Beaconsfield Gold - Australia's Richest Gold Resource.

High Grade, Low Cost Gold Producer

March 2003 Quarterly Report

BEACONSFIELD MINE JOINT VENTURE (BMJV)(Beaconsfield Gold Direct Interest 48.49%)

The participants in the unincorporated BMJV, which operates the Beaconsfield Mine at Beaconsfield in north-east Tasmania, are Allstate with a 51.51% interest and Beaconsfield Gold with a 48.49% interest. Allstate, with the higher interest, is Manager of the BMJV and the BMJV Mine Manager and all the personnel reporting to him are employed by Allstate. Beaconsfield Gold in turn owns 30% of the fully paid shares in Allstate.

Joint Administrators (Michael Ryan and Tony Woodings of chartered accounting firm, Taylor Woodings, based in Perth, Western Australia) were appointed to Allstate on 8 June 2001 and a Receiver and Manager (Garry Trevor of Ferrier Hodgson, Perth office) was appointed to Beaconsfield Gold on 25 June 2001.

FLOW OF MATERIAL INFORMATION TO ALLSTATE AND BEACONSFIELD GOLD SHAREHOLDERS

Allstate's last quarterly report to the ASX was for the period ending 31 March 2001. Since that report, over two years ago, the only publicly-available material information on mine production and costs for the Beaconsfield Mine has been as reported in the quarterly reports to the ASX by Beaconsfield Gold. Those reports have been written by Mike Trumbull, the Executive Director for Beaconsfield Gold, who has written all the quarterly reports for the company since its listing on the ASX in 1993.

Further details on the flow of material information, and the attempts by various parties to conceal it, are set out in the Beaconsfield Gold corporate section of this quarterly report under the heading "Flow of Material Information to Beaconsfield Gold Shareholders".

Current Position

Following the refusal of the Executive Director of Beaconsfield Gold to sign a confidentiality agreement proposed by the Receiver and Manager of Beaconsfield Gold and the release by the Executive Director of the September 2002 quarterly report on 19 December 2002, the Receiver and Manager moved to withhold all material information from Beaconsfield Gold. The list of material information and documents now withheld from the company, since the appointment of the Receiver and Manager in June 2001, includes the following, in order of timing:

1. All detailed documentation regarding the progress of the claims against the construction contractor, Bateman Brown and Root.
   
   
2. Information about the Exergen project which came into being after the appointment of the Receiver and Manager to Beaconsfield Gold. This "secret" project development (which incorporates deepening the Fresh Air Shaft at the Beaconsfield Mine from 375 metres depth to 700 metres depth) is understood to provide significant benefits to the BMJV.
   
   
3. The Memorandum of Understanding referred to in an ASX release by Diamond Ventures NL (DDV) of 11 April 2002 regarding a proposed exploration joint venture between DDV and the BMJV.
   
   
4. The Ore Reserve Report detailing the calculation of reserves and resources for the BMJV as at 30 June 2002.
   
   
5. The independent audit of the 30 June 2002 BMJV Ore Reserve Report.
   
   
6. The updated BMJV 5-Year Mine Plan, including several variations. This plan was prepared around August/September 2002 on the back of the 30 June 2002 Ore Reserves and updated the previous 5-year plan dated June 2001. Given the spectacular turnaround in mine and ore treatment plant performance since September 2002, this plan is likely to dramatically understate the cash flow potential of the mine.
   
   
7. The formal Exploration Agreement between DDV and the BMJV, the signing of which was announced on 3 October 2002 by DDV in an ASX release.
   
   
8. The updated BMJV budget for 1 January 2003 to 30 June 2003 and the BMJV forecasts for 1 July 2003 to 31 December 2003 (these documents would have been approved in December 2002 by the BMJV Operating Committee, consisting of the Allstate Administrator, Michael Ryan, as Chairman and the Receiver and Manager of Beaconsfield Gold, Garry Trevor).
   
   
9. Following the release of the Beaconsfield Gold September 2002 quarterly report on 19 December 2002, the weekly gold shipment notices, the BMJV Mine Manager weekly reports, the BMJV Mine Manager monthly reports and the Beaconsfield Gold gold hedge book monthly reports.

Data Contained in this March 2003 Quarterly Report

As for the December 2002 quarterly report, in the interests of providing shareholders with the best possible material information, this quarterly report estimates certain data. In order to estimate cost per ounce and net cash flow, total costs (operating plus capital) are taken to be the average for the Beaconsfield Mine from October 1999 through to November 2002. In order to estimate head grade to the ore treatment plant, reasonable assumptions are taken for mill throughput and gold recovery based on historical data to late December 2002.

Fortunately, the Executive Director of Beaconsfield Gold has been able to obtain reliable information on the BMJV weekly gold shipments since 19 December 2002 and this information has been used to update the Executive Director's databases for gold production, revenue and Beaconsfield Gold's gold hedge book.

Performance for the June 2003 quarter is projected based on the rate of gold production for the first 37 days to 7 May 2003. The results are spectacular and the Executive Director does not expect them to be sustainable for the whole of the quarter. The projections based on the results to 7 May are included however to illustrate what, at least, the Beaconsfield Mine is capable of achieving.

MINE PERFORMANCE

Graphs

Attached at the end of the written section of this quarterly report are graphs showing BMJV: head grade; conversion from resources to reserves; gold production (per quarter, per shipment and 90-day rolling average); total cost (dollars and dollars per ounce) and net cash flow (after operating and capital costs). These graphs are also available in colour on Beaconsfield Gold's web site: www.beaconsfieldgold.com.au

Tables

The tables on the following pages summarise all the quarterly results for the Beaconsfield Mine since the start of gold production in late 1999 through to the March 2003 quarter: "Production Summary", "Gold Production", "Operating, Capital and Total Cash Costs" and "Estimated BMJV Total Net Cash Flow".

MILL THROUGHPUT

As discussed in the December 2002 quarterly report, the Executive Director of Beaconsfield Gold considers 235,000 tonnes per annum (tpa) to be the maintainable rate for the Beaconsfield Mine based on the currently available information. For a plant availability of greater than 95% for example, an annual rate of 235,000 tpa requires an average ball-milling rate of 28 tonnes per hour maximum, which has proven to be readily achievable provided the mine can supply the ore. The progressive improvements in the mine, incorporating the optimisation of waste development and the optimisation of the range of ore stoping methods employed, has shown that 235,000 tpa is achievable provided that mine planning and scheduling ensures the availability of sufficient live stopes.

For the March 2003 quarter, the Executive Director understands that significant maintenance was carried out during the month of March. In particular, all six of the bacterial oxidation (bacox) tanks were cleaned out and repairs made to the agitator mechanisms etc as required and a full reline of the ball mill was carried out. This extensive, irregular maintenance would have reduced mill throughput significantly and the Executive Director has estimated mill throughput for the March 2003 quarter as being at the rate of, say, 212,000 tpa rather than the figure of 235,000 tpa discussed above. The Executive Director is projecting June 2003 quarter throughput at the 235,000 tpa rate.

HEAD GRADE / RESERVE GRADE

Assuming a mill throughput rate of approximately 212,000 tpa and a gold recovery of (say) 91%, the estimated head grade for the March 2003 quarter would have been around 17.1 g/t gold, the first time that that it had exceeded the average reserve grade for the Beaconsfield Mine of 16.7 g/t gold. If the gold recovery was, for example 92% or 90%, the head grade for the quarter would have been approximately 16.9 g/t or 17.3 g/t respectively.

Head grade for the June 2003 quarter is projected at around 21.1 g/t gold by the Executive Director based on the average estimated head grade for the 37 days to 7 May 2003.

Graph 1 shows the trend for head grade to date in comparison to the reserve grade as at 30 June 2002. While the trend for quarterly head grade is continuing upwards, head grade is only now exceeding the reserve grade, which has not been increased over time as one would expect from a mathematical point of view, and therefore future head grades may well continue to exceed the current reserve grade.

Graph 1 also clearly shows the dramatic lift in the average grade of the Measured and Indicated Resources following the very successful resource drilling program conducted between January and June 2002. Despite the approximate 28% increase in the grade of the Resources (from 19.2 g/t to 24.5 g/t gold), the Ore Reserve grade, as calculated by Allstate as Manager of the BMJV, remained unchanged as at 30 June 2002 at 16.7 g/t gold.

As noted in the December 2002 quarterly report, the Executive Director of Beaconsfield Gold is unable to give a detailed opinion as to why the Ore Reserve grade was not increased by Allstate as the Receiver and Manager to Beaconsfield Gold is continuing to withhold the Ore Reserve Report and the independent audit of that report. However, analysis by the Executive Director of the various Allstate statements of resources and reserves has highlighted a significant aspect of the figures as at 30 June 2002.

Production Summary

1. Mill reconciled head grade.
2. Gold recovery excluding changes in gold in circuit.

Graph 2 shows the percentage conversion from Measured and Indicated Resources into Reserves for both tonnes and ounces of gold for six consecutive Allstate statements - as at 30 June 1998, 30 June 1999, 31 December 1999, 30 June 2000, 31 December 2000 and 30 June 2002. All six of the Identified Mineral Resources and Ore Reserves Statements were prepared by the same geologist - Mr Peter Hills, the BMJV Chief Geologist, who reports to the BMJV Mine Manager.

In terms of the conversion of ounces of gold, the 30 June 2002 statement is very similar to the previous five statements. For all six statements, the conversion of ore resource gold has varied between 91% and 94%. At the Beaconsfield Mine, the various cut-and-fill mining methods allow 100% mining recovery with no requirement for permanent pillars. As a result, the gold conversion figures reflect the higher grade cut-off adopted in the calculation of the Reserves - that is, sections of the orebody that are considered too low grade after the addition of the calculated mining dilution are not mined.

In terms of the conversion of tonnes, however, the 30 June 2002 statement is very different from the previous five statements. For the first five statements considered, the conversion of ore resource tonnes has varied between 103% and 108%. These conversion figures broadly represent the additional tonnes of waste dilution (both hangingwall and footwall dilution) inherent in the various mining methods less the ore resource tonnes that are considered too low grade to justify mining. For the calculation as at 30 June 2002, the conversion of ore resource tonnes is 138%, indicating a dramatic change in the methodology employed to calculate the reserves.

The methodology employed has had the effect of adding precisely sufficient waste tonnes so that the average reserve grade did not increase, or decrease, from the previously calculated grade of 16.7 g/t gold, an apparently extraordinary coincidence. For example, if the conversion of ore resource tonnes had been 108%, as for the previous statement, the average reserve grade as at 30 June 2002 would have risen to around 21.3 g/t gold. If the methodology employed as at 30 June 2002 did in fact allow for significant additional waste dilution, it is not clear why this would be the case. The Executive Director of Beaconsfield Gold understands that hangingwall failures (the source of the majority of the waste dilution incurred to date) have become less prevalent with the increasing depth of mining due to the increasing strength and competency generally of the hangingwall rocks.

Given the dramatic change in the methodology apparently employed, and given that he has not been provided with the latest Ore Reserve statement or the audit of that statement, the Executive Director of Beaconsfield Gold is presently inclined to feel that the real ore reserve grade for the Tasmania Reef may well lie between 16.7 g/t and 21.3 g/t gold. In the September 2002 quarterly report, the Executive Director projected a range for average gold production per year for the updated reserves as at 30 June 2002 (reserve grade 16.7 g/t gold) to be 103,000 to 116,000 ounces. If the real ore reserve grade did in fact lie between 16.7 g/t and 21.3 g/t gold, the upper limit of the gold production range could well be as high as 148,000 ounces per year.

The grade of the ore delivered to the Beaconsfield ore treatment plant is the most critical factor influencing gold production and profitability. Each 1.0 g/t gold of additional grade could result in an additional 6,989 ounces of gold per year (235,000 tpa x 1.0 g/t x .925 recovery / 31.1 g/oz) and add some $3.8 million per year to mine profit at a gold price of say A$550 per ounce. For example, in a circular to the creditors of Allstate dated 5 March 2002, the Joint Administrators of Allstate attached cash flow projections (Annexure B) that indicated an average future head grade for Beaconsfield ore of only 13.72 g/t gold (for the five year scenario). The range postulated by the Executive Director, discussed above, of 16.7 g/t to 21.3 g/t gold would be some 22% to 55% higher and could result in $11 million to $29 million of additional mine profit per year.

GOLD PRODUCTION

Despite the extensive, irregular maintenance required to be carried out in the ore treatment plant during the month of March, total gold production for the March 2003 quarter, at approximately 26,110 ounces (105,890 ounces annualised), was only approximately 919 ounces (or 3%) less than for the December 2002 quarter of approximately 27,029 ounces (107,235 ounces annualised). On a per day basis, March 2003 quarter gold production of approximately 290 ounces per day was only 1% less than for the December 2002 quarter.

Total gold production for the June 2003 quarter is projected at around 146,000 ounces annualised by the Executive Director based on the rate of gold production for the 37 days to 7 May 2003.Graph 3 shows actual quarterly gold production since start-up together with budgeted gold production since the appointment of the Receiver and Manager to Beaconsfield Gold and average gold production projected by the Executive Director (Mike Trumbull - "MWT"). It also shows the average future gold production forecast by the Allstate Joint Administrators in the circular to the Allstate unsecured creditors dated 5 March 2002.

Graph 4 shows total gold production per shipment (generally weekly) since start-up. The trend line for all shipments remains strongly positive and is now at an annualised rate of approximately 115,000 ounces per year.

Gold Production

Graph 5 shows 90-day rolling averages since start-up for gold production. At 25 June 2001, when the Receiver and Manager was appointed to Beaconsfield Gold, the 90-day rolling average for gold production was 75,576 ounces annualised. The 90-day rolling average is continuing its overall upward trend and now clearly has exceeded the feasibility target for gold production. Currently approximately 119,600 ounces annualised, it is some 58% greater than when Beaconsfield was placed in receivership and compares favourably with the range projected by the Executive Director in the September 2002 quarterly report for average annual gold production from the Tasmania Reef of 103,000 to 116,000 ounces. The current 90-day rolling average of approximately 119,600 ounces annualised is also some 55% greater than the 77,158 ounces per year forecast rate (5-year scenario) of the Allstate Joint Administrators in March 2002.

COSTS

Graph 6 shows available quarterly total costs (operating costs plus capital expenditure including ore reserve drilling) since start-up compared with quarterly mill throughput. Total costs have not reflected the significant increase in mill throughput over time, indicating the significant proportion of fixed costs for the BMJV and the ongoing efficiencies being achieved in both the mine and the ore treatment plant. Total annual cost for the BMJV is projected by the Executive Director of Beaconsfield Gold at the historical average of approximately $41.4 million per year. Upon the completion of the main access decline, which would occur several years before the, as-yet undetermined, ultimate mine life for the Beaconsfield Mine, total costs would fall significantly below this figure as mine development costs fell away. The mine life for the Tasmania Reef will be extended periodically in the future by drilling at regular intervals from cuddies located off the main access decline, as for the 2002 ore reserve drilling program.

Graph 7 shows total cost per ounce of gold production since start-up together with budget estimates since the appointment of the Receiver and Manager to Beaconsfield Gold and the projected average total cost per ounce (until the ultimate completion of the main access decline). Total cost per ounce for the March 2003 quarter, estimated at around A$391 per ounce, was a record low for the BMJV, being some $180 per ounce or 32% less than for the June 2001 quarter when the Receiver and Manager to Beaconsfield Gold was appointed.

Total cost per ounce for the June 2003 quarter is projected to be dramatically lower at around A$283 per ounce by the Executive Director based on the rate of gold production for the 37 days to 7 May 2003.

Operating, Capital and Total Cash Costs

1. Including regional exploration costs and underground diamond drilling costs.
2. Operating cash costs (including 2% management fee to Allstate) plus capital cash costs.

New Trucking Technology

Exciting new trucking technology is currently being introduced to various underground gold mines in Australia. The new technology could result in significant capital cost reductions (eliminating the need to deepen the hoisting shaft) and operating cost reductions for the Beaconsfield Mine in the future.

Ultimately, the technology could justify extending the main access decline for the Tasmania Reef from underground through to the surface, preferably coming out near to the ore treatment plant to the north-west (and hopefully accessing a yet-to-be-discovered economic gold reef, perhaps associated with the North Tasmania Reef, along the way). By doing so, the new technology trucks could haul ore from loading points underground all the way to the ore treatment plant, avoiding shaft hoisting, conveying and double handling to the plant (using a contract loader and trucks) altogether. The decline could then also be used to transport men and supplies underground more efficiently. The existing Hart Shaft hoisting arrangements could still be used to hoist the underground development waste rock (larger-sized and therefore not suitable for the new technology trucks) that is not required for stope backfilling underground.

South Africa's Harmony Gold recently scrapped plans for a $20 million, 1,000 metre deep hoisting shaft at the Mt Magnet Hill 50 underground gold mine in Western Australia, opting instead for new generation "Powertrans" roadtrains. Manufactured in Australia by the Darwin-based Gulf RTA Group, the trucks use a motorised trailer operating in tandem with the prime mover. Harmony believes the units will haul 55-tonne loads up the decline two or three times faster than standard underground vehicles. The trucks are also currently in use in Australia at the Bronzewing, Stawell and St Ives underground gold mines.

Hill 50 is currently working stopes at 1,100 metres depth, utilising decline access from the surface, and has identified resources as deep as 1,500 metres. Hill 50 is using a configuration of one prime mover (with its own tray) pulling one trailer, for a total rated capacity of 55 tonnes. They are fast, low profile (only 2.5 metres wide and 3.1 metres high) and have clean engines (as clean in terms of exhaust emissions as a standard underground Toyota personnel vehicle). The trucks' forecast operating costs at Hill 50 are roughly half those of standard underground trucks on a cents per tonne per kilometre basis. The major limiting factor for the units is a bigger turning circle than for standard trucks and Hill 50 intends to install a turning loop for the trucks every couple of levels.

The trucks use motorised trailers that help power the units up the decline. These are electronically synchronised and controlled by an operator from the cabin of the truck. The trailer motors are then switched off going back down the decline. Importantly, the fully loaded unit can still travel up the decline should a motorised trailer fail.

Peter Cook, the former Hill 50 Manager Director, is quoted in the February 2003 edition of Australia's Mining Monthly as saying: "I believe that this is the most exciting technology to happen in the (underground mining) industry since the introduction of Jumbos. These will blow the old underground trucks apart."

BMJV NET CASH FLOW

Net cash flows per quarter for the BMJV since start-up are estimated in the following table for the budgeted average gold price received by the BMJV participants of A$535 per ounce. Graph 8 shows the net cash flows in comparison with budgeted figures. BMJV net cash flow (gold revenue less operating and capital cash costs) for the March 2003 quarter is estimated at around $3.8 million ($15.2 million annualised). This is the seventh straight quarter of positive net cash flow since the appointment of the Receiver and Manager to Beaconsfield Gold, despite significant expenditure over the period on capital projects and ore reserve drilling.

SUMMARY BMJV PERFORMANCE FOR THE MARCH 2003 QUARTER

Comparisons of the performance for the March 2003 quarter with those for the June 2001 quarter (the Receiver and Manager was appointed to Beaconsfield Gold on 25 June 2001) give the following:

• BMJV total gold production up approximately 42% from 74,685 ounces annualised to approximately 105,890 ounces annualised.
  
  
• BMJV total cash cost per ounce (operating plus capital) down some 32% from A$571 per ounce to around A$391 per ounce.
  
  
• BMJV total net cash flow at the budgeted hedged BMJV gold price of A$535 per ounce up dramatically from negative $3.0 million to positive $15.2 million on an annualised basis.

Estimated BMJV Total Net Cash Flow

1. Operating costs, including 2% management fee to Allstate, plus capital costs, including exploration.
2. Budgeted average gold price received by the BMJV participants, Beaconsfield Gold NL and Allstate Explorations NL.
3. Total mine net cash flow after operating and capital cash costs but before corporate overheads (including Tasmanian state royalty) and debt servicing for both Beaconsfield Gold NL and Allstate Explorations NL.

POTENTIAL TO INCREASE BMJV ORE RESERVES OVER TIME

The following sets out the current thinking of the Executive Director of Beaconsfield Gold on the ore reserve potential for the Tasmania Reef.

The Tasmania Reef has now been confirmed, by mining (both past and present) and close-patterned drilling, to be geologically consistent from surface to a depth of 1,000 metres - showing no indication of diminution in strike length, reef width or grade. As mine development continues, periodic resource drilling from cuddies located off the main access decline will clearly continue to show reef extension at depth. The dimensions of the Tasmania Reef detailed to date show that a further 1,000 metres (or more) of mineralisation is possible. Geologically, there is no reason to believe the reef will not extend at depth. The ultimate end of the reef at depth may occur where it "soles-out" against an associated thrust fault, but there is no evidence of this occurring at the deepest drill intersections.

In order to estimate the ore reserve potential below the 1,000 metre level, consider the extension of the orebody to 2,000 metres at the current reserve grade and apply probabilities to the extension. For the extension from 1,000 metres to 1,500 metres, apply a probability of two-thirds or 67%. For the extension between 1,500 metres and 2,000 metres, apply a lower probability of one-third or 33%.

The following table summarises the actual production figures for the Beaconsfield Mine up to 30 June 2002, the date as at which the current ore reserves were calculated by Allstate. Total gold milled to 30 June 2002 is calculated at 240,605 ounces although this figure is likely to be conservative as it is now considered by the Executive Director that the production figures overestimate gold recovery and underestimate head grade due to the presence of previously undetected free gravity gold in the sulphide flotation concentrate.

The current mining phase at Beaconsfield commenced under the deepest historical level at 455 metres depth. Assuming an average 5 metre pillar has been left below the 455 metre level, total gold mined to date in the current phase plus current gold ore reserves (a total of conservatively 711,600 ounces) fit in the interval 460 metres to 1,000 metres, that is a vertical depth of 540 metres. The approximate gold per vertical metre is therefore conservatively 1,318 ounces.

Each 500 metre vertical extension of the Tasmania Reef could therefore yield some 659,000 ounces. Average future gold production is estimated by the Executive Director at 116,712 ounces per year after gold recovery of say 92.5% so that gold milled per year is estimated at 126,176 ounces. Each 500 metre extension of the orebody could therefore extend the ultimate mine life by some 5.2 years.

As a result, before the application of probabilities, potential ore reserves to 2,000 metres as at 30 June 2002 could be some 1,789,000 ounces. As at 30 June 2003, they could be 1,663,000 ounces which would give a mine life from 30 June 2003 of some 13.2 years.

After the application of the probabilities outlined above, potential ore reserves to 2,000 metres as at 30 June 2002 would reduce to a factored figure of some 1,130,000 ounces. As at 30 June 2003, they would reduce to 1,004,000 ounces which would give a mine life from 30 June 2003 of some 8.0 years after the application of the adopted probabilities.

EXPLORATION JOINT VENTURE BETWEEN DDV AND THE BMJV

The exploration joint venture between Diamond Ventures NL (DDV) and the BMJV (represented by the Allstate Joint Administrators and the Receiver and Manager for Beaconsfield Gold) has been outlined in previous quarterly reports based on ASX releases by DDV.

In the DDV report for the March 2003 quarter, DDV announced that:

• Highly encouraging results were returned from an extensive gold-in-soil geochemical survey covering 9km length of the property, with 12 composite anomalies having been selected as drill targets.
  
  
• RC drilling at the Salisbury prospect highlighted anomalous gold and prospective geology within and adjacent to E-W Johnsons Creek fault as a Tasmania Reef (Beaconsfield Gold Mine) look-alike. Follow up diamond drilling is planned.
  
  
• Stream sediment geochemical survey testing of Beaconsfield-style thrust slices west of Beaconsfield has indicated a zone of anomalous drainage.

BEACONSFIELD GOLD CORPORATE

ASIC INVESTIGATION OF ALLSTATE

The Executive Director of Beaconsfield Gold has been informed of numerous complaints that have been made to the Australian Securities & Investments Commission ("ASIC") regarding the administration of the Allstate group of companies. The majority of the complainants are understood to contend that serious breaches of the Corporations Law may have occurred. As a result of those complaints, between December 2002 and April 2003, ASIC is understood to have carried out preliminary inquiries into various matters, in particular the Allstate creditors' meeting of 19 March 2002 and the information that was presented to the Allstate unsecured creditors at that meeting by the Allstate Administrators and a Macquarie Bank representative.

As part of those inquiries, ASIC officials are understood to have interviewed various current and former Superintendents of the Beaconsfield Mine and the current BMJV Mine Manager. The ASIC officials are also understood to have subsequently interviewed the Allstate Administrators, Macquarie Bank, the Receiver and Manager to Beaconsfield Gold and BankWest.

The Executive Director understands that ASIC upgraded the status of the matter from preliminary inquiries to a full investigation in April 2003.

Beaconsfield Gold will of course continue to closely monitor the impacts resulting from any possible action by ASIC and reserve all its legal rights.

BACKGROUND TO THE ASIC INVESTIGATION OF ALLSTATE

The following sets out some of the background to the Allstate administration.

Beaconsfield Gold owns approximately 30.0% of the fully paid shares in Allstate Explorations NL ("Allstate"). Another 56.6% of the shares in Allstate are owned by Otter, a 100% subsidiary of Newmont NFM which is in turn a subsidiary of Newmont, the world's biggest gold mining company.

Otter

1. Both Otter and Allstate had debt and gold hedging facilities with Macquarie Bank. Based on the March 2001 quarterly reports for Otter and Allstate, the Macquarie debt facilities for Otter and Allstate combined at that time totalled some $55.0 million while the marked-to-market value of the hedge books for both companies combined, primarily with Macquarie Bank, totalled negative $39.2 million for a spot gold price of A$530 per ounce. Macquarie's total combined exposure to both companies was clearly substantial and, given the poor performance of Otter's Tanami operation and Allstate's commissioning problems at Beaconsfield at that time (30 April 2001), would have been of great concern to Macquarie.
   
   
2. On Friday, 1 June 2001, Otter announced the resignation of Mr Patrick Scott as Managing Director of Otter and Allstate. It was also announced that an existing director of Otter and Allstate, Mr Mike Jefferies of the Guinness Peat Group ("GPG"), the controlling shareholder of Otter, would take over as Chief Executive of Otter and Allstate. Mr Scott was not replaced as a director of Otter and Allstate. GPG held approximately 43% of the issued shares in Otter but held no shares directly in Allstate.
   
   
3. On Monday, 4 June 2001, Otter announced that its flagship operation, the Tanami Mine (Otter 60% ownership and management), was being shut down with mining to cease on 30 June 2001. With ongoing commissioning problems affecting its 56.6% subsidiary, Allstate, this announcement meant that Otter's only performing, and therefore readily saleable, asset was its interest in the Martha Mine in New Zealand (Otter 32.94% with Newmont 67.06% and manager).
   
   
4. On Friday, 8 June 2001, Otter announced that its subsidiary, Allstate, had been placed in administration as the directors of Allstate (two of the three remaining Allstate directors were also directors of Otter) had insolvency concerns.
   
   
5. On 31 July 2001, in its June 2001 quarterly report, Otter reported that its debt facilities with Macquarie Bank totalled A$38.6 million, an increase of $3.6 million in the June 2001 quarter
   
   
6. On 11 October 2001, Newmont NFM announced its intention to launch a scrip takeover offer for Otter. GPG sold into the offer and when the offer closed on 2 April 2002, Newmont NFM had 89.2% of Otter, falling just short of the 90% compulsory acquisition threshold.
   
   
7. In its December 2002 quarterly report, Otter (controlled by Newmont since 18 February 2002) reported the following: "On 13 December 2002 Otter received an offer from Normandy NFM Limited, trading as Newmont NFM ("NFM"), for all of Otter's outstanding securities which it does not already own, of A$0.28 per Otter share and A$0.01 per 100 Otter options. An independent expert, Investor Resources Limited ("IRL") was commissioned by Otter to produce a report on the merits of NFM's offer. IRL calculated Otter's value at between negative A$0.56 and negative A$0.16 per share and concluded that NFM's offer is fair and reasonable and has merit. On the basis of IRL's report Otter's Directors unanimously recommend that shareholders accept NFM's offer."
   
   
8. As Otter has approximately 83.397 million shares on issue, the Newmont NFM offer of $0.28 per share put a value on Otter of approximately $19.2 million compared with the IRL independent valuation range of negative $46.7 million to negative $13.3 million - a premium range of $32.5 million to $65.9 million. Newmont NFM moved to over 90% of Otter as a result of the offer and subsequently moved to compulsory acquisition of the remaining shares. It is not clear why Newmont NFM paid a very substantial premium for Otter if it indeed had negative value. A possible explanation could be that Newmont and Macquarie may have come to some agreement about the sharing of the Otter debt and out-of-the-money gold hedging facilities with Macquarie.

BMJV, Allstate and Beaconsfield Gold

1. Net cash flow for the Beaconsfield Mine for April 2001 had been strongly positive and a new monthly record for the BMJV. Beaconsfield Gold's net cash flow from its 48.49% direct share of the BMJV had been, at the company's hedged price of A$537 per ounce, approximately positive $0.4 million for the month.
   
   
2. For the month of May 2001, BMJV gold production unexpectedly fell by 28% and BMJV total costs (calculated on an accrued cost basis) went up by 13%. According to the BMJV budget, prepared by Allstate, gold production in May 2001 was expected to increase by 7% compared with April while total costs were expected to fall by 13% compared with April. Beaconsfield Gold's net cash flow from its 48.49% direct interest in the BMJV fell to approximately negative $0.4 million in May 2001, a decline of $0.8 million from April 2001.
   
   
3. Beaconsfield Gold received the April 2001 monthly report from the BMJV Mine Manager, including the BMJV accounts, in the third week of May 2001. The report was, given the performance, very positive. The report for May 2001 was not received until after Allstate, the Manager of the BMJV, was placed in administration in June 2001.
   
   
4. Beaconsfield Gold was due to pay approximately $1.3 million in interest (a six-monthly payment) to its banker, BankWest, on 25 May 2001. Due to the unexpected drop-off during May of the company's share of mine net cash flow, Beaconsfield Gold was only able to pay approximately $0.75 million, leaving approximately $0.55 million interest outstanding.
   
   
5. At the end of May 2001, a BankWest representative told the Executive Director of Beaconsfield Gold that, due to the unpaid interest, the BankWest facilities could only be extended on a monthly basis and that Beaconsfield Gold therefore needed to pay the outstanding interest by the end of June 2001. On 1 June 2001, Beaconsfield Gold paid a further $50,000 to BankWest towards the outstanding interest bill, reducing it to approximately $0.5 million.
   
   
6. Also in late May 2001, Macquarie and BankWest said they intended a review of their exposure to the Beaconsfield Mine which could affect the rollover of facilities the banks had extended to the BMJV participants.
   
   
7. In the week commencing 28 May 2001, Beaconsfield Gold forwarded to Allstate and BankWest a proposal to merge Allstate and Beaconsfield Gold. In the proposal, Beaconsfield Gold would make an agreed scrip takeover offer for Allstate to move to 100% ownership of the Beaconsfield mine, and the bankers to the two companies would jointly syndicate the debt facilities with the new Beaconsfield Gold.
   
   
8. On Friday, 1 June 2001, Allstate announced the resignation of Mr Patrick Scott as a director and Managing Director and did not appoint a replacement director.
   
   
9. On Monday, 4 June 2001 and Tuesday, 5 June 2001, Macquarie and BankWest representatives made a joint visit to the Beaconsfield Mine without any director from Allstate or Beaconsfield Gold being present and were briefed by the Allstate mine staff.
   
   
10. On the morning of Thursday, 7 June 2001, Beaconsfield Gold was brought up to date by the Manager, Allstate, at a BMJV committee meeting in regards to the activities and the general financial position of the BMJV (the BMJV accounts for the month of May 2001 were, however, not yet available). The Executive Director of Beaconsfield Gold understands that during the afternoon of Thursday, 7 June 2001, Macquarie Bank representatives and Mr Michael Ryan of Taylor Woodings visited the Allstate head office in Sydney.
    
    
11. The following morning, Friday, 8 June 2001, the directors of Allstate announced that Allstate was being placed in voluntary administration. Joint Administrators were appointed, being Messrs Michael Ryan and Tony Woodings of chartered accounting firm, Taylor Woodings, based in Perth, Western Australia.
    
    
12. In the week commencing 11 June 2001, the Joint Administrators of Allstate assumed management of the BMJV and issued a surprisingly large cash call under the BMJV that was due for payment on 6 July 2001. The Executive Director put forward to BankWest a proposal for an equity fund raising by Beaconsfield Gold.
    
    
13. At the opening of business on Monday, 18 June 2001, BankWest served notices of default and demand for outstanding monies on the Beaconsfield Gold group companies.
    
    
14. On Wednesday, 20 June 2001, Mr Robert Johanson, a director of Grant Samuel & Associates and several other companies including Bendigo Bank, resigned as a director of Beaconsfield Gold.
    
    
15. On Thursday evening, 21 June 2001, a BankWest representative verbally agreed with the Executive Director that Beaconsfield Gold had until the close of business on Tuesday, 26 June 2001 to secure promises of $3.0 million in emergency loan funds from its larger shareholders. It was agreed that those loan funds would be used to repay the outstanding interest and secure Beaconsfield Gold's position with the BMJV.
    
    
16. On Friday evening, 22 June 2001, Mr George Drysdale, the largest individual shareholder in Beaconsfield Gold, and Mr Harry Stacpoole, a Tasmanian drilling contractor and the Chairman of Beaconsfield Gold, resigned as directors of Beaconsfield Gold.
    
    
17. On the morning of Monday, 25 June 2001, the Executive Director reported to BankWest that, over the weekend, certain larger shareholders of Beaconsfield Gold had promised a significant proportion of the loan funds being sought and that there was every likelihood that the full $3.0 million would be promised by the agreed deadline the next day.
    
    
18. The BankWest representative concerned responded that any verbal agreements he may have had with the Executive Director were null and void following the resignation of the Chairman of the company on the previous Friday evening. During the afternoon of 25 June 2001, BankWest formally appointed Mr Garry Trevor of Ferrier Hodgson as Receiver and Manager of Beaconsfield Gold.
    
    
19. If Beaconsfield Gold had been able to stay out of receivership, it would have taken over as Manager of the BMJV from Allstate. The BMJV Agreement contains a clause that says, in effect, the Manager of the BMJV will immediately be removed if it enters into an arrangement with its creditors - as was the case with Allstate.

Allstate Creditors' Meeting of 19 March 2002

1. Allstate has two wholly-owned subsidiaries, Allstate Prospecting Pty Ltd ("APPL") and ACN 070 164 653 Pty Ltd ("ACN"). While Allstate is the Manager of the BMJV, APPL and ACN together own the 51.51% interest in the BMJV held by the Allstate group. Macquarie Bank Limited is the only secured creditor of the Allstate group. The various Allstate project debt facilities with Macquarie totalled around $21 million when the Joint Administrators were appointed.
   
   
2. In a circular to the creditors of Allstate dated 5 March 2002, one of the Joint Administrators of Allstate, Mr Michael Ryan, outlined a proposal received from Macquarie Bank and called for a meeting on 19 March 2002 to vote on accepting the proposal. The proposal, supported by the Allstate Administrators, was that Macquarie purchase $77.5 million of inter-company loans due to Allstate by the Allstate subsidiaries for $0.3 million, with the $0.3 million to be distributed to the Allstate unsecured creditors by way of an approximate 5 cents in the dollar dividend as full payment for the debts owed to the unsecured creditors by the Allstate group (approximately $3 million).
   
   
3. Explanatory notes in the circular said, in part: "The proposal is that [Macquarie] pays an amount of $300,000 to us as Administrators of [Allstate] for the purchase of debts due to [Allstate] by [Allstate's] subsidiaries ......... The $300,000 will in turn be distributed to the unsecured creditors of [Allstate]." Further: "As at the date of our appointment ACN and APPL owed [Allstate] amounts of $20,069,000 and $57,389,000 respectively [total of $77,458,000]. These amounts comprise a combination of loan account balances and monies due under the [BMJV] cash call regime." The total inter-company loans of $77.5 million broadly represented the Allstate group's share of the BMJV cost of developing the Beaconsfield mine, ore treatment plant and associated infrastructure. The accounting figure of $77.5 million, equivalent to approximately $1.23 per fully paid Allstate share, would have been made up of around $21 million, the borrowings from Macquarie Bank, and around $56.5 million of equity funds provided by the shareholders of Allstate through placements and rights issues of fully paid and partly-paid shares.
   
   
4. The Administrators considered that the unsecured creditors should accept the MBL proposal. One of the reasons given in the circular was as follows: "Athough the proposal provides MBL with the opportunity to receive additional monies over and above its secured debt we see this as very much in the unsecured creditors' interests. This is because the more interest MBL has in the [BMJV] the more incentive it will have to risk further monies in supporting the [BMJV] as a going concern. Creditors have continually said to us the most important goal to achieve in this Administration is to ensure the [BMJV] continues as a going concern." The Administrators also said that, in their view, the $300,000 offered by Macquarie was: "fair in all the circumstances." Further, in part: "It is basically risk money on [Macquarie's] behalf with no certainty of ever recovering it. Annexure B shows that only in the more optimistic scenarios will [Macquarie] ever recover its secured debt (ie after 8 or 9 years)."
   
   
5. Annexure B in the circular considered five scenarios with mine lives from five years through to nine years. For each scenario, the Administrators nominated their best estimates for annual throughput, average head grade and average gold recovery. While Annexure B did not specifically show what annual gold production would result from the nominated figures, the figures given and the resultant revenues indicated annual production varying from 77,158 ounces per year for the five-year scenario through to 78,236 ounces per year for the nine-year scenario. What the Administrators apparently neglected to point out to the Allstate creditors in the circular, or at the subsequent meeting, was that the forecast rates of annual gold production, as indicated by Annexure B, bore little or no resemblance to the actual BMJV gold production rates at the time (for example, the 90-day rolling average was greater than 95,000 ounces annualised), the BMJV budgeted rates of gold production or the BMJV feasibility target rate of gold production (for comparisons, refer to Graphs 3 and 5 attached to this quarterly report). Further, the Administrators apparently neglected to point out that the then-current BMJV Five Year Plan also indicated much higher rates of gold production. In summary, all the official BMJV figures and estimates for gold production would have produced revenue figures way above those provided by the Administrators in the circular to the Allstate unsecured creditors. Why the Allstate Administrators would be so wayward in the critical information they supplied to the creditors is not clear as one of the Joint Administrators, Mr Michael Ryan, is understood to be the current Chairman of the BMJV Operating Committee which approves the budgets for the BMJV. The BMJV Mine Manager also reports directly to the Chairman of the BMJV Operating Committee on a daily or weekly basis as required.
   
   
6. The official minutes for the Allstate creditors' meeting of 19 March 2002 (dated and submitted to ASIC over five months later on 5 September 2002), reported that the following question was asked by one of the unsecured creditors: "What is [Macquarie Bank's] view to going forward if this proposal is not approved?" Mr Warwick Morris of Macquarie Bank, present at the meeting, answered the question and the minutes included the following response by him: "To date [Macquarie] have been very supportive of the mine. For example they are currently contributing toward capital development of the mine. Mr Morris outlined that the Bank has other options if the proposal is not approved. Firstly [Macquarie] can sell the property and then liquidate the companies. Secondly, [Macquarie] may not continue with capital development and mine and process what ore is currently available and then let the mine flood. Thirdly carry on as in the current structure. Mr Morris noted that if the proposal were not accepted, it would be difficult to commit to the Bank continuing to support the mine over the next five years."
   
   
7. The official minutes of the meeting also note that the Joint Administrator, Mr Michael Ryan, said the following: "The Bank does have other options available to it. Firstly, the Bank can gain access to cash via the intercompany loans. Secondly, the Bank could foreclose on the mine providing no further upside for the creditors. Thirdly, the Bank could run the mine down and reap the proceeds of a firesale."
   
   
8. The unsecured creditors of Allstate voted to accept the Macquarie Bank proposal - 16 votes for and 3 votes against. The minutes of the meeting noted that Macquarie Bank did not vote on the resolution although it was entitled to do so. It is not clear why the Joint Administrator, Mr Michael Ryan, considered that Macquarie could vote on the resolution, given that Macquarie were clearly going to be advantaged if the resolution was passed. As the only secured creditor and by far the largest creditor, Macquarie's vote would have clearly outweighed that of all the unsecured creditors combined.
   
   
9. The biggest loser from the decision of 19 March 2002 was Newmont with 56.6% of the fully paid shares. An indirect interest of 56.6% of $77.5 million of future cash flow amounts to approximately $43.9 million. On 28 October 2002, Newmont released the 2002 annual report for Otter. In his letter to the shareholders, the Chairman of Otter, Bruce Kay, said in relation to Allstate: "Allstate, of which Otter is a 56.6% shareholder, has faced numerous difficulties, mainly as a result of engineering problems associated with the gold treatment and bacterial leach plant at its Beaconsfield mine. As a result a claim was brought against the contractor who constructed the facility and in June 2001, the Directors of Allstate appointed an administrator. In [March 2002] Allstate's creditors voted to accept a proposal from Macquarie Bank Limited. As a result of the proposal, creditors were paid out a nominal final dividend in April 2002 and Macquarie secured the right to all surplus cash from the Beaconsfield operation until the end of its current forecast life. On this basis Otter has fully provided against its investment in Allstate."
   
   
10. Beaconsfield Gold, being the second largest shareholder in Allstate with approximately 30% of the fully paid shares, was also a big loser from the decision of 19 March 2002. An indirect interest of 30% of $77.5 million of future cash flow amounts to approximately $23.3 million or $0.31 per Beaconsfield Gold share. Beaconsfield Gold was not a creditor of Allstate.
    
    
11. It is not clear why the Receiver and Manager of Beaconsfield Gold and/or BankWest (Beaconsfield Gold's shares in Allstate represented an important part of the security provided to BankWest by Beaconsfield Gold) apparently did nothing to contest the devaluing of Allstate's shares. Similarly, it is not clear why Newmont, who effectively gained control of Allstate in February 2002, and was a creditor of Allstate, apparently did nothing at the 19 March 2002 Allstate creditors' meeting.

Circular to Shareholders and Creditors of Allstate dated 29 October 2002

1. A circular to the creditors and shareholders of Allstate was released to the ASX by the Allstate Joint Administrator, Mr Michael Ryan, on 29 October 2002. This was the first communication the Allstate shareholders had received from the Joint Administrators since their appointment on 8 June 2001
   
   
2. One comment by Mr Michael Ryan in the circular was, in part: "........ at this stage, it appears that there is little, if any, equity in Allstate that will be available for its shareholders." The Allstate shareholders had never been advised or consulted about the Macquarie Bank proposal to divert the next $77.5 million of free cashflow from Allstate to Macquarie. As the circular did not mention the figure of $77.5 million (it referred only to "..... the sale by Allstate to Macquarie Bank Limited of certain debts that were owing to Allstate by [its subsidiaries]"), the majority of Allstate shareholders probably still don't know what really happened to their company on 19 March 2002
   
   
3. Another comment by Mr Michael Ryan was, in part: "....... the challenge for the BMJV over the next 12 months will be for it to move from the current consolidation period of trading, during which the BMJV has largely traded cash flow neutral (after Capital Expenditure), to a period of significant and continuous cash surpluses so that meaningful debt reductions can be made." This comment, regarding the BMJV having been largely cash flow neutral, contradicted the Beaconsfield Gold published estimates of BMJV net cash flow, which had been based on the BMJV monthly accounts produced by Allstate as Manager of the BMJV. In the September 2002 quarterly report for Beaconsfield Gold, the Executive Director referred to the comment by Mr Michael Ryan and noted that the Allstate Joint Administrator may have been confusing BMJV net cash flow with Allstate net cash flow.
   
   
4. Beaconsfield Gold had been delivering its 48.49% share of BMJV gold production into its hedge book and had consistently received A$537 net per ounce or higher (A$541 per ounce for example) before accounting for the effect of any gains resulting from the low gold lease rates. The BMJV budgeted average gold price of A$535 per ounce implied that the Allstate group were receiving a net gold price of around A$533 per ounce. In the last Allstate quarterly report to the ASX, for the March 2001 quarter, Allstate announced an average delivery price of A$551 per ounce for that quarter. Further, Allstate said that its hedging program with Macquarie Bank consisted of 67,835 ounces of spot deferred forward contracts at an average delivery price of A$510 per ounce, and 180,000 ounces of put options exercisable at Allstate's discretion at an average delivery price of A$533 per ounce.
   
   
5. Based on the BMJV monthly accounts prepared by Allstate as Manager of the BMJV, the average total cash cost (including capital expenditure) for the BMJV participants from 1 July 2001 to 30 September 2002 was approximately $468 per ounce of gold production. This total cost was clearly under both the BMJV budgeted average gold price of A$535 per ounce and the average spot gold price for the period of around A$560 per ounce.
   
   
6. In addition, however, the above BMJV total cost of $468 per ounce included the management fee (2% of gross revenue at spot gold prices) that is payable by the BMJV participants to Allstate as Manager of the BMJV, over and above normal cost recovery by the Manager. The breakeven (or cash flow neutral) gold price for the Allstate group as a result would have been around A$450 per ounce.
   
   
7. In summary, for the period 1 July 2001 to 30 September 2002, Beaconsfield Gold made net cash flow (after capital expenditure) from its 48.49% direct interest in the BMJV of at least $69 per ounce ($537 or more per ounce less $468 per ounce). On the other hand, Allstate appeared to have been selling its share of gold production from the BMJV for around A$450 per ounce, to achieve a largely cash flow neutral position. If this was the reason for the lack of free cash flow for Allstate, it is not clear why the Joint Administrators of Allstate would have been selling Allstate's gold at less than spot gold prices or the Allstate reported hedged prices.
   
   
8. Not only the Allstate Joint Administrator, Michael Ryan, may have been confusing BMJV net cash flow with Allstate net cash flow. In a memorandum to all employees at the Beaconsfield Mine dated 17 October 2002, the BMJV Mine Manager said, in part: "While not as good as we would always hope for, performance to date has been sufficient to give the stakeholders some degree of comfort that the operation has at least stabilised (not losing so much money) and was gradually improving."
   
   
9. The above comment by the BMJV Mine Manager implied that, while the losses were decreasing, the mine had been losing money from the time Allstate went into administration right up until 17 October 2002. The BMJV accounts prepared by the BMJV Mine Manager himself (as reported in the BMJV monthly reports) clearly showed that, based on the BMJV budgeted gold price of A$535 per ounce (which was in turn well under the average spot price of gold for the period of around A$560 per ounce), the mine had in fact been making money shortly after Allstate went into administration. Graph 8, "BMJV Quarterly Net Cash Flow (Annualised)", shows both actual and budgeted BMJV quarterly net cash flow being consistently positive after the June 2001 quarter.

GOLD HEDGING FOR BEACONSFIELD GOLD

The last gold hedge book monthly report received by the Executive Director for Beaconsfield Gold was for November 2002. The Receiver and Manager is currently withholding from Beaconsfield Gold the reports for December 2002 through to April 2003. Fortunately, the Executive Director has been able to obtain alternative, reliable information.

The company initially sold forward 240,000 ounces of gold in October 1998 in a hedging arrangement with BankWest. At 30 November 2002, the hedge book consisted of 95,260 ounces of flat forwards and 8,000 ounces as a long term forward, totalling 103,260 ounces or around 1.9 years of future gold production.

The flat forwards, for which the date of delivery or close out is flexible, covered the period to June 2004 at an average gold price of approximately A$565 per ounce gross or A$537 per ounce net after arrangement costs and 1.5% per annum (assumed) gold leasing costs. The long term forward has a delivery date of July 2004 and an average gold price after arrangement and 1.5% per annum gold leasing costs of approximately A$486 per ounce. At 30 November 2002, with the spot price of gold at A$568.63 per ounce, the total hedge book for Beaconsfield Gold had a marked-to-market value of negative $5.1 million compared with the spot market.

Lease Fees

Beaconsfield Gold has benefited from the prevailing low market gold lease rates. While spot gold prices since 25 June 2001 have averaged higher than the base A$537 per ounce received by Beaconsfield Gold under its hedging program, gold lease fees achieved by Beaconsfield Gold have averaged well under the 1.5% per annum assumed under the hedging arrangements. Currently, gold lease fees range from around 0.2% to 0.5% for 1 month to 12 month leasing periods respectively. In a full year, for example, for 100,000 ounces hedged with gold lease fees averaging say 0.35% instead of the assumed 1.5%, the benefit to Beaconsfield Gold would be of the order of A$0.6 million or A$11 per ounce of attributable gold production.

Policy on Spot Gold Sales

Up until late December 2002, the Receiver and Manager of Beaconsfield Gold was delivering all of Beaconsfield Gold's 48.49% direct share of BMJV gold shipments into the company's hedge book with BankWest. Because the spot gold prices since 25 June 2001 averaged higher than the base A$537 per ounce received by Beaconsfield Gold under its hedging program, the cash balance being held by the Receiver and Manager suffered as a consequence but BankWest's exposure to Beaconsfield Gold via the hedge book was being progressively reduced.

Since late December 2002, however, whenever the spot price of gold exceeds the available hedge price, the Receiver and Manager has deferred delivering into the remaining hedges and sold Beaconsfield Gold's gold production at spot prices. This is the same policy that the Executive Director and BankWest had agreed on prior to the appointment of the Receiver and Manager.

Average Received Price per Ounce

While the flat forward price is A$537 per ounce after arrangement costs and assumed 1.5% per annum gold leasing costs, Beaconsfield Gold has received higher prices on average as a result of generally favourable gold lease rates and selling spot as described above. In 1999 and 2000, when gold production was well below anticipated levels, Beaconsfield Gold also took advantage of low spot prices by purchasing gold at spot and delivering the purchased gold into the hedge book at a profit.

Total net gold book proceeds and effective average received price per ounce of production are estimated in the following table.

Current Hedge Book

The Executive Director calculates the Beaconsfield Gold hedge book to be currently as in the following table. The remaining hedge book covers approximately 93,300 ounces of gold at an average maturity price of approximately A$541 per ounce.

After allowing for favourable gold lease rates and the policy on spot gold sales, whereby advantage is taken whenever the spot price exceeds the hedged price, the hedge book should ensure an average received gold price going forward of at least A$550 per ounce.

Average Proceeds per Ounce of Production

Calculated Hedge Book at 7 May 2003