CODEIFAI LIMITED — Interim / Quarterly Report 2005

Jun 30, 2005

AUSTRALIS MINING CORPORATION LIMITED

ACN 108 649 421

Level 35, Suite 3504, 100 Miller Street NORTH SYDNEY, NSW 2060 Phone: (02) 89085988 or Facsimile (02) 8908 5977

Company Announcements Office Australian Stock Exchange Limited Thursday 30th June 2005 Three Pages

ASX Code: AUV

ACTIVITIES UPDATE

We provide an update to the activities and operating results since the quarterly report released on 28 April 2005. Since that time Australis has made significant progress in the commissioning of its sapphire mine located in central Queensland gem fields. Sapphire produced by the Company has been well received by potential buyers internationally. The Board of Australis remains committed to achieving the goal of establishing Australis as a worldclass sapphire producer during the next 18-month period.

$1.$ Commissioning of Plant & Production

• During the March to June period, the focus of the Company has been to commission the processing plant and start systematic mining of the sapphire-bearing alluvial gravels or "wash".
• Initial test runs of the plant were carried out during April and May.
• Approximately 23,000 tonnes $(11,500)$ loose cubic metres) of sapphire bearing wash was processed in the period to June 1, 2005 yielding 170,000 carats (34,000 grams) of sapphire. It is noted that this level of processing is below the maximum capacity of the processing plant.
• During the mining and processing test runs, it was determined that further upgrading of the processing plant should be carried out to ensure reliable throughput of 200 lcm/hour (400 tonnes/hour). As a result it was decided to suspend further processing during June to undertake these modifications and adjustments.
• The work undertaken on the processing plant during June was as follows:
• $\triangleright$ Strengthening and modifying of the internal structure of trommel barrel with steel lifter bars. This improvement enables it to more effectively clean and separate the oversize rocks from the sapphire bearing gravels, and to break down clay.

• $\triangleright$ Adjustment to the primary jig configuration and cell undersize mesh dimensions.

• $\triangleright$ Uperading of the plant's electrical system

• $\triangleright$ Development of a heating system, using recycled exhaust gasses from the diesel generator, to warm the walls of the plant feed bin so that damp or wet wash can be more easily processed.
• The plant recommenced processing on 19 June and has processed a further 6,000 tones of sapphire bearing wash, although rain has been hampering operations. It is anticipated that targeted rates of production will be achieved during July.
• The number of sapphires recovered in the size range of greater than 5.5 millimetres was higher than expected. A number of very attractive "special" stones (those over about 10 carats in weight) have also been produced. Sapphires in this size range carry a significant premium to the smaller sapphires.

Some of the largest stones produced have been:

• $\circ$ 63 carat dark blue sapphire
• $\circ$ 41 carat yellow/green/blue parti-colour sapphire
• $\circ$ 33 carat yellow green sapphire
• $\circ$ 31 carat blue sapphire
• $\circ$ 20 carat green sapphire

$2.$ Sales Negotiations

• As a result of the initial production during May, management of Australis has been able to assess the quality of the sapphires produced and market receptiveness to the product.
• Mr. Elias Christianos, Australis' director of sales, has introduced the product to a range of potential buyers in Australia and internationally and the feedback has been very encouraging.
• The expectation of a large volume of uninterrupted supply enhances the usefulness and value of the Australis production to buyers. At present, gemstone sources in other countries (such as China and Africa) cannot assure either the continuity of supply or the same quality of sapphires as those produced from the Australis mine.
• These attributes are expected to result in favourable outcomes to the current round of negotiations being undertaken with buyers. Senior management is confident that over the next 6 months Australis will establish itself as a major supplier of sapphires internationally. During a further period of 6 to 12 months it aims to establish itself as a dominant supplier of sapphire internationally.

Revised Result for 30 June 2005 $\mathbf{R}$

• As a result of the further delays encountered during the commissioning of the processing plant during May and June, the revised forecast announced on 28 April cannot now be achieved.

• During the June period, the Board was hopeful that production could be re-commenced earlier than what was actually achieved and that the sapphires, particularly the higher-grade material, could be shipped to buyers that would be willing to purchase significant volumes.
• Primarily due to the process plant commissioning delays explained above, the expected operating loss for the year to 30 June 2005 is now forecast at \$2.4 million.

We invite you to visit our new website at www.australismining.com.au after 12pm today to view a presentation on the development of our sapphire mine and to see some of the larger sapphire "specials" that have been produced so far.

For further information:

Contact:	Anthony Damianos
	Executive Director & CEO

Telephone:	+612 8908 5988
Facsimile:	+612 8908 5977
Email:	mail@australismining.com.au