Annual Financial Report

AIM RELEASE

30 September  2010

DISCOVERY METALS LIMITED
DIRECTORS AND FINANCIAL REPORT FOR THE YEAR ENDED
30 JUNE 2010


A complete copy of the Financial Report for the year ended 30 June 2010 is
available on the Company's website at http://www.discoverymetals.com.au/Reports
& Announcements/ASX Announcements.

Your directors present their report on Discovery Metals Limited and its
subsidiaries ('Consolidated Group') for the year ended 30 June 2010.

THE BOARD OF DIRECTORS

The directors of Discovery Metals Limited ('Company' or 'Discovery Metals') in
office at any time during or since the end of the year are:

GORDON GALT (Date of Appointment 09.05.07)
B.Eng (Hons), B Comm, Grad Dip Applied Finance, MAusIMM, MAICD
Chairman of the Board and a member of the Audit and Financial Risk Committee

Gordon Galt is a mining engineer with post-graduate qualifications in finance.
He has worked in senior management, technical and operational roles including as
managing director of companies engaged in the development and operation of large
resource projects.  He is experienced across a wide range of commodities,
including, coal, gold, copper/lead/zinc and magnesium.  Gordon has also spent a
period of time in banking and is currently engaged in funds management and
corporate advisory work.

Throughout his career Gordon has demonstrated a track record of creating
shareholder value through analysis of a Company's strategic position, followed
by implementation of appropriate corporate strategies, fund raising and
motivating teams of senior resource professionals.

Gordon currently holds the following listed company directorships:
* Aquila Resources Ltd from August 2007 to present
* Navigator Resources Ltd from August 2008 to present
* Nucoal Resources Ltd from February 2010 to present
* US Masters Holdings Ltd from July 2010 to present


STUART BRADLEY SAMPSON (Date of Appointment 01.02.08)
B.E. (Hons)(Mining) Qld, MBA Deakin, AMP Oxf, MAusIMM, GAICD
Managing Director

Brad Sampson has over 20 years International experience as a mining engineer.
He has worked extensively in both open cut and underground mine operations and
developments in Australia, Southern Africa and the Pacific.  He previously held
an executive role in Thiess Ltd and has been in general management roles with
Gold Fields Limited at St Ives gold mine in Western Australia and at the Kloof
operation in South Africa.  He also held the position of General Manager-PNG for
Emperor Mines Limited.  Brad has also worked with Anglo American, Ross Mining NL
and Comalco.  Brad is a director of all Discovery Metals subsidiaries registered
in Botswana and Mauritius.

MORRICE CORDINER (Date of Appointment 30.05.03)
LLB, ASIA
Non-Executive Director and Chairman of the Audit and Financial Risk Committee

Mr Cordiner is a corporate lawyer and has in excess of 15 years experience in
the finance and resources industries.  Morrice was a founding director of
Discovery Metals and was instrumental in identifying the original projects and
strategic alliance with Falconbridge Inc that formed the original assets of the
Company in 2003.  Over the last 6 years, Mr Cordiner has been involved in the
successful development and financing of a number of junior listed resource
companies with projects in gold, nickel, copper and zinc.  He has been actively
involved in raising funds for these ventures on the Australian Stock Exchange,
the London AIM market and the Toronto Stock Exchange.  Mr Cordiner was a
founding and non-executive director of the ASX and TSX dual-listed gold
explorer, Andean Resources Limited (December 2003 to November 2009) and a
non-executive director the ASX listed zinc explorer, Meridian Minerals Limited
(July 2008 to November 2009).

RIBSON GABONOWE (Date of Appointment 30.05.08)
BSc (Mining Engineering), MSc (Mineral Economics), MBA
Non Executive Director

Ribson Gabonowe is a Mining Engineer with over 25 years of experience in the
mining industry. For twelve years to December 2006, Ribson was the Director of
Mines of Botswana, responsible for administering the legal and fiscal framework
governing mineral exploitation.  In this role, Ribson was involved in
negotiations of mineral agreements for copper, nickel, diamonds, coal and soda
ash.

During the past five years Ribson held directorships in the following companies:
* Morupule Colliery (Pty) Ltd
* Botswana Diamond Valuing  Company (Pty) Ltd
* BCL Limited (Pty) Ltd

Ribson is currently a director of Kukama Mining and Exploration, African Coal
(Pty) Ltd, Atlas Minerals (Pty) Ltd and Gabor Consulting (Pty) Ltd.  Mr Gabonowe
is also a director of all Discovery Metals subsidiaries registered in Botswana.

JEREMY READ (Date of Appointment 01.02.08)
BSc (Hons), MAusIMM
Non Executive Director (Managing Director from 01.07.03 to 01.02.08)

Jeremy Read has 22 years domestic and international minerals exploration
experience and was previously the Manager of BHP Minerals Australian Exploration
Team.  Jeremy has extensive exploration experience for gold, nickel sulphides
and base metals.  He played an important role in the discovery of the Kabanga
North Nickel deposit in Tanzania.  Jeremy is skilled in developing new technical
teams, management of technical/specialist service groups, project generation
activities, risk management, multi-commodity mineral exploration, company
listings and capital raisings.  During his employment with BHP, he participated
in the development of several significant strategic exploration alliances.
Jeremy was the founding managing director of Discovery Metals from its
incorporation in May 2003, until his appointment as a non-executive director on
1 February 2008 and secured the Boseto copper project for the Company. He is
also the founding managing director of Meridian Minerals Limited.

JOHN SHAW (Date of Appointment 13.11.06)
BSc (Geological Engineering), FAusIMM, MCIM, FAICD, SME
Non Executive Director, chairman of the Remuneration and Compensation Committee
and member of the Audit and Financial Risk Committee

John Shaw has over 40 years experience in exploration, development and
operations of open cut and underground mines.  John previously was Vice
President of the Australian Operations of Placer Dome Asia Pacific Limited and
managing director of Kidston Gold Mines.  He is a former Chairman of Gallery
Gold Limited (who developed the Mupane Gold Mine in NE Botswana), Zimbabwe
Platinum Mines Limited, Tri Origin Minerals Limited, Albidon Limited and
Lodestone Exploration Limited.  He is a non executive director of IAMGOLD
Corporation and Quadra Australia Pty Ltd.

During the past five years John has held the following listed company
directorships:
* IAMGOLD Corporation from March 2006 to present
* Albidon Limited from February 2008 to April 2009
* Tri Origin Minerals Limited from October 2003 to February 2008
* Lodestone Exploration Limited from May 2002 to November 2007
* Gallery Gold Limited from November 2003 to March 2006



ROSLYNN SHAND (Date of Appointment 24.05.07)
BA, LLB, FCIS
Company Secretary

Roslynn Shand has a combined degree in Arts/Law from the University of
Queensland, is a fellow of the Chartered Secretaries Australia and has
considerable experience in the company secretarial area.  She has been a company
secretary for 20 years for entities in the financial, agricultural and mining
sectors.

Principal Activity

The principal activity of the Company during the year was mineral exploration
and in particular the continued development of its Boseto copper project in
Botswana.

No significant change in the nature of the Consolidated Group's principal
activity occurred during the year.

Dividends Paid or Recommended

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

Operating Results

The result of the Consolidated Group amounted to an after-tax loss of $4,661,265
(2009: loss $4,436,900).

Number of Employees

There are 34 (2009: 28) full-time employees employed by the Consolidated Group
in Australia and Botswana.  All other roles are currently undertaken under
contract arrangements, or by part-time employees.

Significant Changes in State of Affairs

No significant changes in the state of affairs of the Consolidated Group
occurred during the year.

After Balance Date Events

No other matters or circumstances have arisen since the end of the financial
year which significantly affected or may significantly affect the operations of
the Consolidated Group, the results of those operations or the state of affairs
of the Consolidated Group in future financial years other than those noted in
Note 25 in the Notes to the Financial Statements.

Future Developments

Other than as referred to in this report, further information as to likely
developments in the operations of the Consolidated Group and the expected
results of those operations would, in the opinion of the directors, be
speculative.

Review of Operations

The directors continued to operate the Consolidated Group in the best interests
of the shareholders.

Financial Position

The net asset position of the Consolidated Group at 30 June 2010 was $74,084,771
(30 June 2009: $30,978,963).

The Consolidated Group has written off $nil (30 June 2009: $700,000) on
exploration during the year.


Tenement Schedule

The Consolidated Group has an interest in the following tenements:

+--------+---------+---------+-------+---------+----------+-----------+--------+
|PROJECT |TENEMENT | MANAGER | AREA | GRANTED | EXPIRY |EXPENDITURE|COUNTRY |
| | | |(Km(2))| | |COMMITMENT |or STATE|
+--------+---------+---------+-------+---------+----------+-----------+--------+
|DIKOLOTI|P019/2004|Discovery| 284 |1-Jul-07 |30-Jun-11 |BWP 2.210m |BOTSWANA|
| NICKEL | |Metals | | | | Yr 7 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
|DIKOLOTI|P020/2004|Discovery| 89.6 |1-Jul-07 |30-Jun-11 |BWP 2.210m |BOTSWANA|
| NICKEL | |Metals | | | | Yr 7 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
|DIKOLOTI|P021/2004|Discovery| 40.7 |1-Jul-07 |30-Jun-11 |BWP 2.210m |BOTSWANA|
| NICKEL | |Metals | | | | Yr 7 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
|DIKOLOTI|P022/2004|Discovery| 197.4 |1-Jul-07 |30-Jun-11 |BWP 2.210m |BOTSWANA|
| NICKEL | |Metals | | | | Yr 7 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P98/2005 |Discovery| 630 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P99/2005 |Discovery| 893 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P100/2005|Discovery| 757 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P101/2005|Discovery| 426 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P102/2005|Discovery| 557 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P103/2005|Discovery| 463 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |P104/2005|Discovery| 731 |1-Oct-05 |30-Sep-10*|BWP 0.5m Yr|BOTSWANA|
| COPPER | |Metals | | | | 5 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |186/2008 |Discovery| 929 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |187/2008 |Discovery| 951 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |188/2008 |Discovery| 940 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |189/2008 |Discovery| 444 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |190/2008 |Discovery| 861 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |191/2008 |Discovery| 944 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+
| BOSETO |192/2008 |Discovery| 638 |1-July-08|30-June-11|BWP 0.3m Yr|BOTSWANA|
| COPPER | |Metals | | | | 3 | |
+--------+---------+---------+-------+---------+----------+-----------+--------+

BWP - The Botswana Pula exchange rate is approximately BWP 6 to AUD 1.00

Application for renewal of the seven original Discovery Copper tenements (P100
to P104/2005) is with the Botswana Department of Geological Survey.  Application
for renewal of the seven 2008 tenements will be made in the coming year.  The
Dikoloti tenements are currently being assessed during the $3 million joint
exploration program, funded by the Japan Oil Gas and Metals National Corporation
((JOGMEC).  Please refer to Note 25 on the renewal of the 2005 granted tenements
for another 2 years until 30 September 2012.

REMUNERATION REPORT

This report details the nature and amount of remuneration for each key
management personnel (being directors and executives receiving the highest
remuneration) of Discovery Metals.

Remuneration policy

The remuneration policy of Discovery Metals has been designed to align key
management personnel objectives with shareholder and business objectives by
providing a fixed remuneration component combined with specific long term
incentives, based on key performance areas affecting the Consolidated Group's
financial results.  Short-term incentives will be introduced once the Company is
producing revenue from operations.

The Remuneration Committee is responsible for:
* reviewing remuneration arrangements for key management personnel;
* assessing the appropriateness of the nature and amount of remuneration of
directors and key executives on a periodic basis by reference to the
Company's performance, executive performance and comparable information from
industry sectors; and
* making recommendations to the Board.


The Remuneration Committee believes the remuneration policy is appropriate and
effective in its ability to attract and retain high quality key management
personnel to run and manage the Consolidated Group, as well as creating goal
congruence between directors, executives and shareholders.

The Company's policy for determining the nature and amount of remuneration for
key management personnel of the Consolidated Group is as follows:
* All key management personnel receive a base salary (which is based on
factors such as demonstrated skills and experience), superannuation, fringe
benefits and a share plan package.  Short term performance incentives will
be added in future years.
* Review key management personnel packages annually by reference to the
Consolidated Group's performance, executive performance and comparable
information from industry sectors.
* The base salary is determined using a number of factors, including skills
displayed, particular experience of the individual concerned and overall
performance of the Company.  The contracts for service between the Company
and key management personnel are on a continuing basis, the terms of which
are not expected to change in the immediate future.  Upon retirement, key
management personnel are paid employee benefit entitlements accrued to the
date of retirement.  Executives are paid a percentage of between three and
twelve months of their salary in the event of termination, with all granted
options vesting immediately in the event of a takeover bid for the Company.
Any options not exercised within 60 days of the date of termination lapse.
* For executives, the group will seek to emphasise payment for results through
the incorporation of cash incentive payments based on the achievement of
revenue targets and return on equity ratios.  This will be implemented once
the Company commences production in future years.


The performance of executives is measured against criteria agreed quarterly with
the Managing Director and discussed annually by the Remuneration Committee.  The
criteria are based predominantly on the work required to grow the Company and to
bring the Boseto copper project into production and therefore add to
shareholders' value.  As the Company has been in the exploration and feasibility
phase, currently no short term bonus payment scheme is applicable to
executives.  Any future bonuses and incentives will be linked to predetermined
performance criteria.  The Remuneration Committee may however recommend that the
Board exercise its discretion in relation to approving incentives, bonuses and
options and make changes.  Any such changes must be justified by reference to
measurable performance criteria.  The policy is designed to attract the highest
calibre of executives and reward them for performance that results in long-term
growth in shareholder wealth.

Executives are entitled to participate in the Company's Director and Employee
Share Plan (which replaced the previous option plan), which is the long term
incentive portion of their remuneration.  The Director and Employee Share Plan
('Share Plan') was approved by shareholders in February 2010 and links directors
and executive incentives to the shareholder objectives in 4 tranches.

For directors and executive management ('Eligible Employees'), the shares will
be subject to the following vesting conditions, and will only be able to be
released from the Share Plan after these conditions have been satisfied:

(a) The shares will vest in four tranches and each tranche will be subject to
the performance hurdles in (b) below.  Any further tranches will be advised by
the Company's Plan Committee.

(b) Each tranche of shares will not be able to be released from the Share Plan
unless and until the following performance hurdles have been achieved:

(i) tranche one = The processing plant for the Boseto copper project has been
built and commissioned and the plant has achieved an output of 10,000 tonnes of
copper;
(ii) tranche two = The share price (as traded on ASX) has exceeded $1.00 per
share for more than 10 trading days (which need not be consecutive);
(iii) tranche three = The share price (as traded on ASX) has exceeded $1.50 per
share for more than 10 trading days (which need not be consecutive); and
(iv) tranche four = The share price (as traded on ASX) has exceeded $2.00 per
share for more than 10 trading days (which need not be consecutive).

Australian key management personnel receive a superannuation guarantee
contribution required by the Australian government, which is currently 9%, and
do not receive any other retirement benefits.  Botswana key management personnel
receive a similar superannuation contribution payment.  Individuals may choose
to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to key management personnel is valued at the cost to the
Company and expensed during the year of the payment, or in the case of share
options, in the year of the grant.  Options are valued using the Black-Scholes
methodology.  Grants of shares are valued using Monte-Carlo methodology.

The Company's policy is to remunerate non-executive directors at market rates
for time, commitment and responsibilities.  On advice from the Remuneration
Committee, the Board determines payments to the non-executive directors and
reviews their remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when required.  The
maximum aggregate amount of fees that can be paid to non-executive directors is
subject to approval by shareholders.  Fees for non-executive directors are not
linked to the performance of the Consolidated Group.  However, to align
directors' interests with shareholder interests, the directors are encouraged to
hold shares in the Company and are able to participate in the Director and
Employee Share Plan.

Performance-based remuneration

The Company currently has no performance based remuneration component built into
director and executive remuneration packages.

Company performance, shareholder wealth and director and executive remuneration

The remuneration policy has been tailored to increase goal congruence between
shareholders, directors and executives.  This has been achieved by allocating
share options to directors and key management upon commencement and based on the
VWAP of the Company's share price in the period before the director or executive
commenced with the Company.

Managing Director and Executives

The employment conditions of the Managing Director, Stuart Bradley (Brad)
Sampson and other key executives are formalised in contracts of employment.  The
Managing Director and other executives are permanent employees of Discovery
Metals group companies.

Brad Sampson is employed under an ongoing contract, which commenced on 1 June,
2010 which replaced his fixed term contract commencing on 1 February 2008.  The
employment contract stipulates a six (6) month resignation period.  The Company
may terminate the employment contract without cause by providing twelve (12)
months written notice or making payment in lieu of notice, based on the
individual's annual salary.  Termination payments are generally not payable on
resignation or dismissal for serious misconduct.  In the instance of serious
misconduct the Company can terminate employment at any time.  Any options not
exercised within 60 days of the date of termination will lapse.

The Board, on advice from the Remuneration Committee, determines the proportion
of fixed and variable compensation for each executive.


Key Management Personnel Remuneration



2010 Short term Post employment Share based
benefits benefits

Cash Non-
Salary & Monetary Super- Shares or
Name Fees Benefits annuation Other Options Total

  $ $ $ $ $ $

Non- Executive Directors

Gordon Galt (1) 88,320       140,010 228,330

Morrice Cordiner (2) 44,160       250,238 294,398

Ribson Gabonowe (3) 44,368       70,005 114,373

Jeremy Read 40,000   3,600   70,005 113,605

John Shaw     43,600   70,005 113,605



Executive Directors

Brad Sampson  401,604 4,531 25,000   162,856 593,991



Other key management personnel

Paul Fulton 270,000 4,531 50,000   143,060 467,592

Ross Gibbins 233,750 4,531 21,038   58,257 317,576

Nick Franey (4) 64,731 2,266 5,826   70,005 142,827



Notes:

Cash Bonuses are not payable until production commences and therefore 0% of
directors and key management remuneration is related to performance.

Long service leave is not accrued until 5 years service has been reached.

Share Based Payments are valued using the Black-Scholes and Monte-Carlo
methodologies.

(1)  Mr Galts's director's fees are paid to Veromas Pty Limited in accordance
with his contract.
(2)  (Mr Cordiner's director's fees are paid to Mining Investors Australia Pty
Limited in accordance with his contract.
(3)  Mr Gabonowe's director's fees are paid to Gabor Consulting (Pty) Ltd in
accordance with his contract.
(4)  Mr Franey commenced employment on 6 April 2010.

Key Management Personnel Remuneration


2009 Short term Post employment Share based
benefits benefits

Cash Non-
Salary & Monetary Super- Share
Name Fees Benefits annuation Other Options Total

  $ $ $ $ $ $

Non- Executive Directors

Gordon Galt 80,000   7,200     87,200

Morrice Cordiner (1) 44,160     5,993   50,153

Ribson Gabonowe (2) 44,160       33,000 77,160

Jeremy Read 40,000   3,600   33,000 76,600

John Shaw     43,600     43,600



Executive Directors

Brad Sampson  353,211   31,789   225,154 610,154



Other key management personnel

Paul Fulton 240,000   21,600   330,038 591,638

Ross Gibbins (3) 146,667   13,200   58,320 218,187

Christian Heili (4) 200,000 35,678 18,000   125,812 379,490

Fred Nhiwatiwa (4) 150,000 27,600 15,000   41,075 233,675



Notes:

Cash Bonuses are not payable until production commences and therefore 0% of
directors and key management remuneration is related to performance.

Long service leave is not accrued until 5 years service has been reached.

Share Options are valued using the Black-Scholes and Monte-Carlo methodologies.

(1) Mr Cordiner's director's fees are paid to Mining Investors Australia Pty
Limited in accordance with his contract.  Mining Investors was paid $5,993 for
consulting services associated with a capital placement.
(2) Mr Gabonowe's director's fees are paid to Gabor Consulting (Pty) Ltd in
accordance with his contract.
(3) Mr Gibbins commenced employment on 1 November 2008.
(4) Botswana based key executive personnel are provided with housing, a car and
medical and life insurance as part of their employment contracts.




Options issued as part of remuneration for the year ended 30 June 2010

Options were issued to directors and executives as part of their remuneration.
The options were not issued on performance criteria, but are issued to the
majority of directors and executives of Discovery Metals and its subsidiaries to
increase goal congruence between executives, directors and shareholders.

Options Granted as Remuneration (current year)

  Terms & Conditions for Each Grant

  Vested Granted Grant Date Value per Exercise First Last
No. No. Option at Price Exercise Exercise
Grant $ Date Date
Date
$

Non- Executive Directors

Morrice 0 1,000,000 03/12/09 $0.37 $0.50 24/11/10 12/12/11
Cordiner

Director and Employee Share Plan
Shares Issued to Plan Trust Company to be held until Vesting (current year)

Shares for directors and executives are issued to the Plan Trust Company and
will be released to the executives when vesting occurs, subject to performance
and other criteria.  There is no earliest date for vesting and the shares are
issued and not subject to expiry.  Following approval of the Director and
Employee Share Plan by shareholders on 24 February 2010, the shares were issued
to the Plan Trust Company on 31 March 2010.

  Tranche 1 Tranche 2 Tranche 3 Tranche 4

10,000t ASX share ASX share ASX share
Share Rights Copper price exceeds price exceeds price exceeds
produced $1.00 $1.50 $2.00



Value per right at $0.76 $0.74 $0.6990 $0.6619
grant



Non- Executive
Directors

Gordon Galt 500,000 500,000 500,000 500,000

Morrice Cordiner 250,000 250,000 250,000 250,000

Ribson Gabonowe 250,000 250,000 250,000 250,000

Jeremy Read 250,000 250,000 250,000 250,000

John Shaw 250,000 250,000 250,000 250,000



Executive Directors

Brad Sampson  500,000 500,000 500,000 500,000



Other key management
personnel

Paul Fulton 250,000 250,000 250,000 250,000

Ross Gibbins 125,000 125,000 125,000 125,000

Nick Franey 250,000 250,000 250,000 250,000








Shares Issued on Exercise of Compensation Options
Options exercised during the year that were granted as compensation in prior
periods.

  No. of Amount Amount
Ordinary Paid per Share Unpaid per
Shares Share
Issued

Non- Executive Directors

Gordon Galt 1,000,000 30 cents 0

Gordon Galt 800,000 35 cents 0

John Shaw 500,000 30 cents 0

John Shaw 500,000 35 cents 0


Options value as a portion of total remuneration
  Options Total
Granted as Part Remuneration
of Represented Options Options
Remuneration by Options Exercised Lapsed
$ % $ ($)

Non- Executive Directors

Gordon Galt 140,010 61% 372,200 0

Morrice Cordiner  250,238 85% 0 0

Ribson Gabonowe 70,005 61% 0 0

Jeremy Read  70,005 62% 0 0

John Shaw 70,005 62% 150,000 0



Executive Directors

Brad Sampson 162,856 27% 0 0



Other key management personnel

Paul Fulton 143,060 31% 0 0

Ross Gibbins 58,257 18%

Nick Franey 70,005 49% 0 0


Meetings of Directors
During the financial year, nine (9) meetings of directors were held.
Attendances by each director during the year were as follows:

  Directors' Meetings

  Number eligible to attend Number attended

Non- Executive Directors

Gordon Galt 9 9

Morrice Cordiner  9 8

Ribson Gabonowe 9 8

Jeremy Read  9 9

John Shaw 9 8

Executive Directors

Brad Sampson 9 9


As well as formal meetings of directors, executive and non-executive directors
are in frequent communication by way of telephone and email.

Indemnifying Officers

The Company has agreed to indemnify the directors and officers of the Company
against all liabilities to another person (other than the Company) that may
arise from their position as directors and officers of the Company.  This does
not include such liabilities that arise from conduct involving a wilful breach
of duty by the officers or the improper use by the officers of their position or
of information to gain advantage for themselves or someone else or to cause
detriment to the Company.  The liabilities insured include legal costs that may
be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and
any other payments arising from liabilities incurred by the officers in
connection with such proceedings.  A premium has been paid to cover directors
and officers of the Consolidated Group.

Options

At 30 June 2010 there were 10,315,525 (2009: 35,660,569) unissued ordinary
shares of Discovery Metals for which options were outstanding as detailed at
Note 17 of the Financial Statements.

Proceedings on Behalf of Company

No person has applied to the Court for leave to bring proceedings on behalf of
the Company, or intervene in any proceedings to which the Company is a party,
for the purpose of taking responsibility on behalf of the Company for all or any
part of those proceedings. The Company was not a party to any such proceedings
during the year.

Non-audit Services

The board of directors, in accordance with advice from the audit committee, is
satisfied that the provision of non-audit services during the year is compatible
with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the services disclosed
below did not compromise the external auditor's independence for the following
reasons:
* all non-audit services are reviewed and approved by the audit committee
prior to commencement to ensure they do not adversely affect the integrity
and objectivity of the auditor; and
* the nature of the services provided do not compromise the general principles
relating to auditor independence in accordance with APES 110: Code of Ethics
for Professional Accountants set by the Accounting Professional and Ethical
Standards Board.


There were no fees for non-audit services paid or payable to the external
auditors during the year ended 30 June 2010.

Auditor's Independence Declaration

The lead auditor's independence declaration for the year ended 30 June 2010 has
been received and can be found on page 49 of this combined report.

Signed in accordance with a resolution of the board of directors.

Brad Sampson Gordon Galt

Managing Director Chairman

Brisbane

Dated this 29th day of September, 2010




STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 30 June 2010

    CONSOLIDATED GROUP   PARENT ENTITY

  Note 2010 2009   2010 2009
$ $ $ $

Revenues 3 762,562 553,065   1,935,807 1,478,530

Compliance expenses   (655,391) (754,717)   (844,070) (1,030,977)

Depreciation and 10 (91,504) (69,463)   (35,237) (13,092)
amortisation

Exploration expenditure 11 0 (700,000)   0 (700,000)
written off

Legal expenses   (303,894) (188,659)   (282,412) (183,518)

Rent   (187,458) (168,527)   (153,375) (131,598)

Salaries and consultants   (1,997,560) (1,520,237)   (1,805,151) (1,313,729)

Travel expenses   (571,397) (287,467)   (523,048) (266,224)

Share based payments   (1,032,889) (895,480)   (891,156) (854,405)

Interest expenses   0 (32)   0 (32)

Gain/(Loss) on foreign   57 (383)   0 (383)
currency

Other expenses   (583,791) (405,000)   (465,765) (218,461)
------------------------- ------------------------
Profit/(loss) before
income tax (4,661,265) (4,436,900)   (3,064,407) (3,233,889)
expense

Income tax expense 5 0 0   0 0
------------------------- ------------------------
Profit/(loss)   (4,661,265) (4,436,900)   (3,064,407) (3,233,889)
------------- ------------
Other comprehensive
income, 0 0   0 0
net of tax

Total Comprehensive   (4,661,265) (4,436,900)   (3,064,407) (3,233,889)
Income

Profit/(loss)
attributable to members (4,661,265) (4,436,900)   (3,064,407) (3,233,889)
of the Consolidated Group

Total Comprehensive
Income
attributable to members (4,661,265) (4,436,900)   (3,064,407) (3,233,889)
of the
Consolidated Group
--------------------------------------------------


Earnings per share:

Basic earnings per share
(cents per share) 7 (2.01) (3.07)

Diluted earnings per
share 7 (2.01) (3.07)
(cents per share)

The accompanying notes form part of these financial statements



STATEMENT OF FINANCIAL POSITION
For The Year Ended 30 June 2010

    CONSOLIDATED GROUP   PARENT ENTITY

  Note 2010 2009   2010 2009
ASSETS $ $ $ $

CURRENT ASSETS

Cash & cash 8 39,340,219 8,732,079   37,336,498 5,934,808
equivalents

Trade & other 9 786,095 435,999   433,024 166,663
receivables
--------------------------- --------------------------
TOTAL CURRENT   40,126,314 9,168,078   37,769,522 6,101,471
ASSETS
--------------------------- --------------------------


NON-CURRENT
ASSETS

Plant and equipment 10 1,303,510 511,864   265,509 19,685

Exploration 11 33,882,987 22,828,658   - -
expenditure

Other financial 12 - -   40,262,316 28,306,852
assets

Related party loans 13 - -   - -

Intangible assets 14 53,419 -   53,419 -
--------------------------- --------------------------
TOTAL NON-CURRENT   35,239,916 23,340,523   40,581,244 28,326,537
ASSETS
--------------------------- --------------------------


TOTAL ASSETS   75,366,230 32,508,601   78,350,766 34,428,008
--------------------------- --------------------------


CURRENT LIABILITIES

Trade & other 15 972,325 1,372,269   1,966,655 350,644
payables

Short-term provisions 16 309,134 157,369   196,793 105,021
--------------------------- --------------------------
TOTAL CURRENT   1,281,459 1,529,638   2,163,448 455,665
LIABILITIES
--------------------------- --------------------------

--------------------------- --------------------------
TOTAL LIABILITIES   1,281,459 1,529,638   2,163,448 455,665
--------------------------- --------------------------


NET ASSETS   74,084,771 30,978,963   76,187,318 33,972,343



EQUITY

Issued capital 17 88,085,126 43,696,900   88,085,126 43,696,900

Reserves 18 6,580,813 3,201,966   3,460,112 2,568,956

Accumulated losses 19 (20,581,168) (15,919,903)   (15,357,920) (12,293,513)
--------------------------- --------------------------
TOTAL EQUITY   74,084,771 30,978,963   76,187,318 33,972,343


The accompanying notes form part of these financial statements



STATEMENT OF CHANGES IN EQUITY
For The Year Ended 30 June 2010

Issued Accumulated Option Foreign Total
Share (Losses) Reserve Currency
Capital Translation
CONSOLIDATED GROUP Reserve

2009 $ $ $ $ $

Restated Balance at 1
July 2008 27,864,491 (11,483,003) 1,819,551 (912,525) 17,288,514

Currency Translation
Differences       1,399,460 1,399,460

(Loss) for the year   (4,436,900)     (4,436,900)

Shares issued during
the year 16,257,115       16,257,115

Transaction costs for
shares issued (424,706)       (424,706)

Cost of share based
payments     895,480   895,480
----------------------------------------------------------
Restated Balance at
30 June 2009 43,696,900 (15,919,903) 2,715,031 486,935 30,978,963
----------------------------------------------------------
2010

Currency Translation
Differences       2,345,958 2,345,958

(Loss) for the year   (4,661,265)     (4,661,265)

Shares issued during
the year 45,096,015       45,096,015

Transaction costs for
shares issued (707,789)       (707,789)

Cost of share based
payments     1,032,889   1,032,889
----------------------------------------------------------
Balance as at 30 June
2010 88,085,126 (20,581,168) 3,747,920 2,832,893 74,084,771
----------------------------------------------------------
PARENT ENTITY

2009

Restated Balance at 1
July 2008 27,864,491 (9,059,624) 1,714,551 0 20,519,418

(Loss) for the year   (3,233,889)     (3,233,889)

Shares issued during
the year 16,257,115       16,257,115

Transaction costs for
shares issued (424,706)       (424,706)

Cost of share based
payments     854,405   854,405
----------------------------------------------------------
Restated Balance at
30 June 2009 43,696,900 (12,293,513) 2,568,956 0 33,972,343
----------------------------------------------------------
2010

(Loss) for the year   (3,064,407)     (3,064,407)

Shares issued during
the year 45,096,015       45,096,015

Transaction costs for
shares issued (707,789)       (707,789)

Cost of share based
payments     891,156   891,156
----------------------------------------------------------
Balance as at 30 June
2010 88,085,126 (15,357,920) 3,460,112 0 76,187,318
----------------------------------------------------------


STATEMENT OF CASH FLOW
For The Year Ended 30 June 2010

  CONSOLIDATED GROUP   PARENT ENTITY



  Note 2010 2009   2010 2009
$ $ $ $

CASH FLOWS FROM
OPERATING ACTIVITIES

Receipts from
customers

GST receipts   205,576 118,635   205,576 118,635

Payments to suppliers   (5,103,284) (3,241,786)   (1,495,125) (1,914,771)
and employees

Interest received   671,122 545,206   502,996 270,671

Dikoloti operator's   82,191 0   82,191 0
fee

Interest paid   0 (32)   0 (32)

Refunds received   9,250 7,859   7,771 7,859
--------------------------- --------------------------
Net cash used in (4,135,146) (2,570,118)   (696,591) (1,517,638)
operating activities 26
--------------------------- --------------------------


CASH FLOWS FROM
INVESTING ACTIVITIES

Payments for   (11,054,329) (11,254,943)   0 0
exploration

Purchase of plant and   (883,150) (201,255)   (281,061) (15,518)
equipment

Investment in     -   (11,955,464) (13,807,393)
subsidiary companies

Payment of   (53,419) -   (53,419) -
Intangibles
--------------------------- --------------------------
Net cash used in   (11,990,898) (11,456,198)   (12,289,945) (13,822,911)
investing activities
--------------------------- --------------------------


CASH FLOWS FROM
FINANCING ACTIVITIES

Proceeds from issue   45,096,015 16,257,115   45,096,015 16,257,115
of shares

Share issue costs   (707,789) (424,706)   (707,789) (424,706)

Loans made to   - -     0
subsidiary companies
--------------------------- --------------------------
Net cash provided by   44,388,226 15,832,409   44,388,226 15,832,409
financing activities
--------------------------- --------------------------


Net increase
(decrease) in cash 28,262,182 1,806,093   31,401,690 491,860
held

Cash at the beginning   8,732,079 5,526,526   5,934,808 5,442,948
of the period

Effect of exchange   2,345,958 1,399,460   - -
rates
------------------------------------------------------
Cash at the end of 8 39,340,219 8,732,079   37,336,498 5,934,808
the period
------------------------------------------------------



For further information contact:

Discovery Metals Limited
Brad Sampson
Managing Director
Tel: +617 3218 0200

Fairfax I.S. PLC
Ewan Leggat / Laura Littley
Tel: +44 (0)20 7598 5368

Conduit PR
Jos Simson/Emily Fenton
Tel: +44 (0) 20 7429 6603
Mobile: +44 (0)7899 870 450

Further information on the Company is available on its website:
www.discoverymetals.com.au


[HUG#1447816]








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Unternehmen: Discovery Metals Limited - ISIN: AU000000DML9