LYCOPODIUM LIMITED — Annual Report 2007

Oct 7, 2007

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Lycopodium Limited 2007

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Level 5, 1 Adelaide Terrace East Perth, Western Australia 6004 PO Box 6832, East Perth Western Australia 6892 Tel +618 6210 5222 Fax +618 6210 5201 www.lycopodium.com.au

8 October 2007

Dear Shareholder

SHAREHOLDER REPORT 2007

We have pleasure in enclosing your Shareholder Report for 2007.

This year, we have again chosen to report to you with the publication of two documents:

• This Shareholder Report which provides, in an easy to read format, an overview of the year’s activities, a background to the company services as well as a look at some of the projects undertaken this year. The report also provides a brief financial synopsis.

• The Annual Financial Report, presenting the full financial statements, will be available mid October. At the same time, you will receive the Notice of Annual General Meeting.

Next reporting year, Lycopodium will be supporting the initiatives put forward by the Australian Federal Government as part of proposed amendments to the current annual reporting legislation. This legislation is in response to the growing use of electronic communication channels by security holders as well as the enormous environmental and financial cost of producing and distributing hard copy annual reports. We will be writing later in the year to explain what these changes will mean to you.

We also take this opportunity to announce that in September Lycopodium won an Excellence Award for its engineering work on the Ahafo project in Ghana. The Excellence Awards, organised by Engineers Australia WA, seek to encourage and celebrate engineering excellence. Lycopodium’s win was in the International Projects & Exports category which recognises a project where Australian engineering expertise is extensively applied through project management, consulting services or implementation of projects. We extend congratulations to all of the project team who worked tirelessly to achieve the project objectives.

While we try to keep you informed of the Company’s activities throughout the year, you can visit us through our website at www.lycopodium.com.au or call us if there is anything about the Company and its activities you would like to discuss.

Yours sincerely

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MICK CARATTI CHAIRMAN

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Contents

Chairman’s Report	1
The Board of Directors	2
Managing Director’s Report	4
Lycopodium Profle Project Reviews	6 10
Financial Information	17
Shareholder Information	19
Corporate Directory	21

3 • Lycopodium Limited 2007

Lycopodium Limited

My name is Mick Caratti. I’m one of the founders and presently Chairman of Lycopodium Limited.

This publication is designed to introduce you to the Company telling you who we are, what we do, and how we see our future.

The 2006/2007 financial year is described in some detail by the Managing Director, Laurie Marshall, who also describes a few of the projects we are currently involved with. Financial information, again for the 2006/2007 financial year, is also provided with general shareholder information.

This report does not replace the statutory financial statements but is designed to provide an informative insight into Lycopodium Limited in an easier to read layout.

My role as Chairman is to take a more overall or global view of the engineering industry and Lycopodium’s place in it. The Company operates with a Board of Directors where each Director has equal representation; however as Executive Directors each Board member has a specific working role within the organisation. While still described as an Executive Director, I am less involved in the day to day activities of the Company taking a more strategic overall view.

We are currently in the fourth year of a period of very strong metal prices which contribute to the increasing work enjoyed by Lycopodium in the resource industry and Lycopodium’s continuing success. The previous period of strong metal pricing that began in the 1960s and lasted to the 1980s was driven by the industrialisation in Japan, and to a degree, South Korea and Taiwan that collectively represented 3% of world population.

Chairman’s Report

The current period is being fuelled by India and China, collectively representing over 30% of world population with much of that population yet to see the benefits of industrialisation. This implies a much longer period of high demand than in the 1970s. In addition, the low global expenditure on mineral exploration and mine development over the past 20 years has meant that the shortfall in supply will not be made up quickly. In our opinion the major mining companies also view demand as long term and so continue to look to develop large world class projects. This inevitably leads to exploration in less developed countries such as those in Africa.

The Lycopodium Board’s view of the future included this possibility and, as part of its strategy of geographic diversification, targeted projects in the African countries of Ghana and Tanzania. This has served Lycopodium well and it is now recognised as one of the key resource engineering companies operating in these countries, with the experience to operate in other African countries as they open up to mineral development.

One of Lycopodium’s key philosophies is to maximise return with minimum risk both financial and in reputation. It is with this underlying philosophy that Lycopodium continues its strategy of growing organically in core engineering areas while looking for opportunities to diversify regionally and in market sector.

Thank you for your interest in Lycopodium and if you have any questions about us feel free to call me.

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M J Caratti Chairman

Lycopodium Limited 2007 • 1

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➊ ➋
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The Board of Directors

The Board of Lycopodium Limited is responsible for Lycopodium’s strategic development and its corporate governance.

➊ Michael (Mick) John Caratti Chairman

BE (Elec) (Hons) - Age 57

Mick’s primary role as Chairman of Lycopodium is to take a global view of the engineering industry and Lycopodium’s place in it whilst sustaining the Company’s founding philosophy and strategies.

He also continues to be involved at a project level, firstly, at the feasibility study phase where conceptual evaluation is critical, and secondly, acting as project sponsor on larger projects where close team and client liaison is vital.

Mick has over 30 years’ experience in the mineral processing industry and, since 1982, has had extensive experience in company management.

➋ Lawrence (Laurie)William Marshall Managing Director CPA, B.Bus(Acc) - Age 54

As Managing Director of Lycopodium Limited, Laurie’s responsibility is the financial performance, risk management strategy and corporate governance for the Company. He brings to the role over 33 years’ experience in management, accounting and taxation in both the private and public sectors.

Over the years, he has been directly involved with the operational management and corporate planning as well as the legal and accounting / taxation functions of subsidiaries Lycopodium Engineering, OMC and Pdf.

➌ Robert (Bob) Joseph Osmetti Executive Director

BE(Civil), MIEAust, CPEng - Age 51

Currently Manager of Projects with Lycopodium Engineering, Bob has responsibility for delivering and maintaining the quality of project implementation services for the Company.

With almost 30 years of experience in the management and construction of projects, he brings not only direct experience in all aspects of project implementation, estimating, scheduling and construction management but also the management of a number of feasibility studies for major resource projects.

He is also a non executive director of Pdf.

➍ Rodney (Rod) Lloyd Leonard Executive Director

BSc(Hons), MSc, MAusIMM - Age 46

As Managing Director of Lycopodium Engineering, Rod, with a BSc and MSc in metallurgical engineering and 20+ years in the mineral processing industry in Australia and overseas, has diverse experience in the development, evaluation and operation of projects.

This experience has been predominantly in the areas of process development, feasibility studies, design and commissioning and positions held have included that of senior technical consultant, project sponsor and project manager.

2 • Lycopodium Limited 2007

Lycopodium Limited

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The Board reviews
corporate strategy
and financial targets in
➎ ➏
terms of Lycopodium’s
performance and
potential, and
shareholder expectations.
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He is one of the founding directors of Lycopodium, has completed roles of Manager of Process and General Manager Operations and is currently a non executive director of OMC and Lycopodium Engineering Queensland.

➎ Bruno Ruggiero

Executive Director

BE(Mech), Grad Dip Min Sc, MIEAust, MAusIMM - Age 43

As senior consultant to Lycopodium Engineering, Bruno is responsible for the management of engineering design teams and the past year has seen him continue with the Rio Tinto Hope Downs iron ore project.

His expertise lies in mechanical and process design and, with over 20 years’ engineering experience in the international mineral processing industry, he has completed roles for Lycopodium Engineering as diverse as Manager of Engineering and Project Manager.

➏ Peter De Leo

Executive Director

BE (Civil), CPEng, MIEAust - Age 41

Peter who became an executive director of Lycopodium Limited in February 2007, holds the position of General Manager Operations for Lycopodium Engineering, with responsibility for daily operations. He is also an executive director of Lycopodium Engineering.

He has 20 years’ experience in project delivery within the construction and engineering industries and has been responsible for the successful implementation of many of Lycopodium Engineering’s largest and pioneering projects. During the year he completed the role of Project Director responsible for the delivery of the Ahafo Project, Lycopodium Engineering’s largest project to date.

➐ Keith John Bakker

Company Secretary

B.Bus(Acc), FCPA - Age 54

Keith brings to his role of Company Secretary and Chief Financial Officer 30 years of experience in company secretarial and finance roles within the airline, human resource management and mining services sectors.

He has been with Lycopodium for over 10 years and in that time has carried out the roles of Commercial Manager and General Manager Finance with Lycopodium Engineering.

He is also a non executive director of OMC, Pdf and SUPL.

Lycopodium Limited 2007 • 3

Managing Director’s Report

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I am pleased to advise that 2006/07 was another successful year for Lycopodium. Although we believe that this is a result of the strategies adopted, we do acknowledge that the continuing resources boom is a significant contributor.

Full Year Results

During the past financial year ended 30 June 2007 Lycopodium continued to grow strongly and has established itself as a leading internationally recognised supplier of engineering services.

Revenue increased from $84 million in the previous financial year to $105 million, a 25% increase, with net profit after tax increasing from $7.6 million in the previous financial year to $8.9 million, a 17% increase. Personnel numbers grew from approximately 450 at 30 June 2006 to approximately 530 at 30 June 2007, an 18% increase.

Basic earnings per share increased from 20.2 cents to 23.6 cents and in accordance with the company’s dividend policy the directors have resolved to pay a final dividend of 12.5 cents fully franked. The total dividend paid for the year is 17.5 cents fully franked.

To stabilise earnings and minimise the effect of any industry cycles, especially in the minerals sector, while still enjoying growth we continue a general strategy of diversification in market sectors, geographic locations and clients.

Below I have set out some of the highlights for the year reflecting Lycopodium’s strategies. As you are aware, our operations are carried out through three subsidiaries Lycopodium Engineering Pty Ltd (LEPL), Process Design and Fabrication Pty Ltd (Pdf) and Orway Mineral Consultants (WA) Pty Ltd (OMC) and our associated 40% owned company Sherwood Utilities Pty Ltd (SUPL). LEPL provides services to the minerals processing industry. Pdf provides services to a wide range of manufacturing industries including chemical, pharmaceutical, food and automotive. OMC also services the minerals processing industry providing specialist expertise in process modelling with particular focus on crushing and grinding processes. SUPL is a specialist service provider of maintenance planning services.

Corporate Developments

In February 2007 we expanded

Lycopodium’s Board of Directors with the appointment of Peter De Leo. Peter joined LEPL as a Project Manager in 1994 and managed a number of significant projects culminating in appointment as the Project Director responsible for the delivery of the Ahafo Gold Project in Ghana West Africa, the company’s largest project to date. We are of the opinion that Peter’s appointment will enhance the present Board’s ability to respond to future opportunities.

Bernie Siddall, OMC’s founder and Managing Director, retired in June 2007. Bernie established OMC in 1983 and developed it into an internationally recognised expert in the field of comminution. OMC is committed to expanding the services it provides into dynamic modelling of comminution circuits and acquired the Syscad Dynamic Transfer software package. Dynamic modelling will enhance variability analysis capabilities and facilitate the generation of full circuit models for optimising process control design and factory acceptance testing.

To expand our mineral processing target market in Queensland we have committed to open an office in Brisbane. The office is scheduled to be up and running in the first half of the 2007/08 financial year.

In line with our policy of diversification in market sectors, Lycopodium acquired a 40% interest in SUPL, a company providing maintenance planning services to the minerals, oil and gas and coal sectors. While not a major investment, this is seen as a useful additional service to be provided to minerals clients as well as being an entry into sectors that Lycopodium has previously not serviced. Since acquisition, SUPL has experienced growth in revenue and staff and has consolidated its recognised capability in the oil and gas sector by winning work with Chevron in addition to its historical work with Woodside. It has also expanded its target market into the eastern states where it has been successful in winning work in the coal sector with Rio Tinto. Both the oil and gas and coal sectors are not areas in which Lycopodium has previously had any significant involvement.

During the year Lycopodium completed the installation of an Oracle based IT system in LEPL. This system will now be rolled out on a group wide basis.

4 • Lycopodium Limited 2007

Lycopodium Limited

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Clients

Rio Tinto now recognises LEPL as a preferred supplier of EPCM services to its iron ore projects.

BHP Billiton has awarded increased study and project services to LEPL for its Nickel West operations. Nickel West was formed following BHP Billiton’s takeover of WMC, a long term client of LEPL.

Orica has awarded the EPCM services contract for its Hypochlorite Plant in WA to Pdf and Baxter Healthcare has awarded the detailed process design services for its New Mix Room Project in Sydney NSW to Pdf.

Outlook

We are seeing long term growth in the mineral resources industry exemplified by Rio Tinto’s stated aim to increase iron ore production in WA by 50%. Our ability to service this growth is constrained by the worldwide shortages of engineering professionals. Sourcing and attracting these people is our greatest challenge and is a major focus for our managers.

Market Sectors

Geographic Locations

Through LEPL and OMC, we expanded our exposure to the WA iron ore industry. With Stage 1 of the Rio Tinto Hope Downs Project nearing completion, LEPL has been successful in securing EPCM services for Stage 2 and has been awarded the study services for Rio Tinto at Marandoo.

Lycopodium continues to grow its presence in Africa. In Ghana LEPL is completing the 80 MW Mining Reserve Power Plant, in Tanzania LEPL has been awarded the EPCM services for Barrick Gold’s Buzwagi Gold Project and in the Democratic Republic of the Congo LEPL has been awarded the EPCM services for a major copper cobalt project.

Acknowledgement

Lycopodium could not continue to grow and prosper without the loyalty and support of its personnel. We are a service organisation and therefore our ability to deliver world class services and to grow the company is dependant on this loyalty and support. I take this opportunity to sincerely thank all personnel for their highly valued contribution.

OMC has also been awarded study services for Atlas Iron’s Pardoo Magnetite Project and the Molymines’ Spinifex Ridge Molybdenum Project, both in WA.

OMC continues to expand its international reputation, being awarded study services for the Donlin Creek Gold Project in Alaska.

Through Pdf we have developed the Barnawartha Biodiesel Project for Biodiesel Producers Ltd in Victoria. Commissioning of this project is scheduled to occur in the first half of the 2007/08 financial year. This is the largest project undertaken by Pdf.

In the Philippines LEPL has been awarded the engineering services for CGA Mining’s Masbate Gold Project.

Pdf has strengthened its relationship with BlueScope Steel with engineering, study and project services now being provided at Hastings in Victoria in addition to the services historically provided at Port Kembla in NSW.

In recognition of its established capability with respect to development of alternative fuel projects, Pdf has been awarded the design and procurement services for Agri Energy’s Swan Hill Bio-ethanol Project in Victoria.

LEPL has expanded its Manila operations in the Philippines. This office can now accommodate 50 personnel and is integral to providing the services to the Masbate Gold Project.

L W Marshall Managing Director

Lycopodium Limited 2007 • 5

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Lycopodium
Profile
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Who we are

Lycopodium Limited is an Australian based engineering consultancy business with offices nationally in Perth, Sydney, Melbourne, Brisbane and Gladstone and internationally in Ghana and the Philippines. Lycopodium services process industries including mining, pharmaceutical, chemical, food and automotive. Lycopodium’s board, executives and employees are a diverse and experienced team with a strong knowledge of the engineering industry.

What we do

Through its three subsidiaries, Lycopodium Engineering, Pdf and OMC, and its associate SUPL, Lycopodium provides a complete service to the mining and process industries from feasibility studies through design, procurement, project and construction management to commissioning.

The services provided include:

Feasibility Studies

Lycopodium undertakes feasibility studies which establish the viability of a project. The studies are done at different levels of confidence depending on the stage of investigation and on the client’s requirement and are usually defined as Scoping Studies, Prefeasibility Studies and Detailed Bankable Studies. These Studies can include plant and infrastructure design, operating and capital cost estimation and financial analysis.

Lycopodium’s scope can be limited to provision of discrete study components or can include coordination and compilation of the complete document including financial evaluation.

Comminution Circuit Design

Lycopodium has a specialist database and in-house software to design crushing and grinding circuits and to predict their performance.

Process Development

Lycopodium’s process group has a wide range of experience to undertake development of new processes and to determine the viability of new and existing processes.

Lycopodium has been involved in the development of new processes originating from clients’ proposed process routes and from processing routes generated in-house to meet a client’s requirements. Lycopodium’s evaluation of process routes is usually the first step in the feasibility study process.

Process development includes testwork design and management, testwork interpretation, flowsheet design and equipment selection.

Process Modelling

Lycopodium provides computer based dynamic and steady state modelling of process circuits for both existing operations and new projects.

6 • Lycopodium Limited 2007

Lycopodium Limited

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Design

Lycopodium provides a full range of design services including mechanical, civil, structural, piping, electrical, instrumentation and architectural disciplines for process plant, infrastructure and support services.

Project Implementation

Lycopodium undertakes the engineering design, procurement, and project management (commonly called EPCM contracts) of clients’ projects.

The scope typically includes access roads, site preparation, procurement of equipment and contractor services, site management, project and construction management, cost control, reporting and commissioning.

Maintenance Management

Lycopodium provides maintenance engineering consulting services including maintenance audits, life cycle costing reviews, criticality analysis, failure mode and effects analysis, preventative maintenance programmes, safe working procedures and spare parts assessments.

General Engineering Consulting

Lycopodium provides a range of other services including due diligence reports, project valuations and debottlenecking studies.

To illustrate the type of work Lycopodium undertakes, some of its projects are described later in this report.

How we do it

The Lycopodium business model is based on designing and managing the implementation of projects on behalf of clients.

Lycopodium draws on the following inhouse disciplines which can also be provided as discrete services if a client wishes.

Process

• Planning, design, supervision and interpretation of laboratory, bench-scale and pilot-scale test programmes.

• Design, construction, management and operation of pilot plant installations.

• Alternative process evaluations and selection at the conceptual and prefeasibility study stages.

• Management and coordination of necessary skills in the production of a feasibility study.

• Flowsheet development, mass and energy balances, process modelling, process design specification.

• Commissioning, training and operations services.

• Plant audits, debottlenecking evaluations and staged development planning.

• Specific process expertise in refractory gold and copper-gold ores and concentrates including resins, biooxidation, acid pressure oxidation, nitric acid oxidation and roasting.

• Environmental compliance processes, e.g. cyanide recovery and destruction, arsenic fixation and disposal, metal precipitation and water management.

Lycopodium Limited 2007 • 7

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Lycopodium
Profile
continued
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Engineering

• Conceptual and detailed design of treatment plants and infrastructure.

• Design expertise covering all relevant disciplines including:

• Civil

• Structural

• Mechanical

• Electrical

• Instrumentation.

• Plant refurbishment and relocation.

• Conceptual and detailed design of portable and skid-mounted plants.

• Troubleshooting and modification of mechanical and electrical installations.

• Design expertise in tropical, arid, arctic and high altitude locations.

• Plant debottlenecking, upgrading and improvements.

• Maintenance systems review.

Project

• EPCM and turnkey projects inclusive of infrastructure.

• Project management including cost control, scheduling.

• Procurement, expediting and inspection services.

• Tender preparation and evaluation.

• Plant evaluations and assessments for insurance or sales purposes.

• Capital and operating cost estimates.

• Financial evaluation of project.

• Client representation.

• Development and implementation of project accounting services.

• Development and implementation of project maintenance services.

• Logistical and transport management.

Lycopodium uses a team approach to its work where each project has a team drawn from the disciplines required and is led by a project manager. Each discipline is headed by a discipline manager who is responsible for monitoring and controlling the quality of work within the discipline and ensuring each project manager has sufficient resources to run the project team. Regular formal management meetings are held to review progress, cost and quality and ensure all projects are fully resourced, on time and on budget.

Engineering consulting is a service industry and Lycopodium is dependent on its people for the quality of service it provides. Lycopodium is proud of the professionalism and loyalty of the team it has assembled and their achievements in the innovative and cost effective design and construction of projects in diverse industries and regions.

Who we do it for

Lycopodium services a wide range of organisations headquartered throughout the world including:

• BHP Billiton

• Rio Tinto

• Barrick Gold

• Newmont

• AngloGold Ashanti

• Newcrest

• Gold Fields

• GlaxoSmithKline

• Yakult

• Toyota Motor Corporation

• Bluescope Steel

8 • Lycopodium Limited 2007

Lycopodium Limited

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Where we do it

Lycopodium, while Australian based, operates both nationally and internationally and has undertaken studies and projects in diverse locations such as China, Cote D’Ivoire, Democratic Republic of the Congo, Egypt, Finland, Ghana, Malaysia, Mali, Papua New Guinea, Philippines and Tanzania.

How well we do it

Lycopodium’s aim is to be the best in its field and believes its success is a function of the success of its clients’ projects. This belief has proven true with the company growing from 12 personnel in 1992 when Lycopodium started to over 500 in 2007.

Lycopodium has a proven track record of meeting budgets and schedules and achieving project performance criteria and the capital value of current projects, which Lycopodium provides services in respect of, range in value up to US$750 million.

Financial Highlights for the 2006/7 year are as follows:

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Shares on Issue 37,730,000
Options on Issue 110,000
Net tangible assets per Share 59.4 cents
Revenue $105 million
Net Profit after Tax $9 million
Earnings per Share after Tax 23.6 cents
Dividend per Share 17.5 cents
(fully franked)
Dividend yield on Issue
Price of A$1.00 17.5%
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Where to now

A successful company doesn’t stand still – it grows, accepting new challenges and resetting goals, which for Lycopodium reflects in larger, more complex projects and work in new areas, be they technical or geographic. In order to assist this growth Lycopodium’s strategies are as follow:

Clients

Lycopodium focuses on achieving clients’ aims as its primary objective and its success is demonstrated by the high level of client satisfaction and repeat business the company enjoys.

People

Lycopodium continues to build and retain a team of respected professionals in each of the disciplines provided. From one office of 12 staff in 1992 Lycopodium now employs in excess of 500 personnel operating out of offices nationally in Perth, Sydney, Melbourne, Gladstone, Brisbane and internationally in Ghana and the Philippines.

Profitability

Lycopodium’s objective is to maintain consistent profit margins while not exposing the Company to unacceptable risk.

Growth

Lycopodium has grown organically and by strategic acquisition, both of which have provided an expanding client base and access to new market sectors. In addition, Lycopodium floated on the Australian Stock Exchange in December 2004.

Lycopodium Limited 2007 • 9

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Commodity: Biodiesel Project: Barnawartha Biodiesel Plant Client: Biodiesel Producers Ltd Location: Victoria

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Project Reviews

The following projects have been chosen to assist in understanding the varied nature of Lycopodium’s work.

Biodiesel refers to any diesel-equivalent biofuel, usually made from vegetable oils or animal fats. The fuels are biodegradable, non-toxic and have significantly fewer emissions than mineral-based diesel fuels when burned. Biodiesel functions in current diesel engines and has the potential to reduce the world’s reliance on fossil fuels as the primary transport energy source.

Biodiesel Producers Ltd awarded Pdf a contract to construct a 50 000 tonnes (60 million litres) per annum biodiesel production facility at Barnawartha, North East Victoria. Pdf is responsible for the engineering of all site utilities and related requirements working closely with the Austrian-based process technology provider and the client in order to align and manage engineering, schedule and construction requirements of the two groups. In addition Pdf has liaised with, and provided guidance to, the technology provider to ensure the plant will comply with Australian regulations and local requirements.

The main features of the project include a technically sophisticated esterification process which has not been used outside Europe before, a technology that enables fuel to be produced from essentially waste and by-product materials such as animal fats and used cooking oils.

Concrete works commenced May 2006 and mechanical installation December 2006. Process pipework was pre-fabricated off-site to hasten construction time. Site manning levels peaked at approximately 120 in March 2007 and commissioning tests were in progress during July 2007 following essential completion of construction.

Production is expected to commence before the end of 2007.

10 • Lycopodium Limited 2007

Lycopodium Limited

Commodity: Gold Project: Buzwagi Gold Project Client: Barrick Gold Corporation Location: Tanzania, Africa

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Tanzania, independent since 1961 and situated on the east coast of Africa is now that continent’s third-largest goldproducing country. Recognising Tanzania’s potential, Lycopodium Engineering has been actively involved in mineral processing EPCM contracts there for over 10 years. In 1998 Lycopodium Engineering completed the first modern gold processing plant and infrastructure at Golden Pride for Resolute Mining, followed in 2002 by the largest gold plant in Tanzania at Geita for Ashanti Goldfields. The Bank of Tanzania recognised the significance of the mining industry by featuring this plant on the five thousand schillings note.

Barrick Gold Corporation is a leading international gold mining company, reported as having the gold mining industry’s strongest balance sheet. The pre-eminent position Barrick holds within the gold mining industry is predicated on their successful track record of mine development.

As part of the development of their project portfolio, Barrick initially awarded Lycopodium Engineering the feasibility study on the Buzwagi Gold Project, located in central Tanzania some 100 km south of Lake Victoria.

Having completed a positive feasibility study in December 2006, along with 40% of the project’s detailed engineering, Lycopodium Engineering is now undertaking the EPCM contract for the design and construction of the Buzwagi Gold Project processing plant and infrastructure. This will require development of an accommodation village for 300 workers, the treatment plant including associated workshops, stores, laboratory and plant administration, the mine service area including heavy vehicle workshop, core shed, emergency response centre and fuel storage, the water harvest area and associated water storage pond, a tailings storage facility and a 105 km long, 220 kV power line.

The construction team went to site in June 2007 with earthworks to begin in August and housing in September. By 30 June 2007 all major equipment and much of the smaller equipment had been ordered. Two 6 MW mills (SAG and ball) are at an early stage of manufacture with major castings being prepared in Germany.

The process plant will initially treat gold bearing oxide ore through a standard CIL process with gravity concentration, then primary sulphide gold and copper bearing ore with the addition of a flotation/ filtration circuit producing both gold dorè and a copper/gold concentrate.

With proven and probable reserves of 2.64 million ounces of gold and 118 million pounds of copper within the gold reserves, the Buzwagi Gold Project has an estimated mine life of 10 years. Capital costs are expected to be approximately US$400 million and construction is targeted to occur over two years.

Lycopodium Limited 2007 • 11

Commodity:	Iron
Project:	Hope Downs Project
Client:	Rio Tinto
Location:	Western Australia

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Rio Tinto, a leading international mining group, is the world’s second largest iron ore producer accounting for 20% of traded iron ore which contributes approximately 18% to the company’s turnover.

In April 2006, Rio Tinto announced the start of development of the Rio Tinto/ Hancock Prospecting Hope Downs Iron Ore Project, discovered by Lang Hancock more than 50 years ago. At a cost of US$1 billion and reported JORC reserves of 346 million tonnes of iron ore grading 61.6% iron, the Hope Downs project is considered by Rio Tinto to be one of the most significant mine developments in its 40 year iron ore history. Of the ore produced, Chinese steel mills are expected to take 70% with the rest shared between Japan, South Korea and Europe.

Stage 1 of the Project comprises an open cut mine, treatment plant and associated infrastructure, power supply and rail linkage. Lycopodium Engineering is responsible for the engineering and design of the process plant including primary crushing, secondary crushing, screening, sampling, stacking, reclaiming, train loadout, in-plant power distribution, process control and associated plant services. Lycopodium Engineering is responsible for the construction supervision and commissioning of the process plant.

By June 2007 design of Stage 1 of the Hope Downs iron ore project was complete, construction proceeding and handover scheduled for February 2008 in line with Rio’s timetable to be operational by the first quarter of 2008.

With an estimated capital cost of $320 million, Stage 2 of the project, scheduled to be operational by 2009, is planned to increase production from 22 Mtpa to 30 Mtpa and includes a second crushing facility and overland conveying system.

As a result of the success to date of Lycopodium Engineering’s involvement in Stage 1 and completion of a definitive engineering study of Stage 2, Lycopodium Engineering has been included in the awarded contract for the design and construction of Stage 2. Currently early engineering and procurement activities have begun.

While the Hope Downs Project was undertaken in conjunction with KBR, Lycopodium Engineering has since been awarded feasibility study work in its own right at Rio’s Marandoo site.

12 • Lycopodium Limited 2007

Lycopodium Limited

Commodity: Gold Project: Leviathan Project Client: Gold Fields Limited Location: Western Australia

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Project Reviews continued

The St Ives mining operation is located near Kambalda in Western Australia and is owned by Gold Fields Limited, one of the world’s largest unhedged pure gold producers. Ore is mined from both underground and open pit mines at St Ives and in 2006, 1.8 million tonnes from underground and 4.5 million tonnes from open pits produced 262 000 ounces of gold and 273 000 ounces of gold respectively.

High grade ore from the various sources is processed through the large Lefroy CIP plant with low grades being treated via a heap leach circuit. As part of its ongoing development of the site, Gold Fields undertook a project feasibility study on the cut back of the existing Leviathan open pit complex. The study included a sub-study on the benefits of installing High Pressure Grinding Rolls (HPGR) to improve gold recovery in the heap leach circuit.

In a HPGR, ore is fed between two rotating rollers pushed firmly together so that the rotating motion forces the ore through the small gap between them. Due to their energy efficiency, ability to induce micro-cracks and preferential liberation, coupled with high throughput and high reduction ratio, HPGRs are becoming accepted in the minerals industry as a real alternative to the traditional SAG Mill. SAG is an acronym for Semi-Autogenous Grinding, where a rotating drum throws large rocks and steel balls in a cataracting motion causing impact breakage of larger rocks and compressive grinding of finer particles.

OMC specialises in comminution circuit design and has managed the testwork and metallurgical studies on many projects including the use of HPGR technology. OMC has also been exploring the use of the HPGR technology for preparing ore to enhance gold recoveries in heap

leach plants which has resulted in the development of significant expertise in this new technology. At the request of Gold Fields, OMC undertook a detailed study using HPGR technology for the Leviathan Project feasibility study.

The study determined the engineering requirements needed to add a HPGR to the existing Heap Leach crushing circuit, the maximum circuit capacity and HPGR operating conditions to maximise gold recovery.

Following the success of this study, Lycopodium Engineering was commissioned by Gold Fields to undertake a detailed engineering design for the implementation of the project.

Lycopodium Limited 2007 • 13

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Mineral: Water Project: Water Treatment Plants Client: Gladstone Area Water Board (GAWB) Location: Queensland

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Project Reviews continued

The GAWB, established in 1973, was specifically formed to assist the two local authorities, Gladstone Town Council and the Calliope Shire Council, to cope with the heavy financial demands being imposed on them in the early 1970s because of the continued need to upgrade the water supply system serving the area as a result of continued industrial growth. GAWB’s purpose is to ensure the long and short term water needs of current and future customers are met in ways that are environmentally, socially and commercially sustainable.

GAWB owns and operates two water treatment plants one of which is the Yarwun Water Treatment Plant (YWTP) supplied by the Awoonga dam and constructed in 1989 to service the potable water requirements of the Orica Chemical Plant and the Calliope Shire Council. The plant’s current demand (4.6ML/day) is now exceeding the design capacity (3.6ML/ day) and it is believed that the quality of

the output water could be compromised if the plant was to experience a system failure. Demand has increased in recent years as it has taken on additional industrial customers such as Rio Tinto Aluminium – Yarwun (Comalco Aluminium Refinery) and Cement Australia.

As part of its Strategic Water Planning Project report released in November 2004, GAWB proposes to both refurbish the existing plant (Stage 1) and increase the capacity of the plant by implementing a second process stream (Stage 2).

Stage 1 of the YWTP upgrade

involves improvement of the process streams to increase the plant capacity to a maximum throughput of 5.0ML/day (70 L/s at a duty of 20 hours/day) of treated water without compromising the water quality or the reliability of the plant. The Stage 1 refurbishment construction and commissioning works are scheduled to be complete by the end of 2007.

Stage 2 of the YWTP upgrade involves introducing a second process stream to the existing infrastructure and achieving an increased overall plant peak capacity throughput of 10.0ML/ day of treated water. It is envisaged that Stage 2 of the project will be completed within 4 years and be operational by 2011.

Pdf was engaged by the GAWB to provide engineering services for Stage 1 of the project taking into consideration the requirements of Stage 2, namely chemical storage tank and dosage pump capacity. Presently for Stage 1, Pdf is to complete the design development tasks, prepare a construction estimate and deliver the detailed design. A separate contract will be developed by GAWB for the plant construction and commissioning phases of Stage 1.

14 • Lycopodium Limited 2007

Lycopodium Limited

Commodity: Electricity Project: Mining Reserve Power Plant Project Clients: The Mining Consortium (Newmont Mining Corporation, Goldfields Limited, AngloGold Ashanti and Golden Star Resources Ltd) Location: Ghana, Africa

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to provide the design, procurement and project management for all of the power interconnection with the grid and the infrastructure for the project. The plant will be initially operated on diesel fuel but is expected to switch to gas on completion of the West African Gas Pipeline Project which will deliver Nigerian gas to Benin, Togo and Ghana.

Nearly 60% of Ghana’s electricity is produced from the Akosombo hydroelectric system. Growth in demand and reduced rainfall in the Volta River catchment that feeds the Akosombo Dam has lead to insufficient generating capacity and power rationing across the country.

Newmont Mining Corporation, Goldfields Limited, AngloGold Ashanti and Golden Star Resources Ltd are owners and operators of mines in Ghana which require a guaranteed, reliable electricity supply and, to overcome the power shortages, formed the Mining Consortium to address the issue.

Based on its work on Newmont’s Ahafo Project, Lycopodium Engineering was commissioned by the Mining Consortium to undertake the Mining Reserve Power Plant Project (MRP). The MRP involves the installation of an 80 MW diesel/gas fired turbine generation facility at Tema (near Accra, the capital of Ghana) to service the Mining Consortium’s mines.

Lycopodium Engineering’s scope has been to project manage the removal, refurbishment, installation and commissioning of the used plant that was previously barge mounted in Oregon and

The Project is being funded by the Mining Consortium but will be operated by the Volta River Authority, whose primary function is to generate and supply electrical energy for industrial, commercial and domestic use in Ghana.

The MRP Project will allow the mining companies to continue to operate during the power rationing period though at a significantly higher energy cost. Commissioning has begun and completion is expected in August 2007.

Lycopodium Limited 2007 • 15

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Financial Information
16 • Lycopodium Limited 2007
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Lycopodium Limited

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Results

		Consolidated
	2007 $	2006 $
Revenue Employee and contractors expense Depreciation and amortisation expense Other project expenses Administration and management costs Other costs Proft before income tax Income tax expense	104,647,440 (77,189,600) (1,079,497) (7,048,887) (6,726,159) (344,690) 12,406,244 (3,508,581)	84,155,042 (58,949,101) (882,575) (5,165,292) (7,558,254) 1,163,281) 10,616,119 (3,022,043
Proft for the year	8,897,663	7,594,076
Dividend (Fully franked) (cents) Interim Final	5.0 12.5	5.0 10.0
Total Dividend	17.5	15.0
Shares on issue	37,730,000	37,670,000
Share price as at 30 June (A$)	3.66	2.75
Earnings per share (cents)	23.6	20.2
Price earnings ratio (cents)	15.5	14
Net tangible assets per share (cents)	59.4	53.2

Lycopodium Limited 2007 • 17

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Balance Sheet
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Consolidated

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2007 2006
$ $
ASSETS
Current assets
Cash and cash equivalents 13,405,517 13,478,543
Trade and other receivables 22,695,353 17,451,611
Other current assets 1,095,287 847,738
Total current assets 37,196,157 31,777,892
Non current assets
Property, plant and equipment 3,389,613 3,850,759
Other assets 415,965 100,001
Deferred tax assets 1,828,959 1,535,252
Intangible assets 5,908,859 5,275,081
Total non current assets 11,543,396 10,761,093
Total assets 48,739,553 42,538,985
LIABILITIES
Current liabilities
Trade and other payables 15,134,769 13,331,075
Borrowings 1,173,133 443,389
Current tax liabilities and provisions 2,147,219 1,272,427
Total current liabilities 18,455,121 15,046,891
Non current liabilities
Borrowings 1,754,925 2,027,100
Provisions 222,639 205,537
Total non current liabilities 1,977,564 2,232,637
Total liabilities 20,432,685 17,279,528
Net assets 28,306,868 25,259,457
EQUITY
Contributed equity 17,546,497 17,486,497
Reserves (288,967) (33,215)
Retained profits 11,049,338 7,806,175
Total equity 28,306,868 25,259,457
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18 • Lycopodium Limited 2007

Lycopodium Limited

The shareholder information set out below was applicable as at 7 September 2007.

A. Distribution of equity securities

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Analysis of numbers of equity security holders by size of holding: Ordinary shares
Shares Options
1 - 1000 143 -
1,001 - 5,000 397 -
5,001 - 10,000 166 7
10,001 - 100,000 145 2
100,001 - and over 28 -
879 9
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There were 5 holders of less than a marketable parcel of ordinary shares.

B. Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

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Ordinary shares
Name Number held Percentage of issued shares
Reesh Pty Ltd 9,046,221 23.98
Caddy Fox Pty Ltd 3,142,332 8.33
Luala Pty Ltd 3,142,332 8.33
Selso Pty Ltd 3,142,332 8.33
Invia Custodian Pty Limited 2,523,751 6.69
Accede Pty Ltd 2,142,332 5.68
Equity Trustees Limited 1,528,638 4.05
HSBC Custody Nominees (Australia) Limited A/C 2 683,830 1.81
HSBC Custody Nominees (Australia) Limited 656,173 1.74
Peter De Leo 622,466 1.65
ANZ Nominees Limited 478,695 1.27
RBC Dexia Investor Services Australia Nominees Pty Limited 347,058 0.92
RBC Dexia Investor Services Australia Nominees Pty Limited 334,202 0.89
Glenn Robertson 309,997 0.82
Claw Pty Ltd 300,000 0.80
National Nominees Limited 296,852 0.79
Citicorp Nominees Pty Limited 277,243 0.73
David James Taylor 247,500 0.66
Citicorp Nominees Pty Limited 240,424 0.64
UBS Nominees Pty Ltd 237,000 0.63
Total 29,699,378 78.74
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Lycopodium Limited 2007 • 19

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Shareholder Information
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Unquoted equity securities

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Number on issue Number of holders
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Options issued under the Employee Option Plan to	*110,000	9
take up ordinary shares
*Number of unissued ordinary shares under the options.
No person holds 20% or more of these securities.

C. Substantial holders

Substantial holders in the company are set out below:

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Ordinary shares Number held Percentage
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Reesh Pty Ltd	9,046,221	23.98%
Caddy Fox Pty Ltd	3,142,332	8.33%
Luala Pty Ltd	3,142,332	8.33%
Selso Pty Ltd	3,142,332	8.33%
Invia Custodian Pty Limited	2,523,751	6.69%
Accede Pty Ltd	2,142,332	5.68%

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:

(a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

(b) Options

No voting rights.

20 • Lycopodium Limited 2007

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Lycopodium Limited 2007 • 21

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www.lycopodium.com.au

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