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December 2002 - Quarterly Report

Principal Points

30 January 2003

PRODUCTION

  • Continued production difficulties at Southland resulted run-of-mine production of only 196,000 tonnes for the December quarter. This disappointing outcome was due to longwall face stability problems, primarily relating to a zone of poor ground conditions (low angle in-seam shearing).
  • A new alliancing contract between Southland Coal and Thiess commenced on 1 November 2002.
  • Updated 2002-03 outlook for Southland is to mine 1.0 to 1.2 million tonnes, comprising 0.9 to 1.0 million tonnes coking coal and 0.1 to 0.2 million tonnes steaming coal, with two-thirds being in the second half.
  • To underpin future production at 2 million tonnes per annum, Southland now has about 3 million tonnes of developed coal and modernisation of the longwall equipment has been advanced to late calendar 2003.
  • Gold production of 14,716 ounces at a cash operating cost of $330/oz and total cost of $480/oz.
  • The Lewis Decline broke through to the Monkland Mine in late December. This integrates the mines and provides support for production growth as well as providing access for mine exploration activities
  • Forecast 2002-03 gold production at Gympie Eldorado is 60,000 ounces.

EXPLORATION

  • Drilling during the quarter significantly extended the known mineralised length of the Inglewood Structure by 1.5 kilometres to the northwest and more than 2.5 kilometres to the southeast of the mine area:
  • At South Inglewood, initial drilling has confirmed that Inglewood Structure continues to the southwest and a major fault has lifted it close to surface. This shallow, concealed repetition of the Gympie Goldfield's major ore feeder structure is already yielding intercepts of coarse, visible gold and remains open along strike to the southeast; and
  • At Inglewood Hill, encouraging intercepts of 2.5 metres at 10.7g/t gold and 1.1 metres at 18.1g/t gold were drilled 700 metres to the northwest of currently delineated resources. This recent drilling extends to more than 4 kilometres the proven strike length of the Inglewood Structure, a major gold feeder structure which has already produced 2 million ounces from half that strike length.
  • Drilling of the Partridge resource on a 25-metre spacing was completed and the resource upgraded to an Indicated Resource of 280,000 tonnes at 8.7g/t, containing 79,000 ounces of gold.
  • Gympie Gold has invested seed capital and agreed to transfer some exploration tenements with potential for bulk tonnage gold and copper-gold discoveries to D'Aguilar Gold Limited - a new exploration company. D'Aguilar aims to list on the ASX in 2003 with Gympie Gold to own about 25% of the company.

MARKETING

  • Coal export sales during the quarter were 227,431 tonnes to Japan and Korea.

CORPORATE

  • The dispute with previous coal contractor Colrok was settled during the quarter.
  • Southland will contribute an operating loss before tax of approximately $9 million for the December half, outweighing the profitability of Gympie Eldorado and leading to a group operating loss for the half of approximately $12 million before tax. These figures are preliminary and unaudited.
  • Gold hedging has been reducing for two years and is now only 26% of resources.
  • Currency hedging in place for approximately one million tonnes of coal sales at $A/$US rate of 0.541.



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