STREAMPLAY STUDIO LIMITED — Annual Report 2006

Oct 22, 2006

REVIEW OF OPERATIONS

WADI ALLAQI PROJECT SEIGA GOLD PROSPECT DRILL HOLE LOCATION PLAN

Of particular significance are the wide intersections recorded in holes CRC040 and 041 as these two holes are adjacent to each other and indicate a mineralised zone of at least 25m horizontal width at an average grade of 1.4g/t Au.

Significant gold mineralisation has now been confirmed over a strike length of 800m of the Seiga shear. Considerable potential exists beyond the zone tested to date as significant mineralisation occurs at both ends of the shear. Further drilling will be required to the north-west and south-east to determine the full extent of the mineralisation. Drill pads to test a further 700m of the shear to the north-west have been prepared. Similarly drill pads have been prepared to test 400m of the shear to the south-east.

SHASHOBA

Shashoba is located 6km to the south-east of Seiga. Exploration completed during the year included trenching and RC drilling. Forty RC drill holes were completed for a total of 1,636m testing old workings and some gold geochemical targets detected during previous exploration work by the company. The historical workings are mainly located along the margins of a 250m wide, northerly trending shear zone.

The best results were recorded from the south side of a hill adjacent to historical workings located on the eastern side of the shear zone. Hole SRC006 intersected 32m at 2.2g/t Au from 16m. The intersection included 16m at 4.4g/t from 16m. Hole SRC007 drilled 30m to the southwest intersected a 48m wide zone of mineralisation at 1,93a/t from 12m. Hole SRC008, located 25m southwest of hole SRC007, intersected 4m at 1.33g/t Au. The three holes intersected a zone of mineralisation (>0.5g/t Au) approximately 50m wide which has yet to be tested to the north.

A line of widely spaced shallow holes located 75m to the southeast of holes SRC006 & 7 tested an area of colluvium overlying a hard silcrete layer. The best intersections included 8m at 1.06g/t Au from 4m in SRC017 and 12m at 0.46g/t Au from 4m in hole SRC018. These intersections are particularly significant as they confirm the presence of mineralisation to the south of the historical workings in an area devoid of any previous workings.

Gippsland Limited Annual Report 2006

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The drilling results correspond with a geochemical anomaly identified during a previous regolith survey by the Company that extends for a further 300m to the south.

Hole SRC012 drilled 100m to the north of holes SRC006 & 7 intersected 24m at 0.26g/t Au. The results represent footwall mineralisation as the hole did not extend to sufficient depth to intersect the old workings. Hole SRC014 tested some isolated old workings 500m to the northeast and intersected 20m at 0.94g/t from 8m with a best intersection of 4m at 3.07g/t Au.

Additional reconnaissance drilling testing geochemical targets at selected sites along the shear zone intersected anomalous gold values in ten of the RC drill holes.

Table 1 Shashoba - best results from geochemical targets

		Interval
Hole	From (m)	(m)	Gold (g/t)
SRC017	4	я	$\sim$ -1.06 $,$
SRC018			0.33
SRC023			2.11
SRC024			2.35
SRC025	-32		2.62
SRC030	28		-6.91
SRC032			0.26
SRC034			0.74
SRC035	20		0.94
SRC039	36		0.50
SRC040	28		4.60

WADI ALLAQI PROJECT SHASHOBA GOLD PROSPECT

The high proportion of holes containing significant gold values is indicative of the widespread mineralisation within the Shashoba shear system. Additional drilling will be required to follow-up the anomalous intersections and also to drill test the extensions to the shear zones.

Geological mapping has located historical workings over a distance of 1.9km to the north which combined with the 300m geochemical anomaly to the south gives a total strike length of 2.2km of potentially mineralised shear which is open at each end.

Additional drilling is planned to test a number of high priority targets identified as a result of the recent drilling programme. While the evaluation of Shashoba is at an early stage, the area clearly has considerable potential.

HAIMUR

At Haimur ancient workings are located along a series of sub parallel lodes of mineralisation. Ancient miners exploited the high grade mineralisation from multiple quartz veins associated with a northeast trending shear and stoped down to depths of around 30m. In the early 1900s the Nile Valley Company constructed five adits beneath the ancient surface workings and produced a small amount of very rich ore by driving along two of the lodes.

Away from the ancient workings recent geological mapping has identified a large shear zone trending parallel to the historical workings some 50-250m to the northwest. Three occurrences of placer gold workings have been located along this shear. Past exploration by the Company has included rock chip sampling, regolith geochernical survey and mechanical trenching which resulted in the delineation of some large gold geochemical anomalies.

REVIEW OF OPERATIONS

At Haimur 46 holes totalling 1,387m were completed. The majority of the holes tested geochemical targets identified from previously completed regolith and trenching programs. Five holes tested old workings at Haimur South and two holes at Haimur North.

The best result was from a single hole (HRC034) drilled below an ancient stope at Haimur North and adjacent to a shaft sunk by the Nile Valley Company in the early 1900s. Hole HRC034 intersected 28m at 0.74g/t Au from 0m. Another hole (HRC030) located 30m to the west intersected 2m at 6.91g/t Au from 28m to the bottom of the hole and may represent the lateral continuation of the mineralisation in HRC034. At Haimur South significant mineralisation was intersected in two holes. Hole HRC043 intersected 20m at 0.71g/t Au from 4m and HRC044 intersected 20m at 0.55g/t Au from 4m.

Testing of the regolith geochemical anomalies returned anomalous results in thirteen of the 39 holes drilled. The results are considered significant as the drilling was widely spaced.

Table 2 Haimur - best results from geochemical targets

		Interval
Hole	From (m)	(m)	Gold (g/t)
HRC008	. വ	$-8$	$-0.34$
HRC009	- 12		0.35
HRC010	8		0.23
HRC012			0.19
HRC013	16		$-0.47$
HRC016			0.11
HRC019	28	≂ohª 2	0.20
HRC020	12		0.23
HRC022	28		3.11
HRC023	16		0.26
HRC024	24		0.19
HRC025	28	Eoh 2	0.89
HRC027	28	Eoh 2	1.01
HRC043		20	0.71
HRC044		20	0.55

1 Eoh = end of hole

GARAYAT

A small amount of mechanical trenching was completed to the north from the Garayat mine workings at Block A and Wells Area E. Shear structures were mapped and sampled in the trenches with the best gold value recorded from a trench at Block A with 7m at 0.76g/t Au.

A small amount of RC drilling was completed in July 2006. A profile of holes was drilled to the north of the Garayat mine but the shear structure was not located. Four holes were completed at Block A with some anomalous gold values recorded from the shear.

TIUR

The Tiur gold mine was known to the ancients who extracted a considerable quantity of ore. Mining during the early part of the 1900s exploited a series of rich shoots down to depths of 90m.

Trenching by the company early in 2006 identified the shear over the length of the tenement but with only minor gold values. Five RC holes were drilled during June 2006 again with only minor gold vales being encountered. The main drill target was not tested due to poor ground conditions.

ABU SWAYEL (Cu-Ni)

The ancient Egyptians mined copper from shallow open cut workings which can be traced over a length of 180m. In the early part of the 1900s the Nile Vallev Company sank a shallow shaft with a cross-cut at the 22m level to test the vertical continuity of the mineralisation. In the 1960s the shaft was deepened to 69m and ten diamond drill holes were completed to test the down dip continuity of the mineralisation over a strike length of 200m. Of the 1,205m of drilling completed, only 21 samples ranging from 1-2m in length were assayed.

The Abu Swayel licence covers 16km2 of favourable stratigraphy along strike from the old workings which have not been tested for Cu-Ni mineralisation. Much of the area is covered by wadi sediments which can be readily explored by means of ground geophysical methods.

7EEHAN

The Zeehan tin (Sn) deposit is located within a major tin province in the northwest of Tasmania approximately 15km from the large Renison tin deposit.

Tin mineralization occurs as cassiterite and stannite in four deposits; Queen Hill, Severn, Montana and Golf Course.

Past drilling totalling 23,000m has established the presence of a substantial tin resource. The Severn deposit, the largest of the four, is located approximately 120m below the surface and is considered to be open at depth. To a depth of 500m below surface, the inferred resources include 5.1Mt at 0.6% Sn within the 1% mineralised envelope. At Queen Hill the mineralization outcrops on a hill approximately 300m due west of the Severn deposit and contains indicated resources of 1.8Mt at 0.82% Sn. The mineralisation includes minor amounts of copper, lead, zinc and silver.

Gippsland has a joint venture at Zeehan with Western Metals Limited whereby Gippsland has a 40% interest in the project and is free carried to the end of feasibility. Western Metals may earn up to 70% equity in the project by completing a feasibility study acceptable to a project finance bank.

The Zeehan deposit is held in the form of a Retention Licence number 5/1997 which is in good standing with the Department of Infrastructure, Energy and Resources - Mineral Resources of Tasmania.

In light of the recently improved price of tin, the Company is currently considering various commercial and technical options regarding the project.

FINANCIAL STATEMENTS

HRIANGIAL SIATIMENTS

Gippsland Limited Annual Report 2006

GIPPSLAND LIMITED AND ITS CONTROLLED ENTITIES ABN 31.004 766 376

Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been applied for the entire financial year lended 30 June 2006.

Board Composition

The skills, experience and expertise relevant to the position of each director who is in office at the date of. the annual report and their term of office are detailed in the director's report.

The names of the independent directors of the company are:

John Stuart Ferguson Dunlop John Damian Kenny

When determining whether a non-executive director is independent the director must not fail any of the following materiality thresholds:

• less than 10% of company shares are held by the director and any entity or individual directly or indirectly associated with the director; no sales are made to or purchases made from any entity or individual directly or indirectly associated with the director; and -none of the directors income or the income of anindividual or entity directly or indirectly associated with the director is derived from a contract with any member of the economic entity other than income derived as a director of the entity.

Independent directors have the right to seek independent professional advice in the furtherance of their duties as directors at the company's expense. Written approval must be obtained from the chairman prior to incurring any expense on behalf of the company.

Trading Policy

The company's policy regarding directors and employees trading in its securities is set by the board. The policy restricts directors and employees from . acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security's prices.

Audit Committee

The board considers that the company is not of size. nor are its financial affairs of such complexity to justify the formation of an audit committee. The board as a whole undertakes the role of the audit committee.

Performance Evaluation

The board has adopted a self-evaluation process to measure its own performance during the financial year. An annual review is undertaken in relation to the composition and skills mix of the Directors of the company.

Remuneration Policies

The remuneration policy, which sets the terms and conditions for the senior executives, was developed by the board. The board reviews executive packages annually by reference to company performance, executive performance, comparable information from industry sectors and other listed companies. The policy is designed to attract the highest calibre executives and reward them for performance which results in long-term growth in shareholder value.

The amount of remuneration for all directors, including all monetary and non-monetary components, are detailed in the Note 6 to the financial report. All remuneration paid to executives is valued at the cost to the company and expensed.

The board expects that the remuneration structure implemented will result in the company being able. to attract and retain the best executives to run the economic entity. It will also provide executives with the necessary incentives to work to grow long-term. shareholder value.

The payment of options and other incentive payments are reviewed by the board annually as part of the review of executive remuneration.

Remuneration Committee

The board considers that the company is not of size, nor are there sufficient executives to justify the formation of a remuneration committee. The board as a whole undertakes the role of the remuneration committee.

CORPORATE GOVERNANCE STATEMENT

Explanations for Departures from Best Practice Recommendations

During the financial year the company has complied with the majority of the ten essential corporate. governance principles and the corresponding best practice recommendations as published by the ASX Corporate Governance Council except as detailed below:

Council Recommendation 2.2

The chairperson should be an independent director

The company's chairman. Mr Robert John Telford, is considered by the board not to be independent in terms. of the ASX Corporate Governance Council's definition of independent director. However, the board believes. that the chairman is able and does bring quality and independent judgement to all relevant issues falling. within the scope of the role of chairman.

The board considers that the company is not currently. of a size, nor are its affairs of such complexity to necessitate the appointment of an independent non-executive chairperson.

Council Recommendation 2.3.

The roles of chairperson and chief executive officer should not be exercised by the same individual.

The company's chairman Mr Robert John Telford currently holds the position of both chairperson and chief executive officer. The board recognises the importance of independence in decision-making, however believes that Mr Telford is the most appropriate person for the position due to his extensive industry. experience and previous record as chairman. The board recognises that Mr Telford has been a major force in the company's success and that as the company enters. its next growth stage, Mr.Telford's industrial experience and strong and effective leadership will be beneficial.

Council Recommendation 2.4

The board should establish a nomination committee

The board considers that the company is not currently of a size to justify the formation of a nomination. committee. The board as a whole undertakes the process of reviewing the skill base and experience of existing directors to enable identification or attributes required in new directors. Where appropriate independent consultants are engaged to identify possible new candidates for the board.

Council Recommendation 4.2

The board should establish an audit committee

Refer comments above in the corporate governance statement on the audit committee.

Council Recommendation 4.3

Structure the audit committee so that it consists of:

• only non-executive directors; ⋫
• a majority of independent directors;
• an independent chairperson, who is not chairperson of the board;
• at least three members. ⊗.,

Refer comments on council recommendation 4.2

Council Recommendation 4.4

The audit committee should have a formal operating charter, Refer comments on council recommendation 4.2

Council Recommendation 9.2

The board should establish a remuneration committee. Refer comments above in the corporate governance statement on the remuneration committee.

Your directors present their report on the company and its controlled entities, for the financial year ended 30 June 2006.

DIRECTORS

The names of directors in office at any time during or since the end of the year are:

Robert John Telford John Morrison Chisholm. John Stuart Ferguson Dunlop John Damian Kenny

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

COMPANY SECRETARY

The following person held the position of company secretary at the date the accounts were signed:

Mr Rowan St John Caren - Bachelor of Commerce. Chartered Accountant, Mr Caren was employed by a first tier chartered accountancy firm in Australia and overseas for six years and has been directly involved in the minerals exploration industry for a further ten. years. Mr Caren also provides company secretarial and corporate advisory services to several exploration companies and is a member of the institute of Chartered Accountants in Australia.

PRINCIPAL ACTIVITIES

The principal activities of the economic entity during the financial year were the:

. exploration and development of commercially and economically viable mineral resources.

There were no significant changes in the nature of the economic entity's principal activity during the financial year.

Operating Results

The consolidated loss of the economic entity after providing for income tax and eliminating minority equity interests amounted to $3,648,729.

DIVIDENDS

No dividend was paid or declared during the financial year and the directors do not recommend the payment of a dividend for the financial vear ended 30 June 2006.

review of operations

A detailed review of the company and the economic entity's activities during the financial year is set out in. the section titled "Review of Operations" in this Annual Report.

FINANCIAL POSITION:

The net assets of the economic entity have increased by $3,219,135 to $3,790,722 at 30 June 2006. This increase has largely resulted from the following factor:

· proceeds from share issue raising $6,790,038

The economic entity's strong financial position has enabled the group to focus on:

• . updating the bankable feasibility study for the Abu Dabbab tantalum project in Egypt; and
• increasing the amount of exploration work . ۱ undertaken in the Wadi Allagi region of Egypt.

The directors believe the company is in a strong and stable financial position to expand and grow its current operations.

SIGNIFICANT CHANGES IN STATE-OF. affairs

The following significant changes in the state of affairs of the parent entity occurred during the financial year:

• a) On 10 October 2005 the company issued 15,000,000 ordinary shares at $0,093 each.
• b) On 17 March 2006 the company issued 24,000,000 ordinary shares at $0.115 each
• c) On 31 May 2006 the company issued 25,000,000 ordinary shares at $0.108 each to IFC.

ADOPTION OF AUSTRALIAN EQUIVALENTS JO IFRS

As a result of the introduction of Australian equivalents to International Financial Reporting Standards (AIFRS), the company's financial report has been prepared in accordance with those Standards. A reconciliation of adjustments arising on the transition to AIFRS is included in Note 2 to this report.

After balance date events

No matters or circumstances have arisen since the end of the financial year which significantly affected or. may significantly affect the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future financial years.

PUTURE DEVELOPMENTS, PROSPECTS and business strategies

Information as to fikely developments in the operations of the Company and the economic entity and the expected results of those operations in future financial years has not been included in this report because, in the opinion of the Directors, it would prejudice the interests of the Company and the economic entity.

ENVIRONMENTAL ISSUES

The economic entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation. However, the board is committed to achieving a high standard of environmental performance, and regular monitoring of potential environmental exposures is undertaken by management. The board considers that the economic entity has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the economic entity.

The economic entity is required to carry out its activities in accordance with the Mining Laws and regulations in the areas in which it undertakes its exploration activities.

INFORMATION ON DIRECTORS

Robert John Telford (Executive Chairman) AWAIT (Chem), M RACI

Mr Telford holds an Associate degree in Pure Chemistry (Organic and Inorganic) having graduated from the Institute of Technology of Western Australia (now Curtin University) in 1967.

Mr Telford has been a major shareholder in . technology-based industries for some 30 years in the capacity of chief executive officer ("CEO"). He has been involved in the pharmaceutical industry having been a past chairman and major shareholder of the company inovax Limited. Mr Telford has held the position of CEO in companies involved in inorganic. and organic chemical manufacture for some 15 years. He has been involved in the international resource industry for some 16 years via private and public companies and in the main is responsible for securing the Company's interest in its Egyptian resource projects.

Interest in Shares and Options - 13,568,124 ordinary shares in Gippsland Limited and listed options to acquire a further 6,558,322 ordinary shares.

John Morrison Chisholm (Executive Director) B Sc (Hons), PhD, F AusIMM, F AIG

Dr Chisholm is a geologist with a wide experience in exploration geology and exploration management having worked as a lecturer at the University of Western Australia and Curtin University prior to working for various international mining companies. He was formerly an adjunct associate professor in economic geology at Curtin University.

In 1984 he joined Western United Mining Services Pty Ltd during which time as managing director he managed a large group of geoscientists and was involved in the discovery of the Transvaal and Bounty mines.

He is a Fellow of both the Australian Institute of Geoscientists and the Australasian Institute of Mining and Metallurgy with Chartered Practising status in . Geology. Dr Chisholm was one of the first geologists in Australia to have been awarded Practising. Chartered Status in geology by the Australasian Institute of Mining and Metallurgy which is the highest level of recognition that can be attained by professional geologists.

Interest in Shares and Options - 50,000 ordinary shares and listed options to acquire a further 2,260,000 ordinary shares.

John Stuart Ferguson Dunlop (Non-Executive Director)

BE, M Eng Sc, P Cert Arb, CP, F AustMM, F IMMM, M SME, M CIMM, M MICA

John Stuart Ferguson Dunlop (aged 55) holds Bachelors and Masters Decrees in Mining Engineering from the University of Melbourne. He is a certified Mine Manager having approximately 35 years of international surface and underground mining experience in a variety of base metal, industrial and precious metal production and management situations.

He is a Director of the Australasian Institute of Mining and Metallurgy (AustMM) and Chairman of its affiliate, the Mineral Industry Consultants Association (MICA).

Mr Dunlop is a highly experienced mining professional having been involved in the design, construction and on-going operation of a number of major resource. projects throughout the world. He has a detailed knowledge of the Company's 40Mt Abu Dabbab tantalum project in Egypt having been involved in the. preparation of the project's Bankable Feasibility Study.

He has operated his own mining consulting firm based in Perth since 1992 and was previously a senior executive with BHP's (now BHP Billiton) Minerals Division, before becoming General Manager Operations for Aztec Mining Co Ltd until this company's takeover by Normandy Mining Ltd.

Interest in Shares and Options - Unlisted options to acquire 2,250,000 ordinary shares.

John Damian Kenny (Non-Executive Director) B Com (Hons), LLB Mr Kenny a corporate and resources lawyer has a specialised interest in venture capital, initial public offerings and mergers and acquisitions. He has extensive experience in public equity fundraisings and the pricing of equity, debt and derivative securities.

Interest in Shares and Options - Listed options to acquire 2,250,000 ordinary shares.

remuneration report

This report details the nature and amount of remuneration for each director of Gippsland Limited, and for the executives receiving the highest remuneration.

Remuneration Pollov

۰

The remuneration policy of Gippsland Limited has. been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives. The board of Gippsland Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the economic entity, as well as goal congruence between directors, executives and shareholders.

The board's policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is as follows:

The remuneration policy, setting the terms and conditions for the executive directors was developed and approved by the board.

All executives receive a base salary (which is based on factors such as length of service and experience) and options.

The board reviews executive packages annually by reference to the economic entity's performance. executive performance and comparable information from industry sectors.

All remuneration paid to directors and executives is valued at the cost to the company and expensed.

The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the option plan.

Company performance, shareholder wealth and director and executive remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. This achievement of this aim has been through the issue of options to the majority of directors and executive to encourage the alignment of personal and shareholder interests. The company believes this policy to have been effective in increasing shareholder wealth over the past four years.

The following table shows the gross revenue, net. losses and share price at the end of the respective financial years. Analysis of the actual figures shows an, increase in losses as a consequence of the feasibility studies into the Abu Dabbab tantalum project : and exploration at the Wadi Allaqi projects. The improvement in the future outlook for the company is reflected in the share price which has increased over the past four years with the exception of 2006, where the share price fell slightly. The board is of the opinion that these results can be attributed in part to the previously described remuneration policy.

interest to a construction of the
.المتوري والمحافظة فالمحافظ والمحافظ	2002	2003*	2004'	2005	2006
		give this weep.
			パイ1.564)	110Q,069,789)
– Share Price at Year–endi			3735	ISO 11consideration of the constant of the	i Serres erres @∩ t

Prepared under AGAAP. There are no material differences to the results if they were to be presented under AIFRS.

Details of Remuneration for year ended 30 June 2006

The remuneration for each director of the consolidated entity during the year was as follows:

	Salary,Fees andCommissions	Optionss	Total蠹
rectors
Telfort
IM Chis
JSF Dunigp
JD. Kenn			KK)
	-987		114

Options issued as part of remuneration for the year ended 30 June 2006

Options are issued to directors as part of their remuneration. The options are not issued based on performance. criteria, but are issued to all directors of Gippsland Limited and its subsidiaries to increase goal congruence between executives, directors and shareholders.

	Granted No	Options Grantedas part ofRemuneration	TotalRemunerationRepresentedby Options	OptionsExercised	Total
ns will expire on 31 December 2007l he (		and the

The exercise price ($0.15) of shares the subject of the options will be payable in full on exercise of the options.

(MEETINGS, OF, DIRECTORS

During the financial year, 9 meetings of directors were held. Attendances by each director during the year were as follows:

	Directors Meetings
	Numbereligible toattend	Numberattended
Directors
- RJ Telford
JM Chisholm
JSF. Dunlop
Kenny

INDEMNIFYING OFFICERS OR AUDITOR

During or since the end of the financial year the company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay an insurance premium for officers and auditors indemnity.

OPTIONS

At the date of this report, the unissued ordinary shares of Gippsland Limited under option are as follows:

- Grant Date	Date ofExpiry	ExercisePrice	NumberunderOption
Jan 2003'– Mar 2004	31/12/07		43,738,393.
$-21/01/05$	31/12/01
-15/02/06	.31/12/07	15	2,250,1
16/05/06	16/05/12. .	$0.135	$-25,000,000$

During the year ended 30 June 2006, the following ordinary shares of Gippsland Limited were issued on the exercise of options granted. No further shares have been issued since that date. No amounts are unpaid on any of the shares.

. Grant Date	Exercise Price	Number ofShares Issued
∵Jan 2003 —- -- Mar 2004	the contribution of the contract of the contract of the contract of the contract of the contract of the contract of	: 111, $0.09

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the company or 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 any part of those proceedings.

The company was not a party to such proceedings during the year.

INON-AUDIT SERVICES

The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed in Note 7 did not compromise the external auditor's independence.

AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration for the year ended 30 June 2006 has been received and can. be found on page 26 of the directors' report.

Signed in accordance with a resolution of the Board of Directors.

$610$

R J TELFORD, Director Dated this 22nd day of September 2006

AUDITOR'S INDEPENDENCE DECLARATION

AUDITOR'S INDEPENDENCE DECLARATION

Grant Thornton &

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Gippsland Limited for the year ended 30 June 2006, 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.

GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP

San Nill

SEAN MCGURK Partner

Dated this 22nd day of September 2006

INCOME STATEMENT FOR YEAR ENDED 30 JUNE 2006

$\mathcal{A}{\rm{max}}$ , $\mathcal{A}{\rm{max}}$

	Note	2006	2005	2006	2005
		S	4
Revenue		30,345	$-22.941$	30,345	$-22,941$
Foreign exchange gains (losses).		43,441	1(96,093)	43,441	(96,093)
Employee.expenses		(120, 650)	(128, 278)	(120, 650)	(128, 278)
Management and consulting expenses		(349, 102)	(139,968)	(349, 102)	(139,968)
Exploration and feasibility expenses		(2,092,108)	(1, 134, 564)	(2,092,108)	$\langle 1,098,146\rangle$
Corporate office expenses		(88,045)	(60, 958)	(88,045)	.(60,958)
Depreciation expense		(20,496)	(11, 496)	(20, 496)	(11, 496)
Provision for non-recovery of loans			(13, 123)	(489, 621)	(109,623).
Provision for diminution in value of investment		(5,310)	(13,124)	(5,310)
Travel and accommodation expenses		(215, 149)	$-(85,315)$	(215, 149)	(85,315)
AIM administration expenses		(163,527)	(156,309)	(163,527)	(156,309)
Other expenses from ordinary activities		(668,128)	(178,921)	(178,507)	(131,963)
Loss from ordinary activities before income tax				$(3,648,729)$ $(1,995,208)$ $(3,648,729)$ $(1,995,208)$
Income tax relating to ordinary activities
Net loss attributable to members of the parent entity			${3,648,729}$ (1,995,208)		$(3,648,729)$ (1,995,208)
Adjustments recognised directly in equity.			${69, 444}$ (74,581)		$(69,444)$ (74,581)
Total Equity changes			$(3,718,173)$ (2,069,789)		$(3,718,173)$ $(2,069,789)$
		and a more

Basic and diluted loss per share (cents per share)

٠	٠.٠٠.- sti٠.,
	×	٠.
	٠٠MAG٠٠

The income statements are to be read in conjunction with the accompanying notes to the financial statements.

BALANCE SHEET AS AT 30 JUNE 2006

			- 1023 - 123 - 123 - 123 - 123		finnsach na h-Anna Mh
	Note	2006$	2005$	2006$	2005S
CURRENT ASSETS
Cash and cash equivalents	-9	3,937,943	589,522	3,934,620	589,417
Trade and other receivables	$\triangleleft 0$	49,212	$-33,078$	49,212	33,078
Other assets	13	915	15,270	915	15,270
TOTAL CURRENT ASSETS		3,988,070	637,870	3,984,747	637,765
NON CURRENT ASSETS
Receivables -	10
Other assets	13			3,522	305.
Property, plant and equipment	12	35,685	41,942	35,685	41,942
TOTAL NON CURRENT ASSETS		35,685	41,942	39,207	42,247
TOTAL ASSETS		4,023,754	679,812	4,023,954	680,012
CURRENT LIABILITIES
Trade and other payables	$\uparrow$ 4	208,109	99,225	208,109	99,225
Provisions	16	9,923	9,000	9,923	9,000
TOTAL CURRENT LIABILITIES		218,032	108,225	218,032	108,225
NON CURRENT LIABILITIES
Provisions	16	15,000		15,000
TOTAL NON CURRENT LIABILITIES		15,000		15,000
TOTAL LIABILITIES		$233,032$ $^{\circ}$	$^{\circ}$ $^{\circ}$ 108,225 $^{\circ}$
net assets		3,790,722	11571,587	3,790,922	- 571,787
equity
Contributed equity				$22,658,274$ $15,868,236$ $22,658,274$ $15,868,236$
Reserves		$18.11777.827$ and $18.1177.827$		$\sim 77,827$
Accumulated losses				$(18,945,379)$ (15,296,649) $(18,945,179)$ (15,296,449)
TOTAL EQUITY		3,790,722		$-571,587$ 3,790,922	571,787

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

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

ren, k

Service Contractor

$\alpha$ , $\alpha$ , $\alpha$ , $\alpha$

STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2006

ECONOMIC ENTITY	Share CapitalOrdinary	RetainedEarnings	Option Reserve	Total
Balance at 1 July 2004	14,203,912,	(13,301,442)		902,470
Loss attributable to members of parent entity		(1,995,208)		(1,995,208)
Shares issued during the year	1,738,905			1,738,905
Transaction Costs.	(74, 581)			(74, 581)
Sub-total		5,868,236		571,586
Balance at 30 June 2005	15,868,236	(15, 296, 650)		571,586
Loss attributable to members of parent entity		(3,648,729)		(3,648,729)
Shares issued during the year	6,859,482			6,859,482.
Option reserve on recognition of bonuselement of options			-77,827	77,827
Transaction Costs.	(69, 444)			(69, 444)
Sub-total	22,658,274	-(18,945,379)	77,827	·3.790.722
Balance at 30 June 2006		22,658,274 (18,945,379)	77,827	3,790,722
PARENT ENTITY	Share CapitalOrdinary	RetainedEarnings	Option Reserve	Total
Balance at 1 July 2004	14,203,912	(13,301,242)		902,670
Loss attributable to members of parent entity		(1,995,208)		(1,995,208)
Shares issued during the year	1,738,905			1,738,905
Transaction Costs	(74, 581)			(74, 581)
Sub-total		15,868,236. (15,296,450)		-571,786
Balance at 30 June 2005	15,868,236	(15, 296, 450)		571,786
Loss attributable to members of parent entity		(3,648,729)		(3,648,729)
Shares issued during the year	6,859,482			6,859,482
Option reserve on recognition of bonuselement of options				77,827.
Transaction Costs	(69, 444)			(69, 444)
Sub-total-	22,658,274	$^{\circ}$ (18,945,179) $\pm$	- 177,827	3,790,922
Balance at 30 June 2006		$22,658,274$ (18,945,179)	77,827	3,790,922

The statements of changes in equity are to be read in conjunction with the accompanying notes to the financial statements.

CASH FLOW STATEMENT FOR YEAR ENDED 30 JUNE 2006

					1999 - Jan Berger, Amerikaansk ferstjer
	Note	2006S	2005Ś.	2006盎	2005S
CASH FLOWS FROM OPERATING ACTIVITIES
Other receipts			101.906		101,906
Interest received		30,345	,22,941	30,345	22,941
Payments for exploration and feasibilityexpenditure			$(2,012,737)$ $(1,219,906)$		$(2,012,737)$ $(1,183,487)$
Payments for administrative expenditure		${1,488,427}$	(884, 774)	${093,496}$	(837,817)
Net cash used in operating activities.			$(3,470,819)$ $(1,979,833)$		$(2,975,888)$ $(1,896,457)$
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investment in Tantalum Egypt LLC			(13, 124)
Loan to Egyptian Company for Mineral Resources			(13, 123)
Payment for investment in subsidiary				(8,528)	(5)
Loans to subsidiaries				(489, 621)	(109, 623)
Purchase of plant and equipment		(14, 239)	(39,962)	(14, 239)	(39, 962)
Net cash used in investing activities		${14,239}$	(66, 209)	(512, 388)	(149,590)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		6,859,482	1,738,905	6,859,482	$-1,738,905$
Transaction costs from issue of shares		(69,444)	(67,707)	(69, 444)	$-(57,707)$
Net cash provided by financing activities		6,790,038	1,681,198	6,790,038	1,681,198

$(364, 849)$

$(96,093)$

1,050,359

589,417

Net cash provi 3.304,980 $(364, 844)$ 3,301,762 Net increase/(decrease) in cash held 43,441 $(96,093)$ 43,441 Effects of exchange rate changes on cash 589,522 1,050,459 589,417 Cash at the beginning of the financial year 9 3,937,943 589,522 3,934,620 Cash at the end of the financial year

The cash flow statements are to be read in conjunction with the accompanying notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR YEAR ENDED 30 JUNE 2006

Note 1: Statement of Significant Accounting Policies

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers the economic entity of Gippsland Limited and controlled entities, and Gippsland Limited as an individual parent entity. Gippstand Limited is a listed public company, incorporated and domiciled in Australia.

This financial report of Gippsland Limited and controlled entities, and Gippsland Limited as an individual parent entity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.

The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

Reporting Basis and Conventions

The financial report has been prepared on an accrual basis and is based on historical costs.

Accounting Policies

Principles of Consolidation $(a)$ .

A controlled entity is any entity Gippsland Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 11 to the financial statements. All controlled entities have a June financial year end.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

Income Tax $(b)$

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic. entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

$\langle \circ \rangle$ Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and Equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets including building and capitalised leased assets, but excluding, freehold land, is depreciated on a straight-line basis over their useful lives to the economic entity commencing. from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed AssetDepreciation Rate
Plant and Equipment.~13 ~33%
Computing Equipment$-27 - 33%$
30%Motor Vehicles

The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains. and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

${\mathrm{d}}$ Exploration and Development Expenditure.

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage. that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

${\odot}$ Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

${i}$ Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as setiout below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Impairment

At each reporting date, the group assess whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement.

Impairment of Assets ${\omega}$

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Foreign Currency Transactions and Balances ${|\mathbf{r}| }$

Functional and presentation currency

The functional currency of each of the group's entities is measured using the currency of the primary economic, environment in which that entity operates. The consolidated financial statements are presented in Australian, dollars which is the parent entity's functional and presentation currency.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

Transaction and balances

Foreign currency transactions are translated into functional currency using the rates of exchange applicable at the date of the transactions. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or investment hedge.

Group Companies

The financial results and position of foreign operations whose functional currency is different from the group's presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at the reporting date;
• income and expenses are translated at average exchange rates for the period, and
• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the group's foreigncurrency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.

Employee Benefits

$\left{ 0\right}$ .

Provision is made for the company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Equity-settled compensation

The group operates a share option arrangement. The bonus elements over the exercise price of the employee services rendered in exchange for the grant of options is recognised as an expense in the income statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted.

Provisions $\oplus$

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

Cash and Cash Equivalents $\left( \mathbb{K}\right)$ .

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

${{}}$ Revenue

Interest revenue is recognised on an proportional basis taking into account the interest rates applicable to the financial assets.

Goods and Services Tax (GST) $(m)$

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are included in the cash flow statement on a gross basis, except for the GST component of investing and financing activities which are disclosed as operating cash flows.

$(n)$ Comparative Figures

When required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current financial year.

Note 2 First-time Adoption of Australian Equivalents to International Financial Reporting Standards

• Reconciliation of equity at 1 July 2004 and 30 June 2005 ${a}$ On adoption of the new Australian Equivalents to International Reporting Standards (AIFRS), there were no differences between equity presented under AlFRS with that presented under AGAAP.
• $(b)$ Reconciliation of net loss for the year ended 30 June 2005 On adoption of the new AIFRS standards, there were no differences between net loss presented under AIFRS. with that presented under AGAAP.

			Mark Mark Mark Mark Mark Mark Mark Mark		OMANIA KALENDARIA
			2006	2005	2006	2005
		Note	$	Ś,
Note 3	Revenue
	Operating activities
	– Interest received.	За,	30,345	22,941	30,345	22,941
	Total Revenue		30,345	22,941	30,345	22,941
	(a) Interest revenue from:
	- other parties		30,345	22,941	30,345	22,941
Note 4	Loss for the Year
	Expenses
	Rental expense on operating leases
	- minimum lease payments		32,966	20,412	32,966	20,412
	Contributions to employeessuperannuation plans		4,680	4,320	4,680	4,320
	Depreciation of plant and equipment		20,496	11,496.	20,496	11,496
	Movements in provisions:
	- Employee entitlements		15,923	3,958	15,923	3,958
	-Provision against loan to Tantalum Int
	Pty Ltd.				9,788	26,247
	- Provision against loan to Here2win.com
	Pty Ltd.- Provision against Ioan to Nubian				477,723	46,957
	Resources plc				2,110	36,419.
	- Provision for non-recovery of loan to other
	parties			13,123
	- Provision for diminution		5,310	13,124	5,310
	Foreign currency translation losses			96,093.		96,093
	Exploration expenditure incurred andwritten off		1,292,544	1,134,564	1,292,544	1,098,145
	lncome:
	Foreign currency translation gains		43,441		43,441

		2006	2005	2006	2005
		Note
	Note 5 Income Tax Expense
(@) …	The components of the tax expense comprise:
	Current tax
	Deferred tax15
(b)	The prima facie tax on loss before income tax
	is reconciled to the income tax as follows:
	Prima facie tax on loss before income tax at30% (2005: 30%)
	— economic entity	(1,094,619)	(598,562)	(1,094,619)	(598,562)
	Add:
	Tax effect of:
	- provision for non recovery of loans	146,886	32,887	146,886	32,887
	- exploration expenditure incurred in relation
	to a foreign permanent establishment	627,632		627,632
	- non-deductible expenses :	62,008	2,700	62,008	2,700
	Income tax attributable to entity	(258,093)	(562, 975)	(258,093)	(562, 975)
	These tax losses have not been brought to account at balance date.

Key Management Person`Position .
Mr RJ Telford --Chairman – Executive
Dr JM Chisholm.$\sim$ . Director – Executive $,$
Mr JSF. Dunlop- Director — Non-executive
Mr JD Kenny"Director - Non-executive

$(b)$ Compensation Practices

The board's policy for determining the nature and amount of compensation of key management for the group is as follows:

The compensation structure for key management personnel is based on a number of factors, including particular experience of the individual concerned and overall performance of the company. The contracts for service between the company and key management personnel are on a continuing basis, the terms of which are not expected to change in the immediate future.

The employment conditions of the executives are formalised in contracts of employment.

The board determines the compensation for each key management personnel. Refer note 6 (c).

Gippsland Limited Annual Report 2006

36

$\langle$ (c) $\cdot$ Key Management Personnel Compensation

	Short-term Benefits Cash,	Share-based Payment	Total
	salary and commissions	Options
Key Management Person
			.56.737
Kenn
		927	528.114
		) Tolksed har manaramment and subministerious ware noted to an onlike the same partiture

The fees paid to Mr HJ Jelford for management and administration were paid to an entity that he controls, Eco International Pty Ltd.

	Short-term Benefits Cash,
	salary and commissions
Key Management Person
Mr RJ Telford	174.96(
-Dr JM Chisholm	.60,650
Mr JSF Dunlop
∙ Mr JD Kenny	36.000
	271.610

$(d)$ Options Holdings

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Maria Maria (Maria Maria Maria Maria)
Key ManagementPerson	Balance1.7.2005	Granted asCompensation	Value perOption atGrant Date	OptionsExercised	Balance30.6.2006	ExercisePrice
Key Management Person
Mr RJ Telford	6,558,322				-6,558,322	0.09
Dr JM Chisholm	2,260,000				2,260,000	0.09
Mr JSF Dunlop		2.260.000	- 635		- 2,250,000	0.15
: Mr JD Kenny -	2,250,000				:2.250,000	0.09
	11,068,322	2,250,000			13,318,322	0.10

All options were granted for nil consideration. The options held by RJ Telford, JM Chisholm and JD Kenny are listed and hence valued at market prices.

The fair value of the options granted to Mr JSF Dunlop was calculated by using a Black Scholes option pricing model applying the following inputs:

$0,15Exercise Price
Expiry date of Options31 December 2007.
$-$0.13$Underlying share prìce-
Expected share price volatility70%
5.31%Risk free interest rate-

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate.

All options will expire on 31 December 2007.

The option holder may exercise options at any time prior to the expiry date.

The exercise price of shares the subject of the options will be payable in full on exercise of the options.

$\cdot$ (e) Share Holdings

	e inglizio all'illi	Balance 1.7.2005	Received asCompensation	Options Exercised		Balance 30.6.2006
	Key Management Person
	Mr RJ Telford	13,568,124				13,568,124
	Dr JM Chisholm	$-50,000$				$-50,000$
	Mr JSF Dunlop
	Mr JD Kenny
		13,618,124				13,618,124
						a mata kacamatan ing Kabupatèn Bandara
					2006	2005
					Ŝ	S
	Note 7 Auditors' Remuneration
	Remuneration of the auditor of the parent entity for:				14,500	$-12,450$a.
	- auditing or reviewing the financial report
	Note 8 Earnings per Share
{a}-	™Loss					$(3,648,729)$ $(1,995,208)$
	Earnings used to calculate basic and dilute EPS					$(3,648,729)$ $(1,995,208)$
(b).	Weighted average number of ordinary shares outstanding during the year used incalculating basic and dilute EPS					184,346,151 151,695,172

Gippsland Limited Annual Report 2006

36

	an an bhaile an Chomanach an		e samunang.Manakamatang katalog Ul
	2006$	2005$	2006$	2005S
Note 9 Cash and Cash Equivalents
Cash at bank and in hand	3,044,812	136,507	3,044,712	136,402
Cash held in foreign currency	893,131	453,015	889,908	453,015
Cash at bank and on hand
The effective interest rate was 4.7% (2005: 3.16%)	3,937,943	589,522	3,934,620	589,417
Reconciliation of Cash
Cash at the end of the financial year as shown in the cashflow statement is reconciled to items in the balance sheetas follows:
Cash and cash equivalents	3,937,943	-589,522-	3,934,620	589.417
CURRENTOther Receivables	49,212	33,078	49,212	33,078
NON-CURRENT
Amounts receivable from:
Wholly owned entities (a)			3,227,981	2,738,360
Provision for impairment of receivables wholly- ownedsubsidiaries			(3,227,981)	(2,738,360)
Other parties - Egyptian Mineral Resources Authority	72,162	72,162
Provision for impairment	(72, 162)	(72,162)
The loans to controlled entities are advanced interest free, are unsecured and will be repaid when the(a)respective subsidiary is generating sufficient funds and has the financial capacity to meet the loan.commitment

Note 11 Controlled Entities

	aar voorwerk van die deel van die heerste van die voorwerke van die voorwerk van die kalender van die volgenieDie vrouwerke van die van die van die van die van die van die produktiese van die van die van die van die vanV
		2006	2005
Controlled Entities Consolidated
Parent Entity:
Gippsland Ltd	Ausi
Subsidiaries of Gippsland Ltd: 1
Abutan Pty Ltd	'Aust	16O	100.
- Tantalum International Pty Ltd	'Aust	100	100.
- Here2Win.com Pty Ltd	- Aust	100	-90
Nubían Resources plc	i ik	760	-00
. Tantalum Egypt LLC 1	Egypt		50.

Controlled Entities with Ownership Interest of 50% or Less

The parent entity holds 50% of the ordinary shares of Tantalum Egypt LLC. Under the Articles of Association, Tantalum International Pty Ltd has the sole right to nominate the Chairman of the Board of Directors and the Chief Executive Officer.

		Note 12 Property, Plant and Equipment

	2006	2005	2006	2005
- Plant and equipment:
'At cost	195,502	$-177,313.$	195,502 177,313
Accumulated depreciation	$(159, 817)$ $(135, 371)$		$(159, 817)$ (135,371)
Total property, plant and equipment.	35,685	41.942	$-35.685$	41.942

$(a)$ Movements in Carrying Amounts

Movement in the carrying amounts of each class of property, plant and equipment between the beginning and the end of the current financial year:

. Balance at the beginning of year-
Additions	. 14.239.
-Depreciation expense	******************* (20.496)
Carrying amount at the end of year	35.685

Gippsland Limited Annual Report 2006

NOTES TO THE FINANCIAL STATEMENTS

FOR YEAR ENDED 30 JUNE 2006

Note 13 Other Assets
	SASANAN ANG A2006$	2005$	Sida bahan badan2006$	2005$
CURRENT
Prepayments	915	$-15,270$	915	15,270
NON CURRENT
Investment in Subsidiaries			3,522	.305
Note 14 Trade and Other PayablesCURRENT.
Sundry payables and accrued expensesAmounts payable to:	190,529 -	90,225	190,529	90,225
- key management personnel related entities	17,580	$-9,000.$	$-17,580.$	19,000
	208,109	99,225	208,109	99,225
Note 15 Tax
	gy száraz és között eletés száraz eletése.Száradbalásos királyárás magyar a szára			r patente y nor unego
	2006$	2005$	2006$	2005
Assets
Deferred tax assets not brought to account, the benefits ofwhich will only be realised if the conditions of deductibilityset out in Note 1 (b) occur
Prior year tax losses brought forward	3,080,360	$-2,517,385$	$-2,331,825 - 1,768,850$
Additional tax losses	258,093	$-562,975$	258,093	$-562,975$
Tax losses carried forward	3,338,453	3,080,360	2,589,918	2,331,825

a sa gu The economic entity has not entered into a tax consolidated group.

المحاجم ويتمام

$\mathcal{L}_{\rm{max}}$

a maria p

$\sim 10^{-1}$

Note 16 Provisions
	Long-term
	Employee
	Benefits
	S
Opening Balance at 1 July 2005	$-9,000$
Additional Provisions	.18,692
Amounts Used	(2,769)
Balance at 30 June 2006	24,923
Analysis of Total Provisions	1026332262632881882
	2006	2005	2006	2005
			S
-Current	9,923	$-9,000.$	$-9,923$	9,000
Non-current	15,000		15,000
	24,923	9,000	24,923	9,000
			terent.	99 N.J

Provision for Long-term Employee Benefits

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on an estimation. The measurement and recognition criteria relating to employee benefits has been included in Note 1(i) to this report.

Note 17 Issued Capital

			The Communication of the Communication	SARTING SENATORKadalah di Laman dalam k
		2006$	2005$	2006Ŝ	2005朱
	232,851,926 (2005; 162,818,926)
	fully paid ordinary shares	22,658,274	15,868,236	22,658,274	15,868,236
	The company has no maximum authorised share capital.
{a}	Ordinary Shares
	At the beginning of reporting period		15,868,236 14,203,912	15,868,236 14,203,912
	$\sim$ On 3 December 2004 the Company issued
	20,000,000 ordinary shares at 3 perice
	-{7,5 cents) each		1,491,612		1,491,612.
	On 3 March 2005 the Company issued 500,000
	shares under an employment contract at
	11 cents each		55,000		55,000
	On 27. April 2005 the Company issued
	2,790,567 following an option conversion at2.8 pence (7 cents) each		192.293		192,293
	On 10 October 2005 the Company issued
	15,000,000 ordinary shares at 9.3 cents each	1,388,889		1,388,889
	On 17 January and 21 April 2006 the Company
	issued 1,000 & 32,000 ordinary shares
	respectively following an option conversion at
	9 cents each	2,970		2,970
	On 17 March 2006 the Company issued	2,767,623		2,767,623
	24,000,000 ordinary shares at 11.5 cents eachOn 27 March 2006 the Company issued.
	6,000,000 ordinary shares as settlement of a
	dispute for nil ~
	On 31 May 2006 the Company issued
	25,000,000 ordinary shares at 10.8 cents each	2,700,000		2,700,000
	Less: Issue costs associated with capital raisings	${69,444}$	(74, 581)	(69, 444)	(74, 581)
	At reporting date	22,658,274	15,868,236	22,658,274	15,868,236
				n ang mga mga mga mga mga mga mga mga mga mg
				2006	2005
(b)	Options			Number ofOptions	Number ofOptions

The following options over ordinary shares are on issue. Options exercisable at 9 cents on or before 31/12/2007 (listed) Options exercisable at 4 UK pence on or before 31/12/2007 (unlisted)) Options exercisable at 15 cents on or before 31/12/2007 (unlisted)) Options exercisable at 13.5 cents on or before 16/05/2012 (unlisted))

10,000,000 10,000,000 $-2,250,000$ 25,000,000 a sa s 80,988,393 53,771,393

43,738,393 43,771,393

Note 18 Reserves

Option Reserve

The option reserve records items recognised as expenses on valuation of employee share options.

Note 19 Capital and Leasing Commitments

	2006	2005	2006	2005
Operating Lease Commitments
Non-cancellable operating leases contracted but
Payable - minimum lease payments
– not later than 12 months.	73,662	120,400		- 20.400
- between 12 months and 5 years.	.306,600	- 3.400-	306,600	-3.400
– greater than 5 years.	6,388		6,388
	386,650	23.800	386,650	23.800
	not capitalised in the financial statements			73,662

The property lease is a non-cancellable lease with a five year term, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments shall be increased by the lower of CPI or 4% per annum. An option exists to renew the lease at the end of the five-year term for an additional term of five years.

$(b)$ Capital Expenditure Commitments

There were no capital commitments at reporting date

Note 20 Segment Reporting Segment Reporting - Geographical Segments

		18883892526388122888888		27.16.1992.96.1993.
		2006	2005	2006	2005
Geographical Location: :
Australia			$30,345$ $22,941$ $4,020,531$		. 679.81
Eavpt				-3.223
		30.345	22,941	4,023,754	679.812
Business Segments
The economic entity only operates in the mining and exploration segment

Note 21 Cash Flow Information

$(a)$

	2006	2005	2006	2005
Reconciliation of cash flow from operationswith loss after income tax
Loss after income tax			$(3,648,729)$ $(1,995,208)$ $(3,648,729)$ $(1,995,208)$
Non cash flows in loss.
Depreciation -	20,496	11.496	20,496	11,496.
:Provision for non- recovery of loans to subsidiaries ;			494,931	$-109.623$ .

Provision for non- recovery of loans to subsidiaries	$-109,623$494,931
Provision for non-recovery of other loans	13,124.
Provision for diminution in investments.	:13,123.
Foreign exchange loss (gain)	${43,441}$- 96,093.96,093.${43,441}$
Issue of options - non cash	77.82777.827
Changes in assets and liabilities:
— (increase) decrease in sundry debtors.	(16, 134)$(3,608)$ .(16, 134)(3.608)
— (increase) decrease in prepayments	14,35514,355$\scriptstyle\sim$ (21) .(21
- increase (decrease) in payables	$-(118,790)$108,884108,884(118,790)
ningrease (decrease) in provisions	15,92315,9233.9583,958
- Net cash flow used in onerating activities	ld g75 rrr}11 979 833)la 470 210).'† ROG 457)

There were no material non cash items during the financial year.

Note 22 Related Party Transactions

Gippsland limited is the ultimate parent entity.

The only non Director related party to the Company are its controlled entities. Refer note 11 for further details.

Gippsland Limited (the parent entity) has made loans to its controlled entities totalling $3,227,981 (2005: $2,738,360). Refer note 10 for further details.

Gippsland Limited paid an amount of $8,528 on behalf of Nubian Resources PLC for company registration fees.

There were no other related party transactions during the year.

Note 23 Financial Instruments

Financial Risk Management $(a)$

The group's financial instruments consist mainly of deposits with banks, short-term investments, accounts. receivable and payable, and loans to and from subsidiaries.

The main purpose of non-derivative financial instruments is to raise finance for group operations

Financial Risks

The main risks the group is exposed to through its financial instruments are foreign currency risk, liquidity risk and credit risk.

Foreign Currency Risk

The group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the group's measurement currency.

Liquidity Risk

The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate funds are maintained.

Credit Risk

The economic entity does not have any material credit risk exposure to any single receivable or group of receivables.

Financial Instruments $(1)$

Interest Rate Risk

The economic entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets is as follows:

	1333983333325325			merket as a biling management of the
	2006	2005	2006	2005	2006	2005	2006	2005
Financial assets
-Cash assets.				4.7% 3.4% 3.937,943 589,522			$3,937,943 = 589,522$
Receivables					-49,212	-33,078-	49.212	33.078
Total financial assets				3,937,943 589,522		49,212 33,078 3,987,155 822,600
- Financial liabilities:
™Payables :					-208,109	$\sim$ 99,225 $\degree$ 208,109		-99.225
- Total financial liabilities				nanc	208,109		$99,225$ $208,109$	99.225

Note 24 Interests in Joint Ventures

At 30 June 2006, the Company has interests in the following joint ventures whose principal activities are the exploration for gold, precious metals and base metals.

	2006	2005
Zeehan Tin Deposit - Tasmania	-40%	-40%	Western Metals Ltd 60%
: Abu Dabbab - Egypt	50%	·50%	Egyptian Mineral Resources Authority - 50%
Nuwelbi - Wadi Allagi, Egypt	50%	.50%	Egyptian Mineral Resources Authority - 50%
Seiga - Wadi Allaqi, Egypt -	50%	:50%	Egyptian Mineral Resources Authority ~ 50%.
Jm Shashoba - Wadi Allaqi, Egypt	50%	.50%.	Egyptian Mineral Resources Authority - 50%
Haimur - Wadi Allaqi, Egypt	-50%	-50%	Egyptian Mineral Resources Authority - 50%
"Nile Valley Block E - Wadi Allaqi, Egypt	50%	150%	Egyptian Mineral Resources Authority - 50%.
Nile Valley Block A - Wadi Allaqi, Egypt	50%	- 50%	Egyptian Mineral Resources Authority - 50%
Um Garayat - Wadi Allagi, Egypt	50%	50%	Egyptian Mineral Resources Authority - 50%.
"Koleit – Wadi Allaqi, Egypt	50%	:50%	Egyptian Mineral Resources Authority - 50%
Um Tiur - Wadi Allaqi, Egypt	50%	.50%	Egyptian Mineral Resources Authority - 50%
Abu Swayel -- Wadi Allaqi, Egypt	50%	50%	Egyptian Mineral Resources Authority - 50%

The Joint Venture is of the type where initially one party contributes tenements with the other party earning a specified percentage by funding exploration activities. The Joint Venture does not hold any assets.

Note 25 Subsequent Events

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Note 26 Changes in Accounting Policy

The following Australian Accounting Standards have been issued or amended and are applicable to the parent and economic entity but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.

AASBAmendment	AASB Standard Affected	Nature of Change inAccounting Policyand Impact	Application Dateof the Standard	Application Datefor the Group
- 2004-3	k. AAS (1974), Strip Strip Strip SAASB 1: First-time Adoption of AlFRS. No Change, no impactAASB 101: Presentation of Financial No Change, no impact No. 1 January 2006Statements		11 January 2006.	1 July 20061 July 2006
	AASB 124: Related Party Disclosures	No Change, no impact	1 January 2006 -	1 July 2006
2005–1.	AASB 139: Financial Instruments:Recognition and Measurement	No Change, no impact	1. January 2006.	$\sim$ 1 July 2006.
2005–5	AASB 1: First-time Adoption of AIFRSAASB 139: Financial Instruments:Recognition and Measurement	. No Change, no impact .No Change, no impact [11] January 2006 [11] July 2006.	া January 2006 .	≅ 1 July 2006.

AASBAmendment	AASB Standard Affected	Nature of Change inAccounting Policyand Impact	Application Dateof the Standard	Application Datefor the Group
2005-6.	AASB.3: Business Combinations	No Change, no impact	1 January 2006	1. July 2006
2005–9	AASB 132: Disclosure andPresentation	No Change, no impact	1 January 2006	1 July 2006
	AASB 139: Financial Instruments:Recognition and Measurement	No Change, no impact	1. January 2006	1 July 2006
2005–10	AASB 139: Financial Instruments:Recognition and Measurement	No Change, no impact	1 January 2007	July 2007
	AASB 101; Presentation of FinancialStatements	No Change, no impact	1 January 2007.	1 July 2007
	AASB 114: Segment Reporting	No Change, no impact	ni January 2007.	₫ July 2007。
	AASB.117: Lease	No Change, no impact	1. January 2007.	1.July 2007.
	AASB 133: Earnings per Share	No Change, no impact	1 January 2007	1 July 2007
	AASB 132: Financial Instruments:Disclosure and Presentation	No Change, no impact	1 January 2007	1 July 2007-
	AASB 1: First-time Adoption of AIFRS	No Change, no impact	1.January 2007	1 July 2007.
	AASB 4: Insurance Contracts	No Change, no impact	1.January 2007	1 July 2007
	AASB 1023: General InsuranceContracts -	No Change, no impact	1. January 2007	July 2007.
2006–1	AASB 121: The Effects of Changes inForeign Exchange Rates	No Change, no impact	- 1 January 2006	1 July 2006
NewStandard	AASB.7; Financial Instruments.Disclosure.	No Change, no impact.	1 January 2007	1 July 2007
NewStandard	AASB.119: Employee Benefits:December 2004	No Change, no impact 1014 January 2006 1.		đi duly 2006

All other pending Standards issued between the previous financial report and the current reporting dates have no application to either the parent or economic entity.

Note 27 Company Details

The registered office of the company is: Gippsland Limited 207 Stirling Highway Claremont WA 6010

Gippsland Limited Annual Report 2006

DIRECTORS' DECLARATION

The directors of Gippsland Limited declare that:

• 1. the financial statements and notes are inaccordance with the Corporations Act 2001 and:
  • Comply with Accounting Standards and $\langle a \rangle$ : Corporations Regulations 2001; and
  • (b) give a true and fair view of the financial position as at 30 June 2006 and of the performance for the year ended on that date of the Company and economic entity;
• 1. the Chief Executive Officer and Chief Finance Officer have declared that:
  • (a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporation Act 2001; and
  • (b) the financial statements and notes for the financial year comply with Accounting Standards; and
  • the financial statements and notes for the $\langle \text{C} \rangle$ : financial year give a true and fair view.
• 1. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors dated this 22nd day of September 2006.

r j telford Director

Gippsland Limited Annual Report 2006

Grant Thornton®

Scope

The Financial Report and Directors' Responsibility

The financial report comprises the balance sheet, income statement, statement of changes in equity. statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for Gippsland Limited (the company) and (the consolidated entity), for the year ended 30 June 2006. The consolidated entity comprises both the company and the entities it controlled during that year.

The directors of the company are responsible for the preparation and true and fair presentation of the tinancial 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.

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. 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.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with 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 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

assessing the appropriateness of the accounting policies and disclosures used and the. reasonableness of significant accounting estimates made by the directors.

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 the directors or management,

We have read the other information in the annual. report to determine whether it contained any material inconsistencies with the financial report.

Independence

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

In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge and belief that the auditor's independence declaration has not. changed as at the date of providing our audit opinion.

Audit opinion

In our opinion, the financial report of 30 June 2006 is in accordance with:

• a) the Corporations Act 2001, including:
  • i) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2006 and of their performance for the year ended on that date; and
  • ii) complying with Accounting Standards in Australiaand the Corporations Regulations 2001; and
• b) other mandatory financial reporting requirements in Australia.

GRANT THORNTON WESTERN AUSTRALIAN PARTNERSHIP

San My 10

SEAN MCÓURK

Partner Perth, WA

Dated this 22nd day of September 2006

ASX ADDITIONAL INFORMATION

Pursuant to the Listing Requirements of the Australian Stock Exchange Limited, the shareholder information set out below was applicable as at 12 October 2006.

$\mathbb{A}_\ast$ .

Distribution of Equity Securities

Analysis of numbers of shareholders and option holders by size of holding.

	Number of Holders
	Ordinary Shares	Listed Options
Spread of Holdings
$-1 - 1,000$	bh	.51
$\sim$ 1,001 $-$ 5,000	148	44
$5,001 - 10,000$	220
$[10,001 - 100,000]$	.596
$\pm 100,001$ and over $\pm$	205
TOTAL	1,224	267
The total number of securities on issue $\cdot$	232,851,926	43,738,393
The number of holders holding less than a
marketable parcel of securities.

B. Twenty Largest Shareholders

Name	Number of Shares	%
International Finance Corporation	25,000,000	10.74%
Credit Suisse Client Nominees (UK) Ltd.	24,600,000	10,56%
Smith & Williamson Nominees Ltd	10,250,000	.4.40%
Eco International Pty Ltd	10,231,695	4.39%
King Town Holdings Pty Ltd	$-9,650,000$	4.14%
Richard William Basil Beale	9,150,000	3.93%
Situate Pty Ltd	-8,800,000.	3.78%
Barclayshare Nominees Ltd	16,261,503	2.69%
Taveroam Pty Ltd	-5,900,000	2,53%
Sunvest Corporation Ltd	5,166,665	2.22%
Starvest Pic	4,500,000	-1.93%
L'R Nominees Ltd	3,910,374	1.68%
Robert and Robin Telford	3,336,429	1.43%
Giltspur Nominees Ltd	3,109,882	1.34%
Highforce Investments Pty.Ltd	2,765,516.	1.19%
Trafalgar Resource Finance	2,308,332	-0.99%
TD Waterhouse Nominees (Europe) Ltd	$-2,115,562$	0.91%
ANZ Nominees Ltd	1,772,778	0.76%
Yellowrock Pty Ltd	1,300,000	0.56%
HSBC Custody Nominees Ltd	1,250,000	0.54%
	141,378,736	60.72%

ASX ADDITIONAL INFORMATION

C. Twenty Largest Listed Option Holders

Name	Number of Shares	$\frac{0}{2}$
Eco International Pty Ltd	6,259,750	14.31%
King Town Holdings Pty Ltd	3,150,000	7.20%
Situate Pty Ltd <	2,320,000	5.30%
Mandu Superannuation Fund	2,260,000	-5.17%
Ventureworks JDK Pty Ltd. I	2,250,000	5.14%
David James Gray	2,250,000	5.14%
David Christopher Kemp	1,542,267	3.53%
Tricom Nominees Pty Ltd	1,300,000	2.97%
Windowland Pty Ltd	1,000,000	2.29%
Robert Anthony Healy	1,000,000	2,29%
Averon Holdings Limited	1,000,000	2,29%
Edgewater Estates Limited	1,000,000	2.29%
Broko Investments Pty Ltd	780,000	1.78%
Rosewarne Superannuation	700,000	-1.60%
Jacqou Investments Pty Ltd	-654,412	1.50%
Helena Nemchin	500,000	1.14%
Mark Koussas	500,000	1.14%
Cumbak Pty Ltd	500,000	1.14%
Chris Scott-Orr	475,000	1.09%
Peter John Baker	423,000	0.97%
	29.864.429	68.28%

O. Unlisted Option Holders

Name	Number of Options
International Finance Corporation
Credit Suisse First Roston Client Nominees L
	الاستراتي.

$\mathbb{E}$ . Substantial Shareholders

	Number of
	Ordinary Shares
	in which interests	%
	heid
lelford		$\cdots$

Gippsland Limited Annual Report 2006

ana an

OFFICE ADDRESS 202 String Highway Claremont WA 6010, AustraliaPOSTAL ADDRESS 20 BSx 325 Nedlands WA 6909 Australia TELEPHONE +61 8 9340 6000 | FACSIMILE +61 8 9340 6060 | EMAIL info@gippsignalltd.com