Berkeley Eng Regulatory News (BKY)

BERKELEY RESOURCES LIMITED

ANNUAL FINANCIAL REPORT

30 JUNE 2011

ABN 40 052 468 569

CORPORATE DIRECTORY

CONTENTS

The following sections are available in the full version of the Annual Financial Report on Berkeley Resources Limited's website:

www.berkeleyresources.com.au

Notes to the Financial Statements

Directors' Declaration

Auditor's independence Declaration

Independent Auditor's Report

DIRECTORS' REPORTThe Directors of Berkeley Resources Limited submit their report on the Consolidated Entity consisting of Berkeley Resources Limited ("Company" or "Berkeley" or "Parent") and the entities it controlled at the end of, or during, the year ended 30 June 2011 ("Consolidated Entity" or "Group").

DIRECTORS

The names of Directors in office at any time during the financial year or since the end of the financial year are:

Dr James Ross - Non-Executive Chairman since 14 January 2011 (previously Non-Executive)

Mr Brendan James - Managing Director (appointed 6 June 2011)

Señor Jose Ramon Esteruelas - Non-Executive Director

Mr Henry Horne - Chief Financial Officer appointed Executive Director on 11 October 2010 and Acting Managing Director from 14 January 2011 until 6 June 2011, remains as a Non-Executive Director

Mr Laurence Marsland - appointed Non-Executive Director 25 August 2011

Mr Ian Stalker - Managing Director until 14 January 2011 then Non-Executive Director

Mr Matthew Syme - Non-Executive Director

Dr Robert Hawley - Non-Executive Chairman until resigned 14 January 2011

Mr Sean James - Non-Executive Director until resigned 1 October 2010

Mr Scott Yelland - Chief Operating Officer/Executive Director until resigned 30 June 2011

Unless otherwise disclosed, Directors held their office from 1 July 2010 until the date of this report.

CURRENT DIRECTORS AND OFFICERS

James Ross AM

Non-Executive Chairman

Qualifications - B.Sc. (Hons.), PhD, FAusIMM, FAICD

Dr Ross is a leading international geologist whose technical qualifications include an honours degree in Geology at UWA and a PhD in Economic Geology from UC Berkeley. He first worked with Western Mining Corporation Limited for 25 years, where he held senior positions in exploration, mining and research. Subsequent appointments have been at the level of Executive Director, Managing Director and Chairman in a number of small listed companies in exploration, mining, geophysical technologies, renewable energy and timber. His considerable international experience in exploration and mining includes South America, Africa, South East Asia and the Western Pacific.

Dr Ross is a Director of Kimberley Foundation Australia Inc, and chairs its Science Advisory Council. He also chairs the Boards of a geoscience research centre and two foundations concerned with geoscience education in Western Australia.

He was appointed a Director of Berkeley Resources Limited on 4 February 2005 and appointed Non-Executive Chairman on 14 January 2011. He has not been a Director of another listed company in the three years prior to the end of the financial year.

Brendan James

Managing Director (appointed 6 June 2011)

Qualifications - B. Met. Eng. (Hons)

Mr Brendan James is a metallurgical engineer, with an exceptional background in developing, commissioning and optimising a number of large uranium, copper and gold operations. His technical background includes outstanding senior management experience in uranium mining and processing, project management, redesigning and commissioning previously decommissioned operations, biological heap leaching and hydrometallurgy. This background is complemented by five years' experience in financial markets, on both the buy and sell sides. Mr James is highly qualified to lead Berkeley through the optimisation, financing, development and commissioning of the Salamanca Uranium Project, and to advance Berkeley's strong organic growth opportunities. He will be based in Spain.

Jose Ramon Esteruelas

Non-Executive Director

Qualifications - BEcon.,LLB., PDipBus

Señor Esteruelas is an economist with vast experience in the managerial field whose senior executive roles have included Director General of Correos y Telegrafos (the Spanish postal service), Chief Executive Officer of Compania Espanola de Transformadora de Tabaco en Rama S.A. (Cetarsa), (the leading transformer tobacco company in Spain) and Executive Chairman of Minas de Almaden y Arrayanes SA (formerly the world's largest mercury producer).

Señor Esteruelas was appointed a Director of Berkeley Resources Limited on 16 November 2006. Señor Esteruelas has not held any other directorships of listed companies in the last three years.

Henry Horne

Non-Executive Director

Qualifications - BComm. (Financial Accounting and Business Economics)

Mr Horne was appointed Chief Financial Officer of Berkeley on 23 April 2010, before being appointed an Executive Director on 11 October 2010 and Acting Managing Director from 14 January 2011 until 6 June 2011, he remains on the board as a Non-Executive Director. Mr Horne is an international mining executive who holds a degree in Financial Accounting and Business Economics from the University of Stellenbosch (South Africa) and has more than 29 years' experience in the mining industry. This experience includes senior management and executive postings at mines in Namibia, South Africa, Ghana, Bulgaria, Chile and Russia with companies including Gold Fields, Kinross Gold, Navan Mining and Highland Gold. Mr Horne was the former Chief Executive Officer of Highland Gold in Russia and also served on various Boards.

Mr Horne has wide general management experience with strong financial, administrative and people management skills enhanced by confident negotiating abilities. He has extensive experience of African, Eastern European, Russian and North American financial best practices. In addition he also has comprehensive financial and technical knowledge and work experience within the gold and base metal mining industries. In the last three years, Mr Horne was previously on the board of Highland Gold Mining Limited until January 2008.

Laurence Marsland

Non-Executive Director

Qualifications - B. App.Sc. Mech. Eng., M.S.M

Mr Marsland is an engineer with more than thirty years' of diverse experience in the international mining industry, largely in senior management and executive director roles. Since 2000 he has worked extensively in Europe, including Spain.

Mr Marsland has a strong background in project management, and in the acquisition and development of government owned mining assets in Eastern Europe. He worked for Minproc Engineers for more than 15 years in project engineering and engineering management of mining projects in Australia, West African, Latin America and USA. More recently he was Vice President, Project Development for Gabriel Resources, then Executive Vice President and Chief Operating Officer for Dundee Precious Metals Inc. where he was responsible for the development and operation of its mining assets after renegotiating the acquisition of the substantial Chelopech gold-copper mine from the Bulgarian Government. He is currently a partner in PLC Partners S.A., a private company incorporated to pursue resource development opportunities.

Mr Marsland is an Australian citizen, and resides in Sofia, Bulgaria. He has a Bachelor of Applied Science in Mechanical Engineering from Curtin University and an MSc in Management from Stanford University Graduate School of Business. Mr Marsland was appointed a Director of Berkeley Resources Limited on 25 August 2011. He has not held any other directorships of listed companies in the last three years.

Matthew Syme

Non-Executive Director

Qualifications - B.Com, CA

Mr Syme is a Chartered Accountant and has over 20 years experience as a senior executive of a number of companies in the Australian resources and media sectors. He was a Manager in a major international Chartered Accounting firm before spending 3 years as an equities analyst in a large stockbroking firm. He was then Chief Financial Officer of Pacmin Mining Limited, a successful Australian gold mining company, as well as a number of other resources companies.

Mr Syme was appointed a director of Berkeley Resources Limited on 27 August 2004, and was the Managing Director of the Company until the appointment of Mr Stalker in November 2009. Mr Syme continues on the Board as a Non-Executive Director.

During the three year period to the end of the financial year, the only other listed company board that Mr Syme held was as the Managing Director of Sierra Mining Limited (appointed 1 July 2010 - present).

John (Ian) Stalker

Non-Executive Director

Qualifications - BSc (Chemical Engineering)

Mr Ian Stalker is a chemical engineer, with an outstanding history in developing and managing a number of mining projects around the world over the past 35 years. He has considerable experience in the uranium sector and in mining operations in Europe, Africa and Spain and has successfully managed eight mining projects throughout the world through feasibility study, development and construction phases.

Mr Stalker was the Managing Director of Berkeley from 30 November 2009 until 14 January 2011 when he resigned as Managing Director and remains on the board as a Non-Executive. He was formerly Chief Executive Officer of the London and Toronto Listed UraMin, until its acquisition by Areva in August 2007 for US $2.5 billion, and was subsequently CEO of Niger Uranium Ltd an AIM listed Company from 2008-2010. Prior to joining UraMin, Mr Stalker was at Gold Fields Ltd, where he was a Vice President and responsible for all of the company's projects in Australia and Europe in 2004.

Mr Stalker is a non-executive director of the AIM listed Vatukoula Gold Mines plc, AIM and TSX listed Polo Resources Ltd, ASX and TSX listed Elemental Minerals Limited and Forum Uranium Corp, and is CEO of TSX listed Brazilian Gold Corp.

Robert Samuel (Sam) Middlemas

Company Secretary

Qualifications - B.Com, PGradDipBus, CA

Mr Middlemas isa Chartered Accountant with more than 15 years' experience in various financial roles with a number of listed public companies operating in the resource sector. He is the principal of a corporate advisory company which provides financial and company secretarial services specialising in capital raisings and initial public offerings. Previously Mr Middlemas worked for an international accountancy firm. His fields of expertise include corporate secretarial practice, financial and management reporting in the mining industry, treasury and cash flow management and corporate governance. Mr Middlemas was appointed Company Secretary on 1 July 2010.

PRINCIPAL ACTIVITIES

The principal activities of the Consolidated Entity during the year consisted of mineral exploration. There was no significant change in the nature of those activities.

EMPLOYEES

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2011 (2010: nil).

EARNINGS PER SHARE

CORPORATE STRUCTURE

Berkeley Resources Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company has prepared a consolidated financial report including the entities it acquired and controlled during the financial year.

CONSOLIDATED RESULTS

REVIEW OF OPERATIONS AND ACTIVITIES

The year ending June 2011 has been a turbulent and transformational period for the company, driven by both external and internal events.

A high level of commitment to the Feasibility Study timetable associated with the Co-operation Agreement with ENUSA continued through much of the year and was accompanied by a similar level of Corporate activity. For example, a non-binding MOU was signed with the Korea Electric Power Corporation (KEPCO) to finance and develop the SUP was announced on the 10th August. However, on 29th October 2010, a potential takeover bid by OAO Severstal (Severstal) was announced, subject to financial, technical and legal due diligence and the KEPCO financing proposal fell away. By the 29th December 2010, Berkeley and Severstal were unable to agree terms upon which Severstal could make an agreed bid for the Company, and the exclusivity granted to Severstal expired in January.

The Company then proceeded with an equity raising of $55 million at a price of $1.70 per share for the issue of 32,360,000 new shares prior to the decision to advance to exploitation of the Salamanca Uranium Project on 17 January. This placement to institutional investors was completed in March 2011, following shareholder approval for the second tranche of the issue. 

On the 11th March 2011 the global nuclear industry was impacted by the tragic events in Japan and the consequential effects on the Fukushima Nuclear Power Stations. The Company then experienced a more substantial challenge when ENUSA, the Company's consortium partners in the Salamanca State Reserves, failed to form the JV Company 'Newco' by the required date of the 27th May 2011. This followed the submission to ENUSA of a restricted Feasibility Study, limited to the State Reserves Mineral Resources, on 23 February 2011, as required under the Co-operation Agreement. Discussion with ENUSA is ongoing.

Looking forward, our opinion based on industry consensus, is that the events of Fukushima have done little to alter the long term supply-demand drivers of the uranium industry, demonstrated by the continued strength of and term uranium prices. In addition, the Company continues to work with ENUSA towards developing and implementing options that will provide higher levels of confidence, and reduce risks, for both companies, in progressing towards production.

One of the positives of the year ending June 2011 was commencement of a Retortillo scoping study based on heap leach, with the potential to transform Berkeley into a multi-project company. The Retortillo project is expected to remain independent from the proposed project with ENUSA, and will source its production from Berkeley's 100% owned resources, currently totalling 31.7Mlb of uranium. The Company has recently reported that the Retortillo preliminary feasibility study has been initiated, targeting a production rate of between 1.5 to 2.5Mlb per annum. Completion of the preliminary feasibility study is expected mid November 2011, following submissions for licensing and permitting in October 2011.

Sustainable Development - Health, Safety, Environment and Community

Sustainable Development, including environmental responsibility, radiological protection and community awareness, engagement and support are paramount considerations for Berkeley. As a result, Berkeley has established a strong Health Safety Environment & Community (HSEC) team supported by the consultants Golder Associates, Ingemisa SA, Aquaterra, Salamanca University and Paulka Radiation & Environment.

Salamanca Uranium Project

The broader Salamanca Uranium Project (SUP) incorporates the Aguila Area deposits (Sageras, Palacios and Majuelos) and nearby Quercus Processing Plant, the more distant deposits at Alameda and Villar, and the Company's 100% owned resources at Retortillo and prospective licenses contiguous with the State Reserves.

Under the terms of the Co-operation Agreement with ENUSA the feasibility study was to be based solely on resources within the State Reserves (the Mining Domain Feasibility Study "MDFS"). In accord with the Co-operation Agreement, Berkeley paid ENUSA €1 million in December 2010 to extend the completion of the MDFS by one year to 26 November 2011. The Company then advised ENUSA of its decision to progress to the exploitation phase when the decision to exploit was announced on the 17th January, 2011, and submitted the MDFS on 18th February 2011. 

The decision to exploit was to trigger the formation of a joint venture company, Newco, owned 90% by Berkeley and 10% by ENUSA, with the right to exploit Uranium Mineral Resources within the State Reserves. The parties agreed to the target date of 27th May, 2011 to form Newco after ENUSA, as a partner in the Consortium, verified the content of the MDFS. This in turn was to lead to a payment of €20 million to ENUSA by Berkeley, within 30 days of the formation of Newco.

On Monday 23rd May, 2011, ENUSA informed Berkeley of its concerns regarding a number of aspects of the MDFS. The Company responded, supporting the MDFS and requesting formation of Newco by the agreed deadline. However, Newco was not incorporated in time and after receiving further information from ENUSA, Berkeley has taken advice on its legal alternatives under the Co-operation Agreement, from the Madrid office of a leading international legal firm. ENUSA and Berkeley have conducted a number of subsequent meetings with the principal objective of reconciling differing views about the purpose and content of the restricted MDFS and the impact of these differences on the timing of forming Newco. Discussions between the parties are ongoing. Both companies have declared a commitment to this process and believe that there are several constructive options to address the differences. However, Berkeley also recognises the possibility that satisfactory agreement between the parties may not be achieved, and therefore continues to assess its alternatives.

Geology and Exploration Review

During the calendar year to June 2011, operations were planned to achieve the following targets:

1- Convert most of the Inferred Resources included in the State Reserves into Measured and Indicated (M+I).

2- Obtain metallurgical samples from Sageras, Alameda South and Retortillo deposits.

3- Increase the "near to mine" resources (State Reserves and Retortillo)

To achieve this target, Berkeley has drilled 220 holes totalling 15,541m on projects within the Salamanca Province. The table below shows the breakdown by drill type and area.

State Reserves

During the first part of the year, Berkeley was focused on upgrading and improving the Mineral Resource Estimates within the Salamanca State Reserves. In the first quarter 7,207m were drilled, resulting in a 10% increase in Sageras and Alameda South resources, with 93% of these resources falling within the Indicated and Measured Categories. The current Mineral Resource Estimate for all deposits is tabulated below.

* Berkeley has agreed to acquire 90% of the ENUSA State Reserves and deposits therein by, inter alia, completing a feasibility study and paying €20m. For full details of the Agreement, the Berkeley's announcement dated 10thDecember 2008.

As a result from this campaign, and apart from the mentioned resources, new mineralized areas were uncovered in North West area of Sageras, with the mineralization still open to that side.

Additional drilling later in the year was focused on upgrading the remaining Inferred Resources at Alameda South, Palacios and Sageras and identifying additional potential.

Metallurgical Diamond Drilling

A further objective of the Company was to provide sufficient material for the ongoing tank leach and column leach metallurgical testwork programs. This required a diamond drill campaign of 5,000m involving up to 6 diamond drill rigs. A total of 5,000 kg of representative ore grade material was acquired for each of the Alameda, Sageras and Retortillo deposits.

Near Mine Exploration Drilling

After completing the metallurgical diamond drilling, RC rigs were focused on drilling exploration targets at the margins of the Sageras and Alameda South Deposits. At both deposits additional new mineralisation has been identified, in previously undrilled areas and in areas with very sparse drilling.

At Sageras, follow up drilling has extended the mineralization over 250 metres to the north-west where it is still open. At Alameda, which is the largest unexploited resource, a short RC program of 12 holes for 714m was completed during March to test for possible extensions in a structural corridor on the eastern side of the deposit. A narrow zone of high grade mineralisation has been discovered with a strike length of >200m and intersections of up to 8m @ 1,819ppm U3O8 in hole ASR-094.

Mimbre

A very wide spaced drill campaign was planned at the Mimbre Prospect (200m x 400m grid). This project lies 1km south of the Alameda South Deposit in a concealed and highly prospective corridor. A total of 34 wide spaced (1km x 1km) holes were drilled in the 1990's by ENUSA at Espeja approximately 10km south of the Alameda South deposit in the same corridor. Significantly, 40% of these holes intersected uranium mineralization with grades up to 1,700 ppm U3O8, and some intersections in excess of 10m.

Berkeley has completed 14 holes for 876m within that portion of the prospect covered by the Alameda State Reserve and a further 16 holes are planned in the contiguous 100% Berkeley licence to the south. Encouraging results from hole ASR-082 were previously reported (4m@ 472ppm U3O8 from 17m).

Retortillo

During the year a 10,000m RC drill program was designed and permitted by the authorities for the Retortillo & Santidad deposits. The objectives of the program are to increase the size of the current resource and upgrade the inferred resources. Drilling commenced in early July, 2011, and is expected to be finishing by November.

Regional

Permission to drill on a number of projects within the Salamanca State Reserves and other Berkeley Licences has been granted by the authorities giving the company significant drill capacity for the coming year. Several projects have been upgraded by field work and provide high quality, drill ready targets. These include strong radiometric anomalies with outcropping mineralisation at Carpio and Villar East, and other targets beneath Tertiary cover at Nil, Cuellar and Los Prados,close to the Aguila site.

Corporate Developments

During the period under review the Company made a number of appointments to strengthen its Management team, as the Company advanced toward its transformation from an exploration based company to a project development and production based organisation.

The decision was made by the Board of Directors to reinstate Mathew Syme as a Non-Executive Director considering the significant increase in corporate activity early in the financial year. On the 11th October 2010, CFO Henry Horne was appointed an Executive Director of the company. On the 30th December 2010 the Managing Director, Ian Stalker, resigned due to personal reasons. Henry Horne was appointed as Acting Managing Director until a permanent appointment was made.

On the 14th January, 2011, the Company announced the appointment of Dr James Ross AM as Chairman of the Company with immediate effect, following the retirement of Dr Robert Hawley CBE from the Board due to health reasons. Dr Ross had been a Non-Executive Director of Berkeley for the last six years and closely involved with its exploration and development activities. Dr Ross is a leading international geologist with more than forty five years experience in exploration, development and mining, including twenty five years with Western Mining Corporation Limited. Subsequent appointments have been at the level of Executive Director, Managing Director and Chairman with a number of ASX listed companies including Aerodata, World Geoscience, Odin Mining and Investments, Tanganyka Gold and Renewable Energy. Dr Ross is a Director of Kimberley Foundation Australia Inc, a member of the Technology and Industry Council which advises the Western Australian Government on Science and Innovation, and Chairs organisations devoted to education and research.

On the 11th March, 2011, the Company announced the appointment of Mr Brendan James to become Managing Director and Chief Executive Officer of the Company, effective 6th June, 2011. Mr James is a metallurgical engineer, with an exceptional background in developing, commissioning and optimising a number of large uranium, copper and gold operations. His technical background includes outstanding senior management experience in uranium mining and processing, project management, redesigning and commissioning previously decommissioned operations, biological heap leaching and hydrometallurgy. This background is complemented by five years experience in financial markets, on both the buy and sell sides. Mr James is highly qualified to lead Berkeley through the optimisation, financing, development and commissioning of the Salamanca Uranium Project, and to advance Berkeley's strong organic growth opportunities. He is based in Spain.

Mr Scott Yelland, the Company's Chief Operating Officer resigned from the Company for family reasons on June 30th. He also resigned from the Board with immediate effect. His responsibilities were covered by the recent appointment of Mr Francisco Bellón del Rosal as Project Manager for the Salamanca Uranium Project. Mr Bellón del Rosal has subsequently been promoted to General Manager Operations, effective July 1st 2011.

In addition, Mr Henry Horne resigned from his executive position as Chief Financial Officer of the Company, however he will remain as a Non-executive Director of the Company. Mr Sam Middlemas, the Company Secretary, will act as Chief Financial Officer until a permanent replacement is recruited.

Business Strategies and Prospects

The Consolidated Entity currently has the following business strategies and prospects over the medium to long term:

• to conduct studies into the feasibility of exploiting the Salamanca Uranium Project in Spain, with the objective of restarting the mining operations by the end of 2014

• to continue to explore its portfolio of mineral permits in Spain; and

• continue to examine new opportunities in minerals and energy exploration and development.

Risk Management

The Board is responsible for the oversight of the Consolidated Entity's risk management and control framework. Responsibility for control and risk management is delegated to the appropriate level of management with the Managing Director having ultimate responsibility to the Board for the risk management and control framework.

Arrangements put in place by the Board to monitor risk management include monthly reporting to the Board in respect of operations and the financial position of the Group.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Other than as disclosed below, there were no significant changes in the state of affairs of the Consolidated Entity during the year.

• On 29 October 2010 a potential takeover bid by OAO Severstal was announced subject to financial, technical and legal due diligence. The Company granted Severstal a right to subscribe for shares in Berkeley and an exclusivity period which was extended to 29 December 2010. The Company was unable to agree final bid terms, and Severstal's rights lapsed on 14 January 2011;

• On 26 November 2010, 3.5 million shares were issued to Resource Capital Fund at $1.45 per share for net proceeds of $4.8m;

• On 30 December 2010 the Managing Director Ian Stalker resigned from his position. Mr Henry Horne was appointed acting Managing Director until a replacement was found. Mr Stalker remained on the board as a Non-Executive Director;

• On 14 January 2011 Dr James Ross AM was appointed Chairman following the retirement of Dr Robert Hawley CBE from the board due to health reasons;

• In March 2011, the Company completed an equity raising of $55 million at a price of $1.70 per share for the issue of 32,360,000 new shares, via a placement to institutional investors, following shareholder approval for the second tranche of the issue;

• The Company appointed Mr Brendan James as Managing Director on 6 June 2011;

• On 30 June 2011 Mr Scott Yelland resigned from his position as Chief Operating Officer and Mr Henry Horne resigned as Chief Financial Officer. Mr Horne continues on the board as a Non Executive Director.

SIGNIFICANT POST BALANCE DATE EVENTS

Since the end of the financial year, the following events have 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:

Following shareholder approval on 20 September 2011, the Company has issued 2,000,000 Incentive Options to Mr Brendan James each with an exercise price of 41 cents, with an expiry date of 1 May 2016. All the Options will vest on 30 May 2014, or on the date a Change of Control event occurs.

In addition to the above, a further 1,000,000 options have been issued to employees under the Berkeley Employee Option Scheme each with an expiry date of 21 September 2015, vesting in three equal tranches on 21 September 2012, 21 September 2013 and 21 September 2014 at an exercise price of 41 cents.

On 25 August 2011 Laurence Marsland was appointed Non Executive Director of the company.

Other than the above there are no matters or circumstances, which have arisen since 30 June 2011 that have significantly affected or may significantly affect:

• the operations, in financial years subsequent to 30 June 2011, of the Consolidated Entity;

• the results of those operations, in financial years subsequent to 30 June 2011, of the Consolidated Entity; or

• the state of affairs, in financial years subsequent to 30 June 2011, of the Consolidated Entity.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Consolidated Entity's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

There have been no significant known breaches by the Consolidated Entity during the financial year.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

It is the Board's current intention that the Consolidated Entity will continue with development of its Spanish uranium projects. The Company will also continue to examine new opportunities in mineral exploration, including uranium.

All of these activities are inherently risky and the Board is unable to provide certainty that any or all of these activities will be able to be achieved. In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Consolidated Entity and the expected results of these operations in subsequent financial years may prejudice the interests of the Company and accordingly no further information has been disclosed.

INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF BERKELEY

Notes

(i) "Ordinary Shares" means fully paid ordinary shares in the capital of the Company.

(ii) "$0.75 Listed Options" means an option to subscribe for 1 Ordinary Share in the capital of the Company at an exercise price of $0.75 each on or before 15 May 2013.

(iii) "$1.35 Incentive Options" means an option to subscribe for 1 Ordinary Share in the capital of the Company at an exercise price of $1.35 each on or before 19 June 2013.

(iv) "$1.25 Incentive Options" means an option to subscribe for 1 Ordinary Share in the capital of the Company at an exercise price of $1.25 each on or before 1 December 2013.

SHARE OPTIONS

At the date of this report the following options have been issued over unissued capital:

Listed Options

• 11,989,428 listed options at an exercise price of $0.75 each that expire on 15 May 2013.

Unlisted Options

• 1,960,000 unlisted options at an exercise price of $1.86 each that expire on 5 August 2011 (all options lapsed on 5 August 2011).

• 495,834 unlisted options at an exercise price of $1.00 each that expire on 19 June 2012.

• 1,000,000 unlisted options at an exercise price of $1.25 each that expire on 1 December 2013.

• 2,311,666 unlisted options at an exercise price of $1.35 each that expire on 18 June 2014.

These options do not entitle the holders to participate in any share issue of the Company or any other body corporate. During the financial year, there were 1,666,666 new shares issued as a result of the exercise of unlisted options, and a further 681,288 new shares issued as a result of exercise of the listed options. There were 3,298,334 unlisted options that lapsed during the year. Since 30 June 2011, there have been no new shares issued as a result of the exercise of any listed or unlisted options on issue.

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's Directors and the Audit Committee and Remuneration Committee held during the year ended 30 June 2011, and the number of meetings attended by each director.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END)

This report details the amount and nature of remuneration of each director and executive officer of the Company.

Details of Key Management Personnel

The Key Management Personnel of the Group during or since the end of the financial year were as follows:

Directors

James Ross Non-Executive Chairman since 14 January 2011 (previously Non-Executive)

Brendan James Managing Director (appointed 6 June 2011)

Henry Horne Chief Financial Officer, appointed Executive Director 11 October 2010 and Acting Managing Director until 6 June 2011 then Non-Executive Director

Ian Stalker Managing Director until 14 January 2011 then Non-Executive Director

Jose Ramon Esteruelas Non-Executive Director

Laurence Marsland Non-Executive Director (appointed 25 August 2011)

Matthew Syme Non-Executive Director

Robert Hawley Non-Executive Chairman until resignation 14 January 2011

Scott Yelland Chief Operating Officer / Executive Director (resigned 30 June 2011)

Sean James Non-Executive Director (resigned 1 October 2010)

Executives

Sam Middlemas Company Secretary (Appointed 1 July 2010)

Franscisco Bellon del Rosal General Manager Operations (Appointed 9 May 2011)

There were no other key management personnel of the Company or the Group. Unless otherwise disclosed, the Key Management Personnel held their position from 1 July 2010 until the date of this report.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END) (Continued)

Remuneration Policy

The remuneration policy for the Group's Key Management Personnel (including the Managing Director) has been developed by the Board taking into account:

• the size of the Group;

• the size of the management team for the Group;

• the nature and stage of development of the Group's current operations; and

• market conditions and comparable salary levels for companies of a similar size and operating in similar sectors.

In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for key management personnel:

• the Group is currently focused on undertaking exploration activities with a view to expanding and developing its resources. In line with the Group's accounting policy, all exploration expenditure prior to a feasibility study is expensed. The Group continues to examine new business opportunities in the energy and resources sector;

• risks associated with resource companies whilst exploring and developing projects; and

• other than profit which may be generated from asset sales (if any), the Group does not expect to be undertaking profitable operations until sometime after the successful commercialisation, production and sales of commodities from one or more of its current projects, or the acquisition of a profitable mining operation.

Remuneration Policy for Executives

The Group's remuneration policy is to provide a fixed remuneration component and a performance based component (options and a cash bonus, see below). The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning Key Management Personnel objectives with shareholder and business objectives.

Performance Based Remuneration - Incentive Options

The Board has chosen to issue incentive options to Key Management Personnel as a key component of the incentive portion of their remuneration, in order to attract and retain the services of the Key Management Personnel and to provide an incentive linked to the performance of the Company. The Board considers that each Key Management Personnel's experience in the resources industry will greatly assist the Company in progressing its projects to the next stage of development and the identification of new projects. As such, the Board believes that the number of incentive options granted to Key Management Personnel is commensurate to their value to the Company.

The Board has a policy of granting options to Key Management Personnel with exercise prices at and/or above market share price (at time of agreement). As such, incentive options granted to Key Management Personnel will generally only be of benefit if the Key Management Personnel perform to the level whereby the value of the Company increases sufficiently to warrant exercising the incentive options granted.

Other than service-based vesting conditions, there are no additional performance criteria on the incentive options granted to Key Management Personnel, as given the speculative nature of the Group's activities and the small management team responsible for its running, it is considered the performance of the Key Management Personnel and the performance and value of the Company are closely related.

Performance Based Remuneration - Cash Bonus

In addition, some Key Management Personnel are entitled to an annual cash bonus upon achieving various key performance indicators, to be determined by the Board. On an annual basis, after consideration of performance against key performance indicators, the Board determines the amount, if any, of the annual cash bonus to be paid to each Key Management Personnel.

Impact of Shareholder Wealth on Key Management Personnel Remuneration

The Board does not directly base remuneration levels on the Company's share price or movement in the share price over the financial year. However, as noted above, a number of Key Management Personnel have received options which generally will only be of value should the value of the Company's shares increase sufficiently to warrant exercising the incentive options granted.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END) (Continued)

As a result of the Group's exploration and new business activities, the Board anticipates that it will retain future earnings (if any) and other cash resources for the operation and development of its business. Accordingly the Company does not currently have a policy with respect to the payment of dividends, and as a result the remuneration policy does not take into account the level of dividends or other distributions to shareholders (eg return of capital).

Impact of Earnings on Key Management Personnel Remuneration

As discussed above, the Group is currently undertaking exploration activities, and does not expect to be undertaking profitable operations until sometime after the successful commercialisation, production and sales of commodities from one or more of its current projects.

Accordingly the Board does not consider current or prior year earnings when assessing remuneration of Key Management Personnel.

Remuneration Policy for Non-Executive Directors

The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, incentive options have been used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and Non-Executive Directors have received incentive options in order to secure their services and as a key component of their remuneration.

General

Where required, Key Management Personnel receive superannuation contributions (or foreign equivalent), currently equal to 9% of their salary, and do not receive any other retirement benefit. From time to time, some individuals have chosen to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to Key Management Personnel is valued at cost to the company and expensed. Incentive options are valued using the Binomial option valuation methodology. The value of these incentive options is expensed over the vesting period.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END) (Continued)

Key Management Personnel Remuneration

Details of the nature and amount of each element of the remuneration of each Director and executive of the Company or Group for the financial year are as follows:

Notes

(1) Mr James joined the Company as Managing Director on 6 June 2011.

(2) Mr Horne joined the Company as Chief Financial Officer on 8 February 2010, was appointed as a Non-Executive Director on 11 October 2010 and Acting Managing Director from 14 January 211 to 30 June 2011 and continues on the Board as a Non-Executive director (833,334 options were cancelled at this time leading to a P&L reversal of $196,873 for options that had not yet vested - not included in the table above - the Black Scholes value at the date of cancellation was $81,666).

(3) Mr Stalker was appointed Managing Director on 30 November 2009 until 14 January 2011 when he moved to the role of Non-Executive Director (2,000,000 options were cancelled at this time leading to a P&L reversal of $1,321,240 not included in the table above - the Black Scholes value at the date of cancellation was $2,476,700).

(4) Mr Hawley resigned from the Board on 14 January 2011.

(5) Mr James resigned from the Board on 1 October 2010.

(6) Mr Middlemas was appointed Company Secretary on 1 July 2010 replacing Mr McGhie.

(7) Mr Bellon del Rosal was appointed Project Manager on 9 May 2011 and promoted to General Manager Operations on 30 June 2011.

(8) Mr Dattels was appointed as a non-executive Director of the Company on 15 May 2009.

(9) Other Non-Cash Benefits includes payments made for car-parking and insurance premiums on behalf of the Directors, including Directors & Officers insurance, and in some instances, working directors insurance.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END) (Continued)

Options Granted to Key Management Personnel

There were no options granted to any of the Key Management Personnel of the Company or Group during the financial year. Options granted during the prior year are as follows:

(i) For details on the valuation of the options, including models and assumptions used, please refer to Note 19 to the financial statements. In the case of the options issued to Mr Stalker and to Mr Horne during 2010, the unvested options for each lapsed at 30 June 2011.

(ii) In addition to the above, at 30 June 2010, 333,333 $1.86 Incentive Options issued to Mr Yelland on 6 August 2007 had vested.

(iii) Apart from those noted above, during the financial year there were no options exercised or lapsed.

Employment Contracts with Directors and Executive Officers

Mr Brendan James, Managing Director, has a contract of employment with Berkeley Resources Limited dated 10 March 2011. The contract specifies the duties and obligations to be fulfilled by the Managing Director. The contract has a rolling term and may be terminated by the Company by giving three months notice. No amount is payable in the event of termination for neglect of duty or gross misconduct. Mr James receives a fixed remuneration component of $300,000 per annum plus 9% superannuation and the provision of accommodation in Spain and a motor vehicle.

Following shareholder approval on 20 September 2011, Mr James was granted 2,000,000 unlisted incentive options exercisable at $0.41 each on or before 1 May 2016 (36 months vesting period).

Mr Ian Stalker, terminated his employment contract as Managing Director on 30 December 2010, and entered into a new letter agreement as a Non-Executive Director. The letter specifies the duties and obligations to be fulfilled as a Non-Executive Director, and the remuneration is fixed at $50,000 per annum. The letter also includes a consultancy arrangement which provides for a consultancy fee at the rate of $1,200 per day, on an as required basis. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 1 months notice.

Mr Henry Horne, terminated his employment contract as Chief Financial Officer and Acting Managing Director on 30 June 2011, and entered into a new letter agreement as a Non-Executive Director. The letter specifies the duties and obligations to be fulfilled as a Non-Executive Director, and the remuneration is fixed at $50,000 per annum. The letter also includes a consultancy arrangement which provides for a consultancy fee at the rate of $1,200 per day, on an as required basis. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 1 months notice.

The Board granted Mr Horne 1,250,000 unlisted options exercisable at $1.35 each on or before 18 June 2014 on his appointment. The unvested 833,334 options lapsed on 30 June 2011.

REMUNERATION REPORT (AUDITED) (30 JUNE 2011 YEAR END) (Continued)

Employment Contracts with Directors and Executive Officers (Continued)

Dr James Ross AM, Non-Executive Chairman, has a letter of engagement with Berkeley Resources Limited that was updated on 15 January 2011. The letter specifies the duties and obligations to be fulfilled by the Chairman. Dr Ross receives a fixed remuneration component of $100,000 per annum inclusive of superannuation. The letter also includes a consultancy arrangement which provides for a consultancy fee at the rate of $1,200 per day for technical geological work done. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 1 months notice.

Señor Jose Ramon Esteruelas, Non-Executive Director, was appointed a Director of the Company on 1 November 2006. Señor Esteruelas has a letter of employment with Berkeley Resources Limited dated 16 November 2006. Señor Esteruelas receives a fixed remuneration component of €48,000 per annum. The letter also includes a consultancy agreement which provides for a consultancy fee of €1,000 per day. The consultancy agreement has a rolling term and may be terminated by Señor Esteruelas or by the Company by giving 1 months notice.

Mr Laurence Marsland was appointed a Non-Executive Director on 25 August 2011. He has a letter engagement specifying the duties and obligations to be fulfilled as a Non-Executive Director, and the remuneration is fixed at $50,000 per annum. The letter also includes a consultancy arrangement which provides for a consultancy fee at the rate of $1,200 per day, on an as required basis. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 1 months notice.

Mr Matthew Syme has a letter engagement dated 1 February 2010 relating to his appointment as a Non-Executive Director. The letter specifies the duties and obligations to be fulfilled as a Non-Executive Director, and the remuneration is fixed at $50,000 per annum. The letter also includes a consultancy arrangement which provides for a consultancy fee at the rate of $1,200 per day, on an as required basis. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 1 months notice.

Mr Sam Middlemas has a letter agreement dated 31 May 2010 and revised 26 October 2010 relating to his services as Company Secretary. The letter specifies the duties and obligations to be fulfilled as Company Secretary, and the monthly remuneration is fixed at $9,600 for 8 days work per month. The letter also includes a consultancy arrangement which provides for additional work to be charged at the rate of $1,200 per day, on an as required basis. The consultancy arrangement has a rolling term and may be terminated by the Company by giving 3 months notice and termination payment.

Exercise of Options Granted as Remuneration

During the financial year ended 30 June 2011, there were no new options granted as remuneration. There were no options that were exercised during the financial year by Key Management Personnel (2010: Nil).

AUDITOR'S AND OFFICERS' INDEMNITIES AND INSURANCE

Under the Constitution the Company is obliged, to the extent permitted by law, to indemnify an officer (including Directors) of the Company against liabilities incurred by the officer in that capacity, against costs and expenses incurred by the officer in successfully defending civil or criminal proceedings, and against any liability which arises out of conduct not involving a lack of good faith.

During the financial year, the Company has paid an insurance premium to insure Directors and officers of the Company against certain liabilities arising out of their conduct while acting as a Director or Officer of the Company. The net premium paid was $25,874. Under the terms and conditions of the insurance contract, the nature of liabilities insured against cannot be disclosed.

The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify an auditor of the Company or of any related body corporate against any liability incurred.

NON-AUDIT SERVICES

There were no non-audit services provided by the auditor (or by another person or firm on the auditor's behalf) during the financial year.

AUDITOR'S INDEPENDENCE DECLARATION

The auditor's independence declaration is on page 58 of the Annual Financial Report.

ROUNDING OFF

The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the consolidated financial statements and directors' report have been rounded off to the nearest thousand dollars, unless otherwise stated.

This report is made in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001.

For and on behalf of the Directors

BRENDAN JAMES

Managing Director

27 September 2011

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2011

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2011

The above Statement of Changes in Equity should be read in conjunction with the accompanying Notes

The following sections are available in the full version of the Annual Financial Report on Berkeley Resources Limited's website:

www.berkeleyresources.com.au

Notes to the Financial Statements

Directors' Declaration

Auditor's independence Declaration

Independent Auditor's Report