Australian Resources - Annual Report 1996

CHAIRMAN'S REPORT

1995-96 was a year of consolidation for Austraian Resources Ltd operations but a year during which the Group broadened its Australian exploration effort. Attributable gold production increased slightly from 198,184 ounces to 200,764 ounces while copper production increased 52% from 14,136 tonnes to 21,501 tonnes.

 The Group's mining operations generated $57.4 million of net cash before exploration, development and capital expenditure, 39% higher than the previous year. Higher copper and marginally increased gold production and higher realised metal prices produced the increased cash flow. The year's operating profit after income tax was $15.5 million, slightly lower than last year as a result of higher amortisation and depreciation charges. Income tax attributable to the operating profit increased from $8.4 million for the previous year to $8.9 million for 1995-96. Dividends equal to 3 cents per share were paid during the year and were fully franked. The Directors have declared a final, fully franked dividend of 1.5 cents per share to be paid on 24 September 1 996.

 Exploration was again successful at all three operations. Not only was the year's production replaced but contained gold and copper in the ore reserve and measured and indicated resource categories were increased.

The Group broadened its Australian exploration by initiating several new regional exploration projects. At Kuridala, north of the Selwyn operation in Queensland, the Group entered into ajoint venture as a result ofwhich it can earn a 51% interest in extensive and highly prospective tenements. Numerous mineralised prospects and anomalies have already been identified in this area and excellent potential exists for Mount Elliott style copper-gold mineralisation in the old Hampden and Consols mine area.

In Western Australia new regional exploration projects were initiated at Horrigan's Creek in the Ashburton District, Yalgoo in the Murchison District and Phantom Well in the Eastern Goldfields.

All are gold projects with the latter two being joint ventures. In New South Wales, the Group has farmed into an area atTottenham with potential for copper-gold mineralisation. Exploration expenditure for the year totalled $13.5 million (previous year $15.2 million).

Safety and Environment

 Safe operations continues to be one ofthe Group's prime objectives. Outstanding safety performances at the Selwyn mine are described in the Operations Overview and further improvement was pursued at the Western Australian operations. As in previous years, rehabilitation is on or ahead of schedule at all ofthe Group's mines. Selwyn maintained for the second successive year the Category 2 Performance Rating, awarded by the Queensland Department of Minerals and Energy.

Corporate Governance

The Group is committed to good Corporate Governance and our main Corporate Governance practices are detailed elsewhere in this Annual Report.

Conclusion

Capital, exploration and acquisition investments undertaken in 1994-95 began to be realised in 1995-96. The Mt McClure mill expansion was completed early in the year under review and resulted in significantly increased gold production and improved cash operating costs. In addition, the strategic interest acquired in 1994-95 in Oresearch NL was converted to an increased direct interest in the Mt McClure joint Venture (51% to 63.35%). Selwyn had an outstanding year reflecting earlier investments and improved productivities, good production, reduced mining dilution and low costs. As predicted last year, cash flow improved during the year and the Group now has no net debt (existing debt less cash).

Low cost Australian gold and copper production is our core business and aggressive exploration is expected to increase ore reserves and mineral resources. The broadening ofthe Group's Australian exploration effort is a strategy designed to accelerate the growth of our reserve/resource base. As always, any other opportunity to expand the Group's gold production and reserves/resources will also be pursued. The Group's forward sales policies continue to ensure protection against falls in the spot gold price while maintaining substantial exposure to higher gold prices. A major portion of the 1996-97 forecast copper revenue is also protected.

In closing, my fellow directors join me in extending our sincere thanks to our employees and contractors for their dedication and effort during another challenging year.

I B Roberts

Chairman