PRODIGY GOLD NL — Annual Report 2003

Sep 30, 2003

ABN 58 009 127 020

ASIC AUDITED ANNUAL ACCOUNTS 30 JUNE 2003

CORPORATE DIRECTORY

Directos

Mr Michael Fotios Mr Timothy King Mr David Reynolds Ms Sasya Sebi

Secretary

Mr Peter Farrah

Auditors

Stanton Partners 1st Floor, 1 Havelock Street West Perth WA 6005

Bankers

Commonwealth Bank of Australia Head Office, 150 St George's Terrace Perth WA 6000

Share Registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153 Telephone: +61 8 9315 0933

Solicitors
Pullinger Readhead Stewart Level 1, Scott House 46-50 Kings Park Road West Perth WA 6005

Stock Exchange

Australian Stock Exchange Limited Code: TAA

Registered Office

13 Mumford Place Balcatta WA 6021

Principle Office

13 Mumford Place Balcatta WA 6021 Telephone: +61 8 6241 1888 Fax: +61 8 6241 1811 Website: www.tantalumaustralia.com Email: admin@tantalumaustralia.com

Postal Address

13 Mumford Place Balcatta WA 6021

CONTENTS	PAGE NUMBERS
Directors' report	3
Independent auditors' report	10
Directors' declaration	12
Statement of financial performance	13
Statement of financial position	14
Statement of cash flows	15
Notes to the financial statements	16

DIRECTORS' REPORT

The directors present their report together with the financial report of Tantalum Australia NL and its subsidiaries for the year ended 30 June 2003 and the auditor's report thereon.

Directors

The directors at any time during or since the end of the financial year are:

Mr Michael George Fotios
Mr Timothy John King
Mr Kim Robinson	Resigned 1 July 2003
Ms Sasya Sebi
Mr Harris L Crowley	Appointed 18 February 2002, Resigned 17 April 2003
Mr David Reynolds	Appointed 17 April 2003

Directors' meetings

The number of directors' meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are:

Director	Board Meetings Α	Available Meetings В
Mr MG Fotios	11	11
Mr T King	11	11
Mr K Robinson		11
Ms ASA Sebi	3	11
Mr H L Crowley	5	9
Mr D A Reynolds		2

$A =$ Number of meetings attended

$B =$ Number of meetings held during the time the director held office

Principal Activities

The principal activity of the company during the course of the financial year was to continue an active exploration program for tantalite and the development and installation of the mining facility at Dalgaranga.

Result of operations

The consolidated net loss of the economic entity for year ended 30 June 2003 was \$4,630,934 (2002: loss \$2,700,324). This includes exploration expenditure write downs of \$736,644, depreciation of \$864,650 and inventory write downs of \$2,204,000.

The net cash used in operating activities was \$1,259,624 (2002: net cash provided by operating activities was \$923,635) this includes expensed R&D and Gascoyne capital expenditure of \$573,908 and \$468,664 of exploration expenditure.

In 2002 the controlled entity (Tantalum Australia Operations Pty Ltd) bought back 50% of its issued capital from KEMET Corporation, resulting in the parent entity (Tantalum Australia NL) moving from 50% ownership of the controlled entity to 100%. These shares were issued for \$10,000,000 in April 2001. The buyback involved the payment of \$250,000, and the cancellation of an off-take agreement.

As a result of the way in which the accounting standards operated in respect to the buyback only \$2.25 million of the profit on the buyback was included in the accounting profit for 2002.

The tantalum mining and processing operations conducted during the year by the economic entity were adversely impacted by the continued decline in tantalum oxide prices after the buyback in the absence of the fixed price off-take agreement with KEMET. The sale price achieved for tantalum oxide was 25% of the original fixed price.

Exploration and Mining

During the year it became evident that the floating of Savannah Gold NL was not going to be successful in the prevailing market. The ability to list and maintain a respectable market price of securities was uncertain and as a consequence investors showed reluctance to participate. Tantalum Australia has retained the tenements and continued the exploration Savannah had intended to carry out.

At Norseman a reverse circulation drill program confirmed a zone of moderate-grade gold mineralisation at the Iron Duke prospect. As a consequence, a follow-up program to delineate the strike length and depth continuation of the mineralisation has been implemented. The remaining projects are currently being maintained with the minimum requirements of activity.

The exploration for rare metal (tantalum/niobium) deposits has remained at a low level whilst the market value of the metals remains low. No further work has been conducted on the resources at Binneringie and Mt Deans. The lack of success through native title negotiations for additional resources at Dalgaranga have resulted in that project being put on a care and maintenance basis. A new project, Arkaroola, in South Australia has been acquired but to date no field work has been undertaken. Land access at Walwa was finally negotiated but field work has been delayed till the end of winter.

New niobium projects in the Gascoyne and Kimberly districts are in their final stages of acquisition.

Dividends

There were no dividends paid or declared during the year.

Significant changes in state of affairs

• 1. In July 2002, Tantalum Australia NL announced a shortfall of 4,727,209 shares in the rights issue at 11 cents per share, issued on the basis of one share for each 10 shares held at the record date
• 1. As of 12 July 2002, the Company and subsidiary both changed their names. Australasian Gold Mines NL has become Tantalum Australia NL, and Tantalum Australia Pty Ltd has become Tantalum Australia Operations Pty Ltd.
• 1. In October 2002, Tantalum Australia NL announced a technology breakthrough in tantalum metal extraction with the Boston University utilising the Solid ion Oxygen Membrane (SOM) process.
• 1. In October 2002, Tantalum Australia NL announced the signing of its first tantalum concentrate sales contact with a Japanese customer.
• 1. In November 2002, Tantalum Australia NL announced an issue of 6,000,000 fully paid ordinary shares issued at an issue price of 8 cents per share to raise additional working capital for the company.
• 1. In December 2002, Tantalum Australia NL announced a Share Purchase Plan and Sale of Unmarketable Parcels.
• 1. In February 2003, Tantalum Australia NL announced further significant breakthroughs in its work with Boston University's Department of Manufacturing Engineering.
• 1. In February 2003, Tantalum Australia NL announced an issue of 2,533,307 fully paid ordinary shares issued in the Share Purchase Plan at an issue price of 6 cents per share.

Significant changes in state of affairs (cont.)

• 10.In March 2003. Tantalum Australia NL announced a tantalum/niobium project acquisition in Gascovne and Kimberley in Western Australia and a sales contract with a European refiner for the supply of 60 tonnes of columbite concentrates from the Gascovne region.
• 1. In April 2003, Tantalum Australia NL announced that its proposal to separately list its subsidiary Savannah Gold NL would not proceed due to the inability in current market conditions to successfully list Savannah Gold NL on the ASX.
• 1. In April 2003, Tantalum Australia NL announced the retirement of Mr Harris Crowley and the appointment of Mr David Reynolds, having been nominated by KEMET Corporation Inc.
• 1. In May 2003, Tantalum Australia NL announced an issue of 12,000,000 ordinary fully paid shares issued at an issue price of 5 cents per share.
• 1. In May 2003, Tantalum Australia NL announced interim results for the recently completed reverse circulation (RC) drilling program at its Iron Duke and Surprise Gold projects in Norseman WA.
• 1. In June 2003, Tantalum Australia NL announced an issue of 1.434,945 ordinary fully paid shares issued at an issue price of 5 cents per share to comply with anti dilution agreement of 10% of equity as per Shareholders Agreement and shareholders approval on 9 April 2001.
• 1. In June 2003, Tantalum Australia NL announced that KEMET Tantalum Pty Ltd exercised its right to maintain its equity investment in the company at 10%.
• 1. In June 2003, Tantalum Australia NL announced the award of a long term contract that is expected to generate revenue of A\$56m with the potential to reach A\$123m. TAA considers that the margins it will achieve in these contracts can be regarded as normal and commercial for trading in such commodities.

Environmental regulation

The Consolidated entity's operations are subject to significant environmental regulations under both Commonwealth and State legislation. The company has a Management Committee which monitors compliance with environmental regulations. The directors are not aware of any significant breaches during the period covered by this report.

Events subsequent to balance date

• 1. In July 2003, Tantalum Australia NL announced the resignation of Mr Kim Robinson and Mr Timothy King was appointed Chairman of the Board.
• 1. In July 2003, Tantalum Australia NL announced it has exercised its Option for a worldwide exclusive license with Boston University fundamental SOM process in the fields of tantalum, niobium, tungsten, gallium, germanium, thallium and yttrium.
• 1. In July 2003, Tantalum Australia NL announced it had acquired exclusive world license to manufacture of rare metals including nickel.
• 1. In August 2003, Tantalum Australia NL announced that Boston University had been successful in extracting metal directly from tantalum concentrate.
• 1. In September 2003, Tantalum Australia NL announced drilling results of a RC drilling programme at Iron Duke in the Company's Norseman Project.
• 1. In September 2003, Tantalum Australia NL announced that it had issued 11,781,481 ordinary fully paid shares at an issue price of 9 cents per share.

Events subsequent to balance date (cont.)

Other than the events discussed above, there has not arisen in the interval between the end of the financial period 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 affect significantly the operations of the company, the results of those operations, or the state of affairs in the company in future financial years.

Likely developments

The consolidated entity will continue to pursue its policy of establishing the profitability and increasing the market share of its major business sectors during the next financial year. This will require further investment in exploration and development that offers sound opportunities for creating value for the Company.

The Company expects to raise additional capital to fund its requirements over the next two years. The funds will assist in the financing of the R&D programme with Boston University and the conduct of feasibility studies on the Gascoyne tantalum/niobium project and the Norseman Gold Project.

Information on Directors

Particulars of directors' interests in the Shares of Tantalum Australia NL

The particulars of directors' interests in shares are at the date of this directors' statement.

Director	Special Responsibilities	Ordinary Shares	Options over shares
M G Fotios	Managing Director	8,224,610	1,000,000
T J King	Non-executive Director	3,340,200	500,000
A S A Sebi	Non-executive Director	Nil	Nil
D A Reynolds	Non-executive Director	Νil	ΝiΙ

Information on Directors (cont.)

Director	Special	Qualifications and Experience
	Responsibilities
T J King	Non-executive Chairman	Mr King is a Chartered Accountant with over 20 years experience in corporate finance, accounting and taxation. Formerly a partner with a West Perth accounting firm. Mr King is a director of several listed public companies including Western Areas NL, Sphere Investments Limited, and is Chairman of Reclaim Industries Limited. Mr King is also Chairman of SIDS and Kids WA and the Rehabilitation Foundation. Mr King has extensive experience in the management, administration and financing of companies across a range of industries, including particularly the resource industry. He is a member of the Institute of Chartered Accountants, the Securities Institute of Australia, and the Taxation Institute of Australia.
M G Fotios	Managing Director	Mr Fotios is currently the Managing Director of Tantalum Australia NL. He has a BSc(Hons) majoring in geology from UWA. Over the last 21 years he has had continuous involvement in the mineral exploration and mining industries, working for large companies such as Homestake Australia Ltd, Sons of Gwalia NL and also being involved in the junior exploration sector. He has also completed an evaluation of projects overseas including the Philippines and the United States focussing in the most part on gold, tantalum and to a lesser extent base metals. Mr Fotios has been the Managing Director the Company since 1992.
A S A Sebi	Non-executive Director	Ms Sebi has 7 years experience in corporate management and finance and is on the board of several operating subsidiary companies of a Malaysian listed corporation. She has a B.Comm, Graduate Diploma of Economics and Master of Finance gained from Australian Universities.
D A Reynolds	Non-executive Director	Mr Reynolds is Manager of KEMET's Anode Manufacturing facility in Simpsonville South Carolina, USA. He has spent over 25 years working in various positions at Union Carbide and KEMET including Engineering, and Manufacturing at various tantalum locations. He has been working directly with tantalum raw material since 1995 and has been a member of T.I.C. (Tantalum-Niobium International Study Center) Executive Committee since 2001. He has a BS degree from the University of South Carolina.

Directors' and executive officers' emoluments

The emoluments of each Director and each of the two executive officers are as follows:

Directors

	Consulting Fees	Director's Fees	Total
	S	S	£
M G Fotios	155,000		155,000
K Robinson		20,000	20,000
T J King	37,520	15,000	52,520
D Reynolds 1	$\tilde{\phantom{a}}$	2.500	2,500
ASA Sebi	$\mathbf{w}$	15,000	15,000
H L Crowley 2	$\tilde{\phantom{a}}$	12.500	12,500
	192,520	65.000	257,520

Directors' and executive officers' emoluments (cont.)

¹ Appointed director 17 April 2003.

Balance at 30 June 2002

² Resigned as director 17 April 2003.

The fees paid to directors are inclusive of superannuation and are not separated in the above table.

Rexfam Consulting Pty Ltd, a company associated with Mr TJ King, is entitled to receive a total of \$37,520 in consulting fees for corporate advice and assistance provided to Tantalum Australia NL and Tantalum Australia Operations Pty Ltd.

Executive officers

LAGUUNTU VIIIVUI G	Salary	Consulting	Superannuation	Total
	S	Fees \$	Contributions	\$
B Rees	114,600		26,664	141,264
T Brittliffe		18,999		18,999
	114,600	18,999	26,664	160,263
Options issued to directors and executives Unlisted Options				Number of Options 2003
Exercisable at 20 cents, on or before 31 March 2004
Balance at 1 July 2001				3,250,000
Issued during the year Exercised during the year

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate.

3.250.000

Employee incentive options	Number of Options 2003
Unlisted Options
Exercisable at 25 cents, on or before 28 February 2004 (ii)
Balance at 1 July 2001	250,000
Issued during the year
Exercised during the year
Balance at 30 June 2002	250,000
(iii) Exercisable at 25 cents, on or before 28 February 2005
Balance at 1 July 2001	1,095,000
Issued during the year
Exercised during the year
Balance at 30 June 2002	1,095,000

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate

Indemnification and insurance of officers and auditors

Indemnification

Since the Company's incorporation, the Company has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an officer or auditor of the Company.

Dated at Perth (city) this 30th day of September 2003.

Signed in accordance with a resolution of the directors.

M G Fotios Director

INDEPENDENT AUDIT REPORT FOR THE PERIOD ENDED 30 JUNE 2003

STANTON PARTNERS

1 HAVELOCK STREET WEST PERTH 6005 WESTERN AUSTRALIA

TELEPHONE: (08) 9481 3188

Facsimile: (08) 9321 1204

e-mail: australia@stanton.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF TANTALUM AUSTRALIA NL

SCOPE

We have audited the financial report of Tantalum Australia NL for the financial year ended 30 June 2003 as set out on pages 12 to 41. The financial report includes the consolidated financial statements of the consolidated entity comprising Tantalum Australia NL and the entities it controlled at the year's end or from time to time during the financial year. The Company's directors are responsible for the financial report. We have conducted an independent audit of this 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 whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia and statutory requirements so as to present a view which is consistent with our understanding of the Company's and the consolidated entity's financial position, and performance as represented by the results of their operations and their 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 Tantalum Australia NL is in accordance with:

The Corporations Act 2001, including: a)

INDEPENDENT AUDIT REPORT

• (i) Giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2003 and of their performance for the year ended on that date; and
• (ii) Complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• $b)$ Other mandatory professional reporting requirements in Australia.

REALISATION OF ASSET AND GOING CONCERN

Without qualification to the opinion expressed above, attention is drawn to the following matters.

Included in the financial statement is an amount described as Drilling Fund for a total amount of \$738,633. The ability to utilise this fund by way of Colby Corporation Pty Ltd ("Colby") undertaking drilling services to the Company over the term of the Drilling Fund contract is dependent upon the ability of Colby to undertake the drilling services at no cash cost to the Company. In the event that Colby cannot perform the drilling services (other than for cash), the Drilling Fund asset may need to be expensed to the Statement of Financial Performance. Any services to be rendered by Colby on cash terms may affect the ability of the Company to undertake its drilling programs as planned without arranging alternative sources of finance.

Also, attention is drawn to Note 1 that identifies the requirement for additional capital to be raised to ensure the Company continues as a going concern. If the Company is unable to raise additional debt or equity finance, significant uncertainty would exist as to whether the Company would continue as a going concern.

If the Company is unable to continue as a going concern it will be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts that may materially differ from those stated in the financial report. Furthermore, non-current liabilities would crystallise and become immediately due and payable.

STANTON PARTNERS

Sporter Farture

JP Van Dieren Partner

Perth, Western Australia 30 September 2003

DIRECTORS' DECLARATION

The directors of the economic entity declare that:

• $\mathbf{1}$ . the financial statements and notes, as set out on pages 13 to 41 are in accordance with the Corporations Act 2001:
• (a) comply with Accounting Standards and the Corporations Regulations 2001; and
• (b) give a true and fair view of the financial position as at 30 June 2003 and of the performance for the year ended on that date of the company and economic entity;
• $2.$ 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 made in accordance with a resolution of the Board of Directors.

M G Fotios Director

Perth, Western Australia 30 September 2003

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2003

	Note	CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		S	\$	S	\$
Revenue from sale of goods	$\overline{2}$	1,819,167	1,292,971
Revenue - Interest Income	$\overline{2}$	27,132	96,365	25,052	91,255
Other revenues from ordinary activities	2.	418,121	151,036	19,159	125,423
		2,264,420	1,540,372	44,211	216,678
Changes in inventories of finished goods and work in progress	3	2,614,816	2,552,542
Inventory written off	3	2,204,294
Employee expenses	3	326,266	420,449	176,474	368,100
Depreciation and amortisation expenses	3	141,197	147,761	98,605	111,022
Consultancy expenses		338,256	428,877	130,658	259,530
Director Fees		65,000	125,400	65,000	125,400
Rehabilitation, mining and exploration costs		757,589	256,711	109,598	256,500
Provision for doubtful debts		75,807		1,394,956
Share registry and listing costs		42,089	36,244	42,089	36,244
Other expenses for ordinary activities	3	405,847	272,712	402,913	373,968
Loss from ordinary activities before related income tax expense		(4,630,934)		$(2,700,324)$ $(2,376,082)$	(1,314,086)
Income tax expense relating to ordinary activities	5(a)
Net loss attributable to members of the parent entity			$17$ $(4,630,934)$ $(2,700,324)$ $(2,376,082)$		(1,314,086)
Basic loss per share (cents)	6	(2.4)	(1.5)

Diluted earnings per share has not been included as it results in a more favourable earnings per share figure than basic earnings per share.

The statement of financial performance is to be read in conjunction with the notes to the financial statements set out on pages 16 to 41.

	CONSOLIDATED		COMPANY
	2003	2002	2003	2002
Note	\$	\$	\$	\$
7				344,735
			5,937,813	6,116,434
				416,946
			6,452,736	6,878,115
8				594,800
10	338,633	422,845	338,633	423,845
11	2,534,127	3,857,215	553,979	644,380
12.		2,244,756	2,537,558	2,244,756
				3,907,781
	7,222,931	10,124,303	10,463,129	10,785,896
13				762,946
				9,432
15	182,403		182,403	177,894
	2,151,718	1,628,917	1,796,826	950,272
				5,905
				603,288
	657,992	656,193	610,992	609,193
	2,809,710	2,285,110	2,407,818	1,559,465
				9,226,431
16	38,556,701	37,351,739	38,556,701	37,351,739
17	(34, 143, 480)	(29, 512, 546)	(30, 501, 390)	(28, 125, 308)
				9,226,431
	8 9 10 14 14 15 18	304,430 452,954 17,392 406,584 1,181,360 631,253 2,537,558 6,041,571 1,584,761 384,554 657,992 4,413,221 4,413,221	457,765 1,228,400 850,545 416,946 2,953,656 645,831 7,170,647 1,441,591 9.432 177,894 5,905 650,288 7,839,193 7,839,193	108,339 406,584 580,223 4,010,393 1,229,869 384,554 610,992 8,055,311 8,055,311

The statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 16 to 41.

	Note
		CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		\$	\$	\$	\$
Cash flows from operating activities
Cash receipts in the course of operations		1,649,623	1,011,161		2,896
Cash payments in the course of operations		(2,936,379)	(178, 032)	(1,529,702)	(3,856,447)
Interest received		27,132	90,506	25,052	85,396
Net cash provided by/(used in) operating activities	22 b	(1,259,624)	923,635	(1,504,650)	(3,768,155)
Cash flows from investing activities
Bond deposits		14.578		14.578
Proceeds from non-current assets		4.262	25,613	2,344
Proceeds from sale of investments		14,625		14,625
Payments for property plant and equipment		(105, 825)	(4,682,393)	(8,205)	(129, 261)
Payments for exploration, evaluation and development		(384, 452)	(324, 222)	(318, 189)	(272, 981)
Net cash provided by/(used) in investing activities		(456,812)	(4,981,002)	(294,847)	(402, 242)
Cash flows from financing activities
Hire purchase borrowings repaid		(10,629)	(9, 810)	(10,629)	(9,810)
Proceeds from issue of shares		1,269,760	833,634	1,269,760	833,634
Cost of issuing shares		(64, 798)	(30, 460)	(64, 798)	(30, 460)
Loans from directors		368,768		368,768
Net cash provided by financing activities		1,563,101	793,364	1,563,101	793,364
Net (decrease) in cash held		(153, 335)	(3,264,003)	(236,396)	(3,377,033)
Cash at the beginning of the financial year		457.765	3,721,768	344.735	3,721,768
Cash at the end of the financial year		304,430	457,765	108,339	344,735

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2003

The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 16 to 41.

$\mathbf{1}$ . STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The significant policies which have been adopted in the preparation of this financial report are:

$(a)$ Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

It has been prepared on the basis of accrual accounting and historical costs and except where stated, does not take into account changing money values or fair values of non-current assets.

These accounting policies have been consistently applied and, except where there is a change in accounting policy, are consistent with those of the previous year.

$(b)$ Principles of consolidation

Controlled entities

The financial statements of controlled entities are included from the date control commences until the date control ceases.

Outside interests in the equity and results of the entities that are controlled by the Company are shown as a separate item in the consolidated financial statements.

Associates

Associates are those entities, other than partnerships, over which the consolidated entity exercises significant influence and which are not intended for sale in the near future.

In the consolidated financial statements, investments in associates are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The consolidated entity's equity accounted share of the associates' net profit or loss is recognised in the consolidated statement of financial performance from the date significant influence commences until the date significant influence ceases. Other movements in reserves are recognised directly in consolidated reserves.

Joint ventures

A joint venture is either an entity or operation that is jointly controlled by the consolidated entity.

Joint venture entities

In the consolidated financial statements in joint venture entities, including partnerships, are accounted for using equity accounting principles. Investments in joint venture entities are carried at the lower of the equity accounted amount and recoverable amount.

The consolidated entity's share of the joint venture entity's net profit or loss is recognised in the consolidated operating statement of financial performance from the date joint control commenced until the date joint control ceases. Other movements in reserves are recognised directly in consolidated reserves.

$\mathbf{1}$ . STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

(b) Principles of consolidation (cont.)

Transactions eliminated on consolidation

Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.

Unrealised gains resulting from transactions with associates and joint ventures are eliminated to the extent of the consolidated entity's interest. Unrealised gains relating to associates and joint venture entities are eliminated against the carrying amount of the investment. Unrealised losses are eliminated in the same way as unrealised gains, unless they evidence recoverable amount impairment.

Revenue recognition $(c)$

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST). Exchanges of goods or services of the same nature and value without any cash consideration are not recognised as revenues.

Sale of goods

Revenue from the sale of goods is recognised (net of returns, discounts and allowances) when control of the goods passes to the customer.

Interest revenue

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Sale of non-current assets

The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.

Any related balance in the asset revaluation reserve is transferred to the capital profits reserve on disposal.

Goods and services tax (d)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) 1.

(d) Goods and services tax (cont.)

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(e) Foreign Currency

Transactions

Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rates of exchange ruling on that date.

Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the statement of financial performance in the financial year in which the exchange rates change.

(f) Taxation

The consolidated entity adopts the income statement liability method of tax effect accounting.

Income tax expense is calculated on operating profit adjustment for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain. The tax effect of capital losses are not recorded unless realisation is virtually certain.

Acquisition of assets (g)

All assets acquired including property, plant and equipment and intangibles other than goodwill are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. When equity instruments are issued as consideration, their market price at the date of acquisition is used as fair value. Transaction costs arising on the issue of equity instruments are recognised directly inequity subject to the extent of proceeds received, otherwise expensed.

The costs of assets constructed or internally generated by the consolidated entity, other than goodwill, include the cost of materials and direct labour. Directly attributable overheads and other incidental costs are also capitalised to the asset.

Expenditure, including that on internally generated assets other than research and development costs, is only recognised as an asset when the entity controls future economic benefits as a result of the costs incurred, it is probable that those future economic benefits will eventuate, and the costs can be measured reliably. Costs attributable to feasibility and alternative approach assessments are expensed as incurred.

$\mathbf{1}$ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

Acquisition of assets (cont.) $(q)$

Research and development costs

Research and development expenditure is expensed as incurred except to the extent that its recoverability is assured beyond any reasonable doubt, in which case it is deferred.

(h) Receivables

The collectibility of debts is assessed at balance date and specific provision is made for any doubtful accounts.

The carrying amount of receivables approximates fair value.

$(i)$ Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost includes direct materials, direct labour, other direct variable costs and allocated production overheads necessary to bring inventories to their present location and condition, based on normal operating capacity of the production facilities.

Net realisable value

Net realisable value is determined on the basis of the products normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value.

(ί) Investments

A joint venture is either an entity or operation that is jointly controlled by the consolidated entity.

Investments in associate companies are recognised in the financial statements by applying the equity method of accounting.

Leased assets (k)

Leases under which the Company or its controlled entities assume substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.

$\theta$ Exploration, evaluation and development expenditure

Exploration, evaluation and development costs are accumulated in respect of each separate area of interest.

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest, or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

$\mathbf{1}$ STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

$\theta$ Exploration, evaluation and development expenditure (cont.)

Development costs related to an area of interest are carried forward to the extent that they are expected to be recouped either through sale or successful exploitation of the area of interest.

When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period in which the decision is made.

Recoverable amount of non-current assets valued on cost basis (m)

The carrying amounts of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is recognised as an expense in the net profit or loss in the reporting period in which it occurs.

Where a group of assets working together supports the generation of cash flows, recoverable amount is assessed in relation to that group of assets.

In assessing recoverable amounts of non-current assets the relevant cash flows have not been discounted to their present value, except where specifically stated.

Depreciation and amortisation (n)

Useful lives

All assets, including intangibles, have limited useful lives and are depreciated/amortised using the reducing balance method over their estimated lives.

Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads.

The depreciation/amortisation rates used for each class of asset are as follows:

	2003	2002
Property, plant and equipment Plant and equipment	10-40%	10-40%
Leased assets
- plant and equipment	10-40%	10-40%

$(0)$ Payables

Liabilities are recognised for amounts to be paid in the future for goods or services received. Trade accounts payable are normally settled within 90 days. The carrying amount of accounts payable approximates net fair value.

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

$(p)$ Employees entitlements

Wages, salaries and annual leave

Provision is made for the Company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year together with entitlements arising from wages, salaries and annual leave which will be settled after one year, have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Long service leave

The provision for employee entitlements to long service leave represents the present value of the estimated future cash outflows to be made resulting from employees' services provided up to balance date.

The provision is calculated using estimated future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government securities at balance date which most closely match the terms of maturity of the related liabilities.

Employee share and option plans

Where shares or options are issued to employees as remuneration for past services, the difference between fair value of the shares or options issued and the consideration received, if any, from the employee is expensed. The fair value of the shares or options issued is recorded in contributed equity.

Other share or options issued to employees are recorded in contributed equity at the fair value of consideration received, if any.

Transaction costs associated with issuing shares and options are recognised in equity subject to the extent of the proceeds received, otherwise expensed. Other administrative costs are expensed.

Superannuation plan

The Company and other controlled entities contribute to several defined benefit and defined contribution superannuation plans. Contributions are charged against income as they are made.

Provisions (q)

Restoration

Restoration, rehabilitation and environmental expenditure to be incurred during the production phase of operations is accrued when the need for such expenditure is established, and then written off as part of the cost of production of the mine property concerned. Significant restoration, rehabilitation and environmental expenditure to be incurred subsequent to the cessation of production at each mine property is accrued in proportion to production, when its extent can be reasonable estimated.

The entity has certain obligations for restoration and rehabilitation of mining areas. Such obligations have been accrued and the accrual will be adequate to meet those obligations. The estimated future costs not yet accrued have not been determined.

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

$(r)$ Going Concern

The company and consolidated entity's statement of financial position shows net assets of \$8,055,311 and \$4,413,221 respectively and the company and consolidated entity's have incurred consolidated losses of \$2,376,082 and \$4,630,93 respectively during the 12 month period to 30 June 2003. A large part of the deficit reflects the costs incurred and expended in establishing the mine plant at Dalgaranga, and the mineral dressing operation at Balcatta.

The deficit has also been created by the close out of the KEMET take-off agreement which occurred as part of the buy-back of KEMET's 50% interest in Tantalum Australia Operations Pty Ltd. The sale price of tantalum concentrate achieved was substantially below the fixed price in the KEMET off-take agreement.

The consolidated entity has established and commissioned both a processing plant and a mineral dressing plant. During the development phase the consolidated entity remains reliant upon equity capital. The directors consider that the company can continue to obtain investor support to meet its further funding requirements.

		CONSOLIDATED		COMPANY
		2003 S	2002 S	2003 S	2002 \$
2.	REVENUE FROM ORDINARY ACTIVITIES
	Sale of goods revenue from operating activities	1,819,167	1,292,971
	Other revenues:
	From operating activities
	Interest:
	Other parties	27,132	96,365	25,052	91.255
	From outside operating activities
	Management fees received		83,500		83,500
	Gross proceeds from sale of investments	14.625		14,625
	Gross proceeds from disposal of non-current assets	4,262	25,613	2,344
	Net foreign exchange gain-other	55,251
	Rebates and other income	343,983	2,896	2,190	2,896
	Royalties		39,027		39,027
	Total other revenues	445,253	247,401	44,211	216,678
	Total revenue from ordinary activities	2.264.420	1.540.372	44.211	216.678

		CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		\$	\$	\$	\$
3.	LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX
	Loss from ordinary activities before income tax expenses has
	been arrived at after charging/crediting the following items:
	(a) Expenses
	Cost of investments sold	12,000		12,000
	Cost of plant and equipment sold	3,480		1,980
	Exploration expenditure written off (refer Note 12)	736,644	39,711	109,598	39,500
	Provision for doubtful debts	75,807	6,345	1,394,956	76,636
	Depreciation of plant & equipment expensed	141,197	147,761	98,605	111,022
	Depreciation of plant & equipment capitalised to work in progress	725.432	1,285,288
	Net expense from movements in provision for employee entitlements	12.213	132,093	12,213	132,093
	Cost of sales	1,889,384	1,267,254
	(b) Revenues and net gains
	Net (gain)/loss on disposal of non-current assets	(782)	(7, 342)	(364)
	Net (gain)/loss on disposal of investments	(2,625)		(2,625)
4.	AUDITORS' REMUNERATION
	Audit services:
	Auditors of the Company	20,000	21,050	10,000	11,300
	Other services:
	Auditors of the Company	2,000	1,875	2,000	1,875
		22,000	22,925	12,000	13,175

The audit fees of the subsidiaries are borne by the parent entity.

			CONSOLIDATED		COMPANY
			2003 S	2002 Ŝ	2003 S	2002 \$
5.		ΤΑΧΑΤΙΟΝ
	(a)	Income tax expense
		Prima facie income tax expense calculated at 30% (2002:30%) on the loss from ordinary activities	(1,389,280)	(810,097)	(712, 825)	(394, 226)
		Increase in income tax expense due to: Permanent differences Decrease in income tax expense due to:	226,901	89,883	29,816	87,353
		Unbooked future tax benefit in respect of tax losses and timing differences	1,162,379	720,214	683,009	306,873
		Income tax expense attributable to operating profit

Income tax attributable to operating loss $(b)$

At 30 June 2003, the Company has unconfirmed estimated carry forward losses not brought to account of \$8,306,891 $(2002 - $5,218,123)$ .

The potential future income tax benefit arising from tax losses and timing differences has not been recognised as an asset because recovery is not virtually certain.

The potential future income tax benefit will only be obtained if:

• the Company derives future assessable income of a nature and an amount sufficient to enable the benefit to be $(i)$ realised, in accordance with the Income Tax Assessment Act 1997;
• the Company continues to comply with the conditions for deductibility imposed by the law; and $(ii)$
• no changes in tax legislation adversely affect the company in realising the benefit. $(iii)$

CONSOLIDATED 2003 2002

EARNINGS PER SHARE 6.

Weighted average number of ordinary shares used in the calculation of basic eamings per share

194, 156, 814 172,767,483

		CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		\$	\$	S	\$
7.	CASH ASSETS
	Current account	199,785	150,072	3,694	38,737
	At call	104,645	307,693	104,645	305,998
		304,430	457,765	108,339	344,735
	The weighted average interest rate at 30 June 2003 is 2.4% (2002-3.9%)
8.	RECEIVABLES
	Current
	Trade debtors	483,618	258,594
	Trade debtors (Tantalum Australia
	Operations Pty Ltd)			1,390,558	1,347,945
	Other debtors Loans to associated entities	26,186	969,806	21,708	958,554
	Provision for doubtful debts	(56, 850)	179,290 (179, 290)	5,797,547 (1,272,000)	4,059,516 (249, 581)
		452,954	1,228,400	5,937,813	6,116,434
	Non-current
	Bond term deposit*	631,253	645,831	580,223	594,800
		631,253	645,831	580,223	594,800
	*The bond term deposits represent cash deposits with BankWest and CBA fully secured by way of fixed charge in respect of environmental rehabilitation expenditure.
9.	INVENTORIES
	Current
	Raw materials - at cost	2,750	3,303
	Work in progress - at net realisable value	14,642	847,242
	Total inventories	17,392	850,545	$\tilde{\phantom{a}}$
	10. OTHER
	Current
	Drilling fund*	400,000	400,000	400,000	400,000
	Prepayments	6,584	4,946	6,584	4,946
	Listed shares, at cost		12,000		12,000
		406,584	416,946	406,584	416,946
	Non-current Drilling fund*	338,633	422,845	338,633	422,845
	Shares in other associated entities (refer note 20)			1,000	1,000
	Provision for diminution			(1,000)
		338,633	422,845	338,633	423,845

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003 (CONT.)

10. OTHER FINANCIAL ASSETS (CONT.)

1

*This represents a credit with Colby Corporation, which may be utilised over five years from 26 June 1998 to pay for future drilling expenditure (as defined). A Drilling Agreement was executed on 26 June 1998 between the Company and the drilling contractor. The terms and conditions of that agreement were negotiated by the former Administrator of the Company and Colby Corporation.

Under the Colby Agreement, Colby must within 24 days of receiving an operations notice commence carrying out drilling works specified in the notice subject to availability of suitable equipment. Colby shall not be obliged to carry out drilling works exceeding \$50,000 in value in any 30-day period. If at any time during the term of the Agreement, should the trading price of Tantalum Australia NL's shares be lower than 4 cents for a duration of one week, then Colby may suspend drilling works and any drilling undertaken in the resumption period is payable in cash by the Company.

In the event that the determined value of any drilling works performed during any 30 day period exceeds \$100,000 then shares are released from escrow to Colby out of the drilling fund to the value of \$100,000 and the balance is payable in cash within 7 days. Any amount payable beyond the due date will attract interest at the rate of 8% per annum. If the Drilling Fund has no shares to be released, the drilling works are payable in cash.

On 28 August 2002 Tantalum Australia Operations Pty Ltd extended the terms of the Drilling Agreement by an additional 24 months, with termination now on 26 April 2005.

	CONSOLIDATED		COMPANY
	2003	2002	2003	2002
	S	\$	S	\$
PROPERTY, PLANT AND EQUIPMENT
Freehold land at cost	87,322	87,322	87,322	87,322
Plant and equipment
At cost	2,938,724	2,898,368	576,850	578,830
Accumulated depreciation	(762.259)	(406.312)	(237.914)	(194, 196)
	2,176,465	2,492,056	338,936	384,634
Motor vehicle
At cost	67,966	67,966	37,511	37,511
Accumulated depreciation	(34, 251)	(23, 225)	(20, 780)	(14, 684)
	33,715	44,741	16,731	22,827
Office equipment
At cost	364,359	355,135	303,948	295,742
Accumulated depreciation	(227.998)	(166.633)	(192,958)	(146,145)
	136.361	188.502	110.990	149.597

		CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		\$	\$	\$	\$
11.	PROPERTY, PLANT AND EQUIPMENT (CONT.)
	Mining plant
	At cost	2,790,930	2,738,167
	Consolidation adjustment	(1, 173, 471)	(612, 689)
	Accumulated depreciation	(1,517,195)	(1,080,884)
		100,264	1,044,594
	Total property, plant and equipment at net book value	2,534,127	3,857,215	553,979	644,380
	Reconciliations
	Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below:
	Freehold land
	Carrying amount at beginning of year	87,322	87,322	87,322	87,322
	Additions
	Disposals
	Carrying amount at end of year	87,322	87,322	87,322	87,322
	Plant and equipment
	Carrying amount at beginning of year	2,492,056	391,180	384,634	391,180
	Additions	43,837	2,329,076		39,385
	Disposals	(3,480)		(1,980)
	Depreciation	(355, 948)	(228, 200)	(43, 718)	(45.931)
	Carrying amount at end of year	2,176,465	2,492,056	338,936	384,634
	Motor vehicles
	Carrying amount at beginning of year	44,741	30,691	22,827	30,691
	Additions		50,644
	Disposals		(24,090)
	Depreciation	(11, 026)	(12,504)	(6,096)	(7,864)
	Carrying amount at end of year	33,715	44,741	16,731	22,827
	Office equipment
	Carrying amount at beginning of year	188,502	116,948	149,597	116,947
	Additions	9,224	148,511	8,206	89,876
	Depreciation	(61, 365)	(76, 957)	(46, 813)	(57, 226)
	Carrying amount at end of year	136,361	188,502	110,990	149,597
	Mining plant
	Carrying amount at beginning of year	1,044,594
	Reduction due to consolidation adjustment	(560, 782)	(612, 689)
	Additions	52,763	2,738,167
	Depreciation	(436, 311)	(1,080,884)
	Carrying amount at end of year	100,264	1,044,594

		CONSOLIDATED		COMPANY
		2003	2002	2003	2002
		\$	\$	\$	S
12.	EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE
	Costs carried forward in respect of areas of interest in:
	Exploration and/or evaluation phase
	Balance brought forward	2,244,756	5,089,451	2,244,756	2,053,009
	Expenditure incurred during the period	468,664	231,458	402,400	231,247
	Consolidation adjustment	560,582	(3,036,442)
	Expenditure written off and down	(736, 644)	(39,711)	(109, 598)	(39, 500)
		2,537,358	2,244,756	2,537,558	2,244,756
	The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective arears.
13.	PAYABLES
	Trade creditors	1,158,088	847,230	903,312	390,449
	Other creditors and accruals	426,673	594,361	326,557	372,497
		1,584,761	1,441,591	1,229,869	762,946
14.	INTEREST-BEARING LIABILITIES
	Current
	Hire purchase (refer Note 19)	4,708	9,432	4,708
	Other loans	379,846		379,846
		384,554	9,432	384,554
	Non-Current
	Hire purchase (refer Note 19)		5,905
			5,905
15.	PROVISIONS
	Current
	Employee entitlements (refer Note 21)	182,403	177,894	182,403
		182,403	177,894	182,403
	Non-Curent				9,432 9,432 5,905 5,905 177,894 177,894
	Employee entitlements (refer Note 21)	49,792	42,088	49,792	42,088
	Environmental bonds	608,200	608,200	561,200	561,200

	CONSOLIDATED		COMPANY
	2003 \$	2002 Ŝ	2003 S	2002 \$
16. CONTRIBUTED EQUITY
Issued Capital Balance at the beginning of the financial year: 187,425,356 ordinary fully paid shares (2002: 172,384,150)	37, 351, 739	35,651,967	37,351,739	35,651,967
6,000,000 ordinary fully paid shares issued at 8 cents per share	480,000		480,000
2,533,307 ordinary fully paid shares issued at 6 cents per share pursuant to the company Share Purchase Plan	151,998		151,998
12,000,000 ordinary fully paid shares each issued at 5 cents per share	600,000		600,000
755,234 ordinary fully paid shares issued at 5 cents per share - KEMET Corporation	37,762		37,762
1,300,000 ordinary fully paid shares issued on payment of outstanding portion of contributing shares at 9.9 cents per share		128,700		128,700
1,000,000 ordinary fully paid shares from the exercise of director options at 20 cents per share		200,000		200,000
12,741,206 ordinary fully paid shares each issued at 11 cents per share		1,401,532		1,401,532
Less share issue costs	(64, 798)	(30, 460)	(64, 798)	(30, 460)
Balance at the end of the financial year: 208,713,897 ordinary fully paid shares (2002: 187,425,356).	38,556,701	37,351,739	38,556,701	37,351,739

Options on issue

3,250,000 director and executive options exercisable at
20 cents expiring on 31 March 2004

1,345,000 executive options exercisable at 25 cents, of
which 250,000 options expire on 28 February 2004, and 1,095,000 options expire on 28 February 2005.

			CONSOLIDATED		COMPANY
			2003	2002	2003	2002
			\$	\$	S	\$
	17. RETAINED LOSSES
	Retained losses at beginning of year		(29,512,546)	(26, 812, 222)	(28, 125, 308)	(26, 811, 222)
	Net loss attributable to members of the parent entity Deconsolidation of subsidiary		(4,705,744) 74,810	(2,700,324)	(2,376,082)	(1,314,086)
	Retained losses at the end of the year		(34, 143, 480)	(29, 512, 546)	(30, 501, 390)	(28, 125, 308)
	18. TOTAL EQUITY RECONCILIATION
	Total equity at beginning of year		7,839,193	8,839,745	9,226,431	8,840,745
	Total changes in parent and economic entity interest in
	equity recognised in statement of financial		(4,630,934)	(2,700,324)	(2,376,082)	(1,314,086)
	performance
	Transactions with owners as owners:
	Contributions of equity		1,204,962	1,699,772	1,204,962	1,699,772
	Total equity at end of year		4,413,221	7,839,193	8,055,311	9,226,431
19.	COMMITMENTS
$\left( i\right)$	Finance lease commitments
	Payable:
	Not later than one year		4,708	11,472	4,708	11,472
	Later than one year or later and no later than five
	year			4,798		4,798
	Later than five years		4,708	16,270	4,708	16,270
	Less future interest charges		(125)	(933)	(125)	(933)
	Total lease liability	14	4,583	15,337	4,583	15,337
(ii)	Exploration expenditure commitments
	In order to maintain current rights of tenure to exploration
	tenements, the Company and the consolidated entity are
	required to perform minimum exploration work to meet
	the minimum expenditure requirements specified by
	various State governments. These obligations are
	subject to renegotiation when application for a mining
	lease is made and at other times. These obligations are
	not provided for in the financial report and are payable:		448,000	440,000	188,200	50,000
	Within one year One year or later and no later than five years		1,100,000	1,700,000	188,200	200,000
	Later than five years		1,950,000	1,950,000
			3,498,000	4,090,000	376,400	250,000
(iii)	Research and development commitments
	Contracted but not provided for and payable:
	Within one year		80,700	335,000
	One year or later and no later than five years		146,800		146,800
	Later than five years
			227,500	335,000	227,500

Upon execution of a Licencing Agreement with Boston University, the Company will be obliged to issue 750,000 ordinary shares to Boston University.

			CONSOLIDATED	ORDINARY SHARE CONSOLIDATED ENTITY INTEREST	COMPANY
			2003 %	2002 %	2003 %	2002 $\%$
20.		CONTROLLED ENTITIES
	(a)	Particulars relation to controlled entities
		Controlled entities Broad Arrow Mill Pty Ltd Tantalum Australia Operations Pty Ltd Savannah Gold NL	100 100 ΝiΙ	100 100 100	100 100 Nil	100 100 100
		Associated entities WirelessNet Pty Ltd	37	37	37	37

Notes

• Tantalum Australia Operations Pty Ltd ("TA") was incorporated in Australia on 9 November 2000. Tantalum Australia $\left( i\right)$ Operations Pty Ltd's principal activities during the year were to fund, develop and operate tantalum investments.
• On 11 April 2001, Tantalum Australia Operations Pty Ltd issued 1,000 ordinary fully paid shares for a consideration of $(ii)$ \$10,000 per share thereby diluting Tantalum Australia NL interest from 100% equity interest to 50% equity interest.
• On 3 January 2002, Tantalum Australia NL announced a buy-back of KEMET's 50% equity interest in Tantalum $(iii)$ Australia Operations Pty Ltd, thereby increasing Tantalum Australia NL interest from 50% to 100% equity interest effective from 20 February 2002.
• WirelessNet Pty Ltd was established to take advantage of the opportunities in the technology market. The total $(iv)$ investment cost for WirelessNet Pty Ltd was \$179,290 and this has been written down to nil value.
• $(v)$ Savannah Gold NL was established to acquire the gold assets of Tantalum Australia NL, to raise capital and seek admission to the official list of the Australian Stock Exchange, these shares were distributed in specie to the Shareholders of Tantalum Australia NL. On 4 April 2003Tantalum Australia NL announced it was not proceeding with the listing of Savannah Gold NL and has been deconsolidated from the group accounts.

	CONSOLIDATED		COMPANY
	2003	2002	2003	2002
	Ŝ	S
21. EMPLOYEE ENTITLEMENTS
Aggregate liability for employee entitlements, including on-costs:
Current	182,403	177,894	182,403	177,894
Non-current	49,792	42,088	49,792	42,088
	232,195	219,982	232,195	219,982

21. EMPLOYEE ENTITLEMENTS (CONT.)

.	CONSOLIDATED		COMPANY
	2003	2002	2003	2002
Number of employees Number of employees at year end		41	23

Superannuation plans

$(a)$

Cash assets

The group contributes to superannuation for employees in accordance with Government Superannuation Guarantee Legislation. The economic entity has no obligation to meet any shortfall in the superannuation fund's obligations to provide benefits to employees on retirement.

		CONSOLIDATED		COMPANY
		2003 S	2002 S	2003 Ŝ	2002 \$
	Details of contributions to the accumulation plans during the year and contributions payable at 30 June 2003 are as follows:
	Employer contributions to the plans Employer contributions payable to the plans at	2.605	141.843	2.605	141,843
	balance date	153.661	42.735	153.661	42.735
22.	NOTES TO THE STATEMENT OF CASH FLOWS
(a)	Reconciliation of cash For the purpose of the statement of cash flows, cash includes cash on hand and at bank and short term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statement of financial position as follows:

304,430

457,766

108,339

344,735

22. NOTES TO THE STATEMENT OF CASH FLOWS $(CONT.)$

(b) Reconciliation of profit from ordinary activities after income tax to net cash provided by operating activities

Profit/Loss from ordinary activities after income tax	(4,630,934)	(2.700.324)	(2,376,082)	(1,314,086)
Add/(Less) items classified as investment/financing
activities:
(Profit)/loss on sale of non-current assets	(781)	(7, 342)	(364)
(Profit)/Loss on sale of investments	(2,625)		(2,625)
Add/Less non-cash ifems:
Amounts set aside to provisions	12,213	132,093	12,213	132,093
Depreciation	864,650	1,433,049	96.626	111,022
Exploration expenditure written off/down	736,644	39,711	109,598	39,500
Recognition of future rehabilitation mining costs		217,000		217,000
Shares of associates' and joint venture entities' net		(1,000)
Provision for diminution in investments			1,000
Adjustment due to deconsolidation of associate	(74, 810)
Provision for doubtful debts	516	6,345	1,215,666	76,636
Net cash provided by operating activities before
change in assets and liabilities	(3.095.127)	(880.468)	(943, 968)	(737, 835)
Change in assets and liabilities adjusted for effects of purchase and disposal of controlled entities during the
financial year:
(Increase)/decrease in other assets	(1,638)	(3,946)	(1,638)	(4,946)
(Increase)/decrease in trade/term debtors	848,241	706,516	1,066,491	(371, 581)
	833,153	(850, 545)
(Increase)/decrease in inventory			478.000	308.833
(Decrease)/increase in accounts payable	155,747	1,034,478
Increase/(decrease) in loans from associate		917,600	(2, 103, 535)	(2,962,626)
	(1,259,624)	923,635	(1.504.650)	(3,768,155)

	CONSOLIDATED		COMPANY
	2003 S	2002 S	2003 S	2002 \$
23. DIRECTORS' REMUNERATION
Directors' remuneration
$0 - $9,999$ \$ $10,000 - $19,999$ \$ $$30,000 - $39,999$ $$70,000 - $79,999$ $$80,000 - $89,999$ $$150,000 - $159,999$ \$170,000 - \$179,999		3		3
$$210,000$ - \$219,999
Total remuneration paid or payable, or otherwise made available, to all directors from the Company or any related party	257,520	330,080	257,520	330,080

Directors' remuneration includes unlisted share options and an allocation of insurance premiums paid by the Company or related parties in respect of directors' and officers' liabilities and legal expenses' insurance contracts, in accordance with common commercial practice.

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate.

The amounts disclosed for remuneration of directors include the assessed fair values at the date they were granted of options granted to directors during the year ended 30 June 2002. Fair values have been assessed using the Black-Scholes option pricing model. Factors taken into account by this model include the exercise price, the term of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

There were no superannuation or retirement benefits paid on behalf of the directors during the financial year, all directors fees are inclusive of superannuation.

Executive's remuneration

	CONSOLIDATED		COMPANY
	2003	2002	2003	2002
The number of executives whose remuneration from the Company or any related party falls within the following bands:
$$130,000 - $139,999$ $$140,000 - $149,999$

	CONSOLIDATED		COMPANY
	2003	2002	2003 e	2002
23. DIRECTORS' REMUNERATION (CONT.)
Executives' remuneration (cont.)
Total remuneration paid or payable, or otherwise made available, to all directors from the Company or any related party	160,263	278,768	160,263	278,768

Executive's remuneration includes unlisted share options and superannuation.

One executive has 500,000 unlisted options exercisable at 20 cents on or before 31 March 2004.

The other executive was granted 1,000,000 unlisted employee incentive options exercisable at 25 cents of which 500,000 are exercisable on or before 28 February 2003 which have now lapsed, 250,000 are exercisable on or before 28 February 2004, and 250,000 are exercisable on or before 28 February 2005. No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate.

The amounts disclosed for remuneration of executives include the assessed fair values at the date they were granted of options granted to executives during the year ended 30 June 2002. Fair values have been assessed using the Black-Scholes option pricing model. Factors taken into account by this model include the exercise price, the term of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

24. RELATED PARTIES

Directors

The names of each person holding the position of director of the Company during the financial year are Messrs, M G Fotios, T J King, K Robinson, HL Crowley (resigned 28 April 2003), Ms A S A Sebi and DA Reynolds (appointed 28 April 2003).

Mr HL Crowley was senior vice president of KEMET Corporation, the previous other equity investor in Tantalum Australia Pty Ltd. Mr D Reynolds is manager of KEMET's anode manufacturing facility in Simpsonville South Caroliner.

Apart from the details disclosed in this note, no director has entered into a material contract with the Company since the end of the previous financial year and there were no material contracts involving directors' interests subsisting at year end.

Loans to directors

No loans were made to directors during the year.

24.	RELATED PARTIES (CONT.)
		2003	2002
	Directors' shareholdings
	The number of shares and options of the Company acquired or disposed of by directors
	of the Company and their director-related entities during the year are:
	Acquisitions $-$ Ordinary shares	333.330	3,365,308
	Acquisitions - Options
	Disposals - Ordinary shares
	Disposals - Contributing shares		585,000
		No. held 2003	No. held 2002
	The relevant interests of directors and their director-related entities in shares and
	options of the company at year end are:
	Ordinary shares	11,221,145	13,229,605
	Options	1,500.000	2,000,000

The equity held by Mr Kim Robinson, who resigned effective of 1 July 2003, is not included in the 2003 Directors' holdings. They are however included in the 2002 Directors' holdings.

Loans from directors and director related entities

Loan facility agreements were entered into with the following directors:

Director	Facility	Loans Advanced	Accrued Interest	Interest Rate
M Fotios	\$225,000	\$108.768	\$2,932	7.5%
K Robinson	\$375,000	\$260,000	\$4.281	7.5%

Other transactions of director and director related entities

Payments for geological, management services and the provisions of commercial vehicle to MG Fotios & Associates Pty Ltd, a company in which Mr MG Fotios has a beneficial interest amount to \$155,000 were paid by Tantalum Australia NL, of which \$77,500 has been recharged to Tantalum Australia Operations Pty Ltd. These payments were made on normal commercial terms.

Mr G Fotios (father) was paid \$39,480 by Tantalum Australia NL during the year for services provided which has been recharged to Tantalum Australia Operations Pty Ltd. Mrs N Smith (mother-in-law) was paid \$13,000 for cleaning services, of which \$6,500 has been recharged to Tantalum Australia Operations Pty Ltd. All payments have been based on normal commercial terms and conditions.

Mr TJ King was paid a total of \$37,520 for corporate and accounting services. These payments have been based on normal commercial terms and conditions.

25. SEGMENT REPORTING

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income-earning assets and revenue, interest bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

SEGMENT REPORTING (CONT.) 25.

Business segments

The consolidated entity comprises the following main business segments, based on the consolidated entity's management reporting system.

Gold	Exploration
Tantalum	Exploration, development & mining of tantalum

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

The consolidated entity's business segments operate geographically as follows:

Australia	Operating facilities and head office
Thailand	Customer for tantalum

	Gold Tantalum		Other		Eliminations		Consolidated
Primary reporting	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002
Business segments	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Revenue
External segment revenue			1,819	1,293					1,819	1,293
Inter-segment revenue
Total segment revenue Other unallocated revenue			1,819	1,293					1,819	1,293
Total revenue									445 2,264	247 1,540
Result
Segment result			(3,000)	(1,260)					(3,000)	(1, 260)
Share of net profit or loss/result of equity accounted investments
Unallocated corporate expenses									(1,531)	(1, 441)
Loss from ordinary activities before income tax									(4,631)	(2,701)
Income tax expense
Loss from ordinary activities after income tax									(4,631)	(2,701)
Extraordinary items after tax									$\overline{\phantom{a}}$
Net profit									(4,631)	(2,701)
Depreciation and amortisation	44	46	767	1,268	56	85			867	1,399
Non-cash expenses other than depreciation and amortisation	26	257			117	130			143	387
Individually significant items
Inventory write-down			2,204	1,797					2,204	1,797
Assets
Segment assets	3,958	4,305	3,128	4,114					7,086	8,419
Equity accounted investments
Unallocated corporate assets									137	1,705
Consolidated total assets									7,223	10,124
Liabilities
Segment liabilities	561	561	47	47	50				658	658
Unallocated corporate liabilities									2,202	1,677
Consolidated total liabilities									2,810	2,285
Acquisitions of non-current assets	8	39	98	2,864		99			106	3,002

	Thailand Australasia			Other		Consolidated
Secondary reporting	2003	2002	2003	2002	2003	2002	2003	2002
Geographical segments	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
External segment revenue by location of customers	,819			1,293			1.819	,293

	Western Australia		Victoria		Queensland		Other		Consolidated
	2003 2002		2003 2002		2003	2002	2003	2002	2003	2002
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	000'	\$'000	\$'000	\$'000
Segment assets by location of assets	6,846	9,182	328	312	49				7.223	10,124
Acquisitions of non-current assets	106	3,002							106	3.002

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003 (CONT.)

EVENTS SUBSEQUENT TO BALANCE DATE 26.

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 affect significantly the operations of the Company, the results of those operations, or the state of affairs in the Company in future financial years other than:

• 1. On 31 July 2003, the Company announced that it had exercised its option to enter into a Licencing Agreement with Boston University for the worldwide rights over its SOM and related technologies:
• 1. On 15 August 2003, the Company announced gold assay results from its drilling programme carried out at Iron Duke in the Norseman Project:
• 1. On 18 August 2003, the Company announced that Boston University had been successful in extracting metal directly from tantalum concentrate using its SOM technology;
• 1. On 21 August and 3 September 2003, the Company announced final gold assay results of its drilling programme at Iron Duke in the Norseman Project; and
• 1. On 1 September 2003 the Company announced that it had placed 11,781,481 ordinary fully paid shares at an issue price of 9 cents per share. This issue was partly underwritten at a cost of \$40,965.

27. FINANCIAL INSTRUMENTS DISCLOSURE

Interest rate risk exposure

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

FIXED INTEREST MATURING IN:

	Note	Weighted average interest rate	Floating interest rate	1 Year or less	1 to 5 years	more than 5 years	Non- interest bearing	Total
2003
Financial assets
Cash assets	7	2.5%	304,430					304,430
Receivables	8	à.					452,954	452,954
			304,430	$\ddot{\phantom{0}}$	$\ddot{\phantom{0}}$	٠	452,954	757,384
Financial liabilities
Payables	13						1,584,761	1,584,761
Interest-bearing liabilities	14	7.5%		384,554				384,554
			$\ddot{\phantom{a}}$	384,554	$\tilde{\phantom{a}}$	$\blacksquare$	1,584,761	1,969,315
2002
Financial assets
Cash assets	7	3.9%	457,765					457,765
Receivables	8			$\ddot{\phantom{0}}$	$\blacksquare$		1,228,400	1,228,400
			457,765		$\blacksquare$	٠	1,228,400	1,686,165
Financial liabilities
Payables	13	$\blacksquare$					1,441,591	1,441,591
Interest-bearing liabilities	14	8.1%		9,432	5,905			15,337
			$\blacksquare$	9,432	5,905	×.	1,441,591	1,456,928

$27.$ FINANCIAL INSTRUMENTS DISCLOSURE (CONT.)

Credit risk exposures

The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts.

Net fair values of financial assets and liabilities

For all assets and liabilities the net fair value approximates their carrying value.

CONTINGENT ASSET 28.

A controlled entity will submit a claim for a R&D tax concession with Auslndustry for its tantalite processing project.

The contingent asset has not been recognised as a receivable at 30 June 2003