CONNECTED MINERALS LIMITED — Interim / Quarterly Report 2003

Mar 12, 2003

ACN 009 076 233

HALF YEARLY REPORT

For six months ended 31 December 2002

Registered Office 704 Murray Street West Perth WA 6005 Telephone: (08) 9420 0200 Facsimile: (08) 9420 0222 E-mail: aex@acclaimexploration.com.au Website: www.acclaimexploration.com

Acclaim Exploration NL and Controlled Entities Half Yearly Report for the six months ended 31 December 2002

DIRECTORS' REPORT

The Directors present the financial report of the consolidated entity for the half vear to 31 December 2002 and the independent review report thereon.

Directors

The names of the directors who held office during or since the end of the half vear:

Mr G Wheeler (appointed 27 November 2002) Mr B Matich Mr D Thomson (appointed 27 November 2002) Mr N Bassett (resigned 27 November 2002) Mr E Eshuys (removed 26 November 2002)

REVIEW OF OPERATIONS

EXPLORATION

Exploration activities were largely confined to data compilation, regional interpretations. and target generation. However, just over a week was spent in the field evaluating the geophysical anomalies identified along the basal contact. This work demonstrated that there is sufficient contrast between the layered intrusion and the basement gneisses to map the basal contact using high-resolution airborne-magnetic surveys. The ground magnetic traverses also confirmed the presence of untested magnetic anomalies on the basal contact at Wingellina.

Planning of field work for the 2003 season is well advanced, and is waiting on settlement of the Austral Nickel acquisition before proceeding. Exploration will primarily focus on identifying and testing targets for nickel sulphides within the Claude Hills Initial programs will consist of reconnaissance geochemical sampling of area. extensive alluvial covered plains within the tenement, with reconnaissance geophysical testing of any geochemical anomalies identified, and further testing of geophysical anomalies identified previously. Drilling will follow in the 2nd quarter to further evaluate geochemical and geophysical targets identified in this manner. Further drilling and delineation of select areas of high-grade laterite will be carried out, as an adjunct to drill testing for nickel sulphides, with the aim of proving up a resource of 50 - 100 million tonnes grading 1.5% nickel within the existing Wingellina resource of 227 million tonnes at 1.0% nickel and 0.07% cobalt.

The joint Geological Survey of Western Australia (GSWA) and Geoscience Australia (GA) regional airborne magnetic 400 metre lined spaced data, released in late December, was acquired and processed. Initial evaluation of this data confirms the prospectivity of the Wingellina and the selection of the Claude Hills area for nickel sulphide exploration.

The Company held discussions with Justin Gum of the Geological Survey Branch (GSB) of the department of Primary Industry and Resources South Australia (PIRSA), regarding a co-operative approach to mapping on the Company's Claude Hills tenement, and in the application of remote sensing and image processing techniques to identify prospective lithologies within the basement gneiss. Reconnaissance stratigraphic holes drilled by the GSB intersected magmatic copper

Acclaim Exploration NL and Controlled Entities Half Yearly Report for the six months ended 31 December 2002

sulphides in the Mt Davies area, adjacent to the Company's tenements (Gum, PIRSA). Although the intersection was sub-economic, it provides further supporting evidence for sulphides within the Claude Hills - Wingellina area, and validates the Company's belief in the prospectivity of the area. Ground water samples taken from three GSB stratigraphic holes drilled within the Claude Hills tenement also returned elevated base metals (Cu, Zn, Ni, Co) values above the regional background, suggesting that these grounds waters had been in direct contact with metal sulphides at some time in the past (Gum, PIRSA). Particular attention will be given to the area where these holes were drilled in the forthcoming field program.

FUTURE EXPLORATION DIRECTION

The objectives of the Company's exploration and corporate programs for 2003 are: -

• Exploration for nickel sulphides on the recently acquired Claude Hills tenements
• Targeted drilling on Wingellina to extend to laterite resource to 100 million $\bullet$ tonnes at 1.5% nickel, representing a +25 year mine life
• Raise awareness of the quality and value of the Company's assets in the investment and global mining communities

WINGELLINA

The recent sharp rise in the world nickel price is attributed to a shortfall in the supply of new production and rising demand. Most analysts expect this trend to continue for sometime. The rising nickel price presents an opportunity for the Company to realise the value of Wingellina, which has a number of positive attributes that set it apart from other nickel laterite projects.

Wingellina is Australia's largest undeveloped nickel resource and has a high-grade resource of 35 million tonnes of nickel laterite grading 1.40% nickel and 0.08% cobalt (at 1.2% nickel cutoff) within a global resource of 227 million tonnes grading 1.0% nickel and 0.07% cobalt. Metallurgical tests carried out in 2002 showed that recoveries of 95% nickel are obtainable for both the limonitic and saprolitic laterite using pressure acid leach (PAL) technology with very low acid consumption of 350 kilograms per Pressure acid leach on the limonite only had exceptionally low acid tonne. consumption of 290 kilograms per tonne. The favourable metallurgical characteristics of the Wingellina nickel laterite are attributed to the low clay and magnesium content of the material.

There is a common perception that the remote location of Wingellina will prevent The Company has commissioned an independent development of the project. metallurgical consultant with experience in nickel laterite projects to review Wingellina and address the major factors affecting development of the project. Particular attention will be given to the issue of infrastructure.

The metallurgical characteristics of Wingellina are similar to the New Caledonian projects, and resource base also places it on par with the New Caledonian projects in terms of scale and project life. Wingellina has the major advantages of low political and sovereign risk. Furthermore, being in the dry arid environment confers significant mining and environmental advantages to Wingellina.

CORPORATE

Capital Raising

The company completed the placement of 26,717,000 shares (together with the grant of one option for every two shares) as approved by shareholders at the annual general meeting on 25 September 2002, thereby raising \$935,095 before expenses of the issue.

The company also raised a further \$800,000 from calls on the 40,000,000 partly paid shares.

These capital raisings are being applied to continue drilling and analysis at Wingellina.

Dated at Perth this 13 day of March 2003

Signed in accordance with a resolution of Directors.

. . . . . . . . . . . . . . . . . . . .

B R Matich Managing Director

STATEMENT OF FINANCIAL PERFORMANCE FOR THE HALF YEAR ENDED 31 DECEMBER 2002

	Notes		Consolidated
		2002 \$	2001 \$
Revenue from ordinary activities	2	2,283	109,593
Depreciation		(47, 836)	(12, 276)
Carrying value of property, plant & equipment and investments sold			(17, 578)
Other expenses from ordinary activities		(277,910)	(402,729)
Loss from ordinary activities before income tax expense		(323, 463)	(322,990)
Income tax expense relating to ordinary activities
Loss from ordinary activities after income tax expense		(323, 463)	(322,990)
Net loss attributable to outside equity interest			87,819
Net loss attributable to members of Acclaim Exploration NL		(323,463)	(235.171)
Basic earnings per share - cents		(0.13)	(0.12)
Diluted earnings per share - cents		(0.13)	(0.08)

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2002

	Notes	Consolidated
		31 December 2002 \$	30 June 2002 \$
CURRENT ASSETS
Cash assets Receivables		462,854 15,192	31,836 79,900
TOTAL CURRENT ASSETS		478,046	111,736
NON-CURRENT ASSETS Investments Property, plant and equipment Mineral interests		15,198 248,571 10,919,359	15,198 296,407 10,184,790
TOTAL NON-CURRENT ASSETS		11,183,128	10,496,395
TOTAL ASSETS		11,661,174	10,608,131
CURRENT LIABILITIES Payables Interest bearing liabilities		609,025 7,066	946.264 6,321
TOTAL CURRENT LIABILITIES		616,091	952,585
NON-CURRENT LIABILITIES Interest bearing liabilities		29,758	33,478
TOTAL NON-CURRENT LIABILITIES		29,758	33,478
TOTAL LIABILITIES		645,849	986,063
NET ASSETS		11,015,325	9,622,068
EQUITY Contributed equity Reserves Accumulated losses	5	26,175,048 262,809 (15, 422, 532)	24,458,328 262,809 (15,099,069)
TOTAL EQUITY		11.015.325	9.622.068

STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2002

	Consolidated
	2002	2001
	S	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees Interest received	(160, 780) 2,283	(329,789) 9,593
NET CASH USED IN OPERATING ACTIVITIES	(158, 497)	(320, 196)
CASHFLOWS FROM INVESTING ACTIVITIES
Exploration expenditure/recoup	(1, 124, 230)	(1, 169, 049)
Purchase of plant and equipment Proceeds on sale of investments		(83, 148) 100,000
NET CASH USED IN
INVESTING ACTIVITIES	(1, 124, 230)	(1, 152, 197)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share and option issues (net)	1,716,720	4,859,840
Repayments of borrowings	(2,975)
NET CASH INFLOW FROM FINANCING ACTIVITIES	1,713,745	4,859,840
NET INCREASE IN CASH HELD	431,018	3,387,447
CASH AT BEGINNING OF HALF YEAR	31,836	66,091
CASH AT END OF HALF YEAR	462,854	3,453,538

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS for the half year ended 31 December 2002

$\ddagger$ . STATEMENT OF ACCOUNTING POLICY

This general purpose half year consolidated financial report has been prepared in accordance with Accounting Standard AASB 1029 : Interim Financial Reporting and other mandatory professional reporting requirements. It is recommended that these accounts be read in conjunction with the financial report for the year ended 30 June 2002 and any public announcements made by Acclaim Exploration NL during the half year in accordance with any continuous disclosure obligations arising under the Corporations Act 2001.

The accounting policies have been consistently applied by the Consolidated Entity and are consistent with those of the previous financial year.

For the purposes of preparing this half year consolidated financial report, the half year has been treated as a discrete reporting period.

The half year report does not include full disclosure of the type normally included in an annual financial report.

GOING CONCERN

This financial report has been prepared on a going concern basis not withstanding the deficiency in working capital of \$138,045. The directors believe that the going concern basis is appropriate as further calls on unpaid capital of 2 cents per share totalling \$800,000 may be called at any time at the discretion of the directors.

$\mathbf{2}$ REVENUE

3.

	Consolidated
	2002 \$	2001 Ŝ
Revenue from operating activities Interest received - other corporations	2,283	9,593
Revenue from non-operating activities Sale of investments		100,000
Total Revenue from ordinary activities	2.283	109.593
EXPENSES AND LOSSES/(GAINS)
(a) Expenses Depreciation of plant and equipment	47.836	12,276
(b) Losses/(Gains) Profit on sale of investments		(82,422)

NON CASH FINANCING AND INVESTING ACTIVITES 4.

There were no transactions or events during the half year which affected assets and liabilities and did not result in cash flows.

5. ACCUMULATED LOSSES

	Consolidated
	6 months to 31 December 2002	Year to 30 June 2002 S
Balance at beginning of period Net (loss)/profit from ordinary activities	(15,099,069) (323, 463)	(14, 174, 376) (924, 693)
Balance at end of period	(15.422.532	(15.099.069)

6. SUBSEQUENT EVENTS

Subsequent to half-year end:

The company completed the acquisition of the 100% interest in Austral Nickel Pty Ltd, the holder of Exploration Licence 2777 in the Claude Hills region adjoining the company's Wingellina tenement area. The acquisition was satisfied by the issue of 45,000,000 ordinary fully paid shares.

7. CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

DIRECTORS' DECLARATION

The directors of the company declare that:

• $1₁$ The financial statements and notes as set out on pages 5 to 9:
• comply with Accounting Standard AASB 1029: Interim Financial Reporting $(a)$ and the Corporations Regulations; and
• give a true and fair view of the consolidated entity's financial position as at 31 $(b)$ December 2002 and its performance for the half-year ended on that date.
• $2.$ In the directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

. . . . . . . . . . . . . . . . . . . . B R Matich Managing Director

PERTH, Western Australia

Dated: 13 March 2003

INDEPENDENT REVIEW REPORT

To the Members of ACCLAIM EXPLORATION NL

Scope

We have reviewed the financial report of Acclaim Exploration NL for the half-vear ended 31 December 2002 as set out on pages 5 to 10. The financial report includes the consolidated financial statements of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year. The company's directors are responsible for the preparation and presentation of the financial report and the information contained therein.

We have performed the review of the financial report in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the financial report is not presented fairly in accordance with Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory professional reporting requirements and statutory requirements in Australia, so as to present a view which is consistent with our understanding of the consolidated entity's financial position and performance as represented by the results of its operations and its cash flows, and in order for the company to lodge the financial report with the Australian Securities and Investments Commission / Australian Stock Exchange Limited

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements. The review is limited primarily to inquiries of company personnel and analytical procedures applied to the financial data. Our review has not involved a study and evaluation of internal accounting controls, tests of accounting records or tests of responses to inquiries by obtaining corroborative evidence from inspection, observation or confirmation. The procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Statement

Based on our review, which is not an audit, we have not become aware of any matter that causes us to believe that the half-year financial report of Acclaim Exploration NL is not drawn up in accordance with:

• a) the Corporations Act 2001, including:
• i) giving a true and fair view of the consolidated entity's financial position as at 31 December 2002 and of its performance for the half-year ended on that date; and
• ii) complying with Accounting Standard AASB 1029 "Interim Financial Reporting" and the Corporations Regulations; and
• b) other mandatory professional reporting requirements in Australia.

HLB MANN JUDD Chartered Accountants

L DI GIALLONARDO Partner

Perth, Western Australia 13 March 2003

11

HLB Mann Judd (WA Partnership)

¹⁵ Rheola Street, West Perth 6005. PO Box 263, West Perth 6872. DX 238 (Perth). Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686 Email: hib@mjwa.com.au. Website: http://www.hlb.com.au