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Exhibit 99.1

FORM 51-102F4

BUSINESS ACQUISITION REPORT

The Business Acquisition Report (“BAR”) has been amended to (i) conform with the requirements of United States securities laws relating to the reconciliation of financial statements incorporated by reference into the Corporation’s registration statement to be filed with the United States Securities Exchange Commission and (ii) make certain adjustments as described below. This BAR replaces the BAR filed on May 7, 2008 by Northgate Minerals Corporation.

The changes to the previously filed BAR include:

	1.		A reconciliation to United States (“US”) generally accepted accounting principles (“GAAP”) of the Corporation’s pro forma consolidated financial statements has been prepared and included as a supplementary note. The supplementary note reconciles the measurement differences between Canadian and US GAAP as they apply to the pro forma consolidated financial statements (see page 164).

	2.		Amended (i) audited consolidated financial statements of Perseverance and auditor’s report for the year ended June 30, 2007 to state that the financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) (see page 6) and (ii) interim financial statements of Perseverance for the period ended December 31, 2007 to state that the financial statements have been prepared in accordance with IFRS as issued by the IASB (see page 124).

	3.		An adjustment to the reconciliation from International Financial Reporting Standards as issued by the International Accounting Standards Board to Canadian GAAP of Perseverance’s Financial Statements for the year ended June 30, 2007 and the six months ended December 31, 2007 (see pages 74 and 141).

	4.		An adjustment to the unaudited Canadian GAAP pro forma consolidated financial statements of Northgate Minerals Corporation (see page 155).

FORM 51-102F4

BUSINESS ACQUISITION REPORT

Item 1 — Identity of Company

1.1		Name and Address of Company

		The name and address of the principal office in Canada of Northgate Minerals Corporation (“Northgate” or the “Company”) is as follows:

		Northgate Minerals Corporation Suite 406 815 Hornby Street Vancouver, British Columbia V6Z 2E6

1.2		Executive Officer

		The name and business telephone number of the executive officer of the company who is knowledgeable about the significant acquisition and this report are as follows:

		Ken Stowe, President and Chief Executive Officer, Northgate Minerals Corporation Tel. (416) 216 — 2772

		or

		Jon Douglas, Senior Vice President and Chief Financial Officer, Northgate Minerals Corporation Tel. (416) 216 — 2774

Item 2 — Details of the Acquisition

2.1		Nature of Business Acquired

		Perseverance is an Australian based gold producer and explorer. The company owns and operates gold mines at Fosterville and Stawell in Victoria, Australia and has extensive exploration tenements covering of 7,700 km² along major trends within the world-class Victorian goldfields. Gold production at Perseverance’s two mines in the year ended June 30, 2007 aggregated 189,000 ounces.

		The ordinary shares of Perseverance were listed on the Australian Securities Exchange (“ASX”) trading under the symbol “PSV”. Perseverance applied for termination of the official quotation of Perseverance shares on the ASX and was removed from the official list on March 27, 2008.

		The principal and registered office of Perseverance is located at 117 Wills Street, Bendigo, Victoria 3550.

2.2		Date of Acquisition

		On February 18, 2008, a wholly-owned subsidiary of Northgate acquired all of the issued and outstanding securities and existing debt of Perseverance Corporation Ltd. (“Perseverance”) for cash consideration (the “Merger”), pursuant to the Schemes of Arrangement contemplated by the merger implementation agreement (“MIA”) entered into between Northgate and Perseverance on October 28, 2007.

2.3		Consideration

		Each Perseverance ordinary share was acquired for A$0.20 cash per ordinary share. Perseverance warrants (referred to in Australia as options) were purchased for A$0.08 per warrant and subsequently cancelled, and convertible subordinated notes of Perseverance were acquired for A$100,000 per note (the face value) plus any interest accrued thereon and subsequently cancelled.

		In addition, Northgate assumed all of Perseverance’s existing debt from a major financial institution in Australia (the “Bank”) amounting to US$30.6million (A$33.5million), together with extending an additional bridging facility of up to US$22.8million (A$25.0million). Northgate also acquired the Bank’s exposure to Perseverance’s gold hedges, a value of approximately US$43.8million (A$48.0million) at the time of the MIA. Subsequent to closing, Northgate closed out the hedge position.

2.4		Effect on Financial Position

		The Merger has created a mid-tier gold producer with three producing gold mines in politically favourable mining jurisdictions, operating under the name “Northgate Minerals Corporation”. Northgate does not at present have any plans or proposals for material changes in its business affairs or the affairs of Perseverance following the Merger which would have a significant effect on Northgate’s results of operations and financial position, taken as a whole. In connection with the Merger, Northgate prepared the unaudited pro forma condensed and consolidated financial statements referred to in Item 3 below, which show the effect of the acquisition and related transactions on the results of operations and financials position of Northgate.

2.5		Prior Valuations

		No valuation opinions were required.

2.6		Parties to Transaction

		The transaction was not with an informed person, associate or affiliate of Northgate.

2.7		Date of Report

		This report is dated as of the 16th day of May, 2008.

Item 3 — Financial Statement

		The financial statements required to be included with this report pursuant to Part 8 of National Instrument 51-102 are attached hereto and are as follows:

		Schedule A

		The audited consolidated financial statements of Perseverance for the years ended June 30, 2007 and June 30, 2006 including the notes thereto and the auditors’ reports thereon. A reconciliation to Canadian generally accepted accounting principles (“GAAP”) has been prepared for the year ended June 30, 2007.

		The consolidated financial statements of Perseverance for the years ended June 30, 2007 and 2006 have been audited by Ernst and Young. The Canadian GAAP reconciliation for the year ended June 30, 2007 is unaudited.

		Schedule B

		The consolidated interim financial statements of Perseverance for the six month periods ended December 31, 2007 and December 31, 2006 including the notes thereto. A reconciliation to Canadian GAAP has been prepared for the six month period ended December 31, 2007.

		The interim consolidated financial statements of Perseverance for the six months ending December 31, 2007 and 2006 are unaudited. The Canadian GAAP reconciliation for the six months ended December 31, 2007 is unaudited.

		Schedule C

		Unaudited pro forma consolidated financial statements of Northgate which include: (i) the unaudited pro forma consolidated balance sheet as at December 31, 2007; and (ii) the unaudited pro forma consolidated statement of operations for the year ended December 31, 2007.

		Schedule D

		In addition to the requirements pursuant to Part 8 of National Instrument 51-102, the Company has included in a supplementary note to the unaudited pro forma consolidated financial statements a reconciliation of the pro forma consolidated financial statements to United States GAAP. The supplementary note is unaudited.

Annual Financial Report
Financial year ended 30 June 2007

Directors’ Report

The Board of Directors present their report together with the financial statements of Perseverance Corporation Limited (“the Company”) and the consolidated financial statements of the consolidated entity being the Company and its controlled entities (“Perseverance”) for the year ended 30 June 2007.

DIRECTORS

The names and details of the Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

PETER MACPHAIL (EXECUTIVE DIRECTOR) (APPOINTED 18 FEBRUARY 2008)

KENNETH G STOWE (EXECUTIVE DIRECTOR) (APPOINTED 18 FEBRUARY 2008)

JOHN CHARLES QUINN (NON-EXECUTIVE CHAIRMAN) (RETIRED 14 NOVEMBER 2007)

Mr Quinn has had a career of over 30 years in the industry, including Managing Director of Newmont Australia Limited and Newcrest Mining Limited. During Mr Quinn’s tenure as Managing Director at Newcrest, he formulated and implemented the strategies that led to the discovery and development of the Cadia, Ridgeway, Gosowong and the Telfer “I” Series orebodies. Mr Quinn was also Chairman of the Newmont Indonesian subsidiaries that discovered the Mesel and Batu Hijau orebodies. Mr Quinn is also Chairman of King Solomon Mines Limited, a company listed on the Australian Stock Exchange.

BRIAN MARSHALL PHILLIPS (NON-EXECUTIVE DEPUTY CHAIRMAN) (APPOINTED 24 JANUARY 2007) (RESIGNED 18 FEBRUARY 2008)

Mr Phillips has extensive mining industry experience in operational and management roles. Mr Phillips was Chairman of Leviathan Resources Limited prior to its takeover by Perseverance in 2006. He was a director of MPI Mines Limited from 1992 and Managing Director from October 2002 until the takeover of MPI by LionOre in 2004. Mr Phillips graduated as a mining engineer from the Western Australian School of Mines in Kalgoorlie in 1966. He worked for 16 years for Gold Fields Group in Tasmania, the United Kingdom and Western Australia. Mr Phillips joined Metals Exploration Limited in 1981 and served as a director of Metals Exploration, North Kalgurli Mines Limited and Gold Mines of Kalgoorlie Limited. Prior to joining MPI, Mr Phillips ran a privately owned mining services company. He is a former non-executive director of the Australian Gold Council and past president of the Victorian Minerals and Energy Council.

During the past three years Mr Phillips has also served as a director of the following other companies listed on the Australian Stock Exchange:

	•		Indophil Resources NL (a)

	•		Tawana Resources NL (a)

	•		Sally Malay Mining Ltd (a)

(a) Denotes current directorship.

CHRISTOPHER LINDEN ROBERTS (NON-EXECUTIVE DIRECTOR) (RESIGNED 18 FEBRUARY 2008)

Mr Roberts is a geologist with over 30 years experience in exploration throughout Australia, initially with BHP but subsequently in senior positions with a number of other companies. Mr Roberts is a Corporate Member of the Australasian Institute of Mining and Metallurgy and a member of the Australian Institute of Geoscientists.

During the past three years Mr Roberts has also served as a director of the following other companies listed on the Australian Stock Exchange:

	•		Republic Gold Limited

	•		Plentex Limited (a)

(a) Denotes current directorship.

ROBERT JOHN FLEW (NON-EXECUTIVE DIRECTOR) (APPOINTED 24 JANUARY 2007) (RESIGNED 18 FEBRUARY 2008)

Mr Flew has over 30 years experience in senior operating, finance and management roles in the resources industry. Mr Flew held a number of senior positions at BHP, including roles in the Copper and Coal divisions and head office roles in investor relations, company secretarial and corporate development over a 15 year period. Mr Flew was a non-executive director of Leviathan Resources Limited prior to its takeover by Perseverance in 2006.

During the past three years Mr Flew has also served as a director of the following other companies listed on the Australian Stock Exchange:

	•		Geodynamics Limited (a)

	•		Astron Limited (a)

	•		MPI Mines Limited

	•		Bass Strait Oil Company Limited

(a) Denotes current directorship.

Annual Financial Report
Financial year ended 30 June 2007

GRAEME JOHN SLOAN (MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER) (RESIGNED 10 AUGUST 2007)

Mr Sloan was appointed Managing Director and Chief Executive Officer on 15 June 2005. He is a mining engineer with over 30 years professional experience in Australian and overseas mining operations. Mr Sloan was formerly Executive Manager of Development for the Fosterville Gold Project. Mr Sloan is also a Corporate Member of the Australasian Institute of Mining and Metallurgy. Mr Sloan resigned as a director of Perseverance with effect from 10 August 2007.

RODNEY JOHN ROBINSON (NON-EXECUTIVE DIRECTOR) (RESIGNED 27 AUGUST 2007)

Mr Robinson is a metallurgist and has had a career of over 30 years in the industry. Mr Robinson was formerly the Managing Director of Ashton Mining Limited and worked for companies such as Newmont, Aberfoyle and WMC. Mr Robinson is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Robinson is also a non-executive director of Poseidon Scientific Instruments Limited, the Chairman of the Board of Management of the Prince Henry’s Institute of Medical Research and Chairman of Monash Health Precinct Limited. Mr Robinson resigned as a director of Perseverance with effect from 27 August 2007.

During the past three years Mr Robinson has also served as a director of the following other companies listed on the Australian Stock Exchange:

	•		Boom Logistics Limited (a)

	•		Global Mining Investments Limited (a)

(a) Denotes current directorship.

ROBIN JOHN GEORGE (NON-EXECUTIVE DIRECTOR) (RESIGNED 6 AUGUST 2007)

Dr George is a geologist and has had a career of over 30 years in the industry. Dr George was Executive Director — Exploration and Mining at Acacia Resources Limited and prior to that he was General Manager of Shell’s Australian Metals Division. Dr George is a Fellow of the Australasian Institute of Mining and Metallurgy. Dr George resigned as a director of Perseverance with effect from 6 August 2007.

During the past three years Dr George has also served as a director of the following other companies listed on the Australian Stock Exchange:

	•		Leviathan Resources Limited

	•		MPI Mines Limited

RONALD GREGORY MELGAARD (NON-EXECUTIVE DIRECTOR) (RESIGNED 27 APRIL 2007)

Mr Melgaard is Managing Director of and via his family company is a major shareholder in Palmaris Capital PLC. He is also Chairman of ICW Power PLC, a London based manufacturer of sophisticated power systems, and is a Director of Electrometals Technologies Limited an Australian Stock Exchange listed supplier of electrowinning technology and Chairman of Eclipse 3/4 Venture Capital Trust PLC. Prior to his involvement with Palmaris and ICW Power, Mr Melgaard was Deputy Chairman and subsequently Chief Executive of Gestetner Holdings PLC. Mr Melgaard was a founding Director of and significant shareholder in AFP Investment Corporation Limited, an Australian based international investment firm. Mr Melgaard has degrees in science and economics from Monash University and an MBA from Stanford University. Mr Melgaard resigned as a director of Perseverance with effect from 24 April 2007.

PETER MACPHAIL (EXECUTIVE DIRECTOR) (APPOINTED 18 FEBRUARY 2008)

KENNETH G STOWE (EXECUTIVE DIRECTOR) (APPOINTED 18 FEBRUARY 2008)

COMPANY SECRETARY

Mr Martin Bouwmeester was the Company Secretary of Perseverance Corporation Limited until he resigned from the position on 31 August 2007. Mr. Bouwmeester is a Certified Practicing Accountant and an Affiliate member of Chartered Secretaries Australia.

Mr Bruce Paterson was appointed Company Secretary of Perseverance Corporation Limited on 31 August 2007. Mr Paterson is a lawyer and spent over 15 years with Newcrest Mining in a range of senior management roles, including Company Secretary and Commercial Manager, International. For the past 10 years he has provided his substantial secretarial, legal and commercial experience on a consultancy basis, primarily in the mineral resources and energy sectors, both throughout Australia and internationally.

RESULTS FOR THE YEAR

The loss of the consolidated entity for the financial year after income tax was $19,739,170 [2006 loss: $59,025,746].

Annual Financial Report
Financial year ended 30 June 2007

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the course of the financial year were gold mining and exploration. There was no change in the nature of the consolidated entity’s activities during the year.

DIVIDENDS

The Directors do not recommend the payment of a dividend for this financial year. No dividend has been declared or paid by the Company since the end of the previous financial year.

STATE OF AFFAIRS

In the opinion of the Directors, there were no significant changes in the state of the consolidated entity that occurred during the financial year under review not otherwise disclosed in this report or the consolidated financial statements.

OPERATING AND FINANCIAL REVIEW

1. FOSTERVILLE GOLD MINE

Operations

The Fosterville operation produced 76,706 ounces of gold for the year ended 30 June 2007. Gold production was lower than planned for the year due to a higher proportion of lower grade open pit ore processed. Recovery improved to 78% with the flash flotation plant having the expected positive effect. The processing plant performed to expectation given the lower grade mill feed. The BIOX^® circuit performed well, achieving throughput and oxidation rates in excess of design for sustained periods.

Open pit mining continued with production from the Ellesmere pit completed and production commencing from the Harrier pit. Further open pit opportunities are being assessed.

Underground development continued and stope ore production commenced in January 2007. Development of the Falcon ore body in preparation for stoping was substantially complete by year-end and development of the Phoenix ore body was underway. Underground mine production ramped up over the second half of the year and replaced open pit ore as the primary source of mill feed by year-end.

2. STAWELL GOLD MINE

Operations

The Stawell operation produced 112,486 ounces for the year. Recovery was 91% and included processing of low grade oxide ore. The treatment plant continued to perform well on variable feed from the various underground and surface ore sources. The plant is mechanically reliable and the issues associated with an ageing plant are well managed.

Underground operations continued to show the benefits of productivity and management improvement initiatives implemented towards the end of the previous year. Production was mainly from the GG5 Upper, GG1 and GG2 mining areas. Development into the GG3 and GG5 Lower ore bodies commenced with the first GG3 stoping areas ready by the end of the year.

Annual Financial Report
Financial year ended 30 June 2007

3. FINANCIAL POSITION

Perseverance recorded a net loss of $19.7 million after tax for the year ended 30 June 2007. This compares to a net loss of $59.0 million after tax for the previous year. The financial results for the current year included consolidation of Leviathan Resources Limited following the acquisition of that company on 4 December 2006.

Perseverance recorded a gross profit from operations of $50.6 million compared with $26.5 million in the previous year.

Perseverance’s loss before income tax expense, finance cost, movement in the fair value of derivatives and impairment was $14.3 million compared to $9.0 million in 2006. The net loss for the current year included substantially higher administration and corporate expenses largely as a result of the takeover of Leviathan Resources Limited and as a result of exploration expenses more than doubling to $8.6 million. Pursuant to Perseverance’s accounting policy, all exploration costs are expensed as incurred.

Another significant factor in the loss for the year is the depreciation and amortisation (D&A) charge of $45.4 million. D&A charges for the current financial year included $18.2 million relating to the Stawell operation which was acquired as part of the Leviathan takeover. Perseverance amortises major plant and equipment and underground infrastructure over reserve ounces.

A non-cash impairment charge of $13.9 million was booked against the carrying value of the Fosterville assets following a review of the life of mine plan. No impairment charge was required to be booked against the carrying value of the Stawell assets. Impairment assessment is required under the AIFRS standards based upon discounted forecast cash flows from each of the operating assets and reflects the underlying risks and assumptions associated with the life of mine plan.

A $10.7 million hedge accounting benefit was recorded reflecting the changes in the mark to market value of Perseverance’s gold forward sales entered into as a requirement of the bank financing of the Fosterville Gold Mine. As at 30 June 2007, the Group had 181,035 ounces of flat forward sale contracts at A$626 per ounce. The marked-to-market value of the hedge book as at 30 June 2007 was negative $35.6 million.

On 9 October 2006, the Company announced an off-market takeover offer to acquire all shares in Leviathan Resources Limited. Perseverance’s financial results for the twelve months ended 30 June 2007 include the acquisition of Leviathan on 4 December 2006 when the Company obtained control. At that date, the Company allocated the cost of acquisition of Leviathan by recognizing the identifiable assets, liabilities and contingent liabilities at their fair value. Included in the allocation, the Company booked a deferred tax liability of $10.7 million and goodwill of $8.2 million. During the twelve months ended 30 June 2007 Perseverance recognised an income tax benefit of $2.7 million relating to amortisation of the deferred tax liability.

Cash flow from operations totalled $36.3 million compared to $15.6 million last year. During the year cash payments of $42.3 million (2006: $12.4 million) were made for development activities and $10.3 million (2006: $9.2 million) for property, plant and equipment. Net financing activities provided cash of $2.7 million (2006: $27.3 million).

At the end of the year Perseverance had cash available of $11.4 million (2006: $18.4 million) and an undrawn financing facility of $1.9 million of a total facility of $25 million.

Refer to Note 13 for total movements in contributed equity during the year.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Other than as referred to in this report, further information on the likely developments in the operations of the consolidated entity and the expected results of those operations would, in the opinion of the Directors, be speculative and would be likely to result in unreasonable prejudice to one or more entities in the consolidated entity.

EVENTS SUBSEQUENT TO BALANCE DATE

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years except for those matters referred to below:

On 12 July 2007, the Company announced that it had completed a $26.5 million placement to institutional and sophisticated investors. The placement involved the issue of approximately 177 million fully paid ordinary shares at $0.15 per share with one attaching option per share issued. The options have an exercise price of $0.15 and a term to expiry of 31 August 2009. Upon exercise, each option will entitle the holder to receive one fully paid ordinary share. A General Meeting of shareholders held on 24 August 2007 approved the issue of the shares and options. As a result of settlement of the first tranche of the placement on 19 July 2007, the conversion price of the Convertible Notes was adjusted from $0.442 to $0.415 pursuant to the Terms and Conditions of the Convertible Notes as set out in the Offering Circular dated 19 December 2005. As a result of settlement of the second tranche of the placement on 30 August 2007, the conversion price of the Convertible Notes was further adjusted from $0.415 to $0.365 pursuant to the Terms and Conditions of the Convertible Notes as set out in the Offering Circular dated 19 December 2005.

Dr. Robin George tendered his resignation as a director of the Company effective 6 August 2007.

Mr Graeme Sloan tendered his resigned as Managing Director and Chief Executive Officer of the Company effective 10 August 2007.

Annual Financial Report
Financial year ended 30 June 2007

Mr John Robinson tendered his resignation as a director of the Company effective 27 August 2007.

Mr. Peter MacPhail was appointed as a director of the Company effective 18 February 2008.

Mr. Kenneth Stowe was appointed as a director of the Company effective 18 February 2008.

Mr. Jozsef Patarica was appointed as a director of the Company effective 18 February 2008.

Mr. Robert Flew tendered his resignation as a director of the Company effective 18 February 2008.

Mr. Brian Phillips tendered his resignation as a director of the Company effective 18 February 2008.

Mr. Chris Roberts tendered his resignation as a director of the Company effective 18 February 2008.

Mr. Jozsef Patarica tendered his resignation as a director of the Company effective 16 April 2008.

Perseverance Corporation Limited (“Perseverance”) announced on 29 October 2007 that it had entered into a Merger Implementation Agreement that provided for the acquisition of Perseverance by Northgate Minerals Corporation (“Northgate”). The transaction was implemented by Schemes of Arrangement (“Schemes”) between Perseverance and its shareholders and optionholders, and a resolution of holders of the Company’s convertible subordinated notes to approve the early redemption of those notes. The Perseverance Directors unanimously recommend that, in the absence of a superior proposal being received, shareholders and optionholders vote in favour of the Schemes. No such superior proposal emerged.

Subsequent to the announcement, Deloitte Corporate Finance Pty Ltd was appointed as the Independent Expert and concluded that the Schemes are fair and reasonable and, therefore, in the shareholders’ and optionholders’ best interests.

On 17 December 2007, the holders of the Company’s convertible subordinated notes passed the extraordinary resolution for the early redemption of those notes, in the event that the Schemes are implemented. The Scheme Booklet, outlining the details of the Schemes, the Directors’ unanimous recommendation in respect of the Schemes and including the Independent Expert’s Report was dispatched to shareholders and optionholders on 19 December 2007.

Shareholders voted in favour of the Share Scheme at the Share Scheme Meeting and optionholders voted in favour of the Option Scheme at Option Scheme Meeting, both held on 18 January 2008. On 1 February 2008, the Supreme Court of Victoria made orders approving the Share Scheme and Option Scheme between Perseverance and its shareholders and optionholders, respectively, pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth).

Under the Schemes, Northgate, through its wholly-owned subsidiary, Northgate Australian Ventures Corporation Pty Ltd (“NAVCO”), acquired all of the outstanding Shares in Perseverance. The Share Scheme became Effective on 4 February 2008, and holders of Shares as at the Record Date (11 February 2008 7:00pm), received $0.20 for each Share held. NAVCO dispatched the Scheme Consideration within five Business Days after the Implementation Date which was 18 February 2008.

The underground operations at Fosterville were interrupted on the 20 December 2007 following an incident when 11 underground personnel were evacuated and briefly hospitalized after being affected by fumes. All personnel have now returned to normal duties. Underground mining activities were further effected when access to the Falcon Phoenix sections of the mine by damage to the portal area caused during a storm event. Underground operations resumed on the 29 December 2007. Workcover investigations are continuing subsequent to period end, and no fines or penalties have been determined.

All liabilities for 30 June 2007 convertible notes outstanding have been repaid to Noteholders, and contracts for all derivative financial instruments held at 30 June 2007 have been either delivered into or terminated. Funding for these activities was obtained by a mix of related company borrowings and equity injections into Perseverance Corporation Limited from Northgate Minerals Corporation.

OPTIONS AND PERFORMANCE RIGHTS

The Company granted 389,000 performance rights during the year to Mr Graeme Sloan after approval was obtained at its Annual General Meeting held on 15 November 2006. These performance rights lapsed upon Mr Sloan’s resignation on 10 August 2007.

Unissued shares

As at the date of this report, there were 9,800,000 unissued ordinary shares under options and 344,000 unissued ordinary shares under performance rights.

Shares issued as a result of the exercise of options

During the financial year, employees, executives and directors have exercised options to acquire 475,000 fully paid shares in Perseverance at a weighted average exercise price of $0.135.

Annual Financial Report
Financial year ended 30 June 2007

All options and performance rights granted are over ordinary fully paid shares of the Company.

Further details of the number of options and option holder rights and the number of performance rights and performance holder rights are disclosed in Notes 13, 18 and 25.

DIRECTORS’ MEETINGS

During the year the Company held 18 meetings of Directors. The attendance of Directors at meetings of the Board were as follows.


	DIRECTORS’ MEETINGS
DIRECTOR	ATTENDED		MAXIMUM POSSIBLE
J. C. Quinn		18		18
B. M. Phillips		6		6
C. L. Roberts		14		18
R. J. Robinson		17		18
R. J. Flew		6		6
G. J. Sloan		18		18
R. J. George		16		18
R. G. Melgaard		15		15

COMMITTEE MEMBERSHIP

The Company has separate committees for audit and remuneration.

During the year the Company held 3 Audit Committee meetings. The current composition of the committee is Mr R.J. Flew, Mr J.C. Quinn and Mr B.M. Philips. Mr R.J. Flew is the Chairman of the Audit Committee.

Details of the Remuneration Committee are disclosed in the Remuneration Report.

REMUNERATION REPORT

This report outlines the remuneration arrangements in place for directors and executives of the Company.

Remuneration philosophy

The Company embodies the following principles in its remuneration framework:

	•		Ensure external competitiveness;

	•		Ensure internal equity;

	•		Seek independent external advice.

Remuneration committee

The Company has an established Remuneration Committee. The role of the Remuneration Committee is to advise the Board on matters relating to the remuneration of the directors and senior executives and employees of the Company.

It is the Board’s intention that the Committee comprise at least two members and that one of the Committee members be an independent non-executive director. The current composition of the committee is Mr J.C. Quinn and Mr B.M. Phillips. Mr Philips is the Chairman of the Remuneration Committee.

The Remuneration Committee is responsible for making recommendations to the Board regarding the remuneration framework for directors, including in relation to;

	(1)		the level of fees payable to each non-executive director within the maximum aggregate level of remuneration approved by shareholders;

	(2)		any changes to the maximum aggregate level of remuneration approved by shareholders;

	(3)		the manner in which fees may be taken; and

	(4)		any other applicable arrangements, including for example, fees in relation to retirement benefits, payments of fees for special exertions, director expense claims and ad hoc Committee fees.

The Remuneration Committee is also responsible for reviewing, determining and approving remuneration arrangements for the Chief Executive Officer and senior executives. In fulfilling this role, the Remuneration Committee will have regard to the Company’s Remuneration Policy to ensure that the structure of the remuneration package:

Annual Financial Report
Financial year ended 30 June 2007

	(1)		is market related and appropriate for the responsibilities of the role;

	(2)		recognises and rewards performance; and

	(3)		provides incentive and motivation for that person, as part of management, to pursue the long term growth and success of the Company within an appropriate control framework.

During the year the Company held 3 Remuneration Committee meetings. All these meetings were attended by Mr J.C. Quinn, and Mr R.J. Robinson and one meeting was attended by Mr B.M. Phillips.

Remuneration structure

Non-executive director remuneration

Non-executive director fees are determined by reference to external survey data, taking account of the Company’s relative size and business complexity. No additional payments are made for serving on Board Committees. In addition, no equity incentives are offered and no retirement benefits are payable to any non-executive director.

The maximum aggregate sum for non-executive director remuneration of $400,000 was approved by share holders at the 2003 Annual General Meeting.

The remuneration details of non-executive directors are shown in the table below.

Executive director remuneration

The former Managing Director, Graeme Sloan was the only executive director on the Company’s Board. Mr Sloan’s remuneration package comprised a base fixed annual remuneration (FAR) of $350,000 per annum. FAR comprises salary, superannuation and the cash value of all fringe benefits. In addition, Mr Sloan was entitled to short-term cash incentives (STCI) of up to 35% of Mr Sloan’s FAR and long-term incentives (LTI) of up to 35% of Mr Sloan’s FAR in the form of performance rights. Entitlement to STCI and LTI was based upon achievement of performance targets set by the Board annually. LTI was subject to shareholder approval at the Company’s Annual General Meetings. In the financial year ended 30 June 2007, (prior to the takeover of Leviathan Resources Limited), the Board agreed that the STCI be based on two parameters related to the performance of the Fosterville Gold Mine:

1. Operating Performance — 80% of STI be allocated to output and cash cost parameters. Budget forecasts for the year were 100,000 ounces at a cash cost of A$481 per ounce cash cost. For the purpose of this exercise, a spot gold price of A$750 per ounce was used to generate an operating margin of $27.05 million [target]. Mr Sloan was entitled to half of the Operating Performance component of the incentive if the actual operating margin met target. Mr Sloan would have been entitled to additional incentive at the rate of 4% of FAR for each percentage point that actual operating margin at $750 gold price exceeded target up to a maximum by 10 percentage points. No STI would have been awarded if target was not achieved.

2. Safety Performance — 20% of the incentive was allocated to safety performance. Site safety performance was measured by the LTI frequency rate for the year calculated in accordance with the Western Australian DoIR method. The Company currently compiles LTI data and industry LTI frequency rates are available from the Western Australian DoIR for the Gold Mining Industry. If Perseverance’s LTI performance bettered WA industry averages by 25%, Mr Sloan would have been entitled to 100% of this component, scaling down to zero at WA industry averages. No incentive would be earned in the event of a fatality during the year.

At the Company’s Annual General Meeting held on 15 November 2006, approval to amend the terms of employment between the Company and Mr Sloan was obtained from shareholders. In the event that Mr Sloan, in his role as Managing Director and Chief Executive Officer, was either made redundant or was offered a lesser role as a consequence of a reorganisation of the Company of any form, he would have been entitled to compensation in an amount equal to one year of his fixed annual remuneration (“Benefit”).

In the event that Mr Sloan’s employment was not formally terminated following the occurrence of one of the events noted above, he would have been entitled, for a period of not more than one month following such event, to resign from his employment and receive the Benefit. If Mr Sloan chose not to resign within this one month period, his rights to the Benefit would lapse and, in the subsequent event of his termination or resignation, his entitlements would be determined under law. The Benefit would be in lieu of any other claim which Mr Sloan may have for loss of office.

The remuneration details of Mr Sloan and key management personnel are detailed below.

Both operating performance and safety performance have been chosen as parameters consistent with the overall objectives of the Company. Specifically, the operating margin and LTI frequency rate have been assessed as appropriate measures to reflect these parameters.

Executive remuneration

The Remuneration Committee is responsible for reviewing and recommending to the Board the compensation arrangements for executives. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high

Annual Financial Report
Financial year ended 30 June 2007

quality executive team. Executives remuneration packages may comprise a base fixed annual remuneration (FAR), short-term cash incentives (STCI) and long-term incentives (LTI) in the form of performance rights. FAR comprises salary, superannuation and the cash value of all fringe benefits and executives are given the opportunity to receive their FAR emolument in a variety of forms including cash and fringe benefits such as motor vehicles. Entitlement to STCI and LTI will be based upon achievement of performance targets set by the Board annually. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for Perseverance.

Salary adjustments are based on individual performance. A measure of performance is extracted from the performance reviews and used in the salary review process.

Emoluments of Directors and Executives


		SHORT				POST		LONG
		TERM				EMPLOYMENT		TERM
								SHARE BASED				VALUE OF SBP		% SBP
		SALARY		NON		SUPER-		PAYMENTS				AS % OF		PERFORMANCE
		& FEES		MONETARY		ANNUATION		(SBP)		TOTAL		REMUNERATION		RELATED
		$		$		$		$		$

Directors
J.C. Quinn (a)	2007		111,750		—		—		22,023		133,773		16		100
	2006		157,999		—		—		22,023		180,022		12		100
G.J. Sloan (b)	2007		307,339		15,000		27,661		15,834		365,834		4		100
	2006		279,816		15,000		25,183		27,534		347,533		8		100
C.L. Roberts	2007		44,833		—		—		11,686		56,519		36		100
	2006		40,000		—		—		22,482		62,482		36		100
R.J. George (g)	2007		41,131		—		3,702		—		44,833		—		—
	2006		36,697		—		3,303		—		40,000		—		—
R.J. Robinson (h)	2007		41,131		—		3,702		—		44,833		—		—
	2006		36,697		—		3,303		—		40,000		—		—
R.G. Melgaard (f)	2007		35,750		—		—		—		35,750		—		—
	2006		36,697		—		3,303		—		40,000		—		—
R.J. Flew (e)	2007		20,523		—		1,847		—		22,370		—		—
	2006		—		—		—		—		—		—		—
B.M. Phillips (d)	2007		24,312		—		2,188		—		26,500		—		—
	2006		—		—		—		—		—		—		—

Executives
M. Mitchell (c)	2007		146,433		15,000		13,160		—		174,593		—		—
	2006		—		—		—		—		—		—		—
M.W. Bouwmeester (c)	2007		202,294		15,000		18,206		15,959		251,459		6		100
	2006		152,319		15,000		13,709		10,135		191,163		5		100
J.M.J. Patarica (c)	2007		197,477		15,000		17,773		7,583		237,833		3		100
	2006		160,420		15,000		14,438		3,838		193,696		2		100


(a)		Mr J.C. Quinn is Non-Executive Chairman of the Company. For the 6 months ended 31 December 2005, at the request of the Company’s Board, Mr Quinn was engaged by the Company to undertake duties in addition to his role as Non-Executive Chairman of the Company. Mr Quinn’s Short Term remuneration during this period was $18,000 per month. From 1 January 2006, Mr Quinn’s Short Term remuneration reverted to Non-Executive Chairman fees only.

(b)		Mr G.J. Sloan was Managing Director and Chief Executive Officer of the Company until his resignation on 10 August 2007.

(c)		Mr M.W. Bouwmeester was Chief Financial Officer and Company Secretary of the Company until he resigned from these positions on 31 August 2007. Mr J.M.J. Patarica was appointed Deputy Operations Manager on 5 July 2005 and was appointed Operations Manager on 1 November 2005. Mr M. Mitchell was appointed Chief Operating Officer on 1 January 2007 and was appointed Executive General Manager on 10 August 2007. There are no other employees that participate in the executive management of the consolidated entity.

(d)		Mr Phillips was appointed as a director of Perseverance with effect from 24 January 2007.

(e)		Mr Flew was appointed as a director of Perseverance with effect from 24 January 2007.

(f)		Mr Melgaard resigned as a director of Perseverance with effect from 24 April 2007.

(g)		Dr George resigned as a director of Perseverance with effect from 6 August 2007.

(h)		Mr Robinson resigned as a director of Perseverance with effect from 27 August 2007.

Annual Financial Report
Financial year ended 30 June 2007


(i)		The Company uses the fair value measurement provisions of AASB 2 “Share-based Payment” prospectively for all options granted to directors and relevant executives, which were granted subsequent to 7 November 2002, and have not vested as at 1 July 2004. The fair value of such grants is being amortised and disclosed as part of director and executive emoluments on a straight-line basis over the vesting period. The fair value of the options is calculated at the date of grant using a Binomial model and allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the options allocated to this reporting period.

Performance rights granted by Perseverance as part of remuneration

TOTAL VALUE OF

VALUE OF

RIGHTS

VALUE OF

RIGHTS

GRANTED,

REMUNERATION

RIGHTS AT

GRANTED

EXCERCISED

VESTED

LAPSED

EXERCISED AND

CONSISTING OF

GRANT

DURING

DURING THE

DURING

LAPSED DURING

RIGHTS FOR

DATE

NUMBER

DATE

THE YEAR

YEAR

THE YEAR

Directors

G.J. Sloan (a)

21 Dec 2006

389,000

0.22

85,580

—

85,580


(a)		Performance rights are exercisable when the vesting conditions are met, and expire 30 November 2016. On 10 August 2007, Mr Sloan resigned as a director of the Company, at which time the performance rights lapsed.

The fair value of performance rights is estimated as at the grant date using a valuation based on management’s assessment of the probability of the performance right condition being achieved. A probability factor of 0.6 has been applied against the share price at the date of granting the options to derive the fair value calculated.

Employee superannuation

Perseverance currently contributes the 9% superannuation guarantee amount for all employees as required by existing superannuation legislation.

Perseverance offers choice of superannuation fund and does not require employees to join a specific superannuation fund, unless required by existing Australian Workplace Agreements.

CORPORATE GOVERNANCE STATEMENT

In recognising the need for the highest standard of corporate behaviour and accountability, the Directors of the Company support and, except as disclosed, have adhered to the principles of corporate governance. The Company’s corporate governance statement is on page 12.

DIRECTORS’ SHAREHOLDINGS

At the date of this report, the interests of the Directors in the shares of the Company are:


DIRECTOR	SHARES				UNLISTED OPTIONS
	DIRECT		INDIRECT		DIRECT			INDIRECT
J.C. Quinn		1,506,257		1,282,353		5,000,000	(a)		—
C.L. Roberts		200,000		217,840		600,000	(b)		—
R.J. Flew		—		100,750		—			—
B. M. Phillips		117,345		—		—			—


(a)		Of the 5,000,000 options issued to Mr J.C. Quinn, 2,818,332 options can be exercised to take up ordinary shares in the company at 9 cents per share at any time on or before 8 February 2011, and 2,181,668 options can be exercised to take up ordinary shares in the company at 9 cents per share at any time on or before 10 March 2011.

(b)		These options were granted under the Perseverance Employee Option Plan. Further details of the number of options and option holder rights are disclosed in Notes 18 and 25 to the financial statements.

DIRECTORS’ INTERESTS AND BENEFITS

No Director of the Company has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors shown in the consolidated financial report) by reason of a contract made by the Company, its controlled entities or a related body corporate with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except for payment to Mr C.L. Roberts for the provision of accommodation facilities in the Fosterville area. Payments for the year totalled $14,788 (2006: $11,756).

Annual Financial Report
Financial year ended 30 June 2007

ENVIRONMENTAL REGULATION

The operations of the Consolidated Entity in Australia are subject to environmental regulation under the laws of the Commonwealth and the States in which those operations are conducted.

Each mining operation is subject to particular environmental regulation specific to the activities undertaken at that site as part of the licence or approval for that operation. There are also broad industry environmental laws that apply to all mining operations and other operations of the Consolidated Entity. The environmental laws and regulations generally address the potential impact of the Consolidated Entity’s activities in the areas of water and air quality, noise, surface disturbance and the impact upon flora and fauna.

The Executive General Manager reports to the Board on all environmental and health and safety incidents. The Directors are not aware of any environmental matter that would have a materially adverse impact on the overall business of the Consolidated Entity.

TAX CONSOLIDATION

Effective from 1 July 2002, for the purposes of income taxation, the Company and its 100% owned subsidiaries formed a tax consolidated group. Members of the group have not yet entered into a tax funding agreement to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. A tax sharing agreement provides for allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of such default is remote. The head entity of the tax consolidated group is Perseverance Corporation Limited. On 21February 2007 Leviathan Resources Limited and its controlled entities entered the consolidated group of Perseverance Corporation Limited.

NON-AUDIT SERVICES

The following non-audit services were provided by the Company’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided is such that auditor independence is not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:


Tax compliance and financial due diligence services	$	168,500
Risk Management Framework assistance	$	33,800
Acquisition accounting assistance	$	27,000

AUDITORS INDEPENDENCE DECLARATION

A declaration of independence has been provided by Perseverance’s auditors, Ernst & Young, and is attached to the Directors’ Report.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

During the year the Company paid an insurance premium of $55,000 in respect of a contract insuring each of the Directors named earlier in this report and each full-time executive officer, Director and Secretary of group entities, against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law.

This report has been made in accordance with a resolution of Directors

Signed this 14^th day of May 2008.

Peter MacPhail
Director

Annual Financial Report
Financial year ended 30 June 2007

Corporate Governance Statement

A summary of the Company’s corporate governance practices is set out below. The charters and policies referred to below were adopted by the Board of Directors in June 2005. Further information is available in the Corporate Governance section of the Company’s website www.perseverance.com.au

BOARD OF DIRECTORS AT 30 JUNE 2007

The Board of Directors of Perseverance Corporation Limited is responsible for the corporate governance of the Company. The Board Charter is available on the Company’s website.

The Board guides and monitors the business of the Company on behalf of the shareholders, by whom they are elected and to whom they are accountable. The Board seeks to meet the legitimate expectations of shareholders, while discharging its regulatory obligations and ethical responsibilities.

The key role of the Board is strategy development and the review and approval of plans and budgets. In addition, the Board is responsible for identifying areas of significant business risk and ensuring policies and procedures are in place to adequately manage those risks.

The Board at 30 June 2007 comprised four Directors, all of whom are non-executive Directors.

Non-executive Directors

At 30 June 2007, the Company’s non-executive Directors were John Quinn, Brian Phillips, Chris Roberts, and Robert Flew. The non-executive Directors’ qualifications, experience, dates of appointment and details of other listed company directorships are set out in the Directors’ Report and in the Corporate section of the website.

Chairman

At 30 June 2007 John Quinn was the Chairman of the Company. The Company’s policy on the “Role of the Chairman” is posted on the website.

Independence

Three of the four non-executive Directors at 30 June 2007 are independent as defined by the ASXCGC Best Practice Recommendations; Non-executive Chairman John Quinn is not considered to be independent until three years after he ceased to be Executive Chairman of the Company, which occurred in June 2005. The Company does not comply with Best Practice Recommendations 2.1 or 2.2, which recommend that a majority of the Board, including the Chairman, be independent directors.

Managing Director, Chief Executive Officer and Executive General Manager

Graeme Sloan was appointed as a Director in January 2004, was appointed Managing Director and CEO in June 2005 and resigned as a director of the Company on 10 August 2007.

Mark Mitchell was appointed Executive General Manager on 10 August 2007, and has subsequently resigned.

The Company’s policy on the “Role of the CEO” is posted on the website. The Board reviews and provides feedback on the CEO’s performance, and is responsible for the appointment and removal of the CEO.

AUDIT COMMITTEE AT 30 JUNE 2007

The Audit Committee shall comprise at least three Non-executive Directors, as set out in the Audit Committee Charter posted on the website.

Present members of the Committee are Robert Flew (Chairman of the Audit Committee), Brian Phillips and John Quinn.

The purpose of the Audit Committee is to assist the Board with the Company’s financial reporting, internal control structure, risk management systems and other functions. Its primary responsibility is to oversee the Company’s financial reporting process and report the results of its activities to the Board. The Committee is also responsible for making recommendations to the Board on the appointment, removal and remuneration of the auditors, and monitoring their effectiveness and independence.

The Audit Committee meets in order to:

	•		review and approve plans for the annual audit;

	•		review and approve the half-year financial report;

	•		update the plans for the annual audit; and

Annual Financial Report
Financial year ended 30 June 2007

•

review and approve the annual financial report.

The Audit Committee discusses with senior management and the auditors, and reports to the Board, on the adequacy and effectiveness of the accounting and financial controls, including the Company’s policies and procedures to assess, monitor and manage business risk, and legal and ethical compliance programs (including the Company’s Code of Conduct).

In fulfilling its responsibilities the Committee receives regular reports from senior management and the auditors. The Committee ensures there are clear lines of communication between the Committee, the auditors and management. The auditor attends the Annual General Meeting of the Company to answer questions about the audit.

The Committee has authority, in carrying out its duties, to seek information from any employee, and to obtain external legal or other independent professional advice. The Committee requires the persons performing the CEO and CFO functions to sign off on the Company’s financial reports and the soundness of the Company’s risk management and internal compliance and control systems.

The Committee reports to the Board after each Committee meeting and Audit Committee minutes are provided to all Directors.

REMUNERATION COMMITTEE AT 30 JUNE 2007

The Remuneration Committee consists of John Quinn and Brian Phillips. The main tasks of the Committee are to review the performance of the CEO and senior management, and to review in line with best practice the Company’s remuneration levels and employee incentive plans. The incentive plans presently consist of an Employee Option Plan and a Performance Rights Plan, last approved by shareholders at the 2004 Annual General Meeting.

Non-executive Directors receive no retirement benefits in addition to statutory entitlements.

The Committee generally meets twice each year and reports to the Board after each Committee meeting, with Remuneration Committee minutes provided to all Directors.

The Company’s Remuneration Committee Charter is posted on the website.

NOMINATION POLICY AT 30 JUNE 2007

The Board believed at 30 June 2007 that a Nomination Committee is not warranted by a company the size of the Company. The Company does not comply with Best Practice Recommendation 2.4, which recommends that the Company have a Nomination Committee.

The Board’s Nomination Policy aims to preserve a mix of relevant skills and experience on the Board and sets out the procedure for the appointment of Non-executive Directors.

The Company’s Nomination Policy is posted on the website.

BOARD PERFORMANCE REVIEW POLICY AT 30 JUNE 2007

The Board periodically reviews its own performance and that of its committees. The Board’s Performance Review Policy is posted on the website.

INDEPENDENT ADVICE POLICY AT 30 JUNE 2007

Directors have the right, in connection with the discharge of their responsibilities, to seek independent professional advice at the Company’s expense. Prior approval of the Chairman is required.

The Company’s Independent Advice Policy is posted on the website.

CONTINUOUS DISCLOSURE POLICY AT 30 JUNE 2007

The Company keeps the market fully informed by releasing to ASX all information concerning the Company and its activities that a reasonable person would expect to have a material effect on the price of the Company’s securities.

Information disclosed to ASX is posted on the website. When analysts are briefed on aspects of the Company’s operations, the material to be used in the presentation must have previously been released to the ASX and posted on the website.

The Company’s Continuous Disclosure Policy is posted on the website.

Annual Financial Report
Financial year ended 30 June 2007

Balance Sheet
AS AT 30 JUNE 2007


				CONSOLIDATED						THE COMPANY
	NOTES			2007 ($)			2006 ($)			2007 ($)			2006 ($)


CURRENT ASSETS
Cash and cash equivalents		21	(b)		11,418,840			18,370,653			38,680			10,961,468
Trade and other receivables		3			5,361,005			3,463,925			1,474,988			672,424
Inventories		4			13,508,031			7,260,969			—			—
Derivatives		28			—			35,146			—			—

TOTAL CURRENT ASSETS					30,287,876			29,130,693			1,513,668			11,633,892


NON-CURRENT ASSETS
Intangible assets		6			24,281,447			—			—			—
Goodwill		6			8,214,537			—			—			—
Receivables		3			—			—			42,103,133			32,724,855
Other financial assets		5			—			—			52,971,894			202
Property, plant & equipment		7			97,554,151			87,720,289			9,420			—
Mining properties		8			30,664,979			12,518,928			—			—

TOTAL NON-CURRENT ASSETS					160,715,114			100,239,217			95,084,447			32,725,057

TOTAL ASSETS					191,002,990			129,369,910			96,598,115			44,358,949


CURRENT LIABILITIES
Trade and other payables		9			26,906,988			12,462,189			19,890,793			—
Interest bearing loans and borrowings		10			4,826,280			6,307,029			—			—
Provisions		12			4,361,784			507,258			—			—
Derivatives		28			35,620,978			50,289,959			—			—

TOTAL CURRENT LIABILITIES					71,716,030			69,566,435			19,890,793			—


NON-CURRENT LIABILITIES
Interest bearing loans and borrowings		10			24,465,750			12,500,000			—			—
Convertible notes		11			34,743,835			34,365,425			34,743,835			34,372,172
Provisions		12			9,192,230			3,080,711			—			—
Deferred tax liability		16			7,981,629			—			—			—

TOTAL NON-CURRENT LIABILITIES					76,383,444			49,946,136			34,743,835			34,372,172

TOTAL LIABILITIES					148,099,474			119,512,571			54,634,628			34,372,172

NET ASSETS					42,903,516			9,857,339			41,963,487			9,986,777


EQUITY
Issued capital		13			175,290,844			122,864,228			175,290,844			122,864,228
Reserves		14			1,847,980			1,489,247			1,847,980			1,489,247
Retained losses		14			(134,235,308	)		(114,496,136	)		(135,175,337	)		(114,366,698	)

TOTAL EQUITY					42,903,516			9,857,339			41,963,487			9,986,777

The accompanying notes form an integral part of this Balance Sheet.

Annual Financial Report
Financial year ended 30 June 2007

Income Statement
YEAR ENDED 30 JUNE 2007


			CONSOLIDATED						THE COMPANY
	NOTES		2007 ($)			2006 ($)			2007 ($)			2006 ($)


Revenues
Sales revenue		2		115,857,494			62,884,572			—			—
Other revenue		2		1,362,265			1,061,936			331,312			607,313

Total revenue				117,219,759			63,946,508			331,312			607,313


Expenses
Treatment expenses				(24,872,137	)		(16,910,278	)		—			—
Underground mining expenses				(19,851,875	)		—			—			—
Surface mining expenses				(8,528,309	)		(14,803,506	)		—			—
Mine geology expenses				(7,493,431	)		(1,711,428	)		—			—
Engineering & maintenance expenses				(5,827,307	)		(4,051,463	)		—			—

Cost of sales		2		(66,573,059	)		(37,476,675	)		—			—


Gross profit				50,646,700			26,469,833			331,312			607,313


Sustainability expenses				(932,505	)		(910,072	)		—			—
Administration & corporate expenses				(7,678,979	)		(3,992,017	)		(1,585,739	)		(1,350,501	)
Employee benefits		2		(1,662,498	)		(364,534	)		(79,043	)		(38,908	)
Exploration expenses				(8,616,456	)		(3,846,503	)		—			—
Depreciation and amortisation		2		(45,362,478	)		(26,403,222	)		(404	)		—
Other (expenses)/income		2		(688,566	)		9,124			(16,356,573	)		(79,074,611	)


Loss before income tax expense, finance costs and movement in fair value of derivatives and impairment				(14,294,782	)		(9,037,391	)		(17,690,447	)		(79,856,707	)


Finance costs		2		(4,928,985	)		(3,645,895	)		(3,118,192	)		(179,146	)
Benefit/ (loss) movement in fair value of derivatives		2		10,677,226			(46,342,460	)		—			—
Impairment of property, plant & equipment & mining development		2b		(13,880,000	)		—			—			—



Loss before income tax expense				(22,426,541	)		(59,025,746	)		(20,808,639	)		(80,035,853	)

Income tax benefit		16		2,687,371			—			—			—


Net loss attributable to members of Perseverance Corporation Limited		14		(19,739,170	)		(59,025,746	)		(20,808,639	)		(80,035,853	)


Earnings per share (cents per share)
- basic for profit/(loss) for the year attributable to equity shareholders of the parent		15		(3.08	)		(10.31	)

- diluted for profit/(loss) for the year attributable to equity shareholders of the parent		15		(3.08	)		(10.31	)

The accompanying notes form an integral part of this Income Statement.

Annual Financial Report
Financial year ended 30 June 2007

Cash Flow Statement
YEAR ENDED 30 JUNE 2007


			CONSOLIDATED						THE COMPANY
	NOTES		2007 ($)			2006 ($)			2007 ($)			2006 ($)

			INFLOWS/			INFLOWS/			INFLOWS/			INFLOWS/
			(OUTFLOWS)			(OUTFLOWS)			(OUTFLOWS)			(OUTFLOWS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers (inclusive of GST)				105,531,918			61,292,303			—			38,598
Payments to suppliers and employees (inclusive of GST)				(76,702,308	)		(48,577,579	)		(10,410,501	)		(4,828,879	)
GST received from Australian Tax Office				11,287,492			5,762,539			7,971,235			5,762,539
Interest received				740,180			684,426			331,312			607,313
Interest paid				(4,597,382	)		(3,515,293	)		(2,875,910	)		(1,434,890	)

NET CASH FLOWS FROM /(USED IN) OPERATING ACTIVITIES:		21		36,259,900			15,646,396			(4,983,864	)		144,681


CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for development activities				(42,283,142	)		(12,398,915	)		—			—
Payments for property, plant & equipment				(10,258,392	)		(9,169,136	)		(9,824	)		—
Payments for exploration activities				(8,616,456	)		(3,846,503	)		—			—
Net cash from acquisition in subsidiary		27		15,658,018			—			—			—
Cost incurred on acquisition of subsidiary				(607,199	)		—			(607,199	)
Receipts from sale of property, plant & equipment				9,306			—			—			—
Proceeds from sales of subsidiary/ investment				208,683			—			—			—

NET CASH FLOWS USED IN INVESTING ACTIVITIES:				(45,889,182	)		(25,414,554	)		(617,023	)		—


CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issues of shares				62,122			221,135			62,122			221,135
Security deposits received				—			5,000			—			5,000
Net proceeds from convertible note issue				—			34,365,425			—			34,365,425
Advances of borrowings				23,125,000			6,200,000			371,995			—
Repayment of borrowings				(18,371,258	)		(13,523,014	)		(5,756,018	)		—
Advances to related entities				—			—			—			(24,168,386	)
Principal repayment of finance leases				(2,138,395	)		385			—			—

NET CASH FLOWS FROM FINANCING ACTIVITIES:				2,677,469			27,268,931			(5,321,901	)		10,423,174

NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS HELD				(6,951,813	)		17,500,773			(10,922,788	)		10,567,855
Cash and cash equivalents at the beginning of the financial year				18,370,653			869,880			10,961,468			393,613


CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR		21		11,418,840			18,370,653			38,680			10,961,468

The accompanying notes form an integral part of this statement of cash flows.

Annual Financial Report
Financial year ended 30 June 2007

Statement of Changes in Equity
YEAR ENDED 30 JUNE 2007


	Attributable to equity holders of the parent

						Reserves

						Convertible
	Issued		Retained			Notes -		Other
	Capital		Earnings			Equity		Reserves		Total Equity
Consolidated	($)		($)			($)		($)		($)

At 1 July 2005		122,643,094		(51,551,291	)		—		224,340		71,316,143

Application of AASB 132 and AASB 139		—		(3,919,099	)		—		—		(3,919,099	)

Net income/(loss) recognised directly in equity		—		(3,919,099	)		—		—		(3,919,099	)

Loss for the period		—		(59,025,746	)		—		—		(59,025,746	)

Total recognised income/(loss) for the period		—		(62,944,845	)		—		—		(62,944,845	)

Equity transactions:
Exercise of options		221,134		—			—		—		221,134
Issue — convertible notes — equity component		—		—			951,113		—		951,113
Cost of share-based payment		—		—			—		313,794		313,794

Total equity transactions		221,134		—			951,113		313,794		1,486,041

At 30 June 2006		122,864,228		(114,496,138	)		951,113		538,134		9,857,339

Net income recognised directly in equity:
Loss for the period		—		(19,739,170	)		—		—		(19,739,170	)

Total recognised income for the year		—		(19,739,170	)		—		—		(19,739,170	)

Equity transactions:
Equity issued on acquisition of Leviathan Resources Limited		52,364,494		—			—		—		52,364,494
Exercise of options		62,122		—			—		—		62,122
Cost of share-based payment		—		—			—		358,733		358,733

Total equity transactions		52,426,616		—			—		358,733		52,785,349

At 30 June 2007 attributable to members		175,290,844		(134,235,308	)		951,113		896,867		42,903,516

Total Equity as at 30 June 2007		175,290,844		(134,235,308	)		951,113		896,867		42,903,516

Annual Financial Report
Financial year ended 30 June 2007

Statement of Changes in Equity
YEAR ENDED 30 JUNE 2007


	Attributable to equity holders of the parent

						Reserves

						Convertible
						Notes -		Other
	Issued Capital		Retained Earnings			Equity		Reserves		Total Equity
Parent	($)		($)			($)		($)		($)

At 1 July 2005		122,643,094		(34,330,845	)		—		224,340		88,536,589

Application of AASB 132 and AASB 139		—		—			—		—		—

Net income recognised directly in equity		—		—			—		—		—

Loss for the period		—		(80,035,853	)		—		—		(80,035,853	)

Total recognised income for the period		—		(80,035,853	)		—		—		(80,035,853	)

Exercise of options		221,134		—			—		—		221,134
Issue — convertible notes — equity component		—		—			951,113		—		951,113
Cost of share-based payment		—		—			—		313,794		313,794

Total equity transactions		221,134		—			951,113		313,794		1,486,041

At 30 June 2006		122,864,228		(114,366,698	)		951,113		538,134		9,986,777
Net income recognised directly in equity
Loss for the period		—		(20,808,639	)		—		—		(20,808,639	)

Total recognised income for the year		—		(20,808,639	)		—		—		(20,808,639	)

Equity transactions:
Equity issued on acquisition of Leviathan Resources Limited		52,364,494		—			—		—		52,364,494
Exercise of options		62,122		—			—		—		62,122
Cost of share-based payment		—		—			—		358,733		358,733

Total equity transactions		52,426,616		—			—		896,867		52,785,349

At 30 June 2007		175,290,844		(135,175,337	)		951,113		896,867		41,963,487

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

1. Summary of Significant Accounting Policies

CORPORATE INFORMATION

The financial report of Perseverance Corporation Limited (the Company) for the year ended 30 June 2007 was authorised for issue in accordance with a resolution of the directors on 14 May 2008.

Perseverance Corporation Limited (the parent) is a company limited by shares incorporated in Australia.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

BASIS OF PREPARATION

(A) Basis of Preparation

The consolidated financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, applicable Accounting Standards and other mandatory professional reporting requirements.

The financial report has been prepared on a historical cost basis except for:

	•		the carrying values of derivatives which are adjusted to record changes in the fair values attributable to the financial instrument, and

	•		the assets acquired and the liabilities and contingent liabilities assumed at acquisition at fair value based on the purchase method of accounting outlined in 1(c) below.

The financial report is presented in Australian dollars.

(B) Statement of Compliance

Except for the amendments to AASB 101 Presentation of Financial Statements, Australian Accounting Standards and Interpretations that have been issued at 30 June 2007 or amended but are not yet effective have not been adopted by the Group for the annual report period ending 30 June 2007. These are outlined in the table below.


			Application date of	Impact on Group	Application
Reference	Title	Summary	standard*	financial report	date for Group
AASB 2005-10	Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]	Amendments arise from the release in August 2005 of AASB 7 Financial Instruments: Disclosures.	1 January 2007	AASB 7 is a disclosure standard and so will have no direct impact on the amounts included in the Group’s financial statements. However, the amendments will result in changes to the financial instrument disclosures included in the Group’s financial report.	1 July 2007
AASB 2007-1	Amendments to Australian Accounting Standards arising from AASB Interpretation 11 [AASB 2]	Amending standard issued as a consequence of AASB Interpretation 11 Interim Financial Reporting and Impairment.	1 March 2007	This is consistent with the Group’s existing accounting policies for share-based payments so will have no impact.	1 July 2007

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(B) Statement of Compliance (Continued)


			Application date of	Impact on Group	Application
Reference	Title	Summary	standard*	financial report	date for Group
AASB 2007-2	Amendments to Australian Accounting Standards arising from AASB Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131 & AASB 139]	Amending standard issued as a consequence of AASB Interpretation 12 Service Concession Arrangements.	1 January 2007	As the Group currently has no service concession arrangements or public-private-partnerships (PPP), it is expected that this Interpretation will have no impact on its financial report.	1 July 2007
AASB 2007-3	Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038]	Amending standard issued as a consequence of AASB 8 Operating Segments.	1 January 2009	AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group’s financial statements. However the new standard is expected to have an impact on the Group’s segment disclosures as segment information based on management reports are more detailed than those currently reported under AASB 114.	1 July 2009
AASB 7	Financial Instruments: Disclosures	New standard replacing disclosure requirements of AASB 132.	1 January 2007	Refer to AASB 2005-10 above.	1 July 2007
AASB 8	Operating Segments	This new standard will replace AASB 114 Segment Reporting and adopts a management approach to segment reporting.	1 January 2009	Refer to AASB 2007-3 above.	1 July 2009

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(B) Statement of Compliance (Continued)


			Application date of	Impact on Group	Application
Reference	Title	Summary	standard*	financial report	date for Group
AASB Interpretation 10	Interim Financial Reporting and Impairment	Addresses an inconsistency between AASB 134 Interim Financial Reporting and the impairment requirements relating to goodwill in AASB 136 Impairment of Assets and equity instruments classified as available for sale in AASB 139 Financial Instruments:	1 November 2006	The prohibitions on reversing impairment losses in AASB 136 and AASB 139 to take precedence over the more general statement in AASB 134 is not expected to have any impact on the Group’s financial report.	1 July 2007
		Recognition and Measurement.
AASB Interpretation 11	Group and Treasury Share Transactions	Specifies that a share-based payment transaction in which an entity receives services as consideration for its own equity instruments shall be accounted for as equity-settled.	1 March 2007	Refer to AASB 2007-1 above.	1 July 2007
AASB Interpretation 12	Service Concession Arrangements	Clarifies how operators recognise the infrastructure as a financial asset and/or an intangible asset — not as property, plant and equipment.	1 January 2007	Refer to AASB 2007-2 above.	1 July 2007


*		designates the beginning of the applicable annual reporting period

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS also ensures compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

(C) Summary of Significant Accounting Policies

(I) Basis of consolidation

The consolidated financial statements comprise the financial statements of Perseverance Corporation Limited and its subsidiaries as at 30 June each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combinations to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(II) Business combinations

The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business combination, the fair value of the instruments is their published market prices as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(III) Interest in a jointly controlled operation

The Group has an interest in a joint venture that is a jointly controlled operation. A joint venture is a contractual arrangement whereby two or more parties undertake and economic activity that is subject to joint control. A jointly controlled operation involves use of assets and other resources of the venturers rather than establishment of a separate entity. The Group recognises its interest in the jointly controlled operation by recognising its interest in the assets and the liabilities of the joint venture. The Group also recognises the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the jointly controlled operation.

The Group’s interest in its joint venture operations is accounted for by recognising the Group’s assets it controls and liabilities it incurs from the joint venture, as well as expenses incurred by the Group and the Group’s share of income that it earns from the sale of product by the joint venture, in the consolidated financial statements.

(IV) Mineral exploration, evaluation and development expenditure

Exploration, evaluation and development expenditure incurred by the Group is accumulated for each separate area of interest. Accumulated exploration, evaluation and development expenditure on areas of interest are carried forward where costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale. Where exploration and/or evaluation activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing, the costs may be carried forward or expensed.

Expenditure on areas that have been abandoned, or considered to be of no value, is written off or expensed. For those areas in which extraction of ore has commenced, accumulated costs are amortised over the expected gold reserves written off on a unit of gold production basis. Estimates of gold reserves are revised annually.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(V) Mine property, plant and equipment

Plant, equipment, land and buildings are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated either on a units of production or a straight-line basis over the estimated useful life of the asset as follows:


	LIFE	METHOD

Buildings on mining leases	10 years	Straight line
Motor vehicles	4 years	Straight line
Office equipment	5 years	Straight line
Plant and equipment — mining operations	7 years	Units of Production
Mining properties	7 years	Units of Production
Plant and equipment — other	5 years	Straight line

Specifically, pre-stripping costs, and mining costs associated with accessing the ore, are progressively capitalised as such expenditure is incurred, and amortised over the life of the surface pit or underground region to which such costs relate on a units of production basis.

Land is carried at cost.

Mining properties consists of assets in development (including underground mine development) and deferred mining costs associated with capitalised pre-stripping activity and other costs associated with accessing the ore body and preparation for production operations. When development costs meet phase completion criteria, these costs are transferred to property, plant and equipment.

Disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on de-recognition of the assets (calculated as the difference between the net disposal proceeds and the carrying amount of the assets) is included in profit or loss in the year the asset is derecognised.

Impairment

The carrying values of plant and equipment are reviewed for impairment at each balance sheet date when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Plant and associated infrastructure are assessed on a Fosterville Gold Mine cash generating unit basis and a Stawell Gold Mine cash generating unit basis.

If an indication of impairment exists, and where the carrying values exceed the estimated recoverable amount, the assets of the cash-generating unit are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater 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 a pre tax real discount rate that reflects current market assessments of the Company’s cost of capital and the risks specific to the asset.

Land is assessed for impairment at each balance sheet date when events or changes in circumstances indicate the carrying value may not be recoverable. For property, plant and equipment, impairment losses are recognised in the income statement as a separate expense item.

(VI) Finance Costs

Finance costs are recognised as an expense when incurred. Finance costs include costs associated with the unwinding of discounted non current liabilities.

(VII) Research and development

Research costs are expensed as incurred. No development costs other than those relating to mining properties and infrastructure are capitalised.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(VIII) Inventory

Work in progress

Work in progress, including ore stock, is valued at the lower of average cost and net realisable value. Cost represents the weighted average cost and includes direct attributable costs associated with bringing ore to the processing plant and ore in circuit.

Net Realisable Value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Deferred Mining

Deferred Mining costs associated with the mining of ore once it has been accessed are progressively capitalised as expenditure is incurred, and amortised over the life of the surface pit or underground region to which such costs relate on a units of production basis.

Stores

Stores represent consumable supplies and maintenance spares and are valued at the lower of cost and net realisable value on a first in first out basis.

(IX) Trade and other receivables

Trade receivables are recognised and carried at original income amount less an allowance for any uncollectible amounts. Proceeds from gold sales are generally received within 11 trading days.

An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

(X) Trade and other payables

Trade payables and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(XI) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the balance sheet.

(XII) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XIII) Convertible notes

The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of issue costs.

On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a long-term liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance (interest) cost.

The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years.

The corresponding interest on convertible notes is expensed to the income statement.

Issue costs are apportioned between the liability and equity components of the convertible note based on the same allocation of proceeds to the liability and equity components when the instruments are first recognised.

(XIV) Provisions

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

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to passage of time is recognised as a finance (interest) cost.

Employee Provisions

Provision for annual leave and the current portion of long service leave are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. The non-current portion of the long service leave provision is measured at the present value of estimated future cash flows. The present value of future cash outflows reflect estimated increases in entitlement costs and discount rates based on government issued securities.

Restoration and Rehabilitation Provisions

Costs of rehabilitation work, including reclamation, plant closure and monitoring is provided for on the basis of the present value of estimated future rehabilitation expenditures. When a constructive obligation to rehabilitate is identified or revised, a corresponding asset is recognised on the same basis as the determination of the provision. The asset recognised is amortised to the profit and loss account progressively on a units of production basis. A charge is also made to the profit or loss account for the interest component, representing the unwinding of the present value of the provision account.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XV) Share-based payment transactions

The Group provides benefits to employees and executive directors through the Perseverance Employee Performance Rights Plan and the Perseverance Employee Share Option Plan, which provides benefits to certain employees in exchange for services.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined with reference to a valuation performed under the binomial method.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Perseverance Corporation Limited (‘market conditions’).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting period’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

If the terms of an equity-settled award are modified, as a minimum an expense is recognized as if the terms had not been modified. In addition, an expense is recognized for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(XVI) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Assets acquired under finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at inception of the lease at the fair value of the leased property, or if lower, the present value of the minimum lease payment and amortised over the life of the relevant lease or, where ownership is likely to be obtained on expiration of the lease, over the expected useful life of the asset. Lease payments are allocated between interest expense and reduction in the lease liability.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance (interest) charges are charged directly against income.

Operating lease assets are not capitalised and rental payments are charged against operating profit in the period in which they are incurred.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XVII) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sales of gold

Gold sales revenue is recognised as the bars are delivered from the mine site. It is at this point where the risks and rewards of ownership are considered passed, and the transaction costs can be measured reliably.

Interest

Revenue is recognised when the Group controls the right to receive interest payments.

(XVIII) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

	•		When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

	•		When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except:

	•		where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

	•		In respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and the taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

Deferred tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XIX) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

	•		Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

	•		Receivables and payables are stated with the amount of GST included.

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

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

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(XX) De-recognition of financial assets and financial liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

	•		The right to receive cash flows from the asset have expired;

	•		The Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

	•		The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(ii) Financial liabilities

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XXI) Derivative financial instruments

The Group uses derivative financial instruments such as gold commodity flat forward contracts and interest rate swaps to hedge and manage its risks associated with gold price and interest rate fluctuations. Such derivative financial instruments are stated at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value. Any gains or losses from changes in the fair value of derivatives, except for those that qualify as cash flow hedges (if applicable) are taken directly to net profit or loss for the year.

The Group enters into interest rate swap agreements which are used to convert the variable interest rate of its short term borrowings to medium term fixed interest rates. The swaps are entered into with the objective of reducing the risk to the Group of rising interest rates.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement.

(XXII) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. When financial assets are recognised initially, they are measure at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and when allowed and appropriate, re-evaluates the designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place.

Loans and receivables including loan notes and loans to key management personnel are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

(XXIII) Contributed Equity

Ordinary shares are classified as equity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(XXIV) Earnings per share (EPS)

Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to members, adjusted for:

	•		costs of servicing equity (other than dividends);

	•		the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

	•		other non-discretionary changes in revenues or expenses during the period which would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

(XXV) Goodwill and intangibles

Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

	•		represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

	•		is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with AASB 114 Segment Reporting.

Intangibles

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs and mining properties, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.

Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

A summary of the policies applied to the Group’s intangible assets is as follows:


	Mining Rights	Exploration Rights
Useful life	Stawell Gold Mine reserves	Length of tenure over exploration licenses
Amortisation method used	Units of Production	Straight line
Impairment Testing	Annually or more frequently when an indication of impairment exists	Annually or more frequently when an indication of impairment exists

(XXVI) Significant accounting judgements, estimates and assumptions

(i) Significant accounting judgements

No specific accounting judgements are noted which have a significant impact on the financial statements other than the Company’s assessment of the forecast service period of its employees for long service leave determination purposes.

(ii) Significant accounting estimates and assumptions

Estimation of recoverable amount of assets

The Company determines the recoverable amount of mining properties and property, plant and equipment based on estimation of future gold prices, plant recovery rates and gold reserve estimates. An impairment loss of $13.88m was recognised in the 2007 year on the basis of estimates disclosed in Note 2(a).

Rehabilitation cost estimate

The Company has estimated future rehabilitation costs based on external and internal cost assessments.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(C) Summary of Significant Accounting Policies (Continued)

Fair Value of net assets on acquisition of a business

The group determines the fair value of net assets acquired based on valuations performed by external parties and internal assessments. Equity

The Group measures the cost of equity-settled transactions by reference to the fair value of equity instruments measured at grant date. The fair value is determined using a binomial model using the assumptions detailed in Note 25.

Impairment testing of goodwill and intangible assets

The Company’s goodwill and intangible (mining right and exploration right) balances have arisen from the acquisition of Leviathan Resources Limited and have been allocated fully to the Stawell Gold Mine cash generating unit for impairment testing purposes. Based on the assumptions in note 2(a), there is no impairment of these balances at 30 June 2007. The assumption with the greatest degree of sensitivity to impact these calculations is the gold price per ounce. An assumption of A$800 per ounce has been applied to these calculations at 30 June 2007. Each A$1 movement in the gold price has approximately a $280,000 impact on the total forecast cashflows of the Stawell Gold Mine.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

2. REVENUE AND EXPENSES


	CONSOLIDATED				THE COMPANY
	2007 ($)		2006 ($)		2007 ($)		2006 ($)


REVENUES
Sales Revenues
Gold sales		115,857,494		62,884,572		—		—


Other Revenues
Interest received from other persons		740,180		684,426		331,312		607,313
Other		622,085		377,510		—		—

Total other revenues		1,362,265		1,061,936		331,312		607,313

Total revenues		117,219,759		63,946,508		331,312		607,313


Cost of sales (i)		66,573,059		37,476,675		—		—


EXPENSES

Employee Benefits
Employee superannuation expense		1,662,498		364,534		79,043		38,908

Depreciation and Amortisation
Depreciation of:
Buildings		228,168		105,030		—		—
Plant & equipment		16,502,448		12,208,451		404		—

Total depreciation		16,730,616		12,313,481		404		—


Amortisation of rehabilitation costs		293,442		245,047		—		—
Amortisation of mining property
- Development phase		6,678,541		1,340,157		—		—
- Deferred mining		21,659,879		12,504,537		—		—

Total amortisation		28,631,862		14,089,741		—		—


Total depreciation and amortisation		45,362,478		26,403,222		404		—


Finance Costs
Interest paid or payable to :
Other unrelated persons		4,337,049		3,293,972		2,875,910		—
Restoration provision interest unwinding		245,230		122,691		—		—
Convertible notes interest unwinding		118,559		56,187		118,559		56,187
Share based payments expense (ii)		123,723		122,959		123,723		122,959
Employee benefits interest unwinding		104,424		50,086		—		—

Total finance costs		4,928,985		3,645,895		3,118,192		179,146


(i)		Cost of sales comprises underground mining, surface mining, mine geology, treatment, engineering and maintenance expenses.

(ii)		Share based payments expense comprises costs associated with the granting of options to the ANZ Bank pursuant to the terms of the debt facility disclosed in Note 10.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

2. PROFIT AND LOSS ITEMS (CONTINUED)


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)		2006 ($)

(Benefit)/loss on movement in fair value of derivatives
Gold forwards		(10,685,125	)		46,327,845			—		—
Interest rate swaps		7,899			14,615			—		—

		(10,677,226	)		46,342,460			—		—


OTHER EXPENSE ITEMS
Provision for non-recovery of related party receivables		—			—			16,121,563		78,883,776
Provision for employee entitlements		608,869			47,886			—		—
Provision/(credit) for restoration and rehabilitation		(175,903	)		(247,845	)		—		—
Net loss on disposal of property, plant and equipment		20,590			—			—		—
Expense from recognition of		235,010			190,835			235,010		190,835
employee related share based payment expenses


		688,566			(9,124	)		16,356,573		79,074,611

(a) Impairment tests for Fosterville Gold Mine and Stawell Gold Mine

The Perseverance Group comprises two separate cash-generating units (CGU) for impairment testing purposes as follows:

•		Fosterville Gold Mine; and

•		Stawell Gold Mine.

Fosterville Gold Mine

The recoverable amount of the Fosterville Gold Mine assets has been determined based on a value in use calculation using cash flow projections based on a life of mine which extends to 2014 and a gold price of $A800 per ounce. The discount rate applied to cash flow projections is a pre-tax real discount rate of 10%. Cash flow projections have no inflationary impact built in. The discount rate has been determined with reference to the Company’s weighted average cost of capital (WACC) adjusted for risks specific to the Fosterville CGU.

Stawell Gold Mine

The recoverable amount of the Stawell Gold Mine assets has been determined based on a value in use calculation using cash flow projections based on a life of mine which extends to 2010 and a gold price of $A800 per ounce. The discount rate applied to cash flow projections is a pre-tax real discount rate of 9%. Cash flow projections have no inflationary impact built in. The discount rate has been determined with reference to the Company’s WACC adjusted for risks specific to the Stawell CGU.

(b) Impairment charge

The impairment charge of $13.88 million arose relating to the Fosterville Gold Mine CGU following a review of the life of mine plan. The Company has impaired the Fosterville assets within the CGU based on a pro-rata allocation to development assets and plant and equipment as follows:


Impairment charge
Property plant & equipment	10,410,000	—	—	—
Mining properties	3,470,000	—	—	—

Total impairment charge	13,880,000	—	—	—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

(b) Impairment charge (Continued)

CONSOLIDATED

THE COMPANY

2007 ($)

2006 ($)

2007 ($)

2006 ($)

Key assumptions

	(i)		All future gold is sold at A$800 per ounce.

	(ii)		The discount rate is the weighted average cost of capital which reflects site and industry specific risks and cost of debt and equity.

	(iii)		The financials used are real figures and ignore inflationary impacts.

	(iv)		Gold produced of 828,627 ounces for Fosterville mine.

	(v)		Gold recovery rates increasing progressively to 90%.

	(vi)		Cash costs per ounce average A$511 over the remaining life of mine.

These assumptions differ to the value in use calculations performed in prior periods to reflect changes in circumstances.

3. RECEIVABLES


CURRENT
Trade debtors (a)	5,321,582	3,237,104	1,474,988	672,424
Prepayments	39,423	226,821	—	—

	5,361,005	3,463,925	1,474,988	672,424


(a)		Trade debtors are non-interest bearing.


NON-CURRENT
Amounts owing by controlled entities	—	—	159,875,561		133,873,524
Less provision for non-recovery	—	—	(117,772,428	)	(101,148,669	)

	—	—	42,103,133		32,724,855

4. INVENTORIES


ROM pad and circuit stocks	6,562,481	3,401,230	—	—
Deferred mining	563,470	2,067,872	—	—
Stores	6,097,673	1,791,867	—	—
Finished goods	284,407	—	—	—

	13,508,031	7,260,969	—	—

5. OTHER FINANCIAL ASSETS


Unlisted shares in controlled entities (refer Note 27)	—	—	52,971,894	202

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

6. INTANGIBLE ASSETS


	CONSOLIDATED					THE COMPANY
	2007 ($)			2006 ($)		2007 ($)		2006 ($)

MINING RIGHTS
Year ended 30 June 2007
Opening net book amount		—			—		—		—
Acquisitions of subsidiary*		28,800,000			—		—		—
Amortisation charge**		(7,258,777	)		—		—		—

Closing net book amount		21,541,223			—		—		—


*		Refer to note 27.

**		Amortisation of $7,258,777 (2006: $Nil) is included in depreciation and amortisation expense in the income statement.


EXPLORATION RIGHTS
Year ended 30 June 2007
Opening net book amount	—		—	—	—
Acquisitions of subsidiary*	3,500,000		—	—	—
Amortisation charge**	(759,776	)	—	—	—

Closing net book amount	2,740,224		—	—	—


*		Refer to note 27.

**		Amortisation of $759,776 (2006: $Nil) is included in depreciation and amortisation expense in the income statement.

Mining and exploration rights

Mining and exploration rights have been acquired through business combinations and are carried at cost less accumulated amortisation


GOODWILL
Year ended 30 June 2007
Opening net book amount	—	—	—	—
Acquisitions of subsidiary	8,214,537	—	—	—
Impairment charge	—	—	—	—

Closing net book amount	8,214,537	—	—	—

Goodwill

After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

7. PROPERTY, PLANT & EQUIPMENT


	CONSOLIDATED				THE COMPANY
	2007 ($)		2006 ($)		2007 ($)		2006 ($)


LAND AND BUILDINGS
Opening balance at cost		3,008,465		2,070,575		—		—
Additions		2,382,306		937,890		—		—

Closing balance		5,390,771		3,008,465		—		—


Accumulated depreciation
Opening balance		338,471		233,441		—		—
Depreciation for the year		228,168		105,030		—		—

Closing balance		566,639		338,471		—		—


Net book value		4,824,131		2,669,994		—		—


PLANT & EQUIPMENT UNDER LEASE
Opening balance at cost		106,094		85,305		—		—
Additions		7,442,605		20,789		—		—

Closing balance (a)		7,548,699		106,094		—		—

Accumulated depreciation
Opening balance		51,310		25,513		—		—
Depreciation for the year		1,995,575		25,797		—		—

Closing balance		2,046,885		51,310		—		—


Net book value		5,501,814		54,784		—		—

(a) Assets under lease are pledged as security for the associated lease liabilities.



PLANT & EQUIPMENT
Opening balance at cost	100,684,500		80,718,943	—	—
Additions	27,381,299		8,210,457	9,824	—
Transfer from production development	—		11,755,100	—	—
Disposal — written off	(94,993	)	—	—

Closing balance	127,970,806		100,684,500	9,824	—

Accumulated depreciation
Opening balance	15,688,988		3,261,288	—	—
Depreciation for the year	14,643,613		12,427,700	404	—

Closing balance	30,332,601		15,688,988	404	—


Net book value	97,638,205		84,995,512	9,420	—

Total non-current property, plant and equipment, net	107,964,150		87,720,289	—	—

Less impairment related to property plant and equipment	(10,410,000	)	—	—	—

Net book value post impairment	97,554,151		87,720,289	9,420	—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

8. MINING PROPERTIES


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)		2006 ($)


Eploration, evaluation and development costs carried forward in respect of mining areas of interest
Production phase — development
Balance at beginning of year		6,546,477			14,683,969			—		—
Additions		22,957,157			3,617,608			—		—
Transfer to plant and equipment		—			(11,755,100	)		—		—

Closing balance		29,503,634			6,546,477			—		—


Less amortisation
Balance at beginning of year		2,928,869			2,928,869			—		—
Additions		6,678,541			—			—		—

Closing balance		9,607,410			2,928,869			—		—


Net book value — development		19,896,224			3,617,608			—		—


Production phase — deferred mining
Balance at beginning of year		22,753,783			13,972,476			—		—
Additions		19,326,280			8,781,307			—		—

Closing balance		42,080,063			22,753,783			—		—


Less amortisation
Balance at beginning of year		13,852,462			7,768			—		—
Amortisation for the year		13,988,845			13,844,694			—		—

Closing balance		27,841,307			13,852,462			—		—


Net book value — deferred mining		14,238,756			8,901,321			—		—


Exploration & evaluation phase
Balance at beginning of year		—			—			—		—
Additions		8,616,456			3,846,503			—		—
Written off		(8,616,456	)		(3,846,503	)		—		—

Closing balance		—			—			—		—

Total mining properties, exploration, evaluation & development
		34,134,979			12,518,928			—		—

Less impairment related to Mining Properties		(3,470,000	)		—			—		—

Net book value post impairment		30,664,979			12,518,928			—		—

The ultimate recoupment of the value of mining properties in the exploration phase is dependent upon the successful development and commercial exploitation, or alternatively sale of the respective areas of interest. All exploration expenditure incurred in the twelve month period ended 30 June 2007 was written off on the basis that there was no certainty that such costs could be recouped through successful development of the areas under assessment.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

9. PAYABLES


	CONSOLIDATED				THE COMPANY
	2007 ($)		2006 ($)		2007 ($)		2006 ($)


CURRENT
Trade Creditors — unsecured (a)		26,906,988		12,462,189		294,047		—
Intercompany payables (b)		—		—		19,596,746		—

Trade and other payables		26,906,988		12,462,189		19,890,793		—


(a)		Trade creditors are non-interest bearing and are normally settled on 30 day terms.

(b)		The intercompany loan is payable to Leviathan Resources Limited.

10. INTEREST BEARING LIABILITIES AND BORROWINGS


CURRENT — SECURED
Bank loan (a)	—	6,250,000	—	—
Finance lease liabilities (b)	4,826,280	57,029	—	—

	4,826,280	6,307,029	—	—


NON CURRENT — SECURED

Bank loan (a)	23,125,000	12,500,000	—	—
Finance lease liability (b)	1,340,750	—	—	—

	24,465,750	12,500,000	—	—


(a)		Bank loan represents amounts that the consolidated entity has drawn down on its $25,000,000 debt facility which was agreed on 28 May 2007. The loan is secured by a fixed and floating charge over the assets of Perseverance Exploration Pty Ltd and Stawell Gold Mines Pty Ltd and is guaranteed by Perseverance Corporation Limited. Total assets with a carrying amount of $127,842,000 (2006: $116,851,000) of Perseverance Exploration Pty Ltd and Stawell Gold Mines Pty Ltd are pledged as security for the Bank loan specified above. Interest is paid on the loan each six months.

		Pursuant to the terms of a $10,000,000 extension to a prior debt facility entered into with ANZ Bank, the Company granted 3,000,000 options to ANZ Bank on 21 June 2005. Exercise price 34.5c, granted 25 May 2005 (price at grant date 27c), Vesting 21 June 2005, Expiring on 21 June 2008.

(b)		Finance leases have an average lease term of 3 years. The average discount rate implicit in the leases is 7.3% (2006: 7.3%). Secured lease liabilities are secured by a charge over the leased assets.

Financing facilities available

At reporting date, the following financing facilities had been negotiated and were available:


Total bank loan facilities	25,000,000	18,750,000	—	—
Bank loan facilities used at reporting date	23,125,000	18,750,000	—	—

Bank loan facilities unused at reporting date	1,875,000	—	—	—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

11. CONVERTIBLE NOTE

CONSOLIDATED

THE COMPANY

2007 ($)

2006 ($)

2007 ($)

2006 ($)

Convertible note

34,743,835

34,365,425

34,743,835

34,372,172

On 29 December 2005, the Company announced that it had completed an offering of $30 million subordinated convertible notes due in December 2012 (the “Convertible Notes”). The seven year Convertible Notes carry a coupon of 6.75% per annum payable semi-annually in arrears with the redemption value at maturity the principal amount. The conversion price was set at $0.442 (see below regarding changes to the conversion price), at 30% premium to the closing share price of Perseverance Corporation Limited shares on the Australian Stock Exchange on 30 November 2005. On 27 February 2006 the Company announced that Barclays Capital, the book runner for the Convertible Notes, had exercised its option to acquire the remaining $7 million principal amount of the Notes on the same terms as the $30 million offering. The exercise of the option brought the total amount of gross proceeds from the offering to $37 million.

At 30 June 2007, there remains 370 $100,000 ($37 Million) notes on issue. The holder of each note has the right to convert notes to fully paid shares at any time between 20 April 2006 and 10 December 2012 at a conversion price referred to in the paragraph below. Unless previously redeemed, converted, or purchased and cancelled, the convertible notes are to be redeemed on 20 December 2012 at their principal amount of $37 million. When the convertible notes were issued, the prevailing market interest rate for similar debt without conversion option was higher than the coupon rate at which the notes were issued.

On 12 July 2007, the Company announced that it had completed a $26.5 million placement to institutional and sophisticated investors. The placement involves the issue of approximately 177 million fully paid ordinary shares at $0.15 per share with one attaching option per share issued. The options have an exercise price of $0.15 and a term to expiry of 31 August 2009. Upon exercise, each option will entitle the holder to receive one fully paid ordinary share. A General Meeting of shareholders held on 24 August 2007 approved the issue of the shares and options. As a result of settlement of the first tranche of the placement (on 19 July 2007), the conversion price of the Convertible Notes was adjusted from $0.442 to $0.415 pursuant to the Terms and Conditions of the Convertible Notes as set out in the Offering Circular dated 19 December 2005. As a result of settlement of the second tranche of the placement on 30 August 2007, the conversion price of the Convertible Notes was further adjusted from $0.415 to $0.365 pursuant to the Terms and Conditions of the Convertible Notes as set out in the Offering Circular dated 19 December 2005.

12. PROVISIONS


CURRENT
Rehabilitation (a)	250,270	75,000	—	—
Employee benefits	4,111,514	432,258	—	—

	4,361,784	507,258	—	—

NON-CURRENT
Rehabilitation (a)	8,458,344	3,000,591	—	—
Employee benefits	733,886	80,120	—	—

	9,192,230	3,080,711	—	—

At balance date, the Consolidated Entity employed 336 personnel (2006: 85).

(a) Provision for rehabilitation

A provision for rehabilitation is recognised in relation to the mining activities for costs such as reclamation, plant closure and other costs associated with the restoration of a mining site. Estimates of the rehabilitation obligations are based on anticipated technology, legal requirements and future costs, which have been discounted to their present value. In determining the restoration provision, the entity has assumed no significant changes will occur in the relevant Federal and State legislation in relation to restoration of such mines in the future.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

12. PROVISIONS (CONTINUED)


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)		2006 ($)


Movement in provisions

Rehabilitation
Carrying amount at beginning		3,075,591			3,323,436			—		—
Additional provision		5,459,873			(245,047	)		—		—
Amounts utilised during the year		(72,080	)		(125,489	)		—		—
Unwinding of discount		245,230			122,691			—		—

Carrying amount at end		8,708,614			3,075,591			—		—


Employee Benefits
Carrying amount at beginning		512,378			464,493			—		—
Additional provision		4,228,598			(2,201	)		—		—
Unwinding of discount		104,424			50,086			—		—

Carrying amount at end		4,845,400			512,378			—		—


13. CONTRIBUTED EQUITY

712,809,830 (2006: 572,696,179)
Ordinary fully paid shares		175,290,844			122,864,228			175,290,844		122,864,228

Total contributed equity		175,290,844			122,864,228			175,290,844		122,864,228

MOVEMENTS IN SHARES ON ISSUE


	2007 NUMBER		2007 ($)			2006 NUMBER		2006 ($)
Beginning of financial year		572,696,179		122,864,228			571,641,479		122,643,094
Issued during the year (a)		139,638,446		52,364,494			—		—
Employee option plan (b)		475,000		64,125			1,054,700		221,134
Less transaction costs		—		(2,003	)		—		—

End of financial year		712,809,625		175,290,844			572,696,179		122,864,228

(a) Contributed equity issued

During the year ended 30 June 2007, the parent entity issued 139,638,446 ordinary fully paid shares in relation to the takeover of Leviathan Resources Limited. The acquisition was effective 4 December 2006.

(b) Employee option plan

(i) Options excercised during the year ended 30 June 2007

The following table lists ordinary fully paid shares that have been issued by the parent entity as a result of the exercise of vested options by employees of the Company.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

13. CONTRIBUTED EQUITY (Continued)


Date	Ordinary fully paid shares issued		Exercise price per share	Amount raised

22 January 2007		200,000	13.5 cents	$	27,000
27 February 2007		25,000	13.5 cents	$	3,375
23 April 2007		50,000	13.5 cents	$	6,750
07 May 2007		200,000	13.5 cents	$	27,000

Total		475,000	Average 13.5 cents	$	64,125

Refer to Note 25 for further information in relation to the Employee Option Plan.

(b) Performance rights plan

(i) Performance rights granted during the year ended 30 June 2007

On 21 December 2006, the parent entity granted 389,000 performance rights to Mr Graeme Sloan under the terms of the Perseverance Performance Rights Plan. Subsequent to the year end Mr. Sloan resigned from the Company and these rights lapsed.

(ii) Performance rights granted during the year ended 30 June 2006
On 3 January 2006, the parent entity granted 492,000 performance rights to employees of the Company under the terms of the Perseverance Performance Rights Plan.

On 14 November 2005, the parent entity granted 200,000 performance rights to Mr Graeme Sloan under the terms of the Perseverance Performance Rights Plan. Subsequent to the year end Mr. Sloan resigned from the Company and these rights lapsed.

(c) Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

14. ACCUMULATED LOSSES AND RESERVES

(a) Accumulated losses


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)			2006 ($)


Accumulated losses at the beginning of the financial year		(114,496,138	)		(51,551,291	)		(114,366,698	)		(34,330,845	)
Application of AASB 132 and AASB139		—			(3,919,099	)		—			—
Net (loss)/profit attributable to members of Perseverance Corporation Limited		(19,739,170	)		(59,025,746	)		(20,808,639	)		(80,035,853	)

Accumulated losses at the end of the financial year		(134,235,308	)		(114,496,136	)		(135,175,337	)		(114,366,698	)

(b) Reserves

Nature and purpose of reserves

Convertible Note Reserve

This reserve is used to recognise the equity component of Convertible Notes. Refer Note 11 for details of Convertible Notes on issue, and recognition of the debt component of the Notes.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

14. ACCUMULATED LOSSES AND RESERVES (Continued)

Share Based Payment Reserve

This reserve is used to record the value of equity benefits provided to directors, employees, and external parties.


	Consolidated						Parent
			Share Based						Share Based
	Convertible Note		Payment		Total		Convertible		Payment		Total
	Reserve		Reserve		Reserves		Note Reserve		Reserve		Reserves
	$		$		$		$		$		$

At the 1 July 2005		—		224,340		224,340		—		224,340		224,340

Issue of convertible notes		951,113		—		951,113		951,113		—		951,113
Share based payments		—		313,794		313,794		—		313,794		313,794

At 30 June 2006		951,113		538,134		1,489,247		951,113		538,134		1,489,247

Issue of convertible notes		—		—		—		—		—		—
Share based payments		—		358,733		358,733		—		358,733		358,733

At 30 June 2007		951,113		896,867		1,847,980		951,113		896,867		1,847,980

15. EARNINGS PER SHARE

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:


	2007			2006
Earnings used in calculating basic and diluted earnings per share		(19,739,170	)		(59,025,746	)

Weighted average number of ordinary shares used in calculating basic earnings per share		641,587,216			572,377,125

Potential ordinary shares
- share options and performance rights		12,733,000			13,872,000
Potential ordinary shares
- - convertible notes		87,058,823			87,058,823

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

16. INCOME TAX

(a) Current and deferred tax benefit

The major components of income tax benefit are:


	CONSOLIDATED					THE COMPANY
	2007 ($)			2006 ($)		2007 ($)		2006 ($)

Income Statement
Current income tax
Current income tax charge		—			—		—		—
Adjustments in respect of current income tax of previous years		—			—		—		—
Deferred income tax
Relating to origination and reversal of temporary differences		(2,687,371	)		—		—		—

Income tax benefit as reported in the income statement		(2,687,371	)		—		—		—

(b) Reconciliation between aggregate tax benefit recognised in the income statement and tax benefit calculated per the statutory income tax rate

A reconciliation between tax benefit and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows:


Accounting profit/(loss) before income tax	(22,426,541	)	(59,025,746	)	(20,808,639	)	(80,035,853	)

Prima facie income tax expense/(benefit) calculated at 30% (2006: 30%)	(6,727,962	)	(17,707,724	)	(6,242,591	)	(24,010,756	)
Incremental research and development deduction	(378,000	)	(345,036	)	—		—
Equity settled share based payments	107,620		94,138		107,620		94,138
Non-deductible items	—		75,500		—		—

Unrecognised deferred tax assets attributable to temporary differences and tax losses not brought to account	4,310,971		17,883,122		6,134,971		23,916,618

Total Income Tax Expense/(Benefit)	(2,687,371	)	—		—		—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

16. INCOME TAX (Continued)

(c) Recognised deferred tax assets and liabilities

Deferred income tax at 30 June 2007 relates to the following:


	BALANCE SHEET					INCOME STATEMENT
	2007 ($)			2006 ($)		2007 ($)		2006 ($)
CONSOLIDATED
Deferred tax liabilities
Inventory		—			—		189,000		—

Intangibles — Mining and exploration rights		(7,389,628	)		—		2,300,371		—
Acquisition of property, plant and equipment (tax difference)		(592,001	)		—		198,000		—

Gross deferred tax liabilities		(7,981,629	)		—		2,687,371		—


Set-off of deferred tax assets		—			—

Net deferred tax liabilities		(7,981,629	)		—



Deferred tax income/(expense)							2,687,371		2,687,371

PARENT

No deferred tax assets or liabilities were recognised for the parent company in 2007 or 2006.

(d) Tax losses

Companies within the economic entity have estimated unconfirmed unrecouped income tax losses of approximately $53,551,929 (2006: $44,101,622) available to offset against future years’ taxable income. The benefit of these losses of $16,065,579 (2006: $13,230,486) has not been brought to account as it is not currently considered probable that taxable income will be available against which the tax losses can be utilised.

(e) Tax consolidation

Effective from 1 July 2002, for the purposes of income taxation, the Company and its 100% owned subsidiaries formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. In addition, there is provision for allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of such default is remote. The head entity of the tax consolidated group is Perseverance Corporation Limited.

During the year to 30 June 2007, the Company acquired 100% of the shares in Leviathan Resources Limited (“Leviathan”). As a result of this, Leviathan and its wholly owned subsidiaries joined the Perseverance tax consolidated group. A consequence of the Leviathan entities joining the Perseverance tax consolidated group is that the tax value of each of the Leviathan entities’ assets is reset at the time that the entities join the tax consolidated group. The calculation of the tax value of the assets is a complex calculation which is undertaken in accordance with Australian income tax law. At the date of these accounts, high-level calculations have been undertaken to determine the indicative outcome of resetting of the tax values. Further work will be undertaken to confirm and finalise the tax values of the Leviathan assets.

Tax effect accounting by members of the tax consolidated group

At 30 June 2007 a tax funding arrangement had not been finalised in respect of allocation of funds to the parent entity. As no tax is payable by any entity within the Perseverance tax consolidated group at 30 June 2007, the outstanding tax funding agreement has not had any impact on the allocation methodology or the treatment of tax balances within the group.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

17. PARTICULARS IN RELATION TO CONTROLLED ENTITIES

The consolidated financial statements at 30 June 2007 include the following controlled entities. The financial years of all controlled entities are the same as that of the parent entity.


	PLACE OF	INTEREST				INVESTMENT CARRYING VALUE
NAME	INCORPORATION	2007 (%)		2006 (%)		2007 ($)		2006 ($)

Perseverance Corporation Limited	Australia
Controlled Entities:
Perseverance Mining Pty Limited	Australia		100		100		200		200
Perseverance Exploration Pty Limited	Australia		100		100		2		2
Perseverance of North America Inc.	USA		100		100		—		—
Leviathan Resources Pty Ltd	Australia		100		—		52,971,692		—
Stawell Gold Mines Pty Ltd	Australia		100		—		2		—
Coolgardie Mining Company Pty Ltd	Australia		100		—		2		—
Coolgardie Operations Pty Ltd	Australia		100		—		2		—

							52,971,900		202

18. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of directors and key management personnel


Directors		Executives
J.C. Quinn	Non-Executive Chairman	M. Mitchell (g)
G.J. Sloan (a)	Managing Director	J.M.J. Patarica (g)
B.M. Phillips (b)	Non-Executive Director	M.W. Bouwmeester (h)
C.L. Roberts	Non-Executive Director
R.J. Flew (c)	Non-Executive Director
R.G. Melgaard (d)	Non-Executive Director
R.J. George (e)	Non-Executive Director
R.J. Robinson (f)	Non-Executive Director


a.		Mr Sloan was Managing Director and Chief Executive Officer of the Company until his resignation on 10 August 2007.

b.		Mr Phillips was appointed as a director of Perseverance with effect from 24 January 2007.

c.		Mr Flew was appointed as a director of Perseverance with effect from 24 January 2007.

d.		Mr Melgaard resigned as a director of Perseverance with effect from 24 April 2007.

e.		Dr George resigned as a director of Perseverance with effect from 6 August 2007.

f.		Mr Robinson resigned as a director of Perseverance with effect from 27 August 2007.

g.		Mr M. Mitchell was appointed Chief Operations Officer on 1 January 2007 and was appointed Executive General Manager on 10 August 2007. Mr J.M.J. Patarica was appointed Deputy Operations Manager on 5 July 2005 and was appointed Operations Manager on 1 November 2005.

h.		Mr M.W. Bouwmeester was Chief Financial Officer and Company Secretary of the Company until he resigned from these roles on 31 August 2007.

(b) Remuneration of specified directors and specified executives

Compensation by category —key management personnel


	CONSOLIDATED				PARENT

	2007 ($)		2006 ($)		2007 ($)		2006 ($)
Short — term		1,321,212		948,948		1,090,962		606,209
Post employment		—		59,936		—		31,789
Share based payment		73,085		86,012		65,502		72,039

		1,394,297		1,094,896		1,156,464		710,037

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007
18. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

Perseverance has applied the exemption under Regulation2M.6.04 of the Corporations Act which allows the transfer of remuneration disclosures required by AASB 124 Related Party Disclosures out of the financial report and into the Remuneration Report contained within the Directors Report. These disclosures are designated as audited within the Directors Report.

(c) Remuneration options and performance rights: Granted and vested during the year

(i) Options

TERMS & CONDITIONS FOR EACH GRANT

LAST

VALUE PER

EXERCISE

FIRST

EXERCISE/

VESTED

GRANTED

OPTION AT

PRICE PER

EXERCISE

EXPIRY

30 JUNE 2007

NUMBER

GRANT DATE

OPTION

DATE

Specified executives

M. Mitchell

—

M.W. Bouwmeester

—

J.M.J. Patarica

—

Total

—


							TERMS & CONDITIONS FOR EACH GRANT
													LAST
							VALUE PER		EXERCISE		FIRST		EXERCISE/
	VESTED		GRANTED				OPTION AT		PRICE PER		EXERCISE		EXPIRY
30 JUNE 2006	NUMBER		NUMBER		GRANT DATE		GRANT DATE		OPTION		DATE		DATE

Specified executives
M.W. Bouwmeester		250,000		—		—		—		—		—		—
J.M.J. Patarica		100,000		—		—		—		—		—		—

Total		350,000		—		—		—		—		—		—

(ii) Performance Rights

TERMS & CONDITIONS FOR EACH GRANT

VALUE PER

LAST

PERFORMANCE

EXERCISE

FIRST

EXERCISE/

VESTED

GRANTED

RIGHT AT

PRICE PER

EXERCISE

EXPIRY

30 JUNE 2007

NUMBER

GRANT DATE

SHARE

DATE

Specified directors

G.J. Sloan (a)

—

389,000

21 November 2006

0.22

Nil

)

31 October 2015

Total

—

389,000

—


(a)		The performance rights may be exercised on or after 30 November 2008 if, as at 5pm on 29 November 2008, the market value of the underlying shares has increased by at least 20% to their market value at the date the performance rights were granted. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $US580.00 as at 29 November 2008 and rounded to the nearest cent, not exceeding a 15% adjustment. Subsequent to year end Mr Sloan resigned and these performance rights lapsed at that time.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007
18. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

TERMS & CONDITIONS FOR EACH GRANT

VALUE PER

LAST

PERFORMANCE

EXERCISE

FIRST

EXERCISE/

VESTED

GRANTED

RIGHT AT

PRICE PER

EXERCISE

EXPIRY

30 JUNE 2006

NUMBER

GRANT DATE

SHARE

DATE

Specified directors

G.J. Sloan (a)

—

200,000

16 November 2005

0.216

Nil

(a)

31 October 2015

Total

—

200,000

—

Specified executives

M.W. Bouwmeester (b)

—

120,000

3 January 2006

0.192

Nil

(b)

31 December 2015

J.M.J. Patarica (b)

—

120,000

3 January 2006

0.192

Nil

(b)

31 December 2015

Total

—

240,000

—

(a) The performance rights may be exercised on or after 31 October 2007 if, as at 5pm on 30 October 2007, the market value of the underlying shares has increased by at least 20% to their market value at the date the performance rights were granted and the director remained in that capacity at the exercise date. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $US440.00 as at 30 October 2007 and rounded to the nearest cent, not exceeding a 15% adjustment. Subsequent to year end Mr Sloan resigned and these performance rights lapsed at that time.

(b) The performance rights may be exercised on or after 31 December 2008 if, as at 5pm on 30 December 2008, the market value of the underlying shares has increased by at least 20% to their market value on the last trading day of December 2005, adjusted for gold price movements. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $AUD670.00 as at 31 December 2008 and rounded to the nearest cent, not exceeding a 15% adjustment.

Refer to Note 25(c) for details of the valuation of these performance rights at grant date.

(d) Option holdings and performance right holdings of specified Directors and specified executives

(i) Options


									BALANCE
	BALANCE								AT END
	AT						NET		OF
	BEGINNING		GRANTED AS		OPTIONS		CHANGE		PERIOD		VESTED AT 30 JUNE 2007
	OF PERIOD		REMUNERATION		EXERCISED		OTHER		30 JUNE				NOT
30 JUNE 2007	1 JULY 2006		(2007)		(2007)		(2007)		2007		TOTAL		EXERCISABLE		EXERCISABLE

Specified directors
J.C. Quinn		5,000,000		—		—		—		5,000,000		5,000,000		—		5,000,000
G.J. Sloan (a)		2,000,000		—		—		—		2,000,000		2,000,000		—		2,000,000
B.M. Phillips		—		—		—		—		—		—		—		—
C.L. Roberts		1,000,000		—		400,000		—		600,000		600,000		—		600,000
R.J. George		—		—		—		—		—		—		—		—
R.J. Robinson		—		—		—		—		—		—		—		—
R.G. Melgaard		—		—		—		—		—		—		—		—
R.J. Flew		—		—		—		—		—		—		—		—

Totals		8,000,000		—		400,000		—		7,600,000		7,600,000		—		7,600,000


Specified executives
M. Mitchell		—		—		—		—		—		—		—		—
M.W. Bouwmeester		500,000		—		—		—		500,000		500,000		—		500,000
J.M.J. Patarica		200,000		—		—		—		200,000		200,000		—		200,000

Totals		700,000		—		—		—		700,000		700,000		—		700,000

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

18. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED)

(i) Options (Continued)


									BALANCE
	BALANCE								AT END
	AT								OF
	BEGINNING		GRANTED AS		OPTIONS		NET CHANGE		PERIOD		VESTED AT 30 JUNE 2006
	OF PERIOD		REMUNERATION		EXERCISED		OTHER		30 JUNE				NOT
30 JUNE 2006	1 JULY 2005		(2006)		(2006)		(2006)		2006		TOTAL		EXERCISABLE		EXERCISABLE

Specified directors
J.C. Quinn		5,000,000		—		—		—		5,000,000		5,000,000		—		5,000,000
G.J. Sloan (a)		2,600,000		—		—		—		2,600,000		2,600,000		600,000		2,000,000
C.L. Roberts		1,000,000		—		—		—		1,000,000		1,000,000		—		1,000,000
R.J. George		—		—		—		—		—		—		—		—
R.J. Robinson		—		—		—		—		—		—		—		—
R.G. Melgaard		—		—		—		—		—		—		—		—

Totals		8,600,000		—		—		—		8,600,000		8,600,000		600,000		8,000,000


Specified executives
M.W. Bouwmeester		500,000		—		—		—		500,000		500,000		—		500,000
J.M.J. Patarica		200,000		—		—		—		200,000		200,000		—		200,000

Totals		700,000		—		—		—		700,000		700,000		—		700,000

(ii) Performance Rights


										BALANCE
	BALANCE									AT END
	AT				PERFORMANCE		NET			OF
	BEGINNING		GRANTED AS		RIGHTS		CHANGE			PERIOD		VESTED AT 30 JUNE 2007
	OF PERIOD		REMUNERATION		EXERCISED		OTHER			30 JUNE				NOT
30 JUNE 2007	1 JULY 2006		(2007)		(2007)		(2007)			2007		TOTAL		EXERCISABLE		EXERCISABLE

Specified directors
J.C. Quinn		—		—		—		—			—		—		—		—
G.J. Sloan (a)		400,000		389,000		—		(200,000	)		589,000		589,000		589,000		—
B.M. Phillips		—		—		—		—			—		—		—		—
C.L. Roberts		—		—		—		—			—		—		—		—
R.J. George		—		—		—		—			—		—		—		—
R.J. Robinson		—		—		—		—			—		—		—		—
R.G. Melgaard		—		—		—		—			—		—		—		—

Totals		400,000		389,000		—		(200,000	)		589,000		589,000		589,000		—


Specified executives
M. Mitchell		—		—		—		—			—		—		—		—
M.W. Bouwmeester		120,000		—		—		—			120,000		120,000		120,000		—
J.M.J. Patarica		120,000		—		—		—			120,000		120,000		120,000		—

Totals		240,000		—		—		—			240,000		240,000		240,000		—


(a)		Mr Sloan resigned subsequent to the year-end and as a consequence his performance rights lapsed immediately and his options lapsed on 9September 2007.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

18. DIRECTORS’ AND EXECUTIVES’ DISCLOSURES (CONTINUED)

(ii) Performance Rights


									BALANCE
	BALANCE								AT END
	AT				PERFORMANCE		NET		OF
	BEGINNING		GRANTED AS		RIGHTS		CHANGE		PERIOD		VESTED AT 30 JUNE 2006
	OF PERIOD		REMUNERATION		EXERCISED		OTHER		30 JUNE				NOT
30 JUNE 2006	1 JULY 2005		(2006)		(2006)		(2006)		2006		TOTAL		EXERCISABLE		EXERCISABLE

Specified directors
J.C. Quinn		—		—		—		—		—		—		—		—
G.J. Sloan		200,000		200,000		—		—		400,000		400,000		400,000		—
B.M. Phillips		—		—		—		—		—		—		—		—
C.L. Roberts		—		—		—		—		—		—		—		—
R.J. George		—		—		—		—		—		—		—		—
R.J. Robinson		—		—		—		—		—		—		—		—
R.G. Melgaard		—		—		—		—		—		—		—		—

Totals		200,000		200,000		—		—		400,000		400,000		400,000		—


Specified executives
M.W. Bouwmeester		—		120,000		—		—		120,000		120,000		120,000		—
J.M.J. Patarica		—		120,000		—		—		120,000		120,000		120,000		—

Totals		—		240,000		—		—		240,000		240,000		240,000		—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

18. DIRECTORS’ AND EXECUTIVES’ DISCLOSURES (CONTINUED)

(e) Shareholdings of specified Directors and specified executives


	BALANCE		GRANTED AS		ON EXERCISE
	1 JULY		REMUNERATION		OF OPTIONS		PURCHASES		SALES		BALANCE
30 JUNE 2007	2006		(2007)		(2007)		(2007)		(2007)		30 JUNE 2007

Specified directors
J.C. Quinn		2,743,248		—		—		45,362		—		2,788,610
G.J. Sloan		—		—		—		—		—		—
B. M. Phillips		N/a		—		—		—		—		117,348
C.L. Roberts		417,840		—		400,000		—		400,000		417,840
R.J. George		—		—		—		51,000		—		51,000
R.J. Robinson		517,857		—		—		—		—		517,857
R. J. Flew		N/a		—		—		—		—		100,750
R.G. Melgaard		57,233,745		—		—		—		—	Note (a)

Totals		60,912,330		—		400,000		96,362		400,000		3,993,405


(a)		Mr. Melgaard resigned as a director on 24 April 2007 and is no longer a related party.

Specified executives

None of the specified executives held shares in the Company during 2007.


	BALANCE			GRANTED AS		ON EXERCISE
	1 JULY			REMUNERATION		OF OPTIONS		SALES		BALANCE
30 JUNE 2006	2005			(2006)		(2006)		(2006)		30 JUNE 2006

Specified directors
J.C. Quinn		2,743,248			—		—		—		2,743,248
G.J. Sloan		—			—		—		—		—
C.L. Roberts		489,497			—		—		71,657		417,840
R.J. George		—			—		—		—		—
R.J. Robinson		(a	)		—		—		—		517,857
R.G. Melgaard (b)		57,233,745			—		—		—		57,233,745

Totals		60,466,490			—		—		71,657		60,912,330


Specified executives
M.W. Bouwmeester		17,857			—		—		17,857		—
J.M.J. Patarica		—			—		—		—		—

Totals		17,857			—		—		17,857		—


(a)		A total 517,857 shares were held by Mr Robinson’s spouse until 1 December 2005. Mr Robinson did not have a relevant interest in these shares. On 1 December 2005 the shares were transferred into an entity in which Mr. Robinson has a relevant interest.

(b)		A total of 57,233,745 shares are held by Palmaris Capital PLC. Mr Melgaard is a director of Palmaris Capital PLC.

(c)		Shareholdings detailed above include both direct and indirect holdings.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

19. RELATED PARTY DISCLOSURE

(a) Directors

The following persons held the position of Director of the company during all of the past financial year, unless otherwise stated:


J.C. Quinn		Non-Executive Chairman
G.J. Sloan (a)		Managing Director
B.M. Phillips (b)		Non-Executive Director
C.L. Roberts		Non-Executive Director
R.J. Flew (c)		Non-Executive Director
R.G. Melgaard (d)		Non-Executive Director
R.J. George (e)		Non-Executive Director
R.J. Robinson (f)		Non-Executive Director


(a)		Mr G.J. Sloan was Managing Director and Chief Executive Officer of the Company until his resignation on 10 August 2007.

(b)		Mr Phillips was appointed as a director of Perseverance with effect from 24 January 2007.

(c)		Mr Flew was appointed as a director of Perseverance with effect from 24 January 2007.

(d)		Mr Melgaard resigned as a director of Perseverance with effect from 24 April 2007.

(e)		Dr George resigned as a director of Perseverance with effect from 6 August 2007.

(f)		Mr. Robinson resigned as a director of Perseverance with effect from 27 August 2007.

Transactions entered into during the year with the Directors of the Company and their Director related entities are within normal customer and employee relationships, on terms and conditions no more favourable to those available to other customers or employees.

Mr C.L. Roberts provided accommodation facilities in the Fosterville area to the consolidated entity. Payments for the year totalled $14,788 (2006: $11,756).

(b) Transactions with related parties in the wholly owned group

During the year loans were advanced and repayments received on short term intercompany accounts by the parent entity with related parties in the wholly owned Group. These transactions were undertaken on an interest free basis and are eliminated on consolidation.

(c) Ownership interests

The ownership interests in related parties in the wholly owned Group are set out in Note 17.

(d) Amounts due to and receivable from related parties in the wholly owned group

These amounts are set out in the respective notes to the financial statements. At 30 June 2007, Perseverance Corporation Limited had an amount of $159,875,561 receivable from its subsidiary companies, Perseverance Exploration Pty Ltd, Perseverance Mining Pty Ltd, Stawell Gold Mine Pty Ltd and Leviathan Resources Limited. At 30 June 2007, a provision for non-recovery of $117,772,428 has been applied against these amounts owing.

(e) Ultimate controlling entity

The ultimate controlling entity of the consolidated entity in Australia is Perseverance Corporation Limited.

20. FINANCIAL REPORTING BY SEGMENTS

The Economic Entity operates entirely in the mineral exploration, development and production business which is the sole business segment of the economic entity. The economic entity’s operations are all in a single geographic segment, Australia.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

21. RECONCILIATION OF CASH FLOWS

(a) Reconciliation of net cash provided by operating activities to operating loss after income tax


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)			2006 ($)


OPERATING LOSS AFTER INCOME TAX		(19,739,170	)		(59,025,746	)		(20,808,639	)		(80,035,853	)
NON CASH ITEMS:
Depreciation & amortisation		45,362,478			26,403,222			404			—
Payments for exploration activities		8,616,456			3,846,503			—			—
Provision for debtor non-recovery		—			—			16,121,563			78,883,776
Share based payments		358,733			313,794			358,733			313,794
Derivatives — interest rate swaps		—			7,869			(6,664	)		(6,747	)
Loss on sale of property, plant & equipment		20,590			—			—			—
Impairment of property, plant & equipment and mining development		13,880,000			—			—			—
Derivatives — gold forwards		(14,640,498	)		46,327,845			—			—
CHANGES IN ASSETS AND LIABILITIES:
(Decrease)/increase in payables		4,653,802			(2,275,495	)		294,047			—
Increase in convertible note reserve		—			951,158			—			951,113
(Decrease)/increase in provisions		1,069,051			(199,960,845	)		—			—
Decrease/(increase) in receivables		566,955			(1,969,780	)		(943,308	)		38,597
Decrease/(increase) in inventories		(1,201,126	)		1,267,031			—			—
Increase/(decrease) in deferred tax liability		(2,687,371	)		—			—			—

NET CASH FLOW FROM OPERATING ACTIVITIES		36,259,900			15,646,396			(4,983,864	)		144,681


(b) Reconciliation of cash

For the purposes of the Statement of Cash Flows, cash includes cash at bank and short term deposits at call. Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Balance Sheet as follows:

Cash and cash equivalents		11,418,840			18,370,653			38,680			10,961,468


Cash deposits at banks are earning interest at current bank deposit rates. The year average rate was 5.95% (2006: 5.1%).

(c) Financing facilities available

At reporting date, the following financing facilities had been negotiated and were available:

Facilities used at reporting date		23,125,000			18,750,000			—			—
Facilities unused at reporting date		1,875,000			—			—			—
Total facilities		25,000,000			18,750,000			—			—

(d) Non-cash financing activities — finance lease transactions

During the financial year the consolidated entity acquired plant and equipment with an aggregate fair value of $Nil (2006: $Nil), by means of finance leases. As part of the acquisition of Leviathan Resources Limited, plant and equipment under lease with a fair value of $7,980,000 was acquired through the issue of the Company’s shares to Leviathan shareholders.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

22. JOINT VENTURES

The economic entity has interests in the following unincorporated joint ventures:


	PRINCIPAL ACTIVITY	PERCENTAGE INTERESTS (a)	OTHER PARTICIPANT

Cornella East	Exploration	49%	New Holland Mining NL
Nagambie	Exploration	(b)	Panaegis Gold Mines
Credo	Exploration	(c)	Monarch Gold Mining
Johnstone Range	Exploration	(d)	Polaris Metals
Evanstown	Exploration	(e)	Polaris Metals
Goldsworthy	Exploration	(f)	Polaris Metals

(a)		The joint ventures are not separate legal entities. The joint ventures are contractual arrangements between the participants for the sharing of costs and outputs and do not, in themselves, generate revenue and profit. The net contribution of any joint venture activities to the operating profit before income tax is $nil (2006: $nil). Net assets for joint ventures at 30 June 2007 are $nil (2006; $nil).

(b)		Subject to earn-in of 51% upon the joint venture partner meeting certain expenditure levels.

(c)		Subject to earn-in of 60% upon the joint venture partner meeting certain expenditure levels.

(d)		Subject to earn-in of 70% upon the joint venture partner meeting certain expenditure levels.

(e)		Subject to earn-in of 70% upon the joint venture partner meeting certain expenditure levels.

(f)		Subject to earn-in of 70% upon the joint venture partner meeting certain expenditure levels.

23. COMMITMENTS

(a) Exploration expenditure

The economic entity has undertaken:

•		to perform at least a minimum of approximately $3,965,430 (2006: $1,710,200) on exploration works including joint ventures and/or to expend minimum amounts of money on such works in designated exploration areas within the next year, and

•		to restore and rehabilitate sites once exploration and/or production activities in those areas have been completed.

Exploration expenditure contracted for is payable as follows:


	CONSOLIDATED				THE COMPANY
	2007 ($)		2006 ($)		2007 ($)		2006 ($)


Not later than one year		3,965,430		1,710,200		—		—


(b) Capital expenditure

Estimated capital expenditure contracted for at reporting date, but not provided for, payable:
Not later than one year		829,325		328,506		—		—

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

23. COMMITMENTS (Continued)

(c) Lease expenditure


	CONSOLIDATED						THE COMPANY
	2007 ($)			2006 ($)			2007 ($)		2006 ($)


Finance leases:
Not later than one year		5,141,590			59,629			—		—
Later than one year and not later than five years		1,405,430			—			—		—

Total minimum lease repayments		6,547,020			59,629			—		—
Future finance charges		(379,990	)		(2,600	)		—		—

Present value of lease liability		6,167,030			57,029			—		—


Current liability		4,826,280			57,029			—		—
Non-current liability		1,340,750			—			—		—

		6,167,030			57,029			—		—


24. REMUNERATION OF AUDITORS

Remuneration received, or due and receivable, by the auditor of the parent entity and its affiliates for:

- Audit or review of the financial statements (a)		216,580			111,100			—		—
- Other services (b)		229,300			83,500			—		—


(a)		This includes amounts paid or payable to the auditor of the parent entity for the audit of the full year financial report, and the review of the half year financial report.

(b)		Other services primarily comprised taxation compliance and assurance related services.

(c)		All fees to the auditor of the parent entity were borne by a related entity.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

25. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

(a) Employee benefits

The aggregate employee benefit liability is comprised of:


		CONSOLIDATED				THE COMPANY
		2007 ($)		2006 ($)		2007 ($)		2006 ($)

Provisions (current)	Note 12		4,111,514		432,258		—		—
Provisions (non-current)	Note 12		733,886		80,120		—		—

			4,845,400		512,378		—		—

(b) Employee share incentive plan

An Employee Option Plan has been established where Perseverance Corporation Limited may at the discretion of the Board, grant options over the ordinary shares of Perseverance Corporation Limited to any employee of the consolidated entity, or an associated company or other such person as the Board determines. The options are granted in accordance with guidelines established by the Directors and the Board retains the final discretion on the issue of the options. The Board will determine the exercise price of the options granted under the Employee Option Plan and will have the discretion to establish performance or other conditions that must be met before the options can be exercised. The term of the options will be 10 years, or such shorter period determined by the Board. The options cannot be transferred and will not be quoted on the ASX. All employees are eligible for this plan.

Information with respect to the number of options granted under the employee share incentive scheme is as follows:


	2007					2006
				WEIGHTED AVERAGE					WEIGHTED AVERAGE
	NUMBER OF			EXERCISE		NUMBER OF			EXERCISE
	OPTIONS			PRICE		OPTIONS			PRICE

Balance at beginning of year		5,025,000		$	0.222		6,229,700		$	0.222
- granted		—			—		—			—
- forfeited		(750,000	)	$	0.346		(150,000	)	$	0.310
- exercised		(475,000	)	$	0.135		(1,054,700	)	$	0.210
- expired		—			—		—			—

Balance at end of year		3,800,000		$	0.208		5,025,000		$	0.222

Exercisable at end of year		3,800,000		$	0.208		4,425,000		$	0.211

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

25. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (CONTINUED)

(i) Options held at the beginning of the reporting period:


								WEIGHTED AVERAGE
NUMBER OF OPTIONS	GRANT DATE		VESTING DATE			EXPIRY DATE		EXERCISE PRICE

2,000,000	25 November 2002			(a	)	25 November 2012		$	0.20
1,425,000	20 November 2002			(b	)	20 November 2007		$	0.135
800,000	4 February 2004			(c	)	4 February 2009		$	0.31
200,000	4 March 2004			(d	)	4 March 2009		$	0.31
600,000	21 December 2004			(e	)	30 November 2009		$	0.355

5,025,000		—		—			—		—

(a) The Options were granted subject to the following vesting conditions:

	(i)		The first 50% of the Options will vest upon the announcement by the Company to Australian Stock Exchange of a decision to commence the construction of facilities to mine and treat sulphide mineralisation from the Fosterville mineral leases.

	(ii)		The balance of the Options will vest upon the announcement by the Company to the Australian Stock Exchange of the completion of construction and commissioning of facilities to mine and treat sulphide mineralisation from the Fosterville mineral leases.

(b) The Options were granted subject to the following vesting conditions:

(i)

The first 50% of the Options will vest upon the earlier of an announcement by the Company to Australian Stock Exchange of a decision to commence the construction of facilities to mine and treat sulphide mineralisation from the Fosterville mineral leases and 30 September 2004.

(ii)

The balance of the Options will vest upon the earlier of an announcement by the Company to the Australian Stock Exchange of the completion of construction and commissioning of facilities to mine and treat sulphide mineralisation from the Fosterville mineral leases and 30 September 2005.

	(i)		The first 50% of the Options will vest on 4 February 2005.

	(ii)		The balance of the Options will vest on 4 February 2006.

(d) The Options were granted subject to the following vesting conditions:

	(i)		The first 50% of the Options will vest on 4 March 2005.

	(ii)		The balance of the Options will vest on 4 March 2006.

(e) The options may be exercised on or after 30 November 2006 if, as at 5pm on 29 November 2006, the market value of the underlying shares has increased by at least 25% to their market value at the date the options were granted. For the purposes of this calculation, the 25% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $US400.00 as at 29 November 2006 and rounded to the nearest cent, not exceeding a 15% adjustment.

(ii) Options exercised and forfeited during the reporting period:

The table below summarises information about options exercised during the year:


							WEIGHTED								FAIR
NUMBER							AVERAGE		PROCEEDS		NUMBER OF				VALUE OF
OF	GRANT		EXERCISE		EXPIRY		EXERCISE		FROM		SHARES		ISSUE		SHARES
OPTIONS	DATE		DATE		DATE		PRICE		SHARES		ISSUED		DATE		ISSUED

200,000	20 November 2002		13 January 2007		20 November 2007		$	0.135	$	27,000		200,000	22 January 2007		$	0.355
25,000	20 November 2002		27 February 2007		20 November 2007		$	0.135	$	3,375		25,000	27 February 2007		$	0.425
50,000	20 November 2002		13 April 2007		20 November 2007		$	0.135	$	6,750		50,000	23 April 2007		$	0.385
200,000	20 November 2002		4 May 2007		20 November 2007		$	0.135	$	27,000		200,000	7 May 2007		$	0.36

475,000		—		—		—		—	$	64,125		475,000		—		—

During the year 150,000 options were forfeited relating to the tranche granted on 4 February 2004 and 600,000 options were forfeited relating to the tranche granted on 21 December 2004.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

25. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (CONTINUED)

The fair value of the equity-settled share options granted is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted.

The following table lists the inputs to the model used for option valuation:


	2007		2006		2005		PRE-2005

Expected volatility (%)		—		—		56-78		56-78
Risk-free interest rate (%)		—		—		5.46		5.46
Expected life of option/right (years)		—		—		5		1-6
Option exercise price ($)		—		—	$	0.355	$	0.135-$0.355
Weighted average share price at grant date ($)		—		—	$	0.36	$	0.14-$0.40

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

(c) Performance rights plan

A Performance Rights Plan has been established where Perseverance Corporation Limited may at the discretion of the Board, grant performance rights over the ordinary shares of Perseverance Corporation Limited to any employee of the consolidated entity, or an associated company or other such person as the Board determines. The performance rights are granted in accordance with guidelines established by the Directors and the Board retains the final discretion on the issue of the performance rights. No amount will be payable upon exercise of the performance right unless the Board determines otherwise. The Board will have the discretion to establish performance or other conditions that must be met before the performance rights can be exercised. The term of the performance rights is determined by the Board. The performance rights cannot be transferred. All employees are eligible for this plan.

Information with respect to the number of Rights granted under the performance rights plan is as follows:


	2007					2006
				WEIGHTED AVERAGE					WEIGHTED AVERAGE
	NUMBER OF			EXERCISE		NUMBER OF			EXERCISE
	RIGHTS			PRICE		RIGHTS			PRICE

Balance at beginning of year		847,000		$	0.286		200,000		$	0.216
- granted		389,000		$	0.22		692,000		$	0.308
- forfeited		(303,000	)		—		(45,000	)		—
- exercised		—			—		—			—
- expired		—			—		—			—

Balance at end of year		933,000		$	0.258		847,000		$	0.286

Exercisable at end of year		—			—		—			—

The outstanding balance of Rights as at 30 June 2007 is represented by:

	•		200,000 rights over ordinary shares exercisable on or after 31 October 2007 if, as at 5pm on 30 October 2007, the market value of the underlying shares has increased by at least 20% to their market value at the date the performance rights were granted. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $US440.00 as at 30 October 2007 and rounded to the nearest cent, not exceeding a 15% adjustment.

	•		344,000 rights over ordinary shares exercisable on or after 31 December 2008 if, as at 5pm on 30 December 2008, the market value of the underlying shares has increased by at least 20% to their market value on the last trading day of December 2005. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $AUD670.00 as at 31 December 2008 and rounded to the nearest cent, not exceeding a 15% adjustment.

	•		389,000 rights over ordinary shares exercisable on or after 30 November 2008 if, as at 5pm on 29 November 2008, the market value of the underlying shares has increased by at least 20% to their market value at the date the performance rights were granted. For the purposes of this calculation, the 20% hurdle will be adjusted by a percentage equal to the percentage difference in the gold price above or below $US580.00 as at 29 November 2008 and rounded to the nearest cent, not exceeding a 15% adjustment.

The weighted average remaining contractual life of the Rights outstanding as at 30 June 2007 is between 1 and 2 years. (2006; 1 and 3 years).

The weighted average fair value of Rights granted during the year was $0.22 (2006: $0.19).

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

25. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (CONTINUED)

(d) Superannuation commitments

Perseverance contributes the 9% superannuation guarantee amount as required by existing superannuation legislation to all employees.

Perseverance offers choice of superannuation fund and does not require employees to join a specific superannuation fund, unless required by existing Australian Workplace Agreements.

(e) Retirement benefits

No prescribed benefits were given to a prescribed superannuation fund in connection with the retirement of a person from a prescribed office of the group during the financial year. (2006:$Nil).

(f) Share based payments

Share based payments are applicable to directors, executives, employees, and external parties under the terms of:

	•		Perseverance share Plan (Note 25(b))

	•		Perseverance Performance Rights Plan (Note 25(c))

	•		Options and Performance Rights granted to directors and executives (Note 18(c))

	•		Options granted to ANZ Bank as part of the debt facility agreement (Note 10(a))

26. CONTINGENT LIABILITIES

The Consolidated Entity has given to the Department of Primary Industries performance guarantees totalling $6,156,210 (2006:$3,614,000). The guarantees are secured by a fixed and floating charge over the assets of Perseverance Exploration Pty Ltd and Stawell Gold Mines Pty Ltd and are guaranteed by Perseverance Corporation Limited.

The Consolidated Entity has given to the Victorian Energy Networks Corporation (VENCorp) an unconditional bank guarantee totalling $304,000. The guarantee will be released upon termination to a Use of System agreement entered into between the Consolidated Entity and VENCorp for connection to the electricity transmission network. The guarantee is secured by a fixed and floating charge over the assets of Perseverance Exploration Pty Ltd and is guaranteed by Perseverance Corporation Limited.

The consolidated entity has been notified by the Native Title Tribunal of a native title claim which covers MIN(A)5177 held by Perseverance Exploration Pty Ltd. The Company drafted an agreement in 1998 that is still being considered by the claimants.

Unsatisfactory progress with the electrical and instrumentation contract relating to the development of the Fosterville Gold Mine resulted in work being transferred to a new electrical and instrumentation contract in January 2005. Perseverance Exploration Pty Ltd is involved in a dispute with the original contractor. The contractor has made claims against the Company and the Company has made counterclaims against the contractor.

The Directors do not consider that there is any significant financial exposure to these matters and hence no provisions have been made.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

27. BUSINESS COMBINATION
Acquisition of Leviathan Resources Limited

On 4 December 2006, Perseverance Corporation Limited acquired a controlling interest in the shares of Leviathan Resources Limited, a listed public company based in Australia with principal activities of gold mining and exploration.

The total cost of the combination was $52,971,692 and comprised an issue of equity and costs directly attributable to the combination. The Company issued 139,638,446 ordinary shares with a fair value of $0.375 each, based on the quoted price of Perseverance Corporation Limited at the date of exchange (assessed as the date the controlling interest was acquired i.e. 4 December 2006).

The fair value of the identifiable assets and liabilities of Leviathan Resources Limited as at the date of acquisition were:


CONSOLIDATED
	Recognised on
	acquisition
	$


Property, plant and equipment		26,692,200
Investments		208,416
Cash and cash equivalents		15,658,018
Trade receivables		1,075,000
Other receivables		39,727
Inventories		6,385,648
Mining and exploration rights		32,300,000

		82,359,009

Trade payables		(9,787,796	)
Other payables		(8,248,394	)
Deferred tax liability		(10,669,000	)
Provision for annual leave		(1,848,356	)
Provision for long service leave		(1,703,759	)
Provision for restoration costs		(5,344,549	)

		(37,601,854	)

Fair value of identifiable net assets		44,757,155
Goodwill arising on acquisition		8,214,537

		52,971,692


Cost of the combination:
Shares issued, at fair value		52,364,494
Direct costs relating to the acquisition		607,198

Total cost of the combination		52,971,692


The cash outflow on acquisition is as follows:
Net cash acquired with the subsidiary		15,658,018
Cash paid		607,198

Net consolidated cash outflow		15,050,820

From the date of acquisition, Leviathan Resources Limited reduced the net losses of the Group by $1.5 million.

If the combination had taken place at the beginning of the financial year, the loss for the Group would have increased by $1.8 million and revenue would have increased by $36.0 million.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

28. FINANCIAL INSTRUMENTS

The consolidated entity uses derivative financial instruments in the normal course of business for the purpose of economically hedging its future gold production and sales and managing its interest rate exposures. The derivative financial instruments used by the consolidated entity explained below is the position as at 30 June 2007.

(a) Financial assets and liabilities carried at fair value

All financial assets and financial liabilities held at balance date are carried at net fair value with the exception of the bank loan which is carried at amortised cost. The net fair value of a financial asset or a financial liability is the amount at which the asset could be exchanged, or liability settled in a current transaction between willing parties after allowing for transaction costs.


	CONSOLIDATED
	Carrying Value				Fair Value
	2007 ($)		2006 ($)		2007 ($)		2006 ($)

FINANCIAL ASSETS
Cash assets		11,418,840		18,370,653		11,418,840		18,370,653
Trade debtors		5,321,582		3,237,104		5,321,582		3,237,104
Other debtors		39,423		226,821		39,423		226821
Derivatives — interest rate swaps		—		35,146		—		35,146

		16,779,845		21,869,724		16,779,845		21,869,724


FINANCIAL LIABILITIES
Trade creditors		26,906,988		12,462,189		26,906,988		12,462,189
Bank Loan		23,125,000		18,750,000		23,125,000		18,750,000
Derivatives — gold forwards		35,620,978		50,289,959		35,620,978		50,289,959
Convertible note		34,743,835		34,365,425		33,602,167		34,365,425
Lease commitments		6,167,030		57,029		6,167,030		57,029

		126,563,831		115,924,602		125,422,163		115,924,602


	THE COMPANY
	Carrying Value				Fair Value
	2007 ($)		2006 ($)		2007 ($)		2006 ($)

FINANCIAL ASSETS
Cash assets		38,680		10,961,468		38,680		10,961,468
Trade debtors		1,474,988		672,424		1,474,988		672,424

		1,513,668		11,633,892		1,513,668		11,633,892


FINANCIAL LIABILITIES
Trade creditors		294,047		—		294,047		—

(b) Credit risk exposure

The credit risk on financial assets of the consolidated entity is generally the carrying amount net of any provisions for doubtful debts. Credit exposure represents the extent of credit related losses that the consolidated entity may be subject to on amounts to be exchanged under the derivatives or to be received from financial assets. The notional amounts of derivatives are not a measure of this exposure. The consolidated entity, while exposed to credit related losses in the event of non-performance by counter parties to financial instruments, does not expect any counter parties to fail to meet their obligations given their high credit ratings.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

28. FINANCIAL INSTRUMENTS (Continued)

(c) Forward gold sales

The consolidated entity may undertake forward hedging of gold by entering into forward sales of gold that guarantees a minimum sale price for gold. Hedging is undertaken to enhance revenue and reduce exposure to unpredictable adverse fluctuations in gold prices.

During the year ended 30 June 2005, Perseverance Exploration Pty Ltd entered into a gold forward sales programme which requires the delivery of 200,000 ounces of gold between 30 June 2005 and 30 June 2009 at an average price of A$619 and 50,000 ounces over the same period at and average price of $614. All facilities were provided by the Australia and New Zealand Investment Bank.

During the year ended 30 June 2007, Perseverance Exploration Pty Ltd rescheduled the gold forward sales programme by extending the delivery period. As a result, the average forward sale price increased to A$626 per ounce. Perseverance Exploration Pty Ltd sold 24,001 ounces (2006: 40,305 ounces) of gold at an average forward gold price of A$626. As at 30 June 2007, the Company had 181,035 ounces of flat forward sale contracts at A$626 per ounce. The mark-to-market of the hedge book at 30 June 2007 was negative $35,620,978. This fair value is reflected as a derivative liability in the balance sheet. The company considers the forward contracts as an economically effective hedge, however has not designated the gold forwards as cashflow hedges in accordance with AASB 139 Financial instruments Recognition, and as such reflects movements in fair value through the Income Statement as such movements occur.

(d) Interest rate risk exposures

The economic entity is exposed to interest rate risk through primary financial assets and liabilities. The following table summarises interest rate risk for the economic entity, together with effective interest rates as at balance date.


			FIXED INTEREST RATE
			MATURING IN
	FLOATING				OVER 1		NON-
	INTEREST		1 YEAR OR		YEAR TO 5		INTEREST				WEIGHTED
	RATE		LESS		YEARS		BEARING		TOTAL		AVERAGE INTEREST
2007	($)		($)		($)		($)		($)		RATE

FINANCIAL ASSETS											FLOATING			FIXED


Cash assets		11,418,840		—		—		—		11,418,840		5.95	%		—
Trade debtors		—		—		—		5,321,582		5,321,582		—			—

Totals		11,418,840		—		—		5,321,582		16,740,422


FINANCIAL LIABILITIES
Trade creditors		—		—		—		26,906,988		26,906,988		—			—
Bank loan (b)		—		—		23,125,000		—		23,125,000		8.0	%		—
Convertible note		—		—		34,743,835		—		34,743,835		—			6.75	%
Lease commitments		—		4,826,280		1,340,750		—		6,167,030		—			7.3	%

Totals		—		4,826,280		59,209,585		26,906,988		90,942,853

Floating interest rates represent the year average rate applicable to the instrument.

From time to time the consolidated entity enters into interest rate swap agreements that are used to convert the variable interest rate of its short-term borrowings to medium-term fixed interest rates. The swaps are entered into with the objective of reducing the risk of rising interest rates. Bank loan represent amounts that the consolidated entity has drawn down on its $25,000,000 debt facility which was agreed on 28 May 2007. Interest is paid on the loan each 6 months and is based on the Bank Bill Swap Rate plus a margin. Both the debt and the associated interest rate swap (if any) have the same critical terms.

Annual Financial Report
Financial year ended 30 June 2007

Notes to the Financial Statements
YEAR ENDED 30 JUNE 2007

28. FINANCIAL INSTRUMENTS (Continued)


			FIXED INTEREST RATE
	FLOATING		MATURING IN		OVER 1		NON-
	INTEREST		1 YEAR OR		YEAR TO 5		INTEREST				WEIGHTED
	RATE		LESS		YEARS		BEARING		TOTAL		AVERAGE INTEREST
2006	($)		($)		($)		($)		($)		RATE

FINANCIAL ASSETS											FLOATING			FIXED

Cash assets		18,370,653		—		—		—		18,370,653		5.2	%		—
Trade debtors		—		—		—		3,237,104		3,237,104		—			—

Totals		18,370,653		—		—		3,237,104		21,607,757


FINANCIAL LIABILITIES
Trade creditors		—		—		—		12,462,189		12,462,189		—			—
Bank loan (b)		10,559,400		5,779,800		2,410,800		—		18,750,000		7.5	%		7.6	%
Convertible note		—		—		34,365,425		—		34,365,425		—			6.75	%
Lease commitments		—		57,029		—		—		57,029		—			8.5	%

Totals		10,559,400		5,836,829		36,776,225		12,462,189		65,634,643

29. SUBSEQUENT EVENTS