IGO LIMITED — Annual Report 2003

Sep 24, 2003

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES CORPORATE GOVERNANCE STATEMENT

Board Composition

Under the Company's Constitution, the company is required to have a Board consisting of at least 3 and no more than 10 directors. If the company has 3 or more directors, one third of the Directors, with the exception of the Managing Director, must retire and seek reelection at the Annual General Meeting each year.

The Board of the company currently consists of 2 non-executive directors and 2 executive directors. This includes the Managing Director (executive) and the Chairman (non-executive).

The Board composition does not comply with ASX recommendations, in that a majority of directors are not independent. However, the roles of Chairman and Chief Executive Officer (or Managing Director) are not exercised by the same person, and the Board is considered to comprise directors with the experience and qualifications best suited to the company's size and range of activities.

Directors of the company during the financial year and other information pertaining to individual directors is included in the Directors' Report on page 4.

Board members have the right to seek independent professional advice in the furtherance of their duties as directors at the company's expense.

Risk Management

The Board is responsible for the identification of significant areas of business risk, implementing procedures to manage such risks and developing policies regarding the establishment and maintenance of appropriate ethical standards to:

• ensure compliance in legal, statutory and ethical matters;
• monitor the business environment; $\bullet$
• identify business risk areas: $\bullet$
• identify business opportunities; and
• monitor systems established to ensure prompt and appropriate responses to shareholder complaints and enquiries.

The Board meets on a regular basis.

The Managing Director and Company Secretary are required to state in writing to the Board that the company's financial reports present a true and fair view of the company's financial condition and that operational results are reported in accordance with relevant accounting standards

Audit Committee

The company has established an Audit Committee which is responsible for the following:

• $\ddot{\phantom{0}}$ oversee the existence and maintenance of internal controls and accounting systems, including the implementation of mandatory and non-mandatory accounting policies and reporting requirements;
• oversee the financial reporting process, including reviewing and reporting to the Board on the accuracy of all financial ¥ reports lodged with ASX which include the quarterly, half-yearly and annual financial reports;
• recommendations to the Board regarding the nomination, removal and remuneration of the external auditors; and $\bullet$
• review the existing external audit arrangements, including ensuring that any non-audit services provided do not impair $\bullet$ auditor indenendence

The Audit Committee meets and reports to the Board as required, but in any case at least twice each year, and its members are Chris Bonwick, Kelly Ross and John Christie, Chris Bonwick is a geologist with corporate experience, and Kelly Ross and John Christie are qualified accountants with considerable financial experience. The Committee has authority to seek any pertinent information it requires from any employee or external party.

The Audit Committee does not comply with ASX recommendations, as the members are not independent and not all members are nonexecutive directors. The Audit Committee is comprised of those directors the Board considers best qualified to carry out the responsibilities required of an audit committee and it is company policy that the Committee must comprise at least 3 members.

Any member of the Committee is able, and obliged, to bring any matter to the attention of the Board where the member believes the matter has not been adequately dealt with by the Committee, or is of significant importance that the Board should be informed.

The Audit Committee Charter is available on the company's website.

Hedging Committee

The company has established a Hedging Committee to make recommendations to the Board on hedging policies and to maintain the hedging portfolio.

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES CORPORATE GOVERNANCE STATEMENT

The members of the Hedging Committee at the date of this report are Kelly Ross and John Christie.

Procedure for the Selection of New Directors

The company believes it is not of a size to justify having a Nomination Committee. If any vacancies arise on the Board, all directors are involved in the search and recruitment of a replacement.

Corporate performance is enhanced when the Board has an appropriate mix of skills and experience. The Board is evaluated before a candidate is selected to ioin the Board. Candidates are nominated by existing Board members and independent search consultants are also utilised if necessary. Where a director nominates a candidate for the Board, the director must disclose any pre-existing relationship with the nominee

New directors are provided with a letter of appointment setting out their responsibilities and rights, and are provided with a copy of the company's Constitution.

The full policy is available on the company's website.

Remuneration of Board Members

The company has established a Remuneration Committee to oversee the company's remuneration of senior executives and directors. The Remuneration Committee must consist of at least 2 non-executive directors. At the date of this report, the committee members are Rod Marston and John Christie.

The Committee reviews executive and senior management remuneration and other terms of employment annually, having regard to performance, relative industry remuneration levels, and where appropriate, the Committee seeks independent advice to ensure appropriate remuneration levels are in place.

The remuneration of non-executive directors is determined by the Board within the maximum amount approved by shareholders in general meeting. Non-executive directors are not entitled to retirement benefits other than statutory superannuation or other statutory required benefits. Non-executive directors do not participate in share or bonus schemes designed for executive directors or employees.

Non-executive directors may provide consulting services to the company, which are over and above the service normally provided by a non-executive director in the performance of their duty as a member of the Board. Where the company requests that specific projects are investigated by a non-executive director that fall outside their normal duties as a director, additional services may be charged to the company, at a rate approved by the Board.

No director may be involved in setting their own remuneration or terms and conditions.

Disclosure of Information to ASX and Investors

The company has established policies and procedures relating to the disclosure of information to interested parties. These policies and procedures are contained in the Corporate Governance section of the company's website.

These policies include the following:-

• Board and Management Responsibilities
• Audit Committee
• Compliance with ASX Disclosure Requirements $\bullet$
• Communication with Shareholders
• Nomination of Directors
• Directors' and Officers' Trading in Securities $\ddot{\phantom{a}}$

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

Directors

The names of directors in office at any time during or since the end of the year are:

Mr Christopher Bonwick

Mr Rod Marston

Ms Kelly Ross (appointed 13 September 2002)

Mr Jeffrey Schiller (resigned 2 September 2002)

Mr John Christie (appointed 24 October 2002, Previously Alternate for Mr Rod Marston)

Mr Keith Docking (resigned 20 August 2003)

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Principal Activities

The principal activities of the economic entity during the financial year were mineral exploration and nickel mining.

In October 2002 mining activities commenced at the company's Long Nickel Mine.

There were no other significant changes in principal activities during the financial year.

Operating Results

The consolidated profit of the economic entity after providing for income tax amounted to \$1,398,278 (2002: loss \$1,488,542).

Dividends Paid or Recommended

No dividends were paid or declared for payment, and no dividend is recommended in respect of the year ended 30 June 2003. No franking credits are currently available.

Review of Operations

The economic entity focused on the Long Nickel Mine operation which was acquired during the year. The economic entity concentrated its exploration activities on various targets provided by assay indicators from the WMC Diamond Division Database. A summary of activities during the year is in the Exploration and Operations sections of this report.

Significant Changes in State of Affairs

The following significant changes in the state of affairs of the economic entity occurred during the financial year:

On 17 September 2002 the parent entity's subsidiary Lightning Nickel Pty Ltd, acquired the Long/Victor mine complex and associated assets ("the Project") from WMC Resources Ltd. The cost of the acquisition was \$15 million, comprising a deposit of \$1,500,000 paid on 2 July 2002 and a cash payment of \$13,500,000 on 17 September 2002.

The assets purchased comprise the Long Shaft, Victor Decline and a portion of Lease block Location 48, via a 10 year lease agreement with WMC Resources Ltd. Other assets purchased outright are Mineral Leases 15/158, 15/159 and 15/160, and various plant and equipment. The acquisition entitles Lightning Nickel Pty Ltd to mine nickel ore from the Project area, which it must then sell to WMC Resources Ltd. Payment is restricted to nickel and copper in concentrates only, as WMC Resources Ltd has transferred the rights to mine any gold ore within the Project area to Gold Fields South Africa.

Under the terms of the acquisition, WMC Resources Ltd pays Lightning Nickel Pty Ltd for between 63 and 65% of the nickel and copper in concentrates delivered to its Kambalda Nickel Operations Concentrator.

The acquisition was partly funded via a finance facility provided by Bank of Western Australia ("BankWest") of \$10 million. BankWest have also provided a working capital facility of \$3 million, and a facility to cover environmental bonds of up to \$2 million. The parent entity also issued 20,600,000 fully paid ordinary shares via a placement to raise \$7.004 million to assist in the funding of Lightning Nickel Pty Ltd's acquisition of the Project.

Production commenced in late October 2002, with the first cash flow from the operation received in December 2002.

Environmental Issues

The economic entity's operations are subject to significant environmental regulation under the laws of the Commonwealth and State. During the year there were no non-compliance incidents.

After Balance Date Events

The Company is negotiating a facility with a banking institution which may replace the BankWest loan facilities in place at the end of the financial vear.

The Company is seeking shareholder approval for a change of name to Independence Group NL.

No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significant affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years.

Future Developments

The likely developments in the operations of the economic entity and the expected results of those operations in future financial vears are as follows:

• The exploration of existing project areas in the search for gold, nickel, platinoids, copper and zinc.
• The production of nickel and copper from the Long Nickel Mine providing cash flow to fund further exploration in the Long Project area, as well as to provide funding to enable an acceleration of exploration programs planned throughout Australia.

The Board anticipates that the Long Project cash flow will allow the economic entity to vigorously explore existing tenement interests, as well as providing the opportunity to develop any discoveries to their full potential.

Information on Directors

Rod Marston	- (Chairman) (Non-executive) Age 60
Qualifications	BSc(Hons), PhD, MAusIMM, MSEG
Experience	Board member since 2001. Chairman since 20 August 2003.
Special Responsibilities	Dr Marston is on the Remuneration Committee.
Christopher Bonwick	- Managing Director (Executive) Age 44
Qualifications	BSc (Hons), MAusIMM
Experience	Managing Director and Board member since 2000.
Special Responsibilities	Mr Bonwick is the executive in charge of operations and corporate development. He is also on the Audit Committee.
Kelly Ross	- Director (Executive) Age 41
Qualifications	BBus, CPA
Experience	Board member appointed 13 September 2002.
Special Responsibilities	Ms Ross is the Company Secretary, and is on the Audit and Hedging Committees.
John Christie	- Director (Non-executive) Age 65
Qualifications	CPA, ACIS
Experience
	Board member appointed 24 October 2002.
Special Responsibilities	Mr Christie is on the Remuneration, Audit and Hedging Committees.

Directors' Interest in Shares and Options

Director	Ordinary Fully Paid Shares	Contributing Shares (10 cents unpaid)	Ordinary Fully Paid Options	Unlisted Options
Mr C Bonwick	2.448.004 $2,000,000$ (i)	2,500,000	1.415.002 1,000,000 (i)
Mr R Marston	150,000		40,000
Ms K Ross	10.000	300,000	125,000	300,000 (ii)
Mr J Christie	180.000		40,000
TOTALS	2,788,004 $2,000,000$ (i)	2,800,000	1,620,002 1,000,000 (i)	300,000 (ii)

(i) Director Christopher Bonwick is a director and shareholder of Independence Mining Exploration NL and therefore has an indirect interest in the shares and options held by that company as shown above.

(ii) The options were issued under the Employee Share Plan, and are exercisable at 34 cents each after certain dates have lapsed. The options were issued prior to Kelly Ross being appointed as a director of the company.

Details of the terms and conditions for these securities are disclosed in Note 22 to the financial statements in this report and in Note 8 of Additional Information for Listed Public Companies on page 29.

Directors' and Executive Officers' Emoluments

The company's policy for determining the nature and amount of emoluments of Board members and senior executives of the company is set out in the Corporate Governance section of this report.

The remuneration structure for executive officers, including executive directors, seeks to emphasise payment for results through providing various reward schemes, including bonus and employee option schemes.

The objective of the reward schemes is to both reinforce the short and long term goals of the company and to provide a common interest between management and shareholders.

The remuneration of non-executive directors is fixed to encourage impartiality, high ethical standards and independence on the Board.

The emoluments of each director are as follows:

Directors of Parent Entity	Salary	Director's Fees	Service Fees	Superannuation Contributions	Non-Cash Benefits	Total
	\$	\$	\$	\$	\$	\$
Keith Docking			75,836	43,750		119,586
Chris Bonwick			191,872		24.359	216,231
Rod Marston		11.250	5,000			16.250
Kelly Ross (i)	92,484			8.458	9.730	110,672
Jeffrey Schiller	51.301			5,277	15,306	71,884
John Christie		17.170	56,440			73,610

(i) Director Kelly Ross was appointed during the financial year. Only remuneration paid to K Ross whilst holding directorship has been included.

Meetings of Directors

During the financial year, 29 meetings of directors (including committees of directors) were held. The number of meetings attended by each director during the year is as follows:

	DIRECTORS' MEETINGS		REMUNERATION COMMITTEE		AUDIT COMMITTEE		HEDGING COMMITTEE
	Eligible to attend	Attended	Eligible to attend	Attended	Eligible to attend	Attended	Eligible to attend	Attended
Keith Docking	9	9	15	15
Christopher Bonwick	9	9			4	4
Rod Marston	9	8	15	15
Kelly Ross	8	8			4	4
John Christie	8	8			4	4

Options

Options that were granted over unissued shares during or since the financial year by the company to directors or any of the five most highly remunerated officers as part of their remuneration are as follows:

Options granted under the Independence Gold NL employee option plan include:

• 300,000 options for ordinary shares granted to Kelly Ross at an exercise price of 34 cents.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Employees

The economic entity had 75 employees at the end of the financial year (2002: 4).

Indemnifying Officers or Auditor

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

The company has paid premiums to insure each of the following directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The amount of the premium was \$2,192 for each director: Christopher Bonwick, Rod Marston, Kelly Ross, Keith Docking and John Christie.

Proceedings on Behalf of Company

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

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

Rounding of Amounts

The company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report. Amounts have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Signed in accordance with a resolution of the Board of Directors.

C M Bonwick Managing Director Dated this 24th day of September 2003.

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 30 JUNE 2003

		Economic Entity		Parent Entity
	Note	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Revenues from ordinary activities	2	24,649	58	673	58
Mining and development costs		(8, 123)
Employee costs		(4,513)	(161)	(253)	(161)
Depreciation and amortisation expense		(3,757)	(11)	(30)	(11)
Borrowing cost expense	3	(1,042)	(2)		(2)
Royalty expense		(773)
Ore tolling costs		(2,658)
Exploration costs written off		(1,286)	(928)	(1,286)	(928)
Other expenses from ordinary activities		(1, 114)	(443)	(861)	(443)
Profit from ordinary activities before income tax expense		1,383	(1,489)	(1,757)	(1,489)
Income tax benefit/(expense) relating to ordinary activities	4	15		1,015
Profit from ordinary activities after related income tax expense		1,398	(1,489)	(742)	(1,489)
Basic earnings per share (cents per share)	7	2.13	(3.8)
Diluted earnings per share (cents per share)	7	1.80	(3.8)

THE ACCOMPANYING NOTES FORM PART OF THESE FINANCIAL STATEMENTS

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2003

		Economic Entity		Parent Entity
	Note	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
CURRENT ASSETS
Cash assets	8	4,041	2.410	547	2.410
Receivables	9	5,691	74	68	74
Inventories	10	41
Other	12	14,460
TOTAL CURRENT ASSETS		24,233	2,484	615	2,484
NON-CURRENT ASSETS
Receivables	9	1,001	20	6,965	248
Deferred tax assets	11	3,535		1,380
Investments	13	561	555	561	555
Property, plant and equipment	15	8,608	106	105	106
Exploration and development expenditure	16	11,590	1,255	1,215	1,027
Mine acquisition and pre-production costs	17	2,733
Other	12	7	3		3
TOTAL NON-CURRENT ASSETS		28,035	1,939	10,226	1,939
TOTAL ASSETS		52,268	4,423	10,841	4,423
CURRENT LIABILITIES
Payables	18	4,577	273	333	273
Interest bearing liabilities	19	4,738
Other	21	14,697	7	7	7
TOTAL CURRENT LIABILITIES		24,012	280	340	280
NON-CURRENT LIABILITIES
Deferred tax liabilities	20	3,520		365
Interest bearing liabilities	19	12,460
TOTAL NON-CURRENT LIABILITIES		15,980		365
TOTAL LIABILITIES		39,992	280	705	280
NET ASSETS		12,276	4,143	10,136	4,143
EQUITY
Contributed equity	22	12,549	5,814	12,549	5,814
Accumulated losses	23	(273)	(1,671)	(2, 413)	(1,671)
TOTAL EQUITY		12,276	4,143	10,136	4,143

THE ACCOMPANYING NOTES FORM PART OF THESE FINANCIAL STATEMENTS

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES

STATEMENT OF CASH FLOWS

AS AT 30 JUNE 2003

		Economic Entity		Parent Entity
	Note	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		19,139		602
Other receipts			3		3
Payments of rental deposit			(20)		(20)
Payments to suppliers and employees		(12,969)	(809)	(1,045)	(809)
Interest received		94	55	72	55
Borrowing costs		(1,042)	(2)		(2)
GST refunded from ATO		74	197	(2)	197
Net cash provided by (used in) operating activities	26a	5,296	(576)	(373)	(576)
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts from repayment of borrowings			10		10
Purchase of property, plant and equipment		(5, 177)	(116)	(29)	(116)
Payments relating to acquisition and investments		(5)	(45)	(5)	(45)
Payments relating to mine development		(3,660)
Payment of bonds to acquire property, plant and equipment		(980)
Loan to subsidiary			(228)	(6,716)	(228)
Payments for exploration and evaluation expenditure		(12, 329)	(1,025)	(1, 475)	(1,025)
Net cash provided by (used in) investing activities		(22, 151)	(1,404)	(8,225)	(1,404)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		7,009	4,674	7,009	4,674
Share buy back payment			(24)		(24)
Costs associated with issue of shares		(274)	(470)	(274)	(470)
Proceeds from borrowings		13,000	100		100
Repayment of borrowings		(1, 249)	(100)		(100)
Net cash provided by (used in) financing activities		18,486	4,180	6,735	4,180
Net increase/(decrease) in cash held		1,631	2,200	(1,863)	2,200
Cash at beginning of year		2,410	210	2,410	210
Cash at end of year	8	4,041	2,410	547	2,410

THE ACCOMPANYING NOTES FORM PART OF THESE FINANCIAL STATEMENTS

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

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

The financial report covers the economic entity of Independence Gold NL and controlled entities. Independence Gold NL is a listed public company, incorporated and domiciled in Australia.

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

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

Principles of Consolidation $\mathbf{a}$

A controlled entity is any entity controlled by Independence Gold NL. Control exists where Independence Gold NL has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Independence Gold NL to achieve the objectives of Independence Gold NL. A list of controlled entities is contained in Note 14 to the financial statements.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Where controlled entities have entered or left the economic entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

$_b$ Income Tax

The company adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit from ordinary activities adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income are brought to account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Investments c.

Non-current investments are measured on the cost basis. The carrying amount of non-current investments is reviewed annually by directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the quoted market value for listed investments or the underlying net assets for other non-listed investments. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.

Investments in associate companies are recognised in the financial statements by applying the equity method of accounting.

$\mathbf{d}$ . Interests in Joint Ventures

The company's share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the statements of financial performance and financial position. Details of the economic entity's interests. if any, are shown in Note 13.

The company's interests in joint venture entities, if any, are brought to account at cost using the equity method of accounting in the financial statements.

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

$\mathbf{a}$ Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Plant and equipment

Plant and equipment are measured on the cost basis.

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

Depreciation

The depreciable amount of all fixed assets excluding freehold land, is depreciated on a straight line basis over their useful lives to the company commencing from the time the asset is held ready for use.

The useful lives for each class of depreciable assets are:

Class of Fixed Asset	Useful Life
Office furniture and equipment	3-5 years
Mine plant and equipment	$2-5$ vears

Refer to notes 1(g) for the amortisation policy applying to exploration and development costs and note 1(t) for the policy applying to the amortisation of pre-production and acquisition costs.

Recoverable Amount

The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. The expected net cash flows included in determining recoverable amounts of noncurrent assets are not discounted to their present values.

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is devalued to its recoverable amount. The decrement is recognised as an expense in the statement of financial performance. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets.

$f_{\rm{r}}$ Leased Non-Current Assets

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability.

Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal and the interest component of the payment. The leased asset is depreciated over its useful life.

Exploration and Development Expenditure g.

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

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

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

A review is undertaken of each area of interest on a quarterly basis to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

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

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Amortisation of costs are provided on the unit-of-production method with separate calculations being made for each mineral resource. The unit-of-production basis results in an amortisation charge proportional to the depletion of the economically recoverable mineral reserves.

The net carrying value of each mine property is reviewed regularly. If this value exceeds its recoverable amount, the excess is either fully provided against or written off in the financial year in which this is determined.

Restoration and Rehabilitation Expenditure $h$

Restoration and rehabilitation costs necessitated by exploration, evaluation and mining activities are charged to costs of production on a gradual basis over the life of the economically recoverable resources. These costs include the cost of revegetation, 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.

i. Employee Entitlements

Provision is made for the company's liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those entitlements.

Contributions are made by the economic entity to employee superannuation funds and are charged as expenses when incurred

j. Cash

For the purpose of the statement of cash flows, cash includes cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts.

k. Comparative Figures

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

I. Revenue

Sales revenue comprises revenue earned from the provision of products to entities outside the economic entity. Sales revenue is recognised when the product is delivered and risk has been passed to the customer.

Sales revenue represents gross proceeds receivable from the customer. Sales are initially recognised at estimated sales value when the product is delivered. Adjustments are made for variations in metal price, assay, weight and currency between the time of shipment and the time of final settlement of sales proceeds.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

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

m. Payables

These amounts represent liabilities for goods and services provided to the economic 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.

n. Receivables

Receivables represents GST recoverable together with trade debtors and monies held on deposit. All receivables are recognised at the full value of the amount receivable.

Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision is raised where there is some doubt as to the collectability of a debt.

Earnings per share $\mathbf{o}$ .

The economic entity has applied AASB 1027 Earnings Per Share (issued June 2001).

Basic Earnings per Share

Basic EPS earnings are calculated using net profit or loss after income tax attributable to members of the company.

Diluted earnings per Share

Diluted EPS earnings are calculated by adjusting the basic EPS earnings for the after tax effect of financing costs and the effect of conversion to ordinary shares associated with dilutive potential ordinary shares, rather than the notional earnings on the

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

funds that would have been received by the entity had the potential ordinary shares been converted.

The diluted EPS weighted average number of shares includes the number of ordinary shares assumed to be issued for no consideration in relation to dilutive potential ordinary shares, rather than the total number of dilutive potential ordinary shares. The number of ordinary shared assumed to be issued for no consideration represents the difference between the number that would have been issued at the exercise price and the number that would have been issued at the average market price.

The identification of dilutive potential ordinary shares is based on net profit or loss from continuing ordinary operations, and is applied on a cumulative basis, taking into account the incremental earnings and incremental number of shares for each series of potential ordinary share.

Where diluted earnings per share are not dilutive, they are not disclosed.

Foreign Currency Transactions p.

Foreign currency transactions are initially converted to Australian currency at the rate of exchange ruling at the date of each transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are recognised in determining the profit or loss for the year in the statement of financial performance.

(i) Specific Commitments

Hedging is undertaken in order to avoid or minimise possible adverse financial effects of movements in exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods or services, together with subsequent exchange gains or losses resulting from those transactions are deferred to the date of the purchase or sale and included in the measurement of the purchase or sale. In the case of hedges of monetary items, exchange gains or losses are brought to account in the financial year in which the exchange rates change. Gains or costs arising at the time of entering into such hedging transactions are brought to account in the statement of financial performance over the lives of the hedges.

When anticipated purchase or sale transactions have been hedged, actual purchases or sales which occur during the designated hedge period are accounted for as having been hedged until the amounts of those transactions in the designated period are fully allocated against the hedged amounts.

If the hedged transaction is not expected to occur as originally designated, or if the hedge is no longer expected to be effective, any previously deferred gains or losses are recognised as revenue or expense immediately. If the hedging transaction is terminated prior to its maturity date and the hedged transaction is still expected to occur as designated, deferral of any gains or losses which arose prior to termination continues and those gains or losses are included in the measurement of the hedged transaction.

(ii) General Commitments

Exchange gains or losses on other hedge transactions are brought to account in the statement of financial performance in the financial year in which the exchange rates change. Gains or costs arising on entry into hedges of general commitments are recognised as assets or liabilities at the time of entry into the hedges and are amortised over the lives of the hedges.

q. Derivatives

The economic entity is exposed to fluctuations in commodity prices and foreign exchange rates resulting from its activities. It is the economic entity's policy to use derivative financial instruments to hedge a proportion of this exposure.

Derivative financial instruments designated as hedges are accounted for on the same basis as the underlying exposure.

Commodity Hedaina r.

Hedging is undertaken in order to avoid or minimise possible adverse financial or cash flow effects of movements in commodity prices. 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 and included in the measurement of sale.

Where a hedging transaction is terminated prior to maturity because the hedged production is no longer expected to be produced, any gains or losses are recognised in the statement of financial performance on the date of termination. If the hedging transaction is terminated prior to its maturity date and the hedged transaction is still expected to occur, deferral of any gains and losses which arose prior to termination are deferred and brought to account when the hedged transaction occurs.

If a hedge transaction relating to a commitment for the sale of a commodity is redesignated as a hedge of another specific commitment and the original transaction is still expected to occur, the gains and losses that arise on the hedge prior to this redesignation are deferred and included in the measurement of the original purchase or sale when it takes place. If the hedge transaction is no longer expected to occur, the gains and losses that arise on the hedge prior to its redesignation are recognised

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

in the statement of financial performance at the date of the redesignation.

s. Inventories

Raw materials and stores, work in progress and finished goods are stated at the lower of costs and net realisable value. Costs are assigned to individual items of stock on the basis of weighted average costs.

$\ddot{\mathbf{t}}$ . Mine Pre-production and Acquisition Costs

When an operation is acquired, various costs are incurred prior to operations commencing on the mine property, Acquisition Costs, such as legal expenses, financing arrangement expenses, and feasibility costs, are capitalised and included in the Statement of Financial Position (see note 17).

Prior to commencing production at a mine property, various costs are incurred to enable the commencement of mining operations, such as recruitment of staff, repair and maintenance of the site and its related equipment, and mine planning and scheduling. These Pre-production Costs are capitalised and included in the Statement of Financial Position (see note 17).

Mine Acquisition Costs and Pre-production Costs are amortised on a unit-of-production basis, based upon the recoverable mineral reserve estimated at the time of acquisition of the mine property.

Royalties ū.

Royalties are accrued and charged against earnings in the period in which the minerals are extracted.

v. Rounding of Amounts

The company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the directors' report. Amounts have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

w. Tax Consolidation Regime

Independence Gold NL and its wholly owned subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime, Independence Gold NL is responsible for recognising the current and deferred tax liabilities for the tax consolidated group. The group formed an income tax consolidated group on 1 July 2003.

	Economic Entity		Parent Entity
NOTE 2: REVENUE	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Ordinary activities
Sale of goods	24,553	$\overline{a}$
Interest received	95	55	72	55
Management fees			600
Other revenue	1	3	1	3
Total Revenue	24,649	58	673	58
NOTE 3: PROFIT FROM ORDINARY ACTIVITIES
Profit from ordinary activities before income tax has been determined after charging the following items:
Cost of sale of goods	15,814
Employee entitlements provision	230	7		7
Borrowing costs - other entities	1,043	2		2
Amortisation	1,635
Depreciation	2,122	11	30	11
Write-off of capitalised exploration expenditure	1,286	928	1,286	928
NOTE 4: INCOME TAX EXPENSE
a. The prima facie tax on profit from ordinary activities before tax is reconciled to the income tax as follows:
Prima facie tax benefit/(expense) on profit/ loss from ordinary activities before income tax at 30% (2002: 30%)	(415)	447	527	447
Add:
Tax effect of:
Non-allowable items	(69)	(4)	(11)	(4)
Capital raising costs ÷		28		28
Timing differences	(302)	144	(302)	75
Tax losses carried forward not previously brought to account	801		801
Income tax benefit attributable to ordinary activities	15	÷	1,015
Future income tax benefit not brought to account	$\blacksquare$	615	$\cdot$	546

b. The benefit for tax losses will only be obtained if:

the economic entity derives future assessable income of a nature and amount sufficient to enable the benefit from the tax losses $\mathbf{a}$ to be realised:

ii) the economic entity continues to comply with the conditions for deductibility imposed by tax legislations; and

iii) no changes in tax legislation adversely affect the economic entity realising the benefit from the deductions for the losses.

c. Tax Consolidation Legislation

Independence Gold NL and its wholly owned subsidiaries have decided to implement the tax consolidation legislation as of 1 July 2003. The Australian Taxation office has not yet been notified of this decision. The entities also intend to enter a tax sharing agreement, but details of this agreement are vet to be finalised.

As a consequence Independence Gold NL, as the head entity in the tax consolidated group, will recognise current and deferred tax amounts relating to transactions, events and balances of the wholly owned controlled entities in this group in future financial statements as if those transactions, events and balances were its own, in addition to the current and deferred tax balances arising in relation to its own transactions. Amounts receivable or payable under the tax sharing agreement will be recognised separately by Independence Gold NL as tax related amounts receivable or payable. The impact on the income tax expense and results of independence Gold NL is unlikely to be material because of the tax sharing agreement and is not expected to have an impact on the consolidated assets and liabilities and results.

The financial effect of the implementation has not been recognised in the financial statements for the year ended 30 June 2003.

NOTE 5: REMUNERATION AND RETIREMENT BENEFITS	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
a. Directors' Remuneration
Income paid or payable to all directors of the economic entity by the economic entity and any related parties			608	314
Income paid or payable to all directors of each entity in the economic entity by the entities of which they are directors and any related parties	798	314
Number of directors whose income from the economic entity and any related parties was within the following bands:	No.	No.	No.	No.
0 \$9,999 \$		3		3
10,000 \$19,999 \$ $\sim$
\$70,000 \$79,999 $\overline{\phantom{a}}$
\$110,000 \$119,999 $\overline{a}$
\$130,000 \$139,999 $\overline{a}$				1
\$160,000 \$169.999 $\,$ $\,$				1
\$170,000 \$179,999 $\overline{ }$
\$210,000 \$219,999 $\sim$

The names of parent entity directors who have held office during the financial year are Rod Marston, Christopher Bonwick, Kelly Ross, John Christie, Keith Docking and Jeffrey Schiller.

Other directors of the economic entity holding office during the year are Tim Moran and Gary Davison.

b. Executives' Remuneration

Deposits at call

The executives of the Company during the year were Christopher Bonwick, Kelly Ross and Jeffrey Schiller. The executives of the
economic entity during the year were Christopher Bonwick, Kelly Ross, Jeffrey Schiller and Tim

	Economic Entity		Parent Entity
NOTE 6: AUDITORS' REMUNERATION	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Remuneration of the auditor of the economic entity for:
auditing or reviewing the financial report a.	26	7	26	7
other services b.		4		4
NOTE 7: EARNINGS PER SHARE	2003 '000	2002 $000^{\circ}$
	No.	No.
Weighted average number of ordinary shares outstanding a. during the year used in calculation of basic EPS	64,739	38,772
Weighted average number of options outstanding	11,859
Weighted average number of issued contributing shares	400
Weighted average number of ordinary shares outstanding during the year used in the calculation of dilutive EPS	76,998
	\$000	\$'000
Earnings used in the calculation of basic EPS b.	1,383	(1,489)
Options outstanding and contributing shares have been C. classified as potential ordinary shares and have been included in the determination of dilutive EPS.
	Economic Entity		Parent Entity
NOTE 8: CASH ASSETS	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Cash on hand	1
Cash at bank	56	3	4	3

3,984

4,041

2,407

$2,410$

543

$\frac{1}{547}$

2,407

$2,410$

	Economic Entity		Parent Entity
NOTE 9: RECEIVABLES	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
CURRENT
Trade debtors	5,401
Other debtors	13	1		1
Receivable from director related entities		8		8
GST receivable	277	65	68	65
	5,691	74	68	74
NON-CURRENT
Deposits	1,001	20	21	20
Amounts owing from wholly-owned entities			6,944	228
	1,001	20	6,965	248
NOTE 10: INVENTORIES
CURRENT
Mine spares and stores	41
NOTE 11: DEFERRED TAX ASSETS
Future income tax benefit	3,535		1,380
a. The future income tax benefit is made up of the following estimated tax benefits:
- tax losses	3,440		1,371
- timing differences	95		9
	3,535		1,380
NOTE 12: OTHER ASSETS
CURRENT
Foreign exchange gain (i)	14,460
NON-CURRENT
Prepayments	7	3		3

(i) The foreign exchange gain relates to USD currency hedging contracts held by the company as at the end of the financial year. The contracts give rise to a future foreign exchange gain as at the end of the financial year

NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Interests are held in the following unlisted associated companies:

Name		Principal Activities	Class of share	Ownership Interest		Carrying Amount of Investment
				2003 %	2002 ℅	2003 \$'000	2002 \$'000
	Southstar Diamonds Ltd	Mineral exploration	Ordinary	50	50	561	555
				2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
a.	investment in associated companies	Movements during the year in equity accounted
	Balance at beginning of the financial year			555		555
	New investments during the year			6	555	6	555
	Balance at end of the financial year			561	555	561	555
b.	Retained earnings attributable to associate:

NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)
	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Share of retained profits at end of the financial year	(24)		(24)
c. Summarised presentation of aggregate assets, liabilities and performance of associates:
Total Assets	15	41	15	41
Net profit from ordinary activities after income tax of associates	(48)		(48)

d. The interest in Southstar Diamonds Ltd was acquired on 28 March 2002. The purchase consideration was 1,499,994 International Gold NL fully paid ordinary shares.

Due to the immaterial balance of the associates retained losses, the economic entity has not reflected their share of the e. associate's losses in the investment balance.

NOTE 14: CONTROLLED ENTITIES

a. Controlled entities and their contribution to consolidated profit after income tax

			Country of Class of Percentage Owned		Contribution to Profit
Incorporation Share		2003	2002	2003	2002
			%	%	\$'000	\$'000
Controlled Entity: Lightning Nickel Pty Ltd	Australia	Ord	100.	100	2.220

	Economic Entity		Parent Entity
NOTE 15: PROPERTY, PLANT AND EQUIPMENT	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Mine plant and equipment - leased	5,565
Accumulated amortisation	(1, 125)
	4,440
Mine plant and equipment - other	5,030
Accumulated amortisation	(967)
	4,063
Other plant and equipment	146	117	146	117
Accumulated depreciation	(41)	(11)	(41)	(11)
	105	106	105	106
Total written down value	8,608	106	105	106
Reconciliation of the movement for the year:
Carrying amount at the beginning of year	106		106
Additions	10,624	116	29	116
Disposals
Depreciation/amortisation expense	(2, 122)	(11)	(30)	(11)
Carrying amount at the end of year	8,608	106	105	106

NOTE 16: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE

Exploration and Evaluation Expenditure:
Opening balance	1.255	746	1.027	746
Current year's expenditure	12.328	1,437	1.474	1.209
Written off during the year	(1,286)	(928)	(1,286)	(928)
Amortisation expense	(1.287)	$\mathbf{r}$	$\mathbf{r}$	$\mathbf{r}$
	11.010	1.255	1.215	1.027

NOTE 16: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE (continued)

	Economic Entity		Parent Entity
	2003 \$'000	2002 \$000	2003 \$'000	2002 \$'000
Development expenditure:
Opening balance	$\tilde{\phantom{a}}$	$\tilde{\phantom{a}}$	$\overline{a}$
Current year's expenditure	580	$\mathbf{r}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$
	580	$\mathbf{r}$	$\mathbf{r}$
Carrying amount at end of year	11,590	1.255	1,215	1.027

Note1(a) describes the policy relating to the carrying value of interests in exploration, evaluation and development expenditure

NOTE 17: MINE ACQUISITION AND PRE-PRODUCTION COSTS
Mine acquisition costs	1.692
Pre-production costs	1.389
	3.081
Accumulated amortisation	(348)
Carrying amount at end of year	2.733

Note1(t) describes the policy relating to the carrying value of interests in mine acquisition and pre-production costs

NOTE 18: PAYABLES
Trade creditors	2.405	226	253	226
GST Payable	285
Sundry creditors and accrued expenses	1,887	47	80	47
	4,577	273	333	273
NOTE 19: INTEREST BEARING LIABILITIES
CURRENT
Bank loans (i)	3,000
Lease liabilities (ii)	1,738
	4.738	$\overline{r}$	$\,$
NON-CURRENT
Bank loans (i)	10,000
Lease liabilities (ii)	2,460
	12,460
Financing Arrangements (iii)
Entities have access to the following financing arrangements at balance date:
Working capital facility	3,000
Less: drawn down portion	(3,000)
Cash advance facility	10,000
Less: drawn down portion	(10,000)
Guarantee facility	2,000
Less: drawn down portion	(1, 389)		÷
	611	$\overline{a}$	$\,$	÷

(i) The bank loans are secured by a fixed and floating charge over the assets of the economic entity.

(ii) Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

(iii) The facilities are denominated in Australian dollars and interest is charged at the BBSY rate plus an applicable margin. The facilities are repayable by 30 September 2004 (Working capital facility), 31 December 2005 (Cash advance facility), and 31 December 2005 (Guarantee facility). Provision has been made in the Facility Arrangements to enable early repayment of the facilities at the election of the economic entity.

	Economic Entity		Parent Entity
	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
NOTE 20: DEFERRED TAX LIABILITIES
Provision for deferred income tax	3,520		365
NOTE 21: OTHER LIABILITIES
CURRENT
Foreign exchange gain (i)	14,460	×	×
Employee entitlements	237		7
	14.697

(i) The foreign exchange gain relates to USD currency hedging contracts held by the company as at the end of the financial year. The
contracts give rise to a future foreign exchange gain as at the end of the financial year closing out the contracts over the spot USD exchange rate applicable at the end of the financial year.

NOTE 22: CONTRIBUTED EQUITY
68,155,750 (2002: 47,505,750) fully paid ordinary shares (a)	12,271	5,536	12,271	5,536
9,955,000 (2002: 10,000,000) partly paid contributing shares (b)	10	10	10	10
28,739,250 (2002: 28,744,250) fully paid options for ordinary shares (c)	268	268	268	268
	12,549	5,814	12,549	5,814
a. Ordinary shares (i)
At the beginning of year	5,536	1,124	5,536	1,124
Shares issued during the year
Issued 1 July 2001 to 30 June 2002		4,436		4,436
20,600,000 on 29 August 2002	7,004		7,004
5,000 on 14 October 2002			1
45,000 on 21 February 2003	4		4
Transaction costs relating to share issues	(274)		(274)
	12,271	5,560	12,271	5,560
Shares bought back during the year (ii)		(24)		(24)
At reporting date	12,271	5,536	12,271	5,536
	No.	No.	No.	No.
	'000	'000	000	000
At the beginning of year	47,506	35,000	47,506	35,000
Shares issued during year
Issued 1 July 2001 to 30 June 2002		24,506		24,506
29 August 2002	20,600		20,600
14 October 2002	5		5
21 February 2003	45		45
Shares bought back during year		(12,000)		(12,000)
At reporting date	68,156	47,506	68,156	47,506

(i) Ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held. Each ordinary share is entitled to one vote.

(ii) On 22 October 2001, 12,000,000 ordinary shares representing 20.2% of shares on issue at the time, were purchased by the company under a buy-back agreement for a total of \$24,000.

NOTE 22: CONTRIBUTED EQUITY (continued)	Economic Entity		Parent Entity
	2003	2002	2003	2002
b. Ordinary Contributing Shares - Partly Paid (iii)	\$'000	\$'000	\$'000	\$'000
At beginning of the year	10		10
Issued during the year		10		$10 -$
At reporting date	10	10	10	10 1
	No.	No.	No.	No.
	000	'000	'000	000
At beginning of the year	10,000		10,000
Shares issued during year
Issued 1 July 2001 to 30 June 2002		10,000		10,000
Converted to ordinary shares during the year	(45)		(45)
At reporting date	10,000	10.000	9,955	10,000
	2003	2002	2003	2002
c. Options for Ordinary Shares (iv)	\$'000	\$'000	\$'000	\$'000
At beginning of the year	268		268
Issued during the year		288		288
Transaction costs relating to option issues		(20)		(20)
At reporting date	268	268	268	268
	No.	No.	No.	No.
	000	'000	000	'000
At beginning of the year	28,744		28,744
Issue during the year		28,750		28,750
Converted to ordinary shares during the year	(5)	(6)	(5)	(6)
At reporting date	28,739	28,744	28,739	28,744

(iii) Contributing shares were issued during the year ended 30 June 2002 paid to 0.1 cent each. Payment of a further 10 cents each can be made at any time to entitle the holder to one ordinary fully paid share. The Company will not make a call on these shares before 31 December 2005.

(iv) On 3 May 2002 the Company issued 28,750,000 1 cent options to subscribe for one ordinary share each, exercisable at 20 cents on or before 31 January 2005. The options are listed on the ASX.

NOTE 23: ACCUMULATED LOSSES	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Retained (losses) at the beginning of the financial vear	(1,671)	(182)	(1,671)	(182)
Net profit/(loss) attributable to the members of the parent entity	1.398	(1.489)	(742)	(1,489)
Retained (losses) at the end of the financial year	(273)	(1.671)	(2,413)	(1,671)

NOTE 24: CAPITAL AND LEASING COMMITMENTS

Operation Losso Commitments

a. Operating Lease Commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements
Payable
not later than 1 year	22	27	22	27
later than 1 year but not later than 5 years	230	14	230	14
	252	41	252	4 1

The property lease is a non-cancellable lease with a five-year term, with rent payable monthly in advance.

	Economic Entity		Parent Entity
NOTE 24: CAPITAL AND LEASING COMMITMENTS (continued)
b. Finance Lease Commitments	2003 \$ 000	2002 \$'000	2003 \$'000	2002 \$'000
Finance and hire purchase rentals for plant and equipment are payable as follows:
not later than 1 year	1,995
later than 1 year but not later than 5 years	2,607
minimum lease payments	4,602
less: future lease finance charges	(404)
Recognised as a liability	4.198
Finance and hire purchase liabilities provided for in the financial statements
Current	1,738
Non-current	2,460
Total liability	4,198

c. Exploration Commitments

In order to maintain current rights of tenure to certain exploration tenements, the Company will be required to outlay \$888,000 in 2003/2004.

NOTE 25: SEGMENT INFORMATION

The economic entity operated in two industrial segments, which were the mining and mineral exploration industries. The economic entity operated only in Australia.

Industrial Segment Information 2003	Mining \$'000	Exploration \$'000	Inter-segment eliminations/ unallocated \$'000	Consolidated \$000
Revenue from external customers	24.553			24,553
Inter-segment revenue
Other revenue			96	96
Total segment revenue	24,553		96	24,649
Consolidated entity profit/(loss) after income tax	2,740	(1,342)		1,398
Segment assets	31,712	20,636		52,348
Segment liabilities	39,287	705		39,992
Depreciation and amortisation expense	2,440	1,287	30	3,757
Other non-cash expenses	230	928		1,158

Industrial Segment Information 2002	Minina \$000	Exploration \$'000	Inter-segment eliminations/ unallocated \$'000	Consolidated \$'000
Revenue from external customers
Inter-segment revenue
Other revenue			58	58
Total segment revenue			58	58
Consolidated entity profit/(loss) after income tax		(1,286)	(203)	(1,489)
Segment assets		4,423		4.423
Segment liabilities		280		280
Depreciation and amortisation expense			11	11
Other non-cash expenses		1,286		1,293

		Economic Entity		Parent Entity
NOTE 26: CASH FLOW INFORMATION	2003 \$'000	2002 \$000	2003 \$'000	2002 \$'000
a. Reconciliation of Cash Flow from Operations with Profit from ordinary activities after Income Tax
Profit from ordinary activities after income tax	1,383	(1,489)	(1,757)	(1,489)
Non-cash flows in profit from ordinary activities
Depreciation	2,122	11	30	11
Write-off of capitalised expenditure	1,286	928	1,286	928
Amortisation	1,635
Changes in assets and liabilities
(Increase)/decrease in trade debtors	(5, 415)	(1)		(1)
Increase in trade creditors and accruals	4,091	28	56	28
(Increase) in inventory	(41)
(Increase)/decrease in other debtors	4	(60)	10	(57)
Increase in provisions	231	7	1	7
Cash flows from operations	5,296	(576)	(373)	(576)

b. Non-cash Financing and Investing Activities

During the year the economic entity acquired plant and equipment with an aggregate value of \$5,447,372 (2002: \$NII)

NOTE 27: EVENTS SUBSEQUENT TO REPORTING DATE

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years.

NOTE 28: RELATED PARTY TRANSACTIONS

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Transactions with related parties:

a. Director-related Entities
Geological consulting fees have been paid to Earth Xplore Pty Ltd, a company in which director Mr Bonwick had an indirect interest. This interest was disposed of on 21 February 2003.	261	353	261	353
Consulting fees have been paid to Virtual Genius Pty Ltd a company to which director Mr Bonwick provides consulting services.	7	37	7	37
b. Share Transactions of Directors
Directors and director-related entities hold directly, indirectly or beneficially as at the reporting date the following equity interests in the parent entity:	No.	No.	No.	No.
Independence Gold NL (i)
ordinary shares	5,113,504	7.030.066	5.113.504	7,030,066
contributing ordinary shares	4,300,000	6,500,000	4,300,000	6,500,000
options over ordinary shares (listed)	3,995,002	6,765,003	3,995,002	6,765,003
options over ordinary shares (unlisted)	300,000		300,000

(i) Prior year interests included 2,035,002 ordinary shares, 2,500,000 contributing ordinary shares and 2,267,501 listed options held by former director Jeffrey Schiller. As Mr Schiller resigned during the year, these interests are not included in the beneficial interests held by directors at the end of the current year.

NOTE 29: FINANCIAL INSTRUMENTS

a. Interest Rate Risk

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

	Weighted Average Effective Interest Rate		Floating Interest		Non-interest Bearing		Total
	2003	2002	2003	2002	2003	2002	2003	2002
	%	%	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Financial Assets:
Cash	4.44	4.55	3,984	2,407	57	3	4,041	2,410
Receivables	5.06	4.78	1,001	20	5.691	74	6.692	94
Investments					561	555	561	555
Total Financial Assets			4,985	2.427	6.309	632	11,294	3,059
Financial Liabilities:
Pavables			$\overline{\phantom{a}}$	٠	4.577	273	4,577	273
Bank Loans	7.67	×,	13,000	٠	٠	٠	13,000	٠
Lease Liabilities	8.12	×.	4,198	٠	٠	٠	٠	×.
Total Financial Liabilities			17,198		4.577	273	17,577	273

b. Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and notes to the financial statements.

c. Net Fair Values

The net fair values of unlisted investments where there is no organised financial market, have been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment.

The net fair value of assets and liabilities approximates the carrying value.

No financial assets and financial liabilities are readily traded on organised markets.

Financial assets where the carrying amount exceeds net fair values have not been written down as the economic entity intends to hold these assets to maturity.

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

	2003		2002
	Carrying Amount \$'000	Net Fair Value \$'000	Carrying Amount \$'000	Net Fair Value \$'000
Financial Assets
Security deposit	1,001	20	20	20
Unlisted investments	561	555	561	555
	1,562	575	591	575

NOTE 30: COMPANY DETAILS

The registered office and principal place of business of the company is Suite 9, PDM House, 72 Melville Parade, South Perth, Western Australia.

NOTE 31: ECONOMIC DEPENDENCY

Independence Gold NL depends on Western Mining Resources Ltd for a significant volume of revenue. During the year ended 30 June 2003 all sales revenue was sourced from this company. The agreement relating to sales revenue contains provision for Independence Gold NL to seek alternative revenue providers in the event that Western Mining Resources Ltd is unable to accept supply of the Company's product due to a force majeure event.

The directors of the company declare that:

1. the financial statements and notes, as set out on pages 7 to 24:

2. comply with Accounting Standards and the Corporations Act 2001; and a.

3. give a true and fair view of the financial position as at 30 June 2003 and performance for the year ended on that date of the b. company and economic entity:
4. 1. In the directors' opinion there are reasonable grounds to believe that the economic entity will be able to pay its debts as and when they become due and payable.

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

R J Marston

Chairman

Dated this 24th day of September 2003

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES INDEPENDENT AUDIT REPORT TO THE MEMBERS OF INDEPENDENCE GOLD NL

Scope

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 both Independence Gold NL (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 year.

The directors are responsible for the preparation and true and fair presentation of the financial report 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 have conducted an independent audit in order to express an opinion 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 judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot quarantee 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 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. 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.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit Opinion

In our opinion, the financial report of Independence Gold NL is in accordance with:

• a. 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 its performance for the year ended on that date; and
• ii. complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

b. other mandatory financial reporting requirements in Australia.

BDO

G F Bravshaw 24 September 2003 Perth, Western Australia

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

The following additional information is required by the Australian Stock Exchange Ltd in respect of listed public companies only.

• $\mathbf{1}$ Shareholding
• Distribution of Shareholders Number as at 12 September 2003 $a₁$

Category (size of Holding)	Ordinary Shares	Listed Options
$1 - 1,000$	32	15
$1,001 - 5,000$	313	157
$5,001 - 10,000$	470	83
$10,001 - 100,000$	661	214
$100,001 -$ and over	51	35
	1,527	504

b. The number of shareholders holding less than a marketable parcel of fully paid ordinary shares is 7.

c. The names of the substantial shareholders listed in the parent entity's register as at 12 September 2003 are:

Shareholder	Number
	Ordinary	Contributing	Ootions
Ranger Minerals Ltd	20,700,000	1.000.000	8,000,000

d. Voting Rights

The voting rights of each class of share are as follows:-

Fully Paid Ordinary Shares - one vote per share held.

Partly Paid Contributing Shares - a fraction of one vote equal to the proportion which the amount paid on each share bears to the total amounts paid and payable on that share.

Options - no voting rights are attached to unexercised options.

1. The name of the company secretary is Mrs Kelly Ross.

The address of the principal registered office in Australia is Suite 9 PDM House, 72 Melville Parade, South Perth, Western $3.$ Australia, Telephone (08) 9367 2755.

• 1. The Register of securities is held at Security Transfer Registrars Pty Ltd at 770 Canning Highway, Applecross, Western Australia.
• 1. There is no current on-market buy-back of the company's securities.
• 1. Stock Exchange Listing

Quotation has been granted for 50,516,750 ordinary shares and 28,733,250 options of the company on all Member Exchanges of the Australian Stock Exchange Limited. Unquoted securities are detailed in Note 8 below.

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

7. (i) 20 Largest Holders of Ordinary Shares as at 12 September 2003

	Name	Number of Ordinary Fully Paid Shares Held	% Held of Issued Ordinary Capital
1.	Ranger Minerals Ltd	20,700,000	30.35
2.	Virtual Genius Pty Ltd	2.373.504	3.48
3.	Independence Mining Exploration NL	2,000,000	2.93
4.	Jeffrey Christopher Schiller	1,995,002	2.92
5.	Lion Selection Group Ltd	1,471,000	2.16
6.	Australian RBC Global Services	1,470,488	2.16
7.	ANZ Nominees Limited	886,920	1.30
8.	Australian RBC Global Services RA A/c	862,500	1.26
9.	Paull Parker	685,000	1.00
10.	Dunelabs Pty Ltd	599,996	.88
11.	Yarandi Investments Pty Ltd	530,000	.78
12.	UBS Nominees Pty Ltd	517.488	.76
13.	Ross William Anderson	475,931	.70
14.	Jerome Gillman	475,000	.70
15.	John David Fitzpatrick	400,000	.59
16.	Bradleys Polaris Pty Ltd	360,000	.53
17.	Eclipse Resources Pty Ltd	339,137	.50 2
18	Carlo Chiodo	324,193	.48
19.	Stanley Boyd Investments	300,000	.44
20.	Biason Pty Ltd	300,000	.44
		37,066,159	54.36

(ii) 20 Largest Quoted Listed Option Holders as at 12 September 2003

$\mathcal{A}$

	Name	Number of Options Held	% Held of Listed Options
1.	Ranger Minerals Ltd	8,000,000	27.84
2.	Virtual Genius Pty Ltd	1,377,502	4.79
3.	Yarandi Investments Pty Ltd	1,321,573	4.60
4.	Independence Mining Exploration NL	1,000,000	3.48
5.	Jeffrey Christopher Schiller	997.501	3.47
6.	Karen Alana Schiller	915,036	3.18
7.	ANZ Nominees Limited	677.000	2.36
8.	Bradleys Polaris Pty Ltd	660,000	2.30
9.	Richard Davis	632.799	2.20
10.	Finance Associates Pty Ltd	580,000	2.02
11.	Goldsearch Limited	500,000	1.74
12.	Shannon Corporate Nominees	400,000	1.39
13.	Ross William Anderson	339,162	1.18
14.	Peto Pty Ltd	316,500	1.10
15.	Finance Associates Pty Ltd (Super A/c)	240,679	.84
16.	Neogold Enterprises Pty Ltd	181,000	.63
17.	KSD Superannuation Fund	180,000	.63
18	Eclipse Resources Pty Ltd	175,460	.61
19.	Jerome Gillman	175,000	.61
20.	Kimbriki Nominees Pty Ltd	170,000	.59
		18,839,212	65.56

INDEPENDENCE GOLD NL ABN 46 092 786 304 AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

8. Restricted and Unquoted Securities

The following securities have been restricted by the Australian Stock Exchange and are unquoted:i.

Security Holder	Number of Securities	% of Securities on Issue	Number of Holders
Escrowed until 17 January 2004 (a)
Ranger Minerals Ltd	9,750,000	14.29
Virtual Genius Pty Ltd	2,299,000	3.37
Independence Mining Exploration NL	2,000,000	2.93
K S Docking	135,000	0.20
L J Christie	30,000	0.04
R J Marston	15,000	0.02
Unrelated parties	3,461,000	5.07	11
	17.690.000	25.94	16
Escrowed until 17 January 2004 (b)
Virtual Genius Pty Ltd	2,500,000	25.23
K S Docking	1,500,000	15.14
Ranger Minerals Ltd	1,000,000	10.09
Unrelated parties	4,510,000	45.51	6
	9,510,000	95.96	9
Restricted shares (c)
K A Ross	300,000	3.03
Unrelated parties	100,000	1.01
	400,000	4.04	2
Total Restricted Securities	27.690.000

(a) Ordinary fully paid shares. These shares have been escrowed by ASX and represent 25.94% of the total ordinary fully paid shares on issue.

(b) Contributing shares paid to 0.1 cents each, 10 cents unpaid. These shares have been escrowed by ASX and represent 95.96% of the total partly paid shares on issue. When released from escrow, they will remain unquoted until full payment has been made.

(c) Contributing shares paid to 0.1 cents each, 10 cents unpaid. These shares are restricted due to their unpaid status and represent 4.04% of the total partly paid shares on issue.

ii. The following securities have been issued and the Company has not requested their quotation by the Australian Stock Exchange:-

(a) On 11 September 2002, 300,000 unlisted options exercisable at 34 cents were issued to a party related to director Kelly Ross. The options were issued pursuant to the company's Employee Option Plan. The options expire on 10 September 2005.

(b) On 17 September 2002, the Company issued 2,000,000 unlisted options exercisable at 45 cents to Bank of Western Australia Ltd, pursuant to the financing arrangement for the purchase of the Long/Victor Nickel Mine by Lightning Nickel Pty Ltd. The issue was approved at a general meeting held on 23 August 2002. The options expire on 30 June 2006.

(c) On 1 October 2002, the Company issued 1,200,000 unlisted options exercisable at 35 cents to a party related to Timothy Moran. a director of subsidiary Lightning Nickel Pty Ltd. The options were issued pursuant to the company's Employee Option Plan and the issued was approved at a general meeting held on 23 August 2002. The options expire on 31 July 2007.