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Appointment of Voluntary Administrators and Receivers

30 December 2003

Following the devastating underground fire at the Southland Colliery over the Christmas period and the subsequent sealing of the mine, the Board of Gympie Gold Limited has today appointed Joseph Hayes and Murray Smith of KPMG as Voluntary Administrators to the Group.

Shortly after the Voluntary Administrators were appointed this morning, HSBC Precious Metals (Australia) Limited, acting as Agent for the company's corporate loan facility, appointed Andrew Love, Peter Geroff and Allan Lewis of Ferrier Hodgson as Receivers and Managers to the Group.

Despite cash-on-hand currently and the strong outlook until the last week for future cash flows in light of increased US$ coal prices, the current emergency at the Southland Colliery has caused a rapid and substantial deterioration in Group's financial position and prospects.

After taking legal advice, the Directors resolved to appoint Voluntary Administrators, given that:

  • The Southland Colliery is unlikely to resume production for at least some months, Southland having been the Group's primary source of net operating cash flow;
  • The cost of re-establishing production at the Southland Colliery, if proved feasible, cannot presently be quantified, but is likely to be substantial;
  • It is not possible to quantify the amount to be recovered from insurance at present, and in any event the insurance recovery will not be immediately received;
  • The second tranche of the recent $25 million placement will not proceed and the General Meeting called to approve the second tranche will not be held; and
  • Alternative sources of financial support have not been forthcoming.

The Board of Directors, Managing Director and staff are pro-actively assisting the Voluntary Administrators and Receivers and Managers, with a view to preserving as much value as possible for all stakeholders.

The Voluntary Administrators will be convening a meeting of creditors (including Convertible Noteholders) to be held within five business days. Over the coming weeks, the Administrators will review the Group's financial position and will likely report to creditors again in the next month or so regarding the Group's future. Information for shareholders on the Administration will also be posted on the Company's website.

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    Last Modified: Tuesday, 30-Dec-2003 11:47:49 EST