EVOLUTION MINING LIMITED — Interim / Quarterly Report 2003

Jul 28, 2003

QUARTERLY REPORT FOR THREE MONTHS ENDED 30 June 2003

HIGHLIGHTS

• Independent bankable feasibility study nearing completion $\ddot{\bullet}$
• Final open pit infill drilling is underway following results of an $\ddot{\bullet}$ independent resource estimate study
• Nickel sulphides were discovered adjacent to the planned open pit
• The Company controls most of the highly prospective Westonia Greenstone Belt and has a right of first refusal over the remainder
• Westonia Deeps Initiative launched
• Nickel, Deeps Initiative gold and mine resource drilling programmes commenced in July
• Mr David Macoboy to join the Board as a Non-Executive Director ٠ effective 1 August

Enquiries: Andrew Drummond, Managing Director Westonia Mines Limited ABN 074 084 669 036

9 Havelock Street, West Perth, WA 6000 Telephone: +61 8 9321 3088 Facsimile: +61 8 9321 8804 Email: andrewd@westoniamines.com.au Web site: www.westoniamines.com.au

WESTONIA GOLD PROJECT

BANKABLE FEASIBILITY STUDY

An independent bankable feasibility study (BFS) on recommencing a gold operation at Westonia is nearing completion.

All technical studies have been completed and a Notice of Intent to resume a mining operation has been submitted to the relevant State authorities for approval.

RSG Global ("RSG") is undertaking the independent resource estimation. In a draft report, RSG has revised downwards the earlier estimate of mineable open pit resources, as previously released to the market. It cited that in some key regions, where there are high grade intersections and lower drilling densities, its estimation techniques might have limited the resource.

RSG has recommended that by undertaking additional drill in selected target regions, the potential exists to upgrade the resource and therefore improve project economics. It has suggested that a limited program of infill drilling to increase the level of data in those key areas of lower drilling density is warranted.

Westonia Mines ("WEZ") has accepted RSG's recommendation and, as a matter of priority, is drilling holes with diamond extensions. The drilling will total approximately 2,500m and will be completed in July. When drill results are available, the resource estimation will be revised and finalised enabling completion of the BFS.

PROJECT FINANCING

The Company is continuing project financing discussions with principal lenders to the mining industry, and in view of the weaker gold price is considering alternative financing arrangements.

CAPITAL ACQUISITIONS

During the quarter the Company announced that it had taken an option with Interquip Pty Ltd to purchase the principal components of a CIP gold processing plant. The plant is in good condition and located at Mt Pleasant near Kalgoorlie, 300 km from the Westonia mine site.

WEZ has subsequently purchased, at auction, a mine site office complex.

NICKEL

The Company announced in May that nickel assaying of reverse circulation drill hole WRC 994 returned the following result:

16m @ 1.77% Ni from 44m

The down hole intersection is interpreted to approximate the true width. Nickel mineralisation occurs within a broader nickel sulphide zone between 42m and 74m down hole and is associated with ultramafic rocks adjacent to the gold-bearing Edna May Gneiss.

Limited follow up has been undertaken to date, however WRC 999, which is 700m west of WRC 994, returned 10m @ 1.61% Ni from 30m with an interpreted true width of about six metres. The intersection is within the weathered zone (Figures 1 and 2). Re-logging of old diamond hole WDD 078 (drilled to 835.5m in 1987) revealed low grade disseminated nickel sulphide mineralisation in the bottom 10cm of the hole (Figure 1).

Both WRC 994 and WRC 999 are adiacent to the edge of the proposed open pit outline being designed for the Bankable Feasibility Study for the gold project (Figure 1).

Any eventual economic accumulations of nickel mineralisation near the gold mine itself could be extracted by an extension of the proposed open pit or by underground access from the preexisting decline (Figure 2) that extends to a vertical depth of 264 metres.

The first drilling programme to test the depth extensions of the mineralisation in WRC 994 and WRC 999 has commenced and should be completed in July.

Regional Evaluation

This is the first known intersection of nickel sulphide mineralisation in the Westonia Greenstone Belt and the Company has initiated exploration over other tenements containing ultramatic rocks.

The target zone at West Westonia (Figure 3) has returned encouraging soil geochemical values and a coherent EM and IP geophysical anomaly will be drill tested.

In the Jilbadjie area, geochemical sampling for both nickel and gold has indicated anomalous areas worthy of further follow-up.

The Future

While not allowing the Company to be distracted from the main aim of bringing about early gold production from Westonia, it intends to follow-up the nickel mineralisation potential of the Westonia Greenstone Belt. Of particular and immediate interest will be those ultramafic rocks and nickel intersections in or adjacent to the planned open pit gold mine where there may be a near-term impact on Project economics.

TENEMENT ACQUISITIONS

The Company has moved to secure all the tenements covering the Westonia Greenstone Belt. From the original 7.7 $km^2$ holding, the Company now controls 792 $km^2$ and has the right of first refusal over a further 446 km² via an Exploration Licence application and six deals with third parties (Figure 3). The terms of the two principal deals are outlined in Appendix 1.

DEEPS GOLD INITIATIVE

The Westonia Deeps Initiative aims to secure the longer term profitability of the Company by testing the multi-million ounce Westonia gold system to a depth of approximately 1,000m to define ore reserves that can be mined from underground. WEZ intends to define broad mineralised zones suitable for extraction by mechanised mining methods, initially utilising the decline that is already at a depth of 264m.

The Company has previously announced an initial \$500,000 commitment to the Initiative. Stage One of the program involves drilling five diamond drill holes (refer to plan, Figure 4) for a total of 3,000m to test for gold mineralisation between 400 and 700m depth in the main host unit, the Edna May Gneiss ("EMG"). The information gained will enhance targeting of the Stage Two holes, which will test between 700 and 1,000m depth (Figure 4).

Holes WDD 096 and WDD 097 will test for lateral extensions of gold mineralisation intersected in the second deepest hole drilled on the Project (WDD 083; 7.5m $@$ 9.1 g/t from 496.0m, 5.0m @ 7.2 g/t from 529.9m @ 5.8 g/t from 582.0m). They will also test for fault offsets of the Edna May Reef.

WDD 096 and WDD 098 will test for depth extensions of the South and Central/Middle Reef systems in the main Deeps Target Zone, and test the model that these reefs pass to the West of the Edna May Reef at depth.

Based on interpretation of the Company's recent detailed aeromagnetic survey and on resource definition drilling in the Western part of the likely pit area, holes WDD 099 and WDD 100 will test the EMG in a region West of any previous deep drilling. If successful, this will open up a large new zone of EMG for follow-up evaluation.

The Stage One drilling commenced on 21 July.

During the forthcoming quarter, the current drilling database will be used to provide an independent estimate of mineable resources below the Company's planned open cut.

CAPITAL RAISING

During the quarter the Company placed 12.4 million ordinary shares at 36¢ each to domestic clients of Euroz Securities Limited. The prospectus for the issue to raise \$4,464,000 was heavily oversubscribed.

The funds will be utilised to advance the Deeps Initiative and evaluate the nickel and gold prospectivity of the Company's extensive tenement holding.

NEW BOARD APPOINTMENT

The Directors of the Company are pleased that Mr David Macoboy has accepted an invitation to join the Board as a Non-Executive Director, effective 1 August.

Mr Macoboy brings extensive experience in accounting, capital raising, corporate management and treasury to the Company. This will benefit WEZ in the project financing discussions and provide invaluable knowledge as the Company makes the transition from explorer to producer.

He is currently a Director of Consolidated Minerals Ltd, Monarch Resources Ltd and ANZOIL NL. He has previously held senior management positions or Directorships with Portman Mining Ltd, Australian Capital Equity, Merrill Lynch and Challenge Bank.

Andrew Drummond Managing Director

Competent Person Declaration

The information on mineralisation in this report accurately reflects information prepared by competent persons (as defined by the Australasian Code of Reporting of Identified Mineral Resources and Ore Reserves). It is compiled by A.J. Drummond, an employee of the Company who is a Fellow of The Australasian Institute of Mining and Metallurgy with more than requisite experience in the fields of activity in which he is reporting.

APPENDIX 1

With Sons of Gwalia ("SOG") via a Sale Agreement dated 5 May 2003 made between SOG $a)$ as the vendor and the Company as purchaser. SOG agreed to sell to the Company Exploration Licences 77/516, 77/990, Application for Exploration Licence 77/1059 and Prospecting Licences 77/3300, 77/3350 and 77/3351 for a consideration of three hundred and fifty thousand dollars (\$350,000) and a royalty of ten dollars (\$10.00) per ounce of gold produced from such tenements.

SOG retains exclusive rights to conduct exploration activities and/or mining operations on a small portion of Exploration Licence 77/516 and is required to pay a pro-rata share of rent and rates due in respect of that mining tenement, incur a pro-rata share of the required expenditure under the Mining Act and pay an existing royalty to Equinox Resources NL and Swan Resources Pty Ltd ("Equinox Royalty") on its production from that area. In respect of the balance area of Exploration Licence 77/516 the Company has exclusive rights and is required to pay its pro-rata share of rent and rates, incur a pro-rata share of expenditure required under the Mining Act and pay the Equinox Royalty on its gold production from that area. The Equinox Royalty is a royalty of ten dollars (\$10.00) per ounce of gold produced upon to a maximum of five million dollars (\$5,000,000). That portion of E77/516 will transfer to WEZ if SOG does not wish to undertake further exploration of it.

Whilst the Company is paying the Equinox Royalty on gold won from its portion of Exploration Licence 77/516, the Company is required to pay to SOG a royalty of five dollars (\$5.00) per ounce on the same gold production. This royalty payable to SOG increases to ten dollars (\$10.00) per ounce following the Company no longer being required to pay the Equinox Royalty.

A royalty of two percent (2%) of gross revenue in favour of SOG applies in respect of all minerals, metals and ores other than gold produced by the Company from Exploration Licence 77/516.

WEZ also has a right of refusal to purchase Exploration Licences 77/965, 77/988 and 77/991 ("Additional Tenements"). SOG may at any time give notice in writing to the Company offering to sell all or any of these Additional Tenements, which offer, is required to be accepted by the Company within thirty (30) days at a price of fifty thousand dollars (\$50,000.00) for each of the Additional Tenements. If SOG wishes to relinquish or surrender all or any part of the Additional Tenements as part of the statutory surrender requirements under the Mining Act then SOG is first required to give notice to the Company of such proposed relinguishment or surrender whereupon the Company may require SOG to make application for mining leases in respect of such area and following grant of such an application transfer the mining leases to the Company. During the Quarter part of E77/965 (comprising about $45m^2$ ) was transferred to WEZ in this manner.

Where the Company acquires an interest in any of the Additional Tenements or a mining tenement in respect of an area, which was formerly the subject of one or more of the Additional Tenements then a royalty of ten dollars (\$10.00) per ounce of gold production shall apply in favour of SOG in respect of such areas.

b) With Image Resources NL via a letter of agreement dated 24 April 2003 made between the Company and Image Resources NL ("Image") the Company is entitled to earn a sixty five percent (65%) equity in each of Exploration License 77/572 and applications for Exploration Licences 77/1059 and 77/1132 (subsequent to grant) upon incurring expenditure equal to twice the minimum annual expenditure commitment for that tenement.

Upon the Company acquiring a sixty five percent (65%) equity in any tenement, Image can elect either to contribute to further expenditure pro-rata to its equity or be granted a freecarried interest at a thirteen percent (13%) equity to the end of a bankable feasibility study or to be granted a two percent (2%) gross royalty in respect of any precious metal production.