Alliance Gold Mines NL - Annual Report 1996

The 1995/96 year was one of significant achievement for Alliance. seeing the Company progress from an active explorer to an emerging gold producer.

Alliance has continued its efforts into better understanding the geological structure of the Nialdon goldfield, resulting in the discovery of new orebodies on both Linscotts and Eaglehawk reefs. Initial mine production will be from lodes which are easily accessible from the existing decline. with already announced resources sufficient to fullv utilise our treatment plant for a number of years. Additional resource definition is anticipated as mining and exploration proceeds. Gold production is anticipated to rise to a rate of 20,000 ounces per annum during 1996/97. Development of other highly prospective target zones could be fully funded by such a gold production rate, and there is the prospect of dividend payments to shareholders at an early stage.

At the same time the Company has secured and consolidated exploration licence coverage over an extensive basalt-covered corridor through Victoria's 'Golden Triangle'. This area is highly prospective for the discovery of entirely new goldfields. Exploration has commenced using a variety of leading-edge geological. geophysical and geochemical techniques.

While the initial search at Maldon has concentrated on establishing easily accessible resources to provide an early cash flow, the main geological focus has been towards identifying and testing more substantial targets. Comprehensive exploration programs are currently in progress

on a number of these targets, seeking to generate significantly larger resources.

With these programs in mind, Alliance has applied for a larger mining lease covering the Maldon goldfield and has developed a long-term plan for mining, water management, tailings storage and progressive rehabilitation. The plan provides for up to 30 years of production at Porcupine Flat. the site of the Company’s processing plant, underscoring the long-term underground mining operation which is envisaged for the Maldon goldfield.

It is anticipated that the discovery and development of high grade gold resources at Maldon will provide the necessary funding to support ongoing exploration of the nearby Clunes and Creswick projects. Encouraging results to date point to the prospect of these historic towns again becoming active gold mining areas.

Alliance has started the new financial year with strong cash reserves and has an excellent spread of tenements at vanous stages of development throughout central Victoria. An operational gold processing plant and the recently announced gold resources place Alliance in an enviable position to establish a rapid and reliable cash flow.

In closing, the Directors acknowledge the very important contribution by the contractors and consultants who have worked with Alliance throughout this past year, and we express our gratitude to them.

But the outstanding results that have been achieved during the year are largely a reflection of the enthusiasm and hard work of our management and staff; on behalf of the Board I thank them for their special efforts.

CHRISTOPHER 0 HASLAM

Chairman