– Condensed Consolidated Interim Income Statement

– Condensed Consolidated Interim Statement of Comprehensive Income

– Condensed Consolidated Interim Statement of Financial Position

– Condensed Consolidated Statement of Changes in Equity

– Condensed Consolidated Interim Statement of Cash Flows

– Condensed Notes to the Financial Statements

Your Directors present their report, including the Financial Report for the consolidated entity for the half

year ended 31 December 2011.

year ended 31 December 2011:

All directors were in office for the entire half-year and all directors remain in office at the date of this

report.

– Physical site assessment works completed for Definitive Feasibility Study (DFS)

– Project optimisation through use of sulphidisation-acidification-recycle-thickening (SART)

and high pressure grind roll (HPGR) processes to be incorporated in DFS

– DFS target release date is first quarter 2012

– 60 holes (22,633m) of core drilling completed

– Good grade, wide interval intercepts plus intervals of high grade material evident

– Secured exploration rights and contracted an option to purchase 100%

– Commenced on-ground exploration activities

– Drilling completed on 4km strike length ironstone range to provide for release of resource

estimate

– Joint Venture partner undertaken work on Andys Hill and Kalman projects.

The San Anton Project is located in the State of Guanajuato approximately 270km north-west of Mexico

City. The project covers an area of approximately 23,562 hectares. The San Antón Project is owned by

and Goldcorp Inc. (approx. 33%).

Within the San Anton Project area is located the Cerro del Gallo (Hill of the Rooster) project. Work on the

definitive feasibility study (DFS) for heap leaching at Cerro del Gallo advanced over the period with

completion of additional site investigation work, high pressure grinding roll (HPGR) trials and subsequent

unit sizing. Larger scale agglomeration and permeability test work for the HPGR material was also

completed.

Additional metallurgical test work commenced for inclusion of a circuit to remove copper from the heap

leach solution prior to the recovery of gold by activated carbon whilst regenerating cyanide for reuse in

the heap leach process. Test work to date has shown that a high grade copper precipitate containing over

95% of the leached silver can be produced for sale. In addition, the cyanide consumed by the copper in the

acidification, recycle and thickening. The addition of the SART circuit will result in a material increase in

the capital requirements but it is expected this will be recovered early in operations due to the cost savings

associated with cyanide regeneration.

The inclusion of HPGR in the crushing circuit and application of SART were designed to enhance heap

leaching at Cerro del Gallo by reducing process risks associated with fine crushing and interference by

copper. This should improve metal recovery and reduce operating costs.

The Namiquipa project is located in the State of Chihuahua, Northern Mexico, approximately 145kms

West-North-West of the city of Chihuahua.

At the end of the half year, the Company had completed drilling 60 core holes for a total of 22,633m at the

Namiquipa Project in Chihuahua, Mexico.

The drill program targeted the main vein systems at the historic La Venturosa Mine and successfully

continued to intersect broad zones of silver as well as lead and zinc mineralisation. The historic La

Venturosa Mine produced an estimated 14.4 million ounces of silver; 32,550 tonnes of lead and 43,530

vein was only reported to have been mined to 100m below the surface and the down dip projection of the

mineralization remains open at depth as well as along strike to the north and south. Core drilling has now

intersected mineralization to vertical distances of 350m below the surface and continues to be open at

depth. Further drilling will test down dip and strike extensions.

Drilling to the north, targeting extensions of the Princesa vein, has resulted in identification of an

epithermal system considered to have good potential to host a Princesa/America vein.

On 7 October 2011, the Company announced that it had secured exploration rights and a contracted option

to acquire 100% of the Espiritu Santo gold/silver project in the Mascota-Navidad Mining District in

Jalisco State, near the western coast of central Mexico.

The Espiritu Santo Jalisco project consists of three concessions totalling 5,800ha. The historic mining

prospects at Espiritu Santo Jalisco are located approximately 20km SE of the current Endeavour Silver

Project near San Sebastian. The Navidad area was discovered in the early 1900s and was developed at a

low-scale until 1946. After that time, the area was worked by small mining companies and prospectors. It

is considered to be highly prospective.

Site access, camp set-up and planning dominated work for the period as most personnel remained focused

to complete the Namiquipa pre-Christmas drill program. First quarter 2012 will see mapping, soil and rock

chip sampling with the objective of some drilling in the first half of 2012.

Drilling was completed during the reporting period. The work undertaken outlined a resource which was

released to the market on 31 January 2012.

venture area during the period. SMD is earning an interest of up to 80% in the joint venture area.

molybdenum/rhenium mineralisation in the upper parts of the Kalman deposit. In September 2011, SMD

announced positive assay results for the first five holes. Subsequent to the end of the reporting period,

further results have been released.

from 14m down hole and extending to 494m where the hole was terminated in altered and mineralised

the half-year ended 31 December 2011.

Signed in accordance with a resolution of the Board of Directors:

Anthony J McDonald

Managing Director

General and administrative expenses (1,281,357) (3,494,652)

Exploration and evaluation expenses (8,278) (494,921)

Financing income 7 369,891 281,657

Financing expense 7 (2,984,108) –

Income tax expense – –

Shareholders of the Company (3,903,852) (3,720,115)

Non-controlling interest – 12,199

Basic loss per share (cents per share) (0.52) (0.70) Diluted loss per share (cents per share) (0.52) (0.70) The condensed consolidated interim income statement is to be read in conjunction with the condensed

notes to the consolidated interim financial report set out on pages 12 to 16.

Foreign currency translation differences (1,906,703) (3,237,940)

(1,906,703)

(3,237,940)

Net loss for the period (3,903,852) (3,707,916)

Shareholders of the Company (5,810,555) (6,282,482)

Non-controlling interest – (663,374)

The condensed consolidated interim statement of comprehensive income is to be read in conjunction with

the condensed notes to the consolidated interim financial report set out on pages 12 to 16.

Cash and cash equivalents 11,271,997 18,687,091

Trade and other receivables 8 277,823 178,473

Receivables 8 891,159 565,698

Investments 9 1,001,879 2,000,000

Property, plant and equipment 387,412 390,657

Exploration and evaluation expenditure 12 39,508,063 36,857,553

Trade and other payables 10 1,408,665 1,215,927

Employee benefits 8,259 8,956

Share capital 11 91,208,611 91,148,611

Reserves (6,709,302) (4,802,599)

Accumulated losses (32,577,900) (28,891,423)

The condensed consolidated interim statement of financial position is to be read in conjunction with the

condensed notes to the consolidated interim financial report set out on pages 12 to 16.

Balance at 1 July 2010 56,015,606 (1,670,450) (24,320,450) 30,024,706 6,626,032 36,650,738

Loss for the period – – (3,720,115) (3,720,115) 12,199 (3,707,916)

Foreign currency translation differences – (2,562,367) – (2,562,367) (675,573) (3,237,940)

Share-based payments (net of tax) – – 2,134,022 2,134,022 – 2,134,022

Acquisition of non-controlling interest without a change

in control

8,155,209

–

(1,691,651)

6,463,558

(6,463,558)

–

Shares issued 3,850,000 – – 3,850,000 – 3,850,000

Equity contribution by non-controlling interest – – – – 500,900 500,900

Transaction costs (353,770) – – (353,770) – (353,770)

Balance at 1 July 2011 91,148,611 (4,802,599) (28,891,423) 57,454,589 – 57,454,589

Loss for the period – – (3,903,852) (3,903,852) – (3,903,852)

Foreign currency translation differences – (1,906,703) – (1,906,703) – (1,906,703)

Share-based payments (net of tax) – – 217,375 217,375 217,375

Shares issued 60,000 – – 60,000 – 60,000

The condensed consolidated interim statement of changes in equity is to be read in conjunction with the condensed notes to the consolidated interim financial

report set out on pages 12 to 16.

Cash paid to suppliers and employees (1,142,795) (1,716,851)

Cash paid for exploration and evaluation (9,021) (321,123)

Interest received 369,891 51,398

Acquisition of fixed assets (68,848) –

Payments for exploration and evaluation expenditure

capitalised

(6,607,404)

(884,600)

Proceeds from the issue of share capital 60,000 4,350,900

Share issue expenses (1,500) (353,770)

Cash and cash equivalents at 1 July 18,687,091 4,295,566

Effects of exchange rate fluctuations on cash held (15,417) (243)

The condensed consolidated interim statement of cash flows is to be read in conjunction with the

condensed notes to the consolidated interim financial report set out on pages 12 to 16.

consolidated interim financial report of the Company as at and for the six months ended 31

December 2011 comprises the Company and its subsidiaries (together referred to as the

The consolidated annual financial report of the Group as at and for the year ended 30 June 2011 is

The consolidated interim financial report is a general purpose financial report which has been

The consolidated interim financial report does not include all of the information required for a full

annual financial report, and should be read in conjunction with the consolidated annual financial

report of the consolidated entity as at and for the year ended 30 June 2011 and any public

announcements made by Cerro Resources NL during the interim reporting period in accordance with

The condensed consolidated interim financial report was authorised for issue by the directors on 13

March 2012.

The accounting policies applied by the consolidated entity in this consolidated interim financial

report are the same as those applied by the consolidated entity in its consolidated financial report as

at and for the year ended 30 June 2011.

The preparation of the interim financial report requires management to make judgements, estimates

and assumptions that affect the application of accounting policies and the reported amounts of assets

and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this consolidated interim financial report, the significant judgements made by

management in applying the consolidated entity’s accounting policies and the key sources of

estimation uncertainty were the same as those applied to the consolidated financial report as at and

for the year ended 30 June 2011.

During the period, the Company wrote down its investment in Syndicated Metals Ltd to its fair value

resulting in an impairment loss of $998,121. This has been disclosed in Financing Expense in line

with the consolidated entities accounting policy.

The consolidated interim financial report has been prepared on the basis of accounting principles

the foreseeable future and will be able to realise its assets and discharge its liabilities in the normal

course of operations.

The consolidated entity currently has no source of operating cash inflows but does have the ability to

raise funds from the public and intends to raise such funds as and when required to complete its

projects.

The directors have prepared cash flow projections that support the ability of the consolidated entity

to continue as a going concern.

In the longer term, the development of economically recoverable mineral deposits found on the

consolidated entity’s existing or future exploration properties depends on the ability of the

consolidated entity to obtain financing through equity financing, debt financing or other means. If

the consolidated entity’s exploration programs are ultimately successful, additional funds will be

required to develop the consolidated entity’s properties and to place them into commercial

production. The ability of the consolidated entity to arrange such funding in the future will depend in

part upon the prevailing capital market conditions as well as the business performance of the

consolidated entity. There can be no assurance that the consolidated entity will be successful in its

efforts to arrange additional financing, if needed, on terms satisfactory to the consolidated entity. If

adequate financing is not available, the consolidated entity may be required to delay, reduce the

scope of, or eliminate its current or future exploration activities or relinquish rights to certain of its

interests. Failure to obtain additional financing on a timely basis could cause the consolidated entity

to forfeit its interests in some or all of its properties and reduce or terminate its operations.

The consolidated entity has two reportable operating segments, as described below.

consolidated entity on the San Anton, Namiquipa and Espiritu Santo projects.

consolidated entity on the Mt Philp project.

Operating segments have been determined based on the analysis provided in the reports reviewed by

the directors in assessing performance and determining strategy.

Segment result (321,611) (764,332) (350,726) (562,841) (672,337) (1,327,173)

Unallocated expenses (617,298) (2,662,401)

Financial income/(expense) (2,614,217) 281,658

Net loss (3,903,852) (3,707,916)

Interest income on bank deposits 369,891 281,657

369,891 281,657

Foreign exchange loss (1,981,099) –

Impairment losses on financial assets (refer

Note 4)

(1,003,009)

–

(2,984,108) –

(2,614,217) 281,657

The consolidated entity had foreign currency translation differences for foreign operations as disclosed

in the statement of comprehensive income.

Other receivables 277,515 175,671

Receivable from jointly controlled entity 308 2,802

277,823 178,473

Other receivables 4,469 10,889

Receivable from Mexican Tax Authority 831,190 496,195

Bonds and mining deposits 55,500 58,614

891,159 565,698

Equity securities 1,001,879 2,000,000

1,001,879 2,000,000

Trade payables and accrued expenses 1,408,665 1,215,927

1,408,665 1,215,927

748,768,606 (June 2011: 748,268,606)

ordinary shares, fully paid

91,208,611 91,148,611

91,208,611 91,148,611

The Company recorded the following movement in share capital during the half year ended 31 December

2011 as a result of the exercise of vested options arising from the 2009 year share option programme.

Balance at 1 July 2011 748,268,606

Shares issued – September 2011 500,000

Balance at 31 December 2011 748,768,606

Balance at 30 June 36,857,553 31,677,781

Capitalised exploration and evaluation expenditure 5,945,489 874,664

Effect of foreign exchange rate movements (3,294,979) (2,554,509)

Impairment – (240,000)

Balance at 31 December 39,508,063 29,757,936

The carrying amount of the exploration and evaluation assets at 31 December 2011 relates to the San

Anton, Namiquipa and Espiritu Santo Jalisco Projects in Mexico ($25,141,989) and the Mt Philp and

Kalman Projects in Australia ($14,366,074). The recoverability of exploration and evaluation assets is

dependent on the successful development and commercial exploitation, or alternatively, sale of the

respective areas of interest.

During the six month period ended on 31 December 2011, the consolidated entity issued the following

share options in connection with the acquisition of the exploration tenements comprising the Espiritu Santo

Jalisco project.

14/11/11 14/11/11 1,500,000 Immediately 3 years from

grant

The fair value of the options granted is measured using Black-Scholes formulas, taking into account the

terms and conditions upon which the options were granted.

The fair value of share options has been calculated with the following inputs:

14/11/11 0.101 0.155 0.20 114.3 3 – 3.56

There have been no material changes in contingent liabilities or contingent assets since 30 June 2011.

Arrangements with related parties continue to be in place. For details on those arrangements, refer to

the 30 June 2011 annual financial report. There were no significant changes in arrangements with

related parties during the half year.

Since the end of the reporting period, the Company has issued options over ordinary shares. On 10

January 2012, the Company issued 5,250,000 options with an exercise price of $0.17 to executives

and senior employees at no cost to the recipients.

Other than the matters disclosed above, in the opinion of the directors of the Company, no

transaction or event of a material or unusual nature has arisen in the interval between the end of

financial year and the date of this report that affects significantly the operations of the consolidated

entity, the results of those operations or the state of affairs of the consolidated entity in future years.