ZOONO GROUP LIMITED — Annual Report 2004

Sep 21, 2004

Level 4 20 Loftus Street SYDNEY NSW 2000

email: gold@goldsearch.com.au

qsh/psh/qsh609

22 September 2004

The Manager Company Announcements Office Australian Stock Exchange Limited Level 4, 20 Bridge Street SYDNEY NSW 2000 Via ASX Online

No. of pages - 42

Dear Sir.

Re: Audited financial report for the year ended 30 June 2004

Enclosed for release to the market is the audited financial report for Goldsearch Limited for the year ended 30 June 2004.

The 2004 annual general meeting of the Company will be held at The Sofitel Wentworth Sydney hotel, 61-101 Phillip Street, Sydney on Thursday 25 November 2004 at 11.00 am.

The annual report and notice of annual general meeting are currently scheduled to be lodged with ASX and mailed to shareholders on Monday 25 October 2004.

For and on behalf of the directors of Goldsearch Limited

P S Hewson Secretary

DIRECTORS' REPORT

Your directors have pleasure in submitting the statement of financial position of the Company at 30 June 2004 together with related statement of financial performance, statement of eash flows and notes thereto for the year then ended and report as follows:

Directors

The names of the directors in office at the date of this report and throughout the year are:

Mr J. Landerer, CBE AM Mr A.G. Harris Mr R.B. Leece, AM RFD Mr J.M.E. Percival Mr T.V. Willsteed (appointed 20 July 2004)

Principal activities

The principal activities of the Company during the year were exploration for gold and other minerals and investment.

There were no significant changes in the nature of the activities of the Company that occurred during the year.

Results

The result for the financial year was a loss of \$1,015,330 after income tax expense of \$nil.

Dividend

No dividends were paid or declared during the year by the Company and no recommendation is made as to dividend.

Review of operations

During the year under review:

• The Company expended and capitalised \$332,376 on exploration and wrote off \$695,769 of capitalised exploration costs.
• On 10 September 2003 the Company issued 1,500,000 unquoted options to a consultant. These options were not exercised and subsequently expired on 15 July 2004.
• $\bullet$ In the report for the quarter ended 30 September 2003 released on 29 October 2003 the Company advised that, during the quarter:
• Independence Gold NL gained access to areas of interest in both the Northern Territory and South Australia that will allow it to conduct concentrated exploration under its joint venture agreement with Goldsearch.

• A program of follow-up geochemical sampling firmed up four areas of coherent nickel +/- cobalt, copper anomalism on EL 2910 De Rose Hill in South Australia.

• First pass, wide-spaced regional geochemical sampling was completed over targeted areas of granted ELs 5702, 9407 and 9443 and six areas were identified for follow up work.

• A 1,000 metre 10 hole drilling program commenced at Windeyer, an historical gold producing area, located near Hargraves in central western NSW.
• In the report for the quarter ended 31 December 2003 released on 29 January 2004 the Company advised that, during the quarter
• work on the joint venture project in the Musgrave by Independence Group NL (formerly Independence Gold NL) consisted of additional follow-up soil geochemical sampling and ground geophysical surveys on EL 2910 DeRose Hill in South Australia and confirmation reconnaissance soil geochemical sampling on EL 9443 and EL 9407 in the Northern Territory.
• drilling by the Red Metal Limited/Phelps Dodge Australasia Inc. alliance commenced at Hawks Nest to test two geophysical targets.
• Results from the drilling program at EL 6094 Windeyer were inconclusive as the small RAB rig which was used was unable to drill below the water table.
• In the report for the quarter ended 31 March 2004 released on 28 April 2004 the Company advised that, during the quarter:
• Two high priority exploration licence applications ELs 5701 and 5703 in the Northern Territory were granted. A preliminary reconnaissance geological visit to the newly granted areas was undertaken. Three areas with reported silver and base metal anomalism (also low order gold) were located and rock chip samples were taken.
• The Company made application for an exploration licence (ELA 4812) at Sandy Creek approximately 6 kilometres south of the township of Tallangatta in north-eastern Victoria.

• The Company's joint venture partner at Hawks Nest reported assay results from the first two exploration diamond drill holes on the tenement. These results were not encouraging and only a highly metamorphosed banded iron formation was found.

• On 15 July 2004 the Company's 13,500,000 unquoted options expired.

• On 20 July 2004 Mr T.V. Willsteed was appointed a director of the Company to fill a casual vacancy on the board.
• In the report for the quarter ended 30 June 2004 released on 28 July 2004 the Company advised that, during the quarter:
• Sampling close to the northern margin of EL 5701 returned up to 12.03% lead in east-west trending quartz veins.
• A ground electro-magnetic (EM) survey highlighted a series of potential conductive bedrock features in addition to the geochemical anomaly defined in the northwest of the De Rose Hill Project (EL 2910) during April 2004.
• the Company's application for an exploration licence at Sandy Creek, in north eastern Victoria was granted.
• The Company has been in discussion with the owners of Yorkey's mining lease ML 50098 and agreement has been reached for the purchase of ML 50098.
• The Company entered into a conditional agreement to dispose of its entire shareholding in Reefway Pty Limited to Avon Resources Limited.

Significant changes

There were no significant changes to the state of affairs of the Company which occurred during the financial year ended 30 June 2004.

Events subsequent to balance date

Except for the matters set out in Note 17 to the attached financial statements, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations, the result of those operations, or the state of affairs of the Company in financial years subsequent to the financial year ended 30 June 2004.

Likely developments

The directors intend the Company to continue to explore the Company's mineral tenements both by direct exploration and by joint venture and to seek new exploration or development projects, otherwise there are no known likely developments in the operations of the Company.

Information on directors

John LANDERER, CBE AM

(non-executive chairman of directors)

• Appointed as director and non-executive chairman on 11 October, 1995.

• A qualified lawyer LL.B., Sydney University.
• Senior partner of Sydney Lawyers, Landerer $\&$ Company.
• A director of a number of prominent private family companies.
• Beneficially holds 2,829,936 fully paid ordinary shares in the capital of the Company and has an indirect interest in a further 1,621,565 shares and 621,565 quoted options over unissued ordinary shares in the Company.

Albert G. HARRIS

(non-executive director)

• Appointed a director on 11 October 1995.
• Member of the Institute of Measurement and Control.
• Has been involved in the international petroleum and mineral resources industries for over 50 years.
• Has had senior management responsibility for exploration operations and the development of petroleum and mineral projects in Australia, the Middle East. West Africa and the USA.
• · Director of Takoradi Limited.
• Beneficially holds 110,000 fully paid ordinary shares in the capital of the Company.

Robert B. LEECE, AM RFD

(non-executive director)

• Appointed a director on 7 August 2002.
• $\bullet$ A civil engineer with extensive experience in project management and construction, both in the private and public sectors.
• Formerly Deputy Director General of the Olympic Co-ordination Authority and chief executive of the Olympic Roads and Transport Authority for the 2000 Sydney Olympic Games.
• He was also chairman of the Southern Sydney Recovery Task Force to co-ordinate and manage the damage from the 1999 Sydney hail storms.
• Has been involved as a director of several public and private development companies including Abigroup, Transfield and Merlin International Properties.
• · Indirectly holds 8,662,465 fully paid ordinary shares in the capital of the Company and 621,565 quoted options over unissued ordinary shares in the Company.

John M.E. PERCIVAL

(executive director - Director - Operations)

• Appointed a director on 11 October 1995.
• Has been involved in investment and merchant banking for over 25 years including 15 years

as investment manager of Barclays Bank New Zealand Limited.

• Has had extensive experience in stockbroking, corporate finance and investment management.
• Indirectly holds 1,300,000 fully paid ordinary shares in the capital of the Company.

Terence V. WILLSTEED

(non-executive director)

• Appointed a director on 20 July 2004.
• $\bullet$ A qualified mining engineer BE (Mining) Queensland University and a Fellow of the Australian Institute of Mining and Metallurgy with over 45 years experience in mining operations, mineral processing, corporate management and consulting practice.
• · Substantial activities have been involved in gold, uranium, base metal, PGM, oil shale and coal resource projects.
• Gained operational and management experience with Zinc Corporation Limited, Mount Isa Mines Limited and Consolidated Goldfields Australia Limited.
• Principal of Terence Willsteed & Associates, Consulting Mining Engineers since 1973.
• As a member of the Mineral Industry Consultants Association Board of Management has participated in the formation of the Joint Ore Reserves Committee and the formulation of the Australian Code for the Reporting of Resources and Ore Reserves.
• · Director of Climax Mining Limited and Kimberley Oil NL.
• Holds Nil securities in the Company, either directly or indirectly.

Directors' and auditors' indemnification

During or since the end of the financial year the Company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

• Under the provisions of the constitution of the Company every officer (and former officer) of the Company is indemnified, to the extent permitted by law, against all costs expenses and liabilities incurred as such an officer providing it is in respect of a liability to another person (other than the Company or a related body corporate) where such liability does not arise out of conduct involving a lack of good faith and it is in respect of a liability for costs and expenses incurred in defending proceedings in which judgement is given in favour of the officer or in which the officer is acquitted or is granted relief under the Law.

• In prior years the Company paid premiums on a policy to insure each of the directors and executives of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or executive of the Company, other than conduct involving a wilful breach of duty in relation to the Company. This policy was allowed to lapse in November 2001 and at the date of this report has not been renewed.

Directors' meetings

Attendance of individual directors at board meetings held during the year ended 30 June 2004 was as follows:

Director		Meetings Meetings
	heid	attended
J. Landerer, CBE AM	10	8
A.G. Harris	Iθ	10
R.B. Leece, AM RFD	10	Q
J.M.E. Percival	10	10

In addition there were 2 meetings of the audit sub-committee which were attended by directors as follows:

Director		Meetings Meetings
	held	attended
J. Landerer, CBE AM	2.
A.G. Harris	2	2
R.B. Leece, AM RFD	ာ	2
J.M.E. Percival

Options

At the date of this report there are 36,491,869 quoted options over unissued shares in the capital of the Company, details of which are set out in Notes 16 and 17 to the attached financial statements. During the financial year 1,500,000 unquoted options were issued. No options were exercised during the financial year or to the date of this report. Subsequent to balance date 13,500,000 unquoted options have expired.

Directors' and officers' remuneration

The remuneration of the directors is established by the shareholders. The remuneration of executive directors and executive officers of the Company is established by the board of directors. Details of remuneration paid during the year to directors and the five most highly remunerated executive officers are as follows:

Directors:	Fees	Super'n	Total
	Х.	Ж	Æ.
J. Landerer, CBE AM	22.207 1.999		24,206
A.G. Harris	24,000	nil	24,000
R.B. Leece, AM RFD	22,207 1,999		24,506
J.M.E. Percival	22.207 1.999		24,506

Officers:	Salary Super'n Total
	-8 - 8
J.M.E. Percival	67,000 6,030 73,030

Further particulars are set out in Note 18 to the accompanying financial statements.

No share options were granted to directors or executives of the Company during the financial year. On 15 July 2004 a total of 13,500,000 unquoted options held by directors, consultants and their associated entities expired.

Environmental regulation

The Company's operations are subject to general environmental regulation under the laws of the states and territories of Australia in which it operates. In addition, the various exploration licences held by the Company impose environmental obligations on it in relation to site remediation following sampling and drilling programs. The board is aware of these requirements and management has been instructed to ensure that they are complied with. The directors are not aware of any breaches of these environmental regulations and licence obligations during the year.

Directors' benefits

Since the end of the previous financial year no director has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as shown in the annual accounts of the Company, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related entity with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, other than:

• Mr J. Landerer, CBE AM receives a benefit from fees paid for legal services provided by the Company's solicitors, Landerer & Company, of which he is the senior partner. Fees paid for these services during the year totalled \$34,602 (2003: \$56,496) and were charged at normal commercial rates.

Signed in accordance with a resolution of the board of directors.

J. Landerer, CBE AM Director

A.G. Harris Director Sydney 22 September 2004

STATEMENT OF FINANCIAL POSITION as at 30 June 2004

	Note	2004	2003
		\$	${\mathbb S}$
CURRENT ASSETS
Cash assets	23(a)	673,482	1,337,710
Receivables	6	13,953	22,715
Other	7	20,402	22,300
TOTAL CURRENT ASSETS		707,837	1,382,725
NON-CURRENT ASSETS
Other financial assets	9	531,507	521,500
Property, plant & equipment	8	6,150	5,872
Exploration and investment expenditure	10	1,737,385	2,100,778
TOTAL NON-CURRENT ASSETS		2,275,042	2,628,150
TOTAL ASSETS		2,982,879	4,010,875
CURRENT LIABILITIES
Payables	14	36,457	60,493
Provisions	15	32,083	20,713
TOTAL CURRENT LIABILITIES		68,540	81,206
TOTAL LIABILITIES		68,540	81,206
NET ASSETS		2,914,339	3,929,669
EQUITY
Contributed equity	16	22,696,356	22,696,356
Accumulated losses	5	(19, 782, 017)	(18, 766, 687)
TOTAL EQUITY		2,914,339	3,929,669

STATEMENT OF FINANCIAL PERFORMANCE for the year ended 30 June 2004

	Note	2004	2003
		\$	\$
Revenue from ordinary activities	$\mathbf 2$	42,135	22,330
Capitalised exploration expenses written off		695,769	833,571
Salary costs (including directors fees)		113,780	110,071
Professional and legal fees		106,110	123,417
Operating lease expenses (office premises)		40,640	39,327
ASX and share registry expenses		27,217	35,543
Insurance		8,780	9,798
Underwriting costs			140,823
Depreciation and amortisation		1,901	3,093
Other costs		63,268	65,855
Total expenses from ordinary activities		1,057,465	1,361,498
Loss from ordinary activities before income tax expense	3	(1,015,330)	(1,339,168)
Income tax expense relating to ordinary activities	$\overline{4}$
Loss from ordinary activities after income tax expense		(1,015,330)	(1,339,168)
Net loss		(1,015,330)	(1,339,168)
Net loss attributable to members of Goldsearch Limited		(1,015,330)	(1,339,168)
Non-owner transaction changes in equity
Total changes in equity other than those resulting from
transactions with owners as owners		(1,015,330)	(1,339,168)
Basic earnings/(loss) per share - cents per share	24	(0.56)	(0.90)

The accompanying notes form part of these financial statements.

STATEMENT OF CASH FLOWS for the year ended 30 June 2004

	Note	2004	2003
		\$	\$
CASH FLOWS FROM OPERATING ACTIVITIES:
Payments to suppliers and employees		(305, 324)	(270, 857)
Payments to related parties		(65, 552)	(117, 118)
Interest received		44,134	18,053
Net cash used in operating activities	23(b)	(326, 742)	(369, 922)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for exploration activities		(250, 061)	(315, 344)
Payment to related parties for exploration activities		(65, 857)	(37,994)
Payment for property, plant & equipment		(2,210)	(559)
Payment for investment in listed entities		(19,358)	(48, 755)
Net cash used in investing activities		(337, 486)	(402, 652)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of shares			1,459,675
Payment of share issue costs			(140, 823)
Net cash provided by financing activities			1,318,852
Net increase/(decrease) in cash held		(664, 228)	546,278
Cash at beginning of year		1,337,710	791,432
Cash at end of year	23(a)	673,482	1,337,710

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

STATEMENT OF ACCOUNTING POLICIES $\mathbf{L}$

(a) General

The financial report is a general purpose financial report that has been prepared in accordance with applicable Accounting Standards, other mandatory professional reporting requirements (Urgent Issues Group Consensus Views), and the Corporations Act 2001. The financial report has also been prepared on an accrual basis of historical cost and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets. The accounting policies have been consistently applied, unless otherwise stated.

(b) International Financial Reporting Standards

The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards (IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB will issue Australian equivalents to IFRS, and Urgent Issues Group Abstracts corresponding to International Financial Reporting Interpretations adopted by the International Accounting Standards Board (IASB). These Australian pronouncements will be know as Australian International Financial Reporting Pronouncements (AIFRPs). The adoption of the AIFRPs will be first reflected in the Company's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.

The board of directors will manage the transition to AIFRPs, including training of staff and system and internal control changes necessary to gather all the required financial information. Priority will be given to consideration of the preparation of an opening balance sheet in accordance with AIFRPs as at 1 July 2004. A number of accounting policy changes may be required. In some cases, choices of accounting policies are available including elective exemptions under AASB 1 First-time Adoption of Australian International Financial Reporting Pronouncements. Some of these choices are still to be analysed to determine the most appropriate accounting policy

Major changes identified to date that will be required to the economic entity's existing accounting policies include the following:

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

1. STATEMENT OF ACCOUNTING POLICIES (continued)

(b) International Financial Reporting Standards (continued)

Exploration, evaluation and development costs

The IASB has yet to issue a standard dealing with exploration and evaluation costs. It is currently expected that a standard will be released late in 2004, which will be based on Exposure Draft ED6 – Exploration for and Evaluation of Mineral Resources. ED6 proposes that entities can elect to recognise and measure exploration and evaluation assets in accordance with accounting policies applied in their most recent annual financial statements. Entities will only be permitted to carry forward such costs after also having applied AASB136 – Impairment of Assets in respect of any impairment.

At present the Company recognises exploration and evaluation costs as an asset until such time that the area of interest associated with the costs is abandoned or proceeds to development. When the area of interest is abandoned the costs are expensed. As areas of interest reach the development stage, which permits a reasonable assessment of the economically recoverable reserves, these costs are to be amortised over the life of the associated reserves on a unit of production basis.

As the standard is yet to be issued, it is not included in the "stable platform" of standards that the AASB has made 'available by 30 June 2004 for Australian entities to use on transition to IFRS. The future financial effect of this possible change in accounting policy is not yet known.

Income tax

The Company currently recognises deferred taxes by accounting for the differences between accounting profits and taxable income, which gives rise to 'permanent' and 'timing' differences. Pursuant to the AIFRPs, deferred taxes are measured by reference to the temporary differences determined as the difference between the carrying amount and the tax base of assets and liabilities recognised in the statement of financial position.

The Company has carried forward tax losses which have not been recognised as deferred tax assets as they do not satisfy the 'virtually certain' criteria of current Australian Generally Accepted Accounting Principles (GAAP). Pursuant to the AIFRPs these tax losses may be more readily recognised as deferred tax assets as the 'probable' recognition criteria is less stringent than the 'virtually certain' test of Australian GAAP. The impact of this difference is not considered to materially change the recognition of tax related balances.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

1. STATEMENT OF ACCOUNTING POLICIES (continued)

(b) International Financial Reporting Standards (continued)

Rehabilitation and restoration costs

The accounting treatment for the provision for rehabilitation commitments under IFRS is prescribed under a combination of AASB 116 Property, Plant and Equipment and AASB 137 Provisions, Contingent Liabilities and Contingent Assets. On transition to IFRS an estimate of the present rehabilitation liability will be recorded, on a discounted basis, where a legal and constructive obligation to rehabilitate property exists. To the extent the activity that gives rise to the rehabilitation liability represents the construction of an asset, the corresponding cost is included in the asset and amortised over the life of the mine. Otherwise the provision is expensed as a period cost. The Company currently accrues, where appropriate, an estimated amount for the future rehabilitation of an estimated amount for the future rehabilitation of exploration sites. The future financial effect of this change in accounting policy is expected to be an increase in the provision for rehabilitation.

(c) Income tax

Tax effect accounting principles have been adopted whereby the income tax expense shown in the statement of financial performance is based on the operating profit before income tax adjusted for any permanent differences between taxable and accounting income. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. The future income tax benefit relating to tax losses is not carried forward as an asset unless there is virtual certainty of realisation of the benefit.

Income tax on net cumulative timing differences which occur when items are included or allowed for income tax purposes in a different period from that for accounting are shown at the Australian corporate tax rate of 30% in the provision for deferred income tax and future income tax benefit as applicable.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

1. STATEMENT OF ACCOUNTING POLICIES (continued)

(d) Property, plant and equipment

Property, plant and equipment are included in the accounts at cost or at independent or directors' valuation less, where applicable, any accumulated depreciation or amortisation.

The carrying value of property, plant and equipment is reviewed annually by the 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 which will be received from the asset's employment and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts.

All fixed assets, including capitalised leased assets but excluding freehold land, are depreciated over their estimated useful lives to the Company. Mining plant and equipment is depreciated in this manner over the estimated life of the relevant mine with due regard to each item's physical life limitations.

The depreciation rates used for each class of asset are:

Plant and equipment	20-40% DV
Leased plant and equipment	33.3% PC
Leased motor vehicles	20% PC

Depreciation and amortisation charged on fixed assets used in the Company's exploration activities is capitalised as exploration expenditure as it is incurred.

The gain or loss on disposal of all fixed assets, including revalued assets, is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal, and is included in operating profit before income tax in the year of disposal. Any realised revaluation increment relating to the disposed asset which is included in the asset revaluation reserve is transferred directly to capital profits reserve.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

1. STATEMENT OF ACCOUNTING POLICIES (continued)

(e) Exploration expenditure and mineral leases

Expenditure incurred on exploration, evaluation and development is accumulated in respect of each identifiable area of interest of the Company. The costs are carried forward provided that:

• i) such costs are expected to be recouped by successful development and/or exploitation of the area of interest, or
• ii) by sale of the area of interest, or
• iii) exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in relation to the area are continuing.

Should any area of interest be abandoned or considered to be of no value, accumulated expenditure applicable to such area of interest is written off to the statement of financial performance in the year in which the decision is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

(f) Leased assets

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the Company, are classified as finance leases and are capitalised and amortised on a straight line basis over the estimated useful life of the asset where it is assumed the Company will obtain ownership of the asset or over the term of the lease. Finance lease payments are allocated between interest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.

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.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

STATEMENT OF ACCOUNTING POLICIES (continued) $\mathbf{L}$

$(g)$ Business undertakings $-$ joint ventures

The Company has certain exploration activities conducted through joint ventures with other parties. The Company's interest in these joint ventures is shown in the statement of financial position under the appropriate heading. Details of the interests in the joint venture assets and liabilities are set out in Notes 11 and 12.

(h) Cash flows

For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and which are used in the management function on a day-to-day basis, net of outstanding bank overdrafts.

(i) Earnings per share

i) Basic earnings per share:

Basic earnings per share is determined by dividing the operating profit/ (loss) after income tax by the weighted average number of ordinary shares outstanding during the financial year.

ii) Diluted earnings per share:

Diluted earnings per share adjusts the figures used in determining earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial year.

(j) Consolidation

The accounts are not consolidated as the directors have decided that such application is of no material consequence.

(k) Comparative information

Comparative figures are, where appropriate, reclassified so as to be compatible with the figures presented for the financial year.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

1. STATEMENT OF ACCOUNTING POLICIES (continued)

(I) Restoration, rehabilitation and environmental expenditure

Restoration, rehabilitation and environmental expenditure to be incurred during the production phase of operations is accrued when the need for such expenditure is established, and then written off as part of the costs of production of the mine property concerned. Significant restoration, rehabilitation and environmental expenditure to be incurred subsequent to the cessation of production at each mine property is accrued, in proportion to production, when its extent can be reasonably estimated.

(m) Employee entitlements

Provision is made for the Company's liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at their nominal rate.

Contributions are made by the Company to employee superannuation funds and are charged as expenses when incurred.

(n) Remuneration of directors and executive officers

The cost to the Company of share options granted to directors and executive officers is included at fair value as part of the directors' and executive officers' aggregate remuneration in the financial year the options are granted. The fair value of the share option is calculated using the Black Scholes option pricing model, which takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the option, the current price and expected price volatility of the underlying share, the expected dividend yield and the riskfree interest rate for the term of the option.

No expense is recorded in the statement of financial performance for the value of options granted to directors and executive officers.

(o) Investments

Investments have been brought to account at cost or directors' valuation as noted in the financial statements.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

2 REVENUE FROM ORDINARY ACTIVITIES	2004 \$	2003 \$
Revenue from operating activities
Interest received	42,135	22,330
3 LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX
a) Individually significant expenses included in the loss from ordinary activities before income tax:
Capitalised exploration expenditure written off	695,769	833,571
b) Loss from ordinary activities before income tax has been determined after:
Expenses
Depreciation of plant and equipment Plant and equipment	1,901	3,093
Rental expense on operating leases	38,996	37,471
Movements in provisions - employee entitlements	11,371	11,431
Capitalised exploration expenditure written off	695,769	833,571

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

4 INCOME TAX

Subject to the provisions of the Income Tax Assessment Act, if the Company derives assessable income it will be able to utilise carry-forward tax losses. As at 30 June 2004, the Company has estimated carry-forward tax losses after adjusting for permanent and timing differences of approximately \$12,852,729 (2003: \$13,072,684) which amounts to an income tax benefit of \$3,855,819 (2003: \$3,921,805). The Company has estimated carry-forward capital losses of \$Nil (2003: \$141,973) of which income tax benefit of \$Nil (2003: \$42,592) has not been brought into account.

Certain losses which have been incurred in the course of mining activities are only available for offset against future mining income. Due to the manner and nature of activities giving rise to these carry-forward tax losses, a detailed analysis would be required should the Company return to profits.

The future income tax benefit will only be obtained if:

• the Company derives future assessable income of a nature and of an amount $(a)$ sufficient to enable the benefit from the deductions for the loss to be realised:
• $(b)$ the Company continues to comply with the conditions for deductibility imposed by law; and
• no changes in tax legislation adversely affect the Company in realising the $(c)$ benefit from the deduction of the loss.

	2004	2003
	s	S
5 ACCUMULATED LOSSES
Accumulated losses at beginning of year	(18,766,687)	(17, 427, 519)
Net loss attributable to members of Goldsearch Limited	(1,015,330)	(1,339,168)
Accumulated losses at end of year	(19,782,017)	(18, 766, 687)

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

	2004 \$	2003 S
6 CURRENT ASSETS - RECEIVABLES
Other debtors	2,277	6,777
Loans receivable	12,500	12,500
Less provision for non-recovery	(12,500)	(12,500)
GST receivable	11,676	15,938
	13,953	22,715

The above assets are not subject to interest and, after provisions, the full amounts are expected to be received in the ordinary course of business.

7 CURRENT ASSETS - OTHER

Short term bond	18,300	18,300
Prepayments	2.102	4,000
	20,402	22,300

8 NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT

Equipment at cost	45,664	43,454
Accumulated depreciation	(39, 514)	(37, 583)
	6,150	5,871
Motor vehicle at cost	61,300	61,300
Accumulated depreciation	(61,300)	(61,300)
Plant and equipment at cost	6,950	6,950
Accumulated depreciation	(6,950)	(6,949)
Total property, plant and equipment	6,150	5,872

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

8 NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT (continued)

Reconciliation of property, plant & equipment

	Equipment	Plant & equipment	Total
2004
Carrying amount at beginning of year	5,871	I	5,872
Additions	2,210		2,210
Depreciation	(1,931)	(1)	(1,932)
Carrying amount at end of year	6,150		6,150
2003
Carrying amount at beginning of year	7,751	965	8,716
Additions	559		559
Depreciation	(2, 439)	(964)	(3,403)
Carrying amount at end of year	5,871		5,872

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

	2004 S	2003 S
NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS 9.
Shares in controlled entities at cost (Note 27)	885	885
Shares in listed companies at cost (v)	155,622	145,615
Shares in unlisted companies at cost (i)	Ŧ	588,172
Shares in unlisted companies at cost (iii)	733,491	733,491
Provision for diminution in value of investment (ii)	(1)	(588, 172)
Provision for diminution in value of investment (iv)	(358, 491)	(358, 491)
	531,507	521,500
The Company holds a 15.1% (2003: 15.1%) (i)
interest in Capix Pty Ltd a company involved
in development and supply of corporate treasury,
stockbroking and banking software.	1	588,172
The directors have fully provided against the (ii)
investment in Capix Pty Ltd.	(1)	(588, 172)
Capix Pty Ltd was placed into liquidation during
the year and accordingly the directors have applied
the prior provision to write the investment down to \$1.
The Company holds a 9.68% (2003: 9.68%) (iii)
interest in Reefway Pty Limited, a company
involved in mineral exporation.	733,491	733,491
The directors have provided \$358,491 for diminution in value (iv)
of the investment in Reefway Pty Limited.	(358, 491)	(358, 491)
In June 2004 the Company entered into a conditional agreement
for the sale of this investment to Avon Resources Limited.
At the date of these accounts the conditions had yet to be satisfied.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

2004	2003
S	S

9 NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS (continued)

$(v)$

Minority interest in Independence Group NL (formerly Independence Gold NL) shares and options. The market value of these investments at 30 June 2004 was \$655,000.

(vi) There would be no material capital gains tax payable if these listed assets were sold at their market values at balance date.

Reconciliation of other financial assets

Carrying amount at beginning of year	521.500	472.745
Additions	10.007	48.755
Carrying amount at end of year	531.507	521.500

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

	2004 \$	2003 \$
10 NON-CURRENT ASSETS - EXPLORATION AND INVESTMENT EXPENDITURE
Mining expenditure (Pre-production)
Exploration and evaluation expenditure carried forward
in respect of mining areas of interest.
Balance at beginning of year	2,100,778	2,583,473
Exploration expenditure, at cost	332,376	350,876
	2,433,154	2,934,349
Capitalised exploration expenditure written off	(695, 769)	(833, 571)
Balance at end of year	1,737,385	2,100,778
Depreciation included in exploration expenditure	31	40

Mineral exploration is to be amortised when production commences, or written off to the statement of financial performance. The above carrying values do not purport to be the amount receivable by the Company in the event the interests in the mining leases were farmed out or sold, with the recovery of this capitalised exploration expenditure dependent upon future successful mining or realisation of this asset.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

11 BUSINESS UNDERTAKINGS - JOINT VENTURES

a) Allender. Hosking and LeBrun joint venture

The Company has entered into an agreement with Messrs Allender, Hosking and LeBrun whereby it can earn a 51% equity in certain exploration licences and exploration licence applications by funding exploration for the first year of each licence area. Thereafter the Company may elect to earn a further 25% equity (viz. up to a 75% equity) by funding further exploration. The current tenements covered by the agreement are ELs 5701, 5702, 5703, 9443, and 9741 and ELAs 6847 and 9740. The Company's funding commitments under this agreement are partly covered by the Independence Gold joint venture as detailed in Note 11 (b) below.

b) Independence Group joint venture

The Company has entered into a joint venture agreement with Independence Group NL (IGO) whereby IGO can earn a 51% interest in certain designated exploration tenements held by Goldsearch, by funding twice the statutory annual expenditure commitment assigned to the exploration licence by the issuing authority.

The current exploration licences covered by the agreement are South Australian ELs 2910 and 3031 and Northern Territory ELs 5701, 5703 and 9407.

The current exploration licence applications covered by the agreement are South Australian ELAs 35, 198, 260, 262, 336-343 and 534 and Northern Territory ELAs 23783, 23785 and 23786.

The total expenditure commitments for the above exploration licences and applications at 30 June 2004 amount to \$5,029,000. IGO must spend a minimum of \$2,000,000 before earning an equity in any licence area. IGO has advised that it had expended \$918,661 under the agreement up to 30 June 2004. Accordingly, at that date, it had not earned an equity interest in any of the tenements.

c) Phelps Dodge joint venture

The Company has entered into an agreement with Phelps Dodge Australasia Inc (PDA) in relation to a joint venture to explore the base metal potential of EL2899 (Hawks Nest). Under the terms of the agreement, PDA can earn an initial 51% equity interest in the tenement by contributing \$1,000,000 of exploration expenditure. PDA can then elect to earn an additional 19% equity interest by contributing a further \$3,000,000 of exploration expenditure.

At the date of these financial statements the Company has received verbal advice that PDA may not continue with exploration of EL2899. Accordingly capitalised expenditure to date of \$669,093 has been written off.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

$12²$ EXPLORATION TENEMENTS

Expenditure commitments

In order to maintain current rights of tenure to the various exploration interests held by the Company, the Company is required to perform exploration work to meet the minimum expenditure requirements specified by the issuing authority. These commitments are agreed to, and accepted by, the licence holder at the time a licence is granted.

Minimum expenditure requirements to retain current rights of tenure to granted tenements for the year ending 30 June 2005, and the parties responsible for funding that expenditure, are as follows:-

$\bullet$ EL2899	South Australia	\$20,000 to be funded by Phelps Dodge (Australasia) lnc
$\bullet$ EL2910	South Australia	\$190,000 to be funded by Independence Group NL
$\bullet$ EL3031	South Australia	\$150,000 to be funded by Independence Group NL
• EL9407	Northern Territory	\$50,000 to be funded by Independence Group NL
$\bullet$ EL5701	Northern Territory	\$50,000 to be funded by Independence Group NL
$\bullet$ EL5703	Northern Territory	\$50,000 to be funded by Independence Group NL
$\bullet$ EL5702	Northern Territory	\$10,000 to be funded by Goldsearch Limited
• EL9443	Northern Territory	\$50,000 to be funded by Goldsearch Limited
• EPM13336 Queensland		\$100,000 to be funded by Goldsearch Limited
$\bullet$ EL4812	Victoria	\$20,700 to be funded by Goldsearch Limited
$\bullet$ EL6027	New South Wales	\$20,000 to be funded by Goldsearch Limited
• EL6094	New South Wales	\$39,500 to be funded by Goldsearch Limited
		\$750,200

The Company has also made application for further exploration tenements. Whilst no formal expenditure commitment exists until licences are granted and access agreements are in place, should all of these applications be granted, an additional minimum annual expenditure requirement of \$2,520,662 would arise. Of this additional minimum annual expenditure requirement \$2,024,512 would be funded by the joint venture arrangements set out in Note 11 with the Company being obliged to fund the remainder.

The above obligations, relating to both granted tenements and applications, are not provided for in the accounts and are payable as and when they fall due.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

	NOTE	2004 \$	2003 \$
13	COMMITMENTS FOR EXPENDITURE
	Operating lease commitments :
	Non-cancellable operating leases contracted for
	but not capitalised in the accounts:-
	Rental of premises -
	Not later than 1 year	46,588	41,033
	Later than 1 year and not later than 5 years	78,535	63,467
		125,123	104,500

tenements, the Company is required to perform minimum

exploration work to meet the minimum expenditure

requirements specified by various State governments. These

obligations are subject to renegotiation when application for a

mining lease is made and at other times. These obligations

are not provided for in the financial report and are payable:

	1.622.500	1,344,500
Later than I year and not later than 5 years	872.300	734,000
Not later than 1 year	750.200	610.500

As detailed in Notes 11 and 12 these exploration expenditure commitments are largely funded by existing joint venture arrangements.

14 CURRENT LIABILITIES - PAYABLES

Trade creditors	21.444	51.620
Sundry creditors and accruals	15.013	8.873
	36,457	60,493

The above amounts all relate to normal unsecured creditors incurred in the normal course of the Company's business operations and are within the credit terms of each relevant supplier or service provider.

15 CURRENT LIABILITIES - PROVISIONS

Employee entitlements	32.081	20.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

		2004 \$	2003 \$
16	CONTRIBUTED EQUITY
	(a) Issued shares:
	182,459,348 ordinary fully paid shares at beginning of year (2003:145,967,479)	19,951,282	18,491,607
	Issued during the year:
	Nil shares issued during the year
	$(2003:36,491,869$ shares issued at 4 cents each)		1,459,675
	182,459,348 ordinary fully paid shares at end of year
	(2003:182,459,348)	19,951,282	19,951,282
	(b) Issued options:
	Issue price of options issued in prior years and which
	have expired	2,745,074	2,745,074
	Total contributed equity	22,696,356	22,696,356

• (c) There was no movement in issued shares during the year.
• (d) Movement in issued share options during the year:

Total options granted but not exercised as at 30 June 2004 are as follows:

Date	Details	Exercise price	Expiry date	Number
Quoted options - $(f)(i)$ 1 July 2003	opening balance	8 cents	30 September 05	36,491,869
30 June 2004	closing balance	8 cents	30 September 05	36,491,869
Unquoted options - $(f)(ii)$
1 July 2003	opening balance	15 cents	15 July 2004	12,000,000
10 September 2003	options issued	15 cents	15 July 2004	1,500,000
30 June 2004	closing balance	15 cents	15 July 2004	13,500,000

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

16 CONTRIBUTED EQUITY (continued)

(e) Uncalled capital :

No calls are outstanding at year end. All issued shares are fully paid.

(f) Terms and conditions of issued options

(i) Quoted options

All the quoted options were issued during the year ended 30 June 2003 and each option entitles the holder to subscribe for one fully paid share in the Company at an issue price of 8 cents per share at any time from the date of issue until expiry of the options on 30 September 2005.

(ii) Unquoted options

All unquoted options are held by directors and consultants to the board and each option entitles the holder to subscribe for one fully paid share in the Company at an issue price of 15 cents per share at any time from the date of issue until expiry of the options on 15 July 2004.

These options were not exercised prior to their 15 July 2004 expiry date and have now lapsed.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

17 EVENTS SUBSEQUENT TO BALANCE DATE

No material events or matters have occurred since 30 June 2004 to the date of this financial report except for:

Expiry of unquoted options

On 15 July 2004 a total of 13,500,000 unquoted options over unissued shares in the capital of the Company expired under the terms of their issue.

Appointment of director

On 20 July 2004 Mr T.V. Willsteed was appointed as a director of the Company to fill a casual vacancy on the board.

Issue of shares

On 25 August 2004 the Company issued a total of 750,000 ordinary fully paid shares as part consideration for the acquistion of mineral tenements.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

18 Directors and executives remuneration

a) Names and positions held by directors and specified executives are

Non executive chairman
Non executive director
Non executive director
Non executive director (appointed 20 July 2004)
Executive director - Director Operations

There are no specified executives.

b) Director Remuneration

Primary			Post employment	Equity	Other	Total
2004	Salary, fees & commissions	Superannuation contribution	Superannuation	Options
J. Landerer, CBE AM	22,206	1,999	۰			24,205
A.G. Harris	24,000	۰.	٠		٠	24,000
R.B. Leece, AM RFD	22,206	1,999	$\tilde{\phantom{a}}$		۰	24,205
J.M.E. Percival	89,206	8,029	٠	$\blacksquare$	٠	97,235
T.V. Willsteed		۰	٠
2003
J. Landerer, CBE AM	22,206	1,999				24,205
A.G. Harris	24,000	$\blacksquare$	$\tilde{\phantom{a}}$		$\blacksquare$	24,000
R.B. Leece, AM RFD	22,206	1,999	$\tilde{\phantom{a}}$		$\overline{\phantom{a}}$	24,205
J.M.E. Percival	78,206	7,538				85,744

No options have been granted as remuneration.

No shares have been issued on the exercise of remuneration options.

18 Directors and executives remuneration (continued)

c) Options and rights holdings

Number of options held by directors and their associates

	Balance at $1/7/03$	Granted as remuneration	Options exercised	Net change other	Balance at 30/6/04	Vested at 30/6/04
J. Landerer, CBE AM	3,621,565	$\overline{\phantom{a}}$	$\mathbf{w}$	$\mathcal{M}$	3.621.565	3,621,565
A.G. Harris	3.000.000	$\;$	$\mathbf{w}$	$\mathcal{M}$	3.000.000	3,000,000
R.B. Leece, AM RFD	621,565	$\cdot$	$\mathbf{w}$	$\mathbf{w}$	621,565	621.565
J.M.E. Percival	3.000,000	$\,$	$\mathbf{w}$	$\mathbf{r}$	3.000.000	3,000,000
T.V. Willsteed	$\overline{r}$	$\mathbf{r}$	$\mathbf{r}$	$\mathbf{w}$		$\mathbf{w}$

d) Shareholdings

Number of shares held by directors and their associates

	Balance at $1/7/03$	Received as remuneration	Options exercised	Net change other	Balance at 30/6/04
J. Landerer, CBE AM	3.551.501	$\overline{\phantom{a}}$	$\mathbf{r}$	900,000	4.451.501
A.G. Harris	200,000	$\cdot$	$\mathbf{r}$	(90,000)	110,000
R.B. Leece, AM RFD	8.662,465	$\cdot$	$\tilde{\phantom{a}}$	0	8.662,465
J.M.E. Percival	900,000	$\cdot$	$\star$	400.000	1,300,000
T.V. Willsteed	$\overline{r}$	$\overline{\phantom{a}}$	$\star$	0	0

e) Remuneration practices

The Company's policy for determining the nature and amounts of emoluments of directors and senior executives of the Company is as follows;

The remuneration structure for executive officers, including executive directors, is based on a number of factors, including the length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and specified directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement specified directors and executives are paid employee benefit entitlements accrued to date of retirement.

Executive directors and senior executives may receive performance based bonuses. There is no separate profit-share plan.

The constitution of the Company provides that the remuneration of non-executive directors will not be more than the aggregate fixed sum determined by a general meeting of shareholders. The aggregate remuneration has been set at an amount of \$100,000 per annum.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

	2004 \$	2003 \$
19 REMUNERATION OF AUDITORS
Amounts received or due and receivable by the auditors for:
Auditing the accounts	20,892	27,478
Other services	550	1,849
	21,442	29,327

20 ECONOMIC DEPENDENCY

The Company's principal activities are mineral exploration and investment. Other than interest derived from funds on deposit the Company does not derive income from any trading activity and is dependent upon the support of shareholders and the market to finance its on-going exploration program.

21 CONTINGENT LIABILITIES

The directors are not aware of any potential liabilities or claims against the Company as at the date to which these financial statements are made up.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

22 RELATED PARTY TRANSACTIONS

The names of persons who were directors of the Company at any time during the year and to the date of these financial statements are:

J. Landerer, CBE AM J.M.E. Percival A.G. Harris R.B. Leece, AM RFD T.V. Willsteed (appointed 20 July 2004)

Transactions between related parties are on normal commercial terms and conditions unless otherwise stated.

(a) Director transactions

During the year ended 30 June 2003 Mr J. Landerer, CBE AM acted as an underwriter to the Company's rights entitlement issue of shares and options and was paid \$1,459 (2004: Nil) in underwriting fees as disclosed in the prospectus for the issue.

(b) Director related entity transactions

Mr J. Landerer, CBE AM is a partner of Landerer & Company. Landerer & Company act as solicitors to the Company. Charges for services provided during the year amounted to \$34,602 $(2003: $56,496).$

During the year ended 30 June 2003 Mr R.B. Leece, AM RFD, through an associated company Daradine Pty Limited, acted as an underwriter to the Company's rights entitlement issue of shares and options and Daradine Pty Limited was paid \$1,459 (2004: Nil) in underwriting fees as disclosed in the prospectus for the issue.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

22 RELATED PARTY TRANSACTIONS (continued)

Directors and director-related entities hold directly, or indirectly, or beneficially as at the reporting date the following interests in the Company:

	Ordinary shares		Quoted share options		Unquoted share options
Directors	Direct	Indirect	Direct	Indirect	Direct	Indirect
J. Landerer, CBE AM	2,829,936	1,621,565	$\blacksquare$	621.565	$\mathbf{u}$	3.000.000
A.G. Harris	110,000	$\overline{\phantom{a}}$	$\,$	$\mathbf{u}$	3.000.000
R.B. Leece, AM RFD	$\omega$	8,662,465	$\blacksquare$	621.565	$\mathbf{u}$
J.M.E. Percival	$\omega$	1,300,000	$\overline{\phantom{a}}$	$\blacksquare$	$\blacksquare$	3,000,000

Movements in these holding during the year were as follows:

(i) Acquisitions

	Ordinary shares		Quoted share options		Unquoted share options
	Direct	Indirect	Direct	Indirect	Direct	Indirect
J. Landerer, CBE AM	900,000				w
A.G. Harris	$\overline{\phantom{a}}$				$\overline{\phantom{a}}$
R.B. Leece, AM RFD	$\overline{\phantom{a}}$				$\mathbf{u}$
J.M.E. Percival	$\overline{\phantom{a}}$	400,000		w	w	$\,$

(ii) Sales

	Ordinary shares		Quoted share options		Unquoted share options
	Direct	Indirect	Direct	Indirect	Direct	Indirect
J. Landerer, CBE AM
A.G. Harris	90,000	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$		$\overline{\phantom{a}}$
R.B. Leece, AM RFD	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	MAR		$\overline{\phantom{a}}$
J.M.E. Percival	AM				MA

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

23 STATEMENT OF CASH FLOWS

(a) Reconciliation of cash:

For the purposes of the statement of cash flows, cash includes:

• (i) cash on hand and at bank, cash on deposit, net of outstanding bank overdrafts; and
• (ii) investments in money market instruments with less than 30 days to maturity.

Cash as at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:

	2004	2003
Cash at 30 June 2004 is shown	S	S
in the statement of financial position as:
Cash on hand	600	400
Cash at bank	637,635	1,302,690
Deposits at call	35,247	34,620
	673,482	1,337,710

(b) Reconciliation statement:

A reconciliation of "net cash (used in)/ provided by operating activities" to "loss from ordinary activities after income tax" is as follows:

Loss from ordinary activities after income tax	(1,015,330)	(1,339,168)
Add/(less)
Depreciation	1,901	3,093
Write-off of capitalised exploration expenditure	695,769	833,571
Underwriting fees included in financing activities		140,823
Changes in assets and liabilities :
(Increase)/decrease in receivables	4,500	(10,323)
Increase/(decrease) in provisions	11,371	11,431
(Increase)/decrease in prepayments	1,898	331
Increase/(decrease) in trade creditors
and accruals net of exploration expenditure	(26, 851)	(9,680)
Net cash (used in)/provided by operating activities	(326, 742)	(369, 922)

The Company does not have any formal loan facilities in place at the date these financial statements are made up.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

24 EARNINGS PER SHARE	2004	2003
The following reflects the income and share data used in the calculations of basic and diluted earnings per share:
Basic earnings/(loss) per share	(0.56c)	(0.90c)
Weighted average number of ordinary shares outstanding during the year	182,459.348	149,266.744
Net loss	(1,015,330)	(1,339,168)

Options:

As at 30 June 2004 the Company had on issue 49,991,869 (2003: 48,491,869)

options over unissued capital. Refer to Note 16 for further details.

As the notional exercise price of these options would increase basic earnings

(decrease loss) per share, they have not been considered dilutive.

25 SEGMENT INFORMATION

The Company operates predominantly in Australia. Industry segment information is as follows:

	Revenue	Results	Assets	Liabilities
	2004	2004	2004	2004
Mineral exploration		(695,769)	1,737,385
Other investments			531,507
Unallocated	42,135	(319, 561)	713,987	68,540
	42,135	(1,015,330)	2,982,879	68,540
	Revenue	Results	Assets	Liabilities
	2003	2003	2003	2003
Mineral exploration		(833,572)	2,100,778
Other investments			521,500
Unallocated	22,330	(505, 596)	1,388.597	81,206
	22,330	(1,339,168)	4,010,875	81,206

26 FRANKING CREDITS

The Company has no franking credits available.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

27 CONTROLLED ENTITIES	Country of incorporation	Percentage owned
Parent entity: Goldsearch Limited	Australia	۰
Controlled entities:
Caytale Pty Limited (i)	Australia	100%
Chiljill Pty Limited (i)	Australia	100%
Miltonpak Pty Limited (i)	Australia	100%

The above subsidiary companies have no activities other than as holders of exploration rights on $(i)$ certain tenements.

Separate consolidated accounts of the economic entity formed by the Company and these wholly owned subsidiaries have not been prepared on the grounds of immateriality.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

28 FINANCIAL INSTRUMENTS

(a) Interest rate risk exposure

The Company is exposed to interest rate risk through primary financial assets and financial liabilities. The following table summarises the interest rate risk for the Company, together with the effective weighted average interest rate for each class of financial assets and liabilities.

				2004
			Fixed interest
		Floating maturing in		Non-
		interest	1 year or	over 1 to	interest
		rate	less	5 years	bearing	Total
		S	\$	S	\$	S
Financial assets
Cash	23	593,496	35,247		44,739	673,482
Receivables	6				13,953	13,953
Investments - non-listed securities	9				375,885	375,885
Investments - listed securities	9				155,622	155,622
Total financial assets		593,496	35,247	L,	590,199	1,218,942
Weighted average interest rate		4.54%	1.51%	$0.00\%$
Financial liabilities
Trade and sundry creditors	14				36,457	36,457
Total financial liabilities			u.	w	36,457	36,457
Weighted average interest rate		$0.00\%$	0.00%	$0.00\%$
Net financial assets		593,496	35,247		553,742	1,182,485
					2004	2003
					\$	\$
Reconciliation of net financial assets to net assets:
Net financial assets above					1,182,485	1,821,432
Non-financial assets and liabilities:
Other assets					20,402	22,300
Property, plant and equipment					6,150	5,872
Capitalised exploration expenditure					1,737,385	2,100,778
Provision for employee entitlements					(32,083)	(20, 713)
Net assets per statement of financial position					2,914,339	3,929,669

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

28 FINANCIAL INSTRUMENTS (continued)

				2003
			Fixed interest
		Floating	maturing in		Non-
		interest	1 year or	over 1 to	interest
	Note	rafe	less	5 years	bearing	Total
		\$	\$	\$	\$	\$
Financial assets
Cash	23	1,270,689	34,619		32,402	1,337,710
Receivables	6				22,715	22,715
Investments - non-listed securities	9				375,885	375,885
Investments - listed securities	9		w	w	145,615	145,615
Total financial assets		1,270,689	34,619	$\tilde{\phantom{a}}$	576,617	1,881,925
Weighted average interest rate		4.29%	2.16%	$0.00\%$
Financial liabilities
Trade and sundry creditors	14				60,493	60,493
Total financial liabilities		$\tilde{\phantom{a}}$	w	$\overline{\phantom{a}}$	60,493	60,493
Weighted average interest rate		$0.00\%$	0.00%	$0.00\%$
Net financial assets		1,270,689	34,619		516,124	1,821,432

(b) Net fair values of financial assets and liabilities

$(i)$ The net fair values of cash and cash equivalents and non-interest bearing monetary financial assets and liabilities approximate their carrying values as disclosed in the statement of financial position and the notes to the financial statements.

$(ii)$ The carrying amounts and estimated net fair values of equity investments approximate their carrying values as disclosed in the statement of financial position and the notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2004

28 FINANCIAL INSTRUMENTS (continued)

(c) Foreign exchange risk exposure

The Company is not exposed to any currency exchange risk through primary financial assets or liabilities or anticipated future transactions.

(d) Credit risk exposure

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provision for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements.

The Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Company.

Receivables due from major debtors are not normally secured by collateral, however the credit worthiness of debtors is monitored.

29 REHABILITATION COSTS

No known commitments for rehabilitation costs exist as at the date of preparation of these financial statements.

DIRECTORS' DECLARATION

The directors of Goldsearch Limited declare that:

• a) The financial statements and associated notes for the year ended 30 June 2004 comply with Accounting Standards and other mandatory professional requirements;
• b) The financial statements and associated notes for the year ended 30 June 2004 give a true and fair view of the financial position of the Company as at 30 June 2004 and the performance of the Company for the year then ended; and
• c) In the opinion of the directors:
• i) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
• ii) the financial statements and associated notes for the year ended 30 June 2004 are made out in accordance with the Corporations Act 2001, including sections 296 and 297 thereof.

Made in accordance with a resolution of the directors.

On behalf of the directors

J. Landerer CBE AM Director

A.G. Harris Director

Sydney, 22 September 2004

Independent audit report to members of Goldsearch Limited ABN 73 006 645 754

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements and the directors' declaration for Goldsearch Limited (the company), for the year ended 30 June 2004.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

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 and Assurance 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, Accounting Standards and other mandatory financial reporting reguirements in Australia, a view which is consistent with our understanding of the company's financial position and d its performance as represented by the results of its operations and cash flows.

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

• $\blacksquare$ 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 $\blacksquare$ 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.

Independence

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

Audit Opinion

In our opinion, the financial report of Goldsearch Limited is in accordance with;

• a) the Corporations Act 2001, including;
• i). giving a true and fair view of the financial position of Goldsearch Limited as at 30 June 2004, and of its performance for the year ended on that date; and
• ii} complying with Accounting Standards in Australia and the Corporations Regulations 2001.
• b) other mandatory financial reporting requirements in Australia.

Inherent Uncertainty regarding Exploration Expenditure

Without qualification to the opinion expressed above, attention is drawn to the following matters.

The Company is involved with the conduct of continuing exploration and evaluation procedures in order to assess the existence and economic recoverability of minerals in its area of interest. In accordance with the Company's accounting policy exploration expenditure of \$1,737,385 (30 June 2003 - \$2,100,778) has been carried as a non current asset. The recovery of these exploration costs is uncertain as it is dependent upon the successful development and exploitation, or sale, of the area of interest.

William Buck Chartered Accountants

Dated this 22^nd day of September 2004. Melbourne, Australia.

Gerard Belleville Partner