Alkane Exploration - Annual Report 1995

The year of 1995 has been one of the most exciting years in the history of this company. The most significant event during this year has been the buy out of the Peak Hill gold mining operations from our joint venture partners, Associated Gold Fields NL. At long last, Alkane now owns the Peak Hill gold deposit 100 per cent.

The company has been involved with the Peak Hill mine for over fourteen years and it is only now that the mine is owned entirely by Alkane. The finance for the development of the mining operation has been provided by Macquarie Bank Limited and construction has begun. The first gold pour from the heap leach is expected in July of this year. Unfortunately with all mining operations there is a long lead time between the breaking of the ground and the initial revenue from product sales and in this case it is accentuated by the heap leach process which requires some 30 to 45 days of leach time before any extraction is viable.

The exploration area surrounding the Peak Hill mining leases and below 105 metres on the mining leases is still under a 50/50 joint venture with Associated Gold Fields NL and as was reported last year, Cyprus Gold Australia Corporation, a unit of Cyprus Amax Minerals Company entered into a farm-in joint venture to explore this area. Cyprus drilled a few prospects including some 2 deep holes under the Parkers deposit which have provided us with great encouragement that flirther mineralisation exists at depth. Cyprus did not consider the results sufficienfly encouraging for their model size and withdrew from the project. Associated and Alkane, however, believe that flirther deep drilling will be rewarded with significant increases in reserves and the companies are in discussion to plan a drilling program to test the deposit at depth.

All this inforrnation leads the company to believe that the Peak Hill mine will continue long past the current mine plan of five years.

The company's exploration effort at Nullagine has been slowed this year to concentrate on putting Peak Hill into production, and our geological consultants, of which our technical director Mr Ian Chalmers is a principal, are preparing some alternatives for us to consider for this field season which is not due to commence until April.

The rare metal and rare earth deposit at Dubbo in New South Wales is fast becoming more and more interesting with the upward trend in world zirconia prices and this year we have continued with metallurgical testing and marketing surveys with a view to concentrating on this project as soon as Peak Hill has been settled down.

The Board has been having discussions with several brokers with a view to underwriting the exercise of the options due for expiry on 30 June this year. From initial discussions we are confident of underwriting a significant number of options, if not all of them, which will provide the company with a healthy cash influx which can be used to retire debt and improve the cash flow return to the company from its mining operation.

This year will be a year of production and cash consolidation with, hopeflilly, some ft'rther successes at Peak Hill, Nullagine and Dubbo which will provide the company with a steady growth path leading to that fateflil day when the company will be in a position to pay a dividend.

I would like to take this opportunity in to thank my fellow directors and our consultants who have done a splendid job for the company again this year.

I.R Cornelius

Chairman

8 March 1996