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March 2003 Quarterly Report

11 April 2003


    Overcame mining conditions at Southland which restricted coal production from September 2002 to February 2003 to an average of only 50,000 tonnes per month - approximately half the tonnage required to breakeven. Normal production re-commenced in mid-February and 300,000 tonnes was then produced to 31 March. Production was 712,000 tonnes year-to-date, 339,000 tonnes for the quarter and a record 225,000 tonnes for March. The new quarter has started at above budget rates with 80,000 tonnes for the first ten days of April.
    The production delays were triggered by a zone of poor ground conditions (low angle in-seam shearing) and were overcome by slowly mining through the zone, then repositioning the longwall unit to the seam floor where conditions are more favourable. The colliery's operating regime has been overhauled during this time.
    To further underpin future production at over 1.5 million tonnes per annum, Southland has developed 2.5 million tonnes of coal and has advanced modernisation of the longwall equipment to late 2003.
    Year-to-date gold production was 41,000 ounces at a cash operating cost of $327/oz and a total cost of $508/oz. March quarter production of 11,700 ounces was restricted by mill upgrading activities.
    The Lewis Decline has been integrated with the upper levels of the deeper Monkland Mine, providing more flexibility for production, lower operating costs and providing access for underground exploration activities.
    The known mineralised length of a major goldfield ore-feeder system, the Inglewood Structure, has been extended 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 mineralised structure remains open; and
    At Inglewood Hill, a further encouraging intercept of 2.3 metres with coarse visible gold throughout (assays pending) was drilled 750 metres to the northwest of currently delineated resources.
    Export sales of coal at 687,000 tonnes year-to-date and 214,000 tonnes for the quarter. Customer arrangements are in order for the coming 12 months with a higher proportion of sales being made as premium quality and semi-hard coking brands, largely offsetting modest across the board price reductions.
    Cash and undrawn facilities were $8.0 million at 31 March 2003, not including a $6 million equity underwriting facility. Arrangements have since been made to increase this by issuance of $15 million of new equity capital via share placements and a share purchase plan.
    Gold hedging has been reducing for two years and is now 24% of resources.
    Currency hedging in place for approximately 1.2 million tonnes of coal sales at $A/$US rate of 0.58.
    Advanced preparations for the stock exchange listing of regional exploration associate D'Aguilar Gold Limited. Gympie Gold intends to arrange a priority allocation of shares in this float for its shareholders.

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