ST BARBARA LIMITED — Annual Report 2005

Oct 2, 2005

St Barbara Mines Limited

ASX SHAREHOLDERS REPORT

Enquiries regarding this report may be directed to:

Eduard Eshuvs Managing Director & CEO

St Barbara Mines Limited ACN 009 165 066 Level 2, 16 Ord Street West Perth WA 6005 Telephone +61 8 9476 5555 Facsimile +61 8 9476 5500 Email perth@stbarbara.com.au Website www.stbarbara.com.au

30 June 2005 Audited Financial Statements

The audited financial statements for the year ended 30 June 2005 are attached. This audited financial statement differs from the Preliminary Financial Results released on 31 August 2005, following a reallocation within a single balance sheet category, Mining Properties, of the purchase price of the Gold Division of Sons of Gwalia Ltd (Administrators Appointed) ("SGWGD"). The Preliminary Financial Results allocated $13,068,000 to Areas of interest in the exploration/evaluation stage and in the audited financial statements it has now been allocated to Areas of interest in the development and production phase. As a consequence, Areas of interest in the development and production phase, which is expensed in proportion to gold produced, reports an increased expense for the year of $7,287,000. resulting in a net loss of $6,697,000, as compared to the Preliminary Financial Results 2004/05's net profit of $590,000.

The Preliminary Financial Results were determined following discussions between the Company and the Company's external auditor, PricewaterhouseCoopers ("PWC"), including an extensive review of issues regarding the allocation of the SGWGD purchase price in accordance with Approved Australian Accounting Standards. This process culminated in confirmation from PWC as to the Preliminary Financial Results being materially correct, subject to finalisation of its audit processes. This confirmation was treated by the Company's Audit Committee and subsequently, the Company's Board of Directors in turn, as confirmation of its view that the allocation of the purchase price was correct and was part of the basis upon which the Preliminary Financial Results were released.

After the close of business on Thursday 29 September 2005, PWC advised the Company that, following internal partner review, PWC had changed its opinion about the basis of allocating the SGWGD purchase price, as described above. Following discussion with PWC on 30 September the Company decided to amend the financial statements to reflect the changed basis of allocation.

The reported loss does not impact on reported cash flows, reported cash operating costs, and the strong financial position of the Company. A positive outcome from this conservative accounting treatment is that all exploration interests acquired from SGWGD are recorded for accounting purposes at a zero cost.

Eduard Eshuvs

Managing Director & CEO

1 October 2005

ST BARBARA MINES LIMITED

Directors' Report $\mathbf{g}$ Financial Statements

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for 30 June 2005

TABLE OF CONTENTS	Page N°.
DIRECTORS' REPORT	2
DECLARATION OF AUDITOR INDEPENDENCE	17
STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2005	18
STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2005	19
STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2005	20
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005	21
DIRECTORS' DECLARATION	53
INDEPENDENT AUDIT REPORT TO THE MEMBERS	54

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 Wheatley

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 vear 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 83.646ozs 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 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.

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 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.

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 12kms 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 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	Carosue	Total
		Cross	Dam
Open Pit		287,356	256,848	544,204
Grade	g/t	2.25	3.84	3.00
Underground		116,944		116,944
Grade	g/t	7.02		7.02
Stockpiles Processed		259,065	56,750	315,815
Grade	g/t	1.32	0.77	1.22
Ore Milled		663,365	313,598	976,963
Grade	g/t	2.94	3.28	3.05
Recovery	$%$	92	96	93
Gold Shipped	OZS	53,719	29,528	83,247
Cash Cost	$/oz	336	349	341

DIRECTORS' REPORT

In addition to gold shipped from operations of 83.247ozs, 399ozs 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:

OUIDOINARDU TOTORIUDU AHU ROOMU ARU UURIIRIAHOUU AD IUHUWU.
	2005$'000	2004$'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	(6,697)	(25, 228)
Income tax expense
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)	(24, 315)

Significant changes in the state of affairs

Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:

$a)$ 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 Rovalty

On 29 November 2004, shareholders approved the sale of the Company's Paulsen's royalty to NuStar for $5.100.000.

Charles and Latin

DIRECTORS' REPORT

Termination of Reedvs 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 quaranteed 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 Review of Operations, on pages 2 to 4.

$c)$ Changes in Issued Capital

	VIIGITO VII IOOUT
Issued capital at 30 June 2004	574, 149, 157
On 15 July 2004, the Company announced the conversion by OceanResources Capital Holdings plc of the face value of its convertible noteof $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 ordinaryshares at $4\phi$ 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 ordinaryshares to Ocean Resources Capital Holdings plc at 4.6¢ per share insatisfaction of interest of $804,105	688,679,704
On 23 July 2004, the Company issued 26,591,453 fully paid ordinaryshares to Resource Capital Funds II LP ("RCFII") at 4.6¢ per share toraise $1,223,207 for working capital	715,271,157
On 1 December 2004, following shareholder approval, the Companyconverted a $1,200,000 loan from RCFII into 21,554,172 fully paidordinary shares	736,825,329
On 17 January 2005 the Company completed a share buy-back(offering 1.25 NuStar shares as consideration for every 1 St Barbarashare 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
• 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, vielding 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 @ 2.5q/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.

Requiatory 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 C Wise LL.B. FAICD. FAusIMM 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 non-executive 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 Wheatlev 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 vear ended 30 June 2005, and the numbers of meetings attended by each director were:

				Full meetings of committeesdirectors directors executive directors and Audit Remuted Remuted Remuted Remuted Remuted Remuted Remuted Remu
								Remuneration
S J C Wise
E Eshuys	*
H G Tuten		18	22					**	**
M K Wheatley		20	22
R Knight
S W Miller
K A Dundo

$A =$ Number of meetings attended

• B = Number of meetings held during the time the director held office or was a member of the committee during the year
• $*$ = Not a non-executive director
• ** = Not a member of the relevant committee

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:

• $\mathbb A$ Principles used to determine the nature and amount of remuneration
• $\mathsf{B}$ Details of remuneration
• $\mathcal{C}$ Service agreements
• Share-based compensation D
• Managing Director & CEO KPIs $\mathsf{E}$
• $\mathsf{F}$ Valuation of options

Principles used to determine the nature and amount of remuneration $\boldsymbol{A}$

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.

Kev Principles

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

• remuneration will be linked to the creation of value for shareholders: $\bullet$
• 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:
  • align individual and team reward with business performance in both the short term and long term; $\circ$
  • encourage executives to align their interest with those of shareholders; $\circ$
  • encourage executives to perform to their fullest capacity; $\Omega$
  • be business focused and flexible: and $\circ$
  • be competitive and cost effective in each relevant employment market. $\circ$
• Content of Remuneration Packages

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

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

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 vear 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 44.

$\boldsymbol{B}$ 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.

					Post-employment
2005		Primary				Option		Remuner-
	Cash		Non-			Value		ation as
	salary and	Cash	monetary	Super-	Retirement	Current		Option
	∴ fees:	bonus	benefits	annuation	benefits	Date	Total	Value
								℀
Chairman
S J C Wise	87,114			7,840			94,954
Managing
Director & CEO		2				з
E Eshuys	276,178	250,000	40,000	8,652		914,614	1,489,444	61.4
Former
Executive
Chairman
S W Miller	37,716			7,543	245,616		290,875
Non executive
directors
R Knight *	4,701			423			5,124
H G Tuten **
M K Wheatley	73,007			6,571			79,578
Total	478,716	250,000	40,000	31,029	245,616	914,614	1,959,975

Directors of St Barbara

$\overline{1}$ Includes consulting fees paid prior to employment.

$\overline{2}$ Provision for bonus included in the 2005 financial year results, and paid subsequent to balance date. $\overline{3}$ 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	Expiry	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	Continued
23 Dec 04	5,000,000	0.0472	23 Dec 09	21 Jul 06	employment
23 Dec 04	5,000,000	0.1500	23 Dec 08	14 Sep 05	as Managing
23 Dec 04	5,000,000	0.1500	23 Dec 09	14 Sep 06	Director &
23 Dec 04	5,000,000	0.1500	23 Dec 10	14 Sep 07	CEO
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 $\overline{a}$ price for the month after Mr Eshuys was first appointed a Director)
• 14 September 2004 20.000.000 options exercisable at $0.15 (closing market price of $0.044)
• $\overline{4}$ S W Miller received a termination package comprising accrued leave entitlements and redundancy.
• $\bar{5}$ Includes back pay of $27,135 and superannuation thereon of $2,442 relating to the previous financial vear.
• R Knight was appointed a director on 25 May 2005
• $\ddot{x}$ 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
	Cashsalary andfees	Cashbonus	Non-monetarybenefits	'Super-annuation	Retirementbenefits	OptionValueCurrentDate.	Total	Remuner-ation asOptionValue
								₩
Former Executive
Chairman
S W Miller	400,000		11,324	80,000		$\blacksquare$	491,324
Non executive
directors
H G Tuten **
M K Wheatley	27,135			2,446			29,581
KA Dundo	100,000			9,000		$\blacksquare$	109,000
(resigned 18/07/04)
GB Speechly	20,833			1,875
(resigned 28/11/03)
Total	547,968			93,321		$\bar{ }$	652,613

Other executives of St Barbara

other executives of St Barbara
2005	Post-employmentPrimaryOption							Remuner⊦
	Cash		Non-			Value		ation as
	salary and	Cash .	monetary	Super-	Retirement	Current		Option
	fees.	bonus	benefits	annuationJ.	benefits	Date.	Total	Value℅
R J Kennedy	148,292		8,333	10,916		246,276	213,817	21.6
CFO & Company
Secretary
P Thompson	71,499			6,885		47,949	126,333	38.0
$GM$ – Exploration
M R Reed	227,788						227,788
$GM - Operations$
G C Miller	145,000			21,750		$\blacksquare$	166,750
GM - Special
ProjectsG Viska	$3,131,500$					$\overline{\phantom{m}}$	131,500
GM - Commercial
Total	724,079		8,333	39,551		94,225	866,188

$\overline{1}$ includes consulting fees paid prior to employment $\overline{2}$

employee options issued on commencement of employment valued at grant date in accordance with AASB 1046 Director and Executive Disclosures $\overline{3}$

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 vear ended 30 June 2004 is set out below. Information is aggregated except for executives in office during both the current and preceding year.

2004	PrimaryPost-employmentEquityCashNon-
	salary andfees	Cashbonus .	monetarybenefits	- Super- ⊹annuation	Retirementbenefits	Options	Total
G C Miller
$GM - Special$	145,000		3,320	21,750			170,070
Projects
RT Calnan	169,000	÷	11,446	62,600			243,046
(Resigned 31/10/04)
PJ Richardson	150,000	$\blacksquare$	10,789	15,000			175,789
(Resigned 30/11/04)
CW Davis	142,622		9,048	21,393			173,063
(Resigned 31/10/04)
EL Boyd	120,698		214	9,511			130,423
(Resigned 31/12/04)
AD 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

$\mathbf C$ 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 performancerelated 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 vears of service and six months after three vears. R Kennedy is required to give three month's notice of termination.

Share-based compensation D

Options other than those issued to Mr Eshuys (refer Section E) were granted under the St Barbara Employee Option Plan which was 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:

the search search of the timeissued to	Grant date	Expiry date	Exercise price	Value per option.at grant date	Example 19 Date exercisable
R Kennedy	2 Dec 04	2 Dec 07	$0.08	$0.46	Anytime from grant date
P Thompson	16 Dec 04	2 Dec 07	$0.08	$0.48	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.

$\blacksquare$ 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
• Finance and administration
• Investor relations $\overline{a}$
• 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 vield 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 j)
• $\mathbf{ii}$ exercise price
• $\overline{\mathsf{iii}}$ grant date
• $\mathsf{iv}$ expiry date
• share price at grant date V)
• expected price volatility of the company's shares $VI$
• expected dividend vield vii)
• risk-free interest rate viii)

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 Eshuvs. 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:

TypeRCF II	ExpiryBetween 15 Jul 05 and	Issue price of sharesBetween 11.4¢ and 21.3¢	Number under option52,862,679
	24 May 08
Executive options	Between 31 Dec 05 and23 Dec 11	Between 4.7¢ and 15¢	36,000,000
Employee options	Between 31 Aug 05 and17 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 vear 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 17.

	Consolidated2005	$2004$
During the year the following fees were paid or payable for services providedby the auditor of the parent entity, its related practices and non-related auditfirms:
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.

E Eshuys

Director

Perth, 30 September 2005

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.

Inid J. Lot

David J Smith Partner PricewaterhouseCoopers

Perth 30 September 2005

PricewaterhouseCoopers ABN 52 780 433 757

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

STATEMENTS OF FINANCIAL PERFORMANCE for the year ended 30 June 2005

		ConsolidatedCompany
		30 June2005	30 June2004	30 June2005	30 June2004
Revenue from sale of gold	Notes3	$'00046,553	$000.21,972	$'00046,553	$'00021,972
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 andnon-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 anassociate		(272)
Share of net loss of associate		(577)
Provision for diminution in value ofinvestments		(773)		(773)
Provision for diminution in investment incontrolled entities					(12, 348)
Write down of mining developmentexpenses			(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 beforerelated income tax expense		(6,697)	(25, 228)	(5,559)	(31, 929)
Income tax expense
Loss from ordinary activities afterrelated income tax expense		(6, 697)	(25, 228)	(5,559)	(31, 929)
Net loss attributable to outside equityinterests			913
Net loss attributable to members ofthe Company		(6, 697)	(24, 315)	(5, 559)	(31, 929)
Total changes in equity attributable tomembers of the Company otherthan those resulting fromtransactions with owners asowners		(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

	ConsolidatedCompany
		30 June.2005	30 June2004	30 June2005	30 June2004
	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.

STATEMENTS OF CASH FLOWS for the year ended 30 June 2005

		Consolidated		Company
	Notes	30 June2005$'000	30 June2004$,000	30 June2005$'000	30 June2004$,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 byoperating activities	30	(467)	(8, 642)	4,124	(4,263)
Cash Flows from Investing Activities
Payments in respect of exploration, evaluationand development			(5,043)		(3,327)
Payments for property, plant and equipment		(202)	(42)	(40)	(38)
Payments for acquisition of businesscombination, 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, plantand equipment		4,706	3,584	5,733	3.483
Net cash flows provided by investingactivities		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 equitysecurities		4,051	20,017	4,051	860
Principal repayments -finance leases			(2,315)		(2,315)
hire purchaseagreements		(183)	(776)	(183)	(776)
other		(990)		(943)
Net cash flows (used in)/provided byfinancing 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	1
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

$\left{ \right}$ SUMMARY OF SIGNIFICANT 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 vear.

The following accounting policies have been used by the consolidated entity for the periods presented:

Principles of Consolidation a)

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 vear its results are included for that part of the year during which control existed.

$h$ 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.

$\mathbf{C}$ 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.

Depreciation and Amortisation of Property, Plant and Equipment $e)$

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 maiority 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 13% years

The total net carrying values of mine buildings, machinery and equipment at the mine property are reviewed requiarly 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.

$q)$ 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 vet 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.

Maintenance and Repairs $\ddot{\mathbf{i}}$

Plant of the consolidated entity is required to be overhauled on a requiar basis. This is managed as part of an ongoing major evelical 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.

$\mathbf{k}$ Emplovee Benefits

i) Wages and salaries, annual leave and sick leave

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 pavable.

$\mathsf{ii}$ 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.

$\mathbf{D}$ 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.

Cash Flows $\circ$

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 if was classified as investing.

$p)$ 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 vear.

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.

g) 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.

Rehabilitation and Restoration Costs r)

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.

$\mathfrak{h}$ 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.

$\cup$ 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

$\ddot{\text{I}}$ 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 ii)

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.

$\mathbf{2}$ 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.

$3)$ REVENUE

ر بNEVENUE	Consolidated		Company
	30 June	30 June	30 June	30 June
	2005$'000	2004$'000	2005$'000	2004$'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 ACTIVITIES
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 andequipment		2,462		2,462
Depreciation:
Buildings	70
		102	70	102
Plant and equipment	736	1,424	736	1,419
	806	1,526	806	1,521
Borrowing costs expensed:
Interest paid	513	1,523	513	1,434
Convertible Note borrowing cost		2,262		2,012
Finance charges relating to:
finance leases		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)
Diminution of exploration tenements		5,256		5,256

. . . . . . . . . . . . . . . . . . . .

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

. . . . . . . . . . . . . . . . . . . .

$5)$ INCOME TAX

$a)$ Tax Expense

	ConsolidatedCompany
	30 June2005	30 June2004	30 June2005	30 June2004
	$'000	$'000	$'000	$'000
The amount of income tax expense for thefinancial year differs from the amount calculatedon the loss. The differences are reconciled asfollows:
Loss from ordinary activities before income taxexpense	(6,697)	(25, 228)	(5, 559)	(31, 929)
Income tax calculated at 30% (2004 - 30%)	2,009	7,568	1,668	9,579
Tax effect of permanent differences:
Provision for diminution in investments	(307)	(90)	(232)	(3,720)
Legal and other capital expenditure$\tilde{ }$	(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 toaccount	(1, 251)	(7, 384)	(985)	(5,765)
Income tax (expense)
b)Unbooked future income tax benefitFuture 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 timingdifferences 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:

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

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.

. . . . . . . . . . . . . . . . . . . .

$6)$ CASH ASSETS

UJ.САЭП АЭЭЕТЭ	Consolidated
	30 June2005	30 June.2004	Company30 June2005	30 June2004
	$'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
Term deposit (i)	47	40	47	40
Term deposit (ii) (iii)	11,754	3,068	11,754	2,725
	11,801	3,108	11,801	2,765

Funds placed on security deposit for lease rental. The current lease expires on 31 January 2006. $(i)$

Funds placed on security deposit with Macquarie Bank Limited as security for performance bonds $(i)$ issued by Macquarie Bank Limited to WA Department of Industry and Resources.

Funds placed on security deposit with Westpac Banking Corporation as security for performance $(iii)$ 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 (i)	2,262	1,158	2,262	214
	4,767	1,512	4,767	374
$\left( i\right)$Other debtors in the consolidated entityincludes 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

10) ASSETS HELD FOR RESALE

IU).ASSETS HELD FOR RESALE	Consolidated		Company
	30 June	30 June	30 June	30 June
	2005$'000	2004$'000	2005$'000	2004$'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 eachclass of property, plant and equipment are setout 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

. . . . . . . . . . . . . . . . . . . .

	ConsolidatedCompany
	30 June	30 June	30 June	30 June
	2005$'000	2004$'000	2005$'000	2004$'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 heldfor 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)MINING 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/evaluationstage	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 STATEMENTS for the year ended 30 June 2005

. . . . . . . . . . . . . . . . . . . .

14) OTHER FINANCIAL ASSETS

$+ + +$UTHER FINANGIAL ASSETS	Consolidated		Company
	30 June2005$'000	30 June.2004$'000	30 June2005$'000	30 June2004$'000
Current
Investments in controlled entities:
Unlisted securities (at cost)$\tilde{\phantom{a}}$	$\sim$		179	179
Listed securities (at cost)$\tilde{\phantom{a}}$		500		38,138
Provision for diminution	$\sim$	(312)		(16, 429)
Market value$\tilde{\phantom{a}}$		188		21,709
	$\tilde{a}$	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:

vetalia 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.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

15) PAYABLES

D) PAIADLES	Consolidated		Company
	30 June	30 June	30 June.	30 June
	2005$'000	2004$'000	2005$'000	2004$'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 $(3)(4)$		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		7,000
	7,000	75	7,000	75

$(1)$ On 15 July 2004, the Company announced the conversion by Ocean Resources Capital Holdings Limited ("Ocean") of the face 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.

$(2)$ 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.

$(3)$ On 29 March 2005, the Company drew down $7,000,000 from a bridge loan facility provided by Resources 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 loan 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 quarantee 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.

$(4)$ 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.

	ConsolidatedCompany
	30 June2005	30 June2004	30 June2005	30 June2004
	$'000	$'000	$'000	$'000
Assets pledged as security
The carrying amounts of assets pledged assecurity are:
Secured Ioan
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:

	RehabilitationTotal
	$'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

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

18) CONTRIBUTED EQUITY

$101 - 001111100140$				Example 20 Consolidated Company
	∷ 30 June⊥2005	30 June 30 June 30 June 30 June2004	2005	$\sim$ 30 June $\sim$2004
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 yote, and upon a poll each share is entitled to one yote.

Movements in Ordinary Share Capital

Date	Details	Notes	Number of shares	Issue price	No state of$'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	з			(33)
23 Jul 04	Placement	4	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

• $\uparrow$ 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.
• $\overline{2}$ Ocean accepted the issue of 17,480,547 fully paid ordinary shares in satisfaction of interest of $804,105 at 4.6¢ per share.
• $\mathbf{3}$ Share issue costs of $33,000 were offset against issued capital as allowed by Australian Accounting Standards.
• $\mathbf{A}$ 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.
• $\kappa$ In July 2004, RCFII advanced the Company $1,200,000 which was converted into 21,554,172 fully paid ordinary shares, following shareholder approval.
• $\ddot{\mathbf{s}}$ 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.

19) OPTIONS

a) Option Reserve

	Consolidated	Company
	30 June30 June20042005		2005		30 June	30 June2004
	$'000	$'000	$'000	$'000
Option reserve at the beginning of thefinancial period	2.443	1.959	2.443	1.959
Options issued during the financial period	$\sim$	484		484
Option reserve at the end of the financialperiod	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:

• each unlisted option entitles the holder to subscribe for one ordinary share at the specified ${i}$ exercise prices set out below:
• the unlisted options are exercisable at any time up to 5.00pm Perth. Western Australia time on $(ii)$ the dates set out below 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

		Number ofOptions	ExercisePrice	Expiry Date
Date30 Jun 03	DetailsBalance	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 08to 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

. . . . . . . . . . . . . . . . . . . .

20) ACCUMULATED LOSSES

CONDITIONS FER EXPOSED	Consolidated			Company
	30 June2005$'000	30 June2004$'000	30 June2005$'000	30 June i2004$'000
Accumulated losses at the beginning of thefinancial 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 financialperiod	(117,423)	(115, 835)	(128, 910)	(128,460)
21)OUTSIDE EQUITY INTEREST
Outside equity interest in:
contributed equity		22,160
accumulated losses opening balance$\blacksquare$		(2,403)
retained loss current period$\blacksquare$		(913)
		18,844

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:
30 June 2005	Floating	1 year or	Over 1 to	Non-interest
Financial assets	Interest rate$'000	less$'000	5 years.$'000	bearing$'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			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

$\mathbf{c}$ Net Fair Value of Financial Assets and Liabilities

$(i)$ 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.

$(ii)$ 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.

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

On balance sheet financialinstruments	CarrvingAmount$'000	Net FairValue$'000	CarryingAmount$'000	Net FairValue$'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:

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

$\uparrow$ H G Tuten is the Chairman of RCF Management LLC, the management company of RCF

$\overline{2}$ 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 held by directors of the Company and consolidated entity or their director-related entities in the Company:

production of the community of the		Balance at start of Movements during Salance at end of
Directors	year	the year	year
S J C Wise		$\blacksquare$
E Eshuys		35,000,000	35,000,000
R Knight
H G Tuten
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	55,990,026	(3, 127, 347)	52,862,679

Mr 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 Mr 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.

. . . . . . . . . . . . . . . . . . . .

24)		REMUNERATION OF AUDITORS
			Consolidated			Company
			30 June -2005.	∴30 June2004	30 June 2005	30 June2004
			s	£	s
	remuneration:	During the year the auditor of the Company,and its related practices earned the following
		PricewaterhouseCoopers
		Remuneration for audit or review of thefinancial reports of the Company or any entityin the consolidated entity	126,632	117,786	126,632	74,486
		Remuneration for other services:
		Taxation service and general advice	108,726	29,200	108,726	17,200
			235,358	146,986	235,358	91,686
25)		CONTINGENT LIABILITIES
		Details and estimated maximum amounts ofcontingent liabilities, for which no provisionsare included in the accounts, are as follows:
a)		Guarantees and Undertakings
	(i)	The Company has givenundertakings to two of itscontrolled entities that it intends toprovide the necessary financial orother support to enable them tomeet their obligations as andwhen they fall due
	(ii)	Indemnity to the Company'sfinanciers in respect of guaranteesprovided by the bankers to theWestern Australian Department ofIndustry and Resources - seeNote 7 (cash backing of bonds)and Note 16 (details of a bankguarantee 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.

$\mathsf{c}$ Litigation

Westgold $(i)$

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 failing 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.

$(ii)$ Kinostream

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 STATEMENTS for the year ended 30 June 2005

26) COMMITMENTS FOR EXPENDITURE

	UVINIBUTION OF CALCINUM	Consolidated
		30 June	30 June	Company30 June	30 June
a)	Exploration	2005	2004	$-2005$	2004
	In order to maintain rights of tenure tomining tenements, the consolidated entityis required to outlay in 2004/05 fortenement rentals and minimum explorationexpenditure requirements of the WesternAustralian Department of Industry andResources. This requirement in 2004/05will continue for future years with theamount dependent upon tenement holdings	s13,746	S2,669	$13,746	S1,762
b)	Hire Purchase Commitments
	Analysis of hire purchase commitments:Payable not later than one year (referNote 16)Payable later than one year, not laterthan five years (refer Note 16)	76	18875	76	18875
		76	263	76	263
	These commitments relate to plant andequipment and are based on the cost of thevehicles and are payable over a period ofup to 48 months.
C)	Analysis of Non-Cancellable OperatingLease Commitments
	Payable not later than one yearPayable later than one year, not later thantwo years	154	239147	154	239147
		154	386	154	386
	The non-cancellable operating leasecommitments are the net rental paymentsassociated with rental properties
27)	EMPLOYEES
a)	Employment Benefit Liabilities
	Provisionfor employeebenefitsanddirectors'benefits and relatedon-costliabilities
	Current (Note 17)	119	751	119	751
	Non-current (Note 17)		78		78
		119	829	119	829
		Number2005	Number2004	Number2005	Number2004
b)	Number of Employees
	Number of employees at financial year end	33	41	33	36

$\mathbf{C}$ 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.

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

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

. . . . . . . . . . . . . . . . . . . .

$d)$ Amounts receivable from and payable to entities in the wholly-owned group and controlled entities $\hat{S}$ , we have the set of $\hat{S}$ and a straight

	Company is a company of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of the state of t
	30 June 2005 30 June 2004$'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 Company30 June 2005 2004
A LOCAL CONTRACTOR COMMUNICATION CONTRACTOR IN THE CONTRACTOR OF THE CONTRACTOR OF THE CONTRACTOR OF THE CONTRDirector
K A Dundo	2.030
H G Tuten		8,249.863

• $\overline{1}$ 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.
• $\overline{2}$ 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. T 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.

			$\sim$ Equity holding $\sim$	Cost of Company's investment
	Class of		June 2005	June 2005	June 2004
Name of entity	Shares	℅	%	$'000	$'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
				179	38,317

* 100% subsidiary of NuStar

Each company in the consolidated entity was incorporated in Australia.

$\left( 1\right)$ 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.

$30l$ RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

		Consolidated		Company
	30 June 2005	130 June 2004	30 June 2005	30 June 2004
	Ŝ	ŝ	$	$
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 ininvestments and assets	1,023	312	773	12,348
Write down of explorationtenements	775	318	775	318
Provision for diminution ofexploration 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 withshares		1,707		1,707
Convertible note borrowing cost		739		739
Interest on NuStar Ioan account				(841)
NuStar administration service fee				(182)
Provision for non-recovery ofsubsidiary loan				270
Loss on subsidiary becoming anassociate	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 otherdebtors	(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 othercreditors, employee entitlementsand provisions	4,146	(3,624)	9,563	(4,460)
Net cash (used in)/provided byoperating 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 $\circ$ 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 $\circ$ satisfaction of interest of $804,105.

• On 1 December 2004, the Company issued 21,554,172 fully paid ordinary shares to Resource $\circ$ 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 $\sim$ 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 $\circ$ 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 $\Omega$ 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 $\circ$ 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 FACILITIES

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

	30 June2005cents/share	30 Juni2004cents/share
Basic and diluted loss per share	(1.04)	(4.70)
	$'000	$'000
Retained loss for the year used in the calculation of basicearnings per share	(6,697)	(24, 315)
	Number	Number
Weighted average number of fully paid ordinary shares on issueduring 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 issueduring 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 $\Omega$ underground operations at Marvel Loch:
• An on-market share buy-back to buy back up to 10% of the Company's issued capital $\circ$ (56,653,335 shares); and
• $\circ$ 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, vielding total proceeds of $6M.

Alberta

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2005

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 @ 2.5a/t for 180.000oz of cold.

$34)$ 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 quaranteed 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 IFRS

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 AIFRS 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.

Adjustments Required on Implementation of IFRS 30 June2005

			ConsolidatedCompany
			30 June	30 June	30 June	30 June
		Notes	2005$000	2004$000	2005$000	2004$000
a).under AIFRS	Reconciliation of equity aspresented under AGAAP to that
Total equity under AGAAP			20,073	44,852	8,586	13,383
(net of tax)	Adjustments to accumulated losses
Share based payment expense		(i)	(664)		(664)
Revaluation of available for saleinvestments		(v)	773		773
	Accounting for impairment of assets	(iii)	(14, 192)	(14, 192)
entity	Profit on deconsolidation of controlled	(iii)	14,192
			109	(14, 192)	109
tax)	Adjustments to other reserves (net of
Share based payment reserve		(i)	664		664
Investments fair value reserve		(v)	113		113
			777		777
Total equity under AIFRS			20,959	30,660	9,472	13,383
b).under AIFRS	Reconciliation of net loss aspresented under AGAAP to that
	Net loss attributable to members of theCompany as reported under AGAAP		(6,697)	(24, 315)	(5,559)	(31,929)
Adjustments to net loss
Share based payment expense		(i)	(664)		(664)
sale	Revaluation of investments available for	(v)	773		773
entity	Profit on deconsolidation of controlled	(ii)	14,192
Accounting for impairment of assets				(5,621)
Net (loss) attributable to outside equityinterests				6,369
Net loss attributable to members of theCompany under AIFRS			7,604	(23, 567)	(5,450)	(31,929)

Notes Explaining the Impact of Adopting AIFRS

Equity-based compensation benefits i}

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 quidance has been used in determining the share based payments recognised in this disclosure.

Non-current assets held for sale ii)

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.

Impairment of assets iii)

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 noncurrent 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 cash-generating 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.

Financial instruments v).

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.

$\cdots$

DIRECTORS' DECLARATION

In the directors' opinion:

• the financial statements and notes set out on pages 18 to 52 are in accordance with the $(a)$ Corporations Act 2001, including:
  • complying with Accounting Standards, the Corporations Regulations 2001 and other i) 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
• $(b)$ there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
• the remuneration disclosures set out on pages 9 to 15 of the Directors Report comply with $(c)$ Accounting Standard AASB 1046 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 Eshuvs Director

Perth, 30 September 2005

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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 9 to 15 of the directors' report comply with Accounting Standard AASB 1046 Director and Executive Disclosures by Disclosing Entities (AASB 1046) and the Corporations Requlations 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 9 to 15 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

PricewaterhouseCoopers ABN 52 780 433 757

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

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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 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 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.

Pricevorberhouseloopers

PricewaterhouseCoopers

Savid J. Look

David J Smith Perth Partner

1 October 2005