PACIFIC RESOURCES LIMITED — Annual Report 2000

Mar 13, 2003

LODESTONE EXPLORATION PTY LTD ACN 075 877 075

SPECIAL PURPOSE FINANCIAL REPORT

for the year ended 30 June 2000

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LODESTONE EXPLORATION PTY LTD ACN 075 877 075

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DIRECTORS' REPORT

Your directors submit this report on the company for the year ended 30 June 2000.

Director

The name of the director in office during the whole of the year and up to the date of this report is:-

J McCawley

Mr G Baynton was appointed a director on 5 November 2001 and continues in office at the date of this report.

Principal Activity

The principal activity of the company during the year was mineral exploration, development and investment. There were no significant changes in the state of affairs of the company during the year and no changes are expected in the principal activity of the company in subsequent years.

Review of Operations and Results

The operating loss after income tax of the company for the year was $17,073 (1999 : loss $21,905). This loss reflects the nature of the company's principal activity.

Dividends

No dividends were paid during the year and the director recommends that no dividend be paid.

Options

The company has not at any time granted to any person an option to have issued to them shares in the company.

Likely Developments

There are no likely developments in the operations of the company which are expected to significantly affect the results of the company in subsequent years.

Events Subsequent to the Balance Date

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to effect significantly the operations of the company, results of those operations, or the state of affairs of the company, in subsequent financial years.

On behalf of the Board

سے سے ر Director

$\angle 6$ December, 2001 Brisbane,

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF LODESTONE EXPLORATION PTY I TD

Scope

We have audited the financial report, being a special purpose financial report, of Lodestone Exploration Pty Ltd ('the company') for the year ended 30 June 2000 as set out on pages 3 to 9. The company's directors are responsible for the financial report and have determined that the accounting policies used and described in Note 1 to the financial statements, including the basis of accounting, which forms part of the financial report, are appropriate to meet the requirements of the Corporations Law and the needs of the members. We have conducted an independent audit of the financial report in order to express an opinion on them to the members of the company. No opinion is expressed as to whether the accounting policies used, and described in Note 1, are appropriate to the needs of the members.

The financial report has been prepared for distribution to members for the purpose of fulfilling the directors' financial reporting requirements of the company's constitution. We disclaim any assumption of responsibility for any reliance on this audit report or on the financial report to which it relates to any person other than the members, or for any purpose other than that for which it was prepared.

Our audit has been conducted in accordance with Australian Auditing Standards. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is prepared in accordance with the Corporations Law in Australia and presented fairly in accordance with the accounting policies described in Note 1 to the financial statements, so as to present a view which is consistent with our understanding of the company's financial position, and performance as represented by the results of its operations and cash flows. These policies do not require the application of all Accounting Standards and other mandatory professional reporting requirements in Australia.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

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In our opinion, the financial report of the Lodestone Exploration Pty Ltd is properly drawn up:

• so as to give a true and fair view, in accordance with the accounting policies described in Note 1 to the $(a)$ financial statements, of the company's financial position as at 30 June 2000 and of its performance for the year ended on that date:
• in accordance with the provisions of the Corporations Law; and $(b)$
• in accordance with Accounting Standards, the Corporations Regulations and other mandatory $(c)$ professional reporting requirements. As the company has applied AASB 1025 - Application of the Reporting Entity Concept and Other Amendments, other Accounting Standards and mandatory professional reporting requirements have only been applied to the extent described in Note 1 to the financial statements.

DOUGLAS HECK & BURRELL Chartered Accountants

R C Brown Partner Brisbane.

December, 2001

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DIRECTORS' DECLARATION

As stated in Note 1 to the financial statements, the Company is not a reporting entity because, in the directors' opinion, it is unlikely that users exist who are unable to command the preparation of reports tailored so as to satisfy, specifically, all of their information needs. This is a special purpose financial report that has been prepared for distribution to members in accordance with the company's constitution.

The Company has applied Accounting Standard AASB 1025 : Application of the Reporting Entity Concept and Other Amendments, which amends the application clauses of all pre-existing standards so that they now apply only to companies that qualify as reporting entities. However, the financial report has been prepared in accordance with other Accounting Standards and mandatory professional reporting requirements with the exceptions identified in Note 1.

The directors declare that the financial statements and notes set out on pages 4 to 9:

• comply with Accounting Standards, as detailed above, and the Corporations Regulations; and $(a)$
• give a true and fair view of the Company's financial position as at 30 June 2000 and of its $(b)$ performance, as represented by the results of its operations and cash flows, for the year ended on that date.

In the opinion of the directors:

• the financial statements and notes set out on pages 4 to 9 are in accordance with the $(a)$ Corporations Law; and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and $(b)$ when they become due and payable.

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

ےسے ریر۔

Director

/6 December, 2001 Brisbane.

PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED 30 JUNE 2000

	Notes	2000$	1999
Operating profit/(loss) before income tax	2	(17, 073)	(21,905)
Income tax attributable to operating profit/(loss)	3
Operating profit/(loss) after income tax		(17,073)	(21, 905)
Accumulated losses at the beginning of the financial year		(48,422)	(26, 517)
Accumulated losses at the end of the financial year		(65,495)	(48,422)

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The above profit and loss statement should be read in conjunction with the accompanying notes.

BALANCE SHEET AS AT 30 JUNE 2000

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	Notes	2000$	1999$
CURRENT ASSETSCash		332	1,560
TOTAL CURRENT ASSETS		332	1,560
NON-CURRENT ASSETSPlant and equipmentExploration expenditure	45	10,26865,000	13,24940,000
TOTAL NON-CURRENT ASSETS		75,268	53,249
TOTAL ASSETS		75,600	54,809
NON-CURRENT LIABILITIESBorrowings	6	20,895	12,031
TOTAL LIABILITIES		20,895	12,031
NET ASSETS		54,705========	42,778======
SHAREHOLDERS' EQUITYShare capitalAccumulated losses	7	120,200(65, 495)	91,200(48, 422)
TOTAL SHAREHOLDERS' EQUITY		54,705$\equiv$ $\equiv$ $\equiv$ $\equiv$ $\equiv$ $\equiv$	42,778=======

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The above balance sheet should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2000

Notes	2000$	1999S
		Inflow/(Outflow)
	(5,228)	(15,026)
9(a)	(5, 228)	(15,026)
	4,000	10,000
	4,000	10,000
	(1,228)1,560	(5,026)6,586
	332	1,560

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The above statement of cash flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES $1.$

Basis of accounting

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The Company is not a reporting entity because, in the directors' opinion, it is unlikely that users exist who are unable to command the preparation of reports tailored so as to satisfy, specifically, all of their information needs. This is a special purpose financial report that has been prepared for distribution to members in accordance with the company's constitution and must not be used for any other purpose. The director has determined that the accounting policies adopted are appropriate to meet the needs of the members.

The Company has applied Accounting Standards AASB - 1034 Information to be disclosed in Financial Reports and AASB 1025 - Application of the Reporting Entity Concept and Other Amendments.

The financial report has been prepared in accordance with Accounting Standards, other mandatory reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Law with the exception of the disclosure requirements of the following:

AASB 1005	Financial Reporting by Segments
AASB 1017	Related Party Disclosures
AASB 1020	Accounting for Income Tax (Tax effect accounting)
AASB 1033	Presentation and Disclosure of Financial Instruments

The financial report is prepared in accordance with the historical cost convention. The accounting policies adopted are consistent with those of the previous year. Comparative information is reclassified where appropriate to enhance comparability.

Significant accounting policies that have been involved in the preparation and presentation of the financial statements are as follows:

$(a)$ Income Tax

The Company adopts the income "Tax Payable" method of accounting for income tax whereby the income tax expense for the year equals the provision for income tax for the year. The income tax expense in the profit and loss account is determined by adjusting operating profit for timing and permanent differences and applying the corporate tax rate.

$(b)$ Exploration Expenditure

Exploration expenditure is carried forward as an asset provided that one of the following conditions is met:

• such costs are expected to be recouped through successful development and i. exploitation of the area of interest, or alternatively, by its sale; or
• exploration activities in the area of interest have not yet reached a stage which ii. permite a reasonable assessment of the existence or otherwise of recoverable resources, and exploration of the area is continuing.

LODESTONE EXPLORATION PTY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2000

		20005	1999$
2.	OPERATING LOSS
	Operating loss has been arrived at after including:Depreciation	2,981	3,848
3.	INCOME TAX
	The prima facie tax payable on operating loss is reconciledto the income tax expense in the profit and loss account as follows:
	Prima facie tax payable (benefit) at 36%	(6, 146)	(7,886)
	Add tax effect of non-deductible expenditureLess future income tax benefit for tax losses not recognised	6,146	1577,729
4.	PLANT AND EQUIPMENT
	Motor vehicles - costAccumulated depreciation	22,060(11, 792)	22,060(8, 811)
		10,268	13,249
5.	EXPLORATION EXPENDITURE
	Exploration expenditure - cost	65,000	40,000
6.	BORROWINGS
	Loan payable to director - unsecured	20,895	12,031
7.	SHARE CAPITAL
	Issued and paid up12,020,000 ordinary shares (1999: 9,120,000)	120,200	91,200
	1 July 1998 5,420,000 ordinary shares	91,200	54,200
	3,700,000 refer Note 9(b)19992,900,000 refer Note 9(b)2000	29,000	37,000
		120,200	91,200

LODESTONE EXPLORATION PTY LTD NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2000

		2000S	1999S
8.	REMUNERATION OF AUDITORS
	Audit of the financial report	500	500
9.	NOTES TO THE STATEMENT OF CASH FLOWS
(a)	Reconciliation of operating profit/(loss) after incometax to net cash used by operating activities
	Operating profit/(loss) after income taxDepreciationIncrease/(decrease) in borrowings	(17, 073)2,9818,864	(21, 905)3,8483,031
	Net cash used by operating activities	(5.228	(15,026)

$(b)$ Non cash financing and investing activities

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2,900,000 (1999: 3,700,000) ordinary shares were issued during the year in consideration for the purchase ofexploration knowledge and payment for professional services. (1999 : exploration knowledge, professional services and partial payment of loan payable to director).

LODESTONE EXPLORATION LIMITED (FORMERLY LODESTONE EXPLORATION PTY LTD) ACN 075 877 075

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GENERAL PURPOSE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2001

LODESTONE EXPLORATION LIMITED ACN 075 877 075

DIRECTORS' REPORT

Your directors present this report on the company for the year ended 30 June 2001.

Directors

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The name of the director in office during the whole of the year and up to the date of this report is:-

J McCawley

Mr G Baynton was appointed a director on 5 November 2001 and continues in office at the date of this report.

Principal activity

The principal activity of the company during the year was mineral exploration, development and investment. There were no significant changes in the state of affairs of the company during the year and no changes are expected in the principal activity of the company in subsequent years.

Review of operations and results

The operating loss after income tax of the company for the year was $11,729 (2000: loss $11,392). This loss reflects the nature of the company's principal activity.

Dividends

No dividends were paid during the year and the directors recommend that no final dividend be paid.

Options

No options to shares in the company have been granted during the financial year and there were no options outstanding at the end of the financial year.

Likely developments

There are no likely developments in the operations of the company which are expected to significantly affect the results of the company in subsequent years.

Environmental regulation

The company is not subject to any significant environmental regulation in respect of its operations.

LODESTONE EXPLORATION LIMITED ACN 075 877 075

DIRECTORS' REPORT (continued)

Events subsequent to balance date

During the interval between the end of the financial year and the date of this report Lodestone Exploration Pty Ltd converted to a public company limited by shares.

Directors' remuneration

No director has received or become entitled to receive, during or since the end of the financial year, a benefit because of a contract made by the company or a related body corporate with the director, a firm of which the director is a member or an entity in which the director has a substantial financial interest. This statement excludes a benefit included in the aggregate amount of emoluments received or due and receivable by directors shown in the company's financial report.

Insurance of officers

The company has not, during or since the financial year, in respect of any person who is or has been an officer or auditor of the company or a related body corporate;

• indemnified or made any relevant agreement for indemnifying against a liability incurred $(a)$ as an officer, including costs and expenses in successfully defending legal proceedings; or
• $(a)$ paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the cots or expenses to defend legal proceedings.

Proceedings on behalf of company

No proceedings have been brought or intervened on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001.

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

Director

June 2002 Brisbane,

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF LODESTONE EXPLORATION LIMITED

Scope

We have audited the financial report of Lodestone Exploration Limited ('the company') for the vear ended 30 June 2001 as set out on pages 4 to 14. The company's directors are responsible for the financial report. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether. in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and the Corporations Act 2001 in Australia so as to present a view which is consistent with our understanding of the company's financial position, and performance as represented by the results of its operations and cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion, the financial report of the Lodestone Exploration Limited is in accordance with:

• the Corporations Act 2001, including: $(a)$
  • giving a true and fair view of the company's financial position as at 30 June 2001 $(i)$ and of its performance for the financial year ended on that date; and
  • complying with Accounting Standards and the Corporations Regulations: and $(ii)$
• other mandatory professional reporting requirements. $(b)$

DOUGLAS HECK & BURRELL Chartered Accountants

R C Brown Partner

Brisbane, $\sqrt{\frac{1}{2}}$ June 2002

DIRECTORS' DECLARATION

The directors declare that the financial statements and notes set out on pages 5 to 14:

• comply with Accounting Standards, the Corporations Regulations and other mandatory $(a)$ professional reporting requirements; and
• $(b)$ give a true and fair view of the company's financial position as at 30 June 2001 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date.

In the directors' opinion:

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• the financial statements and notes are in accordance with the Corporations Act 2001; and $(a)$
• there are reasonable grounds to believe that the company will be able to pay its debts as and $(b)$ when they become due and payable.

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

Mucalay . . . . . . . . . . . . . . . Director

Brisbane. June 2002

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2001

	Notes	2001$	2000S
Revenue from ordinary activities
Administration expensesDepreciation expensesOther expenses		(7, 439)(2,310)(1,980)	(6, 246)(2,981)(2, 165)
Profit/(loss) from ordinary activities before income tax	$\overline{2}$	(11, 729)	(11, 392)
Income tax expense	3
Net profit/(loss)		(11, 729)	(11, 392)
Accumulated profits/(losses) at the beginning of the financial year		(59, 814)	(48, 422)
Accumulated profits/(losses) at the end of the financial year		(71, 543)======	(59,814)

The above Statement of Financial Performance should be read in conjunction with the accompanying notes.

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2001

	Notes	2001$	2000$
CURRENT ASSETS
Cash		36,032	332
Other assets		500
TOTAL CURRENT ASSETS		36,532	332
NON-CURRENT ASSETS
Plant and equipment	4
Exploration expenditure	5	7,95889,852	10,268
			70,681
TOTAL NON-CURRENT ASSETS		97,810	80,949
TOTAL ASSETS		134,342
		=======	81,281=======
CURRENT LIABILITIES
Payables
		500
TOTAL CURRENT LIABILITIES		500
NON-CURRENT LIABILITIESBorrowings
	6	25,991	20,895
TOTAL NON-CURRENT LIABILITIES		25,991	20,895
TOTAL LIABILITIES
		26,491	20,895
		=======	=======
NET ASSETS/(LIABILITIES)		107,851	60,386
		=======	$z$ zzzzzzz
EQUITY
Contributed equity	$\overline{7}$	179,394	120,200
Accumulated profits/(losses)		(71, 543)	(59, 814)
TOTAL EQUITY		107,851
		=======	60,386$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$

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The above Statement of Financial Position should be read in conjunction with the accompanying notes.

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2001

	Notes	2001	2000$
			Inflow/(Outflow)
CASH FLOW FROM OPERATING ACTIVITIES
Payments to suppliers		(4,823)	(3, 547)
Net cash inflows/(outflows) from operating activities	10(a)	(4,823)	(3, 547)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for exploration		(11, 671)	(1,681)
Net cash inflows/(outflows) from investing activities		(11, 671)	(1,681)
CASH FLOW FROM FINANCING ACTIVITIES
Loan from directorRepayments of loan to directorProceeds from share issue		500(7,500)59,194	4,000
Net cash inflows/(outflows) from financing activities		52,194	4,000
Increase/(decrease) in cash held		35,700	(1,228)
Cash at the beginning of the financial year		332	1,560
Cash at the end of the financial year		36,032:=====	332

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

$11$ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This general purpose financial report has been drawn up in accordance with Accounting Standards, the Corporations Act 2001 and other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Consensus Views.

$(a)$ Basis of Preparation of Financial Report

The financial statements have been prepared in accordance with the historical cost convention, except for certain assets, which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. Comparative information is reclassified where appropriate, to ensure comparability with the current reporting period.

$(b)$ Income Tax

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Income tax has been brought to account using the liability method of tax effect accounting whereby income tax expense for the period is calculated on the operating profit after adjusting for items which, as a result of their treatment under income tax legislation, create permanent differences between that profit and the taxable income. Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating profit before income tax and taxable income are brought to account as either provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

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

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

$(c)$ Exploration Expenditure

Exploration expenditure is carried forward as an asset provided that one of the following conditions is met:

• such costs are expected to be recouped through successful development and i. exploitation of the area of interest, or alternatively, by its sale; or
• exploration activities in the area of interest have not yet reached a stage which ii. permits a reasonable assessment of the existence or otherwise of recoverable resources, and exploration of the area is continuing.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

		2001S	2000S
2.	PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
	Profit/(loss) on ordinary activities before income taxexpense includes the following specific expenses:
	Depreciation	2,310	2,981
3.	INCOME TAX
	The prima facie tax expense on pre-tax accountingincome reconciles to the income tax expense providedin the financial statements as follows:
	Profit/(loss) from ordinary activities before income tax	(11, 729)	(11.392)
	Prima facie tax expense/(benefit) on profit/(loss)from ordinary activities before income tax calculatedat 34% (2000: 36%)	(3,988)	(4, 101)
	Less future income tax benefit not brought to account	3,988	4,101

The directors estimate that the potential net future income tax benefit at 30 June 2001 amounts to $22,578 (2000: $21,601).

The future income tax benefit, which has not been recognised as an asset will only be obtained if:

(i) the company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised:

(ii) the company continues to comply with the conditions for deductibility imposed by the law; and

(iii) no changes in tax legislation adversely affect the company in realising the benefit.

$4.$ PLANT AND EQUIPMENT

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	7,958	10,268-------
Motor vehicles - cost	22,060	22,060
Accumulated depreciation	(14, 102)	(11,792)

LODESTONE EXPLORATION LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

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		2001S	2000$
4.	PLANT AND EQUIPMENT (continued)
	Reconciliations of the carrying amounts of motor vehicle atthe beginning and end of the current and previous financialyear are set out below:
	Carrying amount at beginning of financial year	10,268	13,249
	AdditionsDepreciation expense	(2,310)	(2,981)
	Carrying amount at the end of the financial year	7,958======	10,268======
5.	EXPLORATION EXPENDITURE
	Geological and exploration database expenditure	89,852$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$	70,681=======
6.	BORROWINGS
	Loan payable to director - unsecured	25,991=======	20,895
7.	CONTRIBUTED EQUITY
	Authorised Capital:1,000,000,000 (2000: 1,000,000,000) ordinary shares	10,000,000$=$ =======	10,000,000=========
	Issued and Paid Up Capital:13,505,000 (2000: 12,020,000) ordinary shares	179,394=======	120,200$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$

LODESTONE EXPLORATION LIMITED NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2001

$71$ CONTRIBUTED EQUITY (continued)

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Movements in ordinary share capital:

Date	Details	Number ofShares	IssuePrice
1 July 199915 December 199910 April 2000	Opening balanceShare issueShare issue	9,120,0001,400,0001,500,000	$0.01$0.01	$91,20014,00015,000
30 June 20005 February 2001	BalanceShare issue	12,020,0001,485,000	$0.04	120,20059,194
30 June 2001	Balance	13,505,000		179,394

8.	REMUNERATION OF AUDITORS	2001	2000
	Audit of the financial report	500	500

9. REMUNERATION OF DIRECTORS

The directors received no remuneration from the company.

RECONCILIATION OF PROFIT/(LOSS) FROM ORDINARY $10.$ ACTIVITIES AFTER INCOME TAX TO NET CASH FLOW FROM OPERATING ACTIVITIES

(a)	Net profit/(loss) after income taxDepreciation	(11, 729)2,310	(11, 392)2,981
	Change in operating assets and liabilities:Increase/(decrease) in borrowingsIncrease/(decrease) in other receivablesIncrease/(decrease) in accruals	4,596(500)500	4,864
	Net cash (outflow) from operating activities	(4,823)	(3,547)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

• $101$ RECONCILIATION OF PROFIT/(LOSS) FROM ORDINARY ACTIVITIES AFTER INCOME TAX TO NET CASH FLOW FROM OPERATING ACTIVITIES (continued)
• $(b)$ Non cash financing and investing activities:

2000: 2,900,000 ordinary shares were issued during the year in consideration for the purchase of exploration knowledge and payment for professional services.

11. EVENTS SUBSEQUENT TO BALANCE DATE

Subsequent to the end of the financial year the company converted to a public company limited by shares.

$121$ RELATED PARTIES

Directors

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The names of the person holding the position of director of the company during the financial year is Mr J McCawley.

Remuneration Benefits

No director received any remuneration during the financial year.

Transactions of directors and director related entities concerning shares

Aggregate number of shares of Lodestone Exploration Limited acquired by directors or their director related entities during the period were as follows:

	2001	2000
Ordinary shares	$\overline{\phantom{a}}$

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Aggregate number of shares of Lodestone Exploration Limited held directly, indirectly, or beneficially by directors or their director related entities at balance date:

	2001	2000
Ordinary shares	5,020,000	5,020,000

LODESTONE EXPLORATION LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

FINANCIAL INSTRUMENTS $13.$

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Interest rate risk exposure $(a)$

The company's exposures to interest rate risk and the effective weighted average interestrate for classes of financial assets and financial liabilities are set out below:

2001	FloatingInterestRate	Non-InterestBearing	Total
Financial assets:	36,032		36,032
CashReceivables		500	500
	36,032	500	36,532
Weighted average interest rate
Financial liabilities:			500
PayablesBorrowings		50025,991	25,991
		26,491	26,491
Weighted average interest rate
Net financial assets/(liabilities)	36,032=======	(25, 991)=======	10,041
2000
Financial assets:	332		332
CashReceivables
	332		332
Weighted average interest rate
Financial liabilities:
Payables		20,895	20,895
Borrowings		20,895	20,895
Weighted average interest rate
Net financial assets/(liabilities)	332=======	(20, 895)=======	(20, 563)

LODESTONE EXPLORATION LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2001

FINANCIAL INSTRUMENTS (continued) $13.$

$(b)$ Fair net values

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The company's financial assets and liabilities included in current assets and liabilities in the statement of financial position are carried out at amounts approximate net fair value.

Credit risk exposures $(c)$

The company's maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the statement of financial position.

SEGMENT INFORMATION $14.$

$\bar{\mathcal{L}}$

The company operates solely within the mineral exploration, development, and investment industry in Australia.

$\Delta$

$\mathcal{C}^{(1)}$ .

(FORMERLY LODESTONE EXPLORATION PTY LTD) ACN 075 877 075

FINANCIAL REPORT FOR YEAR ENDED 30 JUNE 2002

DIRECTORY AND INDEX

$\label{eq:2} \frac{1}{\sqrt{2}}\left(\frac{1}{\sqrt{2}}\right)^2\frac{1}{2}\left(\frac{1}{2}\right)^2$ $\mathcal{L}^{\text{max}}$

Directors:	John T ShawMartin Clyde AcklandGregory A J BayntonJohn L McCawleyPatrick W Sankey
Company Secretary:	Leni Pia Stanley
General Manager:	Mark Dugmore
Chief Geologist:	Peter Fox
Registered Office:	C/- Stanley Yeates & AssociatesLevel 18, 200 Mary StreetBrisbane Q 4000
Auditors:	Douglas Heck & BurrellLevel 21, 300 Queen StreetBrisbane Q 4000

Contents

$\sim 10^{11}$

Directors' Report to Shareholders
Independent audit report to the members
Directors' declaration
Financial Report
Statement of financial performance	10
Statement of financial position	11
Statement of cash flows	12
Notes to the financial statements	13

LODESTONE EXPLORATION LIMITED ACN 075 877 075

DIRECTORS' REPORT

Your directors present their report on the entity for the year ended 30 June 2002.

Directors

$\ddot{\phantom{a}}$

$\ddot{\phantom{0}}$

The following persons held office as Directors of Lodestone Exploration Limited at the date of this report:

J L McCawley

G Baynton was appointed a director from 5 November 2001.

J T Shaw was appointed a director from 20 May 2002.

P Sankey was appointed a director from 4 June 2002.

M Ackland was appointed a director from 1 July 2002.

Principal Activities

The principal activity of the company during the year was mineral exploration. No changes are expected in the principal activity of the company in subsequent years.

Significant Changes in the State of Affairs

Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:

	2002$
An increase in contributed equity of $209,100 (from $179,394 to $388,494)as a result of:
Placement of 1,500,000 fully paid shares at 4 cents eachPlacement of 1,590,000 fully paid shares at 10 cents each	60,000159,000
Less transaction costs arising on share issues	219,000(9,900)
Net increase in contributed equity	209.100

There were no other significant changes in the state of affairs of the company during the financial year.

Dividends

No dividend is recommended for the year ended 30 June 2002.

Review of operations and results

The operating loss after income tax of the company for the year was $14,386 (2001: loss $11,729). The loss reflects the nature of the company's principal activity. During the year the company spent $100,773 (2001: $19,171) on exploration activities.

Material progress has been made on three fronts:

Exploration

• Volcanic rocks, similar to those that hosted the Mount Morgan orebody, are now known to occur in a belt at least 11 kilometres long; within Lodestone's tenements.
• Lodestone's target models have been further refined, to guide exploration more precisely.
• A 115 line kilometre HOISTEM airborne geophycical survey, at 100 metre line spacing has confirmed and extended GEOTEM Anomaly Four (TEM 4).
• Two TEMPEST airborne geophysical surveys, totaling 1100 line kilometres at 200 metre and 250 metre line spacing, have been flown to test a 9 kilometre prospective 'corridor' midway between Pomegranate Station and Mount Morgan. Results are expected shortly.

Corporate

• 16 new shareholders have joined the company, and provide a broader and stronger capital base than existed a year ago.
• Four new Directors, a new Company Secretary, and a part-time General Manager; each extensively experienced, have joined the Company.
• Lodestone has been converted from a private company to an unlisted public company and has adopted a new constitution.
• National law firm, Corrs Chambers Westgarth, and other leading professionals, have been engaged to help prepare Lodestone for a proposed ASX-listing.

Other

• Three additional tenements have been applied for: Two are within 3 kilometers and 4 kilometers of the former Mount Morgan open cut, and the third covers some 150 square kilometers; to the south of Pomegranate Station.
• The Alliance between BHP Minerals (now BHP Billiton) and Lodestone has been renegotiated and restated.

Likely developments and expected results from operations

There are no likely developments in the operations of the company which are expected to significantly affect the results of the company in subsequent years.

Environmental regulation

The company is subject to significant environmental regulation in respect of its exploration activities in Australia and is committed to undertaking all its operations in an environmentally responsible manner.

Information on directors

$\sim$ $\star$

$\sim 10^{-11}$

Director:Qualifications:Experience:	JT ShawB.Sc (Geological Engineering) MCIM, FAUSIMM, FAICD, MAIME40 yearsDirector of Aurion Gold Ltd and Kingsgate Consolidated Limited.experience in mining industry in exploration, development and production phases.
SpecialResponsibilities:	Chairman
Director:Qualifications:Experience:	J L McCawleyB.Com (Hons)35 years experience in minerals exploration and finance.
Director:Qualifications:Experience:	G BayntonM.Econ St, MBA, B.Bus (Accounting), ASIA, FAICDDirector of several private companies.
Director:Qualifications:Experience:	P SankeyAIMM30 years experience in the mining industry. Director of Kidston Gold MinesLimited.
Director:Qualifications:Experience:	M AcklandB.App.Sc (Prim)., M.AusIMM, MAIME, FAICD35 years experience in the mining industry. Director of Sedimentary HoldingsLimited, McConnell Dowell Corporation Limited and Southern Cross ResourcesInc.

Directors' Interests in the Share Capital

Director		Ordinary sharesfully paid
J T Shaw	- Direct	100,000
J L McCawley	- Direct	5,020,000
G Baynton	- Indirect	1,090,000
P Sankey		Nil
M Ackland		Nil

Meetings of directors

The numbers of meetings of the company's board of directors and of each board committee held during the year ended 30 June 2002, and the numbers of meetings attended by each director were:

Full meetings of directors

J T Shaw (Appointed 20 May 2002)
J L McCawley
G Baynton (Appointed 5 November 2001)	5
P Sankey (Appointed 4 June 2002)
M Ackland (Appointed 1 July 2002)

$A =$ Number of meetings attended

B = Number of meetings held during the time the director held office or was a member of the committee during the year.

Retirement, election and continuation in office of directors

Messrs J T Shaw, G Baynton, P Sankey and M Ackland, having been appointed directors of the company by the directors since the last Annual General Meeting, retire in accordance with the Constitution and, being eligible, offer themselves for re-election.

Directors' remuneration

No director has received or become entitled to receive, during or since the end of financial year, a benefit because of a contract made by the company or a related body corporate with the director, a firm of which the director is a member or an entity in which the director has a substantial financial interest. This statement excludes a benefit included in the aggregate amount of emoluments received or due and receivable by directors shown in the company's financial report.

Options

No options to shares in the company have been granted during the financial year and there were no options outstanding at the end of the financial year.

Insurance of officers

The company has not, during or since the financial year, in respect of any person who is or has been an officer or auditor of the company or a related body corporate;

• indemnified or made any relevant agreement for indemnifying against a liability incurred as an $(a)$ officer, including costs and expenses in successfully defending legal proceedings: or
• paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as $(b)$ an officer for the costs or expenses to defend legal proceedings.

Events subsequent to balance date

At the date of this report there are no matters of circumstances which have arisen since 30 June 2002 that has significantly affected or may significantly affect:

• the entity's operations in future financial years, or $(a)$
• the results of those operations in future financial years, or $(b)$
• the entity's state of affairs in future financial years $(c)$

Proceedings on behalf of company

No proceedings have been brought or intervened on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001.

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

Auditor

Douglas Heck & Burrell continues in office in accordance with section 327 of the Corporations Act 2001.

This report is made in accordance with a resolution of the directors.

يمت ______________________________________

J McCawley, Director Brisbane, 9 September 2002

$\bigcup$ . . . . . . . . . . . .

Baynton, Director Brisbane, 9 September 2002

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF LODESTONE EXPLORATION LIMITED

Scope

The financial report of Lodestone Exploration Limited ("the Company") for the financial year ended 30 June 2002 is set out on pages 9 to 22.

Responsibility for the financial report and its contents

The Directors of the Company are responsible for the preparation of the financial report and are required to provide a declaration as to whether, in their opinion, the financial report has been prepared in accordance with the Corporations Act 2001. The Directors are also required to state whether, in the Directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is set out on page 9.

Our role as independent auditor

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement and has been prepared in accordance with Accounting Standards, other mandatory professional reporting requirements in Australia and the Corporations Act 2001 and regulations thereto. In forming our opinion we are required to perform our audit with due care, competence and diligence, and to be free of interests which could be incompatible with independence. We have followed the independence requirements set out by The Institute of Chartered Accountants in Australia and the Corporations Act 2001.

We have also been engaged by the Directors to undertake other services for the Company. These services are disclosed in note 15 to the financial statements. In our opinion, the provision of these additional services has not impaired our independence.

Our audit procedures

We have conducted a number of procedures in order to form an opinion as to whether, in all material respects, the financial report presents fairly a view which is consistent with our understanding of the Company's financial position, and of its performance as represented by the results of its operations and cash flows.

Our procedures included:

• the examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report. This included testing, to the extent considered necessary by us to form our opinion, internal controls, transactions, significant accounting estimates and individual items;
• the evaluation of accounting policies applied by the Directors in the preparation and presentation of the financial report; and
• obtaining written confirmation regarding material representations made to us in connection with the $\bullet$ audit.

The Australian Auditing Standards do not require, and we have not undertaken, an analysis of the appropriateness of the business decisions made by the Directors or management.

The audit opinion expressed in this report has been formed on the above basis.

Audit opinion

$\ddot{\phantom{a}}$

$\ddot{\phantom{a}}$

In our opinion, the financial report of Lodestone Exploration Limited, as set out on pages 9 to 22:

• gives a true and fair view of the Company's financial position as at 30 June 2002 and of $a)$ its performance for the financial year ended on that date; and
• is presented in accordance with Accounting Standards, other mandatory professional b) reporting requirements in Australia, Corporations Act 2001 and regulations thereto.

funalertes Brower

DOUGLAS HECK & BURRELL Chaptered Accountants

R C Brown Partner

Brisbane, 9 September 2002

DIRECTORS' DECLARATION

The directors declare that the financial statements and notes set out on pages 10 to 22:

• comply with Accounting Standards, the Corporations Regulations and other mandatory professional reporting requirements; and $(a)$
• give a true and fair view of the company's financial position as at 30 June 2002 and of its give a not any law view of the company's mianolal position as at so sails zook and of its performance, as represented by the results of its operations and its cash flows, for the $(b)$ financial year ended on that date.

In the directors' opinion:

• the financial statements and notes are in accordance with the Corporations Act 2001; and
• there are reasonable grounds to believe that the company will be able to pay its debts as and $(a)$ when they become due and payable. $(b)$

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

ے ے J McCawley, Director

Brisbane, 9 September 2002

G Baynton, Director

Brisbane, 9 September 2002

$\sim 10^7$

$\mathcal{L}$

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2002

	Notes	20025	2001S
Revenue from ordinary activities
Administration expensesDepreciation expenses	33	(12, 595)(1,791)	(9, 419)(2,310)
Profit/(loss) from ordinary activities before income tax	3	(14, 386)	(11, 729)
Income tax expense	4
Net profit/(loss)		(14, 386)	(11, 729)
Total changes in equity other than those resulting fromtransactions with owners as owners		(14, 386)	(11, 729)

The above statement of financial performance should be read in conjunction with the accompanying notes.

$\sim 10$

$\mathcal{L}^{(1)}$

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2002

	Notes	2002S	2001S
Current assets
Cash		134,004	36,032
Other	5	2,500	500
Total current assets		136,504	36,532
Non-Current Assets
Plant and equipment	6	6,167	7,958
Exploration expenditure	$\overline{7}$	190,625	89,852
Total non-current assets		196,792	97,810
Total assets		333,296	134,342
		=======	$=======$
Current LiabilitiesPayables	8	19,159	500
Total current liabilities		19,159	500
Non-current liabilities
Borrowings	9	11,572	25,991
Total non-current liabilities		11,572	25,991
Total liabilities		30,731	26,491
		$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$	$=$ $=$ $=$ $=$ $=$ $=$ $=$
Net assets		302,565=======	107,851$=$ === $=$
Equity
Contributed equity	10	388,494	179,394
Accumulated profits/(losses)		(85, 929)	(71, 543)
Total equity		302,565	107,851
		=======

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

$\sim$ $\star$ .

$\sim$

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2002

	Notes	2002	2001s
Cash flows from operating activities
Payments to suppliers		(13,018)	(4,823)
Net cash outflows from operating activities	18	(13,018)	(4, 823)
Cash flow from investing activities
Payments for exploration		(98, 691)	(11, 671)
Net cash outflows from investing activities		(98, 691)	(11, 671)
Cash flows from financing activities
Loan from directorRepayments of loan to directorProceeds from share issueProceeds from share applications not yet issuedPayment of share issue costs		947(15, 366)219,00015,000(9,900)	500(7,500)59,194
Net cash inflows from financing activities		209,681	52,194
Net increase (decrease) in cash held		97,972	35,700
Cash at the beginning of the financial year		36,032	332
Cash at the end of the financial year		134,004=======	36,032=======

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

Note 1. Summary of significant accounting policies

These financial statements have been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001.

The financial statements are prepared in accordance with the historical cost convention and the accounting policies adopted are consistent with those of the previous year.

$(a)$ Income tax

Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit can be regarded as being virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

Exploration expenditure $(b)$

Exploration expenditure incurred by or on behalf of the entity is accumulated separately for each area of interest until such time as the area moves into Development phase, or is abandoned or sold. The realisation of the value of expenditure carried forward depends upon any commercial results that may be obtained through successful development and exploitation of the area of interest or alternatively by its sale. If an area of interest is abandoned or is considered to be of no further commercial interest the accumulated exploration costs relating to the area are written off against income in the year of abandonment.

$(c)$ Acquisitions of assets

The purchase method of accounting is used for all acquisitions of assets. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.

(d) Recoverable amount of non-current assets

The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. The decrement in the carrying amount is recognized as an expense in the net profit or loss in the reporting period in which the recoverable amount writedown occurs.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

Depreciation of property, plant and equipment $(e)$

Depreciation is calculated on a diminishing value basis to write off the net cost or revalued amount of each item of property, plant and equipment over its expected useful life to the entity. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows:

Plant and equipment

$15 - 20$ years

Trade and other creditors $(f)$

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

Cash $(g)$

For the purposes of the statement of cash flows, cash includes deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2002

Note 2 Segment information

$\bar{\phantom{a}}$

$\mathbf{v}^{\dagger}$

The company operates solely within the mineral exploration industry in Australia.

	2002s	2001s
Profit from ordinary activitiesNote 3
Administrative expenses
Accountancy and secretarial feesAudit feesEntertainmentFiling feesMotor vehicle expensesTool replacementPostage, printing & stationaryRentSubscriptionsTelephoneOther	1,0509194908835,2852,78913626178212,595	1,0505005812001,3161,3173,240831,052809,419
Loss from ordinary activities before income tax expenseIncludes the following specific expenses:
Depreciation	1.791======	2,310=====

$\ddot{\bullet}$

$\cdot$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

	2002	2001
Note 4Income tax	S	s
The income tax benefit for the financial year differsfrom the amount calculated on the loss. The differencesare reconciled as follows:
Loss from ordinary activities before income tax expense	(14, 386)	(11, 729)
Income tax calculated $@$ 30% (2001: 34%)Less future income tax benefit not brought to account	(4,316)4,316	(3,988)3.988
The directors estimate that the potential future income taxbenefit at 30 June 2002 in respect of tax losses not brought
to account is	62.553	22,578

This benefit for tax losses will only be obtained if:

(i) the entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised, or

(ii) the entity continues to comply with the conditions for deductibility imposed by tax legislation, and

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

$\sim 10^7$

$\frac{1}{2}$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

	20025	2001S
Note 5Current assets - Other
Security deposit	2,500=======	500$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$
Note 6Non-current assets - Property, plant and equipment
Motor vehicle
At costLess: Accumulated depreciation	22,060(15,893)	22,060(14, 102)
	6,167$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$	7,95822222222
Reconciliations of the carrying amounts of motor vehicle atthe beginning and end of the current and previous financialyear are set out below:
Carrying amount at beginning of financial yearAdditions	7,958	10,268
Depreciation expense	(1,791)	(2,310)
Carrying amount at the end of the financial year	6,167$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$	7,958=======
Note 7Non-current assets - Exploration expenditure
Exploration phase property costs
Geological and exploration database expenditure - at cost	190,625	89,852
The capitalized exploration expenditure carried forwardabove has been determined as follows:	=======	2222222
Opening balanceExpenditure incurred during the year	89,852100,773	70,68119,171
Closing balance as shown above	190,625========	89,852$=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$ $=$

$\sim$

$\omega$

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2002

						FOR THE YEAR ENDED 30 JUNE 2002
--	--	--	--	--	--	---------------------------------	--	--	--

				2002s	2001s
Note 8	Current liabilities - Payables
Trade creditors	Share application funds received			4,15915,000	500
				-------------19,159========	---------500======
Note 9	Non-current liabilities - Borrowings
	Loan payable to director - unsecured			11,572	25,991
	Note 10 Contributed equity
		2002Shares	2001Shares	2002$	2001$
Share capitalOrdinary sharesFully paid		16,595,000	13,505,000	388,494	179,394

Movements in ordinary share capital:

Date	Details	Notes	Number ofShares	IssuePrice	S
1 July 2000	Opening balance		12,020,000		120,200
5 February 2001	Share issue		1,485,000	$0.04	59,194
30 June 2001	Balance		13,505,000		179,394
6 November 2001	Share issue		500,000	$0.04	20,000
29 January 2002	Share issue		1,000,000	$0.04	40,000
28 May 2002	Share issue		1,590,000	$0.10	159,000
	Share issue expenses				(9,900)
30 June 2002	Closing balance		16,595,000		388.494

$\mathcal{A}^{\mathcal{A}}$

$\mathbf{r}^{(1)}$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

	2002S	2001S
Note 11 Accumulated losses
Accumulated losses at the beginning of the financial year	(71, 543)	(59, 814)
Net loss attributable to members ofLodestone Exploration Limited	(14, 386)	(11, 729)
Accumulated losses at the end of the financial year	(85,929)	(71, 543)
Note 12 Equity
Total equity at the beginning of the financial year	107,851	60,386
Total changes in equity recognised in the statementof financial performance	(14, 386)	(11, 729)
Transactions with owners as owners:Contributions of equity net of transaction costs	209,100	59,194
Total equity at the end of the financial year	302,565	--------107,851
	======

Note 13 Financial instruments

(a) Interest rate risk exposure

The company's exposures to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities are set out below:

2002	FloatingInterestRate	Non-InterestBearing	Total
Financial assets:		134,004	134,004
CashReceivables		2,500	2,500
		136,504	136,504
Financial Liabilities:
Payables		4,159	4,159
Borrowings		11,572	11,572
		15,731	15,731
Net financial assets/(liabilities)		120,773	120,773
		----

$\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{\bar{$

$\mathbf{r}$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

Note 13 Financial instruments (continued)

2001	FloatingInterestRate	Non-InterestBearing	Total
Financial assets:CashReceivables		36,032500	36,032500
		36,532	36,532
Weighted average interest rate
Financial Liabilities:PayablesBorrowings		50025,991	50025,991
		26,491	26,491
Weighted average interest rate
Net financial assets/(liabilities)		10,041	10,041

Fair net values $(b)$

The company's financial assets and liabilities included in current assets and liabilities in the statement of financial position are carried at amounts approximating their fair value.

Credit risk exposures $(c)$

The company's maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the statement of financial position.

Note 14 Remuneration of directors

The directors received no remuneration from the company.

Note 15 Remuneration of auditors

During the year the auditor of the entity earned the following remuneration:

Audit of the financial report of the entity
---------------------------------------------	--	--

500 1,050 ======== $\texttt{m} = \texttt{m} = \texttt{m} = \texttt{m}$

The auditors also undertake taxation compliance services for the company.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

Note 16 Related parties

Directors

$\cdot$

The names of persons who were directors at any time during the financial year are as follows: J L McCawley, G Baynton, J T Shaw, P Sankey and M Ackland. J L McCawley was the only director who also held office during the year ended 30 June 2001. G Baynton was appointed on 5 November 2001. J T Shaw was appointed on 20 May 2002. P Sankey was appointed on 4 June 2002 and M Ackland was appointed on 1 July 2002.

Other Transactions of Directors and Director-Related Entities

G Baynton is a director of Orbit Capital Pty Limited, which received commission of $9,000 in respect of equity raised during the financial year, such service being provided in the ordinary course of business to the Company.

Transaction of directors and director related entities concerning shares

Aggregate number of shares of Lodestone Exploration Limited acquired by directors or their director related entities during the period were as follows:

	2002	2001
Ordinary Shares	1,090,000

Aggregate number of shares of Lodestone Exploration Limited held directly, indirectly, or beneficially by directors or their director related entities at balance date:

	2002	2001
Ordinary Shares	6,110,000	5,020,000

Note 17 Events occurring after reporting date

Subsequent to the end of the financial year the company converted to a public company limited by shares.

Subsequent to the end of the financial year the company issued 500,000 shares at an issue price of 15 cents.

$\mathbf{r}$

$\mathbf{r}$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2002

Note 18 Reconciliation of profit/(loss) from ordinary activities after income tax to net cash inflow (outflow) from operating activities $\sum_{n=1}^{\infty}$ $\sum_{n=1}^{n} a_n$

	2002	2001S
Loss from ordinary activities after income tax	(14, 386)	(11, 729)
Depreciation	1,791	2,310
Change in operating assets and liabilities:Increase/(decrease) in borrowings(Increase)/decrease in other receivablesIncrease/(decrease) in accruals	(2,000)1.577	4,596(500)500
Net cash outflow from operating activities	(13,018)	(4,823)

Note 19 Commitments for expenditure and contingent liabilities

	2002	2001
Consulting commitmentsCommitments for payments under personal servicesContracts in existence at the reporting date but notrecognised as liabilities payable are as follows:
Within one yearLater than one year but not later than 5 yearsLater than 5 years	50,000
Commitments not recognised in the financial statements	50,000

Commitment in respect of permits

So as to maintain current rights to tenure of various exploration tenements, the company will be required to outlay amounts in respect of tenement rent to the relevant governing authorities and to meet certain annual exploration expenditure commitments. The outlays may be varied from time to time, subject to approval of the relevant government departments, and may be relieved if a tenement is relinquished.

A.C.N. 075 877 075

FORM OF PROXY

$I, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots, \ldots$ being a member of Lodestone Exploration Limited hereby appoint

...................................... or failing him/her, the Chairman of the meeting as my proxy to vote for me and on my behalf at the Annual General Meeting of the company to be held on October 2, 2002 at 11.00am and at any adjournment thereof.

(If you desire you may direct your proxy holder how to vote by placing an X in the appropriate box for each resolution, otherwise your proxy holder may vote as he/she thinks fit.)

	IN FAVOUR AGAINST		ABSTAIN
To receive the Reports and Accounts1.To elect a director - Mr G Baynton2.(a)To elect a director - Mr J T Shaw2.(b)To elect a director - Mr P Sankey2.(c)To elect a director - Mr M Ackland2. (d)To approve directors' fees3.
SIGNED thisIndividuals and Joint Holdings.Joint Holder 3Joint Holder 2
Sole Holder/Joint HolderCorporationsDirector/SecretaryDirector[Corporations should sign in accordance with their constitution]	******************	Sole Director/Secretary

Proxies may be lodged by facsimile to: Fax No. 61 7 3221 6625

This proxy must reach the registered office of the company, C/- Stanley Yeates & Associates, $18^{th}$ Floor, 200 Mary Street, Brisbane, (GPO Box 363 Brisbane 4001), at least 48 hours before the time appointed for the meeting.

A member entitled to attend and vote has the right to appoint a proxy. A member who is entitled to cast two or more votes may appoint two proxies. Where two proxies are appointed, each proxy holder may be appointed to represent a specified proportion of the member's voting rights.

A proxy need not be a member.