ST BARBARA MINES LIMITED

ACN 009 165 066

$\overline{ASX}$ SHAREHOLDERS REPORT

Enquiries regarding this report may be directed to:

Stephen W. Miller

Executive Chairman Telephone $(08)$ 9476 5555 Overseas +61 8 9476 5555 $\alpha r$ Colin G. Jackson Investor Relations Telephone 0417 929 107

St Barbara Mines Limited Level 2, 16 Ord Street West Perth Western Australia 6005 Telephone (08) 9476 5555 Overseas +61 8 9476 5555

Dollar values in this report are Australian dollars unless otherwise stated.

Notice of Annual General Meeting 2003

Attached is the Notice of Meeting for the Company's Annual General Meeting which is to be held on Tuesday, 25 November 2003 at 3.00 p.m. at the Conference Suite, Exchange Plaza, 2 The Esplanade, Perth, Western Australia.

Alan Rule Company Secretary

28 October 2003

FOR THE YEAR ENDED 30 JUNE 2003

Notice is given that the Annual General Meeting of members of St Barbara Mines Limited (ABN 36 009 165 066) ("Company") will be held at the Conference Suite, Level 8, Exchange Plaza, 2 The Esplanade, Perth, Western Australia on Tuesday, 25th November 2003 at 3.00 p.m.

An Explanatory Memorandum containing information in relation to each of Resolutions 2 to 7 accompanies this Notice of Annual General Meeting and is hereby incorporated into and forms part of this Notice of Annual General Meeting. Unless otherwise defined, terms used in this Notice of Annual General Meeting are defined in, and are to be interpreted in accordance with the Explanatory Memorandum.

BUSINESS OF THE MEETING

ACCOUNTS AND REPORTS

To receive and consider the financial statements and the reports of the directors and of the auditors for the year ended 30 June 2003.

Resolution 1: RE-ELECTION OF MR DUNDO AS A DIRECTOR

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That Mr Kevin Anthony Dundo, who retires as a director in accordance with article 6.3 of the Company's Constitution, and being eligible, offers himself for reelection, be and is hereby appointed a director of the Company."

Resolution 2: APPROVALTO ISSUE SHARES

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, subject to resolution 3 in this Notice of Annual General Meeting being passed and for the purpose of Listing Rule 7.1 and item 7 of section 611 of the Corporations Act and all other purposes, the members of the Company approve and authorise the Directors to allot and issue 95,684,932 fully paid ordinary shares in the capital of the Company to Resource Capital Fund II L.P. ("RCFII") on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

The Company will disregard any votes cast on Resolution 2 by RCFII and an associate of it unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 3: APPROVAL TO ISSUE SHARES

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, subject to resolution 2 in this Notice of Annual General Meeting being passed and for the purpose of item 7 of section 611 of the Corporations Act and all other purposes, the members of the Company approve and authorise the Directors to allot and issue up to 55,990,026 fully paid ordinary shares in the capital of the Company to RCFH upon exercise by RCFH of the unlisted options held by RCFH on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

The Company will disregard any votes cast on Resolution 3 by RCFII and an associate of it unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 4: AUTHORITY FOR ISSUE OF OPTIONS

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, for the purpose of Listing Rule 7.1 of the Listing Rules of ASX and all other relevant purposes, the Company authorises the issue of 17,382,463 options to acquire fully paid ordinary shares in the capital of the Company to RCFH on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

St Barbara Mines Limited

The Company will disregard any votes cast on Resolution 4 by RCFII and an associate of it unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

FOR THE YEAR ENDED 30 JUNE 2003

Resolution 5: RATIFICATION OF ISSUE OF OPTIONS

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, for the purposes of Listing Rule 7.4 of the Listing Rules of ASX and for all other relevant purposes, the Company ratifies the issue of 9,024,269 Options to RCFII on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

The Company will disregard any votes cast on Resolution 5 by RCFII and an associate of it unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 6: RATIFICATION OF ISSUE OF SHARES

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, for the purposes of Listing Rule 7.4 of the Listing Rules of ASX and for all other relevant purposes, the Company ratifies the issue of the following:

(a) 15,000,000 fully paid ordinary shares in the capital of the Company at \$0.0667 per share; and

(b) 12,000,000 fully paid ordinary shares in the capital of the Company at \$0.08 per share

on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

The Company will disregard any votes cast on Resolution 6 by any of the persons who participated in the issue the subject of Resolution 6 and any associate of any of those persons unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Resolution 7: AUTHORITY FOR ISSUE OF SHARES - CONVERTIBLE LOAN

To consider and, if thought fit, pass with or without amendment, the following resolution as an ordinary resolution:

"That, for the purposes of Listing Rule 7.1 of the Listing Rules of ASX and for all other relevant purposes, the Company authorises the issue of up to 90,000,000 fully paid ordinary shares in the capital of the Company to Ocean Resources Capital Holdings Limited pursuant to the conversion of the Convertible Loan issued to Ocean Resources Capital Holdings Limited and on the terms and conditions set out in the Explanatory Memorandum that forms part of this Notice of Annual General Meeting."

Voting Exclusion Statement

The Company will disregard any votes cast on Resolution 7 by any of the persons who will participate in, or who may obtain a benefit from (except a benefit solely in the capacity of a holder of ordinary securities), the issue the subject of Resolution 7 and any associate of any of those persons unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Snapshot Date

The Directors have determined that for the purposes of regulation 7.11.37 of the Corporations Regulations, the persons eligible to attend and vote at the meeting are those persons who are registered members of the Company at 3:00 p.m. (Perth time) on 23 November 2003.

Proxies

A Shareholder entitled to attend and vote is entitled to appoint no more than two proxies. Where more than one proxy is appointed, each proxy may be appointed to represent a specific proportion of the Shareholder's voting rights. Where a proportion is not specified, each proxy shall be entitled to vote half of the Shareholder's voting rights. A proxy need not be a Shareholder. Proxies must be deposited at the Company's office, Level 2, 16 Ord Street, West Perth, 6005 not less than 48 hours before the time of the meeting. A proxy form is enclosed with this Notice of Annual General Meeting.

BY ORDER OF THE BOARD

ALAN RULE

$\mathcal{D}$

Company Secretary Date: 23 October 2003 Enquiries: All caquiries in relation to the contents of the Notice of Annual General Meeting or the Explanatory Memorandum should be directed to the Executive Chairman, Mr Stephen Miller (telephone: (08) 9476 5555).

FOR THE YEAR ENDED 30 JUNE 2003

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of shareholders of St Barbara Mines Limited (ABN 36 009 165 066) ("Company") in connection with the business to be conducted at the Annual General Meeting of shareholders of the Company to be held on Tuesday, 25th November 2003 at 3:00 p.m. ("Meeting") at the Conference Suite, Level 8, Exchange Plaza, 2 The Esplanade, Perth, Western Australia.

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Annual General Meeting ("Notice").

Capitalised terms used in this Explanatory Memorandum are defined in the Glossary set out in Annexure "A".

OVERVIEW

This Notice of Meeting includes a number of resolutions seeking shareholder approval for various transactions that will result in a significant restructure of the debt and equity position of the Company and the Board. The impact of these transactions is set out in more detail in this Explanatory Memorandum.

Should all these resolutions be approved, the Company will be debt free save for an amount of \$4,400,000 that will be owing under the Convertible Loan.

Should resolutions 2 and 3 not be passed by shareholders, the debt owing to RCFII of \$7,000,000 will be repayable on or before 30 November 2003. Should resolutions 7 not be passed by shareholders by 19 June 2004, the debt owing to Ocean of \$7,200,000 will be repayable within 60 days. The Company may not be able to repay these debts which means that an event of default will occur under the RCFII Facility Agreement and the Ocean Convertible Loan agreement and RCFII and Ocean would be entitled to exercise certain remedies.

The Directors have commissioned the Expert to prepare an Independent Expert's report in relation to the transaction contemplated by the Share Subscription Agreement, the subject of Resolutions 2 and 3. A copy of that report is included in this Explanatory Memorandum is attached as Annexure F.

Annexure B sets out the Voting Power to be held by RCFII and Ocean assuming all of the resolutions are passed and all rights to acquire Shares are exercised.

The Board considers the advantages to members as a result of the approval by shareholders of the transactions contemplated by this Notice of Meeting are;

· significant reduction in debt owing by the Company of \$9.8 million. The Company will be debt free save for \$4,400,000 owing under the Convertible Loan;
stronger balance sheet and significantly improved financial position;
improved financial capacity to fund further development;
greater involvement from a strong internationally focused institutional investor; and
· an increase in Board independence.

The Board have identified the disadvantage is that the interests of shareholders will be diluted by the issue of the Shares to RCFII and Ocean as set out in Annexure B.

Resolutions 2 and 3: APPROVAL TO ISSUE SHARES

2.1 Information requirements

Section 611 of the Corporations Act and Listing Rule 7 are briefly summarised as follows.

(a) Section 611 of the Corporations Act

Except as provided by Chapter 6 of the Corporations Act, section 606(1) of the Corporations Act prohibits a person from acquiring shares in a Company if, after the acquisition, that person's voting power in the Company increases above 20%. Section 611, item 7 of the Corporations Act provides that section 606(1) of the Corporations Act does not apply to an acquisition of shares in the Company that has been previously approved by a resolution passed at a general meeting at which no votes are cast in relation to the resolution by the person to whom the shares are to be allotted or by an associate of that person. There are also specific disclosure requirements under section 611, item 7 which are set out below.

(b) Listing Rule 7.1

St Barbara Mines Limited

Listing Rule 7.1 prohibits the Company from issuing shares that would amount to more than 15% of its existing share capital without the approval of the Shareholders. There are specific disclosure requirements under Listing Rule 7.3 which are set out in 2.6 below.

FOR THE YEAR ENDED 30 JUNE 2003

2.2 Debt for Equity

On 8 January 2002 RCFII and the Company and the Guarantors entered into a financing facility for \$20,000,000. It is secured by first ranking security over all of the assets of the Company and the Guarantors save and except for the prior ranking fixed charge in favour of Macquarie Bank Limited over a cash deposit of \$3,262,000 to secure performance bonds for mining tenements.

On 14 February 2003 the Facility was reduced to \$12,000,000 and on 9 July 2003 the Facility was reduced to \$7,000,000. Prior to the execution of the Share Subscription Agreement \$7,000,000 was repayable on or before 15 August 2003.

Further details of the Facility are referred to in the Company's audited financial statement for the year ended 30 June 2003 and the Independent Expert's Report.

On 6 October 2003 the Company and the Guarantors and RCFII executed the Share Subscription Agreement pursuant to which RCFII agreed to subscribe for 87,500,000 Shares in satisfaction of the principal amount owing to RCFII under the Facility, 3,684,932 Shares in satisfaction of interest owing to RCFII under the Facility and 4,500,000 Shares in satisfaction of a fee. All of the Shares are to be issued at \$0.08.

Completion of the Share Subscription Agreement is subject to the following:

Corporate authorisation: an extract of a resolution of the directors of each Guarantor approving the transactions contemplated by Share Subscription Agreement.
Foreign Investment Review Board approval: a notice in writing is issued by, or on behalf of, the Treasurer of the Commonwealth of Australia stating that the Commonwealth Government does not object to the parties entering into and completing the Share Subscription Agreement either unconditionally or on terms reasonably acceptable to RCFII; or evidence that the Treasurer of the Commonwealth of Australia becomes precluded from making an order in respect of the subscription of the Shares under the Foreign Acquisitions and Takeovers Act 1975 (Cth).
Approval of general meeting: evidence the members of the Company have approved the issue of the Subscription Shares to RCFII under the Share Subscription Agreement and in accordance with the ASX Listing Rules and section 611 Item 7 of the Corporations Act; and the exercise of all of the RCFII Options in accordance with section 611 item 7 of the Corporations Act.
Other approvals: evidence in the form of a legal opinion from independent counsel (which legal counsel is acceptable to RCFII acting reasonably) that the Company has obtained all applicable approvals under the ASX Listing Rules, the Corporations Act and any other approvals required by any Governmental Agency.
Restructure of Board: evidence the Company has restructured its Board to consist of five individuals each to serve in accordance with the Constitution of the Company and that those five individuals are constituted so that two are nominees of RCFII and one is mutually acceptable to each of the Company and RCFII (acting reasonably) who will serve as the independent non-executive chairman of the Board of the Company.
Board of Taipan: evidence that, with effect no later than the Subscription Date, an individual nominated by RCFII has been appointed to the Board of Taipan Resources NL to serve in accordance with that company's Constitution.

If any of these conditions (which include the passing of Resolutions 2 and 3) are not satisfied on or before 30 November 2003, the Facility and related transaction documents will continue in full force and effect and all moneys owing in respect of the Facility will become due and payable. Accordingly, RCFII may exercise its powers under the Facility Agreement and related transaction documents which includes the appointment of a receiver.

The audit report to shareholders included in the Company's audited financial statements as at 30 June 2003 draws attention to the significant uncertainty as to whether or not the Company will be able to continue as a going concern and therefore realise assets and extinguish its liabilities in the normal course of business at the amounts stated in those financial statements. One of the significant uncertainties identified by the auditors is the approval by shareholders of the transactions concerning RCFII and Ocean so that their debt can be converted into equity.

FOR THE YEAR ENDED 30 JUNE 2003

The Company is seeking shareholder approval to issue up to 151,674,958 Shares in the Company to RCFII by way of 2 resolutions as follows:

Resolution 2 - total of 95,684,932 Shares

91,184,932 Shares pursuant to the Share Subscription Agreement as follows:
· 87,500,000 Shares being the amount of Facility owing at the date of this Explanatory Memorandum (A\$7,000,000) divided by an issue price per Share of \$0.08; and
o 3,684,932 Shares being Shares issued to satisfy the interest on the Facility for the period from 1 July 2003 to the Subscription Date.
4,500,000 Shares in satisfaction of a fee for this transaction pursuant to the Share Subscription Agreement; and

Resolution 3 - total of 55,990,026 Shares

* 55,990,026 Shares on the exercise of 55,990,026 unlisted Options.

The Share Subscription Agreement provides, subject to the conditions aforementioned, as follows:

RCFII will subscribe for the Subscription Shares in consideration of a release of all amounts outstanding by way of principal and interest under the Facility at that time;
Each of the Company and the Guarantors makes representations and warranties with respect to, among other things, their capacity to enter into the Share Subscription Agreement and the Subscription Shares.

The Company is obliged to issue 17,382,463 unlisted Options under the Facility Agreement as referred to in resolution 4 which form part of the \$5,990,026 Shares in resolution 3.

Each of the Company and the Guarantors have given an indemnity in favour of RCFII against any loss suffered as a result of, among other things, a breach of the Subscription Agreement, any representations or warranties proving to be untrue or incorrect and any act or omission on the part of the Company or the Guarantors which gives rise to any claim that RCFII has any liability under the Corporations Act in relation to the Subscription.

2.3 Identity of RCFII

St Barbara Mines Limited

Shareholders have previously been provided with information about the identity of RCFII. However, for the sake of completeness a brief summary of information relevant to RCFII follows.

RCFII is a Cayman Island limited partnership owned 99% by its limited partners and 1% by its general partner. The limited partners are the institutions, foundations, family offices and individuals who are investors in the funds. The general partner is a Cayman Island limited partnership, Resource Capital Associates II LP. The limited partners are the members of the management team and ownership of RCF Management LLC, a Delaware limited liability company that employs the individuals who actively manage Fund II and the other Funds. The general partner of Resource Capital Associates II L.P. is RCA II GP Limited, a Cayman Island corporation. Its shareholders are the three individuals that are the sponsors of Resource Capital Funds.

2.4 Persons who are Associates of RCFII

Hank Tuten is a director of the Company and is an associate of RCFII.

2.5 Change in holding and increase in Voting Power

The change in Voting Power caused by each scenario is illustrated in Annexure B.

The effect on the Company's capital structure if resolutions 2, 3, 4 and 7 are passed and RCFII exercises all of its Options is that the Voting Power of RCFII would be 29.47%.

If Ocean also elects to convert the balance of its Convertible Loan into Shares (therefore being an issue of a further 55,000,000 Shares) the Voting Power of RCFII will decrease to 27.11%.

RCFII owns and/or will be issued all of the Options in Annexure C.

On the Subscription Date, in accordance with Resolution 4, RCFII will also be issued with 17,382,463 unlisted Options under the terms of the Facility as referred to in Annexure C.

As a result, RCFII will hold 55,990,026 unlisted Options. RCFII has not at the date of this statement exercised any of the Options. However, on the assumption that it did exercise its Options, its Voting Power would be 185,732,043 Shares (being the aggregate of 129,742,017 Shares issued in satisfaction of principal, interest and fees and 55,990,026 Shares on exercise of the Options) and representing 29.47% of the Company's issued capital (which on exercise of the Options would be 630,139,183 Shares) assuming only RCFII exercised its Options.

FOR THE YEAR ENDED 30 JUNE 2003

The purpose of resolution 3 is to enable RCFII to exercise its Options without further shareholder approval.

The information presented with respect to resolution 2 (including the Expert's Report) should be referred to with respect to the identity and background of RCFII. Annexures C also provide information with respect to the Expiry Date and Exercise Price of each of the unlisted Options.

It should be noted that if RCFII elected to exercise all of its unlisted Options, the total amount raised by the Company would be \$8,338,721.

2.6 ASX Listing Rule 7.3

For the purposes of ASX Listing Rule 7.3 the following information is provided:

the maximum number of Shares that will be issued if resolution 2 is passed is 95,684,932;
the Shares must be issued by no later than 30 November 2003;
the issue price of the Shares is \$0.08;
RCFII will be the allottee; and
the funds raised from the issue of the Shares contemplated by resolution 2 will be used to retire debt, interest and pay associated fees.

2.7 Director's interests

Other than as set out in this Explanatory Memorandum, none of the directors has an interest in RCFII or the Subscription.

2.8 Persons Who Will Acquire Relevant Interests

RCFII and the entities that control them are the only persons who will acquire a relevant interest in shares in the Company if the resolutions are passed.

2.9 Directors

RCFII will have two appointees to the Board following completion of the Subscription if resolution 2 is passed.

2.10 Intentions as to the future

The present intentions of RCFII regarding the future of the Company, if members approve resolution 2, are to maintain the current business of the Company and further develop the assets of the Company.

RCFII has no present intention to do any of the following after the issue of the Shares the subject of this resolution:

change the business of the Company;
inject further capital into the Company;
transfer any property between the Company and themselves; or
redeploy the fixed assets of the Company.

RCFII has no intention of changing the current financial and dividend policies of the Company.

If new investment opportunities arise or become available to the Company, RCFII may, if they desire to do so, participate in any rights issue or other capital raising programme undertaken by the Company subject to obtaining any regulatory approvals that may be required.

2.11 Anticipated Date of Allotment

Subject to the approval of shareholders to these resolutions, it is intended to allot to RCFII the Shares referred to in resolution 2 within 3 Business Days of the Meeting.

2.12 Independent Expert's Report

The Board commissioned KPMG to prepare the Independent Expert's Report on whether the terms of the transaction the subject of Resolution 2 and 3 are fair and reasonable to the non-associated shareholders of the Company. The Independent Expert's Report is attached to this Explanatory Memorandum as Annexure F.

In summary, KPMG has stated in the Independent Expert's Report that, in its opinion, the Subscription is fair and reasonable at the preferred value having regard to the interests of the non-associated shareholders of the Company.

To the best of the Director's knowledge, all matters that are material and necessary for shareholders to make an informed decision on Resolution 2 and 3 have been provided to members in this Explanatory Memorandum and the Independent Expert's Report.

FOR THE YEAR ENDED 30 JUNE 2003

RESOLUTION 4: AUTHORITY TO ISSUE OPTIONS

This resolution seeks shareholder approval pursuant to ASX Listing Rule 7.1 for the issue of 17,382,463 unlisted Options to acquire fully paid shares in the capital of the Company to RCFII. These Options are due to be issued on 24 November 2003 under the Facility Agreement and Share Subscription Agreement.

ASX Listing Rule 7.1 limits the number of equity securities (e.g. shares, options and convertible notes) which a listed company may issue in any 12 month period without shareholder approval (subject to certain exceptions, eg. a pro rata issue to all shareholders). The limit is, generally speaking, no more than 15% of the total of the number of fully paid ordinary shares on issue at the beginning of the 12 month period, plus the number of fully paid ordinary shares issued with the approval of shareholders or under one of the exceptions during the previous 12 months. While the Options to be issued to RCFII are within this 15% limit, the Company is requesting shareholders to approve the issue of the options for the purpose of ASX Listing Rule 7.1, so that the Company will have the flexibility to issue further securities under ASX Listing Rule 7.1 without seeking shareholder approval, if the need or opportunity arises.

Shareholders are also referred to sections 2.5 of this Explanatory Memorandum.

For the purpose of ASX Listing Rule 7.3, the following information is provided:

The exercise price and expiry date of each of the Options is set out in Annexure C. $\bullet$ .
The Options issued are exercisable into fully paid ordinary shares and on conversion will rank equally in all respects with the existing fully paid ordinary shares issued in the capital of the Company.
The Options are exercisable in whole or in part in writing to the Company.
The Options are not listed on ASX.
The Options are to be issued to RCFII in lieu of the monthly usage fee on the \$7 million facility provided to the Company by RCFII.
The terms of the unlisted Options other than the relevant exercise price and expiry date and other terms mentioned in this section are set out in Annexure D hereto.

RESOLUTION 5: RATIFICATION OF ISSUE OF OPTIONS

This resolution seeks shareholder approval pursuant to ASX Listing Rule 7.1 for the issue of 9,024,269 unlisted Options to acquire fully paid shares in the capital of the Company to RCFII. These Options were issued on 7 July 2003 under the Facility Agreement as follows:

Options issued on 7 July 2003

St Barbara Mines Limited

Expiry Date	Exercise Price	Number
7-Jan-07	A\$0.1138	5,874,281
7-Jan-07	A\$0.2086	200,292
7-Jan-07	A\$0.2124	983.541
7-Jan-07	A\$0.2125	1,966,155
	Total	9,024,269

ASX Listing Rule 7.4 provides that an issue made within the 15% limit will be treated as having been made with the approval of shareholders for the purpose of ASX Listing Rule 7.1 if subsequently approved by shareholders, thereby "refreshing" the Company's ability to issue shares within the 15% limit, and restoring the Company's ability to make placements (if that is thought desirable) without the need for shareholder approval. While the 9,024,269 unlisted Options issued were within this 15% limit, the Company is requesting shareholders to ratify the issue of the unlisted Options the subject of this resolution for the purpose of ASX Listing Rule 7.4, so that the Company will have the flexibility to issue further securities under ASX Listing Rule 7.1 without seeking shareholder approval, if the need or opportunity arises.

FOR THE YEAR ENDED 30 JUNE 2003

For the purpose of ASX Listing Rule 7.5, the following information is provided:

The exercise price and expiry date of each of the Options is set out in the above table.
The Options issued are exercisable into fully paid ordinary shares and on conversion will rank equally in all respects with the existing fully paid ordinary shares issued in the capital of the Company.
The Options are exercisable in whole or in part in writing to the Company.
The Options are not listed on ASX.

The Options were issued to RCFII in lieu of the monthly usage fee on the \$12 million facility provided to the Company by RCFII.
The terms of the unlisted Options other than the relevant exercise price and expiry date and other terms mentioned in this section are set out in Annexure B hereto.

RESOLUTION 6: RATIFICATION OF ISSUE OF SHARES

This resolution seeks shareholder approval for the Company to allot and issue Shares in the Company as follows:

15,000,000 Shares in the capital of the Company at \$0.0667 per Share.
12,000,000 Shares in the capital of the Company at \$0.08 per Share.

ASX Listing Rule 7.4 provides that an issue made within the 15% limit will be treated as having been made with the approval of shareholders for the purpose of ASX Listing Rule 7.1 if subsequently approved by shareholders, thereby "refreshing" the Company's ability to issue shares within the 15% limit, and restoring the Company's ability to make placements (if that is thought desirable) without the need for shareholder approval. While the Shares issued were within this 15% limit, the Company is requesting shareholders to ratify the issue of the listed options the subject of this resolution for the purpose of ASX Listing Rule 7.4, so that the Company will have the flexibility to issue further securities under ASX Listing Rule 7.1 without seeking shareholder approval, if the need or opportunity arises.

For the purpose of ASX Listing Rule 7.5, the following information is provided:

15,000,000 fully paid ordinary shares were issued at \$0.0667 per share to RAB Europe Fund Limited for working capital. The shares were issued and allotted on 27 June 2003.
12,000,000 fully paid ordinary shares were issued at \$0.08 per share for working capital. The shares were issued and allotted on 6 October 2003 as follows:

Westpac Custodian Nominees Limited	7.000.000
Kizogo Pty Ltd	-3.750.000
Spinite Pty Limited	1.250.000
	12,000,000

The shares issued were fully paid ordinary shares and rank equally in all respects with the existing fully paid ordinary shares in the Company.

RESOLUTION 7: APPROVAL FOR ISSUE OF SHARES - CONVERTIBLE LOAN

This resolution seeks shareholder approval pursuant to ASX Listing Rule 7.1 for the issue of up to 90,000,000 Shares to Ocean pursuant to the Convertible Loan issued to Ocean.

The Company issued a Convertible Loan certificate with a total face value of \$7,200,000 to Ocean on 19 June 2003. Pursuant to the terms of the Convertible Loan, Ocean has the option, subject to shareholder approval, to convert the amount outstanding under the Convertible Loan into up to 90,000,000 Shares each at an issue price of \$0.08 at any time prior to the termination date of 19 December 2005.

The Convertible Loan is subject to a condition subsequent that the Company will promptly seek the approval of its shareholders to the conversion of the total face value of \$7,200,000 into 90,000,000 Shares each at an issue price of \$0.08 in accordance with the ASX Listing Rules. In the event the Company fails to gain such approval by 19 June 2004 then Ocean may require repayment of the total outstanding under the Convertible Loan within 60 business days notice.

On that day which is 7 business days after the shareholder approval, \$2,800,000 of the total face value amount shall automatically be converted to 35,000,000 Shares each at an issue price of \$0.08 without any need for a notice to that effect. Upon such issue and allotment \$2,800,000 of the total face value amount shall be deemed to have been thereby converted.

FOR THE YEAR ENDED 30 JUNE 2003

shareholders). The limit is, generally speaking, no more than 15% of the total of the number of fully paid ordinary shares on issue at the beginning of the 12 month period, plus the number of fully paid ordinary shares issued with the approval of shareholders or under one of the exceptions during the previous 12 months.

As the maximum number of Shares that may be issued under the Convertible Loan exceeds the 15% threshold referred to above, shareholder approval for the issue of Shares under the Convertible Loan is required for the purposes of ASX Listing Rule 7.1.

ASX Listing Rule 7.3 requires that the following information be provided to shareholders for the purpose of obtaining shareholder approval pursuant to ASX Listing Rule 7.1:

$\bullet$ Up to 90,000,000 Shares could be issued each at an issue price of \$0.08.
On conversion of the Convertible Loan, the Shares will be issued to Ocean.
The shares when issued will be fully paid ordinary shares and rank equally in all respects with the existing fully paid ordinary shares in the Company.
Pursuant to the terms of the Convertible Loan, the Shares may be issued to Ocean at any time up to 19 December 2005.
The terms of the Convertible Loan other than the relevant issue price and other terms mentioned in this section are set out in Annexure E hereto.

DIRECTORS' RECOMMENDATION

The Board (other than Mr Tuten) is unanimously of the view that all of the matters referred to in this Explanatory Memorandum are in the best interests of shareholders for the reasons set out in the Overview and recommend that shareholders vote in favour of all of the resolutions. As Mr Tuten is an associate of RCFII he has abstained from making any recommendation to shareholders.

ANNEXURE A

St Barbara Mines Limited

GLOSSARY
Board	means the board of Directors of the Company
Company	means St Barbara Mines Limited ABN 36 009 165 066
Constitution	means the constitution of the Company
Convertible Loan	means the Convertible Loan Certificate dated 19 June 2003 and executed by the Company and Ocean
Corporations Act	means Corporations Act 2001 (Cth).
Directors	means directors of the Company
Explanatory Memorandum	means this explanatory memorandum
Expert	means KPMG Corporate Finance (Aust) Pty Ltd, Licensed Securities Dealer
Facility	means the facility provided by RCFII to the Company pursuant to the Facility Agreement, which is guaranteed by the Guarantors
Facility Agreement	means the facility agreement dated 8 January 2002 between the Company, the Guarantors and RCFII as amended ad supplemented from time to time
Guarantors	means Silkwest Holdings Pty Ltd ABN 43067834235 and St Barbara Pastoral Co Pty Ltd ABN 35067716312
Independent Expert	means KPMG
Ocean	means Ocean Resources Capital Holdings Limited of Ocean House, 10/12 Little Trinity Lane, London EC4V 2DH
Option	means an option exercisable into one Share
RCFII	means Resource Capital Fund II L.P.
Share	means a fully paid ordinary share in the capital of the Company
Share Subscription Agreement	means the share subscription agreement dated 6 October 2003 between the Company, Silkwest, St Barbara Pastoral and RCFII
Silkwest	means Silkwest Holdings Pty Ltd ABN 43 067 834 235
St Barbara Pastoral	means St Barbara Pastoral Co Pty Ltd ABN 35 067 716 312
Subscription	means the subscription of the Subscription Shares at an issue price of \$0.08 on the terms set out in this Explanatory Memorandum
Subscription Date	means 24 November 2003
Subscription Shares	means 91,184,932 fully paid Shares
Voting Power	is defined in section 610 of the Corporations Act and means the total number of votes attached to all the voting shares of a person and their associates as a percentage of the total voting shares in the Company

Ý)

FOR THE YEAR ENDED 30 JUNE 2003

ANNEXURE B

	TOTAL Shares	$\frac{6}{2}$	RCFII Shares	$\%$	OCEAN Shares	%	OTHER Shares	%
${a}$	443,464,225 95,684,932		34,057,085 95,684,932	7.68%	0	$0.00\%$	409,407,140	92.32%
	539,149,157	100%	129,742,017	24.06%	€	$0.00\%$	409,407,140	75.94%
${b}$	35,000,000				35,000,000
	574,149,157	100%	129,742,017	22.60%	35,000,000	6.10%	409,407,140	71.30%
$\langle c \rangle$	55,990,026 630,139,183	100%	55,990,026 185,732,043	29.47%	35,000,000	5.55%	409,407,140	64.98%
${D}$	55,000,000				55,000,000
	685.139.183	100%	185.732.043	27.11%	90,000,000		409,407,140	59.75%
$\langle d \rangle$	44,329,772						44,329,772
	729,468,955	100%	185,732,043	25.46%	90,000,000		453,736,912	62.20%

	762,543,955	100%	185,732,043	24.36%	90,000,000	11.80%	486,811,912	63.84%
	(e)	33,075,000					13.14% 12.34%	33,075,000

(a) pursuant to shareholder approval under Resolution 2

(b) pursuant to shareholder approval under Resolution 7

(d) these listed options are exercisable at \$0.30 and expire 29 February 2004

(e) these unlisted employee options are exercisable at various prices between \$0.25 and \$0.45 and expire on various dates between 31 December 2004 and 26 April 2007

FOR THE YEAR ENDED 30 JUNE 2003

ANNEXURE C

RCFII Options Current unlisted Options held by RCFII

Expiry Date	Exercise Price	Number
$31 - Dec - 05$	A\$0.1100	1,000,000
7-Jul-06	A\$0.1138	3,177,890
7-Jan-07	A\$0.1138	17,430,243
20-May-05	A\$0.2086	36,118
$3 - \text{Jun} - 05$	A\$0.2086	50,894
15-Jul-05	A\$0.2086	49,252
13-Aug-05	A\$0.2086	50,894
6-Sep-05	A\$0.2086	50,894
15-Oct-05	A\$0.2086	49,252
7-Jul-06	A\$0.2086	151,040
7-Jan-07	A\$0.2086	594,308
$3 - \text{lun} - 05$	A\$0.2124	88,680
15-Jul-05	A\$0.2124	241,854
13-Aug-05	A\$0.2124	249,917
6-Sep-05	A\$0.2124	249.917
15-Oct-05	A\$0.2124	241,854
7-Jul-06	A\$0.2124	741,686
7-Jan-07	A\$0.2124	2,918,376
7-Feb-05	A\$0.2125	157,938
5-Mar-05	A\$0.2125	373,893
2-Apr-05	A\$0.2125	449,638
20-May-05	A\$0.2125	470,589
$3 - \text{Jun} - 05$	A\$0.2125	499,597
15-Jul-05	A\$0.2125	483,482
13-Aug-05	A\$0.2125	499,597
6-Sep-05	A\$0.2125	499.597
15-Oct-05	A\$0.2125	483,482
7-Jul-06	A\$0.2125	1,482,677
7-Jan-07	A\$0.2125	5,834,004
		38,607,563

New Options to be issued to RCF II pursuant to resolution 4

Expiry Date	Exercise Price	Number
$24$ -May-08	A\$0.1138	14,252,357
24-May-08	A\$0.2086	485,953
24-May-08	A\$0.2124	2.386.296
24-May-08	A\$0.2125	257,857
		17.382.463
	Total	55,990,026

ANNEXURE D

Terms of unlisted options for the purposes of Resolutions 4 and 5

Reorganisation of Capital

In the event of a reorganisation or reconstruction of the share capital of the Company and subject to compliance by the Company with the ASX Listing Rules, the rights of RCFII will be changed to the extent necessary to ensure the rights of the RCFII are not prejudiced by the reorganisation or reconstruction in accordance with the ASX Listing Rules applying to a reorganisation or reconstruction of capital at the time of the reorganisation or reconstruction.
The Company must given written notice to the RCFII with 10 business days of any adjustment to the number of the Shares which the RCFII would be entitled to subscribe for on exercise of an Option, or the exercise price per share in accordance with the ASX Listing Rules.

Participation in new Issues

St Barbara Mines Limited

Without limiting the clause below, the Options do not confer the right to participate in new issues of capital during the exercise period. The Company must give RCFII not less than 20 days' notice to exercise its Options prior to the date of determining shareholder entitlements for any new issues of capital that occur during the exercise period.

Changes to Exercise price or Number of Shares Issues on Exercise

The Options shall confer the right to a reduction in the exercise price if there is a pro-rata issue to the holders of Shares (except a bonus issue) in accordance with the formula set out in the ASX Listing Rules.
If there is a bonus issue to the holders of Shares, the number of Shares to be issued upon exercise of the options shall be increased by the number of Shares which RCFII would have received if all Options had been exercise before the record date for the bonus issue.

FOR THE YEAR ENDED 30 JUNE 2003

ANNEXURE E

Terms of Convertible Loan for the purposes of Resolution 7

The Convertible Loan provides that:

The Company shall seek the approval of its shareholders to the conversion of the Total Face Value Amount of A\$7,200,000 to 90,000,000 Shares at a strike price of \$0.08 per share in accordance with the listing rules of the ASX, such approval to be sought at the first general meeting of the Company held after the Issue Date of 19 June 2003.
In the event the Company fails to obtain the approval of its shareholders above by 19 June 2004 then the Ocean may, on not less than 60 business days notice, require repayment of the total outstanding.
On that day which is 7 business days after shareholder approval, \$2,800,000 of the Total Face Value Amount shall be automatically converted to 35,000,000 Shares at a strike price of \$0.08 per share without any need for a Notice to that effect. The Shares the product of such conversion shall be issued and allotted by the Company to Ocean, and upon such issue and allotment \$2,800,000 of the Total Face Value Amount shall be deemed to have been thereby converted.
The Total Face Value Amount must be used solely for working capital and funding of the Projects. The Projects are defined to include Taipan Resources NL's Paulsens gold project and the Company's Paddy's Flat gold project.
The Convertible Loan is unlisted.
Interest is payable on the amount outstanding at a rate of 12% per annum. Interest is payable (calculated daily and compounded six monthly) 6 monthly in arrears as follows:
on 28 February of each year if the consolidated EBITDA of the St Barbara Group for the 6 months ending on the preceding 31 December exceeds A\$0.75 million;
$\sigma$ on 30 August of each year if the consolidated EBITDA of the St Barbara Group for the 6 months ending on 30 June of that year exceeds A\$0.75 million; and
shall otherwise accrue and form part of the total outstanding provided that accrued interest shall be payable if the $\ddot{\circ}$ consolidated EBITDA of the St Barbara Group for the 6 months ended on each of 30 June and 31 December of any year during the Conversion Period exceeds A\$1.5 million.
The holder is granted an option to convert, in whole or in part (save that if in part, in multiples of not less than A\$100,000) during the Conversion Period, being the period from the date of issue of the Convertible Loan to the Termination Date, being 19 December 2005, into the Shares.
Unless converted on or before the Termination Date the holder is entitled to receive from the Company the total amount outstanding under the Convertible Loan on the Termination Date. The Company has the right to give an early redemption notice the holder to redeem the Convertible Loan (or any part which has not been converted). The amount by which any early redemption payment reduces the amount outstanding under the Convertible Loan is dependent upon the then current trading price of St Barbara shares on ASX. If the trading price is less than or equal to the Strike Price the total outstanding under the Convertible Loan, respectively, will be reduced by the early redemption payment. If the price of the Shares are greater than the Strike Price then the total outstanding is reduced according to a formula.
It is an event of default where, relevantly, without the prior written consent of the holder:
^o the Company:
- reduces its capital (including, without limitation, a purchase of its shares but excluding a redemption of redeemable shares);
- passes a resolution to reduce its capital or to authorise it to purchase its shares; or
- applies to a Court to call any such meeting or to sanction any such resolution or reduction;
- all of the Shares are sold (being the Company's fully paid ordinary shares);
the Company is suspended or removed from the Official List of ASX.
At all times during the Conversion period, the Company must give notice of certain matters to the holder, including relevantly, notice immediately upon becoming aware that the power to control more than 50% of the issued Shares will or is likely to change.
The holder has the right to transfer the Convertible Loan, upon giving notice to the Company, save that if the holder intends to transfer all or part of its Convertible Loan in accordance, the holder must grant a first right of refusal to the Company to purchase that Convertible Loan, respectively, or part thereof (as the case may be) for a period of 60 days on terms no less favourable than those offered to the proposed transferee.
The holder has the right to participate in bonus issues and rights offers as if the holder had converted the Convertible Loan respectively to the Shares.
The Convertible Loan provides that if:
$\circ$ the Company ("first company") merges with another company ("third party"); or
the first company enters into an arrangement under which its operations are disposed of to a third party,
the Company must ensure that it is a condition of the merger or arrangement that the right to convert in relation to the first company is transferred to a right to convert into ordinary shares in the third party at the strike price which would put the holder of the Convertible Loan in the same position after the merger or arrangement that it was in before the merger or arrangement relative to the weighted average trading price of the first company for the 30 days before the date of the public announcement of the merger or arrangement.

FOR THE YEAR ENDED 30 JUNE 2003

$\boxed{13}$

ANNEXURE F Experts Report for the purposes of Resolution 2 and 3

St Barbara Mines Limited

KPMG Corporate Finance (Aust) Pty Ltd Licensed Securities Dealer 16310

Central Park 152-158 St Georges Terrace Perth WA 6000 Australia

GPO Box A29 Perth WA 6837 Australia

A.B.N. 43 007 363 215

Telephone: +61 (8) 9263 7171 Fax: +61 (8) 9263 7151 www.kpmg.com.au

Our ref StBarbara03-report2110-PFR

The Directors St Barbara Mines Limited Level 2 16 Ord Street West Perth WA 6005

17 October 2003

Dear Sirs

Independent expert's report

$\mathbf{I}$ Introduction

$\mathbf{1}$ On 22 September 2003, St Barbara Mines Limited ("St Barbara" or "the Company") announced that an agreement had been reached with Resource Capital Funds II LP ("RCF") to convert into equity its current term loan facility of approximately \$7.3³ million (comprising of \$7.0 million principal and \$0.3 million interest) and to issue 4.5 million ordinary shares in lieu of a modification facility fee, both at an issue price of 8 cents ("the Proposed Debt Conversion"). As a result of the Proposed Debt Conversion, RCF will move from a shareholding of approximately 7.7% to a shareholding of approximately 24% of St Barbara.
RCF also currently owns approximately 38.6 million St Barbara unlisted options with exercise prices ranging from 11.0 cents to 21.25 cents. $12$ Under the existing term loan facility agreement with RCF it is also proposed to issue approximately 17.4 million unlisted St Barbara options to RCF in satisfaction of a usage fee. This issue would increase RCF's St Barbara option ownership to approximately 55.9 million options. If RCF elected to exercise all of these options ("the Potential RCF Option Conversion"), RCF could move to a maximum shareholding position of approximately 31% (before Ocean Resources Capital Holdings Limited conversion) in St Barbara by investing approximately \$8.3 million in St Barbara.
St Barbara is a public company listed on the Official List of Australian Stock Exchange Limited ("ASX") and, amongst other assets, owns $1.3$ and operates the Meekatharra Gold mine in the Murchison district of Western Australia. St Barbara also owns an 88.3% shareholding in Taipan Resources NL, a company incorporated in Australia and listed on ASX, which owns the Paulsens gold project in the Ashburton region of Western Australia. St Barbara and Taipan had market capitalisations at 16 October 2003 of approximately \$36.8 million and \$13.0 million respectively.
$1.4$ RCF is a Cayman Island limited partnership owned 99% by its limited partners and 1% by its general partner. The limited partners are the institutions, foundations, family offices and individuals who are investors in the funds. The general partner is a Cayman Island limited partnership, Resource Capital Associates II LP. The limited partners are the members of the management team and ownership of RCF Management L.L.C, a Delaware limited liability company that employs the individuals who actively manage Fund II and the other Funds. The general partner of Resource Capital Associates II L.P. is RCA II GP Limited, a Cayman Island corporation. Its shareholders are the three individuals that are the sponsors of Resource Capital Funds.
$1.5$ You have requested KPMG Corporate Finance (Aust) Pty Ltd ("KPMG Corporate Finance") to prepare an independent expert's report providing an opinion on whether:
the Proposed Debt Conversion of RCF's debt facility into St Barbara equity is fair and reasonable to St Barbara's shareholders other than RCF (the "non-associated St Barbara shareholders"); and
the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders.

^<sup>1 All amounts are expressed in Australian dollars unless otherwise stated.

$\overline{2}$ Purpose of our report

$2₁$ The issue of St Barbara shares under the Proposed Debt Conversion will result in RCF increasing its current shareholding from approximately 7.7% to approximately 24% (assuming that none of RCF's current St Barbara options are exercised). If the Potential RCF Option Conversion is fully exercised. RCF's shareholding would increase to approximately 31%². Section 606 of the Act provides a general prohibition to any person with a relevant interest of less than 20% of the voting capital of a company from increasing their interest to greater than 20% in the absence of a takeover offer. There are, however, various exemptions to this rule, one of which is set out in Section 611 of the Act. Under Item 7 of Section 611 such an acquisition is allowed if a majority of the company's non-associated shareholders pass an ordinary resolution at a general meeting approving the transaction.
$2.2$ Policy Statement 74 issued by the Australian Securities and Investments Commission's ("ASIC") antecedent body, the Australian Securities Commission ("ASC"), requires that, in these circumstances, non-associated shareholders be provided with a report assessing whether a proposed transaction is fair and reasonable in the context of the interests of the non-associated shareholders.
In order to satisfy the requirements of Policy Statement 74, KPMG Corporate Finance has been requested to prepare a report providing its $2.3$ opinion as to whether each of the Proposed Debt Conversion and the Potential RCF Option Conversion is fair and reasonable to the nonassociated St Barbara shareholders. The report is to accompany the Explanatory Memorandum (the "St Barbara Explanatory Memorandum") and Notice of Annual General Meeting to be sent to St Barbara's shareholders to convene a meeting of shareholders on or about 25 November 2003. The purpose of the meeting, amongst other things, will be to seek approval for the Proposed Debt Conversion and the Potential RCF Option Conversion.
$2.4$ The basis of our evaluation as to whether the Proposed Debt Conversion and the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders is an assessment as to whether the non-associated St Barbara shareholders are generally likely to be better off if the Proposed Debt Conversion and the Potential RCF Option Conversion proceeds than if they do not.
In forming our opinion as to whether each of the Proposed Debt Conversion and the Potential RCF Option Conversion are fair and $2.5$ reasonable, we have treated the concepts of fairness and reasonableness as a single opinion; that is, the Proposed Debt Conversion is or is not fair and reasonable and the Potential RCF Option Conversion is or is not fair and reasonable.
2.6 This report has been prepared solely for the purpose of assisting the non-associated St Barbara shareholders in considering the Proposed Debt Conversion and the Potential RCF Option Conversion. We do not assume any responsibility or fiability to any party as a result of reliance on this report for any other purpose, including but not fimited to investment or lending decisions in relation to St Barbara.
$2.7$ Neither the whole nor any part of this report or its attachments or any reference thereto may be included in or attached to any document. other than the St Barbara Explanatory Memorandum to be sent to St Barbara shareholders in relation to the Proposed Debt Conversion and the Potential RCF Option Conversion, without the prior written consent of KPMG Corporate Finance as to the form and context in which it appears.

3 Summary and opinions

$3.1$ We set out below our summarised opinions in respect of, firstly, the Proposed Debt Conversion and secondly, the Potential RCF Option Conversion

Proposed Debt Conversion

$3.2$ In our opinion, on balance, the Proposed Debt Conversion is fair and reasonable to the non-associated shareholders of St Barbara.
$3.3$ The principal factors that have guided us in forming our opinion are summarised below and discussed in more detail in Section 10 of this report.

Advantages

The Proposed Debt Conversion reduces St Barbara's debt levels and significantly improves its financial position and prospects for continuing as a going concern

$3.4$ If the Proposed Debt Conversion is approved St Barbara's net current asset position will improve to approximately \$4.5 million and the only external borrowing will be approximately \$4.4 million owed to Ocean.
At 30 June 2003, St Barbara had a net asset deficiency of approximately \$7.5 million. If the Proposed Debt Conversion is not approved the $3.5$ facility will become repayable on or before 30 November 2003 and, in our opinion and that of the directors, the ability of St Barbara to meet this potential obligation in the absence of the Proposed Debt Conversion is uncertain.

^<sup>2 This shareholding level is calculated before reference to any further share issues pursuant to other resolutions considered by St Barbara's shareholders as part of the Annual General Meeting.

St Barbara Mines Limited Independent expert's report 17 October 2003

The Proposed Debt Conversion is based upon a St Barbara share price of 8 cents which represents a premium of 48% to our assessed 'preferred' value of a St Barbara share and falls within our range of assessed fair values

We have assessed the value of a St Barbara share, inclusive of a premium for control, to lie in the range of 1.8 cents to 10.9 cents ('preferred' $3.6$ 5.4 cents). The Proposed Debt Conversion has been set at 8 cents per share. This represents an additional premium of approximately 344% at the low end of our valuation range and discount of approximately 27% at the high end of our valuation range ('preferred' premium of 48%). Whilst the value for the Proposed Debt Conversion is below the high end of our valuation, it is substantially above the low end and 'preferred' assessment of the value of a share in St Barbara.

The Proposed Debt Conversion represents a premium to the weighted average share price of St Barbara over the 3 month and 6 month periods prior to the announcement of the Proposed Debt Conversion however is at a slight discount to the weighted average share price for the month prior to the announcement of the Proposed Debt Conversion

The Proposed Debt Conversion represents a premium of 10% and 21% to the weighted average share price of St Barbara over the 3 month $3.7$ and 6 month periods prior to the announcement of the Proposed Debt Conversion however is at a slight discount to the weighted average share price for the month prior to the announcement of the Proposed Debt Conversion.

The Proposed Debt Conversion substantially eliminates the security held by financiers over St Barbara's assets and increases the prospects of negotiating hedging arrangements leading to a potential increase in the value of St Barbara

$3.8$ The Proposed Debt Conversion will eliminate the majority of security over St Barbara's assets and, in the opinion of the directors of St Barbara, the ability of St Barbara to enter into forward hedging gold price arrangements will be enhanced. If hedging arrangements are negotiated which secures a flat forward gold price of \$575 / oz the assessed value of a St Barbara share, based upon the increased value of the Meekatharra and Paulsens gold projects, would be to increase the value to within the range of 2.1 cents to 14.4 cents ('preferred' 6.4 cents).

The Proposed Debt Conversion helps facilitate the potential re-capitalisation of Taipan which has the potential to significantly increase the value of St Barbara

3.9 We have been advised that the Board of Taipan intend to re-capitalise Taipan through a capital raising of up to \$20 million at 5 cents and the conversion of St Barbara's current loan to Taipan into equity at S cents. The capital raising will be completed contemporaneously with the Proposed Debt Conversion. If the Proposed Debt Conversion is approved, Taipan are successful in raising \$20 million at 5 cents and the current St Barbara loan is converted into Taipan equity at 5 cents, the Board of Taipan are confident that this re-capitalisation will lead to a re-rating of Taipan in line with its proposed capital raising at 5 cents potentially increasing the value of St Barbara's interest in Taipan to \$27.1 million. Based upon this scenario, the impact upon the assessed value of a St Barbara share would be to increase the value to within the range of 6.6 cents to 12.3 cents ('preferred' 9.6 cents).

The Proposed Debt Conversion provides evidence of support for St Barbara's long-term prospects

$3.10$ If the Proposed Debt Conversion is approved, RCF will become a major shareholder in St Barbara, which provides potential support for St Barbara's longer-term future.

Increases the independence of the St Barbara Board

$3.11$ If the Proposed Debt Conversion is approved, RCF will gain two Board positions. Furthermore there will be a non-executive chairman appointed increasing the independence of the St Barbara Board.

Disadvantages

The non-associated St Barbara shareholders will experience dilution in their ownership of St Barbara

$3.12$ The non-associated St Barbara shareholders currently control 92.3% of St Barbara. If the Proposed Debt Conversion is approved, the nonassociated St Barbara shareholders will dilute to approximately 76% control of St Barbara.

Potential RCF Option Conversion

$3.13$ In our opinion, on balance, the Potential RCF Option Conversion is fair and reasonable to the non-associated shareholders of St Barbara.
$3.14$ The principal factors that have guided us in forming our opinion are summarised below and discussed in more detail in Section 11 of this report.

Advantages

The full exercise of the Potential RCF Option Conversion would result in \$8.3 million being invested in St Barbara

If RCF elects to exercise all of its options, RCF would need to invest \$8.3 million in St Barbara. This would significantly further enhance St 3.15 Barbara's financial position. All of RCF's current options have strike prices at a premium to the closing share price of St Barbara on 16 October 2003 of 8.3 cents.

Disadvantages

The non-associated St Barbara shareholders will experience dilution in their ownership of St Barbara

If the Potential RCF Option Conversion is approved and RCF elected to convert all of its St Barbara options, it could move to a maximum 3.16 shareholding position of approximately 31% (before consideration of the Ocean Loan Conversion) and therefore the non-associated shareholders interest would dilute to 69%.

Other considerations

Voting for or against the Proposed Debt Conversion and the Potential RCF Option Conversion is a matter for individual shareholders, based 3.17 on their own views as to value and future market conditions, industry prospects, risk profile, liquidity preference, portfolio strategy and tax position. Shareholders of St Barbara who are in doubt as to the action that they should take in relation to the Proposed Debt Conversion and the Potential RCF Option Conversion should consult their own professional adviser. Any decision to continue to hold shares in St Barbara is a separate investment decision. KPMG Corporate Finance does not give any advice or offer any opinion in this regard. Shareholders and option holders who are in any doubt as to their actions in this regard should consult their own professional adviser.
Our opinions are based solely on information available as at the date of this report. In particular, we have placed reliance on the report of the 3.18 independent mineral industry specialist engaged by us, Snowden Corporate Services Pty Ltd ("Snowden"). The Snowden report is attached as Appendix 4. KPMG Corporate Finance instructed Snowden on the gold price, exchange rate, discount rate and taxation assumptions to be used in its report.
3.19 We have not undertaken to update our report for events or circumstances arising after the date of this report.
The above opinions should be considered in conjunction with, and not independently of, the information set out in the remainder of this 3.20 report, including its appendices.

Yours faithfully

Duncan Calder Director

aarabung

Steve Scudamore Director

Contents of the remainder of KPMG Corporate Finance's Report

The remainder of this independent expert's report is set out below under the following headings:

$\overline{4}$ Outline of the Proposed Debt Conversion and the Potential RCF Option Conversion
$\sqrt{5}$ Sources of information
Basis of assessment $\,$ 6 $\,$
$\overline{7}$ Overview of the gold industry
$\bar{8}$ Profile of St Barbara
$\mathfrak g$ Valuation of St Barbara
$10\,$ Assessment of whether the Proposed Debt Conversion is fair and reasonable to the non-associated St Barbara shareholders
Assessment of whether the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders $\mathbf{H}$

Appendices

Qualifications and declarations $\mathbf{I}$
$\overline{2}$ Sources of information
$\overline{\mathbf{3}}$ Calculation of Weighted Average Cost of Capital for St Barbara
$\overline{4}$ Snowden's Independent Valuation of the Mineral Assets of St Barbara and Taipan

$\ddot{4}$ Outline of the Proposed Debt Conversion and the Potential RCF Option Conversion

The Notice of Annual General Meeting outlines a number of resolutions which, if approved, will impact the ownership of St Barbara. $4.1$ Further details of the potential impact of each resolution on the ownership of St Barbara is detailed in Annexure B of St Barbara's Explanatory Memorandum. We outline below the impact of the resolutions which we are required to report on.

The Proposed Debt Conversion

$4.2$ On 22 September 2003, St Barbara announced that RCF had agreed to convert its remaining debt of approximately \$7.3 million into equity at 8 cents per share, thereby extinguishing all secured debt from St Barbara's balance sheet. The debt to equity swap by RCF will result in the issue to RCF of approximately 95.7 million shares at 8 cents per share, taking its shareholding from approximately 7.7% to approximately 24%.
The Proposed Debt Conversion is subject to shareholder approval at the Annual General Meeting and also subject to RCF obtaining various $4.3$ approvals including the Foreign Investment Review Board. In addition, St Barbara will restructure the board to consist of five board members to include two nominees of RCF and a new non-executive Chairman mutually acceptable to the Company and RCF. Further details of the other approvals are fully set out in St Barbara's Explanatory Memorandum.
The ownership structure of St Barbara before the Proposed Debt Conversion is set out below: $44$

Source: St Barbara management

$4.5$ In the event that the Proposed Debt Conversion is approved, the share ownership structure of St Barbara will be as follows:

Figure 2: Share ownership if the Proposed Debt Conversion is approved

Currently, St Barbara has a convertible loan from Ocean Resources Capital Holdings Limited ("Ocean") of approximately \$7.2 million. $46$ St Barbara is also seeking shareholder approval for the conversion of Ocean's convertible note into 90 million ordinary St Barbara shares (of these 35 million are to be automatically issued within 7 business days after shareholder approval) at an issue price of 8 cents ("the Ocean Loan Conversion"). If shareholder approval is granted for the Ocean Loan Conversion the ownership structure of St Barbara after the automatic conversion of 35 million shares would be as set out below. We are not required to report on the conversion of the convertible note by Ocean.

Source: St Barbara management

4.7 It is important for St Barbara's shareholders to consider the dilution implication to their current ownership shareholdings, and the shareholding of RCF, if the Ocean Loan Conversion is also approved. If all 90 million shares were converted the shareholding profile would be: non-associated St Barbara shareholders (65%), RCF (21%) and Ocean (14%).

The Potential RCF Option Conversion

$4.8$ RCF currently owns approximately 38.6 million St Barbara unlisted options with exercise prices ranging from 11.0 cents to 21.25 cents. Resolution 4 of St Barbara's Notice of Annual General Meeting seeks approval to issue approximately 17.4 million unlisted St Barbara options to RCF in satisfaction of a usage fee. This issue would increase RCF's St Barbara option ownership to approximately 55.9 million options. Resolution 3 of St Barbara's Notice of Annual General Meeting seeks the prior approval to issue up to approximately 55.9 million shares to RCF in the circumstance where RCF elects to exercise all of its options by investing approximately \$8.3 million. If RCF did elect to exercise all of its St Barbara options, it could move to a maximum shareholding position of approximately 31%, before consideration of the Ocean Loan Conversion (or 29% assuming the Ocean Loan Conversion is approved and 35 million shares are issued upon conversion).
A full analysis of the movement in St Barbara's shares on issue and ownership of these shares resulting from the proposed resolutions is 4.9 detailed in Annexure B of St Barbara's Explanatory Memorandum.

5. Sources of information

51 In preparing this report and arriving at our opinions, we have considered a number of sources of information as detailed in Appendix 2 to this героп.
5.2 Whilst KPMG Corporate Finance has no reason to believe that such information is anything but reliable and accurate, KPMG Corporate Finance has not in any way caused such information to be independently verified or audited. We have however evaluated the information provided by St Barbara through inquiry, analysis and review and nothing has come to our attention to indicate the information provided was materially mis-stated or did not afford reasonable grounds upon which to base our opinion.
An important part of the information used in forming an opinion of the kind expressed in this report is comprised of the opinions and $5.3$ judgment of management. This type of information was also evaluated through inquiry, analysis and review to the extent practical. However, such information is often not capable of external verification or validation.
$5.4$ The achievability of any budgets, forecasts and earnings estimates used in this report are not warranted or guaranteed by KPMG Corporate Finance. Future profits and cash flows are inherently uncertain. They are predictions by management of future events that cannot be assured and are necessarily based on assumptions, many of which are beyond the control of St Barbara or their respective managements. Actual results may be significantly more or less favourable.
The opinion of KPMG Corporate Finance is based on the prevailing market, economic and other conditions at the date of this report. It $5.5$ should be noted that conditions can change over a relatively short period of time and that our findings should be considered in light of any such changes. Any subsequent changes in these conditions could impact upon these assessments, either positively or negatively.

6 Basis of assessment

61 KPMG Corporate Finance has prepared this report for inclusion in the St Barbara Explanatory Memorandum under Section 611 of the Act. It is to be sent to the St Barbara shareholders to convene an Annual General Meeting on or around 25 November 2003. The purpose of the meeting, amongst other items, will be to seek shareholder approval for the Proposed Debt Conversion and the Potential RCF Option Conversion.

Criteria for assessment of fairness and reasonableness

6.2 Policy Statement 74 sets out the ASIC's guidelines in respect of independent expert's reports for the purpose of Item 7 of Section 611 of the Act and the meaning of "fair and reasonable" in the context of Section 611. The term fair and reasonable has no legal definition. Paragraph 21 of Policy Statement 74 states that "what is fair and reasonable for non-associated shareholders should be judged in all the circumstances of the proposal. The report must compare the likely advantages and disadvantages for the non-associated shareholders if the proposal is agreed to, with the advantages and disadvantages to those shareholders if it is not. Comparing the value of the shares to be acquired under the proposal and the value of the consideration to be paid is only one element of this assessment".
6.3 This implies that fairness and reasonableness should be assessed as a single concept. Accordingly, for the purpose of our report, we consider that the Proposed Debt Conversion and the Potential RCF Option Conversion will separately be fair and reasonable having regard to the interests of the non-associated shareholders if, on balance, the non-associated shareholders are generally at a greater advantage if the Proposed Debt Conversion and the Potential RCF Option Conversion is executed, than if it is not.
64 In forming our opinion as to whether the Proposed Debt Conversion and the Potential RCF Option Conversion is fair and reasonable to the non-associated shareholders of St Barbara, we have had regard, inter alia, to the following factors:
the potential favourable impact of the Proposed Debt Conversion and the Potential RCF Option Conversion on the financial position and prospects of St Barbara continuing as a going concern;
the assessed value of a share in St Barbara before the Proposed Debt Conversion;
the prices at which shares in St Barbara have historically traded on ASX;
ż the extent of any premium for control being paid by RCF;
the dilution of the non-associated St Barbara shareholders' interests in St Barbara's assets as a result of the Proposed Debt Conversion and the Potential RCF Option Conversion;
the comparative advantages and disadvantages of each of the Proposed Debt Conversion and the Potential RCF Option Conversion; and
other matters considered relevant to the non-associated St Barbara shareholders.

Valuation methodologies

In assessing the fair market value of St Barbara, we have considered the various methodologies set out in ASC's Practice Note 43 which an 6.5 independent expert is required to consider in completing a valuation. These include:
$\blacksquare$ the discounted cash flow ("DCF") method;
the capitalisation of future maintainable carnings or cashflows to which is added the estimated realisable value of any surplus assets $\blacksquare$ ("Capitalisation of Earnings Method");
the amount that would be distributed to shareholders on an orderly realisation of assets;
the amount which an alternative acquirer might be prepared to pay if all the ordinary shares in the company were available; and
the most recent quoted price of listed securities.
Each of the above methodologies is applicable in different circumstances. In selecting the appropriate valuation methodology to assess 6.6 St Barbara, we have had regard to the individual profile and characteristics of the Company's individual assets. We have also considered recent share trading in arriving at our conclusion. We are not aware of any alternative bidders for St Barbara but would expect such bidders to make their assessment primarily on the DCF's of the key underlying assets. In the event of a takeover, depending upon the circumstances and the level of synergies achievable. St Barbara could potentially achieve values at a premium to the values in this report.
The principal assets of St Barbara comprise interests in mineral exploration and mining projects. Such assets have limited lives and future 6.7 profitability depends on the outcome of exploration programmes that are not predictable. Further, a number of the mineral assets of St Barbara are still at the exploration and/or feasibility stage and are yet to record any earnings. As such, for the purposes of our assessment of the market value of St Barbara, we do not consider it appropriate to apply the Capitalisation of Earnings Methodology.
$6.8\,$ We consider that a valuation of the underlying net assets of St Barbara is the most appropriate basis upon which to value the Company. Accordingly, we have had regard to the net assets of St Barbara as at 30 June 2003 in our valuation adjusted for capital raisings and other transactions by St Barbara subsequent to this date. We have aggregated the estimated fair value of the assets of the Company and deducted debts and an estimate of capitalised corporate overheads to derive an assessed range of values for St Barbara. As set out below, the principal assets of St Barbara have been predominantly valued using the DCF methodology. The DCF approach assesses the value of a 100% interest in an asset and therefore no adjustment is required to state the value of an asset or interest on the basis of 100% control.

St Barbara's valuation methodologies selected

6.9 There are several distinct components that comprise the operations of St Barbara being:
the Meekatharra Gold Project (including the Paddy's Flat area); and
$\blacksquare$ St Barbara's 88.3% interest in Taipan.
6.10 In accordance with Practice Note 43, which envisages the use by an independent expert of specialists in valuing specific assets, Snowden has been engaged to prepare an independent technical report providing a valuation of the mineral assets of each of St Barbara and Taipan.
$6.11$ We have placed significant reliance on the Snowden report which has been prepared with reference to the AusIMM Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports ("the ValMin Code"). Snowden utilises a datum point of 30 September 2003 in its valuations. The valuation methodologies adopted by Snowden are outlined in the Snowden report attached as Appendix 4 and include a combination of:
the DCF method (in valuing the Paddy's Flat Project of St Barbara and Paulsens Gold Project of Taipan);
the Kilburn method; and
the In-Situ Resource or "Yardstick" method.
In respect of the Meckatharra Gold Project and Paulsens Gold Project, we have reviewed the commercial, economic and financial 6.12 assumptions used in Snowden's cash flow models. In addition, we determined the gold price and exchange rate assumptions and discount rates to be applied to the cash flows. We also determined the tax inputs to be included by Snowden in the cash flow projections.
We have satisfied ourselves as to the independence and qualifications of Snowden. Due to the various uncertainties inherent in the valuation 6.13 process, Snowden has determined a range of values within which it considers the value of each of the mineral assets of St Barbara and Taipan to lie. The valuations ascribed by Snowden to the mineral assets of St Barbara and Taipan have been adopted in our report.

St Barbara's investment in Dioro Exploration NL ("Dioro")

6.14 At 30 June 2003, St Barbara had a strategic investment in Dioro, which was sold on 7 July 2003. We have adjusted St Barbara's 30 June 2003 statement of financial position to reflect this transaction.

Other assets and liabilities

6.15 Other assets and liabilities of St Barbara and Taipan not included in Snowden's valuation comprise cash, receivables, prepayments, nonmining property plant and equipment, accounts payable, non-mining provisions and borrowings. For the purposes of this report, these items have been incorporated in our valuations at their book values, except where specified otherwise.

$\overline{7}$ Overview of the gold industry

$71$ St Barbara's principal assets are the 100% owned Meekatharra gold mine in Western Australia, Paddy's Flat property and its 88.3% interest in the Paulsens gold project. Accordingly, the financial performance of St Barbara is significantly impacted by developments in the international gold industry.
7.2 To provide a context for assessing the position of St Barbara in the gold sector we have set out below an overview of recent trends in gold markets. St Barbara is a relatively small gold producer/explorer by global standards and is therefore a price taker in the international gold market.

Demand

73 The demand for gold comes from consumers, industry and investors with consumer demand for fabrication purposes accounting for the greatest proportion of gold sales.
$74$ High gold prices and a weak global economy over the last year had a further softening impact on the demand for fabricated gold jewellery in 2003. Australian Bureau of Agriculture and Research Economics' ("ABARE") September 2003 quarter edition of Australian Commodities has forecast fabrication consumption to fall for the third year in succession to 3,150 tonnes (from 3,175 tonnes in 2002 and 3,535 tonnes in 2001).
$7.5$ Jewellery demand has been under pressure as weak economic markets pressure consumers' buying power. India, the world's largest consumer of fabricated gold, accounted for 18% of the world's fabrication consumption in 2002. A better monsoon season and stronger economic growth in 2003 and 2004 is expected to support growth in gold consumption.
7.6 The weaker global equity markets, the war with Iraq and net reduction in producer hedging has also had a positive impact on investor demand for gold in the first half of 2003.

Production

$7.7$ World gold mine production in 2003 is forecast to grow by just 0.5 per cent to 2,600 tonnes, underpinned by rises in Australian and Peruvian output. Production is forecast to increase by 4% in 2004 to 2,700 tonnes, as the relatively high gold prices of 2002 and 2003 stimulate higher mine output. 9

78 The recent high and sustained gold price has resulted in several large projects becoming more profitable and increased exploration expenditure resulting in the start up of new mines and the extension of the mine life of a number of existing mines.
7.9 ABARE has forecast Australian gold production to increase by 4% to 277 tonnes in 2002-03. ABARE expects Union Reefs to close in late 2003, but the commencement of new mines such as Frog's Leg opencut and Chariot will compensate this loss. However, ABARE reports that on the downside, Harmony Gold is considering the closure of all its Australian operations (equivalent to 16 tonnes in 2002-2003) if profitability does not improve significantly.

Hedging

7.10 Gold producers are able to hedge the price they receive for gold by taking short positions in the gold derivative market and then borrowing gold from bullion banks. In the past decade (except for a few days) the gold market has consistently been in contango with gold lease rates being considerably below interest rates. This persistent contango has allowed producers to hedge their position effectively earning interest on gold still in the ground.
$7.11$ There has been a significant decline in producer hedging in recent years as a result of the record low interest rates, which has resulted in a significant decline in the contango available to producers. As the contango narrows producers are less inclined to hedge due to lower compounding returns. Most importantly, less hedging means that less accelerated supply hits the gold spot market (i.e. gold being sold before it is produced).
712 According to figures released by Gold Fields Mineral Services Ltd the global gold mining industry reduced its hedge book for the seventh consecutive quarter to June 2003. The scale and pace of de-hedging during the second half of 2002 and into the first quarter of 2003 was maintained in the second quarter.

Historical gold prices

7.13 Gold is a globally traded commodity. Trading covers spot sales, forward sales and a range of derivative financial instrument such as options. The revenue stream of an Australian based gold producer is dependent, amongst other things, upon:
fluctuations in the US dollar ("US\$") spot gold price;
the exchange rate between the US\$ and the Australian dollar ("A\$"); and
the extent to which the producer has undertaken hedging of future production and the timing and nature of the hedging transactions.
$714$ The following graph illustrates the generally positive correlation of the A\$ spot gold price with the US\$ spot gold price and its generally negative correlation (other than in the last 12 months) with the A\$/US\$ exchange rate since 1 September 1995.

Source: Bloomberg

715 The terrorist attacks on the US on 11 September 2001 resulted in an increase in the US\$ spot price with many investors seeking a safe haven in gold. Throughout 2002 the US\$ spot price exhibited an upward trend spurred by the growing threat of war against Iraq, weak world financial markets and the net decrease in producer hedging. Since mid 2002 there has also been an appreciation of the A\$ against the US\$ with A\$ increasing to reach a high of US\$0.69 on 1 October 2003. Gold traded at five-year highs reaching US\$389 per ounce on 24 September 2003, however had the biggest price fall in more than six years falling to US\$370 per ounce on 3 October 2003. The closing spot price on 16 October 2003 was US\$371 per ounce.

Forecast gold prices

7.16 Recent gold price forecasts to 2005 prepared by a number of stockbroking firms and market commentators in the last 2 months are summarised in the table below. These projections show that market commentators are expecting average gold prices for 2003 to be lower than the current high levels and maintain a similar average for 2004. The average gold price is expected to remain well above the average price achieved in 2002 of US\$310 per ounce.

Market	Date of forecast	Gold spot price		USS gold forecasts
commentator		US\$	2003	2004	2005
	30 Sept 2003	385	361	365	N/a
2	30 Sept 2003	385	354	330	320
3	25 Sept 2003	385	360	388	365
4	24 Sept 2003	389	360	375	375
5	18 Sept 2003	376	357	400	375
6	18 Sept 2003	376	365	376	368
7	4 Sept 2003	373	350	375	N/a
8	3 Sept 2003	374	350	285	N/a
9	2 Sept 2003	372	345	330	N/a
10	1 Sept 2003	376	357	372	380
$^{11}$	1 Sept 2003	376	355	335	N/a
12	1 Sept 2003	376	353	335	325
13	29 Aug 2003	376	350	375	400
14	25 Aug 2003	361	362	378	380
Average			356	359	365

Table 1: Forecast US\$ gold prices

Source: Various market commentators

717 The table below summarises the results of a Reuters poll of analysts, conducted in the first half of July 2003, on the outlook for the average gold price for 2003 and 2004:

	. USS gold forecasts
	2003	2004
Mean	348	350
Median	349	350
Highest	365	400
Lowest	330	310
No. of forecasts	20	19

- Table 2: Results of Reuters latest noll of analysts

Source: World Gold Council

$7.18\,$ A broker report released on 25 September 2003 concluded on a long-term gold price forecast of US\$350 per oz.
7.19 The major factors noted by market commentators supporting the current high gold prices are:
the current uncertain global political environment. The stability of the real returns from gold have made it a traditional "safe haven" in $\blacksquare$ times of crisis and is a key driver of the current high prices;
the weaker US\$. A weaker US\$ decreases the price of gold in non-US currencies resulting in an increased demand thereby increasing US\$ gold prices;
the continued reduction of producer hedging. In the last two to three years producers have reduced and/or bought back gold hedge positions which has had a positive impact on the price of gold; and
controlled central bank selling. Market commentators expect that the Washington Agreement will be extended for another five years from 26 September 2004.

Industry consolidation

The wave of consolidation activity within the gold mining sector in the last two years is reported by Standard and Poor's to have decreased 7.20 the number of larger participants worldwide from 26 in 2000 to 16 in 2002. This consolidation activity has left a general lack of mid-tier gold producers in Australia. $11$

Consolidation in the mining industry is expected to continue as geographic expansion and economies of scale are becoming necessary for $7.21$ producers to contain costs and remain profitable. There is also pressure on small and mid cap companies to grow in order to maintain relevance to institutional investors.

8 Profile of St Barbara

Corporate background

$8.1\,$ St Barbara is a listed Australian gold producer. The Company was incorporated and listed in Victoria in March 1969 as Endeavour Oil Company NL. It was subsequently listed on the Official List of ASX in May 1969.
$8.2$ The Company's present name was adopted in 1991 after earlier having changed status from a no liability company to a public company limited by shares. Its state of incorporation also changed to Western Australia and its focus was changed from oil and minerals exploration to gold exploration and production.
Following a turbulent history, a new management team was appointed in July 1999. Since then, the Company has undertaken an extensive 83 review of business practices and asset rationalisation.
$8.4$ In July 2000, St Barbara announced plans to merge with Taipan in order to facilitate the development of Taipan's Paulsens gold project. When a takeover bid for Taipan emerged from another ASX listed company, the merger was abandoned and St Barbara proceeded with its own takeover bid. St Barbara now owns 88.3% of Taipan's available share capital (being 190,719,338 fully paid ordinary shares as at 30 June 20033
$8.5$ St Barbara gained access to European capital markets through listing on AIM (Alternative Investment Market of the London Stock Exchange) on 8 July 2002.

St Barbara's current corporate structure

8.6 The current corporate structure of St Barbara is presented below:

Figure 5: St Barbara's current corporate structure

Source: St Barbara's management

Description of Company Assets

Meekatharra Gold Project

8.7 St Barbara's wholly owned gold operations are located in the Murchison District of Western Australia. The Murchison Region is Western Australia's second most important gold province after the Eastern Goldfields with a total historical gold production of approximately 12 million ounces. The Meekatharra Gold Project includes a largely continuous block of nearly 2.443 km² between Paddy's Flat and Tuckanarra. The majority of this tenement block is covered by Mining Leases.
8.8 Mining at the Meekatharra Gold Project was suspended in July 1998 and operations continued only through the processing of low-grade stockpiles. Mining re-commenced during 2000 at the Company's Caledonian, Great Northern Highway and Magazine deposits at Meekatharra.
8.9 In recent years, operations at Meekatharra have developed to include eight open pit mines, two underground mines and an upgraded processing plant and gold room.

8.10 Gold production at the Meckatharra Gold Project over recent years is summarised below:

Table 3: Gold production at Meekatharra
	12 months to 30 Jun 01	12 months to 30 Jun 02	12 months to 30 Jun 03
Ore mined $(2000 \text{ tonnes})$	1.700	1.386	483
Ore milled $(2000 \text{ tonnes})$	2,789	1.889	2.285
Gold produced (ounces)	147,063	103.246	96.611
Net operating $cost(A\$/oz)$	371	553	465
Note: Higher operating costs per ounce at Meekatharra in 2002 reflected capital investment in two underground mines and a

lower mill throughput and higher power and media consumption with ore hardness increasing.

Source: St Barbara 2002 and 2003 annual reports

$8.11$ In October 2002. St Barbara purchased Paddy's Flat from Plutonic Operations Limited for consideration of \$4.5 million and a further \$10 per ounce on all mined production exceeding 50,000 ounces per annum. Paddy's Flat is an area just 15 km northeast of St Barbara's existing treatment plant.
$8.12$ Current operations at Meekatharra comprise the carting and milling of 50,000 to 60,000 tonnes per week of highly oxidised low grade stockpile material from the Paddy's Flat tenements. This phase of operations has resulted in an aggregate of approximately 428,000 tonnes treated and 10,534 ounces recovered. The typical head grade is 0.9 g/t, which is higher than originally expected. Current metallurgical recoveries are at 85% and plant optimisation continues. Stockpile resources are sufficient for continuous operations through to March 2004. Currently site-operating cash costs are around \$470 per ounce with royalties of \$20 per ounce and therefore at current spot prices the Meckatharra operations are cash positive. On 26 September 2003, St Barbara announced that drilling, primarily designed for geotechnical validation and metallurgical testwork purposes, has validated the geological model constructed and recorded intercepts better than predicted by the model. The Paddy's Flat development plan envisages a conventional 5 metre by 4.5 metre decline development to exploit a resource of 635,000 tonnes at 8.0 g/t for 162,500 ounces.
8.13 The current resources at Meckatharra (including Paddy's Flat) as detailed in the Snowden report are summarised below:

Classification	Tonnes (000's)	Grade g/t Au	Contained Ounces Gold
Measured resources	1.992	3.06	196,200
Indicated resources	7.975	2.24	573,400
Inferred resources	10.543	1.90	632.000
Total resources	20.510	2.10	1.401.600
Proven reserves	121	2.93	11.400

Source: Snowden's mineral specialist report

8.14 St Barbara is currently unhedged as part of a Board endorsed strategy to gain maximum leverage to a rising gold price.

Paulsens Project

8.15 Paulsens is 100% owned by Taipan, an 88.3% subsidiary of St Barbara. The current resources for Paulsens as detailed in the Snowden report are summarised below:

Classification	Tonnes (000's)	Grade g/t Au	Contained Ounces Gold
Proven reserves	0	0	€
Probable reserves	0	0	€
Total reserves	0	O.	8
Measured resources	1,103	5.2	182,900
Indicated resources	2.334	4.4	328,700
Total measured and	3.437	4.6	511,700
indicated resources
Inferred resources	532	3.8	65.700
Total resources	3.969	4.5	577,400

Source: Snowden's mineral specialist report

8.16 As announced in the Chairman's address on 6 June 2003, St Barbara's management is examining a number of options to bring Paulsens to development status. Whilst the project is relatively high grade, based on the current mine plan, the most profitable years do not occur untif years 3 and 4. The current mining plan is the establishment of an underground mine and a toll treatment agreement with a nearby producer which results in a lower level of capital expenditure than previously considered under an opencut development. A total of 675,000 tonnes of ore is expected to be recovered over 3 years at an average grade of 12.2 g/t, yielding approximately 247,000 ounces.

Ashburton Exploration

8.17 The Ashburton gold project consists of eight Exploration Licences and seven Mining Leases covering approximately $1,780 \text{ km}^2$ in the Ashburton region of Western Australia. This area includes a number of Exploration Licence Applications covering part of the Ashburton Fold Belt and leases granted for infrastructure development in the Paulsens area. The project is approximately 190 km west of Paraburdoo.

Joint Ventures

8.18 St Barbara is party to a number of joint venture agreements focusing primarily on exploration in the Meekatharra district.
8.19 In November 2002, St Barbara entered into a Joint Venture arrangement with Pelican Resources Ltd on two Wyloo tenements in the Ashburton trough. The terms give St Barbara a 51% participating interest for consideration of expenditure of \$600,000 over 3 years, with an option for an additional 19% interest in exchange for additional expenditure of \$400,000 over 4 years.
8.20 The Independence Gold NL ("Independence") Joint Venture began exploration at Chesterfield in 2001/02, however, whilst the results of that exploration had generally been of limited success a farm-in agreement was reached with Aurex Consolidated Limited ("Aurex") in September 2003. Under this agreement, Aurex is required to spend a minimum of \$100,000 on exploration in the first 12 months of the Joint Venture. To earn an initial 60% interest Aurex must spend \$400,000 in exploration prior to 30 June 2007 and then pay \$250,000 to each of St Barbara and Independence. Each of St Barbara and Independence may clect to revert to a 10% net profits interest leaving Aurex with an effective 80% interest in the Joint Venture.
8.21 In August 2003, Taipan entered into a Joint Venture arrangement with Red 5 Limited on one tenement in the Ashburton trough. The terms will give Taipan a 70% participating interest for consideration of expenditure of \$21,600 in the first year and Taipan will carry all expenditure until a decision to mine is made.
8.22 Cougar Metals has currently earned a 49% interest in a Joint Venture arrangement with St Barbara on the Cue Project Area tenements. They have the option to reach 80% by spending \$250,000 by March 2004.
8.23 In August 2003, St Barbara entered into a joint venture with Coronet Resources Limited ("Coronet") on various tenements in the Burnakura area of Meekatharra. Coronet can earn a maximum of 70% by spending \$2m over 30 months with a minimum expenditure of \$100,000 in the first six months.

Share capital and ownership

$8.24$ St Barbara currently has on issue 443,464,225 ordinary fully paid shares, which are quoted on ASX. St Barbara's major shareholders as at 30 September 2003 were:

Table 6: St Barbara's major shareholders
	Number of shares	% of issued capital
	held
Westpac Custodian Nominees Limited	61,658,409	13.9
National Nominees Limited	47,109,430	10.6
RCF	34,057,085	7.7
Strata Mining Corporation	32.200,000	7.3
Other shareholders	219.841.406	60.5
Total number of shares on issue	443,464,225	100

Source: St Barbara's 2003 annual report

8.25 St Barbara's substantial shareholders as at 30 September 2003 were:

Table 7: St Barbara's substantial shareholders
	Number of shares	% of issued capital
	held
RAB Earope Fund Ltd	45,000,000	10.1
St James's Place Recovery Unit Trust	40,430,000	9.1
RCF	34,057,085	7.7
Strata Mining Corporation	32.200,000	7.2
Total number of shares held by St Barbara's substantial shareholders
	151,687,085	34.1

Source: St Barbara's 2003 annual report

8.27 On 26 June 2003, St Barbara made a private placement of 15 million shares at an issue price of 6.67 cents per share to raise \$1 million.
8.28 On 22 September 2003, St Barbara announced the Proposed Debt Conversion with RCF.
8.29 On 25 September 2003, St Barbara announced an agreement had been entered into with Claymore Capital Pty Ltd for the private placement of up to 12 million ordinary fully paid shares (with a minimum of 6.25 million) at an issue price of 8 cents per share. On 6 October 2003, 12 million ordinary fully paid shares were issued at 8 cents per share.

$8.26\,$ On 27 June 2003, Ocean exercised early 15 million shares at a price of 13 cents per share.

Share price history

8.30 The chart below depicts St Barbara's daily closing share price from August 2001 to the date of this report and the volume of shares traded expressed as a percentage of issued capital.

Source: Bloomberg

$8.31$ The share price exhibited an overall downward trend since July 2002 until recent months. The stock generally exhibited reasonable liquidity over this period. Since mid July 2003 the share price has recovered slightly. Since the announcement of the Proposed Debt Conversion, St Barbara's share price has traded between 8.2 cents and 9.0 cents. The closing price of a St Barbara share on 16 October 2003 was 8.3 cents.

Liquidity History

8.32 Te following table demonstrates the liquidity in trading in St Barbara shares over varying time periods preceding the announcement of the Proposed Debt Conversion.

Table 8: St Barbara's share price liquidityh
Period prior to announcement date	Share price (high) S	Share price (low) S	Weighted average share price	Cumulative volume	As a % of issued capital %
I week	0.081	0.076	0.079	10,124,272	2.35%
I month	0.097	0.074	0.085	44,133,759	10.23%
3 months	0.100	0.039	0.073	139,611,228	32.82%
6 months	0.100	0.036	0.066	189,596,628	45.78%
12 months	0.150	0.036	0.087	309.756.084	78.79%

Source: Bloomberg

8.33 St Barbara shares have exhibited reasonable liquidity in recent times with 46% of shares on issue being traded over the six months prior to the announcement of the Proposed Debt Conversion.

ASX Announcements

$8.34$ ASX announcements made by St Barbara since the beginning of 2003 that may have impacted its share price include:
9 January 2003: St Barbara, Geomaque Explorations Ltd and Midas Gold plc jointly announced their intention to complete a business combination and form a new company named Defiance Mining Corporation ("Defiance");
4 February 2003: announcement of the completion of the purchase of Paddy's Flat project, satisfied through the placement of 15 million shares to institutional clients at 11 cents to raise \$1.65 million;

17 February 2003: St Barbara announced an agreement with Gold Fields Australasia Pty Limited to a Farm-out and Exploration Joint Venture for a 206 $km^2$ block of tenements in the Reedys area, 50 km SSW of Meekatharra;
18 February 2003: St Barbara announced an amendment to the proposed business combination with each listed option holder in St Barbara now receiving 0.081 (previously 0.039) Defiance common shares for every one St Barbara listed option held;
28 February 2003: St Barbara announced a convertible loan issue for \$5.6 million (convertible to 43,076,923 shares at \$0.13 per share) and a convertible note issue for \$2.8 million (convertible to 21,538,462 shares at \$0.13 per share);
7 March 2003: St Barbara announced its six-month results to 31 December 2002 disclosing a loss of approximately \$22 million;
4 April 2003: St Barbara announced a revision to the proposed merger to form Deffance, whereby a sequential merger rather than a concurrent merger would occur;
30 April 2003: St Barbara's March quarterly report. Inaugural milling of Paddys Flat low grade stockpiles commences;
26 June 2003: St Barbara made a private placement of 15 million shares at an issue price of 6.67 cents per share to raise \$1 million;
27 June 2003, Ocean exercised early 15 million shares at 13 cents under its convertible Joan existing at that time;
7 July 2003: St Barbara announced the sale of all of its shares held in Dioro; œ
10 July 2003: St Barbara announced that the convertible note and convertible loan held by Ocean had been restructured to be replaced with a convertible loan with a face value of \$7.2 million and a new conversion price of 8 cents per share;
31 July 2003: St Barbara's June quarterly report. Gold production was up 6.1%, sourced almost entirely from Paddys Flat low grade stockpiles. Production cash cost lowered by \$117 per ounce;
22 September 2003: St Barbara announced the Proposed Debt Conversion;
25 September 2003: St Barbara announced an agreement with Claymore Capital Pty Ltd for the private placement of up to 12 million ordinary fully paid shares (with a minimum of 6.25 million) at an issue price of 8 cents per share. On 6 October 2003, 12 million ordinary fully paid shares were issued at 8 cents per share;
26 September 2003: St Barbara announced positive drilling results at Paddys Flat and confirmed that the project remains on schedule for 2004/05; and
30 September 2003: St Barbara announced its full year financial results for the year ended 30 June 2003 disclosing a loss of approximately \$32.7 million.

Listed options

8.35 St Barbara has on issue 44,329,772 listed options with an exercise price of \$0.30 and an expiry date of 29 February 2004. The chart below depicts the pricing and volume history on ASX of these listed options from May 2001 to the date of this report:

Figure 7: St Barbara's listed option pricing history

Source: Bloomberg

8.36 St Barbara's listed options have generally traded in the range of 0.2 cents to 2.5 cents during the six months prior to the announcement of the Proposed Debt Conversion. On the date of the announcement of the Proposed Debt Conversion, the price of a listed option was 1 cent and the price of a listed option as at 16 October 2003 was 0.9 cents. Approximately 34% of St Barbara's listed options were traded over the past 3 months.

Unlisted options

8.37 In addition, St Barbara currently has on issue 71,682,563 unlisted options (38,607,563 issued to RCF and 33,075,000 issued to employees) with ranging exercise prices as set out in St Barbara's Explanatory Memorandum.

Financial position

8.38 St Barbara's audited consolidated net assets as at 30 June 2001, 2002 and 2003 are summarised below:

Table 9: Summary of St Barbara's consolidated financial position
	Audited	Audited	Audited
	30 Jun 01	30 Jun 02	30 Jun 03
	S000	\$000	5000
Cash and restricted cash.	4,755	10,869	4,170
Receivables	2,017	3,287	3,688
Inventories	6,310	5,151	4.264
Other financial assets	17.577	4,526	4,891
Exploration, evaluation and development	45,071	58,188	46,372
Property, plant and equipment	8,757	9.906	8,380
Assets held for resale	4.896	5.409	4.194
Other	3,659	4,702	1,333
Total assets	93.042	102,038	77,292
Payables	11,757	15,905	10,561
Interest bearing liabilities	20,116	22,319	23,984
Provisions	3,464	3,706	4,774
Total liabilities	35,337	41,930	39,319
Net assets	57,705	60,108	37,973
Number of ordinary shares (million)	209.770	319.758	415.553
Net asset backing per share (cents)	27.5	18.8	9.1

Source: St Barbara's 2002 and 2003 annual reports

The significant reduction in other financial assets over 2001/02 was due to St Barbara's sale of its 10.7% interest in Goldfields Ltd. 8.39 Shareholders' equity increased to \$60.1 million as at 30 June 2002 due principally to the issue of new shares to finance ongoing development and exploration activities. Exploration, evaluation and developments increased to \$58.1 million as at 30 June 2002 due to the establishment of the Gibraltar and Great Northern Highway underground mines.
8.40 A change in accounting policy to expense all exploration and evaluation expenditure until a decision is made to proceed with the development of a mining property resulted in approximately \$9.9 million being written off St Barbara's exploration, evaluation and development assets to approximately \$46 million at 30 June 2003. The loss of approximately \$33 million for the year to 30 June 2003 increased downward pressure on cash balances and a net current asset deficit of approximately \$7.4 million at 30 June 2003 as shown below highlights the operational pressures on St Barbara.

$8.41$ St Barbara's working capital position at 30 June 2003 was as follows:

Table 10: St Barbara's net current asset position
	Audited
	30 Jun 03
	5000
Current assets
Cash and restricted eash	877
Receivables	3,688
Other financial assets	4,891
Inventories	4,264
Assets held for resale	4,194
Other	1,250
Total current assets	19,164
Current liabilities
Payables	10,561
Interest bearing liabilities	15,151
Provisions	898
Total liabilities	26,610
Net current asset deficiency	(7, 446)

$8.42$ At 30 June 2003, St Barbara's other financial asset is its 12.3% interest in Dioro, and the Company also has a Demag digger and two drilling rigs held for resale.

Financial performance

$8.43$ St Barbara's audited consolidated financial results for each of the financial years ended 30 June 2001, 30 June 2002 and 30 June 2003 are summarised below:

	Table T1: Summary of St Barbara's consolutated financial performance

	Audited	Audited	Audited
	30 Jun 01	30 Jun 02	30 Jun 03
	\$000	5000	\$000
Gold revenue from operations	71,217	54,516	56.HH
Other revenue	17.264	31,977	1,493
Earnings/(loss) before interest, tax, depreciation and	29,590	16,112	(6,180)
amortisation
Amortisation of mining development expenses and write	(19,085)	(28, 176)	(15,641)
down of mine development
Depreciation and amortisation	(1,798)	(2,044)	(2,750)
Earnings/(loss) before interest and tax	8,707	(14, 108)	(24, 571)
Interest expense	(1,057)	(3,941)	(5,449)
Income tax benefit / (expense)	1.704		(2,965)
Net loss attributable to outside equity interests	55	155	252
Net profit/(loss)	9,409	(17, 894)	(32,733)
Note: Non-operating revenue for 2003 includes proceeds from the sale of property, plant and equipment (\$982,000). Non-operating

oj property, pla e jo i pi s jr едирі ng. v revenue for 2002 includes proceeds from the sale of the shareholding in Goldfields Ltd (\$26.7 million), tenements (\$210,000), and property, plant and equipment (\$4.3 million). Non-operating revenue in 2001 includes proceeds from the sale of shareholdings (\$9.57 million), property, plant and equipment (\$5.3 million) and dividends (\$1.7 million).

Source: St Barbara's 2002 annual report and 2003 annual report

The result to 30 June 2002 reflected lower gold sales volumes, principally due to the below budget performance of the two new underground 8 4 4 mines (poor contractor equipment and mannower availability) and consequent accelerated mine development non-cash write-offs.
8.45 In the 6 months to 31 December 2002. St Barbara experienced lower production and higher unit costs due to difficulties at Gibraltar which resulted in mining delays and sterilising of ounces to effect mining method changes. These factors had an adverse impact on cost performance, both mine site cash costs and higher capital cost amortisation with the impact exaggerated due to the short remaining mine life. However in the six month to 30 June 2003, the processing of low grade stockpiles at Paddys Flat contributed to an increase in mill throughput and lower cash costs. The Meckatharra operations were cash positive in the second quarter of 2003, with the lower cash costs more than offsetting a reduction in the realised spot gold price from \$592 per ounce in the March 2003 quarter to \$535 per ounce in the June 2003 quarter.
8.46 A change in accounting policy to expense all exploration and evaluation expenditure until a decision is made to proceed with the development of a mining property resulted in approximately \$9.9 million being written off in the financial year to 30 June 2003. Approximately half of this write off (\$4.4 million) related to exploration expenditure completed prior to 1 July 2002.

Summary of cash flow statements

St Barbara's audited consolidated cash flow statements for the financial years ended 30 June 2001, 30 June 2002 and 30 June 2003 are 847 summarised below:

Table 12: Summary of St Barbara's consolidated cash flow statements
	Audited	Audited	Audited
	30 Jun 01	30 Jun 02	30 Jun 03
	\$000	\$000	5000
Cash flows from operating activities
Cash receipts in the course of operations	77,335	59.968	63,043
Payments to suppliers and employees	(73, 298)	(81,280)	(64, 593)
Other (net)	5,853	(1,709)	(341)
Net cash flows provided by/(used in) operating activities	9,890	(23, 021)	(1, 891)
Cash flows from investing activities
Payments in respect of exploration, evaluation and development	(4,462)	(10, 558)	(13,050)
Payments for investments in listed securities	(5,635)	(4,526)	(365)
Payments for purchase of controlled entity (net of cash acquired).	(17,981)
Cash received from investments sold	9.537	26,736
Sale of property plant and equipment (net)	3,264	2,551	777
Net cash flows (used in)/provided by investing activities	(15,277)	14,203	(12,638)
Cash flows from financing activities
Loan and finance repayments	(14,315)	(14,295)	(11,371)
Proceeds from borrowings	21,020	9,653	9.830
Issue of securities	48	19,088	7,635
Share buy-back		(1,066)
Net cash flows provided by financing activities	6,753	13,380	6,094
Net increase/(decrease) in cash	1,366	4.562	(8,435)
Cash at the beginning of the financial year/period	3,104	4,470	9,032
Cash at the end of the financial year/period	4,470	9,032	597

Source: St Barbara's 2002 annual report and 2003 annual report

$8.48$ The loss for the year to 30 June 2003 and repayment of approximately \$11.4 million of debt increased the pressure on St Barbara's cash position which was alleviated, to some extent, by the additional draw down of the RCF facility and the issue of new equity.
8.49 St Barbara is improving its operating cash flows and was operating cash flow positive for the second half of 2003. The closing cash position as at 30 June 2003 was \$597,000, down \$8.5 million from its position at 30 June 2002.
St Barbara's auditors in their report on the financial statements to 30 June 2003 concluded that there was an inherent uncertainty regarding 8.50 the ability of St Barbara to continue as a going concern. If the Proposed Debt Conversion is not approved the facility will become repayable on or before 30 November 2003 and the ability of St Barbara to meet this potential obligation is questionable.

8.51 The directors stated on 30 September 2003 that, should the Proposed Debt Conversion be approved, they were of the opinion that St Barbara will be able to secure such additional debt and equity funding as is necessary; and/or sell such assets as are necessary to provide the required funding for St Barbara and its operations to continue as a going concern. However, should this not occur, the Directors believe there is significant uncertainty whether St Barbara will be able to continue as a going concern as the loan will become payable on or before 30 November 2003.

Contingent liabilities

8.52 We are advised by management that the only major contingent fiability relates to litigation brought against St Barbara by Westgold Resources NL ("Westgold") in September 2000 alleging loss and damage in the sum of \$7,581,768. The Company has incurred legal costs in the order of \$600,000 to date. St Barbara denies the allegations and the claim is being vigorously defended. Uncertainties exist regarding both the success of the litigation and whether or not insurance will cover any losses. Currently the insurer is denying policy liability.
A writ of summons against St Barbara and its subsidiary Zygot Limited has been filed in the Supreme Court of Western Australia dated 8.53 2 July 2002 by the Administrator of Kingstream Steel Limited ("Kingstream"). The legal proceedings relate to an alleged agreement between Kingstream and St Barbara pursuant to which it is alleged that St Barbara agreed to sell to Kingstream various mining tenements including 3 mining lease applications. It is alleged that St Barbara wrongly withdrew the mining lease applications prior to them being granted and that a third party has subsequently applied for the ground the subject of the application. At the date of this report, St Barbara has advised that they consider the potential exposure in relation to this claim to have a value (including costs) of less than \$200,000. The timing of any settlement (if one is deemed necessary) cannot be determined at this point in time.

9 Valuation of St Barbara

$9.1$ We have assessed the value of St Barbara on the basis of the fair market value of the Company's underlying net assets with reference to the valuations assessed by Snowden. The book values of St Barbara's net assets as at 30 June 2003³ are summarised below, together with the range of values at which their fair values have been assessed.

	Ref	Book Value		Valuation range
	para	30 Jun 03 S000	Low \$000	High SOOO
Cash		597.	581	581
Restricted cash		3,573	3,573	3,573
Receivables	9.16	3,688	3,688	3,688
Capitalised exploration, evaluation and development and other	9.8	63,210	29.999	79,984
Investments	9.17	4,891	€	0
Prepayments and other assets	9.16	1,333	1,250	1,250
Total assets		77,292	39,091	89,076
Total liabilities	9.20	(39,319)	(30,623)	(30,623)
Add: cash raised from post 30/06/03 capital raisings and asset sales	9.21		1,825	1,825
Less: capitalised corporate overheads	9.23		(2,200)	(12,100)
Net assets / Assessed value		37,973	8,093	48,178
Fully paid shares on issue (000s)	9.21	431,464	443,464	443,464
Net assets / Assessed value per share in cents (rounded)		8.8	1.8	10.9

9.2 Accordingly, we have assessed the current value of a St Barbara share as lying in the range of 1.8 to 10.9 cents. This valuation does not attribute any valuation to the settlement of contingent liabilities discussed above.
9.3 A 'preferred' value has been calculated to be approximately 5.4 cents per St Barbara share. The wide range of assessed values is based upon the wide range of St Barbara's mineral assets which have been assessed by Snowden. The basis of calculation of a 'preferred' value by Snowden for the mineral assets is set out in the Snowden report.
$9.4$ The premium to market price at the upper end of the assessed fair value of a St Barbara share is approximately 31%, based upon St Barbara's closing share price on 16 October 2003 of 8.3 cents.

^<sup>3 All material movements to St Barbara's net asset position, subsequent to 30 June 2003, have been adjusted for in the above valuation.

Valuation of mineral assets

$\alpha$ In assessing the value of St Barbara's mineral assets we have relied upon the mineral specialist report prepared by Snowden. St Barbara's interests in its mineral assets, along with the range of values ascribed to them by Snowden are set out below. The width of the valuation range reflects the subjectivity and uncertainty attaching to the value of the mineral assets owned by St Barbara.

Project	Low	High
	5000	\$000
Meekatharra Project	3,620	8,730
Remnant resources	5.390	14,030
Exploration valuation	8.580	29,850
Total	17.590	52.610

Source: Snowden's mineral specialist report

9.6 Further details on Snowden's methodology and key assumptions are contained in Snowden's mineral specialist report attached as Appendix 4. A forecast gold price of \$540 was assessed for 2004 and 2005 and \$550 thereafter.

Sensitivity analysis on Snowden's valuation of St Barbara's mineral assets

9.7 The assessed value of the Meckatharra project by Snowden's was based upon future forward gold price assumptions as assessed by KPMG Corporate Finance with reference to recent various market commentators regarding expectations of future gold prices and exchange rates. It should be noted that the value of the Meekatharra project is highly sensitive at the high end to the adopted future gold price assumptions. If the Proposed Debt Conversion is approved the majority of security over St Barbara's assets will be eliminated and, in the opinion of the directors of St Barbara, the ability of St Barbara to enter into forward hedging gold price arrangements will be enhanced. A summary of the value of the Meckatharra project, assuming a flat forward gold price of \$575/oz is presented below and highlights the sensitivity of this project to the adopted gold price assumption:

Project	Low	High
	5000	\$000
Meekatharra Project	4,710	17,700
Remnant resources	5.390	14,030
Exploration valuation	8.580	29,850
Total	18,680	61,580

Table 15: Summary of the valuation of St Barbara's mineral assets ù.

Source: Snowden's cash flow models for the Meekatharra project and Snowden's mineral specialist report

$9.8\,$ A summary of the book value and Snowden's assessed value of St Barbara's minerals assets, mining equipment and inventories (including gold in circuit) is summarised below:

		Tablo 16: Valuation of St Rachaeo's minoral assots, mining caniomem and imponeeics

	Ref	Book Value		Valuation range
	para	30/06/03 SOOO	Low S000	High S000
Valuation of interest in Taipan	9.12		5,779	20,744
Capitalised exploration, evaluation and development	9.5	46.372	17.590	52.610
Inventories	9.15	4.264	$\mathbf{r}$	$\overline{\phantom{a}}$
Property, plant and equipment	9.16	8.380	1.350	1.350
Assets held for resale (net of lease liability)	9.13	4.194	4.000	4.000
Pastoral leases	9.14	0	1,280	1.280
Net book value / Assessed value		63.210	29.999	79.984

9.9 Further details regarding the assumptions adopted by Snowden in its valuation of St Barbara's mineral assets are set out in the Snowden report which is attached as Appendix 4.

St Barbara's investment in Taipan

$9.10$ St Barbara currently owns 190,719,338 fully paid shares in Taipan representing an 88.3% interest in Taipan's ordinary issued share capital. We have determined the value of St Barbara's major shareholding in Taipan through consideration of the value of Taipan's principal asset being the Paulsens Project. Snowden has included in its mineral specialist report the mineral assets held by Taipan and has valued Taipan's minerals assets at between \$5.8 million and \$21.2 million ('preferred' value of \$8.4 million), based on an assessed forecast gold price of \$540 for 2004 and 2005 and \$550 thereafter, as set out below:

Low	High
\$000	\$000
3,750	17.180
170	440
1.840	3,620
5,760	21,240

Table 17: Summary of Snowden's valuation of Taipan's mineral assets

Source: Snowden's mineral specialist report

Sensitivity analysis on Snowden's valuation of St Barbara's mineral assets

$9.11$ The assessed value of the Paulsens project by Snowden's was based upon future forward gold price assumptions as assessed by KPMG Corporate Finance with reference to recent various market commentators regarding expectations of future gold prices and exchange rates. It should be noted that the value of the Paulsens project is highly sensitive at the high end to the adopted future gold price assumptions. If the Proposed Debt Conversion is approved the majority of security over St Barbara's assets will be eliminated and, in the opinion of the directors of St Barbara, the ability of St Barbara to enter into forward hedging gold price arrangements will be enhanced. A summary of the value of the Paulsons project, assuming a flat forward gold price of \$575 $\sigma$ oz is presented below and highlights the sensitivity of this project to the adopted gold price assumption:

Table 18: Summary of the valuation of St Barbara's mineral assets
using a \$575 flat forward gold price

Project	Low 5000	High \$000
Paulsens gold project	3.750	22,800
Remnant resources	170	440
Exploration valuation	1.840	3,620
Total	5,760	26,860

Source: Snowden's cash flow models for the Paulsens project and Snowden's mineral specialist report

9.12 We have valued St Barbara's 88.3% interest in Taipan by incorporating Snowden's valuation of Taipan's mineral assets and assessing St Barbara's proportionate share in the equity and receivables of Taipan set out below ('preferred' value of \$8.3 million):

Table 19: Summary of St Barbara's investment in Tainan

s cansto a r. . Assistentest y tsj uni hron troat of 12 erithusenstoste her skasjeleit
Project	Low 5000	High \$000
Total from the Snowden report	5.760	21,240
Add: Taipan's other assets	1.025	1,025
Less: Taipan's total liabilities (to St Barbara)	(16, 853)	(16, 853)
Convertible note	(1,000)	(1.000)
Assessed value of Taipan	(11,068)	4,412
St Barbara's share of Taipan's assessed value (88.3%)	0	3,896
Repayment by Taipan of St Barbara's loan	5,779	16,848
Value of St Barbara's investment in Taipan	5,779	20,744

$0.13$ We have been advised that the Board of Taipan intend to re-capitalise Taipan through a capital raising of up to \$20 million at 5 cents and the conversion of St Barbara's current loan to Taipan into equity at 5 cents. The capital raising will be completed contemporaneously with the Proposed Debt Conversion. If the Proposed Debt Conversion is approved, Taipan are successful in raising \$20 million at 5 cents and the current St Barbara loan is converted into Taipan equity at 5 cents, the Board of Taipan are confident that this re-capitalisation will lead to a re-rating of Taipan in line with its proposed capital raising at 5 cents potentially increasing the value of St Barbara's interest in Taipan to \$27 Lmillion

Assets held for resale

$0.14$ St Barbara had assets held for resale at 30 June 2003 of \$4.2 million. Subsequent to 30 June 2003, St Barbara sold two drill rigs for net proceeds of \$840,000 which has been included in our assessment of the value of St Barbara's cash balance. The remaining asset held for resale, a large excavator which is currently being negotiated for sale with three parties, has been included at book value and the related finance liability has been included in the value of St Barbara's liabilities.

Pastoral leases

St Barbara have pastoral leases over the Annean, Norie and Cullculli station in the Meekatharra regions of Western Australia. St Barbara $0.15$ engaged a rural property valuer to prepare a report covering indicative sales figures and comments on the saleability of these pastoral leases. It was estimated that these leases could be sold by St Barbara for between \$1.3 million and \$1.4 million after considering recent pastoral property sales. We have assessed the market value of these leases at the lower end of this range.

Inventories

St Barbara's inventories (with a book value of approximately \$4.3 million at 30 June 2003) comprise consumables, ore stock and gold in $916$ circuit. Snowden have included these assets in assessing the value of St Barbara's mineral assets.

Other assets and liabilities

9.17 Assets and liabilities not separately valued by Snowden comprise St Barbara's cash, receivables, prepayments, non-mining property plant and equipment, accounts payable, provisions and borrowings. Except where specifically discussed below, these assets and liabilities have been incorporated in our valuation at their audited book values at 30 June 2003 for the purpose of this report.

St Barbara's investment in Dioro

9.18 St Barbara owned 44,400,000 shares in Dioro representing an approximate 12.3% interest in Dioro's issued share capital. On 3 July 2003, St Barbara sold all of its shares held in Dioro for net proceeds of \$4,984,000 resulting in a profit on sale of \$93,000. As a result of the sale of the shares, the proceeds were used to reduce the debt facility with RCF by \$5 million on 9 July 2003.

Borrowings

9.19 As stated above, St Barbara reduced the debt facility with RCF by \$5 million subsequent to 30 June 2003 predominantly from the sale of its investment in Dioro.

Provisions

St Barbara's provisions include rehabilitation costs of approximately \$3.7 million in respect of future mine site rehabilitation costs expected $9.20$ to be incurred pursuant to specific legislative requirements and conditions under the Company's mining leases. Snowden has incorporated St Barbara's environmental liabilities in assessing the value of the mineral assets.
9.21 A summary of St Barbara's liabilities and our assessed value of these liabilities is presented below:

Table 20: Valuation of St Barbara's liabilities
	Para ref	Book Value	Valuation range
		30 Jun 03 5000	Low 5000	High SOOO
Accounts payable and accruals		10,561	10.561	10.561
Borrowings	9.18	23.984	18.984	18,984
Provisions		1,078	1.078	1,078
Provisions - rehabilitation		3.696	u.
Total liabilities		39,319	30.623	30,623

Cash raised subsequent to 30 June 2003

9.22 On 6 October 2003, St Barbara made a private placement of 12 million ordinary fully paid shares at 8 cents per share to Claymore Capital Pty Ltd raising \$960,000. In addition, approximately \$865,000 was raised through asset sales subsequent to 30 June 2003.

Capitalised corporate overheads

$Q.23$ St Barbara incurs corporate overheads in relation to managing its business and maintaining its head office and status as a listed company. These costs have not been incorporated in the valuations of St Barbara's mineral assets and it is therefore necessary to deduct from the value of the company the present value of anticipated future management and administrative costs. Based upon Snowden's valuation of St Barbara's mineral assets, these costs are estimated by St Barbara to be approximately \$1.5 million per annum at the low end of Snowden's valuation range and approximately \$3.0 million per annum at the high end of Snowden's valuation range reflecting, in particular, the reduced level of personnel required to manage St Barbara's operations in the valuation scenarios envisaged at the lower end of our range of assessed fair values. We consider these estimates to be reasonable.
9.24 Based on a DCF analysis and applying a range of discount rates consistent with the discount rates adopted in Snowden's valuation of St Barbara's mineral assets, we have estimated the negative net present value of these costs to lie in the range of \$2.2 million to \$12.1 million reflecting the longer project life at the high end of the valuation. This valuation does not incorporate any tax shield attaching to future payments as St Barbara already has surplus tax losses. A summary of St Barbara's tax loss position is presented below.

Summary of St Barbara's tax loss position

9.25 Based on the tax return prepared for the year ended 30 June 2001 and tax effect accounting prepared for the year ended 30 June 2002 and the six months to 31 December 2002. St Barbara Mines Limited has revenue tax losses of \$66.114 million. Taipan has revenue tax losses of \$19.446 million based on the tax return prepared for the year ended 30 June 2001 and the tax effect accounting prepared for the year ended 30 June 2003. The extent to which these tax losses are able to be utilised in the future is subject to each company satisfying either the continuity of ownership test or same business test. In addition, if St Barbara acquires the remaining shares in Taipan, then the companies may choose to consolidate for tax purposes, this will allow losses from both companies to be utilised against taxable income from the various projects subject to certain restrictions on the rate of recoupment. On the basis of that these tax losses are available, without restriction, there should be no tax payable in St Barbara (on the Meekatharra project) or in Taipan (on the Paulsen's project).

Contingent liability

The only major contingent liability as discussed at paragraph 8.51 above relates to litigation brought against St Barbara by Westgold alleging 9.26 loss and damage in the sum of approximately \$7.6 million. Whilst the ultimate outcome of these procedures cannot be determined at the date of this report, in the event that a judgement is made against St Barbara and a loss of approximately \$7.6 million and legal costs of \$1 million are incurred, we note that the impact on our valuation range for a St Barbara share would reduce the value per share by approximately 1.9 cents and increase to the premium being paid by RCF.

$10$ Assessment of whether the Proposed Debt Conversion is fair and reasonable to the non-associated St Barbara shareholders

$10.1$ In assessing whether the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders, we have considered the following factors.

Advantages

The Proposed Debt Conversion reduces St Barbara's debt levels and significantly improves its financial position and prospects for continuing as a going concern

At 30 June 2003, St Barbara had a net current asset deficiency of approximately \$7.5 million (which was subsequently reduced to a $10.2$ deficiency of approximately \$2.4 million by repaying \$5 million to RCF predominantly from the sale of Dioro shares). If the Proposed Debt Conversion is approved St Barbara's net current asset position will improve to approximately \$4.5 million and the only external borrowing will be approximately \$4.4 million owed to Ocean. Ocean will however have received approval to convert that balance to shares in St Barbara at an issue price of 8 cents per share but will be under no obligation to do so.
$10.3$ If the Proposed Debt Conversion is not approved it becomes immediately payable on or before 30 November 2003. St Barbara's auditors in their report on the financial statements to 30 June 2003 concluded that there was an inherent uncertainty regarding the ability of St Barbara to continue as a going concern. If the Proposed Debt Conversion is not approved the facility will become repayable on or before 30 November 2003 and, in our opinion and that of the directors, the ability of St Barbara to meet this potential obligation in the absence of the Proposed Debt Conversion is uncertain.

10.4 We have assessed the value of a St Barbara share, inclusive of a premium for control, to lie in the range of 1.8 cents to 10.9 cents ('preferred' 5.4 cents). The Proposed Debt Conversion has been set at 8 cents per share. This represents an additional premium of approximately 344% at the low end of our valuation range and discount of approximately 27% at the high end of our valuation range ('preferred' premium of 48%). Whilst the value for the Proposed Debt Conversion is below the high end of our valuation, it is substantially above the low end and 'preferred' assessment of the value of a share in St Barbara. It should be noted that our assessed values do not incorporate any valuation of the potential settlement of any contingent liabilities previously discussed. Incorporation of an assessment of a potential settlement would therefore reduce the discount at the high end of our assessed values. The range of values attributable to a St Barbara share is wide, reflecting the volatility in value of marginal gold operations at current price levels and uncertainty over funding arrangements and the level of hedging for Paulsens

The Proposed Debt Conversion represents a premium of 10% and 21% to the weighted average share price of St Barbara over the 3 month 10.5 and 6 month periods prior to the announcement of the Proposed Debt Conversion however is at a slight discount to the weighted average share price for the month prior to the announcement of the Proposed Debt Conversion.

10.6 Currently, RCF has a first ranking security over any assets acquired by St Barbara utilising funds drawn down under the RCF Facility and a second ranking charge over St Barbara's consolidated assets generally. This second ranking security is subordinated to St Barbara's existing Macquarie Bank Limited security under a deed of priority. The Proposed Debt Conversion will eliminate the majority of security over St Barbara's assets and, in the opinion of the directors of St Barbara, the ability of St Barbara to enter into forward hedging gold price arrangements will be enhanced. If hedging arrangements are negotiated which secures a flat forward gold price of \$575 / oz the assessed value of a St Barbara share, based upon the increased value of the Meekatharra and Paulsens gold projects, would be to increase the value to within the range of 2.1 cents to 14.4 cents ('preferred' 6.4 cents).

The Proposed Debt Conversion helps facilitate the potential re-capitalisation of Taipan which has the potential to significantly increase the value of St Barbara

We have been advised that the Board of Taipan intend to re-capitalise Taipan through a capital raising of up to \$20 million at 5 cents and the 10.7 conversion of St Barbara's current loan to Taipan into equity at 5 cents. The capital raising will be completed contemporaneously with the Proposed Debt Conversion. If the Proposed Debt Conversion is approved. Tainan are successful in raising \$20 million at 5 cents and the current St Barbara loan is converted into Taipan equity at 5 cents, the Board of Taipan are confident that this re-capitalisation will lead to a re-rating of Taipan in line with its proposed capital raising at 5 cents potentially increasing the value of St Barbara's interest in Taipan to \$27.1 million. Based upon this scenario, the impact upon the assessed value of a St Barbara share would be to increase the value to within the range of 6.6 cents to 12.3 cents ('preferred' 9.6 cents).

The Proposed Debt Conversion provides evidence of support for St Barbara's long-term prospects

10.8 If the Proposed Debt Conversion is approved, RCF will become a major shareholder in St Barbara which provides potential support for St Barbara's longer-term future.

Increases the independence of the St Barbara Board

10.9 If the Proposed Debt Conversion is approved, RCF will gain two Board positions. Furthermore there will be a non-executive chairman appointed increasing the independence of the St Barbara Board.

Disadvantages

The non-associated St Barbara shareholders will experience dilution in their ownership of St Barbara

$10.10$ The non-associated St Barbara shareholders currently control 92.3% of St Barbara. If the Proposed Debt Conversion is approved, the nonassociated St Barbara shareholders will dilute to approximately 76% control of St Barbara.
$11$ Assessment of whether the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders
$\mathbf{H}$ In assessing whether the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders, we have considered the following factors in addition to those discussed above.

Advantages

The full exercise of the Potential RCF Option Conversion would result in \$8.3 million being invested in St Barbara

If Resolution 4 of St Barbara's Notice of Annual General Meeting is approved approximately 16.9 million unlisted St Barbara options will be $11.2$ issued to RCF in satisfaction of a usage fee increasing RCF's St Barbara option ownership to approximately 55.5 million options. If RCF elects to exercise all of its options, RCF would need to invest \$8.3 million in St Barbara. All of RCF's current options have strike prices ranging from 11 cents to 21.25 cents which are all at a premium to the closing share price of St Barbara on 16 October 2003 of 8.3 cents. This would significantly further enhance St Barbara's financial position.

Disadvantages

The non-associated St Barbara shareholders will experience dilution in their ownership of St Barbara

$11.3$ The non-associated St Barbara shareholders currently control 92.3% of St Barbara. If the Proposed Debt Conversion is approved, the nonassociated St Barbara shareholders will dilute to approximately 76% control of St Barbara. If the Potential RCF Option Conversion is approved and RCF elected to convert all of its St Barbara options, it could move to a maximum shareholding position of approximately 31% (before consideration of the Ocean Loan Conversion) and therefore the non-associated shareholders interest would dilute to 69%. Moreover, if the Ocean Loan Conversion is approved and 35 million shares are automatically converted, the non-associated shareholders interest in St Barbara would dilute to approximately 65%.

Appendices

Oualifications and declarations

Purpose of the report

This report is provided solely for the purpose of expressing our opinion as to whether the Proposed Debt Conversion and the Potential RCF Option Conversion is fair and reasonable to the non-associated St Barbara shareholders. This report is not provided for any other reason whatsoever and may not be relied upon by any person other than the non-associated St Barbara shareholders, or for any purpose whatsoever other than that stated above. It should not be used by any other party as the basis for any investment or lending decision relating to St Barbara.

Neither the whole nor any part of this report or its attachments or any reference thereto may be included in or attached to any document, other than the St Barbara Explanatory Memorandum to be sent to St Barbara shareholders in relation to the Proposed Debt Conversion and the Potential RCF Option Conversion, without the prior written consent of KPMG Corporate Finance as to the form and context in which it appears.

Qualifications

KPMG Corporate Finance is a specialist corporate advisory practice owned by the partners of KPMG and is a licensed dealer within the terms of the Corporations Act.

KPMG Corporate Finance provides a full range of corporate advisory services and has advised on numerous corporate valuations, restructures and mergers and acquisitions.

KPMG is a firm of Chartered Accountants and part of the international firm of Klynveld Peat Marwick Goerdeler.

The following persons, whose qualifications and experience are stated below and which are appropriate to the tasks performed, were responsible for the preparation of this report.

Duncan Calder is a director and authorised representative of KPMG Corporate Finance as well as a partner of KPMG. He is an Associate of the Institute of Chartered Accountants in Australia and has been involved in the preparation of numerous independent expert's reports and other financial advisory and valuation assignments.

Steve Scudamore is a director and authorised representative of KPMG Corporate Finance as well as a partner of KPMG. Steve is a Fellow of the Institute of Chartered Accountants in Australia, an Associate of the Securities Institute of Australia and has been personally involved in a wide range of financial advisory and valuation assignments conducted by KPMG Corporate Finance and KPMG.

Christian Johnstone is a senior executive of KPMG Corporate Finance. Christian is a member of the Institute of Chartered Accountants of Scotland, an Associate of the Securities Institute of Australia and has assisted in the preparation of a number of valuations and corporate advisory engagements conducted by KPMG Corporate Finance including independent expert's reports.

Disclosure of interest

At the date of this report, none of KPMG Corporate Finance, KPMG, Duncan Calder, Steve Scudamore, Christian Johnstone nor any other member, director, partner or employee of any of KPMG Corporate Finance or KPMG has any interest in the outcome of either the Proposed Debt Conversion or the Potential RCF Option Conversion, except that KPMG Corporate Finance will receive a fee based on time occupied at normal professional rates. The fees payable to KPMG Corporate Finance are payable regardless of the outcome of the Proposed Debt Conversion and the Potential RCF Option Conversion.

None of KPMG Corporate Finance, KPMG, Duncan Calder, Steve Scudamore or Christian Johnstone has any relationship including shareholdings with St Barbara or any other party interested in the Proposed Debt Conversion or the Potential RCF Option Conversion that affects their independence in preparing this report.

KPMG Corporate Finance has had no part in setting the terms of the Proposed Debt Conversion and the Potential RCF Option Conversion. Our only role has been the preparation of this report.

KPMG Corporate Finance considers itself independent in terms of Practice Note 42 issued by the ASC on 8 December 1993.

With the exception of the above fees, none of KPMG Corporate Finance nor KPMG will receive any other benefits, whether directly or indirectly, for or in connection with the making of this report.

A draft of this report was presented to the directors of St Barbara to review the factual accuracy of the information included in the report. No significant changes that affected our opinion were made to this report as a result of these reviews.

Consents

KPMG Corporate Finance

KPMG Corporate Finance consents to the inclusion of this report in the form and context in which it is included with the St Barbara Explanatory Memorandum to be issued to St Barbara's shareholders. Other than this report, neither KPMG Corporate Finance nor KPMG has been involved in the preparation of the St Barbara Explanatory Memorandum. Accordingly, we take no responsibility for the content of the St Barbara Explanatory Memorandum as a whole.

Reliance on information

The sources of information upon which this report has been based are set out in Appendix 2 of this report. While none of KPMG Corporate Finance, KPMG nor any associate thereof has any reason to believe that such information is anything but reliable and accurate, KPMG Corporate Finance has not in any way caused such information to be independently verified or audited. We have no reason to believe that any information relied on by us is incomplete or incorrect. In preparing reports such as this, time is limited and we do not warrant that our enquiries have identified or verified all of the matters that an audit or due diligence investigation might disclose

As this report has been prepared specifically for the non-associated St Barbara shareholders, neither KPMG Corporate Finance, nor KPMG, or any director, member or employee thereof undertakes responsibility to any other person in respect of this report, including any errors or omissions howsoever caused.

Indemnification

A condition of KPMG Corporate Finance's agreement to prepare this report was that St Barbara indemnify KPMG Corporate Finance against any and all losses, claims, damages and liabilities arising out of or related to reliance on information provided by the Company.

Sources of information

In preparing this report and arriving at our opinion, we have considered and relied upon, without independent verification, the following principal sources of information:

$\blacksquare$ draft St Barbara Explanatory Memorandum prepared by St Barbara;
annual reports of St Barbara for the 3 years to 30 June 2003; $\blacksquare$
п "top 10" shareholder lists for St Barbara including copies of substantial shareholder notices;
projected cash flows for St Barbara's mineral assets; $\blacksquare$
St Barbara's ASX announcements and media releases relating to the Proposed Debt Conversion; $\blacksquare$
$\blacksquare$ Australian Bureau of Agriculture and Research Economics' Australian Commodities September 2003 edition;
Gold Fields Mineral Services web site; $\blacksquare$
discussions with the directors and management of St Barbara and information obtained from them; $\blacksquare$
relevant company betas, share price, liquidity and other information from Bloomberg; and $\blacksquare$
$\blacksquare$ various gold price and exchange forecasts prepared by a number of brokers.

We have also placed significant reliance on the mineral specialist report prepared by Snowden.

Calculation of Weighted Average Cost of Capital for St Barbara

Introduction to WACC concepts

The WACC of a firm is the expected cost of the various classes of its capital (i.e. equity and debt), weighted by the proportion of each class of capital to the total capital of the firm. This concept is illustrated by the following formula (which calculates an after tax nominal rate):

$WACC =$ $K_d(1-t)^(D/(D+E))$ $\div$ $K_e(E/(D+E))$

where the key inputs are defined as follows:

$K_3$ the pre-tax cost of debt, which is the rate of return required by the providers of debt finance
$K_c$ the after-tax cost of equity, which is the rate of return required by the providers of equity capital
$\mathfrak{t}$ the applicable corporate tax rate
D the value of debt
Ë the value of equity

Cost of Equity (K_e)

We have used the Capital Asset Pricing Model ("CAPM") to estimate an appropriate cost of equity. In simple terms, the CAPM states that the returns expected by an equity investor reflect the risk of the underlying equity investment and is determined as set out below:

$\mathbf{R}_\mathrm{f}$ + $\beta$ (MRP) K, $\frac{1}{2}$

where the key inputs are defined as follows:

$R_{\rm f}$ risk free rate of return
$\beta$ beta factor of the investment or business operation
MRP equity market risk premium

Risk-free Rate (R_t)

Having regard to the range at which the yield on a ten-year Commonwealth Government bond has traded recently, we have adopted a risk-free rate of 5.56%.

Market Risk Premium (MRP)

The MRP represents the additional return that investors expect from an investment in a well-diversified portfolio of assets (such as a market index). As expectations are not observable in practice, a historical risk premium is typically used as a proxy.

In Australia, empirical research indicates a range of 6.0% to 6.6% is appropriate for the equity MRP. There is also evidence to suggest the MRP has declined over time, and accordingly, we have adopted a MRP of 6.0% in deriving the Australian base cost of equity.

Beta Factor $(\beta)$

The beta factor is a measure of the relative risk of an investment or business operation, relative to a well-diversified portfolio of investments. In theory, the only risks that are captured by beta are those risks that cannot be eliminated by the investor through diversification.

The following table sets out asset beta estimates and financial gearing for selected comparable Australian energy companies. In this regard, equity betas sourced from Bloomberg (adjusted betas over a five-year period at monthly intervals) have been ungeared.

Company (ranked by market capitalisation)	Market Capitalisation $\mathbf{Sm}$ ¹	Asset Beta ²	Debt/Enterprise Value $\frac{1}{2}$ $\frac{3}{2}$
Kingsgate Consolidated Ltd	303	1.5	6
Croesus Mining NL	217	0.2	2
Equigold NL	205	0.5	Ħ
Resolute Mining NL	186	(3.1)	$\mathbf{H}$
Gympie Gold Limited	116	0.8	45
Bemax Resources NL	45	1.9	0
Rand Mining NL	26	0.7	0
Gindalbie Gold NL	20	0.4	2
Simple Average	140	$0.8^{4}$	10
Median (market capitalisation, asset beta and financial gearing treated separately)	151	0.5	4

$\bar{z}$ Bloomberg beta (adjusted, monthly data from 30 October 1998 to 30 September 2003), ungeared using latest available debt equity information sourced from Bloomberg.

$\beta$ Gross debt divided by enterprise value
Excluding Resolute 4

Source: Bloomberg, as at 7 October 2003

Having regard to the asset betas in the above table we consider that, on balance, an appropriate equity beta for St Barbara is likely to be in the range of 0.83 to 0.88.

Cost of Equity Calculations

The following table sets out our cost of equity estimate for St Barbara based on the assumptions and inputs discussed above:

	Table 22: Australian cost of equity calculation
Input	Definition	Value Adopted	Value Adopted
		Low	High
Rf	Risk free rate of return	5.56	5.56
β.	Equity beta (regeared beta estimate)	0.83	0.87
MRP	Equity market risk premium	6.00%	6.00%
К.	Cost of equity (post-tax)	10.5%	10.8%

We have therefore adopted a cost of equity of between 10.5% and 10.8% for St Barbara's operations.

Cost of debt (Ka)

St Barbara's current cost of debt is approximately 10%, however this rate was determined on the condition that all interest payable on a particular facility would be converted into unlisted options in St Barbara. It would be reasonable to consider that a long-term cost of debt for St Barbara, without the conversion of interest into unlisted options, would be lower than 10%. We have considered the current cost of debt of St Barbara's peers as a proxy for St Barbara's long term cost of debt and have adopted a long term cost of debt of 7%.

Corporate tax rate (t)

We have adopted a corporate tax rate of 30% in estimating the WACC for St Barbara.

Debt/Equity Mix

In drawing any conclusions from the information shown above it is important to note that the observed gearing levels shown represent current gearing levels, which may or may not be representative of optimal, long term gearing levels. Furthermore, the gearing level of a company at a given point in time can reflect recent new issues of debt or equity.

The above discussion of the factors was taken into account in assessing an appropriate gearing level highlights the difficulty and high degree of subjectivity involved in the assessment. Currently, St Barbara is geared at approximately 40%, which is above the average gross debt to enterprise value of its peers of 10%.

Having regard to all of the considerations outlined above, we consider that, on balance, an appropriate gearing level is likely to be in the order of 10% debt and 90% equity for St Barbara.

Calculation of WACC

The following table summarises the base discount rate we have derived for St Barbara, based on the assumptions and inputs discussed above:

Input	Definition	Value Adopted
K,	Cost of debt (pre-tax)	7.0%
К,	Cost of equity (post-tax)	10.5% to 10.8%
т	Corporate tax rate	30%
$D/D+E$	Proportion of debt in the capital mix	0.10
$E/D + E$	Proportion of equity in the capital mix	0.90
WACC	Weighted average cost of capital	9.9% to 10.2%

Table 23: WACC calculation

Using the Fisher Equation, and assuming a long-term inflation rate of 2.2% p.a., we have calculated a real WACC and have considered this calculation in arriving at our conclusion of the appropriate real WACC of 8.0% for St Barbara and Taipan.

Dividend Imputation

St Barbara does not have a history of paying dividends to shareholders and we are not aware of any proposed intention to declare dividends in the future. Accordingly and for the reasons previously discussed, we have not undertaken any adjustments to the WACC methodology outlined above to reflect any value of imputation credits to St Barbara shareholders.

Snowden's Independent Valuation of the Mineral Assets of St Barbara and Taipan

87 Colin Street, West Perth, WA 6005 PO Box 77, West Perth, WA 6872
FO Box 77, West Perth, WA 6872
Tel: (61 8) 9481 6690 Fax: (61 8) 9322 2576 E-mail: [email protected] http://www.snowdenau.com

16 October 2003

The Directors KPMG Corporate Finance (Aust) Pty Ltd 152-158 St George's Terrace PERTH WA 6000

Dear Sirs

Independent Valuation of the Mineral Assets of St Barbara Mines Limited

At your request (letter dated 24 September 2003), Snowden Corporate Services Pty Ltd (Snowden) has prepared an Independent Valuation of the Mineral Assets of St Barbara Mines Limited (SBM). It is our understanding that this report will be included in an independent Expert's Report by KPMG Corporate Finance (Aust) Pty Ltd in relation to a proposed conversion of a debt facility by St Barbara Mines to equity.

The principal mineral assets that are the subject of this valuation report comprise the Meekatharra gold mining operation and associated tenement holdings in the Murchison Region of Western Australia and the Paulsens gold resource project and associated tenement holdings in the Ashburton Region of Western Anstralia.

Snowden has based its valuation of SBM's mineral assets on a site visit to the Meekatharra gold operation during September 2003, detailed discussions with key Meekatharra and Paulsens project personnel and on technical information on the projects ore reserves, mineral resources and exploration potential compiled by SBM and its consultants. No independent validation of SBM's quoted mineral resources was conducted for the purpose of this report. Field visits were not carried out to SBM's other mineral assets, as there have been no recent developments over and above what is presented in the company's technical information. In compiling this valuation, Snowden has also considered the findings from two previously completed valuations of SBM's exploration assets in September 1998 and May 2002.

Snowden has prepared this report on the understanding that SBM's tenement and joint venture interests are current and in good standing. We have relied on documents and information supplied by the management of SBM in this regard and have not independently verified the ownership and legal status of SBM's mineral titles and joint venture interests. Snowden has not undertaken any investigations into issues of Native Title or potential environmental and land access restrictions over its project areas.

A draft version of this report was provided to the directors and management of SBM for comment in respect of omission or error in fact. SBM has warranted that all material information in its possession has been fully disclosed to Snowden.

Snowden has based its valuation on SBM's mineral assets as at 30 September 2003. The values assigned to its assets are in Australian dollars and were prepared on the 16 October 2003. Snowden's opinion of the market value of SBM's mineral assets using the methodologies described in Section 4 of this report is summarised in the following table:

	St Barbara Mines Ltd - Summary of Valuation (ASM)
	Low	High	Preferred
Meekatharra Gold Operation
Operational Valuation	3.62	8.73	3.62
Remnant Resource Valuation	5.39	14.03	8.88
Exploration Potential Valuation	8.58	29.85	19.23
TOTAL	17.59	52.61	31.73
Taipan Resources NL (100% equity)
Operational Valuation	3.75	17.18	5.42
Remnant Resource Valuation	0.17	0.44	0.28
Exploration Potential Valuation	1.84	3.62	2.73
TOTAL	5.76	21.24	8.43

Snowden Corporate Services Pty Ltd is a wholly owned subsidiary of Snowden Mining Industry Consultants Pty Ltd, an independent firm providing specialist mining industry consultancy services in the fields of geology, exploration, resource estimation, mining engineering, geotechnical engineering, risk assessment, mining information technology and corporate services. The company, which operates from offices in Perth, Kalgoorlie, Brisbane, Johannesburg and Vancouver, has prepared independent expert's reports and mineral asset valuations on a variety of mineral commodities in many countries.

This report has been prepared by Mr Philip Retter (Manager Corporate Services), Mr Andrew Richards (Principal Consultant Corporate Services), Mr Mark Sweeney (Principal Resource Consultant) and Mr Peter Myers (Principal Mining Engineer) and reviewed by Dr Philip Snowden (Principal Consultant and Managing Director) of Snowden's Perth and Brisbane offices, in accordance with the Australasian Institute of Mining and Metallurgy's (AusIMM) Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Experts Reports (the VALMIN Code) and Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code).

Neither Snowden nor those involved in the preparation of this report have any material interest in SBM or in the mineral properties considered in this report. Snowden is remunerated for this report by way of a professional fee determined according to a standard schedule of rates which is not contingent on the outcome of this report.

Yours faithfully

Mr P C Retter B AppSc (Hons), MAIG Manager Corporate Services

Dr P A Snowden D Phil, MAIG, FAusIMM, CPGeo Principal Geologist and Managing Director

1.0			MEEKATHARRA GOLD OPERATION
	$\dots$		OVERVIEW
	1.2		PROJECT RESOURCES
	4.3		MINING
		1.3.1	Underground Mining Plans
		1.3.2	Surface Mining Plans
	$\pm 4$		PROCESSING
		1.4.1	Current Operations
		1.4.2	Future Operations
		1.4.3	Metallurgical testwork
	1.5		OTHER
		1.5.1	Environmental
		1.5.2	Native Title
		1.5.3	Barrick royalty
		1.5.4	Site support facilities
	-1.6		EXPLORATION ASSETS
		1.6.1	Abbotts
		1.6.2 1.6.3	Abbotts-Garden Gully
		1.6.4	Aladdin Bayley's Island
		1.6.5	Barrambie
		1.6.6	Bourke's Find
		1.6.7	Burnakura
		1.6.8	Caledonian
		1.6.9	Chesterfield
		1.6.10	Chunderloo
		1.6.11	Cue
		1.6.12	Highway
		1.6.13	Kurara East
		1.6.14	Malanti Projects
		1.6.15	Meekatharra
		1.6.16	Mikhaburra
		1.6.17	Nannine …………………………………………………………………………………………
		1.6.18	Norie
		1.6.19 1.6.20	Polelle
			Ouinns
		1.6.21 1.6.22	Reedys South East Meekatharra
		1.6.23	South Junction
		1.6.24	Stakewell
		1.6.25	Three Sisters
		1.6.26	Tough Go
		1.6.27	Tuckanarra
		1.6.28	Turn of the Tide
		1.6.29	Wanganui
		1.6.30	Yagahong
		1.6.31	Yaloginda
2.0			PAULSENS GOLD PROJECT
	2.1 2.2		OVERVIEW PROJECT RESOURCES
	23		DEVELOPMENT PLAN
	2.4		EXPLORATION ASSETS
		2.4.1	Cue-Day Dawn
		2.4.2	Cue-Emily Well
		2.4.3	Grafters
		2.4.4	Metawandy Creek
		2.4.5	Mt Clement
	VALUATION	2.4.6	Paulsens
			VALUATION CONSIDERATIONS
	3.1
		3.1.1 3.1.2	Introduction Fair Market Value of Mineral Assets
		3.1.3	Methods of Exploration Assets
		3.1.4	Valuation of Resources and Ore Reserves
	3.2		VALUATION METHODOLOGY
		3.2.1	Exploration Potential
		3.2.2	Mineral Resources
		3.2.3	Ore Reserves and Mining Inventories
		3.2.4	Environmental Liabilities, Closure Costs and Plant Salvage Values
	3.3		MEEKATHARRA GOLD OPERATION VALUATION
		3.3.1 3.3.2	Operational Valuation Mineral Resources
		3.3.3	Exploration Potential

		PAULSENS GOLD PROJECT
		Operational Valuation
	349	Other Mineral Resources
	343	Exploration Potential
4.0		SUMMARY OF VALUATION
5.0		DECLARATIONS BY SNOWDEN CORPORATE SERVICES PTY LTD
		INDEPENDENCE
		________

LIST OF TABLES

Table 1.1 Recent MGO production and cost performance
Table 1.2 Meekatharra Gold Operation Resources
Table 1.3 Meekatharra Gold Operation - Mining summary by half year (kt)
Table 1.4 Meekatharra Gold Operation - Processing Plan
Table 1.5 Meekatharra Gold Operation - Processing Plan by Source
Table 1.6 Abbotts Project Resources
Table 1.7 Aladdin Project Resources
Table 1.8 Bayley's Island Project Resources
Table 1.9 Burnakura Project Resources
Table 1.10 Caledonian Project Resources
Table 1.11 Highway Project Resources
Table 1.12 Meekatharra Project Resources
Table 1.13 Namine Project Resources
Table 1.14 Reedys Project Resources
Table 1.15 South Junction Project Resources
Table 1.16 Stakewell Project Resources
Table 1.17 Three Sisters Project Resources
Table 1.18 Tuckanarra Project Resources
Table 1.19 Turn of the Tide Project Resources
Table 1.20 Wangaui Project Resources
Table 1.21 Yaloginda Project Resources
Table 2.1 Paulsens Gold Project Resources
Table 2.2 Paulsens In Situ High-Grade Resource Estimate (2002) using IDW (at a zero cut-off grade)
Table 2.3 Paulsens Underground Mining Inventory
Table 2.4 Mining method use for the 1075 mRL to 1000 mRL interval
Table 2.5 Mt Clement Project Resources
Table 3.1 Kilbum Rating Criteria
Table 3.2 Recent Gold Resource Market Transactions Table 3.3 Meekatharra Gold Operation - Summary of Operational Valuation
Table 3.4 Meekatharra Gold Operation - Summary of Resource Valuation
Table 3.5 Meekatharra Gold Operation - Summary of Exploration Potential Valuation
Table 3.6 Paulsens Gold Project - Summary of Operational Valuation
Table 3.7 Taipan Resources NL - Summary of Resource Valuation
Table 3.8 Taipan Resources NL - Summary of Exploration Potential Valuation
Table 4.1 St Barbara Mines Ltd – Summary of Valuation ………………………………………………………………………………………………
Table 5.1 Malanti Project – Exploration Potential Valuation machine and all anticomponential control to the state of the state of the state of the state of the state of the state of the state of the state of the state of

$1.0$ MEEKATHARRA GOLD OPERATION

$1.1$ OVERVIEW

SBM's activities in recent years at its Meekatharra Gold Operation (MGO) have included the development and completion of nine surface and two underground mines in the vicinity of the Bluebird processing plant located 20 kilometres SSW of Meekatharra in the Murchison District of WA. Mine production ceased in March 2003 with the closure of the Gibraltar underground mine. Stockpiles from surface and underground operations continue to be processed, with minor volumes remaining at September 30, 2003.

The company's resource base increased significantly in late 2002 when ownership and access to the Paddys Flat tenements, formerly held by Barrick Gold Australia Limited, was secured. These tenements are located immediately to the NE of SBM's existing MGO tenements. SBM has advised Snowden that the total Indicated and Inferred Resource at Paddys Flat excluding stockpiles as at June 30 2003 totals 7.58 Mt containing 529,400 ounces of gold. Processing of low grade stockpiles from Paddys Flat commenced in the first quarter of 2003 and provides the mainstay of planned production for the remainder of 2003.

Recent MGO operational performance is summarised in Table 1.1.

			Table 1.1	Recent MGO production and cost performance
	Units	Q3 2001/02	Q4 2001/02	ОI 2002/03	Q2 2002/03	Q3 2002/03	Q4 2002/03
Ore mined	kí	383	227	368	-60	55
Grade mined	g/t	2.39	3.09.	3.59	4.30	3.34
Ore milled	kt	502	453	460.	471	611	741
Grade milled	gÁ	E.90.	2.14	2.87	1.50	1.03	0.94
Recovery	$\frac{0}{4}$	91.8	93.5	94.1	89.8	86.8	83.6
Gold produced	koz.	28.2	29.0	40.0	20.6	17.6	18.6
Net operating cost	AS/oz	519.	625	490	743	625	433

Net operating cost is equivalent to the Gold Institute Standard "total cash cost" per ounce

Mining plans for Paddys Flat in the immediate future include the development of the underground mine to access the Prohibition, Vivian/Consols and Alberts East orebodies, recommencement of mining at the Mickey Doolan and Macquarie open cut mines, and processing of the remaining-low grade stockpiles. Development and mining of the Batavia and Mulla Mulla East open cuts, and the processing of other small Bluebird low-grade stockpiles within the MGO tenements is also planned. Detailed production planning extends from July 2003 to January 2007.

Processing plans make provision for plant modifications to:

improve throughput of all fresh ore sources by installing a tertiary crushing circuit with SAG mill bypass capability; ٠
recover coarse gold from Vivian/Consols and Alberts East and by installing a gravity circuit; and
improve recovery of refractory gold from Prohibition, Mickey Doolan and Macquarie by installing a sulphide flotation, fine grind, oxidation and ٠ leach circuit.

$1.2$ PROJECT RESOURCES

Snowden has undertaken a high level review of the Paddys Flat resources scheduled for development by SBM; namely the Prohibition, Mickey Doolan and Vivian/Consols deposits (which includes Alberts East). The resources reported by SBM in its other tenement areas were the subject of a separate review by Snowden as part of a previous valuation completed in May 2002. Enquiries were made regarding the current status of these resources for the purpose of this valuation report.

Table 1.2 summarises SBM's formal resource statement as at June 30, 2003. The stockpile resources are reported as at September 30, 2003.

			Meekatharra Gold Operation Resources	Table 1.2
Project		Measured			Indicated			Inferred
	Tonnes (kt)	Grade (g/tAu)	Ounces (koz)	Tonnes (kt)	Grade (g/tAu)	Ounces (hoz)	Tonnes (kt)	Grade (g/tAu)	Ounces (koz)
Paddys Flat Project
Prohibition				671	3.7	80.6	192	3.4	20.8
Mickey Doolan				1.175	1.5	47.0	2,351	1.5	94.0
Vivian/Consols				154	9.2	45.3	173	9.9	54.6
Five Mile Well							339	1.8	18.2
Macquarie				61	3.1	5.4	122	3.1	10.8
Ingliston							76 E	1.5	33.0
Magazine ¹							782	1.6	37.1
Paddys Flat Project
Alberts East				335	2.9	31.2	357	3.8	43.6
Mudlode				109	$2.2\,$	7.7
Sub-total:				2,505	MA)	n Santa B	A V	外形	$\mathbf{M}$

				Table 1.2 (cont'd)	Meekatharra Gold Operation Resources
Project		Measured			Indicated			Inferred
	Tonnes	Grade	Ounces	Tonnes	Grade	Ounces	Tonnes	Grade	Ounces
	(kt)	(g/tAu)	(koz)	(kt)	(g/tAu)	(koz)	(kt)	(g/tAu)	(koz)
Bluebird
Batavia	E51	3.1	15.0
Bluebird East				2.117	1.2	81.7	38	1.6	$2.0^{\circ}$
Bluebird Deeps							135	7.3	31.7
Bluebird Extension				1,656	1.8	96.6	885	16	45.5
Gibralter Sth - Mystery				465	1.4	20.6
fronbar				290	1.6	14.8	140	1.5	6.8
Luke's Junction				201	1.8	11.7
Mulla Mulla							1,800	1.2	65.0
Nannine Reef							267	2.1	18.0
Sub-total: 2222	187	Z.		15.0777777777777	Martin Ch	MADE A	$\overline{\mathcal{M}}$	1.612	169.0
NOA Line
$NOA-2$	1,002	$\overline{33}$	107.6
NOA-7/8							216	5.4	37.5
*Commission for the formal is*	1.002	200	TIME				$\mathcal{H}_{\mathbf{G}}$	37. J	X.
Reedy Line
Jack Ryan	839	2.7	73.6
North Rand				98	1.9	6.0
Rand Deeps							130	5.0	20.9
South Emu				315	5.3	53.7
Triton Deeps				78	8.5	21.3
Triton North Deeps				217	5.7	39.8
Sub-total:	XV)	n M	77. J	MX.	e de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la construcción de la const	1202	XXII)	W	29.92
Reedy North Line
Boomerang Deeps							267	5.6	48.5
Suh-total, 2002							X.	en di	48.
Stakewell
Kohinoor Deeps				33	9.3	9.9	7	10.2	2.3
*Commission Color*				20	$\mathcal{N}(\mathcal{A})$	100	T	162	7. 16
Stockpile Resources (as September 30, 2003)
Paddys Flat							1,093	0.85	29.9
Boneyard							356	0.74	8.5
Bluebird Other							132	0.80	3.4
Substatate							7. ST	$\mathbf{u} \in \mathbb{R}^n$	i va
10 X A L SIMBANA	1.99%	346.	196.Z	2012	Chang and Station Station Station Station Station Station Station Station Station Station Station Station Sta	ta 1	10.543	MU.	632.11

Contained within Highway project adjoining Allons Fisher and Grants.

Resource database

The Paddys Flat resource database has been developed and added to since exploration commenced in the early 1980's. The data was sourced principally from RC drill holes and to a lesser extent diamond drill holes. The majority of the project's resource drill hole database was inherited from previous owners, of which Dominion Mining Ltd (Dominion) was the most recent.

A number of significant database issues have been noted by Snowden, including:

SBM has inherited a resource database of variable quality dating back to the 1980's with little or no backup documentation;
no quality (OA/OC) data is available for the historical data;
default SG values in the database have been used; $\blacksquare$
uncertainties with collar survey data;
most of the reverse circulation (RC) drill holes have no down-hole survey data; and
various drilling campaigns have resulted in a degree of ambiguity in the geological nomenclature.

A particular case in point is the Prohibition database, where approximately 50% of the resource delineation data was removed due to a lack of confidence in the data. This measure is related to a lack of survey information and resulting poor interpretation of the underlying mineralisation.

Comment

Snowden believes that resource database quality issues will have a material impact on the quality of the current resource estimates. However, Snowden acknowledges the results from a small (4 drill hole) confirmation drilling program in the Prohibition pit which has confirmed grades within the current resource model, and in the case of the Prohibition model gives a measure of confidence in the resource model grade estimates. SBM is currently planning a more extensive infill and resource extension drilling program at Prohibition to increase confidence in the resource estimates and determine metallurgical characteristics for the fresh sulphide ore. Snowden believes the current resource database poses a medium to high risk in terms of producing reliable resource estimates suitable for mine planning.

Geological and grade controls

Snowden acknowledges that the Paddys Flat resources are inherently difficult to model. The Paddys Flat mineralisation is contained within structures comprising essentially steeply-dipping, strike parallel (NNE-SSW trending) zones of shearing and faulting between felsic porphyry intrusives and ultramafic/mafic volcanic and intrusive rocks. Due to the nuggetty nature of the gold mineralisation and the tabular geometry of the constrained gold mineralisation, the deposits require extensive sampling on a close grid.

It is fair to assume that the geology and mineralisation controls within the main deposits are well understood due to the long history of mining in the area. This was borne out by discussions with the site geologists who displayed an expert knowledge of the geology and underlying controls on the gold mineralisation. Reference was also made to a number of documents in the possession of SBM referring to the geological and structural controls on the gold mineralisation.

However, greater emphasis is now being placed on the down dip extensions to the current resource models to open up new areas for mining. This coincides with a drop in data density which is affecting progress of the resource modelling process. Drilling has commenced at Mickey Doolan and Prohibition to resolve some of these data density issues.

The oxide and transition zones between the oxide and fresh sumhide ore have been modelled for the major deposits using wireframes previously developed by Dominion and appear to be well understood. The resource geologists have demonstrated a good understanding of the underlying issues related to the oxide material and much of the new exploration drilling currently being undertaken by SBM focuses on evaluating the economic potential of the fresh subblide ore.

The Prohibition underground resource model is limited down-dip by a lack of drilling. Resource potential has been demonstrated with respect to its downdip extension below the current pit limits although a number of as yet unresolved issues exist. These include the grade continuity at depth and the location of a barren dyke intrusion. At present this down-dip resource is undefined and represents upside potential until further drilling is carried out. SBM is planning a significant RC drilling program to delineate the extent and grade of the down dip portion of the 'A', 'B' and 'C' lodes below the current pit outline.

The Mickey Doolan open pit resource was interpreted on 20 m sections using the Micromine geological modelling package. The major ore bearing domains were wireframed in 3-D and honoured all host rock types. Drill hole density within the current pit outline is approximately 15 m, but drops down to 25 m to 50 m below the base of the pit. Resource delineation drilling is currently underway in the Mickey Doolan pit to improve confidence in the fresh sulphide ore in the resource model. The deposit has previously undergone an optimisation study using the current resource estimate and a metallurgical drilling program is currently underway to determine the metallurgical characteristics of the fresh sulphide ore within the pit optimisation shell. Other than some peripheral low-grade oxide outliers around the pit, there appears to be little potential for further mining of oxide material from within the proposed open pit.

The Vivian/Consols deposit is a complex orebody with abrupt changes in stratigraphy and geometry. Mineralised domains include north-south striking shear veins along the margins of a porphyry body with tangential spur veins offset from the main mineralisation. A total of 25 domains have been used for grade estimation of the underground resource. The large number of domains used demonstrates the lack of geological continuity within the mineralised area. A review of the current grade model suggests that it is not possible to correlate grade zones between 20 m sections. The decrease in data density with increasing depth further reduces confidence in the geological interpretation. Snowden has concluded that the current Vivian Consols geological model has a low confidence.

The underground exploration potential of Vivian/Consols has been reviewed in 3-D using the Vulcan modelling software. It is observed that former open pit limits for Vivian/Consols extend to approximately 430 mRL. The underground resource model starts below the 400 mRL level, where grades in excess of 5 g/t Au are intersected regularly. However, the current resource model is too fragmented with the current data density being insufficient to demonstrate grade continuity at depth. The grades immediately above the 400 mRL level are generally lower, in the region of 1 to 5 g/t Au.

It is clear that a conservative approach has been adopted to the wireframing (tonnes) as a result of the uncertainty in the geological and structural controls to the gold mineralisation. This has resulted in discontinuous grade domains and a 'patch-work' effect in long section. Further drilling is required to improve confidence in the geological interpretation before the resource classification can be improved.

Comment

It is clear from resource reports and discussions with site geologists that the resource models suffer from a lack of geological and grade continuity. Data density remains a significant hindrance to the extrapolation of grade envelopes below current mined-out pit outlines. Further resource definition drilling is required to increase confidence in the current geological models. The Vivian/Consols geological model has the lowest confidence of the three models reviewed.

Grade estimation

Grade estimation was undertaken using the inverse distance weighting (IDW) method, using both ID to the power 2 and 3. Anisotropies were applied to the search strategies based on the site geologist's knowledge of the mineralisation. The application of anisotropy has impacted significantly on the distribution of tomes and grade, and as such, the anisotropies as applied by SBM should be verified by a variography study.

Grade cutting has been applied using a range of percentiles from 95% to 99%. Snowden endorses the use of grade cutting as this helps to minimise local block grade biases due to grade smearing during estimation.

The use of the IDW grade estimation method is not optimal in a 'nuggetty' gold environment. The IDW method assumes that good grade continuity exists between the drill hole samples, and will result in a very smoothed grade estimate. This is inconsistent with what is seen in the drill hole sections which show a high degree of variability. Grade smoothing has been exacerbated by the use of small block sizes in the grade estimation, and especially so in the Vivian/Consols resource estimate, where an unrealistic block size of 0.65 mE by 0.65 mN by 0.65 mRL was used. Presumably these blocks were used to conserve tonnage estimates in the grade estimation process. The Prohibition resource estimate used a block size of 2 mE by 5 mN by 2 mRL, and the Mickey Doolan used a block size of 2 mE by 10 mN by 5 mRL.

The inherent characteristics of the grade estimation and the small block sizes could result in an overestimation of tonnes and under-estimation of grade for a particular grade cut-off value and block size. At this stage it is not possible to quantify the potential discrepancy in tonnes and grade.

Comment

Snowden was not made aware of any resource validation process for the current resource models at Paddys Flat. Snowden acknowledges that there are limitations with the accuracy of the current resource estimates at Paddys Flat due to data density issues. This risk will be substantially mitigated with further drilling

Resource classification

The methodology used by SBM for resource classification is inconsistent. A number of different criteria have been applied for different orebodies. These include:

Prohibition: geological continuity over three or more 20 m sections with a minimum of 2 drill holes per section.
Mickey Doolan: resource category is based on search ellinse size. ×
Vivian Consols: Inferred and Indicated due to data density and geological continuity issues.
number of drill holes accessed in the grade interpretation. Macquarie:

Comment

Snowden acknowledges that open pit and underground mining operations have different operating parameters, and as such, warrant different resource classification criteria. However, Snowden would like to see a more rigorous and consistent methodology used to quantify the confidence in the block estimates within each resource. Resource classification should also take into account other factors such as the type of resource delineation drilling used, the quality of the sampling and assaying, the results (if any) from the QA/QC analysis of the assay data, the quality of the bulk density determination etc. These and other parameters should be used to assist with the allocation of resource categories.

Conclusion

SBM has demonstrated a good knowledge of the geology, including a detailed understanding of the major structural controls on the gold mineralisation. Snowden's main concerns relate to the database (lack of survey controls and control data), which in some cases, has significantly impacted on SBM's ability to use the data. A case in point is the removal of approximately 50% of the data from the Prohibition resource due to inconsistencies in the database.

Resource estimation has been undertaken using the IDW method, using block sizes that Snowden considers to be too small. The end result is that the grade estimation has produced resource estimates that appear to be over smoothed. There is potential for overestimation of tonnes and underestimation of grade when a mining grade cut-off is applied to these blocks and the effective selectivity with respect to the block size used will be that of a significantly larger block size.

Resource classification methodology is inconsistent and needs to be improved. It is unclear at this stage what can be reported as an Indicated resource with any degree of certainty. Issues such as data quality should also be included as this has a bearing on the quality and veracity of the current resource estimates.

The main resource potential exists at Prohibition where the mineralisation is expected to continue down-plunge. The data density in this area is sparse and SBM is planning a delineation drilling program to address this issue. Exploration potential at the Mickey Doolans deposit is limited to down-dip extensions to the current orebody, below the current pit limits based on optimisation studies undertaken by SBM. Very good grades have been intersected within the Vivian/Consols underground resource, however, taking into account the data density and structural complexities of the orebody, the risk is high with respect to the estimation of tonnes and grade and further detailed drilling is required to increase confidence in the resource.

1.3 MINING

SBM's mining plan is summarised in Table 1.3 which shows the progression of production from Paddys Flat low-grade stockpiles, to other small open pit ore sources, to Paddys Flat underground and open pits and finally to the Mulla Mulla East open pit. These ore sources are at various stages of planning and development, and are described in detail in subsequent sections. Of these, only Batavia is quoted as an ore reserve (Proven Ore Reserve of 121,200 t at $2.93$ g/t).

Table 1.3
				Meekatharra Gold Operation - Mining summary by half year (kt)
		2003/04		2004/05		2005/06		2006/07
	Ш	H2 -11 112 H2 Ħ1 112 111
Paddys Flat UG			-65	190.	333	260	88		937
Mickey Doolan			360	370	268				998
Paddys Flat LG	1.472	320							1,792
Macquarie			105						105
Batavia		121							121
Other Stockpiles		414							414
Mulla Mulla East					E7E	610	720	180	1,681
Total	1.472	856	530	560	772	870	808	180	6,048

$1.3.1$ Underground Mining Plans

The underground ore scheduled for extraction in SBM's life of mine (LOM) production plan includes ore from Prohibition, Vivian/Consols and Alberts East. These deposits are part of the Paddys Flat tenements and are in the area from which the highest grades have historically been sourced. The target deposits have been mined previously, by open cut or underground methods, or by a combination of both. The mining plan as described by SBM, provides for a single access decline to gain entry to each of the target orebodies.

Where possible, only resources classified as Measured, Indicated or Inferred have been used to determine mining inventories. This has not been possible in all cases at Paddys Flat.

SBM recognises the need for further definition of the resources representing the underground mining inventory. A program has commenced to conduct resource confirmation and definition drilling intended to provide the necessary information to allow all planned mining inventories to be classified as resources. Currently, a significant portion of the mining inventory cannot be classified as a resource according to the JORC Code.

Prohibition

The Prohibition mine plan recovers high-grade ore from mineralisation which extends below the floor of the Prohibition Pit. The target ore lenses exist on west dipping reverse faults crossing a SE dipping Banded Iron Formation (BIF) and are predicted to maintain their extent, frequency and grade within the BIF, until the BIF is intersected by a dolerite dyke at depth.

The Prohibition mineralisation was recognised by the previous owners to be relatively refractory in nature, through the association of gold with pyrite and arsenopyrite. Metallurgical testwork reported by Dominion, which included batch processing of ore parcels through the Paddys Flat CIL plant, resulted in gold recoveries of 74% to 77% in a standard CIL process, compared to greater than 90% for non-refractory ores. SBM intends installing a fine grind, oxidation and leach circuit to increase recovery of refractory ones to a level approaching or exceeding 90%. Further details are contained elsewhere in this report.

The current resource extends from the existing pit bottom at 370 mRL to 290 mRL, and from 2900 mN to 2720 mN (mine grid). The resource model has been extended to 150 mRL and 2400 mN to include predicted down-dip extensions that are expected to be confirmed in the current drilling program. This material has been included in the preparation of a mining inventory.

The mining inventory was derived by:

completing detailed mining plans for the defined resource (incorporates an Indicated and Inferred Resource of 308,000 t at a grade of 6.3 $g/t$ Au for 62.600 oz):
estimating the potential resource contained within the host BIF down dip from the current resource by making an assessment of the down-dip continuity of the sulphide bearing BIF;
preparing a development layout for mining the potential down-dip resource; and
estimating the anticipated grade and stoping vield per metre of strike drive development within the potential down-dip resource, based on the results of the detailed planning in the defined resource.

From this, a mining inventory of 686,600 t containing 108,500 oz at a grade of 4.9 g/t Au was derived. Of this mining inventory, 38% of ore tonnes are classified as Indicated, 7% of ore tonnes are classified as Inferred and 55% of ore tonnes are extrapolated from the resource. Planned dilution is included within stope boundaries. No other provision for ore loss or dilution is made.

Comment

The mining inventory estimation methodology is based on significant assumptions, principally:

continuity of the BIF and contained sulphides and gold mineralisation down-plunge to the dolerite dyke. This is hased on sparse drilling data and the current geology model;
continuity of ore thickness, represented by tonnes per metre of strike drive development, from the base of the resource to the predicted down-dip extension position. The upper four sublevels, which have been designed in detail based on the current resource, resulted in 186, 186, 246 and 242 stope tonnes per metre of strike drive respectively. A factor of 245 stoping tonnes per metre of strike drive was used to derive stoping inventories helow the hase of the resource:
continuity of average grade from the limits of the resource to the predicted down-plunge extension position. The average grade of the first four sublevels was 3.76 g/t for development and 5.17 g/t for stope production which was diluted only with planned dilution attributed to the stoping design. These average grades were assumed for tonnes additional to the defined resource; and
no provision for unplanned ore loss or dilution.

The planned mining inventory was prepared using the above described assumptions and presents considerable uncertainty in the absence of adequate drill hole information.

The Prohibition Mine is planned as a decline access, mechanised, longhole, bottom-up open-stoping operation, recovering target ore lenses with stopes dipping across the BIF at 65 to 70 degrees to the west. Access will be from a decline portal south of Prohibition, in the base of the adiacent Consols open cut, at 447 mRL. An adjacent sub-parallel ventilation exhaust decline will be driven to 350 mRL, after which ventilation exhaust will be achieved by a series of rises following the ongoing primary decline development. The main decline will be driven 5.0 mW x 4.5 mH and the ventilation decline 4.5 mW x 4.5 mH.

After crossing the dolerite dyke soon after commencement, the decline will remain in the ultramatic units which form the hangingwall of the BIF. Crosscuts will be driven at 20 metre sublevel intervals from the decline west to the stoping location. Strike drives will then be driven north and south to the orehody limits.

Stoping is scheduled in a bottom up sequence of successive four and six sublevel panels, with a sublevel crown pillar remaining between the two panels. Stopes are designed with a strike dimension of 15 m to 20 m or less, depending on the ore lens geometry. Thicknesses vary with ore lens thickness but are typically 5 m to 15 m. Rib pillars of 5 m are left if in ore grade material, or greater when in waste. The stoping layout outside the known resource is indicative only, based on factors derived from the outcomes of the detailed designs within the resource, and subject to finalisation on completion of ongoing definition work.

Development waste will be used to progressively backfill empty stope voids, with additional backfill sourced from nearby surface waste dumps as required.

Development mining will be carried out with single and two boom electrohydraulic jumbos and diesel load-haul-dump units. Production mining will be carried out with a single boom electrohydraulic longhole drill and diesel load-haul-dump unit. Haulage will be carried out using diesel load-haul-dump units and articulated haul trucks in the 25 t to 40 t class.

Mining development and production rates and costs have been derived with the estimating resources of the contractor which mined the Gibraltar and Great Northern Highway underground mines. Costs for ground support have been based on that required for the Gibraltar mine and are considered by SBM to be conservative. Allowances have been made in drilling rates and consumables consumption for the expected harder conditions in Prohibition compared to Gibraltar. Peak and average production rates of 60 kt and 31 kt per month are scheduled.

Comment

The development design is operationally sound. The stoping design is preliminary in nature and subject to change in detail. In principal, the stoping plan is sound. During final design, consideration will need to be given to geotechnical and operational issues resulting from the final geometry of ore lens outlines, their relationship to drill and extraction drive alignment, and possible implications to recovery, dilution and gentechnical risk. Bottom up, blind uphole stoping may be a more appropriate stoping method to deal with non-aligned sublevel development. Regardless, these issues are unlikely to introduce significant changes to the operational outcomes. Geotechnical and hydrogeological considerations are addressed elsewhere in this report in greater detail.

The mining costs have been comprehensively estimated using recent relevant experience and the likely contractor's estimating resources. They provide a reasonable estimate of expected costs.

The stoping schedule appears reasonable based on estimated development and stoping activity rates. The schedule indicates a vertical advance of 200 m in 1.6 years, equivalent to 125 m per year. In Snowden's opinion, this advance rate is at the upper end of achievable rates for operations of this type. Less ambitious advance rates could be considered for sensitivity modelling.

Vivian/Consols and Alberts East

The Vivian/Consols and Alberts East mine plan recovers high-grade ore from the Upper and Lower Vivian and the Consols areas of the main lode and the Alberts East area of the east lode. Vivian's and Alberts East are located to the east and NE of the Prohibition target, below existing open cut and underground workings. Consols is located southeast of Prohibition and south of Vivian's, also below existing workings. The Vivian lode extends from 410 mRL to 170 mRL and the Eastlode from 370 mRL to 330 mRL. Mineralisation is contained within stockwork quartz vein arrays developed in quartzporphyritic intrusions and adjacent carbonate altered ultramafic rocks. The Consols ore extends from 440 mRL to 340 mRL. Mineralisation is similar to that of Vivian's.

The Vivian/Consols and Alberts East areas include Indicated and Inferred Resource of 1,019,000 t containing 174,700 oz at 5.3 g/t, of which 52 % are classified as Inferred. The mining inventory contained within the resource is $251,400$ t containing 75,000 oz at 9.3 g/t. Vivian's inventory is $161,200$ t containing 47,600 oz at 9.2 g/t, the Alberts East inventory is 53,900 t containing 15,600 oz at 9.0 g/t and the Consols inventory is 36,300 t containing 11,800 oz at 10.1 g/t. The mining inventory was determined by preparing detailed development and stoping plans for extraction of the resource. Planned ore recovery and dilution are included in the stoping designs and the mining inventory.

Comment

With 52% of the resource being classified as Inferred, there is some risk of underperformance.

The ore zones will be accessed from drives and declines driven from the Prohibition decline at appropriate vertical locations. Accesses will be driven at 4.4 mW x 3.8 mH to provide for load-haul-dump haulage of ore either direct to surface or to the Prohibition decline truck loading facilities.

The mining plan is similar to that for Prohibition, though at smaller dimensions to suit smaller ore widths. Bottom up open stoping is the main selected mining method with mechanised cut-and-fill mining of the upper resource at Consols included. Mechanised mining widths down to 2.2 m are anticipated. Production drilling will be by single boom electrohydraulic jumbo. Backfilling will be undertaken where necessary with development or imported waste. Ventilation will be established using interconnecting exhaust raises ultimately linked to the exhaust decline. Peak and average production rates of 17 kt and 10 kt per month are scheduled from these sources.

Mining productivity and costs have been estimated using the likely contractor's estimating resources, and incorporate experience from the Gibraltar and Great Northern Highway underground mines.

Comment

The development and stoping design is operationally sound. Geotechnical and hydrogeological considerations are addressed elsewhere in greater detail. The mining costs have been comprehensively estimated using recent relevant experience and the likely contractor's estimating resources. They are a reasonable estimate of expected costs.

The stoping schedule appears reasonable based on estimated development and stoping activity rates. The schedule indicates a vertical advance rate of about 100 m per year. This advance rate sits towards the upper end of achievable rates for operations of this type.

Geotechnical considerations

The underground mine designs take into consideration regional and orebody specific geotechnical issues. Modest stope spans are planned, substantial loss of ore to pillars is provided for, and consideration has been given to the likely effects of the different geological units to be encountered. In particular, the nature and impact of the ultramafic units bounding each ore host has been considered and conclusions incorporated into the designs.

A geotechnical investigation program has been commenced with initial observations indicating that the local ultramatic rock will have a significantly improved rock mass strength compared to that encountered during mining of the Gibraltar and Great Northern Highway mines. Analysis and interpretation of the results is yet to be completed or presented. Further investigative and analytical work is being undertaken.

Comment

The planned program of work, which includes drilling investigative holes, will identify critical geotechnical issues and develop methods of minimising the risk from those issues. Snowden did not identify any significant issues which will be unmanageable with the diligent implementation of an investigation, analysis and design process. Cost estimates have been built up using the cost of ground support installations at the Gibraltar mine as a base. These costs may prove conservative but are appropriate for inclusion as a base case.

Hydrogeology

Coffey Partners International Pty Ltd (CPI) investigated the hydrogeology of Paddys Flat for Dominion in 1993. The investigations concentrated on the Vivian/Consols and dolerite dyke areas and revealed a "compartmentalised" nature to ground water yield zones, with lithological units being typically impermeable. The review concluded that nominal yields of 300 kL/d to dewater the area could be expected, with peak short term flows of 1,000 kL/d from compartmentalised sources persisting for days to weeks.

SBM intends undertaking a hydrogeological review of the Prohibition area to assess the applicability of the CPI conclusions to Prohibition.

The SBM production plan includes provision for excavation of sumps and pump stations with contractor supply of pumping equipment for managing the inflows predicted by CPL. The pumping system will consist of staged pumping using submersible electric pumps in working areas, and transportable helical rotor pumping installations at pump stations adjacent to the main decline, for pumping to surface. If the updated hydrogeology model indicates the need, bulk dewatering of old workings via the Alberts Shaft can be undertaken.

Comment

The SBM plan for mine dewatering appears appropriate for the environment described by CPI. Confirmation of the Prohibition hydrogeology will confirm the suitability of the plan for Prohibition.

Costs

Mining costs were estimated using the likely contractor's estimating resources. Costs were estimated based on a full contract mining proposition with SBM providing administrative and technical support. Costs were estimated emulating a fixed plus variable contract arrangement similar to that employed in the latter stages of mining at Gibraltar. The resultant cost for the combined underground operations, including development capital, is \$59/t.

Comment

The methodology employed for cost estimation is sound and comprehensive. The resultant unit cost is considered typical for this type of operation.

1.3.2 Surface Mining Plans

Surface mining plans provide for the extraction of ore from existing pits at Mickey Doolan and Macquarie within the Paddys Flat tenements, new pits at Batavia and Mulla Mulla East on SBM's other tenements, and from low-grade stockpiles at Paddys Flat, Boneyard and Bluebird. All resources are well established with the exception of the Mulla Mulla East Inferred Resource which is in the early stage of assessment.

Mickey Doolan

The Mickey Doolan pit sits about 15 km to the north east of the Bluebird processing plant, in the southern part of the Paddys Flat tenements. The pit was originally mined prior to 1995. Dominion recognised the increasing refractory nature of the remaining mineralisation at depth and developed a Business Plan. The plan included provision for installing a sulphide leach circuit to increase gold recoveries from an average 60% to 65% using conventional CIL methods, to greater than 90%, using the Activox technology. The Dominion Business Plan was not implemented with Dominion ceasing operations in 1995, before being acquired by Plutonic Resources Ltd's subsidiary company, Forsayth NL. The Paddys Flat tenements were ultimately acquired by SBM from BGA in late 2002.

SBM has prepared a plan which utilises modern sulphide leach technology to increase recoveries from Mickey Doolan to an acceptable 89%. This has enabled a mining inventory of 997,800 t containing 69,000 oz at 2.15 g/t to be identified within the Indicated Resource using conventional open cut optimisation techniques. SBM plans to undertake a drilling program in October 2003 to collect samples for metallurgical testwork, including grindability and recovery by standard methods, to confirm a definitive flowsheet for improved recovery and update its resource estimate. Details of the proposed plant upgrades are described elsewhere in this report.

The target ore sits as a saddle between the Mickey Doolan and Phar Lap pits and will be mined by conventional drill and blast methods with road train haulage to the Bluebird processing plant. A waste/ore tonnage strip ratio of 4.07 is planned. SBM's recent operating history was used as the basis for preparing estimates of costs for ore and waste mining, and road train haulage.

Comment

The Mickey Doolan mining plan appears reasonable with cost estimates considered realistic. A full geotechnical assessment should be undertaken prior to commencing operations

Macquarie

The Macquarie open cut in the northern part of the Paddys Flat tenements was mined by Dominion prior to 1995. A fresh, harder and refractory resource remains at depth that can be accessed by a pit cut-back.

As with Mickey Doolan, issues of increasing hardness and refractory nature are present. SBM has planned a sampling and testing program to address these issues.

The mining inventory of 104,500 t containing 9,700 oz at 2.88 g/t has been identified within the Indicated Resource using standard open cut optimisation techniques. Mining will be by conventional methods utilising drill and blast where required, with road train haulage to the Bluebird processing plant. A waste/ore tonnage strip ratio of 10.60 is planned. SBM's recent operating history was used as the basis for preparing estimates of costs for ore and waste mining, and road train haulage.

Comment

The Macquarie mining plan appears reasonable with cost estimates considered realistic. A full geotechnical assessment should be undertaken prior to commencing operations.

Batavia

The planned Batavia open cut is located 5 km to the north of the Bluebird plant. Using standard open cut optimisation techniques, a mining inventory consisting of a Proven Ore Reserve of 121,200 t containing 11,400 oz at 2.93 g/t has been identified. A waste/ore tonnage strip ratio of 10.10 is planned.

Mining will be by conventional methods, utilising drill and blast techniques when necessary, with road train haulage to the Bluebird plant. The ore will be mostly fresh displaying increased hardness compared to recent Bluebird plant throughput. Flowsheet changes have been anticipated, which are described elsewhere in this report. SBM's recent operating history was used as the basis for preparing estimates of costs for ore and waste mining, and road train haulage.

Comment

The Batavia mining plan appears reasonable with cost estimates considered reliable. A geotechnical assessment should be undertaken prior to commencing operations

Stockpiles

Remnant surface stockpiles of economic grade have been identified, including those at Paddys Flat, Boneyard and Bluebird (Table 1.2).

These stockpiles consist of known material which SBM expects will display consistent and reliable mining and processing characteristics and performance. The Paddys Flat stockpiles have been used in the production stream since February 2003 with no significant problems arising. SBM's recent operating history was used as the basis for preparing estimates of costs for ore and waste mining, and road train haulage.

Comment

The stockpile mining plan appears reasonable with cost estimates considered reliable. No difficulties achieving the planned cost or production performance are anticipated.

Other Resources

Included in the production plan to January 2007 is a deposit called Mulla Mulla East which is in the early stage of assessment. Commencement of development of this deposit is scheduled for August 2005 and production in November 2005. It is currently estimated by SBM to have a mining inventory of 1,680,900 t containing 70,300 oz at 1.30 g/t. A waste/ore tonnage strip ratio of 4.40 is anticipated.

Comment

The preliminary status of progress on defining this resource precludes further comment or analysis.

$1.4$ PROCESSING

The planned processing outcomes are summarised in Table 1.4 which shows ore feed tonnes (kt), grade (g/t), recovery (rec %) and recovered ounces (rec koz) for the duration of the production plan.


2006/07 2005/06 2003/04 2004/05
Unit	Ш	112	111	112	ш	H2	н	112	Total
kt	1,472	857	578	560	772.	871	808	180	6,463
'g/t	0.8	1.0	2.7	3.0	3.5	2.8	2.2	1.3	2.0
rec %	-85	-90	90	89	90	90	94	92	90
rec koz	34.1	36.7	41.8	48.8	78.4	70.8	53.9	6.9	371.3

1.4.1 Current Operations

The MGO Bluebird processing plant is currently treating 3 Mtpa per annum of soft oxide ore sourced from Paddys Flat low grade stockpiles. The plant is situated adjacent to the Great Northern Highway 20km south of Meekatharra.

In its current configuration, the plant includes:

crushing facilities comprising a primary jaw crusher followed by a secondary cone crusher in open circuit, with crushed product reporting to two stockpile conveyors for discharge onto two stockpiles;
stockpile reclaim tunnel consisting of five belt feeders and an apron feeder that is used for emergency feed;
SAG mill in open circuit;
two ball mills for regrinding of ore in closed circuit with a cyclone cluster;
two leach tanks of 1750 m³ each;
six adsorption tanks with a combined volume of $1600 \text{ m}^3$ ;
a carbon safety screen;
two 2 t elution columns; and
an electrowinning and smelting facility.

The crushing function is performed by a combination of SBM and contract employees operating the SBM crusher loader, crusher and primary conveyors, and contractor owned secondary crusher and conveyors.

The grinding and leach circuits are operated and routinely maintained by SBM personnel, with contract personnel sourced for shutdown and project works. Critical functions are controlled through a Citect PLC management interface. An on-site laboratory is equipped to carry out fire assaying for process and quality control grade determinations.

Comment

The plant appears to be in reasonable to good condition, with some preventative maintenance and monitoring programs in place to minimise the risk of catastrophic failures occurring. An inventory of critical spares has been identified and stocked where practical, and common use opportunities identified. Site facilities are adequate with sufficient vacant space available for maintenance, modification or expansion activities to be undertaken in a safe, planned and considered fashion.

Process plant tailings are pumped to a nearby completed pit being used as a tailings sturage facility. The tailings are deposited subaerially and decant water is reclaimed for return to the process plant. Annual reviews are undertaken of management practices and monitoring bore results.

Return water from the tailings storage facility provides about 40% of the processing plants needs. The remainder is sourced from rain and groundwater accumulations in other nearby pits. Such water is in abundance and of good quality.

Comment

The tailings disposal strategy is effective and supported by the regulatory bodies. Water supplies are adequate for the foreseeable future.

$1.4.2$ Future Operations

Significant changes to future ore type are anticipated by the SBM production plan. The processing plan is detailed on a source-by-source basis in Table 1.5, including the expected outcomes on recovery and throughput of the circuit modifications included in the plan.

All ores, except existing low-grade stockpiles, are expected to be fresher and harder than most of those processed recently. The resultant achievable ore blend will exhibit increased hardness when compared to recent blends, with an increase in work index from about 5 kWh/t to 20 kWh/t. This will impact throughput rates, comminution performance and recovery if left unaddressed.

Vivian/Consols and Alberts East ores at Paddys Flat underground are expected to contain higher proportions of coarse gold when compared to recent ore types. This will impact recovery and throughput if left unaddressed.

Prohibition, Mickey Doolan and Macquarie ores will be more refractory than those previously processed. This will impact recovery if left unaddressed.

SBM is planning modifications to improve plant performance sufficiently to enable a throughput rate of 1.2 to 1.4 Mtpa to be achieved, with a recovery of $90\%$ from an average grade of 2.62 g/t. These modifications include:

installation of a contract supply tertiary crusher, and installation of provision to bypass the SAG mill. This will remove reliance on the SAG mill, which is likely to be inadequate to achieve the required level of size reduction needed for the harder fresh ores. Ball mill operating parameters will be optimised to produce the required final grind size;
installation of a gravity circuit to recover coarse gold. A Knelson concentrator or similar will be installed in circuit with a ball mill feed cyclone underflow to recover the coarse gold expected with Vivian's, Eastlode and Consols ores. By recovering the coarse gold early in the process, recovery is not lost in the cyanide leach process, throughputs are not constrained by increasing leach residence time to minimise losses, and reagent consumption is minimised:
installation of a sulphide flotation circuit to recover sulphides liberated in the grinding circuit mills. Gold associated with sulphides is the major contributor to the refractory characteristics of the ore. The flotation circuit will recover most of the refractory mineral prior to the cyanide leach process to enable an alternative extraction method to be employed. Direct sale of a sulphide concentrate is possible and presents a contingency alternative to oxidation and leaching on site; and
installation of a fine grind, oxidation and leaching circuit to recover gold from the sulphide concentrate. Testwork completed by Dominion prior to cessation of operations in 1995 indicated the technical feasibility of a number of methods including the BIOX and Activox processes. Advances since 1995 make the adoption of such methods increasingly feasible. SBM believe a suitable method will be identified and implemented as part of the production plan.

					Table 1.5
							Meekatharra Gold Operation - Processing Plan by Source
			2003/04		2004/05		2005/06	2006/07
		HI	H2	Ш	H2	H1	H2	111	H2	Total
	kt			65	190	333	260	88		937
Paddys	g/t		15.4	5.7	4.8	5.7	6.3	9.7		6.1
Flat UG	rec %		96	93	89	90	89	96		91
	rec koz		0.5	11.1	26.0	55.3	47.3	26.2		166.4
	kt			360	370	268				998
Mickey	g/t			$2.2\,$	2.2	2.1				2.2
Doolan	rec %			89	89	89				89
	rec koz			22.1	22.8	16.5				61.4
	kt	1,472	320							1,792
Paddys	$\mathbf{g}/\mathbf{t}$	0.8	0.8							0.8
Flat LG	rec %	85	85							85
	rec koz	34.1	7.4							41.5
	kt			105						105
Macquarie	g/t			2.9						2.9
	rec %			89						89
	rec oz			8.6						8.6
	t		E21							121
Batavia	g/t		2.9							2.9
	rec %		90							90
	rec koz		10.3							10.3
	kt		414							414
Other	g/t		0.8							0.8
Stockpiles	rec %		92							92
	rec koz		9.3							9.3
	kt					171	610	720	180	1,681
Mulla	g/t					1.3	1.3	1.3	1.3	E.3
Mulla East	rec %					92	92	92	92	92
	ree koz					6.6	23.5	27.7	6.9	64.7

The capital costs provided for this work are:

Gravity circuit - \$150,000; and

Flotation, oxidation, leach circuit - \$6.8 M

Comminution

SBM has an established relationship with consultants Scott Dalley Francks (SDF) who has previously provided consultancy services regarding comminution circuit performance and design. The proposed plant modifications were identified, assessed and costed and incorporated into the production plan. Costs have been updated where appropriate by escalation or inclusion of recent quotations (eg. tertiary crusher supply by Crushing Services International Pty Ltd). SBM intends to undertake further test and modelling work with SDF to finalise the design of the comminution circuit modifications.

Comment

Results from the previous testwork combined with planned future work are expected to be adequate to predict circuit performance, design flowsheet modifications and estimate costs. Performance and cost estimates are therefore considered to be realistic.

Gravity circuit

The planned installation of a Knelson concentrator (or similar) for improved recovery of coarse gold presents no major metallurgical or cost risks. The technology is proven, in common use and is low cost.

Comment

The SBM plan for installation of a gravity circuit is a reasonable approach and estimated costs are considered to be realistic.

Sulphide flotation and leaching

Extensive metallurgical testwork was carried out prior to 1995 by Dominion on samples of Mickey Doolan and Prohibition ores. Testwork included examination of various process route options including combinations of heap leaching, flotation, fine grinding, BIOX, Activox, pressure oxidation and roasting. Plant batch trials of Prohibition ore were also undertaken. The Dominion testwork demonstrated the technical feasibility of achieving high recoveries through enhanced oxidation and leaching methods. SBM has reviewed the Dominion testwork results and has commenced additional testwork to modernise the results and to ensure QA/QC aspects are addressed, some of which were lacking in the Dominion work.

A drilling program has commenced to collect representative samples from Mickey Doolan and Prohibition for metallurgical testing. The testwork is being carried out by Lakefield Oretest, who have an established relationship with SBM. Testwork is designed to follow on from the work performed by Dominion, and to identify optimum relationships between grinding, flotation, CIL leaching and Activox leaching performance.

To date, testwork has commenced on one sample from Prohibition, with drilling to obtain further samples from Mickey Doolan and Prohibition to commence during October 2003.

Comment

Previous testwork has demonstrated the technical feasibility of the proposed flotation, fine grind, oxidation and leach circuit. Cost estimates made by SBM in the production plan appear to be well founded and therefore realistic, subject to confirmation by current testwork and updated costing.

Preliminary results from testing the first sample of Prohibition ore indicate a "Readily Cyanidable" recovery of the higher grade fraction above 1.5 g/t, in excess of 83%, compared to the stated results of Dominion's plant batch trial of 74% to 77%. This provides some encouragement that the plant performance assumptions and cost estimates included in the production plan may be conservative. Further testwork will confirm or dispel this conclusion.

The timeframe for collection and processing of samples, design of circuit modifications, approval, contract award, design, construction and commissioning is tight. Prohibition testwork results are due by the end of October, with Mickey Doolan results due mid-November. A process route decision must be taken by mid-November to enable a construction contract award to be made before the end of December 2003. The first refractory type ores are scheduled for processing during July 2004.

$1.5$ OTHER

1.5.1 Environmental

Environmental works primarily consist of:

preparing new mining areas by stripping and stockpiling topsoil;
profiling and terracing of waste dumps to an acceptable slope angle $(17^{\circ})$ ;
spreading topsoil on profiled dumps;
seeding and planting;
maintaining rehabilitated areas;
tailings storage facility management;
preparing proposals for new mining activities; and
completing monitoring and reporting commitments.

SBM undertakes this work with the assistance of environmental consultant, Mr C Woolard. The acquisition of the Paddys Flat tenements in 2003 brought with it responsibility for environmental management and rehabilitation works on those tenements.

To date, SBM has made progress with environmental management, with regular bond reductions being achieved in recent years. At June 2002, SBM environmental bonds totalled \$2.05 M, with a reduction of \$0.41 M achieved that year. MGO accounted for \$1.10 M of the bond total, and \$0.36 M of the reduction. Further reductions are expected in this and subsequent years. The Paddys Flat tenements have a remaining bond, at June 2003 of approximately \$0.40 M, down approximately \$0.60 M from the previous year. There are no known environmental liabilities which are not provided for by these bonds.

Comment

Environmental rehabilitation activities appeared to be carried out competently and diligently. The outcomes appear to be satisfactory, a conclusion supported by recent bond reductions. There is an obvious corporate and site commitment to maintaining a high standard of environmental management. There were no undisclosed liabilities noted during the site visit.

$1.5.2$ Native Title

SBM has draft agreements with two representative local indigenous groups who may have rights for Native Title claims. The agreements are expected to be formalised during November 2003. These costs have been included in the MGO LOM production plan.

Comment

Formalising of the draft agreements should ensure implementation of the production plan is unimpeded by Native Title issues.

1.5.3 Barrick royalty

Acquisition of the Paddys Flat tenements included a royalty commitment of an ongoing payment of \$10/oz produced. This provision has been included in the MGO LOM production plan.

1.5.4 Site support facilities

The MGO Bluebird site comprises office buildings, workshops, accommodation quarters and various other site facilities. It has proved adequate for supporting an operational capacity of 3 Mtpa with a workforce exceeding 200 persons. No expansion or upgrade of facilities is included in the production olan.

Power is supplied to the site by an on-site 8 MW diesel fired generating facility owned and operated by SBM. Process water supply is by reclaim from the tailings storage facility and from in-pit accumulations of rain and groundwater. Potable water is supplied commercially in bottles.

Comment

SBM site support facilities will be adequate for the scale of operations contemplated in the production plan. It is unlikely that any upgrade will be required as a result of implementing the plan. Investigations are in progress to identify a lower cost power generation alternative. Options include contract operation of the SBM facility and third-party supply.

EXPLORATION ASSETS 1.6

161 Ahhotty

SBM's 100%-owned Abbotts project is located approximately 30 km north of Meekatharra.

Project Resources

A small, low-grade resource has been outlined at Mt Vranizan within M51/390 which has been excluded from SBM's fune 2003 formal resource statement as it is currently considered uneconomic following an open pit optimisation study.

	Table 1.6 Abbotts Project Resources
Proiect		Measured		Indicated		Total Inferred
		2/t(Au)	62 (Au)	g/t(Au)	02 (Au)		$\mathcal{Q}/\mathbf{f}$ (Au)	02(A0)		g/t(Au)	02 (Au)
Mt Vranizan	470,700	1.72	26,086	$\overline{\phantom{a}}$	-		$\overline{\phantom{0}}$	$\overline{\phantom{a}}$	470.700	ר ל I . J .C	26,086

Snowden has concluded the following from its assessment of the Mt Vranizan resource:

the low-grade open pit resource is centred on a group of historic workings developed on a north-trending quartz vein zone;
the better grade gold mineralisation is supergene related and occurs at depth at the base of oxidation;
there is limited gold mineralisation above this supergene zone resulting in a relatively high strip ratio;
there is limited potential to expand this resource either along the deposit's immediate strike or depth extent;
the resource is located approximately 50 km by road from SBM's Bluebird mill; and
the remnant resource ounces are therefore considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Abbotts project tenements:

the sub-economic Mt Vranizan resource is located between the historic Mt Vranizan and New Murchison King mines in M51/390 which collectively produced approximately 37,000 oz Au;
the gold mineralisation is hosted by a shear zone in mafic volcanic and metasedimentary rocks of the Archaean Abbotts greenstone belt developed near the interpreted axial plane of a synform;
the strike potential of the defined mineralisation within M51/390 extending into the surrounding tenement application (E51/913) has not been assessed in any detail to date;
exploration work within the remaining area of E51/913 has generally yielded unfavourable results except for the Whitehorse prospect where further work has been recommended; and
there are no known substantial gold deposits within the Abbotts greenstone belt close to the project area. Furthermore, the greenstone belt does not possess similar geological attributes to the adjoining Meekatharra greenstone belt suggesting that the project has limited prospectivity for large gold resources.

20/10/03 Page No. 12

$1.6.2$ Abbotts-Garden Gully

SBM's 100%-owned Abbotts-Garden Gully project area is located to the immediate east of the Abbotts project. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Abbotts-Garden Gully project tenements:

the project area covers several groups of small historic gold workings;
historically the most significant producer was the small Kyarra gold mine which is excised from the project area; and
٠ the project tenements have been subjected to cursory exploration work to date which has provided limited encouragement.

1.6.3 Aladdin

SBM's 100%-owned Aladdin project area is located approximately 30 km SW of Meekatharra.

Project Resources

A small, low-grade remnant resource extends from the base of the abandoned Aladdin open pit within M51/62. The resource has been excluded from SBM's June 2003 formal resource statement as it is currently considered uneconomic following an open pit optimisation study.

					Table 1.7 Aladdin Project Resources
Project	Measured Indicated					Total Inferred
		g/t(Au)	02 (Au)	g(t(Au))	02 (Au)		$g$ / $f(Au)$	62 (Au)	2/t (Au)	02 (Au)
Aladdin	60,800 .14.100 1.76 178,900 2,580 4,000 - 179ء 143 . 60 - 6.456 1.32 B.LL

Snowden has concluded the following from its assessment of the Aladdin remnant resource:

the gold resource is related to the intersection of a NE-trending structure with a BIF unit and extends below a relatively deep open pit that is currently flooded;
the open pit produced approximately 23,000 oz Au at an average grade of 5 g/t Au;
there was a positive reconciliation on the resource grade due to previously unrecognised pockets of high-grade mineralisation;
the current resource estimate is substantially based on earlier drilling which has not been subject to any further evaluation by SBM; and
the remnant resource ounces are therefore considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Aladdin project tenements:

there is no potential to expand the Aladdin open pit resource along strike based on the results from exploration work completed to date;
the underground potential of the deposit is limited by the low overall grade of the mineralisation although some potential remains for small tonnage, high-grade shoots; and
previous exploration over the historic gold workings and extensions to the Aladdin structure in the surrounding tenements has downgraded the potential of the project to host further significant gold resources.

1.6.4 Bayley's Island

SBM's 100%-owned Bayley's Island project area is located approximately 40 km SW of Meekatharra and to the immediate south of the Aladdin project.

Project Resources

A remnant resource extends from the abandoned Bayley's Island South open pit within M51/96. The resource has been excluded from SBM's June 2003 formal resource statement as it is currently considered uneconomic.

	Table 1.8 Bayley's Island Project Resources
Project		Measured		Indicated		Inferred		Total
		2/t(Au)	62 (Au)	2/t(Au)	0z (Au)	$\mathfrak{gl}(\mathbf{A}\mathbf{u})$	02 (Au)	2/t (Au)	02 (Au)
South Pit	7.400 103.000 2.30 103,000 2.30 .400 - - $\overline{\phantom{a}}$

Snowden has concluded the following from its assessment of the Bayley's Island project remnant resources:

the former open pit mining operations at Bayley's Island had experienced water inflow problems due to their location on the edge of Lake Annean:
gold mineralisation at Bayley's Island South is related to a shallow dipping BIF unit that was previously mined to a depth of approximately 40 m. Tonnage and grade reconciliations from the last three flitches were strongly positive;
the grade of the remnant mineralisation at Bayley's Island South is insufficient to support an underground mining operation; and
the remnant resource ounces are therefore considered to be of low quality.

Snowden has concluded the following from its assessment of the Bayley's Island project tenements:

exploration work along the north-trending structure that hosts the gold deposits previously mined at Bayley's North, Central and South has downgraded the potential for further open-pit resources; and
the results from limited exploration work completed over an interpreted parallel structure to the immediate west along a granite contact have not been encouraging.

$1.6.5$ Barrambie

SBM's 100%-owned Barrambie project area is located approximately 100 km SE of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Barrambie project tenements:

the project area currently comprises one Mining Lease application covering a group of historic gold workings;
the gold mineralisation is related to a quartz veined shear located along a granite/greenstone contact;
drill testing of the contact zone in the vicinity of the workings has returned several significant intersections; and
the results from limited RAB drilling along strike of the workings has not been encouraging indicating the potential for a small gold resource at hest.

166 Bourke's Fiad

SBM's 100%-owned Bourke's Find project area is located approximately 15 km to the SE of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Bourke's Find project tenements;

the project area surrounds several groups of small historic gold workings (excised in part from SBM's tenements) hosted in ultramatic rocks; and
drill testing of the contact zone in the north of the project area has outlined several discrete zones of low-grade gold mineralisation with limited resource potential.

1.6.7 Rurnakura

SBM's 100%-owned Burnakura project area is located approximately 50 km south of Meekatharra.

Project Resources

Three remnant resources extend from the NOA-2, NOA-7/8 open pits within M51/116 and the Alliance open pit within M51/117. The Alliance resource is currently considered uneconomic by SBM and has been excluded from its June 2003 formal resource statement.

						Table 1.9 Burnskurs Project Resources
Project		Measured			Indicated			Inferred			Total
		g/t (Au)	6z (Au)		g/t(Au)	6z (Au)		2/t(Au)	02 (Au)		g/t(Au)	02 (Au)
$NOA-2$	.002.00	3.30	107.600			-				002,00	3.30	107,600
Alliance	-	-	-	555,800	t 90	33.952			-	555,800	i 90.	33.952
NOA-7/8			-				216,000	5.40	37,500	216,000	5.40	37,500

Snowden has concluded the following from its assessment of the Burnakura project remnant resources:

the Alliance resource is related to narrow BIF horizons and extends both along strike and at depth from the existing Alliance open pit:
the resource estimate is based on the previous owners database and is currently considered by SBM to be uneconomic;
the NOA-2 residual resource represents a large but discontinuous zone of mineralisation related to a quartz-veined shear below the base of the open pit;
an underground resource of 193,000 t at 8.59 g/t has been calculated for 8 high-grade lodes contained within this resource;
the NOA-7/8 residual resource, located to the immediate NNW of NOA-2 along the same host structure, extends from the base of the completed open pit and has a more simple geometry;
the NOA-7/8 resource has been modelled using open pit parameters and valued accordingly;
the high-grade core of the NOA-7/8 resource, which averages 4 m in width and approximately 8 to 9 g/t Au in grade, was evaluated for its underground potential, however, the overall grade is considered by SBM to be insufficient to justify underground development;
metallurgical recoveries of around 70% are estimated for NOA-7/8 ore due to the presence of preg-robbing graphitic shales;
all resource ounces are subject to a 1.5-2.5% royalty to Homestake;
the remnant resource ounces are therefore considered to be of moderate quality with the exception of Alliance;
SBM has recently entered into a joint venture with Coronet Resources Ltd over the tenements containing the defined resources (namely M51/116, 117, 177, 178, 252, 414, 478 and P51/2346) whereby Coronet Resources Ltd can earn up to 70% with the expenditure of \$2M within 30 months including a minimum expenditure of \$100,000 in six months; and
for the purpose of this valuation, Snowden has elected to value SBM's interest at 100% given the current uncertainty in Coronet Resources earning its full entitlement.

Snowden has concluded the following from its assessment of the Burnakura project tenements:

the low overall grade and discontinuous nature of the Alliance mineralisation in M51/117 does not warrant any consideration as an underground exploration target:
potential extensions to the gold mineralisation previously exploited in several other small open pits within M51/116, 117 and 178 have not been evaluated in any detail, but are most likely to represent at best, small tonnage targets;
exploration work along the northern extensions of the NOA host structure, which is concealed under deep alluvial cover, has been unsuccessful to date: and
patchy gold mineralisation has been identified to the immediate west of a small granite stock in M51/178.

$1.6.8$ Caledonian

SBM's 100%-owned Caledonian project area is located approximately 35 km SW of Meekatharra between the Aladdin and Bayley's Island projects.

Project Resources

A remnant resource extends from the former Caledonian open pit within M51/31 which is currently considered uneconomic by SBM and has been excluded from its June 2003 formal resource statement.

					Table 1.10 Caledonian Project Resources
Proiect	Indicated Measured					Inferred		Total
		2/t(Au)	02 (Au)	2/1 (Au)	Oz(Au)		2/1(Au)	Oz (Au)	2/t(Au)	Oz (Au)
Caledonian Deeps		$\overline{\phantom{0}}$	$\sim$	4.70 4.70. 175.000. 75,000 26.444 26,444 $\overline{\phantom{0}}$

Snowden has concluded the following from its assessment of the Caledonian remnant resource:

the Caledonian open pit was completed in October 2002 after mining two north-plunging ore shoots hosted along a sheared granite/greenstone contact;
the Caledonian Deeps resource extends below the former Caledonian South pit and has been modelled using underground mining parameters. An underground mining study indicated a high degree of mining risk and a marginal return at current gold prices; and
the resource ounces are therefore considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Caledonian project tenements:

a potential high-grade shoot extending to the north of the Caledonian pit was drill tested with little encouragement;
extensive drilling along the granite/greenstone contact to the north of the Caledonian pit about numerous historic workings has encountered sporadic zones of mineralisation, however, open pit development is unlikely due to their small tonnage potential and the presence of the Great Northern Highway:
a small section of the Nannine Reef, which is a sub-parallel structure to the immediate east of the Caledonian pit, passes through M51/31; and
minor gold workings developed on BIF within M51/33 have not been assessed in any detail to date.

1.6.9 Chesterfield

SBM's 49%-owned Chesterfield project area is located approximately 50 km NW of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Chesterfield project tenements:

the Chesterfield project was the subject of a joint venture with Independence Gold NL who earned a 51% interest by spending \$500,000 over 2 years. A joint venture has recently been signed with Aurex Consolidated Ltd whereby Aurex can earn 60% of the Chesterfield project through expenditure of \$400,000 by June 2007 and a concluding payment of \$250,000 each to Independence and SBM. If these conditions are met both Independence and SBM will each retain 20% free carried interest to commencement of a bankable feasibility study;
a recent drilling program by Independence Gold has confirmed the presence of the small high-grade shoots previously outlined by SBM at the historic Dorothy and Margueritta mines (M51/353) returning grades up to 7 m at 26.7 g/t Au, 3 m at 8.9 g/t Au and 5 m at 6.0 g/t Au at Dorothy;
infill soil sampling by Independence Gold at the Dorothy and Margueritta prospects has outlined two anomalous corridors extending along strike from these prospects:
reconnaissance soil sampling over E51/917 has outlined several new anomalies not associated with any gold workings;
earlier drilling had downgraded the potential of the Big Ben gold workings in P51/1441 although recent drilling by Independence returned intercents of 2 m at 5.51g/t Au and 1 m at 6.53g/t:
there has been limited exploration work completed to date about the Maranoa gold workings in M51/451, and
for the purpose of this valuation, Snowden has elected to value SBM's interest at 49% given the current uncertainty in Aurex earning its full entiflement.

$1.6.10$ Chunderloo

SBM's 100%-owned Chunderloo project area comprises two tenement groups located approximately 20 km to the south and west of Meekatharra. There are currently no defined resources within the project area.

Snowden has concluded the following from its assessment of the Chunderloo project tenements:

the northern group of tenements at Chunderloo covers a portion of the Abbotts greenstone belt to the immediate south of the Abbotts project;
the northern EL application (E51/1043) has not been explored to date by SBM;
the southern tenements cover the granite/greenstone contact along the main Meekatharra greenstone belt;
with the exception of M51/79, all the southern tenements are Mining Lease applications which have not been explored to date by SBM; and
exploration results from M51/79 were mostly negative with the exception of some historic gold-copper workings where drill testing has indicated the notential for a small tonnage resource.

1.6.11 Cne

SBM's 51%-owned Cae project area is located approximately 100 km SW of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Cue project tenements:

the project tenements are the subject of a joint venture with Cougar Metals who currently has a 49% interest and an entitlement to earn up to 80%
in 2002, Cougar tested numerous small, historic gold workings developed on quartz veins in the Cue Tonalite;
some of the better RC drill intercepts reported to date are from the Light of Asia prospect (including 6 m at 22.73 g/t Au, 2 m at 12.72 g/t Au) in $M20/3$ :
in 2003, Cougar drilled a further 176 RC holes (6,515 m) and tested another 23 prospects throughout the project area. The drilling intersected further quartz vein zones associated with the historic gold workings and several high-grade intervals;
several other gold workings remain untested and there is also the potential for significant eluvial and tailings-hosted gold resources;
no potential resource areas have been indicated from the work completed to date; and
based on the exploration results to date, Snowden has elected to value SBM's interest at 51%.

1612 Highway

SBM's 100%-owned Highway project area is located directly south of Meekatharra.

Project Resources

Mining of the Magazine open pit in M51/256 was completed in November 2001. A remnant resource extends below the open pit.

						Table 1.11 Highway Project Resources
Project		Measured		Indicated			Inferred			Total
		g(t(Au))	02 (Au)	2/t(Au)	oz (Au)		g(t(Au))	-62 (Au)		g(t(Au))	02 (Au)
Magazine	$\overline{\phantom{a}}$		$\overline{\phantom{0}}$	$\overline{\phantom{a}}$	$\overline{\phantom{0}}$	782.000	. 60	37.100	782.000	1.60-	37.100

Snowden has concluded the following from its assessment of the Magazine remnant resource:

the remnant Magazine resource comprises pods of low-grade mineralisation in fresh rock below the base of the recently completed open pit;
previous open pit mining returned a reasonable reconciliation in tonnes but was down on predicted grade (-9%)
the future viability of this resource will be dependent on the outcome of mining studies for the immediately adjoining Grants and Allons Fisher deposits within the Meekatharra project area (see below); and
the resource ounces are therefore considered to be of low to moderate quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Highway project tenements:

the grade of the mineralisation at Magazine diminishes at depth and therefore offers no potential below the limits of drilling;
sporadic zones of low-grade gold mineralisation have been outlined to the immediate south of Magazine at the Hawk Hill prospect in M51/256 along the same host shear structure within mafic/ultramafic rocks;
the Hawk Hill prospect may host potential for further small, low-grade resources and is pending further evaluation work;
drilling completed to date further to the south has encountered sporadic zones of low-grade gold mineralisation associated with the main shear structure and in BIF units: and
patchy gold mineralisation has been outlined about some historic gold workings developed on BIF in M51/503.

1.6.13 Kurara East

SBM's 100%-owned Kurara East project area is located approximately 45 km SW of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Kurara East project tenements:

the project area covers the northern extent of the Reedy's line along a sheared granite/greenstone contact;
the contact zone is extensively concealed by variable depths of cover including lake sediment which has limited the understanding of the project's geology;
encouraging results were obtained from drill testing of the contact zone in the south of the project area in M51/235 and M51/381 where patchy, low-grade gold mineralisation was intersected;
the eastern portion of the project area has been tested by wide-spaced aircore drilling. A 10 km long zone of anomalous gold geochemistry has been outlined adjacent to the western margin of the Turn of the Tide project area (see below);
the anomaly is open to the north and south and hosts the Bluebush (M51/455 and E51/814) and Mingah (M51/455, E51/814 and P51/2038) prospects:
gold mineralisation at these prospects is associated with sulphidic quartz veinlets mainly in altered granite and to a lesser extent in the adjoining greenstones, and is related to east-west trending dolerites emplaced along fracture systems;
aircore drilling at the Bluebush prospect returned numerous anomalous 'end of hole' assays, including a best intercept of 4 m at 5.61 g/t Au;
aircore drilling at the Mingah prospect returned a best intercept of 16 m at 1.42 g/t Au (including 8m at 2.17g/t); and
follow-up programs have been proposed including additional aircore and RC drilling.

1.6.14 Malanti Projects

SBM has a 75% interest in the Darlot East and Boorara gold projects in the Goldfield Region of WA and the Mt Egerton gold project in Victoria.

Project Resources

An unclassified underground resource of 66,000 t at 26 p/t Au has been historically reported for the Mt Egerton project (MIN5325), although the basis for this estimate is uncertain and has therefore been considered in the exploration potential of the project.

Exploration Potential

Snowden has concluded the following from its assessment of the Malanti project tenements:

the Boorara project (P26/2983 and 2981, applications P26/2980, 2982 and applications M26/663-4 and 693) is a contiguous tenement holding along the highly mineralised Boorara shear zone, located to the immediate east of Kalgoorlie, which is prospective for gold and nickel mineralisation;
there is poor outcrop within the tenements which have been subject to limited systematic exploration;
rock chip sampling of an ultramafic-sediment contact on P26/2983 has indicated potential for disseminated nickel sulphide mineralisation with a best result of 0.65% Ni and 0.29% Cu;
the Darlot East exploration licence application (E37/637), located to the east of Barrick's Darlot Gold Mine, is an early stage exploration project that covers mostly granite with minor greenstone;
the Mt Egerton project, located to the east of Ballarat in Victoria, consists of a single Mining Licence (MIN5325) that covers a significant historical gold mine (+0.5 Moz production):
an underground resource of 66,000 t at 26 g/t Au has been estimated from the drilling completed to date although there is currently a poor understanding of the geological controls of the mineralisation; and
Snowden has been advised by SBM that there is currently a degree of uncertainty regarding permitting for future mine developments in this region. Snowden has therefore applied an 80% discount to its valuation to account for this uncertainty.

1.6.15 Meekatharra

SBM's 100%-owned Meekatharra project is located to the immediate east and NE of Meekatharra. The southern portion of this tenement package covers the Paddys Flat area which has previously been discussed in this report.

Project Resources

Numerous underground and open pit resources have been outlined within the project tenements. The Alberts East and Vivian/Consols underground resources and the Mickey Doolan and Macquarie open pit resources quoted in the table below are net of the mining inventory previously considered in this report. There is no remnant resource for Prohibition. The Grants Central, Grants and Allons Fisher resources are currently being reassessed by SBM in conjunction with the Magazine resource (Highway project) and have not been included SBM's June 2003 formal resource statement. The Lukes Creek, Danube, Globe West, Globe Sleeper, Halcyon, Halcyon West, Commodore and Maid Marion resources are currently considered uneconomic by SBM and have been excluded from SBM's June 2003 formal resource statement.

					Meekatharra Project Resources	Table 1.12
Project		Measured			Indicated			Inferred			Total
		g/t	02.	t	g/t	67.		g/t	67.		g/t	0Z
		(Au)	(Au)		(Au)	(Au)		(Au)	(Au)		(Au)	(Au)
Mickey Doolan	$\overline{\phantom{a}}$		٠		-		2,528,000	0.90.	72,025	2,528,000	0.90	72,025
Vivian/Consols	٠		$\overline{\phantom{a}}$		-		129.000	10.10	41.714	129,000	10.10	41,714
Macquarie	$\overline{\phantom{a}}$	۰	$\overline{\phantom{a}}$		۰.	-	78.000	2.60	6.521	78,000	2.60	6,521
Ingliston	$\overline{\phantom{a}}$		۰.		$\tilde{\phantom{a}}$		761000	1.5	33,000	761,000	.50	33,000
Allons Fisher	۰		۰.	633.000	1.80	36,633	274,000	1.70.	14.976	907.000	-80	51,608
Grants Central	۰		$\overline{\phantom{0}}$	176.000	1.70	9.619	26,000	1.50	1,254	202,000	1.70	10,873
Grants	٠		٠.	298.000	1.60	15,329	109,000	1.50	5,257	407.000	1.60	20,586
Five Mile Well	٠		۰.				339,000	1.80.	18,200	339,000	1.80	18,200
Lukes Creek	-		$\overline{\phantom{0}}$	349,000	2.00	22.100	173,000	1.60	9,200	522,000	1.87	31,300
Danube	۰		$\overline{\phantom{0}}$	317,000	1.60	16,300	105,000	1.20	3,900	422,000	1.49	20,200
Globe West	-		$\overline{\phantom{0}}$	163,000	1.70	8.900	183,000	1.30	7.600	346,000	1.48	16,500
Globe Sleeper	-		$\overline{\phantom{0}}$	408,000	1.40	18.400	420,000	1.00	13.500	828,000	1.20	31,900
Alberts East	$\overline{\phantom{a}}$		$\overline{\phantom{0}}$	281,000	2.01	18.134	357,000	3.80	43.600	638,000	3.01	61.734
Halevon*	$\overline{\phantom{a}}$	٠	٠		٠		139,000	3.80	17.000	139,000	3.80	17,000

				Meekatharra Project Resources	Table 1.12
Haleyon West*	-	-		-	-	64,000	70	3,500	64.000	- 70	3,500
Mudlode		$\overline{\phantom{0}}$	109.000	2.20	7,700	-	$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	109.000	2.20	7.700
Commodore*		-	-	-	-	619,000	. 70	33.000	619,000	.66	33.000
Maid Marion*	$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	٠		180,000	2.35	13,600	180,000	2.35	13,600
* - Dominion resource estimate

Snowden has concluded the following from its assessment of the Meekatharra project remnant resources:

apart from the Macquarie, Vivian/Consols and Alberts East resources which are discussed elsewhere in this report, the remaining resource ounces are therefore considered to be of low to moderate quality due to their generally low-grade and possible refractory nature at depth;
the consolidation of tenements at Paddys Flat with the adjoining Highway project held by SBM will enable a more comprehensive mining review of the Allons Fisher/Grants line of resources which remain open at depth with Magazine; and
the remaining resource are in the early stages of assessment.

Exploration Potential

Snowden has concluded the following from its assessment of the Meekatharra project tenements:

the geology of the Paddys Flat tenements is dominated by a package of mafic-ultramafic volcanic rocks with minor sediments and porphyry intrusions. The structure and mineralisation is controlled by the NNE-trending Grants-Haveluck and Paddys Flat shear zones in the south and the Grants-Havelack shear in the north of the project:
most previous mining and exploration activity was concentrated in the southern portion of the project area around Paddys Flat;
the exploration potential of the Prohibition and Vivian Consols underground deposits and the Mickey Doolan and Macquarie open pit resources have been considered elsewhere in this report;
it is noted that a large portion of M51/438 is occupied by the Meekatharra town site;
reconnaissance exploration work has been completed to the north of Paddys Flat but with limited success;
some zones of anomalous bedrock gold geochemistry have been outlined from reconnaissance RAB drilling associated with granitoid intrusives and sheared ultramafic-mafic contacts within tenements P51/1809, P51/1890 and P51/1859-62;
the Five Mile Well and Maid Marion resources remain open at depth;
the Five Mile Well remnant resource is located within a broader bedrock gold anomaly along a mafic-ultramafic contact; and
exploration targets in the area north of Paddys Flat are likely to be for low-grade, open pit resources.

$1.6.16$ Mikhaburra

SBM has a 72%-100% interest in the Mikhaburra project tenements located in the Peak Hill region approximately 75 km to the north of Meekatharra. There is small, unclassified resource at Whittakers Shoot in M51/40 which has been considered in the exploration potential of the project.

Exploration Potential

Snowden has concluded the following from its assessment of the Mikhaburra project tenements:

an unclassified resource of 63,400 t at 2.47 g/t Au (uncut) has been outlined extending at depth from the historic Whittakers Shoot mine workings within M51/40 in which SBM has a 72% interest;
the underground potential below the current resource is considered limited due to the low overall grade of the mineralisation;
the gold deposit is hosted in a NNW-trending quartz vein zone that has been explored over a 500 m strike length with no positive results; and
the potential for further gold deposits within M51/40 and P51/1553 has been downgraded by the exploration work completed to date.

$1.6.17$ Nannine

SBM's 100%-owned Namine project area is located approximately 35 km SW of Meekatharra.

Project Resources

Two resources have been outlined within the Namine project at Luggs Reward within M51/486 and at Namine Reef within M51/75. The Luggs Reward resource is currently considered uneconomic by SBM and has been excluded from its June 2003 formal resource statement.

						Table 1.13 Nannine Project Resources
Project		Measured			Indicated			Inferred			Total
		2/t(Au)	oz(Au)		$2/1$ (Au)	62 (Au)		2/t(Au)	02 (Au)		2/1(Au)	oz(Aa)
Namine Reef	-		$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	-	267.000	2.10	18.000	267,000	2.10	18.000
Luggs Reward	$\overline{\phantom{0}}$	-	$\overline{\phantom{0}}$	$\overline{\phantom{a}}$	-	-	55,000-	2.60	4,598	55,000	2.60	4,598

Snowden has concluded the following from its assessment of the Luggs Reward and Nannine Reef resources:

the Namine Reef deposit lies alongside the Caledonian open pit within a sub-parallel shear zone and encompasses a line of historic workings developed on a high-grade quartz reef;
the open pit resource comprises low-grade, remnant mineralisation surrounding the high-grade reef deposit which was extensively exploited;
limited drilling has outlined a small, low-grade resource associated with quartz veining in a shear zone at Lugg's Reward in the north of the project area. No further work has been undertaken on this resource since 1996; and
the resource ounces are therefore considered to be of low quality.

Snowden has concluded the following from its assessment of the Nannine project tenements:

the project area covers a structurally complex greenstone succession that wraps around the west of the Norie pluton and surrounds the Caledonian, Bailey's Island, Aladdin and Three Sisters projects;
several north-trending shear structures (including Caledonian and Aladdin) have been defined within the project area;
the project area has not been explored in any great detail other than the strike extensions of the known gold deposits which at best has only defined zones of patchy gold mineralisation;
the underground potential below the limits of the historic workings at Nannine Reef has not been assessed to date;
recent reconnaissance aircore drilling in the NW of the project area failed to outline any gold anomalies;
the southern half of the project is covered by Lake Annean and is therefore difficult to explore;
to the north of the Aladdin open pit there are minor historic gold workings developed on BIF; and
SBM has a 100% beneficial interest in M51/334 and M51/51 which is currently 50%-owned by Golden Shamrock Mines.

1.6.18 Norie

SBM's 100%-owned Norie project area is located approximately 25 km SW of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Norie project tenements:

the project area covers a concealed, sheared greenstone succession along the western margin of the Norie pluton;
at the 12 Mile prospect in M51/495, drill testing over a gold-in-soil anomaly surrounding historic gold workings has outlined a narrow zone of gold mineralisation associated with BIF. Further drill testing has been recommended over this target which has the potential to host a small resource:
assay results were disappointing from 5 lines of aircore drilling at the Samphire prospect in M51/495;
the untested Samphire SW prospect in M51/494 is a gold-in-soil anomaly associated with small gold workings and dry blowings and represents a target for BIF-hosted or disseminated (stockwork) gold mineralisation;
the Norie South prospect (M51/492 and 493) is an extensive (+6 km long), relatively untested gold-in-soil anomaly covering a sequence of BIF, mafies and porphyry hosting small historic gold workings;
the Kingy's gold workings on M51/39 were recently acquired by SBM and have been considered in the valuation of the surrounding tenement, M51/493;
the Petra anomaly is a concealed supergene related anomaly extending over 2.5 km in M51/494 and E51/259 (Poletle project). Drilling at depth has encountered anomalous to low-grade gold mineralisation associated with a wide zone of alteration and shearing about a granite/greenstone contact: and
no follow-up work has been carried out over several gold-in-soil anomalies in the west of the project area associated with greenstone xenoliths in granite (M51/492-3).

1.6.19 Poletle

SBM's 100%-owned Polelle project area is located approximately 30 km SSW of Meekatharra.

Project Resources

A large, low-grade Inferred Resource under 15 to 25 m of cover has recently been outlined at the Mulla Mulla prospect within E51/615. This resource, totalling 1.8 Mt at 1.2 g/t Au, is referred to as Mulla Mulla East and has previously been considered in this report.

Exploration Potential

Snowden has concluded the following from its assessment of the Polelle project tenements:

the project area mostly covers a concealed succession of sheared greenstone related to the regional-scale, NNE-trending Mt Magnet-Meekatharra shear zone along the eastern margin of the Norie pluton;
in addition to Mulla Mulla East, narrow intervals of low-grade gold mineralisation and broad zones of anomalous supergene-related gold mineralisation have been outlined at the adjoining Mulla Mulla West and Mulla Mulla Central prospects in E51/615;
the gold mineralisation is associated with quartz veining in a sheared felsic sequence near a granite contact;
reconnaissance aircore drilling on a 400 m x 200 m spacing along the eastern margin of the Norie Pluton to the south of Mulla Mulla has outlined further geochemical anomalies at the Kanji prospect in M51/615 and the Mini Ritchie prospect in M51/797 that warrant follow-up RC drilling;
the Baja prospect in E51/259 is a supergene related gold anomaly although no primary source for the mineralisation has been located from the deeper drilling completed to date;
anomalous gold aircore assays have been reported associated with the intersection of dolerite dykes and magnetic structures at the New Royal prospect in E51/259;
the Petra anomaly (refer to Norie project) extends into the south of E51/259;
a low-order gold anomaly has been outlined at the Ti Tree prospect in the south of the project area within E51/615; and
the completed Bassetts West open pit is located in M51/459.

$1.6.20$ Ouinns

SBM's 100%-owned Quinns project area is located approximately 55 km south of Meekatharra. There are currently no defined resources within the project area.

Snowden has concluded the following from its assessment of the Quinns project tenements:

the project area covers several historic gold workings, the most significant of which is the Two Jacks mine in M51/532;
there is no record of the results from previous RC drilling at Two Jacks although the quartz reef hosting the mineralisation is considered by SBM to have potential for an underground resource; and
no significant results were reported from the drill testing of other gold workings in the project area (Nuggety Hill in P51/1746 and Nowthanna in M51/19).

1621 Reedys

SBM's 100%-owned Reedys project area is located approximately 60 km SW of Meekathara.

Project Resources

Eight remnant resources extend from the former Missing Link West (M20/219), Boomerang Deeps (M51/92 and 233), Jack Ryan (M20/45 and 68), North Rand (M20/45), Rand Deeps (M20/45), Triton Deeps (M20/12), Triton North Deeps (M20/45) and South Emu (M20/12) open pits.

						Table 1.14 Reedys Project Resources
Project		Measured			Indicated			Inferred			Total
		g/t(Au)	02 (Au)		$g$ /t (Au)	62 (Au)		g/t(Au)	6z (Au)		2/t(Au)	02 (Au)
Jack Ryan	839,000	2.70	73,600							839,000	2.70	73,600
South Emu		۰		315,000	5.30	53.676	۰		$\sim$	315,000	5.30	53,676
Triton N Deeps		۰		217,000	5.70.	39.767		۰	٠	217,000	5.70	39,767
Triton Deeps			$\sim$	78.000	8.50	21,316			۰.	78,000	8.50	21,316
Boomerang
Deeps	-4	۰				٠	267,000	5.66	48,564	267,000	5.66	48,564
North Rand	0	0.00.	€	98,000	1.90	6,000				98,000	E.90	6,000
Missing Link
W	6.000	5.00	965	26,000	3.20	2.675	3.000	2.90	280	35,000	3.48	3,919
Rand Deeps						٠	130,000	5.00.	20.898	130.000	5.00	20,898

A recent review of these resources by SBM has led to the view that the Missing Link West resource is currently uneconomic and has been excluded from SBM's June 2003 formal resource statement.

Snowden has concluded the following from its assessment of the Reedys remnant resources:

the remnant Jack Ryan resource extends below and along strike of the existing open pit;
the Jack Ryan gold mineralisation is related to shallow, north-plunging quartz lodes and stockworks in sheared felsic volcanic rocks. Despite the good widths and grade of the mineralisation, the resource has no high-grade core amendable to underground extraction;
the deposit has been closed-off along strike but potential remains for repetitions at depth of the "bulge" zone previously exploited in the open pit;
the South Emu resource extends from the base of the existing open pit (90 m deep) to a depth of around 300 m and is associated with a steepplunging shoot in sheared ultramatic rocks. Further drilling has been recommended to evaluate the full extent of this shoot;
the grade of the resource is marginal with respect to underground mining. Potential metallurgical problems associated with the ore have yet to be assessed:
the Triton Deeps deposit is a steep-plunging lode in ultramatic rocks which was historically mined to a depth of approximately 350 m;
the resource surrounds the historic mine workings, however, the extent of previous stoping is currently unknown;
the Triton North Deeps resource is located to the immediate north of Triton Deeps and is geologically very similar although of lower grade;
the extent of stoping is currently unknown about the historically exploited deposit;
the Boomerang Deeps deposit (M51/92) extends for about 100 m below the base of the former underground mine (developed to approximately 220 m depth during mid-1990's) and could be brought back into production following dewatering;
the North Rand resource is a small, low-grade remnant open pit resource extending from the completed North Rand pit;
the Missing Link West resource is a small, medium-grade remnant resource extending from the completed Missing Link pit;
the Rand Deeps resource is a potential medium-grade, underground resource extending from the Rand open pit. No consideration has been given to evaluating the resource in terms of an expanded open pit scenario;
most of the resources are subject to a 1.5-2.5% royalty to Homestake; and
with the exception of the North Rand and Missing Link West resources, the remaining resource ounces are considered to be of low to moderate quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Reedys project tenements:

the gold deposits of the Reedys line are related to a major NNE-trending shear predominantly hosted in mafic to ultramatic rocks;
combined historical and recent production along the Reedys line has amounted to approximately 1 Moz;
the line has been systematically explored by the previous owners, Metana and GMA, with the remaining exploration potential being mostly restricted to the depth extensions of the former mines:
AngloGold has recently withdrawn from an agreement to earn a 51% interest in M51/233 and has retained no equity in the tenement;
Gold Fields (Australasia) subsequently entered into a joint venture in early 2003 over a tenement package covering portions of the Reedys, Turn of the Tide, Tough Go and Kurara East projects before withdrawing in late 2003;
no exploration work was carried out in the Reedy's project by Gold Fields; and
joint venture negotiations are in progress with another party over this tenement package.

$1.6.22$ South East Meekatharra

SBM's 100%-owned South East Meekatharra project area is located approximately 15 km south of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the South East Meekatharra project tenements:

the project area is located to the immediate east of the projected southern extension of the Paddys Flat line;
although the geology is considered favourable, the project area hosts no gold workings and is not concealed under any significant cover; and
the project has not been explored in any great detail and the results from the exploration work completed to date has mostly been negative. $\overline{\phantom{a}}$

1.6.23 South Junction

SBM's 100%-owned South Junction project area is located approximately 15 km SW of Meekatharra and covers the Bluebird processing plant.

Project Resources

Five remnant resources extend from the abandoned South Junction, Edin Hope and Bluebird open pits in M51/132 and the Bluebird East open pit in M51/491. Two small, low-grade undeveloped resources have been outlined at Ascot West and Ironbar in M51/132.

					South Junction Project Resources	Table 1.15
Project		Measured			Indicated			fuferred			Total
		g/t(Au)	0z(Au)		2/t(Au)	0z(Au)		g(t(Au))	oz(Au)		g/t(Au)	0z(Au)
Bluebird
Extension		-	$\overline{\phantom{a}}$	.656.000	1.80.	96,600	885.000	1.60.	45,525	2,541,000	1.73	141,125
Bluebird East			$\overline{\phantom{a}}$	2,117,000	1.20	81,700	38.000	1.60.	1,955	2,155,000	1.21	83,588
South Junction	172,600	1.76	9.767	98,500	2.50	7,917	12,600	2.35	952	283.700	2.04	18,636
Ironbar		-	$\overline{\phantom{a}}$	290,000	1.59.	14,783	140.000	1.50.	6.752	430,000	1.56	21,535
Ascot West			$\overline{\phantom{0}}$	252,000	$1.80 -$	14,584	31,000	1.60.	1,595	283,000	1.78	16,178
Edin Hone	52,300	1.88	3.161	36,200	2.01	2,339	1.000	1.55.	50	89,500	1.93	5,550
Bluebird Deeps		$\overline{\phantom{a}}$	$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	٠		135,000	7.30.	31,685	135,000	7.30	31,685

A recent review of these resources by SBM has led to the view that the Ascot West, Edin Hope and South Junction resources are currently uneconomic and have been excluded from SBM's June 2003 formal resource statement.

Snowden has concluded the following from its assessment of the South Junction resources:

the Bluebird Extension deposit is a remnant, low-grade resource that extends from the base of the completed Bluebird and Bluebird North open pits;
the resource is predominantly hosted in fresh rock. The Bluebird North pit is currently full of tailings and the Bluebird pit is flooded;
$\bullet$ a sustained improvement in the gold price may render this resource as economic in a single open pit development given its close proximity to the Bluebird mill:
the Bluebird Deeps resource extends at depth (150 to 400 m) from the southern end of the Bluebird Extension resource;
based on the limited drilling to date, the resource most likely comprises en-echelon high-grade lenses;
the South Junction resource comprises remnant, low-grade mineralisation extending from the base of the completed South Junction open pit;
the Bluebird East resource is a low-grade, remnant resource beneath the completed open pit between 90 m and 150 m depth;
the Edin Hope resource is a small, low-grade resource extending from the base of the recently completed open pit;
the Ironbar and Ascot West deposits are small, low-grade undeveloped resources; and
with the exception of the Ascot West, Edin Hope and South Junction resources, the remaining resource ounces are therefore considered to be of low to moderate quality.

Exploration Potential

Snowden has concluded the following from its assessment of the South Junction project tenements:

the open pit potential of the project has been fully assessed;
the exploration potential within the project area lies in its underground resource potential, in particular the Bluebird Deeps deposit; and
the underground potential of Polar Star in north of the South Junction pit has not been assessed to date due to access restrictions.

1.6.24 Stakewell

SBM's 100%-owned Stakewell project area is located approximately 55 km SW of Meekatharra.

Project Resources

A small, underground resource extends from the base of the former Kohinoor open pit within M51/448.

					Table 1.16 Stakewell Project Resources
Project	Measured			Indicated			Inferred			Total
	$Q$ /t $(Au)$	0z (Au)		2/t(Au)	62 (Au)		$\mathbf{g}/\mathbf{t}$ (Au)	02 (Au)		g/t(Au)	62 (Au)
Kohinoor Deeps			33,000	$9.30 -$	9.867	7.000	10.20	2.296	40,000	9.46	12,163

Snowden has concluded the following from its assessment of the Kohinoor Deeps resource:

the underground resource at Kohinoor is based on a polygonal estimate by the former owner;
there is some intertainty regarding the geological interpretation used in the resource estimate;
$\blacksquare$ development of this resource as it currently stands is considered unlikely due to its limited size (ie, could not sustain the required development costs) and a 2.5% production royalty;
AngloGold has recently withdrawn from an agreement to earn a 51% interest in the project and retains no equity; and
the resource ounces are therefore considered to be of low to moderate quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Stakewell project tenements:

the project area covers a sequence of mafic to ultramafic rocks intercalated with BIF horizons which host most of the known gold mineralisation;
exploration work completed to mid 2002 had not yielded any encouraging results; previous drilling was determined to have been largely parallel to the principal vein direction and a subsequent 37 hole aircore drilling program completed in late 2002 recorded several significant gold intersections;
the program established quartz vein continuity of up to 250 m in a NNW-trending zone, open along strike; and
better drill intercepts include 18 m at 2.11 g/t Au and 4 m at 2.56 g/t Au.

$1.6.25$ Three Sisters

SBM's 100%-owned Three Sisters project area is located approximately 34 km SW of Meekatharra to the immediate east of the Nannine project.

Project Resources

The undeveloped Three Sisters open pit resource is located within M51/203.

						Table 1.17 Three Sisters Project Resources
Proiect		Measured			Indicated			Inferred			Total
		g(t(Au))	02 (Au)		g/t(Au)	0z(Au)		Q/t(Au)	0z(Au)		g/t(Au)	02 (Au)
Three Sisters	$\overline{\phantom{a}}$		$\overline{\phantom{0}}$	151.000.	1.40	6,797	73,000	4.70	1,031	224,000	2.48	17,828

A recent review of this resource by SBM has led to the view that the resource is currently uneconomic and has been excluded from SBM's June 2003 formal resource statement.

Snowden has concluded the following from its assessment of the Three Sisters resource:

the low-grade resource encompasses a group of historic workings developed within BIF at the intersection of a shear; and
the resource ounces are considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Three Sisters project tenement:

exploration work has been restricted to the west of the tenement due to the presence of Lake Annean and an aboriginal sacred site; and
$\bullet$ the results from this work which tested several historic gold workings has not been encouraging.

1.6.26 Tough Go

SBM's 100%-owned Tough Go project area is located approximately 50 km south of Meekatharra to the immediate east of the Reedy's project. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Tough Go project tenements:

the tenements cover several structures subsidiary to the main Turn of the Tide shear which is located to the immediate west of the project; and reconnaissance aircore and RAB drilling by Gold Field's along the boundary of M20/71, 107 and 249 as part of the Reedy's joint venture
confirmed a large area of low order gold anomalism and several discontinuous high-grade intersections.

1.6.27 Tuckanarra

SBM's 100%-owned Tuckanarra project area is located approximately 65 km SW of Meekatharra.

Project Resources

A remnant resource extends from the completed Maybelle North open pit within M20/242. The resource is currently considered uneconomic and has been excluded from SBM's June 2003 formal resource statement.

					Table 1.18 Tuckanarra Project Resources
Proiect	Measured			Indicated		Inferred			Total
	2/1(Au)	02 (Au)		$\mathbf{g}/\mathbf{t}$ (Au)	oz(Au)	g/t(Au)	62 (Au)		v/t(Au)	$0.2$ (Au)
Maybelle North			60.000	2.60	5.016			60.000	2.60	5.016

Snowden has concluded the following from its assessment of the Maybelle North remnant resource:

the resources are subject to a 2% production royalty; and
the remnant resource ounces are considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Tuckanaria project tenements;

numerous historic gold workings developed on BIF are scattered throughout the project area;
most of the project area was comprehensively explored by Metana;
AngloGold has recently withdrawn from its agreement to earn a 51% interest in the project and has retained no equity;
exploration work by AngloGold concentrated on a palaeochannel to the south of Maybelle in M20/242;
aircore drilling has outlined two significant bedrock gold anomalies (+0.5 ppm Au); and
significant drill intersections within this anomaly have included 2m at 16.6 $g/t$ Au, 2m at 2.3 $g/t$ Au, 9m at 1.16 $g/t$ Au and 12m at 1.29 $g/t$ Au.

1.6.28 Turn of the Tide

SBM's 100%-owned Turn of the Tide project area is located approximately 55 km SW of Meekatharra to the immediate east of the Reedy's project.

Project Resources

Two resources have been outlined at Paddys West and Tough Go Laterite within M20/249. Both resources, which are subject to a 1.5-2.5% royalty, are currently considered uneconomic and have been excluded from SBM's June 2003 formal resource statement.

						Table 1.19 Turn of the Tide Project Resources
Project		Measured			Indicated			Inferred			Total
		2/t(Au)	0z(Au)		2/t(Au)	62 (Au)		g/t(Au)	62 (Au)		p/t(Au)	oz(Au)
Paddys West	-	-		46,000	2.90	4,289	$\overline{\phantom{a}}$			46,000	2.90	4,289
Tough Go
Laterite				15,000	.90.	916	-			15,000	1.90	916.

Snowden has concluded from its assessment of the Paddys West and Tough Go Laterite resources that both resources are small and low-grade and therefore of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Turn of the Tide project tenements:

the gold deposits within the project area are hosted along a NE-trending shear, referred to as the Turn of the Tide line, which is a sub-parallel structure to the east of the Reedy's line;
the exposed central and southern extent of the Turn of the Tide line within the project area was extensively explored and exploited in several small open pits by Metana:
the northern extent of the shear is concealed under shallow cover. Recent exploration work by SBM in E51/348 has outlined a coherent goldarsenic bedrock anomaly at the Cassia prospect within altered, sheared and quartz veined mafic and felsic lithologies proximal to a swarm of cross-cutting dolerite dykes; and
recent exploration work within the Kurara East project along the western boundary of the Turn of the Tide project tenements has outlined strong gold anomalies at the Bluebush and Mingah prospects that extend into M51/237.

1.6.29 Wanganui

SBM's 100%-owned Wanganui project area is located approximately 30 km SW of Meekatharra.

Project Resources

A remnant resource extends from the former open pits at Wanganui North and South and an undeveloped resource has been outlined at Wanganui Central. Both resources are contained within M51/377 and are currently considered uneconomic and have been excluded from SBM's June 2003 formal resource statement.

					Wangani Project Resources	Table 1.20
Proiect		Measured			Indicated		Inferred			Total
		g(t(Au))	6z (Au)		$g$ / $f(Au)$	0z(Au)	g(t(Au))	02 (Au)		g/t(Au)	02(Au)
Wanganui N & S	103,000	, 97	6.524		$\overline{\phantom{a}}$	$\sim$			103,000	47ء	4,868
Wanganui Central	102,000	. 27	4,165	. .	A				102,000	27ء	4,165

Snowden has concluded the following from its assessment of the Wanganui project resources:

the resources are hosted by silicified shear zones in granite;

the Wanganui North and South resources extend for up to 30 m below the current pit design within hard, fresh granite;

$\bullet$ the lower grade Wanganui Central resource is unlikely to be developed given the marginal return from the Wanganui North and South open pits; and
the resource ounces are therefore considered to be of low quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Wanganui project tenements:

the established resources have been closed-off along strike and do not warrant consideration as underground exploration targets given the low overall stade of the mineralisation: and
limited exploration has been carried out over the remaining project tenements, several of which are still in the stage of application. ٠

1.6.30 Yagahong

SBM's 100%-owned Yagahong project area is located approximately 35 km SE of Meekatharra. There are currently no defined resources within the project area.

Exploration Potential

Snowden has concluded the following from its assessment of the Yagahong project tenements:

the project covers the NW strike extent of the Gabanintha gold mining centre;
there are no details available on the extensive previous exploration carried out along this zone in E51/960;
previous RAB drilling in application M51/789 along a line of historic gold workings developed on quartz veined mafic xenoliths in granite encountered three narrow high-grade intercepts of gold; and
a shear-related resource of around 2.5Mt at 0.89% Cu was outlined at Copper Hills in E15/960. The associated gold mineralisation is considered by SBM to be low-grade, narrow and discontinuous.

1.6.31 Yaloginda

SBM's 100%-owned Yaloginda project area is located to the immediate SW of Meekatharra.

Project Resources

Two remnant resources extend from the former open pits at South Gibraltar-Mystery in M51/190 and Surprise in (M51/211). The Batavia remnant resource within M51/187 is exclusive of the reserve previously considered in this report. Three other resources have been outlined at Rhens West in M51/28, Rock Lee South in M51/27, and at Luke's Junction within M51/180. Apart from Batavia, South Gibraltar-Mystery and Lukes Junction, the remaining resources are currently considered uneconomic and have been excluded from SBM's June 2003 formal resource statement.

						Table 1.21 Yaloginda Project Resources
Project		Measured			Indicated			Inferred			Total
		g/t	02		y/t	67		g/t	02		$y$ t	62.
		(Au)	'Au}		(Au)	(Au)		(Au)	(Ав)		(Au)	(Au)
Surprise	$\overline{\phantom{a}}$		-				4.103.000	0.77	101,574	4,103,000	0.77	101.574
S Gibraltar - Mystery			-	465,000	1.40	20,600			$\overline{\phantom{a}}$	465,000	1.40	20,600
Batavia			-		-		30.000	3.80.	3,673	30,000	3.80	3,673
Luke's Junction			۰	201,000	1.80	11,632			۰	201,000	1.80	11,632
Rock Lee South			-				526,000	0.78	13,191	526,000	0.78	13,191
Rhens West			$\overline{\phantom{a}}$				209.000	1.30	8,735	209,000	1.30	8,735

Snowden has concluded the following from its assessment of the Gibraltar project resources:

the gold deposits within this project area are mostly hosted along the same structure that hosts the Bluebird South Junction deposits to the immediate south:
the Surprise deposit is a large, low-grade $(4)$ g/t Au) resource associated with a quartz stockwork zone in a porphyry surrounding the former open pit mine to the north of the Bluebird East mine;
the South Gibraltar-Mystery deposit is a low-grade remnant resource that lies beneath the existing open pit;
the Rhens West deposit is a small, low-grade, undeveloped resource;
Rock Lee South is an undeveloped, discontinuous, low-grade resource hosted in BIF;
the Batavia resource represents the remnant mineralisation about a planned small open pit development;
Luke's Junction is an undeveloped, low-grade resource; and
with the exception of Batavia, South Gibraltar-Mystery and Lukes Junction, the remaining resource ounces are considered to be of low quality.

Snowden has concluded the following from its assessment of the Yaloginda project tenements:

the open pit potential of the main Gibraltar line has been downgraded by extensive previous exploration except for the historic Baumgarten gold workings on M51/91:
the depth extensions of the Karangahaki mineralisation in M51/28 below the historic underground workings remains untested to date;
recent exploration has concentrated over two NNE-trending lines to the immediate west of the main Gibraltar line, namely the BIF related Rock Lee line and Batavia shear which were both exploited historically;
the high-grade core to the Batavia shoot remains relatively untested at death; and
the Bitches Box prospect to the south of Surprise may host potential for a small open pit resource.

PAULSENS GOLD PROJECT $2.0$

$2.1$ OVERVIEW

Taipan has a 100% interest in the Paulsens project tenements which are located 200km west of Paraburdoo in the Ashburton Region of WA. The Paulsens gold deposit is located within M08/99 has been sporadically exploited in its upper levels since the 1930's. Other small gold and base metal workings are found elsewhere in the project tenements.

Several companies have evaluated the Paulsens deposit since the early 1980's, prior to Taipan's acquisition in 1993. Deeper drilling of the deposit by Taipan intersected high-grade gold mineralisation in three main quartz zones within a structurally complex geological setting. Interpretation of individual ore outlines between sections has been difficult and still poses the largest risk to the project.

There has been a range of mining studies completed on the gold resource including open pit and underground developments and a combination of both. The open pit option envisaged development to a total depth of 195 m with a large upfront capital requirement for the pre-strip and processing facility. A smaller open pit and underground development was also considered but also required significant upfront capital. An underground study currently in progress has formed the basis of Snowden's valuation.

The total open pit resource for Paulsens as at June 30 2003 is summarised in the following table:

						Table 2.1 Paulsens Gold Project Resources
Proiect		Measured			Indicated			Inferred			Total
		g(t(Au))	02 (Au)		-g/t (Au)	87. (Au)		g/t (Ан).	82 (Ан)		g/t (Au)	0.5 (Au)
Paulsens	- 103,000 ،	5.2	182.900	2.334.000	4.4	328,700	532,000	3.8	65.700	3.969.000	4.5	577,400

A high-grade resource estimate has also been completed for Paulsens which has not been formally reported.

PROJECT RESOURCES $2.2$

Snowden has undertaken a high level desktop review of the Paulsens high-grade gold resource estimate generated in early 2002 by SBM.

The current high-grade resource model including supporting assay and geology data was supplied to Snowden by SBM in digital format. In addition to the digital data, a complete set of hard copy geological and grade cross sections were supplied. Two reports, one by Golder Associates Pty Ltd (Golder) and the other by Roger Marjoribanks (Marjoribanks) were also supplied. The comprehensive Golder report (October 2001) details the resource modelling work undertaken for the Paulsens optimisation project and includes a detailed description of the Paulsens database and associated quality data. The Marjoribanks report (June 2002) details the structural controls and main characteristics of the Paulsens gold mineralisation and implications with respect to the resource estimation process.

Resource database

There have been several drilling campaigns undertaken on the Paulsens deposit by various exploration companies including CRA Exploration (1987-89), Hallmark Gold (1992) and Taipan Resources (1997-2001).

Approximately 80% of drill hole intersections within the high-grade (>4 g/t Au) domains were obtained from reverse circulation (RC) drilling at 1 m intervals. The remaining intersections (20%) within the high-grade domains were drilled by either diamond drilling (DD) or reverse circulation (RC) drilling with a diamond tail. The Golder report (2001) concluded that mixing of RC and DD data did not introduce assay bias or down hole grade smearing.

Snowden notes that the current resource estimates are based on relatively few 1 m composited grade samples. The Upper Zone (UZ) contains 332 composites, the Central Zone (CZ) contains 118 composites and the Lower Zone (LZ) has 167 composites. On average, each composite is equivalent to approximately $300 \text{ m}^3$ of ore material or $600$ oz of gold for the high-grade resource.

In a high nugget gold environment, the sparsity of data within the high-grade domains constitutes a high risk to the resource estimation process, as there is insufficient data to adequately represent the inherent characteristics of the in situ mineralisation. Golder (2001) also suggest that there may be a significant coarse gold component to the Paulsens assay data, and this will be especially prevalent in the high-grade domains.

A proposed underground trial mining operation and collection of a 50,000 tonne bulk sample is proposed by Taipan. When undertaken this will improve understanding of the inherent characteristics of the in-situ mineralization, increase confidence and assist in the mining and milling optimisation studies.

Geological and grade controls

Snowden has reviewed the current high-grade domains for the Upper Zone, Central Zone and Lower Zone at Paulsens both in hard copy and digitally in 3-D using the Vulcan geological modelling package. Snowden has concluded from observations of grade intercepts and histograms of composite grades that a nominal cut-off grade of 4 g/t Au or greater was used.

At deposit scale, the geology, structural interpretation and continuity of the high-grade gold mineralisation is well understood. However, at the local level there is still a large degree of subjectivity with respect to the high-grade interpretation, with various modelling interpretations being equally likely.

This uncertainty could have significant implications with respect to the veracity of the current resource estimates. This uncertainty can best be resolved during the bulk sampling and mining stage where detailed mapping, sampling and structural studies can be undertaken.

The majority of the grade boundaries were defined using RC drilling with a 1 m sampling interval. Therefore, the resulting top and bottom contact accuracy is in the region of $\pm 0.5$ m. This variability in the grade modelling accuracy could have significant implications with respect to the estimates of tomes and metal (oz Au) within the various high-grade domains.

This uncertainty in the accuracy of the grade contacts is especially pertinent for the Lower Zone where the average thickness of the high-grade ore is between 1 m and 3 m. This risk can only be practically mitigated by additional grade control diamond drilling from underground to obtain closer spaced geological controls.

Snowden concludes that a high risk is associated with the current resource model with potential for significant variations in volume (tonnes). The presence of coarse gold and a high nugget effect suggest potential for variation in grade, with the expectation of marginal upside potential in grade.

Resource estimates

The table below details the current SBM high-grade resource estimate generated in 2002, detailing the global in situ tonnes and grade. The resource estimate includes dyke tonnage with dyke grades assigned to zero.

	Table 2.2
	Paulsens In Situ High-Grade Resource Estimate (2002) using IDW (at a zero cut-off grade)
Domain	Grade (g/t Au)	Tounes (kt)	Gold Metal (koz)
Upper Zone	9.8	343	F08
Central Zone	18.7	87	52
Lower Zone	22.2	258	84
TOTAL:	15.6	688	344

Grade estimation was undertaken using the IDW estimation technique. A nominal search radius of 40 m was applied with anisotropy factors derived from subjective observations of the grade continuity in the plane of the mineralization.

A statistical analysis comparing the 1 m composite data with the current block grades was undertaken using the high-grade wire frames in the current resource estimate. Snowden concluded that on a global basis the 1 m composite mean grades were equivalent to the mean block grades from the resource estimate and no global estimation bias was observed in gold estimates.

All major barren dykes have been modelled and accounted for in the resource estimate tonnes and grades. Approximately 10% of the resource volume is filled by barren intrusives.

The global tonnes and grades have been validated against the current grade wire frames and underlying 1 m composite gold grades. Snowden did not observe any significant discrepancies in the grade estimation parameters that would significantly impact on the global grade.

Golder (2001) also documents a 'Deep Resource' estimate based on the Lower Zone mineralisation. The estimate is based on a 2-D estimation approach using ordinary kriging. The resource estimate reports 341 kt of ore at an average grade of 15.3 g/t Au using a 4 g/t Au cut-off. This gives an in situ metal content of 168 koz which is globally similar to the current resource for the Lower Zone of 184 koz.

A separate conditional simulation estimate was also undertaken by Golder (2001), for which grade and tonnes were estimated within the broad barren quartz boundaries. This estimate was based on the assumption that the Paulsens resource would be mined by open pit. As such, the grade model lacks the appropriate geological controls to make it suitable to evaluate an underground mining operation, as the grades may have been unnecessarily smeared across barren horizons. However, SBM notes that the conditional simulation grades at the 4 $g/t$ Au cut-off broadly concur with the current > 4 $g/t$ Au boundary outlines. This affords a degree of validation to the ore boundaries interpreted by SBM.

Resource classification

Based on the current understanding of the high-grade gold mineralisation and style of mining currently envisaged at Paulsens, Snowden concurs with SBM that the resource estimate will most likely fall in the Inferred category in terms of the JORC resource classification guidelines.

The degree of grade boundary uncertainty, and the lack of demonstrable grade continuity of the higher grade represents a high risk to the resource estimate, and has significantly contributed to the current thinking on the resource category.

Addressing local grade continuity and grade boundary issues in the bulk sampling stage will go a long way to increasing confidence in the resource and moving tonnes into the Indicated and Measured categories in terms of the JORC code.

Resource notential

The deposit appears to demonstrate good grade continuity at depth to the west, evidenced by an exploration drill hole that intercepted mineralization at a depth of 475 m below surface. The Paulsens deposit is constrained laterally to the south and east, but remains open to the north and west due to a lack of drilling

Conclusion

Snowden has reviewed the current Paulsens high-grade resource developed by SBM using grade envelopes generated at a nominal 4 g/t Au cut-off. Snowden has found the resource estimate to globally reflect the underlying drill hole composite grades, and no global grade bias was observed within the three main domains making up the high-grade resource estimate.

Snowden's main concern relates to a low confidence in reported tonnes for the current high-grade resource. This is a function of the sparsity of drill hole intersections within the current resource domains, and a lack of grade continuity resulting in uncertainty in the modelling process for the various grade domains. In addition, potential bias in tonnes may exist due to the loose grade boundary definition as a result of the high proportion of RC drilling versus diamond drilling.

Based on the strong geological controls within the Paulsens deposit, Snowden believes the grade estimation methodology represents only a low risk factor.

Snowden concurs with SBM based on grade continuity issues, the low confidence in tonnes within the high-grade domains and the proposed underground mining method, that the current SBM high-grade resource will most likely be classified as Inferred (JORC). Snowden believes that the above issues relating to resource classification can best be addressed during the bulk sampling program.

$2.3$ DEVELOPMENT PLAN

The Paulsen's Project has been the subject of a number of reviews and studies aimed at optimising the future development of the project. The most recent formal optimisation study in May, 2001.

The study reviewed mining options comprising a Large Open Pit operation (LOP) and a Medium Open Pit with Underground (MOPUG). It was concluded that the LOP option was preferred, with an indicated net cash flow in the order of \$34M. The LOP was adopted as the basis for further detailed study and optimisation work, with a net cash flow of \$32.2M indicated after completion of that work. A peak negative cashflow of \$58M was required for a significant prestrip program as part of the project. In mid-2003, Taipan concluded that a stand-alone underground operation may provide the best opportunity for Taipan to develop a project at Paulsen's by requiring a lower level of project funding in the absence of a prestrip program. The underground option has become the focus of current study activities and represents Taipan's stated preferred approach for development of the Paulsen's Project.

The Paulsen's underground project includes provision for:

mining a 5 mW x 5.5 mH decline to access the Upper, Middle and Lower Zones from surface, at 1200 mRL to 900 mRL;
producing a 50 kt bulk sample early in the project life,
developing waste and ore level development to extract the Upper, Middle and Lower Zones;
stoping by Room and Pillar, Longitudinal Retreat and Hand-held Panel stoping methods, the Upper, Middle and Lower ore zones; and
road haulage of the ore for toll treatment.

Mining inventory

Detailed mine planning was undertaken using SBM's high-grade gold resource estimate generated in 2002.

The mining resource grade for the 1075 mRL to 1000 mRL interval was produced by cutting the 4 g/t resource model with the mine plan prepared for the MOPUG study. The mining resource grade for the 1110 mRL to 1075 mRL interval was determined by calculating the ratio of mining resource grade to resource grade for the 1075 mRL to 1000 mRL interval, and applying that as a factor to the 1110 mRL to 1075 mRL interval resource grade. The mining resource grade for the 1000 mRL to 900 mRL interval was determined similarly. Waste dilution of 0.3 m vertically was added to hand-held stope layouts to determine a mining inventory grade. Mining resource grades were adopted as inventory grades for development, room and pillar stoping, and longitudinal retreat stoping, as dilution was included in the design outline.

The detailed mine planning undertaken for the MOPUG study provides an accurate estimate of conversion of tonnage from resource to mining inventory for the vertical interval between 1075 mRL to 1000 mRL. This conversion factor, 48%, was applied to the tonnage resource between 1110 mRL and 1075 mRL. to identify a mining inventory for that vertical interval. The tonnage for the 1000 mRL to 900 mRL interval was determined by:

calculating the conversion ratio for the 1110 mRL to 1000 mRL interval for resource ounces-per-vertical-metre (oz/vm) from the 0.5 g/t cut off to the 4.0 g/t cut off resources; then
applying the oz/vm conversion factor to the 0.5 g/t cut off resource model for the 1000 mRL to 900 mRL interval; then
doubling the derived oz/vm, to reflect an increase expected with further definition drilling; and finally; and
determining the mining inventory tonnage by combining the mining resource grade previously determined for the interval with the derived oz/vm.

An anticipated resource tonnage was then determined by dividing by a conversion factor of 58% to indicate mining recovery. The approximate 20% increase in tonnage resource to reserve conversion factor, when compared to 48% for the 1075 mRL to 1000 mRL interval, was determined to reflect the expected higher proportion of longitudinal retreat stoping at depth, where the ore body has a more consistently steeper dip. The resultant mining inventory is shown in Table 2.3.

	Table 2.3
	Paulsens Underground Mining Inventory
Interval	Tonnes	Ounces	Grade(g/t)
Upper panel $(1100 \text{ mRL to } 1075 \text{ mRL})$	88.4	37.4	13.2
Middle panel (1075 mRL to 1000 mRL)	235.6	104.2	13.8
Lower panel (1000 mRL to 900 mRL)	350.6	122.1	10.8
Total	674.5	263.6	12.2

Commont

The methodology used to prepare the mining inventory for the 1075 mRL to 1000 mRL interval is comprehensive. It must rely, however, on one interpretation of the mineralised zone geology. The interpreted geology is complex and reflects the inconsistent continuity displayed by the sample data. The result, therefore, has a level of confidence commensurate with that of the resource specified for the same vertical interval, which is low to medium.

The methodology used to prepare the mining inventory for the 1110 mRL to 1075 mRL interval assumes a resource to mining inventory conversion factor identical to that for the 1075 mRL to 1000 mRL interval. This approach carries some inherent risk. In Snowden's opinion, the level of confidence in this approach, in this circumstance, is high due the geological similarities between the two zones concerned and the strong likelihood that similar mining methods will be employed in each zone. However, as previously discussed, the specified resource on which the inventory is based, has a low to medium level of confidence. The resultant level of confidence in the mining inventory for this interval is therefore low to medium.

The methodology used to prepare the mining inventory for the 1000 mRL to 900 mRL interval relies on an approach which assumes resource ounces per vertical metre based on sparse sample data, difficult to interpret geology, and the use of an arbitrary factor to anticipate a resource upgrade with further drilling. The assumed upgraded resource is converted to a mining inventory by applying a factor derived from detailed designs from another mine area which is increased to reflect an expected increased conversion ratio. The resultant mining inventory for this interval is considered to have a low level of confidence, which is symptomatic of the low density of sampling available in the interval at this time.

Mining method

Three different mining methods have been identified for use in the Paulsens mine.

Mechanised room and pillar mining is selected for flat dipping parts of the orebody, with a dip of less than 10 degrees. Hand-held panel stoping is selected for moderate dipping parts of the orebody, with a dip between 10 degrees and 40 degrees. Mechanised longitudinal retreat stoping has been selected for steeply dipping parts of the orebody, with a dip exceeding 40 degrees. The relative proportion of use for each method cannot be stated due to the method of determining the mining inventory, though an increasing use of longitudinal retreat stoping is expected below the 1000 mRL and is reflected in the increased recovery factor below that RL, of 58% compared to 48% above 1000 mRL. The planned use of each method in the 1075 mRL to 1000 mRL interval is shown in Table 2.4.

	Table 2.4 Mining method use for the 1075 mRL to 1000 mRL interval
Method	kt	% of total
Room and pillar stoping	41.0
Hand-held panel stoping	103.6	44
Longitudinal retreat stoping	5.5
Development	57.6	25
Rising	27.9
Total	235.6	100

Comment

The selected methods are, generally appropriate for the specified mining inventories, however each carries some limitations. The success of each method is dependant on the accuracy of the geological interpretation, which has identified considerable structural complexity and inconsistent continuity of mineralisation, and has a medium level of confidence. Consequently, some flexibility will be required in final mining designs to ensure acceptable actual recovery and dilution outcomes are achieved.

Mechanised room and pillar mining provides for some flexibility in following ore boundaries and direction but is constrained by the minimum mining height achievable with the equipment in use. For Paulsens, a minimum mining height of 4.5 m is assumed which means that ore thinner than that will incur mined dilution which will increase in proportion with decreasing ore thickness, to a point when the composited grade reaches the cut-off grade of 4 g/t. This method requires the establishment of robust management systems to ensure mining recovery is not compromised or dilution allowed to become excessive. The method also relies on maintaining trafficable inclinations, say, less than 10 degrees, in working areas. Ore outlines with variable dips including dips greater than 10 degrees may require additional dilution or ore loss to maintain trafficability. The complexities of the geology model and the variable continuity of ore suggest that changing dips may be a feature of the ore footwall. There is a low to medium risk that significant dilution additional to that planned may result, if the geology model is found to be reliable. If not, dilution and ore loss may be significant issues.

Hand-held panel stoping is a flexible method which allows narrow mining widths and heights, and provides for good control of dilution. The mining plan includes stope heights as low as 1.9 m and a universally applied dilution of 0.3 m. It allows some flexibility in following varying ore directions and dips and so provides for good control on recovery and dilution. The method requires entry into stopes demanding a high level of costly ground support, though that cost can be offset by dilution and recovery control benefits. There is a low risk that significant dilution additional to planned may result, if the geology model is found to be reliable. If not, dilution and ore loss may be significant issues.

Longitudinal retreat stoping is appropriate where the ore is steeply dipping with footwall and hangingwall contacts relatively continuous in dip and azimuth. Gradual changes in dip and azimuth provide the best environment. The method is favoured for the lower zone where the orebody is interpreted to dip steeply, he narrow in width and be well defined by the footwall fault. This interpretation is based on sparse density of sampling at this time, particularly below the 1000 mRL and so presents some risk of being incorrect. There is a low risk that significant dilution additional to that planned may result, if the geology model is found to be reliable. If not, dilution and ore loss may be significant issues.

Schedule

The mining plan has been prepared in comprehensive detail for the 1075 mRL to 1000 mRL zone with factored extrapolation into zones above and below. The plan includes schedules for access and one driveage, rising and stoping. A stoping rate of 220 ktpa with up to 60 ktpa development ore is planned over a 44 month project life. Development has been scheduled at a maximum rate of 495 m per month, from two jumbo development crews. The plan includes provision for mining a bulk sample of 50 kt from above the 1075 mRL horizon, 11 months after project commencement, to enable early confirmation of the geology interpretation

Comment

The scheduling approach is comprehensive and detailed. The proposed schedule is achievable for the planned mining operation.

Geotechnical studies

Geotechnical studies have been undertaken by Mine Geotechnics (WA) who provided design and ground support recommendations. These have been incorporated in the mine plan.

Commont

The management of geotechnical issues has been adequately incorporated in the mine plan. Significant changes to the interpretation of the geology of the deposit would warrant further expert examination of geotechnical issues to ensure provisions remain adequate.

Hydrogeological studies

Extensive hydrological studies were completed as part of the LOP and MOPUG planning. The findings of these studies have been incorporated in the mine plan.

Comment

The management of hydrological issues has been adequately incorporated in the mine plan. Significant changes to the interpretation of the geology of the deposit would warrant further expert examination of hydrological issues to ensure provisions remain adequate.

Mining costs

The mine plan has been costed using tendered costs received as part of the assessment of the LOP and MOPUG alternatives. The costs used are those tendered by Macmahon for mining the 1075 mRL to 1000 mRL interval, and have been projected to the other areas included in the mine plan. Adjustments have been made for the different haulage distances. Total mining cost is \$95/t including capital and development costs.

Comment

Cost estimation is comprehensive and detailed. The mining costs are based on tendered values and are considered reliable.

Site facilities

The mine plan includes provision for a minimum level of site facilities, given that the ore will be creshed and hauled to Paraburdoo for processing. Comprehensive studies on requirements for site facilities were completed as part of the LOP review. The results have been modified to reflect the reduced requirements for the current mine plan. Provision has been made for \$3 M which includes costs for access road and site civils, airstrip, office and laboratory, communications and water supply,

Comment

Costs are based on previous detailed estimates and are considered reasonable.

Processing

The processing plan includes provision for road haulage of ore from Paulsens to the toll treatment plant. A standard haulage rate of \$0.08/tkm has been provided.

Total transport and toll treatment costs have been estimated as \$40.70/t. These arrangements are yet to be finalised, with negotiations currently in progress. Testwork has confirmed the suitability of Paulsen's high-grade ore for toll treatment, with some modification to the cyclones and the addition of oxygen to leach and additional elution and electrowinning capacity. A capital provision of \$1 M has been made for these modifications.

Comment

The costs included are reasonable and reflect typical industry experience, though are subject to commercial confirmation.

Other

Native Title issues have been resolved with the recent signing of agreements with the relevant parties.

With the reduced site infrastructure needed, supporting an underground mine with no processing facility, environmental concerns are minor and require no special considerations or provisioning.

$2.4$ EXPLORATION ASSETS

$2.4.1$ Cue-Dav Dawn

Taipan Resources NL's (Taipan) 100%-owned Cue-Day Dawn project tenement is located approximately 110 km SW of Meekatharra and 10 km to the SW of SBM's Cue project tenements. There are currently no defined resources within the project.

Little is currently known of the exploration potential of P21/610 which lies to the immediate north of the historic Trenton Hill gold workings.

$2.4.2$ Cue-Emily Well

Taipan's 100%-owned Cue-Emily Well project area is located approximately 100 km SW of Meekatharra and 10 km to the NW of SBM's Cue project tenements. There are currently no defined resources within the project area. Exploration Potential

Snowden has concluded the following from its assessment of the Cue-Emily Well project tenements:

there has been limited exploration activity over the project tenements;
no significant gold mineralisation was reported from a program of reconnaissance RAB drilling (15 holes) completed on M20/458 in the early 1990's and
this tenement is interpreted to cover the northern extension of a potentially mineralised structure associated with a mafic-felsic contact that hosts historic gold workings to the immediate south.

$2.4.3$ Grafters

Taipan's 100%-owned Grafters project area comprises two tenements which host a small, oxide gold resource (275,000t at 3.33g/t Au) located within the Bardoc Tectonic Zone to the NW of Kalgoorlie. Snowden understands that an option agreement is about to be entered into whereby the tenements could be sold for \$20,000 with a small royalty interest retained.

$2.4.4$ Metawandy Creek

Taipan's Metawandy Creek project area covers 1,600km² in two large separate tenement packages located 10-20km south of the Paulsens project tenements. They are located within a tightly folded sequence of the Ashburton Formation on the southern flank of the Wyloo Dome.

Two joint ventures are incorporated into the Metawandy Creek project area: the Pelican Resources Joint Venture in the northern tenement group and the Kooline West Joint Venture with Red 5 in the southern group. Most of the regional exploration work completed by Taipan to date has focused on these areas with encouraging results.

The project area has had a long history of ownership, however, exploration activity has been largely confined to mapping and surface geochemistry with only limited follow-up drilling. There are currently no defined resources within the project tenements although gold and base metal geochemical anomalies are widespread.

Exploration Potential

Snowden has concluded the following from its assessment of the Metawandy Creek project tenements:

the Pelican Resources Joint Venture (Taipan earning 70%) incorporates E08/853 and 854 and the Kooline West Joint Venture covers E08/1287 (Taipan earning 70%). Both JV's are in good standing;
the northern tenement group is centred around the Pelican Joint Venture and is located approximately 10km south of the Paulsens deposit. It covers a 50 km strike length of a SE-trending sequence of tightly folded cherts, BIFs with interbedded sediments, dolomites, conglomerates and mafic units;
extensive soil and rock chip sampling on E08/854 outlined Au-Cu-Zn anomalies at the Fuchsite, Jeerinah and Lead Gossan prospects and Au-As anomalies over silicified dolomite hosting gossans at 3 Corner Bore. These anomalies are open along strike. No positive results were returned from 2 drill holes completed at 3 Corner Bore in an area of good gold rock chip samples;
E08/853 contains the Monster Lode, Gossan Ridge and Mt de Courcy prospects;
Monster Lode is associated with small scrapings and a 5m shaft. Encouraging gold rock chip assays were recorded from a chert-BIF horizon which was drill tested returning a best result of 1 m at 5 g/t Au;
the Gossan Ridge prospect comprises a 600 m long ferruginous gossan up to 9m thick and a quartz breccia zone. Recent continuous rock-chip sampling over 300m strike returned results of up to 12.9 g/t Au and 51.5 g/t Au;
minor gold and base metal anomalism was reported from previous rock chip sampling of gossans within a tuff-argillaceous unit in the nose of an anticline at the Mt de Courcy prospect:
based on the above considerations, Snowden considers it highly likely that Taipan will ultimately earn a 70% interest in the Pelican Resources Joint Venture tenements:
the southern tenement group includes the Kooline West Joint Venture tenement, in which Taipan carries all exploration costs to a decision to mine to earn a 70% interest. A continuous ridge defined by quartz veining anomalous in gold has been outlined over a strike length of 8km. Wide-spaced drilling within this anomaly has outlined several zones of low-grade gold mineralisation;
less work has been done on Taipan's 100%-owned tenements (E08/1096 and application E08/1187) but they cover similar geology to the Pelican Joint Venture tenements: and
M08/189, which is 90%-owned by Taipan, hosts gold anomalous quartz veins which were drilled by the previous owners with little encouragement.

$2.4.5$ Mt Clement

Taipan's 100%-owned Mt Clement project area is located approximately 45 km SSW of Paulsens and covers a tightly folded sedimentary sequence of the Ashburton Formation. The project has been the subject of systematic exploration activity since the early 1970's which included the discovery of the Mt Clement gold deposit. Development of this open pit resource has been restricted by its limited size, remote location and refractory nature of the primary ore.

Project Resources

Taipan has estimated a polygonal, uncut Inferred Resource for its Mt Clement gold deposit. Snowden has been advised that this estimate is preliminary and it has therefore been excluded from Taipan's June 2003 formal resource statement.

Table 2.5 Mt Clement Project Resources
Project	Measured			Indicated			Inferred			Total
	g/t(Au)	$0z($ Au $)$	CONTRACTOR	2/t(Au)	0z(Au)		$g$ /t (Au)	02 (Au)		$g$ /t (Au)	oz (Au)
Mt Clement		$\overline{\phantom{a}}$	٠	-	-	624.000	2.11	42.331	624.000	4.1 4.1.	42.331

Snowden has concluded the following from its assessment of the Mt Clement resource:

most of the resource is contained in the oxide zone within the 50 metres of surface;
metallurgical testwork indicates recoveries of up to 90% for the oxide zone mineralisation, however, the primary mineralisation is refractory with respect to conventional evanide leaching;
the resource has been evaluated over a long period of time by various drilling techniques of variable quality and there is a lack of appropriate documentation for this work. Infill drilling planned to 20 m to 25 m spacings to better define the oxide component of the deposit and thus enable a more accurate resource estimate:
with toll treatment proposed for Paulsens high-grade ore it is considered unlikely that this resource will be considered for exploitation on a stand alone basis: and
the resource ounces are therefore considered to be of low to moderate quality.

Exploration Potential

Snowden has concluded the following from its assessment of the Mt Clement project tenements:

the Mt Clement gold resource is contained in M08/191-194 with the maiority in M08/192;
gold mineralisation is confined to two shoots at the folded contact between metasediments and dolomite, with the highest grade mineralisation associated with tale schist ± quartz breecia;
the resource has limited potential along strike although there is potential to outline high-grade lodes at depth;
the main exploration target within the remaining project area is for shallow, low to medium grade oxide deposits; and
limited exploration work has been carried in the remaining tenement areas.

$2.4.6$ Paulsens

Taipan has a 100% interest in the Paulsens project tenements.

Project Resources

The Paulsen's resource located within M08/99 has been considered in Snowden's operational valuation.

Exploration Potential

Snowden has concluded the following from its assessment of the Mt Clement project tenements:

the Paulsen's deposit comprises high-grade, quartz-pyrite-carbonate veins hosted in a complex shear zone;
the exploration potential of the deposit has previously been considered in this report;
the remaining Paulsens project tenements cover the north western margin of the Wyloo Dome which comprises a sequence of argillites with mafic and felsic fragmental volcanic rocks. The sequence is intruded by the Paulsens Gabbro and dolerite dykes and is structurally complex;
the Wyloo Dome in the vicinity of Paulsens is a gently plunging anticlinal structure comprising basement rocks of the Hamersley Formation which host the Paulsens gold deposit:
unconformably overlying the Hamersley Formation is a sequence of conglomerates, sandstones and dolomites of the Ashburton Formation along which basal breccias and gossans have been identified;
axial plane structures of the Wyloo Dome, shear zones and high angle faults are also principal exploration targets;
a SE-trending zone of gold-copper anomalism extends for 6 km from the Paulsen's deposit to the Belvedere workings on M08/222 (historic production of 436 oz Au) and the Tombstone prospect on M47/528 where a number of shallow workings have been recorded. Within this anomaly are zones of silicification in which elevated gold and copper grades have been encountered associated with quartz pyrite stockworks;
a polygonal uncut resource of 39,600t at 4.2g/t Au was estimated for the Belvedere prospect based on recent exploration work by Taipan. There is notential to increase this resource with more drilling:
recent rock chip sampling of possible sulphide gossans at Quartz Ridge (E08/1125) and within the west and central portions of E08/906 has defined promising gold exploration targets;
E08/906 covers favourable geology and several unconformity and structural related targets. Limited previous exploration work has been undertaken in this tenement owing to extensive cover;
recent rock chip sampling of quartz veins at Gossan Hills (E08/1186) returned anomalous gold assays;
E08/1190 and 1191 located approximately 15km south of the Paulsens deposit are contiguous with the Metawandy Creek project tenements; and
the potential for discovering further small to medium sized, high-grade gold deposits in the project tenements which are in the early stages of evaluation is considered high.

$3.0$ VALGATION

$3.1$ VALEATION CONSIDERATIONS

$3.1.1$ Introduction

A authors of this report are either Members of the Australasian Institute of Mining and Metallurgy (AuslMM) or Australian Institute of Geoscientists (AIG) and, therefore, are obliged to prepare mineral asset valuations in accordance with the Australian reporting requirements as set out in the VALMIN Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports as adopted by the AusIMM in 1998. The opinions expressed and conclusions drawn with respect to this valuation of SBM's mineral assets as at 30 September 2003 are appropriate at the valuation date of 16 October 2003. The valuation is only valid for this date and may change with time in response to variations in economic, market, legal or political conditions in addition to on-going exploration results. The objective of a mineral asset valuation is to establish a "fair market" value for an asset in the context of all the foregoing factors.

$3.1.2$ Fair Market Value of Mineral Assets

Mineral assets are defined in the VALMIN Code as all property including, but not limited to real property, mining and exploration tenements held or acquired in connection with the exploration, the development of and the production from those tenements together with all plant, equipment and infrastructure owned or acquired for the development, extraction and processing of minerals in connection with those tenements.

The VALMIN Code defines the value, that is fair market value, of a mineral asset as the estimated amount of money or the cash equivalent of some other consideration for which, in the opinion of the Expert or Specialist reached in accordance with the provisions of the VALMIN Code, the mineral asset should change hands on the valuation date between a willing buyer and a willing seller in an anns length transaction, wherein each party has acted knowledgeably, prudently and without compulsion.

In effect, therefore, the valuation expert is assumed to have the knowledge and experience necessary to establish a realistic value for a mineral asset. The real value of a tenement can only be established in an open market situation, where an informed public is able to bid for an asset. The most open and public valuation of mineral assets occurs when they are sold to the public through a public share offering by a company wishing to become a public listed resource company, or by a company raising additional finance. In this instance, the public is given a free hand to make the decision, whether to buy or not buy shares at the issue price, and once the shares of the company are listed, the market sets a price.

It is well known to most valuation experts that where exploration tenement valuation is concerned there really are two quite distinct markets operating in Australia. Almost without exception, the values achieved for exploration tenements sold through public flotation are higher than where values are established through, say, the cash sale of tenements by a liquidator, or the sale of a tenement by a small prospector to a large company neighbour, or through joint venture arrangements.

It is our opinion, that in all these circumstances the terms of sale generally do not meet the criteria laid out in the VALMIN Code for fair market value ie. transaction between a willing buyer, willing seller in an arms length transaction, wherein each party had acted knowledgeably, prudently and without compulsion. Invariably one of the parties is a less than enthusiastic participant and it can't be said that the purchase or sale is without an element of compulsion.

It is Snowden's opinion that the fair market value of exploration tenements should be valued by the Expert on the assumption that they are traded by vending them into a public float. Generally this will mean that the vendor is issued escrow shares (escrow period is usually two years). Importantly, this is a true cash sale situation, since the purchaser of the tenements (the public) is always expected to pay cash.

The VALMIN Code notes that the value of a mineral asset usually consists of two components: the underlying or Technical Value and the Market component which is a premium relating to market, strategic or other considerations which, depending on circumstances at the time, can be either positive, negative or zero. When the Technical and Market components of value are added together the resulting value is referred to as the market value.

The value of mineral assets is time and circumstance specific. The asset value and the market premium (or discount) changes, sometimes significantly, as overall market conditions, commodity prices, exchange rates, political and country risk change. Other factors that can influence the valuation of a specific asset include the size of the company's interest, whether it has sound management and the professional competence of the asset's management. All these issues can influence the market's perception of a mineral asset over and above its technical value.

$3.1.3$ Methods of Exploration Assets

When valuing an exploration or mining tenement the Expert is really attempting to arrive at a value that reflects the potential of the tenement to yield a mineable ore reserve and which is, at the same time, in line with what the tenement will be judged to be worth when assessed by the market. Arriving at the value estimate by way of a desktop study is notoriously difficult because there are no hard and fast rules and no single industry-accepted approach.

It is obvious that on such a matter, based entirely on professional judgement, where the judgement reflects the valuation Expert's previous geological experience, local knowledge of the area, knowledge of the market and so on, that no two valuers are likely to have identical opinions on the merits of a particular property and therefore, their assessments of value are likely to differ - sometimes markedly. Snowden is aware, for example, of two independent valuation reports prepared at the same time for the same tenement and the preferred values arising from the two studies were approximately \$20,000 and \$1,600,000 respectively.

The most commonly employed methods of exploration tenement valuation are:

Multiple of exploration expenditure method (exploration based) also known as the premium or discount on costs method or the appraised value method;
Joint venture terms method (expenditure based);
Geoscience rating methods such as the Kilbum method (potential based); and
Comparable market value method (real estate based).

It is possible to identify positive and negative aspects of each of these methods. It is notable that most valuers have a single favoured method of valuation for which they are prepared to provide a spirited defence and, at the same time present arguments for why other methods should be disregarded. The reality is that it is easy to find fault with all methods since there is a large element of subjectivity involved in arriving at a value of a tenement no matter which method is selected. It is obvious that the Expert valuer must be cognisant of actual transactions taking place in the industry in general to ensure that the value estimates are realistic.

In Snowden's opinion a geologist charged with the preparation of a tenement valuation must give consideration to a range of technical issues as well as make a judgement about the "market". Key technical issues that need to be taken into account include:

geological setting of the property;
results of exploration activities on the tenement usually data from soil sampling, trenching, mapping and drilling;
$\bullet$ interpretation of geophysical data and remotely sensed information;
evidence of mineralisation on adjacent properties; and
proximity to existing production facilities of the property.

In addition to these technical issues the valuation Expert has to take particular note of the market's demand for the type of property being valued. Obviously this depends upon professional judgement. As a rule, adjustment of the technical value by a market factor must be applied most judiciously. It is Snowden's view that an adjustment of the technical value of a mineral tenement should only be made if the technical and market values are obviously out of phase with each other.

It is Snowden's opinion that the current market in Australia may pay a premium over the technical value for high quality mineral assets ie, assets that hold defined resources that are likely to be mined profitably in the short-term (less than 5 years) or projects that are believed to share the potential to develop into mining operations in the short term even though no resources have been defined. On the other hand exploration tenements that have no defined attributes apart from interesting geology or a "good address" may well trade at a discount to technical value. Deciding upon the level of discount or premium is entirely a matter of the Experts' professional judgement. This judgement must of course take account of the commodity potential of the tenement. Currently in the Eastern Goldfields of Western Australia a tenement may have an elevated value for its gold and nickel potential. There are of course numerous factors that affect the value, such as proximity to an established process facility and the size of the land holding.

The current Australian market in exploration tenements is also strongly impacted by the size of the land holding. In our opinion a large consolidated tenement holding in an area with strong exploration potential attracts a premium because of its appeal to the large companies.

The most widely used methods for the technical valuation of exploration properties are summarised below.

Kilbum's Geoscience Rating Method

Kilbum, a Canadian mining engineer was concerned about the haphazard way in which exploration tenements were valued. He proposed an approach which essentially requires the valuer to justify the key aspects of the valuation process. The valuer must specify the key aspects of the valuation process and must specify and rank aspects which enhance or downgrade the intrinsic value of each property. The intrinsic value is the base acquisition cost (BAC) which is the average cost incurred to acquire a base unit area of tenement and to meet all statutory expenditure commitments for a period of 12 months. Different practitioners use slightly differing approaches to calculate the BAC.

In Western Australia there are three classes of tenement, the exploration licence (EL) the prospecting licence (PL) and the mining lease (ML). The BAC's per unit of area have been determined by Snowden to be:

\$335/km² or \$991/sub-block Exploration licence
Prospecting licence $$42/ha$
Mining lease \$111/ha

For SBM's Mining Licence in Victoria. Snowden has determined the BAC to be \$277/ha.

The Kilburn method systematically assesses and grades four key technical attributes of a tenement to arrive at a series of multiplier factors. The multipliers are then applied serially to the BAC of each tenement with the values being multiplied together to establish the overall technical value of each mineral property. The fifth factor the market factor is then multiplied by the technical value.

The multipliers or ratings and the criteria for rating selection are summarised in Table 3.1.

The successful application of this method depends on the selection of appropriate multipliers that reflect the tenement prospectivity. There is, furthermore, the expectation that the outcome reflects the market's perception of value. Snowden is philosophically attracted to the Kilburn type of approach because it at least makes an attempt to implement a system that is systematic and defendable. It endeavours to take account of the key factors that can be reasonably considered to impact on the exploration potential. The keystone of the method is the BAC which provides a standard base from which to commence a valuation. The acquisition and holding costs of a tenement for 1 year provides a reasonable, and importantly, consistent starting point. Presumably when a tenement (EL, PL or ML) is pegged for the first time by an explorer the tenement has been judged to be worth at least the acquisition and holding cost.

Some argue that on occasions it is expedient to convert say a PL to an ML for strategic rather than exploration success reasons and hence it is unreasonable to value such an ML stanting at the relatively high BAC for an ML compared with a PL. In our opinion the multiplier factors will take care of this issue and will value the tenement appropriately.

It has also been argued that the Kilburn method is a valuation-by-numbers approach. In our opinion the strength of the method is that it reveals to the public, in the most open way possible, just how a tenement's value was arrived at. It is anything but misleading for the public and is indeed the only approach that lays out, for all to see, the subjective judgements made by the valuation Expert.

		Table 3.1 Kilburn Rating Criteria
Rating	Off property factor	On property factor	Anomaly factor	Geological factor
0.1 0.2				Generally unfavourable lithology Generally unfavourable lithology with structures
0.3				Generally favourable
0.4				lithology (10%-20%)
0.5 0.6			Extensive previous exploration with poor results	Alluvium covered. generally favourable lithology (50%)
0.7 0.8 0.9				Generally favourable lithology (50%)
ł.	No known mineralisation	No known mineralisation	No targets outlined	Generally favourable
1.5	Minor workings	Minor workings		lithology (70%) Generally favourable lithology
$\overline{c}$	Several old workings	Several old workings	Several well defined targets	Generally favourable lithology with structures.
2.5 3	Abundant workings	Abundant workings	Several significant subeconomic intersections	Generally favourable lithology with structures along strike of a major mine
3.5	Abundant workings/mines historical production $>200,000$ oz	Abundant workings/mines Historical production $>100,000$ oz
4 4.5
5	Along strike significant mine(s) with production/ reserves $>1M$ oz	Historical production $>500,000$ oz	Several significant ore grade correlatable intersections
10	Along strike significant Mine(s) with production/ reserves >5M oz

Multiple of Exploration Expenditure (also known as the Appraised Value Method)

The basic philosophy of the Multiple of Exploration Expenditure Method is that an exploration tenement is worth the meaningful past exploration expenditures plus warranted future costs adjusted by a market factor. The magnitude of this factor is based on the subjective judgement by the valuer of exploration potential, location of the property and activity in the area. In essence this is precisely what Kilburn was endeavouring to achieve with the multiplier factors but in a more systematic and less ad hoc manner.

An important element of this method, which is often overlooked in its application, is that only those past expenditures which are considered reasonable and productive are retained as value. Productive means that the results of the work give sufficient encouragement to warrant further work by identifying the potential for the existence and discovery of an economic mineral deposit. Warranted future costs comprise a reasonable exploration budget to test the identified potential, which can be geophysical or geochemical anomalies or promising mineralisation already identified. If exploration work downgrades potential, it is not productive and should not be retained as value. Obviously if the property is considered to have negligible exploration potential, it has little or no value.

As with the Kilburn Method, the Multiple of Exploration Method requires a thorough understanding of the exploration process, industry standards and unit costs for drilling and other exploration techniques. It requires that the valuer becomes familiar with the geological setting, the exploration target, the exploration history and appropriate exploration techniques. These requirements are best fulfilled by seasoned exploration geologists with a variety of experience and sound technical judgement.

The principal short-comings of this method are that there is no constant base from which to commence the valuation, as there is with the BAC used in the Kilbum Method, and secondly, there is no systematic approach taken in arriving at the exploration multiplier. A judgement is required therefore, at both the start and the end of the valuation.

Joint Venture Term Method

The Joint Venture Terms method takes into account existing JV agreements or the JV terms for nearby and/or similar properties. Joint Venture terms are particularly difficult to use as a valuation guide because rarely are the terms straightforward - there are usually exit clauses built in to a joint venture whereby the earn-in party has the right to exit after some specified period or some amount has been expended. Just what cash or cash equivalent price is being paid for a tenement becomes distinctly blurred.

In Snowden's opinion the JV method is inappropriate for the valuation of exploration tenements for reasons which include:

the method does not meet the fundamental valuation requirements as presented in the Code; and
the method is too subjective and open to manipulation.

It is our opinion that tenements should be valued prior to JV terms being negotiated for a property rather than the terms of the JV being represented to reflect the value of the tenement.

Where joint venture arrangements do already exist the terms of the joint venture need to be taken into account and are likely to lead to the technical value of the tenement being appropriately adjusted to reflect the prevailing earn-in arrangements and whether the joint venture will run its full course ie. whether the earn-in party will meet all expenditure obligations required in the agreement or will it walk away prematurely with either a small interest or no retained interest at all.

In Snowden's opinion, Joint Ventures are generally complex documents with "walk-away" provisions and do not necessarily have any bearing on the market's perception of the value of a tenement. Joint Venture agreements serve a purpose quite different to that of establishing a market value for a tenement

An acceptable situation exists when an "arms length" JV agreement has been established and the JV partner has demonstrated a strong willingness to meet the terms of the JV and there are reasonable grounds to believe that the terms of the agreement will continue to be met and the eam-in will be concluded in a relatively short time.

Comparable Market Value Method (or Real Estate Method)

In certain circumstances the method of valuing tenements in the context of recent transactions on similar tenements in a given area may be appropriate. In such a case the market's view is being taken into account. We suggest that this general approach can be used to ensure that valuations by the Kilburn or Multiple of Exploration methods are sensible and realistic. However, the Comparable Market Value method is subjective and Snowden believes that it should be avoided for any systematic valuation of tenements for presentation in a public document, since the method is unlikely to hold up to technical scrutiny.

In Snowden's opinion exploration tenements without defined mineral resources can only be realistically valued by the Kilburn (or some other systematic rating method) or the Multiple of Exploration methods. In our opinion the Kilburn approach is generally the most appropriate method to use. At least the basis for the professional judgement is laid out for public scrutiny and the method is as transparent as any method can be.

$3.1.4$ Valuation of Resources and Ore Reserves

Where resources and/or ore reserves have been defined our approach is to excise them from the tenement and to value them separately on a value per ounce basis or on the basis of a discounted cash flow. The value of the exploration potential of the remainder of the tenement can then be assessed using the Kilbum method. A similar approach is adopted for the valuation of gold in tailings or rock stockpiles. Discounts are applied to the estimated contained metal to represent loss in recovery and uncertainty in the information

Once a resource has been assessed for mining by considering revenues and operating (mining processing) and administrative costs the economically viable component of the resource becomes the ore reserve. When this is scheduled for mining and all capital costs are considered the net present value (NPV) of the project is established by discounting future annual cash flows using an appropriate discount rate. The resulting "classical" NPV has numerous deficiencies which are linked to the fact that the method assumes a static approach to investment decision making which is obviously not the case. Nevertheless the NPV represents the only practical approach to valuing a proposed or on-going mining operation.

When only a resource has been outlined and its economic viability has still to be established (there is no ore reserve) then typically a "rule of thumb" approach is usually applied. With gold projects this means allocating a dollar value to resource ounces of gold in the ground.

The quality is a factor of:

the grade of the resource;
the proximity to infrastructure such as an existing mill, roads, power, water, skilled work force, equipment, etc;
likely processing and capital costs;
the amount of pre strip (for open pits) or development (for underground mines) necessary;
the likely ore to waste ratio; and
the overall confidence in the resource.

$3.2$ VALUATION METHODOLOGY

$3.2.1$ Exploration Potential

Having considered the various methods used in the valuation of exploration tenements, Snowden is of the opinion that the Kilburn method provides the most appropriate approach to the technical valuation of SBM's exploration tenements on which there are no defined resources.

In arriving at a technical value for a particular exploration tenement, Snowden has taken into consideration the company's current equity in the tenement if it is subject to a farm-in or joint venture arrangement and has only considered the net area of a tenement if it overlaps with any pre-existing titles. Instances of overlap have arisen as a consequence of the graticular application system for Exploration Licences (EL) and through the conversion of certain ELs and Prospecting Licences (PL) to Mining Leases (ML). Snowden has chosen not to value ML applications arising from the conversion of ELs and PLs and has only considered the underlying title. In the case of outright tenement applications (ie, where there is no pre-existing or related title), Snowden has elected only to value these applications where it is satisfied that there is no cause to doubt their eventual granting.

After careful consideration of the current market for advanced gold exploration properties in Western Australia, Snowden is of the opinion that it is appropriate to apply a market premium to the technical value of SBM's interest in the exploration potential of certain project areas. Snowden has noted that exploration work completed by SBM since its May 2002 valuation has been restricted to several project areas where significant gold resource potential has been identified. Snowden is of the opinion that it is appropriate to apply a market premium of 20% to the technical value of these project tenements given the current buoyant market for advanced gold exploration properties (ie, projects where gold mineralisation has been identified with considerable upside potential).

SBM's remaining project areas at Meekatharra represent a vast and coherent holding over a highly prospective gold province which has a proven track record for the discovery of significant gold deposits. Despite the strategic importance of these tenements to SBM's Meekatharra gold operation, Snowden has noted that many of the identified gold resources have recently been downgraded by SBM and limited exploration work has been carried out in terms of identifying new exploration targets. Snowden therefore considers it appropriate to assign no market premium or a market discount to these tenements where appropriate.

Approval of many of SBM's outright tenement applications remains subject to Native Title clearance. It is Snowden's understanding that for EL and PL applications, this process takes at least four months should there be no objections lodged, but could take longer for Mining Lease applications under the 'Right to Negotiate' process. It is therefore reasonable to expect that title to SBM's EL and PL applications could be resolved in the next four to six months.

Until such time as they are granted, Snowden considers it appropriate to discount the current estimated market value of SBM's EL and PL applications by 10% to reflect the uncertainty in the timing of granting of these tenements to permit the commencement of mineral exploration activities.

Title to SBM's ML applications in Western Australia will, however, be dependent on the execution of an agreement with the relevant Native Title claimants and could take a significantly longer period to negotiate. Snowden has also noted that many of these ML applications have been in the stage of application for a significant period of time (up to six years in some instances) and are located over relatively unexplored or unprospective areas.

Until such time as they are granted, Snowden considers it appropriate to discount the current estimated market value of the Mining Lease applications by 60% to reflect the uncertainty in the timing of granting of these tenements to permit the commencement of mineral exploration activities. An 80% discount has been applied to the Mt Egerton Mining Lease in Victoria to reflect the uncertainties in permitting for any future mine development.

$3.2.2$ Mineral Resources

For the valuation of SBM's gold resource ounces net of the defined ore reserves, Snowden has elected to assign a dollar value per gold resource ounce in the ground. The valuation of unclassified resources (ie. non-JORC compliant) has been considered in the exploration potential of the respective tenements.

To establish a benchmark market value for in-ground resource ounces. Snowden has carried out a search for publicly available information on recent market transactions involving marginal open pit and underground gold resource projects in WA. Table 3.2 summarises several recent market transactions.

In arriving at a fair value for SBM's gold resources, Snowden has conceptualised the quality of its resource ounces in relation to the various market transactions and has considered the following factors:

with the exception of the Mt Pleasant project, the calculated value per resource ounce for each of the above transactions represent low-grade open pit resource projects with no associated infrastructure.
the calculated resource ounce values range from \$4.09 to \$10.46 (average \$6.61); and
notwithstanding the royalties on certain transactions, the value per resource ounce may include a premium for the exploration potential of the respective projects.

In consideration of the foregoing criteria, Snowden estimates that the benchmark value of a gold resource ounce in the ground for a marginal open pit or underground gold resource project in WA with no associated infrastructure lies in the range of \$4.00 to \$10.50 per ounce with a most likely value of \$6.50 per ounce. For SBM's sub-economic resource ounces, Snowden has assigned a preferred value \$3.50 per ounce in the range of \$2.00 to \$5.00 per ounce.

$3.2.3$ Ore Reserves and Mining Inventories

For the valuation of SBM's ore reserves and mining inventories, Snowden has established the NPV of the MGO and Paulsens 'Life of Mine' (LOM) production schedules by discounting estimated future annual cashflows using forward gold price and discount rate assumptions provided by KPMG Corporate Finance.

$3.2.4$ Environmental Liabilities, Closure Costs and Plant Salvage Values

For the purpose of this valuation, Snowden has not undertaken a detailed assessment of plant salvage values, closure costs and mine rehabilitation liabilities and has based its assumptions on information provided by SBM. The financial assumptions used in the cashflow models have not been independently assessed, but it is Snowden's judgement that these revenues and costs are reasonable.

3.3 MEEKATHARRA GOLD OPERATION VALUATION

3.3.1 Operational Valuation

Snowden's operational value has been estimated by discounted cashflow analysis, based on mining inventories, production schedules and mining/processing cost projections supplied by SBM.

	Table 3.2 Recent Gold Resource Market Transactions
Project	Transaction	Resources	Comments	Value/Resource Ounce* (A\$)
Kirkalocka Gold Project	In September 2001, Equigold NL purchased a 100% interest in the Kirkalocka Gold Project from Sons of Gwalia Ltd for a total consideration of \$4.5M. The transaction is subject to a production royalty in excess of 250,000 oz and the right to buy back 50%.	Total Inferred Resource as at September 2001 at Kirkalocka was 7.4 Mt at 2.2 g/t Au or 520.000 oz Au.		\$8.65 per gold resource ounce (before royalty)
Mount Pleasant Project	In September 2001, Goldfields Ltd agreed to purchase a 100% interest in the Mount Pleasant Project from Centaur Mining & Exploration Ltd for a total consideration of \$42.6M	Total resource as at December 2000 at Mt Pleasant was 39.7 Mt at 3.8 g/t Au or 4.8 Moz Au.	Transaction includes a 3,000 km exploration holding.	\$8.88 per gold resource ounce

	Table 3.2 Recent Gold Resource Market Transactions

Lake Cowan Project	In November 2001, Hill 50 Gold NL agreed to purchase a 100% interest in the Lake Cowan Project from AngloGold Australia Ltd for a total consideration of \$0.8M plus a \$1/t rovalty.	Total resource as at December 2000 at Mt Pleasant was 1.8 Mt at 2.42 g/t Au or 141,000 oz Au.		\$5.67 per gold resource ounce (before royalty)
Janet Ivy Project	In December 2001, Delta Gold Ltd agreed to purchase a 100% interest in the Janet Ivy Project from Intermin Resources Ltd for a total consideration of \$1.58M plus a \$0.50/t royalty.	Total resource as at December 2001 at Janet Ivey was 4.5 Mt at 1.60 g/t Au or 231,500 oz Au.		\$6.85 per gold resource ounce (before royalty)
Famous Blue Project	In January 2002, South Boulder Mines Ltd agreed to an option to purchase a 100% interest in the Famous Blue Project from Sub-Sahara Resources NL for a total consideration of \$842,250 plus assuming a \$300,000 liability on the property.	Indicated Inferred and Resource as at June 2001 at Famous Blue was 4.7 t at 1.8 g/t Au or approximately 279,000 oz Au.		\$4.09 per gold resource ounce
Bulong Project	In February 2002, Lakewood Mill PL agreed to purchase a 100% interest in the Bulong Project from Troy Resources NL for a total consideration of \$100,000 plus a \$15/oz rovalty.	Indicated Resource as at June 2001 at Bulong was 179,000 t at 3.1 g/t Au or approximately 17,000 oz Au.		$$5.88$ per gold resource ounce (before royalty)
Paddys Flat Project	In October 2002, St Barbara Mines Ltd entered into an agreement to acquire a 100% interest in the Paddys Flat project from Barrick Gold Australia Ltd for a total cash consideration of \$4.5 M and a production royalty of \$10/oz after 50 koz.	Unclassified resource of 14.5 Mt at 2 g/t Au or approximately 938,000 oz Au		$$4.80$ per gold resource ounce (before royalty)
Lake Carey Project	In October 2002, Midas Resources Ltd entered into an agreement to acquire a 100% interest in the Lake Carey project from Aurora Gold Ltd for a total cash and share consideration of \$5 M and a production royalty of 1.5%.	Indicated Measured. and Inferred Resource of 6.6 Mt at 2.2 g/t Au or approximately 478,000 oz Au.	Transaction includes a 588 km ² exploration holding	$$10.46$ per gold resource ounce (before royalty)
Three Rivers Project	In November 2002, Trov Resources NL agreed to purchase a 30.5% interest it did not already own from Blink Models Ltd in the Three Rivers project for 100,000 fully paid ordinary shares in Troy at a deemed issue price of \$1.69.	Indicated Resource of 1.68 Mt at 2.39 g/t Au or approximately 235,500 oz Au.		\$4.29 per gold resource ounce

*-the implied resource ounce value may include a premium for the exploration potential of the project

Economic and financial assumptions

In developing its MGO cashflow model, Snowden has made the following assumptions:

the start date is 1 October 2003;
revenue is calculated on forward gold price assumptions as specified by KPMG Corporate Finance A\$575 to December 2003, A\$540 to December 2005 and A\$550 thereafter;
pre-tax cash flows have been projected in real terms and discounted according to a post-tax discount rate of 8% as specified by KPMG Corporate Finance:
no allowance was made for corporate tax pursuant to advice received from KPMG Corporate Finance;
all operating cost estimates are based on SBM's LOM plan projections which were reviewed by Snowden;
mine operating costs do not include corporate overheads which were removed at the request of KPMG Corporate Finance;
other production costs include progressive rehabilitation and mine closure provisions which are consistent with SBM's rehabilitation provision of \$3.696M as advised by KPMG Corporate Finance;
direct capital costs include working capital for mine development and equipment expenditure;
allowance for \$4M has been made for plant salvage on closure;
gold in circuit has been incorporated in the cashflow model;
the model assumes that ore is treated in the period in which it is mined and stockpiles are treated when there is available mill capacity; and
provision has been made for State, Native Title and Barrick royalties.

Snowden's High Case model

Snowden's High Case model has considered the treatment of SBM's total open pit and underground mining inventory through to January 2007 with the inclusion of:

\$6.8M in capital expenditure for modifications to the Bluebird mill to process refractory ores;
future ore sources expected through exploration success, mainly from Prohibition after March 2005 and Mulla Mulla East after November 2005; and
an additional \$0.5M in exploration expenditure for resource definition drilling.

Snowden's Low Case model

Snowden's Low Case assumes that the results from the evaluation programs at Paddys Flat are not sufficiently encouraging to justify the underground development and modifications to the processing plant to treat refractory ores. The Low Case production schedule has been derived from the High Case model by removing the underground and open pit mining inventories at Paddys Flat, the open pit mining inventory at Mulla Mulla East and associated capital costs from the cashflow model. The mine life is shortened to May 2004 and only considers the development of the Batavia open pit and treatment of the remaining stockpiles.

Snowden's Preferred Case model

Snowden has elected to use the Low Case model as its Preferred Case as cashflows following development of the underground mine and modifications to the processing plant remain negative until the latter part of the High Case model.

Operational value

Snowden's operational valuation of its High Case cashflow model is estimated at \$8.73M using an 8.0% discount rate and forward gold prices as advised by KPMG Corporate Finance. The operational value of Snowden's Preferred and Low Cases is \$3.62M.

Table 3.3 Meekatharra Gold Operation - Summary of Operational Valuation
	Low Case	High Case
LOM completed	May 2004	January 2007
Open pit ore mined $(i)$	1,692,715	5,423,500
Gold produced (oz)	49,709	349.271
Cash cost per tonne milled	E3 91	31.08
Cash cost per olince recovered	473.76	482.60
Total free cashflow	A\$3,895,000	A\$13,273,000
NPV at $8.0\%$	A\$3,621.000	A\$8,729,000

$3.3.2$ Mineral Resources

A summary of Snowden's estimate of the market value of SBM's interest in the remnant resources within its Meekatharra projects tenements is presented in Table 3.4. A detailed breakdown of Snowden's valuation is provided in Appendix 1 of this report.

Table 3.4 Meekatharra Gold Operation - Summary of Resource Valuation
		Market Value Range (A\$)
Project Name	Low	High	Preferred
Abbotts-Abbotts	\$52,000	\$130,000	\$91,000
Aladdin	\$18,000	\$46,000	\$33,000
Bayley's Island	\$15,000	\$37,000	\$26,000
Burnakura	\$648,000	\$1,694,000	\$1,062,000
Caledonian	\$53,000	\$132,000	\$93,000
Highway	\$148,000	\$390,000	\$241,000
Meekatharra	\$1,595,000	\$4,148,000	\$2,634,000
Namine	\$81,000	\$212,000	\$133,000
Reedys	\$1,063,000	\$2,790,000	\$1,728,000
South Junction	\$1,197,000	\$3,132,000	\$1,955,000
Stakewell	\$48,000	\$128,000	\$79,000
Three Sisters	\$36,000	\$89,000	\$63,000
Tuckanarra	\$10,000	\$25,000	\$18,000
Turn of the Tide	\$11,000	\$26,000	\$18,000
Wanganui	\$21,000	\$54,000	\$38,000
Yaloginda	\$390,000	\$995,000	\$667,000
TOTAL:	\$5,386,000	\$14,028,000	\$8,879,000

In Snowden's opinion, the current market value of SBM's interest in the remnant resources within its projects tenements lies in the range \$5.39M and \$14.03M with a preferred value of \$8.88M.

3.3.3 Exploration Potential

Snowden has used the Kilburn method to arrive at a market value estimate for SBM's interest in the exploration potential of its Meekatharra project tenements. A detailed breakdown of Snowden's valuation is provided in Appendix 2 of this report and is summarised in the following table:

Table 3.5 Meekatharra Gold Operation - Summary of Exploration Potential Valuation
		Market Value Range (A\$)
Project Name	Low	High	Preferred
Abbotts	\$90,200	\$160,900	\$125,600
Abbotts-Garden Gully	\$52,200	\$69,200	\$60,700
Aladdin	\$7,200	\$37,200	\$22,300
Bayley's Island	\$10,200	\$44,800	\$27,600
Barrambie	\$7,100	\$20,000	\$13,600
Bourke's Find	\$113,500	\$338,700	\$226,100
Burnakura	\$981,000	\$4,220,200	\$2,601,200
Caledonian	\$71,800	\$375,000	\$223,400
Chesterfield	\$112,000	\$318,800	\$215,500
Chunderloo	\$133,600	\$186,800	\$160,400
Cue	\$147,400	\$621,300	\$385,200

	Table 3.5
Meekatharra Gold Operation - Summary of Exploration Potential Valuation
Highway	\$240,000	\$1,285,300	\$762,700
Kurara East	\$245,300	\$614,700	\$430,300
Malanti	\$104,500	\$401,400	\$252,900
Meekatharra	\$962,500	\$4,274,600	\$2,619,300
Mikhaburra	\$16,900	\$53,200	\$35,200
Nannine	\$334,900	\$878,100	\$608,000
Norie	\$530,800	\$1,276,700	\$904,200
Polette	\$360,900	\$1,332,400	\$847,200
Quinns	\$239,400	\$416,400	\$328,700
Reedys	\$1,268,200	\$5,396,200	\$3,333,000
SE Meekatharra	\$222,400	\$283,300	\$252,900
South Junction	\$450,800	\$1,787,500	\$1,119,300
Stakewell	\$209,600	\$645,300	\$427,600
Three Sisters	\$8,700	\$29,100	\$18,900
Tough Go	\$226,700	\$408,000	\$317,400
Tuckanarra	\$320,200	\$969,000	\$644,800
Turn of the Tide	\$294,800	\$852,600	\$573,800
Wanganui	\$48,300	\$99,800	\$74,300
Yagahong	\$62,600	\$231,500	\$147,100
Yaloginda	\$703,000	\$2,226,900	\$1,466,400
TOTAL:	\$8,576,700	\$29,854,900	\$19,225,600

In Snowden's opinion, the current market value of SBM's interest in the exploration potential of its Meekatharra project tenements lies in the range \$8.58M and \$29.85M with a preferred value of \$19.23M.

$34$ PAULSENS GOLD PROJECT

$3.4.1$ Operational Valuation

Economic and financial assumptions

In developing its Paulsens cashflow model, Snowden has made the following assumptions:

the start date is 1 January 2004; ٠
the project is considered on a 100% equity basis;
pre-tax cash flows have been projected in real terms; ٠
gold price and discount rate assumptions are the same as those used in the MGO operational valuation;
no allowance was made for corporate tax pursuant to advice received from KPMG Corporate Finance;
all operating cost estimates are based on Taipan's LOM plan projections which were reviewed by Snowden;
mine operating costs do not include corporate overheads at the request of KPMG Corporate Finance;
processing costs assume toll treatment of all ore with no provision made for plant salvage or gold in circuit;
gold revenue is calculated from the batch treatment of stockpiled ore at the toll treatment facility. Toll treatment charges are allocated in the month following treatment;
other production costs include a mine closure provision of \$1.0M and State and Native Title royalties;
direct capital costs include working capital for mine development and equipment expenditure; and
resource definition drilling is expensed and stope definition drilling scheduled before the commencement of mining is capitalised.

Snowden's Low Case model

Snowden's Low Case model has only considered the development and treatment of Taipan's underground mining inventory for the Middle panel (1075– 1000 mRL) in recognition of the risks previously identified with the high-grade resource model and its potential impact on the viability of exploiting the Upper and Lower Panels. The Middle panel contains the majority of the defined resource ounces which has been subject of detailed mine design and costing work.

Snowden's Preferred Case model

Snowden's Preferred Case model has also considered the development and treatment of Taipan's underground mining inventory in the Upper panel (1110-1075mRL). Despite Snowden's concerns with the high-grade resource model, drill hole coverage within this panel is still high, providing some level of confidence in this resource. Mine design and costing work from the Middle panel has been extrapolated into the Upper panel.

Snowden's High Case model

Snowden's High Case model has considered the development and treatment of Taipan's total LOM underground mining inventory through to January 2007 through inclusion of the less well defined Lower panel (1000-900 mRL).

Operational value

Snowden's operational valuation of its Preferred Case cashflow model is estimated at \$5.42M using an 8.0% discount rate and forward gold prices as advised by KPMG Corporate Finance. The operational value of Snowden's Low and High Cases are -\$0.50M and \$17.18M respectively.

Table 3.6 Paulsens Gold Project - Summary of Operational Valuation
	Low Case	High Case	Preferred Case
LOM completed	October 2006	September 2007	September 2006
$Ore$ mined $(t)$	264,000	675.000	324,000
Gold produced (oz)	108,949	246,935	132.944
Capital expenditure	\$10.13M	\$12.61M	\$10.14M
Cash cost per tonne milled	\$179.81	\$145.17	\$165.83
Cash cost per ounce recovered	\$435.80	\$396.83	\$404.16
Total free cashflow	A\$1,699,000	A\$24,398,000	A\$8,432,000
NPV at 8.0%	-A\$495.000	A\$17,175,000	A\$5,415,000

In situ resource ounce valuation

Given that Snowden's Low Case NPV reported a slightly negative NPV, KPMG Corporate Finance requested Snowden to consider the value of the Paulsens gold deposit using the 'rule of thumb' method by assigning a dollar value per in situ gold resource ounce in the ground. Based on Taipan's stated open pit Measured, Indicated and Inferred Resource for Paulsens as at June 30 2003 (refer to Section 2.1) and applying a valuation range of \$4.00 to \$10.50 per ounce with a most likely value of \$6.50 (refer to Section 3.2.2), Snowden's opinion of the current market value of the Paulsens gold deposit lies in the range \$2.31M and \$6.06M with a preferred value of \$3.75M.

In the event that Taipan elects not to proceed with the underground development at Paulsens, it is considered reasonable by Snowden that a fair market value of \$3.75M could be assigned to the Paulsens gold resource ounces. Based on this consideration, it is Snowden's opinion that the Low Case Value of the Paulsens deposit is \$3.75M.

3.4.2 Other Mineral Resources

A summary of Snowden's estimate of the market value of Taipan's interest in the other gold resources within its Paulsens projects tenements is presented in Table 3.4. A detailed breakdown of Snowden's valuation is provided in Appendix 1 of this report.

Table 3.7 Taipsn Resources NL – Summary of Resource Valuation
	Market Value Range (A\$)
Project Name	Low	High	Preferred
Mt Clement	\$169,000	\$444,000	\$275,000
TOTAL:	\$169,000	\$444,000	\$275,000

In Snowden's opinion, the current market value of Taipan's interest in the other gold resources within its project tenements lies in the range \$0.17M and \$0.44M with a preferred value of \$0.28M.

3.4.3 Exploration Potential

Snowden has used the Kilburn method to arrive at a market value estimate for Taipan's interest in the exploration potential of its exploration tenements. A detailed breakdown of Snowden's valuation is provided in Appendix 2 of this report and is summarised in the following table:

Table 3.8 Taipan Resources NL – Summary of Exploration Potential Valuation
		Market Value Range (A\$)
Project Name	Low	High	Preferred
Cue - Day Dawn	\$300	\$700	\$500
Cue - Emily Well	\$18,900	\$65,600	\$42,200
Metawandy Creek	\$597,300	\$1,029,300	\$813,700
Mt Clement	\$487,000	\$730,600	\$608,900
Paulsens	\$740,300	\$1,796,100	\$1,268,600
TOTAL:	\$1,843,800	\$3,622,300	\$2,733,900

In Snowden's opinion, the current market value of Taipan's interest in the exploration potential of its project tenements lies in the range \$1.84M and \$3.62M with a preferred value of \$2.73M.

SUMMARY OF VALUATION 4.0

In this report, Snowden has systematically established the value of SBM's mineral assets as at 30 September 2003. Snowden's opinion of the market value of SBM's mineral assets is summarised in the following table:

Table 4.1 St Barbara Mines Ltd - Summary of Valuation (ASM)
	Low	High	Preferred
Meekatharra Gold Operation
Operational Valuation	3.62	8.73	3.62
Remnant Resource Valuation	5.39	14.03	8.88
Exploration Potential Valuation	8.58	29.85	19.23
TOTAL	17.59	52.61	31.73
Taipan Resources NL (100% equity)
Operational Valuation	3.75	17.18	5.42
Remnant Resource Valuation	0.17	0.44	0.28
Exploration Potential Valuation	1.84	3.62	2.73
TOTAL	5.76	21.24	8.43

DECLARATIONS BY SNOWDEN CORPORATE SERVICES PTY LTD 5.0

INDEPENDENCE $5.1$

Snowden Corporate Services Pty Ltd is a wholly owned subsidiary of Snowden Mining Industry Consultants Pty Ltd, an independent firm of consultants providing a comprehensive range of specialist technical and financial services to the mining industry in Australia and overseas, through offices in Perth, Kalgoorlie, Brisbane, Johannesburg and Vancouver. Our services include technical audits, project reviews, valuations, independent expert reports, project management plans and corporate advice.

This report has been prepared independently and in accordance with the JORC and VALMIN Code of the AusIMM. The authors do not hold any interest in SBM, its associated parties, or in any of the mineral properties which are the subject of this report. Fees for the preparation of this report are being charged at Snowden's standard rates, whilst expenses are being reimbursed at cost. Payment of fees and expenses is in no way contingent upon the conclusions drawn in this report.

$5.2\,$ QUALIFICATIONS

The principal personnel responsible for the preparation and review of this report are Mr Philip Retter (Manager Corporate Services), Mr Andrew Richards (Principal Consultant Corporate Services), Mr Mark Sweeney (Principal Resource Consultant) and Mr Peter Myers (Principal Mining Engineer) and Dr Philip Snowden (Principal Consultant and Managing Director) of Snowden's Perth and Brisbane offices.

Dr Philip Snowden BSc (Hons), PhD, FAusIMM, CPGeo, MAIG (Reviewer) since graduating from the University of Rhodesia (London University) in 1971, has had 31 years experience in geology, mining and consulting. Experience includes completing a PhD in 1975, full-time lecturer in structural geology at Rhodes University in South Africa (to 1981), Divisional Structural Geologist for Anglo American's Gold and Uranium Division (to 1986) and 15 years as an independent geological consultant based in Perth, Australia. Dr Snowden is Managing Director of Snowden, a Fellow of the AusIMM and a Member of the AIG. Dr Snowden has undertaken numerous independent reviews and valuations of exploration and mining projects throughout Australia, Africa and SE Asia and has the appropriate relevant qualifications, experience and competence to be considered an "Expert" under the definitions provided in the VALMIN Code and a "Competent Person" as defined in the JORC Code.

Mr Philip Retter BAppSc (Hons), MAIG, MGSA is a geologist with 17 years experience including 10 years mining and exploration experience in Australia and 7 years as an independent consultant based in Jakarta, Indonesia. Mr Retter joined Snowden in July 1996 as the General Manager of its Jakarta office and is currently the Manager of Corporate Services in Perth. He has been involved in independent reviews and valuations of precious and base metal projects throughout Australia, Africa and Asia. Mr Retter is a Member of the AIG and has the appropriate relevant qualifications, experience and competence to be considered a "Competent Person" as defined in the JORC and VALMIN Codes.

Mr Andrew Richards BSc(Hons), DipEd, AAICD, MAusIMM, MAIG is a geologist with 23 years experience, 7 years of which involved a senior role in Project Finance within a banking environment. Prior to 1996 he worked in a wide variety of areas and commodities for several companies in both production and exploration geology, becoming Manager Geology at New Celebration and Telfer Gold Mines. Subsequent work involved technical reviews and due diligence of projects in Australasia, North America and Europe for project and corporate financing; monitoring of project construction and performance; cash flow modelling for valuation, financing and hedging and haison/advisory services to bankers, project sponsors, receivers and administrators. Mr Richards is a Member of the AusIMM and AIG and has the appropriate relevant qualifications, experience and competence to be considered a "Competent Person" as defined in the JORC Code.

Mr Mark Sweeney BSc (Hons), MSc; MAusIMM joined Snowden in 2002, and has over 18 years experience in the mining industry, including seven years as a Principal Consultant with Rio Tinto Technical Services consulting on a wide range of commodities including gold, copper, iron, nickel coal, mineral sands, borate and diamonds. Other work experience includes reviews, audits, resource estimation, reconciliation studies and the application of resource estimation and conditional simulation techniques into various mining operations for product specification, mine planning, NPV and risk analysis. Mark has also worked in the mineral exploration area, and has extensive production experience on underground and open pit mining operations.

Mr Peter Myers BE(Min), MAusIMM, Qld and WA First Class Mine Manager's Certificate of Competency, Tasmanian Metalliferous Mine Manager's Certificate of Competency is a mining engineer with 24 years experience in underground, open pit and dredge mining operations. He has held senior operational and technical roles including those with Departmental and Site Management responsibility; including environmental management responsibility. He has managed or participated in a number of feasibility studies, major site capital projects, business improvement projects, short, long term and life of mine plans, and mining development and production contracts. Peter's experience covers copper, nickel, zinc, lead and mineral sands operations employing underground selective and bulk methods, hard rock open pit methods, and dry and dredge alluvial methods.

AI assistant

ST BARBARA LIMITED — AGM Information 2003

65749_rns_2003-10-27_be4433d4-5f3e-4438-9ed4-4b05372eec7d.pdf

ST BARBARA MINES LIMITED

Stephen W. Miller

Notice of Annual General Meeting 2003

BUSINESS OF THE MEETING

ACCOUNTS AND REPORTS

Resolution 1: RE-ELECTION OF MR DUNDO AS A DIRECTOR

Resolution 2: APPROVALTO ISSUE SHARES

Voting Exclusion Statement

Resolution 3: APPROVAL TO ISSUE SHARES

Voting Exclusion Statement

Resolution 4: AUTHORITY FOR ISSUE OF OPTIONS

Voting Exclusion Statement

Resolution 5: RATIFICATION OF ISSUE OF OPTIONS

Voting Exclusion Statement

Resolution 6: RATIFICATION OF ISSUE OF SHARES

Voting Exclusion Statement

Resolution 7: AUTHORITY FOR ISSUE OF SHARES - CONVERTIBLE LOAN

Voting Exclusion Statement

Snapshot Date

Proxies

BY ORDER OF THE BOARD

ALAN RULE

EXPLANATORY MEMORANDUM

OVERVIEW

Resolutions 2 and 3: APPROVAL TO ISSUE SHARES

2.1 Information requirements

2.2 Debt for Equity

Resolution 2 - total of 95,684,932 Shares

Resolution 3 - total of 55,990,026 Shares

2.3 Identity of RCFII

2.4 Persons who are Associates of RCFII

2.5 Change in holding and increase in Voting Power

2.6 ASX Listing Rule 7.3

2.7 Director's interests

2.8 Persons Who Will Acquire Relevant Interests

2.9 Directors

2.10 Intentions as to the future

2.11 Anticipated Date of Allotment

2.12 Independent Expert's Report

RESOLUTION 4: AUTHORITY TO ISSUE OPTIONS

RESOLUTION 5: RATIFICATION OF ISSUE OF OPTIONS

Options issued on 7 July 2003

RESOLUTION 6: RATIFICATION OF ISSUE OF SHARES

RESOLUTION 7: APPROVAL FOR ISSUE OF SHARES - CONVERTIBLE LOAN

DIRECTORS' RECOMMENDATION

ANNEXURE A

ANNEXURE B

ANNEXURE C

RCFII Options Current unlisted Options held by RCFII

New Options to be issued to RCF II pursuant to resolution 4

ANNEXURE D

Terms of unlisted options for the purposes of Resolutions 4 and 5

Reorganisation of Capital

Participation in new Issues

Changes to Exercise price or Number of Shares Issues on Exercise

ANNEXURE E

Terms of Convertible Loan for the purposes of Resolution 7

The Convertible Loan provides that:

Independent expert's report

$\mathbf{I}$ Introduction

$\overline{2}$ Purpose of our report

3 Summary and opinions

Proposed Debt Conversion

Advantages

Disadvantages

Potential RCF Option Conversion

Advantages

Disadvantages

Other considerations

Contents of the remainder of KPMG Corporate Finance's Report

Appendices

$\ddot{4}$ Outline of the Proposed Debt Conversion and the Potential RCF Option Conversion

$4.5$ In the event that the Proposed Debt Conversion is approved, the share ownership structure of St Barbara will be as follows:

The Potential RCF Option Conversion

5. Sources of information

6 Basis of assessment

Criteria for assessment of fairness and reasonableness

ST BARBARA LIMITED AGM Information 2003

Cost of Equity (K_e)

Risk-free Rate (R_t)