Gold Mines of Sardinia Limited

A.C.N. 009 234 851

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of accounting

The financial statements have been prepared in accordance with the historical cost convention.

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Law which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. The accounting policies adopted are consistent with those of the previous financial year.

Principles of consolidation

The consolidated accounts are those of the consolidated entity, comprising Gold Mines of Sardinia Limited (GMS) and all entities which GMS controlled from time to time during the year and at balance date.

Information from the financial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the parent company has control.

Subsidiary acquisitions are accounted for using the purchase method of accounting.

The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.

All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

For the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts.

Cash on hand and in banks and money market investments are stated at the lower of cost and net realisable value.

(d) Recoverable Amount

Non-current assets are not carried at an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. In determining the recoverable amount, the expected net cash flows have not been discounted to their present value.

(e) Foreign currencies

Translation of foreign currency transactions

Transactions in foreign currencies of entities within the consolidated entity are converted to the local currency at the rate of exchange ruling at the date of the transaction.

Amounts payable to and by the entities within the consolidated entity that are outstanding at the balance date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year.

Except for certain specific hedges and hedges of foreign currency operations, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit or loss for the financial year, and transaction costs, premiums and discount on forward currency contracts are deferred and amortised over the life of the contract.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

(e) Foreign currencies (continued)

Specific hedges

Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to the date of purchase or sale and costs, premiums and discounts relative to the hedging transaction are included with the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken to the profit and loss statement.

Translation of financial reports for overseas operations

All overseas operations are deemed integrated as each is financially and operationally dependent on the Company. The financial reports of overseas operations are translated using the temporal rate method and any exchange differences are to be taken directly to the profit and loss account.

(f) Plant and equipment

Cost and valuation

Items of plant and equipment comprising a class of non-current asset are carried at cost.

Depreciation

Depreciation is provided on a straight line or production basis on all plant and equipment.

Major depreciation periods are: 2000 1999

Leasehold improvements: the lease term the lease term

Plant and equipment: 5 to 15 years 5 to 15 years

Furtei Processing plant: on production basis on production basis

over life of mine over life of mine

(g) Exploration, evaluation, development and construction costs

Costs carried forward

Costs incurred arising from exploration and evaluation activities are carried forward, provided such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not at balance date reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves.

Costs carried forward in respect of an area of interest that is abandoned are written off in the year in which the decision to abandon is made.

Amortisation

Costs on productive areas are amortised over the life of the interest to which such costs relate on the production output basis.

Restoration costs

Restoration costs that are expected to be incurred are provided for as a part of the exploration, evaluation, development, construction or production phases that give rise to the need for restoration. Accordingly, these costs are recognised gradually over the life of the facility as these phases occur. The costs include obligations relating to reclamation, waste site closure, plant closure, plant removal and other costs associated with the restoration of the site. These estimates of the restoration obligations are based on anticipated technology and legal requirements and future costs, which have not been discounted to their present value. Any changes in the estimates area are adjusted on a retrospective basis. In determining the restoration obligations, the entity has assumed no significant changes will occur in relevant legislation in relation to restoration of such mineral mines, in the future.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

(h) Employee Entitlements

Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.

Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at the nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used.

Employee entitlements expenses and revenues arising in respect of the following categories:

wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and

other types of employee entitlements

are charged against profits on a net basis in their respective categories.

(i) Inventories

Inventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for on a first-in-first-out basis.

(j) Gold in Circuit

Gold is valued at the lower of cost and net realisable value using market price at year end or where applicable a forward contract price. Gold in circuit includes gold in circuit and gold contained in stockpiled ore as determined by production records. The cost of gold in circuit includes the cost of direct materials, labour and variable and fixed overheads relating to mining activities.

(k) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of Gold

Revenue from production of gold is recognised when all of the following recognition criteria have been met:

the product is in a form suitable for delivery and no further processing is required by or on behalf of the consolidated entity;

the quantity and quality of the product can be determined with reasonable accuracy;

the selling price can be determined with reasonable accuracy;

the product has been despatched to a refiner and is no longer under the physical control of the consolidated entity.

Interest

Control of a right to receive consideration for the provision of, or investment in, assets has been attained.

(l) Gold Bullion

In accordance with the policy on revenue recognition, gold bullion is taken up as a sale when it is delivered to a gold refinery. Gold bullion held at the refinery at the end of the year is valued at net realisable value which is either the market price ruling on that date or the forward rate where gold has subsequently been

delivered and the revenue realised. Gold bullion is shown as a receivable in the financial statements. Bullion includes gold poured within three days of the end of the year.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

(m) Comparative Information

Where necessary, comparative figures have been adjusted to conform with changes in presentation in 2000.

Investments

All non-current investments are carried at the lower of cost and recoverable amount.

Income Tax

Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the accounts and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised.

The income tax expense for the year is calculated using the 34% tax rate (1999: 36%).

Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Contingent rentals are recognised as an expense in the financial year in which they are incurred.

Operating Leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Finance Leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the group are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss.

Earnings per share

Basic earnings per share is determined by dividing the operating loss after tax by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share is determined by dividing the operating loss after tax 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.

Trade and other receivables

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectable debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis.

Bills of exchange and promissory notes are measured at the lower of cost and net realisable value.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

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.

Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accrual basis.

Deferred cash settlements are recognised at the present value of the outstanding consideration payable on the acquisition of an asset discounted at prevailing commercial borrowing rates.

Loans and borrowings

All loans are measured at the principal amount. Interest is charged as an expense as it accrues.

Finance lease liability is determined in accordance with the requirements of AASB 1008: Leases.

Share capital

Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Derivative financial instruments

Forward Exchange Contracts

The consolidated entity enters into forward exchange contracts where it agrees to sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The objective is to match the contract with anticipated future cash flows from sales and purchases in foreign currencies, to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange contracts are usually for no longer than 12 months.

Forward exchange contracts are recognised at the date the contract is entered. Exchange gains or losses on forward exchange contracts are charged to the profit and loss expect those relating to hedges or specific commitments which are deferred and included in the measurement of the sale or purchase.

Provisions - other

Other provisions are provided when it is likely that an obligation exists at the reporting date.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

	Consolidated		Gold Mines of Sardinia Limited
NOTE 2 OPERATING LOSS	Year Ended 31/12/00 $000	Year Ended 31/12/99 $000		Year Ended 31/12/00 $000		Year Ended 31/12/99 $000

Operating loss before income tax is arrived at after charging/(crediting) the following items:
Depreciation - plant and equipment	2,865	4,046			5		7
Amortisation - exploration and development	2,164	5,314			-		-
Foreign currency (gain)/loss – other dealings	-	-			(236)		645
Exploration costs written off	2,338	531			-		-
Finance lease interest	2	23			-		-
Borrowing costs: Interest paid	275	907			569		470
Operating lease rental Minimum lease payments	26	26			26		26
Employee entitlements Mine rehabilitation Loan forgiveness - Progemisa Inter-company loan provision	292 184 - - ==========	132 441 (1,317) - =========			15 - - 5,403 ==========		20 - - 1,600 =========
Included in the operating loss are the following items of operating revenue:
Sale of goods	13,326	13,704			-		-
Interest received other corporations Proceeds from sale of plant and equipment	354 288 ___________	252 - ___________			258 - ___________		75 - ___________
	13,968 ==========	13,956 ==========			258 ==========		75 ==========
Included in the operating loss are the following abnormal items:
Items debited/(credited):
Foreign currency translation Loss/(gain)	2,013 ___________	(2,802) ___________		- __________		- __________
	2,013 ==========	(2,802) ==========		- ==========		- ==========
(There is no income tax effect applicable to abnormal items)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

	Consolidated						Gold Mines of Sardinia Limited
NOTE 3 INCOME TAX	Year Ended 31/12/00 $000			Year Ended 31/12/99 $000				Year Ended 31/12/00 $000		Year Ended 31/12/99 $000
a) The prima facie tax on the operating loss differs from the income tax provided in the accounts as follows:
Prima facie tax (benefit)/expense on operating loss		(2,922)			(2,749)				(2,677)	(1,556)
Tax effect of permanent differences.
Consulting fees		124			22				124	-
Legal fees		44			-				44	-
Provision for non-recovery of
Loan		-			-				1,837	577
Loss relating to controlled foreign entity		2,020			1,864				-	-
Utilisation of prior year tax losses Other		- (92)			(116) -				- (154)	- -
Timing differences and tax losses not brought to account as future income tax benefits Foreign taxes paid		826 111 __________			979 - __________				826 - ___________	979 - __________
Income tax expense (benefit) attributable to the operating loss		111 ==========	- ==========			- ==========				- =========
(b) Future income tax benefits
Future income tax benefits arising from tax losses of the consolidated entity have not been recognised as an asset as realisation of the benefit is not regarded as virtually certain.
Revenue		2,696	2,037			2,696				2,020
Capital		1,725 ==========	1,827 ==========			1,725 ==========				1,827 ==========

The future income tax benefit will only be obtained if the consolidated entity:

(i) derives future assessable income of a nature and of an amount sufficient to enable the benefit to be realised;

(ii) continues to comply with the conditions for deductibility imposed by the law; and

(iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

Consolidated

Gold Mines of Sardinia Limited

NOTE 4.

RECEIVABLES

(CURRENT)

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

Sundry debtors

1,225

949

229

Amount owing from other corporations

2,848

___________

4,715

___________

__________

4,073

==========

5,664

==========

229

=========

Australian dollar equivalent of amounts receivable in foreign currencies not effectively hedged: Italian Lire

4,046

=========

4,715

=========

(NON-CURRENT)

Loan to former director (note 17b)

259

Provision for non recovery of loan

(259)

___________

(259)

___________

(259)

__________

(259)

__________

___________-

__________-

Loan to controlled entity (17b)

46,760

45,066

Provision for non-recovery of loan

__________

_________

(14,695)

__________

(9,292)

__________

=========

32,065

=========

35,774

=========

Australian dollar equivalent of non current receivables in foreign currencies not effectively hedged: Italian lire

==========

=========

2,471

=========

2,278

=========

NOTE 5

INVENTORIES (CURRENT)

Gold in circuit and refined gold - at cost

Consumables at cost

2,453

440

__________

1,601

403

__________

___________

__________

NOTE 6.

INVESTMENTS

(NON-CURRENT)

2,893

==========

2,004

==========

=========

(a) Investments comprise:

Shares in controlled entities

at cost (6(b))

4,096

Unlisted shares at cost

164

125

Listed on a prescribed stock exchange

6,305

__________

6,469

__________

125

6,305

___________

10,471

___________

4,166

Provision for diminution in value of shares in controlled entities

(4,096)

Provision for diminution in value of: unlisted shares

Listed shares

(30)

__________

(30)

________

(30)

___________

(30)

___________

6,439

==========

6,345

==========

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

		Consolidated		Gold Mines of Sardinia Limited
NOTE 6. INVESTMENTS (NON-CURRENT) (continued)	Year Ended 31/12/00 $000		Year Ended 31/12/99 $000		Year Ended 31/12/00 $000	Year Ended 31/12/99 $000
(b) Aggregate quoted market value at balance date of investments listed on a prescribed stock exchange: Shares	22,803		-		22,803	-

There would be $1,171,932 of capital gains tax payable if these assets were sold at their market value at the reporting date.

	Cost			% Interest Held by consolidated entity	Class of Shares
Name	Year Ended 31/12/00 $000	Year ended 31/12/99 $000	Year Ended 31/12/00 %	Year Ended 31/12/99 %
Mediterranean Gold Mines Pty Ltd (Incorporated in Australia)(ii)	-	-	100	100	Ordinary
Euro Mining Pty Ltd (Incorporated in Australia) (ii)	4,096	4,096	100	100	Ordinary
Sardinia Gold Mining S.p.A. (Incorporated in Italy)(i)	________-	_________-	90	90	Ordinary
	4,096 ========	4,096 =========

The overseas controlled entity carries on business in the country of incorporation

(i) The controlled entity is audited by a member firm of Ernst and Young International

(ii) Controlled entities which meet the definition of a small proprietary limited Company as set out in the Corporations Law. Ernst & Young has not issued separate audit opinions with respect to these entities.

	Consolidated		Gold Mines of Sardinia Limited
NOTE 7. PLANT AND EQUIPMENT	Year Ended 31/12/00 $000	Year Ended 31/12/00 $000		Year Ended 31/12/00 $000	Year Ended 31/12/00 $000
Plant and equipment at cost	22,916	22,560		63	63
Provision for depreciation	(14,673) ___________	(11,827) ___________		(34) __________	(29) __________
	8,243 ___________	10,733 ___________		29 __________	34 __________
Motor vehicles under lease at cost	373	373		-	-
Provision for amortisation	(373) ___________	(354) ___________		- __________	- __________
	- ___________	19 ___________		- __________	- __________
TOTAL PLANT AND EQUIPMENT	8,243 ==========	10,752 ==========		29 ==========	34 ==========

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

	Consolidated			Gold Mines of Sardinia Limited
NOTE 8. DEFERRED EXPLORATION, EVALUATION AND DEVELOPMENT COSTS	Year Ended 31/12/00 $000	Year Ended 31/12/99 $000			Year Ended 31/12/00 $000		Year Ended 31/12/99 $000

Exploration, evaluation and development costs carried forward in respect of mining areas of interest
Pre-production exploration and evaluation phases formation costs	21,538 53 __________ 21,591 __________		19,558 70 __________ 19,628 __________			- - __________ - __________		- - __________ - __________
Production development phase accumulated amortisation	12,513 (9,801) __________ 2,712 __________ 24,303 ==========		12,513 (7,637) __________ 4,876 __________ 24,504 ==========			- - __________ - __________ - ==========		- - __________ - __________ - ==========

The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of respective mining areas.

Amortisation of the costs carried forward for the development phase is being charged in line with production at the Furtei site.

	Consolidated			Gold Mines of Sardinia Limited
NOTE 9. ACCOUNTS PAYABLE (CURRENT)	Year Ended 31/12/00 $000	Year Ended 31/12/99 $000			Year Ended 31/12/00 $000		Year Ended 31/12/99 $000

Trade creditors	2,046		1,455			-		-
Sundry creditors	614		181			615		181
Lease liability – secured ( note 20)	-		40			-		-
Other	360 ___________		372 ___________			- __________		- __________
	3,020 ==========		2,048 ==========			615 ==========		181 ==========
Australian dollar equivalents of current amounts payable in foreign currencies not effectively hedged: Italian Lire	2,406 ==========		1,780 ==========			- ==========			- ==========

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

Terms and conditions relating to the above financial instruments:

trade liabilities are normally settled on 30 day terms

(ii) details of the terms and conditions of related party payables are set out in note 17.

Consolidated

Gold Mines of Sardinia Limited

NOTE 10.

BORROWINGS

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

Borrowings (current):

Bank loan (ii)

Bridging loans (iii)

Shareholder loan from other

Corporation (i)

1,892

2,742

1,141

__________

5,775

==========

5,831

3,305

1,439

__________

10,575

==========

1,892

___________

1,892

==========

5,831

___________

5,831

==========

Australian dollar equivalents of current amounts payable in foreign currencies not effectively hedged: Italian Lire

3,883

==========

4,774

==========

Borrowings (non current)

Shareholder loan from other

Corporation (i)

8,839

___________

8,100

___________

__________

Australian dollar equivalent of non current liabilities payable in foreign currencies not effectively hedged: Italian lire

8,839

==========

8,839

==========

8,100

==========

8,100

==========

=========

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

(i)This amount represents a shareholder loan from Progemisa S.p.A. the 10% equity partner in Sardinia Gold Mining S.p.A. (SGM). Progemisa will only be repaid from future surplus cash flows from the Sardinia gold project, as resolved by the directors of SGM. The shareholders loan is interest free.

(ii) During December 1996 SGM signed a project loan facility with NM Rothschild & Sons Ltd. The loan was for an amount up to US$5 million to be drawn in US dollars or gold bullion in two separate tranches. Tranche A is for an amount of US$4.25 million and Tranche B which is a standby facility for an amount of US$0.75 million. During March 1997 SGM drew the total US$4.25 million available from Tranche A.

During 1999 a new facility was provided to Gold Mines of Sardinia Limited (GMS) by NM Rothschild & Sons (Australia) Limited (NMR) in Australian dollars in the form of a Corporate Overdraft which consisted of two tranches, Tranche A amounted to the Australian dollar equivalent of US$3.65 million and a short term working capital facility via Tranche B for the Australian dollar equivalent of US$1.35 million. Tranche A was used by GMS to repay the total outstanding balance of US$3.65 million owed by SGM to NM Rothschild & Sons Ltd. This repayment was made on 29 January 1999. Tranche B of the new facility was fully repaid during 1999.

During this financial period, A$3.9 million of the facility was repaid and the facility limit was revised to A$2 million until the earlier of the sale of GMS' shares in Navan Resources plc or April 30, 2001.

Interest on the project facility is charged in monthly arrears at the 90 day Bank Bill Rate plus 3.50%. The facility is secured by:

First ranking fixed and floating charge over GMS.

Unsecured Guarantee for all outstandings under the GMS Overdraft from SGM.

Share mortgage over GMS' share holding in Mediterranean Gold Mining Pty Ltd (MGM) and Euro Mining Pty Ltd (Euro), and over MGM's and Euro's shareholding in SGM.

First ranking charge over the SGM Proceeds Account.

Undertakings from GMS, Euro, MGM and SGM not to create, assume, permit or cause to suffer to exist any security interest or financial indebtedness (other than in favour of Rothschild) over any of their assets or undertakings, without the prior consent to Rothschild.

Rothschild to hold all share scrip for the Navan shares together with signed transfers.

(iii) SGM is entitled to reimbursement from the Italian government for IVA (VAT) taxes paid during the years 1997 to 1998. Below is a summary of bridging finance using the outstanding IVA reimbursements as security.

Banca di Sassari –

Lire.1,000m. (AS$868,810) secured against 1998 annual IVA return amounting to Lire.1.393m.

SGM is entitled to a government grant under a special Law 221 enacted to encourage development in areas which are in economic crisis, such as Sardinia. Under the terms of the grant, SGM has received 80% of the grant totalling Lira 6,018,615,200. SGM will repay a bridging loan provided for the remaining 20% of the grant provided by Banca di Sassari for Lire 1,000m (A$868,810). The 221 Commission audit was carried out in November 2000 and collection of the residual capital grant is expected in early 2001.

Included in the bridging loans balance is accrued interest of Lire 56m (A$48,653).

The Company is entitled to a government income grant under special Law 752. This law was enacted to encourage the development of mineral activities on the territory. Under the terms of this income grant, the Company in 2000 has formally presented to the Authority a statement of expenses incurred in 1999 that would qualify under the requirements of this law and, to date, no reply has been received from the latter as they are still verifying the related supporting documentation. The Company in 2000 has obtained bridge loan financing of Lire 1.100m (A$955,691) equal to approximately 80% of the total income grant amount requested for 1999.

The bridging loans are repayable when IVA returns or related grants are received. Interest is charged at 7% per annum. The bridging loans are secured against the related law 211, law 752 and IVA 1998 receivables.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

Consolidated

Gold Mines of Sardinia Limited

NOTE 11.

PROVISIONS

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

Year

Ended

31/12/00

$000

Year

Ended

31/12/99

$000

CURRENT

Employee Entitlements (refer note 22)

Other

377

___________

403

==========

247

___________

247

==========

__________

=========

__________

=========

NON-CURRENT

Mine Rehabilitation

1,105

921

Employee Entitlements (refer note 22)

Other

522

559

___________

360

___________

__________

_________

2,186

==========

1,281

==========

=========

NOTE 12.

SHARE CAPITAL

Issued and paid up capital 237,069,404 (31 December 1999: 197,412,786) ordinary shares fully paid

74,817

__________

74,817

=========

58,556

74,817

__________

74,817

=========

58,556

Shares issued during the year

On 22 March 2000 an overseas placement was performed under the directors 15% facility resulting in 22,222,222 new shares being issued at a price of £0.18 per share. A$9,985,396, net of commission, was raised from this placement. This facility was reinstated at the Annual General Meeting held on 31 May 2000.

Following shareholder approval on 31 May 2000, 17,334,396 ordinary fully paid shares were allotted on 14 June 2000 to Homestake Mining Company of California in exchange for 6,500,000 ordinary shares in Navan Mining. The number of shares was calculated by reference to the average of the daily closing prices of the shares of the Company and Navan on the London Stock Exchange for the period from 27 March 2000 to 18 April 2000, being 20.38p and 54.35p respectively.

During the year 100,000 options were exercised for a net consideration of $36,000.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

Share Options

During the year the following unlisted options were allotted:

2,250,000 options exercisable at 43c on or before May 31, 2005

200,000 options exercisable at 39c on or before August 8, 2005

At balance date the following unlisted options to acquire ordinary shares were outstanding.

2,575,000 options exercisable at 36c on or before October 28, 2001

505,000 options exercisable at 36c on or before November 29, 2001

250,000 options exercisable at 28c on or before January 28, 2002

310,000 options exercisable at 39c on or before March 14, 2002

555,000 options exercisable at 44c on or before January 15, 2003

1,900,000 options exercisable at 54c on or before February 26, 2003

1,200,000 options exercisable at 52c on or before April 24, 2003

325,000 options exercisable at 42c on or before October 30, 2003.

100,000 options exercisable at 61c on or before April 22, 2004.

250,000 options exercisable at 43c on or before May 31,2005.

200,000 options exercisable at 39c on or before August 8, 2005.

Subsequent to year end, the following options were allotted:

950,000 options exercisable at 33c on or before February 1, 2006.

690,000 options exercisable at 38c on or before March 1, 2006.

During the year or since year end, the following options were lapsed:

2,000,000 options exercisable at 43c on or before May 31, 2005

150,000 options exercisable at 44c on or before January 15, 2003

50,000 options exercisable at 36c on or before November 29, 2001

600,000 options exercisable at 52c on or before April 24, 2003

200,000 options exercisable at 42c on or before October 30, 2003

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2000 (Continued)

	Consolidated			Gold Mines of Sardinia Limited
NOTE 13. STATEMENT OF CASH FLOWS	Year Ended 31/12/00 $000	Year Ended 31/12/99 $000	Year Ended 31/12/00 $000		Year Ended 31/12/99 $000

(a) Reconciliation of cash balance comprises: Cash at bank Closing cash carried forward	5,705 __________ 5,705 ==========	3,112 __________ 3,112 ==========	4,440 _________ 4,440 =========		2,265 _________ 2,265 =========
(b) Reconciliation of the operating loss after tax to the net cash flows from operations
Operating loss after tax	(8,708)	(7,634)