St Barbara Mines Limited

ASX SHAREHOLDERS REPORT

Enquiries regarding this report may be directed to:

Ross Kennedy Company Secretary

St Barbara Mines Limited ACN 009 165 066 Level 2, 16 Ord Street West Perth WA 6005 Telephone -61 8 9476 5555 Facsimile $-461894765500$ Email [email protected] Website www.stbarbara.com.au

Annual Report & Notice of Annual General Meeting

Attached are the St Barbara Mines Limited Annual Report for 2005, the Notice of Annual General Meeting, to be held at 10am AWST, Wednesday 16 November 2005 at the Karri Room, Parmelia Hilton, Mill Street, Perth and accompanying Proxy Form.

Copies are being despatched to shareholders today.

Ross Kennedy Company Secretary

17 October 2005

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St Barbara's key features are:

Extensive Landbank
Mineral Resources of 9.3Moz
Strong Shareholder Support i.
Quality Management & Staff
Financial Strength
Robust Operations ö.

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The Contract of Section

Chairman's Review.
Managing Director's Review
Exploration Review
Reserves & Resources Statement (Editorial Production Production Production Production Production Pro
Operations Review.
Heath, Safety & Environmental Review
Finance Review .
Corporate Governance Review
Directors' Report.
Declaration of Auditor Independence.
Statements of Financial Performance for the year ended 30 June 2005 38
Statements of Financial Position as at 30 June 2005.
Statements of Cashflows for the year ended 30 June 2005. 40
Notes to the Financial Statements for the year ended 30 June 2005 41
Directors' Declaration
Independent Audit Report to the Members
Statement of Shareholders as at 19 September 2005
Shareholder Information as at 19 September 2005.
Corporate Directory.

G THE BELLEVILLE

During the year ending 30 June 2005 the Company was rescued from a difficult financial situation and re-emerged as a significant exploration and gold production company, with a sound basis for optimism about the immediate and long-term future.

There were a number of significant achievements during the year:

» An increase in gold sales from 40,000oz in 2003/04, to 84,000 ounces;
» A substantial increase in announced Company resources from 825,000 ounces to 9.4 million ounces;
* A substantial increase in the Company's landholdings from 2,000km² to 15,000km²;
» A dramatic improvement in the cash at bank position from \$1,000 plus \$3 million cash backing of bonds at the end of the 2004 year, to \$16 million cash at bank plus \$12 million cash backing of bonds, one year later;
» Exploration expenditure of \$3.9 million at Meekatharra and at various locations previously owned by the Sons of Gwalia Ltd Gold Division: and
» An increase in the share price from 4.8 cents on 30 June 2004 to 10.5 cents on 30 June 2005.

These outstanding achievements are attributable to four key factors:

The financial support of the Company's largest shareholder, Resource Capital Fund II LP following the shareholders voting to appoint Ed Eshuys and myself as directors of the Company on 20 July 2004;
» The hard work and technical and commercial prowess of Ed Eshuys and his management team;
* The Company's purchase in March 2005 of the assets owned by Sons of Gwalia Ltd's Gold Division; and

» An increase in the gold price and more favourable operating conditions at the purchased mines. This allowed the Company to generate higher than forecast gold production at a lower than forecast cost.

The future is exciting for the 'new' St Barbara, with drilling to extend the existing mineral inventory base underway at four locations - Marvel Loch, Tarmoola, Gwalia Deeps and Meekatharra, the construction of a new open pit mine at Hercules near Marvel Loch, and exploration drilling for nickel at Sullivans, near Leonora, due to commence next month.

The Company is well placed to continue its growth in the coming years.

The collective experience and expertise at Board level and within the management team will be drawn on to seek to continue to increase shareholder wealth, especially as other opportunities (such as the acquisition of the Sons of Gwalia gold assets) become available.

All at St Barbara look forward to the future with excitement and anticipation.

Colin Wise Chairman

30 September 2005

METRISTIKA DI SAMA DI ANALIZATI

The prime objective at the beginning of the year was to re-establish the integrity and credibility of the Company with its shareholders, investors, employees, consultants, contractors and suppliers and the communities in which the Company was operating.

For this to occur it became clear that to start the process the Company's 54.8% interest in NuStar Mining Corporation Limited ("NuStar") and the 5% royalty over NuStar's Paulsens gold deposits needed to be sold to refinance the Company and to repay the substantial debts which had been previously incurred. The sale of our interest in NuStar occurred in several stages during November 2004 through to February 2005 and resulted in the Company becoming debt free.

During this time, the gold division of Sons of Gwalia Ltd (Administrators Appointed) ("SGWGD") became available for possible acquisition. In conjunction with expert consultants a comprehensive and disciplined assessment of the assets was undertaken. The thoroughness of our preparation together with the financial support of our largest shareholder Resource Capital Funds enabled the Company to bid for the assets and successfully close the purchase in a short period of time.

The purchase of the SGWGD assets enabled the Company to re-establish itself as a gold producer and provides the opportunity to explore the well endowed Southern Cross, Leonora and South Laverton areas of the Eastern Goldfields, which will complement the Company's long held home base at Meekatharra in the Murchison Goldfields.

Cashflow from the operations at Southern Cross, the sale of surplus assets and the planned divestment of non-core land holdings will support the planned corporate and exploration activities of the Company in the year ahead.

Having established a more secure financial footing for the Company, the job ahead is to:

» Extend the mine life of the Southern Cross operations beyond June 2006 and further explore the region:
» Seek to establish a mining inventory at Tarmoola and Gwalia Deeps with a production commencement target of the December 2007 quarter;
Evaluate the possibility of recommencing gold production at Meekatharra;
» Explore for nickel sulphides particularly in the Leonora and Southern Cross regions; and
» Identify and seek to acquire other opportunities.

Gold production at Southern Cross for the 2006 year is on target to achieve our forecast of 150,000 ounces at a cash cost of \$415 per ounce.

Drilling of the high grade shoots at Marvel Loch to define a mining inventory down to a vertical depth of 500 metres below the surface is underway. Earlier drilling has already established that the gold mineralisation extends to that depth but is of insufficient density to outline reserves. To extend the mine life beyond June 2006 it is the conceptual aim to define at least 1.2 million tonnes at 6.0g/t for 230,000 ounces from within the current indicated and inferred resources of 4.2 million tonnes at 4.5g/t of gold for 610,000 ounces. The reported drilling results since July 2005 suggest this is achievable. Production to support the Marvel Loch underground operation is projected to be sourced from open pit mining at Hercules. The Company will also seek to reopen Yilgarn Star and pursue discoveries on the basis of the comprehensive geological reassessment that has been completed of the Southern Cross region.

The famous Sons of Gwalia Mine which has historically produced 5 million ounces to a depth of 1,075 metres and the well known Tarmoola Mine (35 kilometres to the north

Eduard Eshuys George Viska Ross Kennedy Managing Director & CEO Company Secretary & CFO GM Commercial

of Leonora) which has historically produced 1.7 million ounces still have resources of 7.2 million tonnes at 7.3g/t of gold for 1.7 million ounces and 56 million tonnes at 1.2g/t of gold for 2.2 million ounces respectively for a total of 3.9 million ounces. This is a substantial inventory particularly with a rising gold price.

Deep drilling is underway at Gwalia to complete the drilling conducted during 2001 to seek to improve the status of the current inferred resources to indicated resources.

The geology of the Gwalia gold mineralisation is well understood as a result of the mining activity extending over more than 100 years.

The Gwalia Deeps inferred resources starts at a vertical depth of 1,100 metres; thus a number of other issues need to be addressed in conjunction with drilling. A Task Force of geologists, resource modelers, mining engineers, metallurgists and geotechnical specialists has been established to address the geology, geotechnical, mine planning, hydrology, metallurgy and project development schedules with the objective of defining a mining inventory by March 2006, and a timetable for future development.

Gwalia Deeps ore in concept would be processed at Tarmoola and be blended with the ore from Tarmoola.

Modern day mining at Tarmoola produced 1.7 million ounces. There is now an opportunity for the first time in nearly a decade, unhindered by production pressures and mining equipment movements, to take an overall view of the gold mineralisation which incurs in granite and ultramafics at Tarmoola.

The gold mineralisation is located at a major structural position adjacent to the Keith Kilkenny lineament which is a very favourable location in the Eastern Goldfields for hosting substantial mineral deposits.

The Tarmoota pit is two kilometres long and up to 250 metres deep. A wall failure on the northern side of the pit in February 2004 ultimately led to the closure of Tarmoola in September 2004. The current drilling is focusing on the western and south western flanks of the pit where, previous drilling had intersected gold associated with fractures in the granite.

Resource modeling is now in progress and for the first time is treating the entire Tarmoola deposit as one, rather than as previously consisting of nine separate components.

The Company's objective is to develop a mining inventory from Gwalia Deeps and Tarmoola that can produce initially 250,000 ounces per year commencing in the December 2007 quarter, and 400,000 ounces per year when fully developed by 2011.

A separate Task Force to assess all aspects of the potential future redevelopment of Tarmoola has also been established with the objective of outlining a reserve by March 2006 and a timetable for future development.

Successful drilling at Paddys Flat and Reedys, Meekatharra has resulted in an increase in 100% owned resources to 1.6 million ounces. A co-venturer has also increased resources at Bluebird and Surprise to 690,000 ounces subsequent to the end of the financial year, for a total Company resource at Meekatharra in excess of 2.2 million ounces. The possibility of recommencing gold production from the Company's 100% owned Paddys Flat and Reedys and/or in conjunction with Mercator Gold plc at Bluebird and Surprise is to be further investigated. Importantly, the Company retains full ownership of the Bluebird processing plant and

Martin Reed GM Operations .
Julia Martin Snr Mining Engineer/ Anatyst

Graham Miller GM Special Projects $5.1$

Peter Thompson GM Exploration

associated infrastructure such as power station, tailings dams, water, housing in Meekatharra and fly-in fly-out accommodation.

Nickel sulphide exploration has commenced on the Company's tenements particularly in the Leonora region which is transected by the geologically important Keith Kilkenny lineament, which has Cosmos, Leinster, and Mt Keith nickel sulphide mineralisation structurally associated with it to the north.

The Sullivans nickel sulphide target has an ultramafic unit with a strike length of some 8 kilometres.

The ultramafic occurs under a shallow cover of alluvium, and thus remains to be explored effectively. New ground electromagnetic geophysical techniques which have the ability to identify massive nickel sulphides at depth below the cover, have identified a number of anomalies at the basal contact of the ultramafic unit. This is a typical target location for massive nickel sulphides. The Company's other nickel sulphide opportunities will be progressively advanced to the drilling stage during the year ahead.

The strategy is to build up a portfolio of nickel sulphide properties either through conceptual research, joint venturing into properties held by others or acquisition. Worldwide demand for nickel remains strong, which is reflected in the current prices, and supports the strategy of an aggressive approach to nickel sulphide exploration.

To conduct the mining and exploration activities effectively requires the maintenance of a safe workplace. Management and staff have achieved an acceptable safety performance and regime, which will continue to require a dedicated and disciplined effort to maintain and improve on current performance levels.

Rehabilitation of the mined areas and management of the environmental performance bonds is a major focus of the Company's efforts. Environmental matters and issues have been elevated in importance as part of future planning.

In conclusion, to continue to re-establish and maintain the credibility and integrity of the Company will require a dedicated effort. A three year plan encompassing the SGWGD acquisition is being followed while a longer term five year plan is being developed. The Company is striving to achieve exploration success at Southern Cross, Leonora and Meekatharra, and its planned strategy is to redevelop those assets to enable the conceptual production of 400,000-500,000 profitable ounces of gold per annum commencing in the December 2007 quarter, with production of 150,000-200,000 profitable ounces of gold per annum in the intervening period.

Nickel sulphide exploration will also be an important part of the future of the Company. Achievement of these objectives will require the further recruitment of senior management, graduates and skilled people to complement the existing dynamic and energetic management team.

Finally, I acknowledge the significant contribution made by senior management and all staff, with a special mention for the former SGWGD employees who have embraced our enthusiasm and energy, and for the collective efforts in helping to turn around the Company's performance and create improved value for our shareholders.

Eduard Eshuys Managing Director & CEO 30 September 2005

EASTER AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE

The Company has a strong and enviable land position; a solid foundation upon which to pursue the Company's strategic focus on exploring for gold, nickel and copper in Australia.

The Company will also remain vigilant to identify and take advantage of new exploration opportunities, as they arise.

Continuing the search with an expanded data base and healthy budget

The exploration budget for the 2005/06 year is \$10 million.

The exploration work will be carried out using the Company's vastly expanded database which has been successfully merged with the datasets acquired from the Sons of Gwalia Ltd Gold Division.

The database now includes data from an additional 464,818 drill holes.

Southern Cross - attractive exploration targets

Exploration drilling has also commenced with diamond drilling programs at Yilgarn Star, located 14km south of the Marvel Loch plant.

The resource at Yilgarn Star is currently 1.5Mt $@$ 4.1g/t containing 190,000oz, with a decline established to a depth of 465 metres.

A regional gold targeting exercise was recently initiated, to identify and prioritise targets in the Southern Cross land package, and to review the effectiveness of previous

exploration. This study has already identified some attractive exploration targets which are being investigated.

Leonora - towards realising its potential

A specialist Company taskforce has been established to consider, coordinate and manage the Leonora region's planned development into production.

Tarmoota

An evaluation of the Tarmoola resource (currently 56Mt @ 1.2g/t, containing 2.2Moz) geological model and geophysical data has demonstrated potential for expansion of this mineral inventory with the conceptual prospect of developing an enlarged Tarmoola mining operation.

A program of extensional drilling commenced in July 2005. The targets being drilled are largely hosted by the Tarmoola granite, to the west of the current pit, where mineralisation is known to exist, and on the interpreted granite greenstone contacts to the north and south of the current pit area.

Gwalla Deeps

Drilling commenced in July 2005, in a program designed to allow the calculation of Indicated Resources.

The Gwalia Deeps Inferred Resource (currently 4.3Mt @ 8.2g/t for 1.1Moz) lies between 1,100 metres and 1,680 metres below the surface.

This resource is intact, with down-dip continuity of the lodes mined historically by shaft and decline.

Rather than re-drill from the surface, infill drilling is being undertaken with 'daughter' holes from existing deep holes.

The 'daughter' holes commence at depths from 1,100 metres to 1,400 metres.

This drilling requires careful navigational control and planning but is expected to save considerable time and cost.

South Laverton

An assessment of gold exploration potential in the South Laverton project has highlighted some high ranking targets, some of which lie below salt lake sediments.

Several multi-million-ounce gold deposits, including Granny Smith, Sunrise Dam and Wallaby are located on the northern margin of this region, and potential for similar deposits may exist within this project area.

These targets are being assessed and prioritised, in the same manner as at Southern Cross.

Meekatharra - more progress and promising results

Gold exploration recommenced at Meekatharra in late 2004, with the intention of re-establishing a mining inventory and production through the Bluebird plant.

Exploration drilling was focused on the Vivian-Consols (porphyry-hosted mineralisation), Prohibition (banded ironhosted mineralisation) and the Mickey Doolan (ultramafic host) at Paddy's Flat, and on the Rand deposit at Reedys, all of which are 100% owned by St Barbara. Drilling was undertaken with up to three rigs; using deep RC and diamond drill rigs.

Many significant intersections were reported from this drilling, indicating extensions to known mineralisation, and leading to substantial increases in resources.

Significantly, during May 2005, a broad, new zone of mineralisation, adjacent to and east of the Vivian Consols deposit was intersected.

This zone is described as the 'Mudlode' and is interpreted to be an extension of the historically mined Mudlode, which occurs 300 metres further north.

The host for this mineralisation is strong quartz carbonatepyrite alteration in high magnesium ultramafic.

No resource estimate has to date been made for the Mudlode.

Construction of a geological model and further drilling are currently in progress.

Current work at Meekatharra includes ongoing delineation drilling, as well as mining and metallurgical studies, to consider the proposed recommencement of processing at Bluebird.

Wallal, Pardoo, Scorpion & Scorpayle more nickel targets

The company's nickel exploration strategy has seen the completion during the year of a comprehensive review of nickel sulphide exploration opportunities in Western Australia, on both Company and non-Company-held ground.

This has lead to the application for tenements over highpriority nickel targets on the Wallal, Pardoo, Scorpion and Scorpayle projects, totalling 3,900km² in area. These licence applications are pending.

With the SGWGD acquisition, several strategic exploration targets became part of the Company's portfolio and are now being developed as exploration projects.

The first of these to be explored is Sullivans, 35km north of Leonora, where significant copper and nickel enrichment are present in a poorly drilled ultramafic unit over an 8km strike length.

Sauthern Cross Tenement Map

Opposite page | Driffrigs at Gwalia Deeps

RESERVES AT END OF JUNE 2005

		Proved			Probable
Region/Project	Tonnes	Au g/t	oz	Tonnes	Au g/t	ΟZ	Tonnes	Au g/t	oz
Southern Cross
Marvet Loch				240,000	$6.0\,$	46,000	240,000	6.0	46,000
Yilgarn Star
Hercules				2,300,000	2.4	180,000	2,300,000	2.4	180,000
Other	170,000	1.8	10,000	520,000	1.3	22,000	690,000	1.4	32,000
Total Southern Cross	170,000	1.8	10,000	3,100,000	2.5	250,000	3,200,000	2.5	260,000
Leonora
Gwalia
Tarmoola
Other
Total Leonora
Sourch Laverton
All Projects
Total South Laverton
Meekstherra (100% 58%)
Paddys Flat
Reedys
Other
Total Meekatharra (100% SBM)
Neekatherra (3V)
Annean JV
(SBM reducing to 30%)
Polelle JV
(SBM reducing to 35%)
Total Meekatharra (JV)
Total All Regions	170,000	1.8	10,000	3,100,000	2.5	250,000	3,200,000	2.5	260,000

The information in this report that relates to Ore Reserves is based on information compiled by Mr Martin Reed (Marvel Loch), Mr Allan Blair (Hercules) and Mr Michael Bartholomaeus (Southern Cross - Other) who are Members or Fellows of the Australasian Institute of Mining and Metallurgy. Mr Reed and Mr Bartholomaeus are full-time employees of the company. Mr Blair is employed by Snowden Mining industry Consultants. Mr Reed, Mr Blair and Mr Bartholomaeus have sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as defined by the 2004 edition of the ' Australasian Code for Reporting of Mineral Resources and Ore Reserves'.

Mr Reed, Mr Blair and Mr Bartholomaeus consent to the inclusion in the report of the matters based on their information in the form and context in which it appears. 2. All data is rounded to two significant figures 3. Discrepancies in summations will occur due to rounding

Discussing Southern Cross Exploration Strategies Left to right | Peter Thompson, David Broomfield, Eduard Eshuys, Michael Bartholomaeus, Alex Hatch

RESOURCES AT END OF JUNE 2005 (INCLUDES RESERVES)

		Measured			indicated			Inferred		Total
Region / Project	Tonnes	Au g/t	OZ.	Tonnes	Au g/t	OZ.	Tonnes	Au g/t	oz	Tonnes	Au g/t	OZ.
Southern Cross
Marvel Loch	61,000	4.0	7,900	3,000,000	3.8	370,000	1,100,000	6.5	230,000	4,200,000	4.5	610,000
Yilgarn Star				390,000	6.6	82,000	1,100,000	3.2	110,000	1,500,000	3.9	190,000
Hercules				3,600,000	2.2	250,000				3,600,000	2.2	250,000
Other	330,000	1.4	15,000	3,000,000	3.1	300,000	4,700,000	3.0	450,000	7,700,000	3.0	750,000
Total Southern Cross	390,000	1.8	23,000	10,000,000	3,1	1,000,000	6,900,000	3.5	790,000	17.000.000	3.3	1,800,000
ಓಳಂಗವಾ
Gwalia							7,200,000	7.3	1,700,000	7,200,000	7.3	1,700,000
Tarmoola	10,000,000	1.5	460,000	10,000,000	1.2	400,000	36,000,000	1.2	1,400,000	56,000,000	1.2	2,200,000
Other	1,000,000	1,2	40,000	7,000,000	1,5	330,000	6,800,000	1,8	400,000	13,800,000	2,0	900,000
Total Leonora	11,000,000	1.4	500,000	17,000,000	1,3	730,000	50,000,000	2,2	3,500,000	77,000,000	1,9	4,800,000
South Laverton
All Projects	170,000	0,9	4,900	5,900,000	2.4	450,000	3,600,000	2.6	300,000	9,800,000	2.4	760,000
Total South Laverton	170,000	0.9	4,900	5,900,000	2,4	450,000	3,600,000	2.6	300,000	9,800,000	2.4	760,000
Meekstturra (100% SBM)
Paddys Flat				17,000,000	1.7	920,000	9,300,000	1.4	420,000	26,000,000	1.6	1,300,000
Reedys	840,000	2.7	74,000	800,000	5.5	140,000	310,000	5.0	49,000	1,900,000	4.2	260,000
Other				150,000	3,1	15,000				150,000	3.1	15,000
Total Meekatharra (100% SBM)	840,000	2.7	74,000	18,000,000	1,9	1,100,000	9,600,000	1.5	470,000	28,000,000	1.8	1,600,000
Meekatharra (JV)
Annean JV
(SBM reducing to 30%)				4,800,000	1.5	230,000	1,600,000	2.2	110,000	6,300,000	1.7	350,000
Polelle JV
(SBM reducing to 35%)							1,100,000	1.6	58,000	1,100,000	1,6	58,000
Total Meekatharra (JV)				4,800,000	1,5	230,000	2,700,000	2.0	170,000	7,400,000	1,7	410,000
Total All Regions	12,000,000	1.5	600,000	55,000,000	2.0	3,500,000	72,000,000	2.3	5,300,000	140,000,000	2.1	9,400,000

The information in this report that relates to Mineral Resources is based on information compiled by Mr Michael Bartholomaeus, Ms Jane Bateman, Mr Graham Miller and Mr Peter Thompson who are Members or Fellows of the Australasian Institute of Mining and Metallurgy. Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson are full-time employees of the company. Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson have sufficient experience relevant to the style of mineralisation, type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as defined by the 2004 edition of the ' Australasian Code for Reporting of Mineral Resources and Ore Reserves'.

Mr Bartholomaeus, Ms Bateman, Mr Miller and Mr Thompson consent to the Inclusion in the report of the matters based on their information in the form and context in which it appears.

All data is rounded to two significant figures 3. Discrepancies in summations will occur due to rounding

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ON SICHOLD STANDARD

The Company's strategic focus is build on its core production strengths and to introduce innovative and sustainable improvements to achieve measurable lifts in performance.

Sens of Gwalla Ltd Gold Division (SGWGD)

St Barbara's purchase of SGWGD included two operating mines, one at Southern Cross and the other at South Laverton.

The Company took over management of the SGWGD operations on 28 March 2005.

Gold sales for 2005 were 83,646ozs at a cash cost of \$341/oz. The forecast at the time of the purchase of SGWGD was for production of 82,000ozs at a cash cost of \$415/oz.

The improved performance of the operations was due to achieving higher grades than were predicted, successful cost-reduction measures implemented by the Company, and improved mining productivity at both Marvel Loch and Safari Bore.

Operational Health and Safety

The Company's strong focus on health and safety saw a uniformly high performance level achieved.

The specific results are detailed in the Health, Safety and Environmental Review.

Southern Cross Operations

The Southern Cross Operations are centred at Marvel Loch (30km south of the town of Southern Cross).

Prior to purchase by St Barbara, gold production had been derived from open pits at Marvel Loch and Cornishman and underground mining at Golden Pig and Marvel Loch.

Mining at Cornishman and Golden Pig was concluded during the year.

In the Marvel Loch Open Pit, a change to the mine plan in the last quarter resulted in a higher grade tonnage being extracted and mining was completed in August 2005. There are no plans to extend the life of this pit.

Two underground areas located at the northern end of the deposit were mined in the Marvel Loch underground mine in the Sherwood and Undaunted lodes.

Both Sherwood and Undaunted are being drilled for extensions which are planned to be mined commencing in the March 2006 quarter.

Development of a further stoping area at New Lode commenced towards the end of the financial year and stope production will commence in the December 2005 quarter.

Extension drilling is also underway for this lode and it is anticipated that additional production stoping will be carried out in the second half of 2006.

A new open pit is being developed at Hercules, which is located 12km south of the Marvel Loch Processing Plant, with activity commencing in August 2005.

The first stage of this pit comprises 1.1Mt at a grade of 2.1g/t for 74,000oz within the previously announced probable reserve of 180,000 ounces of gold for the whole pit.

It is planned that further development of this pit would extend operations at Southern Cross to the end of 2007 and this will be evaluated once production commences at Hercules.

The processing plant located at Marvel Loch, treated a total of 2,525,451 tonnes derived from the operating mines and stockpiled ore for the period of which 663,365 tonnes, at a grade of 2.94g/t, was processed.

Attributable gold production shipped from Southern Cross Operations during the June quarter was 53,719oz.

Forecast gold production from Southern Cross for 2006 is 150,000oz at a cash cost of \$415/oz.

South Laverton Operations

Processing was completed at Carosue Dam during the last quarter of 2005, with the plant now on care and maintenance, as scheduled.

Mining operations in the June quarter were concentrated at the Safari Bore Pit which is located 70km north of the Carosue Dam plant.

A dry-hired mining fleet, managed by the Company, was used to mine the pit in the last quarter and it achieved better than expected productivities and costs.

Details of 2005 Production

		Southern Cross	Carosue Dam	Total
Open Pit	t	287,356	256,848	544,204
Grade	g/t	2.25	3.84	3.00
Underground	t	116.944		116,944
Grade	g/t	7.02		7.02
Stockpiles Processed	t	259,065	56.750	315,815
Grade	g/t	1.32	0.77	1,22
Ore Milled	t	663,365	313,598	976,963
Grade	g/t	2.94	3.28	3.05
Recovery	%	92	96	93
Gold Shipped	OZ.	53,719	29,528	83,247
Cash Cost	$5/\text{o}z$	336	349	341

In addition to gold shipped from operations of 83,247oz, 399oz was generated from other site clean-ups.

Care and maintenance activities are being continued at Meekatharra, Gwalia, Tarmoola and Carosue Dam.

Single-person operated Jumbo at Marvel Loch Underground

THE REPORT OF THE REPORT OF THE RESIDENCE OF THE REPORT OF THE REPORT OF THE REPORT OF THE REPORT OF THE REPORT

St Barbara appreciates the important connection between financial performance and the safety and welfare of its workforce. The Company is committed to achieving high standards and continuous improvement with respect to health, safety and environment in the work place.

Health and safety

The Company recognises its obligation to provide safe work places for employees, contractors and the community and is committed to the principle that all occupational injuries and illness are preventable.

Encouraging results

There are clear and encouraging indications that the commitment to achieving health and safety excellence is reflected in reduced injuries.

At the end of the year, Southern Cross operations had completed 370 days without any time being lost to injury and Carosue Dam, 276 days.

The rolling 12-month Lost Time Injury Frequency Rate for the two operations was 0.7, compared with the 2003/04 WA Gold Industry Rate of 4.3.

During the quarter there were five medically treated, on-site injuries resulting in a Medical Treatment Injury Frequency Rate of 20 for this period.

Most importantly, there were no disabling injuries in the quarter and the operations achieved a rolling Disabling Injury Frequency Rate of 3.5, compared with the 2003/04 WA Gold Industry rate of 12.1.

A shared responsibility for workforce health and safety

The Company recognises that imposing welfare initiatives developed in isolation is not ideal.

The approach taken has been to provide all employees and contractors with the opportunity to contribute to the development and implementation of safety and welfare programs and individual initiatives.

Daily on-site meetings are held to facilitate this process.

Environmental management for generations to come

St Barbara is committed to conducting its activities in a socially responsibly manner that is designed to protect the natural environment in which we operate and the local communities with whom we interact.

The Company also recognises that the application of thoughtful and innovative solutions to rehabilitation programs can result in sustainable environments as well as commercial benefits for shareholders through the cost effective reduction of security bonds required by the Western Australian Government.

Sons of Gwalla acquired sites

As part of the Company's acquisition of the Sons of Gwalia Ltd Gold Division, a complete evaluation of the related rehabilitation programs has been carried out.

Detailed plans are now being developed and will be progressively implemented over the coming year.

Examples of environmental programs already in place include:

» The progressive rehabilitation of newly mined areas, particularly those likely to be inactive for some time.
» A renewed focus on site-waste management, especially with regard to the careful and safe disposal of hydrocarbon products.
» Improved workforce education to empower individual employees to be better able to ensure their own safety.

Significant progress was made during the year at the Carosue Dam site where several pits and disturbed areas have been rehabilitated.

As part of the closure plan for this site, further work will be carried out and completed.

To reduce the disturbance of the land surface at various sites, rock waste has been disposed of in the existing pits.

Southern Cross

At Southern Cross, rehabilitation trials have commenced at an historic legacy site.

The trial involves employing a new technique designed specifically to benefit sites with a topsoil deficiency.

The Hercules Site

The waste rock from a new pit being mined at Hercules will be used to cap a nearby old tailings dam and secure it properly for the future.

The Company's commitment to environmental management is reflected in the appointment of a full time environmental officer, to work with our environmental advisers and site based staff.

ER KOROL KARLAN

Focus on positive cash flow generation

The focus throughout the year has been on restructuring business activities through divestment and acquisitions to generate positive cash flows. During the first half of the year, the key events were the sell down of NuStar Mining Corporation Limited ("NuStar") shares and the sale of the Paulsen's Royalty to NuStar for \$5.1M. During the second half of the year, gold operations acquired at the end of the March 2005 quarter contributed strongly to operating cashflows and profitability. The cash position of the chief entity improved significantly to \$16.2M as at 30 June 2005, with a further \$11.8M cash backing for environmental performance bonds.

Financial performance

The net loss for the year of \$6.7M represents a substantial improvement from the net loss reported in the year ended 30 June 2004 of \$24.3M.

Gold revenue from operations of \$46.6M was significantly higher than gold revenue from operations in the previous year of \$22.0M. The recently acquired gold operations at Southern Cross and South Laverton generated production of 83,646ozs at a cash cost of \$341/oz for revenue of \$46.4M during the June 2005 quarter. The net cash cost of \$341/oz reflected higher grades than forecast, reduced unit costs and improved mining productivity. Gold production in fiscal year 2004 was derived from the Meekatharra operations before they were placed on care and maintenance in June 2004.

The weighted average price realised of \$557/oz was up from \$546/oz achieved in 2004.

Earnings before interest, tax, depreciation, amortisation and write downs improved significantly to \$6.2M loss (2004: \$11.6M loss).

Other revenue of \$20.9M includes \$5.1M realised on the sale of the Paulsen's Royalty in the December 2004 half year, \$9.7M realised on the sale of shares in NuStar to third parties and deemed revenue of \$3.9M on accepting a share swap offer from Sedimentary Holdings Limited ("Sedimentary") for 69.4M NuStar shares and \$0.5M from the sale of cattle and other items of equipment on the Company's pastoral leases which were sub-let to a third party in the December 2004 quarter.

Interest costs of \$0.5M (2004: \$4.0M) reduced significantly as a consequence of the Company repaying its secured debt in October 2004 and remaining debt free up to 29 March 2005 when \$7M was drawn down on a facility provided by Resource Capital Funds III LP to assist with financing the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) ("SGWGD").

Cash Flows

Cash at the end of the year for the chief entity was \$16.2M cash at bank plus \$11.8M cash backing of environmental performance bonds. This compares favourably with a cash balance for the chief entity, excluding NuStar which was deconsolidated during the year, as at 30 June 2004 of \$1,000 plus \$3M cash backing of bonds. During the first half of the financial year the Company raised \$4.1M for working capital.

	Key sources of cash flow included:	S'M
	Exercise Capital raisings	4.1
数	Proceeds from the sale of NuStar shares to
	30 June 2005	9.7
	Example 3 Sale of Paulsen's royalty	5.1

EXECUTE: Proceeds from borrowing (RCF convertible loan) $7.0$
» Net operating cash flows from the acquired gold operation (SGWGD) during the June 2005 quarter 17.4

Financial Position

The following illustrates the key events that impacted on the Company's shareholders' equity during the financial year:

	יטטי כ
Loss for the year	(6,697)
Capital reduction (share swap)	(8, 514)
Capital raising	4.072
Debt to equity conversions	5.204
Net impact of deconsolidating NuStar	(18, 844)
Total movement in shareholders' equity	(24, 779)

A capital management strategy was implemented to reduce the number of shares on issue through offering all shareholders the opportunity to participate in a share buy back, with NuStar shares being offered as consideration in the ratio of 1.25 NuStar shares for each St Barbara share being bought back. A total of 170M St Barbara shares were bought back and 213M NuStar shares provided as consideration. As a result, the number of shares on issue reduced from 737M to 567M and shareholders' funds reduced by \$8.5M.

Subsequent Events

& Sale of Shares

$\ddot{\phantom{a}}$

On 27 July 2005, the Company sold its remaining shares in NuStar (6.4%) and Sedimentary (5.5%) for a combined total of \$6.0M and net profit on sale of \$100,000.

Example 2 Capital Management

On 26 July 2005, the Company announced:

$\degree$ An on-market buy-back of up to 10% of its capital over the next 12 months in accordance with ASX guidelines; and
6 Sale of unmarketable parcels of shares, unless holders of unmarketable parcels of shares notify the Company in writing of their intention to hold their shares, by 5pm WST 23 September 2005.
4 A total of 3.2M shares were bought back on-market to 30 September 2005 and 6.2M shares held by holders of unmarketable parcels have been sold on their behalf.

CONTRACTO CONTRACTO

Corporate governance is the process by which companies are directed and managed. It influences how the objectives of the Company are set and achieved, how risk is monitored and assessed, and how performance is optimised.

Good corporate governance structures encourage companies to create sustainable value (particularly through the exercise of integrity at all levels, entrepreneurism, innovation, development and exploration) and provide accountability and control systems commensurate with the risks involved.

The ASX Corporate Governance Council, in March 2003, published Principles of Good Corporate Governance and Best Practice Recommendations. These principles are summarised as follows:

Fundamental to any corporate governance structure is establishing the roles of management and the Board (Principle 1), with a balance of skills, experience and independence on the Board appropriate to the nature and extent of company operations (Principle 2). There is a basic need for integrity among those who can influence a company's strategy and financial performance, together with responsible and ethical decision-making (Principle 3).

Meeting the information needs of a modern investment community is also paramount in terms of accountability and attracting capital. Presenting a company's financial and non-financial position requires processes that safeguard, both internally and externally, the integrity of company reporting (Principle 4), and provide a timely and balanced picture of all material matters (Principle 5). The rights of company shareholders need to be clearly recognised and upheld (Principle 6).

Every business decision has an element of uncertainty and carries a risk that can be managed through effective oversight and internal control (Principle 7). Keeping pace with the modern risks of business and other aspects of governance requires formal mechanisms that encourage enhanced board and management effectiveness (Principle 8).

Rewards are also needed to attract the skills required to achieve the performance expected by shareholders (Principle 9). The impact of company actions and decisions is increasingly diverse and good governance recognises the legitimate interest of all stakeholders (Principle 10).

Each principle is of equal importance.

St Barbara is committed to these principles. Key elements of the Company's corporate governance principles in place at the date of this report include:

Structure and Operation of the Board

The Company has a five member Board, four of whom are non-executive directors. A majority of the directors are also independent.

The role of the Board is to provide strategic guidance to the Company, effective oversight of management and a sound base for a culture of good corporate governance within the Company.

The Board has adopted a formal Board Charter which sets out the principles under which the Board operates.

The following Board committees are operative:

» Audit Committee; and
» Remuneration Committee.

Each of these committees has an independent non-executive director as chairperson, as well as a Board approved charter.

None of the directors has a trading relationship with the Company nor a conflict of interest in any business or relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the Company, noting that Mr Tuten is an officer of major shareholder Resource Capital Funds II LP, and the principal financier, Resource Capital Funds III LP and abstains from voting on any Board matters relating to either of these entities.

Rick

The Board is responsible for the establishment and maintenance of a framework of internal control and policies and procedures designed to safeguard Company assets and to maintain the integrity of financial reporting. In respect of safeguarding Company assets, and risk more generally, the management is charged with the responsibility of identifying and managing operational, financial and corporate risks with regular reports to the Board.

To assist the Board in managing the integrity of financial reporting, an Audit Committee has been established.

The primary role of the Audit Committee is to monitor and review, on behalf of the Board, the effectiveness of the financial control environment in the St Barbara Mines Limited group in the areas of operational and balance sheet risk and financial reporting. For the first part of the 2005 financial year this function was performed by the entire Board.

The role of the Audit Committee function has recently been extended to include a review of Company procedures for reviewing and independently verifying resources and reserves.

The external auditor, PricewaterhouseCoopers, has engagement terms refreshed annually and has confirmed its independence to the Board. The current engagement partner has conducted the audit since 2001 with rotation due no later than 2006. The external auditor is required to attend the Annual General Meeting and be available to respond to specific questions from shareholders.

Disclosure of Information

St Barbara has obligations under the Corporations Act, and ASX and AIM Listing Rules to keep the market fully informed of information which may have a material effect on the price or value of St Barbara's securities and to correct any material mistake or misinformation in the market.

The Company has adopted a Continuous Disclosure Policy to provide a disciplined framework for complying with these requirements.

Ethics

The Board Charter provides that, in performing its role, the Board should act at all times:

» in recognition of its overriding responsibility to act honestly, fairly and in accordance with the law in serving the interests of the Company, its shareholders, employees, and other stakeholders
» with integrity and objectivity and consistently with the ethical, professional and other standards set out in the Company's corporate governance policies.

Heritage Listed Gwalia State Hotel now owned by the Company

Dealing in Company shares by directors, officers and employees is governed by a Dealings in Securities Policy. Except for a closed period imposed by AIM Listing Rules where no trading in company securities is allowed by Directors, Officers and Employees from balance date until the release of full year results, and from 31 December until the release of the half year results, this policy allows for a 30 day trading window following significant public announcements, provided the company is not in possession of undisclosed potentially price sensitive information.

Company policies on Occupational Health and Safety and Environment acknowledge the Company's fundamental commitment to providing a safe workplace, and the Company's and employee responsibilities to the environment and local communities with whom we interact.

Issues of substance are considered by the Board with external advice from its professional advisers as required. The Board's individual members can seek independent professional advice at the Company's expense in carrying out their duties. Prior written approval of the Chairman is required, but may not be unreasonably withheld.

Remuneration

The Board has established a Remuneration Committee, and adopted a Remuneration Policy, key principles of which are:

» Remuneration is linked to the creation of value for shareholders:
Remuneration will reward financial and non-financial performance:
* Remuneration will reflect the market in which the Company operates; and
* Remuneration will recognise the contribution of individuals and teams.

Details of remuneration of Directors, the Managing Director and CEO, and senior executives are disclosed in the Directors' Report.

Key elements of remuneration for senior executive employees comprise:

* Base salary;
* Total possible remuneration at risk, subject to meeting prescribed key performance indicators; and
* Equity participation through executive and employee options.

Evolving Practices

The Company recognises that corporate governance practices will continue to evolve as the Company continues to grow and develop.

Diragors Raport

Cotin Wise Chairman

Eduard Eshuys Hank Tuten Managing Director & CEO Non Executive Director

This financial report covers both St Barbara Mines Limited as an individual entity and the consolidated entity consisting of St Barbara Mines Limited and the entities it controlled at the end of, or during the financial year ended 30 June 2005.

Directors present their report on the consolidated entity consisting of St Barbara Mines Limited ("St Barbara") and the entities it controlled at the end of, or during, the year ended 30 June 2005.

Directors

The following persons were directors of St Barbara during the whole of the financial year and up to the date of this report:

H G Tuten

M K Wheatlev

S J C Wise and E Eshuys were appointed directors on 20 July 2004 and continue in office at the date of this report.

R Knight was appointed a director on 25 May 2005 and continues in office at the date of this report.

S W Miller was a director from the beginning of the financial year until removed as chairman and director on 20 July 2004.

K A Dundo was a director from the beginning of the financial year until his resignation on 18 July 2004.

Principal activities

During the year the principal activities of the consolidated entity consisted of gold production, gold and mineral exploration, pastoral activities and investments.

The only significant changes in the nature of the activities of the consolidated entity during the year were the sale of the majority of the Company's equity interest in a listed subsidiary, NuStar Mining Corporation Limited ("NuStar"), the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) as of 28 March 2005 and the sale of cattle and sub-letting of Murchison pastoral lease interests. to a third party, on 4 November 2004.

Dividends.

There were no dividends paid to members during the financial year.

Review of operations

The Company's strategic focus is build on its core production strengths and to introduce innovative and sustainable improvements to achieve measurable lifts in performance.

Sons of Gwalia Ltd Gold Division (SGWGD)

St Barbara's purchase of SGWGD included two operating mines, one at Southern Cross and the other at South Laverton.

The Company took over management of the SGWGD operations on 28 March 2005.

Gold sales for 2005 were 83,646oz at a cash cost of \$341/oz. The forecast at the time of the purchase of SGWGD was for production of 82,000oz at a cash cost of \$415/oz.

Operational Health and Safety

The Company's strong focus on health and safety saw a uniformly high performance level achieved.

The specific results are detailed in the Health, Safety and Environment Report.

Southern Cross Operations

The Southern Cross Operations are centred at Marvel Loch (30km south of the town of Southern Cross).

Prior to purchase by St Barbara, gold production had been derived from open pits at Marvel Loch and Cornishman and underground mining at Golden Pig and Marvel Loch.

Mining at Cornishman and Golden Pig was concluded during the year.

Two underground mining areas located at the northern end of the deposit were mined in the Marvel Loch underground mine in the Sherwood and Undaunted lodes.

Both Sherwood and Undaunted are being drilled for extensions which are planned to be mined commencing in the March 2006 quarter.

Development of a further stoping area at New Lode commenced towards the end of the financial year and stope production will commence in the December 2005 quarter.

Mark Wheatley Non Everutive Birector

Ross Kennedy Non Executive Director CFO & Company .
Secretary

Extension drilling is also underway for this lode and it is anticipated that additional production stoping will be carried out in the second half of 2006.

A new open pit is being developed at Hercules, which is located 12km south of the Marvel Loch Processing Plant, with activity commencing in August 2005.

The first stage of this pit comprises 1.1Mt at a grade of 2.1g/t for 74,000oz within the previously announced probable reserve of 180,000 ounces of gold for the whole pit.

It is planned that further development of this pit would extend operations at Southern Cross to the end of 2007 and this will be evaluated once production commences at Hercules.

Attributable gold production shipped from Southern Cross Operations during the June quarter was 53,719oz.

Forecast gold production from Southern Cross for 2006 is 150,000oz at cash cost of \$415/oz.

South Laverton Operations

Processing was completed at Carosue Dam during the last quarter of 2005, with the plant now on care and maintenance, as scheduled.

Mining operations in the June quarter were concentrated at the Safari Bore Pit which is located 70km north of the Carosue Dam plant.

A dry-hired mining fleet, managed by the Company, was used to mine the pit in the last quarter and it achieved better than expected productivities and costs.

Details of 2005 Production

		Southern Cross	Carosue Dam	Total
Open Pit	t	287,356	256,848	544,204
Grade	g/t	2.25	3.84	3.00
Underground	t	116,944		116,944
Grade	g/t	7.02		7.02
Stockpiles Processed	t	259.065	56.750	315,815
Grade	g/t	1.32	0.77	1.22
Ore Milled	t	663.365	313,598	976,963
Grade	g/t	2.94	3.28	3.05
Recovery	X	92	96	93
Gold Shipped	OZS	53.719	29,528	83,247
Cash Cost	$5/\text{o}z$	336	349	341

In addition to gold shipped from operations of 83,247oz, 399oz was generated from other site clean-ups.

Care and maintenance activities are being continued at Meekatharra, Gwalia, Tarmoola and Carosue Dam.

Consolidated revenues and results

Consolidated revenues and results are summarised as follows:

	2005	2004
	\$'000	\$'000
Gold	46,553	21,972
Share investments	13.675	5,063
Proceeds on sale of royalty,
property, plant and equipment	6.662	3,486
Other	611	1,911
	67,501	32,432
Loss from ordinary activities before related income tax expense Income tax expense	(6,697)	(25, 228)

Loss from ordinary activities after related income tax expense	(6,697)	(25, 228)
Less: Net loss attributable to outside equity interest		913
Net loss attributable to members
of St Barbara	(6.697

a) Changes in Substantial Shareholdings

NuStar Mining Corporation Limited
Shares held as at:	30 June 2004	542.719.338	54.8%
	30 June 2005	63.325.359	6.4%

On 30 September 2004, the Company sold 100M shares at 4¢ each in NuStar and as a consequence deconsolidated its investment for accounting purposes as from that date.

Also on 30 September 2004, the Company granted an option to Claymore Capital Pty Ltd and its nominees to purchase up to 100M NuStar shares at $5¢$ each. The option agreement expired on 16 May 2005, and resulted in the sale of 36,674,700 NuStar shares.

On 17 January 2005, the Company completed a share swap buy-back whereby 212,864,971 NuStar shares were provided as consideration for buying back 170,291,977 St Barbara shares. The issued capital of St Barbara reduced from 736,825,329 fully paid ordinary shares to 566,533,352 fully paid ordinary shares.

On 28 January 2005, the Company accepted an offer for 69,354,367 NuStar shares from Sedimentary Holdings Limited ("Sedimentary") and as a result received 15,412,082 Sedimentary shares representing 5.5% of the issued capital of that company. The shareholding in Sedimentary was sold on 27 July 2005.

As a result of the transactions in NuStar shares described above and further on-market share sales, the Company's investment in NuStar reduced from 54.8% as at 30 June 2004 to 6.4% as at 30 June 2005 and nil as at 27 July 2005.

b) Changes in Operations

Divestment of NuStar

The Company's investment in NuStar was deconsolidated as from 30 September 2004 following the sale of 100M shares as described above.

Divestment of Paulsens Royalty

On 29 November 2004, shareholders approved the sale of the Company's Paulsen's royalty to NuStar for \$5,100,000.

Termination of Reedys Joint Venture

On 9 December 2004, by mutual agreement, Elara Mining Limited ("Elara") withdrew from the Reedys Joint Venture at Meekatharra, and expenditure incurred by Elara of \$593,213 was agreed to be deemed expenditure towards its expenditure commitments for the Polelle Joint Venture.

Acquisition of Gold Division of Sons of Gwalia Ltd (Administrators Appointed)

On 20 March 2005, the Company announced the acquisition of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) ("SGWGD") for a cash payment of \$2,285,000, the replacement of existing bank guaranteed environmental Performance Bonds totalling \$29,960,000 and the assumption of additional Performance Bonds of up to \$5,700,000. The effective date of acquisition was 28 March 2005.

Through this acquisition the Company acquired:

Land positions totalling 10,000km2 in the Leonora, Southern Cross and South Laverton regions of Western Australia;
Gold operations in production at Marvel Loch, Southern Cross, and Carosue Dam, South Laverton; and
* A portfolio of property, plant and equipment.

The results of gold production from these acquired assets are described in the section titled Operations Review, on pages 12 to 13.

	Shares on Issue
Issued capital at 30 June 2004	574, 149, 157
On 15 July 2004, the Company announced the conversion by Ocean Resources Capital Holdings plc of the face value of its convertible note of \$4.4M into 55,000,000 ordinary shares at 8¢ each	629, 149, 157
On 20 July 2004, the Company issued 42,050,000 fully paid ordinary shares at $4¢$ per share to raise \$1,682,000 for working capital	671,199,157
On 20 July 2004, the Company issued 17,480,547 fully paid ordinary shares to Ocean Resources Capital Holdings plc at $4.6\ell$ per share in satisfaction of interest of \$804,105	688,679,704
On 23 July 2004, the Company issued 26,591,453 fully paid ordinary shares to Resource Capital Funds II LP ("RCFII") at 4.6¢ per share to raise \$1,223,207 for working capital	715,271,157
1 December 2004, following 0n. shareholder approval, the Company converted a \$1,200,000 loan from RCFII into 21,554,172 fully paid ordinary shares	736,825,329
On 17 January 2005 the Company completed a share buy-back (offering 1.25 NuStar shares as consideration for every 1St Barbara share bought back) and as a result cancelled 170,291,977 shares	566,533,352

Matters subsequent to the end

of the financial year

On 26 July 2005, the Company announced:

& Extension to operations at Southern Cross based on open pit mining of Hercules and continuing underground operations at Marvel Loch;
An on-market share buy-back to buy back up to 10% of the
Company's issued capital $(56,653,335$ shares); and $\cdots$
The proposed sale of unmarketable parcels of shares, on behalf of holders of unmarketable parcels.

On 27 July 2005, the Company sold its remaining shares in-NuStar (63,325,359 shares) and Sedimentary (15,412,082 shares) for \$3,166,268 and \$2,851,234 respectively, yielding total proceeds of \$6,108,000.

On 9 August 2005, the Company announced a reserve estimate upgrade for Hercules, near Marvel Loch, Southern Cross as at 30 June 2005 using a gold price of A\$550/oz and cut-off grade of 1.1g/t, to Probable Reserves of 2.3Mt @ 2.5g/t for 180,000oz of gold.

Likely developments and

expected results of operations

Likely developments in the operations of the consolidated entity constituted by St Barbara and the entities it controls at the date of this report included:

As a consequence of the extension to operations at Southern Cross as described above, forecast gold production for the financial year 2005/06 is 150,000 ounces at an estimated cash cost of \$415/oz.
Exploration activities are planned to continue at Leonora (both at Tarmoola and Gwalia Deeps), Southern Cross and Meekatharra.

Regulatory environment

The consolidated entity is subject to significant environmental regulation in respect of its mining and exploration activities.

Mining and exploration

The Company's mining activities are all in Western Australia, and are governed by the Mines Act Western Australia, the Mines Safety and Inspection Act and other mining related legislation. Exploration activities are also primarily in Western Australia. Details of mining and exploration activities during the year are set out in separate reports included in this Annual Report.

Information on directors

S J Colin Wise LL.B, FAICD, FAuslMM

Chairman - non-executive Age 59

Experience and expertise

Mr Wise is an experienced corporate lawyer and consultant with significant expertise in the mining and exploration industry and corporate sector. He spent 24 years with WMC Limited, 10 of which as General Counsel and subsequently, 4 years as Counsel to the New York law firm of Howard, Smith and Levin LLP. He has had extensive practical experience in Australia and internationally with a wide range of corporate, operational and legal matters. He is a Fellow of both the Australian Institute of Company Directors and of the Australasian Institute of Mining and Metallurgy. He is a nonexecutive director of Southern Health, the largest health care service in Melbourne.

Other current public company directorships Nil

Former public company directorships in last 3 years Nil

Special responsibilities Chairman of the Board Member of the Audit Committee

Interest in shares and options Mr Wise has a beneficial interest in 3,100,000, fully paid ordinary shares of the Company.

Eduard Eshuys B.Sc, FAICD, FAusIMM

Managing Director and Chief Executive Officer Age 60 Experience and expertise

Mr Eshuys is a geologist with 36 years of experience in mineral exploration, development and operation of gold and nickel mines in Australia. He has a credible record in exploration having led the exploration teams that discovered several major gold deposits, including Plutonic, Bronzewing and Jundee. He brought Bronzewing and Jundee as well as the Cawse Nickel mine into production. Mr Eshuys was awarded the Geological Society of Australia's Joe Harms medal for distinction in exploration success and project development. in 1996. He is a Fellow of both the Australian institute of Company Directors and the Australian Institute of Mining and Metallurgy.

Other current public company directorships Nil :

Former public company directorships in last 3 years Nil

Special responsibilities Member of the Remuneration Committee

Interest in shares and options

Mr Eshuys has a beneficial interest in 1.250,000 fully paid ordinary shares and holds 35,000,000 executive options to acquire fully paid ordinary shares as detailed later in this Report.

Henderson (Hank) G Tuten, B.A. (Econ)

Non Executive Director Age 57 Experience and expertise

Mr Tuten is actively involved in a consolidated entity of private equity funds as a founding partner. These are the Resource Capital Funds ("RCF"), the e-Century Capital Fund and the CIP Fund. Mr Tuten is the Chairman of RCF Management LLC, the management company of RCF. He spent over fifteen years with the NM Rothschild and Sons consolidated entity. During that period, he was the chief executive officer of Rothschild Australia Limited, Rothschild North America Inc. and Continuation Investments NV, the private equity vehicle for Rothschild Continuation Holdings AG consolidated entity. Prior to that, he was a commercial banker with the Philadelphia National Bank. Mr Tuten serves on several boards in connection with his investment activities. He graduated from the University of Virginia with a BA in Economics.

Other current public company directorships Nil

Former public company directorships in last 3 years Nil

Special responsibilities Member of the Audit Committee

Interest in shares and options

Mr Tuten has a beneficial interest in shares and options held by Resource Capital Funds II LP of 177,887,642 shares and 52,088,091 options.

Mark K Wheatley B.E. ((Chem) Hons 1), MBA

Non Executive Director Age 44.

Experience and expertise

Mr Wheatley has 25 years resource industry experience within Australia and overseas. In his 17 years with BHP until 1996, he was involved in engineering, research, business development and commercial roles within the steel, minerals and corporate business groups. He then joined BT and became a Senior Vice President within the Global Metals and Mining Group where he was involved in project finance

and corporate advisory activities over the next 3 years. He moved to the gold industry in 1999 where, as General Manager Corporate Development with Goldfields/Aurion Gold Limited and a period as Acting Managing Director of Goldfields, he completed a number of successful mergers and acquisitions before it was taken over by Placer Dome Inc. in 2002. Mr Wheatley is currently Chairman and CEO of Southern Cross Resources Inc, a company which is listed on the Toronto Stock Exchange.

Other current public company directorships Southern Cross Resources Inc.

Former public company directorships in last 3 years Nil

Special responsibilities

Chairman of the Audit Committee - appointed 25 July 2005 (previously Chairman of the Remuneration Committee) Member of the Remuneration Committee

Interest in shares and options

Mr Wheatley holds 1,000,000 unlisted options as detailed later in this Report.

Richard Knight MSc(Eng), DIC, BSc(Eng), ARSM, FAICD, C. Eng

Non Executive Director Age 64

Experience and expertise

Mr Knight is a mining engineer with some forty years experience, both in Australia and internationally. Mr Knight is a Director of Zinifex Limited and Northern Orion Resources Inc, Chairman of Heuris Partners, a Melbourne-based advisory and strategic planning practice and Senior Advisor to Inco-Limited. He has previously been CEO of Energy Australia Limited, an Executive Director of North Limited and Managing Director of Inco Australia Management Pty Ltd. As the Managing Director of Inco Australia Management Pty Ltd,

Mr Knight was responsible for the redesign and reorganisation of the Goro lateritic nickel project in New Caledonia.

Other current public company directorships Zinifex Limited and Northern Orion Resources Inc.

Former public company directorships in last 3 years Portman Limited and Asia Pacific Resources Limited

Special responsibilities Chairman of the Remuneration Committee appointed 25 July 2005

Interest in shares and options None

Company secretary

Ross Kennedy BComm, Grad.Dip - Company Secretarial Practice, ACA, FTIA, MAusIMM, FAICD, ACSA

Chief Financial Officer and Company Secretary Age 45 Mr Kennedy was appointed to the position of company secretary in 2004. Mr Kennedy has more than 17 years' experience as a public company secretary and has held a number of public company directorships in resources and technology companies. He has commercial experience in the acquisition and sale of mineral assets and extensive corporate experience in public company administration including treasury, IT, risk management, ethical standards, capital and finance raisings, statutory accounting, takeovers, legal contracts and statutory compliance with a diverse range of public companies.

Meetings of directors

The number of meetings of the company's board of directors and of each board committee held during the year ended 30 June 2005, and the numbers of meetings attended by each director were:

		Audit			Meetings of committees
	executive directors			Remuneration
	n	А	B		ĸ
S J C Wise
E Eshuys
H G Tuten
M K Wheatley
R Knight
S W Miller
K A Dundo

Retirement, election and continuation in office of directors

R Knight was appointed a director on 25 May 2005. In accordance with the Constitution, R Knight retires as a director at the annual general meeting and, being eligible, offers himself for re-election.

S J C Wise is the director retiring by rotation who, being eligible, offers himself for re-election.

Remuneration report

The remuneration report is set out under the following main headings:

A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Managing Director & CEO KPIs
F Valuation of options
A Principles used to determine the nature and amount of remuneration

The Company's remuneration policy and practices have been evolving, with a recently adopted Remuneration Policy. A summary of key elements of the Remuneration Policy is as follows:

Overview

The board recognizes that in order to meet and exceed its business objectives, the Company must be able to attract, motivate and retain key executives.

Key Principles

The key principles that underlie St Barbara's Remuneration Policy are:

* remuneration will be linked to the creation of value for shareholders;
* remuneration will reward both financial and non-financial
performance;
remuneration will reflect the market in which the Company operates; and
remuneration will recognise the contribution of individuals and teams.

Executive Remuneration

* Aim of Remuneration Policy
To achieve its goals in relation to executive staff, the Remuneration Policy is designed to:
o align individual and team reward with business performance in both the short term and long term;
o encourage executives to align their interest with those of shareholders:
o encourage executives to perform to their fullest capacity;
o be business focused and flexible; and
o be competitive and cost effective in each relevant employment market.
Content of Remuneration Packages

Remuneration may incorporate fixed and variable pay performance elements with both a short-term and longterm focus. Remuneration packages may contain any or all of the following:

o annual salary with provision to recognize the value of the individual's personal performance and their ability and experience;
o rewards, bonuses, special payments and other measures available to reward individuals and teams following a particular outstanding business contribution;
o share participation St Barbara has adopted an Employee Share Option Plan; and
o other benefits, such as holiday leave, sickness benefits, superannuation payments and long service benefits.

Non executive directors

Fees and payments to non executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non executive directors' fees and payments are reviewed annually by the Board. The Board also considers the advice of independent remuneration consultants to ensure non executive directors' fees and payments are appropriate and in line with the market. The Chairman's fees are determined independently to the fees of non executive directors based on comparative roles in the external market. The Chairman is not involved in any discussions relating to determination of his own remuneration. Non executive directors do not receive employee share options. MK Wheatley received 1,000,000 unlisted options as detailed in note 23 from Resource Capital Fund II LP. Non executive directors may, commencing 1 October 2005 elect to receive all or part of their remuneration with a 20% minimum in St Barbara shares, which would be acquired on-market, pursuant to a non executive director share plan.

Directors' fees

The current base remuneration was last reviewed with effect from 1 July 2005. The Chairman's remuneration is inclusive of committee fees while non-executive directors receive additional yearly fees for their membership on committees of the Board.

Non executive directors' fees are determined within an aggregate directors' fee pool limit, which is periodically

recommended for approval by shareholders. The maximum currently stands at \$215,000 per annum in aggregate (approved in 1991), and shareholders will be asked to consider an increase to \$750,000 per annum in aggregate at the 2005 Annual General Meeting.

Retirement allowances for directors

Non executive directors are not entitled to retirement allowances.

Executive pay

The executive pay and reward framework has four components:

* base pay and benefits
short-term performance incentives
long-term incentives through participation in Executive Options or the St Barbara Employee Option Plan, and
other remuneration such as superannuation.

The combination of these comprises the executive's total remuneration.

Base pav

Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed benefits at each executive's discretion.

Executives are offered a competitive base pay. External remuneration consultants provide analysis and advice to assist in determining base pay that reflects a comparable market role. Base pay for senior executives is reviewed annually to ensure the executive's pay is competitive with the market. An executive's pay is also reviewed on promotion.

There are no guaranteed base pay increases included in any senior executive's contracts.

Benefits

Executives receive benefits including as appropriate, car and/or living away from home allowances.

Superannuation

Employees have a choice of superannuation funds and all benefits accumulate.

Short-term incentives

For the year ended 30 June 2005, KPIs required performance in improving operational efficiencies as well as other key, strategic financial and non-financial measures linked to drivers of performance in future reporting periods.

The Remuneration Committee is responsible for assessing whether the KPIs are met. To help make this assessment, the committee receives detailed reports on performance from management and as appropriate, external remuneration consultants.

St Barbara Employee Option Plan

Information on the St Barbara Option Plan is set out on page 63.

B Details of remuneration

Amounts of remuneration

Details of the remuneration of each director of St Barbara and each of the five executives of the company and the consolidated entity who received the highest remuneration for the year ended 30 June 2005 as reflected in the results of the Company for that year are set out in the following tables. Remuneration for directors and executives is reviewed annually. Cash bonuses are directly related to performance.

Directors of St Barbara

2005		Primary			Post-employment
	Cash salary and fees Ś	Cash bonus	Non- monetary benefits Ś	Super- annuation	Retirement benefits Ś	Option Value Current Date ¢	Total ۹	Remuner -ation as Option Value %
Chairman
S J C Wise	87,114			7,840			94,954
Managing Director & CEO
E Eshuys	1276,178	2250,000	40,000	8,652		3914.614	1,489,444	61.4
Former Executive
Chairman
S W Miller	37,716			7,543	1245,616		290,875
Non executive directors
R Knight *	4,701			423			5,124
H G Tuten **			$\overline{\phantom{a}}$
M K Wheatley	573,007			6,571			79,578
Total	478,716	250,000	40,000	31,029	245,616	914,614	1.959.975

Includes consulting fees paid prior to employment. Ť.

² Provision for bonus included in the 2005 financial year results, and paid subsequent to balance date.

$\mathbb{R}^+$ During the 2005 financial year, E Eshuys was issued executive options, with the approval of shareholders at the 2004 Annual General Meeting. Details are as follows:

Grant date	Number	Exercise price	Expirv	Vesting	Vesting condition
23 Dec 04	5,000,000	0.0472	23 Dec 09	On grant
23 Dec 04	5,000,000	0.0472	23 Dec 09	21 Jul 05
23 Dec 04	5,000,000	0.0472	23 Dec 09	21 Jul 06	Continued
23 Dec 04	5,000,000	0.1500	23 Dec 08	14 Sep 05	employment as Managing Director
23 Dec 04	5,000,000	0.1500	23 Dec 09	14 Sep 06	& CEO
23 Dec 04	5,000,000	0.1500	23 Dec 10	14 Sep 07
23 Dec 04	5,000,000	0.1500	23 Dec 11	14 Sep 08

For statutory purposes, E Eshuys' options are valued as at grant date being the date of shareholder approval apportioned on a pro-rata basis for the period of service to vesting dates. The valuation assumes that all options granted will vest. The pricing of the exercise terms of these options was agreed at prior dates;

$-$ 21 July 2004 15,000,000 options exercisable at \$0.0472 (being the volume weighted average share price for the month after Mr Eshuys was first appointed a Director) $\mathbb{E}{\mathcal{O}(S{\mathcal{O}} \times \mathcal{O}{\mathcal{O}{\mathcal{O}}})} \times \mathbb{E}{\mathcal{O}(S{\mathcal{O}} \times \mathcal{O}{\mathcal{O}})} \times \mathbb{E}{\mathcal{O}(S_{\mathcal{O}} \times \mathcal{O}{\mathcal{O}})} \times \mathbb{E}{\mathcal{O}(S_{\mathcal{O}} \times \mathcal{O}{\mathcal{O}})} \times \mathbb{E}{\mathcal{O}(S_{\mathcal{O}})}$

$-14$ September 2004 20,000,000 options exercisable at \$0.15 (closing market price of \$0.044)

S W Miller received a termination package comprising accrued leave entitlements and redundancy.

Includes back pay of \$27,135 and superannuation thereon of \$2,442 relating to the previous financial year.

R Knight was appointed a director on 25 May 2005

** H G Tuten has declined to receive directors' fees

Total remuneration of directors of St Barbara for the year ended 30 June 2004 is set out below. Information is aggregated except for Directors in office during both the current and preceding year.

2004		Primary			Post-employment
	Cash salary and fees	Cash bonus	Non- monetary benefits	Super- annuation	Retirement benefits	Option Value Current Date	Total	Remuner -ation as Option Value %
Former Executive Chairman
S W Miller	400,000	$\overline{\phantom{a}}$	11,324	80,000			491.324
Non executive directors
H G Tuten **
M K Wheatley	27,135			2,446			29,581
KA Dundo	100,000			9,000			109,000
(resigned 18/07/04)
GB Speechly (resigned 28/11/03)	20,833			1,875
Total	547.968			93,321			652.613

Other executives of St Barbara

2005		Primary			Post-employment
	Cash salary and fees	Cash bonus	Non- monetary benefits	Super- annuation	Retirement benefits	Option Value Current Date	Total	Remuner -ation as Option Value %
R J Kennedy	148,292		8,333	10,916	$\overline{\phantom{a}}$	246.276	213,817	21.6
CFO & Company Secretary
P Thompson	71,499			6,885		247,949	126,333	38.0
GM - Exploration
MR Reed $3$	227,788						227,788
GM - Operations
G C Miller	145,000			21,750			166,750
GM - Special Projects
G Viska i India	.131,500.						$-131,500$
GM - Commercial
Total.	724,079		8,333	39,551	$\tilde{\phantom{a}}$	94.225	866,188
		ko ta da 19 da ya 19 da ya 19

Includes consulting fees paid prior to employment

² employee options issued on commencement of employment valued at grant date in accordance with AASB 1046 Director and

Executive Disclosures

$3$ executives in receipt of consulting fees

All executives commenced with St Barbara during the 2005 financial year save for G C Miller who is a continuing executive.

Total remuneration of executives of St Barbara for the year ended 30 June 2004 is set out below. Information is aggregated except for executives in office during both the current and preceding year.

2004		Primary			Post-employment
	Cash salary and fees	Cash bonus	Non- monetary benefits	Super- annuation S	Retirement benefits	Options	Total
G C Miller
G M - Special Projects	145,000		3,320	21,750			\$170,070
R T Calnan	169,000		11,446	62,600			243,046
(Resigned 31/10/04)
P J Richardson	150,000		10,789	15,000			175,789
(Resigned 30/11/04)
C W Davis	142,622		9,048	21,393			173,063
(Resigned 31/10/04)
E L Boyd	120,698		214	9,511			130,423
(Resigned 31/12/04)
A D Rule	87,796		3,320	11,875	71,250		174,241
(Resigned 15/12/03)
Total	815,116		38,137	142,129	71,250		1,066,632

C Service agreements

Remuneration and other terms of employment for the Managing Director and the specified executives are formalised in service agreements. Each of these agreements provide for the provision of performance-related cash bonuses, other benefits including allowances and participation, when eligible, in the St Barbara Employee Option Plan. Other major provisions of the agreements relating to remuneration are set out below.

All contracts with executives may be terminated early by either party with one month's notice, subject to termination payments as detailed below.

E Eshuys, Managing Director & CEO

The Company may terminate the contract by providing three months' notice and at the end of the notice period paying the executive nine months' salary. E Eshuys may terminate the contract by giving four months' notice.

R J Kennedy, Chief Financial Officer & Company Secretary

The notice period for terminating R Kennedy's contract is three months' during his first year of service, four and a half months for between one and three years of service and six months after three years. R Kennedy is required to give three month's notice of termination.

D Share-based compensation

Options other than those issued to Mr Eshuys (refer Section E) were granted under the St Barbara Employee Option Plan whichwas approved by shareholders at the 2001 annual general meeting. Staff eligible to participate in the plan are generally either of supervisor level and above or employees who have been continuously employed by the consolidated entity for a period of at least one year.

Options are granted under the plan for no consideration. Options granted during the year had a three year term and vested on the grant date.

The terms and conditions of each grant of options granted under the St Barbara Employee Option Plan affecting remuneration in this or future reporting periods are as follows:

Issued to	Grant date	Expiry date	- Exercise price	Value per option at grant date	Date exercisable
R Kennedv	2 Dec 04	2 Dec 07	SO.08	SO.46	Anytime from grant date
P Thompson	16 Dec 04	2 Dec 07	\$0.08	SO.48	Anytime from grant date

Options granted under the plan carry no dividend or voting rights.

When exercisable, each option is convertible into one ordinary share.

The exercise price of options is equal to or greater than the closing market price on the Australian Stock Exchange on the day the options are granted.

E Managing Director & CEO KPIs

In respect of the 2005 financial year, E Eshuys achieved 100% of the potential bonus available for that year.

The key performance indicators relevant to determination of the bonus for the 2005 financial year encompassed the following categories:

Corporate
$\omega$ . Finance and administration
Investor relations
Exploration and development
Business development
Human resources/environment/community

F Valuation of options

The amounts disclosed for emoluments relating to options above are the assessed fair values at grant date of options granted to executive directors and other executives. Fair values at grant date are independently determined using a Black-Scholes option pricing model of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The model inputs for options granted during the year ended 30 June 2005 included:

options are granted for no consideration i)
ii) exercise price
iii) grant date
$\left| \mathbf{v} \right|$ . expiry date and the series of the series of
share price at grant date $\mathcal{N}) \geq 0$
expected price volatility of the company's shares $\mathsf{vi}$ ) .
vii) expected dividend yield
viii) risk-free interest rate

Loans to directors and executives There were no loans to directors or executives during the year.

Share options granted to directors and the most highly remunerated officers

Options over unissued ordinary shares of St Barbara granted during or since the end of the financial year to any of the directors or the five most highly remunerated officers of the company and consolidated entity as part of their remuneration were to E Eshuys, Managing Director and CEO as set out in Section B of this report and otherwise as follows:

Other executives of St Barbara	Options granted	Grant date
R J Kennedy, CFO & Company Secretary	1.000.000	2 Dec 04
P Thompson, General Manager Exploration	1.000.000	16 Dec 04
G Viska, General Manager Commercial	1.000.000	2 Aug 05

Shares under option

Unissued ordinary shares of St Barbara under option at the date of this report are as follows:

Type	Expiry	Issue price of shares	Number under option
RCF II	Between 15 Jul 05 and 24 May 08	Between 11.4¢ and 21.3¢	52,862,679
Executive options	Between 31 Dec 05 and 23 Dec 11	Between 4.7¢ and 15¢	36,000,000
Employee options	Between 31 Aug 05 and 17 Jan 08	Between 8¢ and 35¢	4,750,000
			93.612.679

No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.

Shares issued on the exercise of options

There were no ordinary shares of St Barbara issued during the year ended 30 June 2005 on the exercise of options granted under the St Barbara Employee Option Plan. No other shares have been issued since that date.

Insurance of officers

During the financial year, St Barbara paid a premium of \$172,373 including GST and charges, to insure the directors and officers of the company and its Australian-based controlled entities.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Proceedings on behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001.

Non-audit services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the consolidated entity are important.

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below.

The board of directors has considered the position and, in accordance with the advice received from the Audit Committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not comprise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor's own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 36.

		Consolidated
	2005	2004
	\$
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:
Audit services
PricewaterhouseCoopers Australian firm:
Audit and review of financial reports and other audit work under the Corporations Act 2001	126,632	117,786
Total remuneration for audit services	126,632	117.786
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services, including review of company income tax returns	108,726	29,200
Total remuneration for taxation services	108.726	29.200

Rounding of amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the directors' report. Amounts in the directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001

This report is made in accordance with a resolution of the directors.
	승규는 학습 이 학습 이 학습 이 학습 이 학습 이 학습 이 학습 이 학습
	the the the theory of the the theory of the theory of the theory of the theory of the theory of the	(不能不能不能不能不能不能不能不能不能不能不能不能不能不能不能不能不能不能不能
	e daerdaerdaerdaerdaerdaerdaerdaerdaerdaer	landaris alam lan lan lan lan lan lan lan lan lan lan

	The problem of the problem of the company of the company of the company of the company of the company of the company
Director

Perth, 30 September 2005

PRICEWATERHOUSE COPERS

Auditors' Independence Declaration

As lead auditor for the audit of St Barbara Mines Limited for the year ended 30 June 2005, I declare that to the best of my knowledge and belief, there have been:

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

This declaration is in respect of St Barbara Mines Limited and the entities it controlled during the period.

Javiel J. freeh

David J Smith Partner PricewaterhouseCoopers

Perth 30 September 2005

PricewaterhouseCoopers ABN 52 780 433 757

250 St Georges Terrace PERTH WA 6000 GPO Box D198 PERTH WA 6840 DX 77 Perth

OV1

Australia www.pwc.com/au Telephone +61 8 9238 3000 Facsimile +61 8 9238 3999

Financials

Statements of Financial Performance for the year ended 30 June 2005

		Consolidated		Company
		30 June 2005	30 June 2004	30 June 2005	30 June 2004
	Notes	\$'000	\$'000	\$'000	\$'000
Revenue from sale of gold	3	46,553	21,972	46,553	21,972
Other revenues from outside operating activities	3	20,948	10,460	20,395	10,871
Total revenue from ordinary activities		67,501	32,432	66,948	32,843
Changes in inventories of finished goods		(687)	(3,691)	(687)	(3,691)
Raw materials and consumables used		(6,640)	(9,359)	(6,640)	(9,359)
Carrying value of net assets and non current assets sold		(14, 578)	(6, 849)	(14, 541)	(6, 849)
Contract mining, cartage, milling, maintenance, labour and consultants		(20, 558)	(8,685)	(20, 558)	(8,000)
Tenement rent and rates		(2, 211)	(1, 329)	(2, 211)	(1, 329)
Royalty cost expenses		(1, 265)	(671)	(1,265)	(671)
Employee benefits expenses		(7, 256)	(6, 165)	(7,256)	(5,876)
Exploration drilling and assay expenditure		(3,896)	(4, 360)	(3,896)	(1, 566)
Loss on subsidiary becoming an associate		(272)
Share of net loss of associate		(577)
Provision for diminution in value of investments		(773)		(773)
Provision for diminution in investment in controlled entities					(12, 348)
Write down of mining development expenses			(6, 497)		(6, 497)
Write down of exploration tenements		(775)	(318)	(775)	(318)
Depreciation and amortisation expenses	4	(8,093)	(2,726)	(8,093)	(2,721)
Other expenses from ordinary activities		(6,093)	(2,930)	(5,288)	(1,806)
Earnings/(loss) before interest and tax (EBIT)		(6, 173)	(21, 148)	(5,035)	(28, 188)
Borrowing cost expense	4	(524)	(4,080)	(524)	(3,741)
Loss from ordinary activities before related income tax expense		(6,697)	(25, 228)	(5, 559)	(31, 929)
Income tax expense
Loss from ordinary activities after related income tax expense		(6,697)	(25, 228)	(5, 559)	(31, 929)
Net loss attributable to outside equity interests			913
Net loss attributable to members of the Company		(6,697)	(24, 315)	(5, 559)	(31, 929)
Total changes in equity attributable to members of the Company other than those resulting from
transactions with owners as owners		(6,697)	(24, 315)	(5, 559)	(31, 929)
Basic and diluted loss per share (cents per share)	32	(1.04)	(4.70)

The above Statements of Financial Performance should be read in conjunction with the accompanying notes.

Statements of Financial Position as at 30 June 2005

		Consolidated		Company
		30 June 2005	30 June 2004	30 June 2005	30 June 2004
	Notes	\$'000	\$'000	\$'000	\$'000
Assets
Current assets
Cash assets	6	16,273	12,849	16,273	1
Receivables	8	4,767	1,512	4,767	374
Other financial assets	14		188	179	21,888
Inventories	9	4,448	777	4,448	777
Assets held for resale	10	21,072	58	21,072	58
Other	11	1,864	630	1,864	599
		48,424	16,014	48,603	23,697
Non-current assets
Restricted cash	7	11,801	3,108	11,801	2,765
Receivables	8			595	1,140
Property, plant and equipment	$12\,$	8,996	4,947	8,137	3,821
Mining properties	13	14,848	42,401	14,848	13,538
		35,645	50,456	35,381	21,264
Total Assets		84,069	66,470	83,984	44,961
Liabilities
Current liabilities
Payables	15	16,225	6,691	16,225	6,067
Interest bearing liabilities	16	1,541	9,832	1,541	8,932
Provisions	17	119	751	119	751
		17,885	17,274	17,885	15,750
Non-current liabilities
Payables	15			11,402	11,484
Interest bearing liabilities	16	7,000	75	7,000	75
Provisions	17	39,111	4,269	39,111	4,269
		46,111	4,344	57,513	15,828
Total Liabilities		63,996	21,618	75,398	31,578
Net Assets		20,073	44,852	8,586	13,383
Equity
Contributed equity	18	135,053	139,400	135,053	139,400
Option reserve	19	2,443	2,443	2,443	2,443
Accumulated losses	20	(117, 423)	(115, 835)	(128, 910)	(128, 460)
Parent entity interest		20,073	26,008	8,586	13,383
Outside equity interest	21		18,844
Total Equity		20,073	44,852	8,586	13,383

The above Statements of Financial Position should be read in conjunction with the accompanying notes.

$\frac{39}{20}$

Statements of Cash Flows for the year ended 30 June 2005

		Consolidated		Company
		30 June 2005	30 June 2004	30 June 2005	30 June 2004
	Notes	\$'000	\$'000	\$'000	\$'000
Cash Flows from Operating Activities
Cash receipts in the course of operations		44,508	24,684	44,508	24,507
(inclusive of goods and services tax)
Payments to suppliers and employees		(44, 939)	(31, 712)	(40, 348)	(27, 799)
(inclusive of goods and services tax)
Interest received		301	1,343	301	1,056
Borrowing costs paid and gold lease fees		(239)	(2,662)	(239)	(1,732)
Finance charges - finance leases			(162)		(162)
- hire purchase agreements		(98)	(133)	(98)	(133)
Net cash flows (used in)/provided by operating activities	30	(467)	(8,642)	4,124	(4, 263)
Cash Flows from Investing Activities
Payments in respect of exploration, evaluation and			(5,043)
development					(3, 327)
Payments for property, plant and equipment Payments for acquisition of business combination,		(202)	(42)	(40)	(38)
including associated expenses		(2, 874)	(2,874)
Cash received from tenements sold		42	1,020	42	1,000
Cash received from investments sold		9,862	4,984	9,862	4,984
Payments for investment in listed securities		(458)	(500)	(458)
Net funds from controlled entities				545	490
Cash disposed on sale of controlled entity		(5, 168)
Proceeds from sale of royalties, property,
plant and equipment		4,706	3,584	5,733	3,483
Net cash flows provided by investing activities		5,908	4,003	12,810	6,592
Cash Flows from Financing Activities
Principal repayments under secured loans		(3,500)	(5,000)	(3,500)	(5,000)
Movement in restricted cash		(10, 430)	465	(8,940)	808
Proceeds from borrowings		9,035	4,500	8,853	3,500
Proceeds from issue of shares and other equity
securities		4,051	20,017	4,051	860
Príncipal repayments - finance leases			(2,315)		(2, 315)
- hire purchase agreements		(183)	(776)	(183)	(776)
- other		(990)		(943)
Net cash flows (used in)/provided by financing activities		(2,017)	16,891	(662)	(2, 923)
Net increase/(decrease) in cash		3,424	12,252	16,272	(594)
Cash at the beginning of the financial year		12,849	597	1	595
Cash at the end of the financial year	6	16,273	12,849	16,273	ŧ
Non-cash financing and investing activities	30
Financing facilities	31

The above Statements of Cash Flows should be read in conjunction with the accompanying notes

1) SUMMARY OF SKINIFICANT ACCOUNTING POLICIES

This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001. It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. The following accounting policies have been used by the consolidated entity for the periods presented:

a) Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by St Barbara Mines Limited as at 30 June 2005 and the results of all controlled entities for the year then ended. St Barbara Mined Limited and its controlled entities are together referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlled entities are shown separately in the consolidated statement of financial performance and statement of financial position respectively. Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed.

b) Acquisition of Assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition the value of the instruments is their market price as at the acquisition date, unless the notional price at which they could be placed in the market is a better indicator of fair value. Transaction costs arising from the issue of equity instruments are charged directly against the equity raised.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

c) Recoverable Amount of Non-Current Assets

The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount write-down occurs. The expected net cash flows included in determining the recoverable amounts of non current assets are not discounted.

d) Treatment of Mining Properties

All exploration and evaluation expenditure incurred by or on behalf of the Company up to the decision by the Board to proceed with development of a mining property, is expensed as incurred. Acquired exploration assets are not written down below acquisition cost until such time as the acquisition cost is not expected to be recovered.

Mining properties consists only of acquired exploration assets together with related mine development costs and capital assets. The cost of mineral properties includes the cash consideration and/or the fair value of shares issued on the date the property is acquired.

The recoverability of amounts shown for mining properties is dependent upon the existence of economically recoverable reserves; the acquisition and maintenance of appropriate permits, licenses and rights; the ability of the Company to obtain financing to complete the development of the properties where necessary and upon future profitable production; or, alternatively, upon the Company's ability to recover its spent costs through a disposition of its interests.

Mine development costs relating to mineral properties are deferred until the properties are brought into commercial production, at which time they are amortised over the estimated useful life of the related property or on a unit-of-production basis over proven and probable reserves. Pre-production credits, including the value of marketable metals extracted during mine development, are credited against costs incurred.

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

e) Depreciation and Amortisation of Property, Plant and Equipment

The Directors have considered the economic life of mine buildings, machinery and equipment with due regard to both the physical life limitations, assessments of economically recoverable reserves of the mine property at which the items are located, and to possible future variations in those assessments. The estimated remaining useful life for all such assets is reviewed regularly with annual reassessments being made for major items.

The majority of mine buildings, plant and equipment (other than freehold land) are written off over their expected economic life. The expected useful lives are as follows:

Buildings 10 years

Plant and Equipment $3$ to 131/3 years

The total net carrying values of mine buildings, machinery and equipment at the mine property are reviewed regularly and, to the extent by which these values exceed their recoverable amounts, that excess is fully provided against in the financial year in which this is determined.

Profits and losses on disposal of property, plant and equipment are taken into account in determining the result for the year.

f) Depreciation and Amortisation of Assets Held for Resale

Plant and equipment which is currently surplus to requirements and not used is not depreciated if already written down to residual value. When those assets are used, they are depreciated on an hourly basis. The total carrying value of these assets is not in excess of estimated market value.

g) Accounting for Income Tax

Income tax has been brought to account using the liability method of tax effect accounting. Future income tax benefits relating to tax losses are only recognised and brought to account to the extent that their realisation is virtually certain.

Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

Tax consolidation legislation

The Company and its wholly-owned Australian controlled entities have decided not to implement the tax consolidation legislation as of 1 July 2003. The Australian Taxation Office has not yet been notified of this decision.

h) Investments

Investments in listed and unlisted securities, other than controlled entities, are stated at cost unless, in the opinion of the Directors, a provision for diminution in value is considered necessary. Income from investments is brought to account by the consolidated entity when dividends are received. Controlled entities are accounted for as set out in Note 1a.

Investments in associates are accounted for in the consolidated financial statements using the equity method. Under this method, the consolidated entity's share of the post-acquisition profits or losses of associates is recognised in the consolidated statement of financial performance, and its share of post acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are those entities over which the consolidated entity exercises significant influence, but not control.

i) Inventories

Inventories are valued at the lower of cost and net realisable value. The cost of ore stockpiles and gold stocks includes direct material, direct labour, transportation costs, and variable and fixed overhead costs relating to mining activities. Costs have been assigned to inventory quantities on hand at balance date using the weighted average basis.

j) Maintenance and Repairs

Plant of the consolidated entity is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance programme. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in accordance with note 1e). Other routine operating maintenance, repair and minor renewal costs are also charged as expenses as incurred.

k) Employee Benefits

Wages and salaries, annual leave and sick leave ŤÌ.

Liabilities for wages and salaries and annual leave are recognised, and measured as the amount unpaid at the reporting date at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

ii) Long service leave

The liability for long service leave expected to be settled within twelve months of the reporting date is recognised in the provisions for employee entitlements and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than twelve months from the reporting date is recognised in the provisions for employee entitlements and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the length of service and the probability of achievement of long service leave anniversary dates.

iii) Ownership-based remuneration schemes

Ownership-based remuneration is provided to employees via the Employee Option Plan, Information relating to this scheme is set out in Note 27.

No accounting entries are made in relation to the Employee Option Plan until options are exercised, at which time the amounts receivable from employees are recognised in the statement of financial position as share capital. The amounts disclosed for remuneration of Directors and executives in the Directors Report include the assessed fair values of options at the date they were granted.

I) Leased Assets

Assets acquired under finance leases are included as property, plant and equipment in the statement of financial position. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of the leased property. Where assets are acquired by means of finance leases, the present value of the minimum lease payments is recognised as an asset at the beginning of the lease term and amortised on a straight line basis over the expected useful life of the leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and finance charge.

Other leases under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to expense over the period of expected benefit.

m) Receivables

A provision is raised for any doubtful debts based on a review of all outstanding amounts at year end. Bad debts are written off during the year in which they are identified.

n) Revenue

Amounts are recognised as sales revenue when, there has been a passing of risk to a customer, and:

the product is in a form suitable for delivery and no further processing is required by, or on behalf of, the producer;
the quantity and quality of the product can be determined with reasonable accuracy;
the product has been despatched to the customer and is no longer under physical control of the producer (or property in the product has earlier passed to the customer); and
the selling price can be determined with reasonable accuracy.

Sales revenue represents gross proceeds from the customer. Certain sales are initially recognised at estimated sales value when the product is shipped. Adjustments are made for variations in metal price, assay, weight and currency between the time of shipment and the final settlement of sales proceeds.

Revenue on sale of investments and tenements is recognised at disposal.

Interest revenue is recognised when it accrues taking into account interest rates applicable to financial assets.

o) Cash Flows

For the purpose of the statements of cash flows, cash includes cash on hand, deposits held at call which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts. Exploration expenditure is treated as an operating cashflow in the current year to reflect the nature of the Company's business. Previously it was classified as investing.

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

p) Foreign Currency

Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates at balance date. Exchange gains and losses are brought to account in determining the profit or loss for the year.

Exchange gains and losses and hedging costs arising on forward foreign exchange contracts entered into as hedges of specific commitments are deferred on the statement of financial position and included in the determination of the amounts at which the hedged transactions are brought to account. All exchange gains and losses relating to other hedge transactions are brought to account in the statement of financial performance in the same year as the exchange differences on the items covered by the hedge transactions.

Gains and losses on foreign currency transactions that are not accounted for as specific hedges, if any, are brought to account as they arise and disclosed as speculative gains or losses.

q) Trade and Other Creditors

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. These amounts are unsecured.

r) Rehabilitation and Restoration Costs

Provision is made on a straight line basis for the consolidated entity's estimated liability under specific legislative requirements and the conditions of its mining leases for future costs expected to be incurred in restoring areas of interest. The estimated liability is based on the restoration work required, using existing technology, as a result of activities to date.

s) Borrowing Costs

Borrowing costs are recognised as expenses in the year in which they are incurred. Borrowing costs include interest on bank overdrafts, short-term and long-term borrowings, finance lease charges, the fair value of equity securities issued in satisfaction of interest and facility fees and amortisation of establishment costs and facility fees in connection with the arrangement of borrowings.

t) Interest Bearing Liabilities

Loans are carried at their principal amounts which represent the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.

u) Rounding of Amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial report. Amounts in the report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

v) Earnings per Share

Ť). Basic earnings per share

Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share Ĭi).

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Details of the impact of adopting Australian Equivalents to International Financial Reporting Standards are detailed in Note 35 to the financial statements.

2) SEGMENT INFORMATION

The Consolidated Entity operates predominantly in the gold mining and exploration industry in Australia. The Consolidated Entity's head office is in Australia.

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
3) REVENUE	\$'000	\$'000	\$'000	\$'000
Revenue from operating activities
Revenue from sale of gold	46,553	21,972	46,553	21,972
Revenue from non-operating activities
Proceeds on sale of investments	13,675	5,063	13,675	4,984
Proceeds on sale of tenements	50	1,020	50	1,000
Proceeds on sale of royalty, property, plant and equipment	6,662	3,486	6,109	3,483
Interest received	397	502	397	1,056
Other	164	389	164	348
Total revenue from ordinary activities	67,501	32,432	66,948	32,843
4) LOSS FROM ORDINARY ACTIVITES
Loss from ordinary activities before income tax expense includes the following specific net gains and expenses:
Net Gains
Net gain on disposal of:
- Investments	4,319	172	4,319	93
- Property, plant and equipment	1,369		853
- Tenements	42	1,020	42	1,000
Expenses
Cost of gold sales	31,360	21,165	31,360	21,165
Amortisation:
- Mining expenses	7,287	1,200	7,287	1,200
Write down of mining development expenses		1,241		1,241
Write-down of exploration tenements	775	318	775	318
Loss on disposal of property, plant and equipment		2,462		2,462
Depreciation:
- Buildings	70	102	70	102
- Plant and equipment	736	1,424	736	1,419
Borrowing costs expensed:	806	1,526	806	1,521
- Interest paid	513	1,523	513	1,434
- Convertible Note borrowing cost		2,262		2,012
- Finance charges relating to:
- finance leases	$\overline{a}$	162		162
- hire purchase	11	133	11	133
	524	4,080	524	3,741
Rental of premises	263	274	263	274
Royalties	1,265	671	1,265	671
Provision for:
- Rehabilitation	216	495	216	495

- Inventories		(204)		(204)

Notes to the Ffrancial Statement for the year ended 30 June 2005 continued

	Consolidated		Company
5) INCOME TAX	30 June 2005	30 June 2004	30 June 2005	30 June 2004

a) Tax Expense The amount of income tax expense for the financial year differs from the amount calculated on the loss. The differences are reconciled as follows:	\$'000	\$'000	\$'000	\$'000
Loss from ordinary activities before income tax expense	(6,697)	(25, 228)	(5, 559)	(31, 929)
Income tax calculated at 30% (2004: 30%)	2,009	7,568	1,668	9,579
Tax effect of permanent differences:
- Provision for diminution in investments	(307)	(90)	(232)	(3,720)
- Legal and other capital expenditure	(448)	(91)	(448)	(91)
- Sundry items	(3)	(3)	(3)	(3)
	(758)	(184)	(683)	(3, 814)
Income tax adjusted for permanent differences	1,251	7,384	985	5,765
Net future income tax benefit not brought to account	(1,251)	(7, 384)	(985)	(5,765)
Income tax (expense)
b) Unbooked future income tax benefit
Future income tax benefit attributable to operating losses	1,280	33,263	1,280	25,809
Less: offset to provision for deferred income tax	(4,071)	(1, 357)	(4,071)	(834)
	(2,791)	31,906	(2,791)	24,975
Future income tax benefit attributable to timing differences not brought to account	4,545	1,674	4,545	1,602
Future income tax benefit not brought to account	1,754	33,580	1,754	26,577

These benefits will only be obtained if:

Ť). the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss to be realised; or
the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and ĭi}

iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for the tosses.

c) Tax consolidation legislation

The Company and its wholly-owned Australian subsidiaries have decided not to implement tax consolidation in respect of the year ended 30 June 2005. The Australian Taxation Office has not yet been notified of this decision.

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
6) CASH ASSETS	\$'000	\$'000	\$000	\$'000
Current
Current cash on hand	1,454		1,454
Cash on call	14,819	12,848	14,819
	16,273	12.849	16.273
7) restricted cash Non-Current

$\cdots$
Term deposit i	4	-40	41	-40
Term deposit ""	11.754	3.068.	11.754	2.725
	11,801	3.108	11.801	2.765

$\mathfrak{f}$ Funds placed on security deposit for lease rental. The current lease expires on 31 January 2006.

$\tilde{\mathbf{H}}$ Funds placed on security deposit with Macquarie Bank Limited as security for performance bonds issued by Macquarie Bank Limited to WA Department of Industry and Resources.

$\mathbf{iii}$ Funds placed on security deposit with Westpac Banking Corporation as security for performance bonds issued by Westpac Banking Corporation to WA Department of Industry and Resources.

8) RECEIVABLES

Current
Trade debtors	2,561	576	2,561	382
Provision for doubtful debts	(56)	(222)	(56)	(222)
Other debtors ¹	2,262	1,158	2,262	214
	4,767	1,512	4,767	374
³ Other debtors in the consolidated entity includes a GST receivable of \$1,445,005
Non-Current
Non-trade receivables from controlled entities			2,225	2,770
Less: provision for non-recovery			(1,630)	(1,630)
			595	1,140
9) INVENTORIES
Current
Consumables and spares - at cost	2,635	870	2,635	870
Less: provision for obsolescence	(130)	(130)	(130)	(130)
	2,505	740	2,505	740
Gold in circuit - at cost	1,943	37	1,943	37
	4,448	777	4,448	777

Notes to the Financial Statement for the year ended 30 June 2005 continued

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
10) ASSETS HELD FOR RESALE	\$'000	\$1000	\$'000	\$'000
Current
Investments
- At cost	9,173		9,173
- Provision for diminution	(3,069)		(3,069)
	6,104		6,104
Property, plant and equipment owned
- At cost	14,968	1,587	14,968	1,587
- At fair value
- Accumulated depreciation		(1,529)		(1,529)
	14,968	58	14,968	58
	21,072	58	21,072	58
11) OTHER ASSETS
Current
Prepayments	1,864	630	1,864	599
12) property, plant and equipment
Non-Current
Property, plant and equipment - at cost
Land	972	1,244	113	135
Buildings	4,069	4,434	4,069	4,434
Less: Accumulated depreciation	(3, 964)	(4, 238)	(3, 964)	(4, 238)
	105	196	105	196
Plant and equipment	63,167	55,457	63,167	55,270
Less: Accumulated depreciation and provision for diminution	(55, 248)	(51,950)	(55, 248)	(51,780)
Written down value of plant and equipment	7,919	3,507	7,919	3,490
	8,996	4,947	8,137	3,821
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
Land Carrying amount at the beginning of year	1,244	1,249	135	140
Disposals	(21)	(5)	(22)	(5)
Provision for diminution	(251)
Carrying amount at the end of the year	972	1,244	113	135
Buildings
Carrying amount at the beginning of year	196	383	196	383
Disposals	(21)	(85)	(21)	(85)
Depreciation	(70)	(102)	(70)	(102)
Carrying amount at the end of the year	105	196	105	196

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
12) PROPERTY, PLANT AND EQUIPMENT continued	\$'000	\$'000	\$'000	\$'000
Plant and equipment
Carrying amount at the beginning of year	3,507	6,748	3,490	6,730
Additions	20,200	42	20,200	38
Disposals	(85)	(1, 859)	(68)	(1, 859)
Depreciation	(736)	(1, 424)	(736)	(1, 419)
Transfer from plant and equipment to assets held for resale	(14, 967)		(14,967)
Carrying amount at the end of the year	7,919	3,507	7,919	3,490
	8,996	4,947	8,137	3,821
13) MNING PROPERTIES
Non-Current
Opening balance	42,401	46,372	13,538	19,224
Direct expenditure		4,383		2,668
Acquired tenements	13,068		13,068
Provision for diminution	(775)	(6, 497)	(775)	(6, 497)
Deconsolidation adjustment	(28, 863)
Amortisation charge for the year	(7, 287)	(1, 539)	(7, 287)	(1,539)
Write down as per Director's recommendation		(318)		(318)
Disposal of royalty	(3,696)		(3,696)
Closing balance	14,848	42,401	14,848	13,538
Mining properties
Areas of interest in the exploration/evaluation stage	9,067	38,705	9,067	9,842
Areas of interest in the development and production phase	5,781	3,696	5,781	3,696
	14,848	42,401	14,848	13,538

Certain exploration interests are subject to farm-in agreements, which may result in the establishment of joint ventures in the future.

Notes to the Financial Statement for the year ended 30 June 2005 continued

	Consolidated		Company
	$30 \text{ June}$ 2005	30 June 2004	30 June 2005	30 June 2004
14) OTHER FINANCIAL ASSETS	\$'000	\$'000	\$'000	\$'000
Current
Investments in controlled entities:
- Unlisted securities (at cost)	$\overline{\phantom{a}}$	$\sim$	179	179
- Listed securities (at cost)	٠	500		38,138
Provision for diminution		(312)	٠	(16, 429)
- Market value	$\overline{\phantom{a}}$	188	$\overline{\phantom{a}}$	21,709
		188	179	21,888

On 30 September 2004, the Company sold 100,000,000 shares in NuStar, a Company that was previously controlled. As a result of this sale, the Company no longer exerted control and ceased to consolidate the results of NuStar from that date.

From 1 October 2004, the investment in NuStar was accounted for in the consolidated financial statements using the equity method of accounting and was carried at cost by the parent entity. Details of the disposal are set out as follows:

	\$'000
Net assets of controlled entity disposed of:
Cash	5,168
Restricted cash	1,956
Receivables	1,585
Mining properties	34,463
Property, plant and equipment	172
Creditors	(896)
Interest bearing liabilities	(1,082)

Outside equity interest in controlled entity	41,366
	(18, 595)
	22,771
Cash proceeds for sale of shares in controlled entity	4,000
Carrying value of equity accounted investment following deconsolidation	18,499
	22,499

Loss on subsidiary becoming an associate	(272)

On 17 January 2005, the Company's shareholding in NuStar reduced to 161,254,426 shares, representing 16.3%, and from this date the Company ceased to account for this investment in NuStar using the equity method. The Company's investment was carried at the lower of cost and net realisable value at 30 June 2005.

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
15) PAYABLES	\$'000	\$'000	\$'000	\$'000
Current
Trade creditors and accruals	16,225	6,691	16,225	5,851
Loans from controlled entities - unsecured				216
	16,225	6,691	16,225	6,067
Non-Current
Loans from controlled entities - unsecured			11,402	11,484

16) INTEREST BEARING LIABILITIES
Current
Hire purchase liability - secured	76	188	76	188
Convertible notes - secured $1/2$		6,144		5,244
Insurance premium funding - unsecured	1,465		1,465
Other loans - secured ³⁴		3,500		3,500
	1,541	9,832	1,541	8,932
Non Current
Hire purchase liability - secured		75		75
Other loans - secured ³	7,000	$\overline{\phantom{a}}$	7,000	$\overline{\phantom{a}}$
	7,000	75	7,000	75

On 15 July 2004, the Company announced the conversion by Ocean Resources Capital Holdings Limited ("Ocean") of the face $\hat{\mathbf{s}}$ value of its convertible note of \$4.4 million into 55 million ordinary shares at \$0.08 per share. Interest due on the convertible note loan of \$804,105 was also satisfied by the issue of 17,480,547 fully paid ordinary shares at \$0.046 per share.

A subsidiary at 30 June 2004, NuStar, had a \$900,000 unsecured convertible note with Claymore Capital Pty Ltd which was repaid in October 2004. The Company deconsolidated NuStar with effect as from 30 September 2004.

On 29 March 2005, the Company drew down \$7,000,000 from a bridge loan facility provided by Resource Capital Funds III LP ("RCFIII") to assist in financing the acquisition of the gold division of Sons of Gwalia Ltd (Administrators Appointed) ("SGWGD"), Interest is payable on funds drawn at the rate of 8% per annum, payable 6 monthly in arrears, and with the Company to absorb withholding taxes (currently 10% of gross interest).

The toan has a maturity date of 31 December 2008 and may, at RCFIII's election, and subject to prior shareholder approval, be converted into 100,000,000 shares in the Company at 7¢ each. The Company has the option to repay the loan before maturity, but if it does so, RCFIII is entitled to be issued 100,000,000 options over unissued shares in the Company's capital with an exercise price of 7¢ each, expiring 31 December 2008. The exercise of these options is subject to shareholder approval.

In addition, RCFIII procured financial backing for a \$21,000,000 bank guarantee facility to assist the Company replacing \$30,000,000 in performance bonds with the Department of Industry and Resources WA, attaching to the tenements acquired through SGWGD acquisition. The bank guarantee facility has an annual cost of approximately 2% per annum and expires 30 April 2007.

The loan and financial backing for the performance bond facility are secured by first ranking fixed and floating charges over the assets of the Company.

In addition, RCFIII has been granted a 1.5% royalty on future gold production from Meekatharra from 1 July 2007 and on the acquired SGWGD assets from 1 January 2006, for arranging the acquisition of the financing facilities.

On 8 May 2004, the Company entered into a margin lending facility with Galviston Pty Limited for \$3,500,000. The amount was secured over the investment in NuStar and was repaid in full in October 2004.

Notes to the Financial Statement for the year ended 30 June 2005 continued

		Consolidated	Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
16) INTEREST BEARING LIABILITIES continued	\$'000	\$'000	\$'000	\$'000
Assets pledged as security
The carrying amounts of assets pledged as security are:
Secured toan
- Market value of listed securities	6,104	18,452	6,104	18,452
First Mortgage
- Property, plant and equipment	8,926		8,067
- Other financial assets
- Mining properties	14,848	14,848
Finance Lease
- Plant and equipment under finance lease	70	759	70	759
Floating Charge
- Restricted cash	11,801	3,067	11,801	2,725
- Inventories	4,448		4,448
- Receivables	4,767		4,767
Total assets pledged as security	50,964	22,278	50,105	21,936
17) PROVISIONS
Current
Employee benefits	119	751	119	751
Non-Current
Employee benefits		78		78
Rehabilitation	39,111	4,191	39,111	4,191
	39,111	4,269	39,111	4,269
Movements in Provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
		Rehabilitation	Total
		\$'000	\$'000
Non-Current
Carrying amount at start of the year		4,191	4,191
Additional provision made on acquisition		34,920	34,920
Carrying amount at end of the year		39,111	39,111

	Consolidated		Company
	30 June	30 June	30 June	30 June
	2005	2004	2005	2004
18) CONTRIBUTED EQUITY	\$'000	\$'000	\$'000	\$'000
Ordinary Share Capital
Issued and paid up share capital	135.053	139.400	135.053	139,400

These shares have no par value and are fully paid ordinary shares. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Movements in Ordinary Share Capital

Date	Details	Notes	Number of shares	issue price	\$'000
1 Jul 04	Opening Balance		574,149,157		139,400
15 Jul 04	Debt equity conversion	÷	55,000,000	0.080	4,400
20 Jul 04	Share issue	2.	17,480,547	0.046	804
20 Jul 04	Share placement		42,050,000	0.040	1,682
20 Jul 04	Share issue costs	Š			(33)
23 Jul 04	Placement	$\frac{1}{2}$	26,591,453	0.046	1,223
$1$ Dec 04	Share issue	5.	21,554,172	0.056	1,200
17 Jan 05	Share swap buy back	6	(170, 291, 977)	0.050	(13, 623)
30 Jun 05	Closing Balance		566,533,352		135,053

³ Ocean Resources Capital Holdings Limited ("Ocean") converted a convertible note for \$4,400,000 into 55,000,000 fully paid ordinary shares at 8¢ each.

² Ocean accepted the issue of 17,480,547 fully paid ordinary shares in satisfaction of interest of \$804,105 at 4.6¢ per share.

³ Share issue costs of \$33,000 were offset against issued capital as allowed by Australian Accounting Standards.

⁴ Resource Capital Funds II LP ("RCFII") accepted a placement of 26,591,453 fully paid ordinary shares at 4.6¢ per share to raise \$1,223,207 for working capital.

⁵ In July 2004, RCFII advanced the Company \$1,200,000 which was converted into 21,554,172 fully paid ordinary shares, following shareholder approval.

⁶ In the December 2004/January 2005 period the Company conducted a share swap buy back of shares, whereby 1.25 NuStar shares owned by the Company were offered for every 1 St Barbara share bought back. A total of 170,291,977 St Barbara shares, representing 23% of share capital at that time, were bought back in exchange for 212,864,971 NuStar shares. As a result of the buy back, the excess of the market value over book value of NuStar shares of \$5,109,000 has been applied to accumulated losses.

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June. 2004
	\$'000	\$'000	\$'000	\$'000
19) OPTIONS
a) Option Reserve
Option reserve at the beginning of the financial period	2.443	1.959	2.443	1,959.
Options issued during the financial period		484		484
Option reserve at the end of the financial period	2,443	2.443	2.443	2.443

This option reserve arises from 44,159,394 unlisted options being issued during previous years.

b) Listed Share Options

The consolidated entity had no listed share options on issue at 30 June 2005.

c) Unlisted Share Options

At 30 June 2005, the consolidated entity had 93,612,679 unlisted share options on issue.

Unlisted options are not admitted to the official list of ASX.

On 20 October 1995, shareholders at a general meeting approved the Employee Share Option Plan ("ESOP"). The purpose of the ESOP is to provide an incentive to executive officers on the Company. No new options will be issued in the future under this ESOP. On 28 November 2001, shareholders at a general meeting approved a new Employee Option Plan.

Each unlisted share option entitles the holder to subscribe for one ordinary share on, substantially, the following terms:

Ť) each unlisted option entitles the holder to subscribe for one ordinary share at the specified exercise prices set out below;
the unlisted options are exercisable at any time up to 5.00pm Perth, Western Australia time on the dates set out below Ĭi) by completing an option exercise form and delivering it together with the required payment for the relevant number of ordinary shares in respect of which the unlisted options are exercised to the registered office of the Company. Any unlisted options not exercised by that time will lapse.

Movements in Unlisted Options

Date	Details	Number of Options	Exercise Price	Expiry Date
30 Jun 03	Balance	44,905,632
7 Jul 03	RCF Facility	11,555,962	\$0.1138	7 Jan 07
7 Jul 03	RCF Facility	394,016	\$0.2086	7 Jan 07
7 Jul 03	RCF Facility	1,934,835	\$0.2124	7 Jan 07
7 Jul 03	RCF Facility	3,867,849	\$0.2125	7 Jan 07
7 Jul 03	RCF Facility	5,874,281	\$0.1138	7 Jan 07
7 Jul 03	RCF Facility	200,292	\$0.2086	7 Jan 07
7 Jul 03	RCF Facility	983,541	\$0.2124	7 Jan 07
7 Jul 03	RCF Facility	1,966,155	\$0.2125	7 Jan 07
13 Jul 03	Employee Option Plan 2001 - cancelled	(75,000)	\$0.3500	26 Apr 07
26 Nov 03	RCF Facility	14,252,357	\$0.1138	24 May 08
26 Nov 03	RCF Facility	485,953	\$0.2086	24 May 08
26 Nov 03	RCF Facility	2,386,296	\$0.2124	24 May 08
26 Nov 03	RCF Facility	257,857	\$0.2125	24 May 08
3 Dec 03	Employee Option Plan 2001 - cancelled	(1,550,000)	\$0.3500	26 Apr 07
3 Dec 03	Employee Option Plan 2001 - cancelled	(750,000)	\$0.3500	17 Jan 08
3 Dec 03	B Speechly	(500,000)	\$0.4000	31 Dec 04
29 Feb 04	Employee Option Plan 2001- cancelled	(275,000)	\$0.3500	26 Apr 07
29 Feb 04	Employee Option Plan 2001 - cancelled	(225,000)	\$0.3500	17 Jan 08
15 Jun 04	Employee Option Plan 2001 - adjustment	50,000	\$0.3500	26 Apr 07
30 Jun 04	Employee Option Plan 2001 - cancelled	(775,000)	\$0.3500	26 Apr 07
30 Jun 04	Employee Option Plan 2001 - cancelled	(125,000)	\$0.3500	17 Jan 08
30 Jun 04	Closing Balance	84,840,026
	Options issued:
2 Dec 04	Employee options	1,000,000	\$0.0800	2 Dec 07
16 Dec 04	Employee options	1,000,000	\$0.0800	16 Dec 07
23 Dec 04	Executive options	15,000,000	\$0.0472	23 Dec 09
23 Dec 04	Executive options	20,000,000	\$0.1500	23 Dec 08 to 11
		37,000,000
	Options expired:
	Employee options	26,100,000	Various	Various
	Other unlisted options	2,127,347	Various	Various
		28, 227, 347
30 Jun 05	Closing Balance	93,612,679
	The closing balance is comprised as follows:
	Unlisted options issued in prior years to RCFII	52,862,679
	Unlisted options transferred from RCFII to Mr Wheatley	1,000,000
	Executive options issued during the year	35,000,000
	Employee options issued during the year	2,000,000
	Employee options issued in previous years	2,750,000
		93,612,679

$\frac{55}{2}$

	Consolidated		Company
20) ACCUMULATED LOSSES	30 June 2005 \$'000	30 June 2004 \$'000	30 June 2005 \$'000	30 June 2004 \$'000
Accumulated losses at the beginning of the financial period	(115, 835)	(91,520)	(128, 460)	(96, 531)
Net loss attributable to members of the Company	(6,697)	(24, 315)	(5, 559)	(31,929)
Share swap/buy-back (refer to Note 18)	5,109		5,109
Accumulated losses at the end of the financial period	(117, 423)	(115, 835)	(128, 910)	(128, 460)
21) OUTSIDE EQUITY INTEREST
Outside equity interest in:
- contributed equity		22,160
- accumulated losses opening balance		(2,403)
- retained loss current period		(913)
		18.844	$\overline{\phantom{a}}$

The outside equity interest arose from the Company's 54.8% interest at 30 June 2004 in NuStar which reduced from 88.3% during the previous financial year. Refer to Note 29 for further details.

22) FINANCIAL INSTRUMENTS

a) Credit Risk Exposures

The credit risk on financial assets of the consolidated entity which have been recognised, other than investments in shares, is generally the carrying amount, net of any provisions for doubtful debts.

b) Interest Rate Risk Exposures

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the following tables. Exposures arise predominantly from assets and liabilities bearing variable interest rates as the consolidated entity intends to hold fixed rate assets and liabilities to maturity.

			Fixed interest maturing in:
22) FINANCIAL INSTRUMENTS continued 30 June 2005 Financial assets	Floating interest rate \$'000	1 year or less \$'000	Over 1 to 5 years \$'000	Non- interest bearing \$'000	Total \$'000
Cash	16,273				16,273
Restricted cash	11,801				11,801
Receivables				4,767	4,767
Investments	÷,			6,104	6,104
	28,074			10,871	38,945
Weighted average interest rate	5.12%
Financial liabilities
Trade and other creditors				(16, 225)	(16, 225)
Other loans		(1, 541)	(7,000)		(8,541)
		(1, 541)	(7,000)	(16, 225)	(24, 766)
Weighted average interest rate	7.00%	8.00%
Net financial assets/(liabilities)	28,074	(1, 541)	(7,000)	(5, 354)	14,179
30 June 2004
Financial assets
Cash	12,849				12,849
Restricted cash	3,108				3,108
Receivables				1,512	1,512
Investments				188	188
	15,957		$\overline{a}$	1,700	17,657
Weighted average interest rate	4.72%
Financial liabilities
Trade and other creditors				(6,691)	(6,691)
Lease liability
Other loans		(9, 832)	(75)		(9,907)
	÷,	(9, 832)	(75)	(6,691)	(16, 598)
Weighted average interest rate	12.08%	7.63%
Net financial assets/(liabilities)	15,957	(9, 832)	(75)	(4,991)	1,059

c) Net Fair Value of Financial Assets and Liabilities

Ť). On-Balance Sheet

The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the consolidated entity approximates their carrying value. The net fair value of other monetary financial assets and financial liabilities is based upon market prices.

ĭi) Off-Balance Sheet

The consolidated entity has potential financial liabilities that may arise from certain contingencies disclosed in Note 25. As explained in that note, no material losses are anticipated in respect of any of those contingencies and the net fair value disclosed is the Directors' estimate of amounts which would be payable by the consolidated entity as consideration for the assumption of those contingencies by another party.

$57\,$

22) FINANCIAL INSTRUMENTS continued

The carrying amounts and the net fair values of financial assets and liabilities at balance date are:

	2005		2004
On balance sheet financial instruments	Carrying Amount	Net Fair Value	Carrying Amount	Net Fair Value
	\$°000	\$'000	\$'000	\$'000
Financial assets
- Cash and restricted cash.	28,074	28,074	15.957	15,957
- Receivables	4,767	4,767	1,512	1,512
- Traded investments	6,104	6.991	188	188
	38,945	39,832	17,657	17,657
Financial liabilities
- Payables	16,225	16,225	10,191	10,191
- Other loans	8,541	8,541	6,407	6,407
	24,766	24,766	16,598	16,598

23) DIRECTORS AND EXECUTIVE DISCLOSURES

Directors

The following persons were directors of St Barbara Mines Limited during the financial year.

Executive Directors

E Eshuys (appointed on 20 July 2004)
S W Miller (removed as director and chairman on 20 July 2004)

Non-Executive Directors

H G Tuten
M K Wheatley
S J C Wise (appointed Director and Chairman on 20 July 2004)
R Knight (appointed Director on 25 May 2005).
K A Dundo (resigned 18 July 2004)

Executives (other than directors) with the greatest authority for strategic direction and management

The following persons were the executives with the greatest authority for the strategic direction and management of the consolidated entity ("specified executives") during the financial year.

Name.	Position	Appointment date
R Kennedy	Chief Financial Officer & Company Secretary	27 October 2004
P Thompson	General Manager Exploration	16 December 2004
G Viska	General Manager Commercial	20 March 2005
M Reed	General Manager Operations	20 March 2005

In accordance with the Company's constitution, S J C Wise & R Knight are due for re-election at the 2005 Annual General Meeting.

There were no loans to directors of entities in the consolidated entity during the year to 30 June 2005.

Remuneration

Details of Director and Executive Remuneration are set out in the Directors' Report.

Shareholding

Relevant and beneficial interests in shares of the Company held by directors of the Company and consolidated entity or their director-related entities in the Company:

Ordinary Shares - fully paid	Balance at start of year	Movements during the year	Balance at end of year
Directors
S J C Wise		2,800,000	2,800,000
E Eshuys		1,250,000	1,250,000
R Knight		$\overline{\phantom{a}}$
H G Tuten ¹		$\overline{\phantom{a}}$
M K Wheatley		$\overline{\phantom{a}}$
S W Miller $2$		$\overline{\phantom{a}}$
K A Dundo		$\overline{\phantom{a}}$
Connected Persons
Strata Mining Corporation Limited ²	32,200,000	(32,000,000)
$RCF$ :	129,742,017	48,145,625	177,887,642

³ H G Tuten is the Chairman of RCF Management LLC, the management company of RCF

² S W Miller is a director and shareholder of Strata Mining Corporation Limited which held a relevant interest in the ordinary share capital of St Barbara at the start of the year

Options

Relevant interests in options of the Company heid by directors of the Company and consolidated entity or their director-related entities in the Company:

Ordinary Shares - fully paid	Balance at start of year	Movements during the year	Balance at end of year
S J C Wise	۰
E Eshuys	$\overline{\phantom{0}}$	35,000,000	35,000,000
R Knight	$\overline{\phantom{a}}$
H G Tuten	$\overline{\phantom{a}}$
M K Wheatley	750,000	250,000	1,000,000
S W Miller	17,500,000	(17,500,000)
K A Dundo
Connected Persons
$RCF^{-1}$	55,990,026	(3, 127, 347)	52,862,679

³ H G Tuten is the Chairman of RCF Management L L C, the management company of RCF. During the year in accordance with a pre-existing agreement, RCF transferred 1,000,000 unlisted options, exercisable at 11¢ each and expiring 31 December 2005 to M K Wheatley.

The options granted to RCF were in consideration for facility fees. All other options were granted for no consideration by the Company. There are no voting, conversion or dividend rights related to these options.

30 June 2005	30 June 2004	30 June 2005	30 June 2004
\$		\$


126,632	117.786	126.632	74,486

108,726	29,200	108.726	17,200
235,358	146.986	235,358	91,686
		Consolidated	Company

25) CONTINGENT LIABILITIES

Details and estimated maximum amounts of contingent liabilities, for which no provisions are included in the accounts, are as follows:

		Consolidated		Company
		30 June 2005	30 June 2004	30 June 2005	30 June 2004
		\$'000	\$'000	$$^{\prime}000$	\$'000
	a) Guarantees and Undertakings
í)	The Company has given undertakings to two of its controlled entities that it intends to provide the necessary financial or other support to enable them to meet their obligations as and when they fall due
ii)	Indemnity to the Company's financiers in respect of guarantees provided by the bankers to the Western Australian Department of Industry and Resources - see Note 7 (cash backing of bonds) and Note 16 (details of
	a bank guarantee facility)	32.754	3.068	32,754	2.725

b) Native Title

It is possible that Native Title, as defined in the Native Title Act 1993, may be established over land in which the consolidated entity has an interest. The Company is not currently engaged in any negotiations.

c) Litigation

i) Westgold

In late September 2000, a demand was made against the Company by Westgold Resources NL ("Westgold") alleging loss and damages in the sum of \$6,229,921. A Writ of Summons was issued by Westgold against the Company in the Supreme Court of Western Australia in CIV 2427 of 2000 on 20 October 2000.

The claim by Westgold arises from a series of share transactions in the Company's shares which took place between May and August 1997 as follows:

On 12 May 1997, Westgold purchased 10,350,000 St Barbara shares at \$0.72 per share from Mr Woss who was a director of the Company at the time ("Woss Shares"). This share purchase took the total shares owned in the Company by Westgold to 23,898,951 (approximately 13% of the Company equity at the time) at a total cost of \$18.4 million.
On 9 July 1997, Westgold sold all of its shareholding in the Company (which included the Woss Shares) to Montleigh Investments Pty Ltd, a company associated with Mr Ross Atkins who was a director of the Company at the time. The total sale consideration was \$19.1 million. Approximately \$8.4 million of the sale consideration was due to be paid by 30 June 1998. During 1998, Montleigh Investments Pty Ltd defaulted on payment of the deferred consideration and Westgold recovered only \$991,931 of the deferred consideration.

In these proceedings Westgold has sought to recover the balance of the deferred consideration plus interest from the Company and Mr Woss.

The principal causes of action in Westgold's statement of claim against the Company are as follows:

An alleged breach of section 1001A(2) of the Corporations Act in that the Company allegedly contravened the ASX Listing Rules by falling to notify the ASX of information alleged to have been known to it on or before 30 April 1997.
An alleged contravention of the previous section 995(2) of the Corporations Law (being a misleading or deceptive statement made in relation to securities in the legislation prior to the current Corporations Act) which Westgold alleges to have been made in public releases made on or about 30 April 1997. Westgold alleges that the Company represented that, save for certain matters, the Company's operations were proceeding satisfactorily and that there were no further adverse factors affecting or likely to affect the Company's operations or financial position when in fact such was not the case.

All of these allegations are denied by St Barbara and the claim is being robustly defended. St Barbara has joined one of the directors who was a director of the Company at the time to the action and in the event that the Company is found liable (which is denied) it will seek contribution from such director.

The matter has been entered for trial but is not expected to receive a trial date until the first quarter of 2006.

The Company has incurred legal costs to date in the order of \$900,000 and will incur substantial further costs in relation to the preparation of the matter for trial and the trial itself. Such costs could escalate in the event that there is an appeal from the decision at first instance. None of the current directors of the Company were directors of the Company at the time that the above share transactions took place.

ii) -Kingstream

On 2 July 2002, Kingstream Steel Limited (Subject to Deed of Company Arrangement) commenced proceedings in the Supreme Court of Western Australia against the Company and its 100% owned subsidiary, Zygot Ltd. In early 2005, Kingstream obtained the leave of the Court to substitute the trustees of Kingstream Steel's Creditors Trust as plaintiffs in these proceedings.

Kingstream's claim against the Company and Zygot Ltd arises from the withdrawal by Zygot of three mining lease applications ("MLA's"). Kingstream alleges that these applications were part of the subject matter of an Option Deed between the Company and Kingstream dated 26 March 1997 as supplemented by a Deed dated 20 January 1998 and a letter dated 29 January 1999 from the Company's lawyers to Kingstream. Kingstream exercised the option in February 1999. Kingstream is seeking rectification of the supplemental Deed to include the applications on the basis that this was the common intention of the parties. Kingstream is seeking unquantified damages from the Company and Zygot.

The company denies that such was the common intention and denies that rectification is available. The proceedings are at an early stage and have been, and will continue to be, defended.

Notes to the Financial Statement for the year ended 30 June 2005 continued

	Consolidated		Company
	30 June 2005	30 June 2004	30 June 2005	30 June 2004
26) COMMITMENTS FOR EXPENDITURE	\$'000	\$'000	\$'000	\$'000
a) Exploration
In order to maintain rights of tenure to mining tenements, the consolidated entity is required to outlay in 2004/05 for tenement rentals and minimum exploration expenditure requirements of the Western Australian Department of Industry and Resources. This requirement in 2004/05 will continue for future years with the amount dependent upon tenement holdings	13,746	2,669	13,746	1,762
b) Hire Purchase Commitments
Analysis of hire purchase commitments:
- Payable not later than one year (refer Note 16)	76	188	76	188
- Payable later than one year, not later than five years
(refer Note 16)		75		75.
These commitments relate to plant and equipment and are based on the cost of the vehicles and are payable over a period of up to 48 months.	76	263	76	263
c) Analysis of Non-Cancellable Operating Lease Commitments
Payable not later than one year	154	239	154	239
Payable later than one year, not later than two years		147		147
	154	386	154	386.
The non-cancellable operating lease commitments are the net rental payments associated with rental properties
27) EMPLOYEES
a) Employment Benefit Liabilities
Provision for employee benefits and directors' benefits and related on-cost liabilities
- Current (Note 17)	119	751	119	751
- Non-current (Note 17)		78		78
		78		78
	119	829	119	829
	Number 2005	Number 2005	Number 2005	Number 2005
b) Number of Employees
Number of employees at financial year end	33	41	33	36

c) Superannuation

The Company participates in an "accumulation" superannuation plan under which all employees are entitled to lump sum benefits on retirement, disability or death. The Company contributes various percentages of wages and salaries to the plan. The contributions made are legally enforceable. No actuarial assessment of the plan has been made as such assessments are inappropriate to an "accumulation" plan. The assets of the plan are sufficient to satisfy all benefits that have vested under the plan in the event of its termination, or in the event of voluntary or compulsory termination, of the employment of each employee.

d) Employee Option Plan

Shareholders approved an Employee Option Plan in November 2001. The term of options issued under the plan is five years and the vesting period is three years from the date of grant. A total of 2,000,000 options were issued under the plan during the year to 30 June 2005, with Directors exercising their discretion to issue them with a three year term and no vesting period. These options are cancelled when the employee leaves the Company. A total of 2,675,000 options previously issued under the plan were cancelled due to employees leaving the Company. There are no voting rights and no dividend rights attached to these options. No options issued under this plan were exercised during the year to 30 June 2005. As at 30 June 2005, there were 4,750,000 options on issue under the plan with exercise prices ranging from \$0.08 per share to \$0.35 per share and with expiry dates ranging from 31 August 2005 to 16 December 2007.

28) RELATED PARTIES

a) Directors and specified executives

Disclosures relating to directors and specified executives are set out in Note 23.

b) Transactions with entities in the wholly-owned group

St Barbara Mines Limited is the parent entity in the wholly-owned group comprising the Company and its wholly-owned subsidiaries.

During the year the Company advanced loans of \$nil (2004: \$61,733) to entities in the wholly owned group. Repayments and advances were received of \$545,000 (2004: nil) from entities in the wholly owned group. The Company provided accounting and administrative assistance free of charge to all its wholly-owned subsidiaries.

Loans payable to and advanced from wholly-owned subsidiaries to the Company are interest free.

c) Transactions with non-wholly owned entities in the consolidated entity

The Company provided funding to NuStar, a controlled entity but not wholly owned, for part of the year as follows:

	30 June 2005	30 June 2004
	\$000	\$'000
Balance at beginning of financial year	(216)	16,848
- net funding advanced for exploration and all other activities on normal commercial terms	(119)	(1,703)
- shares issued in satisfaction of debt		(17,600)
- administration service fee	120	1,398
- interest	٠	841
- repayment	215	$\overline{\phantom{a}}$
		(216)

The loan was repaid in full during the year. NuStar is no longer a controlled entity, and no further loans will be provided.

Notes to the Financial Statement for the year ended 30 June 2005 continued

	Company
28) RELATED PARTIES continued	30 June 2005	30 June 2004
d) Amounts receivable from and payable to entities in the wholly-owned group and controlled entities	\$'000	\$'000
Aggregate amounts receivable at balance date from:
Non-current:
Entities in the wholly-owned group	2.225	2,770
Less provision for doubtful receivables	(1,630)	(1,630)
	595	1,140
Aggregate amounts payable at balance date to:
Current:
Controlled entities		216
Non-current:
Entities in the wholly-owned group	11,401	11,484

e) Amounts receivable from Director related entities

At 30 June 2005, there were no amounts receivable from Director related entities.

f) Other Transactions with Directors of the Company and their Director related entities

The aggregate amounts brought to account in respect of the following types of transactions with Directors of entities in the consolidated entities and their Director related entities were:

			Consolidated and Company
		30 June 2005	30 June 2004
Director	Notes
K A Dundo		2.030	4,243
H G Tuten	$\sim$	262,323	8,249,863

⁸ K A Dundo was a non-executive director of the Company up to the date of his resignation on 18 July 2004. K A Dundo is also a partner of the legal firm, Q Legal. For the month of July 2004, Q Legal invoiced the Company for legal services provided at normal commercial rates, amounting to \$2,030 plus GST and disbursements.

² Paid to RCF in 2005 in respect of borrowing costs relating to finance facilities and in 2004 by way of issuance of shares and options as required under the RCF Facility. H G Tuten is the Chairman of RCF Management LLC the management company of RCF.

29) INVESTMENTS IN CONTROLLED ENTITIES

The consolidated entity consists of the Company and its wholly-owned controlled entities as follows.

		Equity holding		Cost of Company's investment
Name of entity	Class of Shares	June 2005	June 2004	June 2005	June 2004
		%	%	\$1000	\$'000
Australian Eagle Oil Co Pty Ltd	Ordinary	100	100	179	179
St Barbara Pastoral Co Pty Ltd	Ordinary	100	100
Capvern Pty Ltd	Ordinary	100	100
Eagle Group Management Pty Ltd	Ordinary	100	100
Murchison Gold Pty Ltd	Ordinary	100	100
Kingkara Pty Ltd	Ordinary	100	100
Oakjade Pty Ltd	Ordinary	100	100
Regalkey Holdings Pty Ltd	Ordinary	100	100
Silkwest Holdings Pty Ltd	Ordinary	100	100
Sixteenth Ossa Pty Ltd	Ordinary	100	100
Vafitu Pty Ltd	Ordinary	100	100
Zygot Pty Ltd	Ordinary	100	100
NuStar Mining Corporation Limited ¹	Ordinary	6,4	54.8		38,138
Bushsun Pty Ltd* 1	Ordinary	6,4	54.8	$\sim$
				179	38,317

* 100% subsidiary of NuStar

Each company in the consolidated entity was incorporated in Australia.

$\hat{\mathbf{s}}$ The Company ceased consolidating NuStar on 30 September 2004 when it reduced its equity position to 44.72%. This equity position was progressively reduced through the financial year and at 30 June 2005 was 6.4%. Subsequent to 30 June 2005 the remaining holding was disposed of. The aggregate loss on the deconsolidation of NuStar was \$272,000.

Notes to the Financial Statement for the year ended 30 June 2005 continued

	Consolidated		Company
30) RECONCILIATION OF LOSS AFTER INCOME TAX	30 June 2005	30 June 2004	30 June 2005	30 June 2004
TO NET CASH OLITFLOW FROM OPERATING ACTIVITIES	\$	S	\$	\$
Operating loss after income tax	(6,697)	(25, 228)	(5, 559)	(31, 929)
Depreciation and amortisation	8,093	2,726	8,093	2,721
Provision for diminution in investments and assets	1,023	312	773	12,348
Write down of exploration tenements	775	318	775	318
Provision for diminution of exploration tenements		5,256		5,256
(Profit)/ loss on sale of property, plant and equipment	(2,795)	2,462	(2, 279)	2,462
Profit on sale of shares	(2, 915)	(93)	(2,915)	(93)
Borrowing expenses paid with shares		1,707		1,707
Convertible note borrowing cost		739		739
Interest on NuStar loan account				(841)
NuStar administration service fee				(182)
Provision for non-recovery of subsidiary loan				270
Loss on subsidiary becoming an associate	272
Share of net loss of associate	577
Provision for doubtful debts	78		78
Provision for rehabilitation	(34)		(34)
Changes in assets and liabilities:
- Decrease in trade and other debtors	(3, 100)	2,676	(4, 450)	3,314
- Decrease in inventories	1,059	3,487	1,059	3,487
- Decrease in other assets	(949)	620	(980)	620
Increase in trade and other creditors, employee
entitlements and provisions	4,146	(3,624)	9,563	(4, 460)
Net cash (used in)/provided by operating activities	(467)	(8,642)	4,124	(4, 263)

Non-Cash Financing and Investing Activities

The following transactions occurred which affected assets and liabilities which are not reflected in the Statements of Cash Flows.

Year ended 30 June 2005

During the year, the following transactions occurred which affected assets and liabilities and did not result in cash flows:

The conversion by Ocean Resources Capital Holdings plc (Ocean) of the face value of its convertible note of \$4,400,000 into 55,000,000 ordinary shares on 15 July 2004.
On 20 July 2004, the Company issued 17,480,547 fully paid ordinary shares to Ocean in satisfaction of interest of \$804,105.
On 1 December 2004, the Company issued 21,554,172 fully paid ordinary shares to Resource Capital Fund to convert an unsecured advance of \$1,200,000 to equity as approved at the 2005 Annual General Meeting.
On 17 January 2005, the Company completed a share buy-back of 170,291,977 fully paid ordinary shares and in consideration transferred to accepting shareholders 212,864,971 fully paid NuStar shares.

Year ended 30 June 2004

During the year, the following transactions occurred which affected assets and liabilities and did not result in cash flows:

The issue of 111,595,854 fully paid ordinary shares to RCF in satisfaction of the RCF interest and facility fees and the debt for equity swap approved by shareholders at the Annual General Meeting on 25 November 2003. The value ascribed to this issue is \$8,249,863.
Pursuant to a resolution by shareholders at the NuStar Annual General Meeting held on 12 December 2003, the Company converted \$17.6 million owing by NuStar to the Company into 352,000,000 fully paid ordinary shares in NuStar.
Pursuant to a resolution by shareholders at the NuStar Annual General Meeting held on 12 December 2003, Claymore Capital converted \$0.1 million owing by NuStar to Claymore Capital by way of a convertible note into 2,000,000 fully paid ordinary shares in NuStar.
On 5 December 2003, the Company issued 35 million fully paid ordinary shares at \$0.08 per share for \$2.8 million to partly satisfy the convertible note loan. This resulted in the remaining face value owing being reduced to \$4.4 million.

31) Financing facilites

Other than as set out in Note 16(iii) regarding the RCF Facility, neither the Company nor the consolidated entity have access to lines of credit that were unutilised.

32) LOSS PER SHARE

	Consolidated
	30 June 2005 cents/share	30 June 2005
		cents/share
Basic and diluted loss per share	(1.04)	(4.70)

	\$'000	\$'000
Retained loss for the year used in the calculation
of basic earnings per share	(6,697)	(24, 315)

	Number	Number
Weighted average number of fully paid ordinary shares on issue
during the year used in the calculation of basic loss per share	644,018,641	517,843,596
Weighted average number of fully paid ordinary shares on issue
during the year used in the calculation of diluted loss per share	644.018.641	517.843.596

33) EVENTS OCCURRING AFTER BALANCE DATE

On 26 July 2005, the Company announced:

Extension to operations at Southern Cross based on open pit mining of Hercules and continuing underground operations at Marvel Loch;
An on-market share buy-back to buy back up to 10% of the Company's issued capital (56,653,335 shares); and

The proposed sale of unmarketable parcels of shares.

On 27 July 2005, the Company sold its remaining shares in NuStar (63,325,359 shares) and Sedimentary (15,412,082 shares) for \$3,166,268 and \$2,851,234 respectively, yielding total proceeds of \$6M.

34) BUSINESS COMBINATION

On 28 March 2005, the Company acquired the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) for consideration consisting of a cash payment of \$2,285,000, the replacement of existing bank guaranteed environmental performance bonds totalling \$30,000,000 and the assumption of additional performance bonds of up to \$5,700,000. The fair value of net identifiable assets acquired was \$2,925,000. Direct transaction costs of \$640,000 were also incurred.

Details of the assets and liabilities arising from the acquisition are as follows:

	\$'000
Property, plant and equipment	19,762
Inventories	4,730
Prepayments	285
Mining properties	13,068
Provision for rehabilitation	(34,920)
Net identifiable assets acquired	2.925

35) australian equivalents to ffrs

The Australian Accounting Standards Board (AASB) has adopted International Financial Reporting Standards (IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS. The adoptions of AIFRS will be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.

Entities complying with AIFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of AIFRS to the comparative period. Most adjustments required on transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.

To facilitate the transition to AIFRS the consolidated entity has established a project team. The priority of this project team has been to identify differences between accounting principles generally accepted in Australia (AGAAP) and AlFRS as they are applied to the group.

The project team has analysed all of the AIFRS and has identified the accounting policy changes that will be required. In some cases choices of accounting policies are available; including elective exemptions under Accounting Standards AASB 1 First Time Adoption of Australian Equivalents to International Financial Reporting Standards. These choices have been analysed to determine the most appropriate accounting policy for the consolidated entity.

The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been prepared using AIFRS are set out below. The expected financial effects of adopting AIFRS are shown below with descriptions of the differences in the form of reconciliations of equity and profit under AGAAP to that under AIFRS. No material impacts are expected in relation to the statements of cashflows.

Although the descriptions disclosed in the note are based on management's best knowledge of expected standards and interpretations, and current facts and circumstances, these may change. For example, ongoing work by the project team may identify further changes amended or additional standards or interpretations may be issued by the AASB and the IASB. Therefore, until the company prepares its first full AIFRS financial statements, the possibility cannot be excluded that the accompanying disclosures may have to be adjusted.

The Alternative Investment Market of the London Stock Exchange, on which the Company is listed, requires a reconciliation of the effect of applying IFRS for the year ended 30 June 2005 on net profit and equity where IFRS are considered to be materially different to Australian Generally Accepted Accounting Principles ("AGAAP"). This requirement has been addressed in the reconciliation below.

		Consolidated		Company
		30 June	30 June	30 June	30 June
		2005	2004	2005	2004
	Notes	\$000	\$000	\$000	\$000
Adjustments Required on Implementation of IFRS 30 June 2005
a) Reconciliation of equity as presented under AGAAP to that under AIFRS
Total equity under AGAAP		20,073	44,852	8,586	13,383
Adjustments to accumulated losses (net of tax)
Share based payment expense	Ť	(664)		(664)
Revaluation of available for sale investments	٧	773		773
Accounting for impairment of assets	Ħ	(14, 192)	(14, 192)
Profit on deconsolidation of controlled entity	Ħ	14,192		$\overline{a}$
		109	(14, 192)	109
Adjustments to other reserves (net of tax)
Share based payment reserve	Ť	664		664
Investments fair value reserve	٧	113		113

		777		777
Total equity under AIFRS		20,959	30,660	9,472	13,383
b) Reconciliation of net loss as presented under AGAAP to that under AIFRS
Net loss attributable to members of the Company as reported under AGAAP		(6,697)	(24, 315)	(5, 559)	(31, 929)
Adjustments to net loss
Share based payment expense	Î.	(664)		(664)
Revaluation of investments available for sale	٧	773		773
Profit on deconsolidation of controlled entity	Ħĭ	14,192
Accounting for impairment of assets			(5,621)
Net loss attributable to outside equity interests			6,369
Net loss attributable to members of the
Company under AIFRS		7,604	(23, 567)	(5,450)	(31, 929)

Notes Explaining the Impact of Adopting AIFRS

Ť) Equity-based compensation benefits

Under AASB 2 Share based Payments, the Company would recognise the fair value of options granted to employees as remuneration as an expense on a pro-rata basis over the vesting period in the income statement with a corresponding adjustment to equity. Share-based payment costs are not recognised under AGAAP.

AASB 1 states that on initial adoption of AIFRS an entity is encouraged, but not required, to apply AASB 2 to equity instruments that were granted on or before 7 November 2002. A first time adopter is also encouraged, but not required, to apply AASB 2 to equity instruments that were granted after 7 November 2002 that vested before the later of (a) the date of transition to AIFRS and (b) 1 January 2005. This guidance has been used in determining the share based payments recognised in this disclosure.

Non-current assets held for sale Ĭi)

Under AASB 5 Non-current assets held for Sale and Discontinued Operations, a non-current asset will be classified as held for sale if its carrying amount is to be recovered principally through a sale transaction rather than through continued use. The asset will be measured at the lower of carrying amount and fair value, less costs to sell. Under AGAAP such investments are valued at the lower of cost or realisable value. There is no significant impact as at 30 June 2005, as the measurement of the assets would have remained unchanged.

iii) Impairment of assets

Under current AGAAP, the carrying amounts of non-current assets valued on a cost basis are reviewed at each reporting date to determine whether they are in excess of their recoverable amount. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount, with the write-down recognised in the statement of financial performance in the period in which it occurs. In assessing the recoverable amounts, the relevant cash flows have not been discounted to their present value.

Under AASB 136 Impairment of Assets, the carrying amount of the consolidated entity's non-current assets will be reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the asset will be tested for impairment by comparing its recoverable amount to its carrying amount. If there is any indication that any asset is impaired, the recoverable amount will be estimated for the individual asset. If it is not possible to estimate the recoverable amount for the individual asset, the recoverable amount of the cash generating unit to which the asset belongs will be determined. An impairment loss will be recognised whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount.

If the policy required under AIFRS had been applied during the year ended 30 June 2005, the consolidated net profit would have been \$14,192,000 higher as a result of the impact from the previous financial year's cumulative impairment losses that would have been incurred under AIFRS policies. This is due to the deconsolidation of NuStar, for which the impairment was related.

iv) Revenue disclosures in relation to the sale of non current assets

Under AIFRS, the revenue recognised in relation to the sale of non current assets is the net gain on the sale. This is in contrast to the current Australian GAAP treatment under which the gross proceeds from the sale are recognised as revenue and the carrying amount of the assets sold is recognised as an expense. The net impact on the profit or loss of this difference is nil.

v) Financial instruments

AASB 139 is likely to have the following impacts:

Classification and measurement of financial assets and liabilities

Under AASB 139, financial assets held by entities in the consolidated entity will be classified as either at fair value through profit or loss, held-to-maturity, available for sale or loans and receivables and, depending upon classification, be measured at fair value or amortised cost.

Under AASB 139:

Investments in traded equity securities as at 30 June 2005 would be classified as available for sale and measured at fair value, with changes in fair value recognised directly in equity until the underlying asset is derecognised.
Receivables and financial liabilities classifications will remain unchanged. Measurement of these instruments will initially be at fair value with subsequent measurement at amortised cost, using the effective interest rate method. This will result in a change of the current accounting policy, under which financial assets are carried at the lower of cost and recoverable amount, with changes recognised in profit or loss.

vi) Income tax

Under AASB 112 Income taxes, deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of an entity's assets and liabilities in the statement of financial position and their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity.

This will result in a change to the current accounting policy, under which deferred tax balances are determined using the income statement method, items are only tax-effected if they are included in the determination of pre tax accounting profit or loss and/or taxable income or loss and current and deferred taxed cannot be recognised directly in equity. If the policy required by AASB 112 had been applied during the year ended 30 June 2005 there would not have been any

significant differences in deferred tax balances as a result of the application of the balance sheet method.

vii) Exploration and evaluation

The Group's existing policy for exploration and evaluation activity provides that exploration expenditure is expensed as it is incurred. Amounts allocated to exploration as part of an acquisition are capitalised. This policy complies with AIFRS requirements and therefore no difference is expected to result from either the treatment of costs or from impairment testing.

DIREQUES DECEMBER

In the directors' opinion:

the financial statements and notes set out on pages 38 to 71 are in accordance with the $a)$ Corporations Act 2001, including:
i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
ii) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and of their performance, as represented by the results of their operations and their cashflows, for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and b) payable; and
the remuneration disclosures set out on pages 28 to 34 of the Directors Report comply with Accounting Standard AASB 1046 $\subset$ Director and Executive Disclosures by Disclosing Entities and the Corporations Regulations 2001.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

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

Eduard Eshuys Director

Perth, 30 September 2005

PRICEWATERHOUSE COPERS

Independent audit report to the members of St Barbara Mines Limited

Audit opinion

In our opinion:

1. the financial report of St Barbara Mines Limited:
gives a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of St Barbara Mines Limited and the St Barbara Mines Group (defined below) as at 30 June 2005, and of their performance for the year ended on that date:
is presented in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, and the Corporations Regulations 2001; and
1. the remuneration disclosures that are contained in pages 28 to 34 of the directors' report comply with Accounting Standard AASB 1046 Director and Executive Disclosures by Disclosing Entities (AASB 1046) and the Corporations Regulations 2001.

This opinion must be read in conjunction with the rest of our audit report.

Scope

The financial report, remuneration disclosures and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for both St Barbara Mines Limited (the company) and the St Barbara Mines Group (the consolidated entity), for the year ended 30 June 2005. The consolidated entity comprises both the company and the entities it controlled during that year.

The company has disclosed information about the remuneration of directors and executives (remuneration disclosures) as required by AASB 1046, under the heading "Remuneration Report" on pages 28 to 34 of the directors' report, as permitted by the Corporations Regulations 2001. The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. The directors are also responsible for the remuneration disclosures contained in the directors' report. Audit approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement and the remuneration disclosures comply with AASB 1046 and the Corporations Regulations 2001. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than

PricewaterhouseCoopers ARN 52 780 433 757

$OW1$ 250 St Georges Terrace PERTH WA 6000 GPO Box D198 PERTH WA 6840 DX 77 Perth Australia www.bwc.com/au-Telephone +61 8 9238 3000 Facsimile +61 8 9238 3999

PRICEVATERHOUSE COPERS

conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected. For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows. We also performed procedures to assess whether the remuneration disclosures comply with AASB 1046 and the Corporations Regulations 2001.

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

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

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

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

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

Independence

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

ficavaterhouseloopers

PricewaterhouseCoopers

Savid J. LOR

David J Smith Perth Partner

1 October 2005

A A MAR RANGAN GARA SA PARTI NA BARA DA SA SA SA SA SA SA SA SA SA SA SA SA SA Erre Maria Barat (

	Twenty Largest Shareholders	Shares Held	% of Total
1	Resource Capital Fund II LP	177,887,642	31.40
2	Westpac Custodian Nominees Limited	91,142,755	16.09
3	ANZ Nominees Limited	9,157,533	1,62
4	National Nominees Limited	7,702,800	1,36
5	Saracen Mineral Holdings Limited	6,000,000	1.06
6	Yamatji Marlpa Barna Baba Maaja Aboriginal Corporation	5,600,000	0.99
7	Gee Nominees Pty Ltd	5,000,000	0.88
8	Mr Yoshihito Koguchi	3,210,000	0.57
9	Colin Wise Consulting Pty Ltd	3,100,000	0.55
10	HSBC Custody Nominees (Australia) Limited	3,000,000	0.53
11	Miroma investment inc	2,737,449	0.48
12	Simpson Podiatry Services Pty Ltd	2,440,000	0,43
13	Citicorp Nominees Pty Limited	2,223,534	0.39
14	Mr Ritesh Mistry	2,220,000	0.39
15	Mr Koichi Sugimura	2,150,000	0.38
16	Mr Andrew Podgornik	2,060,000	0.36
17	Gull Management Pty Ltd	2,000,000	0.35
18	WG Holding Co Pty Ltd	2,000,000	0.35
19	Balcony Developments Pty Ltd	1,948,400	0.34
20.	Mr Paul Varrone & Mrs Jennifer Viviette Varrone	1,700,000	0.30
	Substantial Shareholders	Shares Held	% of Total
	Resource Capital Fund II LP	177,887,642	31.40
	St James' Place Recovery Trust	40,430,000	5.65

Distribution of Shareholdings
Number Held	Number of Shareholders	Number of Shares
$1 - 1,000$	3,364	2,017,589
$1,001 - 5,000$	3.343	8,603,205
5,001 - 10,000	1.181	9,861,794
10.001 - 100.000	2,231	83.457.687
100,001 - and over	436	462, 593, 077
	10.555	566, 533, 352

The number of shareholders holding less than a marketable parcel was 4,241.

Directors' Interests

As at the date of the Directors' Report, the director or indirect interest of each Director of the Company in the issued securities of the Company, or in a related corporation, was as follows:

	Shares Held
S J C Wise	3,100,000
E Eshuvs	1,250,000
R Knight
H G Tuten	177,887,642
M K Wheatley

Share Price

The Company shares were listed on the Australian Stock Exchange during the 2004/05 year. The closing share price on 30 June 2005 and on 19 September 2005 was 10 cents and 33 cents respectively.

Announcements

The Company makes both statutory announcements (activities or quarterly reports, financial reports, changes to Directors' interest) and specific announcements under Continuous Disclosure provisions on a timely basis. Significant announcements made during the year and subsequently include:

Date	Announcement
15/09/05	Appendix 3E On-Market Share Buy-Back
13/09/05	Appendix 3E On-Market Share Buy-Back
12/09/05	Appendix 3E On-Market Share Buy-Back
02/09/05	Appendix 3Y for Cotin Wise
31/08/05	Preliminary Financial Results
28/08/08	Amended Drilling Result
24/08/08	High Grade Drilling Results
09/08/08	Diggers & Dealers Presentation
09/08/05	Hercules Reserve Upgrade
03/08/05	Sale of Unmarketable Parcels
01/08/05	Appendix 3D Changes to Buy-Back
28/07/05	Sale of NuStar & Sedimentary Shareholdings
26/07/05	Hercules, Buy-Back & Unmarketable Parcels
19/07/05	June 2005 Quarterly Report
28/06/05	Corporate File Briefing
27/05/05	Appendix 3X for Richard Knight
27/05/05	Appointment of Richard Knight as Director
26/05/05	Form 604 - St Barbara holding in NuStar Mining Corporation
28/04/05	Sydney Presentation to Investors
27/04/05	March 2005 Quarterly Report
30/03/05	Appendix 3Y for Colin Wise
23/03/05	Melbourne Presentation to Investors
21/03/05	Trading Halt
21/03/05	Acquisition of Sons of Gwalia Gold Division Assets
16/03/05	Response to ASX Query
28/02/05	2004/05 Interim Financial Results
07/02/05	Further High Grade Gold Drill Hole Intersections
02/02/05	Appendix 3Y for Eduard Eshuys
01/02/05	Form 604 - St Barbara holding in NuStar Mining Corporation
01/02/05	Form 604 - St Barbara holding in Sedimentary Holdings
01/02/05	Information Summary
27/01/05	Form 604 - Resource Capital Fund holding in St Barbara
25/01/05	Appendix 3Y for Eduard Eshuys
21/01/05	Sedimentary Offer
21/01/05	Form 604 - St Barbara holding in NuStar Mining Corporation
21/01/05	Confirmation of cancellation of shares
18/01/05	December 2004 Quarterly Report
18/01/05	Results of Buy-Back Offer

Date	Announcement
22/12/04	Shareholders Update
15/12/04	Dispatch of Buy-Back Booklet
10/12/04	Buy-Back Booklet
10/12/04	Appendix 3Y for Colin Wise
07/12/04	Appendix 3Y for Hank Tuten
06/12/04	Appendix 3Y for Colin Wise
06/12/04	Form 604 - Excalibur Mining holding in St Barbara
03/12/04	Form 604 - Resource Capital Fund holding in St Barbara
03/12/04	Form 604 - Ocean Resource Capital holding in St Barbara
02/12/04	Share Buy-Back Offer
02/12/04	Appendix 38 Notice
29/11/04	AGM Results
29/11/04	AGM Presentation
29/11/04	AGM Chairman's Address
26/11/04	Form 604 - NuStar Mining Corporation holding in St Barbara
24/11/04	Form 604 - NuStar Mining Corporation holding in St Barbara
19/11/04	Form 604 - Ocean Resource Capital holding in St Barbara
27/10/04	September 2004 Quarterly Report
27/10/04	2004 Notice of Meeting and Proxy Form
27/10/04	2004 Annual Report to Shareholders
25/10/04	Appendix 3Y for Colin Wise
21/10/04	Exploration Drilling to Recommence at Meekatharra
07/10/04	Form 603 - NuStar Mining Corporation holding in St Barbara
01/10/04	Confirm sale of NuStar Mining Corporation shares and Paulsen's Royalty
30/09/04	30 June 2004 Financial Report
27/09/04	Presentation to Tokyo investors
20/09/04	NuStar Mining Corporation Transaction
31/08/04	June 2004 Pretiminary Final Report
26/08/04	Form 604 - Ocean Resource Capital holding in St Barbara
12/08/04	Settlement with Former Executive Chairman
03/08/04	Appendix 3Z for Stephen Miller and Kevin Dundo
30/07/04	June 2004 Quarterly Report
27/07/04	Appendix 3Y for Hank Tuten
26/07/04	Appendix 3Y for Eduard Eshuys and Colin Wise
23/07/04	Appendix 3B - Ocean Resource Capital
23/07/04	Issue and allotment of shares
23/07/04	Changes to St Barbara Board
20/07/04	Results of General Meeting
20/07/04	Issue and allotment of shares
19/07/04	Resignation of Kevin Dundo
15/07/04	Conversion convertible notes

$\frac{77}{4}$

Investor Relations

This Annual report has been produced with the objective of ensuring that shareholders are informed on Company strategy and performance sufficient to make or retain an investment in the Company.

Announcements, statutory reports and the latest information on the Company's projects are available on the St Barbara website: www.stbarbara.com.au.

Financial institutions, stockbrokers and other non-shareholder entities requiring copies of this report, activities reports and other corporate information should contact the Directors at:

Level 2, 16 Ord Street West Perth WA 6005 Telephone: +61 8 9476 5555 Facsimile: +61 8 9476 5500 E-mail: [email protected] Web site: www.stbarbara.com.au

Shareholder Enquiries

Enquiries relating to shareholding, tax file number and notification of change of address should be directed to:

Australia
	Advanced Share Registry Services	ሳጠ
110 Stirling Hwy
Nedlands WA 6009
Telephone:	+61 8 9389 8033
Facsimile:	+61 8 9389 7871

United Kingdom Computershare Investor Services The Pavilions, Bridgwater Road Bristol BS99 7NH, England Telephone: +44 870 703 6088 +44 870 703 6142 Facsimile:

This page was intentionally left blank.

Corporate Directory

Board of Directors S J Colin Wise (Non Executive Chairman) Eduard Eshuys (Managing Director and CEO) Richard Knight (Non Executive Director) Hank G Tuten (Non Executive Director) Mark K Wheatley (Non Executive Director)

Company Secretary Ross J Kennedy

Registered Office Level 2, 16 Ord Street West Perth WA 6005 Telephone: +61 8 9476 5555 Facsimile: +61 8 9476 5500 E-mail: [email protected] Web site: www.stbarbara.com.au

Share Registry Australia Advanced Share Registry Services 110 Stirling Hwy Nedlands WA 6009 +61 8 9389 8033 Telephone: Facsimile: +61 8 9389 7871 United Kingdom Computershare Investor Services The Pavilions, Bridgwater Road Bristol BS99 7NH, England Telephone: +44 870 703 6088 Facsimile: +44 870 703 6142

Bankers Commonwealth Bank of Australia 150 St George's Terrace Perth WA 6000

Auditors PricewaterhouseCoopers QV1 Building 250 St George's Terrace Perth WA 6000

Solicitors Freehills QV1 Building 250 St George's Terrace Perth WA 6000

Stock Exchange Listing Shares in St Barbara Mines Limited are quoted on both the Australian Stock Exchange Limited and the AIM (London Stock Exchange). Ticker symbol: SBM

SUMMER WITH STIFTER

ART RATE 131

Notice of Annual General Meeting

Meeting Documentation including:

Notice of Annual General Meeting
Explanatory Memorandum
Independent Expert's Report
Proxy Form

The Directors recommend that you vote in favour of all the resolutions to be considered at the Annual General Meeting

Important Notice

This is an important document and requires your careful attention. You should read all of it before deciding whether or not to approve any of the resolutions contained therein. If you do not understand any of it or are not sure what to do, please consult your legal or financial adviser immediately.

If you are unable to attend the Annual General Meeting in person, please complete the enclosed Proxy Form and return it in accordance with the specified instructions.

Important Notices

Read this document

You should read this document in its entirety carefully before making a decision on how to vote on any of the resolutions contained in the Notice of Annual General Meeting.

Role of ASIC and ASX

A copy of this document has been lodged with ASIC and ASX. Neither ASIC nor ASX nor any of their respective officers take any responsibility for the contents of this document.

Future statements

Certain statements in this document relate to the future. These statements involve both known and unknown risks and assumptions both specific to St Barbara and its business and also relating to the general economic environment. Accordingly, future performance or events may be materially different to those expressed or implied in those statements.

Defined terms

Certain capitalised terms used in this document are defined in section 9 of the Explanatory Memorandum.

		1
	What You Should Do	$\mathbf{2}$
	Notice of Annual General Meeting	$\overline{3}$
	Explanatory Memorandum
1.	Purpose of this document	6
2.	Financial Report	6.
3.	Resolutions 1 and $2 -$ Re-election of Directors	6.
4.	Resolution 3 – Adoption of Remuneration Report	7
5.	Resolution $4$ – Increase in the maximum aggregate amount of fees payable to non-executive Directors	7
6.	Resolution $5$ – Change of the Company's name	7
7.	Resolution $6$ – Approval of conversion of cash advances made by Resource Capital Fund III LP	8
8.	Resolution 7 – Approval to issue Options to Resource Capital Fund III LP	16
9.	Definitions	18
	Independent Expert's Report	20

Page

ST BARBARA MINES LIMITED

ACN 009 165 066

Chairman's Letter

14 October 2005

Dear Shareholder

Annual General Meeting - Perth, 16 November 2005

I am pleased to invite you to attend the Annual General Meeting of shareholders of St Barbara Mines Limited to be held on Wednesday 16 November 2005 at 10.00am in the Karri Room, Parmelia Hilton, Mill Street, Perth, Western Australia. Parking is readily available in the nearby Perth Convention Centre.

The business of the meeting is set out in the enclosed Notice of Annual General Meeting. Details and background for each item of business are set out in the accompanying Explanatory Memorandum. Please read this information carefully.

A new item of business this year is Resolution 3: Adoption of Remuneration Report. The Remuneration Report (which forms part of the Annual Report) contains the Company's remuneration policy and a detailed remuneration report for each Director and the top five company executives. The outcome of voting on this item will be carefully considered by the Directors, but does not bind them or the Company.

If you are not able to personally attend the meeting, details of how you can vote are set out in the enclosed Proxy Form. To be valid, Proxy Forms must be received at the designated address by no later than 10.00am on Monday 14 November 2005.

St Barbara has experienced a successful and productive year and I encourage you to read the Annual Report. Updates on our progress are regularly posted on the Company website, www.stbarbara.com.au.

My fellow directors join me in recommending that you vote in favour of each resolution to be considered at the Annual General Meeting. I hope you will be able to attend.

Yours sincerely

Saltar Marin

Colin Wise Chairman

What You Should Do

Step 1

Read this Meeting Documentation

This Meeting Documentation (incorporating the Independent Expert's Report) sets out the details of each resolution for Shareholders. This information is important. You should read this document carefully and if necessary seek your own independent advice on any aspects about which you are not certain.

Step 2

Vote on the resolutions

Your vote is important.

If Shareholders are unable to attend the meeting in person, they should complete the Proxy Form that accompanies this Meeting Documentation and return it in the reply paid envelope provided so as to be received by the Company before 10.00am on 14 November 2005. Proxy Forms received after this time will be invalid.

For details on how to complete and lodge the Proxy Form, please refer to the instructions on the Proxy Form.

The Directors recommend you vote "FOR" each of the resolutions by completing the enclosed Proxy Form.

Questions

If you have any questions about any matter contained in this Meeting Documentation, please contact the Shareholder Information Line on (08) 9476 5555 (within Australia) or +61 8 9476 5555 (overseas).

Key Dates

Deadline for lodgement of Proxy Forms	14 November 2005 at 10.00am
Date and time for determining eligibility to vote	14 November 2005 at 10.00am
Date of Annual General Meeting	16 November 2005 at 10.00am

Notice of Annual General Meeting

Notice is given that an Annual General Meeting of St Barbara Mines Limited will be held at the Karri Room, Parmelia Hilton, Mill Street, Perth, Western Australia on Wednesday 16 November 2005 at 10.00am (Perth time).

AGENDA

Ordinary Business

Financial Report

To receive and consider the Financial Report of the Company for the year ending 30 June 2005, and the Directors' and Auditor's reports.

Resolution 1 - Re-election of Director

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

"That SJ Colin Wise, being the non-executive chairman and a director of the Company who retires by rotation pursuant to rule 6.3(c) of the Company's Constitution, and being eligible, is reelected as a director of the Company."

Resolution 2 - Re-election of Director

To consider, and if thought fit, pass the following resolution as an ordinary resolution:

"That Richard Knight, being a director of the Company who retires pursuant to rule 6.3(i) of the Company's Constitution, and being eligible, is re-elected as a director of the Company."

Resolution 3 - Adoption of Remuneration Report

To consider, and if thought fit, pass the following as an ordinary resolution:

"That the Remuneration Report for the year ended 30 June 2005 as set out on pages 28 to 34 (inclusive) of the Annual Report be adopted." Note – the vote on this resolution is advisory only and does not bind the directors of the Company.

Special Business

Resolution 4 – Change of the Company's name

To consider and, if thought fit, pass the following resolution as a special resolution for the purposes of section $157(1)$ of the Corporations Act and for all other purposes:

"That the Company change its name from 'St Barbara Mines Limited' to 'St Barbara Limited'."

Resolution 5 - Increase in the maximum aggregate amount of fees payable to non-executive Directors

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Rule 6.5(a) of the Company's Constitution, Listing Rule 10.17 of the Official Listing Rules of Australian Stock Exchange Limited and for all other purposes:

"That the maximum yearly aggregate sum for Directors' fees payable by the Company is increased by \$535,000 to \$750,000 per annum."

Resolution 6 - Approval of conversion of cash advances made by Resource Capital Fund III LP

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule 10.11 of the Official Listing Rules of Australian Stock Exchange Limited, section 611 Item 7 of the Corporations Act 2001 (Cth) and for all other purposes:

"The members of the Company approve and authorise:

$(a)$ the conversion of all cash advances provided by Resource Capital Fund III LP (Cash Advances) up to a maximum of \$7,000,000 with a conversion price of \$0.07 (7 cents) per share and otherwise on the terms and conditions set out in the Explanatory Memorandum;
$(b)$ on the conversion of the Cash Advances, and whether by way of one or more allotments, the issue to RCF III of up to a maximum of 100,000,000 ordinary shares; and
$(c)$ the acquisition by RCF III and its Associates of relevant interests in the ordinary shares of the Company as more particularly set out in the Explanatory Memorandum,

in each case irrespective of whether RCF III and its Associate's entitlement to shares in the Company changes between the date of the notice calling this meeting and the date of this meeting."

Resolution 7 - Approval to issue Options to Resource Capital Fund III LP

To consider and, if thought fit, pass the following resolution as an ordinary resolution for the purposes of Listing Rule10.11 of the Official Listing Rules of Australian Stock Exchange Limited, and for all other purposes:

"That the issue of up to 100,000,000 options in the Company to RCF III at an exercise price of \$0.07 (7 cents) each, exercisable on or before 31 December 2008 as described in the Explanatory Memorandum accompanying this Notice of Annual General Meeting is approved."

Shareholders should note that the options referred to in this resolution will only be issued by St Barbara if, and to the extent, it makes an early repayment under the Facility Agreement with RCF III. If shares are issued on conversion of the debt, as contemplated by Resolution 6, the options will not be issued. Further details are contained in the Explanatory Memorandum.

Explanatory Memorandum and Independent Expert's Report

Shareholders are referred to the Explanatory Memorandum and the Independent Expert's Report accompanying and forming part of this Notice of Annual General Meeting.

Entitlement to vote

Snapshot date

It has been determined that under Corporations Regulation 7.11.37, for the purposes of this Annual General Meeting, Shares will be taken to be held by the persons who are the registered holders at 10.00am (Perth time) on 14 November 2005. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Annual General Meeting.

Voting entitlement

In relation to Resolution 5, pursuant to Listing Rule 10.17.1 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast on this resolution by the Company's Directors or any of their Associates.

In relation to Resolution 6, pursuant to Listing Rule 10.13.6 of the Official Listing Rules of Australian Stock Exchange Limited and section 611 Item 7(a) of the Corporations Act, the Company will disregard any votes cast by Resource Capital Fund III LP or any of its Associates. In relation to Resolution 7, pursuant to Listing Rule10.13.6 of the Official Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast by Resource Capital Fund III LP or any of its Associates.

However, in relation to Resolutions 6 and 7, the Company need not disregard a vote if:

it 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
it 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.

Proxies

A Shareholder entitled to attend and vote has a right to appoint a proxy. The proxy does not need to be a member of St Barbara. A Shareholder that is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half of the Shareholder's votes.

A Proxy Form accompanies this Notice of Annual General Meeting and to be effective must be received at St Barbara's share registry:

St Barbara Mines Limited Share Registry C/- Advanced Share Registry Services 110 Stirling Highway Nedlands Western Australia, 6009 OR by facsimile: (618) 9389 7871

by no later than 10.00am (Perth time) on 14 November 2005.

By Order of the Board

Dated: 14 October 2005

Ross Kennedy Company Secretary

Explanatory Memorandum

$\blacktriangleleft$ Purpose of this Document

This Explanatory Memorandum has been prepared to provide all the information known to St Barbara that is material to the decision of Shareholders on how to vote on Resolutions 1 to 7 inclusive as set out in the Notice of Annual General Meeting.

This Explanatory Memorandum is only one part of the Meeting Documentation and Shareholders should read the entire Meeting Documentation, including the Independent Expert's Report, before making a decision on how to vote on the resolutions.

This Explanatory Memorandum is dated 14 October 2005.

$\overline{2}$ Financial Report

The Financial Report forms part of the Annual Report and consists of the financial statements of the Company, the notes to the financial statements and directors' declaration about the statements and notes.

A vote of Shareholders is not required in respect of the Financial Report. However, Shareholders attending the Annual General Meeting will have the opportunity to ask questions or make comments on the Financial Report. Shareholders may also ask questions of the Company's Auditor in relation to the conduct of the audit, the preparation and content of the Auditor's Report (which forms part of the Annual Report), accounting policies adopted by the Company in relation to the preparation of the financial statements and independence of the auditor in relation to the conduct of the audit.

$\overline{3}$ Resolutions 1 and 2 - Re-election of Directors

$3.1$ SJ Colin Wise

Mr Colin Wise, LL.B, FAICD, FAusIMM, aged 59, was appointed as a non-executive director and Chairman of the Company on 20 July 2004.

Mr Wise is an experienced corporate lawyer and consultant with significant expertise in the mining and exploration industry and the resources, energy and corporate sectors. He spent 24 years with WMC Limited including 10 as General Counsel. Subsequently, he spent 4 years as Counsel to the New York law firm, Howard, Smith and Levin LLP.

Mr Wise has had extensive practical experience in Australia and internationally with a wide range of corporate, operational and legal matters. He is a Fellow of both the Australian Institute of Company Directors and the Australasian Institute of Mining and Metallurgy. He is a non-executive director of Southern Health, the largest health care service in Melbourne.

$3.2$ Richard Knight

Mr Richard Knight, MSc(Eng), DIC, BSc(Eng), ARSM, FAICD, C.Eng, aged 64, was appointed as a non-executive director on 27 May 2005.

Mr Knight is a mining engineer with approximately 40 years experience within Australia and overseas. Mr Knight is a director of Zinifex Limited, Chairman of Heuris Partners, a Melbourne-based advisory and strategic planning practice, and Senior Advisor to Inco Limited. He has previously been CEO of Energy Australia Limited, an Executive Director of North Limited and Managing Director of Inco Australia Management Pty Ltd. As the Managing Director of Inco Australia Management Pty Ltd, Mr Knight was responsible for the redesign and reorganisation of the Goro lateritic nickel project in New Caledonia.

4 Resolution 3 - Adoption of Remuneration Report

4.1 Background

The Remuneration Report detailing the company's policy on the remuneration of nonexecutive directors, executive directors and senior directors is set out on pages 28 to 34 (inclusive) of the Annual Report is also available on the St Barbara Mines Ltd internet site (http://www.stbarbara.com.au).

A reasonable opportunity will be provided for discussion of the Remuneration Report at the Annual General Meeting.

The vote on the resolution is advisory only and does not bind the Directors or the Company.

$4.2$ Resolution sought

The Remuneration Report is required to be considered for adoption in accordance with section 250R of the Corporations Act.

5 Resolution 4 - Change of the Company's name

$5.1$ Background

The Directors believe the Company's name should be changed from "St Barbara Mines" Limited" to "St Barbara Limited". The proposed new name would better reflect the involvement of the Company in the exploration and development of mineral resources, as well as mining.

If Shareholders approve this Resolution 4, it is proposed to change the Company's name to "St Barbara Limited" as soon as possible.

$5.2$ Resolution sought

Section 157 of the Corporations Act permits a company to change its name provided that this is done by special resolution. Such a resolution must be passed by at least 75% of the votes cast by members entitled to vote on the resolution.

Accordingly, it is recommended to simplify the name by deleting the word "Mines".

6 Resolution 5 – Increase in the maximum aggregate amount of fees payable to non-executive Directors

$6.1$ Background

Under Listing Rule 10.17 the Company is not permitted to increase the aggregate amount of non-executive Director fees without the prior approval of shareholders.

At present, the maximum aggregate amount of fees that the Company can pay to non-executive Directors is \$215,000 per annum. This level has remained unchanged since last approved by shareholders of the Company in 1991.

The Board's Remuneration Committee, following advice from an independent remuneration specialist, recently completed a review of non-executive Directors' emoluments and concluded that the current levels of fees are insufficient to properly recognise and take into account the responsibilities and risks carried by the non executive Directors of the Company.

With effect from 1 July 2005, the Board proposes to increase the annual fee payable to each non-executive Director from the prevailing level of \$50,000 inclusive of statutory superannuation, to \$70,000 inclusive of statutory superannuation. The Board also proposes to increase the Chairman's fee from the prevailing level of \$100,000 inclusive of superannuation to \$120,000 per annum inclusive of superannuation. These fee levels incorporate Director service on Board Committees.

If approved, the aggregate fees payable to the non-executive Directors will exceed the currently permitted maximum aggregate of fees, which as mentioned, was set by shareholders in 1991.

$6.2$ Resolution sought

The Directors accordingly seek Shareholder approval to increase the maximum aggregate amount of fees that may be paid to the Company's non-executive Directors from \$215,000 per annum to \$750,000 per annum.

This proposed new maximum aggregate amount exceeds the aggregate payments of the proposed increased Directors' fees (as detailed above) thereby leaving the Company with sufficient capacity to accommodate any future increase in the number of Directors, should this be considered appropriate, and will enable the Company to remain competitive and in line with prevailing market forces from time to time in attracting and retaining directors with the necessary qualifications and experience.

St Barbara's present position and anticipated rate of growth requires the Company to have the capacity to attract and retain the most appropriately qualified and experienced non-executive company directors.

$\overline{7}$ Resolution 6 - Approval of conversion of cash advances made by Resource Capital Fund III LP

$7.1$ Background

On 21 March 2005, the Company announced to the ASX that it had acquired the gold division of Sons of Gwalia Ltd (Administrators Appointed) (Assets) for consideration consisting of a cash payment of \$2.3 million, the replacement of existing bank guaranteed environmental performance bonds totalling approximately \$30 million and the assumption of additional performance bonds of up to \$5.7 million.

In order to assist the Company to satisfy the purchase consideration for the Assets, RCF III agreed to provide:

an Environmental Bond Guarantee Facility of \$35.7 million (Bond Guarantee Facility); and
a Bridge Loan Facility of \$4.3 million (Bridge Loan).

under the terms of a facility agreement dated 20 May 2005 (Facility Agreement), in consideration for the Company agreeing to pay the interest rate (set out below), for cash advances made under the Facilities to be convertible at the conversion prices set out below (subject to shareholder approval) for the term of those facilities and the payment of a royalty (the terms of which are set out below).

The Company drew an aggregate of \$7,000,000 by way of cash advance under the Facilities (Cash Advance) by drawing the full amount of the Bridge Loan in an amount of \$4,300,000 in cash and an amount of \$2,700,000 in cash under the Bond Guarantee Facility. The parties agreed that for cash drawings up to an amount of \$7,000,000, the applicable conversion price would be \$0.07 per Share which was a premium to the prevailing market price (6.3 cents) at the time. Also, at present, the Company has drawn \$21 million by way of the Bond Guarantee Facility.

The Company believes the terms of the arrangement in relation to the quantum of the interest rate, the Royalty and the Conversion Price (see below) best reflected the risks and returns that were associated with the transactions contemplated by the Facility Agreement and the acquisition of the Assets. It enabled the Company to negotiate the interest rate to be appropriately discounted but provided RCF III with an adequate return given the risks undertaken by RCF III in financing the acquisition of the Assets. It should be noted that without the support of RCF III, and RCF III's provision of written letters of undertaking of financial support, the Company would most likely not have been able to bid for, and subsequently complete the acquisition of, the Assets.

The approval to enable conversion of the Cash Advances is required by the Facility Agreement, the Listing Rules and the Corporations Act. It should be noted that RCF III and RCF II (the Company's single largest shareholder) are considered Associates by virtue that both funds are managed by the same entity. RCF III does not currently hold any Shares. RCF II currently holds $177,887,642$ (31.6%) of the Company's 563,365,352 issued Shares (as at 7 October 2005). Further details of the interests of RCFII and RCFIII are set out in the section headed "Voting Power" below. In those circumstances, the Company proposes Resolution 6.

Facility Agreement

To assist with financing the purchase of the Assets, the Company and certain of its subsidiaries entered initially into a Term Sheet on 27 February 2005, which was expanded on 29 March 2005 and subsequently replaced by a facility agreement with Resource Capital Funds III LP (RCF III) on 20 May 2005 (Facility Agreement). The key terms of the Facility Agreement are summarised below:

Facilities: Total facilities of \$40 million consisting of:
an Environmental Bond Guarantee Facility of \$35.7 million (Bond Guarantee Facility); and
$\equiv$ a Bridge Loan Facility of \$4.3 million (Bridge Loan).

The Company drew an aggregate of \$7,000,000 by way of cash advance under the Facilities by drawing the full amount of the Bridge Loan in an amount of \$4,300,000 in cash and a further \$2,700,000 in cash under the Bond Guarantee Facility.

The Bond Guarantee Facility expires on 30 April 2007 and the final repayment date for the Bridge Loan is 31 December 2008.

Security: The security granted by the Company and certain of its subsidiaries consists of:
$\equiv$ first ranking fixed and floating charges over certain of the assets then held by the Company and certain of its subsidiaries; and
mining mortgages over certain tenements held by the Company and certain of its subsidiaries.

(together the Security).

Conversion: Subject to the shareholder approvals sought by this notice of meeting, RCF III can elect to convert any outstanding cash advance drawn under the Facilities (\$7 million) into Shares at anytime up to and including 31 December 2008 (Conversion Right). Upon conversion, the amount of the relevant Facility that is converted will be deemed repaid and will not be available for re-drawing.
Conversion Price: The Conversion Price for the \$7 million of cash advances drawn under the Facilities is \$0.07 per Share.
Bonus Shares: If the Company makes a bonus issue of Shares to Shareholders, then the Company must, in addition to any Shares to be issued to RCF III under its Conversion Right, issue to RCF III the same number of bonus shares as RCF III would have received if, immediately before the date of the issue of the bonus shares (or any previous issue), it had converted all cash advances to Shares.
Offers to holders of Shares: If the Company makes an offer to existing Shareholders to subscribe for Shares or other securities in the Company, the Company must extend to RCF III the same offer that RCF III would have received if, immediately before the date of the offer, it had converted all cash advances to Shares.
Commercial equivalent: The Company may request RCF III to consider in good faith an alternative arrangement that would deliver to RCF III the reasonable commercial equivalent of the exercise of its rights in relation to conversion of any cash advance made under the Facilities, the issue of bonus shares or the issue of other securities.
Interest: The Company must pay RCF III interest on the Cash Advances at the rate of 8% per annum, calculated daily and payable semi-annually.

The Company may elect to satisfy any interest payment by the issue of Shares. The Conversion Price for any such payments will be the Market Price of Shares on the day that the interest payment obligations fall due.

Qualifying Equity Raising: The Company can require RCF III to convert all or part of the OER Participation Amount into Shares within 14 days of the completion of any Qualifying Equity Raising up to the Maximum QER Participation.

A Qualifying Equity Raising is any equity raising by the Company of at least \$10 million on or before 31 December 2005, excluding any equity raising made solely to RCF III or any of its related entities.

The OER Participation Amount is the aggregate of any outstanding cash advances less the net of \$7 million and the sum of any cash advances repaid or previously converted.

The Maximum QER Participation is the lesser of \$8 million and 30% of the total amount raised under the Qualifying Equity Raising.

If the Qualifying Equity Raising is underwritten by a third party:

no underwriting fee may be paid by the Company to any third party on any portion of the OER Participation Amount to be converted; and
on subscription or conversion of the QER Participation Amount, the Company must pay to RCF III an amount equal to the underwriting fee that would otherwise have been paid to the third party on the QER Participation Amount.
Prepayment: The Company may prepay a cash advance made under the Facilities by giving RCF III 15 business days' notice. Section 7 provides details regarding any prepayments made by the Company.
Guarantee fee: The Company must pay RCF III non-refundable fees in relation to the provision of any guarantees (or similar) equal to the sum of:
the costs, if any, incurred by RCF III for establishing and maintaining letters of credit or other facilities with the credit support providers; and
0.5% per annum calculated on the maximum liability of each guarantee issued by RCF III payable on the date on which a cash advance is made and semi-annually thereafter.
Review Event: If there is a change in the voting power of the Company whereby a person, other than RCF III or its related entities, obtains voting power of 30% or more, then RCF III may:
require that the Facilities be restructured in a manner acceptable to RCF III;
nominate a date (within 60 days) by which the Company must:
pay to RCF III cash cover equal to the aggregate of the maximum liability of each current guarantee; and
the balance of all money owing to RCF III; and
cancel the Facilities.
Shareholder approval: The Company agreed to seek all appropriate regulatory, shareholder and stock exchange approvals to the transactions contemplated by the Facility Agreement by no later than 30 November 2005 or, if requested by RCF III, at any other time thereafter, by no later than the date which is 40 business days after request by RCF III. If the Company fails to obtain any required shareholder approval or third party consent, the Company will be in default of the Facility Agreement. On or after the occurrence of a default, RCF III may:
$(1)$ by notice to the Company:
- declare that the Company's debts and monetary liabilities owed to (a) RCF III are immediately due and payable;
- (b) declare that any part or whole of RCF III's commitments under the Bond Guarantee Facility and Bridge Loan are cancelled;
- take any action or proceedings necessary or desirable in order to $(c)$ exercise any power conferred by the transaction documents (which includes the Facility Agreement and Royalty Deed),

or do a combination of any of those things; and

$(2)$ at the cost of the Company, appoint a firm of independent accountants or other experts to review and report to RCF III on the affairs, financial condition and business of RCF III and the Company.

Upon receipt of a notice under paragraph (1), the Company must immediately repay RCF III, in full, the Company's debts and monetary liabilities owed to RCF III.

Royalty

It is a condition of RCF III providing the Company with the Facilities that the Company grant certain royalties to RCF III pursuant to the terms of a royalty deed between the Company and RCF III dated 29 March 2005 (Royalty Deed). A supplemental deed was entered into on 20 May 2005 (Supplemental Deed). The key terms of the Royalty Deed (with some additions of the Supplemental Deed) are set out below:

Amount of Royalty: an amount equal to 1.5% of the proceeds of sale of the Company's right, title or interest in the Minerals extracted or won from the Tenements (excluding any revenues, gains or losses from forward sales, puts, calls, options or other similar arrangement entered into by the Company), and in all other cases, the Mineral Value of any Minerals arising from the Company's Meekatharra, Laverton, Leonora and Southern Cross, Bounty Nickel and Outokumpu Tenements less any Allowable Deductions where:
Mineral Value means the actual value of a Mineral determined on arm's length terms and at any applicable spot price (if available);
Mineral includes gold, all other metals, coal and all other hydrocarbons; and
Allowable Deductions means, in the case of a refiner or smelter that is an unrelated party of the Company, all direct costs of the refiner or smelter incurred by the Company for off-site smelting of refining of the Minerals or, otherwise, an amount equal to the commercially reasonable estimate of the cost of the same; and
Tenement includes any tenement, mining lease, prospecting licence, exploration licence, general purpose licence, miscellaneous licences or any applications for the same.
Royalty Period: The Royalty in respect to the Southern Cross, Laverton or Leonora Tenements commences on 1 January 2006 and continues indefinitely. The Royalty in respect to the Meekatharra Tenements commences on 1 July 2007 and continues indefinitely.
Payment: The Company must pay the Royalty to RCF III within 10 business days of the end of each quarter. The Company must pay RCF III interest at 8% per annum on any overdue Royalty payments.
Expiry or relinquishment of Tenements: if a Tenement is due to expire and the Company is not going to apply for its renewal or the Company wishes to surrender a Tenement then the Company must first give RCF III at least 60 days notice of the proposed expiry or surrender and, on request from RCF III, the Company must transfer the Tenement to RCF III (or its nominee) free of any encumbrances (other than the Royalty) for a consideration of \$1.00.
Sale of Tenements: The Company must not transfer any of its rights, title or interests in the Tenements unless the intending transferee has entered into a deed of covenant with RCF III whereby the intending transferee agrees to by bound by the terms of the Royalty Deed.
Assignment: RCF III may assign the Royalty at any time without the Company's consent.

$7.2$ Summary of requirements for Shareholder approval

RCF III has provided the Company with cash advances under the Facilities totalling \$7 million. Therefore, if RCF III elected to convert the total amount of the cash advances currently outstanding, the Conversion Price would be \$0.07 and therefore the Company would be required to issue RCF III with a total of 100 million new Shares.

The Company has not and does not currently intend to prepay any cash advance made under the Facilities. However, the Facility Agreement requires that the Company obtain shareholder approval to issue Options to RCF III as a fee if the Company were to make a prepayment (see section 8 for an explanation of the prepayment fee). Resolution 7 seeks approval for the issue of Options. Approval is therefore sought for the issue of Shares for the exercise of any Options that may be issued.

The possible issue of the Shares to RCF III requires Shareholder approval in accordance with the requirements of:

Item 7 of section 611 of the Corporations Act as the issue of Shares will result in RCF III, together with its Associates, increasing its voting power in the Company from a starting point that is above 20% and below 90%; and
Listing Rule 10.11 as the issue of the Shares to RCF III will constitute the issue of securities to a person in a position of influence.

The regulatory and informational requirements of the above approvals are discussed in detail below.

Item 7 of section 611 of the Corporations Act

Under section 606 of the Corporations Act, a person is prohibited from acquiring a relevant interest in shares in a company if:

the acquisition would result in the person having more than 20% of the voting power $(a)$ in the company; or

$(b)$ the person already has between 20% and 90% of the voting power in the company, and after the acquisition would have a greater percentage of the voting power in the company.

As discussed below, the issue of Shares to RCF III upon exercise of its Conversion Right or Options (if they are issued) may result in RCF III, together with its Associates, having up to approximately 41.9% of the voting power in the Company which therefore exceeds the $20\%$ threshold.

There are certain specified exceptions to the prohibition contained in section 606, one of which is Item 7 of section 611. Item 7 of section 611 exempts from the operation of section 606 an acquisition of shares in a company if the company has agreed to the acquisition by a resolution passed at a general meeting.

Listing Rules

It should be noted that Listing Rule 7.2 Exception 16 provides that any approval under Item 7 of Section 611 acts as an exception to the prohibition in Listing Rule 7.1 against the issue of more that 15% of the capital of a listed company in any 12 month period.

Listing Rule 7.2 (exception 14) provides that, in the event approval is obtained under Listing Rule 10.11 (see below) to an issue of equity securities, separate approval under Listing Rule 7.1 is not required.

Listing Rule 10.11

Listing Rule 10.11 requires that an entity must not issue securities to a related party without the approval of the holders of ordinary shares. RCF III is a related party of the Company and, if Shareholders approve this Resolution 5 and RCF III exercises its Conversion Right or Options (if they are issued), the Company will be required to issue up to 100 million new Shares to RCF III. Consequently, Shareholder approval under Listing Rule 10.11 is required.

Listing Rule 10.13.2 requires that a company must issue any Shares approved under Listing Rule 10.11 within one month after shareholder approval. The Company has obtained a waiver from the ASX to allow it to issue any Shares to RCF III on the exercise of its Conversion Rights at any time during the currency of the Facilities.

$7.3$ Regulatory information required

As outlined above, the issue of Shares to RCF III under Resolution 6 is subject to the approval of Shareholders in accordance with the requirements of the Corporations Act and the Listing Rules. The following information is provided for the benefit of Shareholders and in accordance with those requirements.

Identity of the entity acquiring the Shares

RCF III, or one of its related entities (as that term is described in the Corporations Act), will acquire the Shares the subject of Resolution 6.

RCFIII 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 fund. The General Partner is a Cayman Islands limited partnership, Resource Capital Associates III L.P.. 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 III and other funds. The General Partner of Resource Capital Associates III L.P. is RCA II GP Limited, a Cayman Islands corporation. Its shareholders are the three individuals that are the sponsors of Resource Capital Funds. Resource Capital Funds are private equity funds with mandates to make investments in development and growth stage mining companies across a diversified range of commodities.

Shareholders should note that RCF II, while constituted by a different group of investors to RCF III, is managed by the same entity as RCF III.

Reasons for the proposed issue

As explained above, the loan was provided by RCF III to enable the Company to complete the acquisition of the Assets.

The approval sought by Resolution 6 is to permit conversion of the Cash Advances to satisfy certain of the Company's obligations under the Facility Agreement. It should be noted that if RCF III forms the view that further approval is necessary, it may request the Company seek to refresh the approval sought by this Notice of Meeting under the Facility Agreement within 40 days of the request.

Voting power

Item 7 of section 611 of the Corporations Act requires the Company to disclose to Shareholders, amongst other things, the maximum extent of the increase in the voting power of RCF III and its Associates if RCF III exercises its Conversion Right. RCF III and RCF II are considered Associates by virtue of the fact that both funds are controlled by the same entity.

RCF III does not currently hold any Shares. RCF II, an Associate of RCF III, currently holds 177,887,642 (31.4%) of the Company's 563,365,352 issued Shares (as at 7 October 2005) and the following options:

Maturity or Expiration Date	Conversion or Exercise Price	Shares or Brincipal Amontan

$15$ -Oct-05	AUD 0.2086	49,252
15-Oct-05	AUD 0.2124	241,854
15-Oct-05	AUD 0.2125	483,482
7-Jul-06	AUD 0.1138	3,177,890
7-Jul-06	AUD 0.2086	151,040
7-Jul-06	AUD 0.2124	741,686
7-Jul-06	AUD 0.2125	1,482,677
$7 - \tan -07$	AUD 0.1138	17,430,243
$7 - \tan -07$	AUD 0.2086	594,308
7-Jan-07	AUD 0.2124	2,918,376
$7 - \tan -07$	AUD 0.2125	5,834,004
24-May-08	AUD 0.2086	485,953
24-May-08	AUD 0.2124	2,386,296
24-May-08	AUD 0.2125	257,857
$24-Mav-08$	AUD 0.1138	14,252,357

(Note: RCF II has elected to exercise the 15 October options)

It should be noted that on 25 November 2003, Shareholders approved the issue and exercise of, the above options. At present, RCF II have elected to exercise the options dated 15 October 2005, but have not determined their intention with respect to the exercise of the balance of the options.

If Shareholders approve Resolution 6 and RCF III fully exercises its Conversion Right, RCF II's and RCF III's combined holding of Shares will increase to 328,324,917 Shares (representing 46% of the enlarged capital, on the assumption that no other option issued by the Company is exercised or equity placement is made). If all other unlisted options on issue by the Company were exercised, this would reduce to 43.5% of the enlarged capital.

As announced on 26 July 2005, the Company is currently undertaking an on-market buy-back of up to 56,653,335 (10%) of its issued Shares. If the Company buys back the full amount of these Shares, RCF II's and RCF III's combined holding of Shares may further increase to 49.69% of the Company's issued Shares (assuming no other options issued by the Company are exercised or equity placement is made). If all other unlisted options on issue by the Company were exercised, this would reduce to 46.8% of the enlarged capital. Further, if the Company elects to satisfy any interest payments under the Facility by the issue of Shares (which it currently has no plans to do), this holding may further increase.

RCF III's intentions in relation to the Company

RCF III has informed the Company that it has no current intentions to:

change the business of the Company;
take any action that would affect the future employment of the Company's current employees;
enter into any arrangement, other than as stated in this Notice of Meeting, whereby any property will be transferred between the Company and RCF III or any of its Associates:
redeploy the fixed assets of the Company; or
change significantly the Company's financial or dividend policies.

Issue price

Any Shares issued to RCF III upon exercise of its Conversion Right or Options (if they are issued) will be issued at a price of \$0.07.

Rights attaching to the Shares to be issued

Any Shares issued to RCF III upon exercise of its Conversion Right or Options (if they are issued) will rank equally with, and have the same terms as, all other Shares.

Timing for the issue of the Shares

Any Shares issued to RCF III upon exercise of its Conversion Right will be issued within 5 business days after the date that RCF III gives the Company the required conversion notice. As noted previously, RCF III can exercise its Conversion Right at any time up to and including 31 December 2008.

Intended use of the funds raised

The amount of the Cash Advances converted into Shares will be deemed as repaid, thereby reducing the debt owed by the Company to RCF III.

Contracts with RCF III

Apart from the Facility Agreement, Royalty Agreement and associated Security detailed above, there are no other contracts or proposed contracts between the Company (or any of its Associates) and RCF III (or any of its Associates) which are conditional upon, or directly or indirectly dependent on, Shareholders' agreement to the issue of the Shares under Resolution 6.

Directors' interests and recommendations

Mr Hank Tuten is Chairman of Resource Capital Funds and therefore has an interest in the outcome of Resolution 6. No other Director has an interest in the issue of Shares to RCF III under Resolution 6.

With the exception of Mr Tuten who did not vote as he has an interest in the matter, each Director voted in favour of the proposal to put Resolution 6 to Shareholders. Each Director approved the issue of the Notice of General Meeting and the Explanatory Memorandum to Shareholders.

Each Director, with the exception of Mr Tuten who has an interest in the matter, recommends that Shareholders should approve Resolution 6. The reasons that the Directors make this recommendation are as follows:

At the time the Company wanted to bid for the Assets, the RCF III financing offer was the best confirmed offer received at that time.
A key component of St Barbara's purchase bid (which subsequently proved to be a key feature of the bid), was the availability of an at call facility to fund the purchase price at settlement, which occurred less than one month after the acceptance of the Company's purchase bid. The establishment of such a facility required RCF III to accept that St Barbara's shareholder approval for RCF III to exercise its conversion rights could only be sought at a later date. This is the approval which is now being sought from Shareholders.
The conversion price of 7 cents per Share was at a premium to the market price at the time the commercial terms were agreed on 27 February 2005 (which was 6.3 cents). The acquisition of the Assets has proved to be highly accretive for all Shareholders.
An Independent Expert's Report prepared for shareholders (attached) concludes that the approval for RCF III exercising their conversion rights is fair and reasonable.

The Directors accordingly recommend that shareholders approve the resolution.

$7.4$ Independent Expert's Report

As stated above, in the Independent Expert's Report attached to this Explanatory Memorandum, Deloitte Corporate Finance has concluded that the proposed issue of Shares to RCF III is fair and reasonable with respect to the non-participating Shareholders of the Company.

8 Resolution 7 - Approval to issue Options to Resource Capital Fund III LP

$8.1$ Prepayment fee

Resolution 7 deals with the circumstance where the Company elects to prepay the Facilities early. If this does not occur, the options referred to in Resolution 7 will not be issued.

The Facility Agreement provides that the Company may prepay any cash advance made under the Facilities by giving RCF III 15 business days' notice. If the Company decides to prepay an amount, it must give RCF III, by way of a prepayment fee, a number of unlisted options to subscribe for Shares (Options), equivalent to the number of Shares that would have been issued to RCF III if RCF III had converted the amount prepaid by the Company in accordance with its Conversion Right. The exercise price of the Options will be equal to the applicable Conversion Price, and for a term up to 31 December 2008.

Despite the Company providing RCF III with a notice to prepay an amount, RCF III may elect, prior to prepayment, to exercise its Conversion Right to convert the amount the Company wishes to prepay under the notice into Shares.

The intention of the pre-payment fee is to ensure that RCF III is compensated for undertaking the risks associated with financing the acquisition of the Assets and that such compensation is not removed as a consequence of an election by the Company to prepay the Cash Advances, in circumstances that provide the Company with the flexibility that should it either elect to refinance or repay the Facilities, it may do so. The Company believes that the arrangements

reached in relation to the payment of the prepayment fee provides the Company with sufficient flexibility whilst entitling RCF III to an appropriate compensation for facilitating the acquisition of the Assets.

The Company may prepay or replace all or part of a guarantee or credit support arrangement drawn under the Bond Guarantee Facility by giving RCF III at least 15 business days' prior written notice. The Company must pay any break costs incurred by RCF III.

Approval to issue Options is sought in order to comply with a requirement to seek approval under the Facility Agreement. Approval is sought to issue Shares upon the exercise of options under Resolution 6.

$8.2$ Listing Rule 7.1

Listing Rule 7.1 broadly provides that a company must not, subject to certain exceptions, issue during any 12 month period, any equity securities if the number of such securities exceeds 15% of the number of securities in the same class on issue at the commencement of the 12 month period. One circumstance where such an issue is permitted is where the issue has the prior approval of shareholders in general meeting.

Listing Rule 7.2 (exception 14) provides that, in the event approval is obtained under Listing Rule 10.11(see below) to an issue of equity securities, separate approval under Listing Rule 7.1 is not required.

8.3 Listing Rule 10.11

Listing Rule 10.11 requires that an entity must not issue securities to a related party without the approval of the holders of ordinary shares. RCF III is a related party of the Company and, if Shareholders approve Resolution 7 and RCF III makes a prepayment, the Company may be required to issue Options to RCF III. Consequently, Shareholder approval under Listing Rule 10.11 is required.

Listing Rule 10.13.3 requires that a company must issue any options approved under Listing Rule 10.11 within one month after shareholder approval. The Company has obtained a waiver from the ASX to allow it to issue any Options to RCF III at any time during the currency of the Facilities (eg at any time until 31 December 2008).

$8.4$ Other information

The following information is provided for the benefit of Shareholders in accordance with the Listing Rules.

Identity of entity acquiring Options

RCF III, or one of its related entities (as that term is described in the Corporations Act), will acquire the Options the subject of Resolution 7. RCF III is more fully described in section 7.3 above.

Reasons for the proposed issue

The reason for the proposed issue of Options is to satisfy certain of the Company's obligations under the Facility Agreement.

Number of Options to be issued

The Company has not and does not intend to prepay any cash advance made under the Facilities.

To date, RCF III has provided the Company with cash advances under the Facilities totalling \$7 million and the Directors have no current intentions of requesting any further cash advances. Therefore, if the Company prepaid all cash advances made under the Facilities it would be required to issue RCF III with a total of 100,000,000 Options.

Issue price and intended use of funds raised

The Company will not directly receive any funds from any issue of Options to RCF III, however, on the exercise of the Options, the Company will receive the exercise price of the Options. Options are issued to RCF III by way of a fee payable to RCF III if the Company prepays any cash advance made under the Facilities.

Terms attaching to the Options

Each Option entitles RCF III, when exercised, to one Share. The Options are freely transferable, are exercisable at a price equal to the applicable Conversion Price and will expire on 31 December 2008. All Shares issued upon exercise of the Options will rank parri passu in all respects with all other Shares. There are no participating rights or entitlements inherent in the Options and RCF III will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. The Options do not give any right to participate in dividends until the Shares are allotted pursuant to the exercise of the Options. In the event of a reorganisation of capital of the Company, the number of Options or the exercise price of the Options or both to which RCF III is entitled will be changed to the extent necessary to comply with the Corporations Act and Listing Rules applying to a reorganisation of capital at the time of the reorganisation. The Options will not be quoted on ASX.

9 Definitions

Annual General Meeting means the annual general meeting of St Barbara to be held at the Karri Room, Parmelia Hilton, Mill Street, Perth, Western Australia on Wednesday 16 November 2005 at 10.00am (Perth time) to consider and, if thought fit, pass the resolutions set out in the Notice of Annual General Meeting:

Annual Report means the Company's annual report for the financial year ended 30 June 2005;

ASIC means the Australian Securities and Investments Commission;

Associate has the meaning given to that term in sections 10 to 17 of the Corporations Act;

ASX means Australian Stock Exchange Limited;

Board means the board of directors of St Barbara;

Bond Guarantee Facility means the bond guarantee described in section 7.1;

Bridge Loan means the bridge loan described in section 7.1;

Conversion Price means the price at which RCF III may convert cash advances drawn under the Facilities into Shares as described in section 7.1;

Conversion Right means RCF III's right to convert cash advances drawn under the Facilities into Shares as described in section 7.1;

Corporations Act means the Corporations Act 2001 (Cth);

Corporations Regulations means the Corporations Regulations 2001 (Cth);

Deloitte Corporate Finance means Deloitte Corporate Finance Pty Ltd;

Director means a director of St Barbara;

Explanatory Memorandum means the explanatory memorandum accompanying the Notice of Annual General Meeting contained in this Meeting Documentation;

Facilities means the Bond Guarantee and the Bridge Loan;

Facility Agreement means the agreement described in section 7.1;

Independent Expert means Deloitte Corporate Finance;

Independent Expert's Report means the report by the Independent Expert and contained in the Meeting Documentation;

Listing Rules means the Official Listing Rules of the Australian Stock Exchange Limited:

Meeting Documentation means this document comprising of the Notice of Annual General Meeting, Explanatory Memorandum, Independent Expert's Report and the Proxy Form;

Notice of Annual General Meeting means the notice of meeting which is enclosed in the Meeting Documentation;

Options means unlisted options to subscribe for Shares issued to RCF III, by way of a prepayment fee as described under section 8.

Proxy Form means the proxy form for the Annual General Meeting contained in this Meeting Documentation;

RCF II means Resource Capital Fund II LP;

RCF III means Resource Capital Fund III LP;

Royalty means the royalties described in section 7.1;

Royalty Deed means the deed described in section 7.1;

Security means the securities described in section 7.1;

Share means a fully paid ordinary share in the capital of St Barbara;

Shareholder means a holder of St Barbara Shares; and

St Barbara or the Company means St Barbara Mines Limited ACN 36 009 165 066.

Deloitte.

St Barbara Mines Limited Independent Expert's Report

11 October 2005

De ofte.

Financial services guide

11 October 2005

What is a Financial Services Guide?

This Financial Services Guide (FSG) is an important document the purpose of which is to assist you in deciding whether to use any of the general financial product advice provided by Deloitte Corporate Finance Pty Limited (ABN 19 003 833 127). The use of "we", "us" or "our" is a reference to Deloitte Corporate Finance Pty Limited as the holder of Australian Financial Services Licence ("AFSL") No. 241457. The contents of this FSG include:

who we are and how we can be contacted $\bullet$
what services we are authorised to provide under our AFSL.
how we (and any other relevant parties) are remunerated in relation to any general financial product advice we may provide
details of any potential conflicts of interest
details of our internal and external dispute resolution systems and how you can access them.

Information about us

We have been engaged by St Barbara Mines Limited to give general financial product advice in the form of a report to be provided to you in connection with transactions proposed to be undertaken by St Barbara Mines Ltd. You are not the party or parties who engaged us to prepare this report. We are not acting for any person other than the party or parties who engaged us. We are required to give you an FSG by law because our report is being provided to you. You may contact us using the details located above.

Deloitte Corporate Finance Pty Limited is ultimately owned by the Australian partnership of Deloitte Touche Tohmatsu. The Australian partnership of Deloitte Touche Tohmatsu and its related entities provide services primarily in the areas of audit, tax, consulting, and financial advisory services. Our directors may be partners in the Australian partnership of Deloitte Touche Tohmatsu.

The Australian partnership of Deloitte Touche Tohmatsu is a member firm of the Deloitte Touche Tohmatsu Verein. As the Deloitte Touche Tohmatsu Verein is a Swiss Verein (association), neither it nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Defoitte," "Defoitte & Touche," "Defoitte Touche Tohmatsu," or other related names.

The financial product advice in our report is provided by Deloitte Corporate Finance Pty Limited and not by the Australian partnership of Deloitte Touche Tohmatsu, its related entities, or the Deloitte Touche Tohmatsu Verein. We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and the Australian partnership of Deloitte Touche Tohmatsu (and its related bodies corporate) may from time to time provide professional services to financial product issuers in the ordinary course of business.

What financial services are we licensed to provide?

The AFSL we hold authorises us to provide the following financial services to both retail and wholesale clients:

to provide financial product advice in respect of securities, debentures, stocks or bonds issued or proposed to be issued by the government and interests in managed investment schemes including investor directed portfolio schemes
to deal in a financial product by arranging for another person to apply for, acquire, vary or dispose of financial products in respect of securities and debentures, stocks or bonds issued or proposed to be issued by the government.

Information about the general financial product advice we provide

The financial product advice provided in our report is known as "general advice" because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

How are we and our employees remunerated?

Our fees are usually determined on an hourly basis; however they may be a fixed amount or derived using another basis. We may also seek reimbursement of any out-of-pocket expenses incurred in providing the services.

Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSI 241457 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

Fee arrangements are agreed with the party or parties who actually engage us, and we confirm our remuneration in a written letter of engagement to the party or parties who actually engage us.

Neither Deloitte Corporate Finance Pty Limited nor its directors and officers, nor any related bodies corporate or associates and their directors and officers, receives any commissions or other benefits, except for the fees for services rendered to the party or parties who actually engage us. Our fee is \$75,000, excluding GST, and will also be disclosed in the relevant PDS or offer document prepared by the issuer of the financial product.

All of our employees receive a salary. Our employees are eligible for annual salary increases and bonuses based on overall performance but do not receive any commissions or other benefits arising directly from services provided to you. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance. Our directors do not receive any commissions or other benefits in connection with our advice.

We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

What should you do if you have a complaint?

If you have any concerns regarding our report, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerns promptly and equitably. Please address your complaint in writing to:

The Complaints Officer Practice Protection Group PO Box N250 Grosvenor Place Sydney NSW 1220

If you are not satisfied with the steps we have taken to resolve your complaint, you may contact the Financial Industry Complaints Service (FICS). FICS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry. Complaints may be submitted to FICS at:

Financial Industry Complaints Service PO Box 579 Collins Street West Melbourne VIC 8007 Telephone: 1300 780 808 Fax: +61 3 9621 2291 Internet: http://www.fics.asn.au

If your complaint relates to the professional conduct of a person who is a Chartered Accountant, you may wish to lodge a complaint in writing with the Institute of Chartered Accountants in Australia ("ICAA"). The ICAA is the professional body responsible for setting and upholding the professional, ethical and technical standards of Chartered Accountants and can be contacted at:

The Institute of Chartered Accountants GPO Box 3921 Sydney NSW 2001 Telephone: +61 2 9290 1344 Fax: +61 2 9262 1512

Specific contact details for lodging a compliant with the ICAA can be obtained from their website at http://www.icaa.org.au/about/index.cfm. The Australian Securities and Investments Commission ("ASIC") regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit. Their website contains information on lodging complaints about companies and individual persons and sets out the types of complaints handled by ASIC. You may contact ASIC as follows:

Info line: 1 300 300 630 Email: [email protected] Internet: http://www.asic.gov.au/asic/asic.nsf

De offic.

Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL 241457

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloiffe.com.au

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

11 October 2005

Dear Directors

Independent expert's report

St Barbara Mines Limited (St Barbara or the Company) entered into a finance facility agreement (Facility Agreement) with Resource Capital Fund III LP (RCF III), a related party of St Barbara's major shareholder, Resource Capital Fund II LP (RCF II), to fund the acquisition of the gold division of Sons of Gwalia Ltd (Administrators Appointed) (Gold Assets). The transaction was completed on 28 March 2005.

The terms of the Facility Agreement grant RCF III the option to acquire an equity interest in St Barbara in two ways:

through the conversion of the cash amount drawn down under the Facility Agreement into new St Barbara shares at a conversion rate of \$0.07 (exercise price), at any time until 31 December 2008 (Conversion Right) Öľ
through the exercise of options over new St Barbara shares (which may be granted on early repayment of the funds drawn under the Facility Agreement) at the exercise price, at any time until 31 December 2008 (St Barbara Options) (together the Proposed Transactions).

At the current level of funding, the Proposed Transactions could result in RCF III acquiring up to 100 million new shares in St Barbara.

Purpose of the report

The directors of St Barbara have appointed Deloitte Corporate Finance Pty Ltd (Deloitte Corporate Finance) as an independent expert to express an opinion on whether or not the Proposed Transactions are fair and reasonable to the shareholders of St Barbara other than RCF III and its associates (non-associated shareholders).

Under Section 606 (Section 606) of the Corporations Act 2001 (the Act), a person is prohibited from acquiring a relevant interest in the shares of a company if:

The acquisition would result in the person having more than 20% of the voting power in the company; or
The person already has between 20% and 90% of the voting power in the company and after the acquisition would have a greater percentage of the voting power in the company.

RCF III and its associates currently hold 31.6% of shares in St Barbara, which will increase to 37.2% when the existing unlisted options held by RCF II are exercised. The issue of new shares in St Barbara to RCF III in terms of the Proposed Transactions may result in RCF III and its associates, increasing their equity interest entitlement to 46.0% of the voting power in the Company.

De offic.

Section 611 of the Act (Section 611) provides certain exemptions to Section 606 including, but not limited to:

if the Proposed Transactions are approved by a resolution passed at a general meeting of St Barbara shareholders
if RCF III and its associates' voting power does not increase by more than three percentage points in any six month period (3% creep exemption).

The directors have appointed Deloitte Corporate Finance to consider the Proposed Transactions to assist them in fulfilling the requirements of Policy Statement 74 issued by the Australian Securities and Investments Commission (ASIC), which requires that the Notice of Meeting include, amongst other things, an analysis of the Proposed Transactions by the independent directors.

We have prepared this report having regard to the relevant ASIC policy statements and practice notes. We have also relied on a report prepared by AMC Consultants Pty Ltd (AMC), a mining industry specialist whose report was prepared in accordance with the Australian Institute of Mining and Metallurgy's (AusIMM) Code and Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports (the Valmin code).

This report is to be included with the Notice of Meeting and in the Explanatory Memorandum to be sent to the Company's shareholders and has been prepared for the exclusive purpose of assisting the Company's shareholders in their consideration of the Proposed Transactions. The report should not be used for any other purpose.

Basis of evaluation

In evaluating fairness and reasonableness, we have considered ASIC policy statements and common market practice.

ASIC Policy Statement 74 provides guidelines for independent experts on how to evaluate whether or not a proposed transaction is fair and reasonable to shareholders and requires that the evaluation should:

be judged in all circumstances of the Proposed Transactions
compare the likely advantages and disadvantages to the non-associated shareholders if the Proposed Transactions are agreed to, with the advantages and disadvantages to those shareholders if they are not
consider whether a premium for control is being paid. $\bullet$

In forming our opinion on whether or not the Proposed Transactions are fair and reasonable to non-associated shareholders we have considered the advantages and disadvantages of the Proposed Transaction and whether the advantages outweigh the disadvantages. We have also considered the background circumstances that resulted in the Proposed Transactions.

Summary and conclusion

In forming our opinion as to whether the Proposed Transactions are fair and reasonable to non-associated shareholders we have considered the following:

Background considerations

The Proposed Transactions are a direct result of the funding of the acquisition of the Gold Assets, which has added significant value to St Barbara

Since the acquisition of the Gold Assets, St Barbara's share price has more than tripled. Prior to the acquisition of the Gold Assets, St Barbara did not have any revenue from the sale of gold during the 2005 financial year. As a direct result of the acquisition, gold revenues and operating cash flows amounted to \$46.4 million and \$21.7 million respectively in the fourth quarter of the 2005 financial year. The acquisition also increased the gold resources of St Barbara from 2.0Moz to 9.9Moz at that time and subsequent exploration results have been positive.

The market for St Barbara shares has become significantly more liquid since the acquisition, giving shareholders the opportunity to sell their shares at a higher price.

De offic.

The Proposed Transactions were fair at the time St Barbara agreed to the terms of the Facility Agreement

Our valuation of St Barbara, at the time the terms of the Facility Agreement were agreed, is in the range of \$0.042 to \$0.072 per share. The Conversion Right and any St Barbara Options issued have an exercise price of \$0.07 per share. Accordingly we have concluded that the Proposed Transactions were fair at the time the terms of the Facility Agreement were agreed.

The Proposed Transactions have been announced to shareholders, therefore any potential share value dilution as a result of the Proposed Transactions is likely to be incorporated into St Barbara's current share price

On 21 March 2005, St Barbara announced the acquisition of the Gold Assets. An outline of the funding arrangements was included in the announcement, including the terms of the Conversion Right. The market has received sufficient disclosure to enable it to factor any potential future dilution into the share price of St Barbara.

Advantage

The likely advantage of the Proposed Transactions to non-associated shareholders is:

St Barbara will not expose itself to the risk of being forced to immediately seek an alternative source of funding to replace the facilities provided by RCF III

If the Proposed Transactions are not approved, RCF III may elect for St Barbara to immediately repay all of the amounts outstanding under the facilities. St Barbara may therefore have to source \$28 million in replacement funds and environmental bonds immediately. It is likely that the replacement funds would be sourced from a combination of cash reserves and external funders. If it does not have to replace the RCF III facilities, St Barbara will remain well positioned to use its cash reserves for other purposes such as exploration or further acquisitions.

However, given the current share price of St Barbara, it is unlikely that RCF III would seek immediate repayment and forfeit its St Barbara Options.

Disadvantage

The likely disadvantage of the Proposed Transactions to non-associated shareholders is:

The Proposed Transactions will likely result in the issue of up to 100 million new shares in St Barbara, at a discount to the current market price, thereby diluting existing shareholdings. This dilution, and the increased level of control that RCF III and its associates will have, could occur immediately if the Proposed Transactions are approved.

RCF III and its associates currently hold 31.6% of the shares in St Barbara, which will increase to 37.2% when the existing unlisted options held by RCF II are exercised. If the Proposed Transactions are approved, the shareholding of RCF III and its associates in St Barbara could immediately increase to 46.0% but this could, in any case, occur incrementally if the Proposed Transactions are not approved.

Implications if the Proposed Transactions are not approved

If the Proposed Transactions are not approved by non-associated shareholders, an event of default occurs under the Facility Agreement. In this event, RCF III may elect at any time to demand immediate repayment of the facilities it has provided. It will not have the right to receive St Barbara Options on any such repayment. St Barbara may therefore have to refinance the entire amount of the utilised facilities (i.e. \$28 million) immediately.

Alternatively, RCF III may elect to retain the facilities and all its rights under the terms of the Facility Agreement, including the Conversion Right. Although RCF III could not exercise all of the Conversion Right immediately, RCF III and its associates could exercise existing unlisted options and take advantage of the 3% creep exemption to immediately move to a 40.2% shareholding. Thereafter, RCF III and its associates could progressively use the 3% creep exemption to exercise the remaining Conversion Right and move to a 46.0% shareholding by 31 December 2008.

Premium for Control

In assessing whether a premium for control is being paid as a result of the Proposed Transactions we have considered the following:

De offe.

as at 27 February 2005, the exercise price represented a premium over the net asset value of St Barbara
the exercise price did not represent a premium to the recent share trading range of \$0.063 to \$0.072 prior to 27 February 2005.

Based on the above we conclude that the Proposed Transactions do not incorporate a premium for control.

Conclusion

The difference between RCF III and its associates being able to immediately obtain a 46.0% shareholding as opposed to RCF III and its associates incrementally obtaining this level of shareholding does not represent a significant disadvantage to non-associated shareholders.

This disadvantage needs to be weighed against the risk of RCF III potentially demanding repayment of its facilities at any time, if the Proposed Transactions are not approved. We consider that the risks associated with potential immediate repayment outweigh any potential disadvantage to non-associated shareholders from RCF III and its associates increasing their level of control in a shorter timeframe than may otherwise occur if the Proposed Transactions are not approved.

Based on the foregoing analysis we have concluded that the Proposed Transactions are fair and reasonable to non-associated shareholders.

An individual shareholder's decision in relation to the Proposed Transaction may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser. This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

All amounts stated in this report are Australian dollars unless otherwise stated.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

سایتها

Tom Henderson Director

M. Pittanino

Mark Pittorino Director

1	Outline of the Proposed Transactions	7
1.1	Summary	7
1.2	Impact of the Proposed Transactions on St Barbara and its non-associated shareholders	7
2	Scope of the report	9
2.1	Purpose of the report	9.
2.2	Basis of evaluation	9
2.3	Individual circumstances	10
2.4	Limitations and reliance on information	10
3	Overview of the Gold Industry	11
3.1	Structure of industry	11
3.2	Pricing	11
3.3	Production	12
3.4	Industry Forecast	12
$\overline{\mathbf{4}}$	Profile of St Barbara	14
4.1	Company history	14
4.2	Mining Assets	14
4.3	Legal structure	15
4.4	Capital structure and shareholders	16
4.5	Share price performance	16
4.6	Financial performance	18
4.7	Financial position	19
4.8	Contingent Liabilities	20
5	Effect of Acquisition of the Gold Assets	21
5.1	Background	21
5.2	Alternative funding assessment	21
5.3	Share price changes	22
5.4	Implications of non-associated shareholder approval	23
6	Valuation of St Barbara	24
6.2	Analysis of share market trading prior to the Agreement Date	26
6.3	Number of shares on issue	27
6.4	Summary of valuation methods and conclusion	27.
7	Evaluation and conclusion	28
7.1	Fairness and reasonableness	28
7.2	Conclusion	29.

Appendices

Appendix 1: Glossary	30
Appendix 2: Sources of information	32
Appendix 3: Qualifications, declarations and consents	33
Appendix 4: AMC specialist valuation report	34

1 Outline of the Proposed Transactions

L Summary

On 21 March 2005, the Company announced to the Australian Stock Exchange Limited (ASX) that it had acquired the Gold Assets for a cash payment of \$2.3 million, the replacement of existing bank guaranteed environmental performance bonds totalling approximately \$30 million and the assumption of additional performance bonds of up to \$5.7 million.

To finance this acquisition, St Barbara agreed to a term sheet on 27 February 2005 with RCF III (Agreement Date), which was expanded on 29 March 2005 and subsequently replaced by the Facility Agreement on 20 May 2005. St Barbara's formal, binding bid for the Gold Assets was made on 28 February 2005. The transaction was completed on 29 March 2005.

RCF III does not currently hold any St Barbara shares, however, RCF II an associate of RCF III, currently holds 31.6% of the Company's issued shares.

The key terms of the Facility Agreement are summarised below:

total facilities of \$40 million, which consist of a bridge loan facility (Bridge Loan) of \$4.3 million and an environmental bond guarantee facility (Environmental Bond) of \$35.7 million (together the Facilities)
the Environmental Bond expires on 30 April 2007 and the final repayment date for the Bridge Loan is 31 December 2008
RCF III can elect to convert any outstanding cash advances drawn down under the Facilities into new St Barbara shares at any time up to and including 31 December 2008. The conversion price of the cash advances drawn down, up to a total of \$7 million, is \$0.07 per share (exercise price). The conversion price for any drawings that exceed the \$7 million limit cannot be greater than \$0.07 per share, and separate shareholder approval would be required for any such conversion
repayments made by the Company of cash advances drawn down under the Facilities, prior to the final repayment date, will require the Company to issue options over new shares to RCF III equal to the number of shares that would have been issued to RCF III had it converted the amount of the repayment into St Barbara shares in accordance with the Conversion Right (i.e. St Barbara Options)
the Company has agreed to obtain all appropriate regulatory, shareholder and ASX approvals to the transactions contemplated by the Facility Agreement, including the Proposed Transactions. If shareholder approval is not obtained by 30 November 2005, RCF III may elect to receive immediate repayment of the Facilities (which does not entitle it to St Barbara Options) or retain the Facilities on the existing terms.

The Company has drawn down cash of \$7 million (Cash Advance) under the Facility Agreement by drawing the full amount of the Bridge Loan and a further \$2.7 million under the Environmental Bond at the date of our report. The Company has also utilised \$21 million of the Environmental Bond. RCF III has the option to convert the Cash Advance into 100 million new shares, either through the exercise of its Conversion Right or the exercise of any St Barbara Options issued.

Impact of the Proposed Transactions on St Barbara and its 12 non-associated shareholders

The impact of the Proposed Transactions on St Barbara and its non-associated shareholders depends on a number of factors including:

the amount of cash drawn down by St Barbara under the Facilities $\bullet$
the amount of the Cash Advance converted to equity by RCF III
the market value of St Barbara shares on the Agreement Date.

RCF II also holds 50.5 million unlisted options, the exercise of which has been previously approved by nonassociated shareholders. Once exercised, these options will increase RCF II's total current shareholding to 37.2%. These options have exercise prices of \$0.11 to \$0.21 and expiry dates ranging from 15 October 2005 to 24 May 2008.

The table below summarises the potential impact of the Proposed Transactions on shareholdings in the Company, assuming the entire Cash Advance (i.e. \$7 million) is converted into shares.

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	Current holding	Post exercise of existing options ¹	Post Proposed Transactions
New St Barbara shares issued	0 million	50.5 million	100 million
St Barbara shares on issue after conversion	$563.4$ million	613.9 million	713.8 million
RCF II and RCF III combined shares	177.9 million	228.4 million	328.4 million
% of St Barbara shares held by:
RCF II and RCF III	31.6%	37.2%	46.0%
Westpac Custodian Nominees Limited	$16.2\%$	14.8%	12.8%
Other Shareholders	52.2%	48.0%	41.2%

	Table 1: Summary of shareholder ownership impact

Note 1: The above analysis has not taken into account the potential dilutive impact of existing unlisted options (41.5 million) not held by RCF II and RCF III. The effect of the exercise of these options would reduce the percentage ownership of all existing shareholders including RCF II and RCF III.

$\overline{2}$ Scope of the report

Purpose of the report $2.1$

The directors of St Barbara have appointed Deloitte Corporate Finance as an independent expert to express an opinion as to whether or not the Proposed Transactions are fair and reasonable to the non-associated shareholders of St Barbara.

Under Section 606, a person is prohibited from acquiring a relevant interest in the shares of a company if:

the acquisition would result in the person having more than 20% of the voting power in the company; or
the person already has between 20% and 90% of the voting power in the company and after the acquisition would have a greater percentage of the voting power of the company.

Section 611 of the Act (Section 611) provides certain exemptions to Section 606 including, but not limited to:

if the Proposed Transactions are approved by a resolution passed at a general meeting of St Barbara shareholders
if RCF III and its associates' voting power does not increase by more than three percentage points in any six month period (3% creep exemption).

Policy Statement 74 issued by ASIC requires that the Notice of Meeting include, amongst other things, an analysis of the Proposed Transactions by the independent directors.

The Board of Directors of St Barbara has appointed an independent expert to assist them in fulfilling this requirement.

Basis of evaluation $2.2$

In evaluating fairness and reasonableness, we have considered the requirements of the Act, ASIC policy statements and common market practice.

In our determination as to whether the offer is fair and reasonable, we have had regard to common market practice and to Policy Statement 74 and Practice Note 43 issued by ASIC in relation to independent expert's reports. The Policy Statement and Practice Note prescribe standards of best practice in the preparation of independent expert's reports pursuant to Section 611.

ASIC Policy Statement 74 provides guidelines for independent experts on how to evaluate whether or not a proposed transaction is fair and reasonable when preparing reports for Section 611 proposals. In relation to the Proposed Transactions, Policy Statement 74 requires that the evaluation should:

be judged in all circumstances of the Proposed Transactions $\bullet$
compare the likely advantages and disadvantages to the non-associated shareholders if the Proposed Transactions are agreed to, with the advantages and disadvantages to those shareholders if it is not
consider whether a premium for control is being paid.

In forming our opinion on whether or not the Proposed Transactions are fair and reasonable to non-associated shareholders we have considered the advantages and disadvantages of the Proposed Transaction and whether the advantages outweigh the disadvantages. We have also assessed all circumstances of the Proposed Transactions, including the circumstances that resulted in the Proposed Transactions.

$2.3$ Individual circumstances

We have evaluated the effect of the Proposed Transactions on non-associated shareholders as a whole and have not considered the effect of the Proposed Transactions on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposed Transactions from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposed Transactions are fair and reasonable. If in doubt investors should consult an independent adviser.

$\mathbb{Z}$ of Limitations and reliance on information

The opinion of Deloitte Corporate Finance is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 3.

Our procedures and enquiries do not include verification work nor constitute an audit in accordance with Australian Auditing Standards (AUS), nor do they constitute a review in accordance with AUS 902 applicable to review engagements.

3 Overview of the Gold Industry

3.1 Structure of industry

The gold industry is comprised of producers, investors and consumers, which together determine the commodity gold price. Demand from the jewellery industry accounts for approximately 75% of all gold production and represents the industry's largest customer. The world's major central banks hold a large amount of gold in their reserves. The international central banks gold holdings as a percentage of cash reserves average 11-12%, with the United States of America (US) holding 60% of its reserves in gold and the European Union over 25%. Australia holds approximately 3.1% of cash reserves in gold.

Significant consolidation has taken place within the gold industry over the past few years due to the reduction in gold price and resulting production cutbacks experienced during the period between 1997 and 2001. Many of the smaller producers were unable to continue their operations subsequent to this period and either went bankrupt or were acquired by larger producers. The industry still has a relatively large number of smaller players, with the five largest global producers (Newmont Mining Corporation, Anglogold Ashanti Limited, Barrick Gold Corporation, Gold Fields Limited and Placer Dome Inc) accounting for 31.4% of the global gold market share in 2004 and smaller producers accounting for the remaining $68.6\%$ .

3.2 Pricing

Gold is a globally traded commodity traded on both the spot and futures markets. There are also a number of gold financial instrument derivatives traded. Gold has regained its popularity with investors over the past few years due to the instability of the stock markets and world political events including a number of terrorist attacks and natural disasters.

The international gold price can be extremely volatile due to a number of factors, including:

US dollar (USD) fluctuations

interest rates
inflation
political risks
investment demand
central bank sales
mining supply ۰
primary user (jewellery) demand. ۰

The cashflows of Australian based gold producers are dependent, amongst other things, upon:

level of gold reserves available to be mined
fluctuations in the USD spot gold price $\bullet$
the costs of the gold production process, including materials and labour
the exchange rate between the USD and the Australian dollar (AUD)
the extent to which the producer has undertaken price hedging of future production and the timing and $\bullet$ nature of the hedging transactions.

While a weak USD generally correlates to an increase in the USD gold spot price, a strong AUD compared to the USD can adversely affect Australian gold producers as they incur costs in AUD.

^<sup>1 Hartleys Gold Book Margins from the Depths - April 2005 (Hartley's Gold Book)

$2$ Datamonitor Global Gold Industry Profile - May 2005 (Datamonitor overview)

The graph below shows the AUD gold spot price versus the USD gold spot price and the AUD/USD exchange rate over a ten year period.

Figure 1: AUD and USD gold spot rates and AUD/USD exchange rate

Source: Bloomberg

As can be seen from the graph above, the AUD gold spot price has generally followed the same pattern as the USD gold spot price, with the gap between the two prices being reduced at an increased rate as the AUD strengthened against the USD.

Following the terrorist attacks on the US in September 2001 and continuing uncertainty with respect to terrorist activities, the USD gold spot price increased as investors used gold as a store of value during the turbulent time. Gold prices subsequently eased, but then rose again in response to tensions in the Middle East and between India and Pakistan. Gold prices rose again in 2003 as a result of military action against Iraq and most recently have risen due to inflationary worries, a strong physical demand and speculative buying, and reached a 17 year level high on 20 September 2005.

3.3 Production

Global gold mining production decreased between 2000 and 2004 due to the decrease in investment by producers in the late 1990s when weak demand and low gold prices led to a slowdown in the industry. However, with the recent return of higher gold prices, the level of gold exploration and investment has started to increase and it is expected that by 2007-2008 output will increase compared to the relatively stable levels expected until that time.

According to the IBISWorld Pty Ltd (IBIS) in a report entitled "Gold Ore Mining in Australia", published 1 October 2004 (IBIS Report), gold production in Australia declined in the 2004 financial year to 260 tonnes compared to 277 tonnes recorded in the previous year. This was partly a response to cyclone activity in early 2004 and also as lower grade ore was processed. According to the Datamonitor overview, global gold production also declined in 2004 to a level of 2,470 tonnes from 2,590 in 2003.

Industry Forecast 34

Production within Australia is expected to increase strongly as new mines continue to come into operation and existing mines are expanded through the use of additional capital and resources. Australian producers have also begun to focus on higher grade underground deposits, especially within the Victorian region in order to take advantage of the reduced costs involved. IBIS is forecasting an increase in Australian gold production from 260 tonnes in the 2004 financial year to 320 tonnes in the 2006 financial year.

Given the high gold prices realised during 2004 and 2005, a number of the industry's major players have been able to reduce their debt levels and improve their financial position, allowing them additional investment

alternatives and the likelihood of further consolidation in the industry. The Hartley's Gold Book also makes note of the fact that Australian gold shares appear to trade at a discount compared to worldwide producers and this also increases the probability of further consolidation of the Australian gold mining industry by offshore companies.

Some of the opportunities for the industry going forward include:

increased demand, especially within the Indian and Chinese markets which are continuing to develop. In India, the demand for gold grew 17% and in China 13% during the 2004 year
focus on higher grade production $\bullet$

Some of the risks for the industry going forward include:

increasing costs of production, including increases in fuel price and labour shortages, will lead to higher $\bullet$ costs of supply
forecast continuation of a weak USD due to an increasing US current account deficit. ۰
central bank gold sales are uncertain and can significantly affect supply and price. $\bullet$

4 Profile of St Barbara

Company history 4.1

St Barbara is a gold producer based in Western Australia and is listed on the ASX and the Alternative Investment Market of London. The Company is focused on the continued exploration for gold, nickel and copper within its current landholdings and has processing plants at its major project areas of Meekatharra, Leonora, Southern Cross (Gwalia and Tarmoola) and South Laverton. The areas of Leonora. Southern Cross and South Laverton were acquired as part of the Gold Assets purchased in March 2005.

The following figure highlights the major events at St Barbara, from the time of incorporation to the date of this report.

Figure 2: Company history

1969		Incorporated in March 1969 as Endeavour Oil Company NL Listed on ASX in May 1969
1983		Meekatharra assets acquired
1991		The Company adopted its present name, St Barbara Mines Ltd.
2000		Takeover bid for NuStar Mining Corporation Limited (NuStar) announced
2005	❤	November 2004 – Divestment of Paulsens Royalty and interest in Pelican Joint Venture September 2004 to September 2005 – Divestment of all interests in NuStar and Sedimentary Holdings Ltd (Sedimentary) 29 March 2005 – Gold Assets purchased, funded by the RCF III facility

Source: St Barbara presentations

4.2 Mining Assets

Meekatharra

The Meekatharra region is located in the Murchison District of Western Australia and has been the centre of extensive gold mining and exploration. St Barbara's primary asset within the region is the Bluebird Mine, which has produced a total of 1.5 million ounces (Moz) of gold during the period between 1986 and 2004. The Bluebird plant has been on care and maintenance since June 2004. St Barbara acquired mineral tenements at the Reedy's gold mine in 1996. St Barbara farmed out parts of the project to a joint venture partner in November 2003 however, following the dissolution of the joint venture in December 2004, now retains a 100% interest. The Paddy's Flat project was acquired from Barrick Gold Australia Limited in October 2002 and was used to provide low-grade stockpiles to the Bluebird plant until 2004. Paddy's Flat includes 97km² of granted tenements of which 56km² have been farmed out to the Annean Joint Venture. The remaining 41km² contains all the significant gold deposits. Exploration expenditure in this region was estimated at \$1.5 million for the period between 30 September 2004 and 31 March 2005.

In the 2004 financial year, St Barbara joint ventured a number of its exploration holdings within the Meekatharra region. These include:

the Annean Joint Venture (JV) with Mercator Gold Australia Pty Ltd (Mercator). Mercator manages the JV and can earn a 51% interest by spending \$4 million over three years from early 2004 or 70% by spending a total of \$8 million over five years. At 30 March 2005, Mercator had spent approximately \$1.5 million and was expecting to reach a 51% equity level by October 2005, due to spending at high rates
the Polelle Joint Venture with Elara Mining Limited (Elara). Elara can earn a 51% interest by spending \$3 million over three years from November 2003 or 65% by spending \$5 million over five years. On termination of the Reedy's JV in December 2004, with 100% ownership reverting to St Barbara, Elara's expenditure at Reedy's was transferred to the Polelle JV, resulting in Elara meeting the required expenditure of \$1 million in the first year. No further exploration has been undertaken since September 2004.

St Barbara has maintained 100% ownership in nine other projects within the Meekatharra region and minor interests in 3 non-Meekatharra regions. During the 2005 financial year, St Barbara also applied for 18 exploration licenses covering areas of potential nickel deposits.

Gold Assets

On 28 March 2005, St Barbara acquired the Gold Assets which comprised three main landholdings - Leonora, Southern Cross and South Laverton. Combined, these three projects comprised a landholding of 10,000km², and at that time, mineral resources of 7.9 Moz and remaining reserves estimated at 560,000 ounces (oz). For the quarter ended 30 June 2005, the gold operations at Southern Cross and South Laverton generated production leading to gold sales of 83,646 oz which accounted for nearly all of St Barbara's gold sales for the 2005 financial year. With the purchase of the Gold Assets, St Barbara purchased a current income and cashflow stream that will be used to fund further exploration.

A brief description of each of these areas, at the date of acquisition, is provided below:

Southern Cross

Of the Gold Assets acquired, Southern Cross is the largest producer. Its operations were comprised of the Marvel Loch South open pit mine, the Golden Pig underground mine and the Marvel Loch underground development. There are also a number of mines within the Southern Cross region where operations have ceased. During the fourth quarter of 2005, the Southern Cross project produced 53,719 oz of gold at a cash cost of \$336/oz. The project had mineral resources of 1.8Moz and reserves of 800,000 oz at 30 June 2005.

Leonora Region

The Leonora project is comprised of the Tarmoola gold mine and a 3.4 mega tonne per annum (Mtpa) Leach-CIL processing facility, a number of satellite mines, an underground mine and 1.4 Mtpa Gwalia Leach-CIL processing facility, the Gwalia Deeps project and a regional tenement position. The Leonora region has produced 6.0 Moz of gold since its operations commenced in 1897. The region produced 166,000 oz of gold in the 2003-2004 financial year at a cash cost of \$476/oz. Mining operations ceased at the Leonora underground mine in September 2003 and in April 2004 at the Tarmoola pit. Future gold production from this region will depend on the future exploration and future development of the mines. Historic production in the region was 5.6 Moz.

South Laverton

The South Laverton region is located in the Pinjin area of the Eastern Goldfields. The Carosue Dam Leach-CIL processing plant with capacity of 2.4 Mtpa is located within this region and has produced 0.6 Moz of gold since its construction in November 2000. The South Laverton operations produced 29,528 oz of gold at a cash cost of \$349/oz during the fourth quarter of 2005. Mineral resources in this region totalled 700,000 oz at 30 June 2005. Mining and processing operations at Carosue Dam were ceased in the June 2005 quarter.

4.3 Legal structure

The figure below sets out a simplified group structure for St Barbara.

Figure 3: St Barbara group structure

Source: St Barbara Management

4.4 Capital structure and shareholders

As at the date of our report, St Barbara had the following shares and options on issue:

563.4 million ordinary shares on issue $\bullet$
92.0 million unlisted share options to acquire ordinary shares on issue as at 31 August 2005. The exercise $\bullet$ prices for the options range from \$0.05 to \$0.35 and the expiry dates range from 15 October 2005 to 23 December 2011.

St Barbara has no listed options on issue.

At the date of our report RCF II owned 177.9 million shares, representing 31.6% of the current issued capital. Otherwise, St Barbara's shares are widely held. The register is comprised of two large shareholders and a large number of smaller shareholders. St Barbara's top 20 shareholders as at 19 September 2005 are identified in the table below.

Table 2: St Barbara top 20 shareholders as at 19 September 2005
-----------------------------------------------------------------

Shareholders	Number of Shares (in millions)	% of total shares on issue
Resource Capital Fund H	177.9	31.4%
Westpac Custodian Nominees	91.1	16.5%
ANZ Nominees	9.2	1.6%
National Nominees	7.7	1.4%
Saracen Mineral Holdings	6.0	1.1%
Yamatji Maripa Barna Baba Maaja Aboriginal Corporation	5.6	1.0%
Gee Nominees Pty Ltd	5.0	0.9%
Mr Yoshihito Koguchi	3.2	0.6%
Colin Wise Consulting Pty Ltd	3.1	0.6%
HSBC Custody Nominees (Australia) Limited	3.0	0.5%
Miroma Investment Inc.	2.7	0.5%
Simpson Podiatry Services Pty Limited	2.4	0.4%
Citicorp Nominees Pty Limited	2.2	0.4%
Mr Ritesh Mistry	2.2	0.4%
Mr Koichi Sugimura	2.2	0.4%
Mr Andrew Podgornik	2.1	0.4%
Gull Management Pty Ltd	2.0	0.4%
WG Holding Co Pty Ltd	2.0	0.4%
Balcony Developments Pty Ltd	1.9	0.3%
Mr Paul Varrone & Mrs Jennifer Viviette Varrone	1.7	0.3%
Total	333.2	59.5%

Source: St Barbara Management

Share price performance 45

St Barbara's share price history for the past year is shown in the table below.

Quarter end date	High (\$)	Low (S)	Last Trade (S)	Volumes TANNOR
30/9/2003	0.11	0.04	0.09	143,299
31/12/2003	0.11	0.07	0.07	80.551
31/3/2004	0.07	0.05	0.06	38,003
30/6/2004	0.06	0.04	0.05	29,885
30/9/2004	0.06	0.04	0.04	48,676
31/12/2004	0.08	0.04	0.08	89.938
31/3/2005	0.09	0.06	0.09	121.673
30/6/2005	0.12	0.08	0.10	201.307
30/9/2005	0.34	0.10	0.33	163.425
10/10/2005	0.33	0.31	0.33	4.114

Table 3: St Recharg ASY quarterly closing share prior info

Source: Bloomberg

The St Barbara share price has followed an upward trend from 30 September 2004, after a continuous reduction in share price during the last quarter of 2003 and first three quarters of 2004. The quarter ending 30 September 2005 has seen the share price triple from its 30 June 2005 close, mainly due to acquisition of the Gold Assets, the gold price hitting a 17-year high in September 2005 and inflationary fears which have driven investors into gold stocks.

Historical share prices for St Barbara over the past year and trading volumes are presented graphically in the figure below.

Figure 4: St Barbara stock activity on ASX - September 2004 to 10 October 2005

Source: Bloomberg

The table below details the significant company news announcements related to movements in the share price and significant volumes traded.

Note	Date	Comment
1	20/9/2004	Announcement made that St Barbara will divest a substantial part of its investment in NuStar
2	16/3/2005	Article printed in Western Australian newspaper speculating that St Barbara was intending to purchase Gold Assets
3	21/3/2005	Trading halted and Sons of Gwalia Ltd announces the sale of the Gold Assets to St Barbara
4	28/4/2005	Third quarter activity and cashflow report and April 2005 outlook released
5	26/7/2005	Company announced its decision to proceed with open pit mining at Hercules
		On-market buy-back of up to 10% of its capital over the next 12 months announced
6	28/7/2005	Divestment of remaining investments in NuStar and Sedimentary for total proceeds of \$6 million
7	9/8/2005	The Company announced probable reserves upgrade for Hercules of probable reserves
8	24/8/2005	Initial high grade drilling results from Gwalia Deeps, Tarmoola and Marvel Loch
9	19/9/2005	Stock price increased by \$0.06 as USD gold price hits 17 year high
10	3/10/2005	2005 Annual Report released

Table 4: Announcements impacting recent share market price of St Barbara shares

Source: Bloomberg

The figure below illustrates the movement in the St Barbara share price against the movement in the USD gold spot price.

Source: Bloomberg

St Barbara's share price has historically had little correlation to movements in the USD gold spot price, although the correlation is more evident in the past few months since the purchase of the Gold Assets. Prior to the acquisition of the Gold Assets, St Barbara did not have any revenues from the sale of gold during the 2005 financial year.

Financial performance 4.6

The consolidated audited financial results of St Barbara, for the years ending 30 June 2003, 30 June 2004 and 30 June 2005 are summarised in the table below. We note that the 2003 and 2004 financial year results include the consolidation of NuStar.

$Jun-03$
	Jun-04	Jun-05 \$'000
		46,553
1.493	10.460	20,948
57.604	32,432	67,501
(6.180)	(18.422)	1.920
(18.391)	(2,726)	(8.093)
(24.571)	(21, 148)	(6, 173)
(5.449)	(4,080)	(524)
(30.020)	(25, 228)	(6.697)
(2.965)	٠
(32,985)	(25, 228)	(6,697)
	\$000 56,111	\$'000 21,972

Table 5: Financial results

Source: St Barbara 2004 Annual Report and 2005 Audited Financial Statements

During the 2005 financial year the following events had a significant effect on the underlying result compared to the previous year:

the gold operations at Southern Cross and South Laverton, acquired as part of the Gold Assets purchased in $\bullet$ March 2005, generated gold sales of 83,646 ozs for revenue of \$46.4 million during the June 2005 quarter and comprised nearly 100% of total yearly gold revenue for St Barbara
sales revenue in the 2004 financial year resulted from gold sales from the Meekatharra region. This mine was shut down at the end of the 2004 financial year
other revenue in the 2005 financial year included \$5.1 million realised on the sale of Paulsen's royalty in December 2004, \$9.7 million realised on the sale of NuStar shares to third parties and revenue of \$3.9 million on acceptance of a share swap offer from Sedimentary
contract expenses for mining, milling and labour and consultants were \$11.9 million higher in 2005 due to additional contract work required in the production of gold at the Southern Cross and South Laverton gold operations
the 2005 financial year expenses included the cost of investments sold of \$10.7 million (2004 \$4.9 million) and the cost of the royalty sold of \$3.7 million
interest costs were reduced significantly as a result of the Company paying down its secured debt in October 2004 and remaining debt free up to 29 March 2005 when \$7 million in cash was drawn down under the Facilities to finance the acquisition of the Gold Assets.

4.7 Financial position

The consolidated audited statements of the financial position of St Barbara, as at 30 June 2003, 30 June 2004 and 30 June 2005 are summarised in the table below. We note that the 2003 and 2004 financial year results include the consolidation of NuStar which was substantially divested in 2005.

rasso of chanceless populari	Jun-03	Jun-04	Jun-05
	Audited	Audited	Audited
	\$'000	\$'000	\$'000
Current assets
Cash	597	12,849	16,273
Restricted Cash	280
Receivables	3,688	1,512	4,767
Other Financial Assets	4,891	188
Inventories	4,264	777	4,448
Assets held for Resale	4,194	58	21,072
Other	1,250	630	1,864
Total current assets	19,164	16,014	48,424
Non-current assets
Restricted Cash	3,293	3,108	11,801
Property, plant and equipment	8,380	4,947	8,996
Other	83
Mining Properties	46,372	42,401	14,848
Total non-current assets	58,128	50,456	35,645
Total assets	77,292	66,470	84,069
Current liabilities
Payables	10,561	6,691	16,225
Interest bearing liabilities	15,151	9,832	1,541
Provisions	898	751	119
Total current liabilities	26,610	17,274	17,885
Non-current liabilities
Interest bearing liabilities	8,833	75	7,000
Provisions	3,876	4,269	39,111
Total non-current liabilities	12,709	4,344	46,111
Total liabilities	39,319	21,618	63,996
Net assets	37,973	44,852	20,073

Table 6: Financial position

Source: St Barbara 2004 Annual Report and 2005 Audited Financial Statements

During the 2005 financial year significant changes made to the affairs of the Company included:

disposal of shares in NuStar which resulted in the ownership percentage at 30 June 2005 in NuStar being reduced to 6.4% from 54.8% at 30 June 2004. Due to St Barbara no longer controlling NuStar, its results for 2005 are not consolidated into St Barbara's results
the share buy-back of 170.3 million shares on 18 January 2005 had the effect of reducing the contributed equity balance of the Company by \$8.5 million and reducing the investment in NuStar by 212.9 million shares
St Barbara acquired the Gold Assets for a cash payment of \$2.3 million, the replacement of existing bank guaranteed environmental performance bonds totalling approximately \$30 million and the assumption of additional performance bonds of up to \$5.7 million on 28 March 2005
Cash Advance of \$7 million drawn down under the Facilities on 29 March 2005
assets held for resale at 30 June 2005 include \$6.1 million in investments (NuStar and Sedimentary shares) and \$15.0 million in property, plant and equipment
\$4.4 million of convertible notes were converted into 55 million shares at a conversion price of \$0.08 per share on 15 July 2004
share placements amounting to \$4.1 million were made in 2005.

Subsequent to the year ended 30 June 2005 and up to the date of our report a number of events have occurred that have resulted in significant changes to the funds available to the Company.

on 26 July 2005, the Company announced an on-market buy-back of up to 10% of its current outstanding share capital over the next 12 months in accordance with ASX guidelines. As of the date of this report, 3.2 million shares have been bought back at prices ranging from \$0.22 to \$0.32 per share subsequent to the year end, at a cost of \$895,000
on 26 July 2005, the Company announced the sale of unmarketable parcels of shares, unless holders of unmarketable parcels notify the Company in writing of their intention to hold their shares by 23 September 2005. As a consequence, 6,234,230 shares have been sold and the number of shareholders reduced by 4,973
on 26 July 2005, the Company announced its decision to proceed with open pit mining at Hercules, located 12km to the south of the Marvel Loch mill
on 27 July 2005, the Company sold its remaining shares in NuStar and Sedimentary for combined proceeds of \$6.0 million and net profit of \$100,000.

Contingent Liabilities 4.8

In the 2005 annual report, certain guarantees and potential obligations are disclosed as contingent liabilities, as well as two litigious claims. Details of the two litigious claims are described below.

A claim was brought against St Barbara by Westgold Resources NL in September 2000, which arose as a result of a number of share transactions involving the Company's shares between May and August 1997. The total amount of the claim is \$6.2 million plus costs. St Barbara has denied the allegations and has incurred legal costs to defend the claim of approximately \$0.9 million to the date of this report and expects to incur significant further costs in preparation for the trial, which is anticipated to be in the first quarter of 2006.

On 2 July 2002, Kingstream Steel Limited (Kingstream) commenced proceedings against St Barbara and its 100% owned subsidiary Zygot Ltd in regards to the withdrawal of three mining lease applications. Kingstream alleges that these applications were part of an option deed it had with St Barbara and is seeking unquantified damages.

The Company is defending these claims.

5 Effect of Acquisition of the Gold Assets

ą, į Background

As disclosed in an announcement to ASX in February 2005, St Barbara's corporate strategy includes the establishment of reserves at its currently held gold regions, the establishment of a land bank, increased exploration for gold, nickel and copper within Australia, growth through strategic acquisitions and the creation of corporate growth and shareholder wealth through exploration success.

The opportunity to acquire the Gold Assets was in line with St Barbara's corporate strategy of increasing its land banks and growth through strategic acquisitions. The assets that were purchased included two gold producing regions that could provide immediate cash flow from their operations.

Since acquiring the Gold Assets, St Barbara has earned net operating cash flows from these assets of \$21.7 million for the quarter ending 30 June 2005.

Alternative funding assessment $\mathbb{Z}$ .

Prior to acquiring the Gold Assets, St Barbara management considered three alternative lending sources, based on term sheets provided by the potential financiers at the time. The terms of the RCF III facility were assessed by management to be the best of the three alternative sources contemplated.

The first funding source was unwilling to provide a term loan facility as the risk was deemed too high for its risk tolerance level and was only prepared to provide a guarantee facility conditional on third party support. Therefore, this facility would have needed to be used in conjunction with a second lender who could provide the term loan in order to meet St Barbara's complete financing requirements. Obtaining financing from two different sources would have increased the complexity of the transaction and management deemed that there was no significant benefit in doing so.

The following analysis compares the RCF III facility to the second funding facility, recognising that these two lenders could both provide the total financing requirements that St Barbara required to purchase the Gold Assets.

There were several terms and conditions that were comparable. These include the following:

both facilities provided adequate term loan and bond guarantee amounts required to purchase the Gold Assets, although the final amount of the second funding facility was subject to completion of due diligence
the interest rates on the term loan were similar for both facilities, assuming a base rate of between 5.0% and 5.5%
both facilities were being negotiated at the beginning of February 2005. The timing and availability of both facilities was an important factor as the second funding facility would likely have had much tighter timing, due to outstanding due diligence requirements.

The advantages of selecting the RCF III facility over the second funding facility perceived by management at the time included:

the second funding facility establishment fee was 3% of the aggregate amount of the term loan and bond guarantees and was required to be paid up-front. It would have amounted to \$1.26 million. Instead of fees, a net smelter royalty will be payable under the RCF III facility, the quantum of which is not yet readily determinable
under the second funding facility, the lender would also have been entitled to 30 million options, $\bullet$ representing 5.1% of the total shares on issue at 29 March 2005. There was also a substantial conversion feature in the term sheet, although no conversion price was quoted
the legal fees payable under the RCF III facility were between \$100,000 and \$150,000 compared to a minimum amount of \$250,000 under the second funding facility
the second funding facility required hedging facilities to be utilised for a minimum of 75% of production
the term of the loan is significantly longer under the RCF III facility than under the second funding facility, avoiding the need to refinance after one year

RCF III performed its due diligence in conjunction with St Barbara and its facility was available to St Barbara prior to the required date for the final bid for the Gold Assets

The disadvantages of selecting the RCF III facility over the second funding facility include:

the conversion feature allows RCF III to potentially obtain 100 million new shares, amounting to 15% of St Barbara's shares on issue at 29 March 2005
the net smelter royalty is payable on the existing tenements in Meekatharra from 1 July 2007 and on the Gold Assets from 1 January 2006. Although these royalties will not require an immediate cash outlay by St Barbara, they survive the expiry of the facility and will continue to be payable into the future
should St Barbara have been unsuccessful in its bid for the Gold Assets, the termination fee was significantly higher under the RCF III facility than under the other alternatives and could also have resulted in additional shares being issued to RCF III.

Overall, management believes the comparative advantages of the RCF III facility outweighed the disadvantages and this consequently led to the selection of the RCF III facility as the financing source for the acquisition of the Gold Assets.

$\mathbb{Z}$ Share price changes

St Barbara's share price increased from \$0.066 at 25 February 2005 to \$0.33 at the date of this report. The Company's share price was relatively stable, trading at around \$0.10 until mid-July at which time it began to increase significantly to \$0.33 and has stayed around this level from 19 September 2005 until the date of this report, as shown below.

Figure 6: St Barbara share price and volume from 25 February to 10 October 2005

Source: Bloomberg

The most significant factor that has impacted St Barbara between the Agreement Date and the date of this report was the successful acquisition of the Gold Assets. This acquisition has been a key driver of the increase in St Barbara's share price. If St Barbara had not entered into the Facility Agreement it would not have had sufficient capital to fund the acquisition. Some of the positive impacts of the acquisition include:

a significantly improved financial performance for the Company in the 2005 financial year. The Southern Cross and South Laverton region produced gold revenues and net operating cash flows of \$46.4 million and \$21.7 million respectively in the fourth quarter of 2005. Without the Gold Assets, gold revenue for that quarter would have been nil
significant future exploration and development opportunities. Additional mineral resources of 7.9Moz were acquired, which comprised approximately 80% of St Barbara's combined mineral resources of 9.9Moz at that time. On 24 August 2005, St Barbara disclosed that exploration results at new and existing sites were

more positive than originally anticipated. In addition, on 26 July 2005 the Company announced its decision to proceed with open pit mining at Hercules, which has probable reserves of 180,000 oz, and is located 12km to the south of the Marvel Loch mill in the Southern Cross region, thereby extending gold production forecasts

Other factors that may have also contributed to the increase in St Barbara's share price include:

strong gold prices, which have resulted in a general increase in the share prices of gold companies, particularly those with low levels of hedging in place
the announcement by St Barbara of a share buy-back program in July 2005.

The increase in St Barbara's share price since the Agreement Date has resulted in an increase in the value of the Conversion Right. However, these increases are largely attributable to the acquisition of the Gold Assets facilitated by the Facility Agreement. Accordingly, we consider the assessment of the Proposed Transactions should take this factor into account.

Q.A Implications of non-associated shareholder approval

If non-associated shareholders approve the Proposed Transactions, RCF III will be able to exercise its Conversion Right (or any St Barbara Options issued) at any point in time prior to 31 December 2008. This could result in RCF III and its associates immediately increasing their shareholding to 46.0%, increasing the level of control they have in St Barbara.

If non-associated shareholders do not approve the Proposed Transactions, the non approval will be treated as an event of default under the terms of the Facility Agreement.

The implications of default on St Barbara depend on RCF III's election to:

demand immediate repayment of the Facilities at any time, or
retain the Facilities on the existing terms including the Conversion Right.

If RCF elect to demand immediate repayment, St Barbara will be required to source \$28 million in replacement funds and environmental bonds from a combination of cash reserves and external funders. In this case, RCF III will not receive St Barbara Options.

If RCF III elect not to demand repayment of the Facilities, it could not exercise all of the Conversion Right immediately, however RCF III and its associates could exercise existing unlisted options and take advantage of the 3% creep exemption to immediately move to a 40.2% shareholding. Thereafter RCF III and its associates could progressively use the 3% creep exemption to exercise the remaining Conversion Right and move to a 46.0% shareholding by 31 December 2008.

Valuation of St Barbara 6

For the purpose of our opinion, fair market value is defined as the amount at which the shares in the Company would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment.

We have valued the shares in the Company at the time the terms of the Facility Agreement were agreed because this reflects the commercial circumstances management were operating under at the time. It was not possible to obtain a valuation of the Company's mining and exploration assets at 27 February 2005 because the information required by AMC is only available on a quarterly basis. The valuation of St Barbara's mining and exploration assets was therefore done at 29 March 2005 and adopted for the purposes of valuing the Company at 27 February 2005. We do not consider that the 29 March 2005 position would be significantly different from the 27 February 2005 position.

We have taken into account St Barbara's operations and mineral asset holdings and the lack of operating cashflows and mine plans at 27 February 2005, in forming our opinion that the most appropriate valuation approach for the Company is the net asset approach. We have also considered the share market trading price of the Company at the Agreement Date and the three and six month prior trading history.

We engaged AMC, an independent mining specialist, to prepare a report on the value of St Barbara's mining and exploration assets at 29 March 2005. The values determined by AMC for St Barbara's mining and exploration assets have been adopted in our report.

In respect of the remaining assets of St Barbara, we have had regard to their book values as at the Agreement Date and have only adjusted the balances where we believe that book value is not representative of fair market value.

We have relied on AMC's report which has been prepared in accordance with the Valmin Code. We have satisfied ourselves as to the independence and qualifications of AMC. The valuation methodologies adopted by AMC for the valuation of the mining and exploration assets held by St Barbara are outlined in the AMC report, which is reproduced at Appendix 3, and include the following:

the past expenditure method
use of actual or comparable transactions
use of values per square kilometre of exploration title
use of unit value per ounce of gold contained in resources.

Due to the uncertainties inherent in the valuation process, AMC has determined a range of values for each of St Barbara's mining and exploration assets.

6. I Net assets method

We have assessed the value of St Barbara shares on the basis of the fair market value of the Company's underlying net assets on a going concern basis with reference to the valuations provided by AMC and the fair values of St Barbara's other assets, the majority of which are reflected at their book values at 31 March 2005. The balances at 31 March 2005 exclude the impact of the acquisition of the Gold Assets, including the drawdown of the Bridge Loan. The balances at this date are not significantly different from the 27 February 2005 balances. St Barbara's assets are summarised below, together with our range of fair market values.

Table 7: Valuation of St Barbara

	Section	Book value	Valuation range
	Ref	31-Mar-05 \$'000	\$'000	\$'000
Cash	6.1.1	2,223	2,931	2,931
Restricted cash		2,872	2,872	2,872
Receivables		361	361	361
Investments	6.1.2	7,422	8,276	8,276
Inventories		715	715	715
Other		19	19	19.
Property, plant & equipment	6.1.3	4,256	3,864	4,364
Capitalised mining and exploration assets	6.1.4	9,841	13,200	18,400
Total assets		27,709	32,238	37,938
Total liabilities		(7,321)	(7,321)	(7,321)
Less Corporate overheads	6.1.5		(6,157)	(6,157)
Total		20,388	18,760	24,460
Fully paid shares on issue			566.533	566,533
In-the-money options on issue	6.3		15,000	15,000
Fully diluted share capital			581,533	581,533
Fair market value per share (cents)			3.2	4.2

Source: Deloitte analysis

$6.1.1$ Cash

The cash balance has been adjusted to include cash that would be received from the exercise of 15 million options on issue at 31 March 2005 with an exercise price of \$0.0472. We adjusted the number of shares on issue to take account of the dilutive effect of these options (refer section 6.3).

$6.1.2$ Investments

Investments held by St Barbara at 31 March 2005 were comprised of the following:

82.5 million shares in NuStar
15.4 million shares in Sedimentary ٠
۰ 1.2 million shares in Ausquest Ltd

These investments have been valued at their closing market price on 31 March 2005.

$6.1.3$ Property plant and equipment

The processing plant and related equipment owned by St Barbara and located at the Bluebird mine has been considered in AMC's valuation report. The plant has been under care and maintenance since May 2004, at a cost of approximately \$50,000 per annum. These costs have been reduced slightly by another mining company's use of the camp facilities.

The book value of the plant, incorporating all associated equipment was \$2.6 million at 31 March 2005. AMC has valued the plant in the range of \$2.25 to \$2.75 million. AMC has estimated the salvage value of the plant based on the sale of a similar plant in the region in 2003.

Valuation of mining and exploration assets $6.1.4$

St Barbara's mineral assets prior to the acquisition of the Gold Assets included interests in:

ore reserves, mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and Reedy's area in the south
a number of exploration tenements, mainly in the Yilgarn region of Western Australia
some nickel exploration tenements. ۰

The values estimated by AMC are summarised in the table below:

Table 8: Mineral asset valuation assessed by AMC

Project	Low \$ _cm	High \$'m	Preferred \$'m
Exploration valuation
- Meekatharra tenements/interests	13.0	18.1	15.4
- non Meekatharra tenements/interests	0.2	0.3	0.2
- nickel tenements	$\overline{r}$	$\mathbf{r}$	$\tilde{a}$
Total	13.2	18.4	15.6

Source: AMC mineral specialist report

6.1.5 Corporate overheads

No amount has been included in AMC's valuation for St Barbara's corporate overheads incurred in managing its business and maintaining its head office and its status as a listed company. Based on management's forecasts, we have assumed that corporate overhead costs will be \$3.5 million per annum based on the status quo that existed immediately prior to the acquisition of the Gold Assets. However, we do not believe that St Barbara's Board would have continued to incur such costs indefinitely if the Gold Assets had not been acquired. We have therefore included only 24 months of corporate overheads, discounted over the period, as a reduction in our assessment of St Barbara's fair market value.

$6.1.6$ Tax losses

The potential future income tax benefit of St Barbara's tax losses as at 30 June 2005 was \$1.8 million. No value has been attributed to these tax losses, as no profits were expected to be earned in the foreseeable future from the assets held at 31 March 2005, excluding the Gold Assets.

$6.1.7$ Contingent liabilities

As discussed in section 4.8, St Barbara has identified contingent liabilities in respect of claims brought against it by Westgold and Kingstream. Based on management's decision to defend these claims and their view as to favourable outcomes, we have not included any liability for these claims.

6.2 Analysis of share market trading prior to the Agreement Date

The terms of the RCF III facility were agreed on the Agreement Date, including the exercise price. St Barbara's share price at 27 February 2005 was \$0.066, its three month volume weighted average price (VWAP) was \$0.072 and its six month VWAP was \$0.063.

The exercise price was equal to the mid-point of the three month and six month VWAP, and exceeded the spot trading price of St Barbara's shares at that time.

Subsequent to the RCF III facility being agreed and prior to the closing of the acquisition of the Gold Assets on 29 March 2005, St Barbara's share price increased to \$0.085. During this intervening period, there were several announcements and market speculation regarding the acquisition of the Gold Assets as follows:

Date	Announcement/Transaction	Share price impact
27 February 2005	RCF facility terms agreed	Closing share price of \$0.066 at 25 February 2005
16 March 2005	Newspaper article released entitled "St Barbara" circles Gwalia's gold assets" speculating about the acquisition of the Gold Assets by St Barbara	Closing share price increases to \$0.072 from \$0.066
21 March 2005	Trading halted pending announcement
29 March 2005	Acquisition of Gold Assets becomes effective and RCF III facility is drawn down	Share price closes at \$0.085

Source: Deloitte analysis

The volume of trading in, and therefore liquidity of, St Barbara's shares has increased significantly as a result of the acquisition of the Gold Assets. The average monthly trading volume of St Barbara's shares as a percentage of total outstanding share capital was 4% for the three month period prior to the Agreement Date and 11% for the three month period prior to the date of our report.

It should be borne in mind that stock market values can differ from technical values due to the effect of market sentiment and investor speculation. In particular, investors in small exploration stocks tend to be less risk averse and may hold more positive views on the value potential of the Company's assets than that implied in our valuation and hence such investors may value shares above their technical values.

Number of shares on issue 63

We have adjusted the number of shares on issue to take account of the dilutive effect of 15 million options that were on issue at 31 March 2005 with an exercise price of \$0.0472. We have also included cash of \$0.7 million that would be received from the exercise of these options.

Summary of valuation methods and conclusion 6.4

The valuation of St Barbara derived from the net assets method, using the analysis of recent share trading as a cross check, is summarised in the following table.

	Section Ref	Low value cents	High value cents
Net assets method value per share		3.2	4.2
St Barbara share price at Agreement Date	6.2	66	6.6
Analysis of recent share trading prior to Agreement Date	6.2	6.3	7.2
Value range		32	7 ን
Andreas and Anti-Anti-Anti-Anti-Anti-Anti-

Table 10 : Valuation of St Barbara

Source: Deloitte analysis

The share trading range of 6.3 to 7.2 cents per share represents a premium of $70\%$ to $95\%$ over the mid point of the net asset value range.

We have adopted a value range of 4.2 to 7.2 cents per share as the fair value for St Barbara at the Agreement Date.

The 4.2 cents is the top end of the net asset value range and the 7.2 cents is the top end of the share trading range. This range takes into account the premium that small exploration companies can trade at relative to the technical value of the underlying assets.

Evaluation and conclusion 7

$\mathbb{Z}$ Fairness and reasonableness

In forming our opinion as to whether the Proposed Transactions are fair and reasonable to non-associated shareholders we have considered all the circumstances of the Proposed Transaction including a comparison of the likely advantage and disadvantage of the Proposed Transaction to non-associated shareholders. We have also considered whether the advantage outweighs the disadvantage.

Background considerations

The Proposed Transactions are a direct result of the funding of the acquisition of the Gold Assets, which has added significant value to St Barbara

The market for St Barbara shares has become significantly more liquid since the acquisition, giving shareholders the opportunity to sell their shares at a much higher price.

The Proposed Transactions were fair at the time St Barbara agreed to the terms of the Facility Agreement

The Proposed Transactions have been announced to shareholders, therefore any potential share value dilution as a result of the Proposed Transactions is likely to be incorporated into St Barbara's current share price

Advantage

The likely advantage of the Proposed Transactions to non-associated shareholders is:

St Barbara will not expose itself to the risk of being forced to immediately seek an alternative source of funding to replace the Facilities

If the Proposed Transactions are not approved, RCF III may elect for St Barbara to immediately repay all of the amounts outstanding under the Facilities. St Barbara may therefore have to source \$28 million in replacement funds and environmental bonds immediately. It is likely that the replacement funds would be sourced from a combination of cash reserves and external funders. If it does not have to replace the Facilities, St Barbara will remain well positioned to use its cash reserves for other purposes such as exploration or further acquisitions.

However, given the current share price of St Barbara, it is unlikely that RCF III would seek immediate repayment and forfeit its St Barbara Options.

Disadvantage

The likely disadvantage of the Proposed Transactions to non-associated shareholders is:

The Proposed Transactions will likely result in the issue of up to 100 million new shares in St Barbara, at a discount to the current market price, thereby diluting existing shareholdings. This dilution, and the increased level of control that RCF III and its associates will have, could occur immediately if the Proposed Transactions are approved.

RCF III and its associates currently hold 31.6% of the shares in St Barbara, which will increase to 37.2% when the existing unlisted options held by RCF II are exercised. If the Proposed Transactions are approved, the shareholding of RCF III and its associates in St Barbara could immediately increase to 46.0% but could this could, in any case, occur incrementally if the Proposed Transactions are not approved.

Implications if the Proposed Transactions are not approved

If the Proposed Transactions are not approved by non-associated shareholders, an event of default occurs under the Facility Agreement. In this event, RCF III may elect at any time to demand immediate repayment of the Facilities. It will not have the right to receive St Barbara Options on any such repayment. St Barbara may therefore have to refinance the entire amount of the utilised Facilities (i.e. \$28 million) immediately.

Alternatively, RCF III may elect to retain the Facilities and all its rights under the terms of the Facility Agreement including the Conversion Right. Although RCF III could not exercise all of the Conversion Right immediately, RCF III and its associates could exercise existing unlisted options and take advantage of the 3% ereep exemption to immediately move to a 40.2% shareholding. Thereafter, RCF III and its associates could progressively use the 3% creep exemption to exercise the remaining Conversion Right and move to a 46.0% shareholding by 31 December 2008.

Premium for Control

In assessing whether a premium for control is being paid as a result of the Proposed Transactions we have considered the following:

as at 27 February 2005, the exercise price represented a premium over the net asset value of St Barbara
the exercise price did not represent a premium to the recent share trading range of \$0.063 to \$0.072 prior to 27 February 2005.

Based on the above we conclude that the Proposed Transactions do not incorporate a premium for control.

$T$ Conclusion

This disadvantage needs to be weighed against the risk of RCF III potentially demanding repayment of its Facilities at any time if the Proposed Transactions are not approved. We consider that the risks associated with potential of immediate repayment outweigh any potential disadvantage to non-associated shareholders from RCF III and its associates increasing their level of control in a shorter timeframe than otherwise may occur if the Proposed Transactions are not approved.

Based on the foregoing analysis we have concluded that the Proposed Transactions are fair and reasonable to non-associated shareholders.

Appendix 1: Glossary

Reference	Definition
Agreement Date	Date on which St Barbara agreed to a term sheet with RCF III, being 27 February 2005
AMC	AMC Consultants Pty Ltd
ASIC	Australian Securities and Investment Commission
$\mathbf{ASX}$	Australian Stock Exchange Limited
AUD	Australian dollar
AUS.	Australian Auditing Standards
AusIMM	Australian Institute of Mining and Metallurgy
Bridge Loan	A facility of \$4.3 million provided as part of the Facility Agreement
Cash Advance	Cash of \$7 million drawn down under the Facilities on 29 March 2005
Conversion Right	Conversion of the Cash Advance into new St Barbara shares at the exercise price at any time until 31 December 2008
Datamonitor overview	Datamonitor Global Gold Industry Profile, published May 2005
Deloitte Corporate Finance	Deloitte Corporate Finance Pty Limited
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
Elara	Elara Mining Limited
Environmental Bond	An environmental bond guarantee facility of \$35.7 million provided as part of the Facility Agreement
exercise price	Exercise price of the Conversion Right and the St Barbara Options being \$0.07 per share
Facilities	together the Bridge Loan and the Environmental Bond
Facility Agreement	Finance facility agreement between St Barbara and RCF III providing total facilities of \$40 million, finalised 20 May 2005
Gold Assets	Sons of Gwalia Ltd (Administrators Appointed) gold division assets acquired by St Barbara on 28 March 2005
Hartleys Gold Book	Hartleys Gold Book entitled "Margins from the Depths", published April 2005
IBIS	IBISWorld Pty Ltd
IBIS Report	IBIS report entitled Gold Ore Mining in Australia published 1 October 2004
JV	Joint venture
Kingstream	Kingstream Steel Limited
Mercator	Mercator Gold Australia Pty Ltd
Moz	Million ounces

Reference	Definition
Mtpa	Mega tonne per annum
Non associated shareholders	Holders of St Barbara shares, excluding RCF III and its associates
NuStar	NuStar Mining Corporation Limited
OΖ	Ounces
Proposed Transactions	Together the potential exercise of the Conversion Right and St Barbara Options under the terms of the Facility Agreement into new shares in St Barbara
RCF II.	Resource Capital Fund II LP
RCF III	Resource Capital Fund III LP
RCF Group	Related party group of RCF II and RCF III
Section 606	Section 606 of the Act
Section 611	Section 611 of the Act
Sedimentary	Sedimentary Holdings Ltd
St Barbara or the Company	St Barbara Mines Limited
St Barbara Options	St Barbara options issuable on repayment of the Bridge Loan on the same exercise terms as the Conversion Right
the Act	The Corporations Act 2001
US	United States of America
USD	United States dollar
VWAP	Volume weighted average price
Valmin Code	Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports
Westgold	Westgold Resources NL
3% creep exemption	Exemption to Section 606 provided by Section 611, allowing a shareholder to acquire no more than three percentage points of its voting power in a six month period

Appendix 2: Sources of information

In preparing this report we have had access to the following principal sources of information:

Facility Agreement dated 20 May 2005 between St Barbara and RCF III $\bullet$
term sheet dated 27 February 2005 between St Barbara and RCF III
term sheet dated 29 March 2005 between St Barbara and RCF III ٠
term sheets from other potential lending sources ٠
audited financial statements for the Company for the year ended 30 June 2005 $\bullet$
2004 St Barbara annual report $\bullet$
unaudited management accounts at 28 February 2005 and 31 March 2005 ٠
summary of unlisted options granted $\bullet$
ASX announcements and public information released by St Barbara over the past twelve months $\bullet$
Draft notice of meeting and explanatory memorandum prepared by St Barbara $\bullet$
discussions with management of St Barbara ٠
Hartleys Gold Book "Margins from the Depths" report published April 2005 $\bullet$
Datamonitor Global Gold Industry Profile report published May 2005 $\bullet$
IBISWorld Pty Ltd "Gold ore mining in Australia" report published 1 October 2004 $\bullet$

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

Appendix 3: Qualifications, declarations and consents

The report has been prepared at the request of the Independent Directors of St Barbara and is to be included in the Explanatory Memorandum and Notice of Meeting to be sent to shareholders to convene a meeting of shareholders on or about 16 November 2005. Accordingly, it has been prepared only for the benefit of the nonassociated shareholders in their assessment of the Proposed Transactions outlined in the report and should not be used for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Transactions.

The report represents solely the expression by Deloitte Corporate Finance of its opinion as to whether the Proposed Transactions are fair and reasonable in relation to Section 611. Deloitte Corporate Finance consents to this report being included in the Explanatory Memorandum and Notice of Meeting.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte Corporate Finance has relied upon the information provided by the directors and executives of St Barbara which Deloitte Corporate Finance believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte Corporate Finance does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to St Barbara management for confirmation of factual accuracy.

Furthermore, recognising that Deloitte Corporate Finance may rely on information provided by St Barbara and its officers and/or associates, St Barbara has agreed to make no claim against Deloitte Corporate Finance to recover any loss or damage which St Barbara may suffer as a result of that reliance and also has agreed to indemnify Deloitte Corporate Finance against any claim arising out of the assignment to give this report, except where the claim has arisen as a result of any proven wilful misconduct by Deloitte Corporate Finance.

Deloitte Corporate Finance also relies on the valuation reports prepared by AMC. Deloitte Corporate Finance has received consent from AMC for reliance in the preparation of this report.

Deloitte Corporate Finance holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte Corporate Finance principally involved in the preparation of this report were Tom Henderson, Mark Pittorino and Nicki Ivory. Tom Henderson and Mark Pittorino are Directors and Nicki Ivory is an Associate Director of Deloitte Corporate Finance. Each have many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Neither Deloitte Corporate Finance, Deloitte Touche Tohmatsu, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte Corporate Finance will receive a fee of \$75,000 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the approval or otherwise of the Proposed Transactions.

Appendix 4: AMC specialist valuation report

About Deloitte

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ABN 58 008 129 164

9 Havelock Street WEST PERTH WA 6005

Telephone +61 8 9481 6611 Facsimile +61 8 9481 6622 [email protected] www.amcconsultants.com.au

10 October 2005

Mr T Henderson Director Deloitte Corporate Finance Pty Limited Level 14, Woodside Plaza 240 St George's Terrace PERTH WA 6000

Dear Sir

ST BARBARA MINES LIMITED - TECHNICAL VALUATION

Deloitte Corporate Finance Pty Limited ("Deloitte Corporate Finance") instructed AMC Consultants Pty Limited ("AMC") to undertake an independent assessment of the fair market value of the mining and exploration assets of St Barbara Mines Limited ("St Barbara") as at 29 March 2005, excluding the assets acquired in March 2005 from Sons of Gwalia Limited (in Administration). In preparing its assessment, AMC has developed technical values using relevant industry accepted methods and considers them to be market values for reasons given in the following report.

The assessment is to form part of an independent expert's report to be prepared by Deloitte Corporate Finance advising whether the proposed share issue to Resource Capital Fund III ("the Proposed Transaction") under the terms of a facility agreement dated 20 May 2005 is fair and reasonable to the nonparticipating shareholders of St Barbara. The independent expert's report is required pursuant to Section 611 of the Corporations Act 2001 in order to assist the non-participating shareholders in their decision to accept or reject the Proposed Transaction.

St Barbara's mineral assets include interests in:

mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and the Reedys area in the south
a number of other exploration tenements, mainly in the Yilgarn region of Western Australia.

Values determined in this report are effective as at 29 March 2005.

In October 2004, AMC undertook on behalf of Deloitte Corporate Finance an independent assessment of the Technical Value of the mining and exploration assets of St Barbara.

The following report that includes AMC's technical valuation is an update of the October 2004 report and technical valuation. It relies in part on briefing documents prepared by St Barbara in September 2005 outlining the exploration activities and changes in tenement status between October 2004 and end-March 2005. For the October 2004 assessment, AMC visited site, held discussions with St Barbara management, advisors and technical staff and reviewed numerous documents relating particularly to resource estimation and exploration. For the current assessment, AMC has decided that the nature of the exploration activity and changes in tenement status since October 2004 do not require that further site visits be conducted.

In some previous valuations of St Barbara, AMC has estimated an "Operational Value" after projecting a life of mine model, based both on the existing resources and reasonably quantifiable potential extensions thereof and an "Exploration Value" for the remaining mineral assets. As the Meekatharra operation is currently on care and maintenance and there is no existing production plan or potential plan which, in AMC's opinion, can be reasonably defined, the values for St Barbara presented in this report are "Exploration Values".

Classifications of St Barbara resources, where reviewed, are reasonable in terms of confidence levels, which can be attributed to the density and quality of data. All estimates have been prepared by Competent Persons as defined by the JORC Code¹. The resource estimates are accepted by AMC as being reported in accordance with the JORC Code although it has reservations as to the adequacy of economic limits placed on some estimates.

Exploration values for St Barbara tenements have been determined using methods commonly used for such valuations. As a large part of St Barbara's exploration assets were the subject of transactions in 2004, the Actual or Comparable Transactions approach has been of primary use in this assessment. The tenements host numerous individual resources and AMC has applied a Yardstick Value to St Barbara's formally reported resources where possible.

The total Technical Value estimated for St Barbara's mineral assets, including a salvage value on the Bluebird plant, is \$15.5M to \$21.1M with a preferred value of \$18.1M.

The valuations presented in the report have been prepared in accordance with the Valmin Code².

P R Stephenson FAusIMM (CP), MCIM, MMICA AMC Principal Geologist

I Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC).

$\bar{2}$ Code and Guidelines for Technical Assessment and/or Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for Independent Expert Reports (The Valmin Code), 2005.

1	INTRODUCTION
2	SCOPE OF WORK, LIMITATIONS, ASSUMPTIONS AND VALUATION METHODOLOGY2
3	TITLES
4	ENVIRONMENTAL ISSUES
5	BACKGROUND
6	GEOLOGY AND MINERALISATION AT MEEKATHARRA
7	ANNEAN JOINT VENTURE
	Valuation 7.1
8	REEDYS JOINT VENTURE
	Valuation 8.1
9	POLELLE JOINT VENTURE
	Valuation 91
10	PADDY'S FLAT PROJECT
	10.1 Valuation
11	OTHER 100% OWNED MEEKATHARRA PROJECTS
	Jack Ryan 11.1
	Batavia 112
	Burkes Find 11.3
	Wanganui 11.4
	Yagahong - Gabanintha 11.5
	Quinns 11.6
	Burnakura 11.7
	Abbotts 11.8
	Chesterfield Joint Venture 119
12.	NON MEEKATHARRA INTERESTS
	Mikhaburra 12.1
	Cue 12.2
	Kalgoorlie 12.3
13	NICKEL TENEMENTS
	Valuation 13.1
14	SUMMARY OF VALUATION
15	PREVIOUS VALUATION
16	SOURCES OF INFORMATION
17	OUALIFICATIONS

TABLES

Table 7.1 Annean Joint Venture Mineral Resources as at March 2005
Table 8.1 Reedys Joint Venture, Mineral Resource Estimates as at March 2005
Table 10.1 Mineral Resources at Paddy's Flat, March 2005
Table 14.1 Valuation of St Barbara's Interest

APPENDIX

APPENDIX A Tenements held by St Barbara

$\mathbf{1}$ INTRODUCTION

St Barbara's mineral assets include interests in:

mineral resources and exploration potential within tenements in the Meekatharra region, mainly between Meekatharra in the north and the Reedys area in the south
a number of other exploration tenements, mainly in the Yilgarn region of Western Australia.

In October 2004, AMC undertook, on behalf of Deloitte Corporate Finance, an independent assessment of the Technical Value of the mining and exploration assets of St Barbara.

This report and technical valuation updates of the October 2004 report and technical valuation. It relies in part on briefing documents prepared by St Barbara in September 2005 outlining the exploration activities and changes in tenement status between October 2004 and end-March 2005. For the October 2004 assessment, AMC visited site, held discussions with St Barbara management, advisors and technical staff and reviewed numerous documents relating particularly to resource estimation and exploration. For the current assessment. AMC has decided that the nature of the exploration activity and changes in tenement status since October 2004 do not warrant further site visits.

The report provides independent valuations of the mineral assets of St Barbara and these valuations have been prepared in accordance with the Valmin Code.

AMC has not audited resources but has aimed to satisfy itself that these estimates have been prepared in accordance with proper industry standards and are based on acceptable quality and reliability of data. Except where noted, AMC has found that resource estimates have been prepared using accepted industry practice and have been classified and reported in compliance with the JORC Code.

Values determined in this report are effective as at 29 March 2005.

Exploration assets have been valued using accepted industry methods of valuing exploration properties and resources not subject to mining operations. The Valmin Code considers both a Technical Value and a Strategic Value, which has a premium or discount to the former, in assessing a Fair Market Value. In this case, as AMC has taken into account recent transactions, has not modified its value estimates and considers them to be market values.

All monetary values are expressed in terms of Australian dollars (\$) unless otherwise noted and millions are abbreviated to "M".

$\overline{2}$ SCOPE OF WORK, LIMITATIONS, ASSUMPTIONS AND VALUATION METHODOLOGY

AMC was instructed by Deloitte Corporate Finance to estimate a market value for the mineral assets of St Barbara effective at 29 March 2005 and assuming a gold price at that time of \$553 per ounce (US\$426.10) per ounce and exchange rate of US\$0.77804/\$1.00).

St Barbara's net assets comprise:

Cash, receivables, pre-payments, debtors, creditors, inventories and provisions.

AMC has not estimated values for these assets but notes that they include:

the cash element of bonds on mineral tenements. St Barbara advised this amounts to $(i)$ \$2.75M at 29 March 2005. St Barbara has a policy of progressive rehabilitation and the only area in which there is likely to be significant future capital expenditure, other than at Bluebird plant and camp site when operations finally cease, are the South Junction waste dump and tailings dams at Bassetts West. Bluebird Cell Five and Reedys. The total estimated cost of the latter items is around \$2.3M
$(ii)$ spares and consumables stocks
$(iii)$ provision for rehabilitation.
Land, plant and equipment.

AMC has not estimated values for these assets but notes that they include:

$(i)$ housing in Meekatharra
$(ii)$ pastoral stations which St Barbara intends to lease out
(iii) the Bluebird plant, associated mobile and other equipment, administration facilities and camp. These are in good condition and would have a very substantial replacement value. While under care and maintenance, costs (including insurance) are at a level of around \$50,000 per month as advised by St Barbara management. These costs are being slightly reduced by income from another mining company making use of the camp facilities. At final closure there will be a salvage value offset by rehabilitation costs and by any other termination costs. A similar size plant at Big Bell sold in 2003 for \$2.75M. AMC considers that a salvage value of \$2.25M to \$2.75M with a preferred value of \$2.5M for the Bluebird plant is appropriate. St Barbara's environmental consultant currently estimates a rehabilitation cost at closure for Bluebird of around \$4.2M. Deloitte Corporate Finance advises that a provision of \$4.2M has been made in St Barbara's accounts for such rehabilitation.
Mineral tenement assets which are the subject of this valuation report.

AMC previously reviewed St Barbara assets in 2000, 2001 and 2004. For the 2004 assessment, it visited site, held discussions with St Barbara management, advisors and technical staff and reviewed numerous documents relating particularly to resource estimation and exploration. Because of management changes, some staff losses and the present care and maintenance state of operations, the information supplied lacked completeness in some relevant areas. This applied particularly to resource estimates for which a normal information back-up was not always available and for which there was some ambiguity. A number of resource estimates were quite old and the estimators no longer on St Barbara staff. The database for many

estimates involved several different periods of drilling and assay treatment which can affect reliability. However, for all reviewed projects there was a reasonable procedure to eliminate unreliable data and a fairly standard estimating procedure involving inverse distance grade interpolation into a block model with usually low cut-off grades and the use of upper grade limits to guard against the impact of erratically high sample assays.

In all cases of formally reported resources, there has been an industry standard optimisation which uses a fairly high gold price, typically 150% of the spot price. In the case of informal resource estimates, the estimates do not have an economic limitation and represent all resource as projected from sample assays.

Classifications of resources, where reviewed, are reasonable in terms of confidence levels which can be attributed to the density and quality of data. All estimates have been prepared by Competent Persons as defined by the JORC Code.

The resource estimates tabulated herein are accepted by AMC as being reported in accordance with the JORC Code although it has reservations as to the adequacy of economic limits placed on some of them.

There are other tonnage and grade estimates for various deposits which are not reported herein and have been removed from St Barbara's "formal" resource estimation report. AMC concurs with that action.

Valuation of exploration projects often uses information about past exploration expenditure. For St Barbara, the records are difficult to interpret, particularly in regard to separation of "on-mine exploration" from other exploration. As AMC has adopted a different primary approach to the valuation, this is not considered to be a major issue.

In some previous valuations of St Barbara, AMC has estimated an "Operational Value" after projecting a life of mine model, based both on the existing resources and reasonably quantifiable potential extensions thereof, and an "Exploration Value" for the remaining mineral assets. As the operation is currently on care and maintenance and there is no existing production plan or potential one which, in AMC's opinion, can be reasonably defined, the values in this report are "Exploration Values".

Valuation of exploration assets is subjective and usually involves a judgement after application of several different commonly used methodologies. These include:

The Past Expenditure method which applies a judgement of effectiveness and prospectivity enhancement (using a prospectivity enhancement multiple or "PEM") to past exploration expenditure. As noted, this has not been a significant contribution to valuations herein.
Use of Actual or Comparable Transactions as a basis to estimate a market value. As many such transactions involve farm-in or joint venture deals, it can be necessary to modify the Deemed Expenditure in such a deal for the time impact of the farm-inor's (or buyer's) expenditure obligation and the probability that the earn-in expenditure will be completed. The Deemed Expenditure is inherent in all farm-in deals and measures the value placed on the vendor's interest (usually the whole project) at the time of the deal if it can be assumed that the earn-in expenditure will be completed, in accordance with the formula:

Deemed Expenditure (\$) = $\frac{\text{Vendor's %}$ interest at completion
Buyer's "earn - in" obligation (\$)

As a large part of St Barbara's exploration assets has been the subject of relatively recent transactions, this approach has been of primary use in this assessment.

Use of values per square kilometre of exploration title derived from a value assessment of numerous recent transactions in similar geological terrains. AMC assesses that such unit value for greenstone terrains in the Yilgarn area of Western Australia typically vary in the range \$2,000 to \$10,000 with some lower or higher values depending on evidence of prospectivity and some variation according to the size and nature of the tenement. For instance, small mining leases may transact at a higher unit value than large exploration licences, other things being equal. Mature areas with limited obvious prospectivity usually transact at the lower end of the range and areas of limited exploration testing but with evidence of good mineralisation at the higher end.

In some St Barbara projects, there are large areas of tenement applications, in some cases over ground which has previously been held under a granted St Barbara title. AMC understands that the company has priority over all of these areas and therefore has recognised a discounted value per unit area for some of it.

Use of unit value per ounce of gold contained in resources. Again this is based on comparable transactions. In AMC's experience, the typical range is from \$5 or less for low quality resources, often those residual to mining operations now ceased, to \$30 or more for resources within which an ore reserve is very likely to be proven. Values should be higher for an area containing an existing treatment plant owned by the entity concerned than for one remote from a plant or requiring toll treatment at a plant owned by another.

AMC has applied this approach in this valuation, as there are numerous individual resources. It has not used it for St Barbara's "informal" additional quantifications of tonnage and grade.

The Valmin Code considers both a "Technical Value" and a "Strategic Value", which is a premium or discount to the former, in assessing a Fair Market Value. In this case, as AMC has largely taken into account recent transactions, it has not modified its value estimates and considers them to be market values.

$\overline{\mathbf{3}}$ TITLES

The status of St Barbara's material Tenements has been reviewed by Resource Mapping Pty Ltd ("RMP"). Material tenements were identified by St Barbara as those hosting resources or with a reasonable expectation of resource discovery.

St Barbara's current tenements are listed in Appendix A.

In respect of the Material Tenements related to the Reedys Project, RMP reports as follows:

"All of the Material Tenements related to the Reedys Project are in dispute and subject to plaint action for forfeiture by Agricola Resources Pty Ltd. It is not possible to predict the likely outcome of these plaints. The Reedys Project previously formed part of a Joint Venture with Elara Mining Ltd ("Elara") but now is 100% owned and operated by SBM ("St Barbara"). It is my understanding that should the plaints progress to a Warden's Court hearing then SBM ("St Barbara") will argue, amongst other things, that their previous history of under expenditure was out of their control while the tenements were in joint venture with and managed by Elara and now that they have total control future expenditures will be met. Some of the tenements at Reedys $(M51/92, M20/45 \& M20/68)$ subject to plaint action have had earlier Exemptions from the minimum expenditure requirements refused after the plaints were lodged. It is difficult to know how much weight to apply to tenements in this situation in relation to a successful outcome by the plaintiff because the provisions of the

Mining Act with respect to Exemptions are quite restrictive when compared to issues that can be raised when arguing for non-forfeiture to the Mining Warden or Minister for State Development. If plaints hadn't been lodged and submissions were made to the Minister for non forfeiture following refusal of Exemptions the usual outcome in these circumstances is that the Minister recommends non forfeit but imposes a penalty of 10% of the minimum expenditure requirement in lieu."

RMP reports that two other tenements are in dispute:

Mining Lease 51/455 at the Kurara East project (Annean JV with Aurogenic (renamed Mercator Gold Australia Pty Ltd)) is subject to plaint action by Davdar Enterprises Pty Ltd.
Mining Lease 51/28 at the Yolaginda project (Annean JV with Aurogenic) is subject to an Objection (to reported expenditure) by D Whittaker.

RMP also reports: "In addition some applications for Exemption from the minimum expenditure requirement were lodged some time ago and are yet to be determined. These include M51/62 at the Aladdin project, M51/256 at the Highway project, M20/390 at the Abbotts project and M51/211 at the Yolaginda project. Of particular concern are pending Exemption on M51/211, M51/256 and M51/62 that have now completed another reporting year."

In March 2004, St Barbara reached an agreement with two native title claimant groups such that it is obliged to pay a royalty of 0.75% of value of production from any mining leases granted after that date. It will also pay an annual amount equivalent to 10% of tenement rents.

Other than as discussed above, AMC understands that there are no outstanding plaints or material contingent liabilities relating to granted tenements except for third party royalties as follows:

a royalty of 1.5% to 2.5% of production value payable to Homestake Australia Ltd on certain tenements at Reedys
an additional royalty of 1% on the Rand tenements at Reedys
a 1.5% royalty on Stakewell tenements and 2% royalty on Tuckanarra tenements.

$\overline{\mathbf{4}}$ ENVIRONMENTAL ISSUES

This section is based in part on a report provided by St Barbara entitled "Assessment of Environmental Liabilities", by Woolard Consulting Pty Ltd, September 2005.

As noted above, St Barbara has a policy of progressive rehabilitation and its record of managing these issues is good as supported by government assessments. The major outstanding requirements are:

the Bluebird plant area as and when operations cease
the Reedys tailing facility where the impact of erosion is estimated to require future expenditure of \$1.0M to \$1.5M
the active Bassetts West tailing facility south of Bluebird which is in-pit and, when filled to within 10m to 15m of surface level, will require work costing around \$0.3M to \$0.4M
Cell 5 of the above ground level tailings storage facility at Bluebird which will require some \$0.3M to \$0.4M of work if utilised for future tailings
the South Junction waste rock dump which requires about \$0.3M to \$0.4M of expenditure for final rehabilitation

the Paddy's Flat tailings storage facilities have been rehabilitated but minor remedial work is required.

With the ability to use Cell 5, it is estimated that there is adequate capacity for around 20 Mt of future tailings.

Meekatharra operations utilise groundwater from two borefields and also good quality and quantity water from several in-pit sources. Recent reports indicate there are no material issues associated with discharge of water and the monitoring is of high standard. Similarly a recent review of the tailings storage facilities concludes that they are being managed well in accordance with good operating practice.

5. BACKGROUND

St Barbara was founded in 1969 as Endeavour Oil Company NL. It became primarily a gold mine operator and explorer with its major asset the Bluebird Mine and surrounding tenements near Meekatharra in Western Australia. In 1990 it acquired a number of mineral assets in the same area held by Mr Ross Atkins and changed its name to St Barbara. Ross Atkins had acquired some projects from Dominion Mining Limited ("Dominion") and Metana Minerals NL ("Metana").

Mining at Bluebird was suspended from July 1998 to mid 2000 while low grade stockpiles were treated. Open pit and underground mining then continued until March 2003 and the plant continued to treat low grade stockpiles (from the Paddy's Flat area) until early 2004 from which date the plant has been on care and maintenance.

Total production at Bluebird from 1986 to 2004 has been 31.7 Mt milled at an average grade of 1.62 g/t Au for the production of 1.5M ounces of gold.

In 1996, St Barbara acquired the mineral tenements and some plant and equipment of the Reedys Gold Mine which is centred some 50 km south of Bluebird. Between 1984 and cessation of operations in 1997/98, some 6.9 Mt of ore at an average grade of 3.04 g/t Au were treated at Reedys to produce more than 628,000 ounces of gold.

St Barbara managed the rehabilitation of the old mining areas at Reedys and spent some \$2.0M on further exploration. In 2000, it farmed out the Tuckanarra sub project area to Anglo Gold ("Anglo Gold"), which spent some \$0.75M on exploration before withdrawing.

In 2003, St Barbara farmed out the major part of the Reedys Project to Gold Fields Australasia Pty Ltd ("Gold Fields") which spent some \$0.75M on exploration before withdrawing.

St Barbara also farmed out another sub project at Reedys called Burnakura in 2003 but subsequently sold all of its interest to its Joint Venture partner for \$1.0M.

Other farm outs included the Chesterfield project northwest of Bluebird in 2001.

In October 2002, St Barbara acquired the Paddy's Flat project at Meekatharra from Barrick Gold Australia Limited ("Barrick") and treated low-grade stockpiles from that project at Bluebird until 2004. From 1980 to 1996 predecessor companies to Barrick treated some 16.6 Mt of open pit ore at an average grade of 2.1 g/t Au from Paddy's Flat for a little over 1M ounces of gold production. Earlier historical production approximated 0.9M ounces, some 1.16 Mt grading 16.8 $g/t$ Au being from the underground Fenian's Mine.

Previous management of St Barbara planned to develop and mine underground ore from Paddy's Flat and treat it at Bluebird in conjunction with lower grade open pit ore from Mickey Doolan, Red Spider and Macquarie at Paddy's Flat, Batavia and Mulla Mulla and also stockpiled ore. However, with the cessation of operations at Bluebird, plans are being re-evaluated. In 2003/2004, St Barbara farmed out a large part of its exploration holding at Meekatharra in a number of joint ventures including:

the Annean Joint Venture with Mercator Gold Australia Pty Ltd ("Mercator", previously Aurogenic Resources Pty Ltd), which includes a large part of St Barbara's traditional tenement holding from Meekatharra south towards Reedys; the Abbotts Project northwest of Meekatharra; part of the Paddy's Flat acquisition tenements called Meekatharra North and the western part of the original Reedys Project area (the Stakewell and Tuckanarra sub project areas)
the Polelle Joint Venture with Elara Mining Limited ("Elara") which covers an area of traditional St Barbara exploration tenements east of the so called Norie Pluton
the Reedys Joint Venture with Elara over the ground in which Gold Fields relinquished its interest. This JV was terminated in December 2004, with 100% ownership reverting to St Barbara. Expenditure incurred by Elara on the Reedys JV was allowed to convert to deemed expenditure by Elara on the Polelle JV.

The Chesterfield Joint Venture continues but includes a new managing party, Terra Gold NL ("Terra") previously Aurex Consolidated Limited ("Aurex").

Excluded from the Annean Joint Venture area is the Five Mile Well resource and the Batavia ore reserve. St Barbara retains a 100% interest in the main part of Paddy's Flat, several less advanced sub-project areas in the Meekatharra area and it also has minor interests away from Meekatharra.

Neither of the Elara Joint Ventures nor the Mercator Joint Venture dictates the treatment of any newly discovered ore at Bluebird. However they do include sole risk provisions for St Barbara to enable it to cause a deposit to be mined in circumstances where it has a minority vote.

6 GEOLOGY AND MINERALISATION AT MEEKATHARRA

The Meekatharra greenstone belt has been the subject of extensive gold mining and exploration focused on several centres including Bluebird, Reedys and Paddy's Flat.

The greenstone belt trends north northeast and consists of a lower mafic unit of basalts, banded iron formation ("BIF") and ultramafic rocks overlain by a lower felsic volcaniclastic unit, an upper mafic unit and an upper felsic unit. These units have been subjected to greenschist facies metamorphism, folding, faulting and shearing and intruded by dolerite, felsic porphyry and granitoid bodies.

Although there is some current thought that the major folding structure is anticlinal, the traditional interpretation is that sequence is folded into a north north-east trending synclinal structure called the Polelle Syncline with steep dipping limbs and a general southerly plunge. The core of the syncline is intruded by several granitoid bodies, the largest of which is the Norie Pluton. Largely sub-parallel, north trending regional shear zones disrupt the syncline and range in width from a few metres to more than 200m. Many of the gold deposits are associated with such shears, often near cross-trending structures.

Gold mineralisation occurs in a number of different geological styles. They include:

gold bearing sulphide mineralisation occurring as disseminations, fracture fillings or with quartz veining within porphyritic intrusions emplaced along shear zones and faults, mainly in ultramafic host rocks

gold and sulphide mineralisation hosted by BIF units, usually in cross-cutting fractures
gold in steep dipping lodes and quartz veins, often associated with contacts between different rock types e.g. granite/mafic volcanics.

Other factors recognised as being significant to localisation of gold mineralisation are proximity to anticlinal axes, proximity to Proterozoic dolerite dykes particularly at deviations in strike, spatial correlation with post tectonic granitoids like the Norie Pluton and silica-pyrite alteration with variable content of carbonate, fuchsite and other minerals.

A well developed weathering profile can extend to more than 100m depth so that supergene enriched gold can occur in laterite caps and in saprolitic clays. Alluvial cover is extensive and can exceed 100m thickness. Salt lakes occur in the central part of the Annean Joint Venture block.

$\overline{7}$ ANNEAN JOINT VENTURE

Under the terms of an agreement dated March 2004, Mercator can earn a 45% interest by spending \$3.0M on exploration within two years with a minimum commitment of \$1.0M within one year and, at its election, 51% for \$4.0M within three years from commencement, then 70% for a total \$8.0M within five years from commencement. Mercator will manage exploration. As at 30 March 2005, Mercator had spent an estimated \$1.5M, was spending at a high rate and expected to reach a 45% equity within a few months of that date. Excluded from the Joint Venture but within the Meekatharra North area is the existing Five Mile Well resource of around 18,000 ounces down to 390m ASL. Also excluded are four tenements (one granted) covering the Batavia reserve north of Bluebird.

The area of the Joint Venture contains a number of sub-project areas, reviewed below and a number of resources classed by St Barbara as "Formal-Reportable" at March 2005.

Area	Measured			Indicated		Inferred		Total
	000t	g/t Au	000t	$g/t$ Au	000t	g/t Au	000t	$g/t$ Au
Bluebird East	w		2,117	1.2	38	1.6	2,155	1.2
Bluebird Deeps				$\overline{\phantom{a}}$	135	7.3	135	7.3
Bluebird Extension			1.656	1.8	885	1.6	2,541	1.7
Mystery			465	1.4	21	1.8	486	1.4
Ironbar			290	1.6	140	1.5	430	1.6
Luke's Junction			201	1.8	-61	1.8	262	1.8
Nannine Reef			$\overline{\phantom{a}}$		267	2.1	267	2.1
Kohinoor Deeps	$\mathbf{u}$		33	9.3		10.2	40	9.5
Total	.		4.762	1.6	1,554	$2.2\,$	6,316	1.7
Contained Ounces				245,000		110,000		345,000

Table 7.1 Annean Joint Venture Mineral Resources as at March 2005

AMC saw limited information to support these estimates and describe their parameters (cut-off grade, gold price assumptions etc) and estimating procedure. Reports reviewed for Bluebird East, Bluebird Extension, Mystery and Luke's Junction contained estimates different from those above and reports describing estimates at a gold price of about \$850 per ounce contained much lower tonnages than tabulated.

AMC understands that all of the resources are presently sub-economic and largely represent extensions of previously mined deposits. Bluebird Deeps is a potentially underground mineable depth extension of an open pit mined deposit and Kohinoor Deeps of a deposit previously mined both underground and open pit. The others represent pit cut-backs or low grade potentially open pit mineable zones on known mineralised trends and for Bluebird East and Bluebird Extension, pit wall failures and/or deposition of tailings inhibit access.

St Barbara also records 'informal' estimates of tonnage and grade which include deposits such as Luggs Reward and Rhens West in the Yaloginda sub project area, Aladdin in the Nannine area and Maybelle. Maybelle North and Three Sisters in the Tuckanarra area and/or otherwise near to Reedys.

The sub-project areas are:

Abbotts (Garden Gully) an area of 39 km², 9 km² granted, the remainder in an exploration licence application. A small sub economic deposit has been defined at Mt Vranizan in earlier work but there has been little work in the area since it was drilled out.
Chunderloo with 119 km² granted. The area encloses a mineralised trend north of the Bluebird area but this has had little recent work.
Meekatharra North a 150 km² northern extension of the Paddy's Flat project area. Apart from the excised Five Mile Well deposit there is a small defined tonnage at Maid Marion and the area contains extensions of units mineralised further south.
Highway (11 km² granted), South Junction (16 km² granted) and Yaloginda (65 km² granted) which cover the host rocks to much of the open pit and underground ore which has been treated at Bluebird and include the tabulated resources other than Nannine Reef and Kohinoor Deeps.
Nannine (76 km² granted), Caledonian (3 km² granted), Bailey Island (<1 km² granted) and Aladdin (<1 km² granted), which cover the previously mined Caledonian deposit and the Nannine and Aladdin deposits south of Bluebird.
Norie Pluton (61 km² granted), an area of greenstones on the western contact of the Norie Pluton within which recent exploration by St Barbara has tested encouraging but generally low grade mineralisation in several prospects.
Stakewell (14 km² granted), Three Sisters (1 km² granted), Tuckanarra (36 km² granted) and part of Turn of The Tide (18 km² granted), all part of the original Reedys Project. Stakewell contains the Kohinoor deposit and Tuckanarra some small deposits associated with BIF.
South Eastern Meekatharra (28 km²) an area east of the Polelle Joint Venture area and south of the Paddy's Flat project where the geology is considered prospective but past exploration has not been encouraging.

In all, the Joint Venture includes some 530 km² of granted tenements and over 450 km² of applications. At March 2005, Mercator had undertaken electrical geophysical (induced potential) surveys of a number of areas, including Tuckanarra, Lukes Junction, and Maid Marion, had carried out a reverse circulation ("RC") drilling programme at Maid Marion, and had commenced drilling programmes on several other prospects, notably the Bluebird and Mystery deposits. Early results from Tuckanarra were disappointing, while those from other prospects were mixed, with, in AMC's view, no material impact on valuation. Mercator foreshadowed spending around \$4.5M in Year 2 of the Joint Venture on a programme including 13,000m of rotary air blast ("RAB"), 17,000m of RC and 3,000m of core drilling.

7.1 Valuation

There has been extensive previous exploration on this area. However, it is not possible to separate that related to areas already mined from that relating to remaining prospectivity. St Barbara advises that some 30% of the \$2M to \$3M it has spent on non-mine exploration in 2003/2004 was on these areas.

The terms of the Joint Venture imply Deemed Expenditure for St Barbara of \$3.7M at the 45% earning stage, \$3.8M at the 51% stage and \$3.4M at the 70% earning stage but these figures neglect the time impact on value and the risk that Mercator may not complete the expenditure. Using a discount factor of 0.6 to 0.7 to reflect time and risk, the indicative value of St Barbara's interest at the time of the deal is around \$2.3M to \$2.6M. Mercator's 'work to March 2005 would have slightly downgraded Tuckanarra, but would have had no other material impact except to improve the discount factor used.

Using a unit value of \$3 to \$5 per contained ounce of gold in resources and a unit value of \$2,000 to \$3,000 per km² of granted tenements for the remainder of the exploration area, the estimated value would be \$2.1M to \$3.3M. An additional value of \$500 to \$1,000 per $km^2$ for the tenements under application would increase that to \$2.3M to \$3.8M. St Barbara's beneficial interest at present is around 70% (3.7/5.2 $\times$ 100%), hence the estimated value by this approach would be \$1.6M to \$2.7M.

AMC estimates a final value range of \$2.0M to \$3.0M, preferred value \$2.5M.

Ŕ. REEDYS PROJECT

Elara entered into a Joint Venture in November 2003 with a right to earn a 51% interest in the project by spending \$3.25M by 10 November 2005 and 65% by spending \$5.25M by 10 November 2007, with a minimum commitment of \$0.75M by 10 November 2004. The agreement was terminated in December 2004. 100% equity reverted to St Barbara, which commenced a drilling programme that was ongoing at 30 March 2005. At the time of termination, Elara had spent around \$0.6M, and this amount was credited to the Polelle Joint Venture.

St Barbara previously farmed out the area to Gold Fields on similar terms. Gold Fields spent some \$0.75M before withdrawing in 2002.

After acquisition of the Reedys Project in 1996 and prior to farm-outs and sales of some areas, St Barbara spent some \$2M to \$3M on exploration but much of this was on Jack Ryan (excised), Burnakura (sold) and Tuckanarra (farmed-out to Anglo Gold then joint ventured with Mercator).

The area of granted tenements is 184 km² and applications total 98 km². As discussed in Section 3 of this report, all of the Material Tenements related to the Reedys Project are subject to plaint action for forfeiture by Agricola Resources Pty Ltd.

There are three main trends of gold mineralisation within the favourable greenstone belt geology:

the Reedys line from Reedys South through the mainly underground mining targets associated with old pits, South Emu, Triton and Rand to Jack Ryan, which is excluded from the Joint Venture, northwest to Boomerang and Kurara. The latter two projects are in BIF, the former in ultramafics
the Turn of The Tide ("TOTT") line including Culculli and Thompsons and the intersecting northeast trending
Tough Go line.

Ore from these areas provided much of the production of 628,000 ounces produced at the Reedys treatment plant until 1997/98.

After St Barbara acquired the area and before it farmed it out to Gold Fields, it focussed exploration on Jack Ryan, Burnakara and Tough Go. Some low grade stockpiles were trucked to Bluebird but no new ore was mined.

Gold Fields focussed its work on the Tough Go and TOTT lines, drilling nearly 25,000m of RAB and 2,000m of air core seeking stronger mineralisation below the areas previously tested by shallow drilling. Generally the best results were of disappointing grade. Prior to withdrawal, its staff recommended a change in focus to the underground targets of the Reedys line.

Elara's work prior to withdrawal included air core drilling at TOTT with no significant results reported. Deep drilling of the Reedys line was undertaken by St Barbara from December 2004 to 30 March 2005, with campaigns on the Jack Ryan and Rand deposits. In summary, four RC holes for 800m were drilled at Jack Ryan, seeking the northern plunge continuation of mineralisation, with limited success (best intercept 10m grading 1.5 g/t Au). At Rand, 14 RC and NQ diamond tailed holes for 5,230m (including 1,470m NQ diamond) were completed, with some significant intercepts at depths up to 300m below the current pit floor at Rand and North Rand pits. These include 46m grading 2.66 g/t Au (including 6m grading 11.5 g/t Au) in RDRCD005 and 42.6m grading 2.5 g/t Au and 4m grading 8.5 g/t Au in RDRCD013. A southplunging high grade shoot from North Rand was identified, with further drilling focussed on this feature, and with the aim of establishing resources down to 250 vertical metres. The existing pits at Rand and North Rand finish at depths of 120m and 80m respectively.

Resource estimates classed by St Barbara as "Formal-Reportable" at March 2005 are listed in Table 8.1.

Exploration expenditure on the Reedys Project between September 2004 and 30 March 2005 is approximately \$600,000.

"Informal estimates" by St Barbara add small tonnages from deposits including Missing Link/West and Paddy West.

Area	Measured			Indicated		Inferred		Total
	000t	$g/t$ Au	000t	g/t Au	000t	g/t Au	000t	$g/t$ Au
North Rand			98	1.9			98	1.9
Triton Deeps	$\bullet$	SAF	78	8.5		$\sim$	78	8.5
Triton North Deeps	$\bullet$	$\mathbf{u}$	217	5.7			217	5.7
South Emu	u.	u.	315	5.3			315	5.3
Boomerang Deeps	$\bullet$	$\overline{\phantom{a}}$	w	$\mathbf{u}$	267	5.6	267	5.6
Rand Deeps	٠	$\mathbf{u}$	$\overline{\phantom{a}}$	$\blacksquare$	130	5.0	130	5.0
Total			708	5.3	397	5.4	1,105	5.3
Contained Ounces				121,000		69,000		190,000

Table 8.1 Reedys Joint Venture, Mineral Resource Estimates as at March 2005

The estimates concur with those in a January 2000 St Barbara memo and are derived after a then review of earlier estimates. There is limited supporting information as to database reliability, estimating parameters and methods or approach to resource classification. Limited information on optimisations suggests a high gold price assumption in the estimates and AMC understands that the stated resources are sub-economic. Boomerang Deeps represents the balance of an underground mining plan that was stopped short. Given lack of information, AMC is not able to comment on the reliability of the estimates or their significance for potential economics.

8.1 Valuation

Total exploration expenditure is very large. Even since mining and treatment ceased it is apparent that several million dollars have been expended though much of it has been on projects no longer part of the Reedys Project.

The Burnakura project was sold for \$1M to St Barbara's Joint Venture partner not long after the farm-in commenced. An underground resource of about 100,000 ounces contained is being developed for mining accessed by decline from a pre-existing open pit and there are other former open pits in the area.

Although since terminated, the terms of the Elara Joint Venture give some guide as to value at the time. The Joint Venture entailed a Deemed Expenditure to St Barbara of \$3.1M at the time Elara would have earned 51% and \$2.8M when it would have earned 65%. These figures do not take into account the effect of time on money value nor the risk that Elara might withdraw before earning its interest which it subsequently did in December 2004. Using a factor of 0.5 to 0.6 to account for these issues, the implied value of St Barbara's interest at the time of the deal was \$1.4M to \$1.9M.

Alternatively a value of \$3 to \$5 per ounce of contained gold in resources and a unit value of \$2,000 to \$3,000 per km² granted and \$500 to \$1,000 per km² for applications for the remainder of the exploration potential indicates a value of \$0.9M to \$1.5M for St Barbara's 100% interest. St Barbara's drilling results at Rand and North Rand will have slightly increased their value, and AMC also credits some value from past exploration expenditure not otherwise accounted for.

AMC concludes a value for St Barbara's interest of \$1.2M to \$2.2M, preferred value \$1.7M.

9 POLELLE JOINT VENTURE

In a similar non-managed Joint Venture dated 10 November 2003, Elara had the right to earn 51% for \$3.0M expenditure in two years and 65% for \$5.0M expenditure in four years, with a minimum expenditure of \$1.0M in Year 1. Elara had spent \$0.56M by July 2004 and, at October 2004, AMC was advised that current expenditure was around \$0.60M. With termination of the Reedys Joint Venture, Elara's expenditure on Reedys of \$0.6M was transferred to the Polelle Joint Venture and recognised as contributing to Elara's earning obligations, resulting in Elara meeting the required expenditure of \$1M in Year 1. At the same time, the terms of the Joint Venture were altered, extending the earning periods by one year.

No further exploration work has been undertaken since September 2004.

The granted area of the Polelle Joint Venture is $121 \text{ km}^2$ and there is a further $115 \text{ km}^2$ under application. It covers the prospective ground on the eastern contact of the Norie Pluton. Earlier work by St Barbara and subsequent drilling by Elara has generated several targets with gold mineralisation of which the most substantial are:

Mulla Mulla which is some 7 km from the Bluebird plant. Mineralisation forms two generally north south striking zones (East and West), the former some 600m long and the latter over 1 km. Gold occurs in saprolite overlying felsic volcanics and in the bedrock in multiple steep dipping zones associated with quartz veining and shearing.

Both East and West zones have been drilled with RC and limited diamond drilling. There is a Central zone which has yet to be so tested. The area is under transported cover but may be on strike with Bluebird East.

Kanji-Miniritchie which is further south and has not been drill tested as extensively.

Most intersections are low grade but there are a number of narrow high grade intersections. St Barbara at August 2004 quoted a "Formal-Reportable" Inferred Resource of 1.27 Mt grading 1.6 g/t Au at Mulla Mulla East. This is supported by a pit optimisation with an average cash cost of \$900 per ounce and supported by a polygonal estimate of 1.3 Mt grading 1.5 $g/t$ Au. Later reports by Elara imply a higher tonnage and lower grade and an optimisation for a global estimate in April 2003 by St Barbara implied a small positive cash flow at a gold price of \$550 per ounce.

$9.1$ Valuation

Total attributable exploration expenditure is not available but it can be estimated that the combined St Barbara and Elara figure is around \$2.0M to \$2.7M. The expenditure transferred from the Reedys Joint Venture should not be considered in terms of valuation except for its impact on St Barbara's beneficial interest at about 70% (2.9/4.1 x 100%) which with a PEM of 1.25 indicates a value to St Barbara of \$1.8M to \$2.4M.

The Joint Venture terms imply a deemed expenditure to St Barbara of \$2.9M. Using a time and risk discount factor of 0.6 to 0.7 reflecting the work since agreement, the implied St Barbara value is \$1.7M to \$2.0M, the relatively high factor taking into account the continuing upgrade of the resource and the prospectivity of the area.

Alternatively a value per resource ounce of \$10 to \$15 and a value per granted $km^2$ of \$5,000 to \$6,000 and \$500 to \$1,000 per km² of applications indicate a value of St Barbara's beneficial 70% interest (reduced from 85% interest as a result of Elara having met the initial expenditure requirement) of \$0.9M to \$1.2M.

AMC concludes a value of \$1.3M to \$1.8M, preferred value \$1.6M.

$10¹$ PADDY'S FLAT PROJECT

St Barbara acquired the Paddy's Flat Project in October 2002 for a total payment of \$4.5M (\$1M payable on commencement of mining) and an obligation to pay a royalty of \$10 per ounce on mined production of gold exceeding 50,000 ounces. Of the total 97 km² of granted tenements and 52 km² of applications, St Barbara farmed out the applications and a granted 56 km² to Mercator (excluding the Five Mile Well resource) as part of the Annean Joint Venture but the remaining 41 km² contains all the significant gold deposits.

Included in the acquisition were physical assets estimated to roughly equate in value to the costs of rehabilitation associated with former mining and around 3 Mt of low grade stockpiles, about 2.3 Mt of which were treated with a cash surplus through the Bluebird plant by June 2004.

The main deposits occur in three sub-parallel lines in a north south trending zone of altered and metamorphosed volcanics over a strike length of nearly 5 km. The deposits can roughly be grouped into:

Southern Area:	Phar Lap Mickey Doolan (Mickey Doolan Line) Marmont
Central Area:	Fenian (Fenian - Vivian-Consols Line) Consols Vivian Ingleston $\cup$ Prohibition - Red Spider (Prohibition Line) Alberts East (Mudlode) (Mickey Doolan Line)
Northern Area:	St Frances - Commodore Halcyon Democrat Macquarie (Mickey Doolan Line) Butlers.

Sulphide mineralisation in the Southern and Northern Areas is refractory with low gold recoveries. Better recoveries by conventional gravity and leach recovery can be obtained from the Central Area mineralisation.

Most deposits are hosted in a basal ultramafic unit of the sequence within the so called Paddy's Flat Shear Zone. Within the shear, several alteration zones are developed. West of the Shear Zone is the BIF hosting Prohibition-Red Spider. The BIF is cut by the Prohibition Fault and the mineralised lodes are approximately parallel to the Fault.

Fenian, Consols, Vivian and Ingleston are hosted by quartz veins with associated intrusive porphyry and in an alteration zone with high grades in so called spur veins which trend obliquely northwest-southeast. Mickey Doolan, Phar Lap and St Frances-Commodore occur in an alteration zone marked by carbonatefuchsite-quartz. Prohibition-Red Spider is related to fault and breccia zones in a ladder vein array within a folded BIF unit which plunges south towards a vertically dipping Proterozoic dolerite dyke.

Dominion and its successor companies produced some 1.0M ounces of gold from open pits along the Paddy's Flat Shear. A decline to test for underground mineable mineralisation was started from the base of the Consols pit but work was discontinued.

Since acquisition, St Barbara has carried out resource drilling at Prohibition - Red Spider and to a lesser extent at Mickey Doolan, drilling for metallurgical testing at Mickey Doolan and has completed a feasibility study with contributing studies on geotechnical and other matters.

Between September 2004 and 30 March 2005, St Barbara has completed exploration drilling on three prospects, Micky Doolan, Vivian-Consols and Prohibition.

Mickey Doolan: Three infill NO diamond holes for 1.350m recommended by St Barbara's resource estimation consultant to confirm variography. This deposit is drilled at $40 \times 40$ m and was subject to a resource re-estimation by St Barbara's consultant in April 2005, post this reporting period.
Vivians-Consols: 23 NQ diamond holes for 10,700m, designed to convert Inferred Resources to Indicated, Resources and improve variography. The host porphyry mineralisation was intersected in all holes, and was variably mineralised, with some spectacular coarse gold intercepts reported, including 2.4m grading 531 g/t Au, 3.0m grading 18.1 g/t Au and 2.0m grading 11.3 g/t Au.
Prohibition: Five RC holes for 1,190m.

Exploration expenditure for the period September 2004 to 30 March 2005 is estimated at \$1.5M.

The August 2004 resource statement is set out in Table 10.1.

Informal estimates contain a larger tonnage for Mickey Doolan and tonnages for a series of other deposits grading between 1 g/t Au and 2 g/t Au.

Metallurgical work indicates reasonable (better than 80%) recovery from the Ingleston Alberts East Lode ("East Lode") and Prohibition and more than 90% from Vivian-Consols. Samples from Mickey Doolan indicated lower recoveries around 65%.

AMC has reviewed reports supporting the Prohibition (including Red Spider) resource estimate and the Vivian-Consols estimate. It has seen no other information to support the reliability or classification of the other estimates. One report covers Five Mile Well but with a higher resource estimate without optimisation than that reported in Table 10.1.

Area	Measured		Indicated		Inferred		Total
	000t	g/t Au	000t	$g/t$ Au	000t	g/t Au	000t	$g/t$ Au
Prohibition	u.		1,435	4.1	917	2.8	2,353	3.6
Vivian-Consols ²	$\overline{\phantom{a}}$		848	7.3	137	7.9	985	7.4
Mickey Doolan	$\overline{\phantom{a}}$				2.762	1.5	2,762	1.5
Macquarie			339	2.9	148	2.8	487	2.9
Ingleston	u.		723	1.7	250	1.8	973	1.7
Five Mile Well	$\overline{\phantom{a}}$				339	1.8	339	1.7
Alberts East	$\overline{a}$		335	2.9	357	3.8	692	3.4
Mudlode	$\overline{\phantom{a}}$		109	2.2		u.	109	2.2
Total			3.789	4.1	4,910	2.2	8,700	3.0
Contained Ounces				500,000		340,700		840,700

Table 10.1 Mineral Resources at Paddy's Flat, March 2005

¹ Lower cut-off grade 1.0 g/t Au, high grade assay cut 30 g/t Au

² Wireframes based on 0.5 g/t Au, block lower grade cut-off 0.0 g/t Au, intercept high grade cut 40 g/t Au

A report on Mudlode with an objective of assisting the Vivian estimate concludes a lower tonnage but higher grade. The Alberts East estimate is supported by a report for a block model with inverse distance grade interpolation as is the largely oxide Ingleston estimate. There are several estimates for Mickey Doolan. The one quoted is supported by an optimisation at \$900 per ounce gold of which the upper 650,000t provides an incremental cash cost below \$600 per ounce, albeit with an apparent recovery assumption of 85%. The Mickey Doolan resource is largely below the existing pit.

The Prohibition estimate was carried out in January 2004 by a competent consultant using ordinary kriging into a 10m x 4m x 4m block model. It used a 1 g/t Au cut-off grade and a 30 g/t Au top-cut. The estimator noted significant short scale variability, variation in thickness and grade and a strong relationship between grade and the presence of quartz and sulphide. It noted the database used samples from a number of different drill programs and different assaying methods but concluded all of the data was acceptable. The methodology assumed a low grade cut-off to define a reasonably continuous body and it was noted that at higher cut-offs the resource would be less than 1 Mt but at a grade exceeding 5 g/t Au.

The Vivian-Consols estimate was carried out by the same consultant in November 2004 using a 2D block modelling approach, interpolating grades using ordinary kriging into 20m by 20m parent blocks and applying a 40 $g/t$ Au high grade cut to intercepts. Wireframes were based on an approximate 0.5 $g/t$ Au lower cut-off grade. The consultant observed that Vivian-Consols demonstrates a high to extreme grade variability or high-nugget behaviour, due to the presence of significant quantities of gravity recoverable coarse gold in association with complex short scale structures within a reasonably continuous zone of quartz-carbonate altered porphyry. The drill spacing is very variable, ranging from less than 10m by 10m to more than 40m by 40m.

The feasibility study is dated May 2004 and therefore pre-dates the latest Vivian-Consols resource estimate. It assumes the mining of nearly 1 Mt grading 5.4 $g/t$ Au over a two year period and mines Prohibition-Red Spider from a decline with a portal in the Prohibition open pit and then Vivian-Consols and East Lode. The Consols decline is used for secondary egress and ventilation. Poor geotechnical conditions with depth are noted for Vivian-Consols, hence a need for backfill. There is no information to review the development of the mining tonnage and grade from the resource estimated but AMC is advised the Prohibition consultant's block model was used. Potential upsides noted are (i) an increased resource recovery, (ii) possible additions from depth extensions and nearby metallurgically amenable mineralisation for instance at Fenians, (iii) grade improvements and (iv) metallurgical improvements. All deposits contributing to the study and the historically mined Fenians deposit are open in depth. One drillhole south of the Proterozoic dyke has intersected the Prohibition mineralisation.

The feasibility study assumes treatment at Bluebird at a rate of around 1.2 Mtpa in conjunction with mining of open pits including Batavia, the assumed costs and other parameters indicate a cash cost of nearly \$520 per ounce

10.1 Valuation

Past expenditure cannot sensibly be used to guide current value but St Barbara's post acquisition costs of \$2.5M to \$3.0M can assist.

The actual transaction between St Barbara and Barrick involved cash of \$4.5M and a royalty. Part of the area has been farmed out but it is of low relative value. Plant and equipment value was reported to equate to rehabilitation costs. Treatment of the low grade stockpiles by St Barbara apparently significantly reduced the net cost but in its original assessment of value, it appears that this benefit was not a major factor.

The feasibility work to date does not permit a sensible valuation approach. It is apparent that St Barbara will need significant additional assessment expenditure before a definitive decision can be made.

In the absence of other approaches, AMC has considered resource ounce values of \$20 for the Vivian-Consols resources (recognising the primarily Indicated Resource status), \$10 for Prohibition, \$7.50 for Mickey Doolan, Albert East and Mudlode and \$5 for the balance for a total value of \$9.6M.

AMC's estimated nett actual transaction cost of \$4.0M to \$4.5M plus St Barbara's post acquisition expenditure indicates a value of \$6.5M to \$7.5M.

AMC concludes a value to St Barbara of \$7.0M to \$9.0M, preferred value \$8.0M.

11 OTHER 100% OWNED MEEKATHARRA PROJECTS

11.1 Jack Ryan

The August 2004 Measured Resource is 839,000t grading 2.7 $g/t$ Au containing 73,600 ounces. It is north of the previously mined open pit and there has been an abortive previous attempt to drive a decline. An open pit optimisation using waste to rehabilitate the Reedys tailings facility was economically marginal.

Four RC holes for 800m were drilled in December 2004 to test for a plunge reversal or a closer-to-surface structural repetition of the mineralised zone which could make a larger open pit a more economically attractive proposition. Results were not encouraging.

At \$5 to \$10 per ounce contained, AMC's valuation is \$0.37M to \$0.55M, preferred value \$0.5M.

11.2 Batavia

The Batavia reserve is on M51/187, some 5 km northwest of the plant and is an exclusion from the Annean Joint Venture. The August 2004 Measured Resource is 151,000 to grading 3.1 g/t Au (15,000) ounces) and optimisation indicates a Proved Reserve of 121,000t at 2.9 g/t. The reserve could not be mined earlier because Aboriginal clearance was needed for grant of a mining lease.

St Barbara drilled ten RC holes for 940m in November 2004. Five of the ten holes achieved reasonable intercepts, the best being 6m grading 12.46 g/t Au, but overall the results marginally downgraded the potential of the prospect.

At \$20 to \$25 per ounce contained, AMC's valuation is \$0.30M to \$0.38M, preferred value \$0.35M.

11.3 Burkes Find

This area of 39 km² granted is east of the main group of tenements. One or two small deposits are excluded from St Barbara's ground. While there is good arsenic geochemistry and favourable structures, exploration to date has not been encouraging.

There are no resources.

At a value per km² of \$2,000 to \$3,000, AMC valued the project at \$0.1M.

11.4 Wanganui

St Barbara mined a small vein deposit in granite within this area of 135 km² containing 8 km² granted in MLs and PLs. There has been no recent work or encouragement in the area.

AMC values the four granted MLs and PLs at a total of \$50,000 and the balance of the area at \$1,000 per km² for a total value of \$0.2M.

11.5 Yagahong - Gabanintha

This a large (147 km², including 13 km² granted) area over the old Gabanintha mining field prospective for copper-gold in ultramafic rocks. Because of a contained area of Aboriginal significance, it is expected that any granted area will be reduced.

At \$500 to \$1,000 per km², AMC values the area at \$0.1M to \$0.2M.

11.6 Quinns

41 km² of granted MLs and PLs and 17 km² of applications overlie this area of greenstones with historic gold workings. St Barbara is planning aeromagnetic survey and has spent in order of \$0.2M on exploration in the last four years.

On unit area and past expenditure, AMC values the project at \$0.1M to \$0.2M.

11.7 Burnakura

Six MLs and one EL covering 77 km² overlies alluvial covered ground south of the Polelle Joint Venture and excluded from the Burnakura project sold to St Barbara's partner for \$1M. There has been little work on the ground and AMC values it at \$0.1M.

11.8 Abbotts

Two tenements in the Abbotts greenstone belt are to be disposed of for a contingent royalty payment. No value has been assigned.

11.9 Chesterfield Joint Venture

This large area of more than 100 km² of granted tenements covers greenstone geology over 50 km² northwest of Meekatharra in the Mingah Range.

In November 2001, St Barbara entered into joint venture with Independence Gold NL ("IG") which earned a 51% interest by spending \$0.50M on a program which tested two small fairly high grade resources containing and combined 8,000 ounces of gold.

In September 2003, a new agreement allowed Terra Gold Mining Limited to earn 60% by spending \$0.4M in exploration before 30 June 2007 (\$0.1M minimum commitment in Year 1), paying each of St Barbara and IG \$0.25M and providing them with a free carry to commencement of a feasibility study.

Terra withdrew from the venture in November 2004 after spending \$60,000 and paying the \$40,000 Year 1 expenditure shortfall to St Barbara and IG (St Barbara's share \$19,600).

Following Terra's withdrawal the Joint Venture resumed its pre-Terra status: 51% IG and 49% St Barbara, but with no exploration planned.

AMC values St Barbara's interest at around \$0.2M.

12 NON MEEKATHARRA INTERESTS

12.1 Mikhaburra

St Barbara has a 75% interest in an ML about 100 km west of Meekatharra of no significant value.

12.2 Cue

St Barbara has a 20% contributing interest with Cougar Metals NL ("Cougar") which spent \$525,000 to earn its interest and is drill testing the Lights of Asia project, an extension of an historically mined highgrade quartz veined shear in granite. A resource estimate by St Barbara following RC drilling early in 2004 indicates a tonnage of several hundred thousand tonnes grading around 3 g/t Au at a 0.5 g/t Au cutoff though subsequent core drilling suggested that several of the RC intercepts may have been exaggerated by contamination. A preliminary open pit optimisation indicates a robust surplus operating cash flow at \$550 per ounce gold with toll treatment.

In December 2004, Cougar supplied the assay results from a 203 hole RAB drilling programme to test a number of targets associated with a high resolution aeromagnetic survey. Results were generally negative, and St Barbara elected not to contribute to the following planned six month exploration programme, potentially reducing its equity from 20% to about 17%.

Expenditure with a PEM of 1.5 indicates an St Barbara value of around \$0.3M while a unit ounce value suggests a value between \$0.1M and \$0.2M. AMC concludes a value of \$0.1M to \$0.2M, preferred value \$0.1M.

$12.3$ Kalgoorlie

At Boorara/Balagundi, St Barbara acquired two titles for \$10,000 and has a 75% interest in an area of mining lease applications and prospecting licences with anomalous nickel, copper and PGE.

AMC values its interest at \$0.1M.

13 NICKEL TENEMENTS

In late 2004/early 2005, St Barbara applied for 18 exploration licences totalling over 3,000 km² covering areas considered to be prospective for nickel deposits of the "picrite magma" type. Four main prospect areas were covered - Wallal Downs, Pardoo East, Scorpion and Scorpayle.

Wallal Downs. A cluster of magnetic anomalies with an apparent locally strike-transgressive component occurs within a very prominent linear gravity anomaly, and could represent mafic-ultramatic plugs analogous to the intrusive bodies at Jinchuan, China. The anomalies are close to, or coincident with, the eastern margin of the Pilbara Craton, and are concealed by a skin of Canning Basin sediments of Mesozoic age.

Pardoo East. A large magnetic anomaly under Mesozoic sediment on an east-north-east trending major fault may represent a dyke-sill complex, and is 80km east-north-east of the Highway nickel deposit owned by another company. The geological setting and gravity signature suggest that the inferred dyke sill complex may occur next to a major turbidite basin containing the sulphide-bearing Cleaverville Formation, and possibly also close to an Archaean craton boundary. There is potential to discover mineralisation similar to the Sherlock Bay style.

Scorpion. Complex magnetic anomalies, including reversely polarised anomalies, are associated with a regional-scale Bouguer gravity gradient on a very large, west-north-west -trending domain-bounding fault at the intersection with a suite of north-east -trending faults. A series of large dolerite plugs and sheets are exposed to the north-east of the prospect. The proximity of the Earaheedy Basin metasediments is considered encouraging as they are a likely source of crustal sulphur. The prospect may also occur close to the margin of a large Archaean craton.

Scorpayle Complex magnetic anomalies possibly indicating large dyke-sill complexes coincide with a moderate Bouguer gravity gradient in proximity to a very large, complex, west-north-west-trending, steeply dipping, domain-bounding fault. A suite of poorly exposed large dykes and sills of dolerite are present north of the prospect, which is largely concealed by sand and alluvial sediment. The proximity of the Earaheedy Basin meta-sediments is encouraging as they are a likely source of crustal sulphur.

13.1 Valuation

In general, AMC does not assign significant value to large areas under tenement application. For some of St Barbara's tenements, a discounted value per unit area has been given where the applications are contiguous with granted tenements, often cover areas previously held under a granted St Barbara title and in geological settings that have demonstrated prospectivity. The nickel exploration licence applications are based on untested geological concepts in a region not known for major nickel occurrences. While these represent valid grass roots exploration targets, AMC has placed no value on the application areas.

14 SUMMARY OF VALUATION

Table 14.1 summarises AMC's valuation of St Barbara's interest in mining tenements.

Project	Value of St Barbara Interest
	Low	High	Preferred
	(SM)	(SM)	(SM)
Annean Joint Venture	2.0	3.0	2.5
Reedys Project	1.2	$2.2^{\circ}$	1.7
Polelle Joint Venture	1.3	1.8	1.6
Paddy's Flat	7.0	9.0	8.0
Meekatharra 100% Owned:
Jack Ryan	0.4	0.6	0.5
Batavia	0.3	0.4	0.3
Burkes Find	0.1	0.1	0.1
Wanganui	0.2	0.2	0.2
Yagalong	0.1	0.2	0.1
Quinns	0.1	0.2	0.1
Burnakura	0.1	0.1	0.1
Chesterfield Joint Venture	0.2	0.2	0.2
Non Meekatharra Interests:
Cue	0.1	0.2	0.1
Kalgoorlie	0.1	0.1	0.1
Nickel tenements
Salvage Value of Bluebird Plant	2.25	2.75	2.5
Total	15.5	21.1	18.1

Table 14.1 Valuation of St Barbara's Interest

15 PREVIOUS VALUATION

In 2001, AMC valued St Barbara mineral assets at \$32.5M to \$41.7M. Of that, \$5.9M was for surplus equipment, now sold and \$19.1M to \$24.1M was an "Operational Value", most of it based on reserves and resources since mined and treated. Some of the lesser resources valued herein, including Bluebird East, Mystery and Luke's Junction, were included, in part, in the 2001 Operational Value.

The remaining value \$7.5M to \$11.7M was for exploration potential and was discounted from \$8.3M to \$12.9M with a 10% market discount. It included approximately \$1.5M to \$2.5M in non-Meekatharra area interests which are no longer held by St Barbara and \$0.9M to \$1.2M for the Burnakura assets since sold for \$1.0M. However it excluded the Paddy's Flat assets, herein valued at \$5.0M to \$6.0M. The adjusted 2001 figure for the non-Paddy's Flat's assets of \$5.9M to \$10.7M compares with the 2004 estimate on the same basis of \$6.3M to \$9.8M.

In October 2004, AMC valued St Barbara assets on behalf of Deloitte Corporate Finance as part of an independent assessment of the Technical Value of the mining and exploration assets of St Barbara and Nustar, including the 5% royalty held by St Barbara in respect of the Paulsens Project. The assessment formed part of an independent expert's report prepared by Deloitte Corporate Finance in relation to transactions then being proposed by St Barbara: The total Technical Value estimated, including a salvage value on the Bluebird plant, was \$13.6M to \$18.6M with a preferred value \$16.1M.

In October 2003, St Barbara's mineral assets were valued by another independent party at \$17.6M to \$52.6M of which \$3.6M to \$8.7M was for "Operational Value" including Paddy's Flat. The remaining \$14.0M to \$45.9M was for exploration assets of which Burnakura, valued at \$1.6M to \$5.9M, and Malanti, valued at \$0.1M to \$0.4M are no longer interests of St Barbara. The indicative comparison for current, non-Paddy's Flat exploration interests is thus \$12.3M to \$39.6M. This much higher valuation was prior to the Elara and Mercator farm-outs and used some different methodology.

16 SOURCES OF INFORMATION

The information on which this report is based was gathered by AMC in August/September 2004 during site visits to Meekatharra and in the offices of St Barbara, with updated information being provided by St Barbara in October 2005.

For each project AMC has reviewed recent reports, where available, on resource and reserve procedures and results, exploration reports, feasibility and other engineering/economic reports on existing and/or planned mining operations, environmental reports, reports on process plants and relevant testwork and any other material.

AMC has also referred to published quarterly reports and other Australian Stock Exchange ("ASX") releases of St Barbara.

17 QUALIFICATIONS

AMC is a firm of mineral industry consultants whose activities include the preparation of due diligence reports and reviews on mining and exploration projects for equity and debt funding and for public reports.

The contributors to the report are:

P R Stephenson BSc (Hons) Geol, FAusIMM, FAIG, MMICA, AMC Principal Geologist with more than 30 years experience in the mining industry, the majority in mineral resource and ore reserve estimation and audit, who has coordinated and managed the assessment, reviewed resources and exploration potential and carried out the valuations.
D Carville BSc (Hons) Geol, M AusIMM, M GSA, AMC Principal Resource Geologist with more than 25 years experience in the mining industry with more than five of those years in resource and ore reserve estimation, who has undertaken an internal AMC review of this report.

The contributors to the October 2004 AMC report on which this report is partly based were:

G R Appleyard BSc (Hons), BA, a Director of AMC with more than 35 years experience in the mining and mining investment industries, who coordinated and managed the assessment, reviewed resources and exploration potential and carried out the valuations.
L J Gillett BE (Min), Dip Geosc (Min Econ), M AusIMM, M MICA, AMC Director with more than 30 years experience in the mining industry, who undertook an internal AMC review of the report.

AMC has carried out several consulting assignments for St Barbara in the past two years. AMC has carried out one consulting assignment for Deloitte Corporate Finance in the past two years, being the October 2004 technical valuation of the mining and exploration assets of St Barbara and Nustar on which the current report is partly based.

In all of its assignments, AMC and its subconsultants have acted as independent parties. Neither AMC nor the contributors to this report have any interests in St Barbara or in the proposed transaction subject of this report that could be reasonably construed to affect their independence. AMC has no pecuniary interest, association or employment relationship with St Barbara or Deloitte Corporate Finance. AMC is satisfied that Resource Mapping Pty Limited, which prepared an independent report on the standing of the material tenements held by St Barbara, is an independent and qualified party.

Neither AMC nor the contributors to this report or members of their immediate families hold shares in St Barbara. AMC is being paid a fee according to its normal per diem rates and out of pocket expenses in the preparation of this report. Its fee is not contingent on the outcome of the transaction subject to this report.

In AMC's letter of engagement, St Barbara agreed to comply with the obligations of the commissioning entity under the Valmin Code, including that to the best of its knowledge and understanding, complete, accurate and true disclosure of all relevant material information has been made.

In preparing this report AMC has relied on information provided to us by St Barbara and have no reason to believe that information is materially misleading or incomplete or contains any material errors. St Barbara and Deloitte Corporate Finance have been provided with a draft of this report for correction of any material errors of fact or noting of any material omissions.

This report and the conclusions in it are effective at 29 March 2005. It takes no account of changes in the assets or matters reported since 29 March 2005 that could impact on the conclusions and values herein. Those conclusions could be impacted by changes in relevant metal prices, exploration and other technical developments in regard to the projects and the market for mineral properties.

St Barbara has provided AMC with an indemnity in regard to damages, losses and liabilities related to or arising out of AMC's engagement other than those arising from illegal acts, bad faith or negligence on AMC's part or AMC's reliance on unauthorised statements from third parties.

AMC has given its consent to the release of this report as an attachment to the Expert's Report prepared by Deloitte Corporate Finance. Neither this report nor any part of it may be used for any other purpose without AMC's written consent.

The contributors to this report are corporate members of the AusIMM and bound by its Code of Ethics.

APPENDIX A

Tenements held by St Barbara

DELOITTE CORPORATE FINANCE St Barbara Technical Valuation

						SIEG
Project				Tenements			Area km ²
100% St Barbara Afaddin	G 51/9						0.34
Yaloginda/Batavia	M 51/187						0.72
Reedys/Boomerang	M 51/92						3.44
Boorara	P 26/2983	P 26/2981	P 26/3269	P 26/3268	M 26/793	M 26/794	7.93
Bourkes Find	M 51/530	M 51/562	M 51/563	M 51/564	M 51/565		39.26
Burnakura	M 51/422	M 51/423	M 51/424	M 51/468	M 51/469	E 51/903	45.19
Cue	M 20/347						0.23
Abbotts - Garden Gully	M 51/550	M 51/588					10.22
Kurara East	M 51/235	M 51/381					2.98
Lake Wells	E 38/1754	E38/1755	E38/1756	E38/1352			313.60
Meekatharra - Paddy's Flat	L 51/67	M 51/200	M 51/437	M 51/438	M 51/439	M 51/440	41.41
Mikhaburra	M 51/542	M 51/676	M 51/40				10.85
Mt Hale	E 20/538						22.40
Panakin Bore	M 53/914						4.49
Pardoo East	E 45/2731	E 45/2732					299.60
Polelle	M 51/830						1.99
Quinns	P 51/2321 M 51/72 M 51/531 P 51/1747 P 51/1918 P 51/2045	M 51/776 M 51/19 M 51/532 P 51/1913 P 51/1920	M 51/732 M 51/475 M 51/533 P 51/1914 P 51/1921	M 51/731 M 51/476 M 51/534 P 51/1915 P 51/1984	M 51/730 M 51/505 M 51/574 P 51/1916 P 51/1985	M 51/642 M 51/527 P 51/1746 P 51/1917 P 51/1986	58.67
Reedys	E 20/189 G 51/26 L 51/51 M 20/45 M 51/778	E 20/440 $L$ 20/10 M 20/214 M 20/68 P 20/1791	G 51/13 L20/8 M 20/420 M 20/69 E 20/489	G 51/14 L 51/29 M 20/421 M 20/77 P 20/1863	G 51/15 L 51/30 M 20/437 M 51/233 M 20/476	G 51/17 L 51/31 M 20/438 M 51/649 M 20/477
	M 20/496	E 51/885	M 20/219				154.28
Scorpayle	E 69/2044	E 69/2045					392.00
Scorpion; Scorpion South	E 69/2040 E 69/2055	E 69/2041 E 69/2056	E 69/2042 E 69/2057	E 69/2043			1125.60
South Enni - Reedys	M 20/12	M 20/212					11.06
Stakewell	M 51/579	P 51/1683	L 51/32	L 51/28	L 51/27	$L$ 20/17	3.89
Three Sisters	M 51/203						0.87
Tough Go	$L$ 20/18	M 20/73	M 51/254	M 51/762			26.05
Tuckanarra; Maybelle/North	M 20/239	M 20/240	M 20/241	M 20/242			36.10
Turn of the Tide	M 51/757 M 20/107	M 51/236	M 20/71	M 20/70	M 20/309	M 20/249	55.14
Wallal	E 45/2699 E 45/2705	E 45/2700	E 45/2701	E 45/2702	E 45/2703	E 45/2704	1218.00
Wanganui	M 51/377 P 51/1777	M 51/630 E 51/970	M 51/631 E 51/971	M 51/632 L 51/82	P 51/1775	P 51/1776	135.22
Yagahong	P 51/2323	P 51/2324	M 51/789	E 51/960			147.04
Yaloginda	M 51/561 P 51/2186	L 51/43 P 51/2187	L51/56	L S1/57	L 51/58	P 51/1605	3.14
Mercator JV
Abbotts	E 51/913	M 51/390	M 51/566				159.84
Aladdin	M 51/62	M 51/320	M 51/795	M 51/819	M 51/820		0.48
Bailey Island	M 51/12	M 51/96	M 51/321	M 51/793	M 51/794		0.44
South Junction	M 51/491						7.50
Caledonian	M 51/31	M 51/33					2.88
Chunderloo	M 51/637	M 51/638	M 51/639	M 51/79	E 51/1043		118.98
Abbotts - Garden Gully Yaloginda - Gibralta, Lukes Junction	M 51/567 M 51/28	M 51/656 M 51/180	M 51/657	M 51/658			18.84 4.04

DELOITTE CORPORATE FINANCE St Barbara Technical Valuation

Project				Tenements			Area km ²
Mercator JV (cont)
Highway	M 51/257	M 51/503	M 51/256				17.92
Stakewell	M 51/448						7.84
Kurara East	E 51/814	E 51/908	M 51/675	M 51/746	M 51/781	M 51/2037
	M 51/454 M 51/806	M 51/455 M 51/807	M 51/456 M 51/824	P 51/2038 M 51/825	P 51/2039	P 51/2040	50.80

Nannine	M 51/486 M 51/571	P 51/1799 M 51/572	P 51/1822 M 51/573	M 51/568 M 51/575	M 51/569 M 51/576	M 51/570 M 51/581
	M 51/582	M 51/644	M 51/645	M 51/652	M 51/666	M 51/674
	M 51/740	M 51/758	M 51/780	M 51/782	M 51/334	M 51/374
	M 51/447	M 51/462	M 51/463	M 51/472	M 51/482	M 51/496
	M 51/51 P 51/1583	M 51/523 P 51/1628	M 51/524 P51/1637	M 51/53 P 51/1638	P 51/1581 P 51/1639	P 51/1582 P 51/1640
	P 51/1641	P 51/1642	P 51/1646	P 51/1648	P 51/1649	P 51/1650
	P 51/1656	P 51/1657	P51/1658	P 51/1788	P 51/1789	P 51/1795
	P 51/1796 P 51/1825	P 51/1797 P 51/1990	P 51/1798 P 51/2024	P 51/1818 P 51/2036	P 51/1823 P 51/2056	P 51/1824 P 51/2057
	P 51/2058	P 51/2059	P 51/2061	P 51/2062	M 51/783	M 51/6	125.62
	P 51/647	M 51/75
Norie	M 51/477	M 51/492	M 51/493	M 51/494	M 51/495	M 51/501
	M 51/525	M 51/526	M 51/584	P 51/1717	P 51/1718	P 51/1719
	P 51/1720	P 51/1721	P 51/1991	P 51/2081	P 51/2082	M 51/784
	M 51/39						72.97
Polelle	E 51/615	M 51/802	M 51/801	M 51/800	M 51/799	M 51/809
	M 51/810						115.85
Meekatharra	M 51/199	M 51/521	M 51/654	M 51/688	P 51/1764	P 51/1801
	P 51/1808 P 51/1865	P 51/1809 P 51/1867	P 51/1859 P51/1869	P 51/1860 P 51/1871	P 51/1861 P 51/1875	P 51/1863 P 51/1876
	P 51/1878	P 51/1879	P 51/1880	P 51/1881	P 51/1882	P 51/1883
	P 51/1884	P 51/1885	P51/1886	P 51/1887	P 51/1888	P 51/1889
	P 51/1890 M 51/667	P 51/1891 M 51/668	P 51/1892 M 51/669	P 51/1893 M 51/670	P 51/1894 M 51/671	M 51/653 M 51/672
	M 51/673	P 51/1836	M 51/504	P 51/1862			107.86
South East Meekatharra	M 51/445	M 51/446	M 51/487	M 51/490	M 51/741	P 51/1987
	P 51/2326	M 51/488	M 51/849				29.17
South Junction	M 51/132	M 51/393	M 51/539				15.77
Stakewell	M 51/552	M 51/450	M 51/449	M 51/368			10.96
Tuckanarra	M 20/47	M 20/443	M 20/444	M 20/445			20.32
Turn of the Tide	M 51/788	M 51/237	E 51/348				26.21
Yalonginda	M 51/587	M 51/613	M 51/628	M 51/640	M 51/677	M 51/678
	M 51/679 M 51/35	M 51/680 M 51/91	M 51/718 M 51/190	M 51/737 M 51/209	M 51/738 M 51/280	M 51/557 M 51/281
	M 51/325	M 51/385	M 51/386	M 51/409	M 51/418	M 51/419
	M 51/433	M 51/441	M 51/471	M 51/485	M 51/489	M 51/500
	M 51/502 P 51/1732	M 51/516 P 51/1750	M 51/528 P 51/1760	M 51/560 P 51/1820	P 51/1606 P 51/1903	P 51/1723 P 51/1904
	P 51/1907	P 51/1908	P 51/1909	P 51/1910	P 51/1992	P 51/1775
	P 51/1607	M 51/586	P 51/2185	P 51/2188	P 51/2189	M 51/805
	M 51/811	M 51/211	M 51/27				83.66
IG JV
Chesterfield	M 51/650 M 51/451	E 51/917 E 51/1035	E 51/830	P 51/1441	M 51/270	M 51/353	109.27
Elara JV Burnakura	M 51/465						9.20
Polelle	E 51/259	M 51/427	M 51/459	M 51/484	M 51/483	M 51/605
	M 51/611	M 51/612	M 51/717	M 51/643	M 51/2327	M 51/803
	M 51/798	M 51/797	M 51/796	P 51/1925	M 51/822	M 51/823
	M 51/834						127.33
Malanti JV Balagundi	M 25/244						1.90

Boorara	M 26/663	M 26/664	M 26/693				14.87
Darlot East	E 37/637						98.00

Proxy Form

All correspondence to: Advanced Share Registry Services 110 Stirling Highway Nediands, Western Australia 6009 Australia Enquiries (within Australia) 08 9389 8033 (outside Australia) +61 8 9389 8033 Facsimile +61 8 9389 7871 www.asrshareholders.com

Appointment of Proxy

I/We being a member/s of St Barbara Mines Limited and entitled to attend and vote hereby appoint

the Chairman of the Meeting (mark with an 'X')

If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding the registered security holder) you are appointing as your proxy.

Against

Abstain*

For

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General Meeting of St Barbara Mines Limited to be held at the Karri Room, Parmelia Hilton, Mill Street, Perth, Western Australia on Wednesday 16 November 2005 at 10.00am (Perth time) and at any adjournment of that meeting.

IMPORTANT: FOR RESOLUTIONS 5, 6 and 7 BELOW

As required by ASX Listing Rule 14.2.3, if the Chairman of the Meeting is your nominated proxy, or may be appointed by default, and you have not directed your proxy how to vote on resolutions 5, 6 and 7 below, please place a mark in this box. By marking this box you acknowledge that the Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of the resolutions and that votes cast by him, other than as proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your vote on resolutions 3 and 4 and your vote will not be counted in computing the required majority if a poll is called on those resolutions. The Chairman of the Meeting intends to vote undirected proxies in favour of resolutions 5, 6 and 7.

Voting directions to your proxy – please mark $\boxtimes$ to indicate your directions

Sole Director and		Director	Director/Company Secretary

Individual or Security Holder 1		Security Holder	Security Holder 3
PLEASE SIGN HERE implemented.		This section must be signed in accordance with the instructions overleaf to enable your directions to be
	not be counted in computing the required majority on a poll.	*If you mark the Abstain box for a particular resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will
		In addition to the intention advised above, the Chairman of the Meeting intends to vote undirected proxies in favour of each of the other resolutions.
		Note: The Options covered by Resolution 7 will not be issued if, and to the extent that, the conversion contemplated by Resolution 6 occurs. See Explanatory Memorandum for more details.
Resolution 7.	Approval to issue Options to Resource Capital Fund III LP
Resolution 6.		Approval of conversion of cash advances made by Resource Capital Fund III LP
Resolution 5.		Increase in the maximum aggregate amount of fees payable to non-executive Directors
Resolution 4.	Change of the Company's name
Resolution 3.	Adoption of Remuneration Report (non-binding vote)
Resolution 2.	Re-election of Director - Richard Knight
Resolution 1.	Re-election of Director - SJ Colin Wise

. . . . . . . . . . . . . . . . . . . . Contact Name

Sole Company Secretary

. . . . . . . . . . . . . . . . . . . . Contact Daytime Telephone

$l - l$ Date

How to complete the Proxy Form

$\mathbf{1}$ Your Address

This is your address as it appears on the company's share register. If this information is incorrect, please mark the box and make the correction on the form. Security holders sponsored by a broker (in which case your reference number overleaf will commence with an 'x') should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

$\overline{2}$ Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the individual or body corporate you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the full name of that individual or body corporate. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a security holder of the company. Do not write the name of the issuer company or the registered security holder in the space.

3 Votes on Resolutions

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each resolution. All your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any resolution by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given resolution, your proxy may vote as he or she chooses. If you mark more than one box on a resolution your vote on that resolution will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company's share registry or you may copy this form.

To appoint a second proxy you must:

on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of $(a)$ securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.
$(b)$ return both forms together in the same envelope.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual:	where the holding is in one name, the holder must sign.
Joint Holdina:	where the holding is in more than one name, all of the security holders should sign.
Power of Attorney:	to sign under Power of Attorney, you must have already lodged this document with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.
Companies:	where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of a corporate security holder or proxy is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be produced prior to admission. A form of the certificate may be obtained from the company's share registry.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below not later than 10.00am (Perth time) on 14 November 2005. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Documents may be lodged using the reply paid envelope or:
IN PERSON	Registered Office - Level 2, 16 Ord Street, WEST PERTH WA 6005 Australia
	Share Registry - Advanced Share Registry Services, 110 Stirling Highway, Nedlands WA 6009 Australia
	Share Registry - Advanced Share Registry Services, PO Box 1156, Nedlands WA 6909 Australia
BY FAX	+61 8 9389 7871
BY MAIL	Registered Office - Level 2, 16 Ord Street, WEST PERTH WA 6005 Australia

AI assistant

ST BARBARA LIMITED — Annual Report 2005

65749_rns_2005-10-16_b5b1a6c7-50f4-4048-8ddc-13b588aeb3cf.pdf

ASX SHAREHOLDERS REPORT

Annual Report & Notice of Annual General Meeting

Z St Barbara Mines Limited

St Barbara's key features are:

Table of Contents

G THE BELLEVILLE

METRISTIKA DI SAMA DI ANALIZATI

EASTER AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE AND A LITTLE

Continuing the search with an expanded data base and healthy budget

Southern Cross - attractive exploration targets

Leonora - towards realising its potential

Tarmoota

Gwalla Deeps

South Laverton

Meekatharra - more progress and promising results

Wallal, Pardoo, Scorpion & Scorpayle more nickel targets

RESERVES AT END OF JUNE 2005

RESOURCES AT END OF JUNE 2005 (INCLUDES RESERVES)

ON SICHOLD STANDARD

Sens of Gwalla Ltd Gold Division (SGWGD)

Operational Health and Safety

Southern Cross Operations

South Laverton Operations

Details of 2005 Production

THE REPORT OF THE REPORT OF THE RESIDENCE OF THE REPORT OF THE REPORT OF THE REPORT OF THE REPORT OF THE REPORT

Health and safety

Encouraging results

A shared responsibility for workforce health and safety

Environmental management for generations to come

Sons of Gwalla acquired sites

Southern Cross

The Hercules Site

ER KOROL KARLAN

Focus on positive cash flow generation

Financial performance

Cash Flows

Financial Position

Subsequent Events

Example 2 Capital Management

CONTRACTO CONTRACTO

Structure and Operation of the Board

Rick

Disclosure of Information

Ethics

Heritage Listed Gwalia State Hotel now owned by the Company

Remuneration

Evolving Practices

Diragors Raport

Directors

Principal activities

Dividends.

Review of operations

Sons of Gwalia Ltd Gold Division (SGWGD)

Operational Health and Safety

Southern Cross Operations

South Laverton Operations

Details of 2005 Production

Consolidated revenues and results

a) Changes in Substantial Shareholdings

b) Changes in Operations

Divestment of NuStar

Divestment of Paulsens Royalty

Termination of Reedys Joint Venture

Acquisition of Gold Division of Sons of Gwalia Ltd (Administrators Appointed)

Matters subsequent to the end

Likely developments and

expected results of operations

Regulatory environment

Mining and exploration

Information on directors

S J Colin Wise LL.B, FAICD, FAuslMM

Experience and expertise

Eduard Eshuys B.Sc, FAICD, FAusIMM

Interest in shares and options

Henderson (Hank) G Tuten, B.A. (Econ)

Interest in shares and options

Mark K Wheatley B.E. ((Chem) Hons 1), MBA

ST BARBARA LIMITED Annual Report 2005