ABN 39 008 478 653 MINERAL COMMODITIES LIMITED

ABN 39 008 478 653

MINERAL COMMODITIES LIMITED

ANNUAL FINANCIAL REPORT3 1 D E C E M B E R 2 0 0 2

MINERAL COMMODITIES LIMITEDABN 39 008 478 653

Directors Joseph Anthony Caruso – Non-Executive ChairmanMark Victor Caruso – Managing DirectorGregory Hugh Steemson – Non-Executive

Chief Executive Officer Alan Frederick Luscombe

Company Secretary David Andrew Lymburn

Registered Office Level 1 Unit 1551-53 Kewdale RoadWelshpool Western Australia 6106Telephone: (61 8) 9353 4890Facsimile: (61 8) 9353 4894Email: [email protected]: www.mineralcommodities.com.au

Solicitors Steinepreis PaganinLevel 14 Chancery House37 St Georges TerracePerth WA 6000

Auditors BDOChartered Accountants267 St Georges TerracePerth Western Australia 6000

Share Registry Security Transfer Registrars Pty Limited770 Canning HighwayApplecross, Western Australia 6953Telephone: (61 8) 9315 0933Facsimile: (61 8) 9315 2233

Bankers Australia & New Zealand Banking Group Ltd77 St Georges TerracePerth WA 6000

Stock Exchange Listing The Company is Listed on the Australian Stock Exchange Limited under ASX Code – MRC

CORPORATE DIRECTORY

Corporate Directory ..................................................................................................................Inside Cover

Chairman’s Letter.......................................................................................................................................2

Highlights for the 2002 year.......................................................................................................................3

Xolobeni Mineral Sands Project .................................................................................................................4

Tormin Mineral Sands Project ..................................................................................................................10

Directors’ Report .....................................................................................................................................13

Statements of Financial Performance.......................................................................................................18

Statements of Financial Position ..............................................................................................................19

Statements of Cash Flows.......................................................................................................................20

Notes to the Financial Statements ...........................................................................................................21

Directors’ Declaration ..............................................................................................................................45

Independent Audit Report........................................................................................................................46

Corporate Governance Statement ...........................................................................................................47

Shareholder Information...........................................................................................................................49

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CONTENTS

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CHAIRMAN’S LETTER

Dear Shareholders,

At the commencement of the 2002 year the Company’s principal objective was to progress the Xolobeni MineralSands project. This has clearly been achieved with all goals being met. Securing the financial support of the SouthAfrican Export Development Fund and completion of the 25,469m drilling programme and the resultant resourceupgrade, stand out as highlights. The upgraded resource provides the Board of Directors with significant confidencethe Xolobeni project has every prospect of proceeding to development as a mining and processing project within thealready stated timeframe which envisages commissioning of mining and mineral sand treatment operations in late2006. A pre-feasibility study is underway and will be completed this year. It will be followed immediately by a definitivefeasibility study which should be completed in 2004.

The Xolobeni project is now in the feasibility phase and milestones targeted for achievement in 2003 include;appointing project engineers, preparation of mine plans, completing environmental studies and developing a socio-economic plan that meets the requirements of all stakeholders. Mineral Commodities Limited is committed tosupporting the South African Government’s initiatives to provide social and economic uplift to the historicallydisadvantaged South Africans, and considers the broad objectives of these initiatives to be consistent with thesuccessful development of the Xolobeni project.

During 2002 the Company has also commenced development of the Tormin project on the west coast of SouthAfrica. This smaller scale heavy mineral project is relatively simple due to the nature and location of the mineraldeposit, and accordingly should proceed to a mining and processing operation in a reasonably short timeframe. A definitive feasibility is scheduled to be completed in 2003, with a decision to proceed following in early 2004.

These two projects will continue to be the Company’s main focus throughout 2003. However, it is still within theCompany’s stated strategies to search for other project opportunities that have a high probability of producing earlycash flows. The Company will continue with this philosophy throughout the coming year.

I congratulate the other Board members, management and staff who have all contributed to what has been asuccessful year, and look forward to reporting on the continuation of this success for 2003.

Joseph A CarusoChairman

• Acquisition of 49% interest in Xolobeni Mineral Sands Project, increasingthat interest to 75% before the end of the year

• Secured the investment by South African Export Development Fund in 10% ofthe group’s South African project assets for US$1.5 million

• Completed bulk sampling test-work at Xolobeni allowing samples of ilmenite,rutile and zircon to be produced by standard separating equipment.

• Undertook an extensive drilling programme at Xolobeni, drilling 1217 holesfor 25,469m. This drilling programme has resulted in a significant re-estimation of the Xolobeni heavy mineral resource

> Upgraded the Sikombe resource from Inferred to Measured

> Upgraded the Kwanyana resource from Inferred to Measured

> Upgraded the Mnyameni resources from Inferred to Indicated

> Recorded an initial Inferred resource at Mphalane

• Executed separate memoranda of understanding in relation to the potentialdevelopment of an ilmenite smelter with the East London IndustrialDevelopment Corporation and SMS Demag of Germany

• Initiated a Pre Feasibility study on the Xolobeni project to determine the mostfavourable development option

• Signed an agreement with the holder of a diamond concession at Torminformalising the possible future co-existence of the two Companies' respectiveoperations in the same area

• Submitted updated information for the prospecting permit at Tormin

• Reached an agreement in principle with the owner of a mining permit withinthe confines of the Company’s prospecting permit application at Tormin thatenhances the development potential of this zircon rich resource

• Collected a bulk sample from Tormin for metallurgical process developmenttestwork

• Completed a pre-feasibility study on the Tormin deposit

HIGHLIGHTS FOR THE 2002 YEAR


Xolobeni

Tormin


XOLOBENI MINERAL SANDS PROJECT(Mineral Commodities earning 80% interest)

L o c a t i o n a n d r e s o u r c e d e s c r i p t i o nThe Xolobeni mineral sands deposit is located in the Eastern Cape Province of South Africa, 200 km south ofDurban. The resource is situated in proximity close to existing major mineral sands operations owned by RichardsBay Minerals and Ticor South Africa (Figure 1).

The deposit extends over a strike length of 22 km, averages 1.5 km in width, and has a maximum thickness of 50 m.It is not covered by overburden and contains negligible oversize. The deposit is divided into five prospecting blocksby the Mpahlane, Mnyameni, Kwanyana, Sikombe and Mtentu Rivers. The blocks are named after the river definingthe southern boundary (Figure 2).

Figure 1. Location of Xolobeni project.


The heavy mineral (HM) depositsoccur within recent sands andremnant “red beds” of thePleistocene Berea Formation. Thedeposits were formed around onemillion years ago when the sea wasat a higher level and have been leftstranded as the sea regressed. Winderoded the in situ material to formdune systems which contain anumber of high grade zones having avertical thickness of three to tenmetres. Near the coast adiscontinuous strandline four to eightmetres thick has been deposited justabove bedrock. Heavy Minerals makeup an average of approximately 6%of the resource. Whilst the heavymineral assemblage is variable, itaverages over 50% valuable heavyminerals. The predominant mineral isilmenite (Ilm) although the otherproducts such as rutile (Rt), zircon(Zn) and leucoxene (Lx) add to thevalue of the deposit.

An extensive drilling programme wasundertaken in the Sikombe,Kwanyana and Mnyameni blocksbetween July and October 2002. Two reverse circulation rigs usingcontinuous aircore sampling drilled1,217 holes for 25,469 metres.Samples were taken every two metres, and processed by an independent laboratory in South Africa. The heavymineral from each sample was magnetically separated into three magnetic components and a non-magnetic fraction.The ilmenite percentage referred to in Table 1 is based on magnetic separation hence is only an estimate at this time.The Mtentu block was not drilled, and results from previous drilling were used to determine the Mphalane tonnage.

SRK Consulting have been contracted to model the drilling results and have reported the following based on a2%HM cut-off:

Area Resource Status Tonnes (Mt) % HM % Slimes % Ilm(i)

Sikombe Measured 66 6.5 18.0 3.7

Kwanyana Measured 112 6.8 19.6 3.6

Mnyameni Indicated 82 4.7 28.3 2.5

Mpahlane Inferred 9 3.3 28.9 2.2

TOTAL 269 6.0 22.2 3.2

Table 1. Xolobeni Resource Estimates(i): Ilmenite reported is the magnetic fraction removed between 0.08amps and 0.74amps.

6 540 000 mN

6 545 000 mN

3 455 000 X

6 550 000 mN

3 450 000 X

6 555 000 mN

3 445 000 X

Mtentu

Bloc

k

Siko

mbe B

lock

Kwan

yana

Bloc

k

Mnyam

eni B

lock

Mpahla

ne

Bloc

k23

0 00

0 m

E

80 0

00 Y

225

000

mE

85 0

00 Y

220

000

mE

90 0

00 Y

Figure 2. Xolobeni site plan.


The global grade tonnage curvesdemonstrate a major resourcecontaining in excess of 16 milliontonnes of heavy minerals and 8 million tonnes of ilmenite.

The Xolobeni deposit is similar to thatmined by existing mineral sandsoperators in South Africa and issuitable for conventional mineralsands dry mining, processing,roasting and smelting operations.

A mineral separation plant willproduce rutile, leucoxene andilmenite (all titanium minerals) andzircon. Initial bench scale test workindicates that the products will meet

market specifications. A smelter could be planned as part of an integrated projectto produce titanium slag and pig iron from the ilmenite. A simulation using ilmenitedata from bulk sample test work shows an acceptable grade of titania slag canbe produced.

P r o j e c t s t a t u sThe project is currently in the pre-feasibility stage and the Company is undertakingstudies to identify the optimum development of the project. The ultimate size andeconomics of the project will only be determined after the completion of a definitivefeasibility study.

A pre-feasibility study is due for completion in mid 2003 and a definitive feasibilitystudy is expected to be completed in mid 2004. The pre-feasibility study willincorporate the mineral resource based on the recently completed drillingprogramme, the development of a life of mine plan, environmental planningschedule, further bulk sampling and metallurgical test-work, detailed mineralogicalanalyses, and an engineering assessment of capital and operating cost estimates.The Company believes the pre-feasibility study will establish the commercial viabilityof the project and justify funding a definitive feasibility study.

R e g i o n a l s i g n i f i c a n c eAs the world’s second largest producer of mineral sands, South Africa contributesover 30% of the global production of titanium minerals (ilmenite, rutile, leucoxene)and zircon. Ilmenite has a low market value; however due to South Africa’s lowpower costs, significant value is added by smelting the ilmenite to produce titaniaslag and pig iron.

Richards Bay Minerals is the world’s largest producer of titania slag as well asapproximately 25% of the world’s demand for pig iron, rutile and zircon. Also inKwaZulu-Natal, Ticor South Africa (Pty) Ltd is currently producing ilmenite, rutileand zircon from the nearby Hillendale deposit and is commissioning a smelter at Empangeni.

Figure 3 Global grade-tonnagecurves for Xolobeni.

The Company believesthe pre-feasibility

study will establish thecommercial viability ofthe project and justify

funding a definitivefeasibility study.


In the Eastern Cape Province, extensive mineral sand resources have been widelyrecognized as having economic potential since the first drilling in the 1960s. While mineral sands development has focused on KwaZulu-Natal and is now beingpromoted in neighbouring Mozambique, the potential of the Eastern Cape has beensomewhat overlooked. Potential exists for the Xolobeni project to catalysedevelopment of mineral sands and other associated industries in the Eastern Cape.

S o c i o - E c o n o m i c A s p e c t sXolobeni is located in one of the poorest regions of South Africa. It is sparselypopulated, serviced by very basic infrastructure and community amenities and isdistant from industrial developments that provide training and employmentopportunities. Consequently unemployment is high.

Local people use the area for grazing and subsistencefarming. A local eco-tourism company has beenlicensed to operate horse trail riding in the area and acamp at the Kwanyana estuary.

The project will be a significant generator of jobs forthe region and export income for South Africa. It isenvisaged that the project will create directemployment for 270 personnel with additional jobsbeing generated through contracts and indirectancillary services. Estimated annual revenue will be inexcess of US$75M. Current mineral resources suggesta 17-year life and a total life of mine value well inexcess of US$1.3 billion.

Mining is often the catalyst for other industries that areself sustaining but would never have been establishedwithout the mine generating the initial primary income.

The mine and the mineral sands plant/smelter site(s) will require infrastructure in theform of roads, power and water supplies. Where these do not exist, they will needto be constructed, generating opportunities for other industries to becomeestablished in the area. This is particularly true at Xolobeni.

In October 2002 a Charter for Socio-Economic Empowerment for the South Africanmining industry was developed by the Department of Minerals and Energy inconsultation with Unions, South African Chamber of Mines and representatives ofvarious South African based mining houses. Broad-Based Socio-EconomicEmpowerment (BBSEE) aims to encourage the minerals and petroleum industries toassist Historically Disadvantaged South Africans (HDSAs) by providing ownershipparticipation in existing or future mining operations, training and managementopportunities, an integrated social plan for host communities and sustainable localeconomy post-mining.

The Company is committed to ensuring that socio-economic benefits of theproject are directed to the local community and the Eastern Cape Province. As local benefits will come from employment, training, improved infrastructure andservices, the Company is investigating a number of options for local participationin the project.

It is envisaged thatthe project willcreate directemployment for270 personnel…


During the 2002 drilling programme, the Company employed 37 local personnel to undertake community liaison,sampling, sample preparation, catering and security responsibilities. Local personnel will also be employed during the2003 drilling programme.

The Company initiated the formation of a representative committee within the local community for dissemination ofinformation through meetings and workshops. Prior to commencing work each year and each month during thedrilling programme, the plan is explained and employment practices and the work schedule are undertaken in amanner consistent with input from the local community.

The Company is also actively seeking appropriate empowerment groups to participate in the project. It is theCompany’s objective to have such groups join the project in the near future and, in any event, before formal approvalto mine is requested. The Mining Charter requires HDSA ownership (by way of an “empowerment partner”) to be 26percent in 10 years, the shareholding being achieved in a transparent manner and for fair market value.

P r o j e c t d e v e l o p m e n tIn June 2002 MRC signed a Memorandum of Understanding with the East London Industrial DevelopmentCorporation to jointly undertake a pre-feasibility study into the establishment of an ilmenite smelter at East London onSouth Africa’s east coast, south of Xolobeni. Under the MoU the Company has been granted an exclusive option toenter into a 30 year lease with an options to renew for 20 years, on 30 hectares of land with the proclaimed IndustrialDevelopment Zone at East London.

In August 2002 SMS Demag AG were appointed to undertake a pre-qualification study for an ilmenite smelter at East London.

An internal financial assessment has established the sensitivities of the project to a number of factors particularlythose associated with location, infrastructure, transport and smelting. Despite the significant capital investment, thevalue added by a smelter is the main influence on the economics of the project. Another factor is the location of themineral separation plant and/or smelter and the associated transport costs. Considerable improvements will bederived as capital and operating parameters are optimised in subsequent studies.

A realistic aim is to commission mining and treatment operations in late 2006. In order to commission the Xolobeniproject by that time, it will be necessary to secure environmental and mining approvals by mid 2004 at the latest,placing them on the critical time line. Table 2 illustrates the key project milestones

Upgrade resource

Apply for mining approval

Complete infill exploration

Conduct definitive feasibility study

Award engineering contract

Gain mining approval

Gain finance approval

Decide to proceed

Begin construction

Begin commissioning

Key milestones Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Year 2003 2004 2005 2006

Table 2. Key project milestones for production in late 2006.


E n v i r o n m e n t a lThe Company has excluded environmentally sensitive areas and confined itsactivities to the gently undulating grasslands and dune sands that lie immediatelyinland of the coastal vegetation. It is the Company’s view that mining and other landuse activities can coexist, and that the short term use of the land for mining willfacilitate long-term conservation and eco-tourism.

The tenement contains areaswhich are totally void ofvegetation and are prone to windand water erosion, resulting inextensive blowouts of the dunes.The movement of the sand isthreatening adjoining rivers andestuaries. The disturbances liewithin the proposed mine pathand can be successfullyrehabilitated after mining.

The Company is confident it willbe able to demonstrate theproject will be able to bedeveloped and operate withinacceptable environmental criteria.

P r o g r a m m e f o r 2 0 0 3The 2003 year will see significant progress at Xolobeni, building upon the recentlyestablished foundations. The work programme includes the resource upgrade,preparation of a mine plan, appointing project engineers, finalising locations forthe mineral separation plant and smelter, revising capital and operating costestimates, extensive environmental studies, developing a social plan incorporatingsocio-economic empowerment, and maintaining community involvement and support.

Xolobeni Resource StatementThe Xolobeni resource statment included in this report was prepared by Mr Daniel Guibal (SRK Consulting) a competent person as defined under theJORC Code.

A realistic aim is tocommission mining andtreatment operations inlate 2006.

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TORMIN MINERAL SANDS PROJECT

L o c a t i o n a n d R e s o u r c e D e s c r i p t i o nThe Tormin mineral sands prospect is a small beach deposit located on the rugged west coast of South Africa,approx 400km north of Cape Town. The deposit is situated approx 14km north of the Olifants River and south of the Anglo Base Metals’ Namakwa Sands operation at Brand se Baai. The heavy mineral deposits have accumulatedalong the 12km long, 100m wide beach, to a maximum depth of 12m. The predominant heavy mineral is garnet (Gn) with ilmenite (Ilm), pyroxene (Pyr), zircon (Zn), rutile (Rt), and leucoxene (Lx) contained in the heavymineral assemblage.

As the heavy mineral placer deposits overlie diamond bearing gravel beds a feasibility study into mining the beachdeposits and extracting both diamonds and heavy minerals was undertaken by Trans Hex Operations (Pty) Ltd(THG), a South African diamond producer in 1992. In general, the diamond grades were difficult to determine withouttaking a large sample tonnage, and the 1992 mineral sands product prices made the mineral sands projectuneconomic. The resource estimate was:

Area Tonnes (Mt) % HM % Gn % Ilm % Pyr % Zn % Rt % Lx

Geelwal Karoo 4.9 42.3 22.3 9.2 7.0 2.6 0.6 0.6

Table 3. Tormin Resource Estimate

P r o j e c t S t a t u sBased on data supplied by THG, the Company has completed a preliminary feasibility study. The study demonstratesthat the minerals sands project is now viable based on improved market prices and efficiencies in mining and mineralseparating equipment. On 21st October 2002, a Heads of Agreement was signed between the Company and THGformalising the possible future co-existence of the two Companies’ respective operations in the same area, withparticular reference to diamond security, environmental and health and safety issues.

The agreement allows the Company to submit an application for a prospecting permit covering some 1,800ha beingapproximately 12 km long and extending inland for some 1.5 km. THG supported the application.

Another unrelated company has a mining permit covering the central portion of the deposit which allows it to removea small tonnage of mineral sands for an unrelated application. This company also supported Mineral Commodities’prospecting permit application and both companies expect to reach an agreement regarding mining permits in thenear future.

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P r o j e c t D e v e l o p m e n tIn December 2002, the Company collected a 24t bulk sample from the deposit.

Spiral separation testwork was completed in March 2003. The tests were sufficient to model a number of circuitoptions for the wet concentrator. Proposals to undertake a metallurgical test programme to develop a mineralseparation flowsheet have been received and the programme is expected to commence in May and be completedbefore end 2003.

Preliminary assessment based on the THG resource estimate indicates a minimum life of 7 years producing 300,000 tonnes per annum of heavy mineral concentrate to yield 60,000t ilmenite, 14,000t zircon and 7,000t highTi02 products.

It is expected that the bulk sample and results from the spiral testwork will be sufficient to lodge a mining licenceapplication by June 2003. Table 4 summarises the project development schedule.

E n v i r o n m e n t a lThe mining operation is planned to cause minimum environmental disturbance by locating the wet concentrator onexisting areas used by diamond mining contractors, and by using existing roads and access tracks.

Complete resource drilling

Apply for mining approval

Definitive feasibility study

Mining approval

Decision to proceed

Award engineering contract

Commence construction

Commence commissioning

Key milestones Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Year 2003 2004

Table 4. Key Project Milestones for Production in late 2004


S o c i o - E c o n o m i c A s p e c t sThe Company is committed to the same socio-economic principles as stated for Xolobeni. Discussions arecontinuing with several empowerment groups.

P r o g r a m m e f o r 2 0 0 3The Tormin project will be fast-tracked during 2003 with the objective of commissioning the plant during 2004.

Current metallurgical, engineering, environmental and social activities are designed to minimise the delay in lodgingan application for a mining licence following the granting of the prospecting permit.

DIRECTORS’ REPORT

D I R E C T O R SThe Directors of the Company in office during or since the end of the financial year are:• Mr Joseph A Caruso – Chairman• Mr Mark V Caruso – Non Executive Director• Gregory Hugh Steemson – Non Executive Director

D I R E C T O R S ’ I N F O R M AT I O NJoseph Anthony CarusoChairmanMr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Construction Manager ofSimto Australia Pty Ltd, both of which are involved in mining, earthmoving and civilengineering construction earthworks. Mr Caruso has considerable experience inmanaging and administration of engineering, mining, raw materials productionoperations, earthmoving and related infrastructure utilities services resource contracts.Mr Caruso has been a director of Mineral Commodities Ltd since September 2000.

Mark Victor CarusoNon Executive DirectorMr Caruso is a Director of Zurich Bay Holdings Pty Ltd and Simto Australia Pty Ltd,both of which are involved in mining, earthmoving and civil engineering constructionearthworks. Mr Caruso has been a director of Mineral Commodities Ltd sinceSeptember 2000. He is also a Director of Allied Mining & Processing Limited.

The Directors presenttheir report together with

the financial report ofMineral Commodities Ltd

(“the Company”) and itscontrolled entities for

the year ended 31 December 2002.


Gregory Hugh SteemsonNon Executive DirectorMr Steemson is a qualified Geologist and Geophysicistwith an extensive background in exploration,development and management of mining projects. Mr Steemson was appointed a Director of theCompany on 14 April 2001. He was General Managerof the Company until the appointment of AlanLuscombe as Chief Executive Officer in August 2002.Mr Steemson is also a Director of Allied Mining &Processing Limited.

P R I N C I PA L A C T I V I T I E SThe principal activity of the consolidated entity duringthe year was exploration for mineral sands and othermineral resources. This has mainly involved acquiring acontrolling interest in the Xolobeni Mineral SandsProject in the Eastern Cape Province of South Africa,and exploration and evaluation of that prospect.

C O N S O L I D AT E D R E S U LT SLoss of the consolidated entity after income tax andoutside equity interests was $379,318 (2001: Loss of$695,194).

D I V I D E N D SNo dividends have been paid, declared orrecommended for payment, in respect of the currentfinancial year.

R E V I E W O F O P E R AT I O N S A N D F U T U R ED E V E L O P M E N T SX o l o b e n i M i n e r a l S a n d s P r o j e c t – E a s t e r n C a p e , S o u t h A f r i c a( M R C e a r n i n g 8 0 % i n t e r e s t )During the year the Company acquired its interest inthis project by acquiring a 49% interest in the companythat owns the Prospecting Permit (1/2002 PP),Transworld Energy & Minerals Resources (S.A.) (Pty)Limited (TEM). This interest was increased during theyear to 75% after spending $1,000,000 on the project.

The project is located on the east coast of SouthAfrica in close proximity to existing major mineral sandoperations owned by ISCOR and Richard’s BayMining. The predominant valuable heavy mineral isilmenite which is suitable for slagging feed stock. Theresource is considered a strategic deposit by virtue ofits location and size. The nature of the project is ideallysuited to large scale conventional dry mining.

Between July and October 2002 the Companyundertook an extensive drilling programme consistingof more than 1,200 drill holes for approximately 25,000metres of air core drilling. Analysis of the drillingsamples continued through February 2003. The Company has engaged an independent consultinggeologist to undertake the required modelling whichwill be used as the base for a resource estimateupdate. The updated resource estimate is due to bereleased in April 2003.

Future developments for 2003 following release of theupdated resource will see the project enter thefeasibility phase. The Company has begun theselection process for appointment of an engineeringgroup to conduct the feasibility study.



To r m i n M i n e r a l S a n d s P r o j e c t – We s t e r n C a p e , S o u t h A f r i c aThe Tormin mineral sand project is locatedapproximately 400km north of Cape Town. The mineralsand deposit is an active beach placer deposit. Thevaluable heavy mineral suite consists of, in order ofabundance, ilmenite, zircon, rutile and leucoxene.

The Company has a prospecting permit applicationpending approval over the northern and southern partsof the deposit. The central one third of the deposit isheld by a mining permit by a third party. In Decemberaccess was granted to the mining permit and a bulksample of 20 tonnes collected. This material is to beused for metallurgical flow sheet development.

The Company is preparing additional information forthe Department of Minerals & Energy in support of theProspecting Permit application. Once the ProspectingPermit is granted the Company plans to proceedstraight to an engineering feasibility study.

W a l v i s B a y M i n e r a l S a n d s P r o j e c t –N a m i b i aAn Exclusive Prospecting Licence application for anarea in the vicinity of Walvis Bay was lodged with theMinistry of Mines & Energy in July. The application hasyet to be assessed.

Ya n d a l l a h M i n e r a l S a n d s P r o j e c t –We s t e r n A u s t r a l i aThe Yandallah project is located on the western side ofthe Eucla basin. The Company entered into a jointventure with Eaglefield Holdings Pty Ltd to acquire a51% interest in the project.

A 2,000 metre drilling programme on Explorationlicence E28/1229 was completed during theDecember quarter. Results were disappointing and theCompany will not be proceeding with this project. All costs in relation to this project have been written offat 31 December 2002.

Tr e k e l a n o C o p p e r G o l d P r o j e c t –Q u e e n s l a n dThe principal tenements held by the Company arelocated at Trekelano, South of Duchess in North WestQueensland. Three zones of copper-gold mineralisationare known; Trekelano, Trekelano 2 and Inheritance. Themain mineral resource is located at Inheritance.

The Company has made an assessment of theInheritance deposit resulting in an in stope quantity of540,000t grading 3% Cu and 0.8g/t Au.

The Company has reached agreement with OsborneMines whereby Osborne will acquire an option to buythe project. The amount payable to the Company ifOsborne proceeds with the Option range from$10,000 to $1,000,000 over three years. Themaximum consideration will only be payable if Osborneexercises its option and acquires the project beforeexpiry of the three year term.


E N V I R O N M E N TA L R E G U L AT I O N SIn the course of its normal mining and explorationactivities, the Company adheres to environmentalregulations imposed upon it by the relevant regulatoryauthorities, particularly those regulations relating toground disturbance and the protection of rare andendangered flora and fauna. The Company hascomplied with all material environmental requirementsup to the date of this report.

S C H E D U L E O F M I N I N G T E N E M E N T SMining tenements currently held by the economicentity are:

SIGNIFICANT CHANGES IN STATE OF AFFAIRSShare CapitalIn April 2002 the Company issued 5,500,000 ordinaryshares at a price of 20 cents per ordinary share in partconsideration for the purchase of a 49% interest inTEM. This share issue formed part of the totalconsideration for the acquisition of this interest in TEM.The balance of the consideration was a cash paymentof $400,000.

OptionsThe Company issued 5,168,071 options exercisableon or before 31 December 2003 as an entire parcel inexchange for 12 shares (representing 10% of theissued capital) of controlled entity MRC Resources (Pty) Ltd, incorporated in South Africa. This tranche ofunlisted options was issued to the South AfricanExport Development Fund who subscribed for a 10%interest in MRC Resources (Pty) Ltd in June 2002.

No options have been exercised during the period.The number of options on issue at 31 December 2002is as follows:

23,670,587 options exercisable at 25 cents on orbefore 31 May 2004;5,168,071 options exercisable as an entire parcel inexchange for 12 shares (representing 10% of MRCResources (Pty) Ltd.

The total number of issued ordinary shares underthese options at the date of this report is 28,670,587.

Investment in associated companyDuring the year the Company acquired an 18%interest in another listed entity; Allied Mining &Processing Limited. The principal activity of thiscompany is the exploration for gold and otherminerals. Full details of this investment are disclosed innote 11(a) to the financial statements.

D I R E C T O R S ’ S H A R E H O L D I N G I N T E R E S T SThe relevant interest of each director in the sharecapital of the Company, shown in the Register ofDirectors’ Shareholding at the date of the Directors’Report is:Director Number of Number of

Shares Options

J A Caruso 9,256,015 5,417,566

M V Caruso 9,256,015 5,417,566

G H Steemson 160,000 420,000

J A Caruso and M V Caruso are both directors of aZurich Bay Holdings Pty Ltd, which holds 9,256,015shares in the Company.

AREA ENTITY HOLDING THE INTEREST % HELD TITLE STATUS

Xolobeni – South Africa Transworld Energy & Minerals Resources 100 Prospecting Permit Granted(S.A.) (Pty) Ltd 1/2002

Tormin – South Africa Mineral Sands Resources (Pty) Ltd 100 Prospecting Permit ApplicationGeelwal Karoo 262

Trekelano West, Queensland Queensland Minex NL 100 EPM (A) 12216 Application

Trekelano, Queensland Queensland Minex NL 100 MDL 85 GrantedMLA 90125 ApplicationMLA 90128 Application


M E E T I N G S O F D I R E C T O R SThe numbers of meetings of the Company’s directorsheld during the year and the number of meetingsattended by each director are:

Directors Directors Meetings

Attended Maximum Possible

J A Caruso 4 4

M V Caruso 4 4

G H Steemson 4 4

D I R E C T O R S A N D E X E C U T I V E SR E M U N E R AT I O NThe Board determines remuneration packagesapplicable to the Board members and seniorexecutives of the Company. The Board remunerationpolicy is to ensure the remuneration package properlyreflects the person’s duties and responsibilities andthat remuneration is competitive in attracting, retainingand motivating people of the highest quality.

Executive Directors and senior executives may receivebonuses based on the achievement of specific goalsrelated to the performance of the consolidated entity(including operational results and cash flow). Non-executive directors do not receive any performancerelated remuneration.

Details of the nature and amount of each majorelement of the emoluments of each director of theCompany and each of the five named officers of theCompany and the consolidated entity receiving thehighest emolument are shown in the following table.

There were no other executive officers of the Company.

Further details of the remuneration of the Directors aregiven in note 23 to the financial statements.

I N D E M N I F I C AT I O N A N D I N S U R A N C E O FD I R E C T O R SDuring the year, the Company has paid an insurancepremium in respect of a contract indemnifying theparent entity’s directors. This contract prohibitsdisclosure of the nature of the liability and the amountof the premium.

C O R P O R AT E G O V E R N A N C EIn recognising the need for the highest standards ofcorporate behaviour and accountability, the directorsof Mineral Commodities Ltd adhere to strict principlesof corporate governance. The Company’s CorporateGovernance statement is included before theShareholder Information section of the annualfinancial report.

S I G N I F I C A N T S E V E N T S A F T E R T H EB A L A N C E D AT ENo event or transaction has arisen in the intervalbetween the end of the financial year and the date ofthis report of a material and unusual nature likely, in theopinion of the Directors of the Company, to affectsignificantly the operations of the Company or theConsolidated Entity, the results of those operations orthe state of affairs of the Company or the ConsolidatedEntity in future financial years.

This report has been made in accordance with aresolution of the Directors.

Joseph A CarusoChairmanPerth, Western Australia31 March 2003

Directors’ fees Salary Superannuation Benefits Total

contributions

$ $ $ $ $

Non-Executive Directors

J A Caruso 30,000 – 2,550 – 32,550

M V Caruso 30,000 – 2,550 – 32,550

G H Steemson – 147,112 12,640 6,122 165,874

Executive officers

A F Luscombe – 67,500 6,268 3,151 76,919

Consolidated CompanyNote 2002 2001 2002 2001

$ $ $ $

Revenue from ordinary activities 2 1,310,245 1,031,263 1,310,245 1,031,263

Revenue outside ordinary activities 2 703,264 316,969 369,177 316,459

Total Revenue from operating activities 2,013,509 1,348,232 1,679,422 1,347,722

Exploration and evaluation costs 10 133,279 352,118 128,494 101,668

General & administration expenses 881,902 709,598 729,066 695,503

Other expenses from ordinary activities 1,171,041 981,710 1,175,204 1,191,036

Share of net loss of associate using the equity method 11 120,042 – – –

(Loss) from ordinary activities before related income tax expense 3 (292,755) (695,194) (353,342) (640,485)

Income tax expense relating to ordinary activities 4 (73,609) – – –

(Loss) from ordinary activities after related income tax expense (366,364) (695,194) (353,342) (640,485)

Outside equity interest in result for the year 12 (12,954) – – –

Loss from ordinary activities after related income tax expense attributed to members of the parent entity 19 (379,318) (695,194) (353,342) (640,485)

Net exchange difference on translation of financial report of self sustaining foreign operations 547,726 – – –

Total revenue and expenses attributable to members of the parent entity and recognised directly in equity 547,726 – – –

Total changes in equity other than those resulting from transactions with owners as owners 168,408 (695,194) (353,342) (640,485)

Basic earnings per share (cents) 20 (0.84) (1.19)

The statements of financial performance are to be read in conjunction with the notes to the financial statements.

S t a t e m e n t s o f F i n a n c i a l P e r f o r m a n c e f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 0 2




$ $ $ $

CURRENT ASSETS

Cash assets 5 3,844,725 5,362,647 2,662,118 5,359,996

Receivables 6 207,449 126,355 102,031 102,666

Other Financial assets 7 259,575 484,465 259,575 484,465

Other 8 132,841 1,816 37,556 1,816

Total Current Assets 4,444,590 5,975,283 3,061,280 5,948,943

NON-CURRENT ASSETS

Property, plant and equipment 9 196,204 40,334 42,013 40,334

Exploration & development expenditure 10 4,226,919 405,898 486,467 305,898

Investment in associated entity 11(a) 1,733,081 – 1,853,123 –

Investments in controlled entities 11(b) – – 3 3

Receivables 13 – – 1,723,406 126,336

Total Non-Current Assets 6,156,204 446,232 4,105,012 472,571

Total Assets 10,600,794 6,421,515 7,166,292 6,421,514

CURRENT LIABILITIES

Payables 14 348,480 159,008 164,512 159,008

Provisions 15 7,784 15,168 7,784 15,168

Total Current Liabilities 356,264 174,176 172,296 174,176

NON-CURRENT LIABILITIES

Provisions 15 85,097 – – –

Non-nterest bearing liabilities 16 54,710 54,710 – –

Total Non Current Liabilities 139,807 54,710 – –

Total Liabilities 496,071 228,886 172,296 174,176

NET ASSETS 10,104,723 6,192,629 6,993,996 6,247,338

EQUITY

Contributed equity 17 19,688,201 18,588,201 19,688,201 18,588,201

Reserves 18 3,026,468 236,708 236,708 236,708

Accumulated losses 19 (13,011,598) (12,632,280) (12,930,913) (12,577,571)

Parent entity interest 9,703,071 6,192,629 6,993,996 6,247,338

Outside equity interests 12 401,652 – – –

TOTAL EQUITY 10,104,723 6,192,629 6,993,996 6,247,338

The statements of financial position are to be read in conjunction with the notes to the financial statements.

S t a t e m e n t s o f F i n a n c i a l P o s i t i o n a s a t 3 1 D e c e m b e r 2 0 0 2


$ $ $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Exploration expenditure (2,046,244) (457,285) (309,063) (399,682)

Interest received 266,449 316,969 204,986 316,459

Payments to suppliers & employees (724,594) (740,827) (613,713) (703,195)

Sundry Income 20,691 70,318 20,691 70,318

Goods & Services tax – 9,986 – (12,942)

Net cash generated from (used in) operating activities 25a (2,483,698) (800,839) (697,099) (729,042)

CASH FLOWS FROM INVESTING ACTIVITIES

Payment for purchase of interest in controlled entity 11b (400,000) – (400,000) –

Payment for plant and equipment (195,545) (35,170) (10,515) (35,170)

Purchase of equity investments (950,315) (1,466,176) (950,315) (1,466,176)

Purchase if investment in associate (1,853,123) – (1,853,123) –

Proceeds from sales of investments 1,310,244 975,822 1,310,244 975,822

Loans advanced to controlled entities – – (97,070) (43,896)

Net cash outflow for term deposit – (26,283) – (34,283)

Net cash used in investing activities (2,088,739) (551,807) (2,000,779) (603,703)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issue of shares – 42,671 – 42,671

Proceeds from the issue of options – 236,708 – 236,708

Proceeds from the issue of shares in a controlled entity 2,614,948 – – –

Net cash (applied to) provided by financing activities 2,614,948 279,379 – 279,379

Net increase (decrease) in cash held (1,957,489) (1,073,267) (2,697,878) (1,053,366)

Cash at beginning of financial year 5,362,647 6,435,914 5,359,996 6,413,362

Difference arising from movements in foreign currency 439,567 – – –

Cash at end of financial year 3,844,725 5,362,647 2,662,118 5,359,996

The statements of cash-flow are to be read in conjunction with the notes to the financial statements.

S t a t e m e n t s o f C a s h F l o w s f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 0 2



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

( a ) B a s i s o f A c c o u n t i n gThe financial report is a general purpose financial report that has been prepared in accordance with AccountingStandards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the AustralianAccounting Standards Board.

The financial report covers the economic entity of Mineral Commodities Ltd and controlled entities, and MineralCommodities Ltd as an individual parent entity. Mineral Commodities Ltd is a listed public company, incorporatedand domiciled in Australia.

The financial report has been prepared on an accrual basis and is based on historical costs and does not take intoaccount changing money values or, except where stated, current valuations of non-current assets. Cost is based onthe fair values of the consideration given in exchange for assets.

( b ) C h a n g e s i n A c c o u n t i n g P o l i c i e sThe accounting policies adopted are consistent with those of the previous year. In accordance with subsection 334(5) ofthe Corporations Act 2001, the directors have adopted AASB 1005 Segment Reporting (issued July 2001) for the firsttime in the current financial year. Comparative information is reclassified where appropriate to enhance comparability.

( c ) P r i n c i p l e s o f C o n s o l i d a t i o nThe consolidated financial report incorporates the assets and liabilities of all controlled entities of MineralCommodities Ltd (“Company” or “parent entity”) as at 31 December 2002 and the results of its controlled entities forthe year then ended. Mineral Commodities Ltd and its controlled entities together are referred to in this financialreport as the consolidated entity. The effects of all transactions between entities in the consolidated entity areeliminated in full.

Where control of an entity is obtained during a financial year, its results are included in the consolidated profit andloss statement from the date on which control commences. Where control of an entity ceases during a financial year,its results are included for that part of the year during which control existed.

( d ) R e v e n u e R e c o g n i t i o nRevenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and therevenue can be reliable measured. The following specific recognition criteria must also be met before revenue isrecognised:Interest IncomeInterest and other income is recognised as it accrues.

Asset SalesThe gross proceeds from asset sales are included as revenue of the consolidated entity. The profit or loss ondisposal of assets is brought to account at the date an unconditional contract of sale is signed.

( e ) Ta x e sIncome taxesThe consolidated entity adopts the liability method of tax effect accounting. Income tax expense is calculated onoperating profit adjusted for permanent differences between taxable and accounting income. The tax effect of timingdifferences, which arise from items being brought to account in different periods for income tax and accountingpurposes, is carried forward in the balance sheet as a future income tax benefit or a provision for deferred income tax.

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonabledoubt. Future income tax benefits relating to entities with tax losses are only brought to account when theirrealisation is virtually certain. The tax effect of capital losses is not recorded unless realisation is virtually certain.

The income tax expense for the year is calculated using the 30% tax rate.

Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on apurchase of goods & services is not recoverable from the taxation authority, in which case the GST is recognised aspart of the cost of acquisition of the asset or as part of the expense item as applicable; and where receivables andpayables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables inthe Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flowsarising from investing and financing activities, which is recoverable from, or payable to, the taxation authority areclassified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, thetaxation authority.

( f ) F o r e i g n C u r r e n c yTransactionsTransactions in foreign currencies are translated into Australian currency at the rate of exchange in effect at the dateof each transaction. At balance date amounts payable and receivable in foreign currencies are translated toAustralian currency at rates of exchange current at that date. Resulting exchange differences are brought to accountin the profit and loss for the year.

Financial Reports of Overseas OperationsThe assets and liabilities of foreign operations, including controlled entities, associates and joint ventures that are selfsustaining, are translated at the rates of exchange ruling at balance date. Equity items are translated at historicalrates. The statements of financial performance are translated at a weighted average rate for the year. Exchangedifferences arising on translation are taken directly to the foreign currency translation reserve until the disposal, orpartial disposal of the operations.

( g ) A c q u i s i t i o n s o f A s s e t sThe cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets areacquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental tothe acquisition. Where shares are issued in an acquisition, the value of the shares is determined by reference to thefair value of the assets acquired, including goodwill where applicable.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted totheir present value at the date of acquisition. The discount rate used is the rate at which a similar borrowing could beobtained under comparable terms and conditions.

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s ( c o n t i n u e d )



Where the fair value of the identifiable net assets acquired, including any liability for restructuring costs, exceeds thecost of acquisition, the difference, representing a discount on acquisition, is accounted for by reducingproportionately the fair values of the non-monetary assets acquired until the discount is eliminated.

( h ) R e c o v e r a b l e A m o u n t o f N o n - C u r r e n t A s s e t sThe recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arisingfrom its continued use and subsequent disposal.

The carrying values of non-current assets are reviewed every six months to determine whether they exceed theirrecoverable amounts. Where the carrying amount of a non-current asset is greater than its recoverable amount, theasset is revalued to its recoverable amount. Where net cash inflows are derived from a group of assets workingtogether, recoverable amount is determined on the basis of the relevant group of assets. To the extent that arevaluation decrement reverses a revaluation increment previously credited to and still included in the balance of theasset revaluation reserve, the decrement is debited directly to that reserve. Otherwise the decrement is recognised asan expense in the profit and loss account.

In determining the recoverable amount of non-current assets the expected net cash flows have not been discountedto their present values.

( i ) P r o p e r t y , P l a n t a n d E q u i p m e n tAcquisitionItems of plant and equipment are initially recorded at cost and depreciated as outlined below.

Depreciation of Plant and EquipmentPlant and equipment are depreciated at rates based upon the expected useful lives of these assets. The expecteduseful lives of these assets are 3-10 years.

Disposal of AssetsThe gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at thetime of disposal and the proceeds on disposal and is included in the results in the year of disposal.

Any related revaluation increment standing in the asset revaluation reserve at the time of disposal is transferred to thecapital profit reserve.

( j ) E x p l o r a t i o n a n d D e v e l o p m e n t E x p e n d i t u r eCosts incurred during the exploration and development stages of specific areas of interest are accumulated. Suchare only carried forward if they are expected to be fully recouped through the successful development of the area, orwhere activities to date have not yet reached a stage to allow reasonable assessment regarding the existence ofeconomically recoverable reserves. Costs are written off as soon as an area has been abandoned or considered tobe non-commercial or provided against where an area is considered non-commercial at the period end.

Once production commences, expenditure accumulated in respect of areas of interest is amortised on a unit ofproduction basis over the life of the total proven economically recoverable reserves. Restoration costs recognised inrespect of areas of interest in the exploration and evaluation stage are carried forward as exploration and evaluationexpenditure. Costs recognised after the commencement of production in areas of interest will be charged to theprofit and loss statement.


Potential capital gains tax is not taken into account in determining revaluation amounts unless there is an intention tosell the asset concerned

( k ) I n v e s t m e n t sInterests in – Controlled EntitiesInvestments in controlled entities are carried in the Company’s financial report at the lower of cost and recoverableamount. Dividends and distributions are brought to account in the Company’s profit and loss statement when theyare declared by the controlled entities.

Other Financial AssetsInvestments in listed companies held for re-sale are marked to market value at the end of the financial period, andthe resultant net gain or loss is recognised in the Statement of Financial Performance.

Investments in associatesAssociates are those entities over which the consolidated entity exercises significant influence and which are notintended for sale in the near future.

In the consolidated financial statements, investments in associates are accounted for using equity accountingprinciples. Investments in associates are carried at the lower of the equity accounted amount and recoverableamount. The consolidated entity’s equity accounted share of the associate’s net profit or loss is recognised in theconsolidated statement of financial performance from the date the significant influence commences until the date thesignificant influence ceases.

( l ) R e c e i v a b l e sAll debtors are recognised at the amounts receivable. Collectibility of debtors is reviewed on an ongoing basis. Debtswhich are known to be uncollectible are written off. A provision for doubtful debts is raised where some doubt as tofull collection exists.

( m ) P a y a b l e sLiabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billedto the Company or consolidated entity. Trade accounts payable are normally settled within 60 days. Payables torelated parties are carried at the principle amount. Interest when charged by the lender, is recognised as an expenseon an accrual basis.

( n ) C o n t r i b u t e d e q u i t yOrdinary share capital is recognised at the fair value of the consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of theshare proceeds received.

( o ) C a s hFor the purposes of the statements of cash flows, cash includes cash on hand, bank bills and deposits at call whichare readily convertible to cash. They are not subject to significant risk of changes in value and are net of outstandingbank overdrafts.




( p ) E a r n i n g s p e r S h a r eBasic Earnings per ShareBasic earnings per share is determined by dividing the operating profit after income tax attributable to members ofMineral Commodities Ltd by the weighted average number of ordinary shares outstanding during the financial year.

Diluted Earnings per ShareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking intoaccount amounts unpaid on ordinary shares and any reduction in earnings per share would arise from the exercise ofoptions outstanding at the end of the financial year.

( q ) E m p l o y e e E n t i t l e m e n t sProvision is made for the consolidated entity’s liability for employee entitlements arising from services rendered byemployees to balance date. These benefits include wages and salaries annual leave. Sick leave is non-vesting andhas not been provided for. Employee entitlements expected to be settled within one year have been measured attheir nominal amount.

The contributions made to superannuation funds by entities within the consolidated entity are charged against profitswhen due.

( r ) L e a s e sLease payments for operating leases, where substantially all the risks and benefits remain with the lessor, arecharged as expenses in the periods in which they are incurred.

( s ) S e g m e n t r e p o r t i n gThe consolidated entity has applied the revised AASB 1005 Segment Reporting (issued in August 2000) for the firsttime from 1 January 2002.

Individual business segments have been identified on the basis of grouping individual products or services subject tosimilar risks and returns.

Comparative information has been restated for the changes in definitions of segment revenue and results.

( t ) C o m p a r a t i v e sWhere required by Accounting Standards comparative figures have been adjusted to conform with changes inpresentation for the current financial year.


Consolidated Company2002 2001 2002 2001

$ $ $ $

2. REVENUE

Revenue from Operating Activities

Proceeds from sales of investments in listed companies 1,310,245 1,031,263 1,310,245 1,031,263

Revenue from Operating Activities 1,310,245 1,031,263 1,310,245 1,031,263

Revenue from outside operating activities

Interest received or due and receivable from unrelated entities 266,449 316,969 204,986 316,459

Management fees 143,500 – 143,500 –

Unrealised foreign exchange gain 272,624 – – –

Other income 20,691 – 20,691 –

Total Revenue from outside operating activities 703,264 316,969 369,177 316,459

Total Revenue from Ordinary Activities 2,013,509 1,348,232 1,679,422 1,347,722

3. LOSS FROM ORDINARY ACTIVITIES

Loss (Profit) from ordinary activities before income tax has been arrived at after charging the following:

(a) Expenses

Exploration expenditure written off 133,279 352,118 128,494 101,668

Diminution in value of loan to controlled entity – – – 209,326

Net unrealised loss in listed investments 28,178 16,379 28,178 16,739

Operating lease rentals 36,229 100,366 36,229 100,366

Depreciation – plant and equipment 39,674 5,959 8,836 5,959

Cost of investments in listed companies sold 1,147,026 964,971 1,147,026 964,971

Movements in Provisions

Employee entitlements (7,384) 15,168 (7,384) 15,168

Diminution in value of listed securities 53,636 34,748 53,636 34,748

Unrealised (gain) in value of listed securities (25,458) (18,009) (25,458) (18,009)

Net diminution in value of listed securities 28,178 16,739 28,178 16,739

(b) Net gains on disposals of assets

Investments in listed companies 163,218 66,292 163,218 66,292





$ $ $ $

4. INCOME TAX

The prima facie tax on profit/(loss) from ordinary activities before income tax is reconciled to the income tax expense as follows.

Prima facie tax (benefit) on profit/(loss) from ordinary activities @ 30% (87,827) (208,558) (106,003) (192,146)

Tax effect of permanent differences 140,203 67,223 4,682 91,368

Future income tax benefits not brought to account 33,604 151,411 113,692 110,854

Prior year adjustments (12,371) (12,091) (12,371) (12,091)

Effect of rate change – 2,015 – 2,015

Income tax expense/ (benefit) attributable to operating profit/(loss) 73,609 – – –

The income tax expense for the year comprises:

Provision for deferred income tax 73,609 – – –

Future income tax benefit arising from un-recouped deductions at balance date, for Australian tax resident entities.

Revenue losses 3,225,734 3,143,337 1,505,173 1,423,505

Capital losses 4,643,254 4,643,254 4,643,254 4,643,254

The estimate of income tax benefit arising from unconfirmed tax losses (trading and capital) and accumulatedexploration expenditure has not been brought to account at balance date, as realisation of the benefit is not regardedas virtually certain.

The benefit of these losses will only be realised if:

• future assessable income is derived of a nature and of an amount sufficient to enable the benefit to berealised;

• the conditions for deductibility imposed by tax legislation continue to be complied with; and

• no changes in tax legislation adversely affect the economic entity in realising the benefit.

In addition the economic entity has unconfirmed tax losses and accumulated exploration expenditure that gives riseto potential carry forward tax benefits in South Africa amounting to Rand 13.3 million (approximately A$2.7 million).The benefit of these potential future tax benefits has not been brought to account, and will only be realised ifcircumstances similar to those described above, also apply to the economic entity’s future operations in South Africa.

There are no franking credits available.



$ $ $ $

5. CASH ASSETS – CURRENT

Cash at bank 364,520 255,864 362,118 253,213

Deposits at call 3,480,205 5,106,783 2,300,000 5,106,783

3,844,725 5,362,647 2,662,118 5,359,996

6. RECEIVABLES – CURRENT

Trade receivables 70,162 55,441 67,139 55,441

Term deposits 33,451 57,283 – 34,283

Other debtors 103,836 13,631 34,892 12,942

207,449 126,355 102,031 102,666

The term deposits support bank guarantee issued as security for mineral tenements.

7. OTHER FINANCIAL ASSETS

Investments in companies listed on a recognised stock exchange – shares at cost 304,492 201,204 304,492 201,204

Provision for diminution in value (44,917) (16,739) (44,917) (16,739)

259,575 184,465 259,575 184,465

Convertible notes at cost – 300,000 – 300,000

Total investment in companies listed on a recognised stock exchange 259,575 484,465 259,575 484,465

Quoted market value of investments listed at balance date on a prescribed exchange 259,575 484,465 259,575 484,465

8. OTHER CURRENT ASSETS

Prepayments 132,841 1,816 37,556 1,816





$ $ $ $

9. PROPERTY, PLANT AND EQUIPMENT

Plant and office equipment – at cost 242,280 46,736 57,251 46,736

Accumulated depreciation (46,076) (6,402) (15,238) (6,402)

Total property, plant and equipment 196,204 40,334 42,013 40,334

Reconciliation of the carrying amount of plant & equipment at the beginning and end of the current and previous financial year.

Plant and office equipment

Carrying amount at beginning of year 40,334 11,123 40,334 11,123

Additions 195,544 35,170 10,515 35,170

Disposal – – – –

Depreciation (39,674) (5,959) (8,836) (5,959)

Carrying amount at end of year 196,204 40,334 42,013 40,334

10. EXPLORATION & DEVELOPMENT EXPENDITURE

Exploration expenditure – costs

carried forward in respect of areas of interest in:

Exploration and evaluation phases 4,226,919 405,898 486,467 305,898

Total exploration and development expenditure 4,226,919 405,898 486,467 305,898

Reconciliation of the carrying amount of mining tenements at the beginning and end of the current and the previous financial year

Carrying amount at beginning of year 405,898 300,731 305,898 7,884

Expenditure outlaid in cash 2,446,244 457,285 309,063 399,682

Shares issued for acquisition of interest 1,100,000 – – –

Foreign exchange translation reserve 408,056 – – –

Write off discontinued projects (133,279) (352,118) (128,494) (101,668)

Carrying amount at end of year 4,226,919 405,898 486,467 305,898

11 (a) INVESTMENT IN ASSOCIATED ENTITY

Investment in company accounted for using the equity method – at cost 1,853,123 – 1,853,123 –

Equity accounting adjustments (120,042) – – –

1,733,081 – 1,853,123 –


Consolidated and Company2002 2001

11(a) INVESTMENT IN ASSOCIATED ENTITY (continued)

Details of the investment in associate is as follows:

Name Allied Mining & Processing Limited

Principal activity Mineral Exploration

Balance date 30 June

Ownership interest 18.0% –

Investment carrying amount $1,733,081 –

$ $

Movements in carrying amount of investment in associate

Carrying amount of investment at beginning of year – –

Investments in associate acquired during the year 1,853,123 –

Share of associate’s net loss (81,758) –

Goodwill adjustment arising from equity accounting (38,284) –

Carrying amount of investment at end of year 1,733,081 –

The consolidated entity’s share of aggregate assets and liabilities of the associated company is as follows:

Current assets 432,031 –

Non current assets 166,241 –

Total assets 598,272 –

Current liabilities 59,016 –

Non current liabilities – –

Total liabilities 59,016 –

Net assets as reported by associate 539,256 –

Share of net profit from ordinary activities after income tax as reported by the associate (81,758) –

As this is the first year of holding this investment in associated company there is no share of retained profits orreserves at the beginning of the period.

The market value of this investment in Allied Mining & Processing Limited at balance date was $654,000 based on aprice per share of 6 cents, and at the date of these accounts is $872,000 based on a share price of 8 cents.

The Directors are of the view that the current assets and projects of Allied Mining & Processing Ltd have sufficientvalue to warrant the carrying value shown in the accounts. These include the Jinya gold project, East Pilbara Iron oreproject, the Red Dam gold project and the Modular Mobile Processing and evaluation unit. However the Directors areaware that the recovery of this investment is dependent upon the successful development of these assets.





$ $ $ $

11 (b) INVESTMENT IN CONTROLLED ENTITIES

Unquoted investments – at cost

Shares in controlled entities – – 3 3

– – 3 3

Controlled entities Class Place of Equity Holding Cost to Companyof share Incorporation 2002 2001 2002 2001

% % $ $Parent Entity

Mineral Commodities Limited Australia – – – –

Controlled Entities

Rexelle Pty Ltd Ord Australia 100 100 1 1

Queensland Minex NL Ord Australia 100 100 4,718,302 4,718,302

Provision for diminution in value (4,718,302) (4,718,302)

Q Smelt Pty Ltd Ord Australia 100 100 – –

Mincom Waste Pty Ltd Ord Australia 100 100 2 2

MRC Resources (Pty) Ltd Ord South Africa 90 100 – –

3 3

Controlled entities of MRC Resources (Pty) LtdTransworld Energy & Minerals Resources (SA) (Pty) Limited Ord South Africa 75 – 2,500,000 –

Mineral Sands Resources (Pty) Ltd Ord South Africa 100 100 – –

Nyati Titanium Eastern Cape (Pty) Ltd (formerly Xolobeni Mineral Sands (Pty) Ltd) Ord South Africa 100 100 – –

Skeleton Coast Resources ( Pty) Ltd Ord Namibia 100 100 – –

During the year MRC Resources (Pty) Ltd acquired first a 49% interest in Transworld Energy & Minerals Resources(S.A.) (Pty) Ltd, and later increased this with the acquisition of a further 26% to a total shareholding at balance dateof 75%. The consideration for the first 49% was the issue of 5,500,000 fully paid ordinary shares in the Companyplus payment of $400,000. The next 26% increased interest was acquired by spending more than $1,000,000 on theXolobeni project.



Consolidated2002 2001

$ $

11 (b) INVESTMENT IN CONTROLLED ENTITIES (continued)

Details of the acquisition of the interest in Transworld Energy & Minerals Resources (S.A.) (Pty) Ltd (TEM) is as follows.

Component of consideration comprising cash 400,000 –

Cash acquired – –

Outflow of cash 400,000 –

At the time of acquisition of the controlled entity (15 April 2002) TEM had no recorded assets or liabilities. Other thanbeing the title holder for the Xolobeni Prospecting Permit, the company was essentially a shell company. The entirepurchase consideration of $1,500,000, comprising $400,000 in cash and $1,100,000 in shares therefore reflects thefair value of the Xolobeni project at that time. The further expenditure on the project by the controlled entity to acquirea further 26% of TEM is also reflected in the fair value of carried forward exploration and development expenditure.

Since the net assets of TEM at acquisition were nil, on the face of it there should arise goodwill on acquisitioncalculated as the difference between the purchase consideration and the net assets acquired. However due to theunderlying nature of this acquisition and the assets of TEM, the Directors consider it appropriate to allocate the fullfair value of the consideration to the mineral tenements as exploration and development expenditure.


$ $

12. OUTSIDE EQUITY INTERESTS

Outside equity interests in controlled entities comprise:

Interest in retained profits at the beginning of the financial year after adjusting for outside equity interests in the entities acquired during the financial year – –

Interest in operating loss and extraordinary items after tax 12,954 –

Interest in share capital 2 –

Interest in reserves 388,696 –

Total outside equity interests 401,652 –




$ $ $ $

13. RECEIVABLES – NON-CURRENT

Loans and advances – controlled entities – – 2,727,102 1,130,032

Less provision for non-recovery – – (1,003,696) (1,003,696)

– – 1,723,406 126,336

Recovery of the loans to controlled entities is dependent upon the commercial exploitation of mining tenements held by the controlled entities.

14. PAYABLES – CURRENT

Trade payables – unsecured 188,860 38,772 60,697 38,772

Other payables and accruals – unsecured 159,620 120,236 103,815 120,236

348,480 159,008 164,512 159,008

15. PROVISIONS – CURRENT

Employee entitlements 7,784 15,168 7,784 15,168

Average number of employees during the financial year 5 3 5 3

PROVISIONS NON – CURRENT

Provision for deferred income tax 85,097 – – –

16. NON – INTEREST BEARING LIABILITIES

Other loans – unrelated entity 54,710 54,710 – –

The loan to an unrelated entity bears no interest, is unsecured and has no fixed term of repayment.



2002 2001 2002 2001Number Number $ $

of shares of shares

17. CONTRIBUTED EQUITY

(a) Ordinary shares fully paid

Balance at beginning of financial year 41,012,643 81,356,802 18,588,201 18,545,530

Public equity raising – 650,000 – 39,000

Options exercised – 18,080 – 3,616

Balance before reconstruction – 82,024,882 – 18,588,146

Consolidation @ 1:2 June 2001 – (41,012,459) – –

Options exercised – 220 – 55

Issued as part of the purchase consideration to acquire 49% of Transworld Energy & Minerals Resources (SA) (Pty) Limited 5,500,000 – 1,100,000 –

Balance at end of financial year 46,512,643 41,012,643 19,688,201 18,588,201

During the year 5,500,000 shares were issued as part consideration for the acquisition of a 49% interest inTransworld Energy & Minerals Resources (S.A.) (Pty) Ltd.

Fully paid ordinary shares entitle the holder to participate in dividends and to one vote.

(b) Options over fully paid ordinary shares

The Company issued 5,168,071 options exercisable on or before 31 December 2003 as an entire parcel in exchangefor 12 shares (representing 10% of the issued capital of controlled entity MRC Resources (Pty) Ltd, incorporated inSouth Africa. This tranche of unlisted options was issued to the South African Export Development Fund whosubscribed for a 10% interest in MRC Resources (Pty) Ltd in June 2002.

No options were exercised or lapsed during the year.

The number of options on issue at balance date:

Category No of Options Exercise Price Expiry DateCents per share

Listed options 23,670,587 25 31 May 2004

Unlisted options 5,168,071 See note (i) 31 December 2003

28,838,658

Note (i) The entire parcel of 5,168,071 options is exercisable in a single conversion, and the exercise price isthe transfer of 12 fully paid ordinary shares, representing 10% of the issued capital of MRC Resources(Pty) Limited.

Since 31 December 2002 no further options have been issued and no options have been exercised.




$ $ $ $

18. RESERVES

Option reserve 236,708 236,708 236,708 236,708

Share premium reserve 2,242,034 – – –

Foreign currency translation reserve 547,726 – – –

3,026,468 236,708 236,708 236,708

Movements during the year

Share Premium

Balance at the beginning of year – – – –

Premium on issue of shares in MRC Resources (Pty) Ltd 2,616,828 – – –

Less Outside equity interest in share premium (374,794) – – –

Balance at end of year 2,242,034 – – –

Foreign currency translation

Balance at the beginning of year – – – –

Exchange difference on net investment in foreign operations 547,726 – – –

Balance at end of year 547,726 – – –

Nature and purpose of reserves

Option Reserve

The option reserve arose from the issue of options for subscription in a prior year. Upon conversion of the options toshares, the option reserve will be transferred to contributed equity.

Share Premium

The share premium arose from the issue of shares in MRC Resources Pty Ltd to an entity outside the economicentity. This entity’s holding gives rise to an outside equity interest.

Foreign Currency

The foreign currency translation reserve records the unrealised foreign currency differences arising from thetranslation of self sustaining foreign operations and the translation of foreign currency monetary items forming part ofthe net investment in a self sustaining operation. Refer to accounting policy note 1 (d).


$ $ $ $

19. ACCUMULATED LOSSES

Accumulated losses at beginning of the year (12,632,280) (11,937,086) (12,577,571) (11,937,086)

Net profit (loss) attributable to members (379,318) (695,194) (353,342) (640,485)

Accumulated losses at end of the year (13,011,598) (12,632,280) (12,930,913) (12,577,571)




20. EARNINGS (LOSS) PER SHARE

Basic earnings per share (cents per share) (0.84) (1.19)

Weighted average number of ordinary shares on issue used in calculation of basic earnings (loss) per share 44,930,451 58,263,948

Net (loss)/profit used in the calculation of basic earnings per share $(379,318) $(695,194)

There are 23,670,587 options with an exercise price of 25 cents and an expiry date 31 May 2004 on issue as at 31December 2002, There is a further 5,168,071 options with an expiry of 31 December 2003 and an exercisemechanism as described in note 17(b)(i). These potential ordinary shares are not considered dilutive and accordinglyhave not been used to calculate diluted earnings per share.

21. SEGMENT INFORMATION

Geographical Segments

The consolidated entity has the following two geographical segments

- Australia

- South Africa

(a) Geographical Australia South Africa Elimination Consolidated2002 2001 2002 2001 2002 2002 2001

$ $ $ $ $ $ $

Revenue

External segment revenue 1,310,245 1,031,263 – – (43,855) 1,266,390 1,031,263

Unallocated revenue 642,068 316,969 105,051 – – 747,119 316,969

Total segment revenue 1,952,313 1,348,232 105,051 – (43,855) 2,013,509 1,348,232

Total Revenue from ordinary activities 2,013,509 1,348,232

Result

Segment result (434,562) (695,194) 185,662 – (43,855) (292,754) (695,194)

Income Tax – – (73,610) – – (73,610) –

Profit from ordinary activities after tax (434,562) (695,194) 112,052 – (43,855) (366,364) (695,194)

Outside equity interest in result for year – – (12,954) – – (12,954) –

Net Profit (434,562) (695,194) 99,098 (43,855) (379,318) (695,194)



21. SEGMENT INFORMATION (continued)

(a) Geographical Australia South Africa Elimination Consolidated2002 2001 2002 2001 2002 2002 2001

$ $ $ $ $ $ $

Assets

Segment assets 7,166,291 6,115,617 3,567,296 305,898 (132,793) 10,600,794 6,421,515

Segment liabilities 228,624 174,176 267,447 – – 496,071 174,176

Net segment assets 6,937,667 5,941,441 3,299,849 305,898 (132,793) 10,104,723 6,247,339

Net entity assets 10,104,723 6,247,339

Investment in equity method associates included in segment assets 1,733,081 – – – – 1,733,081 –

Share of net loss of associate (120,042) – – – – (120,042) –

Acquisition of property plant & equipment 10,515 35,170 185,029 – – 195,544 35,170

Depreciation 8,836 5,959 30,838 – – 39,674 5,959

Non cash expenses other than depreciation 149,288 383,665 4,786 – – 154,074 383,665

Secondary reporting

Business segments

The consolidated entity principally operates in the field of exploration for gold and other mineral resources. TheCompany has also participated in the trading of listed securities.



21. SEGMENT INFORMATION (continued)

(b) Industry Mineral Exploration Investment Consolidated& Development

2002 2001 2002 2001 2002 2001$ $

Revenue

External segment revenue – – 1,310,245 1,031,263 1,310,245 1,031,263

Unallocated revenue 703,264 316,969 703,264

Total segment revenue 703,264 316,969 1,310,245 1,031,263 2,013,509 1,031,263

Total Revenue from ordinary activities 2,013,509 1,031,263

Assets

Segment assets 10,341,218 5,937,050 259,575 484,465 10,600,793 6,421,515

Total entity assets 10,600,793 6,421,515

Acquisition of property, plant & equipment 195,544 35,170 – – 195,544 35,170


$ $ $ $

22. AUDITORS’ REMUNERATION

Amounts received or due and receivable by auditors for:

Auditors of the parent entity

Auditing – the financial report 19,440 11,500 17,840 10,000

Other services 2,658 1,500 1,358 1,500

Other auditors

Auditing – the financial report 4,808 – – –

26,906 13,000 19,198 11,500




$ $ $ $

23. DIRECTORS’ REMUNERATION

The directors of Mineral Commodities Ltd during the year were:

Mr Joseph Anthony Caruso

Mr Mark Victor Caruso

Mr Gregory Hugh Steemson

The aggregate of remuneration paid or payable or otherwise made available, in respect of the financial year, to all directors of the Company and Consolidated Entity, directly or indirectly, by the Company or by any related party, including retirement benefits. 230,974 226,200 230,974 226,200

Consolidated Company2002 2001 2002 2001No No No No

The number of directors whose income from the Company was within the specified band are as follows:

$0 – $9,999 – 1 – 1

$30,000 – $39,999 2 1 2 1

$50,000 – $69,999 – 1 – 1

$120,000 – $129,999 – 1 – 1

$160,000 – $169,999 1 – 1 –

The directors received no retirement benefits other than the superannuation guarantee contributions, which areincluded in the aggregate remuneration reported above.

No executive officer of the Company or consolidate entity earned remuneration in excess of $100,000 during the year.



24. RELATED PARTY TRANSACTIONS

Directors’ share holdings

The total numbers of shares and options held by the directors and their director related entities at the end of thefinancial year is as follows.

2002 2001Number Number

Ordinary shares 9,416,015 4,955,000

Options (listed) exercisable at $0.25 on or before 31 May 2004 5,837,566 6,037,566

Transactions with Director related entities

Transactions between related parties are on normal commercial terms and conditions no more favourable than thoseavailable to other parties unless otherwise stated.

In April 2002 the Company completed the acquisition of a 49% interest in the Xolobeni Mineral Sands project byacquiring a 49% share in Transworld Energy & Minerals Resources (S.A.) (Pty) Ltd from SGF Secretaries (Pty) Ltd, acompany in which Joseph Caruso and Mark Caruso have a beneficial interest. This transaction involved the issue of5,500,000 shares in the Company as well as the payment of $400,000. A further stage of the acquisition provided forthe Company to acquire a further 26% interest, taking its holding to 75% by the expenditure of $1,000,000 on theXolobeni project. This expenditure and increased interest was completed in this financial year also. The terms andconditions of the acquisition of up to an 80% interest in the Xolobeni Mineral Sands project were approved byshareholders on 28 May 2001. Joseph and Mark Caruso retain a beneficial interest in Transworld Energy & MineralsResources (S.A.) (Pty) Ltd at the date of these financial statements.

Mr Mark Caruso and Mr Greg Steemson are directors of Allied Mining and Processing Ltd. Since 1 June 2002Mineral Commodities Ltd provided managerial, consulting, accounting and administration services to Allied Mining &Processing. Fees received and receivable by Mineral Commodities Limited during the year were $143,500. Thisamount has not been included in the aggregate of directors’ remuneration in note 23.

Directors’ remuneration is reported in note 23.

Wholly owned group

The group consists of Mineral Commodities Ltd and its wholly owned controlled entities. Details of entities in thewholly owned group are set out in Note 11.

Transactions between Mineral Commodities Ltd and other entities in the wholly owned group during the years ended 31 December 2002 and 31 December 2001 consisted of loans advanced and payments received and madeon intercompany accounts. These transactions were made on normal commercial terms and conditions and atmarket rates.

During the financial year, the Company provided management, accounting and administration services to otherentities in the wholly-owned group.




$ $ $ $

25.(a) RECONCILIATION OF OPERATING PROFIT/(LOSS) FROM ORDINARY ACTIVITIES TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Operating loss before income tax and outside equity interest (292,754) (695,194) (353,342) (640,485)

Depreciation 39,674 5,959 8,837 5,959

Unrealised foreign exchange gain (272,624) – – –

Profit on sale of investment in listed companies (163,218) (66,292) (163,218) (66,292)

Provision for diminution of investments in listed companies 28,178 16,739 28,178 16,739

Provision – employee entitlements (7,384) – (7,384) –

Write down – intercompany loan – – – 209,326

Equity accounting adjustment 120,042 – – –

Exploration expenditure written off 133,279 352,118 128,494 101,668

Exploration expenditure capitalised (2,046,244) (457,285) (309,063) (399,682)

Changes in assets and liabilities during the year:

Increase (decrease) in trade payables 189,472 3,063 5,504 3,063

(Increase) decrease in trade receivables (81,094) 20,479 635 21,088

(Increase) decrease in prepayments (131,025) 19,574 (35,740) 19,574

Net cash generated by (outflow) from operating activities (2,483,698) (800,839) (697,099) (729,042)

25. (b) OTHER FINANCING DISCLOSURES

The group has no available finance facilities as at balance date.

There were no non-cash financing and investing activities during the financial year, other than the issue of 5,500,000fully paid ordinary shares as part of the consideration for the acquisition of a 49% interest in Transworld Energy &Minerals Resources (SA) (Pty) Ltd.



26. FINANCIAL INSTRUMENTS

(a) Credit Risk Exposures

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to theConsolidated Entity. The Consolidated Entity has adopted the policy of only dealing with credit worthy counterpartiesand obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financialloss from defaults. The Consolidated Entity measures credit risk on a fair value basis.

The Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any group ofcounterparties having similar characteristics.

The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses,represents the consolidated entity’s maximum exposure to credit risk without taking account of the value of anycollateral or other security obtained.

(b) Interest Rate Risk

The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each classof financial assets and financial liabilities is set out in the following table:

2002 Weighted Floating Fixed interest Non- TotalFinancial Average interest maturing interestAssets interest rate in 1 year bearingAustralia rate or less

% $ $ $ $

Cash 2.84 362,118 – – 362,118

Short Term deposit 4.20 2,300,000 – – 2,300,000

Receivables 1.67 – 23,184 139,742 162,926

Listed Shares – – 259,575 259,575

Equity accounted investment – – 1,733,081 1,733,081

2,662,118 23,184 2,132,398 4,817,700

Financial Liabilities

Payables – – 220,841 220,841

Net financial assets 2,662,118 23,184 1,911,557 4,596,859



26. FINANCIAL INSTRUMENTS (continued)

2002 Weighted Floating Fixed interest Non- TotalFinancial Average interest maturing interestAssets interest rate in 1 year bearingSouth Africa rate or less

% $ $ $ $

Cash 2.00 2,402 – – 2,402

Short Term deposit 11.65 1,180,206 – – 1,180,206

Receivables – 177,364 177,364

1,182,608 – 177,364 1,359,972


Payables – – 267,447 267,447

Net financial assets 1,182,608 – (90,083) 1,092,525

Combined Australian and South African net financial assets 5,689,384

2001 Weighted Floating Fixed interest Non- TotalFinancial Average interest maturing interestAssets interest rate in 1 year bearing

rate or less% $ $ $ $

Cash 3.4% 255,864 – 255,864

Short Term deposit 4.1% – 5,106,783 5,106,783

Receivables 3.1% – 57,283 70,888 128,171

Listed Shares N/A – – 184,465 184,465

Unlisted Debentures 12.0% – 300,000 – 300,000

255,864 5,464,066 255,353 5,975,283


Payables – – 213,718 213,718

Net financial assets 255,864 5,464,066 41,635 5,761,565

2002 2001$ $

Reconciliation of Net Financial Assets to Net Assets

Net financial assets as above 5,689,384 5,761,565

Non financial assets and liabilities

Property, plant and equipment 196,204 40,334

Exploration & development 4,226,919 405,898

Provisions (7,784) (15,168)

Net assets per statement of Financial Position 10,104,723 6,192,629



26. FINANCIAL INSTRUMENTS (continued)

(c) Net Fair Value

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents theirrespective net fair values, determined in accordance with the accounting policies disclosed in note 1 to the financialstatements.

(d) Unrecognised financial instruments

The Company and controlled entities do not have any unrecognised financial instruments.

27. COMMITMENTS Consolidated Company

2002 2001 2002 2001$ $ $ $

(a) Leasing Commitments

Operating leases

Office premises due within 1 year 31,680 26,429 31,680 26,429

Office premises due greater then 1

year and less than 5 – – – –

Total 31,680 26,429 31,680 26,429

The operating lease is a rental agreement for the Company’s office premises for a 12 month term, with a furtheroption thereafter.

(b) Exploration Tenement Leases – Commitments for Expenditure.

In order to maintain current rights of tenure to exploration tenements, the Company and consolidated entity isrequired to outlay lease rentals and to meet the minimum expenditure requirements of $6,834 over the next financialyear (2001: $8,000). Financial commitments for subsequent periods are contingent upon future exploration resultsand cannot be estimated. These obligations are subject to renegotiation upon expiry of the exploration leases orwhen application for a mining licence is made and have not been provided for in the accounts. These obligations arenot provided for in the accounts.

28. CONTINGENT LIABILITIES

Litigation

In the previous financial year the Company disclosed that Queensland Minex NL, a controlled entity, had commencedproceedings against Mr Peter Topham , a former Managing Director of the Company. The action related to breach ofduties owed by Topham to Queensland Minex NL in relation to the sale of interests in exploration tenements. Also, theCompany had been served with a writ by Mr Topham claiming damages for unlawful termination of services. During thecurrent financial year the two matters were settled and included the payment of $30,000 by the Company to Mr Topham.

29. SUBSEQUENT EVENTS

No event or transaction has arisen in the interval between the end of the financial year and the date of this report of amaterial and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operationsof the Company or the Consolidated Entity, the results of those operations or the state of affairs of the Company orthe Consolidated Entity in future financial years.



The Directors of Mineral Commodities Ltd declare that:

1. The financial statements and notes of the Company and of the Consolidated Entity are in accordance with theCorporations Act 2001, including:

a) giving a true and fair view of the financial position of the Company and consolidated entity as at 31 December2002 and of their performance, as represented by the results of their operations and their cash flows, for theyear ended on that date; and

b) complying with Accounting Standards and the Corporations Regulations 2001; and

2. In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debtsas and when they become due and payable.

Signed in accordance with a resolution of the Directors:

Joseph A CarusoChairman

Dated at Perth, Western Australia this 31st of March 2003

DIRECTORS’ DECLARATION



The Board of Directors of Mineral Commodities Ltd has adopted the following set of principles for the corporategovernance of the Company. These principles, establish the framework of how the Board carries out its duties andobligations on behalf of the shareholders.

Recently the ASX Corporate Governance Council has published “Principles of Good Corporate Governance and BestPractice Recommendations”. This publication prescribes certain changes in reporting requirements for a company’sfirst financial year commencing after 1 January 2003. Therefore the Mineral Commodities Ltd annual report for theyear ending 31 December 2003 (next year’s annual report) will contain revised disclosure in relation to corporategovernance, as is required for a company of its size and nature.

T h e B o a r d o f D i r e c t o r sRole of the BoardThe Board of Directors is responsible for setting the strategic direction and establishing the policies of MineralCommodities Ltd and the consolidated entity. It is responsible for overseeing the financial position, and for monitoringthe business and affairs of the Company and the consolidated entity on behalf of the shareholders, by whom thedirectors are elected and to whom they are accountable. It also addresses issues related to internal controls andapproaches to risk management.

Composition of the BoardThe directors’ report contains details of the directors’ qualifications, experience and special responsibilities.

As a general principle the Company considers that the number of non-executive directors must exceed the numberof executive directors.

Details of directors’ shareholdings are disclosed in the directors’ report and financial report.

C h a i r a n d M a n a g i n g D i r e c t o rThe Company maintains that there must be a separation between the roles of Chairman and the Managing Director.

The Managing Director is responsible for supervising the management of the business as designated by the Board.The Chairman is an independent person who is not involved in any executive management. This ensures theappropriate independent functioning of the Board and management.

I n d e p e n d e n t P r o f e s s i o n a l A d v i c eThe Company has procedures enabling any director or committee of the Board to seek external professional adviceas considered necessary, at the Company’s expense with the approval of the Chairman.

C o n f l i c t o f I n t e r e s tIn the event that a potential conflict of interest may arise, involved directors must withdraw from all deliberationsconcerning the matter. They are not permitted to exercise any influence over other Board members.

S h a r e h o l d e r s R e l a t i o n sThe Company’s shareholders are responsible for voting on the appointment of directors. The Board informsshareholders of all major developments affecting the Company by:• Preparing half yearly financial reports and making these available to all shareholders.• Advising the market of matters requiring disclosure under Australian Stock Exchange Continuous Disclosure Rules.• Submitting proposed major changes in the Company’s affairs to a vote of shareholders, as required by the

Corporations Law.

CORPORATE GOVERNANCE STATEMENT

• Reporting to shareholders at annual general meetings on the Company’s activities during the year. Allshareholders that are unable to attend these meeting are encouraged to communicate issues or ask questions bywriting to the Company.

A u d i t a n d C o m p l i a n c eThe Board undertakes the function of an Audit and Compliance Committee.

Functions include:• Compliance with statutory responsibilities relating to accounting policy and disclosure by review of half yearly and

annual financial statements• Liaising with the external auditors, assessing the quality of their work and reports and review of the external

auditors. This process enables the auditors to communicate any concerns to the Board via the Audit andCompliance Committee, independent of management influence.

P r i v a c yThe company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to theextent required for a company the size and nature of Mineral Commodities Ltd.

C o r p o r a t e G o v e r n a n c e S t a t e m e n t ( c o n t i n u e d )



Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere inthis report. This information is current as at 11 April 2003

Tw e n t y L a r g e s t S h a r e h o l d e r sName Number of Percentage of

ordinary shares issued shares

Zurich Bay Holdings Pty Ltd 9,256,015 19.9 %

Tamily Pty Ltd 1,830,475 3.94 %

Robert Cameron Galbraith 1,157,589 2.49 %

C3D Holdings Pty Ltd 1,100,000 2.36 %

Patrick Francis Caruso 1,038,985 2.23 %

Redera Limited 1,000,000 2.15 %

Nicholas Charles Richards 954,666 2.05 %

Coral Harris 900,000 1.93 %

Almargem Pty Ltd 695,000 1.49 %

F.W. Holst & Co. Pty Ltd 600,000 1.29 %

IEC Investments Pty Ltd 500,000 1.07 %

Kingarth Pty Ltd 497,500 1.07 %

Asset Backed Holdings Pty Ltd 459,177 0.99 %

Merged Funds Pty Ltd 425,000 0.91 %

Harry Arthur Hill 414,000 0.89 %

Frank Rizzi 384,000 0.83 %

Fortis Clearing Nominees Pty Ltd 360,000 0.77 %

Harnbury Pty Ltd 350,000 0.75 %

Kynan Hoffman 321,406 0.69 %

Kevin Anthony Leo 314,406 0.68 %

22,558,219 48.5 %

SHAREHOLDER INFORMATION

Tw e n t y L a r g e s t O p t i o n H o l d e r sName Number Percentage of

of options issued options

Zurich Bay Holdings Pty Ltd 5,417,566 22.89 %

C3D Holdings Pty Ltd 1,976,667 8.35 %

Samuel James Graham 1,300,000 5.49 %

Coral Harris 1,164,168 4.92 %

Clodene Pty Ltd 1,000,000 4.22 %

Patrick Francis Caruso 1,000,000 4.22 %

Donald Boyd 700,000 2.96 %

Tamily Pty Ltd 610,159 2.58 %

Patrick Jebb 558,769 2.36 %

Kevin Anthony Leo 551,668 2.33 %

Christopher Victor Caruso 550,000 2.32 %

Kingarth Pty Ltd 500,000 2.11 %

Keng Heng Goh 500,000 2.11 %

Robert Cameron Galbraith 445,584 1.88 %

Peter Massey 420,000 1.77 %

Gregory Hugh Steemson 420,000 1.77%

Nicholas Charles Richards 332,239 1.40 %

Margarete Anna Thompson 317,670 1.34 %

Jennifer Mo 300,000 1.27 %

Tibor Rodney Stojanovski 250,000 1.06 %

18,314,490 77.35 %

D i s t r i b u t i o n o f S h a r e h o l d e r s a n d O p t i o n h o l d e r sRange of holdings Number of Number of Number of Number of

shareholders shares optionholders options

1 – 1,000 120 44,974 144 72,438

1,001 – 5,000 533 1,948,707 152 401,925

5,001 – 10,000 226 1,913,983 40 321,942

10,001 – 100,000 378 12,283,466 83 3,154,851

100,001 – and over 65 30,321,513 29 19,719,431

Total holders 1322 46,512,643 448 23,670,587

S h a r e h o l d e r I n f o r m a t i o n ( c o n t i n u e d )



M a r k e t a b l e P a r c e l sNumber of shareholders holding less than a marketable parcel of ordinary shares is 307.

Number of option holders holding less than a marketable parcel of options is 367.

Vo t i n g R i g h t sEvery ordinary shareholder present in person or by proxy at meetings of shareholders shall have one vote for everyshare held.

Option holders have the right to attend meetings but have no voting rights until the options are exercised.

U n q u o t e d o p t i o n sThe Company has 5,168,071 unlisted options on issue. Details of these options are described in note 17(b) to thefinancial statements.

S u b s t a n t i a l s h a r e h o l d e r sZurich Bay Holdings Pty Ltd is a substantial shareholder with 19.9 % of the issued ordinary shares.

R e s t r i c t e d s e c u r i t i e sIncluded in Zurich Bay Holdings Pty Ltd’s shareholding is 5,500,000 restricted fully paid ordinary shares. Theseshares will be released from escrow on 9 May 2003.

S h a r e b u y b a c k sThere is no current on market share buy back.

S h a r e h o l d e r I n f o r m a t i o n ( c o n t i n u e d )


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ABN 39 008 478 653 MINERAL COMMODITIES LIMITED