandated superannuation contributions. He is entitled to 20 days paid annual leave and 10 days paid sick leave per annum.

As part of James Fox’s employment package he has been issued 100,000 Performance Rights under the Company’s Performance Rights Plan that vest after six months of continuous employment with the Company.

James Fox’s employment with the Company may be terminated upon three month’s written notice, or on summary notice if he:



is incapacitated from performing his duties as Chief Geologist by illness or injury for a period of two consecutive months;




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Remuneration of Directors and Senior Management

Directors’, Company Secretary and Senior Management remuneration (all amounts are paid or payable) at 30 June 2011

Short term employment benefits

Post Employment Equity

Salary and fees Superannuation Options Performance Rights

Total % of total remuneration consisting of

equity

Directors

Graham Spurling $68,807 $6,193 - - $75,000 -

Paul Dowd $481,156 $26,491 - $116,889 $624,536 18.7%

Peter Watson $30,000 - - - $30,000 -

David Hillier $59,003 - - - $59,003 -

Company Secretary

Peta Marshman $62,046 - - - $62,046 -

Senior Management

Mark Manly $192,661 $17,339 - - $210,000 -

Nick Harding $101,742 - - - $101,742 -

James Fox $38,000 $3,240 - $8,149 $49,389 16.5%

TOTALS $1,033,415 $53,263 - $125,038 $1,211,716

Directors’, Company Secretary and Senior Management remuneration (all amounts are paid or payable) at 30 June 2010

Short term employment benefits

Post Employment Equity

Salary and fees Superannuation Options Performance Rights

Total % total remuneration consisting of

equity

Directors

Graham Spurling $68,807 $6,193 - - $75,000 -

Paul Dowd $254,409 - - - $254,409 -

Peter Watson $40,000 - - - $40,000 -

Company Secretary

Peta Marshman $40,975 - - - $40,975 -

Senior Management

Mark Manly $192,661 $17,339 - - $210,000 -

TOTALS $596,852 $23,532 - - $620,384 -

Other than the amounts disclosed in the column for equity, all other amounts are fixed as part of the executive’s remuneration.

Other than the Performance Shares and Performance Rights, all other securities issued are not subject to performance conditions. The Directors have decided that the exclusion of performance conditions on Options issued to Directors and Mark Manly is appropriate after consideration of industry practice. In relation to the Performance Shares the performance condition attached were chosen at the time (February 2008) as the then key measure as the Directors then considered it to be the most reflective key performance for the Group.

In relation to the Performance Rights the Directors considered that with the acquisition of LCCM the interests of Phoenix Copper would best be served by retaining the services of Paul Dowd until the HUB and SPOKE business plan had been well established based on the MoL processing facilities, a suitable replacement Managing Director had been recruited, appointed and effectively installed and Phoenix Copper had achieved a level of profitability that would enable it to self fund exploration for several years. The vesting conditions for the Performance Rights granted to Paul Dowd were chosen to support those key objectives.F

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Share-based payments granted as compensation during the financial year ended 30 June 2011

Employee Share Option Plan and Performance Rights Plan

Phoenix Copper has operated an ownership-based scheme for employees. In accordance with the Employee Share Option Plan, the Directors could, at their discretion, grant Options to eligible participants. Each Option granted in accordance with the Company’s Employee Share Option Plan converts into one ordinary share of Phoenix Copper on exercise. No amounts are paid or payable by the recipient on receipt of the Option. The Options carry neither rights to dividends nor voting rights. Options may be exercised at any time up to the date that is five years from and including the date they were or are issued.

On 17 September 2010 Phoenix Copper replaced the Employee Share Option Plan with a Performance Rights Plan. The Plan operates similarly to the Share Option Plan; the notable exceptions being that on vesting Performance Rights will convert to Shares without the employee having to pay an exercise price or any other consideration. In addition in relation to each grant of Performance Rights the Board may set vesting conditions, determined in the Board’s discretion, which if not satisfied will result in the lapse of the Performance Rights granted to the particular employee. The Performance Rights Plan has been chosen as it offers employees the possibility of reward without monetary cost and is less dilutive than a Share Option Plan due to the lesser number of Performance Rights that need to be issued to achieve a similar level of reward or incentive.

Summary of Options, Performance Shares and Performance Rights at 30 June 2011

At 30 June 2011, the following Options were on issue to Directors, Company Secretary and senior management:

Options series issued Grant date Expiry date Grant date fair value Vesting date

29 October 2007 4 October 2007 11 February 2013 $0.0648 11 February 2008

19 June 2008 10 March 2008 18 June 2013 $0.0336 18 June 2008

12 September 2008 10 March 2008 11 September 2013 $0.0411 12 September 2008

16 March 2009 10 March 2008 15 March 2014 $0.0436 16 March 2009

At 30 June 2011, the following Performance Shares were in existence:

Grant date Expiry date Grant date fair value Vesting date

Managing Director Performance Shares

4 October 2007 11 February 2013 $0.084 11 February 2008

At 30 June 2011, the following Performance Rights were in existence:

Grant date Expiry date Grant date fair value Vesting date

Managing Director Performance Rights – T1

26 November 2010 31 July 2012 $0.34 31 July 2012

Managing Director Performance Rights – T2

26 November 2010 31 August 2012 $0.34 31 August 2012

General Manager – Mountain of Light Performance Rights

1 May 2011 1 November 2011 $0.25 1 November 2011

No Options were issued as share-based payment compensation to Directors, Company Secretary and senior management during the Financial Year.

No Options have been exercised by Directors or senior management during the Financial Year.

No Options relating to Directors and senior management were granted, exercised or lapsed during the Financial Year.

No options were granted, exercised or lapsed during the year ended 30 June 2011 that relates to Directors, Company Secretary and senior management.

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Value of options – basis of calculation

Value of Options granted at Grant Date is calculated by multiplying the fair value of Options at Grant Date by the number of options granted during the Financial Year;

Value of Options exercised at exercise date is calculated by multiplying the fair value of Options at the time they are exercised (calculated as the difference between exercise price and the Australian Stock Exchange last sale price on the day that the options were exercised) by the number of Options exercised during the Financial Year; and

Value of Options lapsed at the lapsed date is calculated by multiplying the fair value of Options at the time they lapsed multiplied by the number of Options lapsed during the Financial Year.

Value of Performance Shares – basis of calculation

Value of Performance Shares granted at Grant Date is calculated by multiplying the fair value of Performance Shares at Grant Date by the number of Performance Shares granted during the Financial Year;

Value of Performance Shares converted is calculated by multiplying the fair value of Performance Shares at the time they are converted (calculated as the ASX last sale price on the day that the Performance Shares were converted) by the number of Performance Shares converted during the Financial Year; and

Value of Performance Shares lapsed at the lapsed date is calculated at one Share at that date (calculated at the ASX last sale price on the lapse date).

Signed on 30 September 2011 in accordance with a resolution of the Board made pursuant to section 298(2) of the Corporations Act.

Paul J DowdM A N A G I N G D I R E C T O R

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The Board has adopted a Corporate Governance Charter (Charter), which includes a code of conduct, an audit committee charter, a shareholder communication policy, a continuous disclosure policy and a securities dealing policy. The Charter is available on the Company’s website. The Company’s corporate governance principles and policies and this corporate governance statement are structured with reference to the ASX Corporate Governance Principles and Recommendations, 2nd edition, August 2007 (Principles and Recommendations).

Functions of the Board The names, term of office, skills, experience and expertise of the Directors in office at the date of this Annual Report are set out at the beginning of the Directors’ Report.

The Board is responsible for the corporate governance of the Company. The Board’s primary responsibility is to Shareholders but it must also have regard for the interests of other stakeholders and the broader community.

The Company has established the functions reserved to the Board. The most important responsibilities of the Board include:

Providing oversight and strategic direction to the Company;

Appointing, removing and monitoring the performance of the Chairman, Managing Director, senior executives, managers, senior consultants and the Company Secretary;

Reviewing, approving and monitoring the progress of budgets, financial plans, acquisitions, divestments and major capital expenditure;

Approving and monitoring financial performance and financial reporting including approval of the annual and half-year reports;

Reviewing and approving business plans and monitoring the achievement of the Company’s strategic goals and objectives;

Approving remuneration of Directors, senior executives, managers and senior consultants;

Liaising with the Company’s auditors;

Reporting to Shareholders and ensuring that all regulatory requirements are met;

Evaluating the Board’s performance and recommending the appointment and removal of Directors;

Identifying and managing material business and legal risks; and

Improving and protecting the reputation of the Company.

A copy of matters reserved for the Board is publicly available in the Charter on the Company’s website.

Non-executive Directors do not have responsibility for the day-to-day management of the Company’s business, which is the responsibility of the Managing Director.

Corporate Governance Statement

The retirement by rotation of Directors is governed by the Company’s constitution, the Corporations Act and the ASX Listing Rules. According to clause 2.5 of the Company’s constitution one third of the Directors retire from office at the end of each annual general meeting. A retiring Director remains in office until the end of the meeting and will be eligible for re-election at the meeting. The Directors to retire by rotation at an annual general meeting are those Directors who have been longest in office since their last election. According to rule 6.1(9) of the Company’s constitution the Managing Director is not subject to retirement by rotation and is not to be taken into account in determining the rotation of retirement of Directors. Any other executive Directors are subject to retirement by rotation.

According to the Company’s Constitution, the Company may, subject to the Corporations Act, by resolution passed in general meeting:

remove any Director before the end of the Director’s term of office; and

if the outgoing Director is a Non-Executive Director, elect another person to replace the Director.

The Directors may appoint any person as a Director to fill a casual vacancy or as an addition to the existing Directors. Unless the Director is an Executive Director and the ASX Listing Rules do not require that Director to be subject to retirement, a Director so appointed will hold office until the end of the next annual general meeting of the Company, at which the Director may be re-elected but he or she will not be taken into account in determining the number of Directors who must retire by rotation at the meeting.

A person, other than a Director retiring by rotation or because he is a Director appointed by the other Directors, who seeks re-election, is not eligible for election as a Director at a general meeting unless:

the person is proposed as a candidate by at least 50 Members or Members holding between them at least 5% of the votes that may be cast at a general meeting of the Company; and

the proposing Member leaves a notice at the Company’s registered office not less than 35 Business Days before the relevant general meeting which nominates the candidate for the office of Director and includes the signed consent of the candidate.

Directors have the right in connection with their duties and responsibilities, to seek independent professional advice at the Company’s expense where prior written or email approval has been obtained from the Chairman. Such approval will not be unreasonably withheld.

The Company’s constitution states that subject to the Corporations Act, the Company may give a person a benefit in connection with a Director’s retirement from the Board or managerial office in the Company.F

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Functions of Senior ExecutivesPhoenix Copper has established the functions delegated to its chief financial officer, chief geologist and general manager for the Mountain of Light copper mine. Their respective main duties are:

Chief financial officerto assist the Managing Director with evaluating new business opportunities;

continual analysis, development and improvement of financial systems;

to oversee the management, coordination and production of all fiscal reporting activities for the Company;

to investigate and consolidate the reporting process across all entities of the Group;

to maintain overall responsibility for the payables/receivables and payroll function;

to maintain the General Ledger;

to prepare data for statutory financial reporting as required;

to prepare annual budgets and forecasts;

to manage Company cash flow;

to implement accounting policies and internal control procedures for finance and accounting processes;

to evaluate cost of goods sold margin analysis;

to review bills of materials & inventory valuation; and

to coordinate annual audits with external auditors.

Chief geologistto plan, manage, supervise, co-ordinate and control the Company’s multi-faceted exploration program as described in the Company’s prospectus dated 20 November 2007 and otherwise as may be determined by the Board from time to time (Exploration Program);

to liaise regularly with the Managing Director and keep him informed of progress with, and issues arising in the course of, the Exploration Program;

to prepare a written report for each meeting of the Board held during the term of his employment detailing progress with, and issues which have arisen in the course of, the conduct of the Exploration Program in the form required by the Managing Director, and if required by the Managing Director, attend Board meetings to answer questions and/or make presentations to the Board; and

such other duties as he may, from time to time, be requested by the Board or the Managing Director to perform.

General manager – Mountain of Light copper mineto manage the overall safe and efficient operations within the copper mining and processing facilities in the Leigh Creek and Lyndhurst region of South Australia, including requisite planning, reporting and successful implementation of approved budgets and plans;

to lead and manage all aspects of the Company’s safety and environment programmes and to lead, develop and manage government and community relations programmes;

to liaise regularly with the Managing Director and keep him informed of all relevant matters associated with the Company’s operations, development and all other relevant and related matters within the region;

to provide all the reports regarding the Company’s activities, including daily reports, that the Managing Director may from time to time require, ensure the accuracy of those reports and distribute them as directed by the Managing Director from time to time;

to prepare for the approval of the Managing Director and revise as may be required by the Managing Director budgets, plans and schedules for all of the Company’s operations and activities;

to achieve the objectives and outcomes of budgets and plans, approved by the Managing Director;

to manage the operations to ensure compliance with all relevant laws, rules and regulations and the satisfaction of all relevant Company policies, procedures and standards, as well as provide input to the continual review of those Company policies, procedures and standards;

to ensure the adequate attraction and retention of required personnel to maintain operational standards and achieve the outcomes of approved budgets and plans;

to devise and implement appropriate development and training programmes for operations personnel to retain those persons in the Company’s employ and to maintain operational standards to achieve the outcomes of approved budgets and plans;

to liaise and work tactfully and effectively with landholders, government agents and other local stakeholders on a range of problem solving activities;

to liaise and work with other professional services within the Company to ensure that all aspects of planning and efficient cycles of operation, including maintenance of required reserves and resources to ensure steady-state future operations;

to develop Continuous Improvement initiatives to maximise the benefit from all the Company’s assets in the Leigh Creek region, as well as initiatives in relation to other prospects in the Leigh Creek region, including Joint Ventures and other initiatives; and

to perform such other duties as you may, from time to time, be requested by the Board or the Managing Director.

Review of Performance The performance of the Managing Director is monitored by the non-executive Directors. A formal performance review of the Managing Director did not occur during the Period.

The performance of Phoenix Copper’s chief geologist is monitored by the Managing Director. No formal evaluation of the chief geologist took place during the Period but the Managing Director monitored his performance during the Period.

The performance of the general manager for the Mountain of Light copper mine is monitored by the Managing Director. No formal evaluation of the general manager for the Mountain of Light copper mine took place during the Period but the Managing Director monitored his performance during the Period.

Wellington Exploration does not have any senior executives.

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There is currently no formal process for performance evaluation of the Board or individual directors. No formal performance evaluation of the Board, the Audit Committee or individual Directors took place during the Period.

Audit Committee Until 22 September 2010 the Company’s Audit Committee had 2 members, namely Peter Watson (chairman) and Graham Spurling. Graham Spurling is independent. Peter Watson is not independent by virtue of the fact that he is a principal of a material professional adviser to the Company, namely Watsons Lawyers. On 22 September 2010 David Hillier was appointed chairman of the Audit Committee. Since that date the Audit Committee has had three members and a chairman who is an independent, non-executive Director. The qualifications of these three Directors are set out at the beginning of the Directors’ Report.

The Audit Committee’s responsibilities include:

establishing risk management controls and procedures and regularly testing the effectiveness of these controls and procedures;

reviewing the Company’s annual reports and half year reports;

reviewing the performance of the external auditors;

evaluating the adequacy and effectiveness of the Company’s accounting policies through ongoing communication with management, the Company’s accountants and external auditors;

ensuring that the Company’s financial reports comply with the accounting standards and the law;

reviewing, at least twice annually, the Company’s risk management controls and performance with the Company’s external auditors and ensuring the review process and recommendations are recorded and signed by the chairman of the Audit Committee and the auditors; and

investigating any matters raised by the external auditors.

The Audit Committee discharges its responsibilities by making recommendations to the Board. The Audit Committee does not have any executive powers to commit the Board or management to implement its recommendations.

Two Audit Committee meetings were held during the Period. All three members of the Audit Committee attended both of these meetings.

The Company’s auditor was appointed by the Directors in accordance with section 327A of the Corporations Act. Any subsequent appointment or rotation of external auditors will occur in accordance with the Corporations Act.

Risk Management The Board has required management to design and implement a risk management and internal control system to manage the Company’s material business risks. The Company has developed a Risk Management Policy for the oversight and management of material business risks, which is available on the Company’s website.

The Company has established a Risk Management Committee, headed by the Managing Director. Whilst the Board is ultimately responsible for identifying and managing areas of significant

business risk and ensuring that arrangements are in place to adequately manage these risks, the Company’s Audit Committee and Risk Management Committee are heavily involved in this process. The Risk Management Committee has identified and analysed Phoenix Copper’s risk areas and specific risks within each area and created a Corporate Risk Register which lists and rates these risks. A risk matrix which takes into consideration the likelihood and consequence of the risk is used to determine risk ratings.

The areas of risk that have been identified by the Company’s Risk Management Committee are as follows:

Statutory/regulatory

Financial

IT management

Tenement management

Community

Asset management and protection

Corporate and strategic

Environmental

Personnel and safety

The Risk Management Committee has evaluated the Company’s risks and developed specific cost-effective strategies and action plans for minimising and treating the risks. The current control measures and improvement actions for minimising and treating each risk are noted in detail on the Company’s Corporate Risk Register and followed by employees and contractors.

The Managing Director is responsible for overseeing the establishment, implementation and review of Phoenix Copper’s risk management process. The Managing Director is to report annually to the Audit Committee, at its meeting held to recommend approval of the annual accounts, on the effectiveness of the Company’s risk management of material business risks and is to attend that meeting of the Audit Committee to answer questions regarding risk management from the members of the Audit Committee.

The Risk Management Committee must ensure that the Corporate Risk Register is kept up-to-date on an ‘as needs’ basis so as to reflect changes in Phoenix Copper’s business activities and risks, the law and current best practice within the mining industry.

A thorough review of the Corporate Risk Register is to be undertaken by the Risk Management Committee and the Audit Committee each year to identify any further risks, evaluate existing controls and, if necessary, develop and implement further strategies and action plans for minimising and treating the risks.

The Board has required management to report to it on whether the Company’s material business risks are being managed effectively and management has reported to the Board as to the effectiveness of the Company’s management of its material business risks.

The Board has received assurance from the Managing Director that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

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Departures from the Principles and RecommendationsIn accordance with ASX Listing Rule 4.10.3, this Corporate Governance Statement discloses the extent to which Phoenix Copper has followed the Principles and Recommendations by detailing the Principles and Recommendations that have not been adopted by the Company and the reasons why they have not been adopted. With the exception of the departures detailed below, the corporate governance practices of Phoenix Copper were compliant with the Principles and Recommendations throughout the Period.

Recommendation Notification of Departure Explanation for Departure

2.1 A majority of the Board should be independent directors.

During the Period the majority of the Board was not independent. Until 17 September 2010 there were three board members, two of whom are not independent. Since that date there have been four board members, two of whom are not independent. The Managing Director, Paul Dowd, is not independent by virtue of the fact that he is an executive. Peter Watson is not independent by virtue of the fact that he is a principal of a material professional adviser to the Company, namely Watsons Lawyers. Graham Spurling (Chairman) and David Hillier are both independent.

Phoenix Copper considers industry experience and specific expertise to be important attributes of its Board members and has therefore chosen to retain Peter Watson. The Board is conscious of the need for independence and ensures that directors who have interests in specific transactions or matters do not participate in any part of a Board meeting that considers those transactions or matters.

2.4 The board should establish a nomination committee.

The Phoenix Copper Board has not established a nomination committee.

The Phoenix Copper Board considers that a separate nomination committee is not necessary for the Company given its current size and complexity. The full Board is responsible for the duties and responsibilities typically delegated to a nomination committee.

4.2 The audit committee should be structured so that it:

consists only of non-executive directors;

consists of a majority of independent directors;

is chaired by an independent chair, who is not chair of the board; and

has at least three members.

Until 22 September 2010 Phoenix Copper’s Audit Committee had two members not three, did not consist of a majority of independent directors and was not chaired by an independent chair.

David Hillier was appointed non-executive Director on 17 September 2010 and chairman of the Audit Committee on 22 September 2010. David Hillier is an independent director and is not chair of the Board. Since 22 September 2010 the Company has complied with all aspects of this recommendation.

The Charter states that the Audit Committee should be structured so that it consists only of non-executive directors. Where the Board comprises only three members the audit committee will consist of two non-executive Directors. Where the Board comprises more than three members the Audit Committee will consist of at least three members.

Until David Hillier became a non-executive Director and Chairman of the Audit Committee in September 2010, for the Audit Committee to consist only of non-executive directors it could not consist of a majority of independent directors because Peter Watson is not an independent director as he is a principal of material professional advisor to Phoenix Copper.

For the chairman of the Audit Committee until September 2010 to have been a non-executive director who is not chair of the Board, he could not be an independent director.

Since 22 September 2010 the Company has complied with all aspects of this recommendation.

8.1 The board should establish a remuneration committee.

The Phoenix Copper Board has not established a remuneration committee.

The Phoenix Copper Board considers that a separate remuneration committee is not necessary for the Company given its current size and complexity. The full Board acts as the Company’s remuneration committee.

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Auditors Independence Declaration

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Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2011

Note Year ended30/06/11

$

Year ended30/06/10

$

Revenue 4(a) 2,100,766 -

Other income 4(b) 251,671 501,706

Employee benefits expense 4(c) (2,981,838) (302,486)

Other expenses (941,438) (53,424)

Mining (1,571,782) -

Secretarial, professional and consultancy (487,369) (426,435)

Occupancy costs (56,864) (55,428)

Insurance costs (110,053) (40,237)

Share register maintenance (39,187) (34,416)

Communication costs (45,852) (28,868)

Promotion and advertising (14,067) (12,008)

Audit fees (64,404) (30,198)

Impairment (1,629,931) -

Exploration and evaluation write down (650,000) -

Depreciation expense (675,978) (94,462)

Loss before income tax (6,916,326) (576,256)

Tax expense 5 (27,889) (7,539)

Loss for the Financial Year (6,944,215) (583,795)

Other comprehensive income - -

Total comprehensive income for the Financial Year (6,944,215) (583,795)

Note Cents Cents

Earnings Per ShareBasic (cents per share) – (Loss)/profit 26 (8.14) (1.05)

Diluted (cents per share) – (Loss)/profit 26 (8.14) (1.05)

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Consolidated Statement of Financial Positionas at 30 June 2011

Note 30/06/11$

30/06/10$

CURRENT ASSETSCash and cash equivalents 1,089,883 1,871,127

Trade and other receivables 6 730,226 108,892

Other current assets 7 164,168 22,229

Inventory 8 429,404 -

TOTAL CURRENT ASSETS 2,413,680 2,002,248

NON-CURRENT ASSETSExploration and evaluation expenditure 9 5,354,298 4,861,838

Plant and equipment 10 2,423,930 292,968

Mineral rights 11 1,256,714 -

TOTAL NON-CURRENT ASSETS 9,034,942 5,154,806

TOTAL ASSETS 11,448,622 7,157,054

CURRENT LIABILITIESTrade and other payables 12 1,878,104 494,086

Provisions 13 663,081 58,487

Other financial liabilities 14 500,000 -

TOTAL CURRENT LIABILITIES 3,041,186 552,573

NON-CURRENT LIABILITIES

Provisions 15 18,361 7,063

TOTAL NON-CURRENT LIABILITIES 18,361 7,063

TOTAL LIABILITIES 3,059,547 559,636

NET ASSETS 8,389,075 6,597,418

EQUITYIssued capital 16 16,227,893 7,941,788

Reserves 17 993,247 543,480

Accumulated losses 18 (8,832,065) (1,887,850)

TOTAL EQUITY 8,389,075 6,597,418

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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Consolidated Statement of Changes in Equityfor the year ended 30 June 2011

Issued capital $

Performance Shares $

Equity-‐Settled Benefits

$

Accumulated losses $

Total $

Balance at 1 July 2009 7,731,555 126,185 519,350 (1,304,055) 7,073,035

Loss attributable to the Financial Year - - - (583,795) (583,795)

Total comprehensive income for the Financial Year

- - - (583,795) (583,795)

Shares issued pursuant to sale and purchase agreements in relation to tenements

95,000 - - - 95,000

Fair value of equity settled benefits - - 27,730 - 27,730

Conversion of employee options at 6.1 cents

2,440 - - - 2,440

Transfer to issued capital of equity settled benefits from reserve on conversion of employee share options

3,600 - (3,600) - -

Costs associated with the issue of shares (24,532) - - - (24,532)

Applicable income tax relating to share issue costs

7,540 - - - 7,540

Balance at 30 June 2010 7,815,603 126,185 543,480 (1,887,850) 6,597,418

Loss attributable to the Financial Year - - - (6,944,215) (6,944,215)

Total comprehensive income for the Financial Year

- - (6,944,215) (6,944,215)


8,328,430 - - - 8,328,430

Fair value of equity settled benefits - - 472,616 - 472,616

Transfer to issued capital of employee options from share option reserve on conversion of employee share options

22,849 - (22,849) - -

Costs associated with the issue of shares (65,174) - - - (65,174)

Applicable income tax relating to share issue costs

- - - - -

Balance at 30 June 2011 16,101,708 126,185 993,247 (8,832,065) 8,389,075

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Consolidated Statement of Cash Flowsfor the year ended 30 June 2011

Inflows/(Outflows)

Year ended 30/06/11$


Cash flows relating to operating activitiesReceipts from customers 1,664,475 40,834

Payments to suppliers and employees (4,471,785) (551,525)

Net operating cash flows (Note (a)) (2,807,310) (510,691)

Cash flows relating to investing activities

Interest received 76,005 135,208

Payment on acquisition of subsidiary (Note 28) (1,762,086) -

Payments for exploration and evaluation expenditure (1,142,460) (1,795,499)

Payments for plant and equipment (3,931,498) (64,358)

Net investing cash flows (6,760,039) (1,724,649)

Cash flows relating to financing activities

Proceeds from borrowings 500,000 -

Proceeds from share issues 8,351,279 2,440

Payments for capital raising costs (65,174) (24,532)

Net financing cash flows 8,786,105 (22,092)

Net (decrease) / increase in cash (781,244) (2,257,432)

Cash at beginning of financial year 1,871,127 4,128,559

Cash at end of financial year 1,089,983 1,871,127

Note (a): Reconciliation of loss for the Financial Year to net cash flow from ordinary activities.

Profit / (Loss) for the Financial Year (6,944,215) (583,795)

Interest revenue and receivable (76,005) (118,811)

Share options expensed 449,767 27,730

Depreciation 675,978 -

Inventory right off 650,000 -

Impairment 1,629,931 -

Profit on sale of plant and equipment - 94,462

(Increase) decrease in prepayments 8,061 (2,702)

(Increase) decrease in interest receivable 4,776 (16,397)

(Increase) decrease in receivables (626,110) (45,563)

(Increase) decrease in other current assets (150,000) -

(Increase) decrease in inventory (429,404) -

(Increase) decrease in deferred tax - 7,540

Increase/(decrease) in payables 1,384,019 95,792

Increase/(decrease) in employee provisions 615,892 31,053

Net operating cash flows (2,807,310) (510,691)

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

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1 General informationPhoenix Copper Limited (the Company) is a listed public Company, incorporated in Australia and operating in Australia.

Phoenix Copper’s registered office and its principal place of business are as follows:

Registered office Principal place of business

Level 1, 135 Fullarton Road Level 1, 135 Fullarton Road

Rose Park Rose Park

South Australia 5067 South Australia 5067

2 Adoption of new and revised Accounting Standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period.

Various other Standards and Interpretations were on issue but were not yet effective at the date of authorisation of the financial report. The issue of these Standards and Interpretations does not affect the Group’s present policies and operations. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will not materially effect the amounts recognised in the financial statements of the Company or the Group but may change the disclosure presently made in the financial statements of the Company and the Group.

3 Significant accounting policies

Statement of complianceThe financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by the Directors on 30th September 2011.

Basis of preparationThe financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

In the application of the Group’s accounting policies, which are described below, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates.

Notes to the Financial Statementsfor the Financial Year Ended 30 June 2011

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

a) Going concernThe financial report has been prepared on a going concern basis which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

For the year ended 30 June 2011 the Group made a loss of $6,944,215 (2010: $583,795) and recorded a net cash outflow from operating activities of $2,807,310 (2010: $510,691). The Group also has a net current liabilities of $627,506 as at 30 June 2011 (2010: Net current assets $1,449,675). Further for the year ended 30 June 2011, the parent entity made a loss of $7,005,386 (2010: $583,795) and had net current liabilities of $496,459 as at 30 June 2011 (2010: net current assets $1,454,106).

The Directors believe that it is appropriate to prepare the financial statements on a going concern basis for the following reasons:

a) The entity undertakes a rights issue during October 2011 with a view to raising approximately $3.6m of capital by 10 November 2011(after capital raising costs). The underwriting agreement in relation to the rights issue is expected to be executed on or about 4 October 2011;

b) The directors have undertaken measures to reduce expenditure including the cessation of mining activities at the Leigh Creek Copper Mine (“LCCM”) and the reduction in exploration expenditure at other sites except for the exploration earmarked to be undertaken through the rights issue;

c) Combined with the expenditure measures in (b) above, the entity has drawn down the convertible note facility of $250,000 on 2 September 2011 to assist the company meeting its short term funding needs prior to the rights issue. On 23 September 2011 the Company issued ordinary shares to Talis SA upon the conversion of the convertible notes totalling $750,000 at that date; and

d) In order for the company to recommence full operations at LCCM within the first half of calendar year 2012, the Company will need to obtain additional funding. As part of the rights issue to be undertaken as discussed in (a) above, “piggy back” options are attached to the rights issue which contemplates the raising of approximately $5M on or about the time of their expiry on 30 June 2012. The exercise of the piggy back options is at the discretion of the option holders and is subject to the Company’s share price up to the expiry date on 30 June 2012.

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The Directors believe that the combined impacts of the actions in (a), (b) and (d) above will enable the Company and the Consolidated Entity to generate sufficient cash flows to meet their debts as and when they fall due.

In the event that the actions in (a), (b) and (d) are not undertaken either by the time anticipated or in the quantum outlined and the Company and the Consolidated Entity are unable to obtain alternative financing or undertake equity raisings, then there is significant uncertainty as to whether the Company and the Consolidated Entity will be able to continue as going concerns and, therefore, whether they will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amount and classification of liabilities that might be necessary should the Company and the Consolidated Entity not continue as going concerns.

The following significant accounting policies have been adopted in the preparation of the financial report:

b) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in banks and bank deposits.

c) Employee benefitsA liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits, expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

Contributions to accumulated benefit superannuation plans are expensed when incurred.

d) Mineral rights and exploration and evaluation expenditureMineral rights and Exploration and evaluation expenditures in relation to each separate area of interest, are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

i the rights to tenure of the area of interest are current; and

ii at least one of the following conditions is also met:

› the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale: or

› exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Mineral rights and Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploration drilling, trenching and sampling and associated activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they relate directly to operational activities in a particular area of interest.

Mineral rights and Exploration and evaluation assets are assessed for impairment when facts and circumstances (as defined in AASB 6 “Exploration for and Evaluation of Mineral Resources”) suggest that the carrying amount of exploration and evaluation assets may exceed their recoverable amount. The recoverable amount of the exploration and evaluation assets (or the cash-generating unit(s) to which they have been allocated, being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment, reclassified to development properties, and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

e) InventoryInventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on an average cost basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

f) Financial assetsInvestments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit and loss which are initially measured at fair value.

Other financial assets are classified into the following specified categories; financial assets ‘at fair value through profit or loss’, ‘held to maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

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Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments.

Loans and receivables

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘Trade and other receivables’. Trade and other receivables are measured at amortised cost using the effective interest method less impairment.

Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date of impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.

g) Goods and service taxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

l where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense or:

ll for receivables and payables which are recognised inclusive of GST

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

h) Impairment of assets (other than exploration and evaluation)At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash - generating unit) in prior periods. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

i) Research and developmentResearch and development grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

j) Income tax

Current tax

Current tax is calculated by references to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the Financial Year. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

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Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacting by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the Financial Year

Current and deferred tax is recognised as an expense or income in the Statement of Comprehensive Income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination.

Tax consolidation

The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Phoenix Copper Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in Note 5 to the financial statements.

Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

k) Financial instruments issued by the Company

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period.

The following estimated useful lives are used in the calculation of deprecation:

¬ Plant and equipment – at cost 3-10 years

m) Principles of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

n) Revenue Revenue is measured at the fair value of the consideration received or receivable.

Sale of goods

Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

¬ the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

¬ the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

¬ the amount of revenue can be measured reliably;

¬ it is probable that the economic benefits associated with the transaction will flow to the entity; and

¬ the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is that rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

o) Share-based paymentsEquity-settled share-based payments are measured at fair value at the grant date (where this report refers to the ‘grant date’ of Shares or Options, the date mentioned is the date on which those Shares or Options were agreed to be issued (whether conditionally or otherwise) or, if later, the date on which key terms of the Shares or Options (e.g. subscription or exercise price) were determined). Fair value is measured by use of the Black-Scholes model, Monte Carlo model or the use of another binomial model, depending on the type of Share or Option issued.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of Shares that will eventually vest.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the Group obtains the goods or the counterparty renders the service.

p) Business combinationsAcquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group,

liabilities incurred by the Group to the former owners of the acquire and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

¬ Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income taxes’ and AASB 119 ‘Employee Benefits’ respectively;

¬ Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group are entered into to replace share-based payment arrangements of the acquire are measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and

¬ assets (or disposals groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

q) Leasing

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

r) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probably that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

s) Critical accounting judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies, management is required to make judgements estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis for making judgements. Actual results may differ from these estimates.

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

The following are the critical judgements that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

Impairment

Determining whether assets are impaired requires an estimation of the value in use of the cash-generating units to which assets are allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

An impairment loss of $1,629,931 (2010: Nil) was recognised during the current financial year. Details of the impairment loss calculation are provided in note 11.

4 Loss from operations

Year Ended30/06/11

$

Year Ended30/06/10

$

a) Revenue from continuing operations consisted of the following itemsCopper Cement Sales 2,100,766 -

2,100,766 -

b) Other incomeInterest revenue on bank deposits 76,005 118,811

Rental revenue 6,313 37,387

Research and development refund receivable 163,895 342,142

Other 5,458 3,366

251,671 501,706

c) Employee benefits expenseWages, salaries, director’s fees and other

remuneration expenses

2,623,539 243,619

Leave expense 55,644 31,052

Share-based payments expense 302,655 27,815

2,981,838 302,486

Other expensesDepreciation of plant and equipment 675,978 94,462

Operating lease rental expenses 56,864 55,428

Impairment expense 1,629,931 -

Exploration and evaluation expenditure write down 650,000 -

Amortisation of mineral rights 26,021 -

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5 Income tax

Year ended30/06/11

$

Year ended30/06/10

$

a) Income tax recognised in profit or lossCurrent tax expense 27,889 7,539

Deferred tax expense/(income) relating to the origination and reversal of temporary differences and tax losses

- -

Total tax expense/(income) 27,889 7,539

The prima facie income tax expense on the loss before income tax reconciles to the tax expense/(income) in the financial statements as follows:

Profit / (Loss) from continuing operations (6,944,246) (576,256)

Income tax income calculated at 30% (2,083,274) (172,877)

Share based payments 90,797 15,884

Other permanent tax differences 102,933 (86,064)

Temporary difference movement 52,155) (15,149)

Adjustment recognised in the current year in relation to the prior year 15,809 (11,252)

Current year tax losses not recognised 1,849,469 276,997

Tax expense (income) 27,889 7,539

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

b) Recognised tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following:

30/06/11$

30/06/10$

Trade and other receivables (230) (1,662)

Exploration and evaluation expenditure (1,145,354) (998,816)

Trade and other payables 87,577 31,232

Employee benefits 204,433 19,665

Share issue costs 83,921 127,773

(769,653) (821,808)

Temporary difference not recognised 769,653 821,808

Net deferred tax assets / (liabilities) - -

c) Unrecognised deferred tax assets:A deferred tax asset has not been recognised in respect of the following item:

30/06/11$

30/06/10$

Temporary differences (769,653) (821,808)

Tax Losses-revenue 2,312,602 787,941

1,542,949 (33,867)

A deferred tax asset has not been recognised in respect of the above tax losses because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefit.F

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d) Movement in recognised temporary differences and tax losses

30/06/11$

30/06/10$

Opening balance - -

Recognised in equity 27,889 7,539

Recognised in income (27,889) (7,539)

Closing balance - -

Tax consolidation

Relevance of tax consolidation to the consolidated entity

The Company and its wholly-owned Australian resident entities are in a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax consolidated group is Phoenix Copper Limited.

Nature of tax funding arrangement

Entities within the tax-consolidated group have entered into a tax funding arrangement with the head entity. Under the terms of the tax funding arrangement, Phoenix Copper Limited and its wholly owned Australian resident entities have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the-consolidated group.

6 Current trade and other receivables

30/06/11$

30/06/10$

Trade receivables 241,697 6,837

Accrued interest 765 5,541

Goods & Services Tax receivable 323,869 96,514

Research and development refund 163,895 -

730,226 108,892

The average credit period on sales of goods is seven days. No interest is charged on trade receivables. The groups only customer for sales of Copper cement is Adchem (Australia) Pty Ltd.

7 Other current assets

30/06/11$

30/06/10$

Prepayments 14,168 22,229

Bank Guarantee 150,000 -

164,168 22,229

8 Inventory

30/06/11$

30/06/10$

Raw materials 41,823 -

Work in progress 341,378 -

Finished goods 46,203 -

429,404 -

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9 Exploration and evaluation expenditure

30/06/11$

30/06/10$

Costs brought forward 4,861,838 2,777,090

Expenditure incurred during the year 1,142,460 2,087,293

6,004,298 4,864,383

Expenditure written off (650,000) (2,545)

5,354,298 4,861,838

The recoverability of the carrying value of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

10 Plant and equipment

Gross carrying amount $

Balance at 30 June 2009 409,612

Additions 64,358


Additions LCCM Acquisition 1,678,500

Additions Other 2,208,017

Balance at 30 June 2011 4,360,487

Accumulated Depreciation


Depreciation Expense 94,462


Depreciation Expense 649,957

Impairment Expense (i) 1,105,598

Balance at 30 June 2011 1,936,557

Net book value


Balance at 30 June 2011 2,423,930

i) Refer to Note 11 for impairment losses recognised during the year

The following useful lives are used in the calculation of depreciation.

Plant and equipment at cost - 3–10 years

11 Mineral rights

30/06/11$

30/06/10$

Mineral Rights 1,807,068 -

Accumulated Amortisation Mineral Rights (26,021) -

Impairment expense (524,333) -

Total 1,256,714 -

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Impairment losses recognised during the yearProperty, plant and equipment and Mineral Rights have been allocated to the following cash generating units:

- Mining operations (LCCM)

- Exploration

During the year, as the result of the unexpected halt of production and higher than expected costs at Leigh Creek Copper Mine Pty Ltd (LCCM), the Group carried out a review of the recoverable amount of that mining plant and equipment and mineral rights. These assets are used in the Group’s mining reportable segments. The review led to the recognition of an impairment loss of $1,629,931, which has been recognised in profit or loss. The recoverable amount of the relevant assets has been determined on the basis of their value in use. The discount rate used in measuring value in use was 30% per annum. No impairment assessment was performed in 2010 as LCCM was acquired on 23 July 2010.

Mineral rights are amortised as the resource is mined.

12 Current liabilities – trade and other payables

30/06/11$

30/06/10$

Trade payables 1,482,161 317,481

Accrued expenses 291,925 104,107

Other payables 104,018 72,498

Total 1,878,104 494,086

13 Current liabilities – provisions

30/06/11$

30/06/10$


Rehabilitation 560,250 -

Total 663,081 58,487

14 Convertible notes

30/06/11$

30/06/10$

Convertible notes 500,000 -

500,000 7% AUD denominated convertible notes were issued by the Company on 23 June 2011 at an issue price of $1 per note. The Company may, from time to time after the Completion Date until the Maturity Date, request the subscriber to subscribe for Notes under the Optional Note Facility by issuing a written notice to the subscriber. Subsequent to year end (7 September 2011) Phoenix issued a further 250,000 in notes to the subscriber (refer Note 30).

Each note entitles the holder to convert to one ordinary share at cost of $1 per share. Conversion may occur at any time between 23 June 2011 and 23 June 2012. If the notes have not been converted, they will be redeemed on 23 June 2012 at $1. Interest of 7% will be paid quarterly up until that settlement date. Subsequent to year end (23 September 2011) the 750,000 of convertible notes have been converted (refer Note 30).

The net proceeds received from the issue of the convertible notes have been classified as a liability.

The convertible notes component is measured at amortised cost. The interest expense for the year ($300) is calculated by applying an effective interest rate of 7% to the liability component for the period since the loans were issued. Interest paid in the period since issue is nil. There is no difference between the carrying amount of the liability component at the date of issue 23 June 2011 and the amount reported in the statement of financial position at 30 June 2011 ($500,000) represents the effective interest rate less interest paid to that date.

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15 Non-current liabilities - provisions

30/06/11$

30/06/10$


16 Issued capital

30/06/11$

30/06/10$

93,116,512 fully paid ordinary shares (2010: 54,515,500) 16,101,708 7,815,603

1,500,000 Performance shares (2010: 1,500,000) 126,185 126,185

16,227,993 7,941,788

Movement in issued shares for the year:

No. 30/06/11$

No. 30/06/10$

Balance at beginning of financial year 54,515,500 7,815,603 53,975,500 7,857,740


38,399,012 8,328,430 500,000 95,000

Conversion of employee options at 6.1 cents - - 40,000 2,440

Conversion of employee options at 14.6 cents 111,000 16,206 - -

Conversion of employee options at 7 cents 91,000 6,643 - -

Transfer from share option reserve - - - 3,600

Share issue costs - (65,174) - (24,532)

Applicable income tax relating to share issue costs - - - 7,540

Balance at end of financial year 93,116,512 16,101,708 54,515,500 7,815,603

Fully paid shares carry one vote per share and carry a right to dividends

17 Reserves

30/06/11$

30/06/10$

Equity-settled benefits reserve 993,247 543,480

993,247 543,480

The employee equity-settled benefits reserve arises on the grant of share options to employees, consultants and executives under the Employee Share Option Plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised. Further information about share based payments made under the plan is shown in note 19 to the financial statements.

18 Accumulated losses

30/06/11$

30/06/10$

Accumulated losses 8,832,065 1,887,850

Balance at beginning of year 1,887,850 1,304,055

Loss for the year 6,944,215 583,795

Balance at end of year 8,832,065 1,887,850

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19 Share Option and Performance Rights PlanDuring the current year, the Group replaced the Employee Share Option Plan with the Phoenix Copper Limited Performance Rights Plan. Details about these plans are set out below:

Share Option PlanThe Group had an ownership-based compensation plan for executives, employees and consultants. In accordance with the provisions of the Employee Share Option Plan, which was approved by shareholders at an annual general meeting, Directors issued options to purchase shares in the Company to executives, employees, and consultants, at an issue price determined by the market price of ordinary shares at the time the option was granted. No Directors participated in the Employee Share Option Plan.

In accordance with the terms of the Employee Share Option Plan, options vest at grant date and may be exercised at any time from the date of their issue to the date of their expiry.

Share options are not listed, carry no rights to dividends and no voting rights.

The following share based payment arrangements were in existence during the financial year.

Options – Series Number Grant date Expiry date Exercise price Fair value at grant date

Vesting date

Employee Share Option Plan

19 June 2008 250,000 28/04/2008 18/06/2013 $0.25 $0.0336 18/06/2008

12 September 2008 500,000 12/09/2008 11/09/2013 $0.25 $0.0411 12/09/2009

16 March 2009 750,000 16/03/2009 05/03/2014 $0.10 $0.0436 16/03/2009

11 June 2009 23,000 11/06/2009 10/06/2014 $0.086 $0.0600 11/06/2009

22 June 2009 62,000 22/06/2009 21/06/2014 $0.073 $0.0800 22/06/2009

18 August 2009 91,000 18/08/2009 17/08/2014 $0.073 $0.0700 18/08/2009

22 October 2009 111,000 22/10/2009 21/10/2014 $0.146 $0.1600 22/10/2009

Director Options 1,500,000 04/10/2007 11/02/2013 $0.25 $0.0648 11/02/2008

Other Options

Reilly Options 2,000,000 19/10/2007 25/01/2013 $0.25 $0.0642 25/01/2008

Avanti Options 1,750,000 16/10/2007 25/01/2013 $0.25 $0.0648 25/01/2008

Marathon Options 750,000 09/11/2007 25/01/2013 $0.25 $0.0642 25/01/2008

Taylor Collison Options 1,000,000 09/11/2007 25/01/2013 $0.25 $0.0642 25/01/2008

LCCM Vendors 1,250,000 30/07/2010 29/07/2015 $0.275 $0.1673 30/07/2010

15 October 2010 2,298,850 15/10/2010 15/04/2012 $0.35 - 15/10/2010

30 November 2010 750,000 30/11/2010 31/10/2011 $0.28 $0.1542 30/11/2010

1 December 2010 574,713 01/12/2010 15/04/2012 $0.35 - 01/12/2010

11 March 2011 2,351,102 11/03/2011 11/03/2013 $0.35 - 11/03/2011

7,224,665 options were granted during the year (2010: 242,000).

Employee Share Option PlanThe following reconciles the outstanding share options granted under the Employee Share Option Plan at the beginning and end of the financial year:

Share Option Plan 30/06/11 30/06/11 30/06/10 30/06/10

Number of options Weighted average exercise price $


Balance at beginning of financial year 1,787,000 0.2262 1,585,000 0.2407

Granted during the financial year - - 242,000 0.1045

Exercised during the financial year (202,000) (0.1131) (40,000) -

Lapsed during the financial year - - - -

Balance at end of the financial year 1,585,000 0.2407 1,787,000 0.2262

The share options outstanding at the end of the financial year had an average exercise price of $0.2407 (2010: $0.2262) and a weighted average remaining contractual life of 891 days (2010: 1,291 days).

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Directors and Other Options

Directors and Others 30/06/11 30/06/11 30/06/10 30/06/10



Balance at beginning of financial year 7,000,000 0.25 7,000,000 0.25

Granted during the financial year 7,224,665 0.3298 - -

Exercised during the financial year - - - -

Lapsed during the financial year - - - -

Balance at end of the financial year 14,224,665 0.2905 7,000,000 0.25

The share options outstanding at the end of the financial year had an average exercise price of $0.2905 (2010: $0.25) and a weighted average remaining contractual life of 583 days (2010: 1,309 days).

Inputs into the 2011 option pricing model:

LCCM Vendors 30 November 2010

Grant date share price $0.19 $0.34

Exercise price $0.275 $0.28

Expected volatility 142% 103%

Term 5 years 11 months

Risk-free interest rate 4.50% 4.75%

Performance Rights PlanThe Group has an ownership-based compensation plan for executives, employees and consultants. In accordance with the provisions of the Phoenix Copper Limited Performance Rights Plan (PRP), Directors may issue performance rights to the Company executives, employees and consultants. The performance rights are granted for no consideration and entitle the holder to be issued one fully paid ordinary share per performance right upon vesting.

At the Annual General Meeting held on the 26 November 2010, shareholder’s approved the issue of 1,000,000 share upon the vesting of 1,000,000 performance rights granted to the Managing Director under the Phoenix Copper Limited Performance Rights Plan. The performance rights vest as follows as long as the holder remains as the Managing Director of the Company at the relevant vesting dates:

a) 500,000 performance rights on 31 July 2012 (tranche 1) (T1)

b) 500,000 performance rights vest within 30 days of the earlier of (tranche 2) (T2)

i) the achievement of a 2011/2012 profit for the Company of $4.5 million or greater and the Board considers that a profit of at least this amount is sustainable for the following two years; and

ii) a discovery or discoveries of mineralisation internally estimated, to the satisfaction of the Board, to contain, or contain in aggregate, 125,000 tonnes of contained copper or equivalent in other metals.

The Board approved the issue of 100,000 performance rights to the new mine manager for the Mountain of Light Copper Mine that vest on the mine manager completing 6 months continuous employment with Phoenix Copper Limited.

The following PRP awards were in existence during the financial year:

Rights -‐ Series Number Grant date Vesting date Fair value at grant date

September 2010 1,000,000 24/09/2010 As described above $0.34

May 2011 100,000 1/05/2011 1/11/2011 $0.25

The weighted average fair value of the performance rights granted during the financial year is $0.3318.

Performance rights granted during 2011 were fair valued using a Black-Scholes pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimates for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the right), and behavioural considerations.F

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Inputs into the 2011 performance right pricing model:

24 September 2010 (T1) 24 September 2010 (T1) 11 May 2011

Grant date share price $0.34 $0.34 $0.25

Exercise price $0.00 $0.00 $0.00

Expected volatility 110% 110% 87%

Term 1.68 years 1.68 years 6 months

Risk-free interest rate 4.75% 4.75% 4.75%

The following reconciles the performance rights granted under the PRP at the beginning and end of the financial year:

Performance Rights Plan Number of Performance Rights 2011

Balance at the beginning of financial year -

Granted during the financial year 1,100,000

Balance at the end of the financial year 1,100,000

20 Key management personnel compensationThe key management personnel of Phoenix Copper Limited during the year were:

Graham Spurling (Chairman)

Paul Dowd (Managing Director)

Peter Watson (Non-Executive Director)

David Hillier (Non-Executive Director since 17 September 2010)

Peta Marshman (Company Secretary)

Nick Harding (Chief Financial Officer since 1 September 2010)

Mark Manly (Chief Geologist)

James Fox (General Manager – Mountain of Light Copper Mine since 1 May 2011)

The aggregate compensation of Key Management Personnel of the Group is set out below:

Year ended30/06/11

$

Year ended30/06/10

$

Short-term employee benefits 1,033,415 596,852

Post employment benefits 53,263 23,532

Share-based payments (i) 125,038 -

1,211,716 620,384

i) Share based payments relate to performance rights granted during the year to key management personnel. Performance rights do not represent cash payments to key management personnel.

21 Remuneration of Auditors

30/06/11$

30/06/10$

Audit or Review of the financial report 55,325 30,198

Tax return preparation and advice 14,576 9,481

69,901 39,679

The auditor of Phoenix Copper Ltd is Deloitte Touche Tohmatsu.For

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22 Related party disclosures

a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 28 to the financial statements.

b) Transactions with Key Management Personnel

Key Management Personnel compensation

Details of key management personnel compensation are disclosed in Note 20 and the Remuneration Report of the Directors’ Report.

Equity holdings of key management personnel

i) Fully paid ordinary shares issued by Phoenix Copper Limited

2011 Balance 01/07/10 Net changes Balance 30/06/11 Balance held nominally

Directors

Graham Spurling 616,334 93,750 710,084 -

Paul Dowd 450,000 93,750 543,750 -

Peter Watson 4,530,000 93,750 4,623,750 530,000

David Hillier - 150,000 150,000 -

Other Key Management Personnel

Mark Manly - - - -

Peta Marshman 100,000 12,500 112,500 -

Nick Harding 3,000 - 3,000 -

James Fox - - - -

2010 Balance 01/07/09 Net Changes Balance 30/06/10 Balance held Nominally

Directors

Graham Spurling 591,334 25,000 616,334 -

Paul Dowd 350,000 100,000 450,000 -

Peter Watson 4,530,000 - 4,530,000 530,000


Mark Manly - - - -

Peta Marshman 100,000 - 100,000 -

ii) Options to acquire fully paid ordinary shares issued by Phoenix Copper Limited

2011 Balance 01/07/10

Granted Lapsed Balance 30/06/11

Balance held nominally

Vested and exercisable

Directors

Graham Spurling 500,000 - - 500,000 - 500,000

Paul Dowd 500,000 - - 500,000 - 500,000

Peter Watson 500,000 - - 500,000 - 500,000

David Hillier - - - - - -


Mark Manly 1,500,000 - - 1,500,000 - 1,500,000For

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2010 Balance 01/07/09

Granted Lapsed Balance 30/06/10

Balance held nominally

Vested and exercisable

Directors

Graham Spurling 500,000 - - 500,000 - 500,000

Paul Dowd 500,000 - - 500,000 - 500,000

Peter Watson 500,000 - - 500,000 - 500,000


Mark Manly 1,500,000 - - 1,500,000 - 1,500,000

iii) Performance shares issued by Phoenix Copper Limited

2011 Balance 01/07/10 Granted Lapsed Balance 30/06/11

Directors

Paul Dowd 1,500,000 - - 1,500,000


Directors

Paul Dowd 1,500,000 - - 1,500,000

iv) Performance rights issued by Phoenix Copper Limited


Directors

Paul Dowd - 1,000,000 - 1,000,000


James Fox - 100,000 - 100,000

Other transactionsDuring the financial year the Group and the Company entered into the following transactions:

¬ A relative of a Director (Peter Watson) is the Assistant to the Managing Director. The amount paid as salary was $70,000 (2010: $70,000) for the financial year.

¬ The Company engaged Watson’s Lawyers, an entity in which a Director (Peter Watson) is a partner, to advise on legal matters. The amount paid in the financial year for these services was $84,588 (2010: $87,113). A balance of $18,835 is outstanding for payment to Watsons at year end.

¬ Accrued salaries to related parties at year end include: P Dowd $143,016 and G Spurling $18,750.

c) Transactions within wholly owned group

The ultimate parent entity in the wholly-owned group is Phoenix Copper Limited. During the financial year Phoenix Copper Limited provided accounting and administrative services at no cost to the controlled entities and advanced interest free loans. Tax losses have been transferred to Phoenix Copper Limited for no consideration.

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23 commitments for expenditure and contingent liabilities

a) Exploration Expenditure CommitmentsThe Group has certain obligations to perform exploration work and expend minimum amounts of money on such works on mineral exploration tenements.

These obligations will vary from time to time, subject to statutory approval. The terms of current and future joint ventures, the grant or relinquishment of licences and changes to licence areas at renewal or expiry, will alter the expenditure commitments of the Company.

Total expenditure commitments at balance date in respect of minimum expenditure requirements not provided for in the financial statements are approximately:

30/06/11$

30/06/10$

Not later than one year 1,274,667 1,055,000

Later than one year but not later than two years 1,457,167 1,235,000

Later than two years but not later than five years 6,028,667 3,675,000

8,760,501 5,965,000

b) Reilly Tenement Acquisition AgreementBy the Reilly Tenement Acquisition Agreement dated 19 October 2007 between the Company and Matthew Reilly, as amended by deed dated 19 November 2007 (RTAA), the Company agreed to purchase mineral exploration licence EL3161 from Mr Reilly.

The outstanding commitments pursuant to this agreement are:

¬ the issue and allotment to Mr Reilly of 800,000 Shares and 800,000 Options upon grant of an Exploration Licence over some or all of the area within EL 3161 reserved from the operation of the Mining Act 1971 (SA), comprising the area, and immediate surroundings, of the historic Burra Mine and the historic Burra Smelter, as gazetted in March 1988;

¬ the payment of $100,000 upon commencement of processing of any tailings, waste residues, waste rock, spoiled leach materials and other materials located on the surface of the land the subject matter of EL 3161 or derived from that land by or on behalf of the Company;

¬ the payment of $200,000 upon the Company announcing an ore reserve, prepared in accordance with the JORC Code, on EL3161 of at least 15,000 tonnes of contained copper; and

¬ the payment of a retainer of $20,000 per year, payable on the anniversary of completion of the sale and purchase of EL 3161, for a period of four years (to an aggregate total value of $80,000), for the provision of services by Mr Reilly to the Company.

c) Joint Venture with Australian Field Services Pty LimitedThe Eastern portion of EL3164 (acquired by the Company from Marathon Resources Limited (Marathon) on 25 January 2008) is subject to a contractual joint venture with Australian Field Services Pty Ltd (AFS). The joint venture is constituted by a letter agreement dated 8 October 2007 between Marathon and AFS and a Deed of Assignment, Assumption and Variation dated 9 November 2007 between the Company, Marathon and AFS.

AFS has now earned a 90% interest in the joint venture by spending $180,000 within three years. The Company now has 10% free carried interest up to a decision to mine following a feasibility study. AFS have fulfilled their commitment under the Joint Venture.

AFS is the manager of the Joint Venture and is responsible for the design and execution of exploration programmes while it is the sole contributor to joint venture expenditure and thereafter, if and for so long as its joint venture interest is 51% or more. Each party may withdraw from the Joint Venture at any time.

d) Royalty AgreementsThe Company has granted the following royalties:

¬ to Mr Matthew Reilly a royalty calculated at 6% of the aggregate net revenue in respect of all metals derived from EL3161.

¬ to Avanti Resources Pty Ltd a royalty calculated as 2.5% of the net smelter return on all metals derived from EL3604, EL3716 and EL3686.

¬ to Marathon Resources Limited a royalty calculated as a 2.5% net smelter return on all metals derived from the Western Portion of EL3164.

¬ to Copper Range (SA) Pty Limited a royalty calculated as a 1.5% net smelter return on all metals derived from EL3459.

¬ to Copper Range (SA) Pty Limited a royalty calculated as a 2.0% net smelter return on all metals derived from EL3971, EL3972 and EL3451.

¬ to Copper Range (SA) Pty Limited 50% of a royalty calculated as a 1.5% net smelter return on all metals derived from EL4370.

¬ to Flinders Mines Limited 50% of a royalty calculated as a 1.5% net smelter return on all metals derived from EL4370.

Leigh Creek Copper Mine Pty Ltd (LCCM) has granted to Adchem (Australia) Pty Ltd a 1% royalty in respect of copper produced from operations at ML5467, ML5498, and ML5741. The Company purchased all of the shares in the capital of LCCM on 23 July 2010.

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e) Native TitleNative title claims exist over some tenements in South Australia in which the Group has interests. The Group is unable to determine the prospects of success or otherwise of the claims and, in any event, whether or not and to what extent the claims or future claims may significantly affect the Group or its projects.

f) Operating LeaseThe Company leases office space with a lease term of two years, with an option to extend for a further two years.

Non-‐cancellable operating lease commitments 30/06/11$

30/06/10$

Not longer than 1 year 29,723 52,127

Longer than 1 year and not longer than 5 years - 35,666

Longer than 5 years - -

29,723 87,793

g) Contingent liabilities

Employment contracts

The Company has entered into employment contracts with Key Management Personnel, Paul Dowd (Managing Director), James Fox (General Manager – Mountain of Light Copper Mine) and Mark Manly (Chief Geologist). The Company can terminate these employment contracts with three months for Mr Dowd and Mr Fox and one month for Mr Manly. As at 30 June 2011, the Group had a contingent liability in relation to these employment contracts of $142,111 (2010: $107, 054).

24 Financial Instruments

Capital risk managementThe 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 shareholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses as disclosed in notes 16 and 17 respectively.

Due to the nature of the Group’s activities (early stage production and exploration) the Directors believe that the most advantageous way to fund activities is through equity and convertible notes. The Group’s exploration activities and copper mining and production are monitored to ensure that adequate funds are available.

Categories of financial instruments

30/06/11$

30/06/10$

Financial assets

Cash and cash equivalents 1,089,183 1,871,127

Trade and other receivables 880,226 108,892

Financial liabilities

Trade and other payables 1,878,104 494,085

Convertible Note 500,000 -

Interest rate risk managementThe Company and the Group’s exposures to interest rates on financial assets and financial liabilities are covered by the liquidity risk management section of this note.

Interest rate sensitivity analysisThe sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period.

At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s and Company’s net profit would increase/decrease by $5,448 and $5,448 respectively (2010: increase/decrease by $15,000 and $15,000 respectively). This is mainly attributable to interest rates on bank deposits.

The Group’s sensitivity to interest rates has significantly decreased due to the decrease in the current holding in cash compared to the prior year.

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Credit risk managementCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from activities.

The Group does have a credit risk exposure to AdChem being the sole customer for Copper cement sales. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

Liquidity risk managementUltimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and continuously monitoring forecast and actual cash flows.

Liquidity and interest risk tablesThe following table details the Company’s and the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Consolidated and Company

Weighted average effective interest rate

Less than one month 1-‐3 months 3-‐12 months 1-‐5 years

% $

2011

Non-interest bearing - 676,672 1,201,432 - -

Fixed Interest bearing 7% - - 500,300 -

2010

Non-interest bearing - 494,085 - - -

Fair value of financial instrumentsThe fair values of financial assets and financial liabilities are determined as follows:

» the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

» the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.

Convertible notesThe fair value of the liability component of convertible notes is determined assuming redemption on 23 June 2012 and using a 7.% pa payable on a quarterly basis and holding the credit risk margin constant.

Market riskGroup’s activities expose it primarily to the financial risks of changes in US dollar exchange rates and Copper prices. As these risks are not managed there is exposure to the movement in the market.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair values.

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25 Segment InformationAASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

Information reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of performance is more specifically focused on the category of customer for each type of good. The principal categories are exploration as well as mining of Copper. The Group’s reportable segments under AASB 8 are therefore as follows:

» Exploration in Australia

» Mining and production of copper.

The Group has a number of exploration licenses in Australia which are managed on a portfolio basis. The decision to allocate resources to individual projects in the portfolio is predominantly based on available cash reserves, technical data and the expectations of future metal prices.

The Group acquired the Leigh Creek Copper Mine Pty Ltd during the Financial Year. Copper is produced from this mine.

Information regarding these segments is presented below. The accounting policies for the new reportable segments are the same as the Group’s accounting policies.

The following is an analysis of the Group’s revenue and results by reportable operating segment for the Financial Year under review:

Revenue Revenue Segment profit Segment profit

Year ended 30/06/11

$

Year ended 30/06/10

$

Year ended 30/06/11

$

Year ended 30/06/10

$

Exploration and continuing operations 6,313 37,387 (2,434,474) (576,256)

Mining 2,100,766 - (4,481,883) -

Unallocated 245,358 538,869 - -

Loss before tax (6,916,357) (576,256)

Income tax expense (27,889) (7,539)

Consolidated segment revenue and loss for the Financial Year

2,352,437 576,256 (6,944,246) (583,795)

The revenue reported above represents revenue generated from external customers. There were no intersegment sales during the Financial Year.

Segment loss represents the loss earned by each segment without allocation of central administration costs and Directors’ salaries, investment revenue and finance costs, income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

The following is an analysis of the Group’s assets by reportable operating segment:

30/06/11 $

30/06/10 $

Exploration and Continuing operations 7,829,054 5,285,927

Mining 4,079,668 -

Total segment assets 11,448,622 5,285,927

Unallocated assets 288,425 1,871,127

Total assets 11,448,622 7,157,054

For the purposes of monitoring segment performance and allocating resources between segments:

» all assets are allocated to reportable segments, ‘other financial assets’ and current and deferred tax assets. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and

» all liabilities are allocated to reportable segments other than borrowings, ‘other financial liabilities’, current and deferred tax liabilities. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

» Geographically all segments are located in Australia.

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26 Earnings per share

Year ended 30/06/11Cents per share

Year ended 30/06/10Cents per share

Basic earnings per share – Profit / (loss) (8.14) (1.05)

Diluted earnings per share – Profit / (loss) (8.14) (1.05)

Basic earnings per share (8.14) (1.05)

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

$ $

Earnings (6,944,246) (583,795)

Number Number

Weighted average number of ordinary shares 85,267,990 55,748,651

Diluted earnings per shareThe earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

(8.14) (1.05)

$ $

Earnings (6,944,246) (583,795)

Number Number

Weighted average number of ordinary shares 85,267,990 55,748,651

27 Controlled entities

Ownership interest Ownership interest

Name of Entity Country of incorporation 2011%

2010%

Parent Entity

Phoenix Copper Limited i) Australia 100% 100%

Subsidiaries

Wellington Exploration Pty Ltd ii) Australia 100% 100%

Leigh Creek Copper Mine Pty Ltd ii) Australia 100% 0%

i) Head entity in tax consolidated group

ii) Members of tax consolidated group

Phoenix Copper Limited has entered into a deed of cross guarantee with two of its wholly-owned subsidiaries, Leigh Creek Copper Mine Pty Ltd and Wellington Exploration Pty Ltd. The consolidated statement of financial performance and statement of financial position of the entities party to the deed of cross guarantee are the same as those of the consolidated entity.

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28 Acquisition of subsidiaryOn 23 July 2010 the Group acquired a 100% interest in Leigh Creek Copper Mine Pty Ltd (LCCM). LCCM is engaged in the mining of copper.

Consideration transferred

$

Cash 1,762,086

Shares 1,187,500

Share options 209,112

3,158,698

Assets acquired and liabilities assumed at the date of acquisition

$

Non-current assets

Plant and equipment 1,678,500

Mineral rights 1,807,068

Cash backed guarantees 150,000

Current liabilities

Rehabilitation provision (476,870)

3,158,698

Net cash outflow arising on acquisition

$

Consideration paid in cash 1,762,086

1,762,086

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29 Parent entity disclosures

30/06/11$

30/06/10$

Financial Position

Assets

Current assets 1,660,607 2,006,248

Non-current assets 8,903,995 5,211,447

Total assets 10,564,602 7,217,695

Liabilities

Current liabilities 2,157,066 552,142

Non-current liabilities 18,361 7,063

Total liabilities 2,175,427 559,205

Equity

Issued capital 16,227,993 7,941,788

Accumulated losses (8,832,165) (1,827,210)

Reserves

Employee equity-settled benefits reserve 993,247 543,480

Total equity 8,389,075 6,658,058



Financial Performance

Loss for the year (7,005,386) (583,795)

Other comprehensive income - -

Total comprehensive income (7,005,386) (583,795)

Commitment for expenditure and contingent liabilities of the parent entityNote 23 to the financial statements discloses the Group’s commitments for expenditure and contingent liabilities. Of the items disclosed in that note the following relate to the parent entity:

» service agreements

» bank guarantees

» operating leases.

30 Subsequent eventsThe matters or circumstances that have arisen since 30 June 2011 and have significantly affected or may significantly affect:

» the Group’s operations in future financial years;

» the results of those operations in future financial years; or

» the Group’s state of affairs in future financial years,

are as follows:

» the cessation on 13 June 2011 of mining activities and on 24 June 2011 of crushing, screening and ore stacking activities at LCCM’s Mountain of Light (MoL) project and the commencement of a financial and technical review in connection with the future mining of the Paltridge North orebody;

» the issue of a further 250,000 unsecured Convertible Notes to Talis SA on 7 September 2011, for $250,000 in subscription monies;

» the release from voluntary escrow of 15,000,001 Shares; and

» the conversion of 750,000 unsecured Convertible Notes by Talis SA resulting in the issue of 8,392,693 Shares on 23 September 2011.

Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

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The Directors declare that:

In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

In the Directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in Note 3 to the financial statements.

In the Directors’ opinion, the financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Company and consolidated entity; and

The Directors have been given the declaration required by Section 295A of the Corporation Act 2001.

At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each Company which is a party of the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order apples, as detailed in note 27 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the Directors made pursuant to Section 295(5) of the Corporations Act 2001.

On behalf of the Directors

Paul J DowdM A N A G I N G D I R E C T O R

30 September 2011

Directors’ Declaration

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Independent Audit Report to the Membersof Phoenix Copper Limited

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SharesThe total number of Shares issued as at 4 October 2011 was 101,509,205 held by 562 registered Shareholders.

None of these Shares are subject to escrow.

98 Shareholders hold less than a marketable parcel, based on the market price of a Share as at 4 October 2011.

Each Share carries one vote.

Performance SharesAs at 4 October 2011 the Company had on issue 1,500,000 Performance Shares, held by one holder, the Managing Director’s nominee, PJ & BA Dowd Investments Pty Ltd <Super Fund A/C>.

No voting rights are attached to the Performance Shares.

Performance RightsAs at 4 October 2011 the Company had on issue 1,100,000 Performance Rights, held by two holders. The Managing Director holds 1,000,000 of these Performance Rights and the General Manager – Mountain of Light copper mine holds the other 100,000.

No voting rights are attached to the Performance Rights.

Quoted OptionsThe Company does not have any quoted Options on issue.

Unquoted OptionsAs at 4 October 2011 the Company has on issue:

1,500,000 unquoted Options exercisable at $0.25 and expiring at 5pm Adelaide time on 11 February 2013 held by 3 holders (each Director holds 500,000 of these Options);

5,500,000 unquoted Options exercisable at $0.25 and expiring at 5pm Adelaide time on 25 January 2013 held by seven holders (Avanti Resources Pty Ltd <Marlow Family A/C> holds 1,750,000 of these Options and Matthew Reilly holds 1,525,000);

250,000 unquoted Options exercisable at $0.25 and expiring on 18 June 2013 held by one holder;

500,000 unquoted Options exercisable at $0.25 and expiring on 11 September 2013 held by one holder;

750,000 unquoted Options exercisable at $0.10 and expiring on 15 March 2014 held by one holder;



Additional Shareholder Information

1,250,000 unquoted Options exercisable at $0.275 and expiring on 29 July 2015 held by nine holders (McMahon Services Australia Pty Limited holds 345,684 of these Options and Texdos Pty Limited in its capacity as trustee of the Bill Buttrose Family Trust holds 292,920 of these Options);

2,873,563 unlisted Options exercisable at $0.35 and expiring on 15 April 2012 held by three holders (William Goodfellow and Forty Traders Limited each hold 1,149,425 of these Options and The New Zealand Guardian Trust Company Limited holds 574,713);

750,000 unlisted Options exercisable at $0.28 and expiring on 31 October 2011 held by one holder, Insync Equity Services Pty Ltd; and

2,351,102 unlisted Options exercisable at $0.35 and expiring on 11 March 2013, held by 13 holders (Asia Image Limited holds 952,380 of these Options).

No voting rights are attached to any Options.

Twenty Largest Shareholders As at 4 October 2011, the twenty largest Shareholders were as shown in the following table and held 67% of the Shares.

Rank Name Shares % of shares

1 Asia Image Limited 15,357,142 15.13

2 Long Fortune Limited 11,875,000 11.70

3 Talis SA 8,392,693 8.27

4 Mr Peter James Watson + Ms Judith Watson <Super Fund A/C>

4,000,000 3.94

5 Mr William Douglas Goodfellow 3,674,976 3.62

6 Forty Traders Limited 3,448,276 3.40

7 JP Morgan Nominees Australia Limited <Cash Income A/C>

2,931,388 2.89

8 Robert Leon C/O Tony Strasser 2,665,000 2.63

9 HSBC Custody Nominees (Australia) Limited

2,348,000 2.31

10 GDE Exploration (SA) Pty Ltd <A1 English A/C>

2,006,643 1.98

11 The New Zealand Guardian Trust Company Limited <Company No 115240>

1,724,138 1.70

12 Mr Mathew Reilly 1,525,000 1.50

13 Mrs Jaclyn Stojanovski + Mr Chris Retzos + Mrs Susie Retzos <Retzos Executive S/F A/C>

1,350,000 1.33

14 JP Morgan Nominees Australia Limited 1,301,000 1.28

15 The New Zealand Guardian Trust Company Limited <010369 Account>

1,087,500 1.07

16 The New Zealand Guardian Trust Company Limited <469119 Account>

1,087,500 1.07

17 Weldbank Pty Ltd 1,000,199 0.99

18 Mcmahon Services Australia Pty Limited 864,210 0.85

19 Anna Carina Pty Ltd 802,500 0.79

20 Amalgamated Dairies Limited 800,000 0.79

Total 68,241,165 67.23For

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Substantial ShareholdersAs at 4 October 2011, the substantial Shareholders as disclosed in substantial holding notices given to the Company are:

Holding %

Asia Image Limited 15,857,142 17.06

Long Fortune Limited 11,875,000 12.78

Talis SA 8,392,693 8.27

Distribution SchedulesA distribution schedule of the number of Shareholders, by size of holding, as at 30 September 2011 is set out below:

Size of holdings Number of shareholders

1 – 1000 18

1,001 – 10,000 179

10,001 – 100,000 268

100,001 and over 97

Total 562

A distribution schedule of the number of holders of unquoted, restricted Options exercisable at $0.25 and expiring on 11 February 2013, by size of holding, as at 4 October 2011 is set out below:

Size of holdings Number of holders

1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 3

Total 3

A distribution schedule of the number of holders of unquoted Options exercisable at $0.25 and expiring on 25 January 2013, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 7

Total 7

A distribution schedule of the number of holders of unquoted Options exercisable at $0.25 and expiring on 18 June 2013, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 1

Total 1

A distribution schedule of the number of holders of unquoted Options exercisable at $0.25 expiring on 11 September 2013, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 1

Total 1

A distribution schedule of the number of holders of unquoted Options exercisable at $0.10 expiring on 15 March 2014, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 1

Total 1

A distribution schedule of the number of holders of unquoted Options exercisable at $0.086 expiring on 10 June 2014, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 1

100,001 and over 0

Total 1

A distribution schedule of the number of holders of unquoted Options exercisable at $0.073 expiring on 21 June 2014, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 1

100,001 and over 0

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A distribution schedule of the number of holders of unquoted Options exercisable at $0.275 and expiring on 29 July 2015, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 4

100,001 and over 5

Total 9

A distribution schedule of the number of holders of unquoted Options exercisable at $0.35 and expiring on 15 April 2012, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 3

Total 3

A distribution schedule of the number of holders of unquoted Options exercisable at $0.28 and expiring on 31 October 2011, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 1

Total 1

A distribution schedule of the number of holders of unquoted Options exercisable at $0.35 and expiring on 11 March 2013, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 8

100,001 and over 5

Total 13

A distribution schedule of the number of holders of Performance Shares, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 0

100,001 and over 1

Total 1

A distribution schedule of the number of holders of Performance Rights, by size of holding, as at 4 October 2011 is set out below:


1 – 1000 0

1,001 – 5,000 0

5,001 – 10,000 0

10,001 – 100,000 1

100,001 and over 1

Total 2

There is no current on-market buy-back.

Enquiries from ShareholdersShareholders wishing to record a change of address or other holder details or with queries regarding their Shareholding should contact the Company’s share registry, Computershare, as detailed in the Corporate Directory at the front of this Annual Report. Shareholders with any other query are invited to contact the Company’s registered office as detailed in the Corporate Directory at the front of this Annual Report.

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