Suite 34, 18 Stirling Highway, Nedlands WA 6009 PO Box 352, Nedlands WA 6909, Australia ABN 31 004 766 376 Tel: (08) 9389 8611 Fax: (08) 9389 8612 E-mail: [email protected] www.gippslanditd.com.au

OUARTERLY ACTIVITY REPORT Period: April - June 2004

30 July 2004

HIGHLIGHTS

Nine new gold, copper, nickel projects
Encouraging Abu Swavel copper nickel results Ă
Off-take agreement signed for tantalum ٠
Doubling of tantalum production $\bullet$
Tantalum off-take negotiations for expanded production $\bullet$ .
Abu Dabbab bankable feasibility study completion $\bullet$
Abu Dabbab Fast-Track Start-Up $\bullet$
Eqyptian Government Cabinet Changes

NINE NEW GOLD, COPPER, NICKEL PROJECTS

During the quarter Gippsland announced that the Eqyptian Government had granted it the rights to explore eight gold areas and one copper-nickel area in the Wadi Allaqi region of Egypt.

The public signing ceremony which took place in Cairo on 21 June 2004, was seen as a major milestone for the Egyptian resource industry and the Company as the Wadi Allaqi area is considered to have been a significant source of the gold produced within Egypt during the Pharaohic period.

The Wadi Allagi district is located 160km southeast from Aswan in the south-western part of the Eastern Desert of Eqypt covering an area of about 12,000km2. The area, which is bounded to the west by Lake Nasser and to the east by the Red Sea, is readily accessible by a bitumen road and is situated some 300km from the Company's 40Mt Abu Dabbab and 98Mt Nuweibi tantalum projects.

Within the Wadi Allaqi district about 19 historical gold occurrences and deposits are known, most of which were superficially mined by the ancient Egyptians and Romans. A small number of the deposits were mined by the British during the late 1800s and early The historical mining was focused $1900s.$ entirely on the near-surface high grade quartz veins and alluvial gold.

Evidence of the historical mining activity is clearly seen in stoped out quartz veins at shallow depths by means of shafts and adits. Waste dumps and tailing are present at a number of these deposits indicating that they

were sites of significant mining activity by the ancients. Apart from limited regional exploration during the 1960s and 70s under the auspices of the United Nations there has been no exploration or mining since the early 1950s when Egypt became a republic.

The nine (9) Wadi Allagi projects, each 16km2 in area, awarded to Gippsland are:

Umm Garayat, Koleit Umm Qurayyat, Nile Valley Block A, Nile Valley Gold Block E, Seiga, Umm El Tuyer, Haimur, Umm Shashoba.

Copper/Nickel Abu Swayel

The geology of the Wadi Allaqi region comprises the most southerly part of the Late Precambrian Arabian Shield and contains a northwest and west trending belt of metasedimentary and metavolcanics schist, ophiolites and gabbro/granite complexes which are overlain unconformably by Nubia Group sandstones of Upper Cretaceous age.

Under the agreement executed, Gippsland, via its 100% owned United Kingdom registered subsidiary Nubian Resources PLC, shall explore the areas over a four year period during which time any of the Exploration Licences will be converted to Mining Leases on delineation of a viable resource. A non-binding exploration programme has been agreed for year one and may be varied as exploration proceeds. Exploration expenditure during subsequent vears will be determined and dependent upon progressive exploration results.

Upon the discovery of a viable resource in any or all of the nine Exploration Licences, Nubian Resources shall establish a 50:50 Joint Venture with the Eqyptian Geological Survey Authority (EGSMA) to undertake exploitation of such resources. The terms and conditions of the Joint Venture have been agreed to and make allowance for Nubian Resources to manage all exploration and subsequent exploitation stages of the project.

The Company was granted first choice of targets within Wadi Allagi, an area in which Gippsland geologists have delineated numerous and quite obvious drilling targets. Seven of the

eight gold Exploration Licences cover historical gold mining workings which they consider to clearly be a most attractive element of this new project.

Subject to representing the best interests of Gippsland shareholders and at the appropriate time it is the Directors' intention to admit Nubian Resources to AIM (London Stock Exchange) whilst seeking to retain a substantial interest so as not to distract from the development of the existing Abu Dabbab and Nuweibi projects.

ABU SWAYEL - COPPER / NICKEL RESULTS

During the quarter Gippsland geologists completed a review of unpublished exploration data for the Company's recently acquired Abu Swayel Copper/Nickel project. The previous exploration work comprises ten diamond drill holes and a shaft with a single cross-cut all of which test an area of ancient workings.

Copper at Abu Swayel was mined by the ancient Egyptians from shallow open cut workings which can be traced over a length of 180m. An ancient furnace, slag and pottery remains are evidence that some on site processing of the copper ore was completed. In the early part of the 1900s the Nile Valley Company sank a shallow shaft with a cross-cut at the 22m level to test the vertical continuity of the mineralisation.

In the early 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. Three of the holes returned significant Cu and Ni values.

Location	From $(m)$	To $(m)$	Interval $(m)$	Cu (%)	Ni $(%)$
DH01	21.00	23.60	2.6	1.16	0.24
DH 02	25.70	29.95	4.25	1.58	0.23
DH14	48.55	49.85	1.30	2.23	0.20
Shaft	30.00	40.00	10.00	1.87	1.53
Cross-cut	7.50	15.50	8.00	4.11	1.77

Table 1: Abu Swayel - Best Cu & Ni Intersections

Except for geological mapping there has been no exploration outside of the immediate vicinity of the ancient workings since the early 1960s. The results of the previous exploration clearly show that mineralisation is present at grades and over widths that would be readily detected by geophysical methods such as electromagnetic ("EM") plus induced polarisation ("IP") techniques.

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 thin wadi sediments which can be readily explored by means of ground geophysical methods.

An exploration programme of geological mapping, geochemical sampling, EM & IP together with follow-up drilling of the geophysical anomalies has been prepared.

ABU DABBAB TANTALUM-TIN PROJECT

Second Tantalum Off-take Agreement Signed

During May 2004, Gippsland entered into a Heads of Agreement ("Agreement") with a major buyer of tantalum in concentrate (one of the Top 8 buyers of tantalum in the world), regarding the sale by Gippsland on a "take or pay basis" of 320,000 pounds of tantalum per year over a fixed period of four (4) years between Calendar Years 2006 and 2009.

The parties have agreed on the price in USD for the 1,280,000 pounds of tantalum covered by the Agreement. The agreed price cannot be disclosed however due to reasons of commercial confidence.

The signing of this Agreement means that Gippsland has now entered into two (2) Heads of Agreement with two major buyers of tantalum (both are amongst the Top 8 buyers of tantalum in the world) which taken together results in the sale by Gippsland on a "take or pay basis" of a total of 420,000 pounds of tantalum per annum.

Doubling of Tantalum Production

During May 2004, the Company's consultant engineers determined that the initial production rate for the Company's 40Mt Abu Dabbab tantalum project can be increased by approximately 26% by over-sizing the primary SAG mill and ball mill thus increasing tantalum Stage 1 production from approximately 420,000 pounds per year to in excess of 500,000 pounds per year.

The initial installation of the over-sized 2MW SAG mill and 1.4MW ball mill will enable Stage 2 project expansion to be undertaken quickly and at relatively minimal cost. This will be achieved by the retro-installation of a second 1.4MW ball mill which is calculated to expand the mill feed-rate to 2Mtpa thus increasing tantalum production from >500,000 pounds per year to >800,000 pounds per year.

The production rate of 2Mtpa, which will be achieved without increasing the size of the mining fleet, is anticipated to take place within one year of commencement of operations.

Additional Tantalum Off-Take Negotiations for Expanded Production

The Company is currently in negotiation with a number of major tantalum consumers with the view to secure long-term off-take agreements for the increased tantalum production resulting from the Stage 2 project expansion to 2Mtpa.

Bankable Feasibility Study

The international engineering group Lycopodium Pty Ltd is presently finalising the bankable feasibility study ("BFS") for the Abu Dabbab Project. The BFS was scheduled to be completed during July 2004 however the expansion of production from 1Mtpa to 1.26Mtpa has made it necessary to implement minor process plant engineering design changes to cater for the expanded plant capacity.

The Directors believe that this delay is justified given the increased scale of economy achieved by this expansion and are confident that the BFS will be completed during August 2004.

The delay in completion of the BFS is not expected to delay the project's planned start-up during the first quarter of 2006.

Fast-Track Start-Up

In order to fast-track the commencement of operations, the project will proceed based upon the production of tantalum and tin alone. While the project has the potential to produce approximately 1 million tonnes ceramic grade feldspar per annum, the BFS and thus the project will progress independent of feldspar production. The project's viability is not dependent upon feldspar revenue and production of feldspar will be considered as a separate issue following commissioning of the tantalum and tin production facilities.

As the BFS progresses, the Directors are becoming increasingly confident that the 40Mt Abu Dabbab operation has the potential to become the world's largest and lowest cost tantalum producer. The nearby presence of the Company's 98Mt Nuweibi tantalum deposit supports this opinion.

Egyptian Cabinet Changes

During the past 2 weeks important changes have been made to the Egyptian Government Cabinet with the appointment of Prime Minister Ahmed Nazief (52) and 14 mainly younger Ministers many of whom have a sound track record in the private commercial and industrial sectors.

The Egyptian resource sector now comes under the umbrella of the newly formed Ministry of Industry and Foreign Trade which is a combination of the old Ministry of Industry and Technological Developments and the Ministry of Foreign Trade. The newly appointed Minister His Excellency Mr Rashid Mohammed Rashid is a most successful and highly respected industrialist having widespread interests throughout Egypt.

Even at this early stage, it is clear that the dynamic changes that have taken place bodes well for the Egyptian resources industry.

RJ (Jack) Telford Executive Chairman

Note: In accordance with Listing Rule 5.10 of the Australian Stock Exchange Limited, the geological information in this report that relates to mineral resources and ore reserves is based on information compiled by Gippsland Director Dr John M Chisholm, who is a Fellow of the Australasian Institute of Mining and Metallurgy, with over 25 years experience in the mining industry.

AI assistant