SANDFIRE RESOURCES LIMITED — Annual Report 2005

Sep 21, 2005

SANDFIRE RESOURCES NL

ABN 55 105 154 185

ANNUAL REPORT

2005

CORPORATE DIRECTORY

DIRECTORS	Peter S THOMAS Non-executive Chairman
	Gregory H STEEMSON Managing Director
	Graeme J HUTTON Technical Director
COMPANY SECRETARY	Malcolm K Smartt FCPA FCIS
PRINCIPAL REGISTERED OFFICE	1 Ventnor Avenue West Perth Western Australia, 6005 Telephone: (08) 9226 5833 Facsimile: (08) 9226 5844 Email: admin@sandfire.com.au Internet: www.sandfire.com.au
AUDITOR	Somes & Cooke Chartered Accountants 1304 Hay Street West Perth Western Australia, 6005
SHARE REGISTRY	Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross Western Australia, 6153 Telephone: (08) 9315 0933 Facsimile: (08) 9315 2233 Email: www.securitytransfer.com.au
SOLICITORS	Blakiston & Crabb 1202 Hay Street West Perth Western Australia, 6005
STOCK EXCHANGE LISTING	The Company's shares are quoted on the Australian Stock Exchange. The Home Exchange is Perth.
ASX CODE	- ordinary shares SFR SFRO - options

CHAIRMAN'S REPORT

Dear Shareholder

In opening and on behalf of the Board, I would like to thank shareholders for their continued support in the face of what has been a frustrating period for Sandfire from a market capitalisation perspective for the Company.

The fruits of Sandfire's endeavours since listing in March 2004 have vindicated the Board's confidence in the conceptual models postulated in the initial public offering prospectus. Prospecting and exploration endeavours to date have vielded significant encouragement for further exploration and the prospect of finding a world-class mineral deposit.

Sandfire is about to embark upon an ambitious and exciting drilling program at its Sandfire project. Following the identification of three target areas for drilling and obtaining all necessary aboriginal and statutory clearances, the drilling of the first 2 target areas will commence in September with each hole taking about 25 days to complete. Drilling at Mt Genoa is also scheduled to commence in September. The spatial relationship between interpreted structure, the mineralised outcrops and induced polarisation anomalies suggests that this could be an extremely exciting project with considerable potential.

The delineation of drilling targets at Sandfire's other projects is continuing with good, early results being obtained particularly at Doolgunna.

Sandfire's substantial and expensive endeavour entails high risk but, equally, with success, the rewards will be areat.

Sandfire remains confident that continued shareholder's support will be rewarded by Sandfire's pursuit of its mission of generating conceptual targets in under explored geological provinces with the objective of making world-class discoveries by leveraging the expertise of its board comprised of successful geologists and unconventional thinkers.

P S Thomas Chairman

THE PERIOD IN REVIEW

SUMMARY OF TENEMENTS

	(as at	September 2005)
Tenement Listing
Project		Interest	Tenement
Doolgunna		100%	E52/1697
		100%	E52/1698
		100%	E52/1699
		100%	E52/1715
		100%	P52/1123
Yannarie		100%	E08/1374
		100%	E08/1409
		100%	E09/1111
Mt Augustus		100%	E09/1138
		100%	E09/1139
		100%	E09/1140
Mt Genoa		100%	E09/1186
		100%	E09/1173
		100%	E09/1227
Urandy		100%	E08/1462
		100%	E08/1463
Sandfire		100%	E04/1344
		100%	E04/1424
		100%	E04/1425
		100%	E04/1445
		100%	E04/1449
		100%	E04/1450
		100%	E04/1451
Tangadee		100%	E52/1794
		100% 100%	E52/1795 E52/1796
		100%	E52/1797
		100%	E52/1798
		100%	E52/1799
		100%	E52/1800
		100%	E52/1801
Glen Ross		100%	E52/1840
		100%	E52/1841
		100%	E52/1842
		100%	E52/1843
		100%	E52/1844
		100%	E52/1845
Mt Boggola		100%	E08/1433
		100%	E08/1460
		100%	E52/1736
		100%	E52/1780
		100%	E52/1781
		100%	E52/1782
Borroloola		100%	EL 10121
		100%	MLN 624

The Directors present their report on Sandfire Resources NL for the 12 month period ended 30 June 2005.

DIRECTORS

The names and details of the Directors of Sandfire Resources NL at the date of this report are:

Peter S Thomas B. Juris, LLB Non-executive Chairman

Mr Thomas is a practicing solicitor with more than 25 years national and international experience in the resource sector, both oil and minerals, specialising in the provision of general contractual and corporate advice to both miners and explorers. He is also Chairman of Image Resources NL and Meteoric Resources NL and was a Director of Magnetic Minerals Limited until it was taken over by Ticor in early 2003.

Mr Thomas has been a Director of Sandfire Resources since 18 June 2003 and other than stated above has had no other Directorships in listed companies in the last 3 years.

Gregory H Steemson B.Sc (Geology), MSc (Geophysics), F.Aus. I.M.M. FAIG Managing Director

Mr Steemson is a graduate of the University of Queensland and the University of Utah. He is a qualified geologist and geophysicist and has held senior positions within the mining industry during his 30 year career. Greg has been directly involved in successful exploration programs for gold, base metals, diamonds, iron ore, mineral sands and coal. He has professional work experience throughout Australia and in South Africa. New Zealand. New Guinea, Fiii, Canada, South America and China. He is also a Director of Mineral Commodities Limited and Allied Gold Limited. Mr Steemson brings management and expertise in exploration to the Board.

Mr Steemson has been a Director of Sandfire Resources since 18 June 2003 and other than stated above has had no other Directorships in listed companies in the last 3 years.

Graeme J Hutton B.Sc(Hons), F.Aus.I.M.M Technical Director

Mr Hutton is a graduate of the University of Western Australia. Since graduating some 40 years ago, Graeme has established himself as a highly successful prospecting geologist. His early prospecting career was centered on the Hamersely Iron Province. These activities, undertaken on behalf of DFD Rhodes Pty Ltd, have since been rewarded with Graeme's family Company receiving or being entitled to receive royalties from the Rhodes Ridge Group and West Angelas owned by Rio Tinto, Hope Downs owned by Kumba resources and Hancock Prospecting and McAmeys owned by BHP Iron. These royalties give recognition to Graeme's pioneering role in the development of this mineral field.

In the late 1970's, Graeme, together with Mr Peter Ingram, formed Metana Minerals NL which was one of the star performers of the developing gold mining industry in WA during the 1980's. Leaving the Metana Group in the early 1990's. Graeme was the driving force behind the establishment of Kimberley Diamond Company (KDC), now Australia's second commercial diamond producer. Graeme maintains an active involvement with KDC in the role of Technical Director. Graeme also serves on the Board of Herald Resources.

Mr Hutton has been a Director of Sandfire Resources since 18 June 2003 and other than stated above has had no other Directorships in listed companies in the last 3 years.

COMPANY SECRETARY

Malcolm K Smartt BA(Acctg) Grad Dip Bus, FCPA, FCIS, FCIM

Mr Smartt has held a number of senior finance positions within the resource sector over the past 20 years and completes the Finance and Company Secretarial functions for several listed resource companies.

Directors' interests

Directors' Report

The relevant interest's of each director in the share capital of the company, as notified by the directors to the Australian Stock Exchange Limited in accordance with section 205G(1) of the Corporations Act 2001, at the date of this report are as follows:

	Position	Ordinary fully paid shares	Contributing Shares	* Options
P S Thomas	Non Executive Chairman	400,000	1,000,000	700,000
G H Steemson	Managing Director	1,400,000		200,000
G J Hutton	Technical Director	5,662,536

* Listed options with an exercise price of 10 cents expiring on 30 September 2005 convert to a contributing share with 15 cents to pay.

Each Director's holdings from the start of the period and movements to the end of the period are detailed at Note 16.

Cents

$(4.93)$

Earnings Per Share

Basic Loss Per Share

Dividends

No dividends have been paid or will be recommended to be paid.

Corporate Information

Corporate Structure

Sandfire Resources NL is a company that was incorporated and is domiciled in Australia. The Company has no subsidiary Companies.

Nature of Operations and principal activities

The principal activity of the company during the course of the financial year was mineral exploration. There has been no other significant change in the nature of this activity during the year.

Number of Employees

The number of employees as at the end of the financial year was 4 (2004:2).

Operating and Financial Review

In this the Company's second Annual Report, the Board is pleased to report on significant progress with the exploration of its projects. Drilling is scheduled for the Mt Genoa and Sandfire projects and there are active programs on the Company's other projects.

In addition to working up the projects included in the IPO Prospectus, the Company has acquired several new projects being Mt Genoa, Mt Boggola, Glen Ross and Tangadee.

On the inside cover of this Annual Report are various diagrams that have been included to illustrate some of the Company's activities.

The current status of each of the projects is in summary:

CANNING BASIN

SANDFIRE

(Lead-zinc, Sandfire 100%)

At Sandfire, the Company is investigating the lead-zinc potential of the Admiral Bay fault system. The ability of this structure to host a major base metal deposit is demonstrated by the mineralisation defined by CRA Exploration to the south-east where mineralisation was intersected in drilling over a 20km strike length of the fault system.

To identify prospective structural targets, the existing seismic data were reprocessed to provide a framework for the project. The seismic data were integrated with other available geoscience data sets. Three targets designated T1, T2 and T3 have been selected for drilling targeting the Parda and Admiral Bay faults. The hole depths are 1,350m, 1,400m and 1,250 respectively.

The project is ready for drilling and approvals are in place. Drilling is due to commence in mid-September. Targets T1 and T2 will be drilled first. Each hole will take approximately 25 days to drill.

BANGEMALL BASIN PROJECTS

The Company has extensive tenement holdings in the Bangemall Basin which is one of several overlapping basins that formed between the Pilbara and Yilgarn cratons. These basins include the Hamersley Basin that hosts several world class iron ore deposits, the Ashburton Basin that hosts the Mt Olympus and other gold deposits, the Bangemall Basin that hosts the Abra deposit and the Glengary Basin that hosts several large gold deposits (eq. Peak Hill, Labouchere).

MT AUGUSTUS/MT GENOA (Lead-zinc, Sandfire 100%)

The Mt Augustus tenements cover part of the basal sequence of the Bangemall Basin. Within the Mt Genoa ground there are two outcrops containing visible galena, sphalerite and chalcopyrite.

An induced polarization survey undertaken in 2004 identified two anomalies near these outcrops. The extent of these anomalies was not defined by the 2004 survey. A follow up induced polarization survey has been completed and drill targets selected. Drilling is planned for September.

YANNARIE (Lead-zinc, Sandfire 100%)

The combination of drainage geochemistry, historical exploration data and airborne magnetic data acquired by the Company has identified five target areas that are being investigated. These areas are generally characterized by anomalous geochemistry (zinc±copper±lead).

GLEN ROSS/TANGADEE (Lead-zinc, Sandfire 100%)

The Company's conceptual exploration model has undergone significant development during the year supported by interpretation of existing aeromagnetic data and the airborne electromagnetic data collected by the Company. Field work is underway assessing some of the exploration concepts.

GLENGARRY BASIN

DOOLGUNNA (Gold-copper, Sandfire 100%)

The Doolgunna project covers some 40km of the Jenkins fault zone, a wide zone of interconnecting faults located in the Glengary Basin. Soil geochemistry in the eastern part of the project area has delineated a group of gold anomalies measuring approximately $3 \times 1.5$ km. The area is also anomalous in copper. Further sampling is underway to prepare the area for drilling.

Sampling the western part of the fault zone is in progress.

ASBURTON BASIN PROJECTS

The Ashburton Basin underlies the Bangemall Basin. The Mt Boggola and Urandy tenements cover areas of the Ashburton Basin that were tectonically active during the early stages of formation of the Bangemall Basin.

MT BOGGOLA (Gold, Sandfire 100%)

The Mt Boggola tenements cover inferred structures within the Ashburton formation. Drainage sampling has been completed and the results are being followed up.

URANDY (Copper-gold, Sandfire 100%)

The Urandy tenements cover a complex structural zone within the Ashburton Basin. The Company has identified several exploration targets generated from geochemistry and airborne magnetic data collected by the Company warranting follow up. These targets include an inferred dilational zone and magnetic targets in that zone associated with the dominant northwest trending structures, the Mt Minnie Group contact near the Whynot copper workings and the structure hosting the manganese mineralisation near Mt Amy.

MCARTHUR BASIN (NT) BORROLOOLA (Copper, Sandfire 100%)

The drilling undertaken in 2004 was successful in intersecting narrow, high grade zones of copper mineralisation, Prior to undertaking further drilling, follow up induced polarization work is planned.

Review of Financial Condition

The Company has a sound cash position to adequately meet all exploration commitments and assess new projects.

Capital Structure

During the period, 15,000 options were converted to fully paid shares. This raised \$6,000 and increased the number of Contributing Shares on issue to 4,015,000 and the issued capital to 39,015,000 fully paid shares.

Risk Management

The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks and opportunities are identified on a timely basis and that the Company's objectives and activities are aligned with the risks and opportunities identified by the Board.

The Company believes that it is crucial for all Board members to be part of this process, and as such the Board has not established a separate risk management committee and the whole Board acts in that role.

The Board has a number of mechanisms in place to ensure that the management's objectives and activities are aligned with the risks identified by the Board.

Significant Changes in State of Affairs

There were no events that need to be reported since Balance date

Likely developments

The Company will focus on the exploration of its portfolio of mining tenements and the acquisition of new projects and/or assets.

Further information about likely developments in the operations of the Company and the expected results of those operations on future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Company.

Environmental Regulation and Performance

The company's operations were subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities.

The directors are not aware of any breaches during the period covered by this report.

Share Options

OPTIONS OVER UNISSUED CAPITAL

As at 1 July 2005 there were Options as follows:

Listed Options

Number of Options	Exercise Price	Expiry Date
12,714,420	10 cents each.	30 September 2005

These options allow conversion to a contributing share paid to .0001 cents with 15 cents to pay to become a fully paid share. No call before 3 March 2007.

Unlisted Options

Number of Options	Exercise Price	Expiry Date
3.000.000	25 cents each	31 December 2008

Indemnification of officers

The Company has agreed to indemnify and keep indemnified the following officers, Mr P S Thomas, Mr G H Steemson, Mr G J Hutton and Mr M Smartt against all liabilities incurred by the directors as a director or officer of the Company and all legal expenses incurred by the directors as a director of the Company (and subsidiaries).

The indemnity only applies to the extent and in the amount that the directors are not indemnified under any other indemnity, including an indemnity contained in any insurance policy taken out by the Company (or subsidiary), under the general law or otherwise.

The indemnity does not extend to any liability:

• to the Company or a related body corporate of the Company; or
• arising out of conduct of the directors involving a lack of good faith; or
• which was incurred prior to 18 June 2003 and which is in respect of any negligence, default, breach of duty or breach of trust of which the directors may be quilty in relation to the Company or related body corporate.

Insurance of officers

Since the end of the previous financial year the Company has paid insurance premiums of \$20,535 in respect of directors and officers liability and corporate reimbursement, for directors and officers of the Company. The insurance premiums relate to:

• any loss for which the directors and officers may not be legally indemnified by the Company arising out of any claim, by reason of any wrongful act committed by them in their capacity as a director or officer, first made against them jointly or severally during the period of insurance; and
• indemnifying the Company against any payment which it has made and was legally permitted to make arising out of any claim, by reason of any wrongful act, committed by any director or officer in their capacity as a director or officer, first made against the director or officer during the period of insurance.

The insurance policy outlined above does not allocate the premium paid to each individual officer of the Company.

Remuneration Report

This report outlines the remuneration arrangements in place for Directors and Executives of Sandfire Resources NL.

Remuneration philosophy

The Company's broad remuneration policy is to ensure each remuneration package properly reflects the person's duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest quality.

The Company bases its remuneration of employees and consultants on industry standards and the Australian Institute of Mining and Metallurgy Remuneration and Membership Survey. Whilst in the exploration and acquisition phase, the Company targets the lowest quartile of remuneration levels.

Details of the nature and amount of each element of the emoluments of each director of the Company are:

Table 1

Director remuneration for the Year ended 30 June 2005

	Base emolument	Superannuation contribution т	Total s
P.S. Thomas	50.000		50,000
G H Steemson	181.800	-	181.800
G J Hutton	100,000		100,000

Table 2

Remuneration of other Executives in the Company for the Year ended 30 June 2005

	Base	Superannuation	Total
	emolument	contribution	\$
		5
C Vieru	78.998	7,110	86,108
R Roberts	62.292	5,606	67.898
M Smartt	28.750	2.614	31.364
(Part time)

There were no options or other benefits given to any Directors or Executives during the year.

Directors Fees and Benefits

Directors fees are determined within an aggregate fee pool limit, which is periodically recommended for approval by Shareholders. This amount is separate from any specific tasks the Directors may take on for the Company.

There were no Executive officers of the Company other than the Directors.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors shown in the accounts of the Company) because of a contract made by the Company or a related body corporate with the Director or with a firm of which the Director has a substantial financial interest.

Directors' meetings

The numbers of directors' meetings attended by each of the directors of the Company during the financial vear are:

Director	Board Meetings
P.S. Thomas
G H Steemson
G 1 Hutton

$A =$ Number of meetings attended $B =$ Number of meetings during the time the Director held office during the year.

Committee Memberships

As at the date of this report the Company does not have a Remuneration, Nomination or Audit Committee and the role is completed by the full Board.

Results

The operating loss after income tax of the Company for the financial year was \$1,925,886 (2004: \$770,693).

State of affairs

During the financial year there were no significant changes in the state of affairs of the Company.

Auditor's Independence and non audit services

There have been no non audit services provided by the Auditors during this period.

Lead Auditor's Independence Declaration Under Section 307c of the Corporations Act 2001

The lead auditor's independence declaration is set out on page 11 and forms part of this Director's Report for the year ended 30 June 2005.

Corporate governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Sandfire Resources NL support and have substantially adhered to the best practice recommendations set by the ASX Corporate Governance Council. The Company's corporate governance statement is contained on its web page at www.sandfire.com.au.

Signed in accordance with a resolution of directors.

Dated at Perth this day of September 2005

G H Steemson Managing Director

1304 Hay Street West Perth WA 6005 PO Box 709 West Perth WA 6872 Tel (08) 9322 4853 Fax (08) 9481 5645 Email admin@somesandcooke.com.ou www.somesandcooke.com.au

SomesandCooke

21 September 2005 The Board of Directors

Sandfire Resources NL 1 Ventnor Avenue West Perth WA 6005

Dear Directors

Sandfire Resources NL

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Sandfire Resources NL.

As lead audit partner for the audit of the financial statements of Sandfire Resources NL for the year ended 30 June 2005, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• $(i)$ the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
• any applicable code of professional conduct in relation to the review. $(ii)$

Yours sincerely

SOMES and COOKE

Partner Chartered Accountants

Partners Kevin Somes FCA John Cooke FCA ACIS

Associates Julie Burns CA Rachelle Rose CA CPF

Chartered Accountants, Business Consultants and Financial Advisers

STATEMENT OF FINANCIAL PERFORMANCE

(for the 12 months ended 30 June 2005)

	NOTE	2005 \$	2004 \$
Revenue from ordinary activities	2
Other revenue	2	152,286	75,163
Total revenue	2	152,286	75,163
Administration Expenses	3	(199, 581)	(147, 683)
Depreciation and amortisation expense	3	(65, 929)	(4,235)
Exploration expenditure written off	3	(1,812,662)	(693, 938)
Loss from ordinary activities before related income tax expense		(1,925,886)	(770, 693)
Income tax relating to ordinary activities	4
Net loss attributable to members of the Company	12	(1,925,886)	(770,693)
Basic earnings/(loss) per share (cents per share)	20	(4.93)	(4.43)

The statement of financial performance is to be read in conjunction with the notes to the financial statements.

STATEMENT OF FINANCIAL POSITION

(as at 30 June 2005)

	NOTE	2005	2004
		\$	Ś
CURRENT ASSETS
Cash assets	5	1,954,196	3,775,017
Receivables	6	40,114	98,963
TOTAL CURRENT ASSETS		1,994,310	3,873,980
NON-CURRENT ASSETS
Property, plant and equipment	7	210,478	241.039
Bonds	8	23,000
Capitalised mineral exploration and evaluation expenditure	9
TOTAL NON-CURRENT ASSETS		233,478	241,039
TOTAL ASSETS		2,227,788	4,115,019
CURRENT LIABILITIES
Payables	10	141,030	114,563
Provisions	11	10,833	2,396
TOTAL CURRENT LIABILITIES		151,863	116,959
TOTAL LIABILITIES		151,863	116,959
NET ASSETS		2,075,925	3.998.060
EQUITY
Contributed equity	12	4,517,535	4,513,785
Option Reserve	14	254.968	254,968
Accumulated losses	13	(2,696,578)	770,693
TOTAL EQUITY	19	2,075,925	3,998,060

The statement of financial position is to be read in conjunction with the notes to the financial statements.

STATEMENT OF CASH FLOWS

(for the 12 months ended 30 June 2005)

	NOTE	2005 \$	2004 \$
Cash flows from operating activities
Receipts from customers
Interest received		147,894	25,435
Other income received
Payments to suppliers and employees		(124,436)	(143, 686)
Net cash used in operating activities	22(b)	23,458	(118, 251)
Cash flows from investing activities
Payments for exploration and evaluation		(1,812,662)	(644,000)
Payments for property, plant and equipment		(35, 367)	(232, 815)
Net cash used in investing activities		(1,848,029)	(876, 815)
Cash flows from financing activities
Payments for share issue expenses			(487, 385)
Proceeds from the issue of shares and options		3,750	5,257,468
Net cash provided by financing activities		3,750	4,770,083
Net increase / (decrease) in cash held		(1,820,821)	3,775,017
Cash at the beginning of the period		3,775,017	Nil
Cash at the end of the period	22(a)	1,954,196	3,775,017

The statement of cash flows is to be read in conjunction with the notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

(for the 12 months ended 30 June 2005)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in preparing the financial report of the Company, Sandfire Resources NL are stated to assist in a general understanding of the financial report. These policies have been consistently applied throughout the period.

Basis of Accounting $(a)$

This financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Company's assets and the discharge of its liabilities in the normal course of business.

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

The financial report has been prepared on the basis of historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets.

$(b)$ Income Tax

The Company adopts the income statement liability method of tax effect accounting. Income tax expense is calculated on the operating result adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits 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 Company will derive sufficient future assessable income to enable the benefit from the deductions to be realised and the Company will continue to comply with the conditions of deductibility imposed by the law.

$(c)$ Property Plant and Equipment

Depreciable non-current assets, other than freehold land, are depreciated over their expected economic life using the straight line method. Profits and losses on disposal of non-current assets are taken into account in determining the operating loss for the year. The depreciation rate used for each class of assets is as follows:

	Plant and equipment	$13 - 40%$

Motor vehicles $15 - 20%$

The carrying amounts of non-current assets, other than exploration, evaluation and development expenditure carried forward (refer Note 1(f)), are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds the recoverable amount the asset is written down to the lower amount. In assessing recoverable amounts, the relevant cash flows have not been discounted to their present value.

$(d)$ Acquisition of Assets

The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental to acquisition. Costs relating to the acquisition of new areas of interest are classified as either exploration and evaluation expenditure, development properties or mine properties based upon the stage of development reached at the date of acquisition.

$(e)$ Investments

Interests in listed and unlisted securities are brought to account at cost and dividend income is recognised in the statement of financial performance when received. Where, in the opinion of the Directors, there has been a permanent diminution in the value of any individual investment, a provision for diminution is made.

$(f)$ Exploration and Evaluation Expenditure

All exploration and evaluation expenditure is expensed to profit and loss as incurred.

Receivables and Revenue Recognition $\left( 9\right)$

Interest income on short term investments is recognised as it accrues.

The gross proceeds of asset sales are included as revenue of the Company.

$(h)$ Employee Entitlements

Liabilities for employees' entitlements to wages and salaries, annual leave, and other current employee entitlements are accrued at nominal amounts on the basis of current wage and salary rates.

Liabilities for other employee entitlements, which are not expected to be paid or settled within 12 months of balance date, are accrued, where material, in respect of all employees at the present values of future amounts expected to be paid.

Contributions to employee superannuation plans are charged as an expense as the contributions are paid or become payable.

$(i)$ Payables

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

$(i)$ Goods and Services Tax

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

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

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

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

$\left( \mathbf{k}\right)$ Contributed Equity

Issued capital is recognised as the fair value of the consideration received by the Company.

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

$\left($ l Earnings per Share

Basic EPS is calculated based upon the net loss divided by the weighted average number of shares. Diluted EPS is calculated as the net loss divided by the weighted average number of shares and dilutive potential shares.

$\overline{2}$ REVENUE

	2005	2004 5
Revenue from operating activities Interest received	152,286	75,163
Total ordinary from revenue activities	152,286	75.163

3 EXPENSES

The loss from ordinary activities before income tax expense has been determined after charging the following items:

	2005 \$	2004 \$
Auditors' remuneration
Audit or review of the Company's financial statements	(10, 490)	(6,750)
Depreciation	(65, 929)	(4,235)
Administration Expenses	(199, 581)	(139, 287)
exploration evaluation Mineral and expenditure written off	(1,812,662)	(693, 938)
Provision for employee entitlements	(8, 437)	(2,396)

4 INCOME TAX

$(a)$ Reconciliation

The aggregate amount of income tax attributable to the period differs by more than 15% from the prima facie tax benefit on the operating loss.

The differences are reconciled as follows:

	2005 \$	2004 \$
Operating loss	(1,925,886)	(770,693)
Prima facie tax benefit at 30%	577,766	231,209
Tax effect of permanent differences:	6,000	6,000
Future income tax benefits not brought to account	1,342,120	225,209
attributable ordinary to expense Income tax activities	$\blacksquare$

$(b)$ Future income tax benefits

The future income tax benefits of \$1,342,120 not brought to account relate to income tax losses, the benefit of which will only be realised if the following conditions for deductibility are met:

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

5 CASH ASSETS

	2005 \$	2004 5
Cash	729,714	475,017
Bank Bills	1,224,482	3,300,000
	1,954,196	3,775,017

6 RECEIVABLES

	2005 5	2004 s
GST recoverable	35,743	49,235
Accrued Interest	3,981	49,728
Debtor	390	$\blacksquare$
	40,114	98,963

$\pmb{\gamma}$ PROPERTY, PLANT AND EQUIPMENT

	2005 \$	2004 \$
Office furniture and equipment At cost	50,714	21,622
Accumulated depreciation	(15, 045)	(905)
	35,669	20,717
Buildings and infrastructure
At cost	30,430	30,430
Accumulated depreciation	(3,043)	(181)
	27,387	30,249
Exploration plant and equipment
At cost	10,320	7.514
Accumulated depreciation	(2,818)	(4240)
	7,502	7,090
Motor vehicles
At cost	189.177	185,709
Accumulated depreciation	(49,257)	(2,906)
	139,920	182,803
Total property, plant and equipment at book value	210,478	241,039

Reconciliation

There were no assets at the beginning of the period and only additions and no disposals during the period.

8 Bonds

Bonds

23,000

$\bullet$

CAPITALISED MINERAL EXPLORATION EXPENDITURE 9

			2005 \$	2004 \$
	Balance at the beginning of the period
	Purchase price for tenements			20,000
Total	Exploration Expenditure		1,812,662 1,812,662	673,938 693,938
	Less expenditure written off during the year		(1,812,662)	(693, 938)
	Total amount capitalised as at 30 June 2005		$\blacksquare$
10	PAYABLES
	Current
	Unsecured Trade creditors and accruals		141,030	114,563
	Amounts owed to Directors and/or Director-related entities
			141,030	114,563
11	PROVISIONS
	Current Employee entitlements		10,833	2,396
	Number of employees at year end		3	3.
12	CONTRIBUTED EQUITY
(a)	Ordinary Shares 39,015,000 (2004 39,000,000)		4,512,285	4,513,785
(b)	Contributing Shares
	4,015,000 Paid to .001 cents with 15 cents unpaid		1,500
	Total		4,513,785	4,513,785
(c)	Ordinary Share
	Movements During The Period	2005	2005 \$
	Balance at the beginning of the period Promoter shares	39,000,000	5,001,500
	Ordinary shares converted from Contribs Less:	15,000	1,500
	Brokerage on share issues		(487, 715)
	Balance at the end of the year	39,015,000	4,513,785

$(d)$ Contributing Share

(Paid to .001 cents with 15 cents unpaid)

Movements During The Year	2005 Number	2004	2005	2004 \$
Balance at the beginning of the period Promoter shares Converted from options	4,015,000 $\blacksquare$ $\bullet$	4,000,000 15,000	1,500 $\blacksquare$	1,500
Balance at end of year	4,015,000	4.015.000	1.500	1,500

$(e)$ Options

Listed options issued under a Prospectus

The listed options on issue at the end of the period are as follows:

Number of Options Issued	Exercise Price	Expiry Date
12.714.420	10 cents.	30 September 2005

These options allow conversion to a contributing share paid to .0001 cents with 15 cents to pay to become a fully paid share.

Unlisted options

There are 3,000,000 options on issue at the end of the period which have an exercise price of 25 cents and an expiry date of 31 December 2008.

$(f)$ Terms and Conditions of Contributed Equity

Ordinary Shares

Ordinary shares have the right to receive dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

Contributing Shares

Contributing shares require a further payment of 15 cents to become fully paid.

13 ACCUMULATED LOSSES

	2005	2004
Accumulated loss at the beginning of the period	770.693
Net loss attributable to members of the Company	1,925,886	770.693
Accumulated loss at the end of the year	2,696,578	770,693

$\sim$

$max_m$

14 RESERVES

Option Premium Reserve

	2003	2004
Balance beginning of period	254.968
Issue 12,744,420 options at 2 cents each	$\blacksquare$	254.968
Balance end of period	254,968	254.968

15 DIRECTORS' AND EXECUTIVES' REMUNERATION

$(a)$ Remuneration Disclosures

		Sandfire Resources NL			12 Months Ended: 30-Jun 2004
\$'000	Primary	Cash	Non-		Post Employment	Equity	Other	TOTAL
	Salary & Fees	Bonus	cash	Super- annuation	Retirement Benefits	Options	Benefits	\$'000
	Specified Directors
	Thomas, P. Chairman (Non Executive)
2004	41.129							41,129
2005	50,000							50,000
Steemson, G.		Managing Director
2004	43,120							43,120
2005	181,800							181.800
Hutton.G	Technical Director
2004	17.648			2,664				20,312
2005	91,744	$\overline{\phantom{a}}$		8.256				100,000
TOTALS
2004	101,897			2.664				104,561
2005	323.544			8,256				331.800

Note - The 2004 Primary Salary, fees and Superannuation apply to only a 4 Month period.

Remuneration Reviews (b)

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and the executive team. The Board of Directors assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum benefit from the retention of a high quality Board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles.

$(c)$ Related Party Transactions

Sandfire has agreed to purchase the Mt Boggola tenements from Faustus Nominees Pty Ltd a company associated with Mr G J Hutton. The terms of the agreement will require Sandfire to reimburse Faustus circa \$44,000. This payment will be made on transfer of the tenements. There is no other payment under the agreement.

There were no other related party transactions.

		Sandfire Resources NL- Period Ended 30 June 2005
		Number of Shares held: Specific Directors
	Balance	Issued during	Options	Net Change	Balance
	18 June 03	Period	Exercised	Other	30 Jun 04
		Specified Director's Relevant Interest
Thomas, P.		400,000			400,000
Steemson, G.		1,400,000			1,400,000
Hutton, G.		5,662,536			5,662,536
Totals		7,462,536			7,462,536

DIRECTORS' AND EXECUTIVES' SHARE TRADING DISCLOSURES 16

		SANDFIRE RESOURCES NL- Period Ended 30 June 2005
	Number of Options held: Specific Director's Relevant Interest
	Balance	Issued during	Options	Net Change	Balance
	18 June 03	Period	Exercised	Other	30 Jun 04
		Specified Directors
Thomas, P.		700,000			700,000
Steemson G				200,000	200,000

		SANDFIRE RESOURCES NL- Period Ended 30 June 2005
	Number of Contributing Shares held: Specific Director's Relevant Interest
	Balance 18 June 03	Issued during Period	Options Exercised	Net Change Other	Balance 30 Jun 04
		Specified Directors
Thomas, P.		1.000.000			1.000.000

17 AUDITORS' REMUNERATION

	2005	2004
Audit Services - Financial Report	10.000	6.750
Other Services - IPO	$\blacksquare$	9.000

18 EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS

The Company contributes to superannuation plans at the statutory rate.

EXPENDITURE COMMITMENTS 19

The Company has certain obligations to perform minimum exploration work on mineral leases held. These obligations may vary over time, depending on the Company's exploration programs and priorities. As at balance date, total exploration expenditure commitments on tenements held by the Company which have not been provided for in the financial statements and which cover the following twelve month period amount to \$1,096,600 respectively. These obligations are also subject to variations by things such as farm-out arrangements or sale of the relevant tenements.

20 SEGMENT INFORMATION

The Company operates predominantly in one segment involved in the mineral exploration and development industry. Geographically, the Company operates in Australia only.

EARNINGS/(LOSS) PER SHARE 21

The following reflects the loss and share data used in the calculations of basic and diluted earnings/(loss) per share:

	2005	2004 Ś
Earnings/(loss) used in calculating basic and diluted earnings/(loss) cents per share	(1,925,886)	(770, 693)
Weighted average number of ordinary shares used in calculating basic loss per share:	17,443,299	17,443,299

A diluted earnings per share has not been calculated as the shares are not dilutive.

NOTES TO THE STATEMENTS OF CASH FLOWS 22

$(a)$ Reconciliation of Cash

Cash at the end of the period as shown in the statements of cash flows is reconciled to the related items in the statement of financial position as follows:

	2005	2004
	5	s
Cash at bank	154,196	475,017
Deposits at call	1,800,000	3,300,000
	1,954,196	3,775,017

Reconciliation of the loss from ordinary activities after income tax to the net cash flows used $(b)$ in operating activities

	2005 \$	2004 \$
Loss from ordinary activities after income tax	(1,925,886)	(770, 693)
Non-cash items:
Depreciation	65,929	4.235
Exploration expenditure written off	1,812,662	693,938
Change in operating assets and liabilities.
(Decrease)/increase in trade creditors and employee entitiements	22,972	53,232
(Increase)/ decrease in receivables	47,781	(98,963)
Net cash outflows used in operating activities	23,458	(118,251)

23 FINANCIAL INSTRUMENTS

$(a)$ 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 those financial assets, is as follows: 2005

	Note	Weighted Average Effective Interest	Floating Interest Rate	Fixed Interest Rate Maturing 12 $12 - 60$		Non Interest Bearing	Total
				months or less	months
		$\alpha$	\$	\$	\$	\$	\$
Financial Assets Cash assets	22(a)		1,800,000			154,196	1,954,196
Receivables	6					40,114	40,114
Total Financial Assets			1,800,000			194,310	1,994,310
Financial Liabilities Payables	10					129,098	129,098
Total Financial Liabilities
Net Financial Assets/(Liabilities)							1,865,212
2004	Note	Weighted Average Effective Interest	Floating Interest Rate	Fixed Interest Rate Maturing		Non Interest Bearing	Total
				12 months or less	$12 - 60$ months
		$\alpha$	\$	\$	\$	\$	\$
Financial Assets Cash assets	22(a)	5.29	3,300,000		۰	475,017	3,775,017
Receivables	6	0			÷	98,963	98,963
Total Financial Assets			3,300,000	$\blacksquare$	۰	573,980	3,873,980
Financial Liabilities Payables	10					114,563	114,563
Total Financial Liabilities						$\blacksquare$

(b) Credit Risk

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

$(c)$ Net Fair Values

The net fair values of financial assets and fiabilities at balance date approximate their carrying amount.

24 CONTINGENT LIABILITIES

At the date of this report there were no known contingent liabilities.

SUBSEQUENT EVENTS 25

There has not arisen in the interval between the end of the period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company In future financial years.

26 IMPACT OF ADOPTING AUSTRALIAN EQUIVALENT TO IFRS

Sandfire Resources NL is in the process of transitioning its accounting policies and financial reporting from current Australian Accounting Standards (AGAAP) to Australian equivalents of International Financial Reporting Standards (AIFRS) which will be applicable for the year ended 30 June 2006.

An opening balance sheet is being prepared in accordance with AIFRS as at 1 July 2004, the Company's transition date to AIFRS. This will form the basis of accounting for AIFRS in the future and is required when the Company prepares its first fully AIFRS compliant financial report for the year ended 30 June 2006.

Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and our best estimate of the quantitative impact of the changes on total equity as at 1 July 2004 and 30 June 2005 and on net loss for the year ended 30 June 2005.

The figures here are the best estimates of the quantitative impact of the changes as at the date of preparing this report. The actual effects of the transition to AIFRS may differ from the estimates shown here due to (a) ongoing work being undertaken by the Company, (b) potential amendments to AIFRS and interpretations thereof being issued by the standard-setters, and (c) emerging accepted practices in the interpretation and application of AIFRS and UIG interpretations.

Reconciliation of equity as presented under AGAAP and that under AIFRS

	2005	2004
Total equity under AGAAP	2.075.925	3.998.060
Total equity under AIFRS	2,075,925	3,998,060

Taxation

Under the Australian equivalent to IAS 12 "Income Taxes", a balance sheet approach will be adopted for calculating taxation, replacing the "statement of financial performance approach". This method recognises deferred tax balances for all temporary differences arising between the carrying value of an asset or liability and its tax base. Whilst there will be enhanced disclosure of the composition of the deferred tax assets and liabilities it is not expected that there will be any significant impact in terms of the statement of financial position or performance.

Financial Instruments

Under AASB 139 "Financial Instruments: Recognition and Measurement" financial instruments will be required to be classified into five categories and to be measured based on the nature of the classification. The five categories and basis of measurement are:

• Financial asset or financial liability measured at fair value through the statement of financial $1)$ performance:
• $2)$ Held to maturity investments measured at amortised cost, subject to impairment;
• Loans and receivables measured at amortised cost, subject to impairment; 3)
• $\overline{4}$ Available for sale assets measured at fair value with changes in fair value measured directly in equity; and
• 5) Financial liability measured at amortised cost

Whilst this will result in a change in accounting policy from carrying the shares in listed securities at the lower of cost and market value, to carrying them at fair value, the change in accounting policy will not have an impact on the result for the year ended 30 June 2005 or equity at that date,

Impairment of Assets

Under the Australian equivalent to IAS 36 "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 the Company's current accounting policy which determines recoverable amount of an asset on the basis of undiscounted cash flows. Under the new policy it is likely that the impairment of assets may be recognised sooner and the amount of write downs may be greater. As the Company expenses all exploration expenditure as incurred, impairment of assets is not likely to have a material impact on the financial statements.

DIRECTORS' DECLARATION

In the opinion of the Directors of Sandfire Resources NL ("the Company")

• $(a)$ the financial statements and notes as set out on pages 12 to 27 are in accordance with the Corporations Act 2001, including:
• complying with Accounting Standards in Australia and the Corporations Regulations 2001 and other $\left( i\right)$ mandatory professional reporting requirements; and
• $(ii)$ giving a true and fair view of the financial position of the Company as at 30 June 2005 and of their performance, as represented by the results of their operations and their cash flows, for the period ended on that date.
• (b) there are reasonable grounds to believe that Sandfire Resources NL will be able to pay its debts as and when they become due and payable.
• (c) The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2005.

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

Signed at Perth this day of September 2005

G H Steemson Managing Director

1304 Hav Street West Perth WA 6005 PO Box 709 West Perth WA 6872 Tel (08) 9322 4853 Fax (08) 9481 5645 Email admin@somesandcooke.com.ou www.somesandcooke.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF SANDFIRE RESOURCES 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 Sandfire Resources NL ("the company") for the year ended 30 June 2005 as set out on pages 12 to 27.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with 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 judgment 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.

Audit opinion

In our opinion, the financial report of Sandfire Resources NL is in accordance with:

• the Corporations Act 2001, including: $(a)$
• giving a true and fair view of the financial position of Sandfire Resources NL at 30 June 2005 $\left(\mathbf{i}\right)$ and of its performance for the year ended on that date; and
• $(ii)$ complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• $(b)$ other mandatory financial reporting requirements in Australia.

Somes & Cooke Charted Accountants

K C Somes Partner Perth Date:

CORPORATE GOVERNANCE STATEMENT

GOOD GOVERNANCE AND PRACTICE RULES

The Australian Stock Exchange Corporate Governance Council has determined a total of ten Governance and Good Practice Rules, and although not mandatory at this time, these rules must be listed and an explanation provided on whether the Company Complies with the rule, or a reason why it does not.

Full details of the Company Corporate Governance can be viewed on the internet at www.sandfire.com.au or contact the Sandfire Office 08 9226 5833 and a copy of the full Corporate Governance will be sent to you.

PRINCIPAL .	COMPLIANCE OR DETAILS OF
	PLANNING

PRINCIPAL 1: Lay sold foundations for management and oversight
1.1 Formalise and disclose the functions reserved to the Board and those	Board All and Management
delegated to management	functions fully detailed.
PRINCIPAL 2: Structure the Board to add value
2.1 A majority of the Board should be independent directors	Not complied with for economic reasons.
2.2 The Chairperson should be an independent director	Complied with.
2.3 The roles of Chairperson and Chief Executive Officer should not be	Complied with.
exercised by the same individual
2.4 The board should establish a nomination committee	The fulfills Board role of Nomination Committee.
PRINCIPAL 3: Promote ethical and responsible decision-making
3.1 Establish a code of conduct to guide the director's, the Chief Executive Officer (or equivalent), the Chief Financial Officer (or equivalent) and any other key executives as to: the practices necessary to maintain confidence in the 3.1.1 Company's integrity. 3.1.2 The responsibility and accountability of individuals for reporting or investigating reports of unethical practices.	comprehensive Code of Α Conduct has been adopted.
3.2 Disclose the policy concerning trading in Company securities by Directors. Officers and Employees;	A strict policy has been adopted.
PRINCIPAL 4: Safeguard integrity in financial reporting
Require the Chief Executive Officer (or equivalent) to state in writing to 4.1 the Board that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results and are in accordance with relevant accounting standards.	Completed by Managing Director in conjunction with Company Secretary and Auditor.
4.2 The board should establish an audit committee.	The role of Audit Committee has been assumed by the full Board.
Structure the audit committee so that it consists of: $4.3 -$ Only non-executive directors A majority of independent directors. An independent chairperson who is not the chairperson of the ٠ Board. At least three members.	Not Complied with $-$ see above.
The audit committee should have a formal operating charter. 4.4	Not appropriate at this time.
PRINCIPAL 5: Make timely and balanced disclosure.
Establish written policies and procedures designed to ensure compliance 5.1 with ASX Listing Rule disclosure requirements and to ensure
accountability at a senior management level for that compliance.	Complied with.

	PRINCIPAL 6: Respect the rights of shareholders.
6.1	Design and disclose a communications strategy to promote effective
	communication with shareholders and encourage effective participation	Complied with.
	at general meetings.
6.2	Request the external auditor to attend the annual general meeting and
	be available to answer shareholder questions about the audit and the
	preparation and content of the auditors report.	Complied with.
	PRINCIPAL 7: Recognise and manage risk.
	7.1 The Board or appropriate Board committee should establish policies on
	risk oversight and management.	Complied with.
	7.2 The Chief Executive Officer (or equivalent) and the Chief Financial
	Officer (or equivalent) should state to the Board in writing that:
	7.2.1 the statement given in accordance with best practice
	recommendation 4.1 (the integrity of financial statements) is
	founded on a sound system of risk management and internal
	compliance and control which implements the policies adopted by
	the Board.	Complied with.
	the Company's risk management and internal compliance and 7.2.2
	control system is operating efficiently and effectively in all
	material respects.
	PRINCIPAL 8: Encourage enhanced performance.
	8.1 Disclose the process for performance evaluation of the Board, its
	committees and individuals directors, and key executives.	Complied with.
	PRINCIPAL 9: Remunerate fairly and responsibly.
9.1	Provide disclosure in relation to the Company's remuneration policies to
	enable investors to understand (i) the cost and benefits of these policies
	and (ii) the link between remuneration paid to directors and key	Complied with.
	executives and corporate performance.
9.2	The Board should establish a remuneration committee.	Complied with.
9.3	Clearly distinguish the structure of non-executive directors' remuneration
	from that of executives.	Complied with.
9.4	Ensure that payment of equity-based executive remuneration is made in
	accordance with thresholds set in plans approved by shareholders.	Complied with.
	PRINCIPAL 10: Recognise the legitimate interest of stakeholders.
	10.1 Establish and disclose a code of conduct to guide compliance with legal
	and other obligations to legitimate stakeholders	Complied with.

BOARD OF DIRECTORS

The Board is responsible for the overall Corporate Governance of the Company including the strategic direction, establishing goals for management and monitoring the achievement of these goals. The Board has also established a framework for the management of the Company including setting levels of remuneration for Directors and senior personnel, an overall framework of internal control and the establishment of appropriate ethical standards.

The Board regularly reviews the Company's operational and financial performance and reviews and approves detailed budgets and investment opportunities. The Board works closely with executive management to identify and manage operational, financial and legislative risks.

To ensure the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of Directors and for the operation of the Board.

COMPOSITION OF THE BOARD

Principle 2 of the Good Governance and Practice Rules recommends that:

The Majority of the Board should be non-executive - The Company has only a small "working" Board and at this time the lack of non-executives is not seen as a problem. This will be constantly reviewed.

When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board selects a candidate or panel of candidates with the appropriate expertise and experience. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders. The Company does not have a formal Nomination Committee and that role is fulfilled by the whole Board.

The full Board currently holds scheduled meetings each year plus any extraordinary meetings at such other times as may be necessary to address any specific significant matters that may arise.

BOARD RESPONSIBILITIES

As the Board acts on behalf of and is accountable to the shareholders, the Board seeks to identify the expectations of shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.

The responsibility for the operation and administration of the Company entity is delegated by the Board to the executive team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the executive team.

The Board is responsible for ensuring that managements' objectives and activities are aligned with the expectations and risks identified by the Board.

MONITORING OF THE BOARD'S PERFORMANCE AND COMMUNICATION TO SHAREHOLDERS

The Board aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the Directors. Information is communicated to the shareholders through:

• the annual report which is distributed to all shareholders;
• the half-yearly report; and
• the annual general meeting and other meetings so called to obtain approval for board action as appropriate.

All documents that are released publicly are made available on the Company's website at www.sandfire.com.au.

INDEPENDENT PROFESSIONAL ADVICE

Each Director has the right to seek independent professional advice at the Company's expense. However, prior approval of the Chairman is required, which should not be unreasonably withheld.

REMUNERATION

Remuneration levels are set by the Board in accordance with industry standards to attract suitably qualified and experienced Directors and senior executives.

ETHICAL STANDARDS

All Directors and employees are expected to act with the utmost of integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

CONFLICT OF INTEREST

In accordance with the Corporations Act 2001 and the Company's Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes that a significant conflict exists the Director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered. There are no director related entity transactions with the Company.

DIRECTORS DEALINGS IN COMPANY SHARES

The Constitution permits Directors to acquire shares in the Company. Company policy prohibits Directors from dealing in Company shares whilst in possession of price sensitive information. Directors must notify the Company Secretary once they have bought or sold securities in the Company. In accordance with the provisions of the Corporations Act 2001 and the Listing Rules of the Australian Stock Exchange, the Company on behalf of the Directors must advise the Australian Stock Exchange of any transactions conducted by them in shares and/or options in the Company.

ASX ADDITIONAL INFORMATION

Pursuant to the Listing Requirements of the Australian Stock Exchange Limited, the shareholder information set out below was applicable as at 16 September 2005.

Number of Shares and Options Holders

• 39,015,000 Ordinary Shares (SFR)
• 12,641,420 Options (SFRO) to convert to a contributing share for 10 cents on or before 30 September $\bullet$ 2005. (Note that these options cease trading on 23 September 2005)
• 4,663,000 Contributing Shares paid to .001 cents with 15 cents to pay to convert to a fully paid share. $\bullet$ (No call to be made before 3 March 2007)
• 3,000,000 Options exercisable at 25 cents and expiring on 31 December 2008

Distribution of Equity Securities

Analysis of numbers of shareholders by size of holding:

Distribution	٥f Number	of Number
	Shareholders	Option Holders
$-1,000$
$1,001 - 5,000$	21	103
$5,001 - 10,000$	181	30
$10,001 - 100,000$	233	89
More than 100,000	54	19
Totals	491	242

Holders of Un Marketable Parcel (\$500) and Uneconomic Parcels (\$2000)

• There were four holders of less than a marketable parcel of ordinary shares; and, $\mathbf{1}$
• $2)$ There were thirty holders with less than an uneconomical parcel of ordinary shares.

Substantial Shareholders

The following shareholders are recorded in the register of Substantial Shareholders

	Number	Percentage
Faustus Nominees Pty Ltd	5,662,536	14.51
Resource Development Co	3.672.536	9.41

Restricted Securities

Details of restricted ordinary shares are as follows:
24 Months from 1 March 2004.	13,750,000

Voting Rights

In accordance with the Company's Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll each share shall have one vote. The contributing shares have a vote which is proportional to the amount actually paid thereon and relative to the aggregate amount paid on that share when it is fully paid.

On-market buy back

There is currently no on-market buy back of the Company's securities.

Use of cash and assets

From the period of ASX Listing (11 March 2004) until the date of this report, the Company has used the cash and assets as declared on admission to the ASX, in a form consistent with the Company's business objectives.

$\pmb{c}$ Twenty Largest Shareholders

The names of the twenty largest holders of shares are listed below:

. Number .
	Shareholders	(as at 16 Sep 05)	Percentage
1	Faustus Nominees Pty Itd	5,662,536	14.51
2.	Resource Development Co	3,672,536	9.41
3	All-State Finance Pty Ltd	1,400,000	3.59
4	Steemson Gregory Hugh	1,400,000	3.59
5	I E Properties Pty Itd	1,349,619	3.46
6	West Aust NT Exploration	1,000,000	2.56
7	Tongaat Pty Ltd	1,000,000	2.56
8	Topseed Pty Ltd	919,000	2.36
9	Weybridge Pty Ltd	674,928	1.73
10	Whittingham Securities Pty Ltd	500,000	1.28
11	GCN Investments Pty Ltd	474,622	1.22
12	Thomas Peter + Goodwin Su	400,000	1.03
13	National Nominees Limited	400,000	1.03
14	Academic Growth Inst	356,000	0.91
15	Computer Visions Pty Ltd	350,000	0.90
16	Adams Peter Daniel	320,000	0.82
17	Alleyndale Pty Ltd	320,000	0.82
18	Barrymore Geoffrey William	285,000	0.73
19	Australian Commercial World	250,000	0.64
20	Nutsville Pty Ltd	250,000	0.64
		20,984,241	53.79%
	Total Ordinary Shares on Issue	39,015,000

SANDFIRE RESOURCES

D Twenty Largest Option holders

The names of the twenty largest holders of shares are listed below:

Note that at the time of the AGM, these Options will have expired.

	.
Option Holders		(as at 09 Sep 04)	Percentage
1	Resource Development Co.	1,506,268	12.10
2.	I E Properties Pty Ltd	1,120,000	9.00
3.	Thomas Peter + Goodwin Su	700,000	5.62
4	All-State Finance Pty Ltd	700,000	5.62
5	Country Investor Pty Ltd	632,756	5.08
6	Tongaat Pty Ltd	500.000	4.02
7	Biddlecombe Pty Ltd	500,000	4.02
8	T J Mann & Associates Pty Ltd	500,000	4.02
9.	Fogbell Nominees Pty Ltd	299.058	2.40
10	T J Mann & Associates Pty Ltd	200,000	1.61
11	Steemson Gregory Hugh	200,000	1.61
12	West Aust North Terr Exploration	192,766	1.55
13	Alleyndale Pty Ltd	160,000	1.29
14	Dimi Pty Ltd	137,830	1.11
15	Sharples John	132,500	1.06
16	Academic Growth Institute	125,000	1.00
17	Nursville Pty Ltd	125,000	1.00
18	Barrymore Geoffrey William	112,500	.90
19	Ezzy Mervin Everett	102,000	.82
20	Seaton Ross Holdings Pty Ltd	100,000	.80
		8,045,678	64.63%
	Total Options on Issue at 16 Sep 05	12,447,198

Note - There were 194,222 options awaiting conversion as at 16 Sep 05.

E Voting Rights

In accordance with the Company's Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll each share shall have one vote. The contributing shares have a vote which is proportional to the amount actually paid thereon and relative to the aggregate amount paid on that share when it is fully paid.