GATEWAY MINING LIMITED — Annual Report 2003

Sep 29, 2003

ABN: 31 008 402 391 Suite 2002 Level 20 Gateway, I Macquarie Place Sydney NSW 2000 PO Box R833 Royal Exchange PO Sydney NSW 1225 Tel: 61 2 9251 2088 Fax: 61 2 9251 7785 Email: info@gatewaymining.com.au Website: www.gatewaymining.com.au

30 September 2003

The Manager Company Announcements Office Australian Stock Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000

Dear Sir,

LODGEMENT OF ANNUAL ACCOUNTS Listing Rule 4.5.1

In accordance with Listing Rule 4.5.1, please find attached a copy of the audited annual accounts for the Company for the year ended 30 June 2003.

Yours faithfully,

A.C. de Grovnh

Anthony C. de Govrik Company Secretary

DIRECTORS' REPORT

Your directors present their report on the company for the financial year ended 30 June 2003.

$\mathbf{1}$ DIRECTORS

The names and details of the directors of the company in office at any time during or since the end of the vear are:

Names, Qualifications, Experience and Special Responsibilities

Brian Gomez (Chairman)

Bachelor of Science (Earth Sciences) from Macquarie University

Appointed Chairman in 1995. Board member since 1995. Brian has been analysing and writing about resource projects and issues in Australia and internationally for more than two decades. He has acted in a corporate advisory capacity to a number of listed and unlisted resource companies and delivered papers at International Conferences. Brian is a former Jefferson Fellow at the East West Center in Honolulu and a Fellow of the Institute of Company Directors.

Robert A.Creelman (Consultant geologist)

PhD.Geol. F.A.U.S.SI.M.M.

Board member since 1994. Dr Creelman is a Fellow of the Australian Institute of Mining and Metallurgy. and a Certified Professional (Geology) with the Institute. He has had over 30 years experience in the geosciences and allied engineering disciplines and has been a director of public companies involved in exploration and mining.

He recently accepted an Adjunct Associate Professorship on a part time basis at the University of Western Sydney, and is a Research Fellow at the University of Newcastle in coal combustion and utilization. He has in the past been in CSIRO involved in the development of automated mineralogy for the minerals industry. Through his consultancy, he has been involved in exploration for gold, base metals, fuel and platinum resources.

Brian F. Thornton

B.Ec., A.S.I.A.

Board member since 2001. Brian Thornton, a graduate in Economics from the Australian National University and an Associate of the Securities Institute of Australia, has a diverse background covering the public and private sectors. He has worked as an adviser to the resources sector for almost 20 years and consults to a number of listed gold base metals and bulk commodity companies. His expertise covers IPO's, mergers and acquisitions and capital raisings.

He is also a director of Gel Oil Pty Limited.

Interests in the shares and options of the Company.

As at the date of this report, the interests of the Directors in the shares and options of the Company were:

	Ordinary shares	Options over ordinary shares
Brian Gomez	101.250	211.250
Robert A. Creelman	40.500	199.500
Brian F.Thornton	7.325.753	1.355.639

$2.$ PRINCIPAL ACTIVITIES

The principal activities of the company during the year were resource exploration and investments. There were no significant changes in the nature of the activities of the company that occurred during the year.

$\overline{3}$ . RESULTS AND DIVIDENDS

The loss from ordinary activities after tax for the year was \$787.547 (2002 - \$488.096). No dividends have been declared or paid during the year.

REVIEW OF OPERATIONS $\overline{4}$ .

The company continues to assess and evaluate its exploration tenements in Western Australia. New South Wales and Queensland. (See Operation Review).

On 28^th April 2003 the Company entered a Farm-In and Joint venture agreement with Straits Exploration (Australia) Ptv Ltd ("Straits") to explore for and, if appropriate, develop and mine minerals in the Cowra Project. Under the terms of agreement. Straits must spend a minimum of \$250,000 in initial expenditure before earning an interest in the designated tenements. Upon Straits providing evidence to the Company of incurring the initial expenditure and to the reasonable satisfaction of the Company. Straits or its nominee can earn a 51% interest in the Joint Venture by incurring a minimum \$800,000 (including the Initial Expenditure). Straits or its nominee can earn up to 70% participating interest by further contributing \$1,200,000 in expenditure on the joint venture area.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS 5.

There were no significant changes in the state of affairs of the company which occurred during the financial year ended 30 June 2003.

ENVIRONMENTAL REGULATION 6.

The company's operations are subject to various environmental regulations under State regulations. The Directors are not aware of any material breaches during the financial year.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE 7.

There have been no significant events occurring after balance date.

8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The directors believe, on reasonable grounds, that it would unreasonably prejudice the interests of the company if any further information on likely developments in the operations of the company and the expected results of these operations, were included herein.

SHARE OPTIONS $9.$

At the date of this report, there were 9,692,828 unissued ordinary shares under options $(2002-9.692.828)$ . The option is exercisable at 30cts on or before $1^st$ March 2007.

$10.$ EMPLOYEES

There were 2 employees as at 30 June 2003 (2002-2)

$11.$ DIRECTORS' AND OTHER OFFICERS' EMOLUMENTS

The Board of directors is responsible for determining and reviewing compensation arrangements for the directors, the chief executive officer and the executive team. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. The officers are given the opportunity to receive their base emolument in a variety of forms, including cash and expense payments. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company. The Board links the nature and amount of executive directors' and officers' emoluments to the company's financial and operational performance.

Directors' Emoluments

	Fees	Other Benefits	Total
Name
Brian Gomez	18.000	$\overline{\phantom{a}}$	18.000
R.A. Creelman	19.800	$\sim$	19.800
B.F.Thornton	10.000	$\overline{\phantom{a}}$	10.000
Executive Emoluments

	Salarv	Fees	Other	Superannuation	Total
Name			Benefits	Contributions
Steven Lian (CEO)	120.000	$\sim$	9.000	10.800	139.800
Simon Taylor (Exploration Manager)	-	105.653	9,700	COLUM	115.353

Ontions

At the date of this report there are 9,692,828 options over unissued shares in the capital of the Company. The options are exercisable at 30cts on or before 1^st March 2007. No options have been exercised in the financial year.

DIRECTORS AND OFFICERS LIABILITY INSURANCE $12.$

During or since the end of the financial year the Company has given an indemnity or entered an agreement to indemnity, or paid or agreed to pay insurance premiums as follows:

The company has entered into an agreement to indemnify every officer to the extent permitted by law, against all costs expenses and liabilities incurred as such an officer providing it is in respect of a liability to another person (other than the Company or a related body corporate) where such liability does not arise out of conduct involving a lack of good faith and it is in respect of a liability for costs and expenses incurred in defending proceedings in which judgement is given in favour of the officer or in which the officer is acquitted or is granted relief under the law.

The company has paid premiums to insure each of the directors and executives against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of the conduct while acting in the capacity of director or executive of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium paid during the year ended 30 June 2003 was \$16,295. The directors are Brian Gomez, R.A Creelmen and Brian Thornton.

DIRECTORS' MEETINGS $13.$

During the financial year, 6 meetings of directors (including committees) were held. Attendances were:

	Meetings held	Meetings attended
Brian Gomez
R.A.Creelman
B.F.Thornton

The company does not have an Audit Committee as this function is performed by the Board of Directors.

$14.$ CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Gateway Mining NL support and adhered to the principles of corporate governance. These principles have been formalised by the Board in the corporate governance statement contained in the additional ASX information section of this annual report.

PROCEEDINGS ON BEHALF OF THE COMPANY 15.

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Signed in accordance with a resolution of the directors.

B. F. THORNTON Director Sydney Date:

STATEMENT OF FINANCIAL PERFORMANCE
for the year ended 30 June 2003

		NOTE	2003 \$	2002 \$
	Revenues from ordinary activities	$\mathbf{2}$	67,450	62,854
	Depreciation and amortisation expense	3.	(6, 647)	(4,236)
	Salaries and wages		(171, 983)	(141, 540)
	Professional Services Rendered		(60, 900)	(80, 356)
	Office expenses		(97, 778)	(93, 849)
۰	Share registry fees		(13, 774)	(27, 855)
	Diminution charges in listed shares	3.	(280, 670)	(85, 956)
٠	Investment written off	3	(100, 000)
	Other expenses from ordinary activities		(123, 245)	(117, 158)
	Loss from ordinary activities before income tax expense	3.	(787, 547)	(488,096)
	Income tax expense relating to ordinary activities	4
	Loss from ordinary activities after income tax expense		(787, 547)	(488,096)
	Net loss		(787, 547)	(488,096)
	Net loss attributable to members of Gateway Mining NL and total change in equity	14	(787, 547)	(488,096)
	Basic earnings per share Diluted earnings per share	7 $\overline{7}$	(0.011) (0.009)	(0.007) (0.007)

The accompanying notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

as at 30 June 2003

	NOTE	2003 \$	\$ 2002
CURRENT ASSETS Cash assets		904,023	2,433,510
Receivables	8	79,644	194,539
TOTAL CURRENT ASSETS		983,667	2,628,049
NON-CURRENT ASSETS
Receivables	8	109,554	106,506
Other financial assets	9	1,070,195	1,051,975
Plant and equipment ۰	10	21,313	22,718
Deferred exploration and evaluation expenditure	11	5,302,794	4,493,615
TOTAL NON-CURRENT ASSETS		6,503,856	5,674,814
TOTAL ASSETS		7,487,523	8,302,863
CURRENT LIABILITIES
Payables	12	34,250	62,043
TOTAL CURRENT LIABILITIES		34,250	62,043
TOTAL LIABILITIES		34,250	62,043
NET ASSETS		7,453,273	8,240,820
EQUITY
Contributed equity Accumulated losses	13 14	17,011,786 (9,558,513)	17,011,786 (8,770,966)
TOTAL EQUITY		7,453,273	8,240,820

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS
for the year ended 30 June 2003

	NOTE	2003 \$	2002 \$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(383, 626)	(533, 460)
Interest received		67,450	54,746
Receipt from loan repayment			536,500
Other			8,108
NET CASH USED IN OPERATING ACTIVITIES	16	(316, 176)	65,894
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from short term deposits			1,417,262
Purchase of plant and equipment		(5, 242)	(7,049)
Purchase of listed securities		(398, 890)	(196,000)
Purchase of unlisted securities			(550,000)
Expenditure on mining interests		(809, 179)	(793, 453)
NET CASH USED IN INVESTING ACTIVITIES		(1, 213, 311)	(129, 240)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares			2,415,707
Underwriting fees			(123, 342)
NET CASH FROM FINANCING ACTIVITIES			2,292,365
NET (DECREASE) IN CASH HELD		(1,529,487)	2,229,019
Add opening cash brought forward		2,433,510	204,491
CLOSING CASH CARRIED FORWARD	16	904,023	2,433,510

The accompanying notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basic of accounting

The financial report is a general-purpose financial report that has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers the company of Gateway Mining NL as an individual entity. Gateway Mining NL is a listed public company, incorporated and domiciled in Australia.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

The following is a summary of the material accounting policies adopted by the company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Income Tay $\mathbf{a}$

Tax-effect accounting is applied using the liability method whereby the income tax is regarded as expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised.

Goods and Services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

• The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.
• Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
• Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Plant and Equipment h. Cost and valuation

Plant and equipment are measured at cost.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount of these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts.

Depreciation

Depreciation is provided on a reducing balance basis on all plant and equipment over their useful lives to the company commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Assets	Depreciation rate
Plant and equipment	8% to 40%

Investments $\mathbf{c}$

Investments are brought to account at cost. The carrying amount of investments is reviewed annually to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the current market value of the shares for listed investments or the cost for unlisted investments.

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Exploration and Development Expenditure d.

Costs carried forward

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not vet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and where there are active and significant operations.

Accumulated costs in relation to an abandoned area are written off in full against profit in the vear in which the decision to abandon the area is made.

Amortisation

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A reqular review is undertaken of each area of interest to determine the appropriateness of continuity to carry forward costs in relation to that area of interest.

Restoration costs $\bullet$

Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration, evaluation, development, construction or production phases that give rise to the need for restoration. Accordingly, these costs are recognised gradually over the life of the facility as these phases occur. The costs include obligations relating to reclamation, waste site closure, plant closure, platform removal and other costs associated with the restoration of the site. These estimates of the obligations are based on anticipated technology and legal requirements and future costs, which have been discounted to their present value. Any changes in the estimates are adjusted on a prospective basis. In the determining the restoration obligations, the company has assumed no significant changes will occur in the relevant Federal and State Legislation in relation to restoration of such mineral mines in the future.

No provision for restoration work has been made at this stage.

f. Cash and cash equivalent

For the purpose of the Statement of Cash Flows, cash includes:

• cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts. $\bullet$
• money market instruments readily convertible to cash within 14 working days.

Comparative Figures α.

Where required by accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year.

Revenue recognition h.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Interest revenue is recognised when the company controls the right to receive interest payments.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

Leases Ĭ.

Leases are classified at their inception as either operating or financial leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Ĭ. Leases

Financial leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the company are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised.

Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to the Statement of Financial Performance.

Earning per share j.

Basic earning per share is determined by dividing the net loss attributable to members by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earning per share adjusts the figure used in determining earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial year.

Sundry creditors and accruals k.

Recognition for amounts to be paid in the future for goods and services received, whether or not billed to the company.

Contributed equity Ĭ.

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transactions costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

	NOTE	\$ 2003	2002 \$
NOTE 2: REVENUE FROM ORDINARY ACTIVITIES
Non-operating activities Interest received	2a	67,450	54,746
Other revenue			8,108
Total revenues from ordinary activities		67,450	62,854
a. Interest revenue from: - other persons		67,450	54,746
Total interest revenue		67,450	54,746
NOTE 3: LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX
Loss from ordinary activities before income tax has been determined after:
Expenses
Depreciation of non-current asset: - plant and equipment		6,647	4,236
Diminution in value of listed shares		280,670	85,956
Rental expense on operating leases: - minimum lease payments		89,522	85,102
Capitalised exploration expenditure written off			9,997
Investment written off		100,000

	NOTE	2003 5	2002 S
NOTE 4: INCOME TAX
The prima facie tax on loss from ordinary activities before tax is reconciled to the income tax as follows:
Prima facie tax benefit on operating loss from ordinary activities before income tax at 30% (2002: 30%)		(236, 264)	(146, 428)
Tax effect of permanent differences:
- other non-allowable items		300	25,787
Tax effect of capital losses carried forward separately		30,000
Income tax benefit arising from current year		(205, 964)	(120, 641)
Benefit of tax loss not brought to account		205,964	120,641
Income tax expense attributable to loss from ordinary activities before income tax

As at balance date, the Company has estimated carry-forward tax losses after adjusting for permanent and timing differences of approximately \$8,638,258 (2002: \$8,248,381), which is an income tax benefit of \$2,591,477 (2002: \$2,474,514). The Company has estimated carry-forward capital losses of \$100,000 (2002:\$nil) of which income tax benefit of \$30,000 (2002:\$nil). These potential future tax benefits have not been brought into account. The taxation authority has not yet confirmed the quantum of these losses.

This future income tax benefit will only be obtained if:

(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised:

(b) the conditions for deductibility imposed by tax legislation continue to be complied with;

(c) no change in tax legislation adversely affects the company in realising the benefit.

NOTE 5: REMUNERATION
(a) Directors' Remuneration Income paid or payable, or otherwise made available in respect of the financial year, to all directors of
Gateway Mining NL, directly or indirectly from the company or any related party.	47.800	40,722
Number of directors of Gateway Mining NL whose income falls within the following bands:
	No.	No.
$0 - $9.999$
$$10,000 - $19,999$	3
$$20,000 - $29,999$
\$30.000 - \$39.999

In the opinion of directors, remuneration paid to directors is considered reasonable.

	NOTE	2003	\$	2002 \$
(b) Executives remuneration
Remuneration received or due and receivable by executive officers of the company whose remuneration is \$100,000 or more, from the company or any related party, in connection with the management of the affairs of the company whether as an executive officer or otherwise.
The number of executives of the company whose			255,153	138,600
remuneration falls within the following bands: \$110,000 - \$119,999 \$130,000 - \$139,999			No. 1 1	No. 1
NOTE 6: AUDITORS' REMUNERATION
Remuneration of the auditor of the company for: - auditing or reviewing the financial report - current auditors - previous auditors - other services - previous auditors NOTE 7: EARNINGS PER SHARE			12,900 5,000	17,000 9,500
Reconciliation of earnings to net loss
Net loss Adjustments: Net loss attributable to outside equity interest			(787, 547)	(488,096)
Earnings used in calculating basic and dilutive earnings per share			(787, 547)	(488,096)
			No of shares	No of shares
Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share			74,005,450	64,438,962
Effect of dilutive securities
Share options			9,692,828
Weighted average number of ordinary shares outstanding during the year used in calculation of dilutive earnings per share			83,698,278	64,438,962

Conversions, calls, subscription or issues after 30 June 2003

There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential
ordinary shares since the reporting date and before the completion of this financial report.

	NOTE	2003	\$	\$ 2002
NOTE 8: RECEIVABLES CURRENT
Security deposits			45,747	43,744
Other receivable				6,000
Goods & services tax receivable			33,897	144,795
			79,644	194,539
RECEIVABLES NON-CURRENT
Security deposits			109,554	106,506
			109,554	106,506

Security deposits are mining and rental bonds and have a floating interest rate, which has averaged 4.11% for the year (2002: 3.9%). Goods and Services Tax (GST) receivables is non-interest bearing.

NOTE 9: OTHER FINANCIAL ASSETS

NON-CURRENT

Listed securities- at cost	1,310,874	1,011,984
Provision for diminution	(790, 679)	(510,009)
	520,195	501,975
Unlisted investments at cost	550,000	550,000
	1,070,195	1,051,975

NOTE 10: PLANT AND EQUIPMENT

Plant and Equipment At cost	83,677	78,435
Accumulated depreciation	(62, 364)	(55,717)
Total Plant and Equipment	21,313	22.718

Reconciliations

Reconciliations of the carrying amounts of plant and equipment at the beginning and end of the current and previous financial year.
Plant and Equipment nd Eouinm

Carrying amount at the end	21,313	22,718
Depreciation expense	(6, 647)	(4, 236)
Additions	5,242	7,049
Carrying amount at the beginning	22,718	19,905
Plant and Equipment

NOTE 11: DEFERRED EXPLORATION AND EVALUATION EXPENDITURE	NOTE	2003	S	2002	S
NON-CURRENT
Exploration Expenditure
Costs carried forward in respect of areas of interest in - exploration and evaluation phases			5,302,794		4.493.615
Total Deferred Exploration and Evaluation Expenditure			5,302,794		4,493,615

The recoverability being dependent upon further exploitation and exploration of commercially viable mineral deposits.

As detailed in the Directors' Report under the heading of Review of Operations the Company has entered into arrangements whereby Straits Exploration will fund the exploration and expenditure commitments for certain exploration licences and applications.

Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the Company is required to comply with the minimum expenditure obligations under the Mining Act. These obligations have been met. The future obligations, which are subject to renegotiation when application for a mining lease is made and at other times, are not provided for in the financial statements.

NOTE 12: PAYABLES

CURRENT

Sundry creditors and accrued expenses	34,250	62,043
Total payables	34,250	62,043
NOTE 13: CONTRIBUTED EQUITY
a. Issued and fully paid up capital
Ordinary shares fully paid Underwriting fees	17,011,786	17, 135, 128 (123, 342)
	17,011,786	17,011,786
b. Movements in shares on issue	Nο	No.
At the beginning of the financial year	74,005,450	57,782,622
Shares issued during the financial year		16,222,828
At end of the financial year	74,005,450	74,005,450

NOTE 13: CONTRIBUTED EQUITY (CONTINUED)

c. Terms and conditions of contributed equity- Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in event of the winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares and amount paid up on the shares held. Ordinary shares entitle their holder to vote, either in person or by proxy, at a meeting of the company.

d. Share options

At 30 June 2003, there were 9,692,828 options over ordinary shares (30 June 2002: 9,692,828). The options are exercisable at 30 cents on or before 1^st March 2007. $\mathbf{I}$

NOTE 14: ACCUMULATED LOSSES	2003 \$	\$ 2002
Balance at the beginning of the financial year	8,770,966	8,282,870
Net losses attributed to the members of the entity	787,547	488,096
Balance at end of the financial year	9,558,513	8,770,966
NOTE 15: EXPENDITURE COMMITMENTS Lease expenditure commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements 15a
Payable - not later than 1 year	98,732	98,732
- later than 1 year but not later than 5 years	49,366	148,098
- later than 5 years	148,098	246,830

a. Operating leasing relates to office rental and has a lease term of 6 years.

$\overline{1}$

	NOTE	2003	\$	\$ 2002
NOTE 16: STATEMENT OF CASH FLOWS
Reconciliation of the loss from ordinary activities after tax to the net cash flows from ordinary activities
Loss from ordinary activities after tax		(787, 547)		(488,096)
Non-cash items - Depreciation			6,647	4,236
- Provision for diminution of investments			280,670	85,956
- Investment written off			100,000
Diminution in exploration expenses				9,997
Changes in assets and liabilities
- Decrease/ (Increase) in receivables			111,847	410,757
- Increase/ (Decrease) in creditors and accruals			(27, 793)	43,044
Net cash used operating activities		(316, 176)		65,894
Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:
- cash			904,023	2,433,510
			904,023	2,433,510

NOTE 17: RELATED PARTY DISCLOSURES

Directors

Directors remuneration and the names of all directors are disclosed at note 5.

Share transactions of Directors

Directors and director-related entities hold directly, indirectly, or beneficially as at the reporting date the following interests in the company $\mathbf{r}$

FORD MIRRIAGE COLORED THE LIFE CONTIDENTY
		Ordinary shares		Options
	2003	2002		2003		2002
B.Gomez	101,250	101,250	211,250	211,250
R.A.Creelman	40,500	40,500	199,500	199,500
B.F.Thornton	7,325,753	7,325,753	1,355,639	1,355,639

NOTE 18: FINANCIAL INSTRUMENTS

a. Interest Rate Risk

The Company's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Closed Internet Data Maturina

											L MAR BITELAST IZATE MISTORITA
	Weighted Average Effective Interest Rate			Floating Interest Rate \$	Within Year S			1 to 5 Years \$	Over 5 Years \$		Non-Interest Bearing \$			Total \$
	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002
Financial Assets:
Cash	2.56%	4.5%		904,023 2,433,510	$\blacksquare$							$\overline{\phantom{a}}$	904,023	2,433,510
Receivables- other	۰	12%	$\cdot$	$\overline{\phantom{a}}$	۰	6,000				$\overline{\phantom{a}}$	33,897	144.796	33,897	150,796
Security deposits	4.11%	3.9%	127,193	122.142	$\blacksquare$					$\overline{\phantom{a}}$	28.108	28.108	155.301	150.250
Other financial assets											1,070,195	1,051,975	1,070,195	1,061,975
Total Financial Assets				1,031,2162,555,652	٠	6,000					1,132,200	1.224.878	2,163,416	3,786,530
Financial Liabilities:
Sundry creditors and accruats											34,250	62,043	34,250	62,043
Total Financial Liabilities											34.250	62.043	34.250	62.043

b. Credit Risk Exposure

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and notes to the financial statements. The company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the company.

c. Net Fair Value

The net fair values of listed investments have been valued at the quoted market bid price at balance date, adjusted for transaction costs expected to be incurred. For unlisted investments where there is no organised financial market the net fair value has been based on cost.

For other assets and other liabilities the net fair value approximates their carrying value.

Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date:

c. Net Fair Value (cont'd)

	2003		2002
	Carrying Amount	Net Fair Value 5	Carrying Amount	Net Fair Value \$
Financial Assets
Cash	904.023	904,023	2,433,510	2,433,510
Receivables-other	33,897	33,897	150,795	150.795
Security deposits	155,301	155,301	150,250	150,250
Listed securities	520,195	530,531	501.975	532,859
Unlisted investments	550,000	550,000	550.000	550,000
	2,163,416	2.173.752	3,786,530	3,817,414
Financial Liabilities
Sundry creditors and accruals	34.250	34.250	62.043	62.043
	34.250	34.250	62.043	62.043

NOTE 19: COMPANY DETAILS

The registered & principal office of the company is:

Suite 2002, Level 20, 1 Macquarie Place, SYDNEY.

The company's domicile is in Australia.

The company is incorporated in Australia.

NOTE 20: SEGMENT INFORMATION

The company operates in Australia predominantly in the mineral exploration industry, mainly gold.

DIRECTORS' DECLARATION

The directors of the company declare that:

• a. the financial statements and notes of the company are in accordance with the Corporation Act 2001, including:
• (i) giving a true and fair view of the company's financial position as at 30 June 2003 and of its performance for the year ended on that date, and
• (ii) complying with Accounting Standards and the Corporations Regulations 2001, and
• b. 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.

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

On behalf of the Board

B.F.THORNTON Director

Date:

INDEPENDENT AUDIT REPORT To the members of Gateway Mining NL

Scope

We have audited the financial report of Gateway Mining NL for the financial year ended 30 June 2003 as set out on pages 5 to 20. The financial report includes the financial statements of Gateway Mining NL. The company's directors are responsible for the financial report. We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards other mandatory professional reporting requirements and statutory requirements, in Australia, so as to present a view which is consistent with our understanding of the company's financial position and performance as represented by the results of its operations and its cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion, the financial report of Gateway Mining NL is in accordance with:

• the Corporations Act 2001, including: $\mathbf{a}$
• Ĺ. giving a true and fair view of the company's financial position as at 30 June 2003 and of its performance for the year ended on that date; and
• ii. complying with Accounting Standards and the Corporations Regulations 2001; and
• other mandatory professional reporting requirements in Australia. b.

MOORE STEPHENS PMN

P.A.CORDWELL

Partner

Date: