ROX RESOURCES LIMITED — Annual Report 2004

Sep 29, 2004

ROX RESOURCES LIMITED ABN 53 107 202 602

ANNUAL REPORT

2004

CONTENTS

	Page No
CORPORATE DIRECTORY	1
CHAIRMAN'S REVIEW	$\overline{2}$
PROJECTS	3
HIGHLIGHTS	4
OPERATIONS REPORT	5
DIRECTORS REPORT	14
CORPORATE GOVERNANCE	19
FINANCIAL STATEMENTS	25
Statement of Financial Performance	25
Statement of Financial Position	26
Statement of Cash Flows	27
Notes to and Forming Part of the Financial Statements	28
Directors' Declaration	40
Independent Audit Report to the Members of Rox Resources Limited	41
SCHEDULE OF MINING TENEMENTS	43
OTHER INFORMATION	44

CORPORATE DIRECTORY

Directors:

Dr Alistair Cowden Chairman

Mr Ian Mulholland Managing Director

Mr Michael Blakiston Non-Executive Director

Company Secretary:

Mr Brett D Dickson

Bankers:

Westpac Banking Corporation 40 St George's Terrace PERTH WA 6000

Auditor:

Ernst & Young Level 34, Central Park 152 St George's Terrace PERTH WA 6000

Telephone: (08) 9429 2222 Facsimile: (08) 9429 2436

Solicitor:

Balkiston & Crabb 1202 Hay Street West Perth WA 6005

Telephone: (08) 9322 7644 Facsimile: (08) 9322 1506

For shareholder information contact:

Share Registry:

Computershare Registry Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth, Western Australia, 6000

Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

Stock Exchange:

Australian Stock Exchange Limited

Company Code: RXL (Fully Paid Shares)

Issued Capital:

32,272,000 Fully paid ordinary shares 5,250,000 20 cent, 31 January 2009 options 1,200,000 20 cent, 30 April 2007 options

For information on your company contact:

Principal & Registered Office:

Ground Floor 1 Havelock Street West Perth, Western Australia, 6005

Telephone: (08) 9486 4537 Facsimile: (08) 9486 4933 Web: www.roxresources.com.au Dear Fellow Shareholder.

I am pleased to present Rox's first Annual Report.

Rox is fortunate in starting its life with 100% ownership of the historic Menzies goldfield just north of Kalgoorlie in Western Australia. When gold was first discovered at Menzies it quickly developed to a point where it had 13 hotels, a hospital and a railway built from Kalgoorlie in just two years. Over the early part of the 20th century Menzies became the transport hub for the north-eastern goldfields with 14 underground mines and over 650,000 oz of gold produced at the sensational grade of 22.5 g/t these were boom times.

Ownership of the Menzies goldfield over the years has been fragmented and, because of this, this great goldfield has not had the attention given to other historic fields. Rox has now consolidated this ownership, and it is our view that there remains excellent potential for additional gold production at Menzies.

This potential has already been demonstrated with significant progress achieved in the five months since listing. We have made a number of new high-grade hits and upgraded the resources. The potential for significant mineralisation below 100 deep will be investigated in coming months following compilation of the extensive and fragmented historic database.

Rox is in a strong position, it has a 100% owned 170,000 ounce gold resource at Menzies, $3 million in cash and as a young company, relatively few shares on issue.

I commend the Rox team for their efforts and look forward to an exciting year ahead.

$(A \triangle A)$

Alistair Cowden Chairman

The Florence Mine. 1898

PROJECTS

Menzies Project Location Map

HIGHLIGHTS

WHAT YOUR COMPANY HAS ACHIEVED....

LISTING ON ASX

Listed on 27 April 2004.

ORE GRADE RC DRILL INTERCEPTS AT KNOWN DEPOSITS

2 metres at 10.8 g/t Au from 31 metres depth at First Hit, 1 metre at 15.1 g/t Au from 37 metres depth at Lady Harriet, 4 metres at 4.0 g/t Au from 70 metres depth at Lady Harriet, 2 metres at 8.6 g/t Au from 59 metres depth at Lady Shenton.

NEW DISCOVERIES FROM RAB DRILLING

13 metres at 9.9 g/t Au from 20 metres depth at Bonnie Jean, 10 metres at 1.24 g/t Au from 15 metres depth at Ballarat Menzies, 1 metre at 7.8 g/t Au from 30 metres depth at Ballarat Menzies, 5 metres at 12.8 g/t Au from 25 metres at Wedderburn.

RESOURCE INCREASE

Resource Category	Tonnes	Grade	Ounces	℅
Measured	75,000	2.3	5.500	3
Indicated	1,559,000	2.5	124,900	73
Inferred	494.000	2.6	40,500	24
TOTAL	2.128.000	2.5	170.900	100

Totals may not add up due to rounding

OPERATIONS REPORT

Menzies Deposit/Prospect Locations

EXPLORATION PROGRAM

Your company has been actively exploring the Menzies goldfield since listing, with achievement of some excellent results. This has involved RC and RAB drilling, data compilation and database repair, resource estimation and pit optimisation studies.

RC Drilling	3,349 metres in 46 holes completed
RAB Drilling	6.764 metres in 145 holes completed
Database	18,120 holes containing 269,702 assays
Resource Estimate	5 deposits modelled, adding 11% to the total contained ounces.

The results from drilling have been particularly encouraging because they show that there are high-grade along-strike extensions to known gold deposits, and there are new discoveries (such as Bonnie Jean and Ballarat Menzies) still to be made.

Rox is establishing its credentials as a serious and successful explorer.

MENZIES PROJECT DESCRIPTION

Gold was discovered 130 kilometres north of Kalgoorlie at what was to become Menzies in 1894 by L R Menzie and J E McDonald who were prospecting for a Perth syndicate headed by Sir George Shenton. Menzie and McDonald found an alluvial gold deposit with many rich nuggets and quartz specimens studded with gold. A rush of prospectors and miners to the area resulted. The town subsequently established was named Menzies and the first mine there was called the Lady Shenton, after Sir George's wife.

The town soon numbered 1,000 people with 13 hotels, a post office, fire brigade, hospital and many colourful characters. A 20 head battery was installed at Lady Shenton in 1896 followed by another at the First Hit/Queensland Menzies mine in 1900 and a third at Menzies Consolidated (Yunndaga). The railway line to Menzies was completed in 1898.

The Menzies goldfield was one of Western Australia's major historic goldfields, with production in its first few decades returning approximately 650,000 ounces of gold at 22.5 g/t gold from underground mines. In more recent times open pit mining treated some 1.68 million tonnes at 2.64 g/t gold for approximately 143,000 ounces of gold.

Gold mineralisation at Menzies is hosted within three sub-parallel shear zones near the western margin of a mafic-ultramafic dominated greenstone sequence. The structure is part of the major regional structure which hosts the world class Paddington, Golden Mile, New Celebration and St Ives (Kambalda) gold deposits to the south. The shear zones can be traced for over 15 kilometres within Rox's tenements with historical workings and gold anomalism occurring discontinuously over almost the entire strike length.

A major advantage of the Menzies Project is that all existing resources are located on granted mining leases, which together with the excellent infrastructure in the Goldfields, gives Rox the ability to rapidly develop any resource.

RESULTS

Selkirk

Resource modelling of the Selkirk deposit was undertaken so that a pit optimisation could be run to determine where the open pit to underground mining transition would occur. It was found that the high-grade resource at the bottom of the pit would fall within an expanded pit at current gold prices. An economic comparison with underground mining of this shoot is warranted. The Selkirk shoot is also open at depth, beyond the depth limit of drilling.

First Hit

RC and RAB drilling immediately south of the First Hit open pit on the Wedderburn lode intersected significant mineralisation in all drilling programs completed so far. The location of this zone is shown on the diagram below. Significant drilling results were:

FHRC0001	RC.	2 metres at 10.8 g/t Au from 31 metres depth
FHRB0006	RAB.	5 metres at 12.8 g/t Au from 25 metres depth
FHRB0007	RAB.	5 metres at 2.49 g/t Au from 25 metres depth
FHRB0008	RAB	10 metres at 1.46 g/t Au from 40 metres depth

These intersections are currently being followed up by RC drilling to determine continuity of mineralisation.

Resource modelling of the First Hit resource was also undertaken and resulted in an increase from the previous estimate. The work also involved digitising of historic underground workings (to 225 metres below surface) to better determine the controlling structures on mineralisation.

First Hit Open Pit, Resource Model & Underground Workings

The perspective diagram above shows most of the underground workings being on the Southern (Queensland Menzies) and Central (Crusoe) zones. Historic underground mining at First Hit probably ceased because of depth limitations (water pumping, access and hoisting costs etc.). Modern technology may now allow First Hit to be economically mined to much greater depths than in the past.

OPERATIONS REPORT

There is potential to extend the mineralisation at depth below the Northern zone and below the workings at the Southern and Central zones. The company is planning deep drill holes to test for these extensions based on geological studies currently in progress.

Lady Shenton

RC drilling of extensions of the Lady Shenton deposit (to the north of the current open pit) was successful in intersecting high-grade mineralisation.

LSRC0001RC 2 metres at 8.6 g/t Au from 59 metres depth

This result is currently being followed up by further RC drilling.

Resource modelling and pit optimisation at Lady Shenton has allowed an assessment of the remaining potential. The diagram below shows the Lady Shenton open pit, resource model and underground workings (to 210 metres depth below surface).

Lady Shenton Open Pit, Resource Model & Underground Workings

There are three mineralised lodes, but only the Lady Shenton lode has been significantly exploited by underground mining in the past. There is potential beneath the Falconer and Big Babe lodes for extensions of high-grade gold mineralisation, and also below and along strike of the Lady Shenton lode. The company plans deep drilling to test these targets in the near future.

Lady Harriet

RC drilling on the south shoot at Lady Harriet has brought drill definition up to 20 x 20 metre spacing and allowed the south shoot to be included in the new resource estimate. Some of the drill holes were:

LHRC0002	RC.	1 metre at 15.1 g/t Au from 37 metres depth
LHRC0006	RC.	4 metres at 4.00 g/t Au from 70 metres depth

Resource estimation and pit optimisation work was carried out to assist assessment of further drilling targets. The resource at Lady Harriet was significantly upgraded (see table below).

A mineralised zone, some 1.4 km long extending from Warrior (north) to Pioneer (south) through Lady Harriet is recognised from previous drilling as having potential for a number of small high-grade resources.

Lady Harriet Mineralised Zone

Yunndaga

The Yunndaga resource was modelled and a pit optimisation completed. The results highlighted the large mineralised system at Yunndaga as a prime target. A program of deep drilling is planned for the near future to test extensions at depth. The diagram below shows the Southern Shoot (Princess May) underground workings down to 640 metres below surface. The relatively untested (at depth) Northern Shoot, and Central Shoot (Princess Eva) are strong exploration targets.

Yunndaga Open Pit, Resource Model & Underground Workings

Open pit mining (during the 1990's) at Menzies was mainly restricted to the oxidised portion of the ore bodies, which extend mostly down to about 60 metres below surface. The deepest pit (Yunndaga), was mined to a maximum depth of 110 metres. At Yunndaga the open pit is 1.2 kilometres long. Historical underground mining on the southern shoot extracted some 526,000 tonnes at 16 g/t gold (270,000 ounces of gold). The Northern Shoot, which was not discovered by historic miners, has a stronger near surface expression than that of the historically mined Southern Shoot, which demonstrates the exploration potential still remaining at Yunndaga, and the whole Menzies goldfield. Drill intercepts to be followed-up beneath the pit include:

2m at 23.7 g/t Au 2m at 16.0 g/t Au 2m at 9.1 g/t Au

OPERATIONS REPORT

Yunndaga Deposit Long Section

Bonnie Jean

Rox made a potential new discovery at Bonnie Jean in RAB drilling. Bonnie Jean is at the southern end of a line of old workings extending over about 1 km long defined by a >100 ppb gold-in-soil anomaly. There appear to be several parallel zones of mineralisation, which have had very sparse previous drilling. The initial RAB intersection was:

S7RB0052RAB 13 metres at 9.9 g/t Au from 20 metres depth to end of hole (EOH)

This intercept was originally sampled in 5 metre composites. Re-sampling at 1 metre intervals gave:

5 metres at 19.0 g/t Au from 23 metres (including 3 metres at 30.2 g/t Au from 23 metres)

Ballarat Menzies

RAB drilling at Ballarat Menzies returned highly anomalous results.

S8RB0001RAB	5 metres at 1.09 g/t Au from 10 metres depth.
S8RB0002RAB	5 metres at 2.31 g/t Au from 15 metres depth,
S8RB0004RAB	10 metres at 1.24 g/t Au from 15 metres depth, and
	1 metre at 7.8 g/t Au from 30 metres depth to EOH,
S8RB0005RAB	5 metres at 1.43 g/t Au from 10 metres depth.

RC drilling to more fully test this area is in progress, with the old workings appearing to be to 15-20 metres deep in places and occurring over 300-400 metres in strike length.

RESOURCE STATEMENT

Resources now stand at 2.13Mt @ 2.5g/t for 170,900 ounces of gold (refer table below). This is an 11% increase from that at time of listing.

Prospect	Measured		Indicated		Inferred		Total		Metal
	Tonnes	Grade	Tonnes	Grade	Tonnes	Grade	Tonnes	Grade	Ounces
Lady Irene	5,027	3.21	54,362	3.29	35,044	4.74	94.433	3.82	11,610
Selkirk*		÷	4,015	3.30	14,041	7.09	18,056	6.25	3.627
Lady Sherry	11,800	1.70	13,011	2.29	6,000	1.40	30,811	1.89	1.873
First Hit*		$\overline{\phantom{a}}$	70,492	3.23	69,036	3.08	139.528	3.16	14, 157
Aspacia	$\blacksquare$	$\overline{\phantom{a}}$	7,000	3.40	12,000	3.20	19,000	3.27	2,000
Lady Shenton*	$\blacksquare$	$\overline{a}$	260,626	2.99	20,929	4.17	281.555	3.08	27.860
Golden Age	24,500	2.10	9,474	1.65	4,000	1.20	37,974	1.89	2,311
Unknown	22,000	2.30	5,654	2.78	3,500	1.90	31,154	2.34	2.346
South Dump	12,000	2.70	7,500	2.92	2,000	2.30	21.500	2.74	1.894
Warrior			50,150	1.84	0	0.00	50,150	1.84	2,967
Lady Harriet*	۰	÷	132,305	3.08	13,420	2.82	145.725	3.06	14,318
Yunndaga*	$\blacksquare$	٠	944,604	2.20	313,943	1.89	1,258,547	2.12	85.890
Grand Total	75,327	2.27	1,559,193	2.49	493,913	2.55	2,128,433	2.50	170,853

Menzies Total Resources

* New resource estimate

Totals may not add up due to rounding.

Figures are rounded in summary tables and for public reporting.High-grade cuts were applied at different values for different deposits depending on grade distribution statistics

Comparison of New Resource Estimates with Previous Resource Estimates

Deposit	PreviousCurrent
	Tonnes	Grade g/tAu	OuncesAu	Tonnes	Grade g/tΑu	OuncesAu	ChangeOunces Au
Lady Irene	94 433	3.82	11,610	94,433	3.82	11,610	Ð
Selkirk*	18,000	8.95	5,201	18,056	6.25	3,627	$-1,574$
Lady Sherry	30,811	1.89	1.873	30,811	1.89	1.873	0
First Hit*	71,500	4.56	10,477	139,528	3.16	14,157	$+3,680$
Aspacia	19,000	3.27	2,000	19,000	3.27	2,000	0
Lady Shenton*	440,000	3.05	43,211	281,555	3.08	27,860	$-15,351$
Golden Age	37,974	1.89	2,311	37,974	1.89	2,311
Unknown	31 154	2.34	2,346	31,154	2.34	2,346	0
South Dump	21,500	2.74	1.894	21,500	2.74	1.894	0
Warrior	50,150	1.84	2.967	50,150	1.84	2,967	0
Lady Harriet*	89,500	1.79	5,149	145,725	3.06	14,318	$+9,169$
Yunndaga*	830,000	2.42	64.527	1,258,547	2.12	85,890	+21,363
Total	1,734,059	2.75	153.566	2,128,433	2.50	170,853	$+17.287$

* New resource estimate

Totals may not add up due to rounding.

Figures are rounded in summary tables and for public reporting.

High-grade cuts were applied at different values for different deposits (see Appendix 3) depending on grade distribution statistics

OPERATIONS REPORT

The Company aims to further grow these resources through the exploration for high-grade underground shoots and new discoveries, while assessing mining options from pit extensions/cutbacks or underground development.

MINING STUDIES

Rox recognised that high-grade portions of the resources lying below the open pits may be amenable to exploitation by either underground mining or extensions/cutbacks to the existing open pits. Pit optimisations were run to evaluate how much might be extractable by open pit, to target any in-fill drilling required (particularly at the 86,000 ounce Yunndaga deposit), and to determine where the open-pit to underground transition might be for each deposit.

A series of gold prices ranging from A$500/oz to A$700/oz were used in the optimisations and it was assumed that contract mining and toll treatment would be the preferred path for development.

While the optimisations were run primarily as a tool to begin assessment of various development options, they showed that at a gold price of A$575/oz, 185,000 tonnes at a grade of 4.4 g/t Au yielding 24,200 ounces may be profitably mined.

This preliminary result highlights the sparse drill information below open pits, and that more information will be needed before a decision about mining options can be made. For example, in-fill drilling of sparsely drilled areas may increase grades, and the impact of back-filling of open pits and previous unaccounted-for underground mining needs to be assessed.

Rox will continue to examine the alternatives, including underground mining and on-site treatment as a means of maximising the value of the resources at Menzies.

WHAT'S NEXT

Encouraged by the excellent progress to date, the company will conduct follow-up drilling on surface targets where the resource potential is judged to be highest. We will also undertake drill testing of deep resource targets below the major deposits at Lady Shenton, Yunndaga and First Hit, which have the greatest potential of adding to the resource inventory. This work should lead to a re-estimate of resources and further assessment of mining options.

At the same time, the company recognises that it is ideally placed to take advantage of any resource project opportunities that come about, through its strong cash position, and tight capital structure. The company maintains a watching brief for such opportunities that offer to add value.

The information on mineralisation contained in this statement accurately reflects information compiled by Mr Ian Mulholland B.Sc (Hons), M.Sc., F.Aus.I.M.M., F.A.I.G., who is a Competent Person (as defined by the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves) with relevant experience in relation to such mineralisation. Mr Mulholland has given permission for the information to be included in this statement, and is a full time employee of the Company.

Your Directors present their report on the Company for the period 27 November 2003, being the date of incorporation, to 30 June 2004.

DIRECTORS

The names and details of the Company's directors in office during the financial period and until the date of this report are as follows. Directors were in office for the period from incorporation to the date of signing this report.

Mr lan Mulholland (Managing Director) B.Sc. (Hons), M.Sc. FAusIMM, FAIG, FSEG

Mr Mulholland is a geologist with over 20 years broad experience in a number of commodity groups including gold, silver, copper, lead, zinc, uranium, nickel and kaolin in the exploration and mining industry. He has managed activities from grass roots exploration to advanced resource definition, feasibility studies and mining operations for major companies such as WMC and Esso, medium sized companies, Otter Gold and Aurora Gold and junior companies, Archaean Gold, Summit Resources and Conquest Mining. Ian's strength is in bringing resources to economic fruition and his experience is particularly appropriate for his role with Rox.

Mr Mulholland was Development Manager for Archaean Gold, managing the Nimbus silver-zinc project prefeasibility study prior to Archaean's take-over. He was then Exploration Manager for Anaconda Nickel Limited, managing their extensive tenement and exploration portfolio, with particular emphasis on resource and project management from exploration through development to the production stage adding some 1.3 billion tonnes to the resource available to Anaconda.

Mr Mulholland has a B.Sc. (Hons), Geology from the University of Sydney and a M.Sc. in Geology from the James Cook University of North Queensland. He is a Fellow of the AusIMM, the AIG, and the Society of Economic Geologists.

Dr Alistair Cowden (Non-Executive Chairman) B.Sc. (Hons), Ph.D, MAusiMM, MAIG

Dr Cowden has over 20 years experience as a geologist and mining company executive in Australia, Africa, Europe and New Zealand. This experience ranges through a spectrum of activities; from capital and debt raisings, corporate restructuring, ASX listings, exploration company management, project generation, grass roots exploration, project management, feasibility studies through to mine geology and mineral deposit research.

He has been involved with major projects and discoveries such as Nimbus silver-zinc, Sunrise Dam mine, Kanowna Belle gold mine, Magnetic Minerals Dongara mineral sands project, Syerston nickel - cobalt laterite deposit, Hartley platinum mine, St Ives gold mine and Kambalda nickel mines.

Dr Cowden was a founding director of the Australian Gold Council and has a B.Sc (Hons), Geology from the University of Edinburgh and a PhD in Geology from the University of London. He is currently Chairman of Australis Aquaculture Limited and Managing Director of Vulcan Resources Limited.

DIRECTORS' REPORT

Mr Michael Blakiston (Non-Executive Director)

B.Juris, LLB

Mr Blakiston is a practicing solicitor with legal experience in the resources sector. Mr Blakiston holds the degrees of Bachelor of Jurisprudence and Bachelor of Laws from the University of Western Australia and is a partner of the corporate and resource law firm, Blakiston & Crabb. Mr Blakiston has been practicing law for over 20 years.

Mr Blakiston is a director of Platinum Australia Ltd, Colltech Australia Limited, Rox Resources Limited, Tony Barlow Australia Ltd, Australian Development Capital Ltd and is the Chairman of investment bank Chatsworth Stirling Pty Ltd.

Mr Blakiston has extensive commercial experience both in advisory and directorial capacities having been involved in project assessment, structuring and financing, joint ventures and strategic alliances in the resource industry. In addition, Mr Blakiston has experience in initial public offerings, takeovers and mergers, corporate and project fundraisings (either with debt or equity), construction, offtake and sales contracts.

INTEREST IN THE SHARES AND OPTIONS OF THE COMPANY

As at the date of this report the interest of the directors in the shares and options of Rox Resources Limited were:

	Ordinary Shares	Options
	Held directly	Held by related entity	Held directly
A Cowden	$\sim$	2,520,000	1,250,000
l Mulholland	1,350,000	$\blacksquare$	3,000,000
M Blakiston	$\blacksquare$	1.197.857	1,000,000

EARNINGS PER SHARE

Basic earnings per share	$(0.5)$ cents
Diluted earnings per share	$(0.5)$ cents

PRINCIPAL ACTIVITIES

The principal activity of the Company since incorporation was the acquisition of its mineral tenements, listing on the Australian Stock Exchange and exploration at Menzies.

RESULT FROM OPERATIONS

During the period the Company recorded a loss from operations of $64,431.

DIVIDENDS

No amounts have been paid or declared by way of dividend of the Company since the date of incorporation and the Directors do not recommend the payment of any dividend.

REVIEW OF OPERATIONS

A review of operations of the Company is set out elsewhere in this report.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

On 27 April 2004 the Company was admitted to the official lists of the Australian Stock Exchange after raising $4.454 million through the issue of 22,272,000 fully paid shares.

Prior to its listing on Australian Stock Exchange the Company completed the acquisition of its Menzies project from Deep Yellow Limited by the payment of $500,000 and the issue of 2,500,000 fully paid shares.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD

No matter or circumstance has arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial periods.

ENVIRONMENTAL ISSUES

The Company carries out operations in Western Australia which are subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities. During the financial period there has been no significant breach of these regulations.

AUDIT COMMITTEE

At the date of this report, the Company does not have a separately constituted Audit Committee as all matters normally considered by an Audit Committee will be dealt with by the full Board.

MEETING OF DIRECTORS

During the financial period ended 30 June 2004 there were eight meetings of Directors which were attended by all the Directors.

DIRECTOR AND EXECUTIVE EMOLUMENTS

Details of the nature and amount of each element of the emolument of each director of the company are as follows:

	Base Fee	Options 3Superannuation
Directors			Number	Value $
M Blakiston 1	5,242	480	1,000,000	68,300
A Cowden	6,233	560	1,250,000	83,375
Mulholland	56,880	5,118	3,000,000	204,900
Executives
B Dickson 2		$\sim$	750,000	37,350

• 1. Chatsworth Stirling Pty Ltd, a company in which Mr Blakiston is a shareholder and director, received fees totalling $6,600 for corporate advice. In addition Blakiston & Crabb, an entity of which Mr Blakiston is a partner, received fees totalling $19,219 for legal advice.
• 1. Mr Dickson did not receive any executive remuneration. Coolform Investments Pty Ltd, a company in which Mr Dickson is a director and shareholder, received fees totalling $17,578 for the provision of services.
• 1. Fair Value of Options

During the period 5,250,000 options with an exercise price of $0.20 were awarded to Directors after approval was obtained by shareholders at a general meeting and 750,000 were awarded to an executive. Options granted as part of remuneration have been valued using the Black Scholes methodology, an option pricing model which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option. Currently the fair value of these options are not recognised as expenses in the financial statements.

Since grant no options issued to directors or executives have been exercised and at balance date and the date of this report 6,000,000 remain outstanding.

EMPLOYEES

At 30 June 2004 the Company had two employees.

CORPORATE STRUCTURE

Rox Resources Limited is a company limited by shares which is incorporated and domiciled in Australia.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has made an agreement indemnifying all the directors and officers of the Company against all losses or liabilities incurred by each director and officer in their capacity as directors and officers of the Company.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the Company.

SHARE OPTIONS

At the date of this report and at the reporting date there were 6,450,000 unissued shares under options. Refer to note 15 of the financial statements for further details on options outstanding.

Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate or in the interest issue of any other registered scheme.

CORPORATE GOVERNANCE

In recognising the need for the highest standard of corporate behaviour and accountability, the directors of Rox Resources Limited support the principles of corporate governance. The Company's corporate governance statement is contained in the following section of this Annual Report.

Signed in accordance with a resolution of the directors.

zi (uvd

A COWDEN Chairman

Perth, 29 September 2004

INTRODUCTION

Rox Resources Limited ACN 107 202 602 ("Company") has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised below.

The following additional information about the Company's corporate governance practices is set out on the Company's website at www.roxresources.com.au :

• Corporate governance disclosures and explanations; $\bullet$
• Statement of Board and Management Functions:
• Nomination Committee Charter;
• Policy and procedure for selection and appointment of new directors;
• Summary of code of conduct for directors and key executives;
• Summary of policy on securities trading;
• Audit Committee Charter:
• Policy and procedure for selection of external auditor and rotation of audit engagement partners;
• Summary of policy and procedure for compliance with continuous disclosure requirements;
• Summary of arrangements regarding communication with and participation of shareholders;
• Summary of Company's risk management policy and internal compliance and control system;
• Process for performance evaluation of the Board, Board committees, individual directors and key executives:
• Remuneration Committee Charter; and
• Corporate Code of Conduct.

EXPLANATIONS FOR DEPARTURES FROM BEST PRACTICE RECOMMENDATIONS

During the Reporting Period the Company has complied with each of the Ten Essential Corporate Governance Principles and the corresponding Best Practice Recommendations as published by the ASX Corporate Governance Council ("ASX Principles and Recommendations"), other than in relation to the matters specified below.

Principle Ref	Recommendation7ei	Notification ofDeparture	Explanation forDeparture
1	1.1	The functions of management were not formallydisclosed prior to the Board approving itsStatement of Board and Management Functionson 9 June 2004. The Statement of Board andManagement Functions was disclosed on 17June 2004.	Prior to 9 June 2004 separate functions of theBoard and management existed and werepractised prior to the formal adoption of theStatement of Board and Management Functions
$\overline{2}$	2.1	No member of the Board satisfies the test ofindependence as set out in box 2.1 of ASXCorporate Governance Council's Principles ofGood Corporate Governance and Best PracticeRecommendations("Independence Test").	The Board considers Mr Michael Blakiston andDr Alistair Cowden to be independent for thereasons set out under the heading "Identificationof Independent Directors" in the Annual Report.The existing structure of the Company isconsidered appropriate given the early stage ofdevelopment of the Company and the fact theCompany's projects are all early stageexploration projects.
2	2.2	The chairperson satisfies all of the criteria inaccordance with the Independence Test with theexception that he has an interest in 7.7% of theshares in the Company.	Notwithstanding this, the Board considers DrCowden to be independent for the reasons setout under the heading "Identification ofIndependent Directors" in the Annual Report.
$\overline{2}$	2,4	A separate nomination committee has not beenformed.	Given the Board comprises three members itwas decided that no efficiencies would beachieved by establishing a separate nominationcommittee. The whole board carries out theduties which would otherwise be undertaken bythe nomination committee in accordance withthe Nomination Committee Charter which wasadopted on 9 June 2004. Each memberexcludes him or herself from matters in which hehas a material person interest and otherwiseensures compliance with all aspects of theCorporations Act in relation to related partytransactions.
3	3.1	A formal code of conduct was adopted on 9June 2004.	Although there was no written policy the Boardconsiders that the business practices and ethicsexercised by individual Board members and keyexecutives was of the highest standards. On 9June 2004 the Company certified its practicesas a code of conduct and disclosed this code ofconduct on 17 June 2004.
3	3.2	A written securities trading policy was adoptedon 9 June 2004.	All directors and employees were aware ofexisting legislative restrictions regarding trading

Principle Ref	RecommendationRei	Notification ofDeparture	Explanation forDeparture
			in the Company's securities. The Company hasnow adopted and disclosed a policy.
4	4.2	A separate audit committee has not beenformed.	The whole Board carries out the duties of theaudit committee. In so acting, the whole Boardfollows the Audit Committee Charter disclosedon the Company's website.
4	4.3	The full Board carries out the functions of anaudit committee which is not in compliance withthe criteria specified in the best practicerecommendation 4.3.	Based on the fact that the Company is in itsearly stages as an exploration company, theBoard does not consider that the Company willgain any benefit from a separate auditcommittee.
4	4.4	The Company adopted a formal AuditCommittee Charter on 9 June 2004.	Prior to 9 June 2004 the Board conducted aninformal review of the Company's accounts.The Company was only incorporated inNovember 2003 and listed on the ASX on 27April 2004; therefore this information was notcomplex.
5	5.1	There were no written policies and proceduresdesigned to ensure ASX Listing Rule disclosurerequirements were complied with until 9 June2004.	Although there was no written policy, policiesand procedures did in fact exist. These havenow been documented and formally approvedby the Board.
6	6.1	The Company's shareholder communicationstrategy was designed and disclosed on 9 June2004.	Prior to 9 June 2004 the Company has activelyimplemented strategies to facilitatecommunication with its shareholders, includingmaking information available to shareholders onits website.
7	7.1	The Board adopted a formal framework for itspolicy on risk oversight and management on 9June 2004.	Prior to 9 June 2004 the Company had in placeinformal procedures for assessing risk.
8	8.1	The process for evaluation of the Board,individual directors and key executives was notdisclosed during the Reporting Period.	A performance evaluation of the Board,individual directors and key executives has beencarried out by the Chairman. When consideringwhether to acquire a new project, the Chairmanand Board assesses the level of skills on theBoard and whether these are relevant to theproposed acquisition. The Chairman will alsoundertake a formal review of the ManagingDirector in the 2004/2005 financial year as theCompany was only listed in April 2004.
9	9.1	The Company's remuneration policy was notdisclosed during the Reporting Period.	Although the policy was not disclosed it did existand was applied during the Reporting Period

Principle Ref	RecommendationRef	Notification ofDeparture	Explanation forDeparture
9	9.2	A separate remuneration committee has notbeen formed.	The full Board considers those matters thatwould usually fall to a remuneration committeeand does so in accordance with theRemuneration Committee Charter which wasadopted on 9 June 2004. The Board membersdecided that no efficiencies would be achievedby establishing a separate remunerationcommittee. All matters of remuneration weredetermined by the Board in accordance withCorporations Act requirements, especially inrespect of related party transactions. Nodirector participated in any deliberationregarding his own remuneration or relatedissues.
10	10.1	On 9 June 2004 the Company adopted itscorporate code of conduct.	Although there was no disclosed code ofconduct the Board considers its businesspractices, as led by the example of the Boardand key executives, were the equivalent of acode of conduct.

SKILLS, EXPERIENCE, EXPERTISE AND TERM OF OFFICE OF EACH DIRECTOR

A profile of each director containing the applicable information is set out in the Directors' Report.

IDENTIFICATION OF INDEPENDENT DIRECTORS

The independent directors of the Company are Mr Michael Blakiston, non-executive director, and Dr Alistair Cowden, non-executive Chairman.

Mr Blakiston is a principal of the firm Blakiston & Crabb and is a director and shareholder of Chatsworth Stirling Pty Ltd. Blakiston & Crabb have been the main provider of legal services to the Company. Chatsworth Stirling Pty Ltd has provided corporate advice to the Company. As a result of Mr Blakiston being a principal of Blakiston & Crabb and a director and shareholder of Chatsworth Stirling Pty Ltd, he does not fit within paragraph 3 of the Independence Test. Mr Blakiston passes all other aspects of the Independence Test.

The Board of Rox Resources Limited (in the absence of Mr Blakiston) considered he was capable of and demonstrated that he consistently made decisions and took actions which are designed to be for the best interests of the Company and therefore considered him to possess the characteristics required of a person who would be eligible to take the role of an independent director. The Board noted that the fees paid to Blakiston & Crabb and to Chatsworth Stirling Pty Ltd were not high enough to be material to Mr Blakiston's practice or the firm Blakiston & Crabb or to Chatsworth Stirling Pty Ltd and were also not material to the Company. Therefore the Board considered Mr Blakiston to be independent.

Dr Alistair Cowden has an interest in 7.7% of the shares in the Company and therefore does not fit within paragraph 1 of the Independence Test. The Board of the Company (in absence of Mr Cowden) noted that Mr Cowden did not control the Company and considered that he was capable of and demonstrated that he consistently makes decisions and took actions in the best interests of the Company and therefore considered him to possess the characteristics required of a persons who would be eligible to take on the role of an independent director. The Board noted the potential for conflict in which Dr Cowden has an interest and would require Dr Cowden to declare such interest and not participate in the decision making process unless otherwise allowed by the Board, as is required under the Corporations Act.

STATEMENT CONCERNING AVAILABILITY OF INDEPENDENT PROFESSIONAL ADVICE

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

NAMES OF NOMINATION COMMITTEE MEMBERS AND THEIR ATTENDANCE AT COMMITTEE MEETINGS

The full Board carried out the functions of a nomination committee. Relevant issues were dealt with at the regular Board meetings on an as required basis.

NAMES AND QUALIFICATIONS OF AUDIT COMMITTEE MEMBERS

The full Board carries out the functions of an Audit Committee in accordance with the Audit Committee Charter which was adopted by the Company on 9 June 2004.

The relevant financial expertise and industry experience of each of the Board members is set out in the Directors' Report.

NUMBER OF AUDIT COMMITTEE MEETINGS AND NAMES OF ATTENDEES

During the Reporting Period the full Board conducted an informal review of the Company's accounts on 23 February 2004. Subsequent to year end the full board met to consider the annual financial report.

CONFIRMATION WHETHER PERFORMANCE EVALUATION OF THE BOARD AND ITS MEMBERS HAVE TAKEN PLACE AND HOW CONDUCTED

During the Reporting Period an evaluation of the Board and its members was carried out by way of an informal review conducted by the Chairman.

COMPANY'S REMUNERATION POLICIES

Disclosure of directors' and executives' remuneration is set out in the Directors' Report.

The Company has separate remuneration policies for executive and non-executive directors. Nonexecutive directors will receive a fixed fee for their services to the Company. Non-executive director's fees not exceeding an aggregate of $150,000 per annum have been approved by the Company in general meeting.

Executive directors receive a salary for their services to the Company. There is no direct link between remuneration paid to any of the directors and corporate performance such as bonus payments for achievements of certain key performance indicators.

NAMES OF REMUNERATION COMMITTEE MEMBERS AND THEIR ATTENDANCE AT COMMITTEE MEETINGS

The full Board carried out the functions of Remuneration Committee. The full board considered matters of remuneration on 3 June 2004.

EXISTENCE AND TERMS OF ANY SCHEMES FOR RETIREMENT BENEFITS FOR NON-EXECUTIVE DIRECTORS

The Company does not have any terms or schemes relating to retirement benefits for non-executive directors.

STATEMENT OF FINANCIAL PERFORMANCE For the Period Ended 30 June 2004

	Notes	$27/11/03 - 30/6/04$(3)
Revenues from ordinary activities	$\overline{2}$	37,241
Depreciation	3	(198)
Other expenses from ordinary activities	3	(101, 474)
Loss from ordinary activities before income taxexpense		(64, 431)
Income tax expense relating to ordinary activities	4
Net loss attributable to members of RoxResources Limited	16	(64, 431)
Share Issue Costs	15	(388, 223)
Total changes in equity other than those resultingfrom transactions with owners as ownersattributable to members of Rox Resources
Limited		(452, 654)
Basic loss per share (cents per share)	7	(0.5)
Diluted loss per share (cents per share)	7	(0.5)

The accompanying notes form part of these financial statements.

STATEMENT OF FINANCIAL POSITION As at 30 June 2004

	Notes	2004(3)
Current Assets
Cash assets	9	3,362,372
Receivables	10	805
Total Current Assets		3,363,177
Non-Current Assets
Plant and equipment	11	17,196
Deferred exploration costs	12	1,287,483
Total Non-Current Assets		1,304,679
TOTAL ASSETS		4,667,856
Current Liabilities
Payables	13	101,826
Provisions	14	4,134
Total Current Liabilities		105,960
TOTAL LIABILITIES		105,960
NET ASSETS		4,561,896
EQUITY
Contributed Equity	15	4,626,327
Accumulated losses	16	(64, 431)
TOTAL EQUITY		4,561,896

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS For the Period Ended 30 June 2004

	Notes	$27/11/03 - 30/6/04$$($)$
CASH FLOWS FROM OPERATINGACTIVITIES
Interest received		37,241
Payments to suppliers and employees		(42, 361)
Expenditure on mineral interests		(244, 557)
Net cash used in operating activities	8	(249,677)
CASH FLOWS FROM INVESTINGACTIVITIES
Purchase of equipment		(14, 278)
Purchase of mineral tenements		(500,000)
Net cash used in investing activities		(514, 278)
CASH FLOWS FROM FINANCINGACTIVITIES
Proceeds from issue of ordinary shares		4,514,550
Share issue costs		(388, 223)
Net cash provided by financing activities		4,126,327
Net increase in cash heldCash at 27 November 2003 ("date of		3,362,372
incorporation")
Cash at 30 June 2004	9	3,362,372

The accompanying notes form part of these financial statements.

NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been adopted by Rox are detailed as follows:

(a) Basis of Accounting

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 including applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with.

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 Company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

(b) Cash and Cash Equivalents

Cash on hand and in banks and short-term deposits are stated at nominal values.

For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks and money markets investments readily convertible to cash within 2 working days net of outstanding bank overdrafts.

(c) Deferred Exploration and Evaluation Expenditure

Costs arising from exploration and evaluation activities are carried forward provided such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not, at balance date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves.

Costs carried forward in respect of area of interest that is abandoned are written off in the vear in which the decision to abandon is made

(d) Payables

Liabilities are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received whether or not billed.

(e) Contributed Equity

Ordinary share capital is recognized at the fair value of the consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are recognized directly in equity as a reduction of the share proceeds received.

(f) Income Tax

Tax effect accounting has been adopted using the liability method. The income tax expense in the statement of financial performance has been determined after adjusting for income and expenditure that are not assessable or allowable for taxation purposes. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income the net related tax benefit or liability calculated at current rates is disclosed as a future income tax benefit or a provision for deferred income tax.

Future income tax benefits are not brought to account unless:

in the opinion of the directors, realization of the benefits is virtually certain;

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont) NOTE1

• expected future assessable income is derivable of a nature and of an amount sufficient to enable the benefit to be realized:
• the conditions of deductibility imposed by tax legislation can continue to be complied with; and
• no changes in tax legislation adversely affect Rox or its controlled entities in realizing the benefit.

(a) Receivables

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

(h) Plant and equipment

Cost and valuation All classes of plant and equipment are measured at cost.

Depreciation

Depreciation is provided on a straight-line basis on all plant and equipment. Major depreciation periods are:

Plant and equipment 6-30%

(i) Employee Benefits

Provision is made for the employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.

Liabilities arising in respect of wages and salaries, annual leave sick leave and other employee benefits expected to be settled within 12 months of the reporting date are measured at the nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

Employee benefit expenses and revenues arising in respect of the following categories:

• Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave benefits; and
• Other types of employee benefits

are recognised against profits on a net basis in their respective categories.

The value of the equity-based compensation scheme described in Note 23 is not being recognised as an employee benefit expense.

Revenue Recognition $\mathbf{f}$

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont)

Interest

Control of the right to receive the interest payment.

(k) Leases

Leases are classified at the inception as either operating or finance leases, based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.

Contingent rentals are recognised as an expense in the financial year in which they are incurred.

(I) Recoverable Amount

Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. In determining recoverable amount, the expected net cash flows have not been discounted to their present value.

(m) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flow on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net to the amount of GST recoverable from, or payable to, the taxation authority.

(n) Earnings Per Share

• Basic Earnings Per Share Basic earnings per share is determined by dividing the profit from $(i)$ ordinary activities after related income tax expense by the weighted average number of ordinary shares outstanding during the financial vear.
• Diluted Earnings Per Share Diluted EPS is calculated as net profit attributable to members, $(ii)$ adjusted for:
  • costs of servicing equity (other than dividends):
  • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses:
  • other discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; and
  • dividend by the weighted average of ordinary shares and dilutive potential ordinary shares adjusted for any bonus element.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont) NOTE1

(o) Comparatives

The Company was incorporated on 27 November 2003 and therefore there is no prior period comparative information.

NOTE 2REVENUE FROM ORDINARY ACTIVITIES	2004$($ $)
Revenue from non-operating activitiesInterest received	37,241
NOTE 3EXPENSES AND LOSSES/(GAINS)
Expenses from ordinary activities
Depreciation	198
Other Expenses from ordinary activities
Corporate expenses	55,917
Occupancy and related expenses	34,772
Staff expenses	4,020
Exploration expenditure expensed during theperiod	6,765
	101,474
NOTE 4INCOME TAX EXPENSE
Prima facie tax on loss from ordinary activitiesbefore income tax is reconciled to the income taxas follows:
Ordinary loss before income tax	64,431
Prima facie tax benefit on profit (loss) fromordinary activities before income tax at 30%	19,329
Non-deductible expenditure	(8, 432)
Tax losses not brought to account as futureincome tax benefit	(10, 898)
Income tax expense attributable to ordinaryactivities

NOTE 4 INCOME TAX EXPENSE (cont)

Unbooked future income tax benefits:

The Company has accumulated tax losses of $36,326.

The potential future income tax benefit of these losses ($10,898) will only be realised if:

• the Company derives future assessable income of a nature and of an amount sufficient to enable the ${i}$ benefit from the losses and deductions to be released;
• the Company continues to comply with the conditions for deductibility imposed by the law; and $(ii)$
• (iii) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

NOTE5 DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of Specified Directors and Specified Executives

(i) Specified Directors

Alistair Cowden	Non-executive Chairman
lan Mulholland	Managing Director
Michael Blakiston	Non-executive Director

(ii) Specified Executives

Brett Dickson Company Secretary

(b) Director and Executive Emoluments

The Board assesses the appropriateness of the nature and amount of emoluments of officers on a periodic basis by reference to the relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team.

Details of the nature and amount of each element of the emolument of each specified director and specified executive of the company are as follows:

	Base Fee	Superannuation	Options 3		Total
Director			Number	Value $
M Blakiston	5,242	480	1,000,000	68,300	74,022
A Cowden	6,233	560	1,250,000	83,375	90,168
Mulholland	56,880	5,118	3,000,000	204,900	266,898
	68,355	6,158		356,575	431,088
Executive
B Dickson 2			750,000	37,350

NOTE5 DIRECTOR AND EXECUTIVE DISCLOSURES (cont)

• Chatsworth Stirling Pty Ltd, a company in which Mr Blakiston is a shareholder and director, received $\blacksquare$ fees totalling $6,600 for corporate advice. In addition Blakiston & Crabb, an entity of which Mr Blakiston is a partner, received fees totalling $19,219 for legal advice.
• $21$ Mr Dickson did not receive any directors remuneration. Coolform Investments Pty Ltd, a company in which Mr Dickson is a director and shareholder, received fees totalling $17,578 for the provision of services.
• $31$ Fair Value of Options

On 30 January 2004 5,250,000 options with an exercise price of $0.20 and an expiry date of 31 January 2009 were awarded to specified Directors after approval was obtained by shareholders at a general meeting and 750,000 options with an exercise price of $0.20 and an expiry date of 30 April 2007 were awarded to specified executives. Options granted as part of remuneration have been valued at $356,575 (specified directors) and $37,350 (specified executives) using the Black Scholes methodology, an option pricing model which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option. Currently the fair value of these options are not recognised as expenses in the financial statements.

Since grant date no options issued to specified directors have been exercised and at balance date 5.250.000 remain outstanding.

Director and director related entities held directly, indirectly or beneficially as at the reporting date the following equity interests in the Company:

Ordinary Shares	5,017,857
Options over Ordinary Shares	5,250,000

AUDITOR'S REMUNERATIONNOTE 6	2004
Remuneration of the auditor of theCompany for:
Auditing and reviewing the financial report	5.000
Other services
	5.000

NOTE 7LOSS PER SHARE	2004(5)
The following reflects the income and sharedata used in the calculation of basic anddiluted earnings per share
Net profit (loss)	(64, 431)
Adjustments:- Nil
- Earnings used in calculating basic anddiluted earnings per share	(64, 431)
Weighted average number of ordinaryshares used in calculating basic earningsper share	13,142,037
Effective of dilutive securities:- Share options (i)
Adjusted weighted average number ofordinary shares used in calculating diluted
earnings per share	13,142,037

(i) Share options are not dilutive as their exercise would have the impact of decreasing loss per share.

Conversion, calls, subscriptions or issues after 30 June 2004

Since the end of the financial year no ordinary shares have been issued pursuant to the exercise of options.

There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

NOTE 8 CASH FLOW INFORMATION

(а)	Reconciliation of Cash Flow fromOperations with Loss from ordinaryactivities after Income Tax:
	Loss from ordinary activities after Income Tax	64,431
	Adjustments for non-cash expenseitems
	Depreciation$\blacksquare$	(198)
	Provision for employee benefits$\blacksquare$	(4, 134)
	Changes in Assets and Liabilities
	Increase in capitalised exploration$\blacksquare$	287,484
	Increase in receivables	805
	Increase in payables$\blacksquare$	(98, 711)
	Cash Out Flow from Operations	249,677

NOTE 8 CASH FLOW INFORMATION (cont)

(b) Non Cash Financing and Investing Activities During the period the Company issued 2,500,000 fully paid shares at a deemed price of $0.20 per share to Deep Yellow Limited as part satisfaction for the purchase of the Menzies project.

(c) The Company does not have any credit standby arrangements, used or unused loan facilities.

		20045
NOTE 9CASH ASSETS
Cash at bank		3,362,372
NOTE 10 CURRENT RECEIVABLES
Trade Debtors		805
Terms and Conditions
Trade debtors are non-interest bearing and generally on 30 day terms.
NOTE 11 PLANT AND EQUIPMENT
Equipment cost		17,394
Accumulated depreciation	11(a)	(198)
		17,196
Movements in plant and equipment(a)
Carrying amount at beginning
AdditionsDepreciation		17,394(198)
Closing balance		17,196
DEFERRED EXPLORATION COSTSNOTE 12
Exploration Expenditure
Areas of interest in exploration and evaluation
phases
Balance at beginning of periodAcquired during the year		1,000,000
Expenditure incurred during the period		287,483
		1,287,483

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

NOTE 13 CURRENT PAYABLES

Trade creditors (a)(i)	86.894
Related parties $(a)(i)$ and $(ii)$	14,933
	101,827

NOTE 13 CURRENT PAYABLES (cont)

${a}$ Terms and Conditions

Terms and conditions relating to the above financial instruments.

• Creditors are non-interest bearing and generally on 30 day terms. $(i)$
• Related party creditors are companies associated with directors or officers of the Company. $(ii)$

NOTE 14 PROVISIONS 2004 $(5)$ Employee benefits 4.134 NOTE 15 CONTRIBUTED EQUITY Issued and paid up capital - Ordinary shares fully paid Ordinary shares at beginning of period - Nil 150 Issue of 1,500,000 shares upon incorporation Issue of 6,000,000 shares at $0.01 per share 60,000 Issue of 22,272,000 shares at $0.20 per share pursuant to Prospectus 4,454,400 Issue of 2,500,000 shares at $0.20 to purchase mineral tenements 500,000 Less cost of share issue $(388, 223)$ At reporting date: 32,272,000 ordinary 4,626,327 shares

(a) Share Options

During the year 5,250,000 options exercisable at $0.20 cents per share on or before 31 January 2009 were issued together with 1,200,000 options exercisable at $0.20 per share on or before 30 April 2007. No options have been exercised at the date of this financial report.

NOTE 16 ACCUMULATED LOSSES

Balance at 27 November 2003 (date ofincorporation)
Net loss attributable to members of RoxResources Limited	(64, 431)
Balance at end of year	(64.431)

NOTE 17 EXPENDITURE COMMITMENTS

$(a)$ The Company has entered into certain obligations to perform minimum work on leases held. These obligations vary from time to time in accordance with contracts signed. The Company is required to meet tenement lease rentals and Department of Petroleum and Minerals minimum expenditure requirements which for the 2004/05 financial year amount to $372,700. These may be varied or deferred on application and are expenditures expected to be met in the normal course of business.

(b) Lease Expenditure Commitments

The Company has entered into a sub-lease arrangement with Vulcan Resources Limited to lease office space for a 12 month period ending 27 April 2005. The lease has no renewal, escalation or purchase arrangement nor are there any contingent rental payments. The lease may be terminated with one months notice.

	2004(3)
Payable within 1 year	65,000
Later than 1 year and not later than 5 years	$\blacksquare$
Later than 5 years
	65,000

NOTE 18 SEGMENTS

The Company operates only in one business, being the exploration for gold. Geographically all the Company's activities are conducted in Western Australia.

NOTE 19 CONTINGENT LIABILITIES

Rehabilitation

Pursuant to the Agreement for Sale of Mining Interests between the Company and Deep Yellow Limited dated 20 February 2004 the Company is required to replace mining bonds which total approximately $221,000. These bonds will be released upon the completion of all rehabilitation requirements in regard to the mining tenements at Menzies. The exact cost of rehabilitation is not known at this stage but may equal the total of the bonds put in place.

Native Title

The Company has been notified of a number of competing native title claims under the Commonwealth Native Title Act 1993, covering areas in Eastern Goldfields of Western Australia.

Until further information is available and State legislation is finalised, the Company will not be in a position to assess the likely effect, if any, of any claim on the Company. However, the directors expect that existing exploration activities will not be materially affected by any claim or the claims in aggregate.

NOTE 20 EVENTS SUBSEQUENT TO REPORTING DATE

There has been no event or circumstance since balance date which may have an effect on this financial report.

NOTE 21 RELATED PARTY TRANSACTIONS

Other director related transactions

During the year the Company purchased its Menzies project from Deep Yellow Limited for $500,000 cash plus the issue of 2,500,000 fully paid shares. Dr Cowden is a director of Deep Yellow Limited.

The Company leases office facilities from Vulcan Resources Limited, a company which Dr Cowden and Mr Blakiston are directors. During the financial period an amount of $18,000 was paid for those facilities.

The above transactions were entered into on normal commercial terms

NOTE 22 FINANCIAL INSTRUMENTS DISCLOSURE

(a) Interest Rate Risk

The Company'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 liability, is as follows:

	2004
	Floating InterestRate	Non InterestBearing	Weighted AverageInterest Rate
Financial Assets
Cash	3,362,372		4.1%
Trade Debtors	٠	805	N/A
Total Financial Assets	3,362,372	805
Financial Liabilities
Payables	$\omega$	101,826	N/A
Total Financial Liabilities		101,826

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

(c) Net Fair Values

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

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

NOTE 23 EMPLOYEE BENEFITS	2004$($ $)
Employee benefits
The aggregate employee benefit liability iscomprised provisions (current)	4.134

NOTE 23 EMPLOYEE BENEFITS (cont)

Employee Share Incentive Scheme

An Employee Share Scheme has been established where Rox Resources Limited may, at the discretion of directors, grant options over the ordinary shares of Rox Resources Limited to directors, executives and employees of the Company. The options, issued for nil consideration, are granted in accordance with performance quidelines established by the directors. No options have been issued pursuant to the scheme.

Superannuation Commitments

The Company contributes various percentages of the employee's income, but not less than that required under statutory regulations, to employee nominated complying superannuation funds. Employees may contribute amounts either as fixed dollar amounts or as a percentage of income. At year end all amounts due had been contributed to the employee nominated superannuation fund.

NOTE 24 IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS

The Company has allocated internal resources to conduct impact assessments to isolate key areas that will be impacted by the transition to IFRS. As a result of this assessment priority has been given to considering the preparation of an opening balance sheet in accordance with AASB equivalents to IFRS as at 1 July 2004. This will form the basis of accounting for Australian equivalents of IFRS in the future, and is required when the Company prepares its first fully IFRS compliant financial report for the year ended 30 June 2006.

Set out below are the key areas where accounting policies will change and may have an impact on the financial report of Rox Resources Limited. At this stage the Company has not been able to reliably quantify the impacts on the financial report.

Impairment of Assets

Under the AASB136 Impairment of Assets the recoverable amount of an asset is determined as the higher of net selling price and value in use. This will result in a change in the group's current accounting policy which determines the recoverable amount of an asset on the basis of undiscounted cash flows. Under the new policy it is likely that impairment of assets will be recognised sooner and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.

Share Based Payments

Under AASB 2 Share Based Payments, the Company will be required to determine the fair value of options issued to employees as remuneration and recognise an expense in the Statement of Financial Performance. This standard is not limited to options and also extends to other forms of equity based remuneration. It applies to all share-based payments issued after 7 November 2002 which have not vested as at 1 January 2005. Reliable estimation of the future financial effects of this change in accounting policy is impracticable as the details of future equity based remuneration plans are unknown.

Income Taxes

Under the AASB12 Income Taxes, the Company will be required to use a balance sheet liability method which focuses on the tax effects of transactions and other events that affect amounts recognised in either the Statement of Financial Position or a tax-based balance sheet. It is not expected that there will be any material impact as a result of adoption of this standard.

Exploration

No specific IFRS guidance currently exists for the treatment of exploration expenditure. An exposure draft, ED6, has been drafted which proposes that the treatment previously used under Australian GAAP may continue to be used subject to impairment testing. If it was determined that the asset was impaired it would be immediately written off to the statement of financial performance.

In accordance with a resolution of the Directors of Rox Resources Limited, I state that:

• In the opinion of the Directors: $\mathbf{1}$
  • (a) The financial statements and notes of the Company are in accordance with the Corporations Act 2001, including:
    • giving a true and fair view of the Company's financial position as at 30 June 2004 and its $(i)$ performance for the period ended on that date; and
    • $(ii)$ complying with Accounting Standards and Corporations Regulations; and
  • (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

Curd

Alistair Cowden

Perth, 29 September 2004

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF ROX RESOURCES LIMITED

EII FRNST & YOUNG

ff Central Park 152 St Georges Terrace Perth WA 6000 Australia

BET al C B R 0.429 2222 Pay 63 8 9429 2436

GPO Box M939 Perth WA 6843

Independent audit report to members of Rox Resources Limited

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 Rox Resources Limited (the company), for the period from incorporation on 27 November 2003 to 30 June 2004.

The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company, and that complies with Accounting Standards in Australia, 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 of the financial report in order to express an opinion on it 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 judgement, 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 in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's financial position, and of its performance as represented by the results of its operations and cash flows.

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.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company.

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW).

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF ROX RESOURCES LIMITED

EII ERNST & YOUNG

In our opinion, the financial report of Rox Resources Limited is in accordance with:

the Corporations Act 2001, including: $(a)$

• $(i)$ giving a true and fair view of the financial position of Rox Resources Limited at 30 June 2004 and of its performance for the period from incorporation on 27 November 2003 to 30 June 2004; and
• $(ii)$ complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• $(b)$ other mandatory financial reporting requirements in Australia.

Commt + Tay

Ernst & Young

$7.74$

V W Tidy Partner Perth Date: 29 September 2004

SCHEDULE OF MINING TENEMENTS

$\mathcal{O}(2\pi\log n)$ , whereProject	Tenement	Interest
Menzies	M29/14	100%
Menzies	M29/88	100%
Menzies	M29/153	100%
Menzies	M29/154	100%
Menzies	M29/157	100%
Menzies	M29/184	100%
Menzies	M29/212	100%
Menzies	MLA29/223	100%
Menzies	MLA29/225	100%
Menzies	L29/41	100%
Menzies	L29/42	100%
Menzies	L29/43	100%
Menzies	L29/44	100%
Menzies	L29/58	100%

Key to Tenement Schedule

Glossary

• $\rm M$ Mining Lease $MLA$ Mining Lease Application
• $\mathbf{L}$ Miscellaneous Licence

The following information was applicable as at 31 August 2004.

$\ddagger$ . Shareholding

$(a)$

• Distribution of Shareholders Number Category (size of Holding) Number $1 - 1,000$ $\overline{7}$ $1,001 - 5,000$ $5,001 - 10,000$ 88 $10,001 - 100,000$ 346 100,001 and over 40 481
• $(b)$ The number of shareholdings held in less than marketable parcel is four.
• $(c)$ There were no substantial shareholders listed in the Company's register as at 31 August 2004.
• $(d)$ Top 20 shareholders

		Number of	% of Issued
	Name	Shares	Share Capital
1.	Drumfrochar Pty Ltd	2,520,000	7.81
2.	Deep Yellow Limited	2,500,000	7.75
3.	Mr Ian Robert Mulholland	1,350,000	4.18
4.	Residuum Nominees Pty Ltd	1,197,857	3.71
5.	Mr John Damian Kenny	1,131,545	3.51
6.	Mr Brett Dickson	735,000	2.28
7.	Georgina Dickson	725,000	2.25
8.	Bayonet Investments Pty Ltd	711,800	2.21
9.	Interstate Investments Pty Ltd	650,000	2.01
10.	Cobville Pty Ltd <h &="" a="" c="" d="" fund="" orner="" super="">	500,000	1.55
11.	Sancoast Pty Ltd	441,700	1.37
12.	Ackland Printing Pty Ltd	275,000	0.85
13.	Jaspon Holdings Pty Ltd < Jock Clough Family A/C>	250,000	0.77
14.	Mannwest Group Pty Ltd	250,000	0.77
15.	Mr Aaron Mark Colleran	250,000	0.77
16.	Reawin Pty Ltd	250,000	0.77
17.	Jasper Hill Resources Pty Ltd <superannuationAccount></superannuation	225,000	0.70
18.	Marcello Cardaci	214,014	0.66
19.	Coakley Pastoral Company Pty Ltd <t coakley<br="" d="">Family A/C>	200,000	0.62
20.	L & S Davies Pty Ltd	200,000	0.62
		14,576,916	45.16

There is a total of 32,272,000 fully paid ordinary shares on issue, all of which are listed on Australian Stock Exchange Limited. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

$(e)$ Restricted Securities

The following securities have been classified as Restricted Securities:

Number	Class	Escrow Period
1,335,367	Fully Paid Ordinary Shares	To 30 January 2005
8,364,633	Fully Paid Ordinary Shares	To 27 April 2006
750,000	Options exercisable at $0.20, expire 30/04/07	To 27 April 2006
5,250,000	Options exercisable at $0.20, expire 31/01/09	To 27 April 2006

Use of Funds $2.$

Since admission to the official lists of ASX the Company has used its cash and assets in a form readily convertible to cash in a way that was consistent with its business objectives.