CODEIFAI LIMITED — Interim / Quarterly Report 2006

Apr 30, 2006

AUSTRALIS MINING CORPORATION LIMITED (Subject to Deed of Company Arrangement) OUARTERLY REPORT FOR THE THREE MONTHS ENDED 31st MARCH 2006

Highlights

• During the 3 months to 31 March 2006, a total of 651,000 carats of sapphire was produced from the processing of 32,000 tonnes of sapphire-bearing alluvial.
• The production was at an average grade of 20 carats per tonne.
• Sales of \$665,000 were recorded, being 738,000 carats sold at average price of \$0.90 per carat.
• The processing plant operated at an average throughput of 116 tonnes per hour and for 280 hours during the quarter.
• Minimal capital expenditure has been incurred since 31 December 2005.

Status of Administration

• As previously advised, shareholder approval of certain aspects of the Deed of Company Arrangement (DOCA) executed by the Company's Administrators on 27^th February is required. A notice of meeting, explanatory memorandum and an independent expert's report are currently being prepared.

Sales

• Sales of 738,000 carats were made for a total sale value of \$665,000. or \$0.90 per carat.
• All sales were made to the Company's majority shareholder, Nikiticorp Limited (Nikiticorp), at an average price of \$0.90 per carat.

Production

• During the 3 months to 31 March 651,000 carats of sapphire were $\bullet$ produced from the processing of 32,000 tonnes of material. The weight of material processed was 58% of that processed during the December 2005 quarter.
• The average grade of 20.1 carats per tonne, was a significant $\bullet$ improvement to that achieved in the December 2005 quarter of 14.9 carats per tonne.
• During March production was halted for a period so that the trommel mesh size could be replaced with an 18mm sized mesh. The mesh size was increase in September 2005 so as to ensure no larger stones were lost in the separation process. However results during the past 6 months have indicated that few if any such stones were being lost and the decision was made to revert to the smaller mesh size.

During the shut down period other site works have been undertaken. including clearing of the slurry pit and rehabilitation of previously mined areas.

The change in mesh size should have the impact of improving the throughput rates of material through the trommel and therefore lead to higher volumes of sapphire being produced, all other factors remaining constant with current levels.

The average mix of sapphire produced during the December quarter is presented in the table over. Production during the quarter of higher quality blue and coloured stones was 40% of the total produced. compared to 43% in the December 2005 quarter.

• The table below summaries the production results by quarter since production commenced in May 2005.

3 month period ended	Sapphire Produced (carats)	Wash Processed (tonnes)	Grade (cts/t)	Percentage of blue and coloured stones $> 18$ mm
June 2005	234,609	39,600	5.9	27.8%
September 2005	590,723	104,810	5.6	25.3%
December 2005	821,794	55,224	14.9	43.3%
March 2006	651,199	32,430	20.1	40.5%
Total	2.298,325	232,064	9.9	36.3%

Exploration

• No exploration took place during the March quarter.

Financing

• As at 31 March 2006, Nikiticorp owed Australis an amount of \$466,000, being the net of advances and sales of sapphire made during the quarter. Payment of this outstanding balance is being sought during April.
• During the quarter, an amount of $$421,000$ was advanced to the Company or the Company's administrators pursuant to the loan agreement with Nikiticorp (Secured Loan Facility). An amount of \$41,000 was subsequently repaid in cash.
• Sales of \$665,000 were offset against the Secured Loan Facility Balance.
• The Secured Loan Facility was secured by a charge over the assets and business of the Australis group and subsidiary company guarantees. The facility will be subject to approval by shareholders at a general meeting to be called.

Appendix 4C Statement

• Attached to this report is a quarterly cash flow report in the format of Appendix 4C of the ASX Listing Rules.
• $\bullet$ Total operating and investing cash out flows during the quarter were \$466,000. This was funded by net financing cash flows of \$280,000 and a reduction in cash on hand by \$166,000.

Corporate Information

Directors

JW (Jerry) Goddard Ted Tzovaras Anthony Damianos Robert Coenraads

Director Director. Executive Director & CEO Executive Director

Company Secretary

Warren Kember

Registered Office & Mailing Address

Level 35, Suite 3504 100 Miller Street North Sydney NSW 2060 Telephone: +612 89085988 Facsmilie: +61289085977 Email: mail@australismining.com.au www.australismining.com.au Web site: 68 108 649 421 ABN

Contact

Anthony Damianos CEO

Australis Mining Corporation Limited (Subject to Deed of Company Arrangement) ABN 68 108 649 421

Appendix 4C

Quarterly report for March 2006 for entities admitted on the basis of commitments

$1.$ Consolidated Statement of Cash Flows

		Current quarter 3 months \$A'000	Year to date 9 months \$A'000
1.1 1.2	Cash flows related to operating activities Receipts from customers Payments for		12
	(a) staff costs (b) advertising and marketing (c) research and development (d) leased assets	(307)	(1, 051)
1.3	(e) other working capital	(117)	(845)
1.4	Dividends received Interest and other similar items received		3
1.5	Interest and other costs of finance paid		(77)
1.6	Income taxes paid	(22)
1.7	Other (provide details if material)
	Net operating cash flows	(446)	(1,958)
	Cash flows related to investing activities
1.9	Payment for acquisition of:
	(a) businesses (item 5)
	(b) equity investments
	(c) intellectual property
	(d) physical non-current assets (e) other non-current assets		(58)
1.10	Proceeds from disposal of:
	(a) businesses (item 5)
	(b) equity investments
	(c) intellectual property
	(d) physical non-current assets
	(e) other non-current assets
1.11	Loans to other entities
1.12	Loans repaid by other entities
1.13	Other (provide details if material)
	Net investing cash flows		(58)
1.14	Total operating and investing cash flows	(446)	(2,016)
1.15	Cash flows related to financing activities Proceeds from issues of shares, options, etc.
1.16	Proceeds from sale of forfeited shares
1.17	Proceeds from borrowings	423.	2,185
1.18	Repayment of borrowings	(64)	(208)
1.19	Dividends paid
1.20	Other (provide details if material)	(79)	(79)
	Net financing cash flows	280	1,898
	Net increase (decrease) in cash held	(166)	(118)
1.21	Cash at beginning of quarter/year to date	153	105
1.22	Exchange rate adjustments to item 1.20
1.23	Cash at end of quarter	(13)	(13)

$\overline{2}$ . Payments to directors of the entity and associates of the directors Payments to related entities of the entity & associates of the related entities

			Current quarter	Year to date
			3 months \$A'000	9 months \$A'000
2.1	aì	Aggregate amount of payments to the parties included in item 1.2	16	87
	ы	Aggregate amount of payments from the parties included in item 1.17 from
		majority shareholder directors	421 2	2,131 54
2.2	a)	Aggregate amount of loans to the parties included in item 1.11
		b) Aggregate amount of payments to the parties included in item 1.18
		majority shareholder directors	41	41 32

$2.3$ Explanation necessary for an understanding of the transactions

• Payments made to associates of directors who are employed by the consolidated entity in staff positions are excluded from 2.1 a).
• b) Advances were made by the majority shareholder, Nikiticorp Limited pursuant to: Unsecured Loan Facility - commenced on 1st July 2005 and is subject to review on 30 i. June 2006. The Unsecured Loan Facility has a facility limit of A\$2 million and bears interest at commercial lending rates. Interest is capitalised to the loan balance monthly. The facility has been suspended since the appointment of an administrator.
• Secured Loan Facility commenced on 28th October 2005. The Secured Loan Facility ij. was for an initial sum of \$300,000 plus further sums as required from time to time. Interest is payable at 10% per annum. Security provided includes a charge of the assets and undertakings of Australis group companies and guarantees by subsidiaries.
• Sales of sapphire to the Nikiticorp Limited are applied to reduce amounts outstanding cÌ (refer reconciliation of movements in the balance of the Secured & Unsecured Loan Facility at Item 7 below).
• Payments to directors were made against loans outstanding as at 30 June 2004. d)

з. Non-cash financing and investing activities

• $3.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
• During the quarter ended 31 March 2005 the economic entity acquired plant and aì equipment with an aggregate value of \$nil (Year to date: \$211,000) by means of finance leases. This acquisition is not reflected in the statement of cash flows.
• During the quarter ended 31 March 2006 the economic entity invoiced \$665,000 (Year to h) date \$1,990,000) of sapphire sales and costs incurred to its majority shareholder, Nikiticorp Limited. Payment for these sales was effected by a reduction in the outstanding balance of either the Unsecured Loan Facility or the Secured Loan Facility provided by Nikiticorp Limited (refer Item 6 below).
• 3.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest $N_i$

4. Financing facilities available As at 31 March 2006

$4.1$ Loan Facilities Credit Standby Arrangements $4.2$ Unsecured Loan Facility provided by majority shareholder (refer Item 7) Facility suspended pending outcome of administration. Secured Loan Facility provided by

	Amount available \$A'000	Amount used \$A'000
×	2,000	789
Ė
7	300

$5.$ Reconciliation of cash As at 31 March 2006

majority shareholder (refer Item 7)

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current month 31 March 2006 \$A'000	Previous quarter 31 December 2005 \$A'000
Cash on hand and at bank 5.1
Account controlled by Administrator	(10)	40
5.2 2 Deposits at call
5.3 Bank overdraft	(3)
Other (provide details) $-$ cash on deposit 5.4 subject to a bank charge		113
Total: cash at end of quarter	(13)	153
${$ (item 1.22)

6. Acquisitions and disposals of business entities

Not Applicable		Acquisitions [Item 1.9(a)]	Disposals (Item 1.10(a))
-6.1	Name of entity	$\mathbf{r}$
6.2	Place of incorporation or registration	$\mathbf{r}$
6.3	Consideration for acquisition or disposal	$\ddotsc$
-6.4	Total net assets
6.5	Nature of business	$\mathbf{u}$

7. Reconciliation of Loan Facilities

The table below provides a reconciliation of movements in the Unsecured and Secured Loan Facility balances provided by the majority shareholder.

		Current quarter 3 months \$A'000	Year to date 9 months SA'000
	Unsecured Loan Facility
7.1	Opening balance	773	200
7.2	Cash advances received		1,207
7.3	Sales of sapphire offset		(660)
7.4	Interest capitalised	16	42
7.5	Closing Balance	789	789
	Secured Loan Facility
7.1	Opening balance	(161)
7.2	Cash advances received	421	924
7.3	Repayments	(41)	(41)
7.4	Sales of sapphire offset	(665)	(1,329)
7.5	Interest capitalised
7.6	Closing Balance	[446]	(446)

The amount owing to the Company under the Secured Loan Facility remains outstanding to the date of this statement.

8. Compliance statement

• This statement has been prepared under accounting policies which comply with $\mathbf{1}$ accounting standards as defined in the Corporations Act (except to the extent that information is not required as detailed in Note 3) or other standards acceptable to ASX.
• $\overline{2}$ This statement does give a true and fair view of the matters disclosed.