GRANGE RESOURCES LIMITED. — Annual Report 2003

Sep 30, 2003

GRANGE RESOURCES LIMITED A.C.N. 009 132 405

STOCK EXCHANGE ANNOUNCEMENT

LISTING RULE 4.5 - ANNUAL REPORT

30 September 2003

Pursuant to Listing Rule 4.5, attached is the Annual Report of Grange Resources Limited for the financial year ended 30 June 2003.

The attached represents all documents required by Section 319 of the Corporations Act which, pursuant to this announcement, also constitutes their lodgement with ASIC.

For more information visit the Grange website at www.grangeresources.com.au, or alternatively contact Alec Pismiris on (08) 9321 1118.

ALEC PISMIRIS Company Secretary

GRANGE RESOURCES LIMITED

ABN 80 009 132 405

AND CONTROLLED ENTITIES

ANNUAL REPORT

FOR THE YEAR ENDED 30 JUNE 2003

CORPORATE DIRECTORY

BOARD OF DIRECTORS	Anthony Bohnenn (Non-Executive Chairman) Adam Rankine-Wilson (Managing Director) Alexander Henry Nutter (Technical Director) Hans-Rudolf Moser (Non-Executive Director)
SENIOR MANAGEMENT	Alec Christopher Pismiris (Company Secretary)
REGISTERED OFFICE	Level 13, Forrest Centre 221 St George's Terrace PERTH WA 6000 Telephone (+618) 9321 1118 Facsimile (+618) 9321 1523
SHARE REGISTRY	Computershare Investor Services Pty Limited Level 2 45 St George's Terrace PERTH WA 6000
AUDITORS	Ernst & Young Central Park 152 St George's Terrace PERTH WA 6000
SOLICITORS	Clayton Utz QV1 Building 250 St George's Terrace PERTH WA 6000
PRINCIPAL BANKERS	Westpac Challenge Bank Limited 109 St George's Terrace PERTH WA 6000
	NM Rothschild & Sons (Australia) Limited Level 21 140 St George's Terrace PERTH WA 6000
STOCK EXCHANGE	Grange Resources Limited is listed on the Australian Stock Exchange Limited (ASX Codes: GRR) and the "OTC" Markets in Berlin, Munich, Stuttgart and Frankfurt in Germany (Code: WKN. 917447)
WEBSITE	www.grangeresources.com.au

CONTENTS
CHAIRMAN'S REPORT	2
REVIEW OF OPERATIONS	4
TENEMENT SCHEDULE	16
DIRECTORS' REPORT	17
STATEMENT OF CORPORATE GOVERNANCE PRACTICES	25
STATEMENT OF FINANCIAL PERFORMANCE	28
STATEMENT OF FINANCIAL POSITION	30
STATEMENT OF CASHFLOWS	31
NOTES TO THE FINANCIAL STATEMENTS Summary of Significant Accounting Policies 1. Revenue from Ordinary Activities 2. 3. Expenses & Losses/(Gains) 4. Income Tax 5. Receivables 6. Inventories 7. Investments 8. Property, Plant and Equipment 9. Other Assets 10. Deferred Exploration, Evaluation and Development Costs 11. Accounts Payable 12. Payables 13. Provisions 14. Contributed Equity 15. Reserves and Retained Losses 16. Financial Instruments 17. Notes to the Statements of Cashflows 18. Interests in Joint Venture Operations and Business Undertakings 19. Investments in Controlled Entities 20. Remuneration of Directors and Executives 21. Segment Information 22. Related Party Information 23. Leasing and Exploration Commitments 24. Contingent Liabilities 25. Employee Entitlements and Superannuation Commitments 26. Earnings Per Share 27. Remuneration of Auditors 28. Subsequent Events	32 39 40 42 43 43 44 45 47 47 48 48 49 49 50 51 53 54 56 57 59 60 63 63 64 65 65 66
DIRECTORS' DECLARATION	67
INDEPENDENT AUDIT REPORT	68
SHAREHOLDER INFORMATION	69

CHAIRMAN'S REPORT

On behalf of your Board of Directors. I have pleasure in presenting the Annual Report and Financial Statements of Grange Resources Limited ("Grange" or the "Company") and its controlled entities for the financial year ended 30 June 2003.

Grange recorded a consolidated operating loss of \$2.209 million for the financial year ended 30 June 2003. The result was achieved on revenue of \$6.44 million compared to \$24.32 million in the previous financial year. The decrease in Grange's revenue was largely attributable to the completion of mining at the Highway Pit in the previous financial year in accordance with the Company's expectations. The occurrence of delays in development of the Reward Deeps and Conviction underground mine impacted significantly mining activities during the year.

During the year several milestones were reached on the Company's mining projects and royalty interests including the commencement of mining and production of copper concentrate from the Reward Deeps project, the receipt of the first royalties from the Plutonic East (Freshwater) gold mine and the start of mining operations at the Red Hill gold mine. Drilling at Lower Reward Deeps established additional resources of copper mineralisation and further drilling is being undertaken as a priority to determine ore reserves that could extend mine life. At Freshwater, Barrick Gold advised significant increases in reserves and resources at Plutonic East and at Red Hill Placer Dome Asia Pacific advised significant reserves and resources within the area subject to the royalty.

To improve the performance of operations at the Reward Deeps and Conviction underground mine over the coming financial year, the manager of the Mt Windsor Joint Venture recently implemented a change in the mining contractor. During the period of transition of the mining contractors there was no significant interruption to the production of copper concentrate due to the availability of sufficient stockpiled ore which kept the Thalanga processing plant operating.

During the financial year, the Company has pursued a strategy aimed at maximising returns from existing mining operations and identifying new investment opportunities in the Australian resources sector with the potential to deliver long-term growth. In accordance with this growth strategy, the Company recently announced its intention to make an off-market takeover bid for all the fully paid ordinary shares in Selwyn Mines Limited (Receivers and Managers appointed) in collaboration with Hillgrove Gold Limited. The joint bid was designed to secure Selwyn's 1,500 sq. km. exploration and mining tenement package located in the Eastern Succession of the Mt. Isa Inlier in North West The tenements have the potential to host mineralisation that may support the Queensland. development of large tonnage, low-grade mining operations for copper and gold. The region is recognised as one of the world's most significant mineralised provinces and includes the Mt Isa, Century, and Ernest Henry mining operations.

During the financial year, the Company continued with a staged capital management programme that has delivered a significant concentration of wealth to shareholders by reducing the number of shares on issue in the capital of the Company, at the end of the financial year, to 66.755.221 shares compared to 79,298,595 at the beginning of the financial year. The Company's capital management initiatives during the year have included:

• the selective share buy-back 5,681,683 shares at a price of 11 cents per share and 26,830,168 $\bullet$ convertible redeemable preference shares for a total price of \$1.00, approved by shareholders and completed in December 2002:
• the redemption and cancellation of 46,339,633 convertible redeemable preference shares in June 2003 for a total consideration of \$463.40:

CHAIRMAN'S REPORT (CONTINUED)

• the completion of an on-market share buy-back, where the Company, over a six month period $\bullet$ ending 5 June 2003, bought-back 7,361,691 shares for a total consideration of \$1,627,590 inclusive of transaction costs: and
• shareholders of the Company recently approved a further on-market share buy-back authorising the Company to acquire up to 10% of its issued capital, representing 6.675.522 shares, over a six month period.

The 2003/2004 financial year will see the continuation of concentrate production from Reward Deeps and Conviction, rovalty payments from Freshwater and the commencement of rovalty payments from Red Hill towards the end of the year. Grange expects to achieve a significant increase in revenue from operations over the current financial year as a result of increased concentrate production, combined with a positive outlook for base metals prices. The combination of a strong balance sheet and significant cash flows from the sale of copper concentrate and royalty receipts from the Freshwater and Red Hill gold projects means the Company is well positioned to pursue its ambitions of achieving growth through acquisitions in the Australian resources sector.

I wish to extend my sincere thanks to the Board and management team of Grange for their significant contributions and efforts. Appreciation is also extended to our shareholders for their support and we look forward to continued success in the financial vear ahead.

ANTHONY BOHNENN Chairman

REVIEW OF OPERATIONS

OVERVIEW AND HIGHLIGHTS

• The Company was able to fund its entire working capital requirements throughout the financial year $\bullet$ from cash reserves and cash flow generated from operations. The Company remains debt free.
• The Company held cash investments totalling \$3.77 million at the end of the financial year. $\bullet$
• In July 2002 the Company issued 5,825,000 unlisted 12 cent options with a 30 June 2007 expiry pursuant to the Grange Resources Directors' and Officers' Option Plan. The objective of the Plan was to provide incentive to employees to provide dedicated and ongoing commitment and effort to the Company. The establishment of the Plan was approved at a General Meeting of the Company held during the financial year.
• In September 2002 the Company announced the expected life of the Reward Deeps and Conviction underground project was extended due to an increase in the Conviction ore reserves and the delineation of indicated mineral resources near Reward Deeps. The additional ore reserves increased the expected concentrate production from the project by 10% to 151,000 tonnes.
• At the Annual General Meeting of the Company held in November 2002. Shareholders approved $\bullet$ the terms of a selective share buy-back authorising the Company to buy back 5,681,683 fully paid ordinary shares at a price of \$0.11 and 26,830,168 preference shares for a total price of \$1.00 from Callanish Interests Pty Ltd, a company associated with the former Managing Director of the Company.
• In December 2002 the Company announced its intention to implement an on-market share buy- $\bullet$ back. Under the terms of the buy-back, the Company could acquire up to 10% of its issued capital representing 7,361,691 fully paid ordinary shares over a six month period.
• Placer Dome Asia Pacific commenced mining operations at Red Hill during February 2003 with the $\bullet$ main focus being on establishing the pit perimeter and developing the pit to a consistent operational level. By the end of the financial year the pit had been developed to a depth of 10 metres below surface for a planned final depth of 153 metres below surface. Royalty payments to Grange are expected to commence at the end of the second quarter of 2004.
• During the March 2003 quarter an underground diamond drilling programme to evaluate the Lower Reward Deeps deposit commenced. Several encouraging intersections were encountered. The results of the drilling programme formed the basis for a feasibility study to evaluate the economics of extending mining operations at the Reward Deeps and Conviction underground mine.
• In May 2003 the Company issued 500,000 fully paid ordinary shares to Mr Ludger Kohmascher, a former executive director who resigned on 4 February 2003. The shares were issued following the exercise of options issued to Mr Kohmascher pursuant to the Grange Resources Directors' and Officers' Option Plan. Mr Kohmascher agreed to cancel 250,000 options that remained unexercised for no consideration.
• In June 2003 the Company confirmed it had completed the redemption and cancellation of 46,339,633 convertible redeemable preference shares for a total consideration of \$463.40, representing all the outstanding convertible redeemable preference shares on issue.
• In June 2003 the Company announced that Horseshoe Gold Mine Pty Ltd, a wholly owned subsidiary, had reached agreement with Gleneagle Gold Limited on the terms of an option agreement and subsequent joint venture arrangement on the Wembley Gold Project.
• In June 2003 the Company announced its intention to implement a further on-market share buyback. Under the terms of the buy-back, the Company would seek shareholder approval to acquire up to 10% of its issued capital, representing 6,675,522 fully paid ordinary shares over a six month period. At a General Meeting held subsequent to the Balance Date, Shareholders approved the terms of on-market share buy-back.
• Rovalties continued to be received from the Freshwater project during the year.
• The extension of future royalty payments as a result of ore reserves at Plutonic East (Freshwater) underground mine being increased by 20% and Mineral resources at Plutonic East (Freshwater) being increased 400%.

REVIEW OF OPERATIONS (CONTINUED)

OVERVIEW AND HIGHLIGHTS (CONTINUED)

The Company continued to evaluate business opportunities for the development and $\bullet$ commercialisation of the financial services platform by seeking to identify partners that could devote resources and expertise to undertake development of the various components of the platform. The Company will exploit any opportunities that may arise to commercialise the platform.

MINING HIGHLIGHTS

Reward Deeps Project

• Mine development completed and ore production established from the Conviction and Reward Deeps ore bodies.
• The Company's share of concentrate production over the life of the project is estimated to be $\bullet$ 53,000 tonnes grading 27.5% copper.
• At Balance Date 48,338 tonnes of concentrate (Grange share 14,500 tonnes) grading 27.47% $\bullet$ copper and 0.8q/t gold produced from 336,208 tonnes of ore grading 4.35% copper.
• Ore reserves of 799,000 tonnes @ 5.6% copper containing 44,500 tonnes of copper as at 30 June $\bullet$ 2003
• Mineral resources of 959,000 tonnes @ 5.6% copper containing 53,600 tonnes of copper as at 30 $\blacksquare$ June 2003.
• A resource of 131,000 tonnes grading 4.7% copper established at Lower Reward Deeps with $\bullet$ further drilling being undertaken to determine ore reserves and resource extensions.

Freshwater Project

• Rovalty income of \$337,251 was received during the year.
• Ore production from the Plutonic East underground mine established.
• Ore reserves at Plutonic East (Freshwater) underground mine increased by 20% to 457,000 tonnes @ 6.5 g/t gold containing 95,000 ounces gold, as at 31 December 2002.
• Mineral resources at Plutonic East (Freshwater) increased 400% to 1.55 million tonnes @ 6.5g/t $\bullet$ gold containing 323,000 ounces gold, as at 31 December 2002.

Red Hill Project

• Mining operations commenced during February 2003 and ore production established.
• Ore reserves of 5.3 million tonnes @ 2.14 g/t gold containing 366,000 ounces as at 30 June 2003 of which approximately 310,000 ounces are subject to royalty payments.
• Mineral resources of 12.5 million tonnes @ 1.53 g/t gold containing 618,000 ounces gold as at 30 $\bullet$ June 2003.
• Royalty payments due to commence by end of June 2004.

Wemblev Project

Exploration joint venture established with Gleneagle Gold Limited over the Wembley project.

Highway and Reward Project

Capping of the Highway and Reward waste rock dumps completed during the year.

MINING AND EXPLORATION ACTIVITIES

MOUNT WINDSOR JOINT VENTURE Grange 30%, TCM 70%

The Mt Windsor Joint Venture is an unincorporated joint venture between BML Holdings Pty Ltd (BML) 30% (a wholly owned subsidiary of Grange) and Thalanga Copper Mines Pty Limited ("TCM") 70%, the manager. The joint venture mines copper ore from the Reward Deeps and Conviction underground mine and produces copper concentrate for export. The joint venture operated the Reward and Highway open pit mines during 1998-2002 until ore reserves were exhausted. Exploration is being underfaken to locate additional resources and ore reserves. The project area is located approximately 37 km south of Charters Towers in North Queensland.

REWARD DEEPS & CONVICTION COPPER MINE (Grange 30%, TCM 70%)

Operations

Development of the underground mine to extract the Reward Deeps and Conviction ore reserves recommenced during June 2002 following a temporary shutdown to enable drilling for mine design to be completed. By September 2002 a second portal and short decline had been established in the northeast wall of the Highway pit to allow access to additional ore reserves that had been established in the Chimney and B Lens deposits.

Production stoping in the upper levels of the Conviction ore body commenced towards the end of December 2002. Stoping commenced in the B Lens during January 2003, in the Chimney during February 2003 and in Reward Deeps during April 2003.

The Thalanga concentrator commenced treating development ore from the underground mine on 28 October 2002. To the end of June 2003, 336, 208 tonnes of ore grading 4.35% copper had been processed through the Thalanga plant for the production of 48,338 tonnes of concentrate (Grange share 14,500 tonnes) grading 27.47% copper and 0.8g/t gold.

TABLE 1
		MT WINDSOR JOINT VENTURE
		REWARD DEEPS PRODUCTION STATISTICS
	Sep 02	Dec 02	Mar 03	Jun 03	Project to
	Quarter	Quarter	Quarter	Quarter	30 Jun 03
Ore Mined (t)	22,785	77,030	95,161	191,695	386,671
Ore Milled (t)		96,269	97,469	142,470	336,208
Headgrade (Cu %)		5.58	3.92	3.81	4.35
Copper Recovery (%)		91.7	91.6	89.36	90.79
Concentrates Produced (t)		18,033	12,524	17,781	48,338
27.96 27.47 27.32 27.28 Grade - Copper (%)
Gold $(q/t)$		0.80	0.80	0.8	0.8
Silver $(g/t)$		17	17	17	17

A summary of the production statistics for the Reward Deeps project to 30 June 2003 is presented in Table 1.

Reconciliation of copper production from the mill to the ore body models is positive and shows that the Reward Deeps and Conviction ore bodies are performing slightly better than expected.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

During the year mine development and ore production gradually fell behind budget and by the end of June 2003 ore production was approximately 10 weeks behind the original schedule. The working relationship with the mining contractor deteriorated during the year and subsequent to the year-end resulted in the contract being terminated at the end of July 2003 and being awarded to another contractor. TCM, the manager of the joint venture, has received claims from the original contractor with respect to its performance of the mining contract and TCM on behalf of the joint venture has lodged counter claims. The matter is now the subject of an arbitration process.

Concentrate Sales and Production Costs

The Company's first shipment of concentrate (9,332 tonnes) from the Reward Deeps Project was exported from Townsville on 20 April 2003. The Company's second shipment of approximately 10,000 tonnes was exported subsequent to the year-end on 17 September 2003 from Townsville. Based on the current ore reserves, the project is scheduled to produce approximately 179,000 tonnes of concentrate (Grange share 53,600 tonnes) containing 27.5% copper by June 2004.

Sales revenue of \$6.1 million from the sale of 9,332 tonnes of concentrate was recorded for the year.

Ore Reserves

Ore reserves as at 30 June 2003 are summarised in Table 2 and are based on mining the Reward Deeps ore body by sub-level caving, the Conviction ore body by uphole bench stoping with cemented rock fill.

	TABLE 2
		MT WINDSOR JOINT VENTURE
		MINING RESERVE AS AT 30 JUNE 2003
Reserve	Status	Tonnes	Grade	Contained Cu
			Cu %	Tonnes
Reward Deeps	Proven	304,000	5.8	17,800
	Probable	194,000	5.2	10,000
	Other	37,000	4.8	1,7000
Total		535,000	5.5	29,600
Conviction	Proven	208,000	6.4	13,300
	Probable	46,000	3.2	1,500
	Other	10,000	1.4	100
Total		264,000	5.7	15,000
Total Proven		512,000	6.1	31,100
Total Probable		241,000	4.8	11,500
Total Other		46,000	4.1	1,900
Grand Total		799,000	5.6	44,500

NOTES:

• Reserves rounded to nearest 1,000 tonnes. $\bullet$
• Copper Grades rounded to 1 decimal place.
• Contained copper rounded to nearest 100 tonnes.
• "Other" is mineralisation within the resource model that will be mined as part of the stoping blocks.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

This reserve information has been compiled by Mr Neal Valk of Thalanga Copper Mines Pty Ltd who is a competent person as defined in Appendix 5A to the ASX Listing Rules. Thalanga Copper Mines Pty Ltd has consented in writing to the information being included in the form and context in which it appears.

HIGHWAY AND REWARD COPPER MINES (Grange 30%, TCM 70%)

Rehabilitation of the Highway and Reward mine site was commenced in 2002 following the completion of mining from the Highway open pit. By the end of June 2003, capping and topsoiling of the Reward and Highway waste rock dumps had been completed and revegetation had commenced. Revegetation of the remainder of the waste rock dumps is planned during the fourth quarter of 2003 when climatic conditions should be more suitable for seed germination and sustainable growth.

EXPLORATION (Grange 30%, TCM 70%)

Exploration activities during the year were focused on delineating the Lower Reward Deeps copper deposit located within the Reward massive sulphide pipe and relatively grass roots exploration at the Truncheon prospect in the northern part of EPM 3380.

Lower Reward Deeps

An underground diamond-drilling programme to evaluate the Lower Reward Deeps deposit was undertaken during the period January to June 2003. The programme comprised twenty-nine holes of which twenty-three were drilled to increase confidence in the known resource and six deeper holes were drilled to test a 100-metre zone vertically below the base of the known resource.

Most of the drill holes intersected significant copper mineralisation including: 24m @ 6.04% Cu in UG03_077, 12.2m @ 8.5% Cu in UG03 076, 7.7m @ 10.42% Cu in UG03 088, 15.7m @ 5.75% Cu in UGO3 91, 8m @ 5.82% Cu in UGO3 080 and 17m @ 4.04% Cu in UG03 083. The wide intersection of high-grade mineralisation recorded in drill hole UGO3, 091 is very encouraging as this shows the resource to be open at depth. This intersection, at 900mRL, is approximately 50 metres vertically below the base of the known resource. Further drilling of Lower Reward Deeps is currently being planned and is to be undertaken as a matter of priority to determine the extent and grade of the deposit.

Following the completion of drilling, resource modelling was undertaken and a new resource estimate prepared. The Lower Reward Deeps massive sulphide deposit is estimated to contain a measured, indicated and inferred resource of 131,000 tonnes grading 4.7% copper and 0.9 g/t gold. The feasibility of mining the Lower Reward Deeps deposit is currently being evaluated. Of the 131,000 tonne resource approximately, 63,000 tonnes can be accessed without extending the existing decline.

Truncheon Prospect

During the year, seven RC holes were drilled to test coincident geochemical and geophysical targets at the Truncheon prospect. Four holes intersected weak copper mineralisation in altered volcanic rocks. Subsequent to the vear-end, down hole EM surveys were completed with off hole conductors being recorded from two of the holes. Follow-up drilling is being planned.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

Mineral Resources

A summary of mineral resources at a cut off grade of 3% copper within the Mt Windsor project area as at the 30 June 2003 is presented in Table 3.

TABLE 3
	MT WINDSOR JOINT VENTURE
	MINERAL RESOURCES AS AT 30 JUNE 2003
Resource	Status	Tonnes		Grade	Contained
			Cu%	Au g/t	Cu(f)
Reward Deeps	Measured	218,000	6.9	0.8	15,000
	Indicated	200,000	5.3	0.9	10,600
	Inferred	64,000	4.6	0.8	2,900
	Total	482,000	5.9	0.8	28,500
Conviction	Measured	207,000	6.7	0.8	13,900
	Indicated	46,000	3.4	0.8	1,500
	Inferred	10,000	1.4	0.6	100
	Total	263,000	5.9	0.8	15,500
Lower Reward Deeps	Measured	58,000	4.8	0.9	2,800
	Indicated	47,000	4.5	0.9	2,100
	Inferred	26,000	5.2	0.8	1,300
	Total	131,000	4.7	0.9	6,200
Highway South	Indicated	76,000	4.0	0.9	3,000
	Inferred	7,000	3.1	0.6	200
	Total	83,000	3.9	0.9	3,200
Total Measured		483,000	6.6	0.8	31,700
Total Indicated		369,000	4.7	0.7	17,300
Total Inferred		107,000	4.3	0.8	4,600
Grand Total		959,000	5.6	0.7	53,600

NOTES:

• Estimation method Block model, Ordinary Kriging. ٠
• Resources rounded to nearest 1,000 tonnes. $\bullet$
• $\ddot{\phantom{0}}$ Copper Grades rounded to 1 decimal place.
• Contained copper rounded to nearest 100 tonnes. ٠
• Cut off grade 3% Cu. ۰

This resource information has been compiled by Mr Michael Everitt of Thalanga Copper Mines Pty Ltd who is a competent person as defined in Appendix 5A to the ASX Listing Rules. Thalanga Copper Mines Pty Ltd has consented in writing to the information being included in the form and context in which it appears.

It should be noted that the resources modified to produce the reserve figures for Reward Deeps. Conviction, B Lens and Chimney presented in Table 2 are included in the resource figures in Table 3.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

FRESHWATER PROJECT Grange - Sliding Scale Production Royalty Barrick Gold of Australia Limited ("Barrick") 100%

The Freshwater project is located adjacent to and to the east of the Plutonic Gold Mine located approximately 180km north east of Meekatharra in Western Australia. The project is owned and operated by Barrick Gold of Australia Limited. The Company holds a sliding scale royalty based on grade, tonnage and type of ore milled on all production from the Freshwater leases.

Royalty and Production

Over the past several years several small open pit gold mines have been developed within the Freshwater tenements including Salmon, Perch, Trout, Redfin, Bream, Area 4, Dogfish, Catfish, Piranha, and Pigeon, Drilling has also been successful in outlining significant underground resources and reserves at Plutonic East. Most of the open pit reserves have now been mined and the bulk of future production from the Freshwater tenements is expected to be from the Plutonic East underground mine. Ore from Freshwater is trucked to the nearby Plutonic mine site where it is stockpiled prior to treatment.

Total royalty income for the year ended 30 June 2003 amounted to \$337,251 made up of \$84,752 from open pit ore and \$252,499 from underground ore.

TABLE 4 FRESHWATER PROJECT
	ORE PRODUCTION AND ROYALTY INCOME FOR YEAR TO 30 JUNE 2003
Period	Ore Milled Grade Royalty (g/t Au) (Tonnes) (S)
OPEN PIT ORE
September 2002 Quarter	49,298	1.34	17,936
December 2002 Quarter	3,1365	1.97	1,064
March 2003 Quarter	38,615	2.51	27,172
June 2003 Quarter	31,876	2.48	38,580
Total Open Pit	122,925	2.02	84,752
UNDERGROUND ORE
December 2001 to 30 June 2002	20,865	5.05	25,243
September 2002 Quarter	21,941	7.73	105,626
December 2002 Quarter	12,228	7.54	55,680
March 2003 Quarter	16,729	6.78	59,150
June 2003 Quarter	6,624	4.04	6,800
Total Underground	78,387	6.47	252,499

A summary of production statistics and rovalty income received for the year ending 30 June 2003 is provided in Table 4.

Rovalty income for open pit ore from November 1996 when the royalty was first established, to 30 June 2003, amounts to \$2.47 million. Gold ore treated during this period has been 3.7 million tonnes at an average grade of 2.0a/t gold for the recovery of 226,300 ounces. The royalty has averaged \$10.90 per ounce of gold produced.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

Royalty income for underground ore from December 2001 when development of the Plutonic East mine commenced, to 30 June 2003 amounts to \$252,499. Gold ore treated during this period has been 78.388 tonnes at an average grade of 6.47g/t gold for the recovery of an estimated 15,100 ounces. The royalty has averaged \$16.80 per ounce of gold produced.

Reserves and Resources

Barrick has advised that as at 31 December 2002 the Freshwater ore reserves amounted to 598,000 tonnes grading 5.47g/t gold. Of these reserves 457,000 tonnes grading 6.5g/t gold represent the portion of the Plutonic East underground reserves within the Freshwater tenements. The remaining 141,000 tonnes represent open pit and stockpiled reserves from the Speckled open pit.

In addition to these reserves, Freshwater mineral resources as at 31 December 2002 amount to approximately 1.55 million tonnes grading 6.5 g/t gold at the Plutonic East mine.

Ore reserves and mineral resources are summarised in Tables 5 and 6. The Measured and Indicated Resources summarised in Table 6 are exclusive of those Mineral Resources modified to produce the Ore Reserves in Table 5.

TABLE 5
	FRESHWATER PROJECT
ORE RESERVES AS AT 31 DECEMBER 2002
Location	Category	Tonnes	Grade	Contained
			g/t Au	Ounces
UNDERGROUND
Plutonic East	Probable	457,000	6.5	95,000
Plutonic East Stockpiles		339	10.1	110
Total Underground		457,339	6.5	95,110
OPEN PIT
Speckled Pit	Proved	116,500	2.4	8,750
Perch Stockpiles		24,000	0.7	500
Total Pits		140,500	2.1	9,250
TOTAL FRESHWATER RESERVES		597,839	5.47	104,360

Assessment Criteria - Underground:

• Plutonic East Model 2 $\bullet$
• Mining Methods Mechanised room and pillar, Airleg
• Mining Recovery Room and Pillar 85%. Long Hole 95% $\bullet$
• Dilution variable @ 0.1o/t Au
• Metallurgical Recoveries -- primary 88%
• Cut off Grades Lower 3.0g/t Au, Upper 100g/t Au
• Assessment Criteria Open Pit
• Bench Height 3.0 metres
• Mining Method Open Cut
• Mining Recovery 100% $\bullet$
• Dilution 1m hanging wall and footwall
• Metallurgical recoveries Laterite, Oxide & Transitional 93%, Primary 88% ٠
• Cut off Grades Lower 0.9q/t Au, Upper 20q/t

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

TABLE 6 FRESHWATER PROJECT - PLUTONIC EAST UNDERGROUND MINERAL RESOURCES AS AT 31 DECEMBER 2002
Resource Category	Ore Type Contained Grade Tonnes g/t Au Ounces
Indicated	Primary	381,000	7.8	95,000
Inferred	Primary	1,170,000	6.1	228,000
TOTAL RESOURCES	Primary	1,551,000	6.5	323,000

Assessment Criteria:

• Resource Method Sectional Interpretation and ID² grade interpolation constrained inside lodes
• Block Model Plutonic East Model 2 $\bullet$
• Drilling up to 30 October 2002
• Dilution no edge and contains up to 2 metres internal dilution
• Cut off Grades Lower 3.0q/t Au, Upper 100q/t Au
• Density Primary: 2.9
• Search Sphere Indicated: 40m x 40m x 40m; Inferred: 80m x 80m x 80m
• Drill spacing partly 10m or 20m x 20m 40m; remainder 80m x 80m

These reserve and resource statements have been prepared by Maurice Rowley, Manager Mine Geology for Barrick Gold of Australia Limited, who is a competent person as defined in Appendix 5A to the ASX Listing Rules. Mr Rowley is a full time employee of Barrick Gold of Australia Limited. Barrick Gold of Australia Limited has consented in writing to the information being included in the form and context in which it appears.

Development and Exploration

Barrick reported that development drilling was undertaken during the year at several projects including Plutonic East, Salmon North, Catfish, Bream, Pigeon, Speckled and Barramundi to provide data for mine design and reserve estimation.

Exploration activity during the year was focused on reconnaissance drilling within the structural corridor which hosts several gold deposits including Salmon, Perch, Trout and Callop. Drilling was also undertaken to test for mineralisation beneath the Salmon deposit and to test a broad geochemical anomaly at the Hawke prospect. Several narrow intersections of gold mineralisation were recorded.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

RED HILL PROJECT Grange 4% Gross Revenue Rovalty Placer Dome Asia Pacific ("PDAP") 100%

Grange holds a 4% gross revenue royalty on all production after the first 85,000 ounces of gold produced from the Red Hill Mining Lease (M27/57), which is located approximately 4km north east of the Kanowna Bell Gold Mine, 20km north east of Kalgoorlie. The project is owned and operated by PDAP.

Gold mineralisation at Red Hill occurs mainly as free gold in shallow dipping quartz veins within a porphyry host. Drilling has shown the presence of a large tonnage low-grade gold deposit, which extends outside the boundaries of M27/57 on to tenements held 100% by PDAP and not subject to the royalty.

PDAP commenced mining operations at Red Hill on 15 February 2003 and by the end of June 2003 the pit had been developed to a depth of 10 metres for a planned final depth of 145 metres below surface. The reconciled tonnage mined from within M27/57 for the year to 30 June 2003 was 298.480 @ 1.31 g/t gold. Ore from Red Hill is being trucked to Paddington for processing and to 30 June 2003 294,591 tonnes @ 1.32 g/t gold had been processed. PDAP has advised that the Red Hill ore body is to provide approximately half the annual feed (1.5 million tonnes) to the Paddington mill for the next several years.

Based on the current mining schedule it is estimated that rovalty payments to Grange should commence at the end of the second quarter of 2004.

PDAP has advised that as at 30 June 2003, mineral resources within M27/57 amounted to 12.5 million tonnes grading 1.53 g/t gold containing 618,000 ounces of gold. Within these resources PDAP has estimated ore reserves of 5.3 million tonnes grading 2.14 g/t gold (366,000 contained ounces) at a cut off grade of 1.15 g/t gold and a gold price of A\$500/ounce.

Mineral resources and ore reserves within Mining Lease M27/57 are summarised in Tables 7 and 8. The Measured and Indicated Resources summarised in Table 7 are inclusive of those Mineral Resources modified to produce the Ore Reserves in Table 8.

TABLE 7 RED HILL PROJECT - MINING LEASE M27/57 MINERAL RESOURCES AS AT 30 JUNE 2003
Resource Category	Tonnes	Grade g/t Au	Contained Ounces
Measured	1,754,000	1.71	96,400
Indicated	9,043,000	1.53	444,900
Inferred	1,729,000	1.38	76,700
Total	12,526,000	1.53	618,000

NOTES:

• Estimation method Block model, Multiple Indicator Kriging (MIK).
• Resources estimated to a depth of 170 metres.
• Resources rounded to nearest 1,000 tonnes.
• Cut off grade 0.6g/t Au.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

This resource information has been compiled by Mr Haydn Hadlow of Placer Dome Asia Pacific, who is a competent person as defined in Appendix 5A to the ASX listing rules. Placer Dome has consented in writing to the information being included in the form and context in which it appears.

TABLE 8 RED HILL PROJECT - MINING LEASE M27/57 ORE RESERVES AS AT 30 JUNE 2003
Category	Tonnes	Grade (g/t Au)	Contained Ozs
Proved	1,012,000	2.24	72,900
Probable	4,302,000	2.12	293,100
Total	5,314,000	2.14	366,000

NOTES:

• Estimation method Block model, Multiple Indicator Kriging (MIK). $\bullet$
• Reserves estimated to a depth of 145 metres. $\ddot{\bullet}$
• Reserves rounded to nearest 1.000 tonnes. $\bullet$
• Cut off grade 1.15g/t Au. $\ddot{\phantom{0}}$

This reserve information has been compiled by Mr Andrew Law of Placer Dome Asia Pacific who is a competent person as defined in Appendix 5A to the ASX listing rules. Placer Dome has consented in writing to the information being included in the form and context in which it appears.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

OTHER EXPLORATION PROJECTS

In addition to the Mt Windsor Joint Venture (Freshwater and Red Hill projects), the Company holds interests in several exploration projects in Western Australia and the Northern Territory.

The Wembley project is located approximately 14 km south of the closed Peak Hill gold mine in the Peak Hill region of Western Australia. Within the Wembley project tenements a modest gold resource of 557,000 tonnes grading 2.18 g/t gold (39,000 contained ounces) has been delineated at the Durack prospect. Mineralisation occurs as steeply dipping lodes within volcanic rocks.

In April 2003 the Company reached agreement with Gleneagle Gold Limited ("Gleneagle") on the terms of an option agreement and subsequent joint venture arrangement over the Wembley Project. The consideration for the option was the issue of 200,000 ordinary shares in Gleneagle.

During July 2003 Gleneagle exercised the option and the joint venture has now commenced. Under the terms of the joint venture arrangement. Gleneagle can earn an 80% interest in the tenements by spending \$500,000 on exploration within 4 years with minimum expenditure levels of \$150,000 during years 1 and 2 of the 4-year earn in period. Gleneagle can elect to withdraw from the agreement after expenditure of \$150,000.

Horseshoe's 20% interest will be free carried to a decision to mine. Within 60 days after a decision to mine has been made by Gleneagle. Horseshoe can elect to contribute pro-rata to expenditure, sell its 20% interest or convert its 20% interest to a royalty of \$20.00 per recovered ounce for the first 40.000 ounces of production and a 3% gross revenue royalty on any production thereafter. Gleneagle has pre-emptive rights on Horseshoe's 20% interest.

In the Wiluna District of Western Australia the Company holds a 10% free carried interest to a decision to mine or expenditure of \$2 million in the Abercromby Well Joint Venture with MPI Nickel Pty Ltd. The tenement is prospective for gold mineralisation.

At Thaduna the Company holds tenements over the old Thaduna and Green Dragon copper mines located approximately 170km north east of Meekatharra in Western Australia. The Company considers the stockpiles and tailings associated with the Thaduna mine represent potential feed to an operation that may be established at the Horseshoe Lights Mine to process low-grade copper resources. The Company manages the Horseshoe Mine Partnership, which owns the Horseshoe Lights Mine located approximately 100km west of Thaduna.

The Company holds equity in several tenements in the Tennant Creek region in the Northern Territory. The most prospective area with potential to host a high-grade gold, copper, bismuth resource, is the Mt Samuel prospect located approximately 6km south of Tennant Creek. Access to the Mt Samuel property is currently not available due to the presence of an Aboriginal sacred site.

MINING AND EXPLORATION ACTIVITIES (CONTINUED)

TENEMENT SCHEDULE AS AT 30 SEPTEMBER 2003

PROSPECT	TENEMENT	INTEREST	PROSPECTII	TENEMENT	INTEREST
Western Australia			Queensland
Horseshoe Lights	L52/42-45	4% (2)	Mt Windsor JV	ML 1571	30% (9)
	L52/66	4% (2)		ML 1734	30% (9)
	M52/743	4% (2)		ML 1739	30% (9)
	M52/744	4% (1)(2)		ML 10028	30% (9)
				EPM 3380	30% (9)
Thaduna	M52/165	$100\%$ (3)		ML 1758	$30\%$ (9)
	M52/180	$100\%$ (3)
			Northern Territory
Wembley	M52/801	100% (4)(5)	Mt Samuel	MLC 49	50% (10) (13)
	M52/587	$100\%(1)(5)$		MLC 527	100% (13)
				MLC 599	85% (11) (13)
Horseshoe South	M52/558	100% (1)		MLC 617	85% (11) (13)
	M52/585	100% (1)		MLC 678-681	$85\%(11)(1)$
				MCC 174	100% (12)
Abercromby Well JV	M53/336	10% (6)		MCC 212	85% (11) (13)
				MCC 287-288	100% (12)
Red Hill	M27/57	(7)		MCC 308	85% (11)
				MCC 344	100% (13)
Horseshoe South West	M52/651	$4\%$ (1) (2)
			The Trump	MCC 316-317	100%(13)
Freshwater	M52/277-281	(8)		MCC 340-341	100%(13)
	M52/285	(8)
	M52/295-296	(8)	True Blue	MCC 342	100%(13)
	M52/299-301	(8)		MLC 619	85% (11)(13)
	M52/305-306	(8)
	M52/368-370	(8)	Aga Khan	MLC 522	100%(13)
			Black Cat	MCC 338-339	100%(13)

Notes:

• Under application. $\ddagger$ .
• Subject to Horseshoe Mine Partnership. $2₁$
• Subject to 5% Net Smelter Return royalty with Trans-Global Resources NL. $3₁$
• Subject to joint venture with Gleneagle Gold Limited. 4.
• $5₁$ Subject to 1% Net Smelter Return royalty with Lac Minerals (Australia) NL.
• Subject to joint venture agreement with Outokumpu Mining Australia Pty Ltd and MPI Nickel Pty Ltd. $6.$
• Royalty interest with Placer Dome Asia Pacific. $7.$
• 1. Royalty interest with Barrick Gold of Australia Limited.
• 1. Subject to joint venture agreement with Thalanga Copper Mines Pty Limited.
• 1. Subject to joint venture agreement with North Mining Ltd.
• 1. Subject to joint venture agreement with W. & L.D.C. Appel.
• 1. Subject to option agreement with J.L. Love & G.P. Hamilton.
• 1. Subject to 2% Net Profit Royalty with Lytton Nominees Pty Ltd and Moublon Pty Ltd.

DIRECTORS' REPORT

Your Directors present their report with respect to the results of Grange Resources Limited and its controlled entities (the "Consolidated Entity") for the vear ended 30 June 2003 (the "Balance Date") and the state of affairs of the Company and Consolidated Entity at Balance Date.

Grange Resources Limited is a company limited by shares that is incorporated and domiciled in Australia. The companies within the Consolidated Entity are set out in Note 19.

$\mathbf{1}$ DIRECTORS

The names of the directors of the Company in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Mr Anthony Bohnenn Mr Adam Rankine-Wilson Mr Alexander Henry Nutter Mr Hans-Rudolf Moser Mr Ludger David Kohmascher (resigned 4 February 2003)

$2₁$ DIRECTORS' MEETINGS

The Company has an Audit and Compliance Committee of the Board of Directors, a Remuneration Committee and a Seal Committee. As at the date of this report, the members of the Audit and Compliance Committee and Remuneration Committee are Mr A Bohnenn (Chairman). Mr H-R Moser and Mr A C Pismiris (Secretary). Any two directors of the Company can participate on the Seal Committee.

During the year the Company held 4 meetings of directors. 2 audit and compliance committee meetings and 3 remuneration committee meetings. The attendances of the directors at these meetings were:

Meetings	Board of Directors		Audit & Compliance Committee
	Maximum Attended	Meetings Possible	Maximum Attended	Meetings Possible
A Bohnenn
A Rankine-Wilson
LD Kohmascher (i)
A H Nutter
H-R Moser (ii)
A C Pismiris (iii)

Notes

• (i) Mr Kohmascher attended two directors' meetings held prior to his resignation.
• (ii) Mr Moser was appointed to the Audit & Compliance Committee on 16 April 2003 and did not attend a meeting during the vear.
• (iii) Mr Pismiris is the Company Secretary and is not a member of the Board.

Other members of management may attend meetings of the Audit and Compliance Committee at the invitation of the Chairman. The details of the functions and membership of the other committees of the Board are included in the Statement of Corporate Governance Practices.

DIRECTORS' REPORT (CONTINUED)

$2₁$ DIRECTORS' MEETINGS (CONTINUED)

		Seal Committee
Maximum Attended	Meetings Possible	Maximum Attended	Meetings Possible
		۰
		Remuneration Committee

Notes

(i) Mr Rankine-Wilson resigned as a member of the remuneration committee on 30 July 2003.

(ii) Mr Kohmascher attended two meetings of the remuneration committee held prior to his resignation.

(iii) Mr Moser was appointed to the Remuneration Committee on 16 April 2003 and attended one meeting.

(iv) Mr Pismiris is the Company Secretary and is not a member of the Board.

$3₁$ PRINCIPAL ACTIVITIES

The principal activities of the Consolidated Entity during the course of the financial year were mineral exploration and production and mine development.

4. OPERATING RESULTS

The consolidated net operating loss of the Consolidated Entity after providing for income tax amounted to \$2,208,702 (2002: loss \$1,605,490). The result included the following items of significance:

• revenue generated from the first shipment of concentrate from the Reward Deeps and Conviction $\bullet$ underground mine was \$5,729,542;
• royalty income for the year was \$351,020; and $\bullet$
• expenditure associated with mining operations at the Reward Deeps and Conviction underground mine $\bullet$ totalled \$7,372,935 for the year including mining, transportation, milling, depreciation, amortisation and administration.

5. DIVIDENDS

Since the end of the previous financial year, no amount has been paid or declared by the Company by way of a dividend.

6. REVIEW OF OPERATIONS

A Review of Operations is set out on pages 4 to 16 of this Annual Report. This, with the Chairman's Report and the sections headed "Significant Changes in State of Affairs" and "Events Subsequent to Balance Date", provides a review of operations of the Consolidated Entity during the period.

The number of full-time employees at balance date is six (2002; five).

DIRECTORS' REPORT (CONTINUED)

$\overline{7}$ . SIGNIFICANT CHANGES IN STATE OF AFFAIRS

Shareholders' equity decreased \$4.387.418 or 28% during the financial year from \$15.493.183 to \$11.105.765. Factors contributing to this decrease included the following:

• The selective buy-back and cancellation of 5.681.683 fully paid ordinary shares each at a price of 11 cents and 26,830,168 preference shares for a total price of \$1.00
• The redemption and cancellation of 46,339,633 convertible redeemable preference shares for a total $\bullet$ consideration of \$463.40.
• The on-market share buy-back of 7,361,691 fully paid ordinary shares over a six month period for a total $\bullet$ consideration of \$1,627.590.
• The loss from ordinary activities of \$2,208,702.

8. SIGNIFICANT EVENTS AFTER BALANCE DATE

Significant events that have occurred after the balance date include:

• In July 2003 shareholders of the Company approved the terms of an on market share buy-back authorising $\bullet$ the Company to acquire up to a maximum of 6,675,522 of the fully paid ordinary shares representing 10% of the capital of the Company over a six month period commencing 1 August 2003.
• In August 2003 the Company was advised by the manager of the Reward Deeps and Conviction underground project, that operations were placed in a period of transition for approximately two weeks whilst a change in the mining contractor took place. During the period of transition, the manager conducted a maintenance shut down for four days. The manager confirmed there was sufficient supply of ore available to keep the Thalanga processing plant operating during the transition of mining contractors at the mine.
• During July 2003 Gleneagle Gold Limited exercised an option with Horseshoe Gold Mine Pty Ltd $\bullet$ ("Horseshoe") to farmin to the Wembley Project and the joint venture commenced. Under the terms of the joint venture arrangement. Gleneagle can earn an 80% interest in the tenements by spending \$500,000 on exploration within 4 years with minimum expenditure levels of \$150,000 during years 1 and 2 of the 4-year earn in period. Gleneagle can elect to withdraw from the agreement after expenditure of \$150,000. Horseshoe's 20% interest is free carried to a decision to mine. Within 60 days after a decision to mine, Horseshoe has the right to elect to contribute pro-rata to expenditure, sell its 20% interest or convert its 20% interest to a royalty of \$20.00 per recovered ounce for the first 40,000 ounces of production and a 3% gross revenue royalty on any production thereafter. Gleneagle has pre-emptive rights on Horseshoe's 20% interest 2003.
• On 6 September 2003, Hillgrove Gold Limited and Grange Resources Limited announced their intention, through an equally and jointly owned nominee, to make an off-market takeover bid for all the fully paid ordinary shares in Selwyn Mines Limited (Receivers and Managers appointed). The bid was designed to secure 1.500 sq. km, exploration and mining tenement package that is located in the Eastern Succession of the Mt. Isa Inlier in North West Queensland. The tenements have the potential to host mineralization that may support the development of large tonnage, low grade mining operations for copper and gold. The region is recognised as one of the world's most significant mineralised provinces and includes Mt Isa, Century and Ernest Henry.
• On 17 September 2003 the second shipment of copper concentrate from the Reward Deeps and Conviction underground mine was exported from Townsville. The shipment of 9,989 tonnes generated revenue of approximately \$5.7 million.

There is no financial effect of these events as at Balance Date.

DIRECTORS' REPORT (CONTINUED)

8. SIGNIFICANT EVENTS AFTER BALANCE DATE (CONTINUED)

The directors are not aware of any other matters or circumstances at the date of this report, other than those referred to in this report or the consolidated accounts that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs of the Consolidated Entity in subsequent financial vears.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS 9.

The Company expects to return to profitability in the 2003/04 financial year. The coming year should see further development of the Reward Deeps/Conviction underground mine and the continuation of production of copper concentrate from the Reward Deeps/Conviction mine.

The Company expects royalty payments from Barrick Gold to continue during the 2003/04 financial year from mining activities on the Freshwater leases.

The Company expects rovalty payments from Placer Dome Asia Pacific to commence towards the end of the second quarter of 2004 from mining activities at the Red Hill project.

In addition, the Company will continue to pursue growth opportunities in the Australian resources sector as demonstrated by the recent announcement to make a joint off-market takeover bid for Selwyn Mines Limited (Receivers and Managers appointed) and continue to evaluate and pursue opportunities to develop and commercialise the Surfboard Financial Services platform.

10. ENVIRONMENTAL REGULATION AND PERFORMANCE

The mining and exploration tenements held by the Consolidated Entity contain environmental requirements and conditions that the entities must comply with in the course of normal operations. These conditions and regulations cover the management of the storage of hazardous materials and rehabilitation of mine sites. There have been no significant known breaches of the Consolidated Entity's environmental obligations.

DIRECTORS' REPORT (CONTINUED)

INFORMATION ON DIRECTORS 11.

A BOHNENN (Non-Executive Chairman)

Mr Bohnenn was appointed as a director of Grange in November 2001 and subsequently elected as Chairman on 1 July 2002. Mr Bohnenn has more than 25 years experience as Managing Director in the investment banking and financial services industries, with an emphasis in research and funds management. Mr Bohnenn is based in the Netherlands and his main focus has been identifying investment opportunities in Australia. China and Asia.

A RANKINE-WILSON (Managing Director)

Mr Rankine-Wilson was reappointed as Managing Director of Grange in November 2001. He was joint Managing Director of Grange between September 1990 and February 1994 and Managing Director from November 1995 until September 2000. Mr Rankine-Wilson is a Non-executive Director of Australian Silicon Limited. Wave Capital Limited, Investment Company of the West Limited and Capital Growth Corporation Limited. Previous directorships of publicly listed companies have included Musgrave Block Holdings Limited (since renamed to Unitract Limited) and ECAT Development Capital Limited (since renamed to Clinical Cell Culture Limited). Over the past 15 years. Mr Rankine-Wilson has also been a director of numerous other private and public companies. He has extensive experience in the mining and investment industries, particularly in Western Australia.

L D KOHMASCHER (Executive Director)

Mr Kohmascher was a Director of Grange from January 1996 until his resignation. He has extensive international investment experience, in particular in the technology sector, and is experienced in raising capital from international equity markets. He is a German businessman who is an active investor in Australian companies and is the Managing Director of a family business based in Germany. Previous directorships of publicly listed companies have included ECAT Development Capital Limited (since renamed to Clinical Cell Culture Limited) and Asset Backed Holding Limited. Mr Kohmascher resigned on 4 February 2003.

A H NUTTER (Technical Director)

Mr Nutter is a geologist and holds degrees from Southampton, Leeds and London universities. He has over 30 vears experience in mineral exploration, resource evaluation and mining geology in Australia. West Africa and the Asia-Pacific region. He has held senior positions in the mining industry and has been responsible for the discovery and/or acquisition of several mineral resources for both international and Australian public companies. Mr Nutter resigned as a director of the Company on 24 May 2000 and was re-appointed as a director in November 2001.

H-R MOSER (Non-Executive Director)

Mr Moser is based in Switzerland with more than 20 years experience in the Swiss banking industry. He has a Bachelor of Commerce from the University of Basel in Switzerland and is a Director of a number of Australian publicly listed companies in the resource and technology sectors. Mr Moser manages a large European investment fund and has been an active investor in Australian companies for many years.

DIRECTORS' REPORT (CONTINUED)

COMPANY SECRETARY

A C PISMIRIS

Mr Pismiris was appointed Company Secretary and Chief Financial Officer of Grange in December 2001. Mr Pismiris is also a director and company secretary of several public and private companies. Mr Pismiris has a Bachelor of Commerce from the University of Western Australia and is an associate of The Institute of Chartered Secretaries and Administrators. Mr Pismiris has over 20 years experience in the securities and finance industry.

$12₁₂$ DIRECTORS' INTERESTS

At the date of this report the direct or indirect interest of each director of the Company in the issued securities of the Company is:

Director	Ordinary Shares	12 Cent Options
A Bohnenn	8,762,313	1,125,000
A Rankine-Wilson	523,606	1,500,000
A H Nutter	99,999	750,000
H R Moser	3,560,450	750,000

$13.$ SHARE OPTIONS

Unissued Shares

As at the date of this report there were 5.075.000 unissued ordinary shares under options. At the Balance Date there were 5,075,000 unissued ordinary shares under options and nil were issued during the current financial year. These options were issued to directors, executives and eligible full-time staff pursuant to the Grange Resources Limited Directors' and Officers' Option Plan. The options entitle the holder to take up one ordinary share in the Company at an exercise price of \$0.12. The options are unlisted and expire on 30 June 2007.

Shares issued as a result of the exercise of options

Five hundred thousand options were exercised during the financial year and were converted to ordinary shares at an exercise price of \$0.12 per share.

There have been no further shares issued as a result of options being exercised since Balance Date.

14 INDEMNIFICATION AND INSURANCE

The Consolidated Entity has paid premiums in respect of Directors' and Officers' Liability Insurance and Company Reimbursement policies, which cover all directors and officers of the Consolidated Entity. The policy conditions preclude the Consolidated Entity from any detailed disclosures.

DIRECTORS' REPORT (CONTINUED)

DIRECTORS' AND OTHER OFFICERS' EMOLUMENTS 15.

The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the managing director, executive directors and the executive team. The remuneration committee 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. Such officers are given the opportunity to receive their base emolument in a variety of forms, including cash and fringe benefits. such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Consolidated Entity.

To assist in achieving these objectives, the remuneration committee links the nature and amount of executive directors' and officers' emoluments to their individual performance and the Consolidated Entity's financial and operational performance. The criteria considered by the remuneration committee include those relating to profitability, cash flow, share price growth and individual performance.

The executive directors review the emoluments of non-executive directors and where appropriate, recommend changes for approval by shareholders.

Details of the nature and amount of each element of the emolument of each director of the Company and each of the two most highly paid executive officers of the Company and of the Consolidated Entity paid or payable by the Consolidated Entity during the financial year are as follows.

		Annual Emoluments
	Base Fee/Salary	Bonus	Other	Superannuation
A Bohnenn (i)	50,000		183,750
A Rankine-Wilson	148,930		165,000	4,431
LD Kohmascher	62,417		82,500
A H Nutter	105,499		82,500	69,044
H R Moser	23,000	۰	82,500

Emoluments of Directors of the Company

Notes

(i) Other includes fees of \$60,000 paid to Hendygwyn Holding, of which Mr Bohnenn is a director and shareholder, under a marketing and public relations services agreement.

Emoluments of the most highly paid executive officer of the Company and of the Consolidated Entity

	Annual Emoluments
	Base Fee/Salary	Bonus	Other	Superannuation
A Pismiris	79,153		82,500	21,445

The terms directors and officers have been treated as mutually exclusive for the purpose of this disclosure.

The elements of emoluments have been determined on the basis of the cost to the Consolidated Entity during the financial year.

DIRECTORS' REPORT (CONTINUED)

DIRECTORS' AND OTHER OFFICERS' EMOLUMENTS (CONTINUED) 15.

Executives are those directly accountable and responsible for the operational management and strategic direction of the Company and the Consolidated Entity.

The category 'Other' includes the value attributable to options granted and issued to directors and executives pursuant to the Grange Resource Limited Directors' and Officers' Option Plan and also includes the value of any cash and or non-cash benefits provided including.

Options granted to directors and any of the five most highly paid officers

There were 5,625,000 options granted and issued to directors and sole executive officer pursuant to the Grange Resource Limited Directors' and Officers Option Plan during the year. These options are included in Directors' and Officers' remuneration for this financial year. The options allow the holder to take up one ordinary share in the Company at an exercise price of \$0.12. The options are unlisted and expire on 30 June 2007.

The value attributable to these options granted and issued to directors and the sole executive pursuant to the Grange Resource Limited Directors' and Officers' Option Plan was \$0.11 cents per option. The value was derived using the Black & Scholes valuation model which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option. Therefore the total financial benefit derived by directors and the sole executive as a consequence of the option issue was \$618.750.

Signed for and on behalf of the directors in accordance with a resolution of the board.

ADAM RANKINE-WILSON Managing Director

Dated this 30th day of September 2003

Perth, Western Australia

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

The Board of Directors of the Company is responsible for the overall corporate governance of the Consolidated Entity.

Corporate governance is a term used to describe the way a board is structured and the way the directors act to ensure their responsibilities as directors are performed properly. The Board keeps its own processes under review and aims to achieve best practice in matters of corporate governance.

A description of the Company's main corporate governance practices follows. Unless otherwise stated, all practices were in place throughout the year.

THE BOARD OF DIRECTORS

The Board of Directors is responsible for setting the strategic direction, establishing the policies and overseeing the financial position of the Consolidated Entity, and for monitoring its business and affairs on behalf of the shareholders

The responsibility for the day-to-day operation and administration of the Consolidated Entity is delegated by the Board to the Managing Director.

The composition of the board is determined in accordance with the following principles and quidelines:

• the board should comprise an appropriate mix of executive and non-executive directors: $\bullet$
• the chairperson of the board should be a non-executive director: $\bullet$
• $\bullet$ the board should comprise directors with relevant experience and expertise; and
• the board meets at intervals of approximately two and not more than three months or more often if necessary. The managing director and company secretary, in consultation with the chairman, ensure all directors are notified of each meeting and have available all necessary information far enough in advance of the meeting to enable them to participate in an informed discussion on all agenda items.

The composition of the board is reviewed on an ongoing basis by the chairman to ensure that the board has the appropriate mix of expertise and experience and effectively represent shareholders' interests.

Each director has the right to seek reasonable independent professional advice at the Consolidated Entity's expense. However, prior approval of the chairman is required, which will not be unreasonably withheld.

COMMITTEES OF THE BOARD

The Board currently has three committees which have been established to consider particular issues and strategies in order to advise and quide the Board. Committees are also established as the need arises. Details of board committees that operated throughout the year follow.

STATEMENT OF CORPORATE GOVERNANCE PRACTICES (CONTINUED)

Audit & Compliance Committee

Current members of the Audit & Compliance Committee are Mr A Bohnenn (Non-Executive Chairman), Mr H-R Moser (Non-Executive Director) and Mr A C Pismiris (Secretary). The committee has the following responsibilities:

• To review the adequacy and effectiveness of internal controls over the Company's accounting and financial reporting systems.
• To provide the board with additional assurance regarding the reliability of financial information for inclusion in $\blacktriangle$ the financial statements.
• Review of external audit arrangements and findings. $\bullet$
• To monitor compliance issues, particularly compliance with the Stock Exchange Listing Rules.
• To review all public releases to the ASX of material consequence, prior to release to the market.

Remuneration Committee

Current members of the Remuneration Committee are Mr A Bohnenn (Non-Executive Chairman), Mr H-R Moser (Non-Executive Director) and Mr A C Pismiris (Secretary). The committee has the following responsibilities:

• To review remuneration packages and policies applicable to executive directors and senior executives. This $\blacksquare$ includes responsibility for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies.
• The committee obtains independent advice on the appropriateness of remuneration packages where it considers it necessary to do so.

Seal Committee

Any two directors of the Company can participate on this committee. The committee has the responsibility of approving the application of the Company seal to documents that legally bind the Company.

Internal Controls and Risk Management

The board is responsible for identifying areas of significant business risk and ensuring that management's objectives and activities are aligned with the expectations and risk management policies identified by the board. In addition to the establishment of the committees referred to above, the following controls assist in achieving these objectives:

• Financial Reporting An annual budget is approved by directors. Quarterly actual results are reported against $\bullet$ budget and revised forecasts for the year are prepared regularly.
• Quality and Integrity of Personnel All personnel are advised of the Company's policies and practices with performance appraisals taking place on an ongoing basis.
• Operational Reporting Key areas identified and major activities are subject to regular reporting to the board.
• Continuous Disclosure Continuous disclosure is a recurring agenda item at board meetings and is monitored and considered on an ongoing basis by the Audit & Compliance Committee.

GRANGE RESOURCES LIMITED
ABN 80 009 132 405

FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2003

		Consolidated		Grange Resources Limited
	Note	2003 S	2002 \$	2003 S	2002 \$
Sales revenue	2	6,438,801	24,320,612
Cost of sales	3(c)	(6,272,688)	(13,095,508)
Gross profit/(loss)		166,113	11,225,104
Amortisation & depreciation of mining assets	3(a)	(1,060,952)	(9,249,773)
Net profit/(loss) from mining activities		(894, 839)	1,975,331
Other revenue from ordinary activities	2	436,235	289,863	83,337	36,746
Administration costs	3(c)	(1,652,042)	(2,939,690)	(1,655,868)	(1, 117, 096)
Borrowing costs	3(e)	(27, 825)	(93, 168)
Other expenses from ordinary activities	3(b)	(70, 231)	(837, 826)	(49, 537)	(1,223,895)
Loss from ordinary activities before income tax		(2,208,702)	(1,605,490)	(1,622,068)	(2,304,245)
Income tax expenses relating to ordinary activities
Loss from ordinary activities after income tax expense		(2,208,702)	(1,605,490)	(1,622,068)	(2,304,245)
Net loss attributable to members of Grange Resources Ltd		(2,208,702)	(1,605,490)	(1,622,068)	(2,304,245)
Net increase/(decrease) in asset revaluation reserve
Total revenue/expenses & valuation adjustments attributable to members of Grange Resources Ltd and recognised directly in equity
Total changes in equity other than those resulting from transactions with owners as owners		\$(2, 208, 702)	\$(1,605,490)	\$(1,622,068)	\$(2,304,245)

STATEMENT OF FINANCIAL PERFORMANCE (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2003

		Consolidated		Grange Resources Limited
	Note	2003	2002	2003	2002
Basic earnings per share (cents per share)	26	(3.02)	(1.93)
Diluted earnings per share (cents per share)	26	(3.02)	(1.93)

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2003

		Consolidated		Grange Resources Limited
	Note	2003	2002	2003	2002
		\$	\$	\$	\$
Current Assets
Cash	17	3,771,497	12,357,436	168,535	217,571
Receivables	5	3,279,660	1,423,206	347,033	166,979
Inventories	6	3,044,770	350,543
Other	9	42,312	35,372	42,312	35,372
Total Current Assets		10,138,239	14,166,557	557,880	419,922
Non-Current Assets
Receivables	5	309,488	426,268	1,047,896	1,164,996
Property, plant and equipment Deferred exploration, evaluation and	8	280,325	283,620		34,398
development costs	10	4,117,198	4,480,428	558,294	526,407
Investments	7			4,581,143	4,581,456
Other	9	1,614,988
Total Non-Current Assets		6,321,999	5,190,316	6,187,333	6,307,257
Total Assets		16,460,238	19,356,873	6,745,213	6,727,179
Current Liabilities
Accounts payable	11	2,980,635	857,188	52,556	32,186
Provisions	13	616,354	1,174,951	54,121	38,851
Total Current Liabilities		3,596,989	2,032,139	106,677	71,037
Non-Current Liabilities
Payables	12		732	15,218,407	11,435,229
Provisions	13	1,757,484	1,830,819	584,603	584,603
Total Non-Current Liabilities		1,757,484	1,831,551	15,803,010	12,019,832
Total Liabilities		5,354,473	3,863,690	15,909,687	12,090,869
Net Assets		\$11,105,765	\$15,493,183	\$(9,164,474)	\$(5,363,690)
Equity
Contributed Equity Reserves	14 15	30,271,408 5,874,348	32,450,124 5,874,348	30,271,408 4,752,143	32,450,124 4,752,143
Accumulated losses	15	(25,039,991)	(22, 831, 289)	(44, 188, 025)	(42, 565, 957)
Total Equity		\$11,105,765	\$15,493,183	\$(9,164,474)	\$(5,363,690)

STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2003

	Note	Consolidated 2003	2002	Grange Resources Limited 2003	2002
Cashflows from Operating Activities		\$	\$	\$	\$
Receipts from product sales Other income Payments to suppliers and employees Interest received Borrowing costs		6,391,568 57,042 (10,747,723) 381,690 (27, 825)	25, 187, 968 26,631 (14,066,769) 242,318 (93, 168)	53,174 (1,610,116) 28,792	98,207 (1,224,816) 6,494
Net cash provided by/(used in) operating activities	17(b)	(3,945,248)	11,296,980	(1,528,150)	(1, 120, 115)
Cashflows from Investing Activities
Proceeds from sale of property, plant and equipment exploration, evaluation for 8. Payment			16,843
development work Payments for property, plant and equipment Loans to controlled entities within wholly owned		(725, 150) (39, 522)	(3,702,381) (79, 395)	(42, 128) (4,897)	(20, 267) (19, 395)
group Refund of security deposit Payments of security deposit		116,511 (1,614,988)		66,746	(1,381,939)
Advances to related entities		(198, 826)		(198, 826)
Net cash (used in) investing activities		(2,461,975)	(3,764,933)	(179, 105)	(1,421,601)
Cashflows from Financing Activities
Proceeds from borrowings from controlled entities within wholly owned group Repayment of borrowings Finance lease principal repayments			(1,312,797)	3,834,268	4,432,842 (1,250,000)
Proceeds from issue of fully paid shares Payments for shares bought back		60,000 (2, 238, 716)	2,676 (568, 171)	60,000 (2,236,049)	2,676 (568, 171)
Net cash provided by/(used in) financing activities		(2, 178, 716)	(1,878,292)	1,658,219	2,617,347
Net increase/(decrease) in cash held		(8,585,939)	5,653,755	(49, 036)	75,631
Cash at the beginning of the financial year		12,357,436	6,703,681	217,571	141,940
Cash at the end of the financial year	17(a)	\$3,771,497	\$12,357,436	\$168,535	\$217,571

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with.

The following is a summary of the significant accounting policies adopted by the Consolidated Entity in the preparation of the accounts. Unless otherwise disclosed, the financial statements have been prepared in accordance with the historical cost convention.

$(a)$ Principles of Consolidation

The accounts of the Consolidated Entity comprise the accounts of Grange Resources Limited and all of its controlled entities. Control exists where Grange Resources Limited has the capacity to dominate the decision making relative to the financial and operating policies of another entity so that the other entity operates with Grange Resources Limited to achieve the objectives of Grange Resources Limited.

On acquisition of a controlled entity, the difference between the purchase consideration plus incidental expenses and the fair values of identifiable net assets acquired is initially brought to account as goodwill or discount on acquisition. Discount on acquisition is then eliminated by reducing proportionately the fair value of the non-monetary assets acquired. Purchased goodwill is amortised over a period of three years, being the period during which the benefits are expected to arise. The unamortised balance of goodwill is reviewed at each balance date and charged to profit and loss to the extent that applicable future benefits are no longer probable.

A list of controlled entities is contained in note 19 to the accounts. All inter-company balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation.

Where controlled entities have entered or left the Consolidated Entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

$(b)$ Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous year except for the accounting policies with respect to the provision for employee benefits and the accounting policy with respect to foreign currency contracts that are hedges.

Employee Benefits

The consolidated entity has adopted the revised Accounting Standard AASB 1028 "Employee Benefits", which has resulted in a change in the accounting policy for the measurement of employee benefit liabilities. Previously, the consolidated entity measured the provision for employee benefits based on remuneration rates at the date of recognition of the liability. In accordance with the requirements of the revised Standard, the provision for employee benefits is now measured based on the remuneration rates expected to the paid when the liability is settled. The effect of the revised policy is no material to existing balances.

Foreign Currency Contracts

The consolidated entity has adopted revised Accounting Standard AASB 1012 "Foreign Currency Translation". applicable to annual reporting periods beginning on or after 1 January 2002. In accordance with the revised Standard, the consolidated entity has for the first time recognised foreign currency contracts that are hedges on the Statement of Financial Position. Previously, foreign currency contracts that qualified for hedge accounting were not recognised in the Statement of Financial Position. As at 30 June 2003 this has resulted in an increase iof \$2,114,900 in current liabilities and an increase of \$2,114,900 in current assets.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

$(c)$ Recoverable Amount of Non-Current Assets

The carrying amounts of all non-current assets are reviewed at least annually to determine whether they exceed their recoverable amount.

The recoverable amounts of all non-current assets have been 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 been discounted to their present values in determining recoverable amounts.

$(d)$ Property, Plant and Equipment

Property, plant and equipment are brought to account at cost less, where applicable, any accumulated depreciation or amortisation. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets.

Property, plant and equipment are depreciated to their residual value at rates based upon the life of the individual asset or the life of the mine, whichever is considered shorter. Both the straight line and diminishing value methods are used and assets are depreciated over a 1 to 6 year period (2002: 1 to 6 years).

$(e)$ Mineral Exploration and Evaluation Expenditure

Mining tenements and capitalised exploration expenditure (including acquisition costs) are stated at cost, less, where applicable, any accumulated amortisation. The carrying amount of deferred mineral exploration and evaluation expenditure is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets.

Costs arising from the acquisition, exploration and evaluation relating to an area of interest are carried forward provided that rights to tenure of the area of interest are current and provided further that at least one of the following conditions is met:

• (a) such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or
• (b) exploration and evaluation activities in the area of interest have not at balance date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and sionificant operations in, or in relation to, the area of interest are continuing.

Ultimate recoupment of these costs is dependent on the successful development and commercial exploitation or sale, of the respective areas of interest.

$(f)$ Development Properties

Development expenditure incurred by, or on behalf of, the entity is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the directors.

Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area of interest is aggregated with the costs of development and classified under non-current assets as "Development Properties".

All expenditure incurred prior to the commencement of commercial levels of production from each development property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

No amortisation is provided in respect of development properties until they are reclassified as "Production Properties" following a decision to commence mining.

Production Properties $(q)$

Production properties represent the accumulation of all exploration, evaluation and development expenditure incurred by, or on behalf of, the entity in relation to areas of interest in which mining of a mineral resource has commenced.

Where further development expenditure is incurred in respect of a production property after the commencement of production, such expenditure is carried forward as part of the cost of that production property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Costs on production properties in which the Consolidated Entity has an interest are amortised over the life of the area of interest to which such costs relate on the production output basis.

The net carrying value of each production property is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets.

$(h)$ Restoration, Rehabilitation and Environmental Costs

Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are accrued at the time of those activities and treated as exploration and evaluation expenditure.

Restoration, rehabilitation and environmental costs arising annually from development and production are expensed during the production phase of operations as part of the cost of production. Rehabilitation costs in relation to the Horseshoe Mine were provided for at the time of placing the mine on care and maintenance and are reviewed and. where necessary, adjusted on an annual basis.

Restoration, rehabilitation and environmental obligations recognised include the costs of rehabilitation, plant and waste site closure and subsequent monitoring of the environment.

Costs are estimated on the basis of current undiscounted costs, current legal requirements and current technology.

Estimates of future costs are reassessed at least annually. Changes in estimates relating to areas of interest in the exploration and evaluation phase are dealt with retrospectively, with any amounts that would have been written off or provided against under the accounting policy for exploration and evaluation immediately written off. Changes in estimates of costs relating to producing areas are dealt with prospectively over the remaining mine life.

$(i)$ Investments

Current investments are carried at the lower of cost and net market value except where they have been disposed of subsequent to year end where they are carried at the lower of cost and the net value realised from their sale.

All other non-current investments are carried at the lower of cost and recoverable amount.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

${i}$ Revenue Recognition

Sales revenue is recognised when title in the product has passed to the buyer, unless otherwise contracted.

Royalty revenue is recognised in the month in which the ore is processed at a treatment plant.

Revenue received from the sale of product, materials or services during the exploration, evaluation, expenditure or development phases of operations is offset against expenditure in respect of the area of interest/mineral resource concerned.

Other revenues is recognised when a right to receive it has been attained.

$(k)$ Foreign Currencies

Transactions in foreign currencies are converted into Australian dollars at their actual conversion rates or at rates at which they are expected to be delivered into foreign exchange hedging contracts.

Foreign currency amounts receivable and payable at Balance Date have been converted into Australian dollars at their actual rates of conversion subsequent to year end or at rates at which they are expected to be delivered into foreign exchange contracts.

Specific Hedges

Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to the date of purchase or sale and costs, premiums and discounts relative to the hedging transaction are deferred and included in the measurement of the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken to the net profit.

$(1)$ Employee Entitlements

The amounts expected to be paid to employees for their pro-rata entitlement to annual leave are measured at their nominal amounts. No non-current employee entitlements exist at present.

The value of the employee share plan in Note 25 is not being charged as an employee entitlement expense. Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.

Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

Employee benefit expenses and revenues arising in respect of the following categories:

• wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits; and
• other types of employee benefits
• are recognised against profits on a net basis in their respective categories.

The value of the employee share plan described in note 25 is not being charged as an employee entitlement expense.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories $(m)$

Inventories comprise broken ore, work in progress and concentrate which are carried at the lower of cost and net realisable value. Costs represent weighted average cost and includes direct costs and an appropriate portion of fixed and variable overhead expenditure, including amortisation. Net realisable value is the amount estimated to be obtained from sale of the item of inventory in the normal course of business, less any anticipated costs to be incurred prior to its sale.

Cash $(n)$

For the purposes of the statement of cashflows, cash includes deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts.

$(0)$ Interests in Joint Venture Operations

The Consolidated Entity's share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the statement of financial position and statement of financial performance. Details of the Consolidated Entity's interests are shown in note 18.

Where part of a joint venture interest is farmed out in consideration of the farm-in party undertaking to incur further expenditure on behalf of both the farm-in party and the entity in the joint venture area of interest, exploration expenditure incurred and carried forward prior to farm out continues to be carried forward without adjustment, unless under the terms of the farm out it is considered excessive based on the diluted interest retained. A provision is then made to reduce exploration expenditure to its recoverable amount. Any cash received in consideration for farming out part of a joint venture interest is treated as a reduction in the carrying value of the related mineral property.

$(p)$ Trade and Other Debtors

Trade and other debtors are recognised and carried at the original invoice amount less a provision for any uncollectible debts. Collateral is not normally obtained and a provision for doubtful debts is recognised when collection is no longer probable. Bad debts are written off as incurred.

Receivables from controlled entities are carried at the principal amount. Interest, when charged, is recognised as income on an accruals basis.

Trade and Other Creditors $(q)$

These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

Amounts payable to controlled entities are carried at the principal amount. Interest when charged by the lender, is recognised as an expense on an accruals basis.

Borrowings $(r)$

Loans are carried at their principal amounts. Interest is charged as an expense as it accrues.

Finance lease liability is determined in accordance with the requirements of AASB 1008.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

$(s)$ Borrowing Costs

Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:-

• interest on bank overdrafts and short-term and long-term borrowings ٠
• amortisation of ancillary costs incurred in connection with the arrangement of borrowings
• finance charges on leased assets

$(t)$ Leases

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

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.

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

$(u)$ Intellectual Property

Intellectual property is brought to account at cost and amortised on a straight line basis over a period of three years. being the period during which the benefits are expected to arise.

The carrying value of intellectual property is reviewed bi-annually by directors to ensure it is not in excess of its recoverable amount. Where the carrying amount exceeds its recoverable amount it is revalued to its recoverable amount with the revaluation decrement being recognised as an expense in determining the operating profit/(loss).

In the prior year all intellectual property was written off.

$(v)$ Currency and Commodity Hedging

Hedging is undertaken in order to avoid or minimise possible adverse financial or cashflow effects of movements in commodity prices and exchange rates. Premiums received or costs arising upon entering into forward sale, option and other derivative contracts intended to hedge specific future production, together with subsequent realised and unrealised gains or losses, are deferred until the hedged production is delivered.

In those circumstances where a hedging transaction is terminated prior to maturity because the hedged production is no longer expected to be produced, any previously deferred gains and losses are recognised in the statement of financial performance account on the date of termination.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings per Share ("EPS") $(w)$

Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing entity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to members, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends:
• the after tax effects of dividends and interest associated with dilutive potential ordinary shares that have been ۸ recognised as expenses; and
• other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares; and
• divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

$(x)$ Contributed Equity

Ordinary share capital is recognised at the fair value of the consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

$(y)$ Taxes

Income Taxes

Tax-effect accounting is applied using the liability method whereby income tax is regarded as an 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 benefit 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:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.

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.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Comparative Figures $(z)$

Where necessary, comparative figures have been adjusted to conform with changes in presentation in 2003.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 2 - REVENUE FROM ORDINARY ACTIVITIES

		Consolidated		Grange Resources Limited
	2003 \$	2002 s	2003 5	2002 \$
Sales Revenue Copper Zinc	6,087,781	24,045,795
Royalties	351,020	274,817
	6,438,801	24,320,612
Other Revenue Interest received from other persons Sundry income	381,690 54,545	242,318 30,702	28,792 54,545	6,494 30,252
Proceeds on disposal of:- Property, plant & equipment		16,843
	436,235	289,863	83,337	36,746
	6,875,036	24,610,475	83,337	36,746

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 3 - EXPENSES AND LOSSES/(GAINS)

	Consolidated		Grange Resources Limited
	2003	2002	2003	2002
Loss from ordinary activities before income tax includes the following expenses and losses/(gains) whose disclosure is relevant in explaining the financial performance of the entity.	\$	\$	\$	\$
Amortisation and depreciation of mining (a) assets:
Amortisation of deferred exploration, evaluation and development costs	1,053,546	8,637,437
Depreciation of plant and equipment	7,406	612,336
Total amortisation and depreciation of mining assets	1,060,952	9,249,773
(b) Other expenses from operating activities:
Depreciation of office furniture and equipment	39,295	84,849	39,295	10,462
Write off of exploration assets	30,936	770,699	10,242	18,725
Provision for non-recovery of related party loans		(17, 722)		(17, 722)
Provision for non-recovery of loans to subsidiaries				1,212,430
Total other expenses from operating activities	70,231	837,826	49,537	1,223,895
Other relevant disclosure items: (c)
Operating lease rentals Government mining royalties incurred Write-off property, plant & equipment Provision for mine rehabilitation (included in	57,366 80,167	140,053 503,930 456,794	57,366	20,624
cost of sales) Provision for vacant rental premises Provision for annual leave	54,121	1,192,499 (13, 143) (33, 873)	54,121	(33, 873)

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 3 - EXPENSES AND LOSSES/(GAINS) (CONTINUED)

		Consolidated		Grange Resources Limited
	2003	2002	2003	2002
(d) Gains/(Losses):	\$	\$	\$	\$
Proceeds from sale of office furniture and equipment Book value of office furniture and equipment		16,846
sold		(429, 129)		(3,297)
Profit/(loss) on sale of office furniture and equipment		(412, 283)		(3,297)
(e) Borrowing Costs:
Interest paid to non-related entities	27,825	93,168

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

	Consolidated	2002 \$	Grange Resources Ltd 2002 \$
NOTE 4 – INCOME TAX
(a) The prima facie income tax expense/(benefit) on the loss from ordinary activities is reconciled to the income tax provided in the accounts as follows:
The prima facie income tax expense/(benefit) on the loss from ordinary activities at 30% (2002: 30%). Tax effect of permanent differences:-	(662, 611)	(432, 804)	(486, 620)	(685, 574)
Provision for diminution of investment in controlled entities
Provision for diminution of investments		65,252
Provision for non-recovery of loans		(5,332)		(5, 332)
Entertainment	1,392	1,246	1,392	1,246
Other non-deductible expenses/permanent differences	120,292	376,204	2,019	75,794
Tax effect of timing differences not recognised	540,927	(4, 566)	483,209	613,866
Income tax expense/(benefit) attributable to loss from ordinary activities	\$	S - \$	S

(b) Potential net future income tax benefits attributable to tax losses carried forward but not brought to account amount to approximately \$6,682,302 at 30% for the Consolidated Entity and \$4,568,155 at 30% for the Company (2002: Consolidated Entity \$1,418,655 at 30%, Company nil at 30%). The benefits will only be obtained if:

The Company and Consolidated Entity derive future assessable income of a nature and amount which will enable the $\bullet$ benefit from the deductions for the losses to be realised:

The Company and Consolidated Entity continue to comply with the conditions for the deductibility imposed by law; and $\bullet$

No changes in tax legislation adversely affect the Company and Consolidated Entity's ability to realise the benefit from $\bullet$ the deductions for the losses.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

	Consolidated		Grange Resources Limited
	2003	2002	2003	2002
	\$	S	S	\$
NOTE 5 - RECEIVABLES
Current
Trade debtors	788,127	1,133,761
Security deposits	47,416	80,351
Amounts receivable from related parties (Note 22 (d))	324,932	126,106	324,932	126,106
Other debtors	4,285	82,988	22,101	40,873
Foreign currency hedge receivable	2,114,900
	3,279,660	1,423,206	347,033	166,979
Non-Current
Related parties:
Loans to controlled entities (Note 22 (d)) Provision for doubtful recovery (Note 22 (d))			12,829,916 (12,092,225)	12,757,564 (11, 975, 125)
Loans to other related parties (Note 22 (d))		263,650		263,650
Provision for doubtful recovery		(263, 650)		(263, 650)
			737,691	782,439
Other:
Security deposits	309,488	426,268	310,205	382,557
	\$309,488	\$426,268	\$1,047,896	\$1,164,996
NOTE 6-INVENTORIES
Product inventory - at cost Stores inventory - at cost	2,724,671 320,099	\$350,543
Total inventory	\$3,044,770	\$350,543	\$	\$

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

	Consolidated 2003 2002		2003	Grange Resources Limited 2002
NOTE 7-INVESTMENTS	\$		\$	\$	\$
Non-Current Unlisted Investments (at cost) Provision for diminution			1,253,135 (1,253,135)		1,552,626 (1,552,626)
Controlled entities (at cost) (Note 19) Provision for diminution				27,903,678 (23, 322, 535)	27,903,678 (23, 322, 222)
				4,581,143	4,581,456
	\$		S	\$4,581,143	\$4,581,456

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

	2003 \$	Consolidated 2002 \$	Grange Resources Limited 2003 \$	2002 \$
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT (a) Situation at Balance Date
Plant and equipment (at cost) Accumulated depreciation	1,138,052 (1, 106, 946)	1,099,540 (1,099,540)
	31,106
Office equipment (at cost) Accumulated depreciation	97,509 (73, 652)	92,615 (40, 752)	46,663 (46, 663)	41,766 (13, 763)
	23,857	51,863		28,003
Motor vehicles (at cost) Accumulated depreciation	24,362 (24, 362)	24,362 (17, 967)	24,362 (24, 362)	24,362 (17, 967)
		6,395		6,395
Land (i)	225,362	225,362
	\$280,325	\$283,620	\$	\$34,398

$(i)$ Land refers to a pastoral lease acquired in relation to mining activities at Mt Windsor.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

		Consolidated	Grange Resources Limited
	2003 \$	2002 \$	2003 \$	2002 \$
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
(b) Movement for the year
Property, plant and equipment Balance at beginning of year Additions Disposals Depreciation expense Write down to recoverable amount	38,512 (7, 406)	616,118 60,044 (3,817) (612, 345) (60,000)
Balance at end of year	31,106
Office Equipment Balance at beginning of year Additions Disposals	51,863 4,894	245,990 19,395	28,003 4,897	12,233 19,395
Transfer to leased assets Depreciation expense Write down to recoverable amount	(32,900)	(6, 858) (206, 664)	(32,900)	(3,625)
Balance at end of year	23,857	51,863		28,003
Motor Vehicles Balance at beginning of year Depreciation expense	6,395 (6, 395)	10,049 (3,654)	6,395 (6,395)	10,049 (3,654)
Balance at end of year		6,395		6,395
Computer systems under lease Balance at beginning of year Amortisation expense Transfer from office equipment		233,627 (74, 389)
Write down to recoverable amount		(159, 238)
Balance at end of year
Computer equipment under lease Balance at beginning of year Amortisation expense		30,892
Write down to recoverable amount		(30, 892)
Balance at end of year

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

	2003 \$	Consolidated 2002 \$	Grange Resources Limited 2003 \$	2002 S
NOTE 9 - OTHER ASSETS
Current
Prepayments	\$42,312	\$35,372	\$42,312	\$35,372
Non-Current
Security deposit- cash backed	\$1,614,988	\$	\$	\$
NOTE 10 - DEFERRED EXPLORATION, EVALUATION & DEVELOPMENT COSTS
Exploration & evaluation properties (at cost) Development properties (at cost)	767,343	696,789 3,340,958	558,294	526,407
Production properties (at cost) Less: Accumulated amortisation	22,831,456 (19,481,601)	18,870,736 (18, 428, 055)
	\$4,117,198	\$4,480,428	\$558,294	\$526,407
Movement: Exploration & Evaluation Properties Balance at beginning of year
Current year expenditure Write-down to recoverable amount	696,789 101,490 (30, 936)	1,297,906 169,582 (770, 699)	526,407 42,129 (10, 242)	524,865 20,267 (18, 725)
Balance at end of year	767,343	696,789	558,294	526,407
Development Properties Balance at beginning of year Current year expenditure	3,340,958	505,546
Transfer to production properties	(3,340,958)	2,835,412
Balance at end of year		3,340,958
Production Properties Balance at beginning of year Transfer from development properties	442,681	8,378,833
Current year expenditure Amortisation charged	3,340,958 619,762 (1,053,546)	701,285 (8,637,437)
Balance at end of year	3,349,855	442,681
	\$4,117,198	\$4,480,428	\$558,294	\$526,407

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 10 - DEFERRED EXPLORATION, EVALUATION & DEVELOPMENT COSTS (CONTINUED)

The directors have reviewed the carrying values of each area of interest as at Balance Date. Where the carrying value of an individual area of interest was in excess of its recoverable amount the area of interest has been written down to its recoverable amount as at 30 June 2003.

The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value.

NOTE 11 - ACCOUNTS PAYABLE

		Consolidated		Grange Resources Limited
	2003	2002	2003	2002
	S	\$		\$
Trade creditors	839,416	774,480	46,237	24,519
Other creditors	26,319	82,708	6,319	7,667
Foreign currency hedge payable	2,114,900	$\blacksquare$	$\blacksquare$
	2,980,635	\$857,188	\$52,556	\$32,186

NOTE 12 - PAYABLES

Non-Current Loans from controlled entities - unsecured (Note 22(d)			15,218,407	11,434,497
Convertible redeemable preference shares		732		732
	\$	\$732	\$15,218,407	\$11,435,229
NOTE 13 - PROVISIONS
Current Provision for annual leave (Note 25) Provision for mine rehabilitation	54,121 562,233	38,851 1,136,100	54,121	38,851
	\$616,354	\$1,174,951	\$54,121	\$38,851
Non-Current Provision for mine rehabilitation	\$1,757,484	\$1,830,819	\$584,603	\$584,603

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 14 - CONTRIBUTED EQUITY

	Consolidated			Grange Resources Limited
	2003	2002 \$	2003 \$ \$	2002 \$
fully paid shares (66,755,221) Ordinary shares	30,240,342	32,419,058	30,240,342	32,419,058
Ordinary partly paid shares (nil shares)	28,066	28,066	28,066	28,066
Forfeited shares (nil shares)	3,000	3,000	3,000	3,000
	\$30,271,408	\$32,450,124	\$30,271,408	\$32,450,124

Movements in shares on issue:

	Consolidated 2003		Consolidated 2002
	Number of shares	S	Number of shares
Beginning of financial year Issues through options exercised during the	79,298,595	32,450,124	84,976,932	33,015,617
year	500,000	60,000	3,345	2,676
Bought back during the year	(13,043,374)	(2,238,716)	(5,681,682)	(568,169)
	66,755,221	\$30,271,408	79,298,595	\$32,450,124

Options Issued During the Year $(a)$

5,825,000 options over unissued shares were issued during the year. During the year 500,000 options were exercised and 250,000 options were cancelled.

$(b)$ Share Options

Options over unissued ordinary shares outstanding at Balance Date are as follows:-

(i) 5,075,000 options over unissued ordinary shares exercisable at 12 cents each on or before 30 June 2007.

$(c)$ Selective and On Market Share Buy Back

(i) The Company completed a selective share buy-back and cancellation of 5,681,683 fully paid ordinary shares each at a price of 11 cents (amounting to a total price of \$624,985) and 26,830,168 preference shares for a total price of \$1.00.

(ii) The Company also completed an on-market share buy-back and cancellation of 7,361,691 fully paid ordinary shares for a total consideration of \$1,627,590 including transaction costs.

Convertible Redeemable Preference Shares $(d)$

The Company redeemed and cancelled 46,339,633 convertible redeemable preference shares in June 2003 for a total consideration of \$463.40.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

		Consolidated		Grange Resources Limited
	2003 \$	2002 \$	2003 \$	2002 \$
NOTE 15 - RESERVES AND RETAINED LOSSES
(a) Reserves
General reserve Option issue reserve Asset revaluation reserve	667,433 3,568,912 1,638,003	667,433 3,568,912 1,638,003	667,433 3,568,912 515,798	667,433 3,568,912 515,798
	\$5,874,348	\$5,874,348	\$4,752,143	\$4,752,143
(b) Retained Losses
Balance at beginning of year Net loss attributable to members	(22, 831, 289) (2,208,702)	(21, 225, 799) (1,605,490)	(42, 565, 957) (1,622,068)	(40, 261, 712) (2,304,245)
Balance at end of year	\$(25,039,991)	\$(22,831,289)	\$(44, 188, 025)	\$(42,565,957)

NOTE 16 - FINANCIAL INSTRUMENTS

The Consolidated Entity is a party to derivative financial instruments entered into in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates and commodity prices.

Off-Balance Sheet Derivative Instruments $(a)$

Commodity Contracts

The Consolidated Entity had committed to the following hedging contracts, in order to protect it from adverse movements in commodity prices.

	2003	2003	2002	2002
	Qty	Average	Qty	Average
	Hedged	Price	Hedged	Price
	(tonnes)	(US\$/tonne)	(tonne)	(US\$/tonne)
Copper Forwards (tonnes)	1,170	\$1,651	$\blacksquare$	S $\sim$

As commodity contacts can be settled other than by physical delivery of the underlying commodity, they are classified as financial instruments. On maturity, the contracted price is compared to the spot price on that date and the price differential is applied to the contracted quantity. A net amount is paid or received by the Consolidated Entity.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 16 - FINANCIAL INSTRUMENTS (CONTINUED)

As these contracts are entered into for the purpose of hedging future production, the gains and costs of entering into these contracts and any unrealised gains and losses are deferred until the underlying production occurs.

It is the Company's practice to hedge a portion of expected future production. The unrealised gains and losses are not brought to account at Balance Date in accordance with recognised accounting principles.

Foreign Exchange Contracts

The sales revenue of the Consolidated Entity is predominantly denominated in United States dollars. In order to protect against adverse exchange rate movements, a portion of anticipated United States dollar exposure in relation to sales from the Reward Deeps project was sold forward under foreign exchange contracts.

At Balance Date, the details of outstanding contracts are:-

	Sell US Dollars		Buy Australian Dollars		Average Exchange Rate
Maturity	2003	2002	2003	2002	2003	2002
$0 - 12$ months	\$6,452,779	$\sim$	\$11,802,303	$\sim$	54.7c

The unrealised gains and losses are measured by comparing the contracted price to the spot price at Balance Date. The amounts disclosed below are only indicative of the amounts which may be ultimately realised and should be considered in conjunction with unrealised gains or losses on commodity contracts.

	2003 Net Gain/(loss)	2002 Net Gain/(loss)
Maturity	\$2,114,900	\$ $\tilde{\phantom{a}}$
$0 - 12$ months	2,114,900	\$ $\blacksquare$
	\$2,114,900	\$ $\tilde{\phantom{a}}$

As these contracts are hedging anticipated future sales, any unrealised gains and losses on the contracts, together with the cost of the contracts, are deferred and will be recognised in the measurement of the underlying transaction.

$(b)$ Interest Rate Risk Exposure

The Consolidated Entity's exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities are set out below.

Exposures arise predominantly from cash at bank and on deposit, bank borrowings and finance leases.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 16 - FINANCIAL INSTRUMENTS (CONTINUED)

	2003 Floating Interest Rate	2003 Non- Interest	2003 Total	2002 Floating Interest Rate	2002 Non- Interest	2002 Total
	\$	Bearing	\$		Bearing	\$
Financial Assets
Cash at bank	477,210	563	477,773		581,176	581,176
Cash on deposit	3,293,724		3,293,724	11,776,260		11,776,260
Receivables		3,541,732	3,541,732	32,935	1,309,920	1,342,855
Security deposits	1,614,988	47,416	1,662,404	116,063	390,556	506,619
	5,385,922	3,589,711	8,975,633	11,925,258	2,281,652	14,206,910
Weighted average interest rate	2.37%	NA		3.87%	N/A
Financial Liabilities
Trade and other creditors		2,980,635	2,980,635		859,587	859,587
Preference shares				732		732
		2,980,635	2,980,635	732	859,587	860,319
Weighted average interest rate	NA	ΝA		NА	NA

Net Fair Value of Financial Assets & Liabilities $(c)$

The fair value of on-balance sheet financial assets and liabilities of the Consolidated Entity, excluding foreign exchange contracts, approximate their carrying values.

In relation to the foreign exchange contracts and commodity contracts, the net fair value is taken to be the unrealised gain or loss at Balance Date calculated by reference to the current forward rates for contacts with similar maturity profiles

	2003 Carrying Amount	2003 Net Fair Value	2002 Carrying Amount	2002 Net Fair Value
	Φ			\$
Financial Assets Foreign Exchange Contracts Commodity Contracts	2,114,900	1,239,008
Financial Liabilities Foreign Exchange Contracts Commodity Contracts	2,114,900	(507, 481)
		731,527

GRANGE RESOURCES LIMITED ABN 80 009 132 405 ANNUAL REPORT 2003 NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 17 - NOTES TO THE STATEMENTS OF CASHFLOWS

$(a)$ Reconciliation of Cash

For the purposes of the statements of cashflows, cash includes cash on hand and in banks, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statement of cashflows is reconciled to the related items in the balance sheet as follows:

	Consolidated		Grange Resources Limited
	2003	2002	2003	2002
Cash at bank	384,983	302.288	168,535	207,561
Deposits at call (i)	3,143,807	11,776,260		10,010
Cash at bank - Joint ventures (ii)	242,707	278,888
	\$3,771,497	\$12,357,436	\$168,535	\$217,571

$(i)$ Deposits at call

The deposits are bearing floating interest rates between 1.50% p.a. and 4.70% at 30 June 2003 (30 June 2002 between 1.75% and 4.80%).

Joint Venture cash at bank $(ii)$

This cash represents Mount Windsor Joint Venture, Reward, Highway and Reward Deeps/Conviction cash calls paid by Grange Resources Limited but not yet used by the joint ventures to pay creditors.

$(b)$ Reconciliation of cashflow from operating activities with loss from ordinary activities after income tax

Loss from ordinary activities after income tax Non-cashflows loss from in ordinary	(2,208,702)	(1,605,490)	(1,622,068)	(2,304,245)
activities:
deferred Amortisation exploration, οf
evaluation & development costs	1,053,546	8,711,313
Depreciation of plant & equipment	46,701	619,250	39,295	10,512
Provision for rehabilitation		1,192,499
Provision/(reversal of provision) for non- recoverability of loans to related parties		31,667		31,667
Provision for vacant rental premises		(13, 143)
Provision for non-recovery of loans to
subsidiaries				1,212,430
Profit/(loss) on disposal of property, plant and
equipment		412,283		3,297
Provision for annual leave	15,270	(33, 873)	15,270	(33, 873)
Amortisation of intangibles
Write down of exploration assets	30,936	770,699	10,242	18,725
Changes in assets and liabilities
Receivables	457,272	825,566	18,770	67,952
Prepayments	(6,940)	10,744	(6,940)	(1,712)
Trade creditors and accruals	8,094	(1,342,871)	17,281	(124, 868)
Provisions	(647, 198)
Inventories	(2,694,227)	1,718,336
Cash Inflow/(Outflow) from operating activities	\$(3,945,248)	\$11,296,980	\$(1,528,150)	\$(1, 120, 115)

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 18 - INTERESTS IN JOINT VENTURE OPERATIONS AND BUSINESS UNDERTAKINGS

At 30 June 2003 the Consolidated Entity was a participant in the following joint ventures:

			Grange Resources Limited
% Interest 2003	% Interest 2002	% Interest 2003	% Interest 2002
31.15%	31.15%
30%	30%
30%	30%
85%	85%	42.5%	42.5%
10%	10%
30%	30%
		Consolidated

The joint ventures are not separate legal entities. They are contractual arrangements between the participants for the sharing of costs and output and do not in themselves generate revenue and profit.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 18 - INTERESTS IN JOINT VENTURE OPERATIONS AND BUSINESS UNDERTAKINGS (CONTINUED)

The Consolidated Entity's direct interests in joint venture net assets, as summarised below, are included in the corresponding balance sheet items in the Consolidated Entity accounts. $\mathbf{a}$ and $\mathbf{a}$ and $\mathbf{a}$ $\mathbf{r}$ and $\mathbf{r}$

	2003 \$	Consolidated 2002 \$	2003 S	Grange Resources Limited 2002 \$
Current Assets Cash Inventories	242,707 3,044,770	278,888 350,543
Total Current Assets	3,287,477	629,431
Non-Current Assets Deferred exploration, evaluation and development costs Property, plant and equipment	3,244,421 256,468	3,407,744 225,362
Total Non-Current Assets	3,500,889	3,633,106
Total Assets	6,788,366	4,262,537
Current Liabilities Accounts payable Provisions	721,044 562,233	675,306 1,136,100
Total Current Liabilities	1,283,277	1,811,406
Non-Current Liabilities Provisions	1,172,568	805,200
Total Liabilities	2,455,845	2,616,606
Net Assets Employed in Joint Venture Operations	\$1,045,044	\$1,645,931	\$	\$

The net contributions of joint venture operations (inclusive of resultant revenues) to the group operating profit before income tax and abnormal items was a profit of \$894,839 (2002: profit \$1,975,331).

Contingent liabilities in relation to joint ventures are disclosed in note 24.

Business Undertakings

A partnership was formed in the 1998/99 financial year between the Consolidated Entity and a group of investors, led by Hestak Pty Ltd, for the purpose of monitoring and carrying out various mining activities in relation to the Horseshoe Mine and other partnership assets. The Consolidated Entity has a 4% interest in the partnership which is reflected at zero value in the Consolidated Entity's accounts at Balance Date.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 19 - INVESTMENTS IN CONTROLLED ENTITIES

The following were controlled entities at 30 June 2003, and have been included in the consolidated financial statements. The financial years of all controlled entities are the same as that of the Company.

Name of Controlled Entity Limited	% Ordinary Shares Held		Book Value in Grange Resources
	2003 $\frac{0}{0}$	2002 $\%$	2003 \$	2002 \$
Grange Capital Pty Ltd	100	100
Tribune Developments Pty Ltd	100	100
Barrack Mines Pty Ltd	100	100	4,581,143	4,581,456
Bamine Pty Ltd	100	100
Barrack Corporate Services Pty Ltd (b)	50	50
BML Holdings Pty Ltd	100	100
Horseshoe Gold Mine Pty Ltd	100	100
Surfboard Securities Limited	100	100
Streetnet Pty Ltd	100	100
			\$4,581,143	\$4,581,456

• (a) The Company and all controlled entities are incorporated in Australia. Grange Resources Limited is a company limited by shares and domiciled in Australia.
• (b) A voluntary application to deregister the company has been lodged with the Australian Securities and Investment Commission subsequent to the year end.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 20 - REMUNERATION OF DIRECTORS AND EXECUTIVES

Remuneration of Directors $(a)$

	Directors of Entities in the Consolidated Entity		Directors of the Company
Income paid or payable, or otherwise made	2003	2002	2003	2002
available, to directors by entities in the Economic Entity and related parties in connection with the management of the affairs of the Company or its controlled entities *.	\$481,199	\$564,935	\$481,199	\$564,935

* Excluding executives of the Company who are only directors of wholly owned Australian controlled entities.

The number of Company Directors whose income (including superannuation contributions and other benefits) from entities in the Consolidated Entity or related parties was within the specified bands are as follows:

are as follows:	2003 Number	2002 Number
$$10,001 - $20,000$
$$20,001 - $30,000$
$$50,001 - $60,000$
$$60,001 - $70,000$
\$140,001 - \$150,000
\$170,001 - \$180,000
\$190,001 - \$200,000
\$270,001 - \$280,000

In the opinion of Directors, remuneration paid to Directors is reasonable.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 20- REMUNERATION OF DIRECTORS AND EXECUTIVES (CONTINUED)

(b)		Executive Officers of Entities in the Consolidated Entity		Executive Officers of the Company
Remuneration received, or due and receivable, from entities in the Consolidated Entity and related parties by executive officers (including	2003 \$	2002 \$	2003 \$	2002
directors) whose remuneration was \$100,000 or more.	\$469,841	\$588,869	\$469,841	\$588,869
The number of executive officers (including directors) whose income from entities in the	2003 Number	Executive Officers of the Consolidated Entity 2002 Number	Executive Officers of the Company 2003 Number	2002 Number
Consolidated Entity and related parties was within the specified bands are as follows:
\$100,001 - \$110,000 \$140,001 - \$150,000 \$170,001 - \$180,000
\$190,001 - \$200,000 \$270,001 - \$280,000

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

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 21 - SEGMENT INFORMATION

$(a)$ Geographic Segments

The Consolidated Entity operates predominantly in one geographic segment, Australia.

$(b)$ Industry Segments

The Consolidated Entity operates predominantly in two industries - the mining and exploration industry and the technology and financial services industry. ESCLED D Postagalla $\ddot{\phantom{a}}$ $\mathbf{r}$ alah Camila $\overline{a}$ .
. et .e. j.

	Mining & Exploration		Financial Services & Technology Activities		Consolidated
	2003 \$	Activities 2002 \$	2003 \$	2002 \$	2003 Ś	2002 \$
Sales revenue Other revenue Unallocated revenue	6,087,781 351,020	24,045,795 274,817			6,087,781 351,020 436,235	24,045,795 274,817 289,863
Total revenue	\$6,438,801	\$24,320,612			\$6,875,036	\$24,610,475
Segment result	\$(953, 609)	\$1,098,841	\$(837)	\$(653,203)	\$(954, 446)	\$445,638
Unallocated expenses					(1,690,491)	(2,340,991)
Unallocated revenue					436,235	289,863
Consolidated Entity loss from ordinary activities					\$(2,208,702)	\$(1,605,490)
Segment assets	\$15,491,123	\$18,387,713	\$101,030	\$97,581	\$15,592,153	\$18,485,294
Unallocated asset					\$868,085	\$871,579
Total assets					\$16,460,238	\$19,356,873
Segment liabilities	5,235,515	3,780,224	18,318	18,318	5,253,833	3,798,542
Unallocated liabilities					100,640	65,148
Total liabilities					5,354,473	3,863,690

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 21 - SEGMENT INFORMATION

$(b)$ Industry Segments (Continued)

	Mining & Exploration	Activities	Financial Services & Technology Activities		Consolidated
	2003 \$	2002 \$	2003 \$	2002 \$	2003 \$	2002 \$
Other segment information:
Acquisition of property, plant and equipment, intangible assets and other non current assets	38,512	3,706,281			43,410	3,725,676
Depreciation and
amortisation	1,053,546	9,220,720		74,387	1,100,247	9,334,672
Non cash expenses other than depreciation and amortisation
	2,694,227	1,963,198		408,986	2,694,227	2,360,132

NOTE 22 - RELATED PARTY INFORMATION

Directors $(a)$

The following persons held the position of Director of the Company during all of the past financial year, unless otherwise stated:

A Bohnenn A Rankine-Wilson A Nutter H-R Moser L D Kohmascher (resigned 4 February 2003)

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 22 - RELATED PARTY INFORMATION (CONTINUED)

$(b)$ Transaction with Directors or Director Related Entities

• Fees of \$60,000 (2002; 60,000) was paid to Hendygwyn Holding, of which Mr A Bohnenn is a director and $\Delta$ shareholder, under a marketing and public relations services agreement.
• An administration fee of \$8.870 (2002: \$nil) was accrued and paid to Grange from Clinical Cell Culture Limited (formerly ECAT Development Capital Ltd), a company of which Mr A Rankine-Wilson and Mr L D Kohmascher were directors, in relation to an office sharing agreement for the provision of shared offices to Clinical Cell Culture Limited by the Company on a reimbursement of costs basis.
• An administration fee of \$16,120 (2002: \$58,041) was accrued and paid by Grange to Clinical Cell Culture Limited in relation to an office sharing agreement for the provision of shared offices to the Company by Clinical Cell Culture Limited on a reimbursement of costs basis.
• Grange paid \$3,520 to Clinical Cell Culture Limited representing the purchase of office furniture and fittings and office equipment.
• An administration fee of \$9.418 (2002; nil) was accrued and paid to Grange from Capital Growth Corp Limited, a company of which Mr A Rankine-Wilson is a director, in relation to an office sharing agreement for the provision of shared offices to Capital Growth Corp Limited by the Company on a reimbursement of costs basis.

$(c)$ Directors' Interests in Shares of the Company

$(i)$ The aggregate number of securities held by directors (or their related entities) at Balance Date.

	Ordinary Shares	12 cent Options
2003	12,946,368	4,125,000
2002	12,385,918	Nil

$(ii)$ Movements in Directors' Equity Holdings.

During the year Mr H R Moser purchased 560,450 shares on-market on terms no different to shareholders.

The Company issued 5.825.000 12 cent options exercisable on or before 30 June 2007 under the Grange Resources Directors' and Officers' Option Plan. Of this amount 4.875.000 were issued to directors. During the year, Mr L D Kohmascher exercised 500,000 of his 750,000 options and agreed to cancel the remaining 250,000 options for no consideration.

Details of individual directors' security holdings are included in paragraph 12 of the Directors' Report. $(iii)$

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 22 - RELATED PARTY INFORMATION (CONTINUED)

$(d)$ Amounts Receivable From or Payable to Related Parties

	2003 \$	Consolidated 2002 \$	2003	Grange Resources Limited 2002 \$
Aggregate amounts receivable at Balance date from:			\$
Controlled entities (iv)			12,829,916	12,757,564
Provision for non-recovery Other related parties		$\overline{\phantom{0}}$	(12,092,225)	(11, 975, 125)
- Partners (ii)	324,932	126,106	324,932	126,106
- Agricultural Trading Systems Pty Ltd (iii)	51,338	51,338	51,338	51,338
- Provision for non-recovery - Resources Trading Systems Pty Ltd (in	(51, 338)	(51, 338)	(51, 338)	(51, 338)
liquidation) (iii)	36,750	36,750	36,750	36,750
- Provision for non-recovery	(36, 750)	(36, 750)	(36, 750)	(36,750)
	\$324,932	\$126,106	\$1,062,623	\$908,545
Aggregate amounts payable at Balance Date to:
Controlled entities			15,218,407	11,434,497
	\$	\$	\$15,218,407	\$11,434,497

• Debtor amounts owing by partners of the Consolidated Entity in the Horseshoe Mine Partnership for the $(ii)$ reimbursement of Horseshoe Mine care and maintenance expenses.
• Shareholder loans made to private companies in which the Consolidated Entity has or had substantial shareholdings. $(iii)$ These loans are unsecured, interest free and are repayable at such time as is unanimously agreed by the directors of those companies. Both loans have been provided for in full as their recoverability is considered doubtful.
• $(iv)$ Loans from controlled entities are interest free with no fixed repayment date.

Transactions with related parties, other than wholly owned subsidiaries, are made under normal commercial terms and conditions unless otherwise stated.

$(e)$ Ultimate Holding Company

Grange Resources Limited is the ultimate Australian holding company of the Consolidated Entity.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 23 - LEASING AND EXPLORATION COMMITMENTS

		2003	Consolidated 2002	Grange Resources Limited 2003	2002
(a)	Operating Lease Commitments (Office Premises)	\$	\$	\$	\$
	Payable - not later than one year - later than one year but not later than two years - later than two years but not later than five years	75,562 94,452	65,096 74,062 87,528	75,562 94,452	65,096 74,062 87,528
		\$170,014	\$226,686	\$170,014	\$226,686

The operating lease commitments refer to the rent of the Perth office for three years (1 September 2002 to 31 August 2005).

(b) Exploration Expenditure Commitments

In order to maintain the mining and exploration tenements in which the Consolidated Entity is involved, the Consolidated Entity is committed to meet conditions under which the tenements were granted. If the Consolidated Entity continues to hold those tenements, the minimum expenditure requirements (excluding obligations farmed out under joint venture arrangements) will be approximately:

Payable
- not later than one year	164.500	364,500	164,500	76,100
- later than one year but not later than two years	164,500	364,500	164,500	76.100
- later than two years but not later than five years	493.500	1,093,500	493,500	228,300
	\$822,500	\$1,822,500	\$822,500	\$380,500

NOTE 24 - CONTINGENT LIABILITIES

Bank Guarantees

At year end bank quarantees have been provided on the Consolidated Entity's behalf to secure, on demand by the Minister for Mines and Energy for the State of Queensland, any sum to a maximum aggregate amount of \$1,233,858 (2002: \$1,238,858), in relation to the rehabilitation of the Highway Reward project.

Bank quarantees have been provided on the Consolidated Entity's behalf to secure, on demand by the Minister for Mines and Energy for the State of Western Australia, any sum to a maximum aggregate amount of \$327,500 (2002; \$327,500), in relation to the rehabilitation of the Horseshoe Lights Mine.

Claims

Thalanga Copper Mines Pty Limited ("TCM") the manager of the Mt Windsor Joint Venture, has received claims from Brandrill Limited totalling approximately \$6.0 million with respect to its performance of the mining contract at the Reward Deeps and Conviction Underground Mine with Grange's share being approximately \$1.80 million. TCM on behalf of the joint venture has lodged counter claims against Brandrill Limited totalling \$4.74 million with Grange's share being approximately \$1.58 million. The matter is now the subject of an arbitration process.

No material losses are anticipated in respect of any of the above contingent liabilities.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 25 - EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS

(a)	Employee Entitlements	Consolidated		Grange Resources Limited
		2003 S	2002	2003	2002
	The aggregate employee entitlement liability is comprised of:
	Provision for annual leave	\$54,121	\$38.851	\$54,121	\$38,851

$(b)$ Number of Employees

The number of full-time employees of the Company at Balance Date was six (2002: 5)

$(c)$ Directors & Officers Option Plan

In July 2002 the Company established the Grange Resources Directors' and Officers' Option Plan where Grange may at the discretion of management and directors, grant options over the ordinary shares of Grange to directors. executives and eligible full-time staff of the Consolidated Entity. The maximum number of options issued must not exceed 10% of the total number of fully paid shares on issue. The options, issued for nil consideration, are granted in accordance with performance guidelines established by the directors of Grange, although the management of Grange retains the final discretion on the issue of the options. The options issued during the year are exercisable at 12 cents. can be exercised at any time, and expire on 30 June 2007. The options cannot be transferred and will not be quoted on the Australian Stock Exchange Limited. There are currently four directors, one executive and five full-time staff that have been issued options pursuant to the Grange Resources Directors' and Officers' Option Plan. The objective of the Plan is to provide incentive to employees to provide dedicated and ongoing commitment and effort to the Company. The establishment of the Plan was approved at a General Meeting of the Company held during the financial year.

	2003
	Number of options	Exercise Price
Balance at beginning of year		\$0.12
- granted	5,825,000	\$0.12
- exercised	(500,000)	\$0.12
- cancelled	(250,000)	\$0.12
Balance at end of year	5,075,000	\$0.12
Exercisable at end of year	5,075,000	\$0.12

$(d)$ Superannuation Commitments

Employees contribute to their own superannuation plans at various percentages of their salaries and wages and the end benefit is determined by accumulation of contributions and earnings of the fund.

The Consolidated Entity also contributed to staff superannuation plans during the financial year at a rate of 9% of employees' wages and salaries as required by the Superannuation Guarantee Legislation.

These contributions are legally enforceable only where payable in terms of a ratified award obligation or under the Superannuation Guarantee Legislation.

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 26 - EARNINGS PER SHARE

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:

	Consolidated Entity 2003 \$	Consolidated Entity 2002 \$
Earnings used in calculating basic and diluted earnings per share	\$(2,208,702)	\$(1,605,490)
	Number of shares	Number of shares

No securities are dilutive to the weighted average number of shares.

NOTE 27 - REMUNERATION OF AUDITORS

	Consolidated		Grange Resources Limited
	2003 \$	2002 5	2003 \$	2002 \$
The following total remuneration was received, or is due and receivable, by the auditors of the Company and Consolidated Entity in respect of:
- Auditing the accounts - Providing other services	36,000 106,821	31,649 92,105	36,000 106.821	31,649 77,407
	\$142,821	\$123,754	\$142,821	\$109,056

NOTES TO AND FORMING PART OF THE ACCOUNTS AT 30 JUNE 2003

NOTE 28 - SUBSEQUENT EVENTS

• In August 2003 the Company was advised by the Manager of the Reward Deeps and Conviction underground project, that operations were placed in a period of transition for approximately two weeks whilst a change in the mining contractor took place. During the period of transition the manager conducted a maintenance shut down for four days. The Manager confirmed there was sufficient ore available to keep the Thalanga processing plant operating during the transition of mining contractors at the mine.
• During July 2003. Gleneagle Gold Limited exercised an option with Horseshoe Gold Mine Pty Ltd ("Horseshoe") to farm-in ٠ to the Wembley Project and the joint venture commenced. Under the terms of the joint venture arrangement Gleneagle could earn an 80% interest in the tenements by spending \$500,000 on exploration within 4 years with minimum expenditure levels of \$150,000 during years 1 and 2 of the 4-year earn in period. Gleneagle could elect to withdraw from the agreement after expenditure of \$150,000. Horseshoe's 20% interest would be free carried to a decision to mine. Within 60 days after a decision to mine. Horseshoe has the right to elect to contribute pro-rata to expenditure, sell its 20% interest or convert its 20% interest to a royalty of \$20.00 per recovered ounce for the first 40,000 ounces of production and a 3% gross revenue royalty on any production thereafter. Gleneagle has pre-emptive rights on Horseshoe's 20% interest 2003.
• On 6 September 2003. Hillarove Gold Limited and Grange announced their intention, through an equally and jointly owned $\bullet$ nominee, to make an off-market takeover bid for all the fully paid ordinary shares in Selwyn Mines Limited (Receivers and Managers appointed). The bid was designed to secure 1,500 sq. km. exploration and mining tenement package that is located in the Eastern Succession of the Mt. Isa Inlier in North West Queensland. The tenements have the potential to host mineralization that may support the development of large tonnage, low grade mining operations for copper and gold. The region is recognised as one of the world's most significant mineralised provinces and includes Century. Ernest Henry and Mt. Isa.
• On 18 September 2003 the second shipment of concentrate from the Reward Deeps and Conviction underground mine was exported from Townsville. The shipment of 9,989 tonnes generated revenue of approximately \$5.70 million.

DIRECTORS' DECLARATION

The directors of the Company declare that:

• $\ddagger$ In the opinion of the directors:
• the financial statements and notes of the Company and of the Consolidated Entity are in $(a)$ accordance with the Corporations Act 2001, including:
  • (i) giving a true and fair view of the Company's and Consolidated Entity's financial position as at 30 June 2003 and of their performance for the year ended on that date; and
  • (ii) complying with Accounting Standards and Corporations Regulations 2001; and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and $(b)$ when they become due and payable.

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

ADAM RANKINE-WILSON Managing Director

Dated this 30th day of September 2003

Perth, Western Australia

EII FRNST & YOUNG

Central Park 152 St Georges Terrace Perth WA 6000 Australia

CRO Roy M929 Perth WA 6843

Independent audit report to members of Grange Resources Limited

Scone

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for Grange Resources Limited ("the company") and the consolidated entity, for the year ended 30 June 2003. The consolidated entity comprises both the company and the entities it controlled during that vear.

The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approach

We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, ٠ and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company.

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Audit opinion

In our opinion, the financial report of Grange Resources Limited is in accordance with:

• $(a)$ the Corporations Act 2001, including:
• $(ii)$ giving a true and fair view of the financial position of Grange Resources Limited and the consolidated entity at 30 June 2003 and of their performance for the year ended on that date; and
• complying with Accounting Standards in Australia and the Corporations Regulations 2001; and $(ii)$

$(b)$ other mandatory financial reporting requirements in Australia.

Comment + Tong
Ernst & Young

V W Tidy Partner Perth Date: 30 September 2003

SHAREHOLDER INFORMATION AT 29 AUGUST 2003

ORDINARY SHARES

Distribution of Shareholders $\mathbf{1}$ .

$(a)$ Analysis of number of shareholders by size and holding:

Category of Shareholding	Number of Shareholders
$1 - 1.000$	188
$1,001 - 5,000$	389
$5,001 - 10,000$	158
$10,001 - 100,000$	212
$100,001 -$ and over	46
TOTAL	993

$(b)$ There are 290 holders of ordinary shares each holding less than a marketable parcel.

$2.$ Top Twenty Shareholders

The twenty largest holders of ordinary fully paid shares are listed below:

Name	Number	%
ANZ Nominees Limited	27,232,238	40.98
National Nominees Limited	6,274,757	9.44
Equitas Group Holdings Pty Limited	3,342,802	5.03
Dr Salim Cassim	2,209,046	3.32
King Chong Chai	1,767,650	2.66
Blackmort Nominees Pty Ltd	1,300,000	1.96
HSBC Custody Nominees (Australia) Limited	1,000,958	1.51
Dr Salim Cassim	1,000,000	1.50
Mr Abdul Aziz Bin Mohamed Hussain	1,000,000	1.50
First Distribution Services Limited	800,000	1.20
Mr James Ng	774,500	1.17
Zero Nominees Pty Ltd	715,000	1.08
Piranha Nominees Pty Ltd	700,000	1.05
Mr Hans-Rudolf Moser	560,450	0.84
Clodene Pty Ltd	552,248	0.83
Bayonet Investments Pty Ltd	523,606	0.79
Jaronach Pty Ltd	500,000	0.75
Citicorp Nominees Pty Limited	499,034	0.75
Reynolds (Nominees) Pty Limited	492,013	0.74
Hollywood Marketing (WA) Pty Ltd	400,000	0.60
	52,122,981	77.70

SHAREHOLDER INFORMATION AT 28 AUGUST 2003 (CONTINUED)

ORDINARY SHARES (Continued)

$\mathbf{3}$ Voting Rights

In accordance with Article 9.22 of the Company's Constitution, subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or classes of shareholders:

• on a show of hands, every member present in person and each other person present as a $(a)$ proxy, attorney or representative of a member has one vote; and
• $(b)$ on a poll, each member present in person has one vote for each fully paid share held by the member and each person present as a proxy, attorney or representative of a member has one vote for each fully paid share held by the member that the person represents,

but a member is not entitled to vote at a general meeting in respect of shares which are the subject of a current restriction agreement for so long as any breach of that agreement subsists.

4. Substantial Shareholders

An extract of the Company's Register of Substantial Shareholders is set out below:

Name	Number (fully paid Shares)	% (fully paid shares)
Mr Anthony Bohnenn	8,762,313	13.24%
Mr Hans-Rudolf Moser	3,560,450	5.39%
Equitas Group Holdings Pty Limited	3,342,802	5.03%

UNQUOTED SECURITIES

The Company has the following unquoted securities on issue:

Class of Security	No. of Securities on Issue	No. of Security Holders
Options expiring 30 June 2007	5,075,000	10