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Production Resumes at Southland Colliery

19 February 2003

The longwall completed the transition to the seam floor at Gympie Goldís 90%-owned Southland Colliery on 10 February. Production then resumed with average tonnage limited to 2,000 tonnes per day for the first week as mechanical equipment was brought back into a normal production cycle and workload. The build-up is in progress with production in the last 24 hours of 4,800 tonnes.

Ground conditions are better than they have been for the last six months and, after consulting Southlandís contract-operator Thiess and independent experts, production for the June 2003 half-year is expected to be between 500,000 tonnes and 600,000 tonnes.

Annual coal sales negotiations are commencing in Japan and elsewhere. Demand for Southland Coal's product range remains very strong particularly because of its low ash and high fluidity.

Southland intends to purchase a near-new 90-metre longwall mining unit which will be integrated into the existing 220-metre longwall unit. The upgraded, integrated equipment would overcome the limitations of part of the current face support equipment and thus enhance reliability of operations, particularly if poor ground conditions such as those recently experienced are encountered again. It is planned to be installed at the commencement of the next longwall block (SL4) in late calendar 2003.

Recent delays in achieving consistent coal production have been a drain on the Group's cash resources. As at 19 February, the Gympie Gold Group had cash and undrawn credit facilities of approximately $5.5 million and in-situ, developed coal with a realisable value at current prices, net of expected production costs, of more than $50 million.

Steps taken to conserve funds include temporary curtailment of exploration and mine development at Southland Colliery and at Gympie Eldorado Gold mine. On the basis of achieving the forecast coal production referred to above, the Group will be net cash flow breakeven until June 2003 and then cash flow positive thereafter.

Gympie Gold is an Australian exploration, production and marketing company which mines and markets gold and gemstone from southeast Queensland and high-quality coking coal from the Hunter Valley in New South Wales.

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    Last Modified: Wednesday, 19-Feb-2003 10:20:15 EST