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Corporate InformationABN 27 009 066 648

DirectorsNicholas Curtis (Executive Chairman)Jacob KleinDavid Davidson

Company SecretaryIvo PolovineoRegistered Offi ceLevel 7, 56 Pitt StreetSYDNEY NSW 2000Tel: +61 2 8259 7100Fax: +61 2 8259 7199Email: [email protected]

SolicitorsDeacons1 Alfred StreetCircular QuaySYDNEY NSW 2000

BankersWestpac Banking Corporation275 George StreetSYDNEY NSW 2000

Share RegisterSecurity Transfer Registrars770 Canning HighwayAPPLECROSS WA 6153Tel: +61 8 9315 2333Fax: +61 8 9315 2233

AuditorsErnst & YoungThe Ernst & Young Building680 George StreetSYDNEY NSW 2000

Internet Addresswww.lynascorp.com

Realising our future

Annual Report 2007

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To put it directly, our strategy has brought us here; our ability to capture its potential will realise our future.

Contents04 Chairman’s Report and Outlook Statement06 The Rare Earths Direct (RED) Production Model10 Australian Operations – Mt Weld Mine Development 12 Malaysian Operations – Process Plant Development

16 Global Market Activity19 Crown Polymetallic Resource20 Board of Directors21 Financial Report

Our visionWe will lead the growth of the global Rare Earths industry by creating a reliable, fully-integrated source of supply from mine through to customer.

Our values as a team will be• Strive for excellence in safety,

health and the environment

• Value our differences and beopen to change

• Operate in an honest, candidand transparent manner

• Deliver quality products,processes and services

• Always respect and contribute to thecommunities in which we operate

Lynas Corporation Limited ABN 27 009 066 648

Glossary

Basic Engineering Design The technical drawings for the plant including fl ow sheets, mass balances, equipment, piping and instrumentation diagrams.

CAGR Compound Annual Growth Rate.

Carbonatite Mt Weld carbonatite; a circular, 3 kilometre diameter, pipe-like, intrusive igneous complex composed dominantly of calcium carbonate with lesser components of silicates, iron oxide and calcium phosphate.

Catalytic Converter A device otherwise known as a ‘Cat’ fi tted in the exhaust system of vehicles to reduce the emission of harmful gases to the atmosphere. Rare Earths are crucial to the catalytic activity and thermal stability of the Cat. A Cat consists of a ceramic structure coated with a mixture of Rare Earths and a precious metal such as platinum.

Central Lanthanide Deposit (CLD) High grade deposit of Rare Earths overlying the centre of the Mt Weld carbonatite.

Cracking A process where Rare Earths concentrate is reacted with sulphuric acid at high temperature which ‘cracks’ the minerals thus making the Rare Earths amenable to chemical processing. This process also referred to as sulphuric acid bake (SAB).

Crown Polymetallic Resource A sector of the Mt Weld carbonatite that is enriched in Rare Metals and Rare Earths.

CRT Cathode Ray Tube, traditional television technology .

Detailed Engineering Design Complete plant layout, civil engineering drawings and ready for construction equipment drawings.

Iron Oxide Material (IOM) An iron oxide material produced in the Rare Earths concentration process that has potential applications in cement and as fi ller in rubber.

Initial Separation The fi rst step of the solvent extraction process of mixed Rare Earths to produce LCPN and SEG.

Intermediate Rare Earth Products

Includes a range of products which contain one or several Rare Earth elements. The chemical form of the intermediate products is usually a chloride, carbonate or oxide.

JORC Code The Australasian Code for Reporting of Mineral Resources and Ore Reserves (the ‘JORC Code’ or ‘the Code’) which sets out minimum standards, recommendations and guidelines for Public Reporting of exploration results, Mineral Resources and Ore Reserves in Australasia.

Lanthanides Collective name for the 14 naturally occurring lanthanide elements from lanthanum (atomic number 57) to lutetium (atomic number 71).

LCPN An intermediate mixed Rare Earths product containing the light Rare Earths lanthanum, cerium, praseodumium and neodymium, suitable for use by Rare Earths separation plants for the manufacture of individual compounds.

Mineral Resource The term “Mineral Resource” covers mineralisation which has been identifi ed and estimated through exploration and sampling and within which Ore Reserves may be defi ned by the consideration and application of technical, economic, legal, environmental, social and governmental factors.

Mischmetal A pyrophoric alloy made from a mixture of Rare Earths metals.

Neo Magnet A neodymium iron boron permanent magnet that is manufactured by either polymer bonding of neodymium iron boron metal, and where the magnet shape can be easily formed by injection or compression moulding (Bonded) or pressing the powder to a shape followed by high temperature sintering to form the magnet (Sintered).

Ore Reserve Ore Reserves are those portions of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Competent Person or Persons making the estimates, can be the basis of a viable project after taking account of all relevant metallurgical, economic, marketing, legal, environmental, social and governmental factors. Ore Reserves are inclusive of diluting material which will be mined in conjunction with the Ore Reserves and delivered to the treatment plant or equivalent.

Rare Earths Name commonly used for the 15 naturally occurring lanthanide elements from lanthanum (atomic number 57) to lutetium (atomic number 71) plus yttrium (atomic number 39).

Rare Earths Direct® or RED Lynas’ trademark representing the value propositions of the RED Model.

Rare Metals Collective term used by Lynas for a group of valuable metals including niobium, tantalum, titanium, and zirconium.

RED Production Model Lynas’ “mine-to-market” approach to the supply chain of the Rare Earths industry.

REO Acronym for Rare Earths oxides which is the common form for expressing the Rare Earth composition of materials other than metals.

SEG An intermediate mixed Rare Earths product containing samarium, europium, gadolinium and other heavier Rare Earths suitable for use by Rare Earths separation plants for the manufacture of individual compounds.

Separation A process of solvent extraction (or liquid-liquid extraction) that is employed to separate the Rare Earths from impurities and to the separate the Rare Earths into groups of Rare Earth elements and individual elements.

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RED begins here...

The fi rst drill and blast operations at Mt Weld

Lynas Corporation Limited 2007 Annual Report 1

Fluid Cracking Catalyst

LaLanthanum

La2O3

Automotive Catalytic Converters

CeCerium

CeO2

Consumer Electronics

PrPraseodymium

Pr6O11

Hybrid Vehicles

NdNeodymium

Nd2O3

High Temperature Magnets

SmSamarium

Sm2O3


HoHolmium

Ho2O3

Hybrid Vehicles

DyDysprosium

Dy2O3

Energy Effi cient Light Bulbs

TbTerbium

Tb4O7

MagneticRefrigeration

GdGadolinium

Gd2O3

Colour Televisionsand Monitors

EuEuropium

Eu2O3

Fibre-optics

ErErbium

Er2O3

X-ray Phosphors

TmThulium

Tm2O3

Electronics

YbYtterbium

Yb2O3

Magnetic BubbleMemory

LuLutetium

Lu2O3

Phosphors

YYttrium

Y2O3

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2 Lynas Corporation Limited 2007 Annual Report

Camera and Optical Lenses

LaLanthanum

La2O3

Electronic Capacitors

NdNeodymium

Nd2O3

CRT, LCD and Plasma Screens

EuEuropium

Eu2O3

LCD MonitorBacklighting

TbTerbium

Tb4O7

Micro Motor Magnets

DyDysprosium

Dy2O3

Electronics

YbYtterbium

Yb2O3

Magnetic BubbleMemory

LuLutetium

Lu2O3

CRT, LCD and Plasma Screens

YYttrium

Y2O3

Hard Disk Drives

PrPraseodymium

Pr6O11

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Enabling Digital Technology

The digital era is gathering pace; broadband access, digital television, digital cameras, and digital music are around us at home and on the move – Rare Earths are enablers of this technology and its miniaturisation. New materials and novel applications of them enable companies to produce more effi cient, higher performance materials which meet the demand for faster, smaller and lighter products.


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Nicholas CurtisExecutive Chairman

With a vision that has sustained Lynas through transitional years the time has come for the company to begin a new era as we turn the vision into reality. This year’s achievements are propelling the company forward to bring the vision to fruition and on into the future. Our success will be measured on completion of the Mt Weld Rare Earths project as well as by our ability to direct both investment and people to where they can produce superior shareholder returns.

To put it directly, our strategy has brought us here: our ability to capture its potential will realise our future.


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Chairman’s Reportand Outlook Statement

The vision of our company is to lead the growth of the global Rare Earths industry by creating a reliable, fully integrated source of supply from mine through to customer. I can confi dently say 2006/2007 was the year in which the company’s achievements gave certainty to our vision becoming reality.

Achievements in the fi nancial markets include broker coverage for Lynas, by Austock Securities and Patersons, and the raising of funds to develop the mine, construct the Rare Earth processing plant and sustain the company through to positive cash fl ow. In August 2006 a $75 million equity and convertible note package was closed. The share price appreciated signifi cantly, achieving the seventh highest price appreciation of all the shares on the Australian Stock Exchange in the fi nancial year. After the fi nancial year end $250 million was secured with a senior project fi nance facility, a convertible note and an equity issue, completing the required project funding including contingency.

The exceptional Rare Earths resource at Mt Weld underpins the company’s vision. A historic milestone was achieved when Downer EDI Mining mobilised to site and mining commenced at Mt Weld. The site infrastructure has been established and by the end of the year the full mining fl eet had cleared the area for commencement of the open pit mine in early July.

During the year the Board took the important strategic decision of relocating the planned processing plant from China to the east coast of Malaysia after Lynas observed an increase in Chinese Government policy in relation to limiting the export of Rare Earths from China. This was a watershed decision for the company. The Federal Government of Malaysia has welcomed us. The project has received “Strategic Pioneer Status” with an associated tax incentive package of 100% exemption on corporate income tax for ten years, as well as exemption from import duty and sales tax.

The company has appointed Ranhill WorleyParsons Sdn Bhd in Malaysia as our engineering partners. This year all process design and basic engineering design was completed with a capital cost estimate for the Malaysian processing plant of $220 million. The detailed engineering design is well underway.

Another step in the realisation of the vision was the signing of the fi rst supply contract. This cornerstone contract was with a major consumer of Rare Earths for delivery of product in 2009. Customer demand continues to be very strong and early in the new fi nancial year a second signifi cant sales contract was completed.

Owing to strong customer demand the basic engineering has been completed for a rapid expansion of the processing plant from an initial, Phase I, production capacity of 10,500 REO tonnes per annum to a Phase II of 21,000 REO tonnes per annum. Phase I costs and construction plans incorporate $44 million worth of infrastructure associated with the Phase II expansion.

Strong customer demand is a function of the increasing growth in the use of Rare Earths, and the diminishing supply. This has been refl ected in the sharp price increase for the basket of Rare Earth oxides to be produced from Mt Weld ore. The price at the beginning of the year was $5.90 per kilogram of REO, by the end of the year this price had risen to $14.18 per kilogram of REO.

The industry sees no sign of this demand slowing down. Rare Earths have very specifi c chemical and physical properties. These unique properties make them vital and non substitutable for many applications in the electronics and automotive industries. Consumer products such as hybrid vehicles, compact fl uorescent light bulbs, iPods and PC’s of any type rely on certain components that cannot operate without Rare Earths.

Put simply, our products underpin new technologies which are required to sustain the needs of modern society. These needs cover the use of more powerful yet smaller digital technology in our everyday lives, being more energy effi cient and reducing our impact on the environment in which we live. We see no retreat from these needs, and therefore see an ever increasing demand for our products.

Our company’s role in this technological progress is to produce high quality raw material essential to the development of these products. Our processing plant is a science based advanced materials project, not a labour based project. Our staff will require a broad set of skills in advanced industrial operations and advanced materials technology. The company will ensure the knowledge infrastructure exists around our plant in Malaysia to enable world class customer service based on the scientifi c understanding of our advanced materials products.

The realisation of a vision relies on the skills of the team within the company, our company’s most important asset. The broadening of the senior executive team has been another signifi cant achievement this year. I welcome Michael Wolley, Vice President Operations, William ‘Bill’ Moss, Project Director, and Volker Hars, Chief Financial Offi cer, to the senior leadership team of Lynas. They join Harry Wang, President China Operations, Mike Vaisey, Vice President Technical Development, and Dr Matthew James, Vice President Corporate and Business Development, all of whom have a long standing commitment to realising the vision. I am particularly proud of the quality of the senior executive team in the company, and fi rmly believe that this team has the commitment, capacity and experience to deliver this exciting project and beyond. I thank them and all of our dedicated staff for their commitment.

I would also like to thank my fellow Board Members, Jake Klein and David Davidson. They have never wavered in their enthusiasm and support, and their guidance and wisdom is gratefully received.


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The Rare Earths Direct (RED) Production Model

The RED production model is the implementation of the vision. Establishing a reliable, fully integrated, supply chain from mine through to separated products and marketed to customers under the Lynas RED® brand.

Mining Concentration

The Mt Weld asset is a world class ore body. The JORC code compliant resource is the highest Rare Earths grade resource in the world, and has inherently low thorium and a negligible fl uorine content making it viable from an environmental perspective. The Mt Weld ore has a favourable distribution of Rare Earths elements which results in 25% more value per unit of REO than the main competition.

The RED production model is built on these strong foundations, with mining and crushing at the mine site before transporting the high grade ore to the processing site on the east coast of Malaysia.

By the end of June the mining contractor, Downer EDI Mining, had installed the required infrastructure and mobilised the full mining fl eet to site. Approximately 100 hectares were cleared over the planned pit, the overburden waste dump and ore stockpile areas. Page 1 of this Annual Report shows the fi rst drill and blast operations at Mt Weld. The overburden mining is now well underway.

At a 4% REO cut-off grade, the resource estimate is as follows –

Mineral process engineering is the study of recovering specifi c minerals from the mined ore. The RED production model employs froth fl otation to select the Rare Earths minerals from the rest of the ore. Chemical reagents set up conditions that allow the Rare Earths mineral particles to selectively attach to air bubbles and lift it to the water surface to form a froth which is collected from the top of the concentrator cells.

Lynas developed a unique fl otation reagent regime for the Mt Weld ore. An Australian pilot plant utilising this fl otation process on Mt Weld ore achieved a 63% recovery of Rare Earths in steady state process producing a 40% REO grade concentrate.

After the ore is received on the east coast of Malaysia it is transported to the processing plant, which is approximately 2km from the port. The concentration plant is the fi rst section of the processing plant. The basic engineering design for the concentrator was completed in March, and the detailed engineering design is well underway with Ranhill WorleyParson’s Sydney offi ce. The concentration plant is being built with the ability to expand rapidly, in either a modular design or with equipment sized to process higher volumes of ore where appropriate.

Category Tonnes (Mt) Grade (% REO) Tonnes REO

Measured 1.2 15.6 186,000

Indicated 5.0 11.7 583,000

Inferred 1.5 9.8 146,000

Total 7.7 11.9 917,000

Clearing operations for the Rare Earths project at Mt Weld Froth fl otation of Mt Weld ore during the pilot plant


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The key value propositions of the RED production model are: • Building the world’s only integrated supply system from mine to customers;• Producing Rare Earths that meet the world’s environmental standards; and• Marketing an international brand of guaranteed quality.

Lynas will be unique in its ability to offer security of supply at known costs to the global Rare Earths consumers, creating market opportunities by:• Striking stable long term fi xed or framed price contracts;• Offering supply chain transparency thereby minimising inventory costs; and• Increasing confi dence to apply Rare Earths to new applications.

A rotary kiln will be used for the atmospheric pressure, high temperature, sulphuric acid bake The fi nal products will be high purity Rare Earths

Cracking and Initial Separation Final Separation and Product Finishing

The Mt Weld concentrate will be processed in the second section of the Malaysian processing plant known as the cracking and initial separation plant. The chemical engineering processes employed in this section of the plant are mature processes within the Rare Earths industry. The fi rst is an atmospheric pressure, high temperature, sulphuric acid baking process of Mt Weld concentrate to crack open the minerals containing the Rare Earths. The sulphuric acid baking process has undergone pilot plant testing in Australia to specifi cally understand any materials handling issues of Mt Weld concentrate and also to improve the waste gas treatment compared to industry standard.

This is followed by solvent extraction separation of a mixed Rare Earths solution into two streams to produce two intermediate mixed Rare Earths products that are free from impurities; one known as “LCPN” containing the light Rare Earths lanthanum, cerium, praseodymium and neodymium. With the other known as “SEG” containing samarium, europium, gadolinium and other heavier Rare Earths. These intermediate Rare Earths products are suitable for use by Rare Earths separation plants for the manufacture of individual Rare Earths compounds.

The basic engineering design was completed in March, and the detailed engineering design is well underway with Ranhill WorleyParson’s Beijing offi ce. The cracking and initial separation plant is also being built in a modular design with the ability to expand rapidly.

The intermediate Rare Earths products are further separated into individual Rare Earths products of various purities utilising industry standard solvent extraction technology. The products can be fi nished to either carbonates or oxides, depending on customer requirements.

The Malaysian plant will have an initial, Phase I, production capacity of 10,500t REO, with the following products:

• 500t REO of the SEG mixed heavy Rare Earths product which will be sold into the market;

• 5,000t REO of the LCPN mixed light Rare Earths product which shall be either sold into the market or further separated within China to individual Rare Earths products suitable for direct sales to customers;

• 5,000t REO of products which shall be processed in a fi nal separation and product fi nishing plant in Malaysia to individual Rare Earths products suitable for direct sales to customers.

The addition of the fi nal separation and product fi nishing plant allows Lynas to sell a higher value product than was planned previously. The design of this fi nal separation and product fi nishing plant is based on an existing operational plant and becomes a ‘modular’ unit for expansion, allowing the company to replicate two additional units for the Phase II plant expansion to 15,000t REO of fi nal separation and 21,000t in total.


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EuEuropium

Eu2O3


TbTerbium

Tb4O7


YYttrium

Y2O3For

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Improving Energy Effi ciency

Increased population and economic growth leads to greater demand of the world’s energy, which means increased use of our limited fossil fuel reserves. Rare Earths are already playing a vital role in conservation of these reserves, and are likely to play an even larger role in taking us forward to the hydrogen economy.


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The exceptional Rare Earths resource at Mt Weld underpins the company’s vision. A historic milestone was achieved when Downer EDI Mining mobilised to site at Mt Weld. The site infrastructure has been established and by the end of the year the full mining fl eet had cleared the area and mining commenced in early July.

A Hitachi P1800 160t excavator and a Cat 789 180t dump truck breaking ground at Mt Weld


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Grade Control DrillingCompletion of the grade control drilling program has confi rmed the high degree of confi dence in the grade and distribution of ore in the pit, and resulted in only minor modifi cations to the mine plan.

Grade control drilling was completed for the planned open pit mine using effi cient Air Core reverse circulation from the surface prior to overburden removal. An initial close-spaced drilling campaign was carried out over a limited part of the pit area in August 2006 to assess the veracity of the mining plan based on exploration drilling, and to supply data for derivation of the optimum drill hole spacing for the remaining grade control drilling. The second grade control drilling campaign at optimised spacing was completed in February 2007. This brought the total program to 146 holes for 8,438m. A new estimation of ore in the planned pit based on the grade control data closely correlated with the estimates from exploration drilling.

Regulatory Approvals for MiningPrior to commencement of mining, the company undertook extensive consultation, planning and reporting to project stakeholders and regulatory authorities to gain approval for all mining aspects of the project at Mt Weld by 21 May 2007.

Lynas was required to demonstrate how it planned to fulfi l obligations under ministerial conditions attached to previous Environmental Protection Agency approval of the project, meet new guidelines for environmental management under the Environmental Division of the Department of Industry and Resources, and fulfi l health and safety obligations under regulation by the Department of Consumer and Employee Protection. Additional licences were required for the ore screening operation and test pumping for de-watering of deeper levels of the mine, and additional approval was required for construction of the access road.

Mining ContractGiven the high demand for contract mining services in Western Australia, Lynas was fortunate in attracting highly competitive tenders for the major mining contract and associated services. A comprehensive invitation for expressions of interest and draft mining contract was compiled by EPAC Pty Ltd and advertised before Christmas 2006. From fi ve qualifi ed responses, Roche Mining, now Downer EDI Mining, was selected as the preferred contractor.

In recognition of the unique nature of the ore body, and the relatively small scale of the mining operation, considerable fl exibility was built in to the contract to allow variable mining rates for overburden and ore excavation. Mining commenced at the end of May on the basis of a Notice of Award, with the formal contract to be fi nalised in the new fi nancial year.

Site Establishment By the end of June, the mine administration area, access road and open pit mine area had been cleared. Site infrastructure including offi ces, workshops, ablution block, communications, fuel storage and power generation facilities were installed and operational. Pipeline and power infrastructure for the Granny Smith Gold Mine bore fi eld on the Mt Weld mine site was relocated and a standpipe installed for supply of dust-suppression water for the mine site.

Mobilisation of Mining FleetThe main component of the mining fl eet, the Hitachi P1800, 160t excavator was assembled, two Cat 789 180t dump trucks were driven to site from the nearby Sunrise Dam Gold Mine, three Cat 777 75t dump trucks were trucked to site, and other mobile equipment including water trucks, bulldozer, grader and road roller progressively assembled at site by the end of June.

Mining OperationsScrub clearing and top soil stockpiling over the open pit, waste dump and ore stockpile areas was established as a combined operation with windrowing of soil and vegetation with a bulldozer, followed by load and haul by excavator and dump truck to an adjacent stockpile area. By the end of June, 31,000 cubic metres of top soil had been removed from the fi rst part of the mine area.

The next stage was the commencement of drill and blast operations in the cemented alluvium over laying the pit followed by excavation and haulage to the waste dump.

In the months following the fi nancial year end substantial progress was made in development of the Lynas Western Australia operations team with the recruitment of the general manager of the mining operations, a senior mine geologist, mine superintendent and surveyor.

Australian Operations – Mt Weld Mine Development


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Both the Federal Government of Malaysia and the Pahang State Government have welcomed us. The Gebeng Industrial Area on the east coast of Malaysia is well established and has all the facilities and infrastructure required for our operation including the planned expansion to 21,000 tonnes per annum REO.

Environmental baseline work underway on the Lynas cleared, fi lled and level site at Gebeng Industrial Area, Pahang


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Processing Plant RelocationDuring 2006 management observed a trend in Chinese Government policy leading to increased Government control of the Rare Earths industry in China. This included the removal of the VAT export rebate, imposition of mining production quotas and the reduction of export quotas. With these constraints emerging, Lynas commenced a global search for an alternative location for the processing facility.

The east coast of peninsula Malaysia was selected as an ideal location, providing fl at industrial land, deep water ports, a skilled labour force, access to industrial chemicals, affordable power, and transparent regulators as well as a receptive Federal Government providing an attractive investment climate. The Malaysian authorities supported the selection of the industrial estate of Teluk Kalong in Kemaman, in the State of Terengganu, as the preferred location. Consequently the decision was taken to develop the regulatory submissions, the investment proposal and the basic engineering design package for this plant utilising the Kemaman site.

In March 2007 Lynas received “Strategic Pioneer Status” from the Malaysia Investment and Development Authority (MIDA) and was granted 100% exemption from income tax for 10 years as well as exemption from import duty and sales tax on all raw materials, machinery, and equipment imported into the company.

Subsequent to year end, on 24 August 2007, the company received advice from the federal offi ce of the MIDA requesting an alternative location for the project, at the Gebeng Industrial Area within the State of Pahang. Gebeng is 2.5km from Kuantan Port, is well established and has all the conditions required for our operation.

The company believes locating within a supportive State is of great importance and will benefi t the company in the long term. The existing schedule for the Project defi nes a total construction time of 16 months. This schedule will be revised to account for the move within Malaysia, however, the anticipated date for the commencement of plant production is in early 2009.

Engineering DesignThe relocation of the plant to Malaysia required a design review to ensure all engineering and design would meet Malaysian standards. The opportunity was taken to amend the design to meet industry developments. These changes included the addition of a 5,000 tonne per annum REO fi nal separation and product fi nishing plant within the Malaysia operations, improved product quality specifi cations for higher purity products, and tighter environmental emission standards.

The engineering design and the site layout for the Project have been developed with the planned rapid expansion to 21,000 tonnes per annum REO of total production clearly in view. Some parts of the plant have been designed for expansion conditions and the layout provides effective process fl ow and optimal areas for facilities expansion. The plant will be well placed for a doubling of capacity within a short time of completion of the initial 10,500 tonnes per annum REO, subject to appropriate approvals.

Ranhill WorleyParsons Sdn Bhd was appointed to progress the transfer and amendment of this plant design and to fi nalise the basic engineering design (BED) package. This was completed in April 2007, and formed the basis of the project cost estimate. The capital cost is projected as $220 million including a contingency of $20 million. This estimate is under review due to the move to Pahang, but is not expected to result in a material change. Detailed engineering design has been progressed during the third quarter of 2007.

Regulatory ApprovalsConcurrent with engineering and design activities, submissions were developed to meet all Malaysian regulatory authority approval requirements. Submissions were developed for the Department of Environment, the Atomic Energy Licensing Board and the Municipal Council authorities. Baseline monitoring was conducted for the preferred site.

The Pahang location will require a new assessment of the baseline environmental conditions in order to properly evaluate the environmental impact of the plant, followed by a new submission to the Department of Environment and the Kuantan Municipal Council.

Project ManagementRanhill WorleyParsons Sdn Bhd will undertake detailed engineering design, manage all procurement and contracting, and manage construction of the Malaysian Project. The Project Manager to oversee all of these activities was appointed in July 2007 and has mobilised the team to lead all phases. The Project Manager will work closely with the Lynas Project Director to ensure successful delivery, with environmental, safety and quality considerations as high priorities.

Project activity is global in nature, with engineering design being carried out in WorleyParsons offi ces in Sydney, Beijing and Kuala Lumpur, and equipment procurement targeting potential suppliers world-wide.

Malaysian Operations – Process Plant Development


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LaLanthanum

La2O3

Automotive Catalytic Converters

CeCerium

CeO2

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Enhancing Environmental Protection

Global warming due to green house gas emissions is a concern for us all. Rare Earths already play a vital role in the reduction of green house gas emissions.

Many scientists believe that global warming is caused by a human-driven increase in greenhouse gases in the earth’s atmosphere. Our society is becoming more aware of the part we have to play in addressing global warming.Governments of today are now legislating higher environmental and lower emission standards in both domestic and industrial settings.


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Enabling digital technology, improving energy effi ciency and enhancing environmental protection are essential facets of today’s world. With their distinctive physical and chemical properties Rare Earths play a critical role in new materials technologies which are required to sustain these needs of modern society.

Used in small quantities, but essential ingredients, Rare Earths can be likened to the vitamins of material properties. For many products which use Rare Earths there are no viable alternatives. The Rare Earth magnet is a prime example. The power to weight performance of a neodymium iron boron magnet is essential in the drive systems of the hybrid vehicle. No Rare Earths – no hybrid vehicle.

For other products, performance would drop signifi cantly without Rare Earths. Without lanthanum in a fl uid cracking catalyst, used to separate crude oil into the many different gas, fuel and oil products, the global oil refi nery output would drop by 7%: the

equivalent of the production output from the United Arab Emirates, Iraq and Kuwait combined.

The Rare Earths market is divided into seven main segments: magnets, phosphors, NiMH batteries, automotive catalysts, fl uid cracking catalysts, glass and ceramic additives, and polishing powders. There are also many other applications beyond these main segments.

The table below shows the segments which account for the majority of the demand, together with the forecast growth rates, key elements used in each application, and the applications which are the growth drivers in each segment.

The global demand for Rare Earths was an estimated 105,000t of Rare Earths oxide (REO) in 2006 and is projected to increase to 194,000 REO by 2012, growing at 11% per annum.

As demand continues to outstrip supply both today and in the foreseeable future, the global chemical companies are turning to Lynas to secure their Rare Earths supply chain requirements.

Rare Earths Application Elements Demand ‘06 Demand ‘12 CAGR Growth Drivers

Magnets Nd, Pr, Dy, Tb, Sm

20,300t 40,400t 12% • Hybrid vehicle electric motors• Electronic power steering• Hard Disk Drives• Other small electric motors• Air conditioners

Phosphors Eu, Tb, Y 4,500t 9,700t 13% • Energy efficient lights• Plasma TVs and displays• LCD TVs and monitors

NiMH Batteries La, Nd, Ce 9,200t 45,200t 30% • Hybrid vehicle batteries• Rechargeable batteries

Auto Catalysis La, Ce 6,100t 8,400t 5% • Gasoline and diesel fuel additives• Tightening of automotive emission

standards globally

Fluid Cracking Catalysis Ce, La, Nd 16,000t 19,500t 3% • Oil production• Increased use for sour oils

Glass and Ceramic Additives Ce, La, Nd, Er, Gd, Yb

16,700t 18,300t 2% • CRT TV glass• UV cut glass• Optical glass• Fiber optics

Polishing Powders Ce, La, Pr 16,500t 27,900t 9% • LCD TVs and monitors• Plasma TVs and displays• Silicon wafers and electronics

Others 15,700t 24,600 t 8% • Metallurgy, lasers, capacitors• Pharmaceuticals• Water treatment, plus many more

Total 105,000t 194,000 t 11%

Global Market Activity

Demand


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Chinese Government policy plays an important role in the current supply situation of the Rare Earths industry. Lynas has observed an increase in policy decisions as the Chinese Government protects their Rare Earths resource base from over mining with low yielding processes, enforces proper environmental standards within the industry, and ensures the rapidly growing Chinese economy has suffi cient Rare Earths resources for their internal needs. The key policies that have been implemented over the last few years which are now impacting global Rare Earths supply include:

• In 2003 the introduction of volume export quota limitations;

• A year-on-year reduction of the overall export quota volume which at present stands at approximately 40,000t of Rare Earths product per annum;

• In 2005 the removal of VAT rebates for exports of Rare Earths, effectively increasing the price of exported Rare Earths to the same price as within China;

• In April 2006 the introduction of mining production quotas for each region of Rare Earths production in China. The total Rare Earths mining quota in 2007 increased by only 2% to 87,020 tonnes REO in concentrate form (which after process losses would equate to approximately 74,000t of REO in fi nal products);

• Ongoing enforcement of China’s stringent environmental standards resulting in closure of non-compliant Rare Earths plants; and

• In November 2006 the imposition of a 10% Rare Earths export tariff, thereby increasing the export price of Rare Earths above the price within China.

These policy changes are starting to drive changes within the Chinese industry. Mining has reduced to more sustainable levels, processing plants are beginning to invest in environmental protection technology, and the Chinese industry is slowly restructuring after a number of years of destructive internal competition.

The resulting decrease in Rare Earths raw materials from the Chinese mines and concentration plants has fl owed through to a reduction in production volumes of fi nal commodity Rare Earths from the Chinese producers, and, more importantly for Lynas, a marked reduction in the Rare Earths volumes available for export.

At present, Lynas is the only company outside China that has a defi ned Rare Earths Resource with a bankable feasibility study, which has been announced to the market, showing the Resource is commercially viable in terms of processing technology, fi nancial robustness, and environmental compliance.

Lynas believes a Rare Earths deposit requires two critical characteristics to be viable as a Rare Earths resource. These are:

• an ability to produce a high grade Rare Earths concentrate via pilot plant tested, low cost concentration processes.

• inherently low thorium and uranium content thereby making it practical from an environmental perspective and allowing transportation of the concentrate or high grade ore.

After the year end, Lynas acquired an additional Rare Earths Resource located in Malawi, Africa which has these characteristics. The Kangankunde Carbonatite Complex is a fully permitted Rare Earths deposit with an Inferred Resource of 107,000 tonnes of Rare Earths Oxide (REO) at an average grade of 4.24% REO, using a 3.5% REO cut-off grade, and remains open at depth. Importantly, the deposit has extremely low thorium and uranium levels for a Rare Earths deposit.

Completed test work shows the deposit is amenable to a low cost gravity separation concentration process producing a 60% REO concentrate. The assets include an unassembled gravity separation concentration plant designed for the ore based on prior pilot plant test work.

Whilst there are companies undertaking exploration and feasibility studies on other Rare Earths prospects, the quality of the Mt Weld and Kangankunde Resources appear to stand head and shoulders above these other potential projects.

The 2007 Rare Earths market continued on from the break through year of 2006. It was a year where the strong continuous growth in demand for applications dependant upon Rare Earths became explicit. This merged with a realisation for many that the once unfettered supply from China was no longer sustainable. The result was a fundamental market shift in both the willingness of Rare Earths consumers to be dependant upon a single point of supply, China, and in the price increases of Rare Earths products.

Supply


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— Tb Oxide— Eu Oxide— Dy Oxide

The strong growth in demand for applications that are dependant upon Rare Earths and the fundamental restrictions of supply from China has resulted in a marked shift in the pricing of Rare Earths products.

Rare Earths prices have increased dramatically over the last twelve months. The price for the generic composite of Rare Earths equivalent to the Rare Earths distribution at Mt Weld (the Mt Weld Composition), on a Freight On Board (FOB) China basis, increased 140% from US$5.90/kg as at 30 June 2006 to US$14.18/kg at the end of June 2007.

With restricted supply within China expected to continue and demand for Rare Earths expected to continue to grow at 11% per annum through to at least 2012, the price for Rare Earths is expected to continue to increase.

The charts below show the price progression for the ‘standard’ 99% purity individual element oxides and also for the Mt Weld Composition, on a FOB China basis. The prices quoted are obtained from a weekly market price report; higher purity oxides and other value added properties will attract higher prices than those shown.

Customer supply discussions with a number of large Rare Earths consumers across European, Japanese and US markets have progressed well through the year and resulted in three supply contracts by September 2007. The combined value of these contracts is over US$310 million, and the contracts range from three year to fi ve year terms.

The pricing of the contract refl ects the value of surety of supply from a reliable, fully integrated source of supply from mine through to customer.

The products from the 5,000 tonne per annum Phase I fi nal separation and product fi nishing plant in Malaysia are now sold out. These contracts also cover some LCPN and SEG products and also additional volume to be produced from the planned Phase II expansion of the Malaysian processing plant.

Historical Prices for Standard 99% Purity Rare Earth Oxides and the ‘Mt Weld Composition’, FOB China

Pricing Customer Agreement

Global Market Activity (CONT)

US$/kg

US$/kg


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In addition to the world class Rare Earths Oxide (REO) deposit, the Mt Weld carbonatite is also host to an extensive polymetallic Resource within the ‘Crown Deposit’ including niobium, tantalum, zirconium, titanium, and Rare Earths.

Dr Phillip Hellman of Hellman & Schofi eld Pty Ltd, Sydney, completed a JORC-compliant multi-metal geostatistical resource estimation study which resulted in Indicated and Inferred Resources totalling 37.7 million tonnes. The ore composition is presented in the table below. The majority of the ore lies between 30m and 60m in depth, suitable for open pit mining.

The scoping study completed in 2005 envisages an open-cut mine and a process route based on existing technology to produce a suite of metal compounds and products. The strong economic and technical results of the scoping study were encouraging.

Ore samples for mineralogical assessment and metallurgical testing were prepared this year. An external research institute has been engaged to work on the mineralogical assessment and preliminary process development of the polymetallic ore, thereby allowing this project to move forward whilst Lynas personnel remain dedicated to the development of the Rare Earths project.

The next step for the Crown Polymetallic deposit is commencement of process test work based on the mineralogy and preliminary process development.

NiobiumThe Mt Weld niobium resource is potentially the world’s second largest when ranked by contained niobium metal and compared to the resources of existing commercial operations which include:

• CBMM’s Araxa deposit in Brazil, with 460 million tonnes grading 2.5% Nb2O5 supplying over 80% of the world niobium market;

• Mineracao Catalao de Goias Ltd’s (Anglo American plc) deposit in Brazil totalling approximately 18 million tonnes at an average of 1.34% Nb2O5; and

• Niobec Inc’s Canadian underground deposit of 24 million tonnes at 0.65% Nb2O5

Titanium Titanium metal and Ti-ferroalloy products are used in the aerospace industry, for specialised process equipment in power engineering, chemical processing and in sporting equipment, notably golf clubs.

Rare Earths and ScandiumThe Mt Weld Rare Metals deposits also contain signifi cant grades of Rare Earths strongly enriched with the valuable heavy lanthanides, which could ultimately contribute considerable value. Also present is scandium which is used in high strength aluminium alloys.

Polymetallic Mineral Resources for Coors and Crown Sectors, Mt Weld

Category Mt Ta2O5 Nb2O5 TLnO ZrO2 Fe2O3 P2O5 Y2O3 Al2O3 TiO2

Indicated 1.5 0.037 1.40 1.65 0.32 46.5 8.9 0.10 9.94 5.8

Inferred 36.2 0.024 1.06 1.14 0.30 42.6 8.0 0.09 11.3 3.9

Total 37.7 0.024 1.07 1.16 0.30 42.8 8.0 0.09 11.3 4.0

Mt = million tonnes, other fi gures are percentages. Ta2O5 tantalum oxide, Nb2O5 niobium oxide, TLnO Rare Earths oxide, ZrO2 zirconia, Fe2O3 iron oxide, P2O5 phosphate, Y2O3 yttria, Al2O3 alumina, TiO2 titanium oxide.

Plan view of the Mt Weld tenement showing the Crown Polymetallic Resource

Crown Polymetallic Resource

Crown Polymetallic Resource at Mt Weld


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Nicholas CurtisExecutive ChairmanAppointed Executive Chairman of the Company in 2004. Prior to this Nick was President and Chief Executive Offi cer. He has over 20 years background in mining and fi nance including founding Sino Gold Mining Limited, an Australian public company with gold mining assets in China and serving as Chairman for fi ve years until November 2005. Nick also serves as Chairman of St Vincents & Mater Health Sydney Limited and as a Director on the Boards of the Sisters of Charity Health Service and the Garvan Institute of Medical Research.

David Oliver DavidsonDirector – Non ExecutiveDavid is an independent Director of the Company and joined the Board on 28 March 2002. He has had a distinguished career with ICI and DuPont. An Australian, he has lived and worked in Europe and North America and held a number of Senior Executive roles with global responsibilities. He is a former Director of ICI America Inc. Since returning to Australia, David has been providing executive and corporate advice on organisation development and strategy.

Jacob KleinDirector – Non ExecutiveAppointed an independent Director of the Company, Jake joined the Board on 28 August 2004. He is also President and Chief Executive Offi cer of Sino Gold Mining Limited. Jake has over 15 years experience in senior fi nance and managerial positions. He brings invaluable knowledge of management of operations in China gained through his role as Chief Executive Offi cer of Sino Gold Limited.

Sound principles of corporate governance are critical to obtaining and retaining the trust of investors and to achieving Lynas’s overarching goal of performance with integrity.

Board of Directors


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Directors’ Report30 June 2007


The Directors submit their report for the year ended 30 June 2007

DIRECTORSThe names and details of the company’s Directors in offi ce during the fi nancial year and until the date of this report are as follows. Directors were in offi ce for this entire period unless otherwise stated.

Names, qualifi cations, experience and special responsibilities

Nicholas Curtis, B.A. (Hons) (Executive Chairman)Mr Curtis is the Executive Chairman of the company; he is the Chairman of St Vincents and Mater Health Sydney Limited; and a Director of Garvan Institute of Medical Research. His background is in resources banking and fi nancing based on more than 20 years as a professional in the futures, commodities and stockbroking industries. During the past three years the only other listed company directorship held by Mr Curtis was in Sino Gold Mining Limited until November 2005.

Jacob Klein, BCom (Hons). ACA, DipFinmarkets (Sec Inst)Mr Klein joined the Board on 25 August 2004. He has over 15 years experience in senior fi nance and managerial positions in both South Africa and Australia. He joined Macquarie Bank in 1991 and in 1995, as an associate Director at Macquarie, he participated in the formation of Asia Resource Capital Limited, a joint venture between Macquarie Bank and CNNC. From 1996 to June 2000 he worked for Sino Mining International. Mr Klein is CEO of Sino Gold Mining Limited and during the past three years the only other listed company directorship held by Mr Klein was in Sino Gold Mining Limited.

David Davidson Mr Davidson is a Non-Executive Director of the Company and originally joined the Board on 28 March 2002. He resigned from the Board on 18 August 2005 and was re-appointed as a Director on 8 December 2005. Mr Davidson has had a distinguished career with ICI and DuPont. An Australian, he has lived and worked in Europe and North America and held a number of senior executive roles with global responsibilities. He is a former Director of ICI America Inc. Since returning to Australia, Mr Davidson has been providing executive and corporate advice on organisation development and strategy. During the past three years Mr Davidson has not held any other listed company directorships.

COMPANY SECRETARYIvo Polovineo PNAMr Polovineo has been the company secretary for Lynas Corporation Limited for the past 6 years. He has spent over 20 years in senior management roles in the resource sector including over 15 years as company secretary of a number of listed public companies.

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATEAs at the date of this report, the interests of the Directors in the shares and options of Lynas Corporation Limited were:

Ordinary Shares

OptionsOver Ordinary

Shares

Nicholas Curtis 25,656,478 5,000,000

Jacob Klein 1,580,580 –

David Davidson 635,000 300,000


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CORPORATE INFORMATION

Corporate StructureLynas Corporation Limited is a company limited by shares that is incorporated and domiciled in Australia. Lynas Corporation Limited has prepared a consolidated fi nancial report incorporating the entities that it controlled during the fi nancial year, which are outlined in the following illustration of the Group’s corporate structure:

Lynas (Shandong)Chemet (JV)

Mt Weld Mining Pty Ltd

Lynas Malaysia Sdn Bhd

Lynas ChemetAustralia Pty Ltd

Mt Weld Rare Earth Pty Ltd

Mt Weld Holdings Limited

Mt Weld Niobium Pty Ltd

Lynas TransalesPty Ltd

Lynas Corporation Limited

100% 100% 100%100% 100% 100%

100% 95%

Nature of Operations and Principal ActivitiesThe principal activities during the year of entities within the consolidated entity continued to be:

Exploration and development of Rare Earths deposits;

Exploration for other mineral resources.

EmployeesThe consolidated entity employed 25 employees as at 30 June 2007 (2006: 19 employees).

PERFORMANCE REVIEWManagement and the Board monitor the Group’s overall performance, from its implementation of the mission statement and strategic plan through to the performance of the company against operating plans and fi nancial budgets.

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REVIEW AND RESULTS OF OPERATIONS

Group Overview

Consolidated operating results for the year2007

$’0002006

$’000

Revenue 3,792 780

Operating Expenses (6,200) (4,669)

Write down in asset carrying value (1,434) –

Depreciation Expense (150) (105)

Interest Expense (2,208) (508)

Income tax expense – –

Net Loss (6,201) (4,502)

Capitalised Costs 25,095 18,023

Working Capital (2,344) (5,498)

Provisions (699) (488)

Cash 64,036 7,186

Interest Bearing Loans – (4,947)

Net Assets 86,088 14,316

Net increase/(decrease) in cash & cash equivalents 56,985 (182)

The key fi nancial events for the Group for the year are summarised below, full details of each of these items are disclosed in the fi nancial accounts.

The Group has signifi cantly improved its fi nancing position by raising $83.4m in new cash which provides a solid base for the further development and execution of the Rare Earths project. The funding split for the equity raising consisted of $40m from a share placement, $35m from a convertible bond placement and $8.4m from unlisted options exercised during the year.

Part of the newly generated cash was used for the repayment of a previous convertible bond facility of $4.9m and the fi nal settlement with Ashton Mining for $5.7m.

As the operational business is scheduled to start in 2009 the revenue line primarily refl ects the interest income of the Group. A net loss of $6.2m (2006 $4.5m) was incurred during the year, including a $1.4m write off of capitalised costs which were specifi cally related to the proposed Rare Earths processing plant in China.

The overall net assets of the Group increased by $71.8m, which was mainly driven by the increased cash position & additional capitalised development expenditure at Mt Weld ($3.5m) and for the Rare Earths processing plant in Malaysia ($5.4m).

EARNINGS PER SHARE

2007 2006

Basic loss per share (cents) (1.49) (1.86)

Diluted loss per share (cents) (1.49) (1.86)

DIVIDENDSNo dividend has been recommended since the end of the fi nancial year.


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REVIEW OF OPERATING ACTIVITIES

Rare EarthsOver the last year Lynas observed a trend in Chinese Government policy decisions which led to an increase in Government control of the Rare Earths industry in China. Rare Earths supply was tightening due to the imposition of mining production quotas, and the reduction and restrictions on trading of the existing export quota. These policy decisions followed the removal of VAT rebates for exports of Rare Earths oxides and an increased enforcement of China’s stringent environmental standards which resulted in the closure of non-compliant Rare Earths plants.

Shortly after the introduction of production quotas in China the company determined it was prudent to investigate potential sites other than China that would be suitable for the company’s proposed processing plant for Mt Weld ore. The drivers for this decision were the:

Increasing Government control of the Rare Earths industry in China, thereby increasing the project risk for our plant

Favourable tax environments available in alternative countries

Opportunity to reduce cost base denominated in Chinese Renminbi, and thereby benefi t from a strengthening Chinese currency

Following a detailed evaluation of several possible locations, the east cost of Malaysia was chosen due to the favourable investment climate, the high quality workforce and the excellent infrastructure servicing the proposed site. Lynas received ‘strategic pioneer status’ from the Malaysian Industrial Development Association (MIDA) which has a number of associated benefi ts including a 10 year tax free period.

Project engineering continued through the year. Lynas appointed Ranhill WorelyParsons, an international engineering company with experience in Malaysia, to provide an EPCM service (engineering, procurement, and construction management) for overall project delivery in Malaysia.

Commercial discussions were carried out throughout the year and as an outcome the fi rst 5 year supply contract was signed in June 2007.

Rare MetalsThe engineering scoping study for the signifi cant poly-metallic resource, referred to as the ‘Crown Deposit’, has improved. This deposit is separate and in addition to the Mt Weld Rare Earths resource. Work has commenced on the pre-feasibility work, specifi cally mineralogy work and initial benefi ciation work to produce a concentrate material.

REVIEW OF FINANCIAL CONDITION

Capital Structure

At the start of the period the Company had 232,261,595 shares on issue. During the year an additional 256,232,240 shares were issued from the following sources:

Issue of shares pursuant to exercise of convertible note: 87,500,000

Issue of shares pursuant to option conversion: 39,699,982

Allotment of new shares 129,032,258

Total 256,232,240

At the end of the period there were 502,057,164 ordinary shares and 34,493,325 unlisted options over ordinary shares on issue. The issue of these shares during the period resulted in an increase of issued capital of $78,098,874 during the year.

Subsequent to year end the Group fi nalised a placement of an additional 52,173,713 shares. Furthermore, an additional 6,049,325 options have been converted and 50,000 options over ordinary shares have been issued. This results in a total of 560,280,403 ordinary shares on issue and 28,494,000 unlisted options over ordinary shares on issue.

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Liquidity and FundingSubsequent to 30 June 2007 the Group secured debt and equity funding comprising of:

Senior Debt Facility US$ 105 million

Convertible Note Facility AU$ 115 million

Equity Placement AU$60 million

Full details of the equity and debt raising are detailed in this report under the section titled “Signifi cant Events After Balance Date” and within the Subsequent Events note contained in the fi nancial accounts. As a result of these fundraising activities the Group has suffi cient funds to fi nance its operations for the next fi nancial year and to proceed with development of the mining and concentration operations.

Risk ManagementThe Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identifi ed on a timely basis and than the Group’s objectives and activities are aligned with the risks and opportunities identifi ed by the Board.

The Group believes that it is crucial for Board members to be a part of this process, and as such has established a Safety, Health, Environment & Community (SHEC) Committee which manages the risks of the company and the interface with the community in which it operates.

The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identifi ed by the Board.

Statement of ComplianceThe report is based on the guidelines in The Group 100 Incorporated publication Guide to the Review of Operations and Financial Condition.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRSThere have been a number of signifi cant changes in the state of affairs of the company. The following are items of signifi cant change during the fi nancial year ending 30 June 2007.

Receipt of defi nitive capital cost estimate for the planned Malaysian Processing plant for A$220 million, including a 10% contingency

Commencement of mining activities at Mt Weld in Western Australia

Increase of Mt Weld Rare Earths composition price from US$5.50/kg to US$11.30/kg, which is an increase of 105% during the fi nancial year.

Signing of the fi rst Supply contract with a signifi cant Rare Earths customer

There have been other signifi cant changes in the state of affairs which occurred after balance date. These are detailed below;

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SIGNIFICANT EVENTS AFTER THE BALANCE DATESubsequent to year end Lynas Corporation has achieved the following important milestones, which have a signifi cant impact on the position of the Group:

(a) Site Location within Malaysia

During the year a site within the Teluk Kalong Industrial Estate in Kemaman, Terengganu, Malaysia was selected as the preferred location for the construction of the Rare Earths Plant. The land was owned by the State Government of Terengganu.

Subsequent to year end, the company received advice from the federal offi ce of the Malaysian Industrial Development Authority (MIDA) stating “the Malaysian Government would like to seek your kind consideration for an alternative location for the project. Given the nature of your project and with the presence of dedicated industrial areas for petrochemical and chemical projects in the State of Pahang, where the required supporting facilities and infrastructure are in place, you may wish to consider relocating the project to this state”. The request was received following high level consultations between the federal Government of Malaysia and the Government of the State of Terengganu.

An alternative location has been identifi ed within Pahang at the Gebeng Industrial Area. Gebeng is 2.5km from Kuantan Port and approximately 30km to the south of the original planned site. The supporting facilities and infrastructure required for the processing plant are well developed at Gebeng and include:

Filled site, which reduces the site preparation requirements

Required electricity, gas, water, and steam infrastructure

Complete logistics infrastructure including roads, a railway line to port side, and port facilities for both containers, liquid chemicals, and dry bulk materials

The Gebeng Industrial Area houses signifi cant international petrochemical and chemical plants. Companies with facilities in the industrial area include:

BP Amoco Corporation

WR Grace & Co

BASF-Petronas Chemical S/B

Eastman Chemical (M) Sdn. Bhd.

The change in location will require a new assessment of the baseline environmental conditions in order to properly evaluate the environmental impact of the plant within the changed location, followed by a new submission to the Department of Environment. However engineering changes to the current design are expected to be minimal. It is anticipated that this change in location will cause a delay of 3 to 6 months, leading to an assumed production start in Quarter 2 of 2009.

(b) Debt Raising

In July the Group announced the acceptance of two debt funding packages to provide the basis of the funding for the mining development at Mt Weld and the Rare Earths Processing Plant in Malaysia.

On 6 July 2007 the company announced the acceptance of an offer to provide a convertible note facility to Lynas for up to $115 million from Indus Capital Partners LLC. On 27 July 2007 the Group secured a commitment from Bayerische Hypo-und Vereinsbank AG (HVB) to underwrite a debt facility of US$105 million.

Draw down of these facilities is subject to standard banking due diligence, all facility documentation in place, all necessary authorisations, consents and approvals in place.

(c) Capital Raising

In August the company completed a share placement of $60 million, for 52,173,713 shares at $1.15. This completes a $300 million funding package for the Rare Earth’s project. Settlement and allotment of shares was fi nalised on 10 August 2007.

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(d) Signing of Rare Earths Supply Contract

In July the company signed a second supply contract with a signifi cant Rare Earths customer for the supply of Mt Weld Rare Earths to be produced from the company’s Malaysian processing plant.

The contract is a long term fi ve year contract with a value in excess of US$200 million over fi ve years based on prices at the time the contract was signed. The contracted sales cover neodymium and praseodymium which are key elements for the Rare Earths magnet industry. The pricing structure of the contract is related to the market price; however it includes a minimum fl oor price, without a maximum ceiling price, for the product sales over the term of the contract.

LIKELY DEVELOPMENTS AND EXPECTED RESULTSA number of key events will take place within the next fi nancial year. The fi rst phase mining campaign at Mt Weld will continue for the next 9-12 months, building ore stock-piles ready for shipment to the processing plant in Malaysia.

During the fi rst half of the 2007/2008 fi nancial year the Group will seek to fi nalise the acquisition of land at the new site in Pahang. Due diligence processes are well underway and formal negotiations with the vendor will commence shortly.

The applications for environmental approval are being revised for re-submission following the change in plant location for resubmission to the Department of Environment of the State of Pahang.

Once all necessary government approvals are in place and the acquisition of the land is fi nalised, construction will commence on the Rare Earths processing plant.

SHARE OPTIONS

Unissued SharesAs at year end the Company had on issue the following options to acquire ordinary fully paid shares:

Description Number Expiry date Exercise price

Incentive plan options 300,000 November 2007 $0.30

Unlisted options 7,500,000 November 2007 $0.30

Unlisted options 4,333,325 December 2007 $0.20

Unlisted options 100,000 March 2008 $0.80

Incentive Plan options 1,170,000 June 2008 $0.30

Unlisted options 5,100,000 August 2009 $0.17


Incentive Plan options 50,000 October 2011 $0.32

Incentive Plan options 40,000 October 2011 $0.36

Incentive Plan options 700,000 March 2012 $0.71

Incentive Plan options 50,000 April 2012 $0.83

Incentive Plan options 20,000 April 2012 $1.02



Total 34,493,325

Option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate or in the interest issue of any other registered scheme.


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Shares Issued as a Result of the Exercise of OptionsDuring the fi nancial year, the following options were exercised:

Share Options Exercised Exercise Price

Incentive Plan options 7,700,000 $0.25

Unlisted options 2,799,993 $0.20



Incentive Plan options 100,000 $0.30



Total 39,699,982

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERSDuring or since the fi nancial year, the company has paid premiums in respect of a contract insuring all the Directors of Lynas Corporation Ltd against costs incurred in defending proceedings for conduct involving:

(a) a wilful breach of duty; or

(b) a contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.

The total amount of insurance contract premiums paid was $66,614. This amount is not included as part of the Directors remuneration in note 29.

ENVIRONMENTAL REGULATION AND PERFORMANCEThe consolidated entity is bound by the requirements of the relevant environmental protection authorities for the management and rehabilitation of tenements owned or previously owned by the Group. Tenements are being maintained and rehabilitated following these guidelines. There have been no known breaches of any of these conditions.

REMUNERATION REPORTThe remuneration report is set out under the following main headings:

(a) Remuneration policy

(b) Details of remuneration

(c) Service agreements

(d) Share-based compensation

(a) Remuneration Policy

Philosophy

It is the company’s objective to provide maximum stakeholder benefi t from the retention of a high quality board and executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature and amount of executive Directors’ and offi cers’ emoluments to the company’s fi nancial and operational performance. The expected outcomes of the remuneration structure are:

a. Retention and Motivation of key executives;

b. Attraction of quality management of the company; and

c. Performance incentives which allow executives to share the rewards of the success of Lynas Corporation Limited.


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For details on the amount of remuneration and all monetary and non-monetary components for each of the non-director executives during the year and for all Directors, refer to Table 1 of this report. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of Lynas Corporation Limited and the performance of the individual during the period.

There is no scheme to provide retirement benefi ts, other than statutory superannuation, to non-executive Directors.

Remuneration Committee

The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves and the chief executive offi cer and the executive team. The Board has established a remuneration committee, comprising the non-executive Directors. Members of the remuneration committee throughout the year were:

D. Davidson (c)

J. Klein

Remuneration Structure

In accordance with best practice corporate governance, the structure of non-executive Director and senior manager remuneration is separate and distinct.

Non-executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers advice where required from external consultants as well as the fees paid to non-executive Directors of comparable companies when undertaking the annual review process.

Each Director receives a fee for being a Director of the company. No additional fee is paid for board committees on which a Director sits.

Non-executive Directors have long been encouraged by the Board to hold shares in the company (purchased by the Director on market). It is considered good governance for Directors to have a stake in the company whose board he or she sits. The non-executive Directors of the company can participate in the Executive and Employee Option Plan.

Senior Manager and Executive Director Remuneration

Objective

The company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company and so as to:

reward executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks;

align the interests of executives with those of shareholders;

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

ensure total remuneration is competitive by market standards.

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Structure

In determining the level and make-up of executive remuneration, the Remuneration Committee may engage external consultants as required to provide independent advice detailing market levels of remuneration for comparable executive roles.

Remuneration consists of the following key elements:

Fixed remuneration

Variable remuneration

Short Term Incentive (“STI”); and

Long Term Incentive (“LTI”)

The proportion of fi xed and variable remuneration is decided by the Remuneration Committee after consideration of the overall performance of the company and the individual. The remuneration is not necessarily linked to specifi c performance targets. The remuneration of the key management personnel for the year ending 30 June 2007 is detailed below.

(b) Details of Remuneration (Audited)

2006Short-term

employee benefi tsPost-employee

benefi tsShare-based

payment

NameCash salary

and feesCash

bonus Other

Non-Monetary

benefi ts Super Retirement Options Total

Executive Director

N Curtis 416,000 – – 715 – – 308,333 725,048

Non–Executive Directors

J Klein 45,872 – – – 4,128 – – 50,000

D Davidson 13,441 – – – 35,000 – – 48,441

Sub Total – Non-Executive Directors 59,313 – – 715 39,128 – – 98.441

M James 237,177 – – – 45,375 – 61,667 344,219

M Vaisey 245,490 – – – 18,223 – 46,250 309,963

R Kana 178,462 – – – 16,062 – – 194,524

M Wolley 59,692 – – – 5,372 – 22,692 87,755

I Polovineo * – – – – – – 15,417 15,417

Total 1,196,134 0 0 715 124,160 0 454,359 1,775,368

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2006Short-term

employee benefi tsPost-employee

benefi tsShare-based

payment

NameCash salary

and feesCash

bonus Other

Non-Monetary

benefi ts Super Retirement Options Total

Executive Director

N Curtis 333,829 – – 655 5,504 – 14,667 354,655

Non-executive Directors

J Klein 45,872 – – – 4,128 – – 50,000

D Davidson 25,795 – – – 2,322 – 1,500 29,617

P Newton 22,936 – – – 2,064 – – 25,000

M Okeby 25,000 – – – – – – 25,000

Sub Total – Non-Executive Directors 119,603 – – – 8,514 – 1,500 129,617

Other Key personnel

M James 239,352 – 730 – 21,542 – 11,167 272,791

M Vaisey 223,412 – 6,028 – 20,107 – 3,667 253,214

H Wang 28,211 – *18,750 – 4,645 – 11,000 62,606

I Polovineo* – – – – – – 1,833 1,833

Total 944,407 – 25,508 655 60,312 – 43,834 1,074,716

* services provided by Sino Gold Mining Limited – refer note 27

(c) Service AgreementsIt is the Remuneration Committee’s policy that employment agreements shall only be entered into with the Chief Executive Offi cer and with no other executives. The company entered into an agreement (“Employment Agreement”) dated 2 August 2001 with Mr N Curtis for the provision of Mr Curtis’ services as Chief Executive Offi cer on reasonable commercial terms and conditions. The current employment agreement with Mr Curtis expires on 31 July 2008.


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(d) Share-based Compensation (Audited)

Options Granted as Part of Remuneration for the Year needed 30 June 2007

The following table details the options issued to Directors and Key Management Personnel during the year ended 30 June 2007, and those options vested at year end. No options were issued during the year ended 30 June 2006.

Name

Balance at beginning

of periodGranted as

Remuneration

Options Exercised/ Cancelled

Net Change over

Balance at end

of periodVested at

30 June 2007

Directors

N Curtis* 2,000,000 5,000,000 (2,000,000) 3,000,000 5,000,000 –

D Davidson 300,000 – – – 300,000 300,000

M James 500,000 3,000,000 – 3,000,000 3,500,000 500,000

M Vaisey 500,000 1,750,000 (500,000) 1,250,000 1,750,000 –

M Wolley – 1,700,000 - 1,700,000 1,700,000 –

R Kana – 700,000 (700,000)** – – –

I Polovineo 250,000 500,000 (250,000) 250,000 500,000 –

Total 3,550,000 12,650,000 (3,450,000) 9,200,000 12,750,000 800,000

* The board of Lynas Corporation Ltd agreed to issue a further 5,000,000 options to N Curtis on the same terms and conditions as the unlisted employee options issued on 25 June 2012, subject to approval by shareholders at the next General Meeting of the company.

** options cancelled.

Fair value of options

The fair value of each option is estimated on the date of grant using a Black & Scholes valuation model with the following assumptions:

Dividend yield Nil

Expected volatility 45%

Risk-free interest rate 6.35%

Life of option 5 years

No dividends have been paid in the past and hence it is not appropriate to estimate future possible dividends in the calculations. The life of the options is based on a 5 year expiry from date of issue and therefore not necessarily indicative of exercise patterns that may occur. The resulting weighted average fair values per option for those options issued during the year are:

Numberoptions

Grant date

Fair value per option at

grant dateExercise price

per optionExpiry

date

First exercise

date

Lastexercise

date

N Curtis 5,000,000 1/07/2006 $0.185 $0.300 30/06/2011 1/07/2009 30/06/2011

M James 1,000,000 1/07/2006 $0.185 $0.300 30/06/2011 1/07/2009 30/06/2011

2,000,000 25/06/2007 $0.635 $1.200 25/06/2012 25/06/2010 25/06/2012

M Wolley 700,000 29/03/2007 $0.389 $0.710 29/03/2012 29/03/2010 29/03/2012

1,000,000 25/06/2007 $0.635 $1.200 25/06/2012 25/06/2010 25/06/2012

M Vaisey 750,000 1/07/2006 $0.185 $0.300 30/06/2011 1/07/2009 30/06/2011

1,000,000 25/06/2007 $0.635 $1.200 25/06/2012 25/06/2010 25/06/2012

I Polovineo 250,000 1/07/2006 $0.185 $0.300 30/06/2011 1/07/2009 30/06/2011

250,000 25/06/2007 $0.635 $1.200 25/06/2012 25/06/2010 25/06/2012


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Shares issued on Exercise of Compensation Options

Name


Paid per share

$

Unpaid per share

$

N Curtis (2,000,000) 0.25 -

M Vaisey (500,000) 0.25 -

I Polovineo (250,000) 0.25 -

Total (2,750,000)

DIRECTORS’ MEETINGThe number of meetings of Directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director were as follows:

Directors’ Meetings

Meetings of Committees

AuditNomination and Remuneration

Safety, Health, Environment

& Community

Number of meetings held: 8 2 1 1

Number of meetings attended:

N. Curtis 8 2 - 1

D. Davidson 8 - 1 1

J. Klein 8 2 1 -

Committee MembershipAs at the date of this report, the company had an Audit Committee, a Nomination and Remuneration Committee and a Safety, Health, Environment and Community (“SHEC”) Committee of the board of Directors.

Members acting on the committees of the board during the year were:

AuditNomination and Remuneration

Safety, Health, Environment & Community

J. Klein (c) D. Davidson (c) D. Davidson (c)

N. Curtis J Klein N. Curtis

(c) Designates the chairman of the committee.

TAX CONSOLIDATIONEffective 1 July 2002, for the purposes of income taxation, Lynas Corporation Limited and its 100% owned subsidiaries have 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 the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations.

CORPORATE GOVERNANCEIn recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Lynas Corporation Limited seek to ensure appropriate and effective corporate governance. The company’s corporate governance statement is contained in the following section of this annual report.


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AUDITOR’S INDEPENDENCE DECLARATIONWe have obtained the attached independence declaration from our auditors, Ernst & Young.

Auditor’s Independence Declaration to the Directors of Lynas CorporationLimited

In relation to ouruu auda itii of the fiff nancial report of Lf ynas Corpr orataa ion Ln imitii ed foff r the fiff nancial yearended 30 JuJJ ne 2007, to the best of mymm knowledge and belief,ff there have been no contnn raventnn ions ofthe aua ditii or independence requirii ementnn s of the Corpr orataa ions Act 2001 or any apa plicable code ofprofeff ssional conduct.

Ernst & Young

Gary DanielsPartnerSydy ney4 Septembm er 2007

Signed in accordance with a resolution of the Directors.

N Curtis

Executive Chairman

Sydney, 4 September 2007

J Klein

Director


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Corporate Governance Statement


The Board of Directors of Lynas Corporation Limited is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Lynas Corporation Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

Lynas Corporation Limited’s corporate governance principles and policies are therefore structured with reference to the Corporate Governance Council’s best practice recommendations, which are as follows:

Principle 1. Lay solid foundations for management and oversight

Principle 2. Structure the board to add value

Principle 3. Promote ethical and responsible decision making

Principle 4. Safeguard integrity in fi nancial reporting

Principle 5. Make timely and balanced disclosure

Principle 6. Respect the rights of shareholders

Principle 7. Recognise and manage risk

Principle 8. Encourage enhanced performance

Principle 9. Remunerate fairly and responsibly

Principle 10. Recognise the legitimate interests of stakeholders

IndependenceCorporate Governance Council Recommendation 2.1 requires a majority of the board to be independent Directors. In addition, Recommendation 2.2 requires the chairperson of the company to be independent. The Corporate Governance Council defi nes independence as being free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of unfettered and independent judgement.

In accordance with the defi nition of independence above, and the materiality thresholds set, David Davidson and Jake Klein are viewed as independent Directors of Lynas Corporation Limited. Whilst having had associations with the Company in the past, the Board does not view this as interfering with the exercise of unfettered and independent judgement.

Nick Curtis is the Executive Chairman of the Company. Although he has a 4.6% shareholding in the Company the Board does not view this as interfering with the exercise of unfettered and independent judgement. The composition of the Board and the nature and present state of the company’s business activities precludes the Company from having both a Chairman and a Chief Executive Offi cer.

There are procedures in place, agreed by the Board, to enable Directors, in furtherance of their duties, to seek independent professional advice at the company’s expense.

The term in offi ce held by each Director in offi ce at the date of this report is as follows:

Name Term in offi ce

N. Curtis 5 years

J Klein 2 years

D Davidson 7 months*

* Mr Davidson was previously a Director of the Company from March 2002 until August 2005. He rejoined the Board in December 2005.

For additional details regarding board appointments, please refer to our website.


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Nomination and Remuneration CommitteeRecommendation 2.4 requires listed entities to establish a nomination committee. During the year ended 30 June 2007, Lynas Corporation Limited operated a joint nomination and remuneration committee. The duties and responsibilities typically delegated to such a committee are expressly included in the board’s own charter as being the responsibility of the full Board. The Board does not believe that any marked effi ciencies or enhancements would be achieved by the creation of a separate nomination committee.

The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves and the chief executive offi cer and the executive team. The Board has established, as a single unit, a nomination and remuneration committee, comprising two non-executive Directors.

Members of this committee during the year were:

D. Davidson (c)

J Klein

RemunerationIt is the company’s objective to provide maximum stakeholder benefi t from the retention of a high quality board and executive team by remunerating Directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature and amount of executive Directors’ and offi cers’ emoluments to the company’s fi nancial and operational performance. The expected outcomes of the remuneration structure are:

Retention and motivation of key executives;

Attraction of quality management to the company; and

Performance incentives which allow executives to share the rewards of the success of Lynas Corporation Limited.

For details on the amount of remuneration and all monetary and non-monetary components for each of the non-Director executives during the year and for all Directors, refer to Table 1 of the Directors’ Report. In relation to the payment of bonuses, options and other incentive payments, discretion is exercised by the Board, having regard to the overall performance of Lynas Corporation Limited and the performance of the individual during the period.

There is no scheme to provide retirement benefi ts, other than statutory superannuation, to non-executive Directors.

Audit CommitteeThe Board has established an audit committee, which operates under a charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and effi ciency of signifi cant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of fi nancial information as well as non-fi nancial considerations such as the benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the consolidated entity to the audit committee.

The committee also provides the Board with additional assurance regarding the reliability of fi nancial information for inclusion in the fi nancial reports.

The members of the audit committee during the year were:

J. Klein (c)

N. Curtis

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Performance The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the nomination committee conducted two performance evaluations which involved an assessment of each Board member’s and key executive’s performance against specifi c and measurable qualitative and quantitative performance criteria. The performance criteria against which Directors and executives are assessed are aligned with the fi nancial and non-fi nancial objectives of Lynas Corporation Limited. Directors whose performance is consistently unsatisfactory may be asked to retire.

Safety, Health, Environment and Community (SHEC) CommitteeThe Company has a SHEC Committee, principal objective of which is to receive reports and consult with management to monitor and review, on behalf of the Board, the due compliance of the company with laws, regulations and policies relating to the following:

workplace health and safety;

environmental matters; and

community relationships.

The key activities of the Committee are:

ensuring appropriate policies are in place and regularly reviewing those policies;

ensuring that appropriate systems are implemented to monitor and measure compliance with the enacted policies;

and the maintenance of the adherence to these systems; and

reporting to the Board on its deliberations and recommending appropriate courses of action as necessary.

The members of the SHEC committee during the year were:

D. Davidson (c)

N. Curtis

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Income StatementYear ended 30 June 2007

Consolidated Lynas Corporation Limited

Notes2007

$2006

$2007

$2006

$

Revenue 2 3,791,803 779,704 3,791,020 773,413

Expenses

Salaries and employee benefi ts expense 2,793,092 1,576,139 2,751,084 1,566,171

Other expenses from ordinary activities 3 3,406,680 3,092,816 3,447,143 3,067,051

Depreciation expense 3 150,012 105,037 150,012 105,037

Impairment of deferred exploration, evaluation and development costs 12 1,434,380 – – –

Provision for diminution of receivable from subsidiary 9 – – 1,473,000 –

Interest expense 3 2,208,298 507,773 2,208,062 507,773

Loss before income tax expense (6,200,659) (4,502,061) (6,238,281) (4,472,619)

Income tax expense 4 – – – –

Net loss attributable to members of Lynas Corporation Limited (6,200,659) (4,502,061) (6,238,281) (4,472,619)

Basic loss per share (cents per share) 24 (1.49) (1.86) (1.49) (1.86)

Diluted loss per share (cents per share) 24 (1.49) (1.86) (1.49) (1.86)


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Balance SheetAt 30 June 2007


Notes2007

$2006

$2007

$2006

$

Current Assets

Cash and cash equivalents 19 64,036,478 7,185,572 63,345,899 6,190,937

Trade and other receivables 6 3,001,984 266,042 967,990 249,339

Prepayments 7 90,748 67,609 89,280 4,998

Total Current Assets 67,129,210 7,519,223 64,403,169 6,445,273

Non-current Assets

Prepayments 8 – 430,420 – 430,420

Receivables 9 – – 19,268,207 15,324,002

Other fi nancial assets 10 – – 3,011,062 2,925,491

Property, plant and equipment 11 6,291,107 903,192 280,783 214,242

Deferred exploration, evaluation & development costs 12 18,804,827 17,119,788 251,566 530,823

Total Non-current Assets 25,095,934 18,453,400 22,811,618 19,424,978

Total Assets 92,225,144 25,972,623 87,214,787 25,870,251

Current Liabilities

Trade and other payables 13 5,437,303 6,262,485 678,413 6,258,111

Interest bearing liabilities 14 – 4,947,482 – 4,947,482

Provisions 15 329,576 227,957 329,576 227,957

Total Current Liabilities 5,766,879 11,437,924 1,007,989 11,433,550

Non-current Liabilities

Provisions 16 369,782 220,335 119,779 220,335

Total Non-current Liabilities 369,782 220,335 119,779 220,335

Total Liabilities 6,136,661 11,658,259 1,127,768 11,653,885

Net Assets 86,088,483 14,314,364 86,087,019 14,216,366

Equity

Parent entity interest

Issued capital 17 131,938,908 53,840,034 131,938,903 53,840,034

Convertible notes – equity component – 532,468 – 532,468

Accumulated losses (46,474,951) (40,274,292) (46,483,131) (40,244,850)

Reserves 18 624,526 216,154 631,247 88,714

Total Equity 86,088,483 14,314,364 86,087,019 14,216,366


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Cash Flow Statement30 June 2007


Notes2007

$2006

$2007

$2006

$

Cash fl ows from operating activities

Receipts from rental 159,750 158,542 159,750 152,890

Payments to suppliers and employees (4,534,905) (4,941,742) (5,284,544) (4,958,508)

Interest received 3,564,001 493,722 3,563,218 620,523

Borrowing Costs (2,157,102) (453,102) (2,157,102) (453,102)

Net cash fl ows used in operating activities 19(a) (2,968,256) (4,742,580) (3,718,678) (4,638,197)

Cash fl ows from investing activities

Proceeds from sale of investment in listed company – 6,526,828 – 6,526,828

Purchase of property, plant and equipment (2,154,878) (715,483) (216,553) (26,533)

Proceeds from sale of property, plant and equipment 667,162 470 – –

Security bonds paid (2,581,267) – (578,000) –

Advances to subsidiary company – – (5,502,783) (3,000,000)

Payments for exploration and development (2,869,419) (3,377,706) 279,257 (2,037,750)

Net cash fl ows from/(used in) investing activities (6,938,402) 2,434,109 (6,018,079) 1,462,545

Cash fl ows from fi nancing activities

Proceeds from issues of ordinary shares, convertible notes and exercising options 17 78,098,874 2,126,165 78,098,868 2,126,165

Repayment of borrowings (11,207,150) – (11,207,150) –

Net cash fl ows from fi nancing activities 66,891,724 2,126,165 66,891,718 2,126,165

Net increase/(decrease) in cash and cash equivalents 56,985,067 (182,306) 57,154,962 (1,049,487)

Add opening cash brought forward 7,185,573 7,240,438 6,190,937 7,240,424

Net foreign exchange differences (134,162) 127,440 – –

Closing cash and cash equivalents carried forward 19(b) 64,036,478 7,185,572 63,345,899 6,190,937


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Consolidated

Issued capital

$

Convertible Notes Equity

Component$

Accumulated losses

$Reserves

$Total

$

At 1 July 2005 51,713,869 532,468 (35,772,231) 59,726 16,533,832

Currency translation differences – – – 127,440 127,440

Loss for the period – – (4,502,061) – (4,502,061)

Total income/(expense) for the year – – (4,502,061) 127,440 (4,374,621)

Exercise of options 754,165 – – – 754,165

Allotment of new shares 1,372,000 – – – 1,372,000

Cost of share based payments – – – 28,988 28,988

At 30 June 2006 53,840,034 532,468 (40,274,292) 216,154 14,314,364

Currency translation differences – – – (134,161) (134,161)


Total income/(expense) for the year – – (6,200,659) (134,161) (6,334,820)

Exercise of options 8,394,024 – – – 8,394,024

Convertible Note Issue Costs – (186,844) – – (186,844)

New Convertible Note Equity Component – 2,415,277 – – 2,415,277

Exercise of Convertible Note 34,202,506 (2,760,901) – – 31,441,605



Cost of Equity raising Costs (4,497,656) – – – (4,497,656)

At 30 June 2007 131,938,908 – (46,474,951) 624,526 86,088,483

Parent Entity

At 1 July 2005 51,713,869 532,468 (35,772,231) 59,726 16,533,832


Total expense for the year – – (4,472,619) – (4,472,619)

Exercise of options 754,165 – – – 754,165



At 30 June 2006 53,840,034 532,468 (40,244,850) 88,714 14,216,366

Loss for the period – (6,238,281) – (6,238,281)

Total income/(expense) for the year – – (6,238,281) – (6,238,281)

Exercise of options 8,394,024 – – – 8,394,024

Convertible Note Issue Costs – (186,844) – – (186,844)

New Convertible Note Equity Component – 2,415,277 – – 2,415,277

Exercise of Convertible Note 34,202,506 (2,760,901) – – 31,441,605



Cost of Equity raising Costs (4,497,656) – – – (4,497,656)

At 30 June 2007 131,938,908 – (46,483,131) 631,247 86,087,024

Statement of Changes in EquityYear ended 30 June 2007


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Notes to Financial StatementsYear ended 30 June 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of PreparationThe fi nancial report of Lynas Corporation Limited for the year ended 30 June 2007 was authorised for issue in accordance with a resolution of the directors on 4 September 2007.

Lynas Corporation Ltd (the parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. The nature of the operations and principle activities of the Group are described in the Directors’ Report.

The fi nancial report is a general-purpose fi nancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and applicable Australian Accounting Standards. The fi nancial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.

Historical Cost Convention

The fi nancial report has been prepared in accordance with the historical cost convention.

Critical Accounting Estimates

The preparation of fi nancial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements are related to impairment.

(b) Statement of ComplianceThe fi nancial report complies with Australian Accounting Standards, which include Australian Equivalents to International Financial Reporting Standards (AIFRS). The fi nancial report also complies with International Financial Reporting Standards (IFRS).

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2007. These are outlined in the table below.

Reference Title SummaryApplication date of standard*

Impact on Groupfi nancial report

Application 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]

Amending standard issued as a consequence of AASB 7 Financial Instruments: Disclosures.

1 January 2007 AASB 7 is a disclosure standard so will have no direct impact on the amounts included in the Group’s fi nancial statements. However, the amendments will result in changes to the fi nancial instrument disclosures included in the Group’s fi nancial report.

1 July 2007

AASB2007-4

Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments [AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128, 129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038]

Amendments arising as a result of the AASB decision that, in principle, all options that currently exist under IFRSs should be included in the Australian equivalents to IFRSs and additional Australian disclosures should be eliminated, other than those now considered particularly relevant in the Australian reporting environment.

1 July 2007 These amendments are expected to reduce the extent of some disclosures in the Group’s fi nancial report.

1 July 2007


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AASB2007-6

Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]

Amending standard issued as a consequence of revisions to AASB 123 Borrowing Costs.

1 January 2009 The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised. The Group has no borrowing costs associated with qualifying assets and as such the amendments are not expected to have any impact on the Group’s fi nancial report.

1 July 2009

AASB2007-7

Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 & AASB 128]

Amending standards for wording errors, discrepancies and inconsistencies.

1 July 2007 The amendments are minor and do not affect the recognition, measurement or disclosure requirements of the standards. Therefore the amendments are not expected to have any impact on the Group’s fi nancial report.

1 July 2007

AASB 7 Financial Instruments: Disclosures

New standard replacing disclosure requirements of AASB 130 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and AASB 132 Financial Instruments: Disclosure and Presentation.

1 January 2007 Refer to AASB 2005-10 above.

1 July 2007

AASB 123 (amended)

Borrowing Costs The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset must be capitalised.

1 January 2009 Refer to AASB 2007-6 above.

1 July 2009

AASB 8 Operating Segments New standard replacing AASB 114 Segment Reporting, which adopts a management approach to segment reporting.

1 January 2009 Refer to AASB 2007-3 above. 1 July 2009

2007-3 Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB, 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 fi nancial statements. However the amendments may have an impact on the Group’s segment disclosures as segment information included in internal management reports is more detailed than is currently reported under AASB 114 Segment Reporting.

1 July 2009

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)


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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 classifi ed as available for sale in AASB 139 Financial Instruments: Recognition and Measurement.

1 November 2006

The prohibitions on reversing impairment losses in AASB 136 and AASB 139, which are to take precedence over the more general statement in AASB 134, are not expected to have any impact on the Group’s fi nancial report.

1 July 2007

*designates the beginning of the applicable annual reporting period

(c) Principles of ConsolidationThe consolidated fi nancial statements are those of the consolidated entity, comprising Lynas Corporation Limited (the parent company) and all entities that Lynas Corporation Limited controlled from time to time during the year and at reporting date.

Information from the fi nancial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated fi nancial statements include the results for the part of the reporting period during which the parent company has control.

Subsidiary acquisitions are accounted for using the purchase method of accounting.

The fi nancial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All intercompany balances and transactions, including unrealised profi ts arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

(d) Foreign Currencies

Translation of Foreign Currency Transactions

Both the functional and presentation currency of Lynas Corporation Limited and its Australian subsidiaries is Australian dollars ($). The functional currency of the China operations of Lynas Chemet Australia Pty Ltd is Renmimbi Yuan (“RMB”). The functional currency of Lynas Malaysia Sdn Bhd is Malaysian Ringgit (“MYR”).

Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction.

Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fi xed in the contract) are translated using the spot rate at the end of the fi nancial year.

All resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the fi nancial year.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Lynas Corporation Limited at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period. The exchange differences arising on the retranslation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.



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(e) Cash and Cash EquivalentsCash on hand and in banks and short-term deposits are stated at nominal value.

For the purposes of the Cash Flow Statements, cash includes cash on hand and in banks, and money market investments with an original maturity date of three months or less, net of outstanding bank overdrafts.

(f) ReceivablesReceivables from related parties are recognised and carried at amortised cost. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identifi ed. Funds on deposit are measured at nominal value.

(g) Investments and other Financial AssetsInterests in listed securities are initially recognised at cost. At each balance sheet date they are adjusted to fair value with any changes in value recognised direct to equity. Dividend income is recognised in the statement of fi nancial performance when received. Investments in controlled entities are carried at the lower of cost and recoverable amount.

(h) Impairment of AssetsAt each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash infl ows that are largely independent of those from other assets or Groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pretax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profi t or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(i) Property, Plant and Equipment

Cost

All classes of property, plant and equipment are initially measured at historical cost less accumulated depreciation and any impairment charges.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment.

Major depreciation periods are: 2007 2006

Leasehold improvements: The lease term The lease term

Plant and equipment:

– furniture & fi ttings 5 years 5 years

– computer hardware & software 3 years 3 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate at each fi nancial year end.


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(j) LeasesLeases are classifi ed at their inception as either operating or fi nance leases based on the economic substance of the agreement so as to refl ect the risks and benefi ts incidental to ownership.

Operating Leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefi ts of ownership of the leased item, are recognised as an expense on a straight-line basis.

The lease incentive liability in relation to the non-cancellable operating lease is being reduced on an imputed interest basis over the lease term at the interest rate implicit in the lease.

Contingent rentals are recognised as an expense in the fi nancial year in which they are incurred.

(k) Exploration, Evaluation, Development and Restoration Costs

Exploration and Evaluation Costs

Costs arising from exploration and evaluation are accounted for in accordance with the ‘area of interest’ method. Exploration and evaluation expenditure is capitalised provided the rights of tenure of the area of interest is current and either:

The exploration and evaluation activities are expected to be recouped through successful development or alternatively, by sale; or

where exploration and evaluation activities have not, at reporting date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves, and active and signifi cant operations in, or relating to, the area of interest are continuing.

When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any capitalised exploration and evaluation expenditure is reclassifi ed as capitalised mine development. Prior to reclassifi cation, capitalised exploration and evaluation expenditure is assessed for impairment.

Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which the decision to abandon is made.

Development Costs

Development expenditure represents the costs incurred in preparing the mine for production, and includes stripping and waste removal costs incurred before production commences. The costs are capitalised to the extent that they are expected to be recouped through successful exploitation of the related mining leases. Once production commences, these costs are amortised using the units of production method based on the estimated economically recoverable reserves to which they relate or are written off if the mine property is abandoned.

Stripping Costs

In mining operations, it is necessary to remove overburden and other barren waste materials to access ore from which minerals can economically be extracted. The process of mining overburden and waste materials is referred to as stripping. Stripping costs incurred before production commences are included within capitalised mine development expenditure and subsequently amortised.

Amortisation

Costs on productive areas are amortised over the life of the area of interest to which such costs relate on the production output basis. Unamortised costs are reviewed at each reporting date to determine the amount (if any) that is no longer recoverable and any amount identifi ed is written off.

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Restoration Costs

The Group is required to decommission and rehabilitate mines and processing sites at the end of their productive lives to a condition acceptable to the relevant authorities. The costs include obligations relating to reclamation, waste site closure, plant closure, platform removal and other costs associated with the restoration of the site.

The expected cost of any approved decommissioning or rehabilitation programme, discounted to its net present value, is provided for when the related environmental disturbance occurs. The cost is capitalised when it gives rise to future benefi ts, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of closure. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision for the expected cost is included in fi nancing expenses. Expected decommissioning and rehabilitation costs are based on the discounted value of the estimated future cost of detailed plans prepared for each site. Where there is a change in the expected decommissioning and restoration costs, the value of the provision and any related asset are adjusted and the effect is recognised in profi t and loss on a prospective basis over the remaining life of the operation.

(l) Trade and other PayablesLiabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Liabilities for trade creditor amounts represent liabilities for goods and services provided to the Group prior to the end of the fi nancial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

Payables to related parties are recognised at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis.

Deferred cash settlements are carried at the present value of the outstanding consideration payable on the acquisition of an asset discounted at prevailing commercial borrowing rates.

(m) Interest-bearing LiabilitiesThe 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 fi nance cost.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of issue costs. The value of the conversion option is not changed in subsequent years.

(n) ProvisionsProvisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifi ce of economic benefi ts to other entities as a result of past transactions or other past events, it is probable that a future sacrifi ce of economic benefi ts will be required and a reliable estimate can be made of the amount of the obligation.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.


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(o) Issued CapitalIssued and paid up capital is recognised at the fair value of the consideration received by the company.

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

(p) Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the entity and the revenue can be realisably measured. The following specifi c recognition criteria must also be met before revenue is recognised:

Sale of Goods

Revenue received from the sale or disposal of products, material or services during the exploration, evaluation or development phases of operations is offset against deferred expenditure in respect of the area of interest or mineral resource concerned.

Interest – Recognised using the effective interest rate method.

Rent – Control of the right to receive the rent payment.

Rendering of services – Control of the right to receive the payment.

(q) Share-based Payment TransactionsThe Group provides benefi ts to employees (including directors) of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’). The Executive and Employee Option Plan (EOP) are in place to provide these benefi ts. Options granted under this vest over a three year period and have no attaching market or performance conditions.

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 by an external valuer using a binomial model.

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date refl ects (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.

The income statement charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not been modifi ed. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modifi cation, as measured at the date of modifi cation. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised 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 modifi cation of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is refl ected as additional share dilution in the computation of earnings per share.

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(r) Taxes

Income Taxes

Tax-effect accounting is applied using the balance sheet method where 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 fi nancial reporting purposes.

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 suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.

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.

Deferred tax assets and deferred tax 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.

Goods and Services Tax (GST)

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

Where the GST included 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 fl ows are included in the cash fl ow statement on a gross basis and the GST component of cash fl ows arising from investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority, are classifi ed as operating cash fl ows.

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

(s) Employee Benefi tsProvision is made for employee benefi ts accumulated as a result of employees rendering services up to the reporting date. These benefi ts include wages and salaries, annual leave, sick leave and long service leave.

Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefi ts expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefi t liabilities are measured at the present value of the estimated future cash outfl ow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outfl ows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Expected salary increases and assumptions on the likely period of service are incorporated into the calculations.

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(t) Government GrantsGovernment grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions have been complied with.

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. They are not credited directly to shareholders equity. When the grant relates to an asset, the fair value of the grant is released to the income statement over the expected useful life of the relevant asset.

(u) Earnings Per ShareBasic EPS is calculated as net profi t attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

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

Costs of servicing equity (other than dividends) and preference share 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 that 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.

(v) Borrowing CostsBorrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding borrowings during the period.


2007$

2006$

2007$

2006$

2. REVENUERevenues

Sales revenue 10 5,652 10 –

Other revenue

Rent 159,750 88,721 159,750 88,721

Interest – other persons/corporations 3,632,043 621,162 3,631,260 620,523

Income from outsourcing – 64,169 – 64,169

Total revenues 3,791,803 779,704 3,791,020 773,413

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Notes2007

$2006

$2007

$2006

$

3. EXPENSES AND LOSSES/(GAINS)

(a) ExpensesDepreciation of non-current assets

Leasehold improvements 23,365 24,161 23,365 24,161

Plant and equipment 126,647 80,876 126,647 80,876

Total depreciation of non-current assets 150,012 105,037 150,012 105,037

Borrowing costs expensed

Interest expense 2,208,298 507,773 2,208,062 507,773

Total borrowing costs expensed 2,208,298 507,773 2,208,062 507,773

Other expenses

Accounting and tax consulting 56,608 44,881 41,064 44,881

Audit and accounting fees – auditors 187,369 50,161 187,369 50,161

Consulting 807,873 1,091,729 807,128 1,091,080

Legal consulting 83,361 419,377 83,361 419,377

Offi ce expenses 202,167 367,164 199,736 362,436

Operating lease rental 319,927 235,949 318,339 235,949

Share registry and stock listing fees 114,475 48,173 114,475 48,173

Travel and accommodation 916,694 365,842 908,660 364,701

Other 718,206 469,540 787,011 450,293

Total other expense 3,406,680 3,092,816 3,447,143 3,067,051

Share based employee benefi ts 542,533 28,988 542,533 28,988

Superannuation contributions 178,882 100,009 178,882 100,009

(b) Losses/(Gains)Net loss/(gain) on disposal of property, plant and equipment – 14,882 – 14,882

Impairment of deferred exploration evaluation and development costs (i) 1,434,380 – – –

Impairment of receivable from subsidiary company – – 1,473,000 –

Total Losses 1,434,380 14,882 1,473,000 14,882

(i) The write down of deferred exploration evaluation & development costs relates to the write down of expenses incurred in relation to the proposed construction of the Rare Earth processing plant in China. The decision was made to construct the plant in Malaysia & costs that were specifi c to the China operation have been written off.


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2007$

2006$

2007$

2006$

4. INCOME TAXThe prima facie tax, using tax rates applicable in the country of operation, on loss differs from the income tax provided in the fi nancial statements as follows:

(a) Operating Profi t/(Loss) before Income Tax (6,200,659) (4,502,061) (6,238,281) (4,472,619)

Prima facie tax benefi t on loss from ordinary activities (1,860,198) (1,350,618) (1,871,484) (1,341,786)

Deferred tax asset not brought to account 1,860,198 1,350,618 1,871,484 1,341,786

Income tax expense attributable to ordinary activities – – – –

Net future income tax benefi t not brought to account due to doubt over future realisation.

Tax LossesThe Group has capital tax losses which no deferred tax asset is recognised on the balance sheet that arose in Australia of $2,330,079 (2006: $2,330,079) and are available indefi nitely for offset against future capital gains of a similar nature subject to continuing to meet relevant statutory tests.

The Group has revenue losses for which no deferred tax asset is recognised on the balance sheet that arose in Australia of $34,989,909 (2006: $30,532,961) and are available indefi nitely for offset against future revenue gains of a similar nature subject to continuing to meet relevant statutory tests.

Tax ConsolidationLynas Corporation Ltd and its 100% owned Australian subsidiaries have 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 the agreement provides for the allocation of income tax liabilities between the entities should the head entity default in its tax payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is Lynas Corporation Ltd.

5. DIVIDENDS PAID

Ordinary SharesNo dividend has been recommended or declared since the end of the previous fi nancial year.

6. TRADE AND OTHER RECEIVABLES (CURRENT) Interest receivable 68,042 – 68,042 –

Security bonds 2,745,267 164,000 742,000 164,000

Other receivables 40,771 62,333 10,044 45,630

GST receivable 147,904 39,709 147,904 39,709

3,001,984 266,042 967,990 249,339

Trade and other receivables are non-interest bearing and are generally on 60-day terms


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2007$

2006$

2007$

2006$

7. PREPAYMENTS (CURRENT)Prepaid insurance 89,280 – 89,280 –

Prepaid project costs – 67,609 – 4,998

Other prepaid expenses 1,468 – – –

90,748 67,609 89,280 4,998

8. PREPAYMENTS (NON-CURRENT)Deferred share issue costs – 430,420 – 430,420

– 430,420 – 430,420

9. TRADE AND OTHER RECEIVABLES (NON-CURRENT)Related party receivables

Controlled entities – – 28,507,281 23,090,076

Less provision for doubtful debts – – (9,239,074) (7,766,074)

– – 19,268,207 15,324,002

For terms and conditions relating to related party receivables refer to note 30

10. OTHER FINANCIAL ASSETS (NON-CURRENT)Investments at cost comprise:

Shares

Interest in subsidiaries – – 3,130,210 3,044,639

Less provision for diminution – – (119,148) (119,148)

Total investments – – 3,011,062 2,925,491

Country of incorporation

Percentage of equity interest held by the consolidated entity Investment

Name2007

%2006

%2007

$2006

$

Mt Weld Rare Earths Pty Ltd Australia 100 100 5 5

Mt Weld Holdings Ltd Australia 100 100 3,044,631 3,044,631

Mt Weld Mining Pty Ltd* Australia 100 100 – –

Mt Weld Niobium Pty Ltd Australia 100 100 1 1

Lynas Transales Pty Ltd Australia 100 100 1 1

Lynas Chemet Australia Pty Ltd Australia 100 100 1 1

Lynas Malaysia Sdn Bhd Malaysia 100 0 85,571 –

3,130,210 3,044,639

* Mt Weld Mining Pty Ltd is a 100% subsidiary of Mt Weld Holdings Pty Ltd


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2007$

2006$

2007$

2006$

11. PROPERTY, PLANT AND EQUIPMENTLandAt cost – 667,162 – –

– 667,162 – –

Capitalised Project Costs – Rare Earths Processing PlantAt cost 5,983,580 – – –

5,983,580 – – –

Leasehold ImprovementsAt cost 131,064 131,064 131,064 131,064

Accumulated amortisation (100,433) (77,068) (100,433) (77,068)

30,631 53,996 30,631 53,996

Furniture & FittingsAt cost 718,797 497,287 692,052 475,499

Accumulated depreciation (441,900) (315,253) (441,900) (315,253)

276,897 182,034 250,152 160,246

Total property, plant and equipment 6,291,108 903,192 280,783 214,242

ReconciliationReconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current and previous fi nancial years.

LandOpening balance 667,162 – – –

Additions – 667,162 – –

Disposals (667,162) – – –

Closing Balance – 667,162 – –

Capitalised Project CostsOpening balance – – – –

Additions 5,983,580 – – –

Closing Balance 5,983,580 – – –

Leasehold ImprovementsOpening balance 53,996 93,509 53,996 93,509

Disposals/Write offs – (15,352) – (15,352)

Depreciation for year (23,365) (24,161) (23,365) (24,161)

Closing Balance 30,631 53,996 30,631 53,996

Furniture & FittingsOpening balance 182,034 214,589 160,246 214,589

Additions 221,510 48,321 216,553 26,533

Depreciation for year (126,647) (80,876) (126,647) (80,876)

Closing Balance 276,897 182,034 250,152 160,246

Net book value 6,291,108 903,192 280,783 214,242


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2007$

2006$

2007$

2006$

12. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT COSTSExploration, evaluation and development costs carried forward in respect of mining areas of interest & Rare Earths processing facilities:

Capitalised Exploration Expenditure 87,354 17,119,788 87,354 530,823

Capitalised Development Expenditure (Mt Weld) 18,467,473 – 164,212 –

Deferred Rehabilitation Asset 250,000 – – –

18,804,827 17,119,788 251,566 530,823

ReconciliationReconciliations of the carrying amounts of deferred exploration, evaluation and development costs at the beginning and end of the current and previous fi nancial years

Costs brought forward 17,119,788 8,000,000 530,823 530,823

Expenditure incurred during the year 3,486,080 9,119,788 87,354 –

Research & Development Grant received (366,661) – (366,661) –

Reduction in carrying value(a) (1,434,380) – – –

18,804,827 17,119,788 251,516 530,823

a. The reduction in carrying value of $1,434,380 refl ects a write down in capitalised costs relating to proposed processing plant in China. As detailed in the Directors Report, the decision was taken during the year to move the proposed site of the Rare Earths processing plant to Malaysia instead of China. Accordingly, the costs incurred conducting the due diligence in China, that do not provide a direct benefi t for the Malaysian plant are not considered recoverable and have been written off.

b. During year the technical feasibility and commercial viability of the Mt Weld Mining development and Rare Earths processing plant were demonstrated. Accordingly, expenditure that was previously disclosed as Exploration Expenditure was reclassifi ed as Development Expenditure

c. During the year $366,611 was received as a research & development grant. This was in relation to the Mt Weld development. The grant is offset against the carrying value of the asset and recognised as income over the life of a depreciable asset by way of a reduced depreciation charge.

13. TRADE AND OTHER PAYABLES (CURRENT)Trade creditors (i) 5,098,556 308,261 148,130 308,261

Other creditors (ii) 338,747 227,024 530,283 222,650

Accrual for payment to Ashton Mining (iii) – 5,727,200 – 5,727,200

5,437,303 6,262,485 678,413 6,258,111

Terms and conditions relating to the above fi nancial instruments:(i) Trade creditors are non-interest bearing and are normally settled on 30 day terms.(ii) Other creditors are non-interest bearing and have an average term of 30 days.(iii) 1 August 2006 Lynas Corporation repaid $5,727,200 of a residual debt due to Ashton Mining.

14. INTEREST BEARING LIABILITIES – UNSECUREDConvertible notes – 100 notes at $50,000 each – 4,916,306 – 4,916,306

Accrued interest – 31,176 – 31,176

– 4,947,482 – 4,947,482

Notes:1) In August 2006 the CMIEC convertible note totaling $5,075,088 was paid out.2) Convertible notes totaling $35 million were issued in August 2006, which were all converted to ordinary shares in May 2007


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2007$

2006$

2007$

2006$

15. PROVISIONS (CURRENT)Employee benefi ts 329,576 212,457 329,576 212,457

Restoration, rehabilitation and closure – 15,500 – 15,500

329,576 227,957 329,576 227,957

16. PROVISIONS (NON-CURRENT)Long service leave 119,782 110,335 119,779 110,335

Restoration, rehabilitation and closure 250,000 110,000 – 110,000

369,782 220,335 119,779 220,335

Provision for Restoration, Rehabilitation and ClosureRestoration, rehabilitation and closure costs refl ect the estimated amounts that will be incurred and the net exposure to future costs for the closure of the Mt Weld operations

Movements in Provision for Restoration, Rehabilitation and ClosureCarrying amount at beginning 125,500 224,569 125,000 224,569

Increase/Reduction in provision 165,000 (96,970) – (96,970)

Transfer of provision to subsidiary company – – (125,000) –

Amounts utilised during the year (40,500) (2,099) – (2,099)

Carrying amount at end 250,000 125,500 – 125,500

17. ISSUED CAPITALIssued and paid up capital

Ordinary shares fully paid 131,938,908 53,840,034 131,938,908 53,840,034

131,938,908 53,840,034 131,938,908 53,840,034

2007 2007 2006 2006

Movements in shares on issueNumber

of shares $Number

of shares $

Beginning of the fi nancial year 245,824,924 53,840,034 232,261,595 51,713,869

Issued during the year

– issue of shares – exercise of convertible notes 87,500,000 32,772,888 – –

– issue of shares – option conversion 39,699,982 8,394,024 3,763,329 754,165

– allotment of new shares 129,032,258 36,931,962 9,800,000 1,372,000

Total share issues during the year 256,232,240 78,098,874 13,563,329 2,126,165

End of the fi nancial year 502,057,164 131,938,908 245,824,924 53,840,034


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17. ISSUED CAPITAL (CONT)

Reconciliation of Options on Issue

Unlisted Share OptionsAt 30 June

2006 Issued Exercised ExpiredAt 30 June

2007Exercise

Price Expiry

Incentive Plan options 7,700,000 7,700,000 0 $0.25 Nov 2006

Unlisted options 2,933,326 2,799,993 133,333 0 $0.20 Dec 2006

Unlisted options 1,000,000 1,000,000 0 $0.20 Nov 2006

Incentive plan options 300,000 300,000 $0.30 Nov 2007

Unlisted options 7,500,000 7,500,000 $0.30 Nov 2007

Unlisted options 7,733,314 3,399,989 4,333,325 $0.20 Dec 2007

Unlisted options 0 100,000 100,000 $0.80 Mar 2008

Incentive Plan options 1,270,000 100,000 1,170,000 $0.30 Jun 2008

Unlisted options 9,800,000 9,800,000 0 $0.17 Jan 2009

Unlisted options 0 20,000,000 14,900,000 5,100,000 $0.17 Aug 2009

Incentive Plan options 0 8,200,000 8,200,000 $0.30 Jun 2011

Incentive Plan options 0 50,000 50,000 $0.32 Oct 2011

Incentive Plan options 0 700,000 660,000 40,000 $0.36 Oct 2011

Incentive Plan options 0 700,000 700,000 $0.71 Mar 2012

Incentive Plan options 0 50,000 50,000 $0.83 Apr 2012

Incentive Plan options 0 20,000 20,000 $1.02 Apr 2012



TOTAL 38,236,640 36,750,000 39,699,982 793,333 34,493,325

Additional Share Capital and Option Movements Post Balance Date:Subsequent to 30 June 2007, the company has undertaken additional capital raising activities, which involved:

New shares issued via equity placement: 52,173,913 ordinary shares at AU $1.15 per share (AU $60 million) – details on placement contained in Subsequent Events Note

New shares issued as a result of the conversion of Options: 6,049,325 ordinary shares

New options issued to employees under the employee option plan: 50,000 unlisted options over ordinary shares

Terms and Conditions of Contributed EquityOrdinary Shares: 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.

Options

Option holders do not have the right to receive dividends nor are they entitled to vote at a meeting of the company.

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2007$

2006$

2007$

2006$

18. RESERVESShare-based payments reserve 631,247 88,714 631,247 88,714

Foreign currency translation reserve (6,721) 127,440 – –

624,526 216,154 631,247 88,714

ReconciliationReconciliations of the movement in reserve balance at the beginning and end of the current and previous fi nancial years.

Reserve balance brought forward 216,154 59,276 88,714 59,276

Currency Translation Differences (134,161) 127,440 – –

Cost of Share based payments during the year 542,533 29,438 542,533 29,438

624,526 216,154 631,247 88,714

Share-based Payments Reserve:The share based payments reserve is used to record the value of equity benefi ts provided to employees and directors as part of their remuneration.

Foreign Currency Translation Reserve:The foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial statements of foreign subsidiaries.


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2007$

2006$

2007$

2006$

19. STATEMENT OF CASH FLOWS

(a) Reconciliation of the Net loss after Tax to the Net Cash Flows from OperationsNet loss (6,200,659) (4,502,061) (6,238,281) (4,472,619)

Non-Cash items

Depreciation and Amortisation of non-current assets 150,012 105,037 150,012 105,037

Net (profi t)/loss on disposal of property, plant and equipment – 14,882 – 14,882

Impairment of exploration costs 1,434,380 – – –

Impairment of receivable from subsidiary – – 1,473,000 –

Net exchange differences (127,440) – –

Share based employee remuneration 542,533 28,988 542,533 28,988

Changes in assets and liabilities

(Increase)/decrease in other assets 252,607 (580,472) 205,487 (501,158)

(Decrease)/increase in trade and other creditors 898,560 294,680 147,505 162,867

(Decrease)/increase in employee entitlements 79,811 52,628 126,566 52,628

(Decrease)/increase in rehabilitation provision (125,500) (28,822) (125,500) (28,822)

Net cash fl ow from operating activities (2,968,256) (4,742,580) (3,718,678) (4,638,197)

(b) Reconciliation of CashCash balance comprises:

– Cash and cash equivalents 64,036,478 7,185,572 63,345,899 6,190,937

(c) Financing Facilities AvailableAt reporting date, the following fi nancing facilities had been negotiated and were available:

Total facilities

– Convertible note facility – 5,000,000 – 5,000,000

Facilities used at reporting date

– Convertible note facility – 5,000,000 – 5,000,000

Facilities unused at reporting date – – – –

(d) Signifi cant Non-cash TransactionsAccrual for payment to Ashton – 5,727,200 – 5,727,200


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2007$

2006$

2007$

2006$

20. EXPENDITURE COMMITMENTS

(a) Capital Commitments– not later than one year 200,000 235,679 – –

– later than one year and not later than fi ve years 924,992 150,000 – –

– later than fi ve years 3,273,616 40,000 – –

4,398,609 425,679 – –

(b) Lease Commitments (Offi ce Premises)– not later than one year 340,777 280,556 340,777 280,556

– later than one year and not later than fi ve years 196,348 522,295 187,037 522,295

537,124 802,851 527,814 802,851

21. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

Employee Benefi tsThe aggregate employee benefi t liability is comprised of:

Current:

Accrued wages, salaries and on-costs 25,000 46,754 25,000 46,754

Accrued annual leave 195,533 111,879 195,533 111,879

Provision for long service leave 109,043 100,578 109,043 100,578

329,576 259,211 329,576 259,211

Non-current:

Provision for long service leave 119,782 110,335 119,779 110,335

449,358 369,546 449,355 369,546

Superannuation CommitmentsAll employees are entitled to varying levels of benefi ts on retirement, disability or death. Employees contribute to the plans at various percentages of their wages and salaries. Contributions by the consolidated entity of at least 9% of employee’s wages and salaries are legally enforceable in Australia, subject to statutory limits.


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22. SHARE BASED PAYMENTS

Employee Option PlanAn employee option plan has been established whereby Lynas Corporation may, at the discretion of directors, grant options over the ordinary shares of Lynas Corporation Limited to directors, executives and certain members of staff of the consolidated entity.

The options issued for nil consideration, are granted in accordance with performance guidelines established by the directors of Lynas Corporation Limited, although the management of Lynas Corporation Limited retains the fi nal discretion on the issue of the options. The options are issued for a term of 5 years and are exercisable beginning on the third anniversary of the date of grant.

The options cannot be transferred and will not be quoted on the ASX.

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

2007 2006

Number of options

Number of options

Balance at beginning of year 9,270,000 9,300,000

– issued 16,650,000 –

– cancelled (660,000) –

– exercised or lapsed (7,800,000) (30,000)

Balance at end of year 17,460,000 9,270,000

Exercisable at end of year 1,470,000 9,270,000

Options held at the beginning of the reporting period:

The following table summarises information about options held by employees as at 1 July 2006:

Number of options Grant date Vesting date Expiry date

Weighted average exercise price

7,700,000 30 November 2001 30 November 2004 30 November 2006 $0.25

300,000 26 November 2002 26 November 2005 26 November 2007 $0.30

1,270,000 30 June 2003 30 June 2006 30 June 2008 $0.30

9,270,000

Options granted during the reporting period:



8,200,000 August 2006 June 2009 June 2011 $0.30

50,000 October 2006 October 2009 October 2011 $0.32


700,000 March 2007 March 2010 March 2012 $0.71

50,000 April 2007 April 2010 April 2012 $0.83


1,000,000 June 2007 June 2010 June 2012 $1.11

5,930,000 June 2007 June 2010 June 2012 $1.20

16,650,000


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22. SHARE BASED PAYMENTS (CONT)

Options cancelled during the reporting period:




660,000

Options exercised during the reporting period:

Number of shares issued

Number of options converted Vesting date Expiry date


Proceeds from shares issues

7,700,000 7,700,000 30 November 2001 30 November 2006 $0.25 $1,925,000

100,000 100,000 30 June 2003 30 June 2008 $0.30 $30,000

7,800,000 7,800,000 $1,955,000

Options held as at the end of the reporting period:



300,000 November 2002 November 2005 November 2007 $0.30

1,170,000 June 2003 June 2006 June 2008 $0.30

8,200,000 June 2006 June 2009 June 2011 $0.30



700,000 March 2007 March 2010 March 2012 $0.71



1,000,000 June 2007 June 2010 June 2012 $1.11

5,930,000 June 2007 June 2010 June 2012 $1.20

17,460,000

23. CONTINGENT LIABILITIES AND CONTINGENT ASSETSThe company had entered into guarantees, contracts, maintenance bonds and warranties in the normal course of business, including performance bond guarantees arranged with a bank totaling $2,745,267 (2006 – $164,000). The security against these guarantees are recorded in Trade and Other Receivables.

The company had no other contingent liabilities or contingent assets at 30 June 2007.


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24. EARNINGS PER SHARE

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

Consolidated

2007 $

2006$

Net loss (6,200,659) (4,502,061)

Earnings used in calculating basic and diluted earnings per share (6,200,659) (4,502,061)

Number of shares

Number of shares

Weighted average number of ordinary shares used in calculating basic earnings per share: 416,011,338 237,394,818

Effect of dilutive securities:The number of options and convertible notes which are potential ordinary shares that are not dilutive and hence not used in the valuation of the diluted earnings per share 34,493,325 64,552,429

Adjusted weighted average number of ordinary used in calculating diluted earnings per share 416,011,338 237,394,818

Basic loss per share (cents per share) (1.49) (1.86)

Diluted loss per share (cents per share) (1.49) (1.86)

Conversions, Calls, Subscriptions or issues after 30 June 2007

Subsequent to year end there have been the following changes to the capital structure of the Group:

New shares issued via equity placement: 52,173,913 ordinary shares

New shares issued as a result of the conversion of Options: 6,049,325 ordinary shares

New options issued to employees under the employee option plan: 50,000 unlisted options over ordinary shares

Information Concerning the Classifi cation of Securities

Options

Options granted to employees under the Lynas Corporation Limited Employee Option Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share.

Convertible Notes

Convertible notes are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share from their date of issue. At 30 June 2007 there were no convertible notes on issue.

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25. SUBSEQUENT EVENTSSubsequent to year end Lynas Corporation has achieved the following important milestones, which have a signifi cant impact on the position of the Group:

(a) Site Location within MalaysiaDuring the year a site within the Teluk Kalong Industrial Estate in Kemaman, Terengganu, Malaysia was selected as the preferred location for the construction of the Rare Earths Plant. The land was owned by the State Government of Terengganu, and the company obtained a letter of intent advising that the land would be alienated to the Group following the fi nalisation of all other government approvals.

Subsequent to year end, the company received advice from the federal offi ce of the Malaysian Industrial Development Authority (MIDA) stating “the Malaysian Government would like to seek your kind consideration for an alternative location for the project. Given the nature of your project and with the presence of dedicated industrial areas for petrochemical and chemical projects in the State of Pahang, where the required supporting facilities and infrastructure are in place, you may wish to consider relocating the project to this state”. The request was received following high level consultations between the federal Government of Malaysia and the Government of the State of Terengganu.

An alternative location has been identifi ed within Pahang at the Gebeng Industrial Area. Gebeng is 2.5km from Kuantan Port and approximately 30km to the south of the original planned site. The supporting facilities and infrastructure required for the processing plant are well developed at Gebeng and include:

Filled site, which reduces the site preparation requirements

Required electricity, gas, water, and steam infrastructure

Complete logistics infrastructure including roads, a railway line to port side, and port facilities for both containers, liquid chemicals, and dry bulk materials

The Gebeng Industrial Area houses signifi cant international petrochemical and chemical plants. Companies with facilities in the industrial area include:

BP Amoco Corporation

WR Grace & Co

BASF-Petronas Chemical S/B

Eastman Chemical (M) Sdn. Bhd.

The change in location will require a new assessment of the baseline environmental conditions in order to properly evaluate the environmental impact of the plant within the changed location, followed by a new submission to the Department of Environment. However engineering changes to the current design are expected to be minimal. It is anticipated that this change in location will cause a delay of 3 to 6 months, leading to an assumed production start in Quarter 2 of 2009.

(b) Debt RaisingIn July the Group announced the acceptance of two debt funding packages to provide the basis of the funding for the mining development at Mt Weld and the Rare Earths Processing Plant in Malaysia.

On 6 July 2007 the company announced the acceptance of an offer to provide a convertible note facility to Lynas for up to $115 million from Indus Capital Partners LLC. On 27 July 2007 the Group secured a commitment from Bayerische Hypo- und Vereinsbank AG (HVB) to underwrite a debt facility of US$105 million.

Draw down of these facilities is subject to standard banking due diligence, all facility documentation in place, all necessary authorisations, consents and approvals in place.

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25. SUBSEQUENT EVENTS (CONT)

(c) Capital RaisingIn August the company completed a share placement of $60 million, for 52,173,713 shares at $1.15. This completes a $300 million funding package for the Rare Earth’s project. Settlement and allotment of shares was fi nalised on 10 August 2007.

(d) Signing of Rare Earths Supply ContractIn July the company signed a second supply contract with a signifi cant Rare Earths customer for the supply of Mt Weld Rare Earths to be produced from the company’s Malaysian processing plant.

The contract is a long term fi ve year contract with a value in excess of US$200 million over fi ve years based on prices at the time the contract was signed. The contracted sales cover neodymium and praseodymium which are key elements for the Rare Earths magnet industry. The pricing structure of the contract is related to the market price; however it includes a minimum fl oor price, without a maximum ceiling price, for the product sales over the term of the contract.


2007$

2006$

2007$

2006$

26. AUDITORS REMUNERATION Amounts received or due and receivable by Ernst & Young Australia for:

(i) an audit or review of the fi nancial report of the entity and any other entity in the consolidated entity 84,631 51,000 84,631 51,000

(ii) tax related services 98,000 – 98,000 –

(iii) accounting advice 4,738 – 4,738 –

187,369 51,000 187,369 51,000

Amounts received or due by related practices of Ernst & Young (Australia) for:

(i) due diligence services provided by overseas Ernst & Young fi rm 96,123 – 96,123 –

283,492 51,000 283,492 51,000


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27. KEY MANAGEMENT PERSONNEL(i) Directors

N Curtis Executive Chairman

D Davidson Non-Executive Director

J Klein Non-Executive Director

(ii) Other key management personnel:

The following persons also had authority and responsibility for planning, directing and controlling activities of the Group, directly or indirectly during the fi nancial year

M Vaisey Vice President – Technical Development

M James Vice President – Corporate & Business Development

I Polovineo Company Secretary

R Kana Chief Financial Offi cer (appointed 1 September 06, resigned 1 June 07)

M Wolley Vice President – Operations (appointed 14 April 07)

In late June 2007 the Group made two new appointments of Key Management Personnel. Volker Hars was appointed as CFO and William (“Bill”) Moss was appointed as the Project Director for the Malaysian Processing Plant. They have been excluded from the remuneration report as they did not receive salary payments during that time, however it should be noted that Volker Hars was issued with 1,000,000 unlisted employee options with an exercise price of $1.11 on acceptance of the role of CFO.

Key Management Personnel Compensation


2007$

2006$

2007$

2006$

Short Term employee benefi ts 1,196,847 970,570 1,196,847 970,570

Post-Employment benefi ts 124,161 60,312 124,161 60,312

Share based payments 454,358 43,834 454,358 43,834

1,775,367 1,074,716 1,775,367 1,074,716

The company has applied the option under Corporations Amendments Regulation 2006 to transfer key management personnel remuneration disclosures required by AASB 124 Related Party Disclosures (paragraphs AUS 25.4 to 25.7.2) to the Remuneration Report section of the Directors’ Report. The transferred disclosures have been audited.

Equity Instrument Disclosures Relating to Key Management Personnel

(a) Remuneration Options: Granted and Vested during the Year

Options provided as remuneration and shares issued on exercise of such options

Details of options provided as remuneration and shares issued on the exercise of such options together with the terms and conditions of the options can be found in section D of the remuneration report.

(b) Shares issued on Exercise of Remuneration Options

During the fi nancial year no shares were issued on exercise of remuneration options to specifi ed directors and specifi ed executives.


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27. KEY MANAGEMENT PERSONNEL (CONT)

(c) Option Holdings of Key Management Personnel (Consolidated)

2007

Balance at beginning of period

Granted as Remuneration


Net Change over

Balance at end of period

Vested at 30 June 2007

Directors

N Curtis 2,000,000 5,000,000 (2,000,000) 3,000,000 5,000,000 –

J Klein – – – – – –

D Davidson 300,000 – – – 300,000 300,000

Other key personnel

M James 500,000 3,000,000 – 3,000,000 3,500,000 500,000

M Vaisey 500,000 1,750,000 (500,000) 1,250,000 1,750,000 –

M Wolley – 1,700,000 – 1,700,000 1,700,000 –

R Kana – 700,000 (700,000) – – –

I Polovineo 250,000 500,000 (250,000) 250,000 500,000 –

3,550,000 12,650,000 (3,450,000) 9,200,000 12,750,000 800,000

2006Directors

N Curtis 2,000,000 – – – 2,000,000 2,000,000

J Klein – – – – – –

D Davidson 300,000 – – – 300,000 –

Other key personnel

M James 500,000 – – – 500,000 500,000

M Vaisey 500,000 – – – 500,000 500,000

H Wang 1,500,000 – – – 1,500,000 1,500,000

I Polovineo 250,000 – – – 250,000 250,000

2,750,000 – – – 2,750,000 2,750,000


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27. KEY MANAGEMENT PERSONNEL (CONT)

(d) Shareholdings of Key Management Personnel (Consolidated)

As at 30 June 2007Balance at

beginning of periodReceived during year

on exercise of optionsOther changes

during the yearBalance at end

of period

Directors

N Curtis 20,656,478 2,000,000 3,000,000 25,656,478

J Klein 1,580,580 – – 1,580,580

D Davidson 635,000 – – 635,000

Other key personnel

M James 571,643 – – 571,643

M Vaisey 250,000 500,000 (150,000) 600,000

M Wolley – – – –

I Polovineo – 250,000 – 250,000

As at 30 June 2006Directors

N Curtis 15,564,192 – 5,092,286 20,656,478

J Klein 1,080,580 – 500,000 1,580,580

D Davidson 635,000 – – 635,000

Other key personnel

M James 390,000 – 181,643 571,643

M Vaisey – – 250,000 250,000

H Wang 800,000 – 400,000 1,200,000

I Polovineo – – – –

All equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing with third parties at arms length.

(a) Loans to Key Management Personnel

There are no loans to specifi ed directors or specifi ed executives.

(b) Other Transactions and Balances with Key Management Personnel

Administrative services amounting to $40,000 were provided by Sino Gold Mining Limited to Lynas Corporation Limited at rates based on arms-length transactions. This includes payments for the services of I Polovineo as Company Secretary. Sino Gold Mining Limited is a company of which Mr Klein is a director and Mr Curtis was a director until November 2005.

The balance owing on items detailed above refl ected in the current liabilities at year end is $40,000 (2006 $12,484).

28. RELATED PARTY DISCLOSURES

Ultimate ParentLynas Corporation Limited is the ultimate parent company.

Wholly-owned Group Transactions

LoansLoans made by Lynas Corporation Limited to wholly-owned subsidiaries. The loans are made in the ordinary course of business and are unsecured and interest free with no fi xed term of repayment.

As at 30 June 2007 the total amount owing by wholly-owned subsidiaries to the Parent Company was $28,507,281 (2006: $23,090,076). This amount is at call and interest free and is not expected to be repaid during the next twelve months. (Refer to note 9.)


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29. SEGMENT INFORMATIONThe Group’s geographical segments are determined based on the location of the Group’s assets and activities. Previously the Group reported segment information based upon potential production lines, including Rare Earths, Niobium/Tantaum & Gold. Since July 2006 the focus of Group activities has been Rare Earths production. Accordingly, the decision was made to change the basis of segment reporting to Geographical segments, rather than product segments.

A summary of the activities undertaken within each location is detailed below:

Location Activities

Australia – Corporate Head Offi ce

– Mining Operations in Western Australia

Asia – Rare Earths Processing Plant design Malaysia

– Engineering & Development team – Based in China who are developing technology for use in the Malaysian Plant

The following table presents revenue, expenditure and certain asset information regarding geographical segments for the years ended 30 June 2007 and 30 June 2006. The segment information for 30 June 2006 has been restated in line with the revised segment accounting policy

Business segments Australia Asia Consolidated

2007 $

2006 $

2007 $

2006 $

2007 $

2006 $

Income Statement

Segment Revenue 159,760 158,542 – – 159,760 158,542

Segment Expenses (6,593,284) (4,773,992) (1,190,880) – (7,784,164) (4,773,992)

Segment Result (6,433,524) (4,615,450) (1,190,880) – (7,624,404) (4,615,450)

Interest Income 3,632,043 621,162

Interest Expense (2,208,298) (507,773)

Consolidated entity loss from ordinary activities before income tax expense (6,200,659) (4,502,061)

Assets

Segment Assets 85,566,996 24,998,017 6,658,148 974,606 92,225,144 25,972,623

Total Assets 85,566,996 24,998,017 6,658,148 974,606 92,225,144 25,972,623

Liabilities

Segment Liabilities (2,342,940) (11,654,770) (3,793,720) (3,489) (6,136,660) (11,658,259)

Intercompany Assets/(Liabilities) 4,055,308 2,059,431 (4,055,308) (2,059,431) – –

Total Liabilities 1,712,368 (9,595,339) (7,849,028) (2,062,920) (6,136,660) (11,658,259)

Net Assets 87,279,363 15,402,678 (1,190,880) (1,088,314) 86,088,483 14,314,364

Other Segment Information

Depreciation Expense 150,012 105,037 – – 150,012 105,037

Acquisition of Property, Plant & Equipment & deferred exploration & development costs 3,340,929 8,802,109 5,983,580 1,033,162 9,324,509 9,835,271

Reduction in carrying value of deferred exploration & development costs – – (1,434,380) – (1,434,380) –


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30. FINANCIAL INSTRUMENTS

(a) Interest Rate RiskThe following table sets out the carrying amount and maturity of the fi nancial instruments exposed to interest rate risk.

Consolidated – 2007 Time PeriodInterest Bearing

(Floating)Non Interest

Bearing

Total carrying amount as per

the balance sheet

Weighted average effective

interest rate

Category $ $ $ %

Financial assets:

Cash < 1 year 64,036,478 – 64,036,478 6.20%

Security bonds > 1 < 2 years 2,745,267 – 2,745,267 6.20%

Total fi nancial assets 66,781,745 – 66,781,745

Financial liabilities:

Trade creditors and other payables < 1 year – 5,437,303 5,437,303 0.00%

Total fi nancial liabilities – 5,437,303 5,437,303

Consolidated – 2006

Category Time PeriodInterest Bearing


Bearing


the balance sheet


interest rate

Financial assets:

Cash < 1 year 6,922,689 262,883 7,185,572 5.00%

Security bonds > 5 years 164,000 – 164,000 5.00%

Total fi nancial assets 7,086,689 262,883 7,349,572



Convertible note < 1 year 4,947,482 – 4,947,482 5.70%

Total fi nancial liabilities 4,947,482 6,262,485 11,209,967


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30. FINANCIAL INSTRUMENTS (CONT)

Parent – 2007 Time PeriodInterest Bearing


Bearing


the balance sheet


interest rate

Category $ $ $ %

Financial assets:

Cash < 1 year 63,345,899 – 63,345,899 6.00%

Intercompany receivables > 5 years – 28,507,281 28,507,281 0.00%


Total fi nancial assets 64,087,899 28,507,281 92,595,180


Trade creditors and other payables < 1 year – 678,411 678,411 0.00%

Total fi nancial liabilities – 678,411 678,411

Parent – 2006

Category Time PeriodInterest Bearing


Bearing


the balance sheet


interest rate

Financial assets:

Cash < 1 year 6,003,834 187,103 6,190,937 5.00%

Intercompany receivables > 5 years – 15,324,002 15,324,002 0.00%


Total fi nancial assets 6,167,834 15,511,105 21,678,939



Convertible note < 1 year 4,947,482 – 4,947,482 5.70%

Total fi nancial liabilities 4,947,482 6,262,111 11,209,593

(b) Net Fair ValueThe carrying amounts of all fi nancial assets and liabilities approximate the net fair values at balance date.

(c) Credit Risk ExposuresThe maximum exposure to credit risk, excluding the value of any collateral or other security, net of any provisions for doubtful debts of those assets is the carrying value, as disclosed in the balance sheet and notes to the fi nancial statements.

The economic entity does not have any material credit risk exposure to any single debtor or Group of debtors under fi nancial instruments entered into by the economic entity.


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In accordance with a resolution of the directors of the company, we state that:

In the opinion of the directors:

1 (a) the fi nancial statements and notes of the company and the consolidated entity and the additional disclosures included in the Directors’ Report designated as audited are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and the consolidated entity’s fi nancial position as at 30 June 2007 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

2 This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 259A of the Corporations Act 2001 for the fi nancial period ended 30 June 2007.

On behalf of the board

N Curtis

Executive Chairman

J Klein

Director

Sydney, 4 September 2007

Directors’ Declaration30 June 2007


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Independent Audit Report

Independent audit report to members of Lynas Corporation Limited

ScopeThTT e fiff nancial repoe rt and directors’ respons sibilityttThe fiff nancial reportrr compmm rises the balance sheet, income statementnn , stataa ementnn of changes in equitii y,cash flff ow statementnn , accompmm anying notes to the fiff nancial statementnn s, and the dirii ectors’ declarationfoff r Lynyy as Corpr orataa ion Ln imitii ed (the compmm any)yy and the consolidated entnn itii y, foff r the year ended 30JunJJ e 2007. The consolidated entnn itii y compmm rises both the compmm any and the entnn itii ies itii contnn rolledduring that year.

The compmm any has disclosed infoff rmation as requirii ed by paragrapa hs AuAA s 25.4 to AuAA s 25.7.2 ofAccountnn ing Standard 124 Related Partytt Disii closures (“remumm neration disclosures”), under theheading “Remumm neration Report” on pages 10 to 14 of the dirii ectors’ reportrr , as permittii ed byCorpr orataa ions Regulation 2M.6.04.

The dirii ectors of the compmm any are responsible foff r preparing a fiff nancial reportrr that gives a true andfaff irii view of the fiff nancial positii ion and perfoff rmance of the compmm any and the consolidated entnn itii y, andthat compmm lies witii h Accountnn ing Standards in AuAA stralia, in accordance witii h the CoCC rprr orarr tions Act2001. This includes responsibilitii y foff r the maintnn enance of adequate accountnn ing records and intnn ernalcontnn rols that are designed to preventnn and detect frff aud and error, and foff r the accountnn ing policies andaccountnn ing estimates inherentnn in the fiff nancial report.

Audit approachWe conducted an independentnn audaa itii of the fiff nancial report in order to expxx ress an opinion to themembm ers of the compmm any. Our auaa ditii was conducted in accordance witii h AuAA stralian AuAA ditii ingStandards in order to provide reasonable assurance as to whether the fiff nancial report is frff ee ofmaterial misstatementnn . The nature of an aua ditii is inflff uenced by facff tors such as the use ofprofeff ssional judgementnn , selective testing, the inherentnn limitii ations of intnn ernal contnn rol, and theavailabilitii y of persuasive rather than conclusive evidence. Therefoff re, an auaa ditii cannot guarantnn ee thatall material misstatementnn s have been detected.

We perfoff rmed procedures to assess whether in all material respects the fiff nancial reportrr presentnn sfaff irii ly, in accordance witii h the CoCC rporr rar tions Act 2001, including compmm liance witii h Accountnn ingStandards in AuAA stralia, and other mandatory fiff nancial reporting requirii ementnn s in AuAA stralia, a viewwhich is consistentnn witii h our understanding of the compmm any’s and the consolidated entnn itii y’s fiff nancialpositii ion, and of their perfoff rmance as representnn ed by the resultll s of theirii operataa ions and cash flff ows.

We foff rmed our auda itii opinion on the basis of these procedures, which included:• examining, on a test basis, infoff rmation to provide evidence supportrr ing the amountnn s and

disclosures in the fiff nancial reportrr ; and• assessing the appaa ropriateness of the accountnn ing policies and disclosures used and the

reasonableness of sf ignififf cantnn accountnn ing estimates made by the dirii ectors.


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Independent Audit Report

2

While we considered the effecff tiveness of managementnn ’s intnn ernal contnn rols over fiff nancial reportrr ingwhen determining the nature and extentnn of our procedures, ouruu auda itii was not designed to provideassurance on intnn ernal contnn rols.

We perfoff rmed procedures to assess whether the subu stance of business transactions was accuratelyreflff ected in the fiff nancial reportrr . These and our other procedures did not include consideration orjudgementnn of the appa ropriateness or reasonaba leness of the business plans or strataa egies adopted bythe dirii ectors and managementnn of the compmm any.

IndependenceWe are independentnn of the compmm any and the consolidated entnn itii y and have met the independencerequirii ementnn s of AuAA stralian profeff ssional ethical pronouncementnn s and the CoCC rprr orar tions Act 2001. Wehave given to the dirii ectors of the compmm any a writtii en AuAA ditii or’s Independence Declaration, a copy ofwhich is inclull ded in the Dirii ectors’ Reportrr . In additii ion to ouruu audaa itii of the fiff nancial report, we wereengaged to undertake the services disclosed in the notes to the fiff nancial statementnn s. The provisionof these services has not impmm aired our independence.

Audit opinionIn our opinion:the fiff nancial reportrr of Lf ynyy as Corpor rataa ion Ln imitii ed is in accordance witii h:(a) the CoCC rporr rarr tions Act 2001, including:

(i) giving a true and faff irii view of the fiff nancial positii ion of Lf ynyy as Corpr orataa ion Ln imitii edand the consolidated entnn itii y at 30 JuJJ ne 2007 and of theirii perfoff rmance foff r the yearended on that dataa e; and

(ii) compmm lying witii h Accountnn ing Standards in AuAA stralia and the CoCC rporr rarr tionsRegue lations 2001; and

(b) other mandatory fiff nancial reportrr ing requirii ementnn s in AuAA stralia.

Ernst & Young

Gary DanielsPartnerSydney4 Septembm er 2007


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ASX Additional Information

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 24 September 2007.

(a) Distribution of Ordinary SharesThe number of shareholders, by size of holding, of ordinary share are:

Ordinary shares

Number of holders Number of shares

1 – 1,000 839 545,763

1,001 – 5,000 1,844 5,645,844

5,001 – 10,000 1,086 9,060,568

10,001 – 100,000 1,543 49,651,513

100,001 – and over 221 495,376,715

TOTAL ON REGISTER 5,533 560,280,403

TOTAL OVERSEAS HOLDERS 378 12,558,414

The number of shareholders holding less than

a marketable parcel of shares are: 158 30,058

(b) Distribution of OptionsThe number of holders, by size of holding, in each class of unlisted options are:

$0.30 30/11/07$0.20

31/12/07$0.17

11/08/09$0.80

12/03/08

VariousDirectors &Employees

1 – 1,000

1,00 – 5,000

5,001 – 10,000

10,001 – 100,000 1 11

100,001 – and over 1 4 1 15

Total 1 4 1 1 26


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ASX Additional Information

(c) Twenty Largest ShareholdersThe names of the twenty largest holders of quoted shares are:

Listed ordinary shares

Number of shares Percentage of ordinary shares

ANZ NOMINEES LTD 75,395,344 13.46

HSBC CUSTODY NOMINEES AUST LTD 64,860,710 11.58

NATIONAL NOMINEES LTD 56,852,578 10.15

J P MORGAN NOMINEES AUSTRALIA 47,567,343 8.49



CITICORP NOMINEES PTY LTD 32,044,100 5.72

MR NICHOLAS ANTHONY CURTIS 13,450,192 2.40

MERRILL LYNCH AUST NOMINEES PTY LTD 12,628,636 2.25

ALIANA PTY LTD 7,900,000 1.41


NYCO PTY LIMITED 6,440,000 1.15

WILKES HOLDINGS PTY LTD 5,356,286 0.96

CREDIT SUISSE SECURITIES EUROPE 4,175,000 0.75

ROSENFIELD NOMINEES PTY LTD 3,706,287 0.66


SILMAR PTY LTD 3,095,970 0.55

CITICORP NOMINEES PTY LTD 2,905,577 0.52


OMA’S NOMINEES PTY LTD 1,732,989 0.31

431,859,395 77.08

(d) Substantial ShareholdersThe names of substantial shareholders who have notifi ed the Company in accordance with section 671B of the Corporations Act 2001 are:

Number of shares

The Goldman Sachs Group Inc 39,301,926

Tell Capital Ltd 34,274,931

Merrill Lynch & Co Inc. 31,709,610

The Capital Group Companies, Ic. 31,253,171

JP Morgan Chase & Co. and its affi liates 29,231,610

Nicholas Anthony Curtis 25,656,478

(e) Voting RightsAll ordinary shares (whether fully paid or not) carry one vote per share without restriction.

(f) Schedule of Interests in Mining Tenements

Location Tenement Percentage held

Mt Weld Rare Earths Project

Mt Weld M38/58 100

M38/59 100

M38/326 100


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To put it directly, our strategy has brought us here; our ability to capture its potential will realise our future.

Contents04 Chairman’s Report and Outlook Statement06 The Rare Earths Direct (RED) Production Model10 Australian Operations – Mt Weld Mine Development 12 Malaysian Operations – Process Plant Development

16 Global Market Activity19 Crown Polymetallic Resource20 Board of Directors21 Financial Report

Our visionWe will lead the growth of the global Rare Earths industry by creating a reliable, fully-integrated source of supply from mine through to customer.

Our values as a team will be• Strive for excellence in safety,

health and the environment

• Value our differences and beopen to change

• Operate in an honest, candidand transparent manner

• Deliver quality products,processes and services

• Always respect and contribute to thecommunities in which we operate

Lynas Corporation Limited ABN 27 009 066 648

Glossary

Basic Engineering Design The technical drawings for the plant including fl ow sheets, mass balances, equipment, piping and instrumentation diagrams.

CAGR Compound Annual Growth Rate.

Carbonatite Mt Weld carbonatite; a circular, 3 kilometre diameter, pipe-like, intrusive igneous complex composed dominantly of calcium carbonate with lesser components of silicates, iron oxide and calcium phosphate.

Catalytic Converter A device otherwise known as a ‘Cat’ fi tted in the exhaust system of vehicles to reduce the emission of harmful gases to the atmosphere. Rare Earths are crucial to the catalytic activity and thermal stability of the Cat. A Cat consists of a ceramic structure coated with a mixture of Rare Earths and a precious metal such as platinum.

Central Lanthanide Deposit (CLD) High grade deposit of Rare Earths overlying the centre of the Mt Weld carbonatite.

Cracking A process where Rare Earths concentrate is reacted with sulphuric acid at high temperature which ‘cracks’ the minerals thus making the Rare Earths amenable to chemical processing. This process also referred to as sulphuric acid bake (SAB).

Crown Polymetallic Resource A sector of the Mt Weld carbonatite that is enriched in Rare Metals and Rare Earths.

CRT Cathode Ray Tube, traditional television technology .

Detailed Engineering Design Complete plant layout, civil engineering drawings and ready for construction equipment drawings.

Iron Oxide Material (IOM) An iron oxide material produced in the Rare Earths concentration process that has potential applications in cement and as fi ller in rubber.

Initial Separation The fi rst step of the solvent extraction process of mixed Rare Earths to produce LCPN and SEG.

Intermediate Rare Earth Products

Includes a range of products which contain one or several Rare Earth elements. The chemical form of the intermediate products is usually a chloride, carbonate or oxide.

JORC Code The Australasian Code for Reporting of Mineral Resources and Ore Reserves (the ‘JORC Code’ or ‘the Code’) which sets out minimum standards, recommendations and guidelines for Public Reporting of exploration results, Mineral Resources and Ore Reserves in Australasia.

Lanthanides Collective name for the 14 naturally occurring lanthanide elements from lanthanum (atomic number 57) to lutetium (atomic number 71).

LCPN An intermediate mixed Rare Earths product containing the light Rare Earths lanthanum, cerium, praseodumium and neodymium, suitable for use by Rare Earths separation plants for the manufacture of individual compounds.

Mineral Resource The term “Mineral Resource” covers mineralisation which has been identifi ed and estimated through exploration and sampling and within which Ore Reserves may be defi ned by the consideration and application of technical, economic, legal, environmental, social and governmental factors.

Mischmetal A pyrophoric alloy made from a mixture of Rare Earths metals.

Neo Magnet A neodymium iron boron permanent magnet that is manufactured by either polymer bonding of neodymium iron boron metal, and where the magnet shape can be easily formed by injection or compression moulding (Bonded) or pressing the powder to a shape followed by high temperature sintering to form the magnet (Sintered).

Ore Reserve Ore Reserves are those portions of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Competent Person or Persons making the estimates, can be the basis of a viable project after taking account of all relevant metallurgical, economic, marketing, legal, environmental, social and governmental factors. Ore Reserves are inclusive of diluting material which will be mined in conjunction with the Ore Reserves and delivered to the treatment plant or equivalent.

Rare Earths Name commonly used for the 15 naturally occurring lanthanide elements from lanthanum (atomic number 57) to lutetium (atomic number 71) plus yttrium (atomic number 39).

Rare Earths Direct® or RED Lynas’ trademark representing the value propositions of the RED Model.

Rare Metals Collective term used by Lynas for a group of valuable metals including niobium, tantalum, titanium, and zirconium.

RED Production Model Lynas’ “mine-to-market” approach to the supply chain of the Rare Earths industry.

REO Acronym for Rare Earths oxides which is the common form for expressing the Rare Earth composition of materials other than metals.

SEG An intermediate mixed Rare Earths product containing samarium, europium, gadolinium and other heavier Rare Earths suitable for use by Rare Earths separation plants for the manufacture of individual compounds.

Separation A process of solvent extraction (or liquid-liquid extraction) that is employed to separate the Rare Earths from impurities and to the separate the Rare Earths into groups of Rare Earth elements and individual elements.

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Corporate InformationABN 27 009 066 648

DirectorsNicholas Curtis (Executive Chairman)Jacob KleinDavid Davidson

Company SecretaryIvo PolovineoRegistered Offi ceLevel 7, 56 Pitt StreetSYDNEY NSW 2000Tel: +61 2 8259 7100Fax: +61 2 8259 7199Email: [email protected]

SolicitorsDeacons1 Alfred StreetCircular QuaySYDNEY NSW 2000

BankersWestpac Banking Corporation275 George StreetSYDNEY NSW 2000

Share RegisterSecurity Transfer Registrars770 Canning HighwayAPPLECROSS WA 6153Tel: +61 8 9315 2333Fax: +61 8 9315 2233

AuditorsErnst & YoungThe Ernst & Young Building680 George StreetSYDNEY NSW 2000

Internet Addresswww.lynascorp.com

Realising our future

Annual Report 2007

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