LAKE RESOURCES N.L. — Annual Report 2003

Sep 10, 2003

Our mission is to develop a profitable minerals discovery business, concentrating on the effective use of the geosciences and making strategic investments. To this end, Lake Resources' strategy is focussed on: The Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the C

• . Exploration in the most prospective areas for world-class deposits that will attract major mining companies as joint venture partners at an early stage.
• Use of the most cost-effective practices and technologies including reprocessing and reinterpretation of existing databases and application of appropriate deposit models and temane analysis.
• Formation of alliances with major mining companies for exploration and development of the Company's discoveries.
• Development of a revenue stream comprising up-front fees from mining companies who wish to drill targets identified by us and, later from net smelter royalties and net profits interests when mining companies develop deposits discovered by us. The control of the control of the control of the control of the control of
• Seed capital investments in other emerging resources sector companies.

The board considers that the corporate culture required for successful mineral exploration is significantly different to the culture of the downstream businesses of mining and smelling. The control of the control of the control of the control of the control of the control of

Accordingly, Lake Resources does not place a high priority on becoming a miner, preferring, instead, to retain royalty and net profits interests in its discoveries and to remain focussed on its core business of mineral exploration.

Company Directory

Lake Peauroen L A B N 49079471-960

Directors

Kenneth J Foots, Chairman
Peter J Gilchrist, Managing Director
James G Clavarino, Exploration Director Ross Johnston, Director

Registered Office

Levely 183 North Quay
GPO Box 1289 Brisbane 4001 Australia

Contacts

Telephone:+61 7 3221-5950 51 7 3220-0282 Facsimical 617 3221 3338 -mail: lakeresources@lakeresources.com.au Website: www.lakeresources.com.au

Bankers

Commonwealth Bank of Australia
240 Queen Street
Brisbane: 4000, Australia

Share Registry

Douglas Heck & Burrell GPO Box 35 Brisbane 4001, Australia

Auditors

Robertsons Chartered Accountants
4/127 Creek Street
Brisbane 4000, Australia

Australian Stock Exchange Listing

ASX Code: LKE

Dear Shareholder. The Charles of Shareholder

Lake Resources was formed in 1997 as a specialist mineral explorer with the objective of developing a profitable mineral discovery business.

The year under review has produced mixed results in a difficult period for mineral exploration

• 1. Our land position in southern Sweden has been reduced and the Exploration Agreement with Zinkgruvan Mining AB has been terminated. The annual and the control of the control of
• 1. Almost US\$100 000 was contributed to exploration of our Moskosel Project area in northern Sweden by BHP Billiton. However post year end, BHPB withdrew from the Joint Venture Agreement. Lake is seeking another partner for the project.
• 1. Three Exploration Licences covering important copper and gold targets of our Chagai Project in Pakistan were renewed for a further period of 3 years.
• 1. The Company has initiated a low-cost regional exploration program targeting world-class copper and gold deposits in Argentina which enjoys a number of comparative advantages including geological prospectivity, low costs and infrastructure.
• 1. The value of our investment in DiamonEx Limited has been enhanced with the granting of Prospecting Licences over the Martin's Drift kimberlite diamond resource (13 million tonnes at a grade of 22 carats/100 tonnes) and other prospective diamond areas in Botswana.
• 1. Our investment in the Mincor Resources NL associate, Tethyan Copper Company Limited, has benefited from the increase in price of Mincor shares to more than A\$0.40 by year end. Lake
     can convert its 1 million TCC shares acquired at A\$0.10/share into 1 million Mincor shares.
• 1. Oropiata Limited, in which we have a 13% interest, received encouraging results from the testing of additional targets at the Cerro Negro Project in Argentina where a drill-indicated inferred resource of 600,000 ounces of gold is present at the Vein Zone. Oroplata is earning a 49% interest in the project and a state of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the

On the world scene, the decline in exploration expenditure has continued and activity has been further reduced through mergers and takeovers (e.g. the recent takeover of MIM by Xstrata). At the same time, the outlook for raising risk capital for junior explorers has shown little sign of improvement.

The Company's exploration expenditure and overheads have been reduced to the minimum level necessary to maintain momentum and position the company so that shareholders can benefit when the industry returns to growth.

I wish to thank the board of directors and our management and contractors for their ongoing contribution to the operation of the company. Thanks also to you, our shareholders for your ongoing support during a testing period for the resources sector. We look forward to your continuing association with Lake Resources.

Ken Foots Chairman

Lake Resources N.I

Exploration Projects

As previously noted, mineral exploration is an inherently risky undertaking and the probability of success depends on a number of factors including:

the level of geological prospectivity; access to land: access to data.

Taking into account other risk factors such as sovereign risk, government policies and infrastructure, Lake Resources has initiated exploration projects in Sweden, Pakistan and Argentina, which, on balance, the Company believes meet these requirements, and where Lake Resources has a competitive advantage. Opportunities in other countries that meet these requirements continue to be reviewed.

With an area of 450 000 sq km (see Map 1) Sweden has a recorded mining history spanning more than 1,000 years and is a significant producer of iron ore, base metals and gold.

Changes to Sweden's mining legislation in the early 1990s, together with availability of extensive geoscience databases developed by government institutions have created a favourable environment for mineral exploration and mining in a stable political and economic climate.

Before the current global recession in mineral exploration, the country experienced a three-fold increase in exploration expenditure in the period 1993 to 1998, but by late 1999-early 2000, the area under exploration tenements was low. Interpretation of available data by Lake Resources identified a number of areas with potential for lead-zinc and copper-gold deposits in the Norrbotten and Bergslagen Districts.

Norbotten Project

Lake Resources is exploring for Broken-Hill-type (BHT) silver-lead-zincand iron-oxide-hosted copper-gold (IOCG) deposits in the Norrbotten District in northern Sweden (see Map 1).

The Caledonian Mountain Range, occupying the western border area, grades eastwards into extensive conifer forest, peat bogs and lakes in a terrain of low-lying hills and undulating plains. The Arctic Circle, marking the land of the midnight sun, passes through the north and the daily average temperature ranges from +18°C (summer) to -20°C (winter).

Major mines in the region include the world-class Kiruna iron ore mine, the Laisvall lead-zinc mine and the Aitik copper-gold mine.

In 1999 interpretation of available geoscience data for the Norrbotten region by Lake Resources, identified a number of multi-attribute target areas. The Company established a branch office (Lake Resources N.L. Australia Filial) and secured exploration title over a number of areas. An operational base was established in Malà and exploration activities commenced in the third quarter of 2000.

Lake Resources N.L

During June 2001, an alliance was formed with a subsidiary of BHP Billiton Limited (BHPB) for exploration in northern Sweden. The Alliance Agreement provided for BHPB to subscribe US\$500 000 for shares in Lake Resources (completed in August 2001), with the bulk of the funds earmarked for exploration of the Tiamotis and Klingersel tenements. Exploration of these tenements however, proved unfruitful and by late 2002, the tenements, with the exception of Tjamotis Nr 3, were relinquished.

In the latter part of 2002, three new exploration permits (Moskosel Nr 1, 2 & 3) were granted to Lake Resources in the Moskosel area, approximately 100 km southeast of Tiamotis. The tenements, covering an area of 532 sq km, are prospective for Broken Hill-Type (BHT) silver-lead-zinc deposits mineralised rocks have been identified in outcrop and in previous exploration drillholes.

Following the signing of a Joint Venture Agreement with BHPB in September 2002, available airborne geophysical and other data were reprocessed and interpreted, and field reconnaissance and geochemical sampling were completed in late 2002. In early 2003, BHPB undertook a detailed review of the geophysical and exploration data. It was concluded that no drill-ready targets had been identified and BHPB withdrew from the Moskosel Joint VentureAgreement, effective 18th July 2003.

Lake Resources is seeking another Joint Venture partner to continue exploration of the area.

Details of the Norrbotten tenements as at 30 June 2003 are set out below.

Tenement	Number	Area (sq km)	Lake Interest	Grant Date	Expiry Date
RESERVE REAL	RESERVED	79	10022	1.2014.2019.2	10/04/2005
Westform Ministrative	A MARITA NA MARI a izanzen z	202 r. ma	a di Sw 100%	2. ZRZEDNI 291982202	30/07/2005 2610872016
watera Brie	a Mod zinow	WA.	$100\%$	21212002	1/12/2005

Bergslagen Project

Lake Resources is exploring for Broken-Hill-type (BHT) silver-lead-zinc and iron-oxide-hosted copper-gold (IOCG) deposits in the Bergslagen District in western central Sweden (see Map 1).

With more temperate climatic conditions than northern Sweden, the region is characterised by flat to undulating terrain supporting extensive forestry plantations and agriculture. The region is also an important district for iron ore, silver-lead-zinc and copper-gold mining. Significant mines include Falun, which closed only within the last decade and was for centuries the largest copper producer in Europe, and silver-leadzinc mines at Zinkgruvan and Garpenberg.

Following interpretation of available geoscience data for the Bergslagen District in late 1999-early 2000, four target areas, Trunhem, Loka, Krakow & Simas, were secured by Lake Resources under exploration tenements. In the second quarter of 2000, an Exploration Agreement was signed with Zinkgruvan Mining AB (ZMAB), operators of the Zinkgruvan silver-lead-zinc mine, over a specified area (see Map 1) including the Trunhem, Loka and Simas tenements.

Under the terms of the Agreement, Lake Resources were responsible for funding and managing exploration up to the stage of identification of drill targets, at which stage, ZMAB would have the first right of refusal to enter a joint venture agreement with Lake for the purpose of drilling selected targets.

Investigation of the tenements in late 2000 - 2002, comprising till geochemical sampling, geological mapping and rock chip sampling, failed to locate suitable drill targets. The Trunhem

tenement was relinquished in the second quarter of 2002. Following expiry of the Krakow, Simas Nr 1 and Loka tenements in Q2/2003. ZMAB and Lake Resources agreed to terminate the Exploration Agreement.

Geological reconnaissance and sampling of the Simas Nr 2 tenement has located indications of coppergold associated with magnetite-pyrrhotite in alteration zones peripheral to historic iron mines. Details of the Simas Nr 2 tenement are set out below.

anya. Manaz	Tenement	Number	Area (sq km) – Lake Interest i		Grant Date	Expiry Date
	2008 Since St 2008 4th 31/2002		and the second contract of the second contract of the second contract of the second contract of the second con	$400\%$	2810312002	27/03/2005

Pakistan

Bordered by Iran, Afghanistan, China and India, Pakistan has a land area of about 779 000 sq km, about one tenth of the area of Australia (see Map 2). With a population of about 147 million people, Pakistan shares some similar core traditions and institutions with Australia, including the English language, common law system and similar financial institutions. Following the assumption of power by a nonelected government headed in October 1999, programs of wide-ranging reforms aimed at restoration of accountability and good governance, strengthening of key institutions, elimination of corruption, revitalisation of the economy and encouragement of foreign investment were initiated at both federal and provincial levels. Following local government elections, a referendum and a series of constitutional amendments to extend the position and powers of the President and Chief Executive, Provincial and National Assembly elections were held in October 2002.

With a rich geological endowment and a competitive national mineral policy, Pakistan offers opportunities for investment in the minerals sector.

Chagai Project

Lake Resources is exploring for epithermal gold and porphyry copper-gold deposits in the Chagai region in northwest Balochistan (see Map 2). Access is by sealed highway from the provincial capital of Quetta a wide-gauge railway that was upgraded for mine development at the Saindak Copper-Gold Mine parallels the highway.

Cretaceous island arc basement rocks together with Tertiary sediments, volcanics and intrusives of Andean-type affinities host significant mineral deposits including the Saindak copper-gold mine, at present being recommissioned, and the BHP Billiton-TCC Reko Diq Copper Project (see Investments section). In a similar geological environment to the west in Iran, world-class porphyry copper-gold deposits are mined at Sar Cheshma.

Apart from limited investigations by the Geological Survey of Pakistan, and exploration by BHP during the 1990s, little systematic modern exploration has been undertaken in the Chagai region. In March 1998, a Reconnaissance Licence

Lake Resources N.L.

(RL/2877-87) was granted to Lake Resources over an area of 10 000 sq km. Follow up investigation of targets identified by specialist interpretation of satellite images and airborne magnetic data located indications of untested porphyry systems and epithermal gold.

The RL was relinguished and four Exploration Licences (ELs), covering a total area of 920 sq km, were granted to Lake Resources in March 2000. Three of the ELs were renewed over a reduced area for a further period of three years in March 2003. (see Map 2). Details of the Chagai tenements are set out below.

Tenement	Number	Area (sq km) l	Lake Interest	Grant Date	Expiry Date
Service Control	Manaratta	K.	TANDOA	20.03.2906	19032005
ATERNATIVE A MARINE AND THE COMPANY	KENTRAA-58 2201037-47	58. 10X	HAINCA RANCA	2003/2008 2010212000	19/03/2006 19/03/2006

On the Amalaf tenement which adjoins the Saindak Copper-Gold Mine of Saindak Metals Limited, geological, geochemical, and ground magnetic surveys by Lake Resources have identified an extensive leached cap that overlies intensely stockworked, altered porphyritic intrusives, metavolcanics and metasediments with anomalous gold and base metal values. Further east of Saindak near the northwestern margin of the BHPB-TCC Reko Dig tenement, the Dasht-i-Gauran tenement covers a number of interpreted alteration zones identified from satellite images.

The Koh-i-Sultan tenement covers the partially dissected remnants of a major Quaternary age compound andesitic stratovolcano. Extensive zones of advanced argillic alteration, with sulphur, barite and silica deposits, and stockwork-veined altered intrusives are present. The area is prospective for high sulphidation epithermal gold and porphyry copper-gold deposits.

Anomalous levels of gold and base metals are present in stream sediments associated with major alteration zones in the vicinity of the Nawah Caldera at the southeastern end of the Koh-i-Sultan Complex. Intense gypsum stockwork and advanced argillic alteration are widespread within a 5 km radius to the west, south and east of the caldera.

Siliceous 'ribs' in the alteration zone carry gold values up to 1 g/t with anomalous levels of arsenic and mercury. Breccia and stockwork veins within an interpreted 1 km diameter circular feature on the southwest flank of the caldera have returned gold values up to 1.07 g/t. Stockwork veined volcanics with secondary copper minerals carry gold values up to 0.32 g/t.

Northwest of the caldera, geological reconnaissance has identified argillic alteration zones with acid leached and silicified felsic dykes, quartz-barite, breccia and silica vein systems with flat-lying banded siliceous sediments. Rock samples from this area have returned gold values up to 21.0 g/t with anomalous levels of silver, copper, arsenic, bismuth and antimony.

New Project Generation

Lake Resources has recently initiated regional exploration in Argentina, targeting porphyry copper-gold and epithermal gold-silver deposits. With a market economy based on an abundance of natural resources, and investment protection and double taxation agreements with Australia, Australian investment in Argentina over the past decade totals almost US\$1.5b, including mining (MIM at the Bajo de la Alumbrera copper-gold mine), agribusiness, port management and freight equipment.

Opportunities in Australia and other selected countries continue to be monitored in line with Lake Resources' long term global discovery objectives.

Investments

Tethyan Copper Company Ltd (TCC), a specialist, Asian-focused copper company, was formed by Perth-based Mincor Resources NL (Mincor) to house its alliance with BHPEBilliton Limited to develop copper resources at the Reko Dig Copper Project in the Chagai District in Pakistan. Lake Resources, which is also exploring for copper and gold in this region, has an equity interest in TCC of 1 million shares at A\$0.10 per share and 2 million options exercisable at A\$0.15 per share. The issued capital of TCC is 56.80 million shares and 23.95 million options.

The Reko Diq Project is centred on a complex, comprising an older central porphyry surrounded by younger porphyries that host a number of porphyry copper-gold deposits. A supergene copper deposit (H4 Project) is developed over the central porphyry. During 2001, a scoping study (±30% accuracy) on the H4 Project confirmed the potential economic viability of the project. In March 2002, TCC announced that the Government of Pakistan had granted the status of "Export Processing Zone" (EPZ) for the H4 Project. It provides relief from various taxes, exemptions from foreign exchange control regulations and customs duties and fixes in place the fiscal regime for the life of the project.

In the second half of 2002, BHP Billiton executed a subscription agreement with TCC providing for a subscription of US\$600,000 at or shortly after a proposed stockmarket listing. TCC also completed a Rights Issue, raising A\$586,100 at \$0.30/share. In early 2003, TCC reported the discovery of a new leached cap, a possible indicator of a new zone of supergene enriched copper, at the Reko Dig Copper Project in Pakistan. TCC's majority shareholder, Mincor, also announced further exploration success at its Redross, Wannaway and North Mitel nickel projects in Western Australia. Lake Resources can convert its TCC shares into 1 million Mincor shares at any time up to the earlier of TCC being admitted to the official list of a stock exchange, or the 31^st of December 2003. The last sale of Mincor shares on the ASX for Monday 28th July 2003 was \$0.45.

For further information, refer to the Mincor Resources N.L. website at http://www.mincor.com.au

DiamonEx Limited is an unlisted Brisbane-based company in which Lake Resources has an equity interest of 2 million shares. Following a capital raising of A\$0.5 million in late 2002, the issued capital of DiamonEx comprises 24.6 million shares and 19.3 million options.

DiamonEx is exploring for diamonds in the Martin's Drift and Molopo areas in Botswana. At Martin's Drift, with the granting of two additional Prospecting Licences in June 2003, DiamonEx's tenements total an area of approximately 700 sq km. The tenements cover a number of diamondiferous kimberlite pipes. including a resource of 13 million tonnes at a grade of 22 carats/hundred tonnes (at 1 mm cutoff). At its Molopo Project, the Company holds two Prospecting Licences covering an area of 1 500 sq km. Within the PLs, previous exploration has identified more than 50 kimberlitic intrusives, of which eight are known to contain microdiamonds. DiamonEx plans to complete a mining feasibility study on the Martin's Drift diamond resource and to continue exploration of the Martin's Drift and Molopo project areas.

For further information, refer to the DiamonEx Limited website at http://www.diamonex.com.au.

Oroplata Limited, is an unlisted Australian company in which Lake Resources has an equity interest of 3 million shares (22.2052 million shares on issue). Oroplata is earning a 49% interest in the Cerro Negro epithermal gold project in Argentina by expenditure of US\$2.5 million over a period of five years. Although previous exploration has identified a number of epithermal vein systems, only one system, the "Vein Zone", has been tested in any detail, with an Inferred Mineral Resource of 6 million tonnes @ 3.2 g/t gold.

During November 2002, Oroplata undertook follow-up investigation of regional targets, and completed a drilling program at the Eureka Vein System (11 holes totalling 805m). Encouraging gold values were encountered in several drillholes, including a best intersection of $14 \text{ m} @ 2.19 \text{ g}/1 \text{ Au}$ .

In this Report, the following words have these meanings unless the context otherwise requires.

"Alluvial" means of a placer, or its associated valuable mineral, tormed by the action of running water.

"Alteration" means chemical changes to rocks and minerals, commonly related to ore forming processes

"Andean-type arc" means a chain of volcanic centres and intrusives associated with continental plate margins.

"Anomalylanomalous" means abnormal, in geological data may indicate a target for investigation.

ARGENTINA

"Argillic alteration" means a type of alteration of rocks and minerals to clay minerals.
"Basal till sampling" means collection by criting of the basal section of till just above bedrock - used to more precisely locate the bedrook source of displaced surface till geochemical anomalies,

PAKISTAN

• "Base metals" means any of the more common metals such as copper, lead and zinc.
• "Batholith" means a large body of intrusive igneous rock

"Breccia" means a rock made up of angular coarse fragments.

Caldera" means a more or less circular volcanic depression whose diameter is many times greater than that of a volcanic W

"Chalcopyrite" means one of the sulphide minerals of copper
"Diamond drilling" means a method of drilling using diamond tuped drill bits to recover sollo core samples from the ground. "Disseminated" means mineral particles scattered more or less evenly within rock or zone of rocks.

"Epithermal" means ore deposited at shallow depths from ascending hot solutions.

"Float" means rocks no longer in their original place.

"Geochemical sampling" means the collection and chemical analysis of geological samples for metals and trace elements
"Geophysical surveys" means surveys using instruments to detect and measure naturally occurring and mouc electrical and electromagnetic properties of the earth.

"GIS" (Geoghraphic/Geokogo information System) means a system for defining, storing, manipulating and presenting spatially
related information such as geological, geophysical, geochemical and topographic data

*Gossan* means the autoroping femighous deposits derived from the oxidation of underlying suibhide minerals.
*Gravity (survey/data)* means measurements of the eartit's field of gravity. Which vaniss depending on the underl

"Island arc" means a chain of volcaritic slands associated with oceanic tectonic plate marginal

means kilometres "Magnetic (survey/data)" means measurement of the earth's natural magnetic field, which varies depending on the underlying

"Magnetile" means one of the oxide minerals of iton.

"Massive sulphide" means mineral deposits containing a high proportion of sulphide minerals.
"Net smelter return" means the payment made by a smelter to a mine for the contained metal in concentrate after deduction
of all

of all smelling and refining costs, penalties, deductions and freight.

"Porphyry deposits" refer to a type of mineral deposit (usually copper, molybdenum and gold) associated with intrusive

"Per means parts per million,

"Stratigraphic" refers to identifiable geological strata.
"Stratovolcano" means a stratified volcanic cone of large protorions.
"Stream sediment sample" means a sample of the sit and sand dollected from a stream bed for ge "Supergene deposit" means a mineral deposit formed by descending surficial solutions.
"Tectoric plate" means a distinct conesive block of the earth's crust.
"Tenements" means mineral exploration and mining rides granted by