SKY METALS LIMITED — Audit Report / Information 2003

Mar 8, 2004

9 March 2004

Stephen Yan Companies Advisor Australian Stock Exchange Limited 20 Bridge Street Sydney NSW 2000

Dear Stephen

RE: PRO FORMA ACCOUNTS

Further to your correspondence of yesterday, please find attached;

1. An updated pro forma balance sheet based on actual funds raised under the prospectus;

2. A statement setting out the number of securities subject to escrow and the escrow period applied to those securities

3. A reviewed pro forma balance sheet that complies with listing rule 1.3.5(c).

Please do not hesitate to contact me if you have any questions.

Yours sincerely

Juch

Anthony J McClure Director

1. PLANET GAS LIMITED

	Consolidated
	31 December 2003$	Proforma$
CURRENT ASSETS
Cash assets	816,322	15,066,322
Receivables	21,254	21,254
TOTAL CURRENT ASSETS	837,756	15,087,576
NON-CURRENT ASSETS
Plant and equipment	6.915	6,915
Exploration and evaluation expenditure	2,491,482	2,991,482
Other	20,000	20,000
TOTAL NON-CURRENT ASSETS	2,518,397	3,018,397
TOTAL ASSETS	3,355,973	18,105,973
CURRENT LIABILITIES
Payables	164,782	164,782
Other	2,500,000
TOTAL CURRENT LIABILITIES	2,664,782	164,782
TOTAL LIABILITIES	2,664,782	164,782
NET ASSETS/(LIABILITIES)	691,191	17,941,191
SHAREHOLDERS' EQUITY
Contributed equity	1,322,054	18,572,054
Accumulated losses	(630, 863)	(630, 863)
TOTAL EQUITY	691,191	17,941,191

Investor Services

Computershare Investor Services Pty Limited ABN 48078279277 Level Two 45 St George's Terrace Perth Western Australia 6000 Australia GPO Box D182 Perth Western Australia 6840 Australia Investor Enquiries 1300 557 010 Australia Telephone 61 8 9323 2000 Canada Facsimile 61 8 9323 2033 Channel Islands www.computershare.com Germany Hong Kong Ireland New Zealand South Africa United Kingdom USA

9 March 2004

The Directors Planet Gas Limited Level 8, 261 George Street SYDNEY NSW 2000

Dear Sirs

Escrow Securities

We advise that the detailed Securities have been issued under the listed restrictions to the following holders:

Ordinary Fully Paid Shares, restricted 24 Months from Date of Listing

Name	No. Shares
Norman A. Seckold
Sharif A. Oussa	2,000,001
Peter J. Nightingale
Permgold Pty Limited
Altinova Nominees Pty Limited	23,250,001
Rosignol Pty Limited	3,375,000
Thomas J. Mann	3,000,000
Anthony J. McClure	3,000,000
Nitroshire Pty Limited	4,000,000
Bruce Riederer	4,000,000
Greg Barnett	250,000
Trio Investments Pty Limited	3,000,000
Flatoak Pty Limited	1,000,000
Australia & New Zealand Banking Group Ltd	1,000,000
John K. Nightingale	375,000
TOTAL	48,250,005

Ordinary Fully Paid Shares, restricted until 7 November 2004

Name	No. Shares
Umbiram Pty Limited	250.000
Paradyn Holdings Pty Limited	1,000,000
All States Secretariat Pty Ltd	1.000.000
All-States Finance Pty Ltd	3,000,000
ITOTAL	5,250,000

In accordance with Australian Stock Exchange Listing Rule 9.5 (b) we confirm that we have imposed a holding lock on the register that will prevent a proper SCH transfer on all of the above securities. We undertake to maintain the restriction until such time as a written consent is received from ASX.

Yours sincerely,

John Lawlor Relationship Manager

Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1217 Australia

DX 1030755F Telephone (02) 9322 7000 Facsimile (02) 9322 7001 www.deloitte.com.au

Deloitte Touche Tohmatsu

16 January 2004

The Directors Planet Gas Limited Level 8, 261 George Street Sydney NSW 2000

The Due Diligence Committee Planet Gas Limited Level 8, 261 George Street Sydney NSW 2000

Dear Directors

PLANET GAS LIMITED - INVESTIGATING ACCOUNTANTS' REPORT

Introduction

We have prepared this report and its Annexure for the Directors and the Due Diligence Committee of Planet Gas Limited ("Planet Gas" or "the company"), regarding the initial public offering ("Offer") of up to 60,000,000 shares in the company, which will be listed on the Australian Stock Exchange. Planet Gas will use the net proceeds raised pursuant to the Offer, among other things, to fund exploration and development on properties in which the company holds an interest. This report has been prepared solely for the use of the Directors and Due Diligence Committee for the purposes of preparing the prospectus under the Offer and the requirements of ASX Listing Rule Appendix 1A and is not to be included in that prospectus.

Scope of Report

You have requested that we prepare an Investigating Accountants' Report reviewing the pro forma historical financial information comprising the:

• Pro forma Consolidated Statement of Financial Position of Planet Gas and its controlled entities as $\bullet$ at 31 December 2003 which presumes completion of the transactions disclosed in Note 1 of Annexure A of this report; and
• ¥ Notes (including significant accounting policies) to the above pro forma Consolidated Statement of Financial Position of Planet Gas and its controlled entities as at 31 December 2003, as set out in Annexure A of this report.

The pro forma historical financial information has been prepared by the Directors of Planet Gas in accordance with the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, being Urgent Issues Group Consensus Views, and the accounting policies set out in Annexure A of this report.

Deloitte Touche Tohmatsu is the auditor of Planet Gas and its controlled entities. The financial statements of Planet Gas and its controlled entities for the financial year ended 31 December 2003, upon which the pro forma historical financial information is based, have been audited by Deloitte Touche Tohmatsu. Our audit was conducted in accordance with Australian Auditing Standards. Our audit opinion was unqualified, and included an emphasis of matter in relation to an "inherent uncertainty regarding continuation as a going concern".

The liability of Deloitte Touche Tohmatsu, is limited by, and to the extent of, the Accountants' Scheme under the Professional Standards Act 1994 (NSW),

Page 2 16 January 2004

In our role as Investigating Accountants, we have reviewed the pro forma historical financial information in order to state whether, on the basis of the procedures described, anything has come to our attention which would indicate that the pro forma Consolidated Statement of Financial Position of Planet Gas and its controlled entities is not presented fairly assuming completion of the proposed transactions as at that date in accordance with the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, being Urgent Issues Group Consensus Views, and the accounting policies described in Annexure A to this report.

Our review of the pro forma historical financial information has been conducted in accordance with Australian Auditing Standards applicable to review engagements. Our review procedures were limited primarily to enquiries of the directors, a review of the proposed transactions and their impact on the pro forma Consolidated Statement of Financial Position of Planet Gas and its controlled entities as at 31 December 2003, and an evaluation of the accounting policies used.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Statement

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the pro forma historical financial information set out in Annexure A of this report, does not present fairly, the pro forma state of affairs of Planet Gas and its controlled entities as at 31 December 2003, assuming completion of the proposed transactions as at that date in accordance with the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, being Urgent Issues Consensus Views, and the accounting policies described in Annexure A to this report.

Subsequent Events

Subsequent to 31 December 2003 and up to the date of this report, nothing has come to our attention that would cause us to believe material transactions or events outside of the ordinary course of business of Planet Gas and its controlled entities have occurred, other than the matters dealt with in this report which would require comment on, or adjustment to, the information contained in this report, or which would cause the information contained in this report to be misleading.

Yours faithfully

D. usitte Tanche Terrator

DELOITTE TOUCHE TOHMATSU

Labarre.

James H W Riddell Partner Chartered Accountants

Page A1 16 January 2004

DeloitteToucheTohmatsu

ANNEXURE A

PLANET GAS LIMITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

$\alpha$		Consolidated
	Note	31 December 2003$
Current assets
Cash		12,186,322
Receivables		21,254
Total current assets		12,207,576
Non-current assets
Plant and equipment		6,915
Exploration and evaluation expenditure	3, 5	2,991,482
Other		20,000
÷.Total non-current assets		3,018,397
Total assets		15,225,973
Current liabilities
Payables		164,782
Other
Total current liabilities		164,782
Total liabilities		164,782
Net assets		15,061,191
Equity
Contributed equity	4, 5	15,692,054
Accumulated losses		(630, 863)
Total Equity		15,061,191

Notes to and forming part of the pro forma Consolidated Statement of Financial Position of Planet Gas and its controlled entities are set out on the following pages.

ANNEXURE A

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

$\mathbf{1}$ . Basis for Preparation of the Pro forma Consolidated Statement of Financial Position

The pro forma Consolidated Statement of Financial Position as at 31 December 2003 has been prepared as if the following proposed transactions had taken place as at 31 December 2003:

• Completion of the issue, pursuant to the Prospectus, of 60,000,000 new shares for cash consideration totalling $12,000,000.
• The estimated costs of the share issue pursuant to the Prospectus, being $630,000, which are charged against contributed equity.
• The conversion of $2,500,000 convertible notes to 31,250,000 new shares in accordance with $\bullet$ the terms of the convertible notes.
• The issue of 2,500,000 new shares as part consideration totalling $500,000 in accordance with the terms of the acquisition of the company's subsidiary, Greenpower Energy Pty Limited.

2. Summary of Significant Accounting Policies

(a) Going Concern

The directors have prepared the pro forma historical financial information of Planet Gas and its controlled entities on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

The consolidated entity is a development stage entity engaged in the development, production, operation, exploration and acquisition of oil, gas and coal bed methane properties, and currently has no revenue producing operations. Accordingly, the consolidated entity is subject to a number of risks and uncertainties inherent in the oil and gas industry, including fluctuating oil and gas prices, uncertainties related to the estimation of oil and gas reserves and the value of such reserves, and effects of competition and extensive environmental regulation.

The consolidated entity's ability to continue as a going concern will depend upon the consolidated entity's ability to find and develop natural gas and oil reserves and upon the prices received for natural gas and oil produced, if any. The directors acknowledge that unless the consolidated entity is successful in its efforts to find and develop natural gas and oil reserves, there remains uncertainty as to whether the consolidated entity will be able to continue as a going concern without substantially curtailing its operations. Failure to generate operating cash flow could result in substantial dilution of the consolidated entity's property interests and/or delay or cause indefinite postponement of further exploration and development of its prospects and ultimately the possible loss of such properties.

Should the consolidated entity of Planet Gas and its controlled entities be unable to continue as a going concern, it may be required to realise its assets and extinguish liabilities other than in the normal course of business and at amounts that differ from those stated in the pro forma Consolidated Statement of Financial Position.

The pro forma Consolidated Statement of Financial Position does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the consolidated entity be unable to continue as a going concern.

Page A3 16 January 2004

ANNEXURE A

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

$\overline{2}$ . Summary of Significant Accounting Policies (cont'd)

(b) Basis of Accounting

The pro forma Consolidated Statement of Financial Position as at 31 December 2003 has been drawn up in accordance with the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, being Urgent Issues Group Consensus Views.

(c) Exploration and Evaluation Expenditure

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

When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period in which the decision is made. Each area of interest is also reviewed at the end of each financial period and accumulated costs written off to the extent that they will not be recoverable in the future.

Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences. When production commences, carried forward exploration, evaluation and development costs are amortised on a units of production basis over the life of the economically recoverable reserves.

(d) Recoverable Amount of Non-Current Assets

Where the carrying value of non-current assets exceeds their recoverable amount, the assets are written down to their recoverable amount. In determining recoverable amount, the expected net cash flows have not been discounted to their present value.

(e) Interest-Bearing Liabilities

All loans are measured at the principal amount. Interest is charged as an expense on an accruals basis.

(f) Financial Instruments

Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement. Interest and dividends are classified as expenses or as distributions of profit, consistent with the statement of financial position classification of the related debt or equity instruments. Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate.

Deloitte ToucheTohmatsu

ANNEXURE A

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

l.

$3.$ Exploration and Evaluation Expenditure

	Consolidated31 December 2003S
Esponda – Powder River BasinStrike Oil - Gunnedah (PEL 428)Greenpower Energy (PEL 4500, 4535)Other	×.2,155,011259,12550,00027,346
	2,491,482

Contributed Equity 4.

	Consolidated31 December 2003
60,750,005 fully paid ordinary shares	1,322,054
	1,322,054

5. Pro Forma Adjustments

(a) Cash assets

	ConsolidatedPro formaS
Balance at 31 December 2003Add:	816,322
Issue of sharesDeduct:	12,000,000
Costs of share issue	(630,000)
Pro forma balance	12,186,322

Page A5 16 January 2004

Deloitte Touche Tohmatsu

ANNEXURE A

NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Pro forma adjustments (cont'd) 5.

(b) Exploration and evaluation expenditure

	ConsolidatedPro formaS÷
Balance at 31 December 2003Add	2,491,482
Purchase consideration - Greenpower Energy Pty
Limited	500,000
żPro forma balance	2,991,482

(c) Other current liabilities

	ConsolidatedPro formaS
Balance at 31 December 2003Deduct:	2,500,000
Conversion of convertible notes	(2,500,000)
Pro forma balance

(d) Contributed equity

	ConsolidatedPro formaNo.	ConsolidatedPro formaS
Balance at 31 December 2003Add:	60,750,005	1,322,054
Issue of shares	60,000,000	12,000,000
Conversion of convertible notesPurchase consideration - Greenpower	31,250,000	2,500,000
Energy Pty LimitedDeduct:	2,500,000	500,000
Costs of share issue		(630,000)
Pro forma balance	154,500,005	15,692,054