ABN 88 000 759 535 LEVEL 9 GOLD FIELDS HOUSE 1 ALFRED STREET SYDNEY NSW 2000 AUSTRALIA Phone : 02 9251 2777 Facsimile : 02 9251 2666 Email : [email protected] Website : www.gympiegold.com.au

5 December 2003

Dear Shareholder

Equity Raising and General Meeting

On 25 November 2003, Gympie Gold announced the placement of 50.0 million ordinary shares at \$0.50 per share to raise \$25.0 million.

Further information on this raising and the progress of your company is provided in the enclosed Chairman's Address to the recent Annual General Meeting. In essence the proceeds are earmarked to:

Meet increased working capital requirements of growing coal production;
Reduce the Company's debt-to-equity ratio: and
Pursue organic growth opportunities at both coal and gold projects.

The ASX Listing Rules limit the number of shares that a company may issue during any 12 month period to 15% of its shares on issue. Given this limitation, the placement of 50.0 million shares has been structured as follows:

28.5 million shares were issued, raising \$14.25 million; and
subject to approval by shareholders at a General Meeting on 8 January 2004, 21.5 million shares will be issued to raise the balance of \$10.75 million.

Subject to the approval of shareholders, the placements will increase Gympie Gold's shares on issue by 24% to 256.7 million shares, compared with 206.7 million shares prior to the issue.

Due to time constraints, costs and various legal issues, your Directors considered these placements to be the most appropriate method to raise capital at this time. The Board considered raising some of the new equity by making an offer to existing shareholders. However, in view of:

the Company having offered a share purchase plan to shareholders as recently as April 2003; and
the complications associated with offering shares to all shareholders by a rights issue.

the Board decided that it was in the best interests of the Company and the shareholders to proceed with the placement.

General Meeting

Also enclosed with this letter are the following documents relating to the General Meeting to be held on 8 January 2004:

Explanatory Statement and Notice of the General Meeting ('Notice'); and
A proxy form.

The Notice contains the proposed resolutions which require the approval of the shareholders. The Explanatory Statement explains each proposed resolution, as well as why shareholder approval for the resolution is required. It also sets out a voting exclusion statement for each resolution.

You are urged to consider carefully all of this material, determine how you wish to vote and cast your vote accordingly. Shareholders unable to attend the General Meeting are urged to complete the proxy form in accordance with the instructions set out in the Notice.

Yours sincerely

Michael Darling Chairman Gympie Gold Limited

GYMPIE GOLD LIMITED CHAIRMAN'S ADDRESS - 25 NOVEMBER 2003

Welcome to the Annual General Meeting for the company. In this report I will cover the highlights of the past year and go into more detail on events since 1 July 2003. I also want to talk about the outlook for the current year and our corporate objectives beyond then.

Financial Year 2002/2003

In the Annual Report, I recounted how six months of production problems at Southland Coal had a major negative impact on both profitability and the balance sheet over the year. The net loss of \$22.9 million reflects this. The episode cost the company about \$25 million and in effect exhausted the company's cash and reserves

As a result, a total of \$15.2 million was raised in the June quarter by a combination of placement and share purchase plan. I reported then that further work on the balance sheet would be required and foreshadowed a restructuring of the loan facilities as part of that process.

The improvements at Southland Coal became evident, in a production sense, in March this year, but as you can see the financial implications are still with us. They also overshadowed some very real achievements at Gympie Eldorado, particularly in exploration.

Gold production at Gympie Eldorado was 55,368 oz, slightly below budget and near-mine exploration was disappointing in that it failed to find large unmined ore zones that could be brought into production quickly from the new main access tunnel, the Lewis Decline. We found that the miners of a century ago had beaten us to these zones.

But overall, exploration success was significant and added to the prospectivity of Of particular importance was the identification of goldfield the whole field. extensions to the prolific Inglewood Structure both to the north and south of current workings.

In our view, the evidence continues to build that the Gympie Goldfield has the potential to deliver more gold in the future than the 4 million ounces it has already produced. It is a major exploration project supplemented by a mining operation that will remain small until exploration results trigger expansion using the infrastructure that has already been established.

Current Situation: Southland Coal

Since March this year with the introduction of new operational techniques to mine thick-seam coal, production at Southland Coal has been solid and has passed a number of important milestones. Production from March to October was over 1.3m tonnes, some 200,000 tonnes above budget. The very extensive improvements made to equipment, techniques and practices to address the problems earlier in the vear have shown their effectiveness. A further milestone was the longwall move, over about 6 weeks, completed to plan in mid-October. In the course of this move, a modern 90 meter section was inserted into the 220 meter longwall to replace the most troublesome area of supports, and the control systems were upgraded to current technology.

Since the longwall move, production has recommenced strongly. In November we saw a record week of 72,000 tonnes and production Month to Date has been 208,000 tonnes. We are on target to achieve over 2.1 million tonnes for the financial year. We hope to gradually improve the rate of production to nearer 2.5 million tonnes per annum over the next 12 months or so.

Importantly, in considering future production we are much more confident we can handle difficult ground conditions, if they occur. In fact the longwall has already been through ground that would have caused major problems a year ago without substantial loss of production.

All this is happening against a general background of strong demand for coking coal which is being driven by the phenomenal 20% per annum growth of the Chinese steel industry. This is an enormously influential and multi-year trend which is very significant for all Australian coking coal producers.

Demand for Southland Coal is as strong as we have ever seen and we have continued to diversify our customer base. We have recently secured new longterm contracts into North Asia and Europe and we have a full order book for next year. Southland retains its position as the seller of the lowest ash, high fluidity coking coal.

In the immediate future, this strong coking coal market is likely to lead to good price rises for the next coal year, beginning April 2004. A typical strengthening commodity market sees the value of the Australian dollar rising faster than the commodity prices in the early part of the cycle, with prices catching up as the cycle matures. The current situation fits that pattern fairly closely.

We have hedged the value of our production to early 2004 at 62.5 cents and have caps in place bevond that at between 71.50 and 73.50 to July 2004. The effect of the new coal price, which is expected to be a good increase, starts in April 2004.

As the growth in coal production strengthens working capital requirements have risen. This is partly a function of higher volumes and partly due to some current problems in the Hunter Valley rail and port systems. Offsetting that, to some degree, operating cash flows are growing fast and earnings before interest tax and depreciation and amortisation for 2003-04 from Southland look to be about \$50 million.

Strategic Goals & Opportunities: Southland

Looking ahead at Southland, we have begun to focus on some opportunities to add substantial value to the asset.

The first of these is an open cut project to mine about 2 million tonnes close to existing infrastructure. This would have a very small capital cost and contribute coal at a low cost of production.

A larger opportunity is a feasibility under way with a major Chinese coal company and an international engineering company to examine the applicability of new thick seam extraction technology to Southland that has the potential to double annual output and add substantially to the scale of reserves. This project could lead to a pilot program being introduced in 2005.

Current Situation: Gympie Eldorado

Production at Gympie Eldorado is expected to be about 50,000 oz in the coming year with some 12,600 oz having been produced to the end of October, and grades in November have increased materially. The outlook for the vears following is production of around 40,000 oz per annum based on the current known reserves. Any additional finds would increase this figure.

But Gympie Eldorado is essentially a major exploration project of which current production is an important component. The goal is to re-open a major high-grade goldfield by making multi-million ounce discoveries. Current production is enormously helpful in building our knowledge of the field and its geology and in providing underground access to areas of interest via modern infrastructure with large-scale capacity.

Over the past 12 months, we have been able to extend the potential length of the field a further 20 km to the south and we have now secured exploration rights to this extra ground. Taken with other results extending structures to the north, the Gympie field now has a potential strike length of some 30 km. This compares to the 10 km extent of the old goldfield which yielded 4 million ounces.

Surface drilling re-commenced, on a restricted program, in August this year and has continued to make progress. The Quarterly Report in October referred to new gold-bearing structures identified to the North of current workings.

Strategic Goals & Opportunities: Gympie Eldorado

The wider Gympie goldfield is very under-explored. Until last year there had been only 20 holes drilled that were more than 500 m away from current mine workings. Our limited program last year doubled that figure to 40 holes - still a very small number for a large unexplored area adjacent to a known gold mineralisation.

The drilling program of the last 12 months identified gold-bearing sequences to the south of the current workings which had been uplifted and were present relatively close to the surface. Other work indicated that these mineralised systems could extend much further to the south. In terms of adding value to the potential of the whole Gympie field, this work was highly significant.

A major corporate goal is to begin wide step-out drilling on the new ground identified to the south. This extends some 20 km to large granite structures which are now interpreted as the possible source rocks for the goldfield's mineralisation. The quality of these targets is very high and the opportunity they present for the company is a very substantial one.

Corporate Goals

Our overall corporate goal is, firstly, to take both the coal and the gold businesses to new levels of production and value. I have mentioned the opportunities for organic growth that we are pursuing, but we are also looking at possibilities for growth by acquisitions or merger to see whether these present the chance of substantial value increments for shareholders.

A second major goal is to build a strong financial base for this growth.

Capital Raising

This morning the company announced a capital raising to raise some \$25 million of new equity by the placement of 50 million new shares at 50 cents per share. The shares were placed both in the United Kingdom and Australia.

General Meeting will be called on or about 8th January 2004 to approve the issue of 21.5 million of these shares. The other shares can be issued under the Directors' standing authority to place 15% of the capital of the company in any one vear.

The purposes of this raising are to provide additional working capital to take advantage of a strong coal market to expand production at Southland, to strengthen the balance sheet generally, and to pick up the rate of surface exploration at Gympie Eldorado.

The demand for the new shares was solid and we are appreciative of the efforts of the three brokers involved. Southern Cross Equities and Wilson HTM in Australia and Numis Securities in the UK. Numis Securities, our newly-appointed UK broker has introduced a large number of leading investment institutions to the share register.

Directors

I would like to close by thanking all my colleagues on the Board for their efforts and contribution over the last year. Directors' responsibilities are always onerous and in tough times this is doubly true. Their contribution in addressing the problems we experienced and in rectifying the situation was substantial and reflects very creditably on them.

Michael Darling Chairman 25th November 2003

Notice Of General Meeting

A general meeting of the shareholders of Gympie Gold Limited ('the Company') will be $heid:$

Date: 8 January 2004

Time: $10.30am$

Exchange Square Location: Basement 2 18 Bridge Street Sydney NSW 2000

AGENDA

BUSINESS

RESOLUTION 1: Approval of Issue and Placement of New Shares

To consider and if thought fit to pass the following resolution as an ordinary resolution:

'THAT, in accordance with the requirements of the Listing Rules of Australian Stock Exchange Limited, the issue of 21,500,000 Ordinary Shares to certain investors at an issue price of \$A0.50 per Ordinary Share as described in the Explanatory Statement to this Notice of General Meeting dated 5 December 2003 be approved.'

RESOLUTION 2: Ratification of November 2003 Placement

To consider and if thought fit to pass the following resolution as an ordinary resolution:

'THAT, in accordance with the requirements of the Listing Rules of Australian Stock Exchange Limited, the issue of 28,500,000 Ordinary Shares to certain investors at an issue price of \$A0.50 per Ordinary Share ('the November 2003 Placement') as described in the Explanatory Statement to this Notice of General Meeting dated 5 December 2003 be ratified."

VOTING:

Persons who hold shares in the Company at 10.30am 6 January 2004, will be entitled to attend and vote at the meeting.

PROXY

$1¹$ A member who is entitled to vote at the meeting may appoint:
one proxy if the member is only entitled to one vote; or $(a)$
one or two proxies if the member is entitled to more than one vote. $(b)$
$2₁$ Where the member appoints two proxies, the appointment may specify the proportion or number of votes that each proxy may exercise. If the appointment does not specify a proportion or number, each proxy mav exercise one-half of the votes, in which case any fraction of votes will be disregarded.
1. A proxy need not be a member of the Company.
$\overline{4}$ . If you require an additional proxy form, the Company will supply it on request.
5 The proxy form and the power of attorney or other authority (if any) under which it is signed (or a certified copy) must be received by the Company, at least 48 hours before the time for holding the meeting either:
at Level 9 Goldfields House $(a)$
- 1 Alfred Street

Sydney NSW 2000

by facsimile: $(b)$
for persons faxing in Australia on (02) 9251 2666; or $(i)$
$(ii)$ for persons faxing from overseas on (+61) 2 9251 2666.

BY ORDER of the Board of Directors

Anne Adalev Company Secretary

5 December 2003

GYMPIF GOLD LIMITED ABN 88 000 759 535

EXPLANATORY STATEMENT

INTRODUCTION

This is an Explanatory Statement for the proposed resolutions to be considered at the General Meeting of Gympie Gold Limited ('the Company') to be held on 8 January 2004.

RESOLUTION 1: APPROVAL OF ISSUE AND PLACEMENT OF NEW $\mathbf{1}$ . SHARES

$1.1$ BACKGROUND

As announced by the Company on 25 November 2003, the Company has:

issued, by way of private placement, 28,500,000 Ordinary Shares $\bullet$ (the 'First Tranche');
contracted to issue, by way of private placement 21,500,000 Ordinary $\bullet$ Shares (the 'Second Tranche').

at \$0.50 per Ordinary Share. Ratification of the issue of the Ordinary Shares in the First Tranche is the subject of Resolution 2. The Second Tranche is conditional on shareholder approval pursuant to Resolution 1.

The Ordinary Shares in the Second Tranche will be issued on the same terms as, and rank equally with, all other Ordinary Shares in the capital of the Company at the date of issue. Subject to shareholder approval being obtained, the Ordinary Shares in the Second Tranche will be issued within three business days of the general meeting.

The placees will be investors who, under Australian and United Kingdom securities laws do not need to receive a prospectus or similar document ('professional investors'). The placees will be clients of the stockbrokers to the placement: Numis Securities Limited, Wilson HTM Corporate Finance Limited and Southern Cross Equities Limited: as well as Chapel Chase Corporation Pty Limited. The Ordinary Shares in the Second Tranche are together referred to as the 'New Shares'.

In undertaking the private placement, the Company will rely on Category 1 of the Australian Securities and Investments Commission Class Order ICO 02/1180], which deals with compliance issues in relation to placements.

The funds raised will be applied towards increasing the Company's working capital requirements arising from growth in production at the Southland Colliery, to reduce the Company's debt to equity ratio, and to enable the Company to pursue organic growth opportunities in coal and gold.

$1.2$ SHAREHOLDER APPROVAL

Rule 7.1 of the Listing Rules of ASX limits the number of equity securities (which include shares) that the Company may issue during any 12 month period to 15% of its shares on issue without shareholder approval.

The November 2003 Placement, together with other issues by the Company in the last 12 months, represented approximately 15% of the Company's shares on issue, and reached the limit under Rule 7.1.

The Company seeks shareholder approval in these circumstances for the purposes of Listing Rule 7.1.

$1.3$ VOTING EXCLUSION STATEMENT

In accordance with Listing Rules 7.3.8 and 14.11 the Company will disregard any votes cast on Resolution 1 by any person who will receive the New Shares. The Company will similarly disregard the votes of any associates of persons who will receive the New Shares.

However, the Company need not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in $(a)$ accordance with the directions on the proxy form; or
$(b)$ it is cast by a person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 2: RATIFICATION OF NOVEMBER 2003 PLACEMENT $2₁$

$2.1$ BACKGROUND

The purpose of Resolution 2 is to ratify the issue of the Ordinary Shares in the First Tranche. The Ordinary Shares in the First Tranche were issued on the same terms as, and rank equally with, all other Ordinary Shares in the capital of the Company at the date of issue.

The placees were professional investors and were clients of the stockbrokers to the placement; Numis Securities Limited, Wilson HTM Corporate Finance Limited and Southern Cross Equities Limited: as well as Chapel Chase Corporation Pty Limited. The Ordinary Shares in the First Tranche are together referred to as the 'November 2003 Placement'.

In undertaking the private placement, the Company relied on Category 1 of the Australian Securities and Investments Commission Class Order [CO 02/1180], which deals with compliance issues in relation to placements.

$22$ SHAREHOLDER APPROVAL

The November 2003 Placement represented approximately 13.9% of the Company's issued capital, and was within the 15% in 12 months limit.

The Company now seeks shareholder approval for the issue of the November 2003 Placement for the purposes of Listing Rule 7.4, which allows the Company to refresh its 15% in 12 months limit. If Resolution 2 is approved. the Company, going forward, may issue 28,500,000 securities within the 15% limit during the next 12 months without the need to obtain shareholder approval.

$2.3$ VOTING EXCLUSION STATEMENT

In accordance with Listing Rules 14.11 and 7.5.6 the Company will disregard anv votes cast on Resolution 2 by any person who received the shares in the November 2003 Placement. The Company will similarly disregard the votes of any associates of persons who received shares in the November 2003 Placement

However, the Company need not disregard a vote if:

$(a)$ it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is cast by a person chairing the meeting as proxy for a person who $(b)$ is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

$\overline{3}$ PROXY FORM

Shareholders unable to attend the meeting are urged to complete the proxy form and return it to the Company as soon as possible (see proxy form for details) and in any event not later than 48 hours prior to the meeting.

4. DEFINITIONS

In this Explanatory Statement:

'ASX' means Australian Stock Exchange Limited;

'Listing Rules' means the Listing Rules of ASX and any other rules of ASX which are applicable while the Company is admitted to the Official List of ASX, each as amended or replaced from time to time, except to the extent of any express written waiver by ASX:

'New Shares' means the Ordinary Shares privately placed by the Company, the subject of Resolution 1;

'November 2003 Placement' means the Ordinary Shares privately placed by the Company, the subject of Resolution 2;

'Ordinary Share' means a fully paid ordinary share in the capital of the Company;

'Proposed Resolutions' means the resolutions proposed in the Notice of General Meeting;

DATED 5 December 2003

General Meeting 8 January 2004 - Proxy Form

The Secretary, Gympie Gold Limited Level 9, Gold Fields House 1 Alfred Street Sydney NSW 2000 AUSTRALIA Facsimile (+61) 2 9251 2666

I/We
	(please print)

оf
	(please print)
	being a Member(s) of Gympie Gold Limited hereby appoint:
L	the Chairman of the Meeting (mark with an 'X' in the box)
OR
Name of proxy

Address of proxy

Or, in his/her absence, or if no person is named, the Chairman of the meeting as my/our proxy to vote on my/our behalf at the General Meeting of Gympie Gold Limited to be held on 8 January 2004 at 10.30am and at any adjournment of this meeting.

If two proxies are being appointed, complete the following:

This proxy is authorised to exercise ______ votes _____ % of my/our total voting rights.

Proxy instructions

To instruct your proxy how to vote, insert 'X' in the appropriate column against each item of business set out below.

If you do not wish to instruct your proxy how to vote please insert 'X' in the column 'No Direction'. If your proxy is the Chairman, by marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as proxy will be disregarded because of that interest. The Chairman will be voting in favour of all proposed resolutions in relation to undirected proxies.

I/We instruct my/our proxy to vote as follows:

Resolutions	For	Against	Abstain	No direction
Approval of Issue and Placement of New shares
Ratification of November 2003 Placement

This proxy must be signed by each appointing Member or the Member's attorney.

Proxies given by companies must be executed in accordance with section 127 of the Corporations Act 2001 or signed by an authorised officer or attorney.

SIGNATURE(S) OF SHAREHOLDER or in case of a Company: SIGNATURE OF ATTORNEY OR AUTHORISED OFFICER	NAME (please print)	OFFICE HELD (if signing as an authorised officer of a company)

COMPANY COMMON SEAL

Dated ... ... . . . . . . . . . . . . . . .

To be effective, this proxy form and any power of attorney or other authority under which it is signed (or a certified copy) must be received at the registered office of Gympie Gold Limited, Gold Fields House, Level 9, 1 Alfred Street, Sydney NSW 2000 or by facsimile on (+61) 2 9251 2666 at least 48 hours before the meeting.

NOTES:

1. A member who is entitled to attend and vote at this meeting is entitled to appoint not more than 2 proxies to attend and vote instead of the member.
1. Where 2 proxies are appointed:
a. a separate proxy form should be used to appoint each proxy;
b. the proxy form may specify the proportion, or number, of votes that the proxy may exercise, and if it does not do so the proxy may exercise half of the votes.
1. A proxy need not be a member of the Company.
1. If you require an additional proxy form, the Company will supply it on request.

AI assistant

Lachlan Star Limited Capital/Financing Update 2003

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