resources limited prospectus - morningstar, inc

R E S O U R C E S L I M I T E D

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PROSPERITY RESOURCES LIMITED

ABN 60 103 280 235

PROSPECTUS

FOR THE OFFER OF 14,000,000 SHARES AT AN ISSUE PRICE OF 20 CENTS EACH TO RAISE A TOTAL OF $2,800,000 CONSISTING OF A PRIORITY OFFER EXCLUSIVELY TO COMET RESOURCES

LIMITED SHAREHOLDERS AND A PUBLIC OFFER WHICH IS OPEN TO THE GENERAL PUBLIC

Sponsoring Broker

Findlay & Co Stockbrokers LtdACN 065 943 982

Member of Australian Stock Exchange LimitedABN 98 008 624 691


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TABLE OF CONTENTS

IMPORTANT NOTICE 1

INVESTMENT HIGHLIGHTS 2

1. CORPORATE DIRECTORY 3

2. MANAGING DIRECTOR’S LETTER 5

3. DETAILS OF THE OFFER 6

4. COMPANY AND PROJECT OVERVIEW 13

5. EXPLORATION BUDGET 23

6. BOARD OF DIRECTORS 25

7. INDEPENDENT GEOLOGIST’S REPORT 26

8. INDEPENDENT ACCOUNTANT’S REPORT 63

9. SOLICITOR’S REPORT ON TENEMENTS 75

10. RISK FACTORS 112

11. ADDITIONAL INFORMATION 114

12. DIRECTORS’ AUTHORISATION 119

13. GLOSSARY 122

APPLICATION FORMS

IMPORTANT NOTICE

This Prospectus is dated 22 September 2003 and was lodged with the ASIC on that date. The ASIC and ASX take no responsibility for the contents of this Prospectus or the merits of the investment to which the Prospectus relates.

The expiry date of this Prospectus is 13 months after the date of issue (Expiry Date). No securities will be issued on the basis of this Prospectus after the Expiry Date.

Application will be made to ASX within seven (7) days after the date of this Prospectus for Official Quotation of the Shares offered pursuant to this Prospectus.

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DISTRIBUTION OUTSIDE AUSTRALIA

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any of these restrictions. Failure to comply with these restrictions may violate securities laws. Applicants who are resident in countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer.

It is important that investors read this Prospectus in its entirety and seek professional advice where necessary. An investment in the Shares offered under this Prospectus should be considered to be speculative.

WEB SITE – ELECTRONIC PROSPECTUS

A copy of this Prospectus can be downloaded from the website of the Company at www.prosperity.net.au. Any person accessing the electronic version of this Prospectus for the purpose of making an investment in the Company must be an Australian resident and must only access the Prospectus from within Australia.

The Corporations Act prohibits any person passing on to another person an Application Form unless it is attached to a hard copy of this Prospectus or it accompanies the complete and unaltered version of this Prospectus. Any person may obtain a hard copy of this Prospectus free of charge by contacting the Company.

Eastern face of old workings at Yalgoo North

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1 CORPORATE DIRECTORY

DIRECTORS

Richard (Ric) Morris Dawson Managing Director

David James Holden Executive Director

Robert (Roj) Oswald Jones Non-Executive Director

COMPANY SECRETARYRichard Morris Dawson

AUSTRALIAN BUSINESS NUMBER60 103 280 235

REGISTERED AND PRINCIPAL OFFICELevel 9190 St Georges TerracePERTH WA 6000

Telephone: (08) 9322 5872Facsimile: (08) 9322 5988E-mail: [email protected]: www.prosperity.net.au

SHARE REGISTRYComputershare Investor Services Pty LtdLevel 2 45 St Georges TerracePERTH WA 6000

Telephone: (08) 9323 2000Facsimile: (08) 9323 2033E-mail: [email protected]: www.computershare.com.au

SOLICITORS

Steinepreis Paganin Lawyers & ConsultantsLevel 14, Citibank House37 St Georges TerracePERTH WA 6000

INDEPENDENT ACCOUNTANT Stanton Partners Corporate Pty LtdLevel 11 Havelock StreetPERTH WA 6000

INDEPENDENT CONSULTING GEOLOGISTMalcolm CastlePO Box 473SOUTH PERTH WA 6951

TENEMENT CONSULTANTGail McMahonWA Mining Titles25 North RoadBASSENDEAN WA 6054

SPONSORING BROKERFindlay & Co Stockbrokers LtdLevel 1 27 Macquarie StreetSYDNEY NSW 2000www.findlay.com.au

AUDITORStanton PartnersLevel 11 Havelock StreetPERTH WA 6000

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EXPOSURE PERIOD

This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Potential investors should be aware that this examination may result in the identification of deficiencies in the Prospectus and, in those circumstances, any Application that has been received may need to be dealt with in accordance with Section 724 of the Corporations Act.

Applications for Shares under this Prospectus will not be accepted by the Company until after the expiry of the Exposure Period. No preference will be conferred on persons who lodge Applications prior to the expiry of the Exposure Period.

INVESTMENT HIGHLIGHTS

Gold focused -All projects are primarily targeting gold mineralisation

Murchison focused - Yalgoo and Mt Gibson, ‘forgotten’ mineral fields of Western Australia and host for the exploration and development of gold deposits

Over 900 square kilometres of tenure - One of the largest substantially under explored ground positions in the Murchison

Ownership structure of tenements giving Shareholders maximum leverage to exploration success

Already quantified resources on granted mining leases with identified drill targets with potential for an increase in resources and progression to production

Ground strategically located near existing infrastructure- Established gold processing plants and haul roads provide rapid development of future discoveries

Capital structure has high leverage to exploration success and strong gold price

High calibre Board with proven technical ability and commercial aptitude

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2 MANAGING DIRECTOR’S LETTER

Dear Investor

On behalf of the Directors, it gives me great pleasure to present this Prospectus and invite you to invest in Prosperity Resources Limited.

The Company has assembled a high quality portfolio of tenements with a special focus on gold mineralisation within the Murchison greenstone belt of Western Australia. The Company has identified exploration areas that either contain known resources capable of production in the very near future, or which offer high prospectivity resulting from abundant historical workings or first phase exploration successes.

Prosperity recognises the potential for a major new discovery that a lack of focused exploration in this ‘forgotten’ greenstone belt offers. It has tempered the excitement of potential new discoveries with a commonsense decision to locate tenements close to existing infrastructure.

This strategy provides the Company with the flexibility to toll treat its identified ore resources through nearby milling plants as an alternative to developing stand alone operations should the economics so dictate.

The Company will continue to build its portfolio of tenure within the belt, as it strives to become the dominant gold resources company in the region. Its mission statement is to be known throughout the resources industry as the most successful exploration and mining company within the Murchison.

On behalf of the Directors, I commend this Offer to you, and look forward to welcoming you as a shareholder in Prosperity Resources Limited.

Ric DawsonManaging Director

22 September 2003

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3. DETAILS OF THE OFFER

3.1 The Offer

By this Prospectus, the Company offers for subscription a total of 14,000,000 Shares at 20 cents per Share to raise $2,800,000 before the expenses of the Offer.

The Shares offered under this Prospectus will rank equally with the existing Shares on issue.

The Offer consists of:

(a) a Priority Offer exclusively to Comet Shareholders; and

(b) a Public Offer which is open to the general public.

Please refer below for full details of the Priority Offer and the Public Offer.

3.2 The Priority Offer

Under the Priority Offer, Comet Shareholders have a priority allocation in respect of up to 4,000,000 Shares offered under this Prospectus. Each Comet Shareholder will be offered a priority allocation of 10,000 Shares, if they are registered as holders of Comet Shares on the Record Date. Shares will be allocated to Comet Shareholders under the Priority Offer on a priority basis, according to receipt of the Applications by the Company’s Share Registry.

Comet Shareholders may apply for more Shares under the Priority Offer, however any further allocation will be at the discretion of the Directors.

Applications for Shares by Comet Shareholders who wish to apply for Shares under the Priority Offer will only be accepted on the Priority Application Form accompanying this Prospectus. Payment for Shares must be made in full at the issue price of 20 cents per Share. Applications for Shares must be for a minimum of 10,000 Shares ($2,000) and thereafter, in multiplies of 2,000 Shares ($400). Completed Priority Application Forms and accompanying cheques must be mailed to:

Prosperity Resources LimitedC/- Computershare Investors Services Pty LtdGPO Box D182PERTH WA 6840

or delivered to:

Prosperity Resources LimitedC/- Computershare Investors Services Pty LtdLevel 245 St Georges TerracePERTH WA 6000

Cheques should be made payable to “Prosperity Resources Limited – Float Account” and crossed “Not Negotiable”. Completed Priority Application Forms must reach the Share Registry no later than the Closing Date.

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3.3 The Public Offer

Under the Public Offer, members of the general public may apply for Shares pursuant to this Prospectus. The Company does not guarantee that an application for Shares pursuant to the Public Offer will be accepted by the Company.

Applications for Shares under the Public Offer will only be accepted on the Public Application Form accompanying this Prospectus.

Payment for the Shares must be made in full at the issue price of 20 cents per Share. Applications for Shares must be for a minimum of 10,000 Shares ($2,000) and thereafter in multiples of 2,000 Shares ($400). Completed Public Application Forms and accompanying cheques must be mailed to:

Prosperity Resources LimitedC/- Computershare Investor Services Pty LtdGPO Box D182PERTH WA 6840

or delivered to:

Prosperity Resources LimitedC/- Computershare Investor Services Pty Ltd

Level 2 45 St Georges Terrace

PERTH WA 6000

Cheques should be made payable to “Prosperity Resources Limited – Float Account” and crossed “Not Negotiable”. Completed Public Application Forms must reach the Share Registry by no later than the Closing Date.

3.4 Oversubscriptions

No oversubscriptions to the Offer will be accepted.

3.5 Minimum Subscription

The minimum amount to be raised pursuant to this Prospectus is $2,200,000. No Shares will be allotted or issued pursuant to the Prospectus until the minimum subscription is reached. If the minimum subscription has not been raised within four (4) months after the date of this Prospectus, all Applications will be dealt with in accordance with Section 724 of the Corporations Act.

Should only the minimum amount be raised, the Directors believe that the ability of the Company to meet all of the expenditure conditions of the Tenements and other expenditure requirements in general, will not be affected. The allocation of funds will focus on the Melville deposit, contained in the Yalgoo North, with other regional exploration to continue once the Company funds allow this to proceed. Please refer to Section 3.6 for a detailed description of the intended use of funds raised pursuant to the Offer, and Section 5 for the Company’s proposed exploration budget.

3.6 Use of Proceeds

It is intended to apply funds raised from the Offer as follows:

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Description Minimum Subscription Fully Subscribed

Exploration expenditure (refer Section 5) 1,225,000 1,602, 000

Expenses of the Offer, including commissions 260,000 290,000

(refer Section 11.8) General working capital 715,000 908,000

Total $2,200,000 $2,800,000

Note: Total funds raised of $2,800,000 assume that the Offer is fully subscribed.

In the event the Company raises greater than the minimum subscription, but less than the full subscription, the Company intends to apply those funds (being the amount by which the total funds raised exceed $2,200,000) firstly to increased broker related commissions, then to the Yalgoo North until the exploration budget set out in Section 5.1 is reached, and thereafter on a pro-rata basis between the other Projects up to the exploration budget amounts set out in Section 5.1. Any remaining funds will subsequently be applied to general working capital.

3.7 Underwriting

The Offer is not underwritten.

3.8 Arrangements with Sponsoring Broker

Prosperity will pay the Sponsoring Broker, Findlay & Co Stockbrokers Ltd, a fee of $40,000 in accordance with the terms of their appointment as Sponsoring Broker. Prosperity will also pay a commission of 5% of the amounts subscribed (and accepted by the Company) to any licensed security dealer in respect of Applications bearing their stamp.

3.9 Indicative Timetable

Lodgement of Prospectus with the ASIC 22 September 2003

Record Date for Priority Offer 16 September 2003

Opening Date for receipt of Applications 29 September 2003

Closing Date (5.00 p.m. WST) 10 November 2003

Despatch of Holding Statements 13 November 2003

Quotation of Shares on ASX expected to commence 18 November 2003

The Indicative Timetable dates are indicative only and may vary. The Directors reserve the right to change the key dates of the Offer without prior notice (subject to the Corporations Act and Listing Rules) which may have a consequential effect on other dates.

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3.10 Capital Structure

The capital structure of the Company following completion of the Offer, assuming the Offer is fully subscribed, is summarised below:

Shares Number % Shares on issue at date of Prospectus 9,950,000 32.5

Shares to be issued for purchase of certain Tenements 1,2,3 6,690,000 21.8

Shares now offered 14,000,000 45.7

Total Shares on issue at completion of the Offer 30,640,000 100

Options Options on issue at date of Prospectus 0

Options to be issued for purchase of Tenements4 2,000,000

Total Options on issue at completion of the Offer 2,000,000 Notes:

1 Pursuant to the option agreement dated 10 February 2003 (as varied) between the Company and Comet, upon exercise of the option to purchase the relevant Tenements, the Company must allot and issue 6,000,000 Shares at an issue price of $0.10 to Comet as part consideration of the purchase.

2 Pursuant to the option agreement dated 9 May 2003 between the Company and Marak Mining Pty Ltd (Marak), upon exercise of the option to purchase the relevant Tenements, the Company must allot and issue 390,000 Shares at an issue price of $0.20 to Marak as part consideration of the purchase.

3 Pursuant to the purchase agreement dated 6 March 2003 between the Company and Pasine Holdings Pty Ltd (Pasine), the Company must allot and issue 300,000 Shares at an issue price of $0.20 to Pasine as part consideration of the purchase.

4 Pursuant to the option agreement dated 10 February 2003 (as varied) between the Company and Comet, upon exercise of the option, the Company must grant 2,000,000 Options to Comet as part consideration of the purchase of the relevant Tenements.

Please refer to Part II of the Solicitor’s Report contained in Section 9 of this Prospectus for details of the agreements referred to above.

3.11 Allotment and Allocation of Shares

Subject to ASX granting approval for the Company to be admitted to the Official List, the allotment of Shares offered by this Prospectus will take place as soon as practicable after the Closing Date, following which statements of shareholding will be despatched. Prior to allotment, all application monies will be held by the Company in trust. The Company, irrespective of whether the allotment of Shares takes place, will retain any interest earned on the application monies.

Other than in respect of allocations under the Priority Offer, the Directors reserve the right to allot Shares in full for any Application or to allot any lesser number or to decline any Application. Where the number of Shares allotted is less than the number applied for, or where no allotment is made, the surplus application monies will be returned by cheque to the applicant as soon as practicable after the Closing Date. Where no allotment is made, all application monies will be returned in full by cheque as soon as practicable after the Closing Date. Interest will not be paid on monies refunded.

3.12 Applicants outside Australia

This Prospectus does not, and is not intended to, constitute an offer of securities in any place or jurisdiction, or to any person to whom, it would not be lawful to make such an offer or to issue

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this Prospectus. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law. No action has been taken to register or qualify these Shares or otherwise permit a public offering of the Shares the subject of this Prospectus in any jurisdiction outside Australia.

It is the responsibility of applicants outside Australia to obtain all necessary approvals for the allotment and issue of the Shares pursuant to this Prospectus. The return of a completed Application Form will be taken by the Company to constitute a representation and warranty by the applicant that all relevant approvals have been obtained.

3.13 ASX Listing

The Company will apply to ASX within seven (7) days after the date of this Prospectus for admission to the Official List and for Official Quotation of the Shares offered under this Prospectus. If ASX does not grant permission for Official Quotation of the Shares within three (3) months after the date of this Prospectus, or such longer period as is permitted by the Corporations Act, none of the Shares offered by this Prospectus will be allotted or issued. In that circumstance, all Applications will be dealt with in accordance with Section 724 of the Corporations Act.

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3.14 CHESS

The Company will apply to participate in the Clearing House Electronic Subregister System (CHESS). CHESS is operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC), a wholly owned subsidiary of ASX, in accordance with the Listing Rules and the SCH Business Rules.

Under CHESS, the Company will not issue certificates to investors. Instead, Shareholders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS statement.

3.15 Risk factors

Prospective investors in the Company should be aware that subscribing for Shares the subject of this Prospectus involves a number of risks. These risks are set out in Section 10 of this Prospectus and investors are urged to consider those risks (and if necessary, consult their professional adviser) before deciding whether to invest in the Company.

The risk factors set out in Section 10, and other general risks applicable to all investments in listed securities not specifically referred to, may in the future affect the value of the Shares. Accordingly, an investment in the Company should be considered speculative.

3.16 Enquiries

This Prospectus provides information for potential investors in the Company, and should be read in its entirety.

If you have any queries about the Offer set out in this Prospectus or how to apply for Shares, please contact your stockbroker, accountant or financial adviser.

3.17 Privacy Statement

If you complete an application for Shares, you will be providing personal information to the Company (directly or by the Share Registry). The Company collects, holds and will use that information to assess your application, service your needs as a shareholder and to facilitate distribution payments and corporate communications to you as a shareholder.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Share Registry.

You can access, correct and update the personal information that is held about you. If you wish to do so please contact the Share Registry at the relevant contact numbers set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Cth) (as amended), the Corporations Act and certain rules such as the SCH Business Rules. You should note that if the information required on the application for Shares is not provided, the Company may not be able to accept or process your application.

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4 COMPANY AND PROJECT OVERVIEW

4.1 Company History and Background

Prosperity was registered on 2 January 2003 for the purposes of acquiring interests in mining tenements prospective for gold and other commodities. Since incorporation, the Company has raised seed capital and entered into a number of agreements to acquire interests in mining tenements located in Western Australia.

Details of the Company’s projects are summarised in this Section and details of the Tenements and relevant agreements are set out in Section 9 in the Solicitor’s Report. Full particulars of the geological settings and work undertaken previously on the Tenements are set out in the Independent Geologist’s Report in Section 7 of this Prospectus.

4.2 Mission and Objectives

The Company’s mission is to increase shareholder wealth by capital growth and dividend distribution through the discovery of economic mineral deposits and the development of profitable mining operations. It is the initial objective of Prosperity to explore and evaluate its existing mining tenements. The Company may also evaluate other prospective mining projects that would have the potential to contribute to the Company’s future growth.

Prosperity’s main exploration targets are within the Murchison Province, however, any opportunities to identify other minerals, which may be prospective within the Company’s tenement portfolio, will be pursued.

4.3 Regional Geological Setting

The greenstone belt upon which the Company has focused its attention is the Murchison Province, an historically regarded gold producing belt, which until recent times, has been largely overlooked in its gold exploration and production potential.

The Murchison Province is the western most of three granite-greenstone terrains that together form part of the Archaean Yilgarn Craton. The Province extends for over 450 kilometres in strike from Mt Gibson to Meekatharra.

Within the Province, several arcuate belts of supracrustal or greenstone rocks are present, bounded by intrusive granitic batholiths. Mafic volcanic and intrusive rocks with subordinate felsic volcanics and sediments characterise the greenstone sequence. Ultramafic lithologies are more restricted than in the Eastern Goldfields.

The Province is host to vein-shear type gold deposits, which together have produced over 8 million ounces of gold. Major mining centres in the belt include Mt Gibson, Mt Magnet (HiIl 50), Meekatharra and Big Bell.

Within the Yalgoo- Singleton greenstone sequence, the Mt Gibson Mine that has resources of approximately 750,000 ounces (oz) of gold is the main gold deposit. The mine is located 30 kilometres south west of the Paynes Find tenement area.

Other nearby, smaller historic mining centres include the Paynes Find (80,300 oz gold), Rothsay (40,100 oz gold), Fields Find (40,800 oz gold) and Pinyalling (37,000 oz gold) areas. Recent exploration has outlined several new deposits in the area including the Kirkalocka (520,000 oz gold resource) and Minjar (280,000 oz gold resource) discoveries.

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Many of the gold mines in the area are associated with quartz vein systems, hosted within mafic volcanics, banded iron formation (BIF) or other suitable host rock.

Table 1 summarises known past production in the belt with reference locations in Figure 1. Production within the belt continues at Minjar and at Golden Grove. To the south, production is due to commence at the Mt Gibson Minesite, and at Kirkalocka.

Table 1: Past and Current Gold Resources in the Southern Murchison Province

Area/Deposit Past Production (oz) Average Grade (g/t) Resources (oz)

Gullewa 48,000 3.9 91,900

Paynes Find 80,300 22.5 -

Minjar 87,210 2.9 280,000

Rothsay 40,100 6.2 -

Fields Find 40,800 18.1 -

Pinyalling 37,000 3.2 -

Yalgoo* 10,500 32.6 -

City of Melbourne 5,300 14.2 -

Kirkalocka - 2.2 520,000

Mt Gibson 1,000,000 2.4 750,000

TOTAL 1,340,000 1,640,000

* Includes Emerald Reward Mine, Ivanhoe and minor production from Yalgoo environs

4.4 Exploration Projects

The Company’s interest is the Yalgoo- Singleton greenstone belt with the focus in two major areas, namely, the Yalgoo Township and environs (Yalgoo Project Area) and the Paynes Find, Mt Gibson region (Mt Gibson Project Area).

On 10 February 2003, Prosperity entered into an option agreement to purchase tenements in the Yalgoo Project Area from Comet. Upon exercise of the option, the Company will acquire 100% of Comet’s interest in the tenements (excluding certain retained rights), as detailed in the Solicitor’s Report, which is contained in Section 9 of this Prospectus.

Prosperity has also applied in its own right for additional tenure within the Yalgoo Project Area as detailed in the Solicitor’s Report, and as shown in Figure 1, Section 7. Prosperity has entered into agreements with respect to a number of companies Alluvial Gold Treatment Pty Ltd, Murchison Resources Pty Ltd and Marak Mining Ltd (refer to Part II of the Solicitor’s Report for further details).

The Company has entered into a joint venture agreement with Mawson West Limited to earn a 60% interest in a number of tenements in the Mt Gibson Project Area, as well as agreements to purchase exploration and mining tenure from Pasine Pty Ltd and Waybury Holdings Pty Ltd (refer to Part II of the Solicitor’s Report for further details).

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4.5 Potential of Project Areas

Extensive old gold workings provide excellent exposure of the mineralisation styles at most locations and afford opportunities for detailed mapping of structural trends, grade distribution and alteration styles. Many of these historical workings were at grades that today are considered as highly profitable (refer Table 1 above).

Exploration efforts by previous explorers provide detailed aeromagnetic data, colour aerial photography, regional soil chemistry, detailed geological mapping and drilling as the base for exploration targeting.

Whilst strong indications of extensive mineralisation exist within the two project areas, the lack of a continued and focused effort by previous explorers affords Prosperity the opportunity to quickly identify and develop resources within these areas.

The Company has postulated that predominantly structural elements control the mineralisation at both Yalgoo and Mt Gibson.

Four advanced prospects have already been recognised within the Yalgoo Project Area as well as numerous first phase targets capable of providing exploration potential far in advance of previous explorers’ considerations.

4.6 The Yalgoo Project Area

The Yalgoo Project Area can be divided into the following areas, based on geography (Figure 2):

(a) Yalgoo North including the Melville Prospect, City of Melbourne Mine, Lady Lydia, Lady Lydia South, and Brilliant Prospects;

(b) Yalgoo West focusing on the Emerald Reward Mine and the Euro aeromagnetic target; and

(c) Yalgoo East incorporating the Redgate Prospect.

Yalgoo North

The Melville Prospect (75% Prosperity; 25% Platinum Australia Ltd upon exercise of the Comet Option Agreement) is the most advanced of the gold prospects that the Company has identified in the Yalgoo Project Area. Previous resource estimates suggest that approximately 69,000 ounces of gold are contained within the Melville deposit. This is thought to be hosted largely within a banded iron formation. Re-examination of historical data has led the Directors to believe that the mineralisation relates to more subtle structural controls (Figure 3). On this premise, the previous drilling would not have adequately tested both strike and dip extensions to the ore zone, nor would it have sufficiently tested other prospects identified from anomalous drill results. The Company intends to embark upon an exploration programme designed to test the nature and extent of interpreted high grade shoots trending northeast and plunging to the northwest.

Located 5 kilometres northwest of Melville, the City of Melbourne Mine produced 5,300 ounces of gold from 1937-1942. The high grade (14.2 g/t gold) vein system was mined to depths of 30 metres and is open all directions. The City of Melbourne provides an attractive high-grade development target (Figures 4 and 5).

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Headframe, City of Melbourne Mine(At the date of this Prospectus, this is not an asset of the Company)

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To the north at Brilliant, 1,600 ounces of gold from 17,000 tonnes of ore was produced in early 2000 in a near surface small scale open pit mining operation. Economic mineralisation however is seen to still continue at depth below the existing pit (7 metres at 5.8 g/t gold, 2 metres at 11.8 g/t gold), within the pit wall and a second zone immediately to the west of the pit (2 metres at 9.5 g/t gold). To the south and southwest of the pit are the Lady Lydia and Lady Lydia South workings. Mineralisation here follows the same quartz vein orientation within a granite host as seen in the exposure at the Brilliant pit. Rock chip sampling of veins exposed within a creek system some 1,000 metres south of Brilliant returned 4.9 g/t gold and has extended the known mineralisation from the Brilliant through this discovery to the Lady Lydia South, a potential strike length over 5 kilometres. At Lady Lydia South itself, rock chip samples collected by the Company this year returned values up to 142 g/t gold.

Yalgoo West

On the outskirts of the Yalgoo township are the historical workings of the Emerald Reward Mine and environs (Figure 1, Section 7). This prospect has historically been a high-grade producer with over 8,700 ounces of gold produced from 3,100 tonnes of ore recovered, during 1895-1899. The higher grade veins sets beneath the main pit have been explored. The Directors think it is likely that the drilling may have failed to accommodate the southerly plunge to the main shoots and would have intersected mineralisation on the limbs of possible anticlinal folds. In further support of the southern plunging orientation, historical information has come to light that a main shaft sunk within the Yalgoo township itself reached a depth of over 100 metres with a drive of some 60 metres headed to the north, back towards the Emerald Reward Mine workings. Little else is known about the shaft, however the Directors believe that the combined historical evidence from such workings, together with the latest three dimensional modelling of exploration data increases the likelihood of significant gold mineralisation within the fold hinges and plunging to the south. Outside the location of the Emerald Reward Mine itself, repetitions of the folded sequence and the southerly plunging shoot development are likely, increasing the gold potential of the tenement significantly.

Secondary targets in this project area include the Euro Prospect, a well-defined aeromagnetic feature. First phase Aircore drilling in the early 1980’s intercepted low level gold mineralisation across the top of the anomaly which has not been followed up.

Yalgoo East

The Yalgoo East Project comprises tenements to the east of the Yalgoo township (Figure 1, Section 7). The Redgate Prospect is the dominant target in this area and lies adjacent to and immediately northwest of the Wadgingarra mine camp. Well-defined supergene anomalism may indicate the potential for mineralisation at depth. Little drilling has so far penetrated the main ore zone interpreted to exist beneath the supergene blanket however intervals of 4 g/t gold over 3 metres (112 to 115 metres depth) have been recorded. The Directors believe that a high rate of success from drill testing of these targets exists and such drilling should produce an immediate and positive result for the Company, adding to the existing resource inventory.

4.7 The Mt Gibson Project Area

The Mt Gibson Project covers the Paynes Find Prospect to the east, the McDonalds Find and the southern end of the Yalgoo- Singleton Belt (Figure 6, Section 7).

Similarly to the Yalgoo Project Area, the Company has identified largely untested greenstone sequences in close proximity to gold processing plant infrastructure. Previous work has suggested that evaluation of the pit geology shows strong structural controls to the mineralisation. Following this, the Company has identified targets which demonstrate similar structural orientations to the mineralisation identified at the Mt Gibson mine site.

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Recent rock chip sampling at the McDonalds prospect has identified mineralisation within structurally controlled gold hosting quartz veins systems with values up to 9 g/t gold. The Directors conclude that like the Yalgoo Project Area, the opportunity to identify high-grade gold deposits within this project area remains strong.

Whilst the Company remains committed to gold exploration, the opportunity for nickel sulphides also exist within the Mt Gibson Project Area, opening up possibility for nickel exploration through potential joint venture partners.

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5. EXPLORATION BUDGET

5.1 CAPITAL RAISING $2,800,000

PROJECT YEAR 1 YEAR 2 TOTAL

Yalgoo North $635,600 $416,400 $1,052,000Yalgoo East $99,000 $69,400 $168,400Yalgoo West $102,000 $152,680 $254,680Mt Gibson $71,400 $55,520 $126,920

$908,000 $694,000 $1,602,000

Geological mapping $10,000 $10,000 $20,000Ground surveys $5,000 $4,000 $9,000RAB Drilling $110,000 $90,000 $200,000RC Drilling $455,000 $374,500 $829,500Diamond Drilling $150,000 $60,000 $210,000Field support $71,000 $52,500 $123,500Pre feasibility studies $12,000 $8,000 $20,000Rents and rates $95,000 $95,000 $190,000TOTAL $908,000 $694,000 $1,602,000

The Company will immediately initiate resource development drilling at Melville deposit and City of Melbourne Mine, preliminary resource drilling at advanced targets at Brilliant pit, Lady Lydia Mine, Emerald Reward Mine and Redgate supergene anomaly. The budget will allow the Company to continue to meet with statutory obligations regarding expenditure conditions as well as meet any requirements that may arise should the tenement applications included in the Prospectus be granted within the next 2 years.

5.2 MINIMUM CAPITAL RAISING $2,200,000

Should only the minimum subscription be raised pursuant to the Offer, the exploration budget will be as follows:

PROJECT YEAR 1 YEAR 2 TOTAL

Yalgoo North $497,800 $488,500 $986,300Yalgoo East $78,500 $68,000 $146,500Yalgoo West $22,000 $23,500 $45,500Mt Gibson $15,000 $31,700 $46,700

$613,300 $611,700 $1,225,000

Geological mapping $10,000 $10,000 $20,000Ground surveys $5,000 $4,000 $9,000RAB Drilling $42,000 $90,000 $132,000RC Drilling $255,000 $250,000 $505,000Diamond Drilling $150,000 $110,000 $260,000Field support $44,300 $44,700 $89,000Pre-feasibility studies $12,000 $8,000 $20,000Rents and rates $95,000 $95,000 $190,000TOTAL $613,300 $611,700 $1,225,000

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Exploration proposed focuses on identifying the nature and extent of the mineralisation at Melville and the subsequent controls on the higher grade material within the deposit with a view to developing an immediate mining operation for toll treating. The budget will allow the Company to continue to meet with statutory obligations regarding expenditure conditions as well as meet any requirements that may arise should the tenement applications included in the Prospectus be granted within the next 2 years.

5.3 APPLICATION OF FUNDS

In the event the Company raises greater than the minimum subscription, but less than the full subscription, the Company intends to apply those funds (being the amount by which the total funds raised exceed $2,200,000) firstly to increased broker related commissions, then to the Yalgoo North until the exploration budget set out in Section 5.1 is reached, and thereafter on a pro-rata basis between the other Projects up to the exploration budget amounts set out in Section 5.1.

Any remaining funds will subsequently be applied to general working capital.

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6 BOARD OF DIRECTORS

Robert (Roj) Oswald Jones – Non-Executive Director (aged 55 years)BSc, FAusIMM(CP)

Mr Jones is a geologist with over 30 years experience in the resource industry. He has worked in all facets of exploration, development and mining in Australia, Southern Africa, North America and South East Asia. Mr Jones has worked for major international resource companies in senior management positions including Anglo American Corporation and BHP Minerals Limited. Since 1987 he has acted as a consultant to a number of companies on various aspects relating to the resource industry, ranging from prospect generation through to feasibility study and project development. He is the founder and current executive Chairman of Comet, an ASX listed company.

Richard (Ric) Morris Dawson - Managing Director (aged 42 years)BAppSc (Geol.), MAusIMM

Mr Dawson has significant experience in the resources industry and brings skills in managing and marketing of developing junior companies and was involved in the successful restructure, capital raising and researching of junior exploration companies. In 1999, the ASIC issued a permanent ban on Mr Dawson from working as a representative of a dealer or investment adviser on the basis that he had not performed the duties of a representative of a dealer efficiently, honestly and fairly. The ASIC made the order on the grounds that Mr Dawson lodged with the Options Clearing House Pty Ltd, without authority, scrip belonging to one of his clients to meet margin call obligations of two other clients. Since that time, Mr Dawson has held management positions with two successful ASX listed public companies and provided company secretarial services to these companies. He is nearing completion of postgraduate studies in an Executive Masters of Business Administration at University of Western Australia.

David James Holden - Executive Director (aged 42 years)BSc, MBA, MAusIMM

During the past 18 years Mr Holden has worked internationally including in New Zealand and Africa. Whilst he has focused on gold exploration, his experience spans from open pit mining in the Northern Territory, Australia, to the deep level underground mines in South Africa. During his career, he has been intimately involved with the discoveries at Brock’s Creek and Mt Todd, and was involved in the discovery at Nimary - Jundee during his time with Eagle Mining Corporation NL where he was a Senior Geologist. Mr Holden is a principal and director of Ravensgate Pty Ltd, a geology company specialising in resource estimation, and project assessment.

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7 INDEPENDENT GEOLOGIST’S REPORT

MALCOLM CASTLE PO Box 473, South Perth, Western Australia,6951Consulting Geologist Phone:+ 61 8 9368 4923

Fax+ 61 8 9368 4932 18 August 2003

The DirectorsProsperity Resources LimitedLevel 9190 St Georges TerracePERTH WA 6000

Dear Sirs

Re: INDEPENDENT GEOLOGIST’S REPORT ON THE YALGOO PROJECTS AND MT GIBSON PROJECT AREAS

I have been commissioned by Prosperity Resources Limited (“Prosperity”) to provide an Independent Geologist’s Report (“Report”) on the Company’s projects in the Yalgoo and Mt Gibson Project Areas in Western Australia (the “Projects”).

This Report has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (“The Valmin Code”), which is binding upon Members of the Australasian Institute of Mining and Metallurgy (“AusIMM”), and the rules and guidelines issued by such bodies as ASIC and Australian Stock Exchange (“ASX”), which pertain to Independent Expert Reports. Where Mineral Resources have been referred to in this Report, the classifications are consistent with the Australasian Code for Reporting of Mineral Resources and Ore Reserves (“JORC Code”), prepared by the Joint Ore Reserves Committee (“JORC”) of the AusIMM, the Australian Institute of Geoscientists (“AIG”) and the Minerals Council of Australia (“MCA”), effective September 1999.

Significant resources of potential economic significance have been defined within the Melville Prospect. Under the definition provided in the JORC and Valmin Codes this property is therefore classified as an “Advanced Exploration” project, which is inherently less speculative in nature. Other tenements are classified as “Exploration” projects. The properties are considered to be sufficiently prospective, subject to varying degrees of risk, to warrant further exploration and development of their economic potential, consistent with the proposed programmes.

Prosperity intends to raise $2.8 million, and at least half of the liquid assets held, or funds proposed to be raised by Prosperity are understood to be committed to the exploration and development of the properties and has sufficient working capital to carry out its stated objectives. Prosperity has prepared staged exploration programmes, specific to the exploration potential of the individual tenements, which are consistent with its budget allocations. It is considered that sufficient, although sporadic exploration has been undertaken by earlier explorers in the last 25 years to justify the proposed programmes and expenditure. The proposed exploration and development budgets exceed the minimum annual statutory expenditure requirement on the projects.

The Independent Geologist’s Report has been compiled based on information available up to and including the date of this Report. I have given my consent for the inclusion of this report in the Prospectus in the form and context in which it appears, and have not withdrawn that consent prior to lodgment of the Prospectus with the ASIC. I have

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been involved only in the preparation of the Report for inclusion in this Prospectus and have authorised or caused issue of only this portion of the Prospectus.

I am not, nor intend to be, a director, officer or other direct employee of Prosperity and have no material interest in the Yalgoo Projects, the Mt Gibson Project or Prosperity. My relationship with Prosperity is solely one of professional association between client and independent consultant. The review work and this Report are prepared in return for professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this Report.

Yours faithfully

MALCOLM CASTLE B.Sc.(Hons) MAusIMM

Malcolm Castle has 37 years experience in exploration geology and property evaluation, working for major companies for 20 years as an exploration geologist. He established a consulting company 17 years ago and specialises in exploration management, technical audit, due diligence and property valuation at all stages of development. He has wide experience in a number of commodities including gold, base metals and mineral sands. He has been responsible for project discovery through to feasibility study in Indonesia and technical audits in many countries. The information in this report that relates to Resources has been compiled Malcolm Castle B.Sc.(Hons) who is a self employed consultant and who is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM), and has the appropriate relevant qualifications, experience, competence and independence to be considered as an “Expert” and “Competent Person” as defined in the Valmin and JORC Codes, respectively.

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INDEPENDENT GEOLOGIST’S REPORT

INTRODUCTION

REGIONAL GEOLOGICAL SETTING

YALGOO PROJECT AREA

Yalgoo North Project

• Tenure

• Local Geology

• Previous Exploration

• Recent Exploration and Results

• Resource Assessment

• Exploration Potential

Yalgoo East

• Tenure

• Local Geology




Yalgoo West

• Tenure

• Local Geology



MT GIBSON PROJECT AREA • Tenure

• Local Geology




PRINCIPAL SOURCES OF INFORMATION

GLOSSARY OF TECHNICAL TERMS

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7.1 INTRODUCTION

Prosperity Resources Limited is acquiring a comprehensive and focused tenement package surrounding and to the north of the town of Yalgoo in Western Australia covering over 457 kilometres2, and other tenements over 450 kilometres2 in the Mt Gibson area to the south. Yalgoo is an historical mining centre with a mining history dating back to 1894 and is located approximately 430 kilometres north north east of Perth and 200 kilometres east of Geraldton. Mt Gibson lies 170 kilometres south east of Yalgoo. (Refer Figure 1 and Figure 6)

The Yalgoo District lies within the Murchison Province, which is regarded as a multi million ounce gold region based on the combined resources of Hill 50, Meekatharra, Cue, Big Bell, Golden Grove, Minjar and Mt Gibson. Systematic exploration in the greenstone belt in the last decade has offered rewards much later that other goldfields in Western Australia and new discoveries (both open pittable and underground resources) continue to be made in old mining areas. Mineralisation styles in the Yalgoo - Singleton greenstone belt are similar to other districts in the Murchison Province and include:

§ Lateritic hosted deposits,

§ BIF hosted deposits

§ Stockwork mineralisation

§ Shear hosted mineralisation,

§ Lithological contacts including porphyry- BIF and porphyry-basalt,

§ Granite hosted stockworks, and

§ Sediment hosted prospects.

These styles of mineralisation are present within or adjacent to Prosperity’s tenement holding and offer a sound opportunity to develop viable resources. Several treatment plants are located in the Yalgoo and Mt Gibson Project Areas, which may provide facilities for smaller deposits, depending on the economics of stand-alone, or toll treatment scenarios.

The Yalgoo Project Area is at the northern end of the Murchison Province, which includes the Golden Grove deposits held by Newmont and the Minjar Gold deposit held by Gindalbie Gold Limited. The mining centre of Mt Magnet, which includes the Hill 50 Gold mine, is located 100 kilometres to the east.

There are a number of old gold workings with historically very high grades throughout the area although production to date has not been large. The main focus of exploration has been on supergene gold deposits though there is an opportunity for the discovery of high-grade underground gold deposits and also volcanogenic massive sulphides similar to those found at Golden Grove.

The most advanced project area within the tenement group is the Melville Resource Area where 69,000 ounces of gold (“oz”) have been defined in the supergene zone with detailed drilling. Anomalous results at surface can be traced over a 7 kilometre strike length at surface and in shallow drill holes north of the deposit. Extensions to the mineralisation are also possible at depth with further drilling.

Other prospects in Yalgoo North have returned significant RC drill intercepts including 2m @ 9.5 g/t gold, 2m @ 11.8g/t gold and 3m @ 7.6 g/t gold at Brilliant, 6m @ 5.2 g/t gold at Lady Lydia South. Several areas have also returned significant intercepts from wide spaced RAB or Aircore drilling, 5m at 1.70g/t gold at Victory South. Rock chip samples collected from historical underground workings along the Noongal-Victoria-United line of workings returned high grade gold assays (to 11 g/t gold) from both quartz vein and shear zone material. Numerous old workings over 3 kilometres strike length have exploited this mineralised system to depths of 30m. These targets require further examination.

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At Yalgoo West, the very high grade (86.5 g/t gold) historical workings at Emerald Reward Mine have received sporadic modern day exploration, with several significant RC drill intercepts including 9m @ 8 g/t gold, 10m @ 7.8 g/t gold and 2m @ 15g/t gold defining the system at depth that requires follow-up work. Drilling away from the main area of workings has also returned significant RC drilling (3m @ 2.4g/t gold, 1m @ 6.7 g/t gold) and rock chip results (26g/t gold). These may represent new vein systems worthy of further investigation.

The Redgate Prospect lies within the Yalgoo East on the eastern side of the Yalgoo - Singleton greenstone belt. There is a defined soil and rock chip anomaly, which has received Aircore and limited RC drilling. Drilling on this zone has returned drill intercepts, including 9m at 1.57g/t gold, 4m at 1.86g/t gold, and 4m at 1.78g/t gold over 1.5 to 2 kilometres strike within the supergene zone.

The tenement package at Yalgoo represents a strong opportunity to explore a coherent package of prospective ground in a well-mineralised area surrounding an established gold resource.

Prosperity is also exploring a tenement in the southern Murchison Province. The Mt Gibson Project Area covers a prospective area in part of the Yalgoo – Singleton greenstone belt comprising a well-exposed sequence of mafic and ultramafic volcanics, intrusives and minor sediments. The region hosts important gold and base metal mineralisation within similar rock sequences. Operating mines for these commodities are located within 30 kilometres and 85 kilometres of the project.

The Mt Gibson Project Area covers a prospective portion of the greenstone belt north of the Mt Gibson Mine (750,000 oz gold). Prior exploration in the area has been restricted but has defined a number of targets requiring follow up work. The realisation of this prospectivity has only recently become apparent with advances in geological knowledge, extractive technologies and nearby discoveries on which the tenement area can be modelled.

REGIONAL GEOLOGICAL SETTING

Yalgoo Project Area

The Yalgoo Projects held by Prosperity cover a succession of Archaean felsic, mafic and ultramafic extrusive and intrusive rocks interbedded with sedimentary rocks and Banded Iron Formation (BIF). These rocks form four distinct associations. The two main greenstone sequences of the Murchison Province are both present in the Yalgoo - Singleton greenstone belt. These are the Luke Creek Group and the Mount Farmer Group.

Summary of Major Rock Associations within the Yalgoo Region

Predominantly basalt and mafic to ultramafic intrusives. Two types of BIF have been recognised and thin horizons of felsic volcanic rocks are present, commonly as cyclic repetition with BIF and mafic rocks. The Luke Creek Group consists of laterally extensive (province-wide) lava plains, banded iron formations (BIF) and associated rocks.

Luke Creek Group

Formation Description

Murrouli Basalt Interlayered high-magnesium and tholeiitic basalt

Golconda Formation Mafic rocks interlayered with quartz-haematite BIF

Gabanintha Formation Ultramafic rocks, interlayered high-Mg and tholeiitic basalt,

felsic volcaniclastic rocks

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Windaning Formation Felsic volcaniclastic rocks interlayered with jaspilitic BIF

Mainly fine grained sedimentary rocks with BIF and banded chert. Mafic and ultramafic rocks extensively intrude hese sediments. These rocks conformably overly the mafic association.

Clastic sediments comprising sandstone, siltstone, shale and minor conglomerate. These rocks unconformably overlie the mafic association.

Pillowed tholeiitic and komatiitic basalts and ultramafic rocks. No BIF has been recognised in this association. Minor acid to intermediate volcanic rocks and associated volcaniclastic sediments are also present. The Mount Farmer Group consists of nine distinct volcanic centres and one sedimentary basin.

Mount Farmer Group, Yalgoo Subgroup

Formation Description

Wadgingarra Basalt Interlayered high-Mg and tholeiitic basalt

Camberathunun Formation Felsic volcanic rocks

Mougooderra Formation Epiclastic sedimentary rocks with minor tholeiitic basalt

The stratigraphic thicknesses of the major rock sequences are difficult to estimate due to structural complexity and intrusion of granitoids however the Luke Creek Group is probably less than five kilometres thick whereas the thickness of the Yalgoo subgroup is about five kilometres. Late stage intrusives of mixed granitoid composition occur throughout the area.

The mineral assemblages observed within the rocks of the region suggest that pressure and temperature conditions peaked at lower amphibolite facies, with localised areas metamorphosed to middle to upper amphibolite grade.

Structural Regime of the Yalgoo Area

A review of the regional deformation within the Yalgoo Greenstone belt recognised the four deformational events both at outcrop scale and on regional aeromagnetic images of the greenstone belt. The current architecture of the belt reflects the dominant third deformation event. The structural evolution is summarised below.

• The first event is characterised by early thrusting, resulting in small-scale to regional recumbent folds and duplication of stratigraphy. Small-scale thrusts are best observed in the BIF and finer grained sedimentary units. Thick competent units do not record this folding, reflecting the heterogeneous strain in the sequence.

• The second event is interpreted as coaxial to the first deformation and reflects the progressive nature of the deformation. Early recumbent folds are refolded about an inclined axial surface. The orientation of the second fold axial surfaces parallels the strike of stratigraphy/enveloping surfaces and suggests that they are intraformational folds.

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• The third event is characterised by folding about a north-south axis, with fold symmetry indicating westerly vergence. In the regional anticline the earlier structures are best preserved in the hinge of the south-plunging anticline. The change in stratigraphic thickness is mostly the result of elongation parallel to the stretching lineation.

• The fourth event is characterised by north west-trending faults/shears, minor folds and quartz veins. They postdate the emplacement of a granitoid and a porphyry suite. These structures appear to be restricted to the western side of the Mougooderra shear zone

Further to the south, the Mougooderra shear zone to the west of the footwall syncline contains numerous small gold workings associated with north west-trending structures.

Gold was first discovered at Yalgoo in 1894 and by 1900 most mining had ceased. There was renewed production between 1930 and 1942 and isolated minor production at the City of Melbourne Mine in 1985 and at the Brilliant in 2000. Gold production was reported from all rock types in the Archaean succession though it is preferentially hosted by BIF, mafic and ultramafic rocks. The bulk of gold mineralisation is epigenetic and associated with major faults and shears. There is a tendency for deposits to be concentrated close to granite contacts. Most of the mining centres are located on or near the axes of major anticlinal features which acted as dilational traps during the mineralising event

Mt Gibson Project Area

The Mt Gibson Project Area forms part of the southern Murchison Province, the western most of three granite-greenstone terrains that together form part of the Archaean Yilgarn Craton. The Province extends for over 450 kilometres in strike from Mt Gibson to Meekatharra.

In the Murchison, several arcuate belts of supracrustal or greenstone rocks are present, bounded by intrusive granitic batholiths. The greenstone sequence is characterised by mafic volcanic and intrusive rocks with subordinate felsic volcanics and sediments. Ultramafic lithologies are more restricted than in the Eastern Goldfields. The Murchison Province is host to vein-shear type gold deposits which together have produced over 8 million ounces of gold. Major mines in the belt include the Mt Gibson, Mt Magnet (HiIl 50), Meekatharra and Big Bell mining centres.

Within the Yalgoo- Singleton greenstone sequence, the Mt Gibson Mine, which has resources and reserves of approximately 750,000 ounces of gold, is the main gold deposit. The Mt Gibson Mine commenced operations in 1988, originally mining an extensive laterite gold resource. As the understanding of the deposit developed, exploration successfully focused on locating the primary gold source. Much of the recent mining has exploited this style of mineralisation, as both an open cut and underground operation. The mine is located 30 kilometres south west of the Paynes Find tenement area.

Other nearby, smaller historic mine centers include the Paynes Find (80,000 oz gold), Rothsay (40,100 oz gold), Fields Find (40,300 oz gold) and Pinyalling (45,000 oz gold) areas. Recent exploration has outlined several new deposits in the area including the Kirkalocka (520,000 oz gold resource) and Minjar (300,000 oz gold resource) discoveries. Many of the mines in the area are associated with quartz vein systems, hosted within mafic volcanics, BIF or other suitable host rock. Copper is a common accessory metal and may range up to several percent.

Base metal mineralisation in the area was first discovered at Golden Grove (including the Scuddles and Gossan Hill areas) from 1979 onwards. This significant deposit is currently being mined. The mine is located over the northern portion of the Warriedar greenstone sequence, approximately 85 kilometres north west of the project area. The deposits are considered to be Volcanogenic (VMS) in origin and are hosted within a narrow sedimentary horizon dominated by felsic to intermediate volcanics, pyritic chert and BlF. The base metal anomalous horizon is regionally extensive and ranges from 50m to 400m in thickness. Stratabound alteration is also present as part of a broader footwall assemblage. The mineralisation has no surface

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expression, being only of economic grade below 150m depth. It is developed as a series of lenses up to 50m wide over a strike of 1 kilometre.

Minor copper occurrences have been mined within the region such as at the Warriedar Copper Mine but are not of economic significance. Little activity in the exploration for other metals has occurred.

YALGOO NORTH

A resource of 69,000oz of gold has been delineated at Melville, with extensions to this zone possible both along strike and at depth.

The project has a number of other targets including City of Melbourne, Brilliant, Lady Lydia South, Victoria United and Noongal with over 7 kilometres of strike that require immediate drilling to determine their economic potential. Less advanced targets include a number of high grade rock chip anomalies ranging from 4.9g/t gold (Lady Lydia) to 21g/t gold (Continental), a 700 metre +150ppb surface gold anomaly, an untested electromagnetic conductor and a number of other geochemical, structural, and lithological targets.

Several areas of old gold workings indicate that significant high-grade mineralisation was exploited by historic miners.

Tenure

The Yalgoo North area is situated about 430 kilometres NNE of Perth in the Yalgoo - Singleton greenstone belt. The tenement group is centred 20 kilometres north of the Yalgoo townsite and covers portions of Carlaminda and Noongal pastoral holdings. Access to the area is via the Yalgoo North Road, which traverses the western boundary of the project.

The project comprises eleven Mining Leases and five Exploration Licences covering approximately 200 kilometres2.

Local Geology

The Yalgoo North tenements are situated along the north-south striking, eastern limb of a regional scale antiform. Amphibolites and quartz-magnetite BIF of the Golconda Formation dominate the area. The amphibolites are locally fine-grained, strongly foliated and hornblende-rich. The western portions of the lease also contain minor tremolite-talc schist. The BIF is finely laminated and commonly tight to isoclinally folded. These BIFs dominate the eastern portions of the tenement, forming prominent NNW trending ridges.

Early fold structures dominate outcrop in the area. Within BIF, structures are represented by tight to isoclinal west-plunging folds (centimetre to outcrop-scale) with a shallow west to southwest-dipping axial plane. Apart from small-scale localised jigsaw brecciation (and subsequent silica infill) these ironstones appear largely unaltered.

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A suite of north to northwest-trending quartz porphyry dykes intrudes the amphibolite-BIF sequence. The porphyry dominates the northwestern areas of the tenement, with small isolated outcrops of micro-gabbro forming roof pendants within it. These porphyry bodies commonly have strongly sheared margins with thin quartz veins parallel to the shear fabric. Quartz fibres and stretched mineral lineations noted on the surface of this shear fabric suggest that it formed due to south west over north east directed thrusting. These deformed porphyries are commonly weakly mineralised.

In the northwestern portion of the area, an ovoid granitic plug has intruded the anitform. Gold mineralisation is contained both with the granite itself (Brilliant & Lady Lydia) and along its margins (Continental), suggesting it may be an important control to mineralisation.

Pegmatite bodies intrude both the porphyries and units of the Golconda Formation. These are muscovite-rich and grade into graphic granite in places. Regional evidence suggests that these pegmatites, which generally trend north to northwest, clearly post-date the granite.

Prominent northeast-trending quartz veins, 1 to 10m wide bisected the area, with well-developed tension vein arrays suggesting dextral movement. Regional evidence suggests that these post-date mineralisation. These structures largely parallel the northeast-trending granodiorite dykes that crosscut the region. These dykes have a well-developed magnetic signature and are interpreted to be Proterozoic in age.

Previous Exploration

Modern exploration of the Melville area is recorded from 1973 when Placer Prospecting carried out exploration for copper and nickel. Ground geophysical surveys and soil and rock chip sampling were carried out and 14 RC holes were drilled.

In the period from 1982 to 1984, Aztec Exploration Ltd, Geopeko Ltd/Newmont Holdings Ltd, Chevron Exploration Corporation and CRA explored the Krakatinni area, including rock chipping, 4 RC holes and 3 costeans. Reconnaissance mapping/rock chipping, ground magnetics and soil sampling followed by a further 7 RC holes targeting an aeromagnetic anomaly were completed. Rock chip and pisolite sampling were carried out, with 40 shallow percussion holes drilled by Chevron.

In 1985, Clackline Refractories Ltd drilled 12 RC holes around the ‘Don Bradman’ prospect. Johnsons Well Mining NL completed regional geological mapping, soil and rock chip sampling and aeromagnetics in 1986 to 1988. In the period 1985 to 1997, Roebuck Resources carried out geological mapping, rock chip sampling, RAB, RC and diamond drilling. In 1998, the Acacia Resources/Roebuck Resources Joint Venture completed an aeromagnetic/radiometric survey, soil and rock chip sampling, geological mapping, fixed/ moving loop and downhole EM, RAB, Aircore, RC and diamond drilling were also carried out.

Exploration in the Brilliant-Lady Lydia area commenced in 1981 with surface mapping and sampling. Limited RC drilling was carried out on the three historical mining locations in 1985. Except for occasional surface sampling programme, there was no further exploration until 1995 and 1996 when coordinated RC drilling programmes were carried out in the same locations. Between 1985 and 1996, 73 RC percussion holes for an aggregate 2,729m of drilling were completed within the area of the lease, the majority of which targeted the potentially open pittable mineralisation at the Brilliant Prospect.

Recent Exploration and Results

Exploration in recent years showed that the mineralisation at Melville, is associated with pyrrhotite alteration of BIF and is most likely concentrated in zones where NNW striking structures intersect BIF units and/or where earlier folds have thickened the BIF units. Work concentrated on the Melville prospect in a zone of BIF hosted gold mineralisation that had been defined by historical drilling. RC, RAB, Aircore and diamond drilling were completed with the aim of following up mineralised intersections and defining the extent of the mineralisation. Extensive geological mapping, soil sampling, rock chip sampling and an EM survey were also completed.

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At the Brilliant Deposit, the mining lease applied for in 1996 was granted in January 2000 and field work, including bulk-sampling, metallurgical testing and mining studies of a gold resource in the Brilliant prospect, commenced in August 2000.

Resource estimates were calculated by Global Mining Services in 2000 and are summarised as an Inferred Resource of 49,082t at 4.76g/t gold at the Brilliant deposit to 60m depth. Subsequently, 17,000 tonnes were mined in 2001 at an average recovered grade of 2.93 g/t gold. Drilling to the east of the main Brilliant vein system returned down hole intercepts including 2m @ 9.5 g/t gold (8-10m) from a new mineralised system that is open in all directions, whilst shallow drilling at Lady Lydia South gave 6m @ 5.2 g/t gold from 14m downhole that has not been followed up.

Recent surface sampling of quartz vein material by Prosperity at Lady Lydia South returned gold values including 18.6 g/t gold, 83 g/t gold and 143 g/t gold from shallow pits. Also, a new vein system was located 1000m southeast of Brilliant that gave results to 4.9 g/t gold in rock chips. A series of rock chip samples at Contintental gave results to 21 g/t gold.

Melville Resource Area

The main prospect within the Melville JV tenements is located on M59/329 and is referred to as the Melville Resource area. Prior to AngloGold/Acacia’s involvement in the Melville JV, the Melville Prospect was the main focus of Roebuck’s exploration with ~90 RAB, ~63 RC and 17 (unorientated) diamond tails/holes drilled since 1995.

Drilling concentrated on a limited zone, no greater than 200 metres wide, delineated by the aeromagnetic signature of the Melville BIF, with little or no stepping out to the east or west. Results of up to 11m at 7.1 g/t gold and 16m at 5.5 g/t gold were obtained in this drilling and a loosely defined “resource” (non- JORC) of approximately 100,000 ozs gold claimed by Roebuck.

Subsequent RAB, Aircore and RC drilling by AngloGold were successful in extending the zone of gold anomalism 1 kilometre to the north of the Melville Resource Area and 400 m to the southeast. The bulk of RC/Diamond diamond drilling conducted in 2000 concentrated on testing the preliminary geological model for the Melville Resource area. Significant results from this work are tabulated below:

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Melville Resource Area Drilling Results

Hole ID North East Hole Depth From To Interval g/t Gold Description

MVRC049 6881960 475905 200 138 140 2 14.25 Quartz porphyry

MVRC052 6882150 475910 200 44 50 6 3.59 Saprolitic clay

134 137 3 4.43 Chert

151 153 2 11.42 Chert

165 166 1 9.50 Quartz porphyry

193 195 2 3.07 Chert

MVRC053 6882150 475960 198 200 272 92 3.36 Transported clay




MVRC046D 6881700 475700 198 137 141 4 3.16 BIF

MVRC047D 6881700 475816 207 116 118 2 2.60 BIF

121 125 4 1.49 BIF

139 140 1 7.75 BIF

MVRC055D 6882100 475905 200 50 59 9 1.60 BIF and Amphibolite

72 75 3 11.00 BIF

125 131 6 1.40 BIF

141 156 15 2.90 Hornblende -amphibolite and banded chert 163 17 613 1.40 BIF, Quartz Porphyry

This work was successful in confirming the existence of the several zones of supergene gold mineralisation. These zones are located within the antiformal hinges of west verging folds where they are intersected by late cross cutting structures. This mineralisation is associated with intense carbonate-pyrrhotite+/-bornite-chalcopyrite veining (mainly within BIF) which grades to brecciation and infill in places. Work to date suggests that significant and coherent high-grade mineralisation exists at the Melville prospect.

Brilliant Prospect

Mineralisation at Brilliant is contained within mafic granulites that occur as possible roof pendants with the late granitic plug, although this relationship is unclear. Gold mineralisation occurs within northwesterly trending quartz-sulphide stockwork systems that dip moderately west. (Figure 3)

The residual ore left beneath the current open pit is open at depth. RC drill hole intercepts of 2m @ 11.8g/t gold, 7m @ 7.6 g/t gold and 3m @ 5.6 g/t gold have been recorded. Also, a new zone of high-grade gold mineralisation (2m @ 9.5g/t gold) is located 40m east of the Brilliant mineralised zone and remains open in several directions.

Lady Lydia

This prospect occurs entirely within the granitoid stock with rocks present being granitic gneiss and pegmatite. The mineralisation appears to be related to a narrow 20 to 30 cm wide shear or fault striking 035 - 040° and dipping 65° east. A rock chip sample of the structure at the south end of the pit over a width of about 30cm returned an assay of 1.12 g/t gold. The historical trenching and shaft appear to have been off-line and in the footwall of the main structure. One RC hole was drilled to the west and emplaced only a few metres from the structure. A sulphidic quartz vein was located 150m southeast of the Lady Lydia North workings in an ephemeral creek bed. Results to 4.9 g/t gold were received from rock chip sampling.

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Lady Lydia South

At least two mineralised shear-quartz vein systems appear to have been exploited by the old miners. A series of shallow pits and shafts over 150-200m length target quartz stockwork systems that strike northwest and dip shallowly to the west. Host lithologies include granite, mafic porphyry and quartz feldspar porphyry.

Rock chip samples ranging from 18.6 g/t gold to 143 g/t gold have been collected from the old workings, with a number of significant RC drill intercepts including 6m @ 5.2g/t gold remaining open in several directions and requiring immediate follow-up. (Figure 4) Minimal cover exists in the area, suggesting that surface or near surface sampling would be an effective exploration tool.

Continental Mine

Located 1.5 kilometres northwest of Brilliant, the Continental workings were historically very high grade, with ore extracted averaging over 60 g/t gold. The Continental vein system trends northeast and dips moderately to steeply west. The mineralisation is controlled by a 2-5m wide shear zone that has preferentially exploited a BIF-Amphibolite contact. A small Prospecting Licence not currently held by Prosperity covers the old workings, however, recent mapping and sampling traced the controlling structure for over 250m along strike in Prosperity tenure. Rock chip results including 17g/t gold and 21g/t gold were recorded from quartz vein material over 150m along strike from the old workings. No evidence of drilling is apparent outside the Prospecting Licence.

City of Melbourne Mine

The City of Melbourne Mine is located within granted Mining Lease M59/57, approximately 5 kilometres northwest of Melville.

From 1937-42, the mine produced 5300 oz of gold at an average grade of 14.2 g/t gold, exploiting a moderately dipping narrow quartz vein in sheared mafic volcanics. In this respect the City of Melbourne Mine represents the northern continuation of the Noongal - Victory United line of high grade quartz veins amounting to over 3.5 kilometres of potential mineralised strike.

A group of prospectors purchased the lease in early 1990’s and sunk a shaft to 30 metres below the surface to intersect the high-grade reef beneath the ground of the old workings. Mining proved to be uneconomic despite rock chips ‘face’ samples of greater than 50 g/t gold due to equipment failure and lack of capital. Nine shallow RC holes have been completed at the deposit. Of these, six intersected ‘open stopes’ whilst grades of 1m at 44 g/t gold, 2m at 5.2 g/t gold, and 1m at 4.8 g/t gold were recorded in others.

The mineralised system remains open at depth and along strike. The Company intends to investigate the prospectitivty of the City of Melbourne vein system through drilling, with the aim of defining a high grade gold resource.

Melville Resource Assessment

A significant amount of drilling within the Melville Resource Area has been carried out to date and Ravensgate Pty Ltd generated a new resource block model in May 2002 for Comet Resources Ltd.

The total resource for the Melville deposit at a 1.0g/t gold lower cut-off for all categories is: -

1,129,950 tonnes at 1.9g/t gold, 69,000 contained ounces og gold

This total has been calculated using an assumed and estimated tonnage factor for all material types. All of this material is defined and constrained within 3-D ore zone shells.

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JORC Assessment Requirements - In the Joint Ore Reserve Committee (JORC) guidelines for estimation of Mineral Resources a number of criteria are required to be addressed. The following comments apply to the resources for the Melville Gold Deposit.

Geological Interpretation - The styles of mineralisation are reasonably well known based on a history of exploration and drilling at the project, including geological mapping and interpretation. Several mineralisation models have been addressed from shear hosted to BIF hosted deposits. Uncertainty in geological models and controls is encapsulated in the classification applied to the resources.

Data density - The data density is considered adequate to classify the various sections of the deposit. There is a significant database of drilling records including RC and diamond holes with assays available.

Accuracy of location of sampling points - Inaccuracies in drill hole collar location are too small to have a material impact on the resource estimate. Down-hole survey information is limited for reverse circulation drill holes, and this may have an impact on the exact location of the resources at depth, i.e. below open cut targets. Diamond drill holes are surveyed.

Drilling technique - The deposits are tested mainly by reverse circulation drilling with additional diamond drilling. Rotary air blast drilling results were used to define drill targets and not used in the resource estimation.

Sampling technique - The reverse circulation samples were collected in an acceptable manner through cyclone recovery systems with attention to sample integrity. Diamond drill holes were marked up and split with a diamond saw.

Drill sample recovery - RC drilling generally returned sufficient sample for adequate representative assay procedures to be applied.

Tonnage factor (specific gravity) - Assumed wet tonnage factors of in-situ material used for the new Melville block model were 2.00 for Overburden, Laterite and oxide material and 2.60 for fresh and sulphide material. These values are a reasonable approximation for typical specific gravities found in most Eastern Goldfields and Archaean style gold deposits.

Quality of assay data - Industry wide check assay results indicate that during the period of interest the laboratories were able to report gold analysis on pulps well within accepted tolerances of the standards.

Quality of data description - Reverse circulation cuttings and diamond core were generally logged in sufficient detail and with significant properties recorded to allow geological maps and sections to be constructed.

Cut-off grades - Appropriate high-grade top-cuts have been determined from probability plots and spatial distribution plots. Lower cutoffs were established arbitrarily at 1.00g/t.

Estimation techniques - The block estimations involved interpolation of grade in regular down the hole composites. The estimation technique of Ordinary Block Kriging is judged as appropriate to the nature of the deposit and the proposed open cut mining method. The quality of the variography does not warrant the use of a more sophisticated method.

Classification - Estimates based on geostatistical techniques are classified according to the kriging error, which is the standard deviation of the various factors. This allows the blocks to be allocated to Indicated and Inferred on the confidence in the estimates and the distribution of quality factors.

Other issues - It is considered that all deposits included in the statement have been prepared to appropriate professional standards and are acceptable to be included in a conformable JORC Mineral Resource Statement.

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Details of the Mineral Resources

Category In-Situ Tonnes In-SituGrade (g/t gold) Contained Ounces of Gold Indicated 881,231 1.9 37,300

Inferred 248,700 1.71 13,700

TOTAL 1,129,950 1.9 69,000

The deposit has been modelled and analysed quite rigorously by the traditional 3-D estimation methods and also by using the Ordinary Kriging technique. The results of this study have confirmed the robust and relatively uniform nature of the gold mineralisation within the Melville deposit. The lode structures are overall quite thin and whilst clearly identifiable in a major mineralised zone also show some levels of localised complexity and significant fault and structural offsetting. The drilling on the margins of the deposit provides a few mineralised intersections that demonstrate that the deposit geometry may not show any significant widening in these zones. This orientation of the ore zones and their proximity to surface will lend themselves to open pit mining if the economic criteria are favourable.

There is considerable potential to increase the definable amount of mineralised material. The main mineralised structures are for the most part “open” with respect to drilling at depth and there is very good potential to increase the overall resource base with some limited extra peripheral and deeper drilling

Extra drilling at a later stage to define further mineralisation to the north and south of the currently delineated area may extend the current in-situ resource tonnage at similar grades.

Exploration Potential

RC and diamond drilling at the Melville Resource area validated the existence of northern and southern mineralised zones localised within antiformal fold hinges. There is an opportunity to expand on the resource base at Melville through further drilling.

Apart from the residual resource at Brilliant left after the recent mining campaign, there are a number of drill hole intercepts that remain to be followed up. These include the extensions of the mineralisation below and along strike of the Brilliant Pit as well as areas at Lady Lydia South.

Several anomalies defined by wide spaced RAB or Aircore drilling and areas where high grade rock chip samples have been collected require further work.

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YALGOO EAST

The Project lies on the eastern side of the Yalgoo – Singleton greenstone belt. Initially, the Redgate area was defined by a geochemical anomaly over residual soils, which has approximately one kilometre of strike length. Drilling on this zone and further north under thin alluvial cover has returned drill intercepts, including 9 m at 1.57g/t gold, 4 m at 1.86g/t gold, and 4 m at 1.78g/t gold from Aircore and limited RC drilling.

Tenure

Yalgoo East is located approximately 430 kilometres northnortheast of Perth in the Murchison Province of the Yilgarn Craton, Western Australia.

The tenement group is situated 13 kilometres east of Yalgoo town site, straddling the Carlaminda and Wagga Wagga pastoral leases. Access to the area is good in dry weather with the sealed Yalgoo-Mt Magnet road on the southern border of the tenements and station tracks throughout.

The Project is covered by an Option Agreement between Comet Resources Limited and Anthony Vodanovich that commenced on 19 March 2002, with Comet Resources Limited currently managing the exploration. The project comprises four tenements that are held by Mr Vodanovich covering 42.8 kilometres2.

Local Geology

The project area lies on the eastern limb of a regional scale synform. Structural evidence, together with aeromagnetic data, suggests that the Mougooderra shear zone, a northsouth-trending structure that can be traced south for approximately 100 kilometres to Warriedar, has truncated this synform.

The rock units within Yalgoo East form part of the Luke Creek Group. They are predominantly of the Golconda Formation and include a sedimentary succession of thrust-thickened quartz-magnetite BIF and medium grained epiclastics. These form a prominent north south-trending ridgeline, which dominates the topography of Yalgoo East.

To the west of the tenements, the area is dominated by a complexly folded succession of tremolite-talc schists interlayered with fine-grained basalts of the Gabanintha Formation. Interpretation of the geometry of this succession is largely based on aeromagnetic data due to the limited outcrops. Gabbroic and ultramafic sills (locally dunite to cumulate orthopyroxenite) belonging to the Wadgingarra basalt have intruded this sequence of rocks in the west of the project area.

Three of the four major deformational events are recognised at within the Yalgoo East area. The effects of late stage deformation appear to be restricted to the western side of the Mougooderra shear zone.

The west-dipping Mougooderra shear zone plays host to numerous small gold workings, within the Mougooderra conglomerate. This unit contains stretched quartz pebbles and lithic clasts, with north/south striking long axes.

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Quartz veins with associated garnet-amphibole alteration crosscut the shear zones sometimes with mylonitic fabric, infilling tension fractures. These vary from moderately north east-dipping within the Mougooderra conglomerate, to moderately southeast-dipping within gabbro of the Wadgingarra Basalt.

Previous Exploration

Records suggest that exploration in the Yalgoo East area commenced in the late 1890s around the same time, as gold mines were active at Yalgoo and Wadgingarra. Two areas of historical workings known as Copper Pits and AV Zone are present within the Yalgoo East tenements although the production details for these workings are unknown.

The AV Zone is located approximately 300m northwest from the stockyards at Bridge Well and comprises a few shallow workings and a 1.3 m pit within a north-trending, siliceous, altered, felsic or sheared sediment.

The Copper Pits prospect is situated 1.9 kilometres northwest from the AV Zone within P59/1397. This prospect comprises nine shallow pits up to 2.5 m wide and 1.5 m deep over a north-south strike length of approximately 140 m. The workings appear to be focussed on quartz veining within gabbro containing gold, malachite and azurite.

From 1969 to 1972, Placer Prospecting (Aust) Pty Ltd held a number of mineral claims along the NW boundary of the project area. These were explored for nickel, copper, zinc and tungsten as part of a joint venture between Placer and Esso Exploration. It was concluded that base metal levels were generally low apart from an anomalous zone of copper associated with small irregular veins. Minor scheelite was noted in pegmatite veins adjacent to granite.

Between 1970 and 1978, a number of companies including Australian Consolidated Minerals, North Flinders Mines Ltd and Mimets Exploration Pty Ltd, as well as a number of individual prospectors, held ground along the western boundary of the Yalgoo East Project Area. From 1974 to 1975, Esso Exploration and Production Australia Ltd held eight Mining Claims through the centre of the project area. However no reports are available for their work.

Pegmines Exploration Pty Ltd (1980 to 1982) explored twelve Mineral Claims in the west and central west of the Bridge Well project area targeting base metals as part of their Wadgingarra project. No reports of work undertaken or results obtained are available.

During the period 1983 to 1985, CRA Exploration Pty Ltd held the Exploration Licence E59/23 that included the central and eastern parts of the present Yalgoo East Project Area. They conducted exploration for volcanogenic copper-zinc massive sulphides and targeted the flat soil and alluvium covered area between the mafic outcrops in the west and the granite subcrops to the east.

This area was interpreted to represent transported cover over felsic volcanics equivalent to those of the Gossan Hill Group at Golden Grove. The prospect was downgraded and the project dropped after CRA drilled three holes that did not intersect felsic volcanics, but rather encountered a magnetic amphibolite.

In 1984, Mt Kersey Mining NL was granted a number of Prospecting Licences over the current Wadgingarra Mining Centre, extending east and south onto the western portion of the current Bridge Well project area. Under a number of different joint venture agreements, Mt Kersey carried out exploration over these tenements and the surrounding areas until mid-1990. Exploration by Mt Kersey within the current area comprised reconnaissance mapping, rock chip sampling, gridding and orientation soil sampling.

From 1991 to 1995, Roebuck Resources NL held a number of Exploration Licences surrounding and partially overlapping the Bridge Well area. No significant work or results were reported.

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Old workings near Wadgingarra, Yalgoo

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Merrit Mining NL was managers of a joint venture over the current area from 1996 to the end of 1998. During this time they completed general prospecting, shallow hand trenching, reconnaissance mapping, RAB drilling, stream sediment, soil, lag and rock chip sampling over the historical workings and some gold in soil anomalies. They also flew a 50m spaced, low-level aeromagnetic survey over the entire project area.

The exploration completed by Acacia Resources Ltd in 1999 focused on testing a gold in soil anomaly that had been delineated by Merrit Mining in the northwestern corner of the project area adjacent to the Wadgingarra Mining Centre. Work completed included soil sampling, RAB and Aircore drilling.

Recent Exploration And Results

AngloGold delineated a 200 m by 1,500 m northnorthwest-trending gold-in-saprolite anomaly by RAB and Aircore drilling, and confirmed bedrock gold mineralisation by limited RC drilling (5 holes). The gold is associated with sulphidised BIF, grunerite-magnetite altered amphibolite and quartz-carbonate veining within BIF and amphibolite.


A northnorwest-trending anomalous zone measuring 200m by 1500m was defined and was interpreted to represent gold dispersion in saprolite along a mineralised thrust fault.

Subsequent RC drill testing of the anomaly intersected narrow zones of primary mineralisation associated with weakly sulphidised BIF and quartz carbonate veining within a BIF/amphibolite package. These narrow mineralised zones require additional drilling in order to confirm the existence of gold mineralisation at depth.

Encouraging drill intersections have been obtained at Redgate. RAB/Aircore drilling has confirmed the gold-in-saprolite anomaly, and further deeper testing of the anomalous structure is necessary to delineate the zones of mineralisation in bedrock. Exploration leads from previous base metal explorers also remain to be followed up.

YALGOO WEST

Yalgoo West area contains the historically high grade Emerald Reward workings that have returned significant RC drilling intercepts from sporadic exploration, Several gold anomalies defined by Aircore drilling along the mineralised trend at Emerald Reward also require follow-up.

A number of geophysical and structural targets have also been defined, the most prospective of which is a large ‘bullseye’ aeromagnetic anomaly 8 kilometres west of the Emerald Reward that is considered to show similarities in its aeromagnetic signature to the Wallaby deposit in the Eastern Goldfields of Western Australia.

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Tenure

The tenements lie within the Yalgoo – Singleton greenstone belt described in the regional geology section above.

The tenements surround the township of Yalgoo, approximately 430 kilometres northnortheast of Perth in the Murchison Province of the Yilgarn Craton, Western Australia. The tenements lie within Carlaminda, Wagga Wagga and Gabyon pastoral lease boundaries. The project area can be accessed via the sealed Mt Magnet-Geraldton Road and gravel station tracks from Yalgoo.

Yalgoo West area covering 80 kilometres2 comprises one Prospecting Licences and four Exploration Licences. The project has been owned and operated by AngloGold Australasia Limited since September 1999 after an agreement was signed with the previous project holders, Arimco Mining Pty Limited and Archaean Gold NL.

Local Geology

The project area covers a mafic to ultramafic dominated sequence of rocks with BIF and sediments becoming common towards the east and north of the area. Porphyry and pegmatitic dykes intrude the greenstone sequence and are generally orientated in a north-to-north westerly direction.

Fault-bounded south-plunging folds and west dipping to subvertical faults dominate major regional structural elements of the Yalgoo – Singleton greenstone belt. Gold was initially discovered at Emerald Reward Mine in 1884, and historical production of over 8,500oz of gold at grades of over 80 g/t gold was recorded.

Historical Exploration

A number of companies have conducted exploration at the Emerald Reward prospect, including bulk sampling, drilling and geological mapping and sampling. Most of the drilling was shallow aiming at intersecting the quartz veins down dip.

In 1981-1982, Australian Hannah Limited carried detailed sampling of the old workings at Emerald Reward Mine in order to determine the lithological and structural controls to the high-grade gold mineralisation. Sampling was concentrated on the thin stockwork quartz veins distributed throughout the ultramafic unit. A total of 651 samples were collected and an average grade of 23.7g/t gold was determined for the eastern face of the open pit. However, no further work was completed before the company withdrew from Australia.

Balmoral Resources NL undertook bulk sampling of the ore zone exposed in the eastern face of the Emerald Reward Mine Pit in 1982. A portion of the bench, 10m long by 5m wide by 3m deep was excavated and transported to the State Battery in Mt. Magnet for treatment.

A total of 142 tonnes of material treated yielded an average grade of 0.89g/t gold with 3.2 g/t in the tails, a result that was inconsistent with the earlier sampling by Australian Hannah. However, it was later determined that the high-grade zone of the eastern face was not sampled by Balmoral due to access problems. Balmoral also completed 6 shallow diamond core holes for 345.3 m. Significant results are shown in Table below.

Udaps Investment Ltd drilled a further seven holes (U1-7) in 1984. Although the results were considered poor at the time, several significant intercepts were returned as shown in Table below.

Later in 1984, Yalgoo Gold Mines NL completed 26 shallow RC drill holes (YRC1-22, 24-27) for 416m. Five of the holes ended in significant gold mineralisation (see Table 1). Yalgoo Gold Mines NL also carried out extensive sampling of the stockpiled material at Emerald Reward Mine, calculating a figure of 21,000t @ 6.35g/t gold.

In 1985, Central Murchison Gold Ltd re-sampled the stockpile material, but was more selective in their sampling.

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This resulted in a lower resource calculation of 21,000t @ 0.97g/t gold. It was considered that the result obtained by Yalgoo Mines were influenced by the inclusion of four high grade dumps, and, that by ignoring these or cutting the average grade to 10g/t gold, a conservative average grade of 2-3g/t gold was obtained. Seventeen RC holes (YRC29-45) for 589.5m were also completed, with significant results shown in Table below

Arrowfield Mining NL employed consulting geologists H.K. Morgan and Associates to review previous work at Emerald Reward Mine in 1987. It was recommended that potential still existed for the discovery of economic gold mineralisation within the general area.

A short drilling programme was undertaken by Polaris Pacific NL shortly after the Arrowfield review, however the details of this work are not known.

Murchison Resources Pty Ltd reviewed all work completed at Emerald Reward Mine in 1998, and concluded that it had been largely inconclusive and disjointed, and that further work on the project was warranted.

EMERALD REWARD MINE - SUMMARY OF DRILLING RESULTS (PRIOR TO ANGLOGOLD)

Hole Number Result (g/t gold) Dip/Azimuth Comments

1982 (Balmoral) YER01 1m @12 g/t (25.4m-26.4m) -90/000 Drilled on southern edge of pit, near shaft to east. YER06 1m @ 10.7 g/t (32-33m) -60/160 Slightly north of the centre of the pit.

1984 (Udaps) U1 2m @ 2.6 g/t (10-12m) 1.1m @ 21.57 g/t (21.5-23.6m) -60/270(?) Western end of pit near shaft U5A 3m @ 2.40 g/t (41-44m) -60/340(?) 230m WSW of pit (near Russian Pit?)

1984 (Yalgoo Gold Mines) YRC01 1m @ 6.7g/t (10-12m) 2m @ 3.3 g/t (12-14m) 2m @ 1.9 g/t (15-17m) -90/000 Position unclear YRC03 6m @ 3.5 g/t (4-10m) -90/000 Drilled on southern edge of pit, near shaft to east (20m SW of YER01) YRC05 10m @ 7.8 g/t (0-10m) -90/000 Drilled on southern edge of pit, near shaft to east (30m SW of YER01) YRC06 9m @ 8.80 g/t (1-10m) -90/000 Drilled on southern edge of pit, near shaft to east (40m SW of YER01) YRC07 1m @ 5.8 g/t (16-17m) -60/160 20m west of pit in between old workings YRC09 1m @ 4.5 g/t (34-35m) -60/260 In southern end of pit.

1985 (Central Murchison) YRC41 1m @ 1.2 g/t (0-3m) Not Known Approx 45m SW of pit

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Acacia undertook an extensive programme of rock chip sampling to determine preferential structural orientations for the high grade quartz vein set seen at the Emerald Reward Mine workings. Rock chip samples with assay values to 242 g/t gold (with numerous samples assaying over 30g/t gold) were collected from within the pit. Acacia concluded that the Emerald Reward Mine mineralisation consisted of a stockwork quartz vein system with a possible moderate easterly plunge. A total of three inclined RC holes were completed to intersect the proposed model in 2000. Significant results including 2m @ 15g/t gold and 1m @ 4.3g/t gold were returned. These have not been followed up.

Acacia also completed 27 vertical Aircore drill holes along strike and to the east in intersect repetitions of the Emerald Reward Mine mineralisation. An anomaly approximately 350m east of the old workings with values up to 0.5 g/t gold was defined in wide spaced drilling under thin alluvial cover. This anomaly requires further work.


The high-grade gold mineralisation at Emerald Reward Mine remains open at depth and along strike. Systematic exploration for repetitions of this style of gold mineralisation along strike has not been completed and is a priority drill target. (Refer Figure 5)

Gold anomalism returned from wide spaced Aircore drilling east of Emerald Reward Mine may provide clues to the presence of further mineralisation and requires further exploration.

MOUNT GIBSON PROJECT AREA

The Mt Gibson Project Area covers an area of approximately 450 kilometres2 of a prospective greenstone belt in the southern Murchison province comprising a well-exposed sequence of mafic and ultramafic volcanics, intrusives and minor sediments. The region hosts important gold and base metal mineralisation within similar rock sequences. Operating mines for these commodities are located within 30 kilometres and 85 kilometres of the project.

Drilling conducted by previous explorers at Back Well investigated a 10 kilometres strike length of an ultramafic unit and anomalous nickel mineralisation was encountered up to 0.65% nickel within a lateritic profile. A strike extent of approximately 5 kilometres of the 500m wide ultramafic unit is within the current tenement area and remains to be tested.

The gold and base metal prospectivity of the tenement has been enhanced by the discovery of significant nearby deposits including Golden Grove and the Mt Gibson bedrock orebodies, together with recently defined resources in the region at Kirkalocka and Minjar.

Several areas of quartz-copper mineralisation defined in the 1970s appear to remain untested for their gold potential, and are a target due to the common association of these metals in the region

A weakly mineralised base metal horizon, the Marlu Horizon, has been defined over a strike extent of 12 kilometres.

Tenure

The project is located within the southern portion of the Murchison Province, Western Australia approximately 320 kilometres northeast of Perth and 40 kilometres west of the Paynes Find. (Refer Figure 6).

Access to the tenement is via the Great Northern Highway and pastoral and exploration tracks within the tenement

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Prosperity holds options and joint ventures over six Exploration Licences in the area covering approximately 450 kilometres2.

LOCAL GEOLOGY

Tenement geology is dominated by a mafic sequence known as the Singleton Basalt, which forms a local subgroup of the Mount Farmer Group. The sequence is folded into a large southeasterly plunging syncline. Much of the synclinal core crops out and has a rugged relief, although extensive soil and laterite cover mask small portions over the southern and western flanks.

The sequence is essentially the record of a large basaltic volcano. The succession comprises tholeiitic and high-magnesium basalts, mafic pyroclastic rocks, ultramafic rocks, gabbro and dolerite.

The western tenement sector margins a sedimentary unit termed the Mougooderra Formation. Best exposure of this unit is outside the tenement, west of Kiaby Well. Sandstone, metamorphosed to quartzite predominates, with finer grained equivalents further to the west. Within the tenement area only minor amounts of this unit may be present, potentially in those areas in the west around Kiaby Well, which are obscured by laterite cover. The Minjar discovery is hosted along the contact zone of this sedimentary unit 70 kilometres further to the northwest.

Granodiorite crops out in the southern tenement area, extending between Back Well and Beanthinny Hill. The late stage stock assimilates part of the greenstone margins and appears to be an important control to gold and tungsten mineralisation at Bonnie Venture, located 5 kilometres to the west.

PREVIOUS EXPLORATION

Base Metals

Between 1969 and 1973 Hawkstone Minerals Ltd carried out extensive fieldwork over the Marlu Prospect where gossan samples returned up to 6.2% copper, 1.5% lead and 11. 7% zinc. Work focused on exploring the Marlu prospect.

The Marlu mineralisation is stratigraphically controlled within a horizon, which has been traced for 13 kilometres along the southwestern limb of the Paynes Find syncline. The rock unit was mapped as over 10-15m thick volcano-sedimentary horizon comprising BIF, quartzite, tremolite tuff and talc tremolite rock assemblages. The basal unit is typically a BIF horizon overlain by quartzite and tremolitic tuff. The median member comprises a banded tremolite tuff horizon, locally brecciated and approximately 10m thick at the MarIu Prospect. The majority of the siliceous and ferruginous gossan was located within this horizon. The uppermost member is a massive talc tremolite rock with only rare gossan lenses.

In 1969-70 the MarIu discovery area was percussion drilled with 56 vertical holes for 1257m completed. Collar spacing was on an approximately 30m grid pattern with local infilling to 30m x 15m spacing. The area down dip, to the north of the exposed mineralisation was tested over an approximate 500m strike length, with most holes being located west of the mineralisation. The average hole depth ranged from 15-27m. This relatively shallow drilling intersected the host unit in nearly every drillhole and although anomalous, only weak zinc values were returned in 3 holes, all being within the oxidised horizon.

Elevated copper and zinc values were returned for approximately 30m down dip of the host horizon and were considered to be supergene enrichment. Intense fracturing, parallel to the north west synclinal axial plane was noted and the possibility of deeply buried mineralisation ‘leaking’ upwards was postulated. A subsequent, deeper drilling campaign was undertaken in 1971 with eleven holes for 635m completed. Only some of the drillholes were declined towards the surface gosssan. No significant mineralisation was intersected.

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Regional mapping identified four other areas along Marlu stratigraphy, which returned copper assays above 5%. These were the Ricochet, Bang-Bang, Bang-Bang East and Back Well North prospects. The best results were obtained from Bang-Bang East where rock chips to 8.6% copper were assayed. The areas were subsequently costeaned and returned broadly anomalous copper results at Bang-Bang where a 19m section of costean returned an average of 0.1 % copper.

The Back Well North prospects are associated with quartz veins within schist at the base of the main gabbro intrusive (unit E). The prospect has three areas, the’ South Mine, Central Mine and Northern Mine, where historic workings and shaft have been sunk. Values to 7.8% copper were returned.

Gold

Hawkestone conducted little gold analysis in their sampling, being restricted to two samples of copper rich rock chip samples from the Bang-Bang areas.

Subsequent to Hawkestone several companies have held tenements that cover portions of the current project area. The work they conducted is minor given the prospective location of the tenement area. The degree of outcrop may have reduced the perceived prospectivity of the area.

Capricorn Resources NL held tenements over the Paynes Find - Back Well area between 1989-90 and 1987-93. The ground was held in joint venture with Equatorial Gold NL as part of a larger tenement package. Work conducted included the collection of soil and BLEG samples and geological mapping and Landsat imagery. Soil results up to 600ppb gold were returned, together with 11 other samples above 10ppb gold compared with a background of less than 1ppb gold.

Nickel

Initial work in follow up to the Marlu discovery included a gossan search over selected portions of the tenement. Several ochreous goethitic gossans were located in the southern tenement sector in the Back Well area. These were originally thought to have been derived from nickel sulphides and returned up to 14ppm copper, 3100ppm nickel and 82ppm lead.

The Back Well area, located over the lower slopes of Paynes Find has poor outcrop and a ground magnetic survey was conducted to better define the more ultramafic horizons. Magnetic responses indicating ultramafic was identified across an approximate 500m width and a total strike length of approximately 10 kilometres was selected for geochemical drilling. Drillholes were locally sited over magnetic highs approximately 30m apart on 250m spaced lines. The programme tested only small portions of the ultramafic body. A total of 124 holes for 814m were subsequently drilled. A lateritic profile to 15m thick was identified.


Review of geophysical data has identified several targets for further exploration.

UItramafics at Back Well appear to be narrower than defined by previous explorers and within a unit between 400-800m in thickness. A granodiorite stock which intrudes the Back Well area is identifiable and appears to narrow the ultramafic unit to the south.

The Marlu Horizon is visible as a narrow magnetic low. It is locally cut by northeast to east-northeast linears, for example coincident with the Ricochet Prospect and to the south of Ninghan Homestead. The latter area is obscured by recent cover and is coincident with a weak magnetic high.

Several lineaments representing faults or shear zones are identifiable, including those with a northeast strike, which in a regional sense are important potential hosts to gold mineralisation. Most disruption is apparent within the tenement sector north east of Kiaby Well. In some places the structures have coincident magnetic highs.

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The tenement area is prospective for a range of commodities including vein and shear type gold, nickeliferous laterite, and volcanogenic (VMS) base metals deposits.

Previous workers who have identified target areas of anomalous results have defined the potential for nickel and base metal mineralisation. Testing of the areas remains incomplete. Similarly the gold prospectivity of the region has been enhanced with the discovery of several important orebodies nearby on structures that pass through the tenement.

Gold

The general geological setting of the tenement is well placed in regard to potential gold mineralisation and deposits in the region. Prior exploration for gold has been restricted, with only one company conducting any sampling of note. Hawkestone defined several copper occurrences within quartz veins and numerous copper stream sediment anomalies. Many of the gold deposits in the region have strong gold-copper associations (eg Rothsay, Mt Gibson) and copper may in effect be regarded as a pathfinder element to pinpoint the gold mineralisation. The areas outlined by Hawkestone warrant follow up work.

Several additional areas can be highlighted for early exploration work due to their prospective geology. These include the granite - ultramafic contact south of Back Well and the possible sediment contact around Kiaby Well. This area is situated adjacent to the northerly extension of the Mt Gibson Mine fault corridor and is in a geological setting with some similarities to the recent Minjar discovery

Base metals

Significant base metal mineralisation has been defined at surface at the Marlu prospect. The setting has some similarities to volcanogenic massive sulphide (VMS) deposits and is stratigraphically contained in a chemical sediment-tuff package deposited during a quiescent phase of mafic volcanism. The Golden Grove deposit was discovered 85 kilometres to the north. This major VMS type base metal mine is blind at surface, only being mineralised below 150m depth. It was discovered by testing a magnetic anomaly relating to magnetite within the orebody. It is developed in a relatively narrow horizon of chemical sediments and felsic intermediate volcanics.

The Mt Gibson Project has approximately 12 kilometres of strike extent to the Marlu Horizon. Provisional interpretation of Landsat - TM and high quality magnetics data flown over the area has outlined several areas of interest. These include weak alteration and magnetic responses and should be investigated for the possibility of Golden Grove type targets to be present at depth.

Nickel

The Back Well Prospect area was earlier drilled and sampled and although the depth extension of the gossan was not found, a laterite horizon comprising weathered ultramafic rock was intersected. This returned up to 0.68% nickel from the bottom of a hole. Eleven other drillholes returned values above 0.2% nickel, and together they define a zone with a strike of approximately 10 kilometres of which 5 kilometres is within the current tenement area.

The potential within the bedrock ultramafic units to host nickel sulphide deposits presents a worthwhile exploration target. This is especially so given the refinements in exploration methods and models of mineralisation that have been developed since the 1970s.

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PRINCIPAL SOURCES OF INFORMATION

Asten, M.W., 2000, “Comments on Melville EM data: Report 0004/2 for AngloGold Australasia”, Flagstaff GeoConsultants.

Attgold Pty Ltd, 1997, “A Geological Evaluation of Mt Singleton, E59/699, Murchison Province Western Australia” Bakkara Pty Ltd.

Collins, G & Steuart, P, December 2000 “Melville JV - M59/282-285, M59/329, M59/408,M59/428-429, M59/322-324. Annual Report for the Period 1 January 2000 to 31 December 2000” AngloGold Australasia Limited. Collins, G & Steuart, P, December 2000 “Bridge Well JV- E59/642, P59/1397,. Annual Report for the Period 1 January 2001 to 31 December 2001” Comet Resources Limited.

Hungerford, N., 1999, “Melville area, Yilgarn, WA, Interpretation of TEM surveys,3/99: Report for Acacia Resources”, Flagstaff GeoConsultants.

Hyland, S, May 2002 “Data Analysis, preliminary Deposit Evaluation and Block Model Construction, Yalgoo Gold Project for Comet Resources Limited “ Ravensgate Pty Ltd.

Magart, A. P. M. & Steuart, P. J. 1999. Melville J.V. M59/282-285, M59/329,M59/408, M59/428-429, M59/322-324, Annual Report For The Period 1/1/1999 to 31/12/1999”, Acacia Resources Internal Report 08.10154.

Magart, A.P.M. & Steuart, P.J. 1999. “Bridge Well JV E59/642, P59/1397 Annual Report for the period 1/1/1999 to 31/12/1999”, Acacia Resources.

Smith, R. 2000. “Comments on deformation history and timing of mineralisation in the Yalgoo Greenstone Belt. Memo, 22nd September 2000, AngloGold Australasia Limited.

Watkins, K. P. and Hickman, A. H. 1990. “Geological Evolution and Mineralisation of the Murchison Province, Western Australia”, Geological Survey of Western Australia, Bulletin 137.

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GLOSSARY OF TECHNICAL TERMS

Abbreviations oz – ounce, km – kilometre, m – metre, M – million, t – tonne, ha – hectare, bcm – bulk cubic metres, tpa – tonnes per annum, µm – microns,

Aeromagnetics A geophysical technique utilised from an airborne craft.

Aircore, airtrack A method of rotary drilling whereby rock chips are recovered by air flow returning inside the drill rods rather than outside, thereby providing usually reliable samples.

Alluvium Unconsolidated detrital material deposited by stream or river

Alteration A change in mineralogical composition of a rock commonly brought about by reactions with hydrothermal solutions or by pressure changes.

AmphiboliteA metamorphic crystalline rock consisting mainly of amphibole and some plagioclase.

Anomalous A departure from the expected norm. In mineral exploration this term is generally applied to either geochemical or geophysical values higher or lower than the norm.

Anticline Applied to strata which dip in opposite directions from a common ridge or axis.

Antiform A convex fold or anticline-like structure.

Archaean The oldest rocks of the Precambrian era, older than about 2,500 million years.

Auger A screw-like boring or drilling tool for use in clay or soft sediments

Auriferous Containing gold.

Banded Iron Formation (BIF) A rock composed of iron oxides and chert with distinct layers or bands

Basalt A dark, fine-grained extrusive igneous rock composed of feldspar and iron and magnesium rich minerals.

Batholith A large, domed, intrusive igneous body.

Biotite A dark brown to green, magnesium-iron mica commonly found in igneous and metamorphic rocks.

Block model A 3D array of cells constructed to enable recording of variables of interest such as grade and geology.

Breccia Fragmented rock with angular components.

Brittle deformation Fracturing and brecciation caused by applied stress, usually evident in competent rocks.

Brittle-ductile deformation

A combination of both brittle and plastic deformation produced in response to changes in stress orientation or changes in the rock competency due to progressive alteration.

Bulk density The weight of a material divided by the volume it occupies (including pore spaces).

Bulk miningA non-selective mining approach, whereby both ore and sub-grade material within a larger ore block are mined and processed collectively, usually adopted where discrimination between ore and waste is impractical.

Calcic-amphibole A group of hydrated rock-forming silicate minerals incorporating iron, magnesium, calcium and sodium, but in which calcium is the dominant cation.

Calcite A mineral of composition CaCO3 (calcium carbonate), which is a common alteration product and an essential constituent of limestones and marbles.

Calc-silicate A fine-grained metamorphic rock containing a high abundance of calcium and/or magnesium silicate minerals.

Carbonate Common mineral type consisting of carbonates of calcium, iron, and/or magnesium.

Chalcopyrite A copper iron sulphide mineral, the most important ore of copper.

Chemical symbols Au – Gold, Ni – Nickel, Cu – Copper, Zn – Zinc, Co – Cobalt, Pb – Lead, W – Tungsten, As – Arsenic, Ag – Silver,

Chert A hard extremely fine grained sedimentary rock consisting almost entirely of interlocking quartz crystals, of which flint is a dark variety

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Clastic Term to describe sedimentary rocks that consist of fragments of rock or other material that have been transported from their place of origin

Colluvium Loose soil or rock fragments accumulated by slow down-slope creep or rain-wash, as found at the base of slopes or hillsides

Conformable The relationship of stratigraphic units emplaced in an uninterrupted succession, or structural features with an attitude consistent with this succession.

Conglomerate A rock type composed predominantly of rounded pebbles, cobbles or boulders deposited by the action of water.

Cordierite A silicate of magnesium and aluminium, Mg2Al3 (AlSi5O18), found as an accessory mineral in granite and metamorphic rocks.

Craton A relatively large and stable block of the earths crust.

Cutoff grade The threshold applied in grade-tonnage reporting, wherein only blocks that return a value above the particular cutoff grade are reported.

Decline An inclined tunnel-like excavation into the ground to allow vehicle and equipment access for the mining of ore bodies.

Deflation

Process involving the removal of finer surficial material by the action of wind or water, resulting in relative concentration of the coarser, more resistant or heavier component.

Detrital gold Accumulated particles of gold derived from pre-existing mineralised rocks by the process of weathering or erosion.

Diamond drilling Mineral exploration hole completed using a diamond set or diamond impregnated bit for retrieving a cylindrical core of rock.

Dilatant Deformation characterised by an increase in volume while maintaining the overall shape

Dip The angle at which rock stratum or structure is inclined from the horizontal.

Diopside A white to light green calcium-magnesium silicate mineral.

Dip-slip movement Direction of movement along a fault that is the same as the direction of dip of the fault.

Dolerite A medium grained basic intrusive rock composed mostly of pyroxenes and sodium-calcium feldspar.

Ductile deformation Plastic deformation or shearing caused by applied stress in incompetent rocks.

Dunite An ultramafic igneous rock composed almost entirely of olivine.

Duricrust A general term for a hard crust on the surface or in the upper levels of the weathering profile.

Dyke A tabular intrusion of igneous rock that cuts across the planar structure of the surrounding rock.

Electrowinning Recovery of a metal from an ore by means of electrochemical processes.

Electrum A natural alloy of gold and silver.

Extension lineation The preferred alignment of minerals in the direction of maximum extension, frequently consistent with (or indicative of) the plunge of ore shoots.

Fabric The spatial and geometrical configuration of all those components that make up a deformed rock.

Fault A fracture in rocks along which rocks on one side have been moved relative to the rocks on the other.

Feasibility study An advanced study undertaken to determine the economic viability of a mineral deposit to a reasonable degree of accuracy.

Felsic Light coloured rock containing an abundance of any of the following:- feldspars, felspathoids and silica.

Felsic volcanic A volcanic extrusive rock, which has a high proportion of silica, potassium and sodium and low iron and magnesium.

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Ferruginous Containing iron.

Foliation The banding or lamination of metamorphic rocks as distinguished from stratification in sedimentary rocks.

Footwall The mass of rock below a fault, vein or zone of mineralisation.

Free-milling A term, generally applied to gold ores, in which the gold is readily extractable via conventional processing.

g/t Grams per tonne, a standard volumetric unit for demonstrating the concentration of precious metals in a rock, equivalent to parts per million (ppm).

Gabbro A coarse grained intrusive rock, which is low in silica and has relatively high levels of magnesium minerals

Geochemical exploration A prospecting technique which measures the content of certain metals in soils and rocks and defines anomalies for further testing.

Galena A grey sulphide ore of lead, PbS.

Geophysical Pertains to the physical properties of a rock mass.

Geophysical exploration The exploration of an area in which physical properties (eg. resistivity, gravity, conductivity, magnetic properties) unique to the rocks in the area are quantitatively measured by one or more geophysical methods.

Goethite A yellow, red to brown-black iron oxide mineral which is a common weathering product.

Gossan The oxidised, near surface part of underlying primary sulphide minerals.

Grade g/t - grams per tonne, ppb – parts per billion, ppm – parts per million, dwt - pennyweight.

Granite A medium to coarse-grained felsic intrusive rock which contains 10-50% quartz.

Granitoid A field term for a coarse-grained felsic igneous rock, resembling granite.

Granodiorite

A coarse grained igneous rock containing quartz, plagioclase (sodium - calcium feldspar) and potassium feldspar, with biotite, hornblende or pyroxene

Greenstone A collective term for slightly altered mafic igneous rocks.

Gravity circuit A part of the processing circuit, which allows the extraction of coarse gold by means of gravity.

Greenstone A general term applied in a regional context to lithologies characterised by greenschist facies metamorphism.

Grits A term applied to quartz rich sedimentary rocks in which the particle shape is angular to sub-angular and the grain size coarser than sand.

Hangingwall The mass of rock above a fault, vein or zone of mineralisation.

Heap leachA low-cost technique for extracting metals, principally gold, from ore by percolating leaching solutions through heaps of ore placed on impervious pads; generally used on low grade ores.

Hinge zone A zone along a fold where the curvature is at a maximum.

Hydrothermal A term applied to magmatic emanations rich in water and to the alteration products and mineral deposits produced by them.

IgneousA rock that has solidified from molten material or magma Intrusion/

Intrusives A body of igneous rock that invades older rocks.

Indicated resource In situ mineral resource, estimated with a moderate degree of confidence, to which economic parameters can be applied.

Indurated Hardened; applied to rocks hardened by heat, pressure, or by the addition of a cementing ingredient.

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Inferred resource In situ mineral resource, estimated with a low degree of confidence, to which economic parameters cannot be applied.

Jaspilite A banded, ferruginous, siliceous rock

Komatiite An ultramafic volcanic rock with a high magnesium content.

Kaolin A white clay mineral or hydrous aluminium silicate, usually derived by the weathering of aluminous feldspar.

K-feldspar An abbreviation for potassium feldspar.

LagA residual deposit remaining after finer particles have been blown away by wind.

Laterite Red residual soil generally leached in silica with a high alumina and/or iron content.

Limbs The margin side or edge of a fold structure.

Limonite A general term for a yellow to brown-black iron oxide minerals which are a common weathering product.

Lineament A linear feature of regional extent, generally recognisable in the topography; commonly detected by satellite imagery.

Lithology A term pertaining to the general characteristics of rocks. It generally relates to descriptions based on hand sized specimens and outcrops rather than microscopic or chemical features.

Lode deposit A vein or other tabular mineral deposit with distinct boundaries.

Mafic Descriptive of rocks composed dominantly of magnesium and iron rock - forming silicates.

Mafic (composition) Igneous rocks composed dominantly of iron and magnesium minerals.

Malachite A copper carbonate mineral found in oxidised zone of copper deposits.

Metallurgy The science of separating metals from their ores and preparing them for use via concentration, smelting and refining.

Metamorphism The process by which changes are brought about in earth’s crust by the agencies of heat, (metamorphic rocks) pressure and chemically active fluids.

Metasediment Metamorphosed sedimentary rock.

Microgranite An igneous rock of granitic composition, where the constituent minerals have crystallised more quickly to produce a finer grain-size.

Monazite A phosphate of the cerium metals and the principal source of thorium.

Monzogranite A granular plutonic rock containing approximately equal amounts of orthoclase and plagioclase feldspar, but usually with a low quartz content.

Mottled zoneThat portion of the lateritic weathering profile (below the ferruginous zone and above the pallid zone), where iron oxides are partitioned via variable depletion and enrichment to create a mottled appearance.

Mtpa Million tonnes per annum.

Muscovite A white to pale green, potassium-aluminium mica commonly found in igneous and metamorphic rocks.

Open pit A mine working or excavation open to the surface.

Ordinary kriging A geostatistical grade estimation technique, which reproduces modeled spatial variability for a given block size.

Palaeochannel An ancient preserved stream or river.

Pallid zoneThat portion of the lateritic weathering profile, below the mottled zone and above the transition zone, where iron oxides are largely depleted, imparting a pale appearance to the rock mass.

Pegmatite A very coarse grained intrusive igneous rock which commonly occurs in dyke-like bodies containing lithium-boron-fluorine-rare earth bearing minerals.

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Percussion drilling Method of drilling where rock is broken by the hammering action of a bit and the cuttings are carried to the surface by pressurised air returning outside the drill pipe.

Pisolitic Describes the prevalence of rounded manganese, iron or alumina-rich chemical concretions, frequently comprising the upper portions of a laterite profile.

Plagioclase A feldspar mineral (aluminium silicate) in which calcium and sodium are the dominant cations.

Plunge The attitude of a line in a plane which is used to define the orientation of fold hinges, mineralised zones or intersecting planes and structures.

Porphyry An igneous rock that contains conspicuous crystals in a fine-grained matrix.

Portal The entrance of a horizontal or near horizontal mine opening or decline.

Post-tectonic Occurring after a major deformational and/or metamorphic event.

Pre-tectonic Prior to metamorphism and deformation.

Primary Fresh or unoxidised rock or ore, occurring below the effects of weathering and oxidation.

Pyrite, Pyrrhotite A common pale bronze iron sulphide mineral

Quartz Mineral species composed of crystalline silica.

Quartzite A sandstone which has been metamorphosed or indurated by the recrystallisation of silica.

Quartzo-feldspathic Gneiss A metamorphic rock containing abundant quartz and feldspar.

Quartzose Quartz-rich, usually relating to clastic sedimentary rocks.

Radiometrics Geophysical technique measuring emission from radioactive isotopes.

Recovery The proportion of valuable minerals which can be economically extracted.

Reef A term used to describe large quartz veins or lodes.

Reserve A Measured or Indicated Mineral Resource, to which mining parameters have been applied to determine the component that can be economically mined and processed.

Reverse Circulation Percussion (RC) Drilling method employing a repeated hammering action on a drill bit, which yields sample material, which is delivered to the surface inside the rod string by compressed air.

Rock Chip Sample A series of rock chips or fragments taken at regular intervals across a rock exposure.

Rotary Air Blast (RAB) Drilling method employing a rotary action on a drill bit, which yields sample material

delivered to the surface outside the rod string by compressed air.

Saprolite Disintegrated somewhat decomposed rock that lies in its original place.

Schist A crystalline metamorphic rock having a foliated or parallel structure due to the

recrystallisation of the constituent minerals.

Scoping Study A preliminary study to determine the likely viability of a project to a relatively low degree

of accuracy.

Sedimentary Rock Rocks formed by deposition of particles carried by air, water or ice.

Selective Mining The discrimination and mining of discrete ore intervals, usually based on geology or

grade.

Serpentinised Hydrothermally altered magnesium rich rock dominated by serpentine minerals

Shaft A vertical or inclined tunnel from the surface, through which underground excavations

can be entered, and by which, ore and waste may be removed.

Shale Fine-grained sedimentary rock with well defined bedding planes.

Shear zone A zone in which shearing has occurred on a large scale, such that the rock is deformed

in a dominantly ductile manner.

Sheeted veins Generally applied to a group of closely spaced, parallel fractures filled with mineral

matter.

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Silcrete A deposit cemented by silica commonly formed in the weathering profile.

Silicification Replacement by, or introduction of, appreciable quantities of silicon dioxide minerals.

Silicified Alteration of a rock by introduction of silica

Sill A tabular intrusion that parallels the planar structure of the surrounding rock

Sinistral Lateral movement on a fault, whereby the far side block has moved left, relative to the

near side.

Sphalerite A black to brown sulphide ore of zinc, ZnS.

Stockwork A network of veins.

Stope An underground excavation in an orebody

Stoped out Material that has been exhumed replaced or assimilated.

Stratigraphy The study of formation, composition and correlation of sedimentary rocks.

Strike The direction of bearing of a bed or layer of rock in the horizontal plane.

Stripping ratio The ratio of the volume of waste material removed to the volume of ore removed, used

in connection with open pit mining.

Sulphide A general term to cover minerals containing sulphur and commonly associated with

mineralisation.

Supergene An enrichment or deposit formed by descending fluids in weathered rock.

Supergene enrichment Solution of metal ions from the upper part of an ore deposit, usually by surface waters,

and its re-deposition below, creating a zone of enrichment.

Supracrustal rocks Layered upper-crustal rock succession sitting on an older deformed basement.

Syn-tectonic Contemporaneous with metamorphism and deformation.

Tailings Finely ground waste product from the crushing and grinding of ore.

Tectonic Forces or movements resulting in the formation of structural features.

Tertiary Subdivision of geological time covering the period from 65 million years to 1.6 million

years ago.

Tonalite A coarse grained granitic rock composed of quartz, sodium-calcium feldspar and a

high proportion iron rich minerals.

Tourmaline A complex aluminium silicate containing boron.

Ultramafic An igneous rock comprised chiefly of mafic minerals Volcanics Collective term for

extrusive igneous rocks.

Volcaniclastic Sediments comprising rock fragments derived by explosion or eruption from a volcanic

vent.

Wallrock Rock forming the walls of veins, lodes or igneous intrusions.

Wireframe A computer technique to enclose a volume of interest within a series of three-

dimensional coordinates, which form an enveloping surface.

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8 INDEPENDENT ACCOUNTANT’S REPORT

STANTON PARTNERS CORPORATE PTY LTDA.C.N 063 036 3311 HAVELOCK STREET

WEST PERTH 6005WESTERN AUSTRALIA

TELEPHONE: (08) 9481 3188FACSIMILE: (08) 9321 1204

e-mail: [email protected]

9 September 2003

The DirectorsProsperity Resources Limited9th Floor190 St Georges TerracePERTH WA 6000

Dear Sirs

RE: INDEPENDENT ACCOUNTANT’S REPORT

1. Introduction

This report has been prepared at the request of the Directors of Prosperity Resources Limited (“Prosperity” or “the Company”) for inclusion in a Prospectus to be dated on or around 12 September 2003 (“the Prospectus”) relating to the proposed issue by Prosperity of up to 14,000,000 shares to be issued at a price of 20 cents per share.

2. Basis of Preparation

This report has been prepared to provide investors with information on historical results, the assets and liabilities of Prosperity and the pro-forma consolidated assets and liabilities of Prosperity as noted in Appendix 3. This report does not address the rights attaching to the securities to be issued in accordance with the Prospectus, nor the risks associated with the investment. Stanton Partners Corporate Pty Ltd has not been requested to consider the prospects for Prosperity, the securities on offer and related pricing issues, nor the merits and risks associated with becoming a shareholder and accordingly, has not done so, nor purports to do so. Stanton Partners Corporate Pty Ltd accordingly, takes no responsibility for those matters or for any matter or omission in the Prospectus, other than responsibility for this report.

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3. Background

Prosperity Resources Ltd was incorporated on 2 January 2003 with an issued capital of $7,000, represented by 7,000,000 ordinary shares issued at 0.1 cents each. 4,000,000 shares were issued to Classico Holdings Pty, a company controlled by Mr Richard Dawson and 3,000,000 shares were issued to Ravensgate Pty Ltd, a company controlled by Mr David Holden. Messrs Dawson and Holden are directors of Prosperity.

Between February and June 2003, the Company raised a further $117,000 by way of an issue of 1,462,500 ordinary shares at 8 cents per share to various seed investors. Since 30 June 2003, a further $119,000 was raised from investors by way of issues of 1,487,500 shares at 8 cents each.

On 10 February 2003, the Company or nominee entered into an Option Agreement with Comet Resources Ltd (“Comet”) and $30,000 was paid to Comet as an option fee to acquire various mineral tenements in the Yalgoo goldfields of Western Australia. To exercise the option, Prosperity will issue 6,000,000 shares in Prosperity and issue 2,000,000 share options, exercisable at 20 cents per share, on or before 30 November 2005. It is proposed that the option to acquire the tenement interests will be exercised as part of the Australian Stock Exchange Ltd (“ASX”) listing process. The Option Agreement refers to a deemed issue price of 10 cents per share (relating to the 6,000,000 shares), however under Australian Accounting Standards the shares may be issued for accounting purposes at 20 cents per share as this is the price that shares will be issued to investors under the Prospectus. The Yalgoo prospects being acquired from Comet, have been acquired by Prosperity Resources (Yalgoo) Pty Ltd (“PRY”), a wholly owned subsidiary of Prosperity. PRY was formed in March 2003. The option period expires on 30 November 2003 or such other period as agreed between the parties. There are several agreements between Comet and other parties that have an effect on the Option Agreement between Comet and Prosperity, along with various native title claims over various tenement areas in which Comet has an interest in (and who has given Prosperity the right to acquire its interests). These are the Option and Sale Agreement with Anthony Vodanovich of 19 March 2002, the Pandawn Deed, Sale and Royalty Agreement of 6 July 1999 and the Melville Joint Venture Agreement and various amendments. Prosperity has agreed to assume the obligations of Comet if it exercises the option by entering into various Deeds of Assignment and Assumption. Mr Roger Jones is a director of and shareholder in Comet and a director of Prosperity.

In February 2003, the Company entered into a Letter Agreement with Mawson West Limited (“Mawson West”) whereby the Company has agreed to farm in the Paynes Find Joint Venture tenements (four applications) in which Mawson West has an interest. Prosperity will earn up to a 60% interest by committing to spend a minimum of $500,000 over a three-year period and meeting the minimum expenditure requirements of the Department of Mineral and Petroleum Resources, once the tenements (4 exploration licences) are granted. The Paynes Find tenement interests are being acquired by Prosperity Resources (Mt Gibson) Pty Ltd, (“PRM”), a wholly owned subsidiary of Prosperity. PRM was formed in March 2003. The Paynes Find Agreement expires on or around 27 December 2003 if Prosperity is not listed on the ASX by that date.

On 6 March 2003, the Company or nominee entered into a letter agreement with Pasine Holdings Pty Ltd (“Pasine”) for the purchase of two exploration licence applications. Once granted, Pasine is to receive $3,000 along with the allotment of 300,000 shares. The deemed issue price is 10 cents, however for accounting purposes 20 cents per share has been used, being the initial public offering price. On 6 March 2003, the Company or nominee entered into a letter agreement with Waybury Holdings Pty Ltd (“Waybury”) (for the purchase of two mining leases. Waybury is to receive $5,000 payment plus a royalty. Both the Pasine and Waybury acquisitions have been acquired by PRY.

On 19 March 2003, an option agreement was reached with Murchison Resources Pty Ltd for Comet or nominee to acquire one prospecting licence (“PL”) in the Yalgoo goldfields by way of a non refundable payment of $10,000 and if the options is exercised Prosperity is to pay $50,000 upon Prosperity listing

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on the ASX and $80,000 in the event that more than 10,000 ounces of gold is produced from the PL. In addition royalties are payable.

On 9 May 2003, the Company or nominees entered into a letter Agreement with Marak Mining Pty Ltd (“Marak”) whereby Marak granted Prosperity an option to purchase a mining lease. Marak is to receive a payment of $15,000 plus GST in consideration of Marak granting Prosperity a twelve-month option to purchase. If exercised, Prosperity is to pay Marak a further payment of $15,000 and allot 390,000 shares at a deemed issue price of 20 cents per share to Marak. On 19 July 2003, the Company or nominee entered into a letter agreement with Alluvial Gold Treatment Pty Ltd (“Alluvial”) whereby Alluvial granted Prosperity a twelve-month option to purchase a mining lease. A non-refundable deposit of $12,000 is payable and if exercised a payment of $40,000 is payable to Alluvial on the commencing of trading of the Company on the ASX and a further payment of $100,000 to Alluvial twelve months after listing. Royalties are also payable. The Murchison, Marak and Alluvial tenement interests are being acquired by PRM.

Further details on all of the above agreements including terms and conditions and various royalties payable are outlined in the Solicitors Report on Mining Tenements (Part II) included under section 9 of the Prospectus. Potential investors should read the Prospectus in full that includes a geological technical report and a solicitors report on mining tenements. We make no comments as to ownership or values of the mineral tenement interests.

The Company has entered into an employment agreement with Mr Richard Dawson (director of Prosperity) to provided management, secretarial and corporate services. The term is for a minimum period of three years and the first years’ fee is $120,000 plus statutory superannuation and the provision of a fully maintained 4 wheel -drive vehicle and parking. After year one, increases are to be negotiated with Richard Dawson, however the minimum increase will be CPI. The Company has entered into a two-year service agreement with Ravensgate Pty Ltd, who is to supply the services of Mr David Holden to the Company for a minimum of ten days per month at the rate of $660 per day (inclusive of GST).

4. Scope of Examination

You have requested Stanton Partners Corporate Pty Ltd to prepare an Independent Accountant’s Report on:

(i) The results of Prosperity for the period from incorporation to 30 June 2003;

(ii) Statement of Financial Position of Prosperity as at 30 June 2003;and

(iii) The pro-forma Statement of Financial Position of Prosperity as at 30 June 2003 and the consolidated Statement of Financial Position of Prosperity and its subsidiaries adjusted to include funds to be raised by the Prospectus and the completion of transactions referred to in note 2 of Appendix 3.

All of the financial information referred to in this report has not been audited, however has been subject to audit review. We have however examined the financial statements and other relevant information and made such enquiries, as we considered necessary for the purposes of this report. The scope of our examination was substantially less than an audit examination conducted in accordance with Australian Auditing Standards and accordingly, we do not express such an opinion.

Our examination included:

(i) Discussions with Directors and other key management of Prosperity;

(ii) Review of contractual arrangements;

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(iii) A review of publicly available information; and

(iv) A review of work papers, accounting records and other documents.

5. Opinion

In our opinion, the pro-forma statement of financial position and pro-forma consolidated statement of financial position as set out in Appendix 2 presents fairly, the pro-forma statement of financial position of Prosperity and pro-forma consolidated statement of financial position of Prosperity and its two subsidiaries as at 30 June 2003 in accordance with the accounting methodologies required by Australian Accounting Standards on the basis of assumptions and transactions set out in Appendix 3.

No opinion is expressed on the historical results, as shown in Appendix 1, except to state that nothing has come to our attention which would require any further modification to the financial information in order for it to present fairly, the results of the periods identified.

To the best of our knowledge and belief, there have been no other material items, transactions or events subsequent to 30 June 2003, that have come to our attention during the course of our review which would cause the information included in this report to be misleading.

6. Other matters

At the date of this report, Stanton Partners Corporate Pty Ltd or Stanton Partners do not have any material interest in Prosperity either directly or indirectly, or in the outcome of the offer. Stanton Partners, a firm that is related to Stanton Partners Corporate Pty Ltd were appointed as auditors of Prosperity in January 2003. Stanton Partners Corporate Pty Ltd and Stanton Partners were not involved in the preparation of any other part of the Prospectus, and accordingly, make no representations or warranties as to the completeness and accuracy of any information contained in any other part of the Prospectus.

Stanton Partners Corporate Pty Ltd consents to the inclusion of this report (including Appendices 1 to 3) in the Prospectus in the form and content in which it is included. At the date of this report, this consent has not been withdrawn.

Yours faithfully

STANTON PARTNERS CORPORATE PTY LTD

J P Van Dieren FCA

Director

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INDEPENDENT ACCOUNTANT’S REPORT

APPENDIX 1

UNAUDITED STATEMENT OF FINANCIAL PERFORMANCE

2 January 2003 to 30 June 2003

$

Operating Revenue 56

Operating costs (15,255)

Net (loss) before tax (15,199)Income Tax expense attributable to net loss -

Net (loss) after tax (15,199)

APPENDIX 2

UNAUDITED STATEMENTS OF FINANCIAL POSITION

Note

Unaudited 30 June

2003

$

Pro-formaUnaudited

(Parent entity)30 June

2003$

Unaudited Consolidated

Pro-forma30 June

2003$

Current AssetsCash assets

Receivables3

5,636

14,412

2,404,851

14,412

2,404,851

14,412Total Current Assets 20,048 2,419,263 2,419,263

Non Current Assets

Investment in subsidiaries

4 - - -

Loan to subsidiaries 5 168,538 1,746,538 -Exploration expenditure 6 - - 1,746,538Total Non Current Assets 168,538 1,746,638 1,746,538Total Assets 188,586 4,185,801 4,165,801

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Note

Unaudited 30 June

2003

$

Pro-formaUnaudited

(Parent entity)30 June

2003$


Pro-forma30 June

2003$

Current Liabilities Payables 114,785 100,000 100,000Total Current Liabilities 114,785 100,000 100,000

Total Liabilities 114,785 100,000 100,000Net Assets (deficiency) 73,801 4,065,801 4,065,801

Equity

Contributed Equity 8 89,000 4,091,000 4,091,000

Accumulated Losses 9 (15,199) (25,199) (25,199)

Total Equity (deficiency) 73,801 4,065,801 4,065,801

To be read in conjunction with Appendix 3

INDEPENDENT ACCOUNTANT’S REPORT

APPENDIX 3

NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

AND STATEMENTS OF FINANCIAL POSITION

1. Statement of Significant Accounting Policies

(a) Basis of Accounting

The unaudited Statement of Financial Performance and unaudited Statements of Financial Position have been prepared in accordance with applicable accounting standards, the Corporations Act 2001 and mandatory professional reporting requirements in Australia and we have made such disclosures as considered necessary. They have also been prepared on the basis of historical cost and do not take into account changing money values. The accounting policies have been consistently applied, unless otherwise stated.

(b) Income Tax

The Company adopts the liability method of tax effective accounting, whereby the income tax expense in the Statement of Financial Performance is based on the operating profit before tax adjusted for permanent differences. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of

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realisation of the benefit. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income tax legislation, the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and that the Company will comply with the conditions of deductibility imposed by the law.

(c) Exploration, evaluation and development expenditure

Exploration, evaluation and development costs are accumulated in respect of each separate area of interest. Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

When an area of interest is abandoned or the Directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.

Amortisation is not charged on costs carried forward in respect of areas of interest in the development phase until production commences.

(d) Accounts Payable

Accounts payable represent the principal amounts outstanding at balance date, plus, where applicable, any accrued interest.

(e) Recoverable Amount of Non Current Assets

The carrying amount of non- current assets are reviewed annually by Directors to ensure they are not in excess of the recoverable amounts from those assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employed and subsequent disposal. The expected net cash flows have not been discounted to present values in determining recoverable amounts.

(f) Operating Revenue

Revenue represents interest received and reimbursements of exploration expenditures.

(g) Principles of Consolidation

The pro-forma consolidated statement of financial position incorporates the assets of all entities controlled by Prosperity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlled entities are shown separately in the consolidated statement of financial performance and statement of financial position respectively. Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance 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.

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(h) Investments

Interest in listed and unlisted securities, other than controlled entities and associates in the consolidated financial statements, are brought to account at cost and dividend income is recognised in the Statement of Financial Performance when receivable. Controlled entities are accounted for in the consolidated financial statements as set out in note (g).

(i) Goodwill on Consolidation

Goodwill on consolidation has been calculated as the excess of cost of acquisition over the fair value of their identifiable net assets acquired. Goodwill on consolidation will be amortised by systematic charges against income over the time that the benefits are expected arise. In the case of Prosperity, the excess of the cost over the book value of assets acquired in PRY and PRM have been allocated by the directors of Prosperity as part of the fair value of the exploration projects in PRY and PRM.

2. Actual and Proposed Transactions to Arrive at Pro-forma Unaudited Statement of Financial Position and Consolidated Statement of Financial Position

Actual and proposed transactions adjusting the 30 June 2003 unaudited Statement of Financial Position in the pro-forma Statement of Financial Position of Prosperity and the pro-forma consolidated Statement of Financial Position (of the Prosperity Group of companies) are as follows:

(a) The issue of 1,487,500 ordinary shares at 8 cents per share to raise a gross $119,000;

(b) The payment of accounts payable of $114,785 and further operating costs of $10,000;

(c) The issue of 14,000,000 ordinary shares at 20 cents each pursuant to the Prospectus to raise a gross $2,800,000;

(d) The further payment of expenses of the public issue totalling an estimated $255,000 and expensed against contributed equity (total capital raising costs of $290,000);

(e) The issue of 6,000,000 vendor ordinary shares to Comet at an issue price of 20 cents each and the issue of 2,000,000 share options, exercisable at 20 cents per share on or before 30 November 2005 as consideration to exercise the option to acquire mineral interests in the Yalgoo goldfields;

(f) The entering into an employment contract with Mr Richard Dawson and a management contract with a company controlled by Mr David Holden;

(g) The entering into various Deeds of Assignment referred to in the Solicitors Report under section 9 of the Prospectus;

(h) The payment of $8,000 by Prosperity on behalf of PRM as part consideration to acquire Mount Gibson tenements from Pasine and Waybury and the issue of 300,000 shares post listing at an issue price of 20 cents per share being the issue price of the public issue;

(i) The payment of $50,000 by Prosperity on behalf of PRY as part consideration to acquire interests in tenements from Murchison Resources Pty Ltd;

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(j) The payment on behalf of PRY of $30,000 to Marak and the issue of 390,000 shares to Marak at an issue price of 20 cents per share; and

(k) The payment on the behalf of BRY of $52,000 to Alluvial and the accrual of $100,000 payable to Alluvial 12 months after listing of Prosperity on the ASX.

Note

2

Unaudited 30 June

2003

$

UnauditedPro-forma

(Parent Entity)30 June

2003$


Pro-forma30 June

2003$

3. Cash at bank

The movements in cash at bank are as follows:Unaudited 30 June 2003 5,636 5,636 5,636

Issue of shares to investors (a) - 119,000 119,000

Payment of payables/other costs (b) - (124,785) (124,785)Issue of shares pursuant to Prospectus

(c) - 2,800,000 2,800,000

Prospectus issue costs (d) (255,000) (255,000)

Payments to Pasine and Waybury (h) - (8,000) (8,000)Payments to Murchison Resources Pty Ltd

(i) - (50,000) (50,000)

Payments to Marak (j) - (30,000) (30,000)

Payments to Alluvial (k) - (52,000) (52,000)

5,636 2,404,851 2,404,851

4. Investments in subsidiariesShares in PRY - - -

Shares in PRM - - -

- - -

5. Loan to Subsidiaries (Receivables)

Owing by subsidiaries at 30 June 2003

164,538 164,538 -

Additional advances (refer note 2) - 1,578,000 -

Owing by subsidiaries at the date of listing

164,538 1,746,538

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The loans to subsidiaries are unsecured and interest free. The recoverability of the loans (present and future advances) and the recoverability of the capitalised exploration costs (refer note 6) is subject to the successful commercialisation of the projects owned by the subsidiaries and the parent entity. In the event of the failure to commercialise the exploration projects (by development or sale), the loans may not be all to be repaid to Prosperity and the costs pertaining to the projects may need to be written off. The amounts owing assume the exercise of all option agreements.

Note 2

Unaudited 30 June

2003

$

UnauditedPro-forma

(Parent Entity)30 June

2003$


Pro-forma30 June

2003$

6. Exploration ExpenditureExploration expenditure to 30 June 2003

- - 168,538

Issue of shares to Comet (e) - - 1,200,000

Payments to Pasine and Waybury (h) - - 8,000

Issue of shares to Pasine (h) - - 60,000Payment to Murchison Resources Pty Ltd

(i) - - 50,000Payments and share issues to Marak

(j) 108,000

Payments/ accruals to Alluvial (k) 152,000

- - 1,746,538

7. PayablesAccounts payable 114,785 114,785 114,785Less: Payment of accounts

payable (b) - (114,785) (114,785)

Owing to Alluvial (k) - 100,000 100,000

- 100,000 100,000

8. Contributed EquityShare Capital

8,462,500 shares at 30 June 2003 124,000 124,000 124,000

1,487,500 shares at 8 cents each (a) - 119,000 119,00014,000,000 shares at 20 cents each

(c) - 2,800,000 2,800,000

6,000,000 shares at 20 cents each (e) - 1,200,000 1,200,000

300,000 shares at 20 cents each (h) - 60,000 60,000

390,000 shares at 20 cents each (j) - 78,000 78,000

124,000 4,381,000 4,381,000

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Less: Share issue costs (d) (35,000) (290,000) (290,000)

Pro-forma (30,640,000 shares) 89,000 4,091,000 4,091,000

In the event that the minimum subscription of $2,200,000 only is received, the number of shares on issue would be 27,640,000 and the net issued capital (contributed equity) after share issue costs of $260,000 would be $3,521,000. Cash assets would reduce from $2,404,851 (refer note 3) to $1,834,851 before the collection of receivables.

9. Accumulated Losses

Accumulated losses at beginning of period

15,199 15,199 15,199

Further operating costs (b) 10,000 10,000 10,000

Accumulated losses at end of period

25,199 25,199 25,199

10. Contingent Liabilities

Based on discussions with the Directors and legal advisors, to our knowledge, the Company has no material contingent liabilities other than potential commitments as noted in the various Deeds of Assignment referred to in the Solicitor’ Report under section 9 of the Prospectus, royalty payments and a possible payment of $80,000 due to Murchison Resources Pty Ltd. As noted in the Solicitors’ Report, there are potential native title claims over the tenements in which Prosperity has an interest. This report assumes the exercise of all options pursuant to the agreements set out in the report and the Solicitors Report on Tenements set out in Section 9 of the Prospectus.

11. Rental of Premises Commitments

The Company has no written rental tenancy agreement. The Company plans to rent premises after listing of the Company on the ASX.

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12. Exploration commitments

For details on proposed exploration commitments on mineral tenements, refer to the Independent Geologists Report in the Prospectus. Under the Letter Agreement with Mawson West, the Company is committed to spend $500,000 over a minimum period of three years. Furthermore, pursuant to various agreements, the Company is committed to spend a minimum of $35,000 in the first year on other tenement areas. Under the agreement with Comet, Comet is invoiced 50% of the costs incurred by Prosperity until listing on the ASX, however Prosperity will reimburse Comet for payments made to Prosperity once Prosperity is listed. To 30 June 2003, $33,679 inclusive of GST has been invoiced. The statements of financial position have been adjusted to assume that Prosperity will need to repay the funds back to Comet.

13. Management and Employment Contracts

The Company has entered into an employment contract with Mr Richard Dawson and a management contract with Ravensgate Pty Ltd, a company controlled by Mr David Holden. The contracts are conditional upon the Company’s shares being quoted on the ASX. Outstanding commitments from the date of listing of the Company on the ASX under the employment and management contracts are estimated as follows:

Note 2Unaudited 30 June

2003

$

UnauditedPro-forma30 June

2003$

UnauditedConsolidated

Pro-forma30 June

2003$

Due 1 year 220,000 220,000

Due 1 to 2 years - 224,000 224,000

Due 2 to 3 years - 156,000 156,000

- 601,000 601,000

The management contract with Ravensgate Pty Ltd assumes a minimum 120 days of service by Ravensgate Pty Ltd (David Holden) at the rate of $600 per day for two years (exclusive of GST).

14. Share Options

Post issue of shares pursuant to the Prospectus

2,000,000 share options exercisable at 20 cents per share on or before 30 November 2005 (assumes the option to acquire tenement interests from Comet has been exercised).

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9 SOLICITOR’S REPORT ON TENEMENTS

12 September 2003

The Board of DirectorsProsperity Resources LimitedLevel 9, 190 St Georges TerracePERTH WA 6000

Dear Sirs

SOLICITOR’S REPORT ON MINING TENEMENTS

This report is prepared for inclusion in a prospectus (Prospectus) to be issued by Prosperity Resources Limited (Company) on or about 12 September 2003.

1. Assets

As at the date of this report, the Company has entered into agreements with Comet Resources Limited, Mawson West Ltd, Pasine Holdings Pty Ltd, Waybury Holdings Pty Ltd, Marak Mining Pty Ltd, Murchison Resources Pty Ltd and Alluvial Gold Treatment Pty Ltd (Agreements). Under the Agreements, the Company has acquired or is entitled, subject to completion of the Agreements, to acquire an interest in various granted mining tenements and in various applications for the grant of mining tenements. In addition, the Company has made applications for the grant of mining tenements in its own right (all granted mining tenements and all applications, collectively referred to as the Tenements).

A schedule of Tenements is attached to and forms part of this report (Schedule). Part I of the Schedule contains a list of the Tenements. Part II of the Schedule contains a summary of the material terms of the Agreements. Part III of the Schedule contains a summary of the status of the native title claims existing over the Tenements.

2. Searches

For the purposes of this report, we have conducted searches and made enquiries in respect of all the Tenements as follows:

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(a) we have reviewed searches of the Tenements in the register maintained by the Western Australian Department of Industry and Resources (DIR). These searches were conducted on 24 January 2003, 28 January 2003, 12 February 2003, 13 February 2003, 20 March 2003, 26 March 2003, 10 July 2003 and 19 August 2003. Updated searches of the Tenements were obtained on 21 August 2003 to confirm that no changes had occurred in respect of the Tenements since the initial searches were conducted;

(b) we have reviewed all transfers of the Tenements;

(c) we have obtained “Quick Appraisal” reports from the DIR, summarising information available in the “TENGRAPH” system maintained by the DIR to determine if any native title claims are registered over the area of the Tenements. These searches were conducted on 13 February 2003, 20 March 2003, 26 March 2003, 10 July 2003 and 19 August 2003. Updated searches were also conducted on 21 August 2003 and 22 August 2003 to confirm that no relevant changes had occurred in respect of the claims since the initial searches were conducted; and

(d) we have obtained a register of extracts from the Register of Native Title Claims maintained by the National Native Title Tribunal (NNTT) in respect of registered native title claims identified in the Quick Appraisals. This material was obtained on 13 February 2003. Updated searches were also conducted on 22 August 2003 to confirm that no relevant changes had occurred in respect of the claims since the initial searches were conducted.

The Company’s right to acquire an interest in the Tenements depends on the enforceability of the Agreements and the parties to the Agreements complying with and fulfilling the terms and conditions of such Agreements. On the basis of the searches conducted and our review of the Agreements (assuming all the Agreements were executed as at 21 August 2003), subject to the enforceability of such Agreements, we consider that this report (and the Schedule) provides an accurate statement as to the status of the Tenements as at 21 August 2003.

Where the Schedule refers to a granted Tenement in which the Company is not recorded as being registered as the holder of a legal interest, the Company may lodge a caveat to protect its interest and we have advised the Company to do so in order to protect its prior equitable claim to an interest in the Tenement.

In addition, we have advised the Company to register the relevant Agreement against the relevant Tenement to ensure compliance with the requirement of the Mining Act 1978 (WA) (Mining Act) to register dealings in Tenements.

3. Opinion

As a result of our searches and enquiries, but subject to the assumptions and qualifications set out below, we are satisfied that, as at the date of the relevant searches:

(a) the details of the Tenements included in this report are accurate as to the status of the Tenements and the Company’s interest in the Tenements;

(b) where title to a Tenement has not been granted or an application for extension of a term of a Tenement is pending, that fact is disclosed in the Schedule or the Notes;

(c) all applicable rents due under the Mining Act in respect of the Tenements have been paid, unless otherwise noted in the Schedule;

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(d) all expenditure requirements under the Mining Act have been met or exemptions obtained, unless otherwise noted in the Schedule;

(e) under the terms and conditions of the Agreements (assuming all agreements were executed as at 21 August 2003), the Company has the right to acquire an interest in the Tenements on the terms set out in the Agreements, subject to the matters referred to in this report or the Schedule; and

(f) Tenements granted prior to 1 January 1994 have been validated by the Native Title Act 1993 as amended by the Native Title Amendment Act 1998 (Cth) (which as amended is referred to as the NTA). Tenements granted between 1 January 1994 and 24 December 1996 have been validated by the NTA if the subject land was freehold or “exclusive possession” leasehold (which we have not checked). Tenements granted since 23 December 1996 are valid assuming the applicable processes prescribed by the NTA were complied with by the State Government (which we have not checked). The valid grant of any of the current applications for Tenements which may affect native title will require compliance with the applicable processes of the NTA.

4. Tenements

The Tenements comprise prospecting licences, exploration licences and mining leases granted or applied for under the Mining Act.

(a) Prospecting Licence

A prospecting licence remains in force for a period of 4 years and does not carry a right of renewal. Pursuant to sections 49(1) and 75(7) of the Mining Act, the holder of a prospecting licence may apply for and, subject to the Mining Act and the conditions of the licence, has the right to have granted a mining lease over any of the land within the licence. Applications have been made to convert three of the prospecting licences set out in the Schedule, the terms of which have expired, to mining leases. Prior to the terms of the other prospecting licences expiring, applications may be made to convert them to mining leases. Where an application has been made to convert a prospecting licence to a mining lease, section 49 of the Mining Act provides that the prospecting licence remains in force until the application for the mining lease is determined. There is no restriction on assignment of a prospecting licence.

(b) Exploration Licence

An exploration licence remains in force for a period of 5 years. The Minister for State Development (Minister) may extend the term by a further period or periods of 1 or 2 years. An exploration licence cannot be assigned during the first year of its term without the prior written consent of the Minister. Thereafter, there is no restriction on assignment. Pursuant to sections 67(1) and 75(7) of the Mining Act, the holder of an exploration licence may apply for and, subject to the Mining Act and the conditions of the licence, has the right to have granted one or more mining leases over any of the land within the area of the licence. Prior to the expiration of the term of any of the exploration licences set out in the Schedule, an application may be made to convert it to one or more mining leases.

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(c) Mining Lease

A mining lease remains in force for a period of 21 years and may be renewed for successive periods of 21 years. It is a breach of a condition of a mining lease to assign it without the prior written consent of the Minister. In the case of a mining lease application which is a conversion from either a prospecting licence or an exploration licence, if the licence is assigned, the mining lease application continues in the name of the assignee.

(d) Generally Applicable Conditions

Mining tenements are granted subject to various conditions prescribed by the Mining Act including payment of rent, compliance with minimum expenditure and reporting requirements.

Certain conditions that apply to one or more of the Tenements include standard environmental conditions. Tenements are also subject to statutory requirements of certain other Acts including Aboriginal heritage legislation, environmental protection legislation and rights in water legislation. These standard conditions are not detailed in the notes to the Schedule.

(e) Specific Conditions

Specific conditions applicable to the individual Tenements are detailed in the notes to the Schedule.

(f) Encumbrances

Encumbrances and caveats applicable to the individual Tenements are mentioned in the notes to the Schedule.

5. Aboriginal Sites

Tenements in Western Australia are granted subject to an endorsement reminding the tenement holder of its obligation to comply with the requirements of the Aboriginal Heritage Act 1972 (WA) (Heritage Act).

The Heritage Act protects sites and areas of significance to Aboriginal persons. The Minister’s consent is required where any use of land is likely to result in the excavation or other alteration of or damage to an Aboriginal site or any objects on or under that site.

There is no requirement for a site to be registered in any public manner or, indeed, be in any way acknowledged as an Aboriginal site for it to qualify as an Aboriginal site for the purposes of the Heritage Act. A register of sites is maintained by the Aboriginal Affairs Department of Western Australia. The Heritage Act applies to all Aboriginal sites and objects whether or not they are registered under the Heritage Act. For that reason, we have not conducted a search of that register for the purposes of this report.

A practical method of minimising the danger of unintentional disturbance of a site, is to undertake Aboriginal heritage surveys with local Aboriginal communities before the commencement of land disturbing activities. This is an informal process because the Heritage Act does not actually prescribe a mechanism for identifying Aboriginal sites. We are not aware of any heritage surveys of the land the subject of the Tenements having been conducted to date.

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The Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) (Heritage Protection Act) also affords some protection to Aboriginal sites in Western Australia. It allows declarations to be made which protect or preserve objects or areas which are of significance to Aboriginals, whether situated on private or Crown land.

Two types of declarations may be made in relation to significant Aboriginal objects or Aboriginal areas (being objects or areas of significance to Aboriginals in accordance with Aboriginal tradition) under the Heritage Protection Act:

(a) emergency declarations of preservation which remain in force for a maximum of 60 days; and

(b) declarations of preservation (which remain in force for the terms specified in the declarations).

Before making a prominent declaration in relation to an area, the Minister for Aboriginal Affairs must commission a report on the area, which addresses specific matters such as the significance of the area, the extent of the area to be protected and the effects of the declaration on any non-Aboriginal interests in the land. Compensation is payable by the Minister for Aboriginal Affairs to a person who is, or is likely to be affected by a permanent declaration of preservation.

It is an offence to contravene a declaration made under the Heritage Protection Act.

In respect of these sites and any other sites identified on any of the Tenements, the Company needs to ensure that any interference with such sites is in strict conformity with the provisions of the Heritage Act and the Heritage Protection Act.

6. Native Title – MABO and Native Title Legislation

On 3 June 1992, the High Court of Australia held in Mabo v. Queensland (no.2) (1992) 175 CLR 1 that the common law of Australia recognises a form of native title. In order to succeed in a native title claim the persons making such claim must show that they enjoy certain customary rights and privileges in respect of a particular area of land and that by these rights and privileges they have a connection with that land. Such a claim will not be recognised if the native title has been extinguished, either by voluntary surrender to the Crown, death of the last survivor of a community entitled to native title, abandonment of the land in question by that community or the granting of a wholly “inconsistent interest” in the land by the Crown. An example of an inconsistent interest would be the granting of a freehold or some type of exclusive possession leasehold interest in the land. The granting of a lesser form of interest not conferring exclusive possession will not extinguish native title as it would not be wholly inconsistent with native title rights and interests.

The Racial Discrimination Act 1975 (Cth) (RDA) enacted by the Federal Parliament is binding on the State of Western Australia, and generally makes racial discrimination unlawful.

The Commonwealth Parliament responded to the Mabo decision by passing the Native Title Act 1993 (Cth). This Act enabled a State Parliament to validate any mining tenements granted prior to its commencement which might otherwise have been invalid by reason of the RDA. The Native Title Act 1993 (Cth) was extensively amended by the Native Title Amendment Act 1998 (Cth). These amendments include the ability of a State Parliament to validate any titles which may have been invalidly granted over pastoral leases and certain other leasehold interests during the period 1 January 1994 to 23 December 1996. The State of Western Australia has enacted the validating legislation contemplated by the NTA: the Titles (Validation) and Native Title (Effect of Past Acts) Act 1995 as amended by the Titles (Validation) and Native Title (Effect of Past Acts) Amendment Act 1999.

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7. Native Title – Native Title Claims

Persons claiming to hold native title may lodge an application for determination of native title with the Federal Court. The Court will then refer the application to the Native Title Registrar for the registration test.

If the Native Title Registrar is satisfied that the lodged claim meets the registration requirements set out in the NTA (Registration Test), it will be entered on the Register of Native Title Claims maintained by the National Native Title Tribunal (Register). Claimants of registered claims are afforded certain procedural rights under the NTA including the “right to negotiate”.

Claims which fail to meet the Registration Test are recorded on the Schedule of Applications Received. Such claims may be entered on the Register at a later date if additional information is provided by the claimant that satisfies the Registration Test.

Some of the Tenements relate to land which is currently the subject of one or more registered native title claims. These claims are identified in the Schedule. If native title is found to exist, the nature of the native title may be such that consent to the grant of a mining tenement may be required by the native title holders but is withheld or only granted on conditions unacceptable to the Company.

We have not undertaken the considerable historical, anthropological and ethnographic work that would be required to determine the likelihood that existing claims may be successful, or the possibility of any further native title claims being made in the future.

In any event, the existence of native title is not the relevant issue for the Company. The relevant issue is the existence of a registered native title claim. That effectively requires the Company to observe the provisions of the NTA in proceeding with its applications for Tenements. The reason for this is that an act which affects native title rights such as the grant of a mining tenement may be invalid unless there has been compliance with the provisions of the NTA. Until the native title claim has been determined by the Federal Court the existence of native title will be uncertain. Prudence dictates that native title should be assumed to exist over all claimed land other than freehold, “exclusive possession” leasehold or vested reserve until the claim has been determined.

8. Native Title – Validity of Titles

(a) Tenements granted before 1 January 1994

The grant before 1 January 1994 of mining tenements over land other than freehold, “exclusive possession” leasehold or vested reserve is an act that is capable of affecting native title and could have been invalid under the RDA. However, the NTA and State legislation has validated any such mining tenements.

The following Tenements were granted prior to 1 January 1994 and thus have been validated by the NTA and State legislation:

Holder Tenement

Comet Resources Ltd/ Platinum Australia Ltd M59/0282 M59/0283 M59/0284 M59/0285

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Holder Tenement

Waybury Holdings Pty Ltd M59/0275 P59/1168

Alluvial Gold Treatment Pty Ltd M59/0057

(b) Tenements granted between 1 January 1994 and 23 December 1996

The grant of a mining tenement over land other than freehold “exclusive possession” leasehold or vested reserve is an act that is capable of affecting native title. Acts affecting native title must comply with the future act processes of the NTA.

However, the State Government granted some mining tenements during the period between 1 January 1994 and 23 December 1996 without complying with the requirements of the NTA. Accordingly, there was a risk that some of the Tenements granted during this period may have been invalid as a result of the failure to comply with the NTA. This risk has been removed by the 1998 amendments to the NTA (and corresponding State legislation) so far as the Tenements were granted over land which is the subject of a pastoral lease or other prescribed leasehold land.

The following Tenements were granted between 1 January 1994 and 23 December 1996 and have been validated by the NTA if the subject land was freehold or “exclusive possession” leasehold. We have not undertaken independent enquiries to confirm that this is the case:

Holder Tenement

Anthony Vodanovich E59/0642 P59/1397

Comet Resources Ltd E59/0638

Comet Resources Ltd / Platinum Australia Ltd M59/0322 M59/0323 M59/0324 M59/0329

(c) Tenements granted since 23 December 1996

Mining tenements granted since 23 December 1996 may be invalid if they were granted over land other than freehold, “exclusive possession” leasehold or vested reserve and the applicable processes prescribed by the NTA were not complied with. We understand that it has been the practice of the State Government since 23 December 1996 to comply with these processes subject to certain cases where the Minister granted mining tenements over enclosed or improved pastoral leasehold land relying on WA v Ward (2000) 170 ALR 159 (since overruled by the High Court on this point).

82


83

The following Tenements have been granted since 23 December 1996. We have not undertaken any independent enquiries to confirm whether the applicable processes prescribed by the NTA were complied with by the State Government:

Holder Tenements

Anthony Vodanovich P59/1508

Comet Resources Ltd E59/0941 E59/0943 E59/0953 E59/0966 E59/1006 E59/1031 P59/1516

Comet Resources Ltd / Platinum Australia Ltd M59/0408 M59/0428 M59/0429

Murchison Resources Pty Ltd P59/1487

Marak Mining Pty Ltd M59/0407

(d) Future Tenement Grants

The valid grant of any of the current applications for Tenements which may affect native title requires compliance with the provisions of the NTA.

The NTA regulates all future actions (such as the grant of a mining tenement) which affect native title rights. These actions are known as “future acts”. A future act will be valid if it falls within one of a number of categories of land dealings specified in the NTA provided that there is compliance with the applicable procedural requirements: NTA Part 2, Division 3, Subdivisions B-P.

So, if the grant of any of the current applications for Tenements affects native title, the grant will be a future act and will be valid only if there has been compliance with the relevant requirements of the NTA. In order to determine whether the grant of any of the current applications will affect native title, a determination must be made as to whether native title exists in the area. This will require a hearing by the Federal Court (or a consent determination) as to the existence of native title, which could take years. However, in the interim, the validity of the grant of the current applications for Tenements can be assured if the State and the Company comply with the requirements of the NTA on the assumption that native title does in fact exist in the area.

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83

The following tenements are current applications:

Holder Tenements

Anthony Vodanovich MLA59/0525

Comet Resources Ltd ELA59/1090 ELA59/1097 ELA59/1098 ELA59/1112

Prosperity Resources Ltd PLA59/1649 PLA59/1650 PLA59/1651 PLA59/1652 PLA59/1653 PLA59/1654 PLA59/1655 PLA59/1656 PLA59/1657 PLA59/1658

Mawson West Ltd ELA59/0853 ELA59/0878 ELA59/0903 ELA59/1102

Murchison Resources Pty Ltd MLA59/0570

Waybury Holdings Pty Ltd MLA59/0450

Pasine Holdings Pty Ltd ELA59/1011 ELA59/1038

9. Qualifications

While the status of the Tenements is dealt with in the Schedule and the notes to the Schedule, we point out, by way of summary, that:

(a) we have assumed the accuracy and completeness of all Tenement searches and other information or responses which were obtained from the relevant Department or authority. We cannot comment on any obligations of the Company that may arise from agreements that are not registered as a dealing, encumbrance or otherwise noted on the searches of the Tenements obtained from the DIR;

(b) the holding of the Tenements is subject to compliance with the terms and conditions and the provisions of the Mining Act;

(c) we have assumed the accuracy and completeness of any instructions or information which we have received from the Company or any of its officers, agents and representatives;

(d) with respect to any application for the grant of a Tenement, we express no opinion as to

84


85

whether such application will ultimately be granted and that reasonable conditions will be imposed upon grant, although we have no reason to believe that any application will be refused or that unreasonable conditions will be imposed;

(e) where compliance with the requirements necessary to maintain a Tenement in good standing is not disclosed on the face of the searches referred to in this report, we express no opinion on such compliance;

(f) references in the Schedule to any area of land are taken from details shown on searches obtained from the DIR. It is not possible to verify the accuracy of those areas without conducting a survey;

(g) where Ministerial consent to any agreement or dealing referred to in Part II of this report is being or will be sought, we express no opinion as to whether such consent will be granted, or the consequences of consent being refused, although we have no reason to believe that any application for consent will be refused;

(h) the Schedule of Tenements is accurate as at 21 August 2003 as it is based on searches from the DIR at that date. We cannot comment on whether any changes have occurred in respect of the Tenements between 21 August 2003 and the date of the Prospectus; and

(i) Part II of this report is accurate as at the date of this report

10. Consent

This report is given solely for the benefit of the Company and the directors of the Company in connection with the issue of the Prospectus and is not to be relied on or disclosed to any other person or used for any other purpose or quoted or referred to in any public document or filed with any government body or other person without our prior consent.

Yours faithfully

STEINEPREIS PAGANIN

84


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92


93

Key to Tenement Schedule:

E – Exploration Licence ELA – Exploration Licence Application G – General Purpose Lease GML – Gold Mining Lease L – Miscellaneous Licence M – Mining Lease MLA – Mining Lease Application P – Prospecting Licence PLA - Prospecting Licence Application

All of the native title claims listed in the Schedule have been accepted and entered on the Register of Native Title Claims. Please refer to Part III of this Report for the status of the Native Title Claims.

Unless otherwise indicated, capitalised terms have the same meaning given to them in the Prospectus.

References to letters in the “Notes” column refers to the agreements summarised in Part II of the report. References to numbers in the “Notes” column refers to the notes following this table.

Notes:

All tenements are subject to the standard endorsements and conditions imposed by the Department of Industry and Resources.

1. The grant of this licence does not include Mining Lease 59/303.

2. Pursuant to the Savings and Transitional Provisions of the Mining Amendment Act 1990 all land surrendered, forfeited (other than by forfeiture by plaint action) or expiring from a non-graticular licence will automatically be included into a graticular licence, provided the surrender, forfeiture or expiry occurred after the grant of the graticular licence.

3. The lessee’s/licensee’s attention is drawn to the provisions of the Aboriginal Heritage Act, 1972.

4. All surface holes drilled for the purpose of exploration are to be capped, filled or otherwise made safe after completion.

5. All costeans and other disturbances to the surface of the land made as a result of exploration, including drill pads, grid lines and access tracks, being backfilled and rehabilitated to the satisfaction of the District Mining Engineer. Backfilling and rehabilitation being required no later than 6 months after excavation unless otherwise approved in writing by the District Mining Engineer.

6. All waste materials, rubbish, plastic sample bags, abandoned equipment and temporary buildings being removed from the mining tenement prior to or at the termination of exploration programme.

7. Unless the written approval of the District Mining Engineer is first obtained, the use of scrapers, graders, bulldozers, backhoes or other mechanised equipment for surface disturbance or the excavation of costeans is prohibited. Following approval, all topsoil being removed ahead of mining operations and separately stockpiled for replacement after backfilling and/or completion of operations.

8. The lessee/licensee or transferee, as the case may be, shall within thirty (30) days of receiving written notification of:

92


93

(i) the grant of the lease/licence; or

(ii) registration of a transfer introducing a new lessee/licensee;

advise, by certified mail, the holder of any underlying pastoral lease details of the grant or transfer.

9. No interference with Geodetic Survey Station YAL29 (Wadgingarra) and mining within 15 metres thereof being confined to a depth of 15 metres from the natural surface.

10. Application for Amalgamation MM3/023 lodged on 24/07/02 for the area of land contained within the boundaries of former Mining Lease 59/303. Granted on 10 April 2003.

11. A conversion of Prospecting Licence 59/1397 to Mining Lease 59/525 pursuant to Section 49 of the Mining Act 1978 (as amended) was applied for on 08/09/99. The term of the Prospecting Licence continues until the application for conversion is determined: Section 49(2) of the Mining Act.

12. The lessee / licensee notifying the holder of any underlying pastoral or grazing lease by telephone or in person, or by registered post if contact cannot be made, prior to undertaking airborne geophysical surveys or any ground disturbing activities utilising equipment such as scrapers, graders, bulldozers, backhoes, drilling rigs, water carting equipment or other mechanised equipment.

13. Pursuant to the Savings and Transitional Provisions of the Mining Amendment Acts 1990 and 1994 all land surrendered, forfeited (other than forfeiture by plaint action) or expiring from a non-graticular exploration licence will either:

(i) automatically be included into a graticular exploration licence provided the surrender, forfeiture or expiry occurred after the grant of the graticular licence; or

(ii) automatically be included into an application for a graticular exploration licence provided the surrender, forfeiture or expiry occurred after 14/10/95.

14. The prior written consent of the Minister for Mines being obtained before commencing mining on Water Reserve 2968.

15. No interference with the Telecom Route or the installations in connection therewith, and the rights of ingress to and egress from the facility being at all times preserved to the owners thereof.

16. The grant of this licence does not include Mining Leases 59/57, 59/167 and 59/408.

17. The grant of this licence does not include Gold Mining Lease 59/1573, Mining Leases 59/282, 59/329 and 59/358 or Prospecting Licence 59/1493.

18. The grant of this licence does not include Mining Leases 59/57 and 59/285.

19. No interference with Geodetic Survey Station Yalgoo 4 and 5 and mining within 15 metres thereof being confined to a depth of 15 metres from the natural surface.

20. No mining within 25 metres of either side of the Windimurra Gas Pipeline contained within FNA’s 2851 and 3931 as shown in TENGRAPH.

21. No surface excavation approaching closer to the boundary of the Safety Zone established by Condition 9 (Note 20) hereof than a distance equal to three times the depth of the excavation without the prior written approval of the State Mining Engineer.

94


95

22. No interference with the drainage pattern and no parking, storage or movement of equipment or vehicles used in the course of mining within the Safety Zone established by established by Condition 9 (Note 20) hereof without the prior approval of the operators of the Gas/Petroleum Pipeline.

23. The licensee shall not excavate, drill, install, erect, deposit or permit to be excavated, drilled, installed, erected or deposited within the Safety Zone established in Condition 9 (Note 20) hereof, any pit, well, pavement, foundation, building, or other structure or installation, or material of any nature whatsoever without the prior written consent of the State Mining Engineer.

24. No explosives being used or stored within one hundred and fifty (150) metres of the Windimurra Gas Pipeline without the prior written consent of the State Mining Engineer.

25. Mining on the Safety Zone established in Condition 9 (Note 20) hereof being confined to below a depth of 50 metres from the natural surface unless otherwise approved by the State Mining Engineer.

26. The rights to ingress to and egress from the Windimurra Gas Pipeline easement established in Condition 9 (Note 20) hereof being at all times preserved for employees, contractors and agents of the operators of the Windimurra Gas Pipeline.

27. Such further conditions as may from time to time be imposed by the Minister for State Development for the purpose of protecting the Windimurra Gas Pipeline.

28. In respect to the area outlined in ‘red’ (FNA 3937) as shown in TENGRAPH the following condition shall apply: No prospecting, exploration or mining activities being conducted that will interfere with or endanger the construction or operation of the Gas/Petroleum pipeline and associated facilities and rights of ingress to and egress from the area being at all times preserved to the holders, their employees, agents and contractors.

29. The licensee’s attention is drawn to the provisions of the Rights in Water and Irrigation Act 1914, as amended.

30. The prior written consent of the Minister for Mines being obtained before commencing mining on Repeater Station Site Reserve 40815.

31. No interference with the tower/mast or the installations in connection therewith, and the rights of ingress to and egress from the facility being at all times preserved to the owners thereof.

32. Consent to mine on Water Reserve 84 granted subject to (Notes 32-40) - No action being taken that will interfere with the natural drainage or adversely affect in quality or quantity the water in any water course, dam, waterhole, spring or subterranean source of supply.

33. No activities being carried out that will adversely affect waters from the surface and underground sources.

34. Pumping of underground water supplies being prohibited without the necessary approval of the Minister for Water Resources.

35. Authorised officers of the Water and Rivers Commission being permitted at all reasonable times to enter onto the mining tenement for the purposes of inspection and for water source investigation as provided for in Water Authority Act 1984, as amended.

36. No activity being carried out that will in any manner affect or compromise the physical integrity, access, operation and maintenance of any of the Water Corporation’s infrastructure, assets or operations.

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The infrastructure and assets of the Water Corporation includes all assets and infrastructure owned, occupied or operated by the Water Corporation and its agents, they include but are not limited to:

(a) plant, facilities and equipment for treatment, communication, monitoring, storage, transport and construction;

(b) access roads, routes or tracks;

(c) pipe, meters, apparatus used in connection with the supply of water;

(d) water works, sewerage works and drainage works;

(e) excavations, structures, buildings, plant and equipment; and

(f) reservoirs, storage dams, weirs, wells, bore tanks, aqueducts, tunnels, buildings and engines.

37. No exploration, mining or other activity being carried out within 30 metres of any part of the Water Corporation’s infrastructure, asset or operations without the written consent of the Water Corporation, which consent may be subject to such conditions as the Water Corporation sees fit.

38. Where on land managed by the Water Corporation, the licensee will give written notice to the Water Corporation of its intention to carry out exploration or mining operations, 21 days prior to the commencement of such operations.

39. The licensee shall not use any access road, route or track created, owned, occupied, operated or maintained by Water Corporation, its agents, contractors or assigns, without obtaining the Water Corporation’s consent in writing to such use, which may be withheld by the Water Corporation or granted on such conditions as the Water Corporation sees fit.

40. Where on land managed by the Water Corporation the licensee, on completion of mining and exploration rehabilitate the land to its former condition.

41. The grant of this licence does not include Gold Mining Lease 59/1573, Mining Leases 59/329 and 59/358 or Prospecting Licence 59/1493.

42. The grant of this licence does not include any portion of Leases 3116-9311 which is referred to in Section 29(2) of the Mining Act 1978 except that below 30 metres from the natural surface of the land.

43. The grant of this licence does not include Mining Leases 59/266 and 59/267, Exploration Licence 59/417 or Prospecting Licence 59/1131.

44. The grant of this licence/lease does not include any private land referred to in Section 29(2) of the Mining Act 1978 except that below 30 metres from the natural surface of the land.

45. The prior written consent of the Minister for Mines being obtained before commencing mining on Yalgoo Townsite, Water Supply Reserves 6201 and 9688, Rifle Range Reserves 10080 and 16386, Aerial Landing Ground Reserve 34324, Recreation Reserves 3684 and 21865, Historical Purpose Reserve 33166, Public Recreation Reserve 22348, Cemetery Reserve 3452, Drainage Reserve 4787, Explosive Reserve 4193, Rubbish Reserve 3451, Camping Reserve 3450, Pipe Track Reserve 6200 and UV Disinfecting Plant Reserve 42511.

46. Consent to mine on the Yalgoo Townsite granted subject to: Access to the surface of the land within

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the Yalgoo Townsite for mining purposes being subject to the approval of the local Authority or relevant reserve vestees, and mining activities within the first 100 metres below the surface of the land being limited to such exploration activities as may be approved by the State Mining Engineer.

47. Survey.

48. Compliance with the provisions of the Aboriginal Heritage Act, 1972 to ensure that no action is taken which would interfere with or damage any Aboriginal site.

49. No developmental or productive mining or construction activity being commenced until the tenement holder has submitted a plan of the proposed operations and measures to safeguard the environment to the State Mining Engineer for assessment; and until his written approval has been obtained.

50. No mining on the Noongal Townsite without the prior written consent of the Minister for Mines.

51. Mining on any road, road verge or road reserve being confined to a depth of 15 metres from the natural surface.

52. Consent to Mine on the Noongal Townsite, granted on 17 September 1999 subject to: Access to the surface of the land within Noongal Townsite for mining purposes being subject to the approval of the local Authority or relevant reserve vestees, and mining activities within the first 100 metres below the surface of the land to such mining activities as may be approved by the State Mining Engineer.

53. The land subject of this lease does not include land the subject of Prospecting Licence 59/974.

54. No interference with Geodetic Survey Station YAL 28 (Noongal) and mining within 15 metres thereof being confined to below a depth of 15 metres from the natural surface.

55. The grant of this lease does not include land the subject to Prospecting Licenses 59/1017 and 59/1257 or Mining Leases 59/282 and 59/283.

56. No interference with the power/transmission line or the installations in connection therewith, and the rights of ingress to and egress from the facility being preserved to the owners thereof.

57. The grant of this lease does not include land the subject of Mining Leases 59/322 to 59/324.

58. Persons claiming native title to the land the subject of this mining tenement entered into a deed under the Native Title Act 1993 with the State of Western Australia, the Minister for Mines and the tenement holder agreeing to the grant of the tenement. Copies of the deed were given to the National Native Title Tribunal pursuant to Section 34 of the Native Title Act and filed at the Department of Minerals and Energy.

59. The lessee submitting a plan of proposed operations and measures to safeguard the environment to the State Mining Engineer for his assessment and written approval prior to commencing any developmental or productive mining or construction activity.

60. The lessee being liable for the payment of any compensation under the Native Title Act 1993 and in accordance with Section 123 of the Mining Act 1978 and payable to a native title holder in respect of any land comprised in the lease, as a result of the grant of the lease or any activities conducted by the lessee in connection with the lease. (The term ‘native title holder’ has the same meaning as the term in the Native Title Act 1993).

61. Agreement 194H/956 (Joint Venture) between Archaean Gold NL and Arimco Mining Pty Ltd lodged and registered on 06/06/96. Agreement has expired.

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62. Agreement 347H/956 (Variation) between Archaean Gold NL and Arimco Mining Pty Ltd lodged and registered on 06/06/96. Agreement has expired.

63. Amalgamation MM1/967 for the area of land contained within the boundaries of former Prospecting Licence 59/1131 lodged on 29/07/96 and granted by the Minister for Mines on 11/06/97.

64. Agreement 4H/990 (Sale and Royalty) between Acacia Resources Ltd, Arimco Mining Pty Ltd and Archaean Gold NL lodged and registered on 26/07/99. Refer to “G” in Summary of Agreements.

65. Caveat 26H/990 lodged on 20/08/99 by Archaean Gold NL and recorded on 20/08/99: 14 day notice sent 12/11/02 in relation to Transfer 551H/023. Order under Section 122(1)(c) of the Mining Act 1978 that caveat to remain in full force and effect upon expiry of 14 day notice, by order of Warden, G. Calder on 22/11/02. Archaean Gold NL is permitted to lodge this Caveat pursuant to the Sale and Royalty Agreement dated 6 July 1999 between Acacia Resources Limited, Arimco Pty Limited (receivers and managers appointed) (in liquidation) and Archaean Gold NL. As at 21 August 2003 the Company has sought approval from Archean Gold NL to withdraw and re-lodge the Caveat (subject to the leave of the warden) in order to allow the registration of the transfer of the Exploration Licence from Comet Resources Ltd to the Company (or its nominee) should the Company exercise its option pursuant to the Option Agreement dated 10 February 2003 between Comet Resources Limited and the Company (refer to “A”, “G” and “H” in Summary of Agreements).

66. Agreement 93H/989 (Joint Venture) between Acacia Resources Ltd and Roebuck Resources NL lodged on 12/01/99. Refer to “I” in Summary of Agreements.

67. A conversion of Prospecting Licence 59/1487 to Mining Lease 59/570 pursuant to Section 49 of the Mining Act 1978 was applied for on 31/05/02. The term of this Prospecting Licence continues until the application for conversion is determined: Section 49(2) of the Mining Act.

68. Expenditure exemptions granted for 2000, 1999 and 1997 and refused for 2002 and 2001.

69. No mining on Water Reserve 16620 without the prior written consent of the Minister for Mines.

70. A conversion of Prospecting Licence 59/1168 to Mining Lease 59/450 pursuant to Section 49 of the Mining Act 1978 was applied for on 23/01/97. The term of the Prospecting Licence continues until the application for conversion is determined: Section 49(2) of the Mining Act.

71. The construction and operation of the project and measures to protect the environment being carried out generally in accordance with the document titled “Notice of Intent Proforma for Low Impact Mining Operations” with Project Title “ Noongal Project Brilliant Mine” dated 13 August 2001 and the letter from G R Dale dated 31 August 2001 “RE: NOI for Noongal M59/407” (NOI 3753) and retained on the Department of Minerals and Petroleum Resources File No. 4246/01. Where a difference exists between the above document (s) and the following conditions (Notes 72 – 79), then the following conditions (Notes 72 - 79) shall prevail.

72. The development and operation of the project being carried out in such a manner so as to create the minimum practicable disturbance to the existing vegetation and natural landform.

73. All topsoil being removed ahead of all mining operations from sites such as pit areas, waste disposal areas, ore stockpile areas, pipelines, haul roads and new access roads and being stockpiled for later respreading or immediately respread as rehabilitation progresses.

74. At the completion of operations, all building and structures being removed from site or demolished and buried to the satisfaction of the State Mining Engineer.

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75. All rubbish and scrap being progressively disposed of in a suitable manner.

76. At the completion of operations, or progressively where possible, all access roads and other disturbed areas being covered with topsoil, beep ripped and revegetated with local native grasses, shrubs and trees to the satisfaction of the State Mining Engineer.

77. Any alteration or expansion of operations within the lease boundaries beyond that outlined in the above documents(s) (see Note 71) not commencing until a plan of operations and a programme to safeguard the environment are submitted to the State Mining Engineer for this assessment and until his written approval to proceed has been obtained.

78. The lessee arranging lodgement of an Unconditional Performance Bond executed by a Bank or other approved financial institution in favour of the Minister for Mines for due compliance with the environmental conditions of the lease in the sum of $10,000.

79. The lessee submitting to the State Mining Engineer, a brief annual report outlining the project operations and rehabilitation work undertaken in the previous 12 months and the proposed operations and rehabilitation programmes for the next 12 months. This report is to be submitted each year in September.

80. All topsoil being removed ahead of mining operations and stockpiled for replacement in accordance with the directions of the District Mining Engineer.

81. The construction and operation of the project and measures to protect the environment being carried out generally in accordance with the documents titled “Notice of Intent M59/57 Yalgoo” dated 25/01/93 and “Low Impact Mining Operations Notice of Intent Proforma – City of Melbourne Gold Project” dated 12/05/00, both of which are retained on the Department of Minerals and Energy File No. 1351/91. Where a difference exists between the above documents and the conditions in Notes 72-76 or 82-83, then the conditions in Notes 72-76 and 82-83 prevail.

82. Any alteration or expansion of operations within the lease boundaries beyond that outlined in the above documents (see Note 81) not commencing until a plan of operations and a programme to safeguard the environment are submitted to the State Mining Engineer for his assessment and until his written approval to proceed has been obtained.

83. The lessee submitting to the State Mining Engineer, a brief annual report outlining the project operations and rehabilitation work undertaken in the previous 12 months and the proposed operations and rehabilitation programmes for the next 12 months. This report is to be submitted each year in May.

84. The licensee notifying the holder of any underlying pastoral lease by certified mail and taking all reasonable steps to notify by telephone or contact in person prior to undertaking airborne geophysical surveys or any ground disturbing activities utilising equipment such as scrapers, graders, bulldozers, backhoes, drilling rigs, water carting equipment or other mechanised equipment.

85. Caveats 537H/023 – 544H/023 lodged on 28 February 2003 by Prosperity Resources Ltd and recorded on 28 February 2003.

86. Exemption from Drop-off 238H/023 lodged on 30 May 2003. This exemption is pending.

87. Extension of Term MM20/023 lodged and recorded on 18/03/03 – application to extend term for a period of 2 years. The term of this Exploration Licence continues until the application for extension has been determined: Section 61(3) of the Mining Act, Regulation 23A of the Mining Regulations 1981(WA).

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88. Consent to mine on Noongal Townsite, granted on 17 September 1999 subject to: The grant of this lease does not include any private land referred to in Section 29(2) of the Mining Act 1978 except that below 30 metres from the natural surface of the land.

89. Caveats 527H/023 – 536H/023 lodged on 28/02/03 by Prosperity Resources Ltd in respect to 75/100ths shares in the name of Comet Resources Ltd and recorded on 28/02/03.

90. The lessee or transferee as the case may be, giving notice by certified mail to the holder of any underlying pastoral lease within 30 days of being notified of:

(i) the grant of the lease; and

(ii) the registration of a transfer introducing a new holder.

91. Access to the surface of the land within Noongal Townsite for mining purposes being subject to the approval of the local Authority or relevant reserve vestees, and mining activities within the first 100 metres below the surface of the land to such mining activities as may be approved by the State Mining Engineer.

92. Expenditure exemptions granted for 2002 and 1999.


94. Expenditure exemption granted for 2002.

95. Expenditure exemptions granted for 2002 and refused for 2001.

96. Expenditure exemption withdrawn for 2002.

97. Expenditure exemption recorded for 2003 and granted for 2002, 2001 and 1999.

98. Expenditure exemptions granted 2002, 1998 and 1995 and refused for 1997 and 1996.

99. Expenditure exemptions granted for 2002, 2001, 2000, 1998 and 1995 and refused for 1997 and 1996.

100. Expenditure exemptions granted for 2002, 2001, 1998 and 1995 and refused for 1997 and 1996.

101. Expenditure exemptions granted for 2002, 2001, 2000, 1999, 1998 and 1995.

102. Expenditure exemptions granted for 2002, 2001, 2000, 1999, 1997, 1996 and 1995.

103. Expenditure exemptions granted for 2002, 2001, 2000, 1997, 1996 and 1995.

104. Expenditure exemptions granted for 2002, 2000 and 1995.

105. Expenditure exemptions granted for 2002, 2000 and 1998.

106. Access to the surface of the land within the Yalgoo Townsite for mining purposes being subject to the approval of the local Authority or relevant reserve vestees, and mining activities within the first 100 metres below the surface of the land being limited to such exploration activities as may be approved by the State Mining Engineer.


108. Expenditure exemptions granted for 2003.

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PART II

SUMMARY OF AGREEMENTS

A. OPTION AGREEMENT

On 10 February 2003, the Company entered into an option agreement with Comet Resources Limited (Comet), as varied by letter agreements dated 2 July 2003 and 21 August 2003, whereby Comet has agreed to grant to the Company the sole and exclusive option to purchase the whole of Comet’s right, title and interest in the following assets:

(a) the Melville joint venture (being a 75% beneficial interest), including Mining Leases 59/282 - 59/285, 59/322 - 59/324, 59/329, 59/408, 59/428 and 59/429 (Joint Venture Tenements) (Joint Venture Interest);

(b) Exploration Licence 59/638 (Emerald Eclipse Tenement);

(c) Exploration Licences 59/941, 59/943, 59/953, 59/966, 59/1006 and 59/1031 and Prospecting Licence 59/1516 (Chinaman Rock Tenements);

(d) Exploration Licence Applications 59/1090, 59/1097, 59/1098 and 59/1112 (Exploration Licence Applications);

(e) Exploration Licence 59/642, Prospecting Licences 59/1397 and 59/1508 and Mining Lease Application 59/525 (Vodanovich Tenements)(together, the Sale Assets); and

(f) such mining information as in the possession of Comet as relates to the Sale Assets, except for the rights that Comet currently has as legal and/or beneficial owner of such area the subject of the Sale Assets as is contained in the grid areas set out in Schedule 5 of this option agreement which rights are expressly retained, and free of any encumbrance except the following permitted encumbrances:

(a) the caveat lodged by Archaean Gold NL in respect of the Emerald Eclipse Tenement;

(b) the Melville Joint Venture Agreement (as summarised in ”I” below), in respect of the Joint Venture Tenements;

(c) the Pandawn Deed (as summarised in “E” below), in respect of Mining Leases 59/408, 59/428 and 59/429;

(d) the Sale and Royalty Agreement (as summarised in “G” below), in respect of the Emerald Eclipse Tenement; and

(e) the Option and Sale Agreement (as summarised in “C” below), in respect of the Vodanovich Tenements,

(Option) (Option Agreement).

In consideration for Comet granting the Option, the Company has paid Comet the non-refundable sums of $30,000 and $10,245.10.

The exercise of the Option and completion under this Option Agreement is subject to and conditional upon the following conditions:

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(a) the Company being satisfied with the outcome of all due diligence investigations conducted by it in relation to the Sale Assets by no later than 14 days after the date of the Option Agreement;

(b) Comet receiving notification from Platinum that Platinum waives its pre-emptive rights in respect of the Joint Venture Interest and the Parties acknowledge that such notification has already been received by Comet;

(c) the Company receiving approval from Australian Stock Exchange Limited (ASX) to the admission of the Company or its nominee to the official list of ASX and the Company confirming with Comet that the minimum value of securities and shareholder spread requirements of ASX have been satisfied by no later than 30 November 2003;

(d) the Company and Comet executing deeds of assumption and assignment where the Company assumes the obligations of Comet under the Joint Venture Agreement, the Pandawn Deed, the Sale and Royalty Agreement and the Option and Sale Agreement and delivering signed copies of these documents to Comet by no later than 30 November 2003; and

(e) the receipt of all necessary governmental consents and approvals to the matters set out in this Option Agreement including the consent of the Minister under the Mining Act 1978 (WA) (if required) (Mining Act) to transfer the Sale Assets (other than the Exploration Licence Applications) in accordance with this Option Agreement by no later than 3 months after the Execution Date.

The conditions specified in paragraphs (a), (b), (d) and (e) above have been satisfied as at the date of this report.

The Option may be exercised by the Company in the period until 30 November 2003 (or such other period as agreed by the parties) (Option Period) and following satisfaction or waiver of the conditions precedent above, for the following consideration:

(a) the allotment and issue of 6,000,000 fully paid ordinary shares in the Company (Shares) at an issue price of $0.10 per Share to Comet;

(b) the allotment and issue of 2,000,000 options each to subscribe for one Share and exercisable at $0.20 per Share on or before 30 November 2005 to Comet; and

(c) the acceptance of Comet’s nominee as a director of the Company.

Pursuant to the Option Agreement, exploration activity upon the Sale Assets during the Option Period is to be negotiated and agreed upon by the parties, with all associated expenditure on agreed exploration activity to be borne equally by the parties. Once the Company is admitted to the official list of ASX, the Company must reimburse Comet for all expenditure incurred by Comet on the Sale Assets during the Option Period.

Furthermore, during the Option Period, the Company must maintain the Sale Assets in good standing and comply with the conditions of the Sale Assets and the requirements of the Mining Act.

The exercise of the Option by the Company creates an enforceable contract for the sale by Comet and the purchase by the Company of the whole of Comet’s right, title and interest in the Sale Assets.

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Pursuant to the Option Agreement, the Company may nominate a third party as the entity which may exercise the Option. The Company intends to nominate its subsidiary, Prosperity Resources (Yalgoo) Pty Ltd (Prosperity Resources (Yalgoo)) to exercise the Option.

The parties acknowledge that if, upon exercise of the Option, any of the rights are not legally capable of being transferred to the Company, Comet must hold these rights in trust for the Company.

The Company has the right to lodge caveats over the Sale Assets to protect its interests under the Option Agreement.

B. PAYNES FIND JOINT VENTURE AGREEMENT

On or about 19 February 2003, the Company and Mawson West Ltd (Mawson) entered in a joint venture agreement in respect of Exploration Licence Applications 59/853, 59/878, 59/903 and 59/1102 (Tenements) (Paynes Find Joint Venture Agreement).

The Paynes Find Joint Venture Agreement is subject to and conditional upon:

(a) the listing of the Company on ASX within 280 days of the Paynes Find Joint Venture Agreement; and

(b) the grant of one or more of the Tenements.

Pursuant to the Paynes Find Joint Venture Agreement, the Company will earn a 60% interest in the Paynes Find joint venture (including the Tenements) (Paynes Find Joint Venture) by committing to a minimum of $500,000 expenditure on the Tenements over three years, and meeting the minimum yearly DIR requirements on each of the Tenements once granted. Further, the Company is required to maintain the Tenements in good standing and comply with all statutory obligations in respect of the Tenements during the earn-in period.

If the Company makes no expenditure on a granted Tenement, then the whole of the ownership of the Tenement reverts to Mawson. In addition, if the Company deems that further expenditure is not warranted on a Tenement then the whole of the ownership of the Tenement may revert to Mawson, provided that pro-rata expenditure is completed.

At the end of the three year period, subject to the Company earning its 60% interest, the Company or Mawson may elect to contribute to the Paynes Find Joint Venture and may earn or dilute their interest in the Tenements in accordance with accepted industry dilution formulae depending upon the level of expenditure contribution made.

The holder of the majority interest in the Paynes Find Joint Venture will be the joint venture manager unless otherwise agreed by the parties.

The transfer of each party’s joint venture interests in the Paynes Find Joint Venture to a third party are subject to the consent of the other party, and the expiry of a 45 day pre-emptive period during which time the other party may match the third party offer.

Furthermore, under the Paynes Find Joint Venture Agreement, if a joint venture party holds a joint venture interest of less than 5%, then it is deemed to have withdrawn from the Paynes Find Joint Venture whereupon their interest will convert to a royalty of $0.50 per tonne of ore mined and treated in respect of the first one million tonnes of ore mined and treated.

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The parties acknowledge that the grant of rights in respect of the Tenements under the Paynes Find Joint Venture Agreement are subject to the Minister’s consent, and should such consent not be obtained, any rights of the Company in respect of the Tenements shall be held in trust by Mawson for the Company.

C. OPTION AND SALE AGREEMENT

On 19 March 2002, Comet and Anthony Vodanovich (Vodanovich) entered into an option and sale agreement in respect of the following tenements:

(a) Exploration Licence 59/642;

(b) Prospecting Licence 59/1397;

(c) Prospecting Licence 59/1508, and

any extensions, renewals, substitutions and replacements thereof (Tenements) (Option and Sale Agreement). Furthermore, Vodanovich has applied for a conversion of Prospecting Licence 59/1397 to a mining lease, being Mining Lease Application 59/525, which also forms part of the Tenements.

Pursuant to the Option and Sale Agreement, in consideration of the payment of $12,000 by Comet to Vodanovich (and the payment of an option extension fee of $15,000), Vodanovich granted Comet the exclusive right to:

(a) purchase the Tenements, free from encumbrances, together with all technical information in the custody of Vodanovich, for $50,000 (Purchase Price) during the period of 24 months after 19 March 2002 (Option Period) (Option); and

(b) prospect, explore on, investigate and perform feasibility studies in respect of the Tenements during the Option Period (Rights).

Upon exercise of the Option, Vodanovich must sell to Comet, free from encumbrances, and Comet must purchase, all of Vodanovich’s legal and beneficial ownership of and interest in the Tenements and the technical information and all other rights or privileges received or appertaining thereto for the Purchase Price, subject to the receipt of all consents and approvals required under the Mining Act, (which must be received within 3 months of exercise or such later date as Comet nominates). If a transfer of the Tenements is not registrable, Vodanovich must hold the Tenements upon trust for Comet.

In addition to the Purchase Price, Comet must, from the date which is 30 days following receipt by Comet of proceeds derived from the sale of mining product (as defined in the Mining Act) that was extracted from the Tenements, pay to Vodanovich a royalty of $1.00 per tonne of ore mined and processed by Comet from the land the subject of the Tenements (Royalty).

If Vodanovich receives a bona fide offer to purchase the Royalty, he must first offer the Royalty to Comet on the same terms, which offer will remain open for 30 days. If Comet declines the offer, then Vodanovich has a period of 30 days in which to transfer the Royalty for a consideration which is not less than that offered to Comet.

Pursuant to the Option and Sale Agreement, Comet is responsible for all liabilities and obligations in connection with the Tenements on and from 19 March 2002 (Effective Date).

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Furthermore, Comet must indemnify Vodanovich against all claims, demands, costs, actions and proceedings which he may suffer arising out of any activities carried out by Comet in relation to the Tenements on and from the Effective Date. Comet is also responsible for all rehabilitation and rectification costs directly arising out of its exploration work undertaking during the Option Period in relation to the Tenements.

Comet has the right to lodge caveats against the Tenements to protect its interests under this Agreement.

D. DEED OF ASSIGNMENT AND ASSUMPTION

On 21 August 2003, the Company, Prosperity Resources (Yalgoo), Comet and Vodanovich entered into a Deed of Assignment and Assumption in respect of the Option and Sale Agreement, pursuant to which the parties agreed to Prosperity Resources (Yalgoo) accepting an assignment of all of the rights and interests of Comet, and assuming all of Comet’s obligations under the Option and Sale Agreement, subject to settlement of the Option Agreement.

E. PANDAWN DEED

On 7 August 1997, Neil Albert Phillips, for and on behalf of the Pandawn descendants and extended families, (Claimants) and Roebuck Resources NL (now Swiftel Limited (Swiftel)) (Roebuck) entered into a deed (Pandawn Deed).

Pursuant to the Pandawn Deed:

(a) Roebuck agreed to pay to the Claimants the total sum of $50,000, with $40,000 payable upon the execution of the Pandawn Deed and the balance of $10,000 payable upon the grant of Mining Leases 59/408, 59/428 and 59/429 (Tenements) (which amounts have been paid); and

(b) the Claimants agreed to enter into a deed with the State of Western Australia and the Minister for Mines to facilitate the future grant of the mining titles to Roebuck within the area the subject of the Claimant’s native title claim (and all land within 10 kilometres of the outer boundary of the land the subject of the claim) (Affected Area) so that Roebuck may carry out its respective exploration and mining activities.

Furthermore, under the Pandawn Deed, the Claimants agreed to:

(a) the grant of the Tenements, any future applications for and grants of mining tenements made by Roebuck or an associate pursuant to the Act over all or part of the Affected Area (New Tenements) and any other Tenement or New Tenement which is necessary or desirable for the carrying out of mining in respect of all or part of the Affected Area and any extension, renewal or re-issue of the same (Mining Titles); and

(b) Roebuck exercising its rights and discharging its obligations in all respects pursuant to the Act or otherwise in respect of the Mining Titles and the Affected Area.

The Claimants must be permitted access to all areas on the Affected Area unless, for reasonable safety or security requirements, access is restricted by Roebuck. Further, Roebuck must ensure that all persons who are engaged in the Affected Area by the Company abide by the code of practice accepted by the mining and exploration industry.

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The Pandawn Deed may only be terminated by mutual agreement. However, if Roebuck ceases to have an interest in any Mining Titles within the Affected Area then it may withdraw from with the Pandawn Deed by written notice to the Claimants.

In November 1998, AngloGold Australia Limited (previously Acacia Resources Limited (Acacia)) (AngloGold) executed a Deed of Assumption and Consent between Acacia, Roebuck and the Claimants in respect of the Pandawn Deed. On 21 March 2002, AngloGold, Comet and the Claimants entered into a Deed of Assignment and Assumption in respect of the Pandawn Deed whereby Comet accepted an assignment of all the rights and interests of AngloGold and assumed all of AngloGold’s obligations under the Pandawn Deed.

F. DEED OF ASSIGNMENT AND ASSUMPTION

On 25 August 2003, the Company, Prosperity Resources (Yalgoo) and Comet entered into a Deed of Assignment and Assumption in respect of the Pandawn Deed, pursuant to which the parties agreed to Prosperity Resources (Yalgoo) accepting an assignment of all of the rights and interests of Comet, and assuming all of Comet’s obligations under the Pandawn Deed, subject to settlement of the Option Agreement.

G. SALE AND ROYALTY AGREEMENT

On 6 July 1999, Arimco Pty Limited (receivers and managers appointed) (in liquidation) (Arimco), Archaean Gold NL (Archaean) (together, the Vendors) and Acacia (now AngloGold), entered into a sale and royalty agreement with respect to Exploration Licence 59/638 (which term includes any extensions, renewals, substitutions and replacements thereof) (Emerald Eclipse Tenement) (Sale and Royalty Agreement).

Pursuant to the Sale and Royalty Agreement, the Vendors agreed to sell to AngloGold, and AngloGold agreed to purchase the Emerald Eclipse Tenement for the sum of $10,000.

In addition, AngloGold must, from the commencement of commercial gold production on the land the subject of the Emerald Eclipse Tenement, pay to the Vendors, $0.75 per tonne of ore mined and treated from the Emerald Eclipse Tenement adjusted to a gold price of AU$470.00 per ounce and a head grade of 2.5g/t of gold (Royalty).

The Royalty is payable in proportions of 55.16% to Arimco and 44.84% to Archaean and is due and payable quarterly in arrears on the last business day of the months of March, June, September and December for the immediately preceding quarter, the first payment falling due at the end of the first complete quarter following the commencement of commercial gold production.

Furthermore, AngloGold acknowledged that the Vendors have a caveatable interest in the Emerald Eclipse Tenement and consented to the lodgment of such caveats.

Pursuant to the Sale and Royalty Agreement, if AngloGold decides to surrender the Emerald Eclipse Tenement in its entirety, it must first offer the Emerald Eclipse Tenement to the Vendors for a consideration of one dollar, where such offer must remain open for 30 days, and following expiration of that period, AngloGold may surrender the Emerald Eclipse Tenement.

On 21 March 2002, Comet, AngloGold, Archaean and Arimco entered into a Deed of Assignment and Assumption with respect to the Sale and Royalty Agreement whereby Comet accepted an assignment of all the rights and interests of AngloGold and assumed all of AngloGold’s obligations under the Sale and Royalty Agreement.

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H. DEED OF ASSIGNMENT AND ASSUMPTION

On 3 September 2003, the Company, Prosperity Resources (Yalgoo), Comet, Archaean and Arimco entered into a Deed of Assignment and Assumption in respect of the Sale and Royalty Agreement, pursuant to which the parties agreed to Prosperity Resources (Yalgoo) accepting an assignment of all of Comet’s rights and interests, and assuming all of Comet’s obligations under the Sale and Royalty Agreement, subject to settlement of the Option Agreement. The Company has provided a guarantee and indemnity to Archaean and Arimco in respect of Prosperity Resources (Yalgoo)’s obligations arising under the Deed of Assignment and Assumption and the Sale and Royalty Agreement.

In addition, pursuant to the Deed of Assignment and Assumption, Archaean has agreed to lift and re-lodge Caveat 26H/990, lodged over the Emerald Eclipse Caveat, in order to allow the registration of the transfer of the Emerald Eclipse Tenements from Comet to Prosperity Resources (Yalgoo), subject to settlement of the Option Agreement and the leave of the warden.

I. MELVILLE JOINT VENTURE AGREEMENT

Roebuck (now Swiftel) and Acacia (now AngloGold) entered into a joint venture agreement on 21 October 1998 in respect of Mining Leases 59/282 - 285, 59/329, 59/408, 59/322 – 59/324 and Prospecting Licences 59/1169-1176 (the subject of Mining Lease Applications 59/428 - 59/429 (now Mining Leases 59/428 - 59/429)), including any tenements issued in substitution thereof (Tenements)(Melville Joint Venture Agreement).

Pursuant to the Melville Joint Venture Agreement, Swiftel shall hold a 25% participating interest and AngloGold shall hold a 75% participating interest. AngloGold has met the necessary expenditure requirements, and accordingly the earn-in period has ended. If AngloGold elects to withdraw from the Melville joint venture (MJV), Swiftel may give AngloGold notice that it wishes to purchase AngloGold’s 75% legal and beneficial interest in the Tenements for a total consideration of $1.00.

AngloGold shall be manager of the MJV so long as it holds a participating interest at least as great as that of Swiftel.

An operating committee must be formed comprising one representative from each party with voting rights in proportion to each party’s participating interest, with each party to contribute in accordance with its participating interest to approved programmes and budgets. If a party elects not to contribute, its interest will be reduced according to the proportion of that party’s total exploration expenditure since 23 October 1998 (Commencement Date) (including deemed expenditure) to the total exploration of the parties since the Commencement Date.

On 17 July 2000, Swiftel (previously Roebuck), AngloGold (previously Acacia) and Platinum Australia Limited (Platinum) executed a Deed of Assignment, Assumption, Waiver and Consent in respect of the Melville Joint Venture Agreement whereby Platinum accepted an assignment of all the rights and interests of Swiftel and assumed all of Swiftel’s obligations under the Melville Joint Venture Agreement.

On 29 November 2000, in accordance with the terms of the Melville Joint Venture Agreement, Platinum elected to convert its participating interest to a 25% carried interest until completion of a feasibility study that forms the basis of a decision to commit to the development of a mine on the Tenements. AngloGold will be reimbursed for the costs paid on Platinum’s behalf out of Platinum’s cash flow from a mining project on the Tenements after payment of MJV contributions but before servicing any other debt of Platinum.

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If a party proposes to surrender any Tenement, the other party may elect to retain that Tenement in which case the first party must transfer its participating interest in the Tenement to the electing party. If either party proposes to acquire any tenement within the areas of the Tenements, it must offer that tenement to the other party for inclusion in the Tenements. If the other party agrees, then that tenement shall be acquired and be subject to the MJV.

Under the terms of the Melville Joint Venture Agreement, a party may assign its participating interest to a third party provided it first offers to assign the interest to the other party on the same terms and conditions and for the same consideration, whereby if such offer is not accepted within 30 days, then the party wishing to assign its interest may do so within the next 30 days.

In addition, if a party defaults in making a payment or in any other material respect and has not remedied the default within 14 days of having been notified by the manager of such default, its rights in the conduct and control of the MJV shall be suspended until remedy of the default, and if it has failed to pay an amount due in respect of joint venture expenditure, it shall be deemed to have elected to dilute its interest in the manner specified above.

On 21 March 2002, Comet, AngloGold and Platinum entered into a Deed of Assignment and Assumption with respect to the Melville Joint Venture Agreement whereby Comet accepted an assignment of all the rights and interests of AngloGold and assumed all of AngloGold’s obligations under the Melville Joint Venture Agreement.

J. DEED OF ASSIGNMENT AND ASSUMPTION

On 14 July 2003, the Company, Prosperity Resources (Yalgoo), Comet and Platinum entered into a Deed of Assignment and Assumption in respect of the Melville Joint Venture Agreement pursuant to which the parties agreed to Prosperity Resources (Yalgoo) accepting an assignment of all of Comet’s rights and interests, and assuming all of Comet’s obligations under the Melville Joint Venture Agreement, subject to settlement of the Option Agreement.

In addition, on 9 December 2002, Platinum confirmed its consent to the assignment of Comet’s interest in the MJV to the Company and the waiver of Platinum’s pre-emptive right pursuant to the Melville Joint Venture Agreement in respect of the proposed assignment.

K. PASINE PURCHASE AGREEMENT

On 6 March 2003, the Company entered into a letter agreement with Pasine Holdings Pty Ltd (Pasine) for the sale and purchase of Exploration Licence Applications 59/1011 and 59/1038 (Applications) (Pasine Purchase Agreement).

The Pasine Purchase Agreement is subject to and conditional upon the following:

(a) the grant of one or both of the Applications;

(b) the grant of the necessary Ministerial consents (the parties must use their best endeavours to obtain such consents); and

(c) the Company completing one week of due diligence.

Subject to the conditions precedent being satisfied or waived, the Company (or its nominee) must purchase the tenements granted pursuant to the Applications for the following consideration:

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(a) the payment of $3,000 to Pasine;

(b) the allotment of 300,000 Shares at a deemed issue price of $0.10 per Share to Pasine; and

(c) the payment to Pasine of a royalty of $1.00 per tonne for the first 500,000 tonnes of ore mined and treated, and $0.50 per tonne thereafter.

In the event that the necessary Ministerial consents are not granted, any of the rights of the Company, as beneficial owner of the tenements, must be held in trust by Pasine for the Company.

The Pasine Purchase Agreement contains pre-emptive rights which apply to the transfer of any interest to third parties. The Company and Pasine retain the right to assign their respective interests to a third party subject to a mutual agreement by both parties and subsequent to the expiry of a pre-emptive period of 30 days from the delivery of a copy of a firm unconditional offer from a third party to the other party, which the other party can match.

Under the Pasine Purchase Agreement, Pasine retains the right to access the existing mining camp.

L. WAYBURY PURCHASE AGREEMENT

On 6 March 2003, the Company entered into a letter agreement with Waybury Holdings Pty Ltd (Waybury) for the sale and purchase of Mining Lease 59/275 and Prospecting Licence 59/1168 (Tenements) (Waybury Purchase Agreement).

The Waybury Purchase Agreement is subject to and conditional upon the following:

(a) confirmation of secure title of the Tenements;

(b) the grant of the necessary Ministerial approvals;

(c) the Company’s board of directors approving the acquisition; and

(d) the Company completing one week of due diligence.

Subject to the conditions precedent being satisfied or waived, the Company (or its nominee) must purchase the Tenements for the following consideration:

(a) the payment of $5,000 to Waybury; and

(b) the payment to Waybury of a royalty of $0.50 per tonne of ore mined and treated.

M. MARAK OPTION AGREEMENT

On 9 May 2003, the Company entered into a letter agreement with Marak Mining Pty Ltd (Marak) whereby Marak granted the Company an option to purchase Mining Lease 59/407 (Tenement) (Marak Option Agreement).

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The Marak Option Agreement is subject to and conditional upon the following:

(a) Marak paying all DIR rentals, fines or penalties associated with the Tenement in existence prior to the date of the Marak Option Agreement;

(b) the acceptance of Form 5 as required under the Mining Act;

(c) the grant of an expenditure exemption for the period up to January 2003;

(d) confirmation of secure title of the Tenement;

(e) the Company completing one week of due diligence;

(f) the Company’s board of directors approving the acquisition within 14 days of the satisfaction of (e) above; and

(g) the grant of the necessary Ministerial approvals.

Upon satisfaction of the conditions precedent set out in (a) to (d) above, the Company must:

(a) pay to Marak a non-refundable option fee of $15,000 (plus GST); and

(b) maintain the Tenement, in good standing in accordance with the requirements of DIR,

in consideration of Marak granting the Company a 12 month option to purchase the Tenement.

Subject to the remaining conditions precedent being satisfied or waived, the Company (or its nominee) may exercise its option and purchase the Tenement for the following consideration:

(a) payment of $15,000 (plus GST) on the commencement of trading of the Company (or its nominee) on ASX; and

(b) the allotment of 390,000 Shares at a deemed issue price of $0.20 per Share to Marak (or its nominee).

N. MURCHISON OPTION AGREEMENT

On 19 March 2003, the Company entered into a letter agreement with Murchison Resources Pty Ltd (Murchison) whereby Murchison granted the Company an option to purchase Prospecting Licence 59/1487 and Mining Lease Application 59/570 (Tenements) (Murchison Option Agreement).

The Murchison Option Agreement is subject to and conditional upon the following:

(a) the discharge of Caveat 662H/989 and withdrawal of Agreement 92H/989, which were registered by Acacia (now AngloGold);

(b) the Company completing one week of due diligence;

(c) the Company’s board of directors approving the acquisition; and

(d) the grant of the necessary consents required by the Mining Act.

Subject to the condition in clause (a) being satisfied, the Company must:

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(a) pay Murchison a non-refundable option fee of $10,000 (plus GST);

(b) maintain the Tenements in good standing in accordance with the requirements of DIR for a period of 12 months from the satisfaction of condition (a) above; and

(c) the Company must commit to spend $25,000 on the Tenements within 12 months of the date of the Murchison Option Agreement,

in consideration of Murchison granting the Company a 12 month option to purchase the Tenements.

Subject to the remaining conditions precedent being satisfied or waived, the Company (or its nominee) may exercise its option and purchase the Tenements for the following consideration:

(a) the payment of $50,000 (plus GST) to Murchison on the commencement of trading of the Company (or its nominee) on ASX;

(b) an additional payment of $80,000 (plus GST) to Murchison if more than 10,000 ounces of gold are produced from the Tenements; and

(c) the payment to Murchison of a royalty of $1.00 (plus GST) per tonne for the first 500,000 tonnes of ore mined and treated, and $0.50 (plus GST) per tonne of ore mined and treated thereafter.

The Murchison Option Agreement contains pre-emptive rights which apply to the transfer of any interest to third parties. The Company and Murchison retain the right to assign their respective interests to a third party subject to consent (which must not be unreasonably withheld) of both parties and subsequent to the expiry of a pre-emptive period of 30 days from the delivery of a copy of a firm offer from a third party to the other party, which the other party can match.

O. ALLUVIAL OPTION AGREEMENT

On 19 July 2003, the Company entered into a letter agreement with Alluvial Gold Treatment Pty Ltd (Alluvial) whereby Alluvial granted the Company a 12 month option to purchase Mining Lease 59/57 (excluding chattels) (Tenement) (Alluvial Option Agreement), in consideration of the Company:

(a) paying to Alluvial a non-refundable option fee of $12,000 (plus GST); and

(b) maintaining the Tenement in good standing in accordance with the requirements of DIR, and committing to a drill programme of at least $10,000 prior to the anniversary date of the Tenement this year.

The Alluvial Option Agreement is subject to and conditional upon the following:

(a) receipt of confirmation that Alluvial has paid all DIR fines or penalties associated with the Tenement in existence prior to the date of the Alluvial Option Agreement;

(b) the Company completing four weeks of due diligence;

(c) the Company’s board of directors approving the Alluvial Option Agreement;

(d) the grant of the necessary Ministerial approvals; and

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(e) the removal of any outstanding charges, caveats, agreements or liabilities associated with the Tenement.

The option may be exercised by the Company (or its nominee) during the 12 month option period for the following consideration:

(a) the payment of $40,000 (plus GST) to Alluvial on the commencement of trading of the Company (or its nominee) on ASX;

(b) a further payment of $100,000 (plus GST) to Alluvial in 12 months from the date that the Company (or its nominee) is listed on ASX; and

(c) the payment to Alluvial, in perpetuity, of a royalty of:

(i) $2.00 (plus GST) per tonne of ore mined and treated based on a JORC mineable reserve grade of 10gms og gold/tonne or less; or

(ii) $8.00 (plus GST) per tonne of ore mined and treated based on a JORC mineable reserve grade of greater than 10gms of gold/tonne.

PART III

STATUS OF NATIVE TITLE CLAIMS

Tribunal No. Federal Court No. Application Name Status RNTC Status In Mediation

WC01/003 W6042/99 The Wajarri Elders Active Registered Yes

WC96/98 WG6123/98 Badimia People Active Registered Yes

WC96/93 WG6119/98 Mullewa Wadjari Community Active Registered Yes

* All Tenements are the subject of Aboriginal Representative Body 14 Geraldton ARB.

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10 RISK FACTORS

10.1 Introduction

An investment in the Company is not risk free and prospective investors should consider the risk factors described below, together with information contained elsewhere in this Prospectus, before deciding whether to apply for Shares.

The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.

10.2 Economic Risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s exploration, development and future production activities, as well as on its ability to fund those activities.

10.3 Market Conditions

The market price of the Shares can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities and, in particular, resource stocks. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

10.4 Exploration Success

The mineral tenements of the Company as described in this Prospectus are at various stages of exploration, and potential investors should understand that mineral exploration and development are speculative undertakings.

There can be no assurance that exploration of the project areas described in this Prospectus, or any other tenements that may be acquired in the future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified, there is no certainty that it can be economically exploited.

10.5 Operating Risks

The operations of the Company may be affected by various factors, including, without limitation, failure to locate or identify mineral deposits, failure to achieve predicted grades in exploration and mining, operational and technical difficulties encountered in mining, difficulties in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions, industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

Having been incorporated in January 2003, the Company does not have any operating history, although it should be noted that the Company’s Directors have between them significant operational experience. No assurances can be given that the Company will achieve commercial viability through the successful exploration and/or mining of its tenement interests.

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10.6 Resource Estimates

Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates, which were valid when originally calculated, may alter when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates may change. This could result in alterations to development and mining plans, which may, in turn, adversely affect the Company’s operations.

10.7 Commodity Price and Exchange Rate Risks

If the Company achieves exploration success leading to mineral production, the revenue it will derive through the sale of commodities may expose the potential income of the Company to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand fluctuations for precious and base metals, technological advancements, forward selling activities and other macro-economic factors.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

10.8 Environmental Risks

The operations and proposed activities of the Company are subject to State and Federal laws and regulations concerning the environment. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws.

10.9 Title Risks and Native Title

Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance. Consequently, the Company could lose title to, or its interest in tenements if licence or lease conditions are not met or if insufficient funds are available to meet expenditure commitments.

In addition, the Company cannot guarantee that those Tenements that are applications for tenements will ultimately be granted in whole or in part pursuant to the Mining Act 1978 (WA).

It is also possible that, in relation to tenements which the Company has an interest in, or will in the future acquire such an interest, there may be areas over which legitimate common law native title rights of Aboriginal Australians exist. If native title rights do exist, the ability of the Company to gain access to tenements (through obtaining consent of any relevant landowner), or to progress from the exploration phase to the development and mining phases of operations may be affected.

The Directors will closely monitor the potential effect of native title claims involving tenements in which the Company has or may have an interest.

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11 ADDITIONAL INFORMATION

11.1 Disclosure of Interests

Directors are not required under the Company’s Constitution to hold any Shares. As at the date of this Prospectus, the Directors have relevant interests in Shares as set out in the table below:

Director Number of Shares

Richard Morris Dawson 4,000,0001

David James Holden 3,000,000²Robert Oswald Jones Nil³

1 These shares are owned by Classico Holdings Pty Ltd, a company of which Mr Dawson is a Director and 100% shareholder.

² These shares are owned by Ravensgate Pty Ltd, a company of which Mr Holden is a Director and 50% shareholder.

³ Pursuant to the option agreement dated 10 February 2003 (as varied) between the Company and Comet, upon exercise of the option to purchase the relevant Tenements, the Company must allot and issue 6,000,000 Shares at an issue price of $0.10 and grant 2,000,000 Options to Comet as part consideration of the purchase of the relevant Tenements (refer to the Solicitor’s Report contained in Section 9). Mr Jones is a director of Comet.

11.2 Remuneration

The aggregate remuneration payable to non-executive Directors has been set at an amount not to exceed $200,000 per annum. The Company’s Constitution provides that the aggregate fixed sum shall not be increased without the prior approval of Shareholders in general meeting.

The remuneration of executive Directors will be fixed by the Directors and may be paid by way of fixed salary. As at the date of this Prospectus, the Company does not have any commitments or contractual obligation with respect to executive Directors, other than as detailed in Section 11 of this Prospectus.

The Directors are entitled to be paid reasonable travelling, accommodation and other expenses incurred in consequence of their attendance at meetings of Directors and otherwise in the execution of their duties as Directors. A Director may also be paid additional amounts as fees or as the Directors determine where a Director performs extra services or makes any special exertions, which in the opinion of the Directors are outside the scope of the ordinary duties of a Director.

11.3 Fees and Benefits

Other than as set out below or elsewhere in this Prospectus, no:

(a) Director or proposed director of the Company;

(b) person named in this Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Prospectus;

(c) promoter of the Company, or

(d) financial services licensee named in the Prospectus as a financial services licensee involved in the Offer,

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has, or had within 2 years before lodgement of this Prospectus with ASIC, any interest in:

(a) the formation or promotion of the Company;

(b) any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or in connection with the offer of Shares under this Prospectus; or

(c) the offer of Shares under this Prospectus,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of those persons as an inducement to become, or to qualify as, a Director of the Company or for services rendered in connection with the formation or promotion of the Company or the offer of Shares under this Prospectus.

Stanton Partners Corporate Pty Ltd have acted as the Independent Accountant and have prepared an Independent Accountants’ Report which has been included in Section 8 of this Prospectus. The Company estimates it will pay Stanton Partners Corporate Pty Ltd a total of $4,500 (inclusive of goods and services tax) for these services. Subsequently, fees will be charged in accordance with normal charge out rates. Stanton Partners Corporate Pty Ltd have received no fees for other services provided to the Company since the incorporation of the Company on 2 January 2003.

Steinepreis Paganin have acted as the solicitors to the Company in relation to the Offer and have prepared the Solicitor’s Report on Tenements which has been included in Section 9 of this Prospectus. The Company estimates it will pay Steinepreis Paganin $40,000 (inclusive of goods and services tax) for these services. Subsequently, fees will be charged in accordance with normal charge out rates. Since incorporation of the Company on 2 January 2003, Steinepreis Paganin have not received any fees for any other legal services.

Mr Malcolm Castle has prepared an Independent Geologist’s Report which has been included in Section 7 of this Prospectus. The Company estimates it will pay Mr Castle a total of $6,000 (inclusive of goods and services tax) for these services. Since incorporation of the Company on 2 January 2003, Mr Castle has not received any fees for any other geological consultancy services.

Findlay & Co Stockbrokers Ltd is acting as Sponsoring Broker to the Issue and will receive a fee of $40,000, together with a commission of 5% in respect of funds raised by the allotment of Shares pursuant to the Application Forms bearing their stamp.

11.4 Consents

Each of the parties referred to in this section:

(a) does not make, or purport to make, any statement in this Prospectus other than those referred to in this section; and

(b) to the maximum extent permitted by law, expressly disclaim and take no responsibility for any part of this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this section.

Stanton Partners Corporate Pty Ltd has given its written consent to being named as Independent Accountant to the Company in this Prospectus and to the inclusion of the Independent Accountant’s Report in Section 8 in the form and context in which the report is included. Stanton Partners Corporate Pty Ltd has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Steinepreis Paganin have given their written consent to being named as the solicitors to the Company in this Prospectus and to the inclusion of the Solicitor’s Report on Tenements in Section 9 in the form

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and context in which the report is included. Steinepreis Paganin have not withdrawn their consent prior to the lodgement of this Prospectus with the ASIC.

Mr Malcolm Castle has given his written consent to being named as Independent Consulting Geologist in this Prospectus and to the inclusion of the Independent Geologist’s Report in Section 7 in the form and context in which the report is included. Mr Castle has not withdrawn his consent prior to lodgement of this Prospectus with the ASIC.

Ms Gail McMahon has given her written consent to being named as Tenement Consultant in this Prospectus. Ms McMahon has not withdrawn her consent prior to the lodgement of the Prospectus with the ASIC.

Findlay & Co Stockbrokers Ltd has given its written consent to being named as Sponsoring Broker in this Prospectus and has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Computershare Investor Services Pty Ltd has given its written consent to being named as the Company’s Share Registry in this Prospectus and has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Stanton Partners has given its written consent to being named as Auditor to the Company in this Prospectus and has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

11.5 Material Contracts

The following is a discussion of the material contracts entered into by the Company. Certain material contracts are summarised elsewhere in this Prospectus (for example, the Solicitor’s Report on Tenements), and accordingly have not been included here.

11.5.1 Executive Services Agreement

On 3 September 2003, the Company entered into an executive services agreement with Mr Richard Dawson, pursuant to which Mr Dawson is engaged as Managing Director of the Company for a period of three (3) years from the date on which the Company is granted approval for admission to the Official List (Listing Date) unless otherwise extended or terminated in accordance with the agreement. The Company will pay a salary of $120,000 per annum plus statutory superannuation to Mr Dawson, who must devote the whole of his time to the business of the Company.

11.5.2 Consultancy agreement

The Company entered into an agreement with Ravensgate Pty Ltd (Ravensgate) on 3 September 2003, whereby Ravensgate will provide the services of Mr David Holden as Geological and Technical Consultant to the Company at a rate of $600 per day plus reasonable expenses for 10 days per calendar month, for a period of two (2) years from the Listing Date unless otherwise extended or terminated in accordance with the agreement.

11.5.3 Deeds of Indemnity, Insurance and Access

The Company has entered into, or will enter into, a deed of indemnity and insurance and access with each of the Directors and the company secretary (Deeds).

Under the Deeds, the Company indemnifies each officer to the extent permitted by the Corporations Act against any liability arising as a result of the officer acting as an officer of the Company.

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The Company is required under the Deeds to maintain insurance policies for the benefit of the relevant officer for the term of the appointment and for a period of seven (7) years after retirement or resignation.

The Deeds also provide for the right to access Board papers.

11.6 Rights Attaching to Shares

The following are the more important rights, privileges and restrictions attaching to the Shares offered for subscription by this Prospectus:

(a) subject to any special rights or restrictions for the time being attached to any class or classes of Shares in the Company (at present there are none), at a general meeting every Shareholder present in person or by proxy, representative or attorney will have one vote on a show of hands and, on a poll, one vote for each Share held;

(b) each Shareholder will be entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, accounts and other documents required to be furnished to Shareholders under the Constitution, the Corporations Act or the Listing Rules;

(c) subject to any special rights of the holders of any Shares as to a dividend (at present there are none), any dividend declared shall be payable on all Shares in proportion to the amount paid up or credited as paid up in respect of such Shares;

(d) subject to the rights of holders of Shares with special rights in a winding-up (at present there are none), on a winding-up of the Company all monies and property that are to be legally distributed among holders of Shares will be distributed so that, to the greatest extent possible, the amount distributed is in proportion to the Shares held by Shareholders respectively, irrespective of the amounts paid up or credited as paid up in respect of the Shares. At the commencement of the winding up, Shares classified by ASX as restricted securities shall rank, on a distribution of assets to Shareholders, after all other Shares; and

(e) subject to the Constitution, the Corporations Act and the Listing Rules, Shares are freely transferable.

11.7 Restricted Securities

ASX has indicated that certain existing security holders may be required to enter into agreements, which restrict dealings in Shares held by them. These agreements will be entered into in accordance with the Listing Rules.

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11.8 Expenses of the Offer

The total expenses of the Offer are estimated to be approximately $290,000 made up as follows:

Amount Commission to Brokers 1 140,000

Sponsoring Broker’s Fee ² 40,000 ASIC and ASX fees 23,200 Legal fees 40,000 Independent Accountant’s fees 4,500 Independent Consulting Geologist’s fees 6,000 Printing and associated costs 22,100 Miscellaneous expenses 14,200

Total $290,000

1 Assuming Offer is fully subscribed and a fee of 5% is payable on all Applications received (and accepted by the Company).

² The Sponsoring Broker’s fee does not include any commissions paid. If the Sponsoring Broker provides Applications, the Sponsoring Broker will be paid a 5% commission on acceptance of that Application (which amount is included in Item 1 in the above table).

Some of the above amounts are inclusive of goods and services tax, which must be absorbed by the Company pursuant to current taxation laws on deemed financial services.

11.9 Litigation

As at the date of this Prospectus, the Company is not involved in any material legal proceedings and the Directors are not aware of any legal proceedings pending or threatened against the Company.

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12 DIRECTORS’ AUTHORISATION

This Prospectus is issued by Prosperity and its issue has been authorised by a resolution of the Directors.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospectus with the ASIC.

Dated 22 September 2003

Richard Morris DawsonFor and on behalf ofProsperity Resources Limited

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13 GLOSSARY

Where the following terms are used in this Prospectus they have the following meanings:

A$ or $ means an Australian dollar.

Application means a valid application to subscribe for Shares.

Application Forms means the Priority Application Form and the Public Application Form accompanying this Prospectus.

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ABN 98 008 624 691).

Board means the board of Directors of the Company as constituted from time to time.

Business Day has the meaning given to that term in the Listing Rules.

Closing Date means the closing date for receipt of Acceptance Forms under this Prospectus, being 5.00 p.m. (WST) on 10 November 2003 or an extended date as set by the Board.

Comet means Comet Resources Limited (ABN 80 060 628 202).

Comet Shareholders means holders of Comet Shares.

Comet Shares means fully paid ordinary shares in the capital of Comet.

Company or Prosperity means Prosperity Resources Limited (ABN 60 103 280 235).

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company at the date of this Prospectus.

Exposure Period means the period of seven (7) days after the date of lodgement of this Prospectus with the ASIC, which period may be extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act.

Listing Rules means the official Listing Rules of ASX.

Offer means the offer of Shares pursuant to this Prospectus as outlined in Section 3.

Official List means the Official List of ASX.

Official Quotation means official quotation by ASX in accordance with the Listing Rules.

Opening Date means the opening date for receipt of Application Forms under this Prospectus, being 5.00 p.m. (WST) on 29 September 2003.

Option means an option to subscribe for one Share, exercisable at $0.20 per Share on or before 30 November 2005.

Priority Application Form means the application form accompanying this Prospectus to be used in applying for Shares under the Priority Offer.

Priority Offer means the priority offer of Shares to Comet Shareholders as detailed in Section 3 of this Prospectus.

Prospectus means this prospectus dated 22 September 2003.

Public Application Form means the application form accompanying this Prospectus to be used for applying for Shares under the Public Offer.

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Public Offer means the offer of Shares to the general public on the terms and conditions set out in Section 3 of this Prospectus.

Record Date means 5.00 p.m. (WST) on 16 September 2003.

Share means a fully paid ordinary share in the capital of the Company.

Share Registry means Computershare Investor Services Pty Ltd (ABN 48 078 279 277).

Shareholder means a holder of Shares.

Sponsoring Broker means Findlay & Co Stockbrokers Ltd (ACN 065 943 982).

Tenements means those tenements referred to in Part II of Section 9 – Solicitor’s Report on Tenements, of this Prospectus.

WST means Western Standard Time, Perth, Western Australia.

resources limited prospectus - morningstar, inc

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