EVOLUTION MINING LIMITED — Interim / Quarterly Report 2005

Jan 30, 2005

WESTONIA MINES LIMITED

QUARTERLY REPORT FOR THREE MONTHS ENDED 31 DECEMBER 2004

SUMMARY

• Capital and operating cost savings identification programme continues for the Westonia gold project against a background of weaker AUD gold price and industry cost inflation.
• Geostatistical resource estimates are to be reworked on consultants' advice to assess potential significant underestimates of resource grade to date.
• Early encouragement from modelling of zones of gold mineralization beneath the planned pit and targeted for underground production.
• Drilling to test the open cut mining potential of the Greenfinch Prospect scheduled for March Quarter.
• Regional gold exploration programme resumes on 20 targets.

Comest Details

OPEN CUT MINING PROJECT

The Company has previously announced positive completion of a Bankable Feasibility Study ('BFS') into mining and processing of a reserve of 687,000 ozs from its resource inventory of 1,360,000 ozs to 300m depth.

In the September Quarterly Report, the Company advised that tenders submitted for its major construction and mining contracts had increased compared to the indicative ones used in that BFS. This cost increase has been triggered by the generally booming international minerals demand. Additionally the strong Australian dollar has offset any advantages of the higher US gold price, and oil costs have risen throughout 2004.

During the Quarter the Company has been examining all aspects of its mining and processing plans to determine areas in which savings can be made in operating and capital costs. It has been working closely with banks to optimise the project and its debt-carrying capacity. RFC Corporate Finance Ltd has been appointed as corporate adviser.

GRADE ESTIMATES

The Company has considered for some time that its stated resource grade estimates may be unduly conservative.

The resources of the Westonia Gold Project currently stand at a grade of 1.39 g/t. Estimates have been provided by several independent consulting groups and the results are in broad accord.

The potential for a conservatively estimated resource grade is considered to be due to a combination of the relatively unusual style of mineralization at Westonia, as well as the effects on the geostatistical modelling of the production of some 360,000 ounces of gold from the historic high grade underground mines.

Accordingly, geostatistical consultants were commissioned in January to review the methodologies of the estimation process so as to provide a new approach from which a future estimation result would be in greater accord with the broad statistics of the gold grades determined from the Company's extensive database.

ROYALTY

Westonia Mines records with gratitude that the Read Family, which has a 2% gross royalty on production, has formally agreed to a three year suspension of 14/15^ths of that royalty with respect to an open cut operation. This decision allows savings of about \$1.0M per year which can be directed to earlier retirement of any Project debt.

UNDERGROUND

The Company aspires to an early resumption of underground mining on its major gold system – which has so far been successfully drilled to 700 m depth.

There is potential for a significant increase in Project value based on parallel gold production from underground and open-cut mining. During the Quarter, consultants were employed to use 3D computer techniques to model the mineralized zones below the planned open cut, as the basis for estimation of underground resources. Results from the initial phase of work are most encouraging.

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GREENFINCH

The Greenfinch Prospect occurs close to the western boundary of the planned open pit. Previous widely spaced drilling of it indicated good potential for delineation of the Company's second deposit amenable to open cut mining. Its mining would have a major secondary effect in that it would lower the operating costs of the main pit by reducing waste haulage costs. Drilling of Greenfinch is planned for the March Quarter. A figure and table from the 2004 Annual Report are reproduced herein.

Previous Greenfinch Drilling Results

Hole No.	From	To	Metres	Gold Assay
WRC 304	ີ	33		8.2
WRC 685	29	34
WRC 686		25		2.9
WRC 689	34	38
WRC 692
WRC 697		52 (EOH)

EXPLORATION

Exploration levels during the Quarter were subdued while the Company focussed on the development Project, and also because of seasonal Wheatbelt cropping factors.

A research project based on evaluation of all accessible historic exploration data was completed, and some 20 gold anomalies and a nickel prospect were defined for follow-up. With district harvesting completed, field exploration was recommenced in January. General gold prospect distribution is indicated on the accompanying figure.

Shareholders are reminded that the Company controls most of the highly prospective Westonia Greenstone Belt (see figure), and that previous exploration has been of relatively low intensity by Eastern Goldfields standards.

Andrew Drummond Managing Director

31^st January 2005

Competent Person Declaration

The information on mineralization 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.

REGIONAL TARGET LOCATIONS

WESTONIA GREENSTONE BELT - TENEMENT STATUS

Appendix 5B

$Rule 5.3$

Mining exploration entity quarterly report

$\overline{\phantom{a}}$

Current quarter

Name of entity

WESTONIA MINES LIMITED

${\rm ABN}$

74 084 669 036

Quarter ended ("current quarter") 31 DECEMBER 2004

$\mathsf{I}$

Year to date

Consolidated statement of cash flows

Cash flows related to operating activities		\$A'000	\$A'000 (3 months)
1.1	Receipts from product sales and related debtors
1.2	Payments for (a) exploration and evaluation (b) development	(208)	(704)
	(c) production (d) administration	(371)	(655)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	29	51
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (GST refunds received)	51	78
	Net Operating Cash Flows	(498)	(1,232)
1.8	Cash flows related to investing activities
	Payment for purchases of: (a) prospects		(10)
	(b) equity investments
	(c) other fixed assets		(21)
1.9	Proceeds from sale of:
	(a) prospects (b) equity investments
	(c) other fixed assets
1.10	Loans to other entities
1.11	Loans repaid by other entities
1.12	Other
	Net investing cash flows		(31)
1.13	Total operating and investing cash flows (carried forward)	(498)	(1,263)

1.13	Total operating and investing cash flows (brought forward)	(498)	(1,263)
1.14 1.15 1.16 1.17 1.18 1.19	Cash flows related to financing activities Proceeds from issues of shares, options, etc. Proceeds from sale of forfeited shares Proceeds from borrowings Repayment of borrowings Dividends paid Costs of capital raisings		1,000
	Net financing cash flows		1,000
	Net increase (decrease) in cash held	(498)	(263)
1.20 1.21	Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20	1,699	1,464
1.22	Cash at end of quarter	1,201	1,201

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

		Current quarter \$A'000
1.23	Aggregate amount of payments to the parties included in item 1.2	93
1.24	Aggregate amount of loans to the parties included in item 1.10	$\bullet\bullet$

1.25 Explanation necessary for an understanding of the transactions

Salaries and payments to director controlled entities for the provision of consultancy services and directors fees. All payments on commercial terms.

Non-cash financing and investing activities

$2.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

None

2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

None.

Financing facilities available
Add notes as necessary for an understanding of the position.

		' Amount available \$A'000	Amount used \$A'000
$\mathcal{Z}$ 1	Loan facilities
3.2	Credit standby arrangements

Estimated cash outflows for next quarter

		\$A'000
4.1	Exploration and evaluation	760
4.2	Development	$\mathbf{u}$
	Total	760

Reconciliation of cash

	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 quarter SA'000	Previous quarter SA'000
5.1	Cash on hand and at bank	107	504.
5.2	Deposits at call
5.3	Bank overdraft
5.4	Other (Commercial Bills)	1.094	1,195
	Total: cash at end of quarter (item 1.22)	1.201	1.699

Changes in interests in mining tenements

		Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
-6.1	Interests in mining tenements relinquished, reduced or lapsed
6.2	Interests in mining tenements acquired or increased

Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.

		Total number	Number	Issue price per	Amount paid up per
			quoted	security (see note 3)	security (see note 3)
				(cents)	(cents)
7.1	Preference
	securities
	(description)
7.2	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases through returns of
	capital, buy-backs,
	redemptions
7.3	Ordinary
	securities	105,193,852	105, 193, 852
7.4	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases
	through returns of
	capital, buy-backs
7.5	Convertible debt
	securities
7.6	Changes during
	quarter
	(a) Increases through issues
	(b) Decreases
	through securities
	matured,
	converted
7.7	Options			Exercise price	Expiry date
	(description and	800,000		\$0.30	31/5/05
	conversion factor)	700,000		\$0.40	31/5/06
		120,000		\$0.36	17/7/06
		120,000		\$0.43	17/7/06
		120,000		\$0.50	17/7/06
		27,448,001	27,448,001	\$0.20	20/8/06
		105,000 105,000		\$0.36 \$0.42	27/4/07 27/4/07
	Total on Issue	29,558,001	27,448,001
7.8	Issued during
	quarter
7.9	Exercised during
	quarter
7.10	Expired during
	quarter
7.11	Debentures
	(totals only)	A.
7.12	Unsecured notes
	(totals only)

Compliance statement

• $\mathbf{I}$ This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
• $\overline{2}$ This statement does /does not* give a true and fair view of the matters disclosed.

Sign here: "Mark Churchward" Date: 31 January 2005 Company Secretary

Print name: MARK CHURCHWARD

Notes

• The quarterly report provides a basis for informing the market how the entity's activities have been $\mathbf{1}$ financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
• $\bar{2}$ The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
• $\overline{3}$ Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
• The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: 4 Statement of Cash Flows apply to this report.
• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.