CODEIFAI LIMITED — Board/Management Information 2005

Oct 30, 2005

Company Announcements Office Australian Stock Exchange Limited Monday 31st October 2005 Four Pages

ASX Code: AUV

APPOINTMENT OF ADMINISTRATOR

The Board of Australis Mining Corporation Limited (Australis) advises that it has resolved to appoint Mr. Robert Elliott and Mr. Richard Albarran, partners of the Chartered Accounting firm of Hall Chadwick, as administrators (Administrators).

The Board has taken this step after being unable to negotiate a settlement to its negotiations with the Australian Securities & Investment Commission (ASIC). In the Boards' opinion, the appointment is in the best interests of all stakeholders in the company.

ASIC had launched proceedings against Australis seeking the appointment of either a Provisional Liquidator or Receiver. ASIC had brought those proceedings notwithstanding that there were no outstanding statutory demands for payment from any of the Australis group's creditors.

Australis Activities

Australis was formed in April 2004 to acquire sapphire mining interests in central Queensland. The company sought and raised over \$6.5 million in equity capital and was listed on the Australian Stock Exchange in March 2005.

Since listing, Australis has been in the process of establishing its mining plant and site of operations. While operational issues have caused delays, the company is now close to achieving a breakeven cash flow level.

During its start-up phase, Australis' majority shareholder, Nikiticorp Limited (Nikiticorp) has provided considerable financial and management support to Australis. This support has included:

• provision of a standby loan facility of \$2 million;
• agreement to purchase 100% of Australis' production regardless of the average quality and volumes achieved, at a favourable commercial price (this agreement is subject to shareholder approval); and

• agreeing to bear marketing and management costs for at least a 12month period to ensure the long-term success of the Australis business.

Notwithstanding that Nikiticorp had, at the time of the ASIC action, provided over \$1.1 million in working capital in response to draw down requests from Australis, ASIC has continued to press its enquiries.

In addition, the majority of Australis' creditors are directors or management of the company. Total liabilities of Australis are \$6.3 million, of which directors and management (or their related entities) total \$4.7 million or 74%. Those creditors have indicated their continuing support for the current board and management of the company together with shareholders comprising over 70% of the issued capital.

ASIC Actions

ASIC had, since early August, sought and was promptly given detailed information from Australis concerning its financial position and status of its creditors. ASIC had also sought, and was provided on several occasions, assurances from the Australis Board as to the solvency of the company.

The investigation by ASIC was seemingly prompted by a few vocal creditors and their appearance, around that time, on a business television program. The only creditors featured on that program were an ex-employee, who was at the time under investigation by the company and has since been charged with stealing as a servant, and a contractor whose is claimed is disputed as being excessive.

From the undertakings and information, ASIC was aware that there were no outstanding statutory demands by creditors against companies in the Australis group. ASIC commenced proceedings, however, against Australis without prior notice of their intention and has sought an order by the Supreme Court for the appointment of either a provisional liquidator or receiver.

Subsequent to the initiation of those proceedings, Australis has been in discussions with ASIC. Australis, with the support of Nikiticorp, formulated various proposals to ASIC, which would have resulted in the payment all of Australis' small, unrelated claims within seven days and its other unrelated creditors being paid fully paid within 3 months.

As an indication of Australis commitment to the proposed payment arrangement, Australis offered an undertaking to ASIC that if it defaulted in paying any of those amounts then Australis would be placed under external administration.

The various Australis proposals were rejected by ASIC, having been considered by ASIC staff for only a few hours. In response ASIC repeated its previously made non-binding offer which was unacceptable to Australis and Nikiticorp as it was predicated on ASIC's legal proceedings for the appointment of a liquidator remaining pending.

The continued action by ASIC, and the resulting uncertainty caused by it, has forced Nikiticorp to reconsider its financial support to Australis under those circumstances. The ASIC proceedings may have resulted in the appointment of a liquidator whose only role is to sell off the company's assets and close the business, an outcome which would have been clearly unacceptable to the Board, management, creditors, employees and all shareholders of Australis.

Nikiticorp has, however, indicated a willingness to continue to financially support the business of Australis under the guidance of a professional administrator. Nikiticorp has provided undertakings to the Administrators to enable the administration process to proceed.

Unlike the appointment of a liquidator, the appointment of the Administrators with the continued financial support of Nikiticorp, will ensure that a reasonable basis for the conduct of business and payment of current and future creditors of the company can occur.

Creditor, Employee and Shareholder Support

Australis acknowledges the support of its creditors, employees and shareholders and the commitment that they have made towards the company's future. The Board expects that the company will emerge from the administration process within a period of 6 months.

While the administration process is considered to be the only alternative by the Board in the current circumstances, it is a costly process necessarily caused by ASIC's actions. Australis therefore deplores ASIC's precipitous actions which, if allowed to continue, would be, in the Board's view, destructive of the interests of shareholders, employees and creditors of Australis.

If any shareholder or creditor has comments or questions these can be communicated to the company via telephone, email or post as indicated below.

Contact:	Anthony Damianos
	Executive Director & CEO
Mail address	PO Box 1330
	North Sydney NSW 2060
Email	mail@australismining.com.au
Telephone:	+612 8908 5988
Facsimile:	+612 8908 5977