annual report

Corporate Strategy

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:

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 terrane 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.
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 smelting.

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 Resources N.L. A.B.N. 49 079 471 980

Directors

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

Registered Office

Level 2 183 North Quay GPO Box 1239 Brisbane 4001 Australia

Contacts.

Telephone: 4-61 7 3221-5950 $\div 61$ 7 3220-0282 Facsimile: +61 7 3221-9338 :E-mail: [email protected] Website: www.lakeresources.com.au

Bankers

Commonwealth Bank of Australia 240 Queen Street Brisbane 4000. Australia

Share Registry

ASX Perpetual Registrars Limited Level 22, 300 Queen Street Brisbane 4000, Australia.

Auditors

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

Australian Stock Exchange Listing

ASX Code: LKE

Chairman's Report

Dear Shareholder.

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

During the year under review, a number of developments have taken place that have placed our Company on a sound footing to pursue its exploration and investment objectives.

1. Our seed capital investment in the Mincor Resources NL (Mincor) associate. Tethyan Copper Company Limited (TCC), significantly increased in value as a result of the conversion of our 1 million TCC shares into 1 million Mincor shares and the subsequent return of 296,736 TCC shares through an in-specie distribution by Mincor.
1. The value of our investment in Oroplata Limited has been enhanced. Following the exercise of its pre-emptive right to acquire 100% of the Cerro Negro Gold project in Argentina and conditional agreements between Oroplata and ASX-listed Andean. Resources Limited (formerly known Kanowna Consolidated Gold Mines Ltd), Lake received 6,334,500 shares in Andean Resources.
1. The Company increased its holding to 5.465 million shares in DiamonEx Limited, an-Australian company that is exploring for diamonds in Botswana, through the acquisition of 3.465 million DiamonEx shares in exchange for 3.465 million new shares in Lake Resources, under the terms of an offer document to the shareholders of DiamonEx. DiamonEx commenced trading on the ASX on 30^th. March 2004 following a successful IPO that raised A\$4.0 million. والمعاونين والمعا
1. On the exploration front, Lake 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 high geological prospectivity, lowcosts and attractive government policies.
1. In the Chagai region in Pakistan, Lake continued exploration on its three properties covering important copper and gold targets. Also in the same belt, mining operations at the Saindak porphyry copper-gold mine were recommissioned and TCC intensified its exploration and feasibility study programs on the Reko Dig porphyry copper gold project with encouraging results.
1. Our land position in Sweden has been reduced and the Company is seeking joint venture partners to continue exploration of the two remaining properties.

On the world scene, increased commodity prices have re-invigorated mineral exploration and investor interest in the resources sector.

With a promising new exploration play in Argentina and continuing progress in Pakistan, the Company is well-positioned to increase the value of its shareholders' investment in the short to medium term.

liwish to thank the board of directors, our management and contractors for their contribution to the operation of the company. Thanks also to you, our shareholders. for your ongoing support. We look forward to your continuing association with Lake. Resources.

Ken Foots Chairman.

Exploration Projects

Mineral exploration is an inherently risky undertaking and the probability of success depends on a number of factors including:

geological prospectivity; ۰
access to land:
access to data:

Other factors relevant to exploration investment decisions include sovereign risk, government policies, infrastructure and competitive advantages. During the year underreview, Lake has initiated a promising new exploration play in Argentina, as well as continuing exploration in Pakistan. In Sweden the Company has reduced its exploration commitments. Opportunities in other countries continue to be reviewed.

Argentina

Lake Resources has initiated regional exploration in northern Argentina, targeting porphyry copper-gold and epithermal gold-silver deposits. Argentina, with an area of more than 2 million-square kilometres, is bordered on. the west by Chile. With a string of major porphyry copper mines and gold and silver deposits. Chile is the World's largest copper producer. By comparison, Argentina remains underexplored.

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.

Rio ta Janes ne s. Mendoza Santiago Buenos Aires 45° S $\bullet$ Stanley

Lake is focusing initially on the Precordillera/Cordillera Principal region of northwestern Argentina which hosts a variety of mineralised environments including eastward extensions of Chile's El Indio and Maricunga gold belts.

Significant mineral deposits in the region include Bajo de la Alumbrera, and the new US\$450 million Veladero gold-silver. mine being developed by Barrick.

$\overline{\mathbf{2}}$

Specialist interpretation of satellite images is being undertaken to provide accurate lithostructural mapping of the region.

The study, which to date has been completed over twelve 1:100,000 scale half-degree sheet areas covering an area of more than 30 000 square kilometres has utilised. 15m resolution Landsat-Enhanced Thematic Mapper (ETM+) images. LSFitClay prediction images which have proved extremely useful in the Cordillera for location of hydrothermal alteration systems, have also been used.

More than 100 targets have been identified for follow-up exploration. Preliminary 'ground-truthing' reconnaissance of several targets including a known porphyry copper-gold system has confirmed the validity of the study

Intensive field investigations of priority targets for the 2004-2005 field season are scheduled to commence in October 2004.

Pakistan

Bordered by Iran, Afghanistan, China and India, Pakistan has a land area of about 7.79 000 sq km, about one tenth of the area of Australia, with a population of about 147 million people.

Following the assumption of power by a non-elected government 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

Chagai Project

Lake Resources is exploring for epithermal gold and porphyry coppergold deposits in the Chagai region in northwest Balochistan. 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 important mineral deposits include the Saindak copper-gold mine, and the TCC-BHP-Billiton Reko Dig 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 inthe Chagai region. Lake Resources commenced exploration in the region in 1998. 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.

Details of Lake's Chagai tenements are set out below.

tenement	Nimmer	Area (sq km)	Lake Interest Date of Grant Date of Expiry
Amalaf	$(1)/1059-69$		100%	20/03/2000	19/03/2006
Dasht-i-Gauran (4)/1048-58		59	100%	20/03/2000 19/03/2006
Koh-i-Sultan	$(3)/1037 - 47$		100%	$-20/03/2000$	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. Drill-testing of this target is planned.

To the east of Saindak, near the northwestern margin

of the TCC-BHPB Reko Dio 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 majoralteration 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 goldvalues 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 a/t.

Northwest of the caldera, geological reconnaissance has identified argillic alteration zones with acid leached and silicified felsic dykes, quartzbarite, 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.

With an area of 450 000 sq km (see Map 1) Sweden has a recorded mining history spanning more than 1000 years and is a significant producer of iron ore, base. metals and gold.

Since late 1999, Lake Resources has been exploring for Broken-Hill-type (BHT) silver-lead-zinc and tron-oxide-hosted copper-gold (IOCG) deposits in the Norrbotten District in northern Sweden and in the Bergslagen District in southern Sweden.

Norrbotten Project

Major mines in the Norrbotten region include the world-class Kiruna iron ore mine, the Laisvall lead-zinc mine and the Aitik copper-gold mine. During 2001-2002. Lake explored a number of areas under an alliance with BHP Billiton Limited (BHPB). However exploration proved unfruitful and by late 2002, most of the tenements were relinquished.

In the latter part of 2002. Lake's focus switched to exploration for Broken Hill-Type (BHT) silver-lead-zinc deposits in the Moskosel area where mineralised rocks have been identified in outcrop and in previous exploration drillholes.

Under a joint venture agreement with BHPB, available airborne geophysical and other data were reprocessed and interpreted, and field reconnaissance and geochemical sampling were completed in late 2002. Following 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 Venture in July 2003.

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

Tenement Mumber Area (sq km) Lake Interest Date of Grant Date of Expiry
Moskosel Nr 1 $\,$ nr 71/2002		ำ00% ∶	$-31/07/2002 - 30/07/2005$

Bergslagen Project

With more temperate climatic conditions than northern Sweden, the Bergslagen 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-lead-zinc mines at Zinkgruvan and Garpenberg.

In the period late 2000 to early 2003. Lake explored a number of areas for Zinkgruvantype silver-lead zinc and IOCG copper-gold deposits. Interpretation of available airborne geophysical data together with geochernical sampling and geological mapping failed to locate drill targets and the tenements, with the exception of Simas Nr 2, were relinquished.

Geological reconnaissance and sampling of the Simas Nr 2 tenement has located indications of copper-gold associated with magnetite-pyrrhotite in alteration zones peripheral to historic iron mines. Lake Resources is seeking a Joint Venture partner to continue exploration of the area.

Details of the Simas Nr 2 tenement are set out below.

Tenement Number Area (sq km) Lake Interest Date of Grant Date of Expiry Simas Nr 2 compared $x = 8.5$ 100% 28/03/2002 27/03/2005

Investments Mincor Resources NL and Tethyan Copper. Company Limited

In early 2001, Lake Resources acquired an interest of 1 million fully paid ordinary shares at A\$0.10 per share with 2 million options exercisable at A\$0.15 per share in the Mincor Resources NL (Mincor) associate, Tethyan Copper Company Limited (TCC). In September 2003, pursuant to a Put and Call Option Agreement with Mincor, Lake Resources exchanged its interest in TCC for 1 million fully paid ordinary shares in. Mincor.

In October 2003, Lake received 296,736 fully paid shares in TCC as a result of an 'in specie' distribution by Mincor of its shares in TCC. Subsequently TCC raised A\$15 million at \$0.30/share in a heavily oversubscribed IPO and the TCC shares were listed. on the ASX on 30th October 2003.

Mincor Resources NL is a profitable Kambalda Nickel Mining Company listed on the Australian Stock Exchange. Mincor's core assets are its mines and tenement holdings in the Kambalda Nickel District, where it has been in production since 2001 from the Miltel and Wannaway Nickel Mines. Mincor's current production rate is approximately 10,000 tonnes of nickel metal in concentrate per annum. In addition the Company has two new operations under development, with a combined additional production capacity of nearly 7,000 tonnes per annum of nickel in concentrate. The last sale of Mincor shares on 2^rd July 2004 was at A\$0.73.

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

Tethyan Copper Company Ltd (TCC), is a specialist, Asianfocused copper company that was formed by Perth-based-Mincor Resources NL to house its alliance with BHP Billiton Limited to develop copper resources at the Reko Dig Copper Project in the Chagai District in Pakistan. Lake Resources is. also exploring for copper and gold in this region.

The Reko Dig Project comprises a giant porphyry copper and gold complex with over 4.8 million tonnes of contained copper metal and 9 million ounces of contained gold already delineated in JORC standard Inferred and Indicated Resources. The complex is centred on an older central porphyry surrounded by more than 14 younger mineralised porphyries. A supergene copper deposit (H4 Project) is developed over the central porphyry.

During 2001, a scoping study ( $\pm 30\%$ 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, providing relief from various taxes, exemptions from foreign exchange control regulations and customs duties and fixing the fiscal regime for the life of the project.

In December 2003, TCC announced the commencement of a major program at the Reko Diq Project, to expand existing resources through further drilling programs, to carry out regional exploration targeting giant Escondida-style supergene copper deposits and to progress feasibility studies on the advanced H4 Starter Project.

Glossary of Terms

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

"Alluvial" means of a placer, or its associated valuable mineral, formed 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.

"Anomaly/anomalous" means abnormal; in geological data may indicate a target for investigation, "Argillic alteration" means a type of alteration of rocks and minerals to clay minerals.

"Basal till sampling" means collection by drilling of the basal section of till just above bedrock - used to more precisely locate

the bedrock source of displaced surface till geochemical anomalies. "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 vent.

"Chalcopyrite" means one of the sulphide minerals of copper.

"Diamond drilling" means a method of drilling using diamond tipped drill bits to recover solid core samples from the ground. "Disseminated" means mineral particles scattered more or less everily within rock or zone of rocks. "Epithermal" means ore deposited at shallow depths from ascending not 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 induced magnetic, electrical and electromagnetic properties of the earth.

"GIS" (Geoghraphic/Geologic 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 outcropping ferruginous deposits derived from the oxidation of underlying sulphide minerals.

"Gravity (survey/data)" means measurements of the earth's field of gravity, which varies depending on the underlying rocks. "g/t" means grams per tonne, a measurement commonly used for precious metal ores.

"Island arc" means a chain of volcanic islands associated with oceanic tectonic plate margins. "km" means kilometres.

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

"Magnetite" means one of the oxide minerals of iron.

"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 smelting and refining costs, penalties, deductions and freight.

"Porphyry deposits" refer to a type of mineral deposit (usually copper, molyboenum and gold) associated with intrusive igneous rocks where the valuable minerals are present in disseminated form. "ppm" means parts per million, a measurement of concentration.

"Precious metals" means gold, sliver or any of the platinum group of metals.

"Quaternary age" means a geologic period of time from 1.8 million years ago to present.

"Satellite images" means digital images of the earth's surface complied from spectral data collected by sensors carried in special-purpose satellites, readily available for all parts of the world from various commercial and government sources.

"Sheeted dykes" means groups of thin (relative to length) tabular igneous intrusives.

"Sovereign risk" means the potential risk that could arise due to a change in government or government policy. "Sq km" means a measurement of area in square kilometres.

"Stockwork" means a network of veins.

"Stratigraphic" refers to identifiable geological strata.

"Stratovolcano" means a stratified volcanic cone of large proportions.

"Stream sediment sample" means a sample of the sit and sand collected from a stream bed for geochemical analysis. "Supergene deposit" means a mineral deposit formed by descending surficial solutions.

"Tectonic plate" means a distinct cohesive block of the earth's crust.

"Tenements" means mineral exploration and mining titles granted by government agencies. "Terrane" means a complex group of strata accumulated within a definite geologic epoch.

"Till" means non-sorted, non-stratified material deposited by a glacier.