ANNUAL REPORT 2001

Heron Resources Limited 21 Close Way, West Kalgoorlie PO Box 1280, Kalgoorlie, Western Australia, 6433 Telephone: (08) 9091 9253 Facsimile: (08) 9091 9256 Email: [email protected] www.heronresources.com.au HERON RESOURCES LIMITED CORPORATE DIRECTORY SHAREHOLDER REVIEW

COMPANY SECRETARY AUDITORS Any Shareholder visiting Kalgoorlie is encouraged to drop in to the office and see how it all works. Ross Arancini BBus, ACA Butler Settineri Chartered Accountants Company Secretary 35-37 Havelock Street Usually a field trip to Goongarrie can be arranged with Pam Buchhorn, your most 110 Hensman Street WEST PERTH WA 6005 capable tour guide. SOUTH PERTH WA 6151 Telephone: (08) 9367 1213 BANKERS Facsimile: (08) 9367 7853 “So this run-of-mine ore is worth $100 a Email: [email protected] Challenge Bank tonne, and Heron’s got 400 million tonnes!” 230-236 Hannan Street Local Kalgoorlie businessmen and REGISTERED AND PRINCIPAL OFFICE KALGOORLIE WA 6430 major Heron Shareholders Dean Willis, 21 Close Way Rino Borromei and Brett Nazzari PO Box 1280 CORPORATE ADVISER with David Crook. KALGOORLIE WA 6433 Carmichael First Capital Pty Limited Telephone: (08) 9091 9253 Kalgoorlie businessman Nigel Byrd at Facsimile: (08) 9091 9256 Level 11, 77 St Georges Terrace PERTH WA 6000 Goongarrie with some of the high grade Email: [email protected] “$600 a tonne revenue value” drill samples. Website: http://www.heronresources.com.au Very encouraging when you’re a major SOLICITORS TO THE COMPANY Heron Shareholder. SHARE REGISTRY McKenzie Lalor Security Transfer Registrars Pty Ltd 74 Egan Street “A rose between two thorns....” Level 1, 168 Adelaide Terrace KALGOORLIE WA 6430 PERTH WA 6000 Alan Rudd, Libby Willis and Telephone: (08) 9221 4200 Pullinger Readhead Stewart Simon Gobbett at Facsimile: (08) 9221 1581 46-50 Kings Park Road the Heron shed. Email: [email protected] WEST PERTH WA 6005

STOCK EXCHANGE Front Cover: Holding high grade black Australian Stock Exchange Limited Goongarrie Ore, assaying 3% Ni and 2% Co. 2 The Esplanade PERTH WA 6000 Background montage of the exploration journals of Keith Quartermaine (Order of Australia), a Scientist and Historian. ASX CODE HRR Jack Otway. “There’s miles and miles of that Laterite SEAT ABBREVIATION at Perrinvale.” Keith Quartermaine led his friends on expeditions into the Heron Heron, Avoca and Balladonia exploration country. Between 1951 and 1976, Keith wrote 26 journals and took HOME BRANCH over 10,000 photographs on his exploration of the Perth Sue Geary, Administration Manager. Nullarbor and Goldfields - exploring, recording and Easily the neatest office at Heron Kalgoorlie. researching the history, flora, fauna, caves, meteorites, INDUSTRY CLASSIFICATION Please telephone Sue on (08) 9091 9253 tektites and geological features of the region. if you have any enquiries. Other Metals 022 Base Metals Keith began writing up his journals at the request of his father who wanted to share in his activities in these remote RESEARCH SERVICE INDEX NO. locations. Mining H50 On these trips Keith was variously accompanied by Harry Wheeler, John Carlisle (Order of Australia), Bill Cleverly, ISIN David Crook (far right) explaining the Pamela Jean Deeps to a very demanding Tom Bateman and Ross and Beverly Quartermaine. audience of Kalgoorlie-based Shareholders and the Board. AU000 000 HRR6 As Heron works in the same country, we take this opportunity to acknowledge Keith Quartermaine, a true Goldfields explorer.

All sepia images in this Report are from All photographic page art by Justin Madden, Keith Quartermaine’s volumes. p Reynolds Graphics, Kalgoorlie. p e r K g u o D d n a en le Ei of y es Footsteps of urt Co Bill, Keith and Harry across Lake Yindarlgooda. DIRECTORS

Rodney Michael Evans FCA, FCIS, FCIM, AlArbA Chairman (Non Executive) 21 Close Way, Kalgoorlie, Western Australia, 6430

Ian James Buchhorn BSc (Hons), Dipl Geosci, MAusIMM Managing Director (Executive) 21 Close Way, Kalgoorlie, Western Australia, 6430

Robert George Colville AssocRMIT, MAusIMM Director (Non Executive) Level 1, 1 Sleat Road, Applecross, Western Australia, 6153

Goongarrie Country ANNUAL REPORT 2001

1.0 Chairman’s Review...... 3

2.0 Operations Review ...... 4

3.0 Corporate Profile ...... 30

4.0 Directors’ Report ...... 32

5.0 Financial Statements...... 36

Statement of Financial Performance...... 36

Statement of Financial Position...... 37

Statement of Cash Flows ...... 38

Notes to and Forming Part of the Accounts...... 39

Directors’ Declaration...... 50

6.0 Independent Audit Report...... 51

7.0 Shareholder Information ...... 52

8.0 Interest in Mining Tenements...... 55

CONTENTS Glossary of Terms ...... 67 Avoca Country

Page 1 HERON RESOURCES LIMITED FIG.1: EASTERN GOLDFIELDS PROJECT LOCATIONS Heron, Avoca and Balladonia Tenements

Heron Avoca Balladonia Tenure Tenure Tenure

Heron has acquired a quality project portfolio covering 19,000 km2 of Archaean Nickel and Gold mineralised terrain.

Heron’s aim in pegging is to build up contiguous tenement holdings covering several 100km2 of favourable geological structure.

Only projects with known mineral resource potential or well defined drilling targets are acquired.

Page 2 1.0 CHAIRMANS REVIEW

It is with pleasure that I present the sixth Annual Report of Heron Resources Limited ("Heron"). During 2001 the Company has significantly advanced its high quality assets in the Nickel and Precious Metal sectors, while maintaining its strong cash position. During the year, A$2.8 million was raised through a placement, resulting in A$3.1 million in cash at year’s end.

Heron Nickel Assets The commodity Resource Definition Reverse Circulation drilling continued almost non-stop during 2001, with 67,017m in emphasis for 1,335 holes now having been completed at Goongarrie. Heron is unequivocally Drilling results at the Pamela Jean Zone have been consistently exceptional, and validate the tenacity Nickel Laterite, and professionalism of the Heron team in exploring this project. Drill intercepts during 2001 include: and the project emphasis is • GSRC1022 111m at 1.37% Ni and 0.07% Co Goongarrie, • GSRC1025 118m at 1.31% Ni and 0.12% Co specifically the • GSRC1030 104m at 1.33% Ni and 0.09% Co Pamela Jean Zone. Discussions are continuing with parties involved in the sale and re-structuring of Cawse Nickel Operations. Your Board is optimistic that the final outcome of these negotiations will be beneficial for your Company.

Exploration All key Mining Leases at Goongarrie have been granted. Heron is preparing a Notice of Intent to success during commence mining at Goongarrie. I wish to specifically compliment the efforts of David Crook as Heron’s 2001 at the Exploration Manager and Brian Wyatt representing the Goldfields Land Council for the good spirit shown in Goongarrie negotiating the Native Title Land Access Deeds and State Deeds which will facilitate Goongarrie mining. Nickel Project has resulted in A substantial area of future infrastructure sites was acquired to the immediate west of Goongarrie. Heron Heron identifying now has contiguous tenement coverage from Goongarrie southwest towards the Cawse plant site. the premium Australian Nickel As at 30 June 2001, the total Measured, Indicated and Inferred Mineral Resource above a 0.75% Ni cut-off Laterite deposit for Goongarrie-Kalpini and satellite nickel projects was 180.1 million tonne at 1.05% Ni and 0.08% Co. in terms of grade, thickness The Measured, Indicated and Inferred Mineral Resource above a 0.50% Ni cut-off for the Goongarrie- and metallurgy. Kalpini and satellite nickel projects was 406 million tonne at 0.8% Ni and 0.06% Co. During the year, Centaur variously nominated Peter Lee and Stephen Dennis to the Heron Board, both of whom have now retired. I thank them for their contribution.

The Avoca IPO Avoca Precious Metal Assets aims to derive Planning is advanced to "spin-off" Heron’s non-nickel assets into a listed company known as value for Heron shareholders Avoca Resources Limited ("Avoca"). Heron plans to transfer to Avoca 216 tenements in 23 projects, from Heron’s including 15 Joint Ventures with an aggregate of A$9.2 million in farm-out expenditure and a substantial quality Precious royalty portfolio. Newly acquired projects to be owned 100% by Avoca will include: Metal assets. • Powder Sill Platinum Group Element (“PGE”) Project, PGE soil geochemical targets.

Together, Heron • Jimberlana PGE Project, three advanced stage PGE-Ni-Cu sulphide layered mafic complex targets. and Avoca • Mungari Gold Project, south along strike on the Zuleika Shear from the Frog’s Leg gold discovery. control some • Wiluna South Gold Project, 129km2 immediately SE of the Wiluna gold mining centre on Lake Way. 4,500km2 of the tenement area Should the listing proceed in the currently intended form, it is proposed to issue to Heron Shareholders one within a 100km Avoca share for every five Heron Shares held, for no payment to the Company. radius of Kalgoorlie, being Your Board looks forward to the continued support of its Shareholders. The Board again acknowledges 14.3% of the the enthusiastic efforts and technical professionalism of its management and staff, and expresses its available ground. sincere thanks.

ROD EVANS Chairman

Page 3 HERON RESOURCES LIMITED 2.0 OPERATIONS REVIEW

HERON TECHNICAL ACTIVITY DURING 2001 Drilling Activity High grade drilling results were continuously obtained throughout 2001, such that Heron expended Goongarrie has $3.0 million on exploration: been the focus of drill exploration, • Goongarrie South 382 Reverse Circulation ("RC") holes for 22,172m to confirm resource continuity. with patterns • Goongarrie Hill 83 RC holes for 2,177m, to close off the ore body to the west. now at a pre- mine level of • Scotia Dam 113 RC holes for 4,835m to outline resources and confirm geology. detail at • Siberia 12 RC holes for 417m to outline resources. 40x20m. • Ghost Rocks 81 RC holes for 2,299m to outline resources and confirm geology. • Kalpini 53 RC holes for 1,355m, to confirm ore body lateral continuity. • Mineral Patch Hill 51 RC holes for 1,923m to define the ultramafic stratigraphy. and Merolia Drill-out of High Grade Ore Heron is aiming for a mining head grade exceeding 1.5% Ni, which requires a 1.25% Ni cut-off grade. There is market When determining cut-off grade, Heron views that a Nickel Laterite operation should stand alone on its recognition that nickel grade, and cobalt should be considered as an additional bonus. The Goongarrie South 1.25% Ni Goongarrie is a unique and cut-off resource, occurring in three pits, is listed by ore category exceptional nickel deposit, TABLE 1: GOONGARRIE NICKEL PROJECT with excellent Mineral Resource Inventory by Category, 1.25% Ni Cut Off early cash flow potential Category Million Tonne % Ni % Co % Ni4Co SG Proportion resulting from the high grades. Inferred 4.7 1.61 0.13 2.11 1.4 27% Indicated 8.7 1.54 0.18 2.25 1.4 54% Measured 3.2 1.53 0.16 2.15 1.4 19% Total 16.6 1.56 0.16 2.19 1.4 100%

At average 15 year historical metal prices, this resource alone is able to support a Goongarrie-Cawse 0.5 million tonne per annum (“mtpa”) scale of operation for a 30 year mine life. More significantly, the resource can potentially facilitate early project payback for a Goongarrie-Cawse 4mtpa scale of operation.

Production Opportunities Identified by Heron • The Cawse Nickel Operation Stage One ("CNO I") is for sale. Following de-bottlenecking to 1mtpa, Goongarrie is and using Heron’s high grade Goongarrie Goethite Ore feed, CNO I has a potential production of up one of the to 13,000tpa nickel as metal and intermediate product. strategic keys to the long term • Heron alone has sufficient mineral resources for a 30 year mine life 4mtpa Nickel Laterite operation, and successful such as that proposed for the Cawse Nickel Operation Stage Two ("CNO II"). development of • A Scoping Study has commenced for a joint venture evaluation involving the production of ferro-nickel an Eastern from the High Grade Saprolite Ore that underlies Heron’s Goethite Ore. Goldfields Nickel Laterite industry. Ore Processing Objective The strategy is to process Nickel Laterite through an existing plant using 1.25% Ni cut-off Goethite Ore with a Leach Feed Grade (“LFG”) of 1.6% Ni. This can be supplemented with 1.0% Ni cut-off Siliceous Ore, screen upgrading to a 1.6% Ni LFG. Based on current financial models, this blend is the preferred Nickel Laterite feed stock for a Cawse Stage One processing operation. Goongarrie Goethite is Goongarrie Goethite Ore has a remarkable chemical consistency, which is a great advantage undoubtably the when operating a complex chemical plant such as a Pressure Acid Leach (“PAL”), which premium Nickel requires a consistent feedstock. Laterite ore feed.

Bill Cleverly, smoko at Mount Remarkable.

Simon Gobbett logging drill samples. The task is demanding, requiring intense concentration from sunrise to sunset. Methodical drilling practice is the only way to discover world class ore bodies. Page 4 2.0 CONTINUED OPERATIONS REVIEW

HERON CORPORATE ACTIVITY DURING 2001

Capital Raising Heron has The Company’s working capital position is robust at A$3.1 million (at 30 June 2001), and is such that the negotiated $2.8 cash demands of the proposed 2002 drilling programs are well accommodated. This position has arisen million in capital through the placement of 10.0 million Shares at $0.28 in March 2001 to raise A$2.8 million. raisings since March 2001. Additional strategic capital raising discussions are current.

Avoca Resources Limited Precious Metal Spin-off Subject to completion of due diligence, Heron intends to assign its non-nickel assets to Avoca Resources Limited ("Avoca") in exchange for the issue to Heron of 20,191,745 fully paid shares in Avoca or such other consideration as the Board may determine. Following the completion of this transaction, and subject to market conditions, Heron proposes to make a 1 for 5 share distribution of ordinary shares in the capital of Avoca to Heron Shareholders with no payment to the Company. It is envisaged that Heron Shareholders will in addition have a priority right to subscribe The quality of the to Avoca shares in the Initial Public Offer (“IPO”) capital raising. Avoca Precious Metal portfolio is Avoca has developed an active tenement pegging program, having acquired an outstanding Precious a testament to Metal tenement portfolio since incorporation in June 2001. Avoca is the registered holder of 37 tenements. the tenement acquisition skills Avoca is most pleased to announce the appointment of Rohan Williams as its founding Managing Director. of Heron. Rohan is a professional geologist of 14 years experience and was Chief Geologist of WMC’s St Ives Gold Operation. He has been based in Canada researching layered complex Ni-Cu-PGE mineralisation, and was a joint developer of the metallogenic model responsible for the discovery by WMC of the West Musgrave Ni-Cu-PGE mineralisation.

The insolvency of Termination of the Strategic Alliance Agreement with Centaur Mining & Exploration Limited Centaur resulted in the Centaur- Under the terms of the September 1999 Strategic Alliance Agreement ("SAA"), Centaur had the right to Heron Strategic complete a Bankable Feasibility Study ("BFS") for a Cawse Stage Two expansion (“CNO II”) on or before Alliance being 19 August 2001 in order to secure toll milling entitlements in relation to Heron’s Goongarrie, Ghost Rocks terminated. and Kalpini Projects. Heron is now Heron was advised on 14 March 2001 that its Strategic Alliance partners, Centaur Nickel Pty Ltd reviewing new ("Centaur") and Centaur Mining & Exploration Limited ("CME") had appointed Administrators, and that the corporate Cawse Bondholders had subsequently appointed Receivers and Managers. Heron was entitled to opportunities involving major terminate the SAA as a result of the occurrence of an Insolvency Event on 90 days written notice. base metal On 30 April 2001, Heron served a 90 days Notice of Termination on the Centaur and CME Administrators producers and and Receivers and Managers to terminate the SAA. The nominated SAA Practical Termination Date was marketers. 30 July 2001. On 27 June 2001, the Receivers and Managers gave notice to Heron of a dispute or difference concerning the right of Heron to terminate the SAA. There has been no further action involving this alleged dispute. Heron agreed to extend the Notice of Termination period to 31 August 2001, to allow various commercial matters to be further discussed with the Receivers and Managers. There was no presentation to Heron of a BFS for CNO II on or before 19 August 2001 as required by the SAA. The Receivers and Managers to Centaur and CME are seeking to sell Cawse. This has generated considerable corporate interest from several parties in Heron’s Goongarrie Nickel Project.

Calweld wide diameter drilling was carried out at the Goongarrie Nickel Project to obtain bulk samples for density determinations and for metallurgical test work.

The bulk samples confirmed that the run-of-mine Goongarrie Goethite Ore is homogenous and shows excellent materials handling properties.

Penetration rate for the Calweld drilling was fast, suggesting Goongarrie Goethite will be free-digging.

Page 5 HERON RESOURCES LIMITED 2.0 CONTINUED OPERATIONS REVIEW

THE NICKEL LATERITE SECTOR DURING 2001 Heron’s Corporate Strategy With all manner of media coverage during 2001 concerning the Murrin Murrin and Cawse "First Generation" Nickel Laterite Heron’s low risk projects, it is appropriate to clarify the industry position of Heron, a "Second Generation" Nickel Laterite. strategy is to be an ore supplier to Heron is focussed on deriving Shareholder value from the acquisition and development at minimal risk of high established quality Nickel Laterite assets. Heron has one of the largest 100%-owned, unencumbered tenement portfolios Nickel Laterite within Eastern Goldfields Nickel Laterite Province. plants. Heron’s preference is to develop its tenement base and be an "upstream" ore supplier, rather than take on the debt service risk of being a "downstream" ore processor. However, subject to appropriate terms, the sale of Cawse provides an opportunity to merge the Goongarrie and Cawse Nickel Laterite assets. Any merger mechanism must minimise debt service risk to Heron. This may be achieved either through Heron ore supply or by Heron membership in a purchase consortium.

Strategic Role of Heron’s Goongarrie Nickel Project

The combined Goongarrie and Cawse Nickel Laterite resource base is some 0.7 billion tonne at 0.7% Ni at a Goongarrie is a 0.5% Ni cut-off, with Heron controlling more than half of the combined resource. Such a resource base could “company potentially support a 30 year 4 to 10mtpa Nickel Laterite processing operation. maker” and a world class In the March 2000 Independent Expert’s Report by PricewaterhouseCoopers Securities Pty Ltd addressing the then discovery. Centaur bid for Heron, it was stated that without Goongarrie "there is insufficient reserve tonnages on Centaur’s Its high grade own tenements" to support the Cawse Stage II expansion. More specifically, the Independent Expert stated allows resilience in times of low that "it appears unlikely that Cawse Stage II would proceed without access to Heron’s ore in one metal prices. manner or another". This is the longterm basis for seeking to merge the Goongarrie and Cawse nickel assets. The strategic significance of Goongarrie has become even more critical since July 2001, when the world nickel price cycle moved towards the lower part of its historical range. At current nickel prices of around US$2.30 per pound, only the highest grade and lowest cost operations within a given sector are likely to be viable. The high nickel-cobalt grade of Goongarrie delivers considerable strategic advantage to Heron, particularly to weather low metal price cycles.

Implications of the Ravensthorpe Nickel Laterite Sale and Indicative Resource Valuations

In March 2001, Billiton (now BHP Billiton) purchased the 50% of the Ravensthorpe Nickel Project which it did not Using already own, for a cash and share consideration of approximately $34 million (a 100% interest valued at $68 million). Ravensthorpe as a yardstick, The Heron nickel projects and Ravensthorpe comparative resource position is: Heron’s 406 Resource Status Heron Resources Limited Billiton Ravensthorpe million tonne resource is a million tonne % Ni % Co million tonne %Ni %Co most valuable Measured, Indicated 108.6 0.8 0.06 169.4 0.8 0.03 asset. Inferred 297.0 0.8 0.06 - - - Total 405.6 0.8 0.06 169.4 0.8 0.03 Heron’s Nickel Laterite mineral Heron’s Future in the Nickel Laterite Industry resource base Heron’s preferred position is to develop its nickel assets as a consortium in association with a major base metal provides the company. The established infrastructure and the absence of sovereign risk in Western Australia is a significant pathway to a advantage for Heron’s strategy. The preferred scale of operation for a major base metal company would be 4mtpa future 4 to 10 mtpa Nickel Laterite or more, such as that proposed for Cawse Stage Two. operation based Of key importance for commissioning a major Nickel Laterite project is pilot plant test work. The existing Cawse in the Kalgoorlie plant can operate as a large-scale pilot plant suitable for metallurgical testing for future Goongarrie-Cawse "CNO II region, and producing up to scale" expansions. A firm foundation exists for Heron’s future as a Second Generation Nickel Laterite ore supplier. 10% of the world’s nickel.

Tektites found by Keith at McAuliffe’s Soak, Avoca country.

Goongarrie Nickel Project. There are 50,000 drill chip trays catalogued at the Heron Kalgoorlie office within Heron’s drill chip archive system. Page 6 2.0 CONTINUED OPERATIONS REVIEW

HERON MANAGEMENT

Tenement Management Heron’s tenement Joint venturing is a key component of Heron’s non-nickel tenement management strategy. Heron has in portfolio is operation, or has offers on the table, for some 16 Joint Ventures involving Gold, Base Metals and Iron Ore. without equal for These industry associations cover some 136 tenements and will see a minimum Department of Minerals an emergent and Petroleum Resources ("DMPR") commitment of $1.4 million spent by our partners annually. In addition resource a minimum total outlay of $9.675 million can be spent on Heron’s joint ventured tenements whilst Heron is company. free-carried. By this process Heron retains free equity in its gold and non-nickel developments, and in terms of risk-minimisation and success optimisation, the Heron non-nickel portfolio provides a low risk and low cost means of asset creation. These assets are now the basis of the Avoca Initial Public Offer.

TABLE 2: HERON RESOURCES LIMITED Summary of 100%-Owned and Joint Venture Tenements DMPR* Project Number of Tenements Area Expenditure Commitment $million Pending Granted Total km2 HRR JV Total Even with its Heron Nickel large tenement Heron 100% - owned 121 35 156 4,607 0.92 0.00 0.92 holding, Heron’s DMPR Avoca Precious Metal expenditure Avoca 100% - owned 84 12 96 4,089 0.16 0.00 0.16 commitment is Joint Venture Current 39 89 128 3,809 0.00 1.42 1.42 managed at $1.2m per JV Negotiations 8 0 8 83 0.00 0.00 0.00 annum, through Avoca sub-total 131 101 232 7,981 0.16 1.42 1.58 joint venture. Balladonia Oil Shale Heron 100% - owned 33 7 40 5,246 0.04 0.00 0.04 Yilgarn Regional Heron 100% - owned 40 8 48 1,222 0.06 0.00 0.06 TOTAL 325 151 476 19,056 1.18 1.42 2.60

*DMPR WA Department of Minerals and Petroleum Resources Heron in the Community The Company appreciates the assistance provided by the Goongarrie, Gindalbie, Hampton Hill and Mount Vetters pastoral stations in terms of field camp sites, drill site preparation and rehabilitation. These stations have a long established land care ethic, under which Heron works at all times. Heron is an equal opportunity employer, committed to the community of Kalgoorlie-Boulder. It has supported Work for the Dole programs, and several Aboriginal training schemes. The Company is proud to be a long term sponsor of Ngunytju Tjitji Pirni Aboriginal Corporation ("NTP"), an organisation committed to Aboriginal mother and children’s health in the Eastern Goldfields. Heron’s funding of NTP is part of its Native Title access arrangement. The funding assistance provided by Heron has helped NTP achieve a Heron has at all nation-wide recognition as a leader in indigenous pediatrics, for which Heron is most proud. Well done to times attempted Jenny, Coral, Paula and dedicated staff and committee members. to respect Heron, as do all Australian mineral explorers, works within the framework of Native Title. The Company is Indigenous Culture in the committed to a policy of cultural respect and negotiation with the Aboriginal custodians of our exploration course of its land. To the claimants of this land and the Goldfields Land Council, we once again express our exploration. appreciation of their patient negotiation, and ongoing site clearance field work.

The Heron Team During year, Senior Geologist Alan Rudd and Mara had their third child, a son Ben Diesel. Project Geologist Simon Gobbett and Olivia married. Long term stalwart, Doug Krepp from Karlkurla Environmental has fully recovered from major surgery. Exploration Manager Dave Crook became president of the Hannans- Kalgoorlie Rotary Club. Geoff Collis and Des Steel joined the team during 2001 with Geoff as Exploration Manager of Avoca, and Des as Tenement Manager of Heron. Their impact has been immediate, with the impressive Avoca project list largely due to their efforts.

Page 7 HERON RESOURCES LIMITED 2.0 CONTINUED OPERATIONS REVIEW

RESOURCE STATUS OF NICKEL LATERITE PROJECTS Detailed resource estimation incorporating the 2001 Pamela Jean Zone exploration successes is current. On the basis of 40x20m pre-mine drilling (Measured Mineral Resource), 80x80m resource definition drilling (Indicated Mineral Resource) and 400x80m reconnaissance drilling (Inferred Mineral Resource), the total Heron resource inventory as at January 2001 at a 0.75% Ni cut-off is detailed below. Updated resource estimates will be completed once recent drilling results are fully interpreted and validated.

TABLE 3: HERON RESOURCES LIMITED NICKEL PROJECTS Indicated and Inferred Mineral Resource Inventory, 0.75% Ni Lower Cut-Off During 2001, Heron has Project Pit Strike Width Tonne Ni Co Ni4Co* converted the km km Million % % % majority of its Goongarrie Hill GN1 5.80 0.20 17.7 1.08 0.06 1.31 Goongarrie South mineral resources Goongarrie South GN2 7.00 0.60 62.4 1.08 0.10 1.47 to the Measured Scotia Dam GN3 2.40 0.30 6.2 1.07 0.11 1.52 and Indicated Siberia SB1 1.60 0.24 4.3 1.04 0.08 1.34 status required Ghost Rocks GR1 3.00 0.08 5.8 0.91 0.12 1.39 for Feasibility Ghost Rocks GR2 4.50 1.00 12.3 1.02 0.06 1.26 Studies. Total Goongarrie 108.6 1.06 0.09 1.41 Acra North KA1 1.60 0.12 8.5 1.04 0.06 1.29 Acra North KA2 0.40 0.20 2.3 1.02 0.09 1.37 Wellington East KA3 0.40 0.12 3.9 1.04 0.08 1.35 Wellington East KA4 1.90 0.20 8.1 1.17 0.07 1.45 Wellington East KA5 1.70 0.16 1.4 1.23 0.10 1.63 Wellington East KA6 0.50 0.08 9.8 1.04 0.07 1.32 Wellington East KA8 0.50 0.08 5.0 0.96 0.09 1.31 Wellington Fold KA9 2.50 0.20 1.3 0.85 0.08 1.15 Wellington North KA10 3.60 0.16 1.4 0.87 0.05 1.09 Binti Binti BB1 2.40 0.16 2.8 0.91 0.09 1.28 Wyo Well WW1 1.00 0.16 0.7 0.83 0.04 0.99 Acra AA1 0.70 0.30 0.5 0.75 0.04 0.91 Total Kalpini 45.7 1.03 0.07 1.33 KALGOORLIE REGION SUB-TOTAL 154.3 1.05 0.08 1.39

Lake Rebecca LR1 2.20 0.30 11.6 1.15 0.08 1.46 Lake Rebecca LR2 1.10 0.15 2.1 1.03 0.03 1.16 Total Lake Rebecca 13.6 1.13 0.07 1.41 Boyce Creek YE1 1.00 0.20 6.4 0.93 0.09 1.27 Lady Byron YE2 0.60 0.20 2.8 1.11 0.05 1.30 Aubils YE3 0.80 0.20 2.9 0.99 0.10 1.37 Total Yerilla 12.1 0.99 0.08 1.30 KEITH KILKENNY LAVERTON SUB-TOTAL 25.7 1.06 0.08 1.36

HERON TOTAL 180.1 1.05 0.08 1.38

* “Ni4Co%” is %Ni plus 4 times %Co, and is an “equivalent” nickel grade. The multiplier factor reflects the price of cobalt generally being around four times that of nickel.

Page 8 2.1 OPERATIONS REVIEW

KALGOORLIE NICKEL PROVINCE

Ore Genesis Studies The priority Detailed research studies were completed at the Pamela Jean Zone to elucidate the controls on during the 2001 Goongarrie mineralisation, particularly bedrock controls. Financial Year has been to drill There is a strong correlation of ore zone mineralogy with ore grades and metallurgical performance. The out the various premium ore is dominantly goethite with subordinate gibbsite and kaolin, and is termed Goongarrie South "Goongarrie Goethite" (CUP, subordinate CUF ore types, refer Table 4). The ore zones have a resources to a remarkably uniform mineralogy, related to three separate cycles of weathering and duricrust formation: 40x20m pattern, and complete an TABLE 4: ORE TYPE MINERALOGY 8 hole Diamond Drill program for Duricrust Cycle Associated Ore Type Mineralogy metallurgy and Upper Carbonate Cycle not applicable calcite-ankerite-quartz ore genesis studies. Middle Ferricrete Cycle Laterite Ferruginous LF goethite-alunite-kaolin

Lower Goethite Cycle Clay Upper CU gibbsite-goethite Lower Goethite Cycle Clay Upper Pyrolusitic CUP goethite-gibbsite Lower Goethite Cycle Clay Upper Ferruginous CUF goethite-kaolin-maghemite Lower Goethite Cycle Clay Upper Siliceous CUS quartz-maghemite-goethite Magnesia Discontinuity Clay Lower Siliceous CLS antigorite-chlorite-talc-quartz

The Pamela Jean Zone deep drilling has encountered brecciated and sulphide-bearing ultramafic bedrock. This mineralogy has promoted particularly intense weathering conditions, leading to the formation of exceptionally thick laterite. Brecciation is related to fault splays of the Bardoc Tectonic Zone, which occurs at the eastern contact of the mineralised Goongarrie ultramafic unit. The breccia zones provide a conduit for ground water, allowing oxidising fluids to percolate below the limit of normal near-surface weathering. The groundwater has also removed oxidation products, such as dolomite/magnesite and silica, leaving behind a residual nickel-cobalt bearing goethite.

Metallurgy

Goongarrie Metallurgical assessment was completed on 14 drill core samples by Lakefield Oretest of Perth. Goethite has the best documented TABLE 5: METALLURGICAL PERFORMANCE bench scale Ore Type Screen Nickel Cobalt Acid Slurry Settling metallurgical Upgrade Recovery Recovery Consume Density Rates performance for an % % % kg/tonne w/w% minutes Eastern Goldfields Laterite, notably Clay Upper Pyrolusitic CUP Nil 97.5% 95.0% 283 31% 2.15 the low acid Clay Upper Ferruginous CUF Nil 96.7% 82.9% 285 28% 84.50 consumption. Clay Upper Siliceous CUS 55% 95.9% 92.3% 389 32% 10.83 Clay Lower Siliceous CLS 28% 92.5% 78.5% 616 32% 27.25

Pyrolusitic Ore, which is the dominant ore type at the Pamela Jean Zone, is confirmed as a premium product with high metal recovery, low acid consumption, good ore slurry density and fast settling from the slurry. More importantly, the Goongarrie Goethite Ore displays remarkable continuity in mineralogy and chemistry, which is a critical feedstock parameter. At a 1.25% Ni cut-off grade, Goongarrie Goethite consistently assays in excess of 1.5% Ni, 0.15% Co and 40% FeO, with less than 0.5% MgO.

Hydrological Studies Future Hydrological studies are well advanced, with a detailed drill hole piezometer array having been installed for Goongarrie water level monitoring. A confined aquifer is present below 60m at the base of the main Goethite Ore mining operations profile, associated with Lower Siliceous Ore. Water quality is 38,000-50,000 mg/l TDS, which is should not be comparable to the process water currently in use at Cawse. The good water quality indicates the aquifer impacted by ground water is not being recharged from surrounding hypersaline lake systems. flow. The shallow Goethite Ore zones do not carry significant ground water, and there should be minimal wet mining difficulties.

Page 9 HERON RESOURCES LIMITED 2.1 CONTINUED OPERATIONS REVIEW

TABLE 6: GOONGARRIE SOUTH PROJECT RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling Hole North East From To Interval Ni Co Ni4Co* Ni4Co* Number m m m m m % % % m.% GSRC672 70,637 2,855 49 91 42 1.25 0.223 2.14 90.06 GSRC724 71,440 2,454 10 33 23 1.65 0.325 2.95 67.83 including at a 1.25% Ni cutoff 12 33 21 1.71 0.354 3.13 65.63 GSRC870 69,356 3,236 20 63 43 1.39 0.187 2.14 91.96 GSRC876 69,397 3,236 12 58 46 1.48 0.111 1.93 88.59 including at a 1.25% Ni cutoff 17 56 39 1.57 0.122 2.06 80.31 In Nickel Laterite GSRC891 69,377 3,237 17 57 40 1.51 0.115 1.97 78.66 mines, GSRC898 69,680 3,140 67 106 39 1.42 0.253 2.43 94.92 15 Ni4Co.m% is including at a 1.25% Ni cutoff 75 105 30 1.52 0.232 2.44 73.28 an acceptable GSRC901 69,640 3,180 29 97 68 1.15 0.073 1.44 97.85 ore body. At the GSRC902 69,640 3,140 39 117 78 1.11 0.094 1.49 115.91 Pamela Jean Zone, GSRC907 69,600 3,140 35 124 89 1.19 0.131 1.71 152.17 100 Ni4Co.m% is GSRC912 69,560 3,140 38 124 86 1.23 0.081 1.55 133.71 consistently GSRC916 69,520 3,140 29 94 65 1.11 0.088 1.46 95.16 recorded. GSRC924 69,440 3,220 21 52 31 1.62 0.212 2.47 76.49 GSRC942 69,200 3,220 21 64 43 1.34 0.112 1.78 76.61 The spectacular including at a 1.25% Ni cutoff 24 52 28 1.54 0.203 2.35 65.81 Ni-Co grades and GSRC966 69,000 3,140 18 57 39 1.13 0.291 2.30 89.56 substantial ore including at a 1.25% Ni cutoff 42 50 8 2.03 1.147 6.62 52.96 zone thickness underpins the GSRC970 68960 3140 21 46 25 1.30 0.425 2.99 74.86 profitability of the including at a 1.25% Ni cutoff 32 45 13 1.54 0.775 4.64 60.36 future Goongarrie GSRC973 68920 3220 22 41 19 1.58 0.315 2.84 53.97 mining operation. including at a 1.25% Ni cutoff 25 38 13 1.81 0.424 3.50 45.54 GSRC990 69,380 3,200 17 94 77 1.32 0.084 1.66 127.52 GSRC992 69,360 3,200 18 66 48 1.41 0.127 1.92 92.24 GSRC1001 69,720 3,140 42 112 70 1.30 0.152 1.90 133.18 including at a 1.25% Ni cutoff 77 112 35 1.59 0.245 2.57 90.05 GSRC1008 69,800 3,100 38 101 63 1.23 0.057 1.46 91.93 GSRC1012 69,840 3,060 30 97 67 1.28 0.076 1.58 106.08 GSRC1020 69,680 3,120 29 103 74 1.29 0.077 1.59 118.02 including at a 1.25% Ni cutoff 43 80 37 1.55 0.110 1.99 73.66 GSRC1022 69,600 3,120 30 141 111 1.37 0.070 1.65 183.15 including at a 1.25% Ni cutoff 66 121 55 1.85 0.111 2.30 126.38 GSRC1023 69,560 3,120 30 87 57 1.28 0.101 1.68 96.04 GSRC1025 69,640 3,120 26 144 118 1.31 0.123 1.80 212.64 including at a 1.25% Ni cutoff 118 139 21 1.82 0.393 3.39 71.10 GSRC1030 69,720 3,120 40 144 104 1.33 0.087 1.68 174.51 including at a 1.25% Ni cutoff 73 128 55 1.59 0.129 2.10 115.76 GSRC1032 69,680 3,160 37 118 81 1.24 0.197 2.03 164.55 GSRC1034 69,640 3,160 36 107 71 1.39 0.150 1.98 140.91 including at a 1.25% Ni cutoff 66 106 40 1.60 0.208 2.44 97.41 GSRC1036 69,600 3,160 33 82 49 1.47 0.141 2.03 99.62 including at a 1.25% Ni cutoff 44 82 38 1.59 0.175 2.29 87.09 GSRC1037 69,560 3,200 34 82 48 1.37 0.124 1.86 89.46 GSRC1039 69,520 3,200 26 85 59 1.33 0.126 1.83 108.05 GSRC1040 69,520 3,160 29 122 93 1.33 0.141 1.89 176.14 including at a 1.25% Ni cutoff 31 98 67 1.49 0.182 2.22 148.89 GSRC1049 69,440 3,200 20 52 32 1.62 0.208 2.45 78.33 including at a 1.25% Ni cutoff 21 50 29 1.67 0.222 2.56 74.10 GSRC1052 69,380 3,160 20 76 56 1.33 0.042 1.50 84.17 GSRC1100 68,960 3,160 16 62 46 1.30 0.254 2.31 106.48 including at a 1.25% Ni cutoff 36 62 26 1.58 0.408 3.21 83.41 GSRC1106 69,000 3,160 17 58 41 1.17 0.194 1.95 79.91 GSRC1126 69,200 3,240 19 63 44 1.39 0.198 2.18 95.99 including at a 1.25% Ni cutoff 27 49 22 1.68 0.314 2.93 64.49

* Ni4Co m.% for a drill intercept is the value of %Ni plus 4 times %Co of the interval multiplied by the intercept in metres.

Page 10 2.1 CONTINUED OPERATIONS REVIEW

2.1.1 Goongarrie Nickel Project Heron 100% Nickel (- gold). The 521km2 project area covering 44 tenements is located 50-130km NNW of Kalgoorlie along the eastern flank of the Goongarrie Dome. The western flank of this structure hosts the Cawse Nickel Laterite mine. The lithological precursor of the Goongarrie and Cawse Nickel Laterite mineralisation is the Walter Williams Formation komatiite.

Goongarrie South Nickel Prospect The continuity During 2001, Heron completed 382 RC drill holes at Goongarrie South for 22,172m. and thickness of high grade ore at Exploration has concentrated on 40x20m pre-mine drilling at the Pamela Jean Zone, being the likely Goongarrie is starter pit for future Goongarrie mining operations. The Pamela Jean Zone is characterised by: without parallel • N-S strike length of 2,000m at a 1.25% Ni cut-off. in Australian Nickel Laterite • Mineralisation width typically 80-200m at a 1.25% Ni cut-off. deposits. • Shallow depth to the top of the ore envelope, typically 12 to 25m, generating exceptionally low stripping ratios. The overburden is amenable to low cost scaper mining. • Depths to the base of ore consistently exceeding 100m vertical, with the deepest high grade intercepts at 144m in the Pamela Jean Deeps. • Metallurgically uniform Goongarrie Goethite assaying less than 0.5% MgO, with low acid consumption. • Good ore zone continuity at high grade. A selected test area was drilled on a 20x20m grid to produce continuity data for ore reserve modelling. The target area (GSRC036) had a block grade of 1.08% Ni and 0.08% Co. The in-fill drilling returned a block grade of 1.25% Ni and 0.11% Co with a significantly higher tonnage estimate.

Sulphides Within the central Pamela Jean Zone, RC drilling has defined a discrete zone of exceptionally deep occur within the weathering. Drill holes have been completed to depths of up to 160m, still in ore grade saprolite. These ultramafic holes confirm complete alteration and weathering of the ultramafic host rock into limonitic clay to depths of bedrock up to 144m (GSRC1025, 1030). This zone, termed the Pamela Jean Deeps, has now been defined underlying the Pamela Jean over a strike length of 800m and remains open to the north and south. Zone. The final hole of the 2001 drilling campaign confirmed the Deeps are open to the south, having been offset to the west by a previously unidentified fault. The necessity for 40x20m detailed drill patterns was Detailed EM surveying and reinforced by this latest Deeps discovery. diamond drilling The ultramafic bedrock underlying the Pamela Jean mineralisation contains a structurally complex zone of is required in brecciation and shearing. Discrete zones of talc-carbonate and talc-chlorite schist separated by bleached order to define Nickel Sulphide but otherwise undeformed olivine adcumulate are present. Disseminated and stringer sulphide targets. mineralisation (typically 5%) has been identified within the shear zones. ElectroMagnetic (“EM”) surveys were completed by Curtin University testing potential Nickel Sulphide targets. Interpretations are awaited. The priority is however to Having elucidated the mineralisation controls at the Pamela Jean Deeps, it is now apparent that a number continue to block of earlier Goongarrie 80x80m drill holes have not gone to sufficient depth. In order to screen for such out the Pamela under-tested areas, trial gravity and EM surveys were completed to map the base of mineralisation. Jean Nickel Interpretations are awaited. Laterite ore body. Heron has received several joint venture expressions of interest to explore for Nickel Sulphides beneath the Pamela Jean Deeps. At the current time however, Heron wishes to retain a 100% unencumbered interest at Goongarrie, to help facilitate the potential rationalisation of the Goongarrie and Cawse nickel assets.

Simon Gobbett (left) and Geoff Collis (right) during the Goongarrie piezometer installation, for monitoring the ground water levels. Doug Krepp was responsible for setting up the piezometer field management.

Page 11 HERON RESOURCES LIMITED FIG.2: GOONGARRIE NICKEL PROJECT Goongarrie South Ore Zones

The high grade 1.5% Ni drill holes show excellent clustering into specific ore zones. These are future Stage I pits, being the Pamela Jean, Elsie Tynan and Patricia Anne Zones.

The Pamela Jean, Elsie Tynan and Patricia Anne most likely represent the main central channel of an ancient komatiite lava flow, and the Daphne Mina, Sylvia Virginia and Mavis Irene represent flood plain subsidiary lava flows.

Drill section interpretations, Goongarrie South.

Page 12 2.1 CONTINUED OPERATIONS REVIEW

Goongarrie Hill Prospect

Goongarrie Hill During 2001, Heron completed 83 RC drill holes at Goongarrie Hill for 2,177m, closing off low grade ore contains a large positions on the western side of the ore body. tonnage of TABLE 7: GOONGARRIE HILL PROSPECT screen-upgrade Siliceous Ore RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling suitable for Hole North East From To Interval Ni Co Ni4Co Ni4Co processing in a Number m m m m m % % % m.% CNO II scale of operation. GWRC150 76,456 1,656 6 13 7 1.24 0.111 1.46 10.25 GWRC124 76,356 1,656 5 11 6 1.19 0.171 1.53 9.16 GWRC174 76,577 1,574 4 11 7 1.14 0.056 1.25 8.75 The ore type is uniformly shallow Cawse-style Siliceous Ore, with excellent screen upgrade characteristics. The current Goongarrie Hill drilling is almost entirely on a 400x80m pattern, with a major 80x80m infill drilling program required. The Goongarrie South 40x20m RC drilling currently has priority.

Scotia Dam Prospect Scotia Dam During 2001, Heron completed 113 RC drillholes at Scotia Dam for 4,835m. Significant intercepts include: contains exceptional TABLE 8: SCOTIA DAM PROSPECT cobalt grades in RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling Goethite Ore, suitable for Hole North East From To Interval Ni Co Ni4Co Ni4Co immediate Number m m m m m % % % m.% processing in a GSRC759 58,638 6,457 18 53 35 1.10 0.206 1.92 67.34 CNO I scale of GSRC767 58,801 6,375 17 56 39 1.10 0.072 1.39 54.34 operation. GSRC788 59,278 6,216 15 35 20 1.15 0.142 1.72 34.36 GSRC792 59,442 6,138 14 31 17 1.19 0.137 1.74 29.58 GSRC802 59,599 6,130 15 30 15 1.54 0.376 3.04 45.67 The Scotia Dam ore is relatively shallow, and uniformly cobalt-rich. Detailed 40x20m pre-mine drilling will be completed once mining leases are granted.

Siberia Prospect Siberia is the During 2001, Heron completed 12 RC drillholes at Siberia for 417m. Significant intercepts include: northern strike extension of the TABLE 9: SIBERIA PROSPECT Cawse laterite RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling deposits, suitable for a CNO II Hole North East From To Interval Ni Co Ni4Co Ni4Co scale of Number m m m m m % % % m.% operation. SBRC003 62,758 4,496 5 56 51 1.03 0.076 1.33 68.03 SBRC007 62,358 4,496 2 9 7 1.26 0.074 1.56 10.89 SBRC009 62,358 4,656 4 14 10 1.05 0.072 1.34 13.35 SBRC010 62,358 4,736 10 16 6 0.78 0.169 1.46 8.74

Siberia is dominantly Siliceous Ore, entirely comparable to “run-of-mine” Cawse ore.

Ghost Rocks Prospect Ghost Rocks is a During 2001, Heron completed 81 RC drillholes at Ghost Rocks for 2,299m. Significant intercepts include: further resource TABLE 10: GHOST ROCKS PROSPECT of screen- upgrade RC Drilling Significant Intersections, 0.75% Ni Cut-Off, 2001 Drilling Siliceous Ore, Hole North East From To Interval Ni Co Ni4Co Ni4Co suitable for a Number m m m m m % % % m.% CNO II scale of operation. GRRC145 31,758 3,095 2 14 12 1.01 0.071 1.30 15.57 GRRC158 30,958 3,495 16 20 4 1.33 0.083 1.66 6.63 GRRC166 30,158 4,375 4 12 8 1.30 0.089 1.65 13.22 GRRC168 30,158 4,215 8 16 8 1.12 0.127 1.63 13.02 22 28 6 1.00 0.048 1.19 7.13 Ghost Rocks is dominantly Siliceous Ore, entirely comparable to “run-of-mine” Cawse ore.

Page 13 HERON RESOURCES LIMITED 2.1 CONTINUED OPERATIONS REVIEW

FIG.3: GOONGARRIE CROSS SECTIONS Showing RC Drill Intersections and Pamela Jean Zone Proposed Pit Outline

These four drill Sections are regularly spaced at 200m N-S, and show the consistency of “run-of-mine” drilling results at the Pamela Jean Zone.

The Pamela Jean Zone has a shallow overburden of 12-25m, and thick ore zone of 20-118m. This results in a low stripping ratio, which underpins the profitability of the future Goongarrie mining operation.

Strip ratios are also minimised due to pit wall batter angles naturally following the ore body shape.

The continuity of high grade ore (>1.25%Ni) is remarkable, both within and between sections.

Flitch plans (which are horizon sections through the ore body) also show remarkable continuity, and confirm individual 1.5% Ni mining ore blocks to consistently exceed 400x40m.

Page 14 2.1 CONTINUED OPERATIONS REVIEW

2.1.2 Kalpini Nickel Project Heron 100%. Nickel (- gold). Heron has The 1,041km2 project area covering 39 tenements is located 65km NE of Kalgoorlie. Infrastructure is good. one of the Kalpini is 75km E of the Cawse processing plant, and 45km NE of the Bulong Nickel Operation. Four key largest ultramafic Mining Leases have been granted, and subject to Notice of Intent, are open to mining. tenement holdings in the Eastern Several new tenements have been acquired, such that Heron now has a near contiguous landholding from Goldfields. Kookynie in the north to Transline in the south, an ultramafic strike of 150km. This includes from north to As well as south the Boomerang, Binti Binti, Kalpini, Acra, Transline and Cowarna Rocks Nickel Laterite deposits and hosting Nickel of particular significance, two recorded Nickel Sulphide occurrences at Binti Binti and Acra. The Laterite, these ultramafics have demonstrated sulphide endowment of the Kalpini belt is an important exploration guide for Nickel Sulphide. excellent In-fill drilling on an 80x40m pattern to confirm ore continuity was completed at Kalpini, with 53 RC drill holes potential for for 1,355m. Nickel Sulphide targets. TABLE 11: KALPINI PROJECT RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling Hole North East From To Interval Ni Co Ni4Co Ni4Co Number m m m m m % % % m.% WNRC015 52,400 7,240 27 35 8 0.98 0.107 1.40 11.24 WNRC016 52,400 7,280 24 41 17 0.87 0.054 1.09 18.46 WERC362 37,760 15,720 14 23 9 1.42 0.048 1.61 14.49 WERC364 37,760 15,640 4 12 8 1.03 0.077 1.34 10.70 ANRC114 28,477 7,576 3 12 9 0.99 0.04 1.15 10.35 ANRC116 28,477 7,656 3 20 17 0.92 0.042 1.09 18.496 ANRC117 28,477 7,696 13 59 46 1.10 0.057 1.33 61.09 including at a 1.25% Ni cutoff 14 32 18 1.52 0.096 1.90 34.27 ANRC123 25,357 9,576 19 34 15 1.02 0.096 1.40 21.06 including at a 1.25% Ni cutoff 21 23 2 1.57 0.29 2.73 5.46

Whereas A geological evaluation of basal komatiite nickel-copper sulphide targets was completed, with the Goongarrie is Wellington East Prospect laterite resources at Zones 4 to 6 emerging as the prime Nickel Sulphide a Goethite Ore targets. Soil geochemistry within the Nickel Sulphide target area has coincident anomalies of 114-602ppm with low Mg and high Co, Kalpini Cu and 788-1,941ppm Ni, notably at the Zone 4 Western Ultramafic. A soil anomaly of 50-230ppb Pd tends to be a occurs at Zone 6, again indicating a potentially favourable Nickel Sulphide setting. Saprolite Ore The Acra Nickel Sulphide Prospect immediately south of Acra North Laterite Zone 1 consists of three with higher Mg separate steeply dipping komatiite horizons, interlayered with mafic and felsic volcanics. The uppermost and relatively low Co. Acra komatiite unit hosts Nickel Sulphide mineralisation. The Kalpini ore Metallurgical Scoping Studies were commenced to evaluate the viability of a ferro-nickel smelting operation type is suited to at Kalpini. Previous metallurgical results from Kalpini have been re-evaluated, and on initial studies, confirm the production of ferro-nickel in an a suitable ferro-nickel smelter feed stock. arc furnace. 2.1.3 Widgiemooltha Nickel Project Heron 100%. Nickel - gold. The 185km2 Widgiemooltha project area covering 7 tenement applications is located 120km SSE of Kalgoorlie within the southern extension of the Kunanalling and Zuleika Shear systems. The project area covers the Mariners-Dordie Rocks Nickel Sulphide-hosting komatiite succession. An advanced stage Nickel Sulphide target has been generated at the Pioneer Prospect. Field checking has confirmed a felsite-sulphidic black shale footwall contact overlain by sulphide-bearing komatiite. Stream geochemistry is anomalous, with 700ppm Ni and 16ppb Pd. Aeromagnetic interpretation at Pioneer confirms three well defined ultramafic units striking N-S. The eastern-most ultramafic correlates with the highly mineralised Mariners-Redross Nickel Sulphide line. The western-most ultramafic unit is a well exposed ridge of tremolite-actinolite-chlorite-biotite schist. Significant rock-chip anomalism indicative of Nickel Sulphide settings was identified, with up to 0.23% Ni, 0.03% Cu, 25ppb Pt and 18ppb Pd.

Page 15 HERON RESOURCES LIMITED 2.2 OPERATIONS REVIEW

SOUTHERN CROSS NICKEL PROVINCE NICKEL LATERITE EXPLORATION, IRON PRODUCTION ROYALTY 2.2.1 Bungalbin Nickel Project Heron 100%. Nickel - gold. The 983km2 project area covering 10 tenement applications is located 100-130km NNE of Southern Cross. Dominant lithology is ultramafic, basalt and banded iron formation (BIF).

Nickel Exploration High priority Siliceous Nickel Laterite targets are indicated from Heron’s literature reviews. Follow up of the Heron controls a nickel targets will commence once tenements are granted. 40km strike length of Previous nickel exploration at Bungalbin was directed towards ground EM targeting of Nickel Sulphides, ultramafic rock at with very few drill holes completed. Heron plans to carry out systematic RC drilling of the Nickel Laterite Bungalbin, totally horizons. The aim is to identify a stand alone Nickel Laterite operation. covered by surficial laterite. Gold Exploration This represents a significant new Mafic-hosted gold mineralisation targets are indicated from Heron’s literature research. Historic gold Nickel Laterite production from the eastern project area is recorded from the excised Mount Dimer mine which produced target. 126,000 ounces of gold at a head grade of 7.5g/t Au, along with 189,000 ounces of silver. Gold mineralisation occurs within an enriched laterite profile developed above quartz stockwork systems. There is a major NW trending structural corridor that controls mineralisation in the Mount Dimer area. The structure is 1km wide and has been traced over a strike length of 5.5km within Heron’s project area. At the Marda gold mining centre in the western project area, located 5km NW along strike of Heron’s ground, recent exploration success has resulted in the definition of a gold resource of 2.49 million tonnes at a grade of 1.99g/t Au. The Marda deposits occur within intensely folded BIF and mineralisation is associated with the most deformed and structurally thickened BIF zones. The ore zones are steeply plunging and rich in sulphide mineralisation.

2.2.2 Bungalbin Iron Ore Project Heron 100%. Portman Limited right to acquire Iron Ore rights by providing a Royalty. Heron retains all other mineral rights, notably Nickel-Gold. The 202km2 project area covering 3 granted tenements is located 105km N of Southern Cross and 60km The current N of the Portman Koolyanobbing Iron Ore operation. Dominant lithology is an E-W trending ridge of BIF. feasibility The project area includes an Iron Ore Inferred Mineral Resource estimated from Heron’s open file study schedule by Portman is for at 65.7 million tonne at 57.9% Fe, with a calcined grade of 64.1% Fe. Within this global resource, there possible mining is good potential for smaller structurally controlled high grade iron-low phosphorus ore positions. The total at Bungalbin in prospective BIF strike extent within the project area is 40km. 2003, providing Heron with a Portman has commenced exploration within the Royalty tenements. Initial drilling at the Mount Jackson J4 cash flow to help deposit amounted to 1,400m within 12 wide spaced drill holes. Limonite-goethite mineralisation was fund future Nickel routinely intersected yielding an average grade of 57.2% Fe when using a lower cutoff of 55% Fe. A Laterite comprehensive costeaning program is planned to evaluate the eluvial deposits (kankar) recently identified developments. at Bungalbin. An updated Inferred Mineral Resource is currently being estimated and all information will be incorporated into a feasibility study by Portman. This study may include planning for a railway spur-line into the Bungalbin and Mount Jackson deposits to supplement an enlarged Koolyanobbing Iron Ore operation. The Esperance Port Authority has completed dredging of the harbour to accommodate full loading of 75,000t Panamax vessels for shipping Iron Ore.

John Carlisle’s camp, a touch of style in the Balladonia bush.

Not much style but a shovel makes a good hotplate for the lunch time barbecue. Page 16 2.3 OPERATIONS REVIEW

KEITH KILKENNY-LAVERTON NICKEL PROVINCE NICKEL LATERITE EXPLORATION Heron’s Heron’s Keith Kilkenny Province Nickel Laterite projects are associated with discrete rift-related ultramafic Keith Kilkenny olivine mesocumulate channels, in contrast to the more sheet-like olivine adcumulates of the Kalgoorlie Province nickel Nickel Province Walter Williams Formation. The Keith Kilkenny ultramafic lava channels are considered tenements cover prospective for Silver Swan style Nickel Sulphide mineralisation. Heron’s exploration to date has however a 400km strike length sequence been restricted to Nickel Laterite. which includes rift-related 2.3.1 Edjudina Nickel Project ultramafic rocks. Heron 100%. The ultramafics Nickel (- gold). host documented 2 Nickel Laterite The 706km project area covering 35 tenements is located 145-175km NNE of Kalgoorlie within the Keith occurrences and Kilkenny Tectonic Zone. This rift structure contains ultramafic complexes from north to south at Aubils, include highly McAuliffe West, Boyce Creek and Lake Rebecca. The ultramafic flows are located on the rift margins prospective interbedded with basalt, with the rift axes containing coarse sediments. Nickel Sulphide settings. Nickel targets include the Boomerang Prospect, a series of komatiite mega-channels localised within the Emu Fault, in an analogous geological setting to the Silver Swan Nickel Sulphide deposit. At the Monks Well Prospect, Heron has identified Nickel Laterite. In the course of field work at the Yerilla Prospect, Nickel Sulphide settings were identified, with gossan assays of up to 0.23% Ni, 0.17% Co, 0.04% Cu, 8ppb Pt and 18ppb Pd. Additionally, semi-massive pyrite float was located in felsic volcanics. A Teutonic Bore - style VMS setting has been identified, which is confirmed by anomalous regional lag samples of 203ppm Cu and 395ppm Zn. Gossan assays of up to 0.23% Co, 0.05% Cu and 0.14% Zn are associated with the soil Cu-Zn anomaly.

2.3.2 Mulgabbie Nickel Project Heron 100%. Nickel (- gold). The 4km2 project area covering 2 tenements is located 110km NE of Kalgoorlie. The project area covers rift-related mafic to ultramafic units striking NNW along the southwest shore of Lake Rebecca. Advanced discussions are current and previous metallurgical work has been re-assessed indicating Saprolite Ore at Lake Rebecca may be suited to smelter ferro-nickel production. The ore chemistry is comparable to Nickel Saprolite Ores being smelted in the Pacific Rim region.

2.3.3 Laverton Nickel Project Heron 100% Nickel. MPI Gold Pty Ltd has the Gold rights for Merolia and Mineral Patch Hill. The 448km2 project area covering 4 tenements is located 50km ESE of Laverton. The main nickel target is at the Merolia-Mineral Patch Hill Prospects adjoining and immediately north along strike of the Coglia Well-Irwin Hills Nickel Laterite prospects. Detailed aeromagnetic coverage has been acquired, and interpretation completed to define zones with olivine adcumulate units. An 800x80m RC stratigraphic drilling program was completed at Merolia-Mineral Hill, confirming low grade ore occurrences.

TABLE 12: LAVERTON PROJECT RC Drilling Significant Intersections, 0.75% Ni Cut-off, 2001 Drilling Hole North East From To Interval Ni Co Ni4Co Ni4Co Number m m m m m % % % m.% MPRC003 90,800 8,940 63 70 7 0.82 0.028 0.93 6.54 MPRC007 89,520 8,140 66 72 6 0.89 0.078 1.20 7.20

On the basis of intersected lithologies and komatiite styles, it is apparent that the Laverton Prospects are more prospective for Nickel Sulphide mineralisation. Reconnaissance ground EM surveying is planned.

Drilling at Laverton, March to July, 2001.

Page 17 HERON RESOURCES LIMITED 2.4 OPERATIONS REVIEW

JIMBERLANA PLATINUM PROVINCE PROPOSED AVOCA The Jimberlana Dyke is a layered mafic to ultramafic intrusion emplaced into the granite-greenstone terrain RESOURCES of the Yilgarn Craton. The Dyke is Lower Proterozoic in age and exhibits many similarities to the Great Dyke ASSET of Zimbabwe, which hosts PGE resources of over 300 million ounces. Similarities to the Great Dyke include host rocks, age, strike length, width, cross sectional lopolith shape, magmatic stratigraphy and PGE anomalism documented at the mafic-ultramafic boundary.

2.4.1 Cowan PGE Project Heron 100%. Avoca assignment of all mineral rights. PGE-nickel-copper (-gold). The 209km2 project area covering 10 tenements is located 12km N of Norseman. Previous drill testing of The Jimberlana ultramafic units during gold exploration programs has intersected up to 10m at 0.8% Ni. Dyke PGE Province is the The Cowan Complex of the Jimberlana Dyke was explored for PGE mineralisation by Barrier Exploration closest Australian in the early 1970s. The economically significant Lower Layered Series mafic-ultramafic contact is exposed analogy to the near Lake Cowan, however most of this Complex is covered by ferruginous laterite and residual soil. Deep Great Dyke of auger sampling by Barrier identified significant Cu-Ni anomalism within the centre of the Dyke as well as Zimbabwe, one along its margins. Values exceeding 2,000ppm Cu (background 100ppm Cu) and 9,000ppm Ni of the world’s foremost PGE (background 500ppm Ni) are common within the anomalous areas. Nickel, copper and chromium are resources. excellent pathfinder elements used in the search for PGE mineralisation. Barrier drilled two diamond holes in the centre of the Dyke and three along its margins. The central holes Avoca’s Jimberlana field passed through 80m of heavily weathered ultramafic rock before entering the Lower Layered Series reconnaissance gabbro-norite sequence. Drill logs recorded considerable limonite staining, possibly after sulphide has confirmed mineralisation and a 12m intercept near the base of the ultramafic contained massive bands of magnetite geological (-chromite). The best recorded intercept is 1.52m at 0.39g/t Pt and 2.7 g/t Pd, although not all drill core settings identical was sampled. The mineralisation is associated with zones of disseminated sulphide mineralisation located to the Great Dyke within a layered dunite-norite sequence. of Zimbabwe.

2.4.2 Dundas Hills PGE Project Heron 100%. Avoca assignment of all mineral rights. PGE-nickel-copper (-gold). The 6km2 Dundas Hills project area covering 4 tenements is located at the western end of the The Dundas Hills Norcott Complex and has been explored by both Central Norseman Gold Corporation and WMC at platinum- different times since the early 1970s. Detailed geological mapping shows a completely differentiated rock palladium target zone is suite ranging from serpentinised dunite at the base, through pyroxenite and gabbro, to anorthosite at the highlighted by top. Numerous zones of copper mineralisation are present immediately below the mafic-ultramafic contact anomalous within the prospective PGE zone. Rock chip samples from this horizon returned a maximum assay of Cu-Ni-Pt-Pd soil 9,250ppm Cu. geochemistry, and has not been Detailed soil geochemistry was completed. Coincident copper, platinum and palladium anomalies are tested by defined over a strike length of 4km and are open to the east. The threshold contours define an arcuate previous drilling. anomaly coincident with the mapped location of the prospective mafic-ultramafic contact.

TABLE 13: DUNDAS HILLS PROJECT Soil Anomalism Element Background Threshold Peak Cu (ppm) 15-20 50 295 Pt (ppb) <10 20 90 Pd (ppb) <5 30 440

A bulk sample of soil and saprock was collected from the peak of the anomalous area and concentrated using a jig. The concentrate assayed 540ppb Pt, 61ppb Pd and 2.1% Cr. An igneous stratigraphy endowed with PGEs is confirmed.

Bill Cleverly with dried clay at Lake Raeside crossing, Avoca country. Exploration Manager David Crook, Nickel Laterite Clay, Goongarrie. Page 18 2.4 CONTINUED OPERATIONS REVIEW

2.4.3 Mount Norcott PGE Project Heron 100%. Avoca assignment of all mineral rights. PGE-nickel-copper (-gold). The Norcott The 518km2 Mount Norcott Project covering 3 tenements is located in the central part of the Complex has Norcott Complex approximately 25km ENE of Norseman. Newmont Holdings explored a 20km section demonstrated of this Complex in the late1980s. Detailed geological mapping defined a strongly differentiated mafic- PGE occurrences ultramafic sequence termed the Upper Layered Series conformably overlying gabbro-norite of the Lower within sulphide horizons. Layered Series. Numerous copper mineralised outcrops were rock chip sampled with maximum assays of 0.49g/t Pt and 1.20g/t Pd. Avoca plans Newmont drilled a single vertical diamond hole through the basal section of the Upper Layered Series systematic drill exploration of the locating patchy sulphides near the top of the gabbro-norite unit. Only two samples were collected, being generally soil from the more sulphidic zones : covered PGE target horizon. TABLE 14: MOUNT NORCOTT PROJECT WMC Sampling of Newmont Diamond Core Hole From To Interval Cu Pt+Pd m m m % g/t ND1 67.50 67.55 0.05 0.48 0.83 ND1 72.80 72.85 0.05 1.12 1.57

Again, significant PGE endowment is confirmed, with immediate drill targets available to Avoca.

2.4.4 Fraser Range PGE Project Heron 100%. Avoca assignment of all mineral rights. PGE-nickel-copper (-gold). Reconnaissance The 784km2 Fraser Range Project covering 4 tenements is located 170km ENE of Norseman north of the soil geochemistry Eyre Highway. at Fraser Range has confirmed A research project was completed by Heron for the Albany-Fraser Province which aimed to identify Voisey’s favourable Bay style nickel-copper-PGE sulphide targets (comparable in age and geological setting to the WMC West Voisey’s Bay Musgrave discovery). The Heron study has identified a deep crustal structural corridor containing a style geological discrete suite of magnetic features interpreted as packages of Proterozoic ultramafics within the Fraser settings. Range Complex. The corridor is marked by elevated Cu, Ni, Co, Cr, Au and Pd soil geochemistry associated with interpreted anorthosite and troctolite. The metallogenic concept is the localisation of nickel-copper-PGE sulphides within structurally prepared targets. Heron has pegged four exploration licence applications to cover these and other targets. Previous explorers in the project area have confirmed chromite-bearing ultramafic rocks assaying up to 20% Cr and 800 ppb Pt, with drilling returning up to 16m at 1.3% Ni in saprolite.

FIG.4: JIMBERLANA DYKE Idealised Geological Cross Section through the Jimberlana Dyke

Page 19 HERON RESOURCES LIMITED 2.5 OPERATIONS REVIEW

ILLAARA PROVINCE PROPOSED VOLCANOGENIC MASSIVE SULPHIDE EXPLORATION AVOCA RESOURCES 2.5.1 Perrinvale Joint Venture Project ASSET Heron 100%. Subject to Agreement, proposed assignment of Precious and Base Metal rights to Avoca. Mount Burgess Mining NL right to earn 70% through spending $0.5m. Copper-zinc-gold. The 945km2 contiguous project area covering 7 tenements and applications is FIG.5: PERRINVALE JOINT VENTURE located 170-290km NW of Kalgoorlie. The project covers the Illaara Greenstone Aeromagnetics Province over a continuous strike of 120km. Heron retains Nickel and Sulphur rights. A review of all available exploration data within the area has identified several target areas, including a 30km strike of a multi-element soil anomaly and a 50m thick possible massive "VMS" gossan. Several under-explored gold occurrences occur throughout the project area, and a copper occurrence was drilled previously within the northern project area. Upper cycle felsic volcanic exhalative units are extensive, and include chert, BIF and muscovite schist. Three target areas have to date been identified which warrant follow-up drill exploration:

• Day Rock Prospect Possible Volcanogenic massive sulphide Cu-Zn-Au • Central Felsic Volcanic Complex Possible Volcanogenic massive sulphide Cu-Zn-Au • Regional As-Sb-Bi-Se anomalies Multi-element target

Since the establishment of the Mount Burgess joint venture, work completed includes a review of previous exploration, the acquisition and interpretation of aeromagnetic and Landsat 7 data, field mapping and re-sampling of holes drilled by previous explorers. A soil sampling program is current.

Jack Otway is a ‘legend’ in the ranks of Kalgoorlie prospectors. Jack is our 19th largest Shareholder, and is always putting Heron onto likely prospects such as Perrinvale.

On his last solo trip to Perrinvale in the trusty ‘Landie’, Jack had 22 punctures. Jack has now donated the ‘Landie’ as an exhibit to the Museum of the Goldfields, Kalgoorlie.

Ian Buchhorn and Jack Otway, at Jack’s office

Gold prospecting, dry blowing spoil heaps at Pennyweight Point, in Avoca country. Nickel Laterite drill sample piles. The dark earthy material is the high grade ore. Page 20 2.6 OPERATIONS REVIEW

PROPOSED ZULEIKA SHEAR ZONE PROVINCE AVOCA PRECIOUS METALS EXPLORATION JOINT VENTURES RESOURCES ASSET 2.6.1 Snake Hill Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. Barra Resources Limited right to earn 70% of Gold rights through spending $0.3m. Gold (-nickel). The 14km2 project area covering 2 tenements is located 140km NW of Kalgoorlie immediately west of the Ida Fault. Nickel and gold soil geochemical targets have been defined for RAB drill testing. Exploration expenditure to date is $0.2 million.

2.6.2 Blister Dam Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Placer Dome Asia Pacific right to earn 70% through spending $1.2m. Heron retains Nickel rights. Gold-nickel. The Zuleika The 120km2 project area covering 8 tenements is located 70km NW of Kalgoorlie on the Zuleika Shear Shear Zone is Zone. The area consists of an extensive sand cover between the Dunnsville, Hawkins Find, Carbine and one of the prime Chadwin gold mining centres. gold mineralised structures of the The northern tenement area covers part of the Walter Williams and Siberia Formation ultramafics. Additional Eastern ultramafics are associated with the Zuleika - Kunanalling Shear Zones, and occur at Blister Dam as well as Goldfields, with Frances Lesley and adjacent Heron tenements. These are prospective for Nickel Sulphide and Heron intense corporate activity aimed at accordingly retains all nickel rights expanding Aircore, RC and diamond drilling was completed by Heron and its previous joint venture partners at Blister control of the Dam, testing beneath previously discovered supergene gold mineralisation. Broad zones of low order Kundana gold mineralisation (0.1-0.3g/t Au) suggest the presence of a large bedrock alteration system, with a peak mining centre. intercept of 14m at 2.89g/t Au. Sub-vertical zones of altered feldspar-phyric basalt, with up to 10% Avoca has a sulphide (pyrite, pyrrhotite and arsenopyrite), silica flooding and textural destruction within mylonitic zones significant all confirm a favourable gold mineralised setting. 100% owned, unencumbered 2.6.3 Powder Sill Project tenement holding Heron 100%. Avoca assignment of all mineral rights. on the Zuleika PGE-gold. Shear Zone. The 47km2 project area covering 7 tenements is located 45km WNW of Kalgoorlie within the Zuleika Shear Placer Dome Asia Zone. Pacific has been attracted as a The central tenement area contains extensive outcrop of the Powder Sill gabbro. The Powder Sill is a highly joint venture fractionated layered mafic intrusion that is hosted within the Black Flag Group sediments. The sill, a south- partner at east plunging syncline reaches a maximum width of 2.8km within the Heron project area. Blister Dam. Gold occurrences in the Powder Sill region are generally associated with the two major NW trending regional structures, being the Kunanalling and the Zuleika Shear Zones. Additionally, a NNE trending brittle fault system traverses the entire project area, being the Black Flag-Royal Standard Faults. These structures localise the Mount Pleasant gold mining centre 15km NNE. Detailed geochemistry has been completed with 4,591 auger samples generating a number of coherent Au and Au-As anomalies. Gold targets have been partially tested with 590 RAB drill holes completed for a total drill advance of 22,513m. In addition, 400 Aircore holes for 20,000m were completed. Anomalous intersections include 12m at 0.46g/t Au from 36m, 4m at 0.36g/t Au from 52m, and 4m at 0.35g/t Au from 56m, confirming alteration systems are present, but as yet no ore grade mineralisation. It should be noted that gold mineralisation in the district is characterised by minimal dispersion halos. In terms of PGE targets, a well defined PGE soil anomaly is associated with the lower Powder Sill layered sequence, peaking at 41ppb Pt with coincident 16ppb Pd. Avoca’s Powder Sill PGE exploration target is considered to be a "Lac des Iles" brecciated gabbro PGE system.

Page 21 HERON RESOURCES LIMITED 2.6 CONTINUED OPERATIONS REVIEW

2.6.4 Mungari Gold Project Heron 100%. Avoca assignment of all mineral rights. Gold. The 35km2 project area covering 11 tenements is located 45km WNW of Kalgoorlie in the Kundana gold mining centre associated with the Zuleika Shear Zone. Avoca has lodged tenement applications 10km SSE along strike from the Frogs Leg gold discovery on the ore hosting Zuleika Shear Zone. This is a prime structural setting, hosting from north to south the Kundana, Raleigh, Kurrawang, Rubicon, Hornet and Frogs Leg gold deposits. The Avoca Mungari Prospect is interpreted from aeromagnetics as a dolerite sill intruding felsic volcaniclastics. Avoca mapping confirms abundant quartz vein float. The Mungari geological setting is entirely comparable to that of Frog’s Leg, in respect of the Zuleika Shear structural association. There have been a series of major new gold discoveries at the Kundana gold mining centre which together with past production represent a total endowment for this area of over 4 million ounces of gold. The major recent discoveries are: FIG.6: ZULEIKA SHEAR PROJECTS • The ABC Line is the continuation of the Strzelecki structure Prospect Locations and Targets currently being exploited by Goldfields Ltd at Kundana. Exploration along this line-of-lode is on-going and resources currently stand at 971,000 ounces of gold at a grade of 6.6 g/t Au, divided between the Pegasus, Rubicon and Hornet deposits. A thin laminated quartz reef emplaced along a lithological contact hosts the mineralisation. • The White Foil gold discovery at Mungari West is now owned by Mines and Resources Australia Pty Ltd and Goldfields Ltd. At both White Foil and Avoca’s Mungari Project, the prospective geological setting is dolerite units occurring between the Zuleika Shear Zone to the east and Kunanalling Shear Zone to the west. Resources at White Foil are currently quoted as 11.8mt at 2.4g/t Au for a total endowment of 915,000 ounces of gold. • The Raleigh deposit is a laminated quartz vein emplaced along lithological contacts. The structure trends parallel to the Strzelecki-ABC line and can be traced for the full length of Avoca’s project area, a distance of 4.5km. The current Raleigh resource is 0.747mt at 41.7 g/t Au for a total endowment of 1,002,000 ounces of gold. • The Frog’s Leg discovery by Mines and Resources Pty Ltd- Dioro Exploration NL is a continuation of the ABC line. Exploration is on-going and the deposit is open in all directions, including south towards Avoca’s tenements. Resources currently stand at 5.07mt at 4.6g/t Au for a total endowment of 750,000 ounces of gold. Exploration by Heron and its former Joint Venture partner on Avoca’s northern project area between 1998 and 2000 included a comprehensive program aimed at locating extensions to the Kundana gold deposits. High resolution aeromagnetic surveys confirmed similar lithologies and structural settings to both the Kundana and White Foil deposits. Auger soil geochemistry defined six significant gold-anomalous targets, all coincident with dilatant structural sites identified using the geophysical data. Four of these targets were RAB drill tested, defining 100ppb Au gold-in-saprock anomalism. Deep follow-up of these anomalies was not undertaken. These targets will be re- evaluated in light of recent exploration success at Raleigh, which comprises a very small target and is not accompanied by a large dispersion halo.

Bill Cleverly, shaving day at Billy Goat Donga, east of Balladonia.

Field Supervisor, Fred Andrei, at the Goongarrie field camp. Page 22 2.7 OPERATIONS REVIEW

PROPOSED AVOCA SHEAR PROVINCE AVOCA GOLD EXPLORATION JOINT VENTURES RESOURCES ASSET 2.7.1 Gindalbie Terrain Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Delta Gold NL right to earn 70% in respect of gold through spending $1.0m. Heron retains Nickel rights. Gold-nickel.

The Gindalbie The 200km2 project area covering 5 tenements is located 25-60km NE of Kalgoorlie on the eastern flank Terrain was of the Scotia Kanowna Anticline. The main structural control of the project area is the Moriaty Shear Zone, previously a bifurcation of the intensely gold-mineralised Boorara Shear Zone, which occurs on the western flank of explored by the Scotia Kanowna Anticline. The Gindalbie Terrain adjoins the Golden Cities-Federal granitoid gold Heron for Nickel Sulphides. province. Joint venture partner Delta has completed a 800x100m Vacuum drill soil program, to target the northern Importantly, extension of the Mulgarrie East gold mine structure. A 40ppb gold anomaly was identified. Ultramafic there are major regional rocks are clearly identified by elevated nickel-chrome-copper values. Data interpretation and in-fill sampling structures is current. present in the Avoca Shear 2.7.2 Gidgi Project Province, Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. favourable for Gold-nickel. large scale gold systems. The 98km2 project area covering 7 tenements is located 10-30km N of Kalgoorlie associated with felsic volcaniclastics and lateritised ultramafic within the Boorara Shear Zone. At the Gidgi Project, Avoca The Roaster Prospect is located 15km N of Kalgoorlie associated with the Boorara Shear Zone. controls 98km2 of Previous exploration of the tenement area includes aeromagnetics, airborne EM, gravity, geological and prime gold regolith mapping, auger sampling, several phases of follow up RAB and RC drilling at the Roaster and mineralised Penghana Prospects, and regional Aircore-RAB drilling traverses. The geological setting outlined by this ground on the exploration is highly prospective for Kanowna Belle style gold mineralisation. north and northeast The Kanowna South Prospect is outskirts of located 3km S of Kanowna, some 20km FIG.7: GINDALBIE-GIDGI PROJECTS Kalgoorlie, the NE of Kalgoorlie. Previous RAB drilling world’s greatest Prospect Locations and Targets gold mining includes intersections of up to 1m at centre for the last 0.95g/t Au. Regional Aircore drilling and Century. limited RC drilling produced up to 4m at 2.35g/t Au at the Phoenix Prospect.In view of the deep surface depletion zone, further drill testing is required. The similarity of the geological setting to that of the nearby Kanowna Belle gold mine means that very detailed drill exploration is warranted once the tenements are granted. At the Kurramia South Prospect, several extremely large old gold mine shafts are present on two separate NW trending lines of lode. Of interest, six separate sulphide gossans were located. Peak assays were 0.5% Ni, 0.6% Co, 22ppb Pt and 31ppb Pd. Interestingly, the host lithology for the gossans is a siliceous breccia, rather than the ultramafic rock normally associated with nickel gossans. Avoca has now generated several Eastern Goldfields PGE targets in "non- traditional" host rocks. Gold joint venture discussions are advanced.

Page 23 HERON RESOURCES LIMITED 2.7 CONTINUED OPERATIONS REVIEW

2.7.3 Roe Hills Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Delta Gold NL right to earn 80% in Gold through spending $1.0m. Heron retains Nickel rights. Gold-nickel. The 403km2 project area covering 6 tenements is located 60-90km E of Kalgoorlie, adjoining Heron’s The Avoca Shear Transline Joint Venture Project. Following a GIS data review and target generation by Heron, a farm-out Province has been agreed whereby Delta Gold may earn 80%, with Heron free-carried to decision to mine. contains belts of Nickel Laterite There is a major suite of ultramafic rocks with documented Nickel Laterite occurrences within the project bearing area. Heron retains all Nickel rights. ultramafics.

2 A further 9 tenement applications covering 730km are currently subject to farm-out negotiation. This The ultramafics project area has an excellent structural setting, covering the Emu-GMQ-Avoca Fault System. The dominant are associated outcrop lithology is felsic volcaniclastics and lateritised meta-sediments. From data reviews, several gold with major targets have been generated for drill follow-up once the tenements are granted. crustal structures being the 2.7.4 Transline Joint Venture Project Emu-GMQ-Avoca Faults. Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. These structures Harmony Gold Limited right to earn 80% through spending $0.8m. localise Gold-nickel. regional gold mineralisation. The 558km2 contiguous project area covering 14 tenements is located 60km ESE of Kalgoorlie on the Bulong Anticline straddling the Emu Fault. The project area is partly underlain by the Juglah Monzogranite To help retain which intrudes felsic volcanics. Gold mineralisation is extensively developed, and includes the adjoining tenure on the Juglah, Trojan and Transfind gold mining centres. Nickel Laterites, Heron has joint Heron previously generated several +50ppb gold in soil targets associated with the GMQ Shear Zone, ventured out the following which a tenement acquisition program was carried out. GIS compilations were subsequently Gold rights, to completed, identifying from previous exploration several +1g/t Au RAB anomalies, peaking at 6g/t Au. assist in meeting expenditure Harmony has commenced systematic pedogenic carbonate sampling, with 1,500 samples collected. commitments. Several coherent soil gold anomalies have been defined, peaking at 45ppb Au. Reconnaissance drilling programs have commenced, with initial results including 4m at 1.24g/t Au. The Gold Joint Ventures are now 2.7.5 Avoca Project to be assigned to Heron 100%. Avoca assignment Precious Metal rights. Heron retains Nickel rights. Avoca, but Heron Gold - nickel. will retain the Nickel Laterites. The 818km2 project area covering 14 tenements is located 80km ESE of Kalgoorlie associated with felsic volcaniclastic and lateritised ultramafic associated with the Avoca Shear Zone. This strategy allows Heron to The Avoca Shear Zone is a zone of deformation which bisects and runs the entire length of the project area. control over This is a major crustal structure controlling gold mineralisation along its length. Gold deposits associated 2,000km2 of with the Avoca Shear Zone include Success, Kurnalpi Consols, Scottish Lass, Old Harriett, Rising Sun and Nickel Laterite Gessners Find. terrain in the Avoca Shear The Avoca Shear Zone divides the project into two separate stratigraphic sequences. The western Province, and lithologies consist of sediments that have a significant component of ultramafic units. The eastern area provide Avoca contains a mixture of felsic volcaniclastics, sediments and banded iron formation. In the southern project Resources Limited with a area the Avoca Shear Zone can be traced beneath recent sediments of Lake Randall using aeromagnetic free carried data. This area is totally unprospected. interest in gold The Avoca Shear Zone is in fact covered by recent lake sediments, aeolian sand and transported colluvium exploration. for much of its length. This lack of exposure largely renders historic prospecting activities ineffective, as well as the more modern surface geochemical based exploration. The focus of exploration in the Avoca area has previously been towards VMS style base metal deposits and hence exploration for gold has only been cursory.

Tektite, found by Keith Quartermaine near Yerilla, Avoca country.

Typical Goongarrie Goethite Ore. Page 24 2.8

PROPOSED KEITH KILKENNY PROVINCE AVOCA GOLD EXPLORATION JOINT VENTURE RESOURCES ASSET 2.8.1 Wiluna South Project Avoca 100%. Gold. The Keith The 129km2 tenement is located 15km SSE of the currently operating Wiluna gold mining centre. Kilkenny Tectonic The project area is largely covered by Lake Way which has precluded systematic modern exploration. Avoca’s Zone ranks equally with the exploration will be based on aeromagnetic interpretation, and will require specialist lake drilling rigs. Zuleika Shear The NNW trending sequence of basalts and dolerites that hosts the Wiluna gold mining centre is present and Boulder over a strike of 12km within the project area, associated with the Wiluna ore-hosting fault system. Lefroy Fault as a major Wiluna South is one of the prime gold exploration plays in Western Australia. Normandy control on gold Exploration has recently announced exceptional drilling results on Lake Way to the immediate north and mineralisation in west of Avoca’s project area, highlighting Lake Way as an Avoca project of great potential. the Eastern Goldfields. 2.8.2 Wildara North Project Heron 100%. Avoca assignment of all mineral rights. Heron controls some 1,900km2 Gold. of the The 56km2 project area covering 5 tenements is located 120km N of Leonora within the western margin of Keith Kilkenny the Keith Kilkenny Tectonic Zone. Province, largely farmed out with The project area is largely a soil covered basalt and felsic volcanic terrain occurring between the free carry to Bronzewing gold mining centre to the north and the recent Thunderbox gold discovery to the south. Strike mining. parallel structures occur along the western contact of the greenstone belt, and link a number of significant gold deposits, including from north to south Bronzewing, Mount McClure, Success, Parmellia, Challenger Heron is and Thunderbox. assigning this free-carried gold The Thunderbox gold deposit was discovered in 1999, and is located 40km S along strike of the Avoca asset to Avoca. project area. Thunderbox has a resource of 30mt at 2.2g/t gold for a total of 2.1 million ounces. Avoca has completed a GIS target generation study, with field mapping confirming favourable structural sites. At the Mount McClure South Prospect a small internal circular granite plug has been intruded into the western structural corridor. The intersection of strike-parallel gold-bearing structures with the plug is interpreted to create significant dilatancy sites with gold deposition potential.

2.8.3 Victory Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. WMC Resources Ltd right to earn 80% through spending $0.125m. Gold - nickel. The 24km2 project area covering 6 tenements is located 50-120km NW of Leonora, adjoining the Victory and Bannockburn gold mining centres. WMC has completed a GIS review, followed by field validation.

2.8.4 Kookynie Joint Venture Project Avoca 100% of Precious Metal rights. Newcrest Operations Limited right to earn 75% in Gold through spending $0.8m, subject to completion of formal documentation. Heron retains Nickel rights. Gold-nickel. The 87km2 project area covering 3 tenements is located 20-60km SE of Leonora within the western margin of the Keith Kilkenny Tectonic Zone. The project area is largely soil covered basalt and felsic volcanics occurring along strike from the Apollo Hill gold occurrence. Lateritic nickel targets are present, associated with rift margin ultramafics. Heron retains all nickel rights. Newcrest has completed a data review and GIS target generation study. The main regional target in the project area is the Ulster Prospect, an historic gold mine. Sulphidic quartz float is present, linking a series of old shafts that extend over a strike length exceeding 300m. The mineralisation strikes E-W, which is significant in that regionally the Butterfly-Tampa gold mineralisation is hosted by similar trending flat lying shears. At the Tampa and Mount Melita East Prospects, residual laterite with quartz vein float is present. Lag sample anomalism is present in Heron’s sampling on a 400x400m grid pattern.

Page 25 HERON RESOURCES LIMITED 2.8 CONTINUED OPERATIONS REVIEW

2.8.5 Edjudina-Laverton Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. Croesus Mining NL right to earn 80% in respect of Gold through spending $1.0m. Gold. The 562km2 joint venture area covering 13 tenements is located within two separate areas. The southern Heron’s previous joint venture Edjudina area is 120-160km NE of Kalgoorlie immediately northwest and east of the Porphyry work in the Keith gold mine within the Keith Kilkenny Tectonic Zone. Gold mineralisation dominantly occurs as quartz Kilkenny stockworks within felsic and granitoid host rocks. Province concentrated on The northern joint venture Laverton area is 55km N of Laverton within the Laverton Tectonic Zone. Major Nickel Laterite gold mining centres in the area are generally associated with BIF, and from north to south include RC drilling. Rosemont, King of Creation and Corktree Well. Now that the Croesus has expended $0.5 million on exploration to date, with in excess of 12,000m of drilling completed. Avoca IPO is in Several mineralised intercepts have been recorded, but as yet, none of economic potential. train, Exploration Manager 2.8.6 Southern Laverton Tectonic Zone Joint Venture Project Geoff Collis Heron 100%. Subject to Agreement, proposed assignment of Precious Metal rights to Avoca. has been Heron retains Nickel rights. systematically Gutnick Resources NL right to earn 80% in respect of Gold through spending $1.2m. completing reconnaissance Gold. Precious Metal The Southern Laverton Tectonic Zone Project is located 150km NE of Kalgoorlie. Heron’s project area soil and rock comprises 34 tenements covering 305km2. Heron’s tenements within the Tectonic Zone extend 100km, chip sampling of from the Red October gold mine (340,000oz) in the north to the Anglo-Saxon gold mine (170,000oz) in the the project areas. south. This structural zone hosts gold mineralisation from north to south at Laverton, Sunrise Dam, Red Several October, Safari Bore, Edjudina and Pinjin. advanced stage A drill program has been designed to test the Yundamindera Flash Prospect, generated from a 1,500 Precious Metal sample regional auger program. This target is defined by a threshold value of 15ppb Au against a and VMS targets background of <4ppb. Significant soil spikes consistent with near surface gold development are present, have been generated, which with peak soil gold values to 290,000ppb. Two significant N-S anomalies have been defined over 5km. will become a The western anomaly represents northern extension to the historic Gardners Find workings, which are gold- drilling focus mineralised strike parallel shears. Heron sampling of old workings yielded gold values to 6.4g/t. once Avoca has listed on ASX. 2.8.7 Karonie South Joint Venture Project Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. WMC Resources Ltd right to earn 80% through spending $0.30m. Gold (- nickel). The 653km2 contiguous project area covering 8 tenements is located 140-170km SE of Kalgoorlie associated with the Keith Kilkenny Tectonic Zone. This structure hosts gold mineralisation from Old Plough Dam in the north, through to Carosue Dam, Karonie and French Kiss in the south. Following start up of the Joint Venture, WMC has completed a high resolution aeromagnetic survey and a 474 station 1x1km grid gravity survey. These have provided excellent differentiation of the mafic and sedimentary packages of the Roe Hills and Karonie Greenstone Belts. The entire project area has broad spaced soil geochemical coverage and ultra-detailed 50m line spacing aeromagnetics. Several high priority follow-up gold targets have been generated: • HSK1 Prospect, 1.2km soil gold anomaly, peak 29ppb Au against a <2ppb background, dolerite setting. • HSK2 Prospect, 4.6x2.5km soil gold anomaly, peak 27ppb Au against a <2ppb background, dolerite-sediment contact in a major regional structural setting. • HSK3 Prospect, 2.5km soil gold anomaly, peak 30ppb Au against a <2ppb background, granite contact.

Gnamma hole east of Karonie, Avoca country.

Avoca’s Exploration Manager, Geoff Collis Page 26 2.9 OPERATIONS REVIEW

PROPOSED LAVERTON-CELIA TECTONIC ZONE PROVINCE AVOCA GOLD JOINT VENTURES RESOURCES ASSET 2.9.1 Erlistoun Project Heron 100%. Avoca assignment of Precious Metal rights. Heron retains Nickel rights. Gold. The Laverton- The 212km2 project area covering 12 tenements is located from Laverton to 50km N, between the Celia Celia Tectonic Tectonic Zone in the west and Laverton Tectonic Zone in the east. GIS data compilation is current, awaiting Zone is the tenement grant. dominant metallogenic The historical Euro gold mining centre was recently acquired by Avoca. Extensive alluvial gold workings are structure of the present, with potential bedrock gold sources having had minimal exploration. Northeastern Goldfields. 2.9.2 Mount Zephyr Project Heron acquired Avoca 100%. Heron retains Nickel rights. Nickel Laterite Gold - nickel.

targets on the 2 Tectonic Zone, The 154km contiguous project area covering 4 tenements is located 35km NW of Laverton. and will assign An aeromagnetic target is located in the southern project area overlain by sheetwash. Sparse subcrop the Precious includes komatiite with silica cap. Heron field mapping identified a Nickel Laterite profile, with RAB Metal rights to Avoca. intercepts in previous drilling of up to 8m at 1.2% Ni. Heron will retain these Nickel Rights, while Avoca will hold Gold rights. Gold prospectivity is high, due to the presence of the Celia Tectonic Zone (hosts the Mount Morgans gold mining centre 60km SE).

2.9.3 Laverton Joint Venture Project Heron 100%. Avoca assignment of all mineral rights. Metex Resources Limited right to earn 70% through spending $0.5m. Gold. The 31km2 contiguous project area covering 2 tenements is located 15km WSW of Laverton immediately west of the Chatterbox Shear Zone. The project area surrounds the Hawks Nest-Mt Gooses gold mining centres. Metex advises that reinterpretation of gravity and aeromagnetic data has been completed and a number of targets generated. Expenditure to date has been $0.3 million.

2.9.4 Mount Morgans Joint Venture Project Heron 20%. Avoca assignment of all mineral rights. Metex Resources Limited 80%, Heron non-contributing and free-carry at 20%. Gold. The 14km2 project area covering 8 tenements is located 40km WSW of Laverton immediately west of the Celia-Mount Morgans-Korong Shear Zone. The main prospects are 5km NW along strike from the Mount Morgans gold mining centre, associated with an intra-greenstone granitoid. Aeromagnetic, DEMs, open file and geological compilations have been completed, and vacuum and RAB drilling carried out to quantify the regolith profile. Expenditure to date has been $0.2 million, with Metex having now earnt their equity.

Des Steel (Tenement Manager) - left and Alan Rudd (Senior Geologist) - right administer Heron’s substantial tenement portfolio, with check audit by Resource Mapping Pty Ltd, Perth.

Heron’s excellent tenement acquisition record reflects the monitoring procedures implemented by Des and Alan.

Page 27 HERON RESOURCES LIMITED 2.10 OPERATIONS REVIEW

BREMER-EUCLA PALAEODRAINAGE PROVINCE PROPOSED OIL SHALE SCOPING STUDY BALLADONIA ENERGY 2.10.1 Balladonia and Ravensthorpe-Norseman Oil Shale Projects ASSET Heron 100%. Oil shale - lignite - sulphur - limestone - heavy mineral sands - kaolin - vanadium. The 3,648km2 Balladonia project area covering 21 tenement applications is located 20-180km E of Norseman. The 1,597km2 Ravensthorpe-Norseman project area covering 19 tenement applications is located from Norseman and SW to Ravensthorpe.

Energy FIG.8: BALLADONIA Lignite deposits with high oil yields have Resource Occurrences been identified in Heron’s literature reviews. Resource estimates are qualitative at best, but from reviewing previous 1980s exploration data, there is a stated resource potential of 2.6 billion tonne at a Fischer Oil Yield of 133 litre per tonne and a strip ratio of 4:1. The Balladonia lignite has a higher ash content and lower specific energy values than Victorian Tertiary brown coals, but is comparable to the Leigh Creek deposits being actively mined in South Australia. All of the Bremer-Eucla lignite resources have a high oil yield, being up to 190 litre per tonne. The oil yields are comparable to Oil Shale deposits in Queensland, which are now in production. The Bremer-Eucla Oil Shales do not have the environmental issues related to the Queensland projects operating in proximity to the Great Barrier Reef.

Sulphuric Acid The Bremer-Eucla lignite is strongly pyritic. Following flotation, this pyrite would be suitable for sulphuric acid manufacture. Sulphuric acid is a major feedstock in nickel laterite processing. This sulphur requirement was the prime reason for Heron acquiring the Bremer-Eucla Oil Shale tenements.

Corporate The long term corporate objective is for Heron’s Oil Shale assets to be spun off into Balladonia Energy. Heron will seek to introduce a technology joint venture partner to the Oil Shale projects.

IAN BUCHHORN Managing Director The information is based on, and accurately reflects, information compiled by Ian James Buchhorn, who is a Member of the Australasian Institute of Mining and Metallurgy.

John Carlisle on the beach south of Balladonia.

The Heron Board, Rod Evans, Bob Colville, and Ian Buchhorn in the bush. Page 28 CORPORATE DIRECTORY

3.0 CORPORATE PROFILE 30

CORPORATE GOVERNANCE PRACTICES 30

4.0 DIRECTORS’ REPORT 32

5.0 FINANCIAL STATEMENTS 36

STATEMENT OF FINANCIAL PERFORMANCE 36

STATEMENT OF FINANCIAL POSITION 37

STATEMENT OF CASH FLOWS 38

NOTES TO AND FORMING PART OF THE ACCOUNTS 39

DIRECTORS’ DECLARATION 50

6.0 INDEPENDENT AUDIT REPORT 51

7.0 SHAREHOLDER INFORMATION 52

8.0 INTEREST IN MINING TENEMENTS 55

Jurandah rock hole, IsraeliteBay

Grevillea mill, Narina ookynie Mary’s Pool, K Nullarbor sunset

Page 29 HERON RESOURCES LIMITED CORPORATE DIRECTORY

3.0 Corporate Profile

HERON RESOURCES LIMITED is a Kalgoorlie-based exploration and development company. The corporate aim is to become a profitable mining company through the development of mineral deposits. Heron is focused on the exploration and development of its Nickel Laterite projects in the Eastern Goldfields of Western Australia.

The Company undertakes cost-effective exploration based on literature reviews, aeromagnetic interpretation, and ore resource drill testing of targets so generated.

The management of the Company is based in Kalgoorlie. Accordingly, the Company has excellent access to tenement acquisition opportunities, and to specialist contractor services. Administrative overheads are also maintained at lower levels due to the Kalgoorlie base.

The Company is managed and staffed by a team of six professional geoscientists with extensive industry experience. Specialist consultants are used as required, particularly in disciplines where due diligence may be required. Field programs such as drill rig access, drill site rehabilitation and hydrological monitoring are implemented under long-term contracts to experienced operators.

OBJECTIVES a) To convert the existing Nickel Laterite mineral resources into profitable mining operations for the Company; b) To increase the value of the Company through the continued acquisition, exploration and development of mineral resources; c) To establish mining cash flows that increase the Company's market capitalisation and value to Shareholders; d) To conduct operations in a safe and environmentally responsible manner, to offer employment opportunities to those who live in the exploration provinces, and to respect and nurture the Indigenous culture of the exploration provinces; and e) Manage the risk in all exploration, development and corporate endeavours.

STRATEGY a) Acquire the maximum available equity in Nickel Laterite and associated commodity projects through pegging, optioning or outright purchase, concentrating within the Eastern Goldfields of Western Australia; b) Focus on cost-effective drill exploration to convert exploration targets into mineral resources; c) Location of the corporate base at Kalgoorlie within the principal area of operation; d) Active acquisition and testing of new exploration concepts and targets, such as the Avoca PGE projects; e) Use of best management, technical and financial control techniques; and f) Utilise farm-outs where appropriate to spread exploration and commodity risk.

CORPORATE GOVERNANCE PRACTICES

General

The Company does not have any formally constituted committees of the Board of Directors. The Company is not of a size nor are its affairs of such complexity to justify the formation of separate or special committees. The Board as a whole is able to address the governance aspects of the full scope of the Company's activities and to ensure that it adheres to appropriate ethical standards.

Composition of the Board

At the date of this statement the Board comprises three Directors, two of whom are non executive Directors. The names, qualifications and relative experience of each Director are included in the Directors' Report, Section 4.0.

The Company's Constitution provides that the number of Directors shall not be less than three and not more than ten (Clause 11.1.1). There is no requirement for any Share holding qualification although it is preferable that Directors will become significant Shareholders. An Employee Option Plan has been in operation to encourage Directors to take significant Shareholdings.

As the Company's activities increase in their size, nature and scope, the size of the Board will be reviewed periodically and the optimum number of Directors required to adequately supervise the Company's activities determined within the limitations imposed by the Constitution and as circumstances demand.

Page 30 3.0 Corporate Profile cont

Board Membership

The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the appointment of a suitable candidate for the Board shall include the quality of the individual, experience and achievement, compatibility with other Board members, credibility within the Company's scope of activities and the mining industry, intellectual ability to contribute to the Board's duties and physical ability to undertake the Board's duties and responsibilities.

Under the Company's Constitution the tenure of the Directors (other than the Managing Director) is subject to re-appointment by Shareholders not later than the third anniversary following their last appointment (Clause 11.1.3). The Board does not subscribe to the principle of a retirement age and there is no maximum period of service as a Director.

Appointment to Other Boards

Directors are required to take into consideration any conflicts when accepting appointment to other boards. Accordingly, Directors wishing to accept appointment to other boards must first seek approval from the Board, approval of which will not unreasonably be withheld.

Directors' Remuneration

At the date of this statement the maximum per annum total amount payable to Directors as Director's fees was set by Shareholders at a general meeting on 21 June 1996 at $100,000.

No Director's fees are paid to the Managing Director, who receives a salary approved by the Board.

Independent Support

The Board has determined that individual Directors may in appropriate circumstances engage outside advisers at the Company's expense. The engagement of an outside adviser is subject to the prior approval of the Board, approval of which will not unreasonably be withheld.

Compensation Arrangements

The Board is responsible for reviewing compensation arrangements (including superannuation and other benefits) for the Managing Director and other senior executives.

Continuous Review of Corporate Governance

Directors consider on an ongoing basis how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors of the Company. Such information must be sufficient to enable Directors to determine appropriate operating and financial strategies from time to time in light of changing circumstances and economic conditions.

The Directors recognise that mineral exploration has inherent risks and that operational strategies adopted should, notwithstanding, be directed towards improving the value of the net worth of the Company.

Page 31 HERON RESOURCES LIMITED 4.0 Directors’ Report The Directors submit their Report on the operations of the Company and its controlled entities for the year ended 30 June 2001 including the accounts for the financial year ended on that date in accordance with a resolution of the Directors of the Company.

DIRECTORS

The names and details of the Directors of the Company in office at any time during or since the end of the year are:

Director Rodney Michael Evans - FCA, FCIS, FCIM, AIArbA Appointed 26 March 1996 Position Chairman (Non-Executive)

Rod Evans is a chartered accountant and consultant who has had wide experience in corporate administration and finance. Mr Evans is a Director and Chairman of RAC WA Holdings Pty Limited and RAC Finance Limited, and a past Chairman of Clark Kenneth Leventhal a world-wide association of accounting firms, the Australian Automobile Association, and a number of publicly listed companies involved in mining and exploration in Australia.

Director Ian James Buchhorn - BSc (Hons), Dip Geosci, MAusIMM Appointed 17 February 1995 Position Managing Director

Ian Buchhorn is a Mineral Economist and Geologist. He has worked on nickel, gold, lead-zinc and diamond projects in southern Africa. In Australia, Mr Buchhorn has worked on bauxite and industrial mineral mining and exploration, gold and base metal project generation, gold mine operation and in corporate evaluations. He has 28 years' experience as an economic geologist, and for the last 15 years, has acquired and developed projects throughout the Eastern Goldfields of Western Australia, commissioned several open cut gold mines, and has been a Registered Mine Manager. Mr Buchhorn is responsible for the day to day technical management of the Company. He is active within the local community, serving as a Councillor for the City of Kalgoorlie-Boulder.

Director Robert George Colville - AssocRMIT, MAusIMM Appointed 09 December 1996 Position Director (Non-Executive)

Bob Colville has over 29 years' exploration experience predominantly within the Eastern Goldfields of Western Australia. Mr Colville has held a number of senior and executive positions with both major companies and junior explorers. He has been associated with the discovery and development of mines at Ranger Uranium (NT), and New Celebration, Goongarrie and Davyhurst (Eastern Goldfields WA). Mr Colville is an executive director of Barminco Pty Limited, the largest private underground mining contractor in Australia, and Managing Director of Barra Resources Limited, a publicly listed company involved in gold exploration in Australia.

Director Craig Leslie Readhead - B.Juris. LL.B. (alternate for R M Evans) Appointed 03 September 2001 Position Director (Non-Executive)

Craig Readhead is a lawyer with 25 years' legal and corporate advisory experience with specialisation in the resources sector. Mr Readhead is a partner of the law firm Pullinger Readhead Stewart and is a director of a number of listed and unlisted public companies involved in mining and exploration in Australia.

Directors who have resigned during the reporting period are:

Director Peter James Lee Appointed Resigned 20 October 2000; Re-appointed 29 November 2000; Resigned 31 August 2001 Position Director (Non-Executive)

Director Stephen Bruce Dennis Appointed Appointed 20 October 2000; Resigned 20 November 2000 Position Director (Non-Executive)

Director Richard Monti (alternate for S B Dennis) Appointed Appointed 20 October 2000; Resigned 20 November 2000 Position Director (Non-Executive)

Page 32 4.0 Directors’ Report cont

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the year were:

a) Nickel Laterite mineral exploration and development;

b) Various Heron non-nickel mineral exploration activities, often implemented through farm-out; and

c) De-merger of the Heron non-nickel assets into Avoca Resources Limited.

There has been no significant change in the nature of these activities during the year.

OPERATING RESULTS

The loss of the consolidated entity for the 2001 financial year after income tax of nil (2000 : nil) was $558,500 (2000 : $535,636).

DIVIDENDS

No dividends were paid during the year and the Directors do not recommend the payment of a dividend.

OPERATIONS REVIEW

The detailed review of operations of the consolidated entity for the year is contained in Section 2.0 of this Annual Report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Other than noted below there were no significant changes in the state of affairs of the consolidated entity during the year.

During the year 9,999,855 shares were placed at $0.28 each raising $2,799,960 (less costs) to fund exploration activities and for additional working capital.

On 8 June 2001 the subsidiary entity Avoca Resources Limited ("Avoca") was registered. Avoca was registered to allow a spin- off of the non-nickel exploration assets of Heron Resources Limited ("Heron"), to enable the Company to focus on its Nickel Laterite assets and allow more appropriate resources to be devoted to the development of the non-nickel assets.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

Other than noted, at the date of this Report there is no matter or circumstance which has arisen since 30 June 2001 that has significantly affected or may significantly affect:

a) The operations, in the financial years subsequent to 30 June 2001, of the consolidated entity;

b) The results of those operations; or

c) The state of affairs, in the financial years subsequent to 30 June 2001, of the consolidated entity.

As announced on 3 September 2001, subject to certain conditions precedent (including approval by the shareholders of Heron Resources Limited) to be satisfied or waived on or before 15 October 2001 or such later date as may be agreed, it has been agreed to make a private placement to Resource Capital Fund II L.P. of 10 million ordinary shares in the capital of the Company at $0.30 per share, to raise $3,000,000, together with 10 million three year options to subscribe for Heron shares at $0.35 per share (issued for no consideration).

OPTIONS

No Options in the Company were exercised during the year. 1,670,000 Options were issued by the Company during the year. 290,000 Options expired during the year and to the date of this Report.

As at the date of this report the Company had the following Options on issue:

Number Issued Expiry Date Exercise Price 350,000 15 December 2001 $0.25 50,000 05 March 2002 $0.25 200,000 19 December 2002 $0.25 200,000 19 December 2002 $0.35 200,000 19 December 2002 $0.45 200,000 19 December 2002 $0.55 200,000 19 December 2002 $0.65 100,000 04 February 2004 $0.25 785,000 19 October 2004 $0.35 785,000 19 October 2004 $0.50 3,070,000

Page 33 HERON RESOURCES LIMITED LIKELY DEVELOPMENTS

The Company will continue its core nickel development activities through sole funded exploration and joint ventures where appropriate. It is proposed to spin-off of the Heron Resources Limited non-nickel exploration assets into Avoca Resources Limited, which will enable Heron to focus on its Nickel Laterite assets and allow more appropriate resources to be devoted to the development of the non-nickel assets.

The Company is continually assessing commercial opportunities for corporate growth. Because of the unpredictable nature of these opportunities, developments could occur at short notice.

Further information is not included on the likely developments in the operations of the consolidated entity and the expected results of those operations, as it is the opinion of the Directors that this would prejudice the interests of the consolidated entity if included in this Report.

DIRECTORS’ BENEFITS

Disclosure of benefits provided to Directors during the financial year is made in Notes 15 and 17 of the financial statements, in accordance with ASIC class order 98/2395.

DIRECTORS’ INTEREST IN CONTRACTS WITH THE COMPANY

There are no material contracts involving Directors’ interests at the end of the financial year nor have any been entered into since the end of the previous financial year not otherwise disclosed in this Report.

DIRECTORS’ SHAREHOLDING IN THE COMPANY

As at the date of this Report the interests of the Directors in the Shares of the Company were:

Director Ordinary Shares Options over Ordinary Shares Direct Indirect Direct Indirect

R M Evans - 800,000 - 200,000

I J Buchhorn 2,447,857 33,793,155 1,000,000 -

R G Colville - 140,000 - 150,000

DIRECTORS MEETINGS

During the year the Company held 12 meetings of Directors. The attendance of the Directors at meetings of the Board were:

Director Meetings held Number of while a Director meetings attended

R M Evans 12 12

I J Buchhorn 12 12

R G Colville 12 12

PJ Lee 11 10

R Monti (alternate for S B Dennis) 1 1

EMOLUMENTS OF DIRECTORS AND SENIOR EXECUTIVES

Executive remuneration and other terms of employment are reviewed by the Board on an ongoing basis having regard to performance against goals set at the start of the year, the relevant comparative information and independent expert advice. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity’s operations.

Page 34 Director Salary Directors Superannuation Other Options Fees $$ $ $ $

R M Evans - - 43,200 - - I J Buchhorn 130,000 - 20,000 - - R G Colville - 20,000 1,600 - - S B Dennis - 1,667 133 - - P J Lee - 18,333 1,467 - -

Senior Executive $ $ $ $ $

D J Crook 90,500 - 29,500 25,600 12,500

Mr Crook is the only employee of the consolidated entity qualifying as a Senior Executive.

500,000 Options in the parent entity were issued to entities associated with D J Crook during the year:

Number Issued Expiry Date Exercise Price

250,000 19 October 2004 $0.35 250,000 19 October 2004 $0.50

The value of the 500,000 19 October 2004 Options issued to DJ Crook is estimated to be $12,500.

AUDIT COMMITTEE

At the date of this Report the Company has not formed an Audit Committee, and as such the Board effectively acts as the Audit Committee. The Directors discuss the Company’s activities with the auditors throughout the year. Due to the size and nature of operations, it has not been considered necessary to form an Audit Committee of the Board of Directors.

INSURANCE OF OFFICERS

During the financial year the Company has paid an insurance premium in respect of a Directors’ and Officers Liability Insurance Contract. The insurance premium relates to liabilities that may arise from an officer’s position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain personal advantage.

The officers covered by the insurance policies are the Directors and the Company Secretary.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Heron Resources Limited support and have adhered to the principles of corporate governance. The consolidated entity’s corporate governance statement is contained in the Corporate Profile section of the Annual Report.

ENVIRONMENTAL REGULATION

The consolidated entity is subject to and compliant with all aspects of environmental regulation in respect of its exploration activities. The Directors are not aware of any environmental regulation which is not being complied with.

ABORIGINAL CULTURE AND HERITAGE

The consolidated entity is subject to and compliant with all aspects of Aboriginal Heritage regulation in respect of its exploration and development activities. The Directors are not aware of any regulation which is not being complied with. The Directors are committed to cultural respect and Indigenous Reconciliation.

Signed in accordance with a resolution of Directors

R G COLVILLE Director

Perth, 28 September 2001

Page 35 HERON RESOURCES LIMITED 5.0 Financial Statements

STATEMENT OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 30 JUNE 2001

Consolidated Entity Parent Entity Notes 2001 2000 2001 2000 $$$ $

REVENUES FROM ORDINARY ACTIVITIES 2 179,149 171,718 179,149 171,718

Administration expenses from ordinary activities (581,213) (678,000) (548,264) (678,000)

Mineral exploration expenditure written off (156,436) (29,354) (154,643) (29,354)

LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX 3 (558,500) (535,636) (523,758) (535,636)

INCOME TAX RELATING TO ORDINARY ACTIVITIES 4 - - - -

LOSS FROM ORDINARY ACTIVITIES AFTER INCOME TAX (558,500) (535,636) (523,758) (535,636)

NET LOSS (558,500) (535,636) (523,758) (535,636)

Basic earnings per share 25 $(0.0059) $(0.0068)

Diluted earnings per share is not materially different from basic earnings per share

The accompanying notes form part of these financial statements

Page 36 5.0 Financial Statements cont

STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2001

Consolidated Entity Parent Entity Notes 2001 2000 2001 2000 $$$ $ CURRENT ASSETS Cash assets 3,130,967 3,925,296 3,130,947 3,925,286 Receivables 5 119,554 6,661 116,885 6,661 TOTAL CURRENT ASSETS 3,250,521 3,931,957 3,247,832 3,931,947

NON-CURRENT ASSETS Receivables 6 - - 436,320 363,346 Investments 7 - - 20 10 Property, plant and equipment 8 126,511 117,632 126,511 117,632 Exploration and evaluation costs carried forward 9 13,126,872 10,263,600 12,727,963 9,900,254 TOTAL NON-CURRENT ASSETS 13,253,383 10,381,232 13,290,814 10,381,242

TOTAL ASSETS 16,503,904 14,313,189 16,538,646 14,313,189

CURRENT LIABILITIES Payables 10 256,885 172,323 256,885 172,323 Provisions 11 93,829 77,769 93,829 77,769 TOTAL CURRENT LIABILITIES 350,714 250,092 350,714 250,092

TOTAL LIABILITIES 350,714 250,092 350,714 250,092

NET ASSETS 16,153,190 14,063,097 16,187,932 14,063,097

EQUITY Contributed equity 12 24,018,094 21,369,501 24,018,094 21,369,501 Accumulated losses 13 (7,864,904) (7,306,404) (7,830,162) (7,306,404)

TOTAL EQUITY 16,153,190 14,063,097 16,187,932 14,063,097

The accompanying notes form part of these financial statements

Page 37 HERON RESOURCES LIMITED 5.0 Financial Statements cont

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2001

Consolidated Entity Parent Entity Notes 2001 2000 2001 2000 $$$ $ CASH FLOWS FROM OPERATING ACTIVITIES Interest received 179,149 161,007 179,149 161,007 Proceeds from sale of tenements - 15,000 - 15,000 GST Paid (112,893) - (110,224) - Payments to suppliers (442,570) (619,699) (409,621) (619,699) NET CASH OUTFLOWS FROM OPERATING ACTIVITIES 14(a) (376,314) (443,692) (340,696) (443,692)

CASH FLOWS FROM INVESTING ACTIVITIES Exploration expenditure (3,013,211) (2,454,234) (2,975,855) (2,090,888) Acquisition of plant & equipment (53,407) (2,355) (53,407) (2,355) NET CASH OUTFLOWS FROM INVESTING ACTIVITIES (3,066,618) (2,456,589) (3,029,262) (2,093,243)

CASH INFLOWS FROM FINANCING ACTIVITIES Loan to controlled entities - - (72,974) (363,346) Proceeds from issue of Shares 2,799,970 5,669,510 2,799,960 5,669,500 Share issue costs (151,367) (130,000) (151,367) (130,000) NET CASH FLOWS FROM FINANCING ACTIVITIES 2,648,603 5,539,510 2,575,619 5,176,154

NET INCREASE / (DECREASE) IN CASH HELD (794,329) 2,639,229 (794,339) 2,639,219 Cash at the beginning of the financial year 3,925,296 1,286,067 3,925,286 1,286,067 CASH AT THE END OF THE FINANCIAL YEAR 14(c) 3,130,967 3,925,296 3,130,947 3,925,286

Non-cash financing and investing activities 14(b) - 176,841 - 176,841

The accompanying notes form part of these financial statements

Page 38 5.0 Financial Statements cont

NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2001

NOTE 1. STATEMENT OF ACCOUNTING POLICIES

The financial report is a general purpose financial report which has been prepared in accordance with applicable Accounting Standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Act 2001. The financial report has been prepared on the basis of historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. The accounting policies have been consistently applied, unless otherwise stated.

The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial statements.

a) Principles of Consolidation The consolidated accounts comprise the accounts of Heron Resources Limited (the parent entity) and its controlled entities. A controlled entity is any entity controlled by Heron Resources Limited. Control exists where Heron Resources Limited has the capacity to dominate the decision making in relation to the financial and operating policies of another entity so that the other entity operates with Heron Resources Limited to achieve the objectives of Heron Resources Limited. A list of controlled entities is contained in Note 23. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Where controlled entities have entered or left the consolidated entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

b) Income Tax The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense shown in the profit and loss account is based on the operating profit before income tax adjusted for any permanent differences. Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating profit before income tax and taxable income are brought to account as either a provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of the 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 and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

c) Exploration, Evaluation, Development and Restoration Costs Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. Accumulated costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area, or by its sale, or where the activities in the area have not reached a stage which permits a reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. Accumulated costs are not carried forward in respect of any area of interest unless rights to tenure of that area are current. Restoration costs that are expected to be incurred are provided for as part of the cost of the exploration, evaluation and development phases that give rise to the need for restoration.

d) Investments Investments are brought to account at cost or at Directors’ valuation. The carrying amount of investments is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these investments.

Page 39 HERON RESOURCES LIMITED 5.0 Financial Statements cont e) Property, Plant and Equipment Plant and equipment is measured at cost. Depreciation is calculated on a straight line or diminishing value basis to write off the net cost of each item of property, plant and equipment over its expected useful life. Major depreciation periods for plant and equipment are 5 to 15 years. f) Interests in Joint Ventures The consolidated entity’s share of the assets, liabilities, revenue and expenses of joint ventures is included in the appropriate items of the balance sheet and the profit and loss account. Details of the joint ventures are set out in Note 22. g) Employee Entitlements Liabilities for wages and salaries, annual leave and sick leave are recognised and are measured as the amount unpaid at the reporting date at current pay rates in respect of employees’ service up to that date. h) Cash Cash on hand and in banks and short-term deposits are stated at the lower of cost and net realisable value. For the purposes of the statement of cash flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within two working days, net of outstanding bank overdrafts. i) Acquisition of Assets The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up at the date of acquisition plus costs incidental to the acquisition. Where shares are issued in an acquisition, the value of the shares is determined by reference to the fair value of the assets acquired, including goodwill where applicable. Costs relating to the acquisition of new areas of interest are classified as either exploration and evaluation expenditure, development properties or mine properties based on the stage of development reached at the date of acquisition. Assets acquired may also include mineral reserves, mineral resources and unexplored and unevaluated acreage. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of acquisition. The discount rate used is the rate at which a similar borrowing could be obtained under comparable terms and conditions. A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is a demonstrable commitment to a restructuring of the acquired entity and a reliable estimate of the amount of the liability can be made. j) Recoverable Amount of Non-Current Assets The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is revalued to its recoverable amount. Where the net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. To the extent that a revaluation decrement reverses a revaluation increment previously credited to, and still included in the balance of, the asset revaluation reserve, the decrement is debited directly to that reserve. Otherwise the decrement is recognised as an expense in the profit and loss account. The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to their present values using a market-determined, risk adjusted discount rate. k) Trade and Other Payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. These amounts are unsecured and are usually paid within 30 days of recognition.

Page 40 5.0 Financial Statements cont

l) Receivables and Revenue Recognition Bills of Exchange

Bills of Exchange have been purchased in the market at a discount to face value. The Bills are carried at an amount representing cost and a portion of the discount recognised as income on an effective yield basis. The discount brought to account each period is accounted for as interest received. Interest

Interest is recognised on control of the right to receive the interest payment.

m) Earnings per Share

i) Basic Earnings per share

Basic earnings per share is determined by dividing the profit from ordinary activities after related income tax expense by the weighted average number of ordinary Shares outstanding during the financial year.

ii) Diluted Earnings per share

Diluted earnings per share is determined by dividing the profit from ordinary activities after related income tax expense adjusted for the effect of earnings on potential ordinary shares, by the weighted average number of ordinary shares (both issued and potentially dilutive) outstanding during the financial year.

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $

NOTE 2. REVENUE FROM ORDINARY ACTIVITIES Revenues from operating activities Proceeds from sale of tenements - 15,000 - 15,000 Revenues from non-operating activities Interest received – other persons/corporations 179,149 156,718 179,149 156,718 Total revenues from ordinary activities 179,149 171,718 179,149 171,718

NOTE 3. EXPENSES Depreciation and amortisation expenses (44,529) (50,858) (44,529) (50,858) Salaries and employee benefits expense (77,867) (64,517) (67,117) (64,517) Other expenses from ordinary activities (458,817) (562,625) (436,618) (562,625) Mineral exploration expenditure written off (156,436) (29,354) (154,643) (29,354)

NOTE 4. INCOME TAX Prima facie income tax benefit on loss from ordinary activities reconciles to the income tax expense as follows:

Loss from ordinary activities (558,500) (535,636) (523,758) (535,636)

Prima facie tax at 34% (2000 : 36%) (189,890) (192,829) (178,078) (192,829) Non deductible items 12,281 62,492 5,121 62,492 Timing differences and tax losses not brought to account 177,609 130,337 172,957 130,337 Income tax expense - - - -

The Directors estimate the potential tax losses and section 330 exploration expenditure deduction entitlements available to the consolidated entity to be $11,662,896 (2000 : $7,748,391). The future income tax benefit arising from tax losses has not been recognised as an asset because recovery is not virtually certain. The tax benefits will only be obtained if:

a) The consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;

b) The consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and

c) No changes in tax legislation adversely affect the Company in realising the benefit from the deductions for losses.

Page 41 HERON RESOURCES LIMITED 5.0 Financial Statements cont

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $ NOTE 5. RECEIVABLES (CURRENT) Goods & Services Tax Paid 119,554 6,661 116,885 6,661 119,554 6,661 116,885 6,661

NOTE 6. RECEIVABLES (NON CURRENT) Loan to controlled entities (Note 17) - - 436,320 363,346 - - 436,320 363,346

NOTE 7. INVESTMENTS IN CONTROLLED ENTITIES Shares in controlled entities – at cost (Note 23) - - 20 10 - - 20 10

NOTE 8. PROPERTY PLANT AND EQUIPMENT Plant and equipment at cost 85,448 62,605 85,448 62,605 Accumulated depreciation (60,540) (48,995) (60,540) (48,995) 24,908 13,610 24,908 13,610 Office equipment & furniture at cost 32,730 24,251 32,730 24,251 Accumulated depreciation (21,194) (14,625) (21,194) (14,625) 11,536 9,626 11,536 9,626 Motor vehicles at cost 198,254 176,168 198,254 176,168 Accumulated depreciation (108,187) (81,772) (108,187) (81,772) 90,067 94,396 90,067 94,396 Total property, plant and equipment 126,511 117,632 126,511 117,632

Consolidated Entity Parent Entity 2001 2001 $$ Reconciliation Plant and equipment: Carrying amount at 1 July 2000 13,610 13,610 Additions 22,843 22,843 Disposals - - Depreciation Expense (11,545) (11,545) Carrying value at 30 June 2001 24,908 24,908

Office equipment and furniture: Carrying amount at 1 July 2000 9,626 9,626 Additions 8,478 8,478 Disposals - - Depreciation Expense (6,568) (6,568) Carrying value at 30 June 2001 11,536 11,536

Motor vehicles: Carrying amount at 1 July 2000 94,396 94,396 Additions 22,086 22,086 Disposals - - Depreciation Expense (26,415) (26,415) Carrying value at 30 June 2001 90,067 90,067

Page 42 5.0 Financial Statements cont

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $

NOTE 9. EXPLORATION AND EVALUATION COSTS CARRIED FORWARD

Balance at beginning of year 10,263,600 7,681,825 9,900,254 7,681,825 Acquisition costs 138,027 350,286 138,027 350,286 Exploration and evaluation costs incurred during the year 2,881,681 2,260,843 2,844,325 1,897,497 Exploration and evaluation costs written off (156,436) (29,354) (154,643) (29,354) Balance at end of year 13,126,872 10,263,600 12,727,963 9,900,254

The ultimate recoupment of costs carried forward is dependant upon the successful development and/or commercial exploitation or alternatively, sale of respective areas of interest.

NOTE 10. PAYABLES (CURRENT) Trade creditors and accruals 256,885 172,323 256,885 172,323

Trade creditors are non-interest bearing and are normally settled on 30 day terms.

NOTE 11. PROVISIONS (CURRENT) Employee entitlements 93,829 77,769 93,829 77,769

NOTE 12. CONTRIBUTED EQUITY Issued and paid up capital 100,958,727 (2000 : 90,958,872) Ordinary Shares fully paid 24,476,302 21,676,342 24,476,302 21,676,342 Less: Capital Raising Expenses (458,208) (306,841) (458,208) (306,841) 24,018,094 21,369,501 24,018,094 21,369,501

Movements in issued and paid up capital of the parent entity during the year are as follows:

2001 Number $

Balance at beginning of year 90,958,872 21,676,342 Issued during the year 9,999,855 2,799,960 Balance at end of year 100,958,727 24,476,302

9,999,855 Shares were issued during March 2001 at $0.28 per share to fund exploration activities and for additional working capital.

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

Options No Options in the Company were exercised during the year. 1,670,000 Options were issued by the Company to employees during the year. 40,000 Options expired during the year.

Page 43 HERON RESOURCES LIMITED 5.0 Financial Statements cont

As at 30 June 2001 the Company had the following Options on issue:

Number Issued Expiry Date Exercise Price 100,000 28 August 2001 $0.25 150,000 01 September 2001 $0.25 350,000 15 December 2001 $0.25 50,000 05 March 2002 $0.25 200,000 19 December 2002 $0.25 200,000 19 December 2002 $0.35 200,000 19 December 2002 $0.45 200,000 19 December 2002 $0.55 200,000 19 December 2002 $0.65 100,000 4 February 2004 $0.25 785,000 19 October 2004 $0.35 785,000 19 October 2004 $0.50 3,320,000

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $

NOTE 13. ACCUMULATED LOSSES Balance at the beginning of the year 7,306,404 6,770,768 7,306,404 6,770,768 Net Loss 558,500 535,636 523,758 535,636 Balance at end of the year 7,864,904 7,306,404 7,830,162 7,306,404

NOTE 14. STATEMENT OF CASH FLOWS a) Reconciliation of loss from ordinary activities after income tax to the net cash flows from operations Loss from ordinary activities after income tax (558,500) (535,636) (523,758) (535,636) Add/(less) Exploration and evaluation costs written off 156,436 29,354 154,643 29,354 Depreciation 44,529 50,858 44,529 50,858 (Increase)/decrease in accrued interest - 4,289 - 4,289 Increase/(decrease) in creditors, accruals and receivables (18,779) 7,443 (16,110) 7,443 (376,314) (443,692) (340,696) (443,692) b) Non-Cash Financing and Investing Activities Issue of 768,872 shares to a nominee of Carmichael - 176,841 - 176,841 First Capital Pty Limited pursuant to a negotiated success fee which crystallised with the signing of the Strategic Alliance with Centaur Mining & Exploration Limited on 17 September 1999 c) Reconciliation of Cash Cash on hand and at bank 3,130,967 2,431,839 3,130,947 2,431,829 Commercial bills - 1,493,457 - 1,493,457 Closing cash balance 3,130,967 3,925,296 3,130,947 3,925,286

Environmental Bonds of $25,960 (2000 : $25,960) are included in Cash on hand and at bank. This amount is held as security term deposits and is not available to the Company for ordinary activities.

Page 44 5.0 Financial Statements cont

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $ NOTE 15. REMUNERATION OF DIRECTORS Income paid or payable, or otherwise made available to Directors by the consolidated entity and related parties in connection with the management of affairs of the Company: 236,400 291,388 236,400 291,388

The numbers of the consolidated entity’s Directors whose income (including superannuation contributions) was within the specified bands are as follows: 2001 2000 Number Number $0 - $9,999 2 1 $10,000 - $19,999 1 - $20,000 - $29,999 1 2 $40,000 - $49,999 1 1 $150,000 - $159,999 1 - $210,000 - $219,999 - 1

NOTE 16. REMUNERATION OF EXECUTIVES 2001 2000 $$ Income paid or payable, or otherwise made available to Executives by the consolidated entity and related parties in connection with the management of affairs of the Company: 158,100 150,000

The numbers of the Company’s Executives whose income (including superannuation contributions) was within the specified bands are as follows: 2001 2000 Number Number $150,000 - $159,999 1 1

The consolidated entity employs a single Senior Executive, being the Exploration Manager. The terms Director and Executive Officer have been treated as mutually exclusive for the purposes of this disclosure. In the opinion of the Directors, remuneration paid to Directors and Executives is considered fair and reasonable.

NOTE 17. RELATED PARTY DISCLOSURES

a) The directors of the parent entity during the financial year were: Rodney Michael Evans Ian James Buchhorn Robert George Colville Peter James Lee (resigned 20 October 2000, re-appointed 29 November 2000, resigned 31 August 2001) Stephen Bruce Dennis (appointed 20 October 2000, resigned 20 November 2000) Richard Monti (alternate for S B Dennis - appointed 20 October 2000, resigned 20 November 2000)

b) Related party transactions during the financial year were: • payment of $60,000 (2000 : $60,000) to parties related to Mr I J Buchhorn for the provision of office accommodation on normal commercial terms and conditions; • payment of $nil (2000 : $1,068) for residential accommodation secured by the Company for an employee from a party related to Mr I J Buchhorn on normal commercial terms and conditions; • payment of $2,228 (2000 : $1,256) to parties related to Mr I J Buchhorn for the provision of secretarial services and temporary staff on normal commercial terms and conditions; • payments of $nil (2000 : $75,000) for acquisition of mining tenements from parties related to Mr I J Buchhorn on normal commercial terms and conditions; • information on remuneration of Directors and Executives of the consolidated entity is disclosed in Notes 15 and 16; • Interest-free loan of $366,192 (2000 : $363,346) was made by the parent entity to the controlled entity Balladonia Energy NL; • Interest-free loan of $70,128 (2000 : $nil) was made by the parent entity to the controlled entity Avoca Resources Limited.

Page 45 HERON RESOURCES LIMITED 5.0 Financial Statements cont c) Transactions of Directors and Director related entities concerning Shares or Options were: • Aggregate number of Shares and Options of the parent entity held directly, indirectly or beneficially by Directors or Director-related entities at balance date: 2001 2000 Ordinary Shares held 34,233,155 31,609,855 Options over Ordinary Shares held 1,350,000 1,350,000

• During the year Directors and Director related entities Share transactions resulted in an increase in their Shareholding of 2,623,300 shares which were acquired on the same basis as similar transactions with other Shareholders; d) No other benefits have been received or are receivable by Directors or Director related entities, other than those already disclosed in the notes to the accounts. e) Heron Resources Limited is the ultimate parent entity. Heron Resources Limited is a company that is incorporated and domiciled in Australia. During the year the Company changed its status from a no liability company to a company limited by shares. Ownership interest in the controlled entities is as set out in Note 23.

NOTE 18. FINANCIAL INSTRUMENTS a) Terms, conditions and accounting policies The consolidated entity’s accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are as follows: Recognised Financial Balance Accounting Policies Terms and Conditions Instruments Sheet Notes i) Financial assets 11am Call Accounts 11am Call Accounts are carried at cost. The 11am Call Accounts are at call with an interest rate of 4.75% (2000 : 5.75%).

Commercial Bills Commercial Bills are carried at an Commercial Bills have a term amount representing cost and a portion of 26 days with an interest of the discount recognised as rate of 4.75% (2000 : 6.15%). income on an effective yield basis.

Environmental Bonds Environmental Bonds are carried at cost. Environmental Bonds are security term deposits with a 6 month term with an interest rate of 4.9% (2000 : 5.5%). ii) Financial liabilities

Trade creditors 10 Liabilities are recognised for amounts Trade liabilities are normally settled and accruals to be paid in the future for goods and on 30 day terms. services received, whether or not billed to the economic entity. iii) Equity

Ordinary Shares 12 Ordinary Share capital is recognised at Details of the Shares issued and the the fair value of the consideration terms and conditions of the Options received by the Company. outstanding over ordinary Shares at balance date are set out in Note 12.

Page 46 5.0 Financial Statements cont

b) Interest rate risk

The consolidated entity’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at the balance date are as follows: Financial Instruments Floating Fixed interest Total carrying Weighted average interest rate rate maturing in amount as per effective 1 year or less balance sheet interest rate 2001 2000 2001 2000 2001 2000 2001 2000 $$ $$$$%% i) Financial assets Cash at bank 35,502 1,866,425 - - 35,502 1,866,425 4.00 4.85 Commercial Bills - 1,493,457 - - - 1,493,457 - 6.15 11am Call Accounts 3,069,505 539,454 - - 3,069,505 539,454 4.75 5.75 Environmental Bonds 25,960 25,960 - - 25,960 25,960 4.90 5.50

Total financial assets 3,130,967 3,925,296 - - 3,130,967 3,925,296 n/a n/a

Floating Total carrying Weighted average Interest Rate amount as per effective balance sheet interest rate 2001 2000 2001 2000 2001 2000 $$ $$%% ii) Financial liabilities

Trade creditors and accruals 256,885 172,323 256,885 172,323 n/a n/a Total financial liabilities 256,885 172,323 256,885 172,323 n/a n/a

c) Net fair values Total carrying amount as per Aggregate net fair value balance sheet 2001 2000 2001 2000 $$$$ Financial assets Cash at bank 35,502 1,866,425 35,502 1,866,425 Commercial Bills - 1,493,457 - 1,493,457 11am Call accounts 3,069,505 539,454 3,069,505 539,454 Environmental Bonds 25,960 25,960 25,960 25,960 Total financial assets 3,130,967 3,925,296 3,130,967 3,925,296

Financial liabilities Trade creditors and accruals 256,885 172,323 256,885 172,323 Total financial liabilities 256,885 172,323 256,885 172,323

d) The following methods and assumptions are used to determine the net fair values of financial assets and liabilities. Recognised financial instruments:

Cash, cash equivalents and short-term investments: The carrying amount approximates fair value because of their short-term maturity.

Receivables and trade creditors: The carrying amount approximates fair value.

NOTE 19. AUDITORS’ REMUNERATION Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $ Amounts received or due and receivable by the auditors for: - audit services 10,175 11,345 10,175 11.345 - other services 4,638 - 4,638 -

Page 47 HERON RESOURCES LIMITED 5.0 Financial Statements cont

NOTE 20. COMMITMENTS FOR EXPENDITURE Exploration Commitments

In order to maintain current rights of tenure to exploration and mining tenements, the consolidated entity has the following discretionary exploration expenditure requirements up until expiry of leases. These obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the financial statements and are payable:

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $ Not later than 1 year 2,000,000 2,000,000 1,500,000 1,800,000 Later than 1 year but not later than 5 years 8,000,000 8,000,000 6,000,000 6,800,000 Later than 5 years - - - -

If the consolidated entity decides to relinquish certain leases and/or does not meet these obligations, assets recognised in the balance sheet may require review to determine the appropriateness of carrying values. The sale, transfer or farm-out of exploration rights to third parties will reduce or extinguish these obligations. Those amounts detailed above do not include expenditure commitments which are the responsibility of joint venture partners (Note 22).

NOTE 21. SEGMENT INFORMATION

The consolidated entity operates in the mineral exploration industry in Australia.

NOTE 22. JOINT VENTURE AGREEMENTS

The consolidated entity has entered into or is negotiating the following joint venture agreements: Project Operator Right toFarm-in Earn Expenditure Laverton Metex Resources Limited 70% $500,000 Mt Morgans Metex Resources Limited 70% $200,000 Snake Hill Barra Resources Limited 70% $300,000 Southern Laverton Tectonic Zone Gutnick Resources NL 80% $1,200,000 Edjudina and Laverton Croesus Mining NL 80% $1,000,000 Bungalbin and Mount Jackson Portman Limited 100%* $250,000 Karonie South WMC Resources Limited 80% $300,000 Scotia Kanowna Delta Gold NL 70% $1,000,000 Transline Harmony Gold Limited 80% $800,000 Binduli East AngloGold Australasia Limited 75% $500,000 Victory WMC Resources Limited 80% $125,000 Perrinvale Mt Burgess Mining NL 70% $500,000 Kookynie Newcrest Operations Limited 75% $800,000 Blister Dam Place Dome Asia Pacific 70% $1,200,000 Roe Hills Delta Gold NL 80% $1,000,000 TOTAL $9,675,000 * The Company has a royalty based on tonnes of Iron Ore sold by Portman Limited.

NOTE 23. INVESTMENTS IN CONTROLLED ENTITIES Name of Country of Class of Equity Holding Cost of Parent Entity’s Entity Incorporation Shares Investment 2001 2000 2001 2000 $$ Balladonia Energy NL Australia Ordinary 100% 100% 10 10 Avoca Resources Limited Australia Ordinary 100% - 10 -

Balladonia Energy NL was registered to evaluate the potential of documented Oil Shale occurrences in the Balladonia area to contribute to the generation of the energy, sulphur and lime requirements of Heron’s Nickel Laterite projects. The corporate objective has been to introduce a technical partner with demonstrated Oil Shale expertise, to further advance the Oil Shale projects.

Avoca Resources Limited was registered to spin-off the Heron Resources Limited non-nickel exploration assets in order to enable Heron to focus on its Nickel Laterite assets and allow more appropriate resources to be devoted to the development of non- nickel assets.

Page 48 5.0 Financial Statements cont

NOTE 24. CONTINGENT LIABILITIES

Native title claims have been made with respect to areas which include tenements in which the consolidated entity has interests. The consolidated entity is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the consolidated entity or its projects. Agreement is being reached with native title claimants regarding certain areas in which the consolidated entity has interests.

NOTE 25. EARNINGS PER SHARE 2001 2000 $$

Basic earnings per Share (0.0059) (0.0068) Weighted average number of ordinary Shares outstanding during the year used in the calculation of basic earnings per Share. 94,070,707 77,925,300

As diluted earnings per Share is not materially different from basic earnings per Share it has not been disclosed.

NOTE 26. EMPLOYEE ENTITLEMENTS

Consolidated Entity Parent Entity 2001 2000 2001 2000 $$$ $ a) Employee Entitlements: The aggregate employee entitlement is comprised of: Provisions (Current) 93,829 77,769 93,829 77,769

b) Employee Share Scheme An employee share option plan has been established for Heron Resources Limited, where employees, directors and officers of the consolidated entity are issued with Options over ordinary Shares of Heron Resources Limited. The Options, issued for no consideration, are in general exercisable at any time during the period commencing 12 months after the commencement date and ending on the expiry date. There are currently nine employees, directors and officers eligible for this scheme. The Options cannot be transferred and will not be quoted on the ASX. During the year 1,670,000 Options were issued, 40,000 Options expired and no Options were exercised under the scheme. As at 30 June 2001 options on issue under this scheme were:

Number Expiry Date Exercise Issued Price 100,000 28 August 2001 $0.25 150,000 01 September 2001 $0.25 350,000 15 December 2001 $0.25 50,000 05 March 2002 $0.25 100,000 4 February 2004 $0.25 785,000 19 October 2004 $0.35 785,000 19 October 2004 $0.50 2,320,000

c) The consolidated entity employed seven employees as at 30 June 2001 (2000 : six employees).

NOTE 27. SUBSEQUENT EVENTS As announced on 3 September 2001, subject to certain conditions precedent (including approval by the Shareholders of Heron Resources Limited) to be satisfied or waived on or before 15 October 2001 or such later date as may be agreed, it has been agreed to make a private placement to Resource Capital Fund II L.P. of 10 million ordinary Shares in the capital of the Company at 30 cents per Share, to raise $3,000,000, together with 10 million three year Options to subscribe for Heron Shares at 35 cents per Share (issued for no consideration).

Page 49 HERON RESOURCES LIMITED 5.0 Directors’ Declaration

In accordance with a resolution of the Directors of Heron Resources Limited it is declared that: a) The financial statements and notes comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and b) Give a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2001 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date.

In the Directors’ opinion: a) The financial statements and notes are in accordance with the Corporations Act 2001; and b) At the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts when they become due and payable.

On behalf of the Board

R G COLVILLE Director

Perth, 28 September 2001

Page 50 6.0 Independent Audit Report

To the members of Heron Resources Limited

Scope

We have audited the financial report of Heron Resources Limited for the year ended 30 June 2001 as set out on pages 36 to 50, including the Directors’ Declaration. The Company’s Directors are responsible for the financial report which includes the financial statements of Heron Resources Limited and the consolidated financial statements of the consolidated entity comprising the Company and the entities it controlled at the end of, or during, the financial year. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the Company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and statutory requirements, in Australia, so as to present a view which is consistent with our understanding of the Company’s and the consolidated entity’s financial position and performance as represented by the results of their operations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion, the financial report of Heron Resources Limited is in accordance with:

a) the Corporations Act 2001 including: i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2001 and of their performance for the year ended on that date; and ii) complying with Accounting Standards and the Corporations Regulations 2001; and

b) other mandatory professional reporting requirements.

BUTLER SETTINERI COLIN BUTLER Chartered Accountants Partner

Perth, 28 September 2001

Page 51 HERON RESOURCES LIMITED 7.0 Shareholder Information SHAREHOLDER INFORMATION AT 05 SEPTEMBER 2001

1. Issued Shares and Options a) Distribution of Shareholders:

Size of Holding Number of Holders Shares Held 1 - 1,000 41 28,990 1,001 - 5,000 476 1,557,278 5,001 - 10,000 429 3,701,315 10,001 - 100,000 687 22,460,317 100,001 - 76 73,210,827 1709 100,958,727 b) The twenty largest Shareholders hold 59.35% of the issued fully paid capital of the Company. c) Substantial Shareholder who has notified the Company:

Holder Number of Shares %

Hazurn Pty Ltd 25,750,000 25.51

Centaur Nickel Investments Pty Ltd 15,890,310 15.74 d) Distribution of Optionholders: The following Options were on issue: i) 350,000 exercisable on or before 15 December 2001 payment of $0.25 per Option exercised; ii) 50,000 exercisable on or before 05 March 2002 payment of $0.25 per Option exercised; iii) 200,000 exercisable on or before 19 December 2002 payment of $0.25 per Option exercised; iv) 200,000 exercisable on or before 19 December 2002 payment of $0.35 per Option exercised; v) 200,000 exercisable on or before 19 December 2002 payment of $0.45 per Option exercised; vi) 200,000 exercisable on or before 19 December 2002 payment of $0.55 per Option exercised; vii) 200,000 exercisable on or before 19 December 2002 payment of $0.65 per Option exercised; viii) 100,000 exercisable on or before 04 February 2004 payment of $0.25 per Option exercised; ix) 785,000 exercisable on or before 19 October 2004 payment of $0.35 per Option exercised; x) 785,000 exercisable on or before 19 October 2004 payment of $0.50 per Option exercised;

Size of Holding Number of Holders Options Held

1 - 1,000 0 0 1,001 - 5,000 0 0 5,001 - 10,000 0 0 10,001 - 100,000 3 175,000 100,001 - 7 2,895,000 10 3,070,000

e) There were 179 Shareholders who held less than a marketable parcel. f) Nil securities have been classified by ASX as restricted.

VOTING RIGHTS

In accordance with the Company’s Constitution, voting rights are on the basis of a show of hands, one vote for every registered holder and on a poll, one vote for each Share held by registered holders.

Page 52 7.0 Shareholder Information cont

Twenty Largest Shareholders as at 05 September 2001

Number of Shares % 1. Hazurn Pty Ltd 25,750,000 25.51 2. Centaur Nickel Investments Pty Ltd 15,890,310 15.74 3. Koltai Holdings Pty Ltd 2,675,679 2.65 4. Buchhorn Ian James 2,447,857 2.42 5. Buchhorn Pamela Jean 1,519,998 1.51 6. Killoran NL 1,480,074 1.47 7. National Nominees Limited 1,217,605 1.21 8. Dolerite Investments Pty 1,100,000 1.09 9. Baracus Pty Ltd 1,000,000 0.99 10. Commonwealth Custodial Pty Ltd 1,000,000 0.99 11. Bronwen Pty Ltd 800,000 0.79 12. Kett Peter John 701,300 0.69 13. Overnight Nominees Pty Ltd 621,985 0.62 14. GHK Mining Pty Ltd 600,000 0.59 15. Ufar Pty Ltd 560,000 0.55 16. Jayleaf Holdings Pty Ltd 550,000 0.54 17. Hawke Robert Lawrence 506,666 0.50 18. Goldenstate Holdings Pty Ltd 500,000 0.50 19. Otway John Percival 500,000 0.50 20. Yengage Pty Ltd 500,000 0.50 TOTAL 59,921,474 59.35

Optionholders as at 5 September 2001

Optionholders (Options exercisable on or before 15 December 2001) were:

Number of Options % of Issued Options

Whitebeach Pty Ltd 200,000 57.14 Colville Marilyn 150,000 42.86 TOTAL 350,000 100.00

Optionholders (Options exercisable on or before 05 March 2002) were:

Number of Options % of Issued Options

Rudd Mara 50,000 100.00 TOTAL 50,000 100.00

Optionholders (Options exercisable on or before 19 December 2002) were:

Number of Options % of Issued Options

Buchhorn Ian James 1,000,000 100.00 TOTAL 1,000,000 100.00

Optionholders (Options exercisable on or before 4 February 2004) were:

Number of Options % of Issued Options

Gobbett Simon 25,000 25.00 Geary Susan 25,000 25.00 Rudd Alan 50,000 50.00 TOTAL 100,000 100.00

Page 53 HERON RESOURCES LIMITED 7.0 Shareholder Information cont

Optionholders (Options exercisable on or before 19 October 2004) were:

Number of Options % of Issued Options

Geary Peter 150,000 9.55 Gobbett Simon 320,000 20.38 Parkway Superannuation Fund 500,000 31.85 Rudd Alan 500,000 31.85 Arancini Sandra 100,000 6.37 TOTAL 1,570,000 100.00

Summary of Optionholders as at 05 September 2001

Number of Options % of Issued Options 1. Buchhorn Ian James 1,000,000 32.57 2. Rudd Alan 550,000 17.92 3. Parkway Superannuation Fund 500,000 16.29 4. Gobbett Simon 345,000 11.24 5. Whitebeach Pty Ltd 200,000 6.51 6. Colville Marilyn 150,000 4.89 7. Geary Peter 150,000 4.89 8. Arancini Sandra 100,000 3.26 9. Rudd Mara 50,000 1.63 10. Geary Susan 25,000 0.81

3,070,000 100.00

Page 54 8.0 Interest in Mining Tenements

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HERON RESOURCES LIMITED NICKEL PROVINCES

KALGOORLIE NICKEL PROVINCE Goongarrie Nickel Project Ni(-Au) Scotia 65km NW of Kalgoorlie E24/00113 5.60 A 100% Goongarrie West 73km NW of Kalgoorlie E24/00116 98.00 A 100% Goongarrie West 66km NNW of Kalgoorlie E24/00117 126.00 A 100% Goongarrie 70km NNW of Kalgoorlie E24/00119 2.80 A 100% Goongarrie South 75km NNW of Kalgoorlie E29/00148 14.00 G 100% 75km NNW of Kalgoorlie M29/00283 A 100% 75km NNW of Kalgoorlie M29/00303 A 100% 84km NNW of Kalgoorlie M29/00304 A 100% Siberia 70km NW of Kalgoorlie E29/00356 4.78 G 100% Menzies South 109km NNW of Kalgoorlie E29/00433 11.20 G 100% Goongarrie 88km NNW of Kalgoorlie E29/00437 19.60 A 100% Comet Vale 90km NNW of Kalgoorlie E29/00462 89.60 A 100% Twin Hills 150km N of Kalgoorlie E29/00490 42.00 A 100% Comet Vale 96km NNW of Kalgoorlie E29/00508 8.40 A 100% Scotia Dam 65km NNW of Kalgoorlie M24/00542 7.18 A 100% Scotia North 75km NNW of Kalgoorlie M24/00744 0.06 G 100% Vettersberg 50km NNW of Kalgoorlie M24/00749 9.37 A 100% Vettersberg 55km NNW of Kalgoorlie M24/00750 4.48 A 100% Scotia East 68km NNW of Kalgoorlie M24/00798 0.26 G 100% Scotia 62km NNE of Kalgoorlie M24/00843 4.71 A 100% Goongarrie West 87km NNW of Kalgoorlie M29/00167 1.09 G 100% GoongarrieWest 86km NNW of Kalgoorlie M29/00202 5.95 G 100% Menzies East 122km NNW of Kalgoorlie M29/00231 1.29 A 100% Goongarrie South 77km NNW of Kalgoorlie M29/00272 5.94 G 100% Canegrass 74km NNW of Kalgoorlie M29/00278 8.14 G 100% Ghost Rocks 148km NNW of Kalgoorlie M29/00289 8.96 A 100% Ghost Rocks 147km NNW of Kalgoorlie M29/00290 5.97 A 100% Ghost Rocks 145km NNW of Kalgoorlie M29/00291 8.96 A 100% Scotia Dam 65km NNW of Kalgoorlie P24/02754 1.82 G 100% Scotia Dam 66km NNW of Kalgoorlie P24/02755 2.00 G 100% Scotia Dam 67km NNW of Kalgoorlie P24/02756 1.28 G 100% M24/00541 A 100% Vettersberg 59km NNW of Kalgoorlie P24/03695 1.95 A 100% M24/00691 A 100% Vetters North 59km NNW of Kalgoorlie P24/03734 1.84 A 100% Camperdown 78km NW of Kalgoorlie P24/03748 1.62 A 100% Camperdown 78km NW of Kalgoorlie P24/03749 1.87 A 100% Camperdown 78km NW of Kalgoorlie P24/03750 1.82 A 100% Goongarrie 73km NW of Kalgoorlie P24/03763 1.79 A 100% Menzies East 112km NNW of Kalgoorlie P29/01413 0.10 G 100% M29/00230 A 100% Menzies East 112km NNW of Kalgoorlie P29/01500 1.20 G 100% Menzies East 112km NNW of Kalgoorlie M29/00274 6.76 A 100% Goongarrie West 82km NNW of Kalgoorlie P29/01634 1.84 G 100% Goongarrie West 82km NNW of Kalgoorlie P29/01635 1.39 G 100% M29/00292 A 100% Goongarrie 99km NNW of Kalgoorlie P29/01671 0.39 A 100% Ghost Rocks 134km NNW of Kalgoorlie P29/01682 0.75 A 100% Yunndaga 116km NNW of Kalgoorlie P29/01734 1.89 A 100% Yunndaga 116km NNW of Kalgoorlie P29/01735 1.21 A 100% 44 521.05

KALGOORLIE NICKEL PROVINCE Frances Lesley Nickel Project Ni Frances Lesley 95km NW of Kalgoorlie E16/00174 5.60 G 100% Frances Lesley 100km NW of Kalgoorlie E16/00192 86.80 A 100% Frances Lesley 88km NW of Kalgoorlie E16/00239 36.40 A 100% Frances Lesley 90km NW of Kalgoorlie E16/00240 2.80 B 100% Frances Lesley 98km NW of Kalgoorlie M16/00385 2.00 A 100% Saddle Dam 94km NW of Kalgoorlie P16/02123 1.75 A 100% Saddle Dam 94km NW of Kalgoorlie P16/02124 1.86 A 100% Saddle Dam 94km NW of Kalgoorlie P16/02125 1.30 A 100% 8 138.51

Page 55 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

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KALGOORLIE NICKEL PROVINCE Kalpini Nickel Project Ni(-Au) Lake Emu West 68km NE of Kalgoorlie E27/00188 16.80 A 100% Binti Binti South 77km NE of Kalgoorlie E27/00251 39.20 A 100% Emu Lake 72km NE of Kalgoorlie E27/00260 2.80 A 100% Sampson 66km NE of Kalgoorlie E27/00273 176.40 A 100% Grey Dam 66km NE of Kalgoorlie E28/00991 11.20 G 100% Betsy Bore 79km NE of Kalgoorlie E28/01100 173.60 A 100% Mooree Hill 75km NE of Kalgoorlie E28/01187 28.00 A 100% Jubilee 61km NE of Kalgoorlie E28/01191 64.40 A 100% Acra 61km NE of Kalgoorlie E28/01223 109.20 A 100% Wellington North 63km NE of Kalgoorlie E28/01224 196.00 A 100% Boomerang Lake 103km NE of Kalgoorlie E31/00519 156.80 A 100% Mt Ballona 87km NE of Kalgoorlie E31/00575 67.20 A 100% Jungle Hill 140km NE of Kalgoorlie E31/00579 81.20 A 100% Boomerang North 122km NE of Kalgoorlie E31/00581 78.40 A 100% Acra North 67km NE of Kalgoorlie M27/00349 1.14 A 100% Kalpini 60km NE of Kalgoorlie M27/00350 4.28 A 100% Wellington North 68km NE of Kalgoorlie M27/00361 6.17 A 100% Wellington North 70km NE of Kalgoorlie M27/00362 7.46 A 100% Wellington East 69km NE of Kalgoorlie M27/00364 2.14 A 100% Wellington East 70km NE of Kalgoorlie M27/00365 8.09 A 100% Wellington North 68km NE of Kalgoorlie M27/00395 2.61 A 100% Wellington North 72km NE of Kalgoorlie M27/00402 1.55 A 100% Binti Binti South 77km NE of Kalgoorlie M27/00408 8.90 A 100% Binti Binti South 74km NE of Kalgoorlie M27/00409 5.94 A 100% Binti Binti South 74km NE of Kalgoorlie M27/00410 8.90 A 100% Acra Chrysoprase 62km NE of Kalgoorlie M28/00127 0.32 A 100% Wellington East 70km NE of Kalgoorlie M28/00169 1.48 A 100% Acra North 65km NE of Kalgoorlie M28/00199 9.76 A 100% Acra North 62km NE of Kalgoorlie M28/00200 8.43 A 100% Acra North 65km NE of Kalgoorlie M28/00201 9.63 A 100% Acra North 60km NE of Kalgoorlie M28/00202 9.17 A 100% Betsy Bore 66km NE of Kalgoorlie M28/00205 8.50 A 100% Betsy Bore 68km NE of Kalgoorlie M28/00206 8.88 A 100% Wellington East 67km NE of Kalgoorlie M28/00215 3.30 A 100% Barton Dam 59km NE of Kalgoorlie M28/00259 3.41 A 100% Acra 62km NE of Kalgoorlie M28/00260 9.03 A 100% Binti Binti 81km NE of Kalgoorlie M31/00297 8.90 A 100% Binti Binti 80km NE of Kalgoorlie M31/00305 5.93 A 100% Jubilee 66km NE of Kalgoorlie P28/00980 1.01 A 100% 39 1040.93

KALGOORLIE NICKEL PROVINCE Widgimooltha Nickel Project Ni-Au Pioneer 125km SSE of Kalgoorlie E15/00573 47.60 G 100% Larkinville 73km SSE of Kalgoorlie E15/00689 100.80 A 100% Pioneer 136km SSE of Kalgoorlie E63/00753 33.60 A 100% Larkinville 75km SSE of Kalgoorlie P15/04213 1.22 G 100% Larkinville 75km SSE of Kalgoorlie P15/04214 1.21 G 100% Logans 65km SSE of Kalgoorlie P15/04464 0.22 A 100% Widgiemooltha 86km SSE of Kalgoorlie P15/04475 0.04 A 100% 7 184.69

KALGOORLIE NICKEL PROVINCE Bulong South Project Ni-Au Clinker Hill 32km SE of Kalgoorlie E25/00250 58.80 A 100% Wombola North 44km SE of Kalgoorlie P26/03090 1.41 A 100% Wombola North 44km SE of Kalgoorlie P26/03091 1.08 A 100% 3 61.29

Page 56 8.0 Interest in Mining Tenements cont

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SOUTHERN CROSS NICKEL PROVINCE Bungalbin Nickel Project Ni(-Au) Mount Dimer 112km NNE of Southern Cross E77/00946 170.80 G 100% Timberfield 123km NNE of Southern Cross E77/00947 89.60 A 100% Yeeding Hill South 95km N of Southern Cross E77/00975 196.00 A 100% Yendilberin Hills 104km NNE of Southern Cross E77/00976 109.20 A 100% Helena 98km NNE of Southern Cross E77/01067 184.80 A 100% Mount Dimer 107km NNE of Southern Cross E77/01068 8.40 A 100% Yeeding Hill 108km N of Southern Cross E77/01071 22.40 A 100% Bungalbin Hill 97km NNE of Southern Cross E77/01076 123.20 A 100% Bungalbin Hill 109km NNE of Southern Cross E77/01077 28.00 A 100% Bungalbin Hill 96km NNE of Southern Cross E77/01082 50.40 A 100% 10 982.80

SOUTHERN CROSS NICKEL PROVINCE Bungalbin Iron Ore Project Fe Bungalbin 102km NNE of Southern Cross E77/00842 112.58 G 100% 1 Mount Jackson 106km NNE of Southern Cross E77/00896 36.40 G 100% 1 Mount Jackson 105km NNE of Southern Cross E77/00919 53.20 G 100% 1 3 202.18 1 Portman Limited right to acquire Iron Ore rights through spending $0.25m, and providing Heron with an Iron Ore Production Royalty. Heron retain all other minerals.

SOUTHERN CROSS NICKEL PROVINCE Mount Elvire Project Ni-Au Lake Barlee 242km NNE of Southern Cross E29/00503 16.80 A 100% Lake Barlee 219km NNE of Southern Cross E30/00267 92.40 A 100% Elvire Rock 196km NNE of Southern Cross E30/00268 128.80 A 100% 3 238.00

SOUTHERN CROSS NICKEL PROVINCE Maggie Hays Hill Project Ni-Au Maggie Hays Hill 140km SE of Southern Cross E63/00625 81.20 A 100% 1 81.20

KEITH KILKENNY-LAVERTON NICKEL PROVINCE Edjudina Nickel Project Ni(-Au) Mount Catherine South 145km NNE of Kalgoorlie E31/00279 14.00 G 100% Mount Remarkable 155km NNE of Kalgoorlie E31/00346 2.80 B 100% Claypan Dam 158km NNE of Kalgoorlie E31/00347 2.80 B 100% Yerilla Creek Dam 155km NNE of Kalgoorlie E31/00348 11.20 B 100% Mount Catherine East 143km NNE of Kalgoorlie E31/00372 5.60 B 100% Mount Catherine East 138km NNE of Kalgoorlie E31/00373 2.80 B 100% Yerilla 1149km NNE of Kalgoorlie E31/00399 2.80 A 100% Duck Hill South 1151km NE of Kalgoorlie E31/00415 81.20 B 100% Claypan Well 141km NNE of Kalgoorlie E31/00446 8.40 A 100% McAuliffe Well 150km NNE of Kalgoorlie E31/00518 50.40 B 100% Mount Catherine 141km NNE of Kalgoorlie E31/00529 2.80 A 100% Westward Ho Well 140km NNE of Kalgoorlie E31/00576 30.80 A 100% Yerilla 142km NNE of Kalgoorlie E31/00584 47.60 A 100% Wallbrook Hill 118km NE of Kalgoorlie E31/00586 86.80 A 100% Kilmore Hill 177km NNE of Kalgoorlie E39/00694 14.00 G 100% Kilmore Hill 170km NNE of Kalgoorlie E39/00695 2.80 G 100% Lake Raeside 165km NNE of Kalgoorlie E39/00700 32.88 B 100% Lake Raeside 166km NNE of Kalgoorlie E39/00725 16.80 B 100% Aubils 166km NNE of Kalgoorlie M39/00658 1.48 A 100% Aubils 166km NNE of Kalgoorlie M39/00659 1.48 A 100% Lake Raeside 171km NNE of Kalgoorlie E39/00726 8.40 B 100% Murphy Well 177km NNE of Kalgoorlie E39/00831 33.60 B 100% Mount Percy 163km NNE of Kalgoorlie E39/00883 196.00 A 100% Yerilla 145km NNE of Kalgoorlie M31/00105 2.40 G 100% Yerilla 148km NNE of Kalgoorlie M31/00110 7.20 G 100% Boyce Creek 142km NNE of Kalgoorlie M31/00278 0.70 A 100% Boyce Creek 142km NNE of Kalgoorlie M31/00296 5.80 A 100% Boyce Creek 142km NNE of Kalgoorlie M31/00300 1.11 A 100% Aubils 170km NNE of Kalgoorlie M39/00656 1.48 A 100% Aubils 168km NNE of Kalgoorlie M39/00657 4.44 A 100% Aubils 170km NNE of Kalgoorlie M39/00660 1.48 A 100% Aubils 169km NNE of Kalgoorlie M39/00662 2.96 A 100% Aubils 170km NNE of Kalgoorlie M39/00805 5.98 A 100% Aubils 170km NNE of Kalgoorlie M39/00806 5.98 A 100% Aubils 166km NNE of Kalgoorlie M39/00807 8.97 A 100% 35 705.93

Page 57 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

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KEITH KILKENNY-LAVERTON NICKEL PROVINCE Mulgabbie Nickel Project Ni(-Au) Lake Rebecca 114km NE of Kalgoorlie M31/00080 2.02 G 100% Lake Rebecca 114km NE of Kalgoorlie M31/00081 1.21 G 100% M31/00312 A 100% 2 3.23

KEITH KILKENNY-LAVERTON NICKEL PROVINCE Laverton Nickel Project Ni Mineral Patch Hill 75km SE of Laverton E38/00931 196.00 G 100% 2 Merolia 50km SE of Laverton E38/01179 196.00 G 100% 2 Jasper Hill 168km SE of Laverton E39/00880 30.80 G 100% 2 Jasper Hills 120km SE of Laverton E39/00907 25.20 A 100% 2 4 448.00 2 MPI Gold Pty Ltd own the Gold rights.

AVOCA RESOURCES LIMITED PRECIOUS METAL PROVINCES

JIMBERLANA PLATINUM PROVINCE Cowan Project PGE-Ni-Cu Bronzite Ridge 40km W of Norseman E63/00797 196.00 A 100% Norseman Highway 9km NW of Norseman P63/01137 1.19 A 100% Norseman Highway 9km NW of Norseman P63/01138 1.43 G 100% Norseman Highway 8km NW of Norseman P63/01139 1.21 A 100% Norseman Highway 7km NW of Norseman P63/01140 1.21 A 100% Norseman Highway 9km NW of Norseman P63/01141 1.96 A 100% Norseman Highway 10km NW of Norseman P63/01142 1.21 A 100% Norseman Highway 9km NW of Norseman P63/01143 1.24 A 100% Norseman Highway 8km W of Norseman P63/01144 1.51 A 100% Norseman Highway 8km W of Norseman P63/01145 1.77 A 100% 10 208.74

JIMBERLANA PLATINUM PROVINCE Dundas Hills Project PGE-Ni-Cu Norseman 5km N of Norseman P63/01160 1.17 A 100% Norseman 5km N of Norseman P63/01161 1.22 A 100% Jimberlana 8km NNE of Norseman P63/01162 1.87 A 100% Jimberlana 8km NNE of Norseman P63/01163 1.92 A 100% 4 6.18

JIMBERLANA PLATINUM PROVINCE Mount Norcott Project PGE-Ni-Cu Heartbreak 39km NE of Norseman E63/00709 196.00 A 100% Heartbreak 52km NE of Norseman E63/00712 196.00 A 100% Mount Norcott 21km ENE of Norseman E63/00798 126.00 A 100% 3 518.00

JIMBERLANA PLATINUM PROVINCE Ten Mile Rock Project PGE-Ni-Cu Frasers Range West 75km NE of Norseman E63/00631 36.40 G 100% Heartbreak 1 76km E of Norseman E63/00707 196.00 A 100% Heartbreak 2 70km NE of Norseman E63/00708 196.00 A 100% Heartbreak 82km E of Norseman E63/00711 196.00 A 100% Heartbreak 81km NE of Norseman E63/00713 103.60 A 100% Woodline Hills 77km NE of Norseman E63/00795 162.40 A 100% 6 786.80

JIMBERLANA PLATINUM PROVINCE Fraser Range Project PGE-Ni-Cu Fraser Range 163km NE of Norseman E28/01162 196.00 A 100% Fraser Range 177km NE of Norseman E28/01163 196.00 A 100% Fraser Range 164km NE of Norseman E28/01164 196.00 A 100% Fraser Range 154km NE of Norseman E28/01165 196.00 A 100% 4 784.00

Page 58 8.0 Interest in Mining Tenements cont

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ILLAARA PROVINCE Perrinvale Joint Venture Project VMS-Au-Ni Ranford Peak 231km NW of Kalgoorlie E29/00434 98.00 G 100% 3 Mount Marmion 208km NW of Kalgoorlie E29/00435 95.20 G 100% 3 Metzkes Find 208km NW of Kalgoorlie E29/00455 156.80 A 100% 3 Lawrence Find 160km NW of Kalgoorlie E30/00203 208.52 A 100% 3 Lawrence Find North 188km NW of Kalgoorlie E30/00226 196.00 G 100% 3 Lawrence Find 176km NW of Kalgoorlie E30/00228 64.40 G 100% 3 Illaara 196km NW of Kalgoorlie E30/00254 126.00 A 100% 3 7 944.92 3 Mount Burgess Mining NL right to earn 70% through spending $0.5m. Heron retains Nickel and Sulphur rights.

ZULEIKA SHEAR ZONE PROVINCE Snake Hill Joint Venture Project: Au(-Ni) Snake Hill North 174km NW of Kalgoorlie E29/00290 5.60 G 100% 4 M29/00310 A 100% 4 Snake Hill 168km NW of Kalgoorlie E30/00166 8.40 G 100% 4 2 14.00 4 Barra Resources Limited right to earn 70% through spending $0.3m.

ZULEIKA SHEAR ZONE PROVINCE Blister Dam Joint Venture Project Au-Ni Dunnsville 61km NW of Kalgoorlie E16/00181 2.80 G 100% 5 Dunnsville 62km NW of Kalgoorlie E16/00182 14.00 A 100% 5 Carbine 66km NW of Kalgoorlie E16/00195 44.80 G 100% 5 Carbine 63km NW of Kalgoorlie E16/00254 0.02 A 100% 5 Chadwin 77km NW of Kalgoorlie E16/00264 5.60 A 100% 5 Lake Carnage 70km NW of Kalgoorlie E24/00115 42.00 A 100% 5 Blister Dam 73km NW of Kalgoorlie M16/00435 6.84 A 100% 5 Blister Dam 76km NW of Kalgoorlie M24/00842 3.87 A 100% 5 8 119.93 5 Place Dome Asia Pacific right to earn 70% through spending $1.2m. Heron retains Nickel rights.

ZULEIKA SHEAR ZONE PROVINCE Powder Sill Project PGE-Ni-Cu-Au Mungari Northwest 27km W of Kalgoorlie E15/00411 2.08 A 100% Mungari Northwest 33km NW of Kalgoorlie E16/00121 25.20 G 100% Mungari West 30km NW of Kalgoorlie E16/00146 5.60 G 100% M16/00446 A 100% Mungari Northwest 44km NW of Kalgoorlie M16/00377 2.00 A 100% Mungari Northwest 42km NW of Kalgoorlie M16/00378 2.74 A 100% Mungari Northwest 37km NW of Kalgoorlie M16/00379 7.30 A 100% Mungari Northwest 44km NW of Kalgoorlie M16/00414 2.00 A 100% 7 46.92

ZULEIKA SHEAR ZONE PROVINCE Mungari Gold Project Au Mungari 20km WNW of Kalgoorlie E15/00726 19.60 A 100% Mungari 19km WNW of Kalgoorlie M15/01350 1.55 A 100% Dryden's Find 26km WNW of Kalgoorlie P15/04416 0.33 A 100% Dryden's Find 27km WNW of Kalgoorlie P15/04417 1.88 A 100% Dryden's Find 26km WNW of Kalgoorlie P15/04418 2.00 A 100% Dryden's Find 25km WNW of Kalgoorlie P15/04419 1.86 A 100% Dryden's Find 27km WNW of Kalgoorlie P15/04420 1.87 A 100% Dryden's Find 27km WNW of Kalgoorlie P15/04421 1.86 A 100% Dryden's Find 28km WNW of Kalgoorlie P15/04422 1.14 A 100% Dryden's Find 26km WNW of Kalgoorlie P15/04425 1.87 A 100% Mungari 20km WNW of Kalgoorlie P15/04472 1.12 A 100% 11 35.08

Page 59 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

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ZULEIKA SHEAR ZONE PROVINCE Binduli East Joint Venture Project Au Mount Hunt 16km S of Kalgoorlie E26/00081 14.00 A 100% 6 Binduli East 8km SSW of Kalgoorlie P26/02791 1.98 G 100% 6 Binduli East 8km SSW of Kalgoorlie P26/02792 1.82 G 100% 6 Binduli East 11km SSW of Kalgoorlie P26/02794 1.60 G 100% 6 Binduli East 9km SSW of Kalgoorlie P26/02800 1.68 G 100% 6 M26/00751 A 100% 6 Binduli East 10km SSW of Kalgoorlie P26/02801 1.50 G 100% 6 Binduli East 10km S of Kalgoorlie P26/02802 1.73 G 100% 6 M26/00762 A 100% 6 Binduli East 7km SW of Kalgoorlie P26/02803 1.96 G 100% 6 M26/00750 A 100% 6 Binduli East 8km SW of Kalgoorlie P26/02814 0.71 G 100% 6 Binduli East 9km SW of Kalgoorlie P26/02815 1.96 G 100% 6 M26/00763 A 100% 6 Binduli East 11km SSW of Kalgoorlie P26/02904 1.84 G 100% 6 Binduli East 10km SSW of Kalgoorlie P26/02905 2.00 G 100% 6 Binduli East 20km S of Kalgoorlie P26/02972 1.96 G 100% 6 13 34.74 6 AngloGold Australasia Limited right to earn 75% through spending $0.5m. Heron retains Nickel rights.

AVOCA SHEAR PROVINCE Gindalbie Terrian Joint Venture Project Au-Ni Mulgarie North 50km N of Kalgoorlie E24/00097 28.00 G 100% 7 Gindalbie 48km N of Kalgoorlie E27/00145 47.60 G 100% 7 Scotia East 62km N of Kalgoorlie E27/00169 108.40 G 100% 7 Scotia East 60km N of Kalgoorlie M24/00799 9.53 A 100% 7 Scotia East 55km N of Kalgoorlie M24/00800 6.41 A 100% 7 5 199.94 7 Delta Gold NL right to earn 70% in respect of gold through spending $1.0m. Heron retains Nickel rights.

AVOCA SHEAR PROVINCE Gidgi Project Au-Ni Gidji Roaster 14km N of Kalgoorlie E24/00111 64.40 A 100% Five Mill Hill 6km NNE of Kalgoorlie M26/00736 7.04 A 100% Kanowna 15km NW of Kalgoorlie M27/00392 7.70 A 100% Kanowna 17km NW of Kalgoorlie M27/00393 8.02 A 100% Kanowna 16km NW of Kalgoorlie M27/00394 8.02 A 100% Kurramia 8km NE of Kalgoorlie P26/02898 1.60 G 100% Kurramia South 10km NE of Kalgoorlie P26/02977 0.89 G 100% 7 97.67

AVOCA SHEAR PROVINCE Roe Hills Joint Venture Project Au-Ni Kurnalpi East 85km NE of Kalgoorlie E28/00886 53.20 G 100% 8 Tap Rock Hill 88km NE of Kalgoorlie E28/00927 190.40 A 100% 8 Kurnalpi Hill 88km NE of Kalgoorlie E28/01012 53.20 G 100% 8 Jumungie Hill 82km NE of Kalgoorlie E28/01013 8.40 B 100% 8 Kurnalpi Hill 88km NE of Kalgoorlie E28/01108 92.40 A 100% 8 Hampton 90km NE of Kalgoorlie E28/01166 5.60 A 100% 8 6 403.20 8 Delta Gold NL right to earn 80% in respect of gold through spending $1.0m. Heron retains Nickel rights.

Page 60 8.0 Interest in Mining Tenements cont

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AVOCA SHEAR PROVINCE Transline Joint Venture Project Au-Ni Gundocketa Hill 65km ESE of Kalgoorlie E25/00114 16.80 G 100% 9 M25/00267 A 100% 9 Gundocketa Hill 62km ESE of Kalgoorlie E25/00167 2.80 G 100% 9 Gundocketa Hill 66km ESE of Kalgoorlie E25/00168 2.80 G 100% 9 Trans Find North 54km E of Kalgoorlie E25/00179 89.60 G 100% 9 Trans Find 51km ESE of Kalgoorlie E25/00184 53.20 G 100% 9 Gundockerta Hill West 49km E of Kalgoorlie E25/00186 8.40 G 100% 9 Seabrook Hills 67km SE of Kalgoorlie E25/00189 2.80 G 100% 9 Seabrook Hills 67km SE of Kalgoorlie E25/00191 14.00 B 100% 9 Trans Find 58km ESE of Kalgoorlie E25/00195 42.00 G 100% 9 Hawke Hill 68km ESE of Kalgoorlie E25/00204 8.40 G 100% 9 Pipeclay Peaks 68km ESE of Kalgoorlie E25/00216 120.40 A 100% 9 Kim's Dam 84km E of Kalgoorlie E28/01003 56.00 G 100% 9 Gundocketa Hill 66km ENE of Kalgoorlie E28/01116 140.00 A 100% 9 Randalls 66km SE of Kalgoorlie P25/01580 1.00 A 100% 9 14 558.20 9 Harmony Gold Limited right to earn 80% through spending $0.8m.

AVOCA SHEAR PROVINCE Avoca Project Au-Ni Transline 73km ESE of Kalgoorlie E25/00234 53.20 B 100% Pipeclay Peaks 66km ESE of Kalgoorlie E25/00241 11.20 A 100% Lake Sloan 96km SE of Kalgoorlie E25/00248 196.00 A 100% Trans East 72km ESE of Kalgoorlie E28/01079 44.80 A 100% Hampton 71km E of Kalgoorlie E28/01117 33.60 A 100% Hampton 72km ENE of Kalgoorlie E28/01118 5.60 A 100% Sawmill Dam 77km ESE of Kalgoorlie E28/01129 19.60 B 100% Transline 73km ESE of Kalgoorlie E28/01136 14.00 B 100% Transline 73km ESE of Kalgoorlie E28/01137 33.60 B 100% Round Hill 106km SE of Kalgoorlie E28/01148 196.00 A 100% Pineapple Dam 66km E of Kalgoorlie E28/01188 11.20 A 100% Lake Yindarlgooda 59km ENE of Kalgoorlie E28/01192 8.40 A 100% Avoca Downs 83km ESE of Kalgoorlie E28/01199 165.20 A 100% Adelaide Dams 78km E of Kalgoorlie E28/01207 25.20 A 100% 14 817.60

KEITH KILKENNY PROVINCE Yandal Project Au Wiluna South 30km SE of Wiluna E53/1010 128.80 A 100% 1 128.80

KEITH KILKENNY PROVINCE Victory Joint Venture Project Au-Ni Doyle Well 59km NW of Leonora E37/00406 16.80 G 100% 10 M37/01088 A 100% 10 Victory Gold Mine 50km NW of Leonora M37/00931 0.18 A 100% 10 Victory 53km NW of Leonora P37/05830 1.95 G 100% 10 Victory 52km NW of Leonora P37/05831 1.96 G 100% 10 Victory 51km NW of Leonora P37/05832 1.87 G 100% 10 Victory 50km NW of Leonora P37/05833 1.00 G 100% 10 6 23.76 10 WMC Resources Limited right to earn 80% through spending $0.125m.

KEITH KILKENNY PROVINCE Wildara North Project Au-Ni Mount McClure 135km NNW of Leonora E36/00387 16.80 A 100% Mount McClure 128km NNW of Leonora E36/00388 5.60 G 100% Try Again Bore 123km NNW of Leonora E36/00432 19.60 A 100% Table Hill 102km NNW of Leonora E36/00458 5.60 A 100% Table Hill East 97km NW of Leonora E36/00459 8.40 A 100% 5 56.00

KEITH KILKENNY PROVINCE Kookynie Joint Venture Project Au-Ni Glenorn Station South 59km SW of Leonora E31/00410 67.20 G 100% 11 Friday Well 47km SW of Leonora E31/00484 16.80 G 100% 11 Mount Melita East 38km SW of Leonora E40/00127 2.80 G 100% 11 3 86.80 11 Newcrest Operations Limited right to earn 75% in respect of Gold through spending $0.8m. Heron retains Nickel rights.

Page 61 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

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KEITH KILKENNY PROVINCE Kookynie Project Au-Ni Desdemona North 21km SSE of Leonora E40/00122 2.80 A 100% Morapoi 57km S of Leonora E40/00132 5.97 A 100% Tampa 30km SSE of Leonora E40/00140 8.98 A 100% Tampa 33km SSE of Leonora E40/00141 2.99 A 100% Tampa 35km SSE of Leonora E40/00142 14.00 G 100% Mt Melita 30km SE of Leonora E40/00186 58.80 A 100% Malcolm East 22km ESE of Leonora M37/00727 4.43 A 100% Malcolm East 21km ESE of Leonora M37/00728 5.73 A 100% Malcolm East 23km ESE of Leonora M37/00729 9.74 A 100% Malcolm East 22km ESE of Leonora M37/00730 8.00 A 100% Alice Gold Mine 17km ESE of Leonora M37/00953 0.10 A 100% Eulaminna 46km ESE of Leonora P39/04127 1.20 A 100% Eulaminna 47km ESE of Leonora P39/04128 1.20 A 100% Eulaminna 47km ESE of Leonora P39/04129 1.20 A 100% Eulaminna 46km ESE of Leonora P39/04130 1.20 A 100% Eulaminna 46km ESE of Leonora P39/04131 1.28 A 100% 16 121.54

KEITH KILKENNY PROVINCE Edjudina Laverton Joint Venture Project Au-Ni Yarri South 133km NW of Kalgoorlie E31/00235 5.60 G 100% 12 Yarri East 139km NW of Kalgoorlie E31/00312 68.41 A 100% 12 Seddon Bore 136km NW of Kalgoorlie E31/00354 16.80 B 100% 12 Webb Find West 134km NW of Kalgoorlie E31/00374 14.00 G 100% 12 Boyce Creek South 139km NW of Kalgoorlie E31/00377 28.00 G 100% 12 Duck Hill West 154km NW of Kalgoorlie E31/00430 84.00 G 100% 12 Lake Rebecca 116km NW of Kalgoorlie E31/00465 2.80 G 100% 12 Lake Rebecca 118km NW of Kalgoorlie E31/00479 11.20 B 100% 12 Mount Boyce 134km NW of Kalgoorlie E31/00524 176.40 A 100% 12 Camel Hump 49km N of Laverton E38/00945 9.06 G 100% 12 Mount Varden West 55km N of Laverton E38/01152 117.60 G 100% 12 Mount Varden West 55km N of Laverton E38/01153 19.60 G 100% 12 Yabboo Hill East 155km NW of Kalgoorlie E39/00795 8.40 G 100% 12 13 561.87 12 Croesus Mining NL right to earn 80% in respect of gold through spending $1.0m. Heron retains Nickel rights.

KEITH KILKENNY PROVINCE Sth Laverton Tectonic Zone JV Project Au-Ni Pinjin South 155km NW of Kalgoorlie E28/00891 11.20 G 100% 13 Patricia West 146km NW of Kalgoorlie E31/00244 16.80 A 100% 13 Pinjin 139km NW of Kalgoorlie E31/00263 2.80 G 100% 13 M31/00280 A 100% 13 M31/00313 A 100% 13 Stophanis East 150km NW of Kalgoorlie E31/00265 2.80 G 100% 13 Yarri North East 150km NW of Kalgoorlie E31/00313 2.80 G 100% 13 Yarri North East 152km NW of Kalgoorlie E31/00315 2.80 G 100% 13 Edjudina East 144km NW of Kalgoorlie E31/00317 38.65 G 100% 13 Stophanis East 151km NW of Kalgoorlie E31/00343 2.97 G 100% 13 Broken Hill Bore 150km NW of Kalgoorlie E31/00352 2.86 A 100% 13 Clymies Well 147km NW of Kalgoorlie E31/00353 37.46 A 100% 13 Hobble Gap 155km NW of Kalgoorlie E31/00434 44.80 G 100% 13 Patricia South 150km NW of Kalgoorlie E31/00489 16.80 G 100% 13 Deep Well South 168km NW of Kalgoorlie E39/00661 2.80 G 100% 13 Deep Well North 174km NW of Kalgoorlie E39/00662 2.98 A 100% 13 Deep Well 173km NW of Kalgoorlie E39/00663 2.98 A 100% 13 Gardners Find 170km NW of Kalgoorlie E39/00721 47.60 G 100% 13 Mount Hornet 177km NW of Kalgoorlie E39/00729 33.60 G 100% 13 Gardners Find 174km NW of Kalgoorlie E39/00734 5.60 A 100% 13 Crab Hill 135km NW of Kalgoorlie P28/00923 1.38 G 100% 13 Crab Hill 135km NW of Kalgoorlie P28/00924 1.71 G 100% 13 Crab Hill 135km NW of Kalgoorlie P28/00925 1.95 G 100% 13 Crab Hill 135km NW of Kalgoorlie P28/00926 1.64 G 100% 13 Crab Hill 135km NW of Kalgoorlie P28/00927 1.14 G 100% 13 M28/00261 A 100% 13

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KEITH KILKENNY PROVINCE Sth Laverton Tectonic Zone JV Project cont Au-Ni Stophanis South 143km NW of Kalgoorlie P31/01546 1.61 G 100% 13 Stophanis South 143km NW of Kalgoorlie P31/01547 1.20 G 100% 13 Edjudina 150km NW of Kalgoorlie P31/01569 1.79 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01570 2.00 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01571 1.83 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01572 1.86 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01573 0.76 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01574 1.87 A 100% 13 Edjudina 150km NW of Kalgoorlie P31/01575 1.72 A 100% 13 Gardners Find 171km NW of Kalgoorlie P39/03691 2.00 G 100% 13 M39/00812 A 100% 13 34 304.76 13 Gutnick Resources NL right to earn 80% in respect of gold through spending $1.2m. Heron retains Nickel rights.

KEITH KILKENNY PROVINCE Karonie South Joint venture Project Au-Ni Karonie South 161km SW of Kalgoorlie E28/00631 196.00 G 100% 14 Karonie South 152km SW of Kalgoorlie E28/00665 67.20 G 100% 14 M28/00248 A 100% 14 M28/00249 A 100% 14 M28/00250 A 100% 14 M28/00251 A 100% 14 Karonie South 132km SW of Kalgoorlie E28/00860 8.78 G 100% 14 Karonie South 146km SW of Kalgoorlie E28/00861 58.54 G 100% 14 Karonie South 135km SW of Kalgoorlie E28/00862 33.60 G 100% 14 Karonie South 148km SW of Kalgoorlie E28/00929 95.20 G 100% 14 Buningonia 155km SW of Kalgoorlie E28/01014 42.00 G 100% 14 Fraser 168km SW of Kalgoorlie E63/00691 151.20 A 100% 14 8 652.52 14 WMC Resources Limited right to earn 80% through spending $0.3m.

CELIA-LAVERTON TECTONIC ZONE PROVINCE Erlistoun Project Au-Ni Corktree Well South 29km N of Laverton E38/00947 5.60 B 100% Corktree Well West 36km N of Laverton E38/00948 30.80 B 100% Bandya Hill 107km NNW of Laverton E38/01270 36.40 A 100% Mulga Queen 125km NNW of Laverton E38/01329 2.80 A 100% Doris Well 60km N of Laverton E38/01368 22.40 A 100% King of Creation 53km N of Laverton E38/01375 2.80 A 100% Mineshaft Well 72km N of Laverton E38/01380 25.20 A 100% Hackwell 90km N of Laverton E38/01404 22.40 A 100% Ingi-Jingi Hill 119km NNW of Laverton E38/01418 22.40 A 100% Perseverance Well 53km WNW of Laverton E39/00738 36.40 G 100% Euro 10km S of Laverton M38/00404 2.88 G 100% Euro 10km S of Laverton M38/00405 1.77 G 100% 12 211.85

CELIA-LAVERTON TECTONIC ZONE PROVINCE Mount Zephyr Project Au-Ni Mount Zephyr 79km NE of Leonora E39/00538 50.40 G 100% Mount Zephyr 71km NE of Leonora E39/00927 25.20 A 100% Mount Zephyr 71km NE of Leonora E39/00928 19.60 A 100% Mount Zephyr 72km NE of Leonora E39/00940 58.80 A 100% 4 154.00

CELIA-LAVERTON TECTONIC ZONE PROVINCE Laverton Joint Venture Project Au-Ni Hawkes Nest 14km WSW of Laverton E38/00831 16.80 G 100% 15 Hawkes Nest South 20km WSW of Laverton E38/00832 14.00 G 100% 15 2 30.80 15 Metex Resources Limited right to earn 70% through spending $0.5m.

Page 63 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

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CELIA-LAVERTON TECTONIC ZONE PROVINCE Mount Morgans Joint Venture Project Au-Ni Mount Morgans Northwest 40km WSW of Laverton P39/03454 1.56 G 20% 16 M39/00754 A 20% 16 Mount Morgans Northwest 39km WSW of Laverton P39/03455 1.95 G 20% 16 Mount Morgans Northwest 39km WSW of Laverton P39/03456 1.95 G 20% 16 Mount Morgans Northwest 39km WSW of Laverton P39/03457 1.86 G 20% 16 M39/00755 A 20% 16 Mount Morgans West 44km WSW of Laverton P39/03466 1.71 G 20% 16 Mount Morgans West 45km WSW of Laverton P39/03467 1.71 G 20% 16 Mount Morgans West 46km WSW of Laverton P39/03468 1.71 G 20% 16 Mount Morgans West 46km WSW of Laverton P39/03469 1.71 G 20% 16 M39/00753 A 20% 16 8 14.15 16 Metex Resources Limited have earnt 70% through spending $0.5m. Heron free carry to mining at 20%.

BALLADONIA ENERGY NL OIL SHALE PROVINCES

BREMER_EUCLA PALAEODRAINAGE PROVINCE Balladonia Oil Shale Project Oil-Sulphur The Yates 146km S of Norseman E63/00731 196.00 A 100% Mount Beaumont 154km SSE of Norseman E63/00732 196.00 A 100% Charlina Rocks 153km ESE of Norseman E69/01473 196.00 A 100% Balladonia 168km ESE of Norseman E69/01474 196.00 A 100% Boingaring Rocks 156km ESE of Norseman E69/01475 196.00 A 100% Afghan Rock 185km ESE of Norseman E69/01476 196.00 A 100% Balladonia West 153km ESE of Norseman E69/01477 196.00 A 100% Charlina South 147km ESE of Norseman E69/01478 196.00 A 100% Charlina West 143km ESE of Norseman E69/01479 196.00 A 100% Curnadinia Rock 163km ESE of Norseman E69/01480 196.00 A 100% Yalodinya Rock 159km ESE of Norseman E69/01481 134.40 A 100% Charlina East 162km ESE of Norseman E69/01482 81.20 A 100% Balladonia Central 164km ESE of Norseman E69/01483 39.20 A 100% Chidalinya Rock 193km ESE of Norseman E69/01492 106.40 A 100% Jerandilla 190km ESE of Norseman E69/01493 196.00 A 100% Eclipse Hill 189km SE of Norseman E69/01495 196.00 A 100% Bonnie Hill 178km SE of Norseman E69/01499 196.00 A 100% Florabell Hill 190km SE of Norseman E69/01500 196.00 A 100% Balladonia 184km E of Norseman E69/01717 196.00 A 100% Balladonia Central 169km ESE of Norseman E69/01742 179.20 A 100% Balladonia Central 166km ESE of Norseman E69/01743 168.00 A 100% 21 3648.40

BREMER_EUCLA PALAEODRAINAGE PROVINCE Ravensthorpe-Norseman Oil-Sulphur Oil Shale Project Lake Cowan 44km NNE of Norseman E15/00570 204.01 A 100% Heartbreak 9 46km NNE of Norseman E15/00656 61.60 A 100% Geordie Rock 87km SSW of Norseman E63/00720 112.00 A 100% Lake Dundas 34km SSW of Norseman E63/00736 64.40 A 100% Lort River 110km SSW of Norseman E74/00278 151.20 A 100% Flower 161km SW of Norseman E74/00279 193.20 A 100% Lake Three Star 147km SW of Norseman E74/00280 193.20 A 100% Lake Sharpe 112km SW of Norseman E74/00281 196.00 A 100% Recruit Hill 92km SSW of Norseman E74/00282 196.00 A 100% Lake Fitzgerald 101km SSW of Norseman E74/00283 196.00 A 100% Mount Deans 12km SSW of Norseman M63/00417 9.87 A 100% Mount Deans 15km SSW of Norseman M63/00418 9.26 A 100% Lake Kirk 8km SSW of Norseman P63/01114 1.69 G 100% Lake Kirk 9km SSW of Norseman P63/01115 1.86 G 100% Lake Kirk 6km SSW of Norseman P63/01116 1.95 G 100% Lake Cowan 5km SSW of Norseman P63/01119 1.06 G 100% Lake Cowan 4km SSW of Norseman P63/01122 1.77 G 100% Lake Cowan 7km SSW of Norseman P63/01123 1.80 G 100% Lake Cowan 5km SSW of Norseman P63/01124 0.49 G 100% 19 1597.36

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HERON RESOURCES LIMITED NICKEL AND PRECIOUS METAL PROVINCES

ILLAARA PROVINCE Lawrence Find Project Ni-Au Meninga Soak 157km NW of Kalgoorlie E30/00262 81.20 A 100% 1 81.20

IDA FAULT PROVINCE Ida Fault Project Ni-Au Mulline 133km NW of Kalgoorlie E30/00158 39.20 B 100% Mulline 139km NW of Kalgoorlie E30/00159 28.00 B 100% Morleys 144km NW of Kalgoorlie E30/00247 61.60 B 100% 3 128.80

IDA FAULT PROVINCE Bullabulling Project Ni-Au Bullabulling 71km SW of Kalgoorlie E15/00679 114.80 A 100% Bullabulling 74km WNW of Kalgoorlie E16/00172 11.80 A 100% Jaurdie Hills 66km WNW of Kalgoorlie E16/00265 50.40 A 100% Jaurdie Hills 70km WNW of Kalgoorlie E16/00269 100.80 A 100% Londonderry 55km SW of Kalgoorlie P15/04435 1.62 A 100% Londonderry 55km SW of Kalgoorlie P15/04436 1.90 A 100% Londonderry 57km SW of Kalgoorlie P15/04437 1.87 A 100% Londonderry 56km SW of Kalgoorlie P15/04438 1.92 A 100% Londonderry 56km SW of Kalgoorlie P15/04439 2.00 A 100% Londonderry 56km SW of Kalgoorlie P15/04440 0.27 A 100% 10 287.39

KAMBALDA DOMAIN PROVINCE Mount Martin Project Ni-Au Cutters Luck 32km SSE of Kalgoorlie E26/00080 53.20 A 100% Cutters Luck 48km SSE of Kalgoorlie M26/00667 2.27 A 100% Cutters Luck 29km SSE of Kalgoorlie P26/02907 1.60 A 100% Cutters Luck 27km SSE of Kalgoorlie P26/02908 2.00 A 100% Cutters Luck 44km SSE of Kalgoorlie P26/02909 1.66 A 100% 5 60.73

EMU FAULT PROVINCE Garibaldi Project Ni-Au Yindarlgooda 46km E of Kalgoorlie E25/00222 58.80 A 100% Lake Yindarlgooda 52km ENE of Kalgoorlie E25/00251 8.40 A 100% Qeen Lapage 50km ENE of Kalgoorlie E25/00254 28.00 A 100% Qeen Lapage 50km ENE of Kalgoorlie E25/00256 28.00 A 100% Mt Mcleay 50km NE of Kalgoorlie E27/00243 16.80 B 100% Mayday North 53km NE of Kalgoorlie E27/00264 14.00 A 100% Lindsays Find 51km NNE of Kalgoorlie M27/00305 1.20 A 100% Kalpini West 50km NE of Kalgoorlie M27/00371 3.37 A 100% Kalpini West 53km NE of Kalgoorlie M27/00372 1.64 A 100% Lindsays North 53km NNE of Kalgoorlie M27/00382 1.15 A 100% Gindalbie 45km NE of Kalgoorlie M27/00383 3.57 A 100% Garibaldi 48km NNE of Kalgoorlie M27/00386 0.29 A 100% Silver Swan North 46km NNE of Kalgoorlie M27/00388 5.54 A 100% Mount Magnetic 37km ESE of Kalgoorlie P25/01720 1.20 A 100% Mount Magnetic 37km ESE of Kalgoorlie P25/01721 1.20 A 100% Mount Magnetic 37km ESE of Kalgoorlie P25/01722 1.04 A 100% Lindsays Find 50km NNE of Kalgoorlie P27/01474 0.08 G 100% Garibaldi 48km NE of Kalgoorlie P27/01491 1.34 G 100% 18 147.61

Page 65 HERON RESOURCES LIMITED 8.0 Interest in Mining Tenements cont

Prospect Geographic Tenement Area Status Interest Location Identifier km2 Held

KEITH KILKENNY PROVINCE Yarri Project Au Mulgabbie 112km NE of Kalgoorlie E28/00823 8.40 B 100% Mulgabbie West 99km NE of Kalgoorlie E28/00976 8.40 B 100% Rebecca East 134km ENE of Kalgoorlie E28/01082 5.60 B 100% Crab Hill 137km ENE of Kalgoorlie E28/01138 5.60 A 100% Oak Bore 144km NE of Kalgoorlie E31/00233 2.80 G 100% Oak Bore South 144km NE of Kalgoorlie E31/00234 2.80 G 100% Yilgangi East 130km NE of Kalgoorlie E31/00236 1.60 G 100% Yilgangi 130km NE of Kalgoorlie E31/00494 81.20 A 100% Deenya Hill 130km NE of Kalgoorlie E31/00582 8.40 A 100% Yarri 137km NE of Kalgoorlie M31/00141 0.20 A 100% Yilgangi Castle 129km NE of Kalgoorlie M31/00173 0.34 A 100% Mt Catherine 142km NNE of Kalgoorlie M31/00249 0.58 A 100% Webb Find 153km NE of Kalgoorlie M31/00281 1.20 A 100% Banjo Well 141km NE of Kalgoorlie M31/00310 4.70 A 100% Yarri 136km NE of Kalgoorlie M31/00314 440.00 A 100% Yilgangi North 131km NE of Kalgoorlie P31/01580 1.85 G 100% Yilgangi North 131km NE of Kalgoorlie P31/01581 1.76 G 100% Yilgangi North 131km NE of Kalgoorlie P31/01582 1.65 G 100% 18 577.09

TOTAL 476 19,056.00

A = Application G= Granted B = Exploration Licence Application in Ballot

Page 66 Glossary of Terms

"Alteration" means rock-forming minerals which have been chemically changed. "Ankerite" means Carbonate of Calcium, Iron, Magnesium and Manganese. "Anomaly" means a value higher or lower than expected, which outlines a zone of potential exploration interest but not necessarily of commercial significance. "Antigorite" means a platy green Magnesium Silicate of the serpentine group, derived from the weathering of olivine. At Goongarrie, antigorite is diagnostic in the lowermost ore profile. "Au" means gold. "Autoclave" means a reaction vessel in which ore is mixed with high temperature and pressure solutions to enable metals to enter into solution as a precursor to extraction in metallic form. "Breccia" means a broken fragmental rock, usually related to fault zones. Due to the open spaces within a breccia, such rocks are a favourable site for groundwater movement. "Chlorite" means a platy green Magnesium Aluminosilicate resembling the mica group, derived from the weathering of antigorite. At Goongarrie, chlorite is diagnostic in the lower ore profile. "Co" means cobalt. "Cu" means copper. "Dunite" means peridotite where the mafic mineral is olivine. "Duricrust" means a hard weathering crust which is typically ferruginous and aluminous. "Feasibility Study" means: A "Pre-feasibility Study" is an engineering and cost study of a mining operation, processing plant and plant infrastructure, which for the Goongarrie Nickel Project includes a flow sheet of the "Cawse" type that covers ore beneficiation, high pressure acid leach, CCD washing, solution purification, cobalt and nickel solvent extraction, formation of an intermediate precipitate and electrowinning to produce nickel and cobalt metal. Included in the cost estimates will be infrastructure, tailings disposal, power supply, and owner's costs. The plant design may change as a result of testwork analysis, optimisation studies and engineering improvements performed during execution of the Pre-feasibility Study. Operating and capital cost estimates are to an accuracy of ± 30%. In the case of the Goongarrie Nickel Project, the drill density would be such that the resource status is Indicated Mineral Resource. A "Bankable Feasibility Study" is an engineering and cost study addressing the same issues as a "Pre-feasibility Study", but in such detail that it contains sufficient information to satisfy a bank, that it can rely on cash flows and earnings from the project to repay any project loan, and that the assets of the project are suitable as collateral for the loan. The bank must feel comfortable that on a worst case scenario the loan will be repaid. Engineering design concepts will have largely been finalised, and operating and capital cost estimates are to an accuracy of ± 10%. In the case of the Goongarrie Nickel Project, the drill density would be such that the resource status is Proved Ore Reserve. "Felsic" means light coloured feldspar and silica rich igneous rock. "Gabbro" means a dark colored mafic intrusive rock consisting dominantly of feldspar and pyroxene. "Geochemical Survey" means the systematic study of the variation of chemical elements in rocks or soils. "Gibbsite" means Aluminium Hydroxide, a principal component of bauxite. At Goongarrie, gibbsite is diagnostic in the uppermost ore profile. "Goethite" means Iron Hydroxide, being a yellow, red and brown ochre. At Goongarrie, goethite occurs throughout the total upper ore profile.

"Goethite Ore" means nickel-cobalt laterite ore composed mainly of the iron mineral goethite (+40% Fe2O3), which is an optimum ore type. "Gossan" means the weathered oxidised surface expression of a sulphide-bearing deposit, and consists predominantly of hydrated iron oxides. "g/t" means grams per tonne. "km" means kilometres. "km2" means square kilometres. "Komatiite" means an ultramafic rock with high magnesium content extruded from a volcano. Textural variations include: "Orthocumulate" means a rock which exhibits a high proportion of crystallised trapped interstitial ("intercumulus") liquid. The surrounded ("cumulus") olivine crystals are subhedral to enhedral in form. This komatiite type is regarded as prospective for Nickel Sulphide mineralisation (e.g. Kambalda nickel mine). "Mesocumulate" means a rock with cumulus crystals exhibiting extensive mutual boundary contact, but retaining some recognisable interstitial material. This komatiite type is regarded as prospective for Nickel Laterite mineralisation. "Adcumulate" means a rock with little or no intercumulus material and characterised dominantly by anhedral crystals. This komatiite type is regarded as prospective for Nickel Laterite mineralisation. "m" means metres. "Maghemite" means a strongly magnetic form of hematite, an Iron Oxide. "Mineralisation" means, in economic geology, the introduction of valuable elements into a rock body. "Ni" means nickel. "Nickel Laterite" means nickel and cobalt occurring as an oxidised hydrated iron oxide and ferruginous clay assemblage overlying weathered ultramafic rock. "Nickel Sulphide" means nickel and copper occurring as an un-oxidised sulphide assemblage associated with fresh ultramafic rock.

Page 67 HERON RESOURCES LIMITED Glossary of Terms cont

"Norite" means a form of gabbro where hypersthene is the mafic material. "Oil Shale" means a sedimentary rock containing low grade lignite coal and a hydrocarbon material termed kerogen. "Olivine" means a magnesium-iron silicate mineral, often occurring in rocks prospective for nickel. "Option" means a Share option to subscribe for fully paid ordinary Shares in Heron. "PAL" means Pressure Acid Leach, a nickel laterite processing technique in which ore is dissolved in hot high pressure sulphuric acid contained within a titanium-lined reaction vessel termed an autoclave, to release nickel and cobalt into solution, for precipitation as an intermediate product or electroplating as a pure metal. "Pedogenic" means pertaining to soil formation. "Peridotite" means an ultramafic rock consisting of olivine and pyroxene, with minimal feldspar. "PGE" means Platinum Group Elements. "prospect" means a target upon which exploration programs are planned or have commenced. "project" means a grouping of prospects within a specific geographic location, often with a common geological setting. "province" means a grouping of projects within a geological district defined by a major mineralised crustal structure. "ppb" means parts per billion. "ppm" means parts per million. "Precious Metals" means gold, silver and the Platinum Group Elements, ruthenium, rhodium, palladium, osmium, iridium and platinum. The metals are chemically inert, malleable, dense and used in jewellery, and are of high unit value. "RAB drilling" means the drilling technique in which a sample is returned to surface outside the rod string by compressed air. Sample quality is poor. "RC drilling" means the drilling method employing a rotating or hammering action on a drill bit which returns a sample to the surface inside the rod string by compressed air. Sample quality is very good, particularly if the drill hole is dry. "Resources and Ore Reserves" means: "Proved Ore Reserve" is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments, which may include Feasibility Studies, have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. The term "economic" implies that extraction of the Ore Reserve has been established or analytically demonstrated to be viable and justifiable under reasonable investment assumptions. Proved Ore Reserve will require some degree of lateral continuity validation through diamond drilling, wide diameter (900mm) bulk sample drilling, trial mining, exploration winze or most likely for Goongarrie, 10x10m pattern RC drilling. "Measured Mineral Resource" is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and/or grade continuity. At the Goongarrie Nickel Project, Heron’s least dense drill RC pattern for Measured Mineral Resource status is 40x20m. "Indicated Mineral Resource" is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and / or grade continuity but are spaced closely enough for continuity to be assumed. At the Goongarrie Nickel Project, Heron’s least dense RC drill pattern for Indicated Mineral Resource status is 80x80m. "Inferred Mineral Resource" is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and / or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability. At the Goongarrie Nickel Project, Heron’s least dense RC drill pattern for Inferred Mineral Resource status is 400x80m. "ROM" means run of mine ore, referring to the grade and type of ore that is expected to be fed to the processing plant on a day to day basis. "Rift" means a zone of crustal extension in which the predominant sediment deposition is conglomerate, and the predominant volcanic activity is a bimodal basalt-rhyolite association which is intruded by co-magmatic granitoids. The high geothermal gradients are very favourable for gold mineralisation. "Shear Zone" means a zone in which crushed rock has been produced by the action of a shearing stress as on a fault. "Saprolite" means strongly weathered clay-rich rock, often retaining original rock textures. Nickel Laterite ore is restricted to the saprolite zone of weathering. "Specific Gravity" or "SG" means the mass per unit volume of material, usually in reference to ore and waste. "Waste: Ore ratio" means BCM of waste + BCM of low grade sub-ore divided by BCM of ROM ore. "Tectonic Zone" means a major structural feature characterised by deformation of several kilometres in width. "Ultramafic" means rocks composed almost entirely of mafic minerals which are prospective for nickel mineralisation. "VMS" means volcanogenic massive sulphide, which relates to base metal Cu-Zn-Pb-Au-Ag sulphide mineralisation. "Volcaniclastics" means sedimentary rocks derived from fragmental volcanic rocks. "XRD" means X-ray Diffraction, which is an analytical means of identifying microscopic minerals.

Page 68 HERON RESOURCES LIMITED CORPORATE DIRECTORY SHAREHOLDER REVIEW

COMPANY SECRETARY AUDITORS Any Shareholder visiting Kalgoorlie is encouraged to drop in to the office and see how it all works. Ross Arancini BBus, ACA Butler Settineri Chartered Accountants Company Secretary 35-37 Havelock Street Usually a field trip to Goongarrie can be arranged with Pam Buchhorn, your most 110 Hensman Street WEST PERTH WA 6005 capable tour guide. SOUTH PERTH WA 6151 Telephone: (08) 9367 1213 BANKERS Facsimile: (08) 9367 7853 “So this run-of-mine ore is worth $100 a Email: [email protected] Challenge Bank tonne, and Heron’s got 400 million tonnes!” 230-236 Hannan Street Local Kalgoorlie businessmen and REGISTERED AND PRINCIPAL OFFICE KALGOORLIE WA 6430 major Heron Shareholders Dean Willis, 21 Close Way Rino Borromei and Brett Nazzari PO Box 1280 CORPORATE ADVISER with David Crook. KALGOORLIE WA 6433 Carmichael First Capital Pty Limited Telephone: (08) 9091 9253 Kalgoorlie businessman Nigel Byrd at Facsimile: (08) 9091 9256 Level 11, 77 St Georges Terrace PERTH WA 6000 Goongarrie with some of the high grade Email: [email protected] “$600 a tonne revenue value” drill samples. Website: http://www.heronresources.com.au Very encouraging when you’re a major SOLICITORS TO THE COMPANY Heron Shareholder. SHARE REGISTRY McKenzie Lalor Security Transfer Registrars Pty Ltd 74 Egan Street “A rose between two thorns....” Level 1, 168 Adelaide Terrace KALGOORLIE WA 6430 PERTH WA 6000 Alan Rudd, Libby Willis and Telephone: (08) 9221 4200 Pullinger Readhead Stewart Simon Gobbett at Facsimile: (08) 9221 1581 46-50 Kings Park Road the Heron shed. Email: [email protected] WEST PERTH WA 6005

STOCK EXCHANGE Front Cover: Holding high grade black Australian Stock Exchange Limited Goongarrie Ore, assaying 3% Ni and 2% Co. 2 The Esplanade PERTH WA 6000 Background montage of the exploration journals of Keith Quartermaine (Order of Australia), a Scientist and Historian. ASX CODE HRR Jack Otway. “There’s miles and miles of that Laterite SEAT ABBREVIATION at Perrinvale.” Keith Quartermaine led his friends on expeditions into the Heron Heron, Avoca and Balladonia exploration country. Between 1951 and 1976, Keith wrote 26 journals and took HOME BRANCH over 10,000 photographs on his exploration of the Perth Sue Geary, Administration Manager. Nullarbor and Goldfields - exploring, recording and Easily the neatest office at Heron Kalgoorlie. researching the history, flora, fauna, caves, meteorites, INDUSTRY CLASSIFICATION Please telephone Sue on (08) 9091 9253 tektites and geological features of the region. if you have any enquiries. Other Metals 022 Base Metals Keith began writing up his journals at the request of his father who wanted to share in his activities in these remote RESEARCH SERVICE INDEX NO. locations. Mining H50 On these trips Keith was variously accompanied by Harry Wheeler, John Carlisle (Order of Australia), Bill Cleverly, ISIN David Crook (far right) explaining the Pamela Jean Deeps to a very demanding Tom Bateman and Ross and Beverly Quartermaine. audience of Kalgoorlie-based Shareholders and the Board. AU000 000 HRR6 As Heron works in the same country, we take this opportunity to acknowledge Keith Quartermaine, a true Goldfields explorer.

All sepia images in this Report are from All photographic page art by Justin Madden, Keith Quartermaine’s volumes. p Reynolds Graphics, Kalgoorlie. p e r K g u o D d n a en le Ei of y es Footsteps of urt Co Bill, Keith and Harry across Lake Yindarlgooda. ANNUAL REPORT 2001

Heron Resources Limited 21 Close Way, West Kalgoorlie PO Box 1280, Kalgoorlie, Western Australia, 6433 Telephone: (08) 9091 9253 Facsimile: (08) 9091 9256 Email: [email protected] www.heronresources.com.au