ST BARBARA LIMITED — Capital/Financing Update 2005

Mar 21, 2005

ST BARBARA MINES LIMITED

ACN 009 165 066

$\overline{ASX}$ SHAREHOLDERS REPORT

Enquiries regarding this report may be directed to:

Eduard Eshuys

Managing Director & CEO +61 8 9476 5555 Telephone

St Barbara Mines Limited ACN 009 165 066 Level 2, 16 Ord Street West Perth Western Australia 6005 (08) 9476 5555 Telephone +61 8 9476 5555 Overseas

Eduard Eshuys Managing Director & CEO 21 March 2005

Acquisition of Sons of Gwalia Gold Division Assets

St Barbara Mines Limited ("the Company") has acquired the Gold Division of Sons of Gwalia Ltd ("SGWGD") for consideration consisting of a cash payment of $2.3M, the replacement of existing bank environmental Performance Bonds guaranteed totalling $30M and the assumption of additional performance bonds of up to $5.7M. Possession will take place on 28th March 2005.

The acquisition of SGWGD consists of a land position totalling approximately 10,000 km2 in the Leonora, Southern Cross and South Laverton regions of Western Australia. The land bank being acquired includes four processing plants, from which, production over the past eight years has averaged 400,000 oz pa. Mineral resources totalling 7.9M ozs and reserves of 0.85M ozs at 30th June 2004, less subsequent production of approximately 286,000 ozs, are part of the acquisition.

The acquisition is based on the assessment that Southern Cross and South Laverton operations are forecast to produce a total of 150,000 ozs to 30th December 2005 at an average cash cost of A$450/oz. Production post December 2005 will be the subject of intense review during the June 2005 quarter. South Laverton production is currently scheduled to be suspended on 30th June 2005.

In addition to the near term forecast gold production, the Company considers there is substantial exploration potential across the vast land holding to expand the existing mineral resources and re-establish reserves and for additional gold, nickel and base metals discoveries.

New gold exploration by the Company on the SGWGD assets will initially focus on the granite mineralisation at Tarmoola and at Gwalia Deeps in the Leonora region, the Red October and Jubilee Well areas in the South Laverton region and Yilgarn Star, Southern Cross Camp and Marvel Loch in the Southern Cross region. Nickel sulphide exploration targets have been identified in the Leonora and Southern Cross regions and will also be aggressively pursued. An exploration budget of $5M to December 2005 for the SGWGD assets has been allocated to begin testing the exploration potential of the acquired properties during the September 2005 quarter.

The environmental bond guarantee facility ("Performance Bond Facility") and a bridge loan facility of ("Bridge Facility") totalling A$40M have been offered to the Company by Resource Capital Fund III LP ("RCFIII"), a fund managed by the same group as Resource Capital Fund II LP, the Company's largest shareholder.

The combination of a local bank supported by RCFIII and/or cash backing will enable the provision of the Performance Bonds to the Department of Industry and Resources ("DoIR"). Additional Performance Bonds of $5.7M have been proposed by DoIR with the final terms and level of bonding subject to review and discussion. Performance Bonds thus may ultimately total $35.7M.

It is anticipated however that reductions in Performance Bonds can be achieved over the and bevond through next 12 months completing rehabilitation of mining areas, transfer of haul roads to local government infrastructure control and the sale of assets and the related Performance Bonds.

It is intended that the Company draws $7M from the RCFIII bridge loan facility on the Closing Date of 28th March 2005 to cover the cash payment, implementation and transactions costs and project working capital. This draw down will have a conversion price of 7 cents per Company share, subject to shareholder approval by 30th November 2005.

RCFIII has been granted a 1.5% royalty on future gold production at Meekatharra from 1st July 2007 onward, and on the acquired SGWGD assets post 1 January 2006, for arranging the acquisition financing facilities. These royalties can be reduced to 1% should certain commercial arrangements be achieved. In addition, a 0.5% fee to arrange certain bank guarantee facilities and 8% interest on funds drawn under its bridge loan facility are payable.

If Performance Bonds are not replaced by cash from the sale of assets or refinanced by another party, cash drawn down from the Bridge $to$ provide cash backing Facility for Performance Bonds may be converted to equity (also subject to shareholder approval) at the lower of:

• · closing market price at 25th February 2005 being 6.6 cents/share;
• · closing market price at Closing Date of 28th March 2005; or
• · the lowest, if any, 2005 Company equity raising issue price after Closing Date.

The Company is granting the Vendor first ranking security over the assets being acquired and $5M in a cash escrow account to secure the provision of back-to-back guarantees to cover existing performance bonds, within 60 days of execution. Upon the receipt $of$ these replacement guarantees, the cash escrow account shall be released and the Vendor's security will continue as second ranking and be discharged when tenements transfers are registered. At the time when the replacement securities are provided, the Company is required to grant RCFIII first ranking security over the Company's assets to secure the Performance Bond Facility and the Bridge Facility.

If the company does not draw down the Performance Bond Facility and the Bridge Facility, then (subject to the requisite approvals of shareholders of the Company), the Company must pay to RCF III a termination fee of 5 million three-year options to acquire shares in the Company exercisable at 7 cents per share.

Meekatharra

Exploration is continuing at the Company's 100% owned Paddys Flat and Reedys projects with significant results being achieved from the initial drilling at Reedys including:

• Hole $001 18.5m \ @ 2.9g/t$ from 360m
• $\cdot$ Hole 002 14m @ 2.2g/t from 343m
• $\cdot$ Hole 005 48m @ 2.6g/t from 234m including 12m @ 7.4g/t from 234m

The strategy to promptly re-establish reserves at Paddys Flat and Reedys with the objective of recommencing gold production at the Bluebird plant during the September 2006 quarter remains on schedule.