PRODIGY GOLD NL — Annual Report 2005

Oct 26, 2005

CORPORATE DIRECTORY

Directors

Mr Imants Kins Mr Timothy King Mr David Reynolds Ms Sasya Sebi

Secretary

Mr Timothy King

Auditors

Grant Thornton 256 St Georges Tce Perth WA 6001

Bankers

Commonwealth Bank of Australia Head Office, 150 St Georges Tce 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 King Park Road West Perth WA 6005

Stock Exchange

Australian Stock Exchange Limited Code: TAA

Registered Office

24 Mumford Place Balcatta WA 6021

Principle Office

24 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

24 Mumford Place Balcatta WA 6021

CONTENTS

Chairman's report	1
Managing directors' review of operations	$\overline{2}$
Summary of mining tenements and areas of interest	4
Directors' report	6
Corporate governance statement	14
Statement of financial performance	18
Statement of financial position	19
Statement of cash flows	20
Notes to the financial statements	22
Directors' declaration	50
Independent audit report	51
Auditors' independence declaration	53
Additional information for listed public companies	54

Dear Shareholder,

The 2004 year proved to be a disappointing year for the Company. Its strategy of moving to become a significant operator in the tantalum industry through the development of Australian and African tantalum projects, and/or purchasing tantalum through the African supply chain has not been successful during the year. This has been due largely to a combination of weak tantalum prices, ongoing sourcing, logistical and access issues in establishing the African tantalum supply chain, as well as difficulty in maintaining the high cost structure during the development stages of these strategies.

The Company has therefore moved to reduce its cost structure, and commence a review of its activities. particularly in relation to the tantalum business, to determine the best way to create shareholder value within a reasonable time frame with the focus areas, expertise and resources currently available to it. This review process is expected to take up to three months.

During the year the Company entered into an agreement with Accent Resources NL for the sale of its gold interests, subject to Accent completing a capital raising and listing on ASX. This process was completed subsequent to year end, resulting in proceeds of \$1 million in cash and Tantalum having a 19% interest in Accent.

The Company's preliminary test work on oxidized Brockman ore was successful in producing a low grade tantalum/niobium concentrate. Further test work directed towards identifying a viable flow sheet is expected to be conducted during the current financial year.

Tantalum entered into a Joint Venture agreement with Great Gold NL in April 2005 in respect of the Eravinia base metal project, and subsequent drilling has provided encouragement for further exploration.

During the year the Company sold surplus equipment, including the camps at both Dalgaranga and Gascoyne, and as part of the review in process will determine whether the remaining plant is best realised by sale or other use.

Following its internal evaluation processes, the Board determined that the activities review will be best handled by its former Business Development Manager, Mr Imants Kins, and accordingly moved to appoint him as Managing Director. Mr Michael Fotios will move to take on a consulting role to Tantalum. Mr Peter Farrah. Tantalum's long time Company Secretary, has resigned to take up his role as Managing Director of Accent Resources NL.

I would like to thank them for their contributions over many years, and welcome Imants in his new role as Managing Director.

Timothy King

Chairman

INTRODUCTION

During the year the focus remained on developing the company's tantalum concentrate supply business despite the tantalum market softening after having earlier in the year shown signs of improvement. The company sold its Norseman, Meekatharra, Mt Gibson and Clermont gold projects to Accent Resources NL whilst retaining the Brockman. Mt Deans. Binneringie and Gascoyne tantalum projects. The Erayinia base metals joint venture with Great Gold NL was initiated and will be the focus of future exploration activity.

TANTALUM MARKET OVERVIEW

Global electronics end user demand is the key driver of the tantalum concentrate market. Electronics demand consumes an estimated 60% of production with the aerospace sector consuming and estimated 25% of production. The remainder is consumed by non-corrosive inert equipment made for industrial, chemical, medical and pharmaceutical sectors.

While the electronics sector continued to grow in absolute terms during the 12 months the growth rate declined. Demand in the aerospace sector did rise as was predicted in the 2004 Annual Report. The increased orders by Airbus and Boeing going out to 2007, has been the catalyst for the rise in demand for tantalum metal. However given the large inventories held across the supply chain prices for tantalum concentrates did not rise. Prices for tantalum concentrate plateaued during the vear at an average price of around US\$28-35/lb depending on grade. As the year progressed the growth rate in the electronics sector has continued to decline. This was reflected in less that positive forecasts of demand by various players in electronics sector in their quarterly reports during the vear.

Large sales of tantalum products by the US Department of Logistics Agency (DLA/DSNC) from the US Strategic Reserve Stockpile played its part in putting a ceiling on any price movements in the market. For example a significant part of the tantalum concentrates where sold at an estimated US\$17/lb contained Ta2O5.

While Tantalum Australia had sales contracts in place during the year it was unable to secure economically viable material from either Australia or Africa to supply into these contracts. A small amount was sold into the contracts from the processing of tailings at its Balcatta dressing plant of previous production from its Dalgaranga plant.

An agreement was reached with a fantalum metal producer and Tantalum Australia's metal customer to begin production trials to qualify the new tantalum metal producer. A quantity of tantalum metal was purchased by Tantalum Australia for sale to the tantalum metal customer. The production trial was programmed to take place in July 2005.

EXPLORATION

Tantalum

Exploration focussed on collection of bulk samples from Mt Deans (TAA 100%), Binneringie (TAA 100%) and Brockman (TAA earning 78%) for processing and assessment at the Balcatta mineral dressing facility. Drilling data was collated from previous programs to allow interpretation and planning for any future follow up work.

After completion of field assessment of government owned tantalum concessions in Africa, containing significant pegmatite hosted tantalum mineralisation and artisanal production activity, a joint venture proposal and business plan was submitted for review. A request was received for a revised proposal which was lodged early in October with a decision expected by 30 October 2005.

Gold

The Norseman (excluding the plant site and associated mining lease), Meekatharra, Mt Gibson and Clermont projects were sold to Accent Resources NL for a consideration of \$2.5 million consisting of \$1 million in cash and 7.5 million 20 cent shares in Accent representing about 19.3% holding. It was decided that this was the best way to extract the maximum value from the assets whilst ensuring there was adequate funding in place to advance the projects. Accent was listed on the ASX Friday 26 August 2005.

Base Metals

A joint venture agreement with Great Gold Mines NL was concluded during April 2005 whereby the Company can earn an 80% interest in the Erayinia Project located about 130 kilometres east south east of Kalgoorlie, Western Australia, The Eravinia project is situated within the poorly outcropping Eravinia greenstone belt which is located at the extreme (south) east of the Yilgam Block adiacent to the Albany-Fraser tectonic zone. TAA is targeting Archaean volcanic-hosted massive base metal sulphide (VMS) deposits and pegmatite hosted tantalum-niobium-fin mineralisation.

Previous exploration at the project during the early 1990's identified a number of magnetic anomalies thought to be related to VMS mineralisation. Subsequent Em and RC drill testing of the southernmost anomaly intersected massive sulphides containing up to 2% zinc over a 2 to 3 metre interval down hole. Follow up drilling by TAA during August 2005 confirmed the mineralisation and recorded the following significant intercepts:

• ERC14 7 metres of 4.38 % Zn. 0.28% Pb and 31 ppm Ag Incl. 1 metre of 8.40% Zn, 0.86% Pb, 93 a/t Aa and 0.16 a/t Au
• ERC17 3 metres of 2.19 % Zn, 0.27% Pb and 18.7 ppm Ag
• ERC21 4 metres of 1.75 % Zn, 0.12% Pb and 18.8 ppm Ag
• ERC23 1 metre of 1.24% Cu.1.11% Zn. 0.13%Pb, 29 g/t Ag and 1.65 g/t Au

A detailed summary the results was released to the ASX on 29 September 2005. Planning is underway for follow up down hole EM, surface TEM surveys and RC/diamond drilling.

MINING OPERATIONS

The processing plants at Dalgaranga and Gascoyne remained on care and maintenance pending a decision on utilisation or sale of the equipment. The Balcatta Mineral dressing facility was utilised for processing of concentrate received from Africa and treatment of bulk samples from Brockman and Binneringie.

The Brockman test work confirmed that a mineral concentrate containing up to 60% of the contained tantalum and niobium oxides could be produced and has provided sufficient encouragement to proceed with a staged detailed metallurgical program. Samples of concentrate produced from the Binneringie bulk samples were provided to potential Japanese customer for assessment as a precursor to supply contract discussions.

RESEARCH AND DEVELOPMENT - Boston University

Stage 2 of the SOM R&D program was under review during the year. Tantalum Australia and Boston University are in discussions regarding the SOM License and related R&D activities.

SUMMARY OF MINING TENEMENTS AND AREAS OF INTEREST

Areas of interest	Tenements	Economic Entity's Interest	Joint Venture Partners
WESTERN AUSTRALIA
Broads Dam	G16/11	100	Kinross Option
	G16/12	100	Kinross Option
	G16/13	100	Kinross Option
	G16/14	100	Kinross Option
	M16/88	100	Kinross Option
Dalgaranga	M59/106	100
	MLA59/553	100
	MLA59/554	100
Meekatharra	*E51/319	100
	*E51/361	100
	*MLA51/691	100	formerly E51/319
	*MLA51/692	100	formerly E51/319
	*MLA51/693	100	formerly E51/319
	*MLA51/708	100	formerly E51/324
	*MLA51/701	100	formerly E51/361
	*MLA51/702	100	formerly E51/361
	*ELA51/984	100
	*ELA51/985	100
	*ELA51/1012	100
	ELA51/1018 E51/290	100 81	{Murchison Resources Pty Ltd}
	*MLA51/695	81	formerly E51/408
	*MLA51/696	81	formerly E51/408
	*MLA51/697	81	formerly E51/409
	*MLA51/689	81	formerly E51/290
	*MLA51/690	81	formerly E51/290
Mt Gibson South	*ELA59/875	80	Mawson West
	*ELA59/876	80	Mawson West
	*ELA59/890	80	Mawson West
Norseman	L63/46	100
	*P63/719	100
	*P63/749	100
	*P63/798	100
	*P63/799	100
	*P63/801	100
	*P63/911 M63/172	100 100
	*M63/225	100
	*M63/226	100
	*M63/247	100
	*M63/262	100
	*M63/229	100
	*MLA63/369	100	Formerly P63/749
	*MLA63/347	100	Formerly P63/719
	*MLA63/375	100	Formerly P63/801
	*MLA63/376	100	Formerly P63/798
	*MLA63/377	100	Formerly P63/799
	*MLA63/475	100	Formerly P63/911

As at 30 June 2005

Areas of interest	Tenements	Economic Entity's Interest	Joint Venture Partners
Binneringie	M15/217	100
	M15/468	100
Mt Deans	P63/758	100
	P63/945	100
	P63/946	100
	P63/947	100
	P63/948	100
	P63/949	100
	P63/950	100
	MLA63/397	100	Formerly P63/740,741,758
	MLA63/513	100	Formerly P63/945 - 950
	MLA63/541	100	Formerly P63/1074,1075
Gascoyne	ELA09/1136	100
	ELA09/1137	100
	M09/62	100
	M09/75	100
	EL09/1047	100
	PLA09/417	100
Brockman	MLA80/509	78	Brockman Minerals Pty Ltd
	MLA80/510	78	and Aztec Resources Limited
QUEENSLAND
Clermont	*EPM14962	100	application
	*MDL103	100
	*MDL106	100
	*MDL143	100
ERAYINIA	E28/912	$\bf{0}$	Great Gold Mines NL
	E28/1228	$\overline{0}$	Great Gold Mines NL

SUMMARY OF MINING TENEMENTS AND AREAS OF INTEREST (CONT.)

* These tenements are the subject of agreements with Accent Resources NL for the sale or other disposal of the tenements. The agreements are conditional on Accent completing a capital raising and listing on ASX. These conditions were satisfied after 30 June 2005.

DIRECTORS' REPORT

The directors present their report together with the financial report of Tantalum Australia NL ("parent entity" or "the company") and of the economic entity, being the parent entity and its controlled entities, for the year ended 30 June 2005 and the auditor's report thereon.

Directors

The names of directors in office at any time during or since the end of the year are:

Mr Michael George Fotios

Mr Timothy John King

Ms Sasva Sebi

Mr David Reynolds

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Company Secretary

The following person held the position of Company Secretary at the end of the financial year:

Mr Peter Farrah - Mr Peter Farrah has been involved in the management and administration of public companies since 1985. He has held numerous posts as Company Secretary, CEO and CFO of publicly listed companies over a period of almost 20 vears.

Mr Peter Farrah was appointed Company Secretary of Tantalum Australia NL in 1992.

Principal Activities

The principal activities of the economic entity during the financial year were the continued active exploration, evaluation and development programs on its tantalum projects.

During the year the parent entity entered into a conditional sale agreement for the sale of its gold interests to Accent Resources NL. Apart from the parent entity's decision to sell its gold operations, and the related winding down of these activities, there were no significant changes in the nature of the economic entity's principal activities during the financial vear.

Operating Results

The consolidated loss of the economic entity for the year ended 30 June 2005 amounted to (\$4,375,121) (2004: loss of \$2,987,102).

Dividends

There were no dividends paid or declared during the year.

Financial Position

The net assets of the economic entity have decreased by \$ 2,567,742 from 30 June 2004 to \$ 4,097,587 in 2005. This decrease has largely resulted from the following factors:

• Inability to source African concentrate to generate revenue to support the cost structure leading to operating losses: and
• an extensive write down of property plant and equipment as well as exploration, evaluation and development expenditure to reflect current recoverable values

Significant Changes in the State of Affairs

The following significant changes in the state of affairs of the economic entity occurred during the financial year:

• In July 2004, the holding company issued 25,352,956 ordinary shares at \$0.06 to raise net proceeds of $(i)$ \$1,417,379.
• $(ii)$ In February 2005, the parent entity granted an option to Accent Resources NL for a fee of \$25,000, to acquire its gold interests for the following consideration:
• $\mathbf{1}$ . \$250,000 non-refundable cash deposit (including the option fee paid):
• $2.$ \$750,000 cash payment, and the issue of 7.5 million shares in Accent, subject to completing a listing of Accent on ASX:

The option was exercised in March 2005, and the balance of the option fee paid. Provided Accent completed the ASX listing, TAA also expected to participate in a pro-rata issue of options to all Accent shareholders holding shares 4 months after listing, on a one for two basis at an issues price of \$0.01 per option.

• $(iii)$ During the second half of the financial year, the economic entity sold certain items of mining and related plant and equipment, and has been negotiating the sale of additional items, which are considered to be surplus to requirements.
• $(iv)$ On 3 June 2005, the parent entity lodged a prospectus to raise up to \$2,140,368 from the issue of up to 142.691.251 shares at \$0.015 per share.

Review of Operations

During the year the economic entity focused on the development of its tantalum business, the Brockman Rare Metal/Earth project, and the Erayinia base metal project. In addition, agreements were entered into for the sale of the gold assets to Accent Resources NL, as outlined earlier in this report.

The first half of the year saw world tantalum pentoxide concentrate prices maintain an upward trend toward \$US40/lb, however during calendar 2005 the market reached a plateau and has since fallen back to a range between \$US30 and 35/lb. Considerable difficulties were experienced in sourcing concentrate through the African supply chain, with the first shipment eventually being received for processing at the economic entity's Balcatta plant in the second half of the year. RC drilling at Mt Deans identified further extensions to the Western Lode system of pegmatites. Further, a review and evaluation of African tantalum projects continued during the year. A strategic review of the company's tantalum business is currently in process to reduce costs and to identify the areas of focus given the current world market pricing and dynamics.

Preliminary metallurgical test work on oxidized Brockman ore was successful in producing a low grade tantalum/niobium gravity concentrate and has provided encouragement for further test work aimed at identifying a flow sheet that would have the potential to produce a saleable concentrate.

The Erayinia base metals JV with Great Gold NL (TAA earning 80%) was completed during April 2005, and recent drilling at the project has confirmed the presence of Archaean Volcanogenic Massive Sulphide mineralization at relatively shallow depth. Follow up geophysics and RC/diamond drilling is planned as this project becomes one of the economic entity's key exploration projects during the coming year.

The company's surplus plant and equipment has been earmarked for sale and the camps at both Dalgaranga and Gascoyne were sold during the year. Given the strong development phase in the local mining industry, interest has been shown in a number of other plant assets and discussions are continuing with interested parties.

Events Subsequent to Report Date

The following matters or circumstances arose since the end of the financial year which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years:

• The Parent entity completed a partially underwritten rights issue, pursuant to which the holding company issued $(i)$ 120,112,228 shares at \$0.015 to raise gross proceeds of \$1,801,683;
• $(ii)$ Accent Resources NL satisfied the conditions required for the completion of its purchase of the parent entity's gold assets, and subsequently settled on the acquisition of these interests;
• $(iii)$ In July 2005, the board commenced a strategic review of its tantalum business, to ascertain whether the ongoing cost structure should be maintained having regard to the prospects for the business, risk profile and industry outlook. The associated staff and senior management requirements are included in this review.

The financial effects of these events have not been brought to account in the Financial Report for the year ended 30 June 2005

Except for the above, no other matters or circumstances have arisen since the end of the financial vear which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial vears.

Future Developments

The outcome of the review of the tantalum business may result in the rationalisation or cessation of certain tantalum activities in the future, allowing the economic entity to reduce costs and to focus on the strategic direction that the board considers is most likely to generate shareholder wealth.

The strategic direction is likely to involve additional exploration activities on the prospective Erayinia project and further assessment of the prospectivity of the Brockman project, and seeking other prospective resource projects.

Environmental Issues

The economic entity's operations are subject to significant environmental regulation under the law of the Commonwealth and State. The economic entity monitors its compliance with environmental regulations on an ongoing basis. The Directors are not aware of any significant breaches during the period covered by this report.

Information on Directors

The relevant qualifications and experience of the economic entity's directors are set out in the following table:

Executive Chairman	Mr King is a Chartered Accountant with over 25 years experience in corporate finance, accounting and taxation. He has a B.Com from the University of WA, and a
	Graduate Diploma in Applied Finance from the Securities Institute of Australia. Formerly a partner with a West Perth accounting firm, Mr King is a director of the listed public companies Sphere Investments Limited (since prior to 1 July 2002), Legend Corporation Ltd (since 16 February 2004) and Reclaim Industries Limited (since prior to 1 July 2002). Mr King was a director of the listed public company Western Areas NL from 28 July 2000 to 28 April 2005. 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, the Institute of Company Directors and the Taxation Institute of Australia.
	Mr Fotios is currently the Managing Director of Tantalum Australia NL. He has a BSc (Hons) majoring in geology from University of WA. Over the last 23 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 Economic entity since 1992.
	Directorships in other listed entities - none.
	Ms Sebi has 8 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
	Directorships in other listed entities - none.
	Mr Reynolds is Manager of KEMET's Anode Manufacturing facility in Simpsonville South Carolina, USA. He has spent over 27 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 Centre) Executive Committee since 2001. He has a BS degree from the University of South Carolina. Directorships in other listed entities - none.
Non- Non-	Managing Director Executive Director Executive Director

The Board considers that the economic entity is not yet of a size to warrant creating a separate audit committee.

Directors' Interests

As at the date of this report, the direct and indirect interests of the Directors in the Economic entity were:

	Fully paid ordinary shares
Timothy J King	36,254,158
Michael Fotios	20.940.178
David Reynolds	0
Sasya Ahmad	0

REMUNERATION REPORT

This report details the nature and amount of remuneration for each director of Tantalum Australia NL and for the executives receiving the highest remuneration.

Remuneration Policy

The remuneration policy of Tantalum Australia NL has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the economic entity's financial results. The board of Tantalum Australia NL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the economic entity, as well as create goal congruence between directors. executives and shareholders.

The board's policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is as follows:

• The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the board.
• All executives receive a base salary (which is based on factors such as length of service and experience). $\bullet$ superannuation, fringe benefits, options and performance incentives.
• The board reviews executive packages annually by reference to the economic entity's performance, and the $\bullet$ executive's performance.

The performance of executives is measured against criteria agreed annually with each executive and is based predominantly on the growth in shareholders' value. All bonuses and incentives must be linked to predetermined performance criteria. The board may, however, exercise its discretion in relation to approving incentives, bonuses, and equity participation. Any changes must be justified by reference to performance criteria considered appropriate by the board. The policy is designed to attract the highest caliber of executives and reward them for performance that results in long-term growth in shareholder wealth.

Executives are also entitled to participate in the employee share and option arrangements.

The executive directors and executives receive a superannuation quarantee contribution required by the government. which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the economic entity and, in appropriate circumstances where shareholder approval is obtained, should be granted incentive shares and/or options.

Performance Based Remuneration

In appropriate circumstances, certain executive directors' and executives' remuneration packages contain a performance-based component, consisting of key performance indicators (KPIs). The intention of this program is to facilitate goal congruence between directors/executives with that of the business and shareholders. Where applied the KPIs are set annually, with a certain level of consultation with directors/executives to ensure buy-in. The measures are specifically tailored to the areas each director/executive is involved in and has a level of control over. The KPIs target areas the board believes hold greater potential for group expansion and profit. Circumstances in which such incentives may be offered include where key executive directors and executives do not otherwise have a substantial shareholding in the economic entity.

Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration

The remuneration policy has been developed to increase goal congruence between shareholders and directors and executives. The policy provides for two methods to be applied in achieving this aim, the first being a performance based bonus based on key performance indicators, and the second being the issue of shares and/or options to the majority of directors and executives to encourage the alignment of personal and shareholder interests.

The following table shows the gross revenue, losses and dividends for the last five years for the listed entity, as well as the share price at the end of the respective financial years. Taking into account the volatility of the tantalum market over the past several years, and the inability to date to develop a sustainable viable tantalum business, the board is of the opinion that the previously described remuneration policy has not lead to increased shareholder wealth over this period.

	2001	2002	2003	2004	2005
Revenue	192.529	1.540,372	2.264.420	522.600	560.507
Net Loss	1,763,135	2.700.324	4.630.934	2.987.102	4,375,121
Share Price at Year-end	0.17	0.093	0.074	0.061	0.014
Dividends Paid	0	0

Details of Remuneration for Year Ended 30 June 2005

The remuneration for each director and each of the five executive officers of the consolidated entity receiving the highest remuneration during the year was as follows:

	Salary, Fees and Superannuation Commissions	Contribution	Total
	\$	\$	\$
Directors
Michael G Fotios	206,040	0	206,040
Timothy J King	31,000	0	31,000
Sasya Sebi	18,000	0	18,000
David Reynolds	18,000	0	18,000
	273,040	0	273.040

	Salary, Fees and Superannuation Commissions	Contribution	Total
	\$	\$	\$
Specified Executives
Terry Brittliffe	62,142	0	62,142
Barry Rees	129,600	11.664	141,264
Peter Raynor	120,434	8.103	128,537
Peter Heydon	100,000	9.000	109,000
Imants Kins	84.000	0	84.000
	496,176	28,767	524.943

Performance Income as a Proportion of Total Remuneration

The principles used to determine the nature and amount of remuneration did not of themselves establish a relationship between remuneration and the economic entity's performance. Executive directors and executives were not the subject of performance based remuneration during the 2005 financial year. The board considered that the shareholdings of key directors and executives were sufficient to provide the necessary incentives. This position is under consideration as part of the strategic review of the economic entity's tantalum business, and the focus on its other activities.

Options Issued as Part of Remuneration for the Year Ended 30 June 2005

No options were issued to directors and executives as part of their remuneration.

Employment Contracts of Directors and Senior Executives

Remuneration and other terms of employment for the Chairman, Managing Director and Non-Executive Directors are not currently formalised in service agreements. Similarly, there are no formal service agreements in place currently for the Operations Manager and the Business Development Manager. Employment terms for the other specified executives are for a base annual salary, inclusive of super, which is to be reviewed annually and a one month notice period required on termination.

Corporate Governance

The board recognises the need for the highest standards of corporate governance and accountability and has adopted a number of formal charters, codes and policies for the economic entity with reference to the corporate governance principles and best practice recommendations published by the ASX Corporate Governance Council in March 2003.

A summary of the economic entity's corporate governance practices is set out in the Corporate Governance Statement as disclosed.

Meetings of Directors

During the financial year, 14 meetings of directors were held. Attendances by each director during the year were:

	Board meetings attended
Mr M. Fotios	14
Mr T. King	14
Ms S. Sebi	10
Mr D. Reynolds	8

Due to the current size and composition of the economic entity's board, the full board deals with all board related matters rather than delegating responsibilities to board committees.

Directors and Auditors Indemnification

During or since the end of the financial year the parent entity has not given an indemnity or entered into an agreement to indemnify Directors or Auditors.

Share Options

The parent entity or controlled entities have not granted options over unissued shares or interest during or since the financial year to directors or any of the five most highly remunerated officers as part of their remuneration.

During the year ended 30 June 2005 1,095,000 options expired. There were no options on issue at the end of the financial year, and no options were issued subsequent to the end of the financial year up to the date of this report.

Proceedings on Behalf of the Company

No person has applied for leave of Court to bring proceedings on behalf of the parent entity or intervene in any proceedings to which the parent entity is a party for the purpose of taking responsibility on behalf of the parent entity for all or any part of those proceedings.

The parent entity was not a party to any such proceedings during the year.

Non-Audit Services

The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

• all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
• the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia's Professional Statement F1: Professional Independence.

No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2005;

Auditor's Independent Declaration

The lead auditor's independence declaration for the year ended 30 June 2005 has been received and can be found on page 47 of the directors' report.

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

Timothy King Director 30 September 2005

The Board of Directors of Tantalum Australia ("Tantalum" or "Company") is responsible for the corporate governance of the economic entity. The Board guides and monitors the business activities of Tantalum on behalf of the shareholders by whom they are elected and to whom they are accountable. Full details of the Company's corporate governance policies and procedures have been made publicly available on the Company's web site at www.tantalumaustralia.com

Set out below is a summary of the Company's corporate governance practices that have been adopted with reference to the ASX Corporate Governance Council's 10 essential corporate governance principles and 28 recommendations for best practice in corporate governance.

Due to the current size and activities of the Company, the board has resolved not to adopt some of the best practice recommendations at this stage. In addition, the process of formally documenting and implementing policies and procedures relating to some of the best practice recommendations is still continuing. Where the Company has resolved not to comply or is not currently complying with a particular recommendation, the reasons for this are also detailed below.

Lay Solid Foundations for Management and Oversight (Principle 1)

The Company has adopted a formal Board Charter that sets out the role and responsibilities of the Board and those delegated to senior management.

The Board is responsible for determining and monitoring the objectives and strategic direction of the Company. The senior management are responsible for the efficient and effective operation of the Company in accordance with the objectives and strategies determined by the Board.

Structure the Board to Add Value (Principle 2)

Board Composition:

The Company's Board as at the date of this Annual Report consists of four members, being the Chairman - Mr Timothy King, Managing Director - Mr Imants Kins (who replaced Mr Michael Fotios on 12 October 2005), and two Non-Executive Directors - Ms Sasya Sebi and Mr David Reynolds.

The relevant qualifications and experience of the Company's directors are set out in the Directors' Report.

Independent Directors:

Best Practice Recommendations 2.1 and 2.2 recommend respectively that a majority of the Board should be independent directors and the chairperson should be an independent director.

Tantalum Australia is an exploration company that has been attempting to establish itself as a viable producer. As an exploration company, directors and their associates have taken large equity risk positions to provide funding support, particularly at difficult times in the equity markets and in the Company's development, and directors' emoluments have been at the lower end of the scale. This has assisted in conveying to investors the focus and commitment of the Board to achieve its objectives, and to keep costs down. Consultancy arrangements with directors on an as needed basis have also assisted the Company to access required skills, but keep the cost structure flexible and competitive. Consequently none of the current directors of the Company are considered to be independent directors.

The need for access to supporting equity and skills as required, and a flexible cost structure have been greater imperatives for Tantalum Australia as an exploration company, than the largely mutually exclusive concept of independence, which is much more relevant to larger corporations with substantial workforces.

However, the Company has been attempting to progress from an explorer to a producer. As and when this occurs, and as the Company grows in size, the concept of independence will become more relevant.

Whilst the Company expects to progressively increase the independence of its directors over time, compliance with the best practice in this area is not considered a current imperative, due to the additional direct cost of employing such directors, the view that there would not be an increase in board skills (only independence). and the risk that inefficiency will occur in the board decision making process whilst the independent directors

become familiar with the Company's business.

The positions of Chairman and Managing Director within the Company are held by different people. Their respective roles and responsibilities are set out in the Company's Board Charter.

Board Nomination Committee:

Best Practice Recommendation 2.4 recommends that the Board should establish a nomination committee to assess the necessary competencies of board members, review board succession plans, evaluate the board's performance and make recommendations for the appointment and removal of board members. However, due to the current size and composition of the Company's Board, the full Board is responsible for the above duties.

Appointment of Directors:

The Board Charter sets out the Company's policy for the appointment of directors.

Directors are appointed under the terms of the Company's constitution. Appointments to the Board are based upon merit and against criteria that serves to maintain an appropriate balance of skills, expertise and experience on the board. The categories considered necessary for this purpose are a blend of accounting and finance, business, industry and administration skills.

Directors are to be appointed pursuant to formal agreements. The expectations for time to be committed to attend Board meetings and participate in committees and other activities of the Company should be set out in writing.

An induction pack should be provided to all new directors which includes information in relation to the Company's operations, structure, constituent documents, financial position and strategic and business plans.

Independent Professional Advice:

If a director considers it necessary to obtain independent professional advice to properly discharge his or her responsibilities as a director of the Company then, provided the director first obtains approval for incurring such expense from the Chairman, the Company will pay the reasonable expenses associated with obtaining such advice.

Promote Ethical and Responsible Decision-Making (Principle 3)

The Company has adopted a formal Code of Conduct for Company Directors and Senior Executives.

The Code requires directors and senior executives to act in the best interests of the Company and to promote and exercise the highest standards of ethics and integrity at all times in performing their duties for the Company.

The Company has also formally adopted a Share Trading Policy. The Policy sets out when trading in the Company's shares is permitted by directors, senior managers, employees and related parties and sets out procedures to limit the risk of insider trading.

Safeguard Integrity in Financial Reporting (Principle 4)

As a mineral exploration company, the Company provides a report on its activities to the ASX at the end of each quarter. In addition the Company provides a copy of its audited half year and full year financial accounts to the ASX and ASIC.

Internal Sign off:

Prior to signing off the half year and full year financial accounts and approving them for release to the market. the Board requires the Managing Director, and the Chief Financial Officer or Financial Controller to state in writing to the Board that the financial accounts present a true and fair view, in all material respects, of the Company's financial position and operational results and are in accordance with relevant accounting standards

Audit Committee:

Best practice recommendations 4.2, 4.3 and 4.4 recommend that the Board should establish an audit committee, consisting of independent, non-executive directors and adopt a formal charter setting out the committee's role and responsibilities.

As mentioned above with respect to a board nomination committee, due to the current size of the Company. scale of its activities and composition of the Company's Board, the full Board will be responsible for the duties that would be assigned to an audit committee. The relevant duties are set out in the Company's Board Charter.

Appointment of External Auditor:

The Board is responsible for selecting and appointing the Company's external auditor. The Board is also responsible for monitoring and reviewing the independence and quality of the audit services provided.

Make Timely and Balanced Disclosure (Principle 5)

The Company's shares are listed on the ASX and as such the Company is required to comply with the continuous disclosure requirements set out in the ASX Listing Rules.

In order to ensure that the Company meets its obligations with regard to the continuous disclosure requirements, the Company has adopted a Continuous Disclosure Policy.

The Policy sets out the Company's obligations and its policies and procedures to ensure timely and accurate disclosure of price sensitive information to the market.

Respect the Rights of Shareholders (Principle 6)

The Company endeavours to provide shareholders with important information on the Company in a timely and efficient manner. The Company promotes direct communication with shareholders and encourages them to direct questions or requests for further information to the Managing Director. Company Secretary or the Board.

The Company has adopted a Shareholder Communication Policy to formalise its practices in this regard.

In addition to direct mailing of information to shareholders, the Company posts up date information on the Company's activities together with copies of all information released to the ASX on its web site.

Shareholder meetings are an important forum for investors to meet with the Board and senior management and discuss matters concerning the Company.

The Company's external auditor attends all annual general meetings of the Company and is available to answer shareholder questions regarding the conduct of the audit and the preparation and content of the auditor's report.

Recognise and Manage Risk (Principle 7)

The Company's Board is responsible for ensuring that appropriate policies and procedures are in place to identify and manage risks throughout the Company. The Company currently has a range of risk management policies and procedures in place. However, as part of the Company's review of its corporate governance practices, the Board has formulated quidelines from which to prepare a formal Risk Management Policy and Framework for the Company. However, with the nature and scope of the Company's activities currently being determined, particularly in relation to the tantalum business, this process is now expected to occur during the second half of the 2006 financial year.

As part of the ongoing monitoring of the Company's risk management policies, the Board requires the Managing Director and the Chief Financial Officer or Financial Controller to state to the Board in writing when presenting the half and full year financial statements that, to the best of their knowledge, the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board, and that the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

Encourage Enhanced Performance (Principle 8)

The Board is responsible for reviewing its performance and that of its individual directors, committees (where appointed) and senior management.

A formal review is conducted on an annual basis. The Board determines the scope and detailed procedures for assessing performance against both measurable and qualitative indicators.

Individual directors are expected to continually monitor and review their own performance and undertake ongoing education to ensure they have sufficient time, information, knowledge and skills to effectively discharge their duties and responsibilities to the Company.

The Chairman is responsible for ensuring that board meetings are held at regular intervals and that board packs contain the necessary information and are circulated in a timely manner prior to meetings to allow the directors to properly review and scrutinise the information to facilitate effective decision making.

Remunerate Fairly and Responsibly (Principle 9)

Best Practice Recommendation 9.2 recommends that the Board should establish a remuneration committee with responsibility for reviewing and making recommendations to the Board on senior executive remuneration and incentive policies and packages and the remuneration framework for directors.

However, due to the current size and composition of the Company's Board, the full Board will be responsible for the above duties.

The Board recognises that its remuneration policy must be structured to attract, motivate and retain key employees and encourage them to deliver performance to create value for shareholders.

The Board has agreed on the following set of key Remuneration Policy Guidelines from which to determine the remuneration policy for directors, senior executives and employees:

• Individual reward should be based on performance across a range of measurable and qualitative × indicators:
• $\blacksquare$ Rewards to executives should be linked to creating value for shareholders:
• Remuneration arrangements should be equitable and facilitate the deployment of senior management across the various divisions of the Company;
• Remuneration packages should be comparable and competitive against remuneration packages of × other companies within the industries in which the Company operates.

Recognise the Legitimate Interests of Stakeholders (Principle 10)

The Company has adopted a Corporate Code of Conduct for all of its employees in order to ensure the Company meets its legal and other obligations to legitimate stakeholders. These stakeholders include shareholders, customers, suppliers, employees and the community as a whole.

Employees are expected to apply the principles and quidelines set out in the Code at all times in carrying out their duties for the Company.

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2005

		Economic Entity		Parent Entity
	Note	2005	2004	2005	2004
		S	\$	\$	\$
Revenues from ordinary activities	2	560,507	522,600	170,454	175,307
Cost of sales		(246, 466)	(69, 303)
Write-down of inventory to net realisable value			(575, 524)
Employee benefits expenses		(837, 217)	(499, 761)	(240, 861)	(335, 133)
Depreciation and amortisation expenses	3	(366, 278)	(289, 639)	(61, 378)	(71, 914)
Borrowing costs		(80, 418)	(37, 837)	(73, 842)	(21, 592)
Consultancy expenses		(599, 750)	(576, 830)	(233, 584)	(340, 431)
Directors fees		(63, 500)	(93,000)	(63, 500)	(93,000)
Rehabilitation, mining and exploration costs		(1,925,250)	(307, 020)	(944, 205)	(31, 403)
Legal fees		(86, 945)	(228, 157)	(78,084)	(194, 464)
Research and development costs			(289, 349)
Provision for doubtful debts	3			(3,805,480)	(1,965,309)
Other expenses from ordinary activities		(729, 804)	(543, 282)	(372, 220)	(393, 436)
(Loss) from ordinary activities before income tax (benefit)		(4,375,121)	(2,987,102)	(5,702,700)	(3,271,375)
Income tax (benefit) relating to (loss) from ordinary activities	4
Net (loss) attributable to members of the parent entity		(4,375,121)	(2,987,102)	(5,702,700)	(3,271,375)
Basic earnings per share (cents per share)	7	(1.5)	(1.3)
Diluted earnings per share (cents per share)	7	(1.5)	(1.3)

The accompanying notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2005

		Economic Entity		Parent Entity
	Note	2005	2004	2005	2004
		\$	\$	\$	\$
CURRENT ASSETS
Cash assets	8	158,890	245,189	176,180	231,709
Receivables	9	82,997	196,583	74,858	188,140
Inventories	10	246,470	86,694
Exploration, evaluation, development
expenditure	15	2,250,000		2,250,000
Other	12	40,642	163,685	40,642	163,685
TOTAL CURRENT ASSETS		2,778,999	692,151	2,541,680	583,534
NON-CURRENT ASSETS
Receivables	9	698,839	704,192	3,834,908	6,490,816
Intangible assets	13		193,831
Property, plant and equipment	14	2,594,452	3,053,020	425,360	485,268
Exploration, evaluation, development expenditure	15	881,005	4,888,502	20,368	3,177,922
TOTAL NON-CURRENT ASSETS		4,174,296	8,839,545	4,280,636	10,154,006
TOTAL ASSETS		6,953,295	9,531,696	6,822,316	10,737,540
CURRENT LIABILITIES
Payables	16	1,736,828	1,835,946	1,401,244	1,553,496
Interest-bearing liabilities	17	304,815	172,659	304,815	128,769
Provisions	18	107,947	144,984	107,947	144,984
TOTAL CURRENT LIABILITIES		2,149,590	2,153,589	1,814,006	1,827,249
NON-CURRENT LIABILITIES
Provisions	18	706,118	712,778	597,618	604,278
TOTAL NON-CURRENT LIABILITIES		706,118	712,778	597,618	604,278
TOTAL LIABILITIES		2,855,708	2,866,367	2,411,624	2,431,527
NET ASSETS		4,097,587	6,665,329	4,410,692	8,306,013
EQUITY
Contributed equity	19	43,886,157	42,078,778	43,886,157	42,078,778
Accumulated losses	20	(39,788,570)	(35, 413, 449)	(39, 475, 465)	(33,772,765)
TOTAL EQUITY		4,097,587	6,665,329	4,410,692	8,306,013

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2005

		Economic Entity	Parent Entity
	Note	2005	2004	2005	2004
		\$	\$	\$	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		263,188	1,019,187	205,867	216,522
Payments to suppliers and employees		(1, 849, 835)	(2, 551, 338)	(1,385,275)	(2,201,723)
Interest received		45,001	41,500	38,505	32,274
Borrowing costs		(2,279)	(37, 837)	(710)	(21, 592)
Net cash provided by / (used in) operating activities	25	(1,543,925)	(1,528,488)	(1, 141, 613)	(1,974,519)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment		208,500
Proceeds from sale of exploration interests		40,000		40,000
Proceeds from sale of exploration, evaluation and development projects		250,000		250,000
Cash acquired through acquisition			324
Loans from associates (net of cash acquired)			500
Purchase/Payments of property, plant and equipment		(1,350)	(507, 889)	(1,350)	(3,203)
Payments for exploration, evaluation and development		(417, 751)	(956, 141)	(286, 650)	(628,000)
Environmental bond deposits refunded			13,629		11,128
Net cash provided by / (used in) investing activities		79,399	(1,449,577)	(2,000)	(620, 075)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		1,272,026	3,483,326	1,272,026	3,483,326
Proceeds from sale of unmarketable parcels of shares		(709)	130,603	(709)	130,603
Receipts from director's loans		290,000		290,000
Repayment of hire purchase borrowings			(4,709)		(4,709)
Repayment of director's loan			(311, 078)		(91,078)
Repayment of borrowings		(111, 752)	(234, 253)	(67, 864)	(126, 402)
Share issue costs		(71, 338)	(165, 922)	(71, 338)	(165, 923)
Loans provided to controlled entities				(338,031)	(527, 853)
Loans from directors			20,000		20,000
Net cash provided by / (used in) financing activities		1,378,227	2,917,967	1,084,084	2,717,964
Net increase / (decrease) in cash held		(86, 299)	(60,098)	(55, 529)	123,370
Cash at 1 July 2004		245,189	304,430	231,709	108,339

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2005

		Economic Entity		Parent Entity
	Note	2005	2004	2005	2004
		\$	\$	\$	\$
Effect of exchange rates on cash holdings
in foreign currencies			857	$\cdot$
Cash at 30 June 2005	8	158,890	245.189	176.180	231,709

The accompanying notes form part of these financial statements

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

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

The financial report covers the economic entity of Tantalum Australia NL and controlled entities, and Tantalum Australia NL as an individual parent entity. Tantalum Australia NL is a listed public company, incorporated and domiciled in Australia

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

$(a)$ Principles of Consolidation

A controlled entity is any entity controlled by Tantalum Australia NL. Control exists where Tantalum Australia NL has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Tantalum Australia NL to achieve the objectives of Tantalum Australia NL. A list of controlled entities is contained in Note 11 to the financial statements.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

$(b)$ Income Tax

Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantially enacted on 21 October 2002. The directors have assessed the effect, if any, that the implementation of the tax consolidation system may have on the parent entity and the economic entity, and accordingly, the directors have determined that it is appropriate to elect to be taxed as a single entity. Consolidation has been granted in June 2005 with the first period for income tax consolidation being the period beginning 1 July 2003.

The directors do not anticipate that there will be a current financial effect from the implementation of the tax consolidation system on the parent entity and the economic entity.

Tantalum Australia NL and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime from 1 July 2003. Tantalum Australia NL is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. The tax consolidated group has not entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax on the tax consolidated aroup.

The economic entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit from ordinary activities adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income are brought to account as either a provision for deferred income tax or as a 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 and 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.

Inventories $(c)$

Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. The cost of mining stocks includes direct material, direct labour, transportation costs and variable and fixed overhead costs relating to mining activities.

$(d)$ Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Property

Freehold land and buildings is carried at cost.

Plant and equipment

Plant and equipment are measured on the cost basis less any accumulated depreciation.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

Depreciation

The depreciable amount of the fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on either a straight line or reducing balance method over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

Depreciation rates are reviewed at least annually and where necessary, adjusted to reflect the most recent assessments of the useful lives of the respective assets, having regard to such factors as asset usage and the rate of technical and commercial obsolescence.

In addition depreciation methods are reviewed at least annually and, if there has been a change in the expected pattern of consumption or loss of future economic benefits, the method applied is changed to reflect the changed pattern.

The depreciation rates used for each class of depreciable assets during the year are:

Class of Fixed Asset	Depreciation Rate
Leasehold improvements	20%
Plant and equipment	5%-40%

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

$(e)$ LASSAS

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the economic entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the economic entity will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability. Lease payments received reduce the liability.

$(f)$ Investments

Non-current investments are measured on the cost basis. The carrying amount of non-current investments is reviewed annually by directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the quoted market value for listed investments or the underlying net assets for other non-listed investments. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.

$(q)$ Research and Development Expenditure

Research and Development costs are charged to profit from ordinary activities before income tax as incurred or deferred where it is expected beyond any reasonable doubt that sufficient future benefits will be derived so as to recover those deferred costs.

$(h)$ Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development and exploitation of the area of interest or alternatively by its sale and where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs are determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there may be uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs are determined on the basis that the restoration will be completed within one year of abandoning the site.

$(1)$ Intangibles

Goodwill

Goodwill is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill is amortised on a straight-line basis. Goodwill is not carried at an amount above its recoverable amount, and where the carrying value exceeds this recoverable amount, the goodwill is written down.

Foreign Currency Transactions and Balances $(i)$

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

The gains and losses from conversion of assets and liabilities, whether realised or unrealised, are included in profit from ordinary activities as they arise.

(k) Employee Benefits

Provision is made for the parent entity's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year arising from wages and salaries, annual leave and long service leave have been measured at their nominal amounts plus related oncosts. Other employee benefits, including related on-costs, payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Contributions are made by the economic entity to employee nominated eligible superannuation funds and are charged as expenses when incurred.

$(1)$ Cash

For the purpose of the statement of cash flows, cash includes:

• cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and
• investments in money market instruments with less than 14 days to maturity.

$(m)$ Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Revenue from rental properties is recognised when the parent entity has a right to receive the rent in accordance with the lease agreement.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

$(n)$ Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. 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 in the statement of financial position are shown inclusive of GST.

(o) Comparative Figures

Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year.

Impact of Adoption of Australian Equivalents to International Financial Reporting Standards $(p)$

The economic entity is preparing and managing the transition to Australian Equivalents to International Financial Reporting Standards (AIFRS) effective for the financial years commencing from 1 January 2005. The adoption of AIFRS will be reflected in the economic entity's and the parent entity's financial statements for the year ending 30 June 2006. On first time adoption of AIFRS, comparative for the financial year ended 30 June 2005 are required to be restated. The majority of the AIFRS transitional adjustments will be made retrospectively against retained earnings at 1 July 2004.

The economic entity's management, with the assistance of external consultants, has assessed the significance of the expected changes and is preparing for their implementation. The impact of the alternative treatments and elections under AASB 1: First Time Adoption of Australian Equivalents to International Financial Reporting Standards have been considered where applicable.

The directors are of the opinion that the key material differences in the economic entity's accounting policies on conversion to AIFRS and the financial effect of these differences, where known, are as follows. Users of the financial statements should note, however, that the amounts disclosed could change if there are any amendments by standard-setters to the current AIFRS or interpretation of the AIFRS requirements changes from the continuing work of the economic entity's AIFRS committee.

Loss

Reconciliation of AIFRS Statement of Financial Performance

No impacts are expected to the loss presented under AGAAP on adoption of AIFRS

Equity

Reconciliation of equity as presented under AGAAP to that under AIFRS

No impacts are expected to the equity presented under AGAAP on adoption of AIFRS.

Cash Flows

Reconciliation of AIFRS Statement of Cash Flows

No impacts are expected to the cash flows presented under AGAAP on adoption of AIFRS.

The board members are of the opinion that the key differences in Tantalum Australia's accounting policies, which will arise from the adoption of AIFRS are:

$(i)$ Research and Development Expenditure

Under AASB 138: Intangible Assets, costs associated with the research phase of the development of an asset must be expensed. This will result in a change of the current accounting policy, which capitalises research costs to the statement of financial position where it is expected beyond any reasonable doubt that sufficient future benefits will be derived so as to recover these deferred costs.

On transition, the financial effect of this impact is assessed as nil, as no research costs were capitalised at 1 July 2004 or 30 June 2005.

(ii) Impairment of Assets

Under AASB 136: Impairment of Assets, the recoverable amount of an asset is determined as the higher of fair value less costs to sell, and value in use. In determining value in use, projected future cash flows are discounted using a risk adjusted pre-tax discount rate and impairment is assessed for the individual asset or at the "cash generating unit" level. A "cash generating unit" is determined as the smallest group of assets that generates cash flows that are largely independent of the cash inflows from other assets or groups of assets. The current policy is to determine the recoverable amount of an asset on the basis of undiscounted net cash flows that will be received from the asset's use and subsequent disposal. It is likely that this change in accounting policy will lead to impairments being recognised more often.

The economic entity has reassessed its impairment testing policy and tested all assets for impairment as at 1 July 2005. The impact of the change is assessed as nit.

$(iii)$ Goodwill on Consolidation

Under AASB 3: Business Combinations, goodwill is capitalised to the statement of financial position and subjected to an annual impairment test. Amortisation of goodwill is prohibited. Current accounting policy of the entity is to amortise goodwill on a straight-line basis over a period of 3 years.

On transition, the financial effect of this impact is assessed as nil, as goodwill was amortised and written off on impact date.

$(iv)$ Non-current investments

Under AASB 139; Financial Instruments: Recognition and Measurement, financial assets are required to be classified into four categories, which determines the accounting treatment of the item. The categories and various treatments are:

• held to maturity, measured at amortised cost;
• held for trading, measured at fair value with unrealised gains or losses charged to the profit $\overline{a}$ and loss:
• loans and receivables, measured at amortised costs; and
• available for sale instruments, measured at fair value and unrealised gains or losses taken to equity.

The economic entity's financial assets comprise available for sale financial instruments. Under AASB 139: Financial Instruments: Recognition and Measurement, the measurement of available for sale instruments at fair value differs to current accounting policy which measures non-current investments at cost with an annual review by directors to ensure the carrying amounts are not in excess of the recoverable value of the instrument. The impact of the change is likely to increase the value of noncurrent other financial assets in relation to available for sale instruments.

On transition, the financial effect of this impact is assessed as nil.

$(v)$ Income Tax

Currently, the economic entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the accounting profit adjusted for any permanent differences. Timing differences are currently brought to account as either a provision for deferred income tax or future income tax benefit. Under AASB 112: Income Taxes, the entity will be required to adopt a balance sheet approach under which temporary differences are identified for each asset and liability rather than the effects of the timing and permanent differences between taxable income and accounting profit.

On transition, there will be no impact for the economic entity. This is because a deferred tax asset has not been recognised for carry forward tax losses because it is not probable that future taxable profit will be available against which the unused tax losses can be utilised.

$(vi)$ Share Based Payments

Under AASB 2 Share based payments, from 1 July 2004 the economic entity is required to recognise as an expense those securities (including shares and options) that had not vested until after 1 January 2005. This will result in a change in the current accounting policy under which no expense was recognised for the granting of securities. There will be no impact on the Statement of Financial Performance for the year ended 30 June 2005. This is because no securities were granted to staff during the 2005 financial year, and no securities previously granted to staff vested during that year. On transition, there will be no impact for the economic entity.

$(a)$ Going Concern

The financial statements have been prepared on the going concern basis of accounting which assumes that the economic entity will be able to meet its commitments, realise its assets and discharge its liabilities in the ordinary course of business.

The economic entity's ability to continue as going concern is contingent upon raising additional capital to fund exploration commitments, other principal activities and working capital. If additional capital is not raised, the going concern basis may not be appropriate with the result that the entity may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts different from those stated in the financial report. No allowance for such circumstances has been made in the financial report.

NOTE 2: REVENUE		Economic Entity		Parent Entity
		2005 \$	2004 \$	2005 \$	2004 S
	Operating activities:
	sale of goods	85,000
	interest received - other persons	45,001	41,500	38,505	32,274
	rebates		333,200
	other revenue	195,327	145,113	91,949	143,033
		325,328	519,813	130,454	175,307
	Non-operating activities:
	proceeds on disposal of property, plant and equipment	195,000
	proceeds on disposal of non- current exploration interests	40,000		40,000
	Foreign exchange gain	179	$2,787 -$
		235,179	2,787	40,000
	Total Revenue	560,507	522,600	170,454	175,307
following:	NOTE 3: (LOSS) FROM ORDINARY ACTIVITIES (Loss) from ordinary activities before income tax has been determined after the
(a)	Expenses
	Cost of net assets sold	176,830
	Depreciation of non-current assets:
	plant and equipment	254,353	203,413	61,378	71,914
	leasehold improvements	28,855	30,846
	Total depreciation (Note 14)	283,208	234,259	61,378	71,914
	Amortisation of non-current assets:
	Goodwill	83,070	55,380
	Total amortisation	83,070	55,380
	Goodwill written off as future benefits are no longer recoverable	112,947
	Foreign currency translation losses	137	1,930
	Bad and doubtful debts:
	Wholly-owned subsidiaries			3,805,480	1,965,309
	Total bad and doubtful debts	۰		3,805,480	1,965,309

	Economic Entity		Parent Entity
NOTE 3: (LOSS) FROM ORDINARY ACTIVITIES (CONT.)	2005 \$	2004 \$	2005 \$	2004 \$
Revenue and Net Gains (b)
Net gain on disposal of non-current assets:
property, plant and equipment	18,170
Exploration Interests	40,000		40,000
Foreign currency translation gains	42	857
Significant Revenues and (c) Expenses
The following significant revenue and expense items are relevant in explaining the financial performance:
Write-off of capitalised exploration expenditure	(1,925,250)	(307, 020)	(944, 205)	(31, 403)
Consideration for exploration interests	40,000		40,000
	Economic Entity		Parent Entity
	2005	2004	2005	2004
NOTE 4: INCOME TAX	\$	\$	\$	\$
The prima facie tax (benefit) is (a) reconciled to the income tax (benefit) relating to the (loss) on ordinary activities as follows:
Prima facie tax (benefit) on (loss) from ordinary activities before income tax at 30% (2004: 30%)	(1,312,536)	(896, 130)	(1,710,810)	(981, 412)
Decrease in tax benefit due to permanent differences	114,038	2,194	113,797	750
Decrease in tax benefit due to decision not to book future tax benefit due to uncertainty over future recovery of tax losses and timing differences (Note 4(b))	1,198,498	893,936	1,597,013	980,662
Income tax (benefit) attributable to (loss) from ordinary activities before income tax

NOTE 4: INCOME TAX EXPENSE (CONT.)

(b) Deferred income tax (benefits) not taken to account:

The parent entity has elected to form a consolidated income tax group. The unconfirmed consolidated tax losses as at 30 June 2005 are (\$20,409,916), (2004 \$22,275,380).

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

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

• The parent entity and/or the economic entity derives future assessable income of a nature and an $(i)$ amount sufficient to enable the benefit to be realised, or the benefit can be utilised by another company of the economic entity in accordance with Division 170 of the Income Tax Assessment Act 1997;
• The parent entity and /or the economic entity continues to comply with the conditions for deductibility $(i)$ imposed by the law: and
• $(iii)$ No changes in tax legislation adversely affect the parent entity and / or the economic entity in realising the benefit.

NOTE 5: DIRECTORS' AND EXECUTIVES' REMUNERATION

(a) Names and positions held of parent entity directors and specified executives in office at any time during the financial year:

Parent Entity Directors:

Mr T. King	Chairman (Non-executive)
Mr M. Fotios	Managing Director (Executive)
Ms S. Sebi	Director (Non-executive)
Mr D. Reynolds	Director (Non-executive)

Specified Executives:

Mr. T Brittliffe	Operations Manager
Mr B. Rees	Exploration Manager
Mr P. Raynor	Chief Financial Officer
Mr I. Kins	Business Development Manager
Mr P. Heydon	Mining Manager

NOTE 5: DIRECTORS' AND EXECUTIVES' REMUNERATION (CONT.)

(b) Parent Entity Directors' Remuneration:

	Primary		Total
	Salary and Fees
	2005	2004	2005	2004
	\$	\$	\$	\$
Mr T. King	31,000	41,200	31,000	41,200
Mr M. Fotios	206,039	156,334	206,039	156,334
Ms S. Sebi	18,000	15,000	18,000	15,000
Mr. D. Reynolds	18,000	0	18,000	0
	273,039	212,534	273.039	212,534

The service and performance criteria set to determine remuneration are included per Note 5(h).

(c) Specified Executives' Remuneration:		Primary			Total
	Salary and Fees		Superannuation Contribution
	2005	2004	2005	2004	2005	2004
	\$	\$	\$	S	\$	\$
Mr B. Rees	129,600	114.600	11,664	26.664	141,264	141,264
Mr T. Brittliffe	62,142	115,784			62,142	115,784
Mr P. Raynor *	120.433	96,328	8.103	8,670	128,536	104,998
Mr I. Kins	84,000	84,000		÷	84,000	84,000
Mr P. Heydon	100.000	100,000	9.000	9.000	109,000	109,000
	496.175	510.712	28,767	44.334	524.942	555,046

* Changed to Contractor Status in April 2005 and terminated employment with Tantalum Australia in June 2005 The service and performance criteria set to determine remuneration are included per Note 5(h).

(d) Remuneration Options

No Remuneration Options have been granted to Directors or specified executives.

(e) Service agreements:

Remuneration and other terms of employment for the Chairman, Managing Director and Non-Executive Directors are not currently formalised in service agreements. Similarly, there are no formal service agreements in place currently for the Operations Manager and the Business Development Manager. Employment terms for the other specified executives are for a base annual salary, inclusive of super, which is to be reviewed annually and a one month notice period required on termination.

(f) Option holdings of parent entity directors and specified executives:

	Balance	Net Change	Balance
	1.7.04	Other *	30.6.05
Parent Entity Directors:
Mr T. King	w
Mr M. Fotios	$\overline{\phantom{a}}$
Specified Executives:
Mr B. Rees
Mr T. Brittliffe	250,000	(250,000)	$\mathbf{w}$
Mr I. Kins	125,000	(125,000)	$\omega$
Total	375,000	(375,000)

(g) Shareholdings of parent entity directors and specified executives:

	Balance 1.7.04	Net Change Other*	Balance 30.6.05
Parent Entity Directors:
Mr T. King (Note $5(i)$ )	3,340,200	3,667,356	7,007,556
Mr M. Fotios (Note $5(i)$ )	8.224.610	3.591.607	11,816,217
Specified Executives:
Mr B. Rees	55,000		55,000
Mr I. Kins	3.349.527	(519, 527)	2,830,000
Total	14.969.337	6.739.436	21.708.773

* Net Change Other refers to shares purchased or sold during the year.

(h) Remuneration practices:

The parent entity's policy for determining the nature and amount of emoluments for senior executives, including executive directors, is based on a number of factors, including length of service, experience and performance of the individual concerned, and overall performance of the parent entity. The contracts for service between the parent entity and senior executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement executives are paid employee benefit entitlements accrued to date of retirement. Any options not exercised before or on the date of termination remain vested and exercisable at any time prior to their expiry date.

(i) Loans to directors and director related entities:

No loans were made to directors or their related entities during the year.

NOTE 5: DIRECTORS' AND EXECUTIVES' REMUNERATION (CONT.)

(j) Other transactions with directors and director related parties:

Sub-underwriting:

In June 2004 Austminex NL and Michael Fotios ATF Michael Fotios Family Trust (both entities controlled by Mr Michael Fotios), and Rexfam Consulting Pty Ltd (a company in which Mr Timothy King has a relevant interest) each entered into a sub-underwriting arrangement with the underwriter of a non-renounceable rights issue capital raising by the parent entity.

Under the sub-underwriting arrangement Rexfam Consulting Pty Ltd had a sub-underwriting commitment to subscribe for \$200,000 of any shortfall. Austminex NL had a sub-underwriting commitment to subscribe for \$120,000 and Michael Fotios ATF Michael Fotios Family Trust had a sub-underwriting commitment to subscribe for \$180,000 of any shortfall.

No sub-underwriting fees were payable to the sub-underwriters.

Underwriting:

In June 2005 Austminex NL, Michael Fotios ATF Michael Fotios Family Trust (both entities controlled by Mr Michael Fotios) and Rexfam Consulting Pty Ltd (a company in which Mr Timothy King has a relevant interest) each entered into a underwriting agreements with the parent entity in relation to a non-renounceable rights issue capital raising by the parent entity.

Under the underwriting arrangement Rexfam Consulting Pty Ltd had an underwriting commitment to subscribe for \$400,000 of any shortfall. Austminex NL had an underwriting commitment to subscribe for \$11,750 and Michael Fotios had an underwriting commitment to subscribe for \$133,250 of any shortfall.

No underwriting fees were payable to Austminex NL, Michael Fotios ATF Michael Fotios Family Trust and Rexfam Consulting Pty Ltd

Conversion of debt to equity:

Sub-underwriting:

In conjunction with the above sub-underwriting arrangements, in June 2004 the parent entity entered into an agreement with Rexfam Consulting Pty Ltd to offset loans and fees owed to Rexfam Consulting Pty Ltd by the parent entity for loans made to and services performed on behalf of the parent entity totalling \$189,066 (comprising fees of \$153,020, GST on fees of \$15,302, loan payable \$20,000 and interest thereon of \$744), against the subscription amount for shares applied for by Rexfam Consulting Pty Ltd (or its nominee), at the election of Rexfam Consulting Pty Ltd, in the non-renounceable rights issue capital raising by the parent entity. The parent entity also entered into agreements with Austminex NL and Michael Fotios ATF Michael Fotios Family Trust on the same date to offset loan funds and fees owing to Austminex NL and Michael Fotios Family Trust respectively totalling \$252,977 against the subscription amounts for shares applied for by those entities in the non-renounceable rights issue capital raising.

As a result of the shortfall arising on the non-renounceable rights issue capital raising, the above \$189,066 debt to equity conversion of Rexfam Consulting Pty Ltd took place during July 2004, in conjunction with the subscription for shares by Rexfam Consulting Pty Ltd (or its nominee), in accordance with its sub-underwriting commitments. As a result of the subunderwriting and their shareholder entitlements under the rights issue, Mr Tim King and his related entities' shareholding in the parent entity increased by 3.667.356 shares from 3.340.200 to 7.007.556 shares.

In addition, \$215,496 of the above debt to equity conversion of Austminex NL and Michael Fotios Family Trust took place following during July 2004, in conjunction with the subscription for shares by those entities in accordance with their subunderwriting commitments on the shortfall from the non-renounceable rights issue capital raising. As a result, Mr Michael Fotios and his related entities' shareholdings in the parent entity increased by 3,591,607 shares from 8,224,610 to 11,816,217 shares.

NOTE 5: DIRECTORS' AND EXECUTIVES' REMUNERATION (CONT.)

Underwriting:

In conjunction with the above underwriting arrangements, in June 2005 the parent entity entered into an agreement with Rexfam Consulting Pty Ltd to offset loans and fees owed to Rexfam Consulting Pty Ltd by the parent entity for loans made to and services performed on behalf of the parent entity totalling \$283,225 (comprising fees of \$28,500, GST on fees of \$2.850, loan payable \$250,000 and interest thereon of \$1,875), against the subscription amount for shares applied for by Rexfam Consulting Pty Ltd (or its nominee), in the non-renounceable rights issue capital raising by the parent entity. The parent entity also entered into agreements with Austminex NL and Michael Fotios ATF Michael Fotios Family Trust on the same date to offset loan funds and fees owing to Austminex NL and Michael Fotios Family Trust respectively totalling \$142,734 (comprising fees \$77,315, GST on fees \$7,732, loan \$54,815 and interest thereon \$2,872), against the subscription amounts for shares applied for by those entities in the non-renounceable rights issue capital raising.

As a result of the shortfall arising on the non-renounceable rights issue capital raising, the above \$283,225 debt to equity conversion of Rexfam Consulting Pty Ltd took place following the end of the financial year, during July 2005, in conjunction with the subscription for shares by Rexfam Consulting Pty Ltd in accordance with its underwriting commitments. As a result of the underwriting and their shareholder entitlements under the rights issue. Mr Tim King and his related entities' shareholding in the parent entity increased by 29,246,602 shares from 7,007,556 to 36,254,158 shares.

In addition, \$142,734 of the above debt to equity conversion of Austminex NL and Michael Fotios Family Trust took place following the end of the financial year, during July 2005, in conjunction with the subscription for shares by those entities in accordance with their sub-underwriting commitments on the shortfall from the non-renounceable rights issue capital raising. As a result, Mr Michael Fotios and his related entities' shareholdings in the parent entity increased by 9,123,962 shares from 11,816,217 to 20,940,178 shares.

Other services:

Mr G. Fotios, father of Mr Michael Fotios, was paid \$31,200 as remuneration for services rendered to the economic entity during the year. Mrs N. Smith, mother in law of Mr Michael Fotios, was paid \$14,170 wages and superannuation for cleaning services and Mrs N. Fotios, sister in law of Mr Michael Fotios, was paid \$12,749 wages and superannuation for corporate secretarial services during the year.

The terms and conditions of the transactions with directors and director related parties and entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions with nondirector related parties and entities on an arm's length basis.

(k) Loans from directors and director related entities:

	Facility	Loans advanced	Accrued interest for the year	Actual year end accrual	Interest rate	Accrued interest for the year	Actual vear end accrual	Interest rate
			2005	2005	2005	2004	2004	2004
Director	S	\$	\$	\$	%	\$	\$	%
Mr M. Fotios (Note $5(j), 17$ )	225,000	54,815	3.253	3.253	9	8.113	11.045
Mr T. King (Note 5(j), 17)	250,000	250,000	2.694	2,694	9	867	867

		Economic Entity		Parent Entity
	NOTE 6: AUDITORS' REMUNERATION	2005 \$	2004 \$	2005 \$	2004 \$
	Remuneration of the auditor of the parent entity for:
	auditing or reviewing the financial report	41.600	26,000	41.600	26,000
	other services		73.060	$\blacksquare$	73.060
		41.600	99.060	41.600	99,060

The audit fees of the subsidiary companies are borne by the parent entity.

		Economic Entity
	NOTE 7: EARNINGS PER SHARE	2005 S	2004 S.
(a)	Net (loss) used in the calculation of basic and diluted EPS	(4.375.121)	(2,987,102)
(b)	Weighted average number of ordinary shares used in calculation of basic and diluted EPS	281.832.640	234.121.872

	Economic Entity		Parent Entity
	2005	2004	2005	2004
NOTE 8: CASH ASSETS	\$	\$	\$	\$
Cash at bank	(23, 505)	77,451	(6, 215)	63,971
Deposits at call	182,395	167,738	182,395	167,738
	158,890	245,189	176,180	231,709
NOTE 9: RECEIVABLES
CURRENT
Trade debtors	30,164	209,888	30,164	144,595
Provision for doubtful debts		(56, 850)	u.
	30,164	153,038	30,164	144,595
Other debtors	52,834	43,545	44,694	43,545
	82,998	196,583	74.858	188,140
NON-CURRENT
Bond term deposits	698,839	704,192	586,889	591,351
Amounts receivable from wholly -owned subsidiaries		a.	10,290,808	9,136,774
Provision for doubtful debts for wholly- owned subsidiaries			(7,042,789)	(3,237,309)
	698,839	704,192	3,834,908	6,490,816

	Economic Entity		Parent Entity
	2005	2004	2005	2004
NOTE 10: INVENTORIES	\$	\$	S	\$.
Raw materials - at cost
Work in progress - at net realisable value	192,852
Finished goods - at net realisable value	53,618	86.694	$\mathbf{u}$	$\omega$
	246,470	86,694

NOTE 11: CONTROLLED ENTITIES

(a) Controlled Entities

	Country of Incorporation	Percentage Owned (%)
		2005	2004
Parent Entity:
Tantalum Australia NL	Australia	$\overline{\phantom{a}}$	w
Subsidiaries of Tantalum Australia NL:
Tantalum Australia Operations Pty Ltd	Australia	100	100
Rare Resources NL	Australia	100	100
Broad Arrow Mill Pty Ltd	Australia	100	100

	Economic Entity		Parent Entity
	2005	2004	2005	2004
NOTE 12: OTHER ASSETS	\$	\$	\$	\$
CURRENT
Drilling fund	39,876	130,324	39,876	130,324
Prepayments	766	33,361	766	33,361
	40,642	163,685	40,642	163,685
NOTE 13: INTANGIBLE ASSETS
Goodwill at cost	249,211	249,211
Additions to goodwill	2,186
Accumulated amortisation	(138, 450)	(55,380)
Write down of goodwill	(112, 947)	a.
		193,831

	Economic Entity		Parent Entity
NOTE 14: PROPERTY, PLANT AND EQUIPMENT	2005 \$	2004 \$	2005 \$	2004 S
LAND AND BUILDINGS
At cost	87,322	87,322	87,322	87,322
PLANT AND EQUIPMENT
Plant and equipment:
At cost	4,072,556	6,385,625	922,982	921.511
Accumulated depreciation	(1,566,174)	(3,559,508)	(584, 944)	(523, 565)
	2,506,382	2,826,117	338,038	397.946
Leasehold improvements:
At cost	145,791	254,816
Accumulated amortisation	(145, 043)	(115, 235)
	748	139,581
Total plant and equipment	2,507,130	2,965,698	338,038	397,946
Total Property, Plant and Equipment	2,594,452	3,053,020	425,360	485,268

Note: Assets pledged as security for directors loans are a large ball mill in Norseman and the crushing circuit on hand at the Dalgaranga mine site.

(a) Movements in carrying amounts for each class of property, plant and equipment between the beginning and the end of the year:

		Leasehold	Plant and
	Land at cost	Improvements	Equipment	Total
	\$	\$	\$	\$
Economic Entity:
Balance at the beginning of year	87.322	139,580	2.826.118	3,053,020
Additions	$\mathbf{u}$		1,350	1,350
Disposals	$\omega$		(176.830)	(176, 830)
Write down expenses	$\;$	(109, 977)	(581,309)	(691, 286)
Depreciation expense	$\omega$	(28, 855)	(311,089)	(339, 944)
Discount on acquisition and write down added back against above depreciation expense for the year	$\omega$		748,142	748.142
Carrying amount at the end of year	87.322	748	2,506,382	2.594,452

NOTE 14: PROPERTY, PLANT AND EQUIPMENT (CONT.)		Leasehold Land at cost Improvements Equipment	Plant and	Leased Plant and Equipment	Total
	\$	S	\$	\$	\$
Parent Entity:
Balance at the beginning of year	87.322	$\overline{\phantom{a}}$	397,946	w.	485.268
Additions	$\overline{a}$		1,470		1.470
Disposals	$\overline{\phantom{a}}$		w
Depreciation expense			(61, 378)		(61, 378)
Carrying amount at the end of year	87.322		338,038		425.360

NOTE 15: EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE

DEVELOPMENT EXPENDITURE	Economic Entity		Parent Entity
	2005	2004	2005	2004
Costs carried forward in respect of areas of interest in exploration and evaluation phases	\$ 4,888,502	\$ 2,537,358	\$ 3.177.923	\$ 2,537,558
Costs incurred during the year	417.753	1,129,478	286,650	671.767
Addition through acquisition of controlled entity		29,244
Costs written off	(2,717,979)	(307, 020)	(944, 205)	(31, 403)
Deposit on sale of gold interests	(250,000)		(250,000)
Discount on acquisition	792,729	1,499,442
	3,131,005	4,888,502	2,270,368	3.177.922
Current Exploration expenses	2,250,000		2,250,000
Non-current Exploration expenses	881,005	4.888,502	20.368	3.177.922

Ultimate recoupment of exploration and evaluation expenditure carried forward is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

	Economic Entity		Parent Entity
NOTE 16: PAYABLES	2005	2004	2005	2004
	\$	\$	S	\$
Trade creditors	1,194,359	997,272	939.816	889.346
Sundry creditors and accrued expenses	542.465	838.674	461.426	664.150
	1.736.824	1.835.946	1,401,242	1,553,496

	Economic Entity		Parent Entity
NOTE 17: INTEREST BEARING LIABILITIES	2005 \$	2004 \$	2005 S	2004 \$
Unsecured liabilities:
Directors' Ioans		20,000		20,000
Secured liabilities:
Chattel mortgages (Note 17(a), (b))		43,890
Directors' loans (Note 5(k), 17(a), (c))	304,815	108,769	304,815	108,769
	304,815	152,659	304,815	108,769
Total Interest Bearing Liabilities	304,815	172,659	304,815	128,769
(a) The carrying amounts of assets pledged as security are: Current:
Inventory - work in progress Non-current:	192,852
Mortgaged plant and equipment	107,978	112,302
Fixed charge over non current assets		265,597		265,597
Total assets pledged as security	300,830	377,899		265,597

• (b) The Chattel mortgages were secured by certain plant and equipment of Tantalum Australia Operations Pty Ltd (Controlled Entity). The registered security interest over the mortgaged plant and equipment has been discharged after final repayment has been executed on 7 October 2004. No more Chattel mortgages are in place.
• (c) A loan agreement was entered into between the parent entity and Austminex NL (a company associated with Mr Michael Fotios, Managing Director of the economic entity). This loan is to provide working capital for the parent entity for an amount up to \$225,000. As at 30 June 2005 the loan was drawn down to \$54,815. The loan is secured by a fixed charge over tantalum concentrate currently held by the parent entity and a large ball mill in Norseman owned by the parent entity. The interest rate on the loan is 7.5% per annum until December 2004 and 9% per annum from January 2005. (Note 5(k)).

Another two loan agreements were entered into between Rexfam Consulting (a company associated with Mr Timothy King, Chairman of the economic entity) and the economic entity. This loan is to provide working capital for the parent entity for a total amount of \$250,000. As at 30 June 2005 the loan was drawn down to \$250,000. The loans are secured by concentrate purchased from Metal Processing Association (\$200,000) and the crushing circuit on hand at Dalgaranga mine site (\$50,000). The interest rate on the loans is 9% per annum. (Note 5(k)).

Subsequent to the end of the financial year all loans to Austminex NL and Rexfam Consulting have been repaid.

		Economic Entity		Parent Entity
	NOTE 18: PROVISIONS	2005 \$	2004 \$	2005 \$	2004 \$
CURRENT
	Employee benefits (Note 18(a))	107,947	144,984	107,947	144,984
	NON-CURRENT
	Employee benefits (Note 18(a))	33,918	40,578	33,918	40,578
	Environmental bonds	672,000	672,000	563,500	563,500
Other bonds		200	200	200	200
		706,118	712,778	597,618	604,278
	(a) Aggregate employee benefits	141,865	185,562	141,865	185,562
	(b) Number of employees at year end	12	20	12	20
		Economic Entity		Parent Entity
	NOTE 19: CONTRIBUTED EQUITY	2005	2004	2005	2004
		\$	\$	\$	\$
285,382,502 (2004:253,529,546) fully paid ordinary shares (Note 19(a))		43,886,157	42,078,777	43,886,157	42,078,777
	(a) Ordinary shares
	At the beginning of the reporting period	42,078,778	38,556,701	42,078,778	38,556,701
	Shares issued during the year
	25,352,956 ordinary fully paid shares issued at 6 cents per share	1,521,177		1,521,177
	4,166,667 ordinary fully paid shares issued at 6 cents per share	250,000		250,000
	100,000 ordinary fully paid shares issued at 6 cents per share	6,000		6,000
	2,233,333 ordinary fully paid shares issued at 6 cents per share	134,000		134,000
	11,781,481 ordinary fully paid shares issued at 9 cents per share		1,060,333		1,060,333
	2,996,668 ordinary fully paid shares issued at 10 cents per share-Rare Resources NL shareholders		299,666		299,666
	20,000,000 ordinary fully paid shares issued at 8 cents per share		1,600,000		1,600,000
	6,287,500 ordinary fully paid shares issued at 8 cents per share		503,000		503,000
3,750,000 ordinary fully paid shares issued at 6 cents per share			225,000		225,000

$(165, 922)$

42,078,778

$(103, 798)$

43,886,157

$(103, 798)$

43,886,157

$(165, 922)$

42,078,778

NOTE 19: CONTRIBUTED EQUITY $(CONT.)$

		Number	Number	Number	Number
	At the beginning of reporting period	253,529,546	208,713,897	253,529,546	208,713,897
	Shares issued during year
	01 September 2003		11,381,481		11,381,481
	10 October 2003		400,000		400,000
	11 November 2003 *		2,996,668		2,996,668
	17 December 2003		20,000,000		20,000,000
	16 January 2004		6,287,500		6,287,500
	9 June 2004		3,750,000		3,750,000
	July 2004	25,352,956		25,352,956
	3 November 2004	4,166,667		4,166,667
	12 November 2004	100,000		100,000
	18 November 2004	2,233,333		2,233,333
At reporting date		285,382,502	253.529.546	285.382.502	253,529,546

At meetings of shareholders, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands

(b) Options

At reporting date there were no options on issue.

NOTE 20: RETAINED LOSSES

	Economic Entity		Parent Entity
	2005 \$	2004 \$	2005 \$	2004 \$
Retained losses at beginning of year	(35, 413, 449)	(34, 143, 480)	(33,772,765)	(30, 501, 390)
Adjustment to opening retained losses upon correction of fundamental error	$\bullet$	1.717.133
Net losses attributable to members of the parent entity	(4,375,121)	(2,987,102)	(5,702,700)	(3.271.375)
Retained losses at end of year	(39,788,570)	(35, 413, 449)	(39, 475, 465)	(33,772,765)

	Economic Entity		Parent Entity
NOTE 21: TOTAL EQUITY RECONCILIATION	2005 \$	2004 \$	2005 \$	2004 \$
Total equity at beginning of year	6,665,329	4,413,221	8,306,013	8,055,311
Adjustment to opening total equity upon correction of fundamental error		1.717.133
Total changes in parent and economic entity interest in equity recognised in statement of financial performance

	Economic Entity		Parent Entity
NOTE 21: TOTAL EQUITY RECONCILIATION (CONT.)	2005 \$	2004 \$	2005 \$	2004 \$
Transactions with owners as owners:
Contribution of equity	1,807,379	3,522,077	1,807,379	3,522,077
Total equity at end of year	4,097,587	6,665,329	4,410,692	8,306,013
NOTE 22: CAPITAL AND LEASING COMMITMENTS	Economic Entity			Parent Entity
	2005 \$	2004 \$	2005 \$	2004 \$
(a) Finance and Mortgage Commitments
Payable
not later than 1 year	83,355	93,443	83,355	68,368
Minimum lease payments		93,443		68,368
Less future finance charges		(3,481)		(2,723)
Total Lease Liability	83,355	89,962	83,355	65,645
(b) Operating Lease Commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements
Payable
not later than 1 year	78,480	93,072	78,480	93,072
later than 1 year but not later than 5 years		62,048		62,048
	78,480	155,120	78,480	155,120
The property lease is a non-cancellable lease with a five-year term to 18 February 2006, with rent payable monthly in

advance. Two options exist to renew the lease at the end of the five-year term for an additional term of 3 years each.

The lease allows for subletting of part or all lease areas conditional on landlord consent.

(c) Exploration expenditure

In order to maintain current rights of tenure to exploration tenements, the economic entity and the parent entity are required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State Governments. These obligations are not provided for in the financial report and are subject to renegotiation when application for a mining lease is made and at other times.

	Economic Entity		Parent Entity
	2005 \$	2004 \$	2005 \$	2004 \$
Payable
- not later than 1 year	266,680	260,780	115.400	151,700
- later than 1 year but not later than 5 years	1.159.020	1.043.120	178.600	606,800
	1,425.700	1.303.900	294,000	758.500

NOTE 23: CONTINGENT LIABILITIES AND CONTINOENT ACCETC

CONTINGENT ASSETS	Economic Entity		Parent Entity
	2005	2004	2005	2004
	\$	\$	\$	\$
Estimates of the potential financial effect of contingent liabilities that may become payable:
Bank guarantee
The parent entity has provided a bank guarantee to third party in relation to the Business Card facility. A term deposit of the same amount secures this quaranty.	7.500	5.000	7,500	5.000

Environmental

The economic entity provides for all known environmental liabilities. While the Directors believe that, based upon current information, its current provisions for the environmental rehabilitation are adequate, there can be no assurance that material new provisions will not be required as a result of new information or regulatory requirements with respect to known sites or identification of new remedial obligations at other sites.

Bonus

Under the Sale Agreement relating to the acquisition of Rare Resources NL by Tantalum Australia Operations Pty Ltd, a performance target was set out and may give rise to bonus payments upon satisfaction of specified conditions. The Directors however are of the opinion that until economically recoverable reserves are established a provision is not required.

600,000

NOTE 24: SEGMENT REPORTING

The consolidated entity operated predominantly in the mineral exploration industry in Australia.

		Economic Entity		Parent Entity
	NOTE 25: CASH FLOW INFORMATION	2005 \$	2004 S	2005 \$	2004 \$
(a)	Reconciliation of Cash Flow from Operations with (Loss) from Ordinary Activities after Income Tax
	(Loss) from ordinary activities after income tax	(4,375,121)	(2,987,102)	(5,702,700)	(3,271,375)
	Cash flows excluded from (loss) from ordinary activities attributable to operating activities
	Non-cash flows in (loss) from ordinary activities
	Write down of goodwill	112,947	55,380
	Depreciation and amortisation expenses	366,278	234,259	61,378	71,914
	Write-off of capitalised exploration expenditure	1,925,250	307,020	944,205	31,403
	Amounts set aside to provisions	(43, 697)	(46, 634)	(43, 697)	(46, 634)
	Adjustment due to deconsolidation of associate
	Directors and consultants fees	204,360		204,360
	Net (gain) /loss on disposal of property, plant and equipment	(31,790)	1,512	(120)
	Net gain on disposal of investments	(41, 295)		(40,000)
	Net (gain)/loss on disposal of exploration projects
	Interest paid -financed equipment (incl. in CF repayment of borrowings)		19,969		3,724
	Unrealised foreign exchange (gain)/loss		(854)
	Provision for doubtful debts	(56, 850)		3,805,480	1,965,309
	Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries
	(Increase)/decrease in receivables	297,938	743,436	240,787	319,214
	(Increase)/decrease in inventories	(159, 776)	(69, 303)
	Increase/(decrease) in director loans	(113,954)		(113, 954)
	Increase/(decrease) in trade creditors, accruals and provisions	371,785	213,829	318,651	415,355
	Increase/(decrease) in loans with subsidiaries & associates			(816,003)	(1,463,429)
	Cash flow from operations	(1,543,925)	(1,528,488)	(1, 141, 613)	(1,974,519)

Economic Entity		Parent Entity
2005 \$	2004 \$	2005 \$	2004 \$
$\blacksquare$	299,666
u.	324
$\blacksquare$	74,240	w
u.	1,850
w	29,244
$\blacksquare$	(43,950)
	61,708
w	249,211

$(c)$ Non-cash Financing and Investing Activities

Share issue

2,996,668 ordinary fully paid shares were issued at 10 cents each as the consideration for the purchase of Rare Resources NL.

NOTE 26: EMPLOYEE BENEFITS

Employees Share Option Arrangement

On 13 March 2001, 2,690,000 share options were granted to employees to accept ordinary shares at an exercise price of 25 cents. The options held no voting or dividend rights and were not transferable.

		Economic Entity		Parent Entity
		2005	2004	2005	2004
(a)	Movement in the number of share options held by employees:	\$	\$	\$	\$
	Opening balance	1,095,000	1,345,000	1.095.000	1,345,000
	Lapsed during the year	1.095.000	(250.000)	(1,095,000)	(250,000)
	Closing Balance	$\overline{\phantom{a}}$	1,095,000	$\bullet$	1.095.000

$(b)$ Details of share options outstanding as at end of year:

No share options are outstanding per 30 June 2005.

Superannuation plan

The Parent Entity uses Spectrum Super as their default Superannuation Fund and makes contributions to accumulation funds nominated by the employees. Contributions are charged against income as they are made.

NOTE 27: EVENTS SUBSEQUENT TO REPORTING DATE

Subsequent to reporting date, during July 2005, the parent entity completed a fully underwritten non-renounceable rights issue capital raising to shareholders of the parent entity to raise \$1,801,683 from the issue of 120,112,228 shares at 1.5 cents each. on the basis of one share for every two shares held. The financial effect of this transaction has not been brought to account in the 2005 financial report. As a result of the capital raising and sub-underwriting agreements and debt to equity conversion agreements entered into with entities related to Mr Timothy King (Chairman) and Mr Michael Fotios (Managing Director) in relation to the capital raising, loans and other amounts owing to their related entities at the end of the financial year were subsequently repaid and the shareholdings of Mr Timothy King and Mr Michael Fotios and their related entities increased subsequent to the end of the financial year (Note 5(i).(i).(k)).

Subsequent to reporting date, during August 2005, the parent entity completed the sale of Gold Tenements with Accent Resources NL. During March 2005 a deposit of \$ 250,000 was received and the transaction was completed in August 2005 with a further receipt of \$750,000, the parent entity received additionally 7,500,000 shares in Accent Resources NL amounting to \$1,500,000, at the Accent Resources NL IPO price of \$ 0.20. The total value of the sale of the Gold Tenements amounts to \$2,500,000. TAA also expects to participate in a pro-rata issue of options to all Accent shareholders holding shares 4 month after listing, on a one for two basis at an issue price of \$0.01 per option.

In July 2005, the board commenced a strategic review of its tantalum business, to ascertain whether the ongoing cost structure should be maintained having regard to the prospects for the business, risk profile and industry outlook. The associated staff and senior management requirements are included in this review.

NOTE 28: FINANCIAL INSTRUMENTS

$(a)$ Interest Rate Risk

The economic entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

							Fixed Interest Rate Maturing
	Weighted Average Effective Interest Rate		Floating Interest Rate		Within Year		1 to $5$ Years	Over 5 Years	Non-interest Bearing		Total
	%		\$		\$		\$	\$	\$		\$
	2005	2004	2005	2004	2005	2004		2005 2004 2005 2004	2005	2004	2005	2004
Financial Assets:
Cash	3.5	2.6		158,890 245,189							158,890	245,189
Receivables				$\overline{a}$					82,998	196,583	82,998	196,583
Total Financial Assets				158,890 245,189				$\blacksquare$	82,998	196,583	241,888	441,772
Financial Liabilities:
Payables											$-1,736,824$ 1,835,946 1,736,824 1,835,946
Interest bearing liabilities	9.0	7.5	$\overline{\phantom{a}}$		$-304.815$ 172.659						304,815	172,659
Total Financial Liabilities					$-304.815$ 172.659						$-1,736,824$ 1,835,946 2,041,639 2,008,605

NOTE 28: FINANCIAL INSTRUMENTS (CONT.)

(b) Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and notes to the financial statements.

The economic entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the economic entity.

(c) Net Fair Values

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

NOTE 29: RELATED PARTY TRANSACTIONS

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Transactions with related parties:

Associated Companies $(i)$

During the year loan transactions occurred between the parent entity and its wholly owned subsidiaries.

• $(ii)$ Director-related Entities
• $(a)$ Loans

A loan agreement was entered into between the parent entity and Austminex NL (a company associated with Mr Michael Fotios, Managing Director of the economic entity). Another two loan agreements were entered into between Rexfam Consulting (a company associated with Mr Timothy King, Chairman of the economic entity) and the economic entity. Details of these loans are set out in Notes 5(k) and 17(c).

$(b)$ Sub-underwriting and Underwriting

In June 2004 Austminex NL and Michael Fotios ATF Michael Fotios Family Trust (both entities controlled by Mr Michael Fotios), and Rexfam Consulting Pty Ltd (a company in which Mr Timothy King has a relevant interest) each entered into a sub-underwriting arrangement with the underwriter of a non-renounceable rights issue capital raising by the parent entity. Details of these agreements are set out in Note 5(i).

In June 2005 Austminex NL, Michael Fotios ATF Michael Fotios Family Trust (both entities controlled by Mr Michael Fotios) and Rexfam Consulting Pty Ltd (a company in which Mr Timothy King has a relevant interest) each entered into underwriting agreements with the parent entity in relation to a non-renounceable rights issue capital raising by the parent entity. Details of these agreements are set out in Note 5(j).

$(c)$ Conversion of debt to equity:

In conjunction with the above sub-underwriting arrangements, in June 2004 the parent entity entered into an agreement with Rexfam Consulting Pty Ltd, and entered into agreements with Austminex NL and Michael Fotios ATF Michael Fotios Family Trust, to offset loan funds and fees owing to those entities against the subscription amounts for shares applied for by those entities in the non-renounceable rights issue capital raising. Details of these agreements are set out in Note 5(j).

In conjunction with the above underwriting arrangements, in June 2005 the parent entity entered into an agreement with Rexfam Consulting Pty Ltd, and entered into agreements with Austminex NL and Michael Fotios ATF Michael Fotios Family Trust to offset loan funds and fees owing to those entities against the subscription amounts for shares applied for by those entities in the non-renounceable rights issue capital raising. Details of these agreements are set out in Note 5(j).

Provision of Services: $(d)$

Mr G. Fotios, father of Mr Michael Fotios, was paid \$31,200 as remuneration for services rendered to the economic entity during the year. Mrs N. Smith, mother in law of Mr Michael Fotios, was paid \$14,170 wages and superannuation for cleaning services and Mrs N. Fotios, sister in law of Mr Michael Fotios, was paid \$12,749 wages and superannuation for corporate secretarial services during the year.

NOTE 30: COMPANY DETAILS

The registered office of the parent entity is:

Tantalum Australia NL

24 Mumford Place

Balcatta WA 6021

The principal place of business is:

Tantalum Australia NL

24 Mumford Place

Balcatta WA 6021

DIRECTORS' DECLARATION

The directors of the parent entity declare that:

• $\mathbf{1}$ . the financial statements and notes, as set out on pages 10 to 43 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 2005 and of the performance for the year ended on that date of the parent entity and economic entity;
• $\overline{2}$ . the Chief Executive Officer and the Financial Controller of the economic entity have each declared that:
• the financial records of the economic entity for the financial year have been properly maintained in $(a)$ accordance with section 286 of the Corporations Act 2001;
• the financial statements and notes for the financial year comply with the Accounting Standards; and $(b)$
• the financial statements and notes for the financial year give a true and fair view. $(c)$
• $3₁$ in the directors' opinion there are reasonable grounds to believe that the economic entity 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.

Dated this 30^th day of September 2005

Timothy King Director

Grant Thornton ⁶

INDEPENDENT AUDIT REPORT TO MEMBERS OF TANTALUM AUSTRALIA NL

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for both Tantalum Australia NL (the company) and Tantalum Australia NL and Controlled Entities (the consolidated entity), for the year ended 30 June 2005. The consolidated entity comprises both the company and the entities it controlled during that year.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report; and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Our audit did not involve an analysis of the prudence of business decisions made by the directors or management.

We have read the other information in the annual report to determine whether it contained any material inconsistencies with the financial report.

INDEPENDENT AUDIT REPORT TO MEMBERS OF TANTALUM AUSTRALIA NL (cont)

Independence

In conducting our audit, we followed the applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit opinion

In our opinion, the financial report of Tantalum Australia NL is in accordance with:

• (a) the Corporations Act 2001, including:
• $(i)$ giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and of their performance for the year ended on that date; and
• $(i)$ complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• (b) other mandatory financial reporting requirements in Australia.

Inherent Uncertainty Regarding Continuation as a Going Concern

Without qualification to the audit opinion expressed above, attention is drawn to the following matter. As a result of the matters described in Note $1(q)$ to the financial statements, there is significant uncertainty whether the consolidated entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Ant Monday

GRANT THORNTON Chartered Accountants

San Niell.

SEAN MCGURK Partner

Perth Dated this 30th day of September 2005

Grant Thornton

AUDITOR'S INDEPENDENCE DECLARATION

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Tantalum Australia NL for the period ended 30 June 2005 I declare that, to the best of my knowledge and belief, there have been:

• $(a)$ no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit, and
• no contraventions of any applicable code of professional conduct in relation to the audit. $(b)$

San Niell.

Sean McGurk Partner Grant Thornton

Perth

30 September 2005

gtoerth@gtwa.com.au
---------------------	--	--	--	--

W www.grantthornton.com.au

A Western Australian Partnership - A Member of Grant Thornton Association Inc. - The Australian Member of Grant Thornton International Grathers: P. Constantinou PJ Fallon GP Kidd MJ Kitay GM LeGuier SP McGurk
Consultant: V Dappavigna
Consultant: V Zappavigna

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is set out below. The information was prepared based on share registry information processed up to 17 October 2005.

$\ddagger$ . Shareholdings:

Distribution of Shareholders $(a)$

	Number of Holders
Size of holding category (number of shares held)	Ordinary Shares
$1 - 1,000$	13
$1,001 - 5,000$	85
$5.001 - 10.000$	164
$10,001 - 100,000$	980
$100.001 -$ and over	412
	1.654

$(b)$ The number of shareholders holding less than a marketable parcel is 581

$(c)$ The names of the substantial shareholders listed in the holding company's register are:

Shareholder	Number of Ordinary shares	% Held of Issued Ordinary Capital
United Overseas Bank Ltd	25,250,000	6.23
Michael Fotios and controlled entities	20.940.178	5.16
Timothy King and controlled entities	36,254,158	8.94
Kemet Tantalum Pty Ltd and controlled entities	22,049,538	5.44

$(d)$ Voting Rights

The voting rights attached to each class of equity security are as follows:

Ordinary shares

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (CONT.)

$(e)$ 20 Largest Shareholders - Ordinary Shares

Name		Number of Ordinary Fully % Held of Issued Ordinary Paid Shares Held	Capital
1.	United Overseas Bank Ltd	25,250,000	6.23
2.	Kemet tantalum Pty Ltd	20.116.156	4.96
3.	Rexfam Consulting Pty Ltd	18,881,667	4.66
4.	Fotios Michael George	15,188,555	3.75
5.	Jemaya Pty Ltd	14,050,000	3.46
6.	King Timothy John	12,366,241	3.05
7.	Tricom Nominees Pty Ltd	11,000,000	2.71
8.	Notegrin Pty Ltd	7,481,583	1.85
9.	Perth Select Seafoods Pty	6,873,000	1.69
10.	Filmrim Pty Ltd	6,650,000	1.64
11.	Austminex NL	5,836,666	1.44
12.	Fakuba Pty Ltd	5,570,000	1.37
13.	Irrewarra Investments Pty	5,400,000	1.33
14.	Brice Melvyn John	4,837,826	1.19
15.	Filmrim Pty Ltd	4,500,000	1.11
16.	Maier, Wolfgang	4,381,602	1.08
17.	Dixtru Pty Ltd	3,579,036	.88
18	Tricom Nominees Pty Ltd	3,200,000	.79
19.	I H Holdings Pty Ltd	3,100,000	.76
20.	Iddon Helen Catherine	3,050,000	.75
		181,312,332	44.70

$2.$ The name of the company secretary is Timothy King.

• $\overline{3}$ . The address of the principal registered office in Australia is 24 Mumford Place, Balcatta, WA, 6021. Telephone: (08) 6241 1888
• $\ddot{a}$ Registers of securities are held at the following addresses:

Western Australia Security Transfer Registrars Pty Ltd, 770 Canning Highway,

Applecross, WA, 6153.

5. Stock Exchange Listing:

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Stock Exchange Limited.

$6.$ Unquoted Securities:

None