ANNUAL GENERAL MEETING. 23 May am PricewaterhouseCoopers Level Sussex Street Sydney NSW 2000

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2 SHAREHOLDER S DIARY CORPORATE INFORMATION ANNUAL GENERAL MEETING 23 May am PricewaterhouseCoopers Level Sussex Street Sydney NSW 2000 REGISTERED AND CORPORATE OFFICE Level 9 Citadel Towers (Tower B) 799 Pacific Highway CHATSWOOD NSW 2067 Telephone: (02) Facsimile: (02) cimcoal@cimresources.com.au ABN SHARE REGISTRY Security Transfer Registrars Pty Ltd 168 Adelaide Terrace East Perth WA 6004 Telephone: (08) Facsimile: (08) BANKERS Westpac Banking Corporation 255 Elizabeth Street Sydney NSW 2000 AUDITORS PricewaterhouseCoopers 201 Sussex Street Sydney NSW 1171 SOLICITORS Gadens Lawyers 77 Castlereagh Street Sydney NSW 2000 HOME STOCK EXCHANGE DIRECTORS COMPANY SECRETARY Australian Stock Exchange Limited - Sydney 20 Bridge Street Sydney NSW 2000 ASX Code CIM Gordon A McPhie Gavin P May Daniel J Buckley Melvin Garness Robert J Waring Chairman Chief Executive Officer Operations Director Non-Executive Director

3 CONTENTS Letter to Shareholders 2 Directors Report 4 Financial Report Statement of Financial Performance 9 Statement of Financial Position 10 Statements of Cash Flows 11 Notes to the Financial Statements 12 Directors Declaration 33 Independent Audit Report 34 Shareholders Information 35 CIM Resources Ltd 1

4 LETTER TO SHAREHOLDERS Dear Shareholder, CIM Resources, the manager of the Stratford Coal Joint Venture (SCJV), is a significantly different company today compared to the company launched in In 2001 the SCJV, of which CIM Resources is a 90% shareholder, achieved record coal production and has a significantly expanded market portfolio. Your Directors believe that the consolidation and optimisation of its coal assets of the Gloucester Basin, combined with the retirement of foreign exchange hedge commitment in 2002, will make CIM Resources a competitive and profitable coal mining company in future years. CIM Resources share (90%) of SCJV Achieved record sales revenue of $111.6 million (before hedge losses) on total sales tonnes of 2.6 million. Operationally, Stratford has maximised all mining and processing opportunities. During 2001, deepening of the Bowens Road West pit (additional 171,000t of product) and continued reprocessing of the co-disposal area (117,000t of product) contributed to the record production. Henry Walker Eltin Contracting Pty Ltd continued to provide reliable mining operations under contract at the Stratford Mine. Sales Revenue & Own Production Marketing From April 2001 Stratford benefited from price increases on all export coal products. Over the past two years Stratford has supplied coal to 19 different customers including Japanese steel mills, Asian general industry, export traders and the NSW domestic power industry. This diversity in customers has allowed Stratford to reduce the marketing risk associated with being exposed to just one segment of the coal market. Such customer diversity provides flexibility and allows a broad range of coal quality. Stratford has maximised opportunities from coal recovery and on site blending to create competitive and readily marketable coal products. The 2001 year finished with negligible inventory reflecting continued strong customer support for the diversified marketing strategy. Financial Results In 2001 CIM Resources recorded a loss of $9 million. The profitable contribution of CIM s share of the Stratford operation of $9 million (EBIT) was overshadowed by the loss of A$18 million, created by the repayments of US$32 million on the foreign exchange hedge programme. At, CIM Resources had US$23.2 million in hedge commitment remaining (Exchange Rate US$0.7610:A$1.00 and due by December 2002) Tonnes x million Production A$ Revenue A$ million Environmental Matters The Stratford Mine operates under the following: Development Consent Conditions issued by the NSW Minister for Planning; Environment Protection License issued by the Environmental Protection Authority (EPA); and Mining Leases issued by the NSW Department of Mineral Resources (DMR). 2 CIM Resources Ltd

5 LETTER TO SHAREHOLDERS (Continued) Environmental monitoring and reporting has been conducted in accordance with license conditions and the Environmental Management Plan. During the year Stratford Mine has operated generally within the permitted limits and no significant environmental issues have arisen. Directors On 31 July 2001 Johann Jooste-Jacobs resigned from the Board. Mr Jooste-Jacobs had been with CIM Resources for almost seven years, the last two and a half years as Managing Director. In this role he managed CIM Resources through a difficult financial restructure. The Board would like to thank Mr Jooste-Jacobs for his commitment and contribution. Looking ahead, the company will be substantially different, with: low level of debt; no burdensome foreign exchange hedging (current hedges end in December 2002); a production/reserve schedule for the next seven years; good profitability and significant tax losses; and an enhanced future. Future Strategy Over the past two years, CIM Resources has radically changed the Stratford operation and its marketing strategy. Today, Stratford has a new level of coal recovery efficiency and a diverse customer portfolio. Gavin P May Chief Executive Officer CIM Resources Ltd 27 th March 2002 CIM Resources intends to continue this strategy with the development of the Bowens Road North and Duralie coal deposits. Subject to Board approval, Bowens Road North and Duralie will be developed as satellite pits and produce feed stock for a blend of coals from the Gloucester Basin. CIM Resources plans to produce a suite of coals to be marketed as Gloucester Coal products. At the Annual General Meeting CIM Resources will be putting a number of motions to the shareholders for consideration. These recommended motions include: Changing the name of the company from CIM Resources Ltd to Gloucester Coal Ltd. Consolidating the number of shares on offer (Ratio 15:1). CIM Resources Ltd 3

6 DIRECTORS REPORT Your Directors present their report on the consolidated entity consisting of CIM Resources Ltd, the Company, and its controlled entities, for the financial year ended. Directors The following persons were Directors of CIM Resources Ltd during the whole and up to the date of this report: Gavin P May Daniel J Buckley Melvin Garness Chief Executive Officer Operations Director Non-Executive Director Gordon McPhie was appointed Director and Chairman on 28 February 2001 and continues in office at the date of this report. Johann C Jooste-Jacobs was Managing Director from the beginning of the financial until his resignation on 31 July Richard J Budge was a Chairman of Directors from 1 January 2001 until his resignation on 28 February Principal Activities During the the principal continuing activities of the consolidated entity consisted of: the production and marketing of coal from Stratford and the assessment of other resources on the property of which the Company has a 90% interest; and the assessment of its wholly owned Duralie Project. There were no significant changes in the nature of these activities during the financial year. Dividends Paid or Recommended There was no dividend paid or proposed during the year ended. Review of Operations Henry Walker Eltin Contracting Pty Ltd continued to provide contracted mining, processing and rail loading operations at Stratford. During the year 9.8 million cubic metres of waste (previous 15.9 million) and 3.7 million tonnes of run of mine (ROM) coal (previous 4.4 million tonnes) were mined. 3.2 million tonnes was CIM Resources share of ROM coal (previous 4.5 million tonnes) processed through the processing plant to produce 1.1 million tonnes of coking coal (previous 1.6 million tonnes), 0.3 million tonnes of export quality thermal coal (previous 18 month 0.4 million tonnes) and 0.9 million tonnes domestic quality thermal coal (previous 18 month 0.8 million tonnes). In addition 0.1 million tonnes of product coal was recovered by retreating previously discarded material. Environmental Matters The Company recognises the importance of environmental issues and is committed to the highest level of performance in this area. Details of environmental performance of the Company through its operations are set out below: The Stratford Mine operates under conditions included in the Development Consent Conditions issued by the NSW Minister for Planning and the Environment Protection Licence issued by EPA in accordance with the Pollution Control Act 1970 and mining leases issued by DMR. Environmental monitoring and reporting has been carried out in accordance with these conditions and the Environmental Management Plan. The environmental performance of the Stratford Mine is reported in the Annual Environmental Management Report dated June This report includes comparisons of performance against the plans (where applicable) outlined in the Environmental Impact Statement and regulatory requirements are made. A summary our environmental performance of the mine in relation to these requirements is shown below. 4 CIM Resources Ltd

7 DIRECTORS REPORT (Continued) Noise surveys are undertaken quarterly. Compliance under favourable or neutral weather conditions have been largely achieved at all monitoring locations. However some exceedences at certain locations have been recorded under unfavourable weather conditions. Blasting has been carried out in accordance with the relevant conditions. Monitoring confirms that levels are generally within the permitted limits. A small number of exceedences occurred during the first two months of the year. This issue has been reviewed and resolved with EPA and DMR resulting in changes to blast procedures. One subsequent exceedence has occurred. Dust monitoring shows that implemented suppression measures are effective with dust levels well below EPA limits. A revised Life of Mine Water Management Plan incorporating controlled release of mine water (under an amended Environmental Protection Licence) has been submitted to DMR. Water management and monitoring in and around the Mine is in accordance with this plan. A Land Management Plan has been approved by the NSW Department of Land and Water Conservation. Duralie Development consent has been offered for the Duralie mine to be operated as a satellite pit to the Stratford operation. ROM coal will be delivered to Stratford by rail. The Company is in the final stages of development planning with the aim of presenting the project feasibility to the Board for approval in the near future. Significant Changes in State of Affairs There were no significant changes in the state of affairs of the company during the year ended 31 December Matters Subsequent to Balance Date There has not arisen in the interval since 31 December 2001 and up to the date of this report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to substantially affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in the future financial year. The Stratford Mine Community Consultative Committee meets on a quarterly basis. The Mine also participates in the Avon Valley Landcare Group. These forums enable the environmental practices and objectives of the Mine to be communicated to interested parties in the area. Bowens Road North This development of this resource has been progressed to full feasibility level. Development consent has been offered by the NSW Minister for Planning and the Environment. The open cut pit, immediately adjacent to the Stratford Mine will be operated as a satellite pit. Construction is expected to commence in the second quarter of CIM Resources Ltd 5

8 DIRECTORS REPORT (Continued) Information on Directors Gordon A McPhie (50) Chairman BSc (Engineering), FCA Joined the Board in February He is Chief Executive of UK COAL PLC, the United Kingdom s largest coal miner operating various collieries and opencast sites producing 20 million tonnes per year. Number of shares in the economic entity - Nil Melvin Garness (56) Non-Executive Director FCIS, FCMA Joined the Board in June He is Commercial Director and Company Secretary of UK COAL PLC with over 21 years experience in the contracting and mining industries. Number of shares in the economic entity - Nil Gavin P May (42) CEO & Marketing Director BSc (Geology), MAusIMM, GAICD Joined the Board in January He has worked in the coal industry for 21 years in exploration, production and marketing roles. Number of shares in the economic entity - 7,500. Daniel J Buckley (44) Operations Director BSc (Geology/GeoPhys), MMEE, GAICD Joined the Board in January He has more than 21 years experience in the Australian coal industry including roles in project development, mining operations, engineering and project consulting. Number of shares in the economic entity - 7,500. Directors Interests in Shares and Options As at the date of this report, the Directors interest in shares or options in the Company are as detailed above. Meetings of Directors The numbers of meetings of the Company s Board of Directors and of the Audit Committee held during year to, and the numbers of meetings attended by each Director were: Meeting of Directors Meeting of Audit Committee Number of meetings held 5 2 Number of meetings attended by: G A McPhie 1 * R J Budge** 0 * J C Jooste-Jacobs *** 4 1 M Garness 5 2 G P May **** 5 1 D J Buckley 5 * * Not a member of the relevant committee. ** Mr Budge resigned as a Director on 28 February 2001 and there were no meetings in 2001 prior to that date. *** Mr Jooste-Jacobs resigned as a Director on 31 July 2001 and attended the all meetings held in the up to that date. **** Mr May was appointed to the Audit Committee on 31 July Retirement, election and continuation in office of Directors In accordance with the Constitution Mr D J Buckley retires by rotation as a Director at the annual general meeting and, being eligible, offers himself for reelection. 6 CIM Resources Ltd

9 DIRECTORS REPORT (Continued) Directors and Executives Emoluments Executive remuneration and other terms of employment are reviewed annually. As well as a base salary, remuneration packages include superannuation and performance-related bonuses. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity s operations. Remuneration of non-executive Directors is determined by the Board within the maximum amount approved by the shareholders from time to time. Details of the nature and amount of each element of the emoluments of each Director of CIM Resources Ltd and each of the officers of the Company and the consolidated entity receiving the highest emoluments are set out in the following tables. Directors of CIM Resources Ltd Name Directors base fee ($) M Garness 30,000 G May * 206,567 D.Buckley ** 151,805 J C Jooste-Jacobs*** 258,891 * Includes superannuation of $12,992 ** Includes superannuation of $10,592 *** Includes superannuation of $16,012 Other executives of the consolidated entity Name Total ($) B Marquart * Financial Controller 112,358 * Includes superannuation of $12,087 Directors Benefits No Director has received or become entitled to receive, during or since the financial, a benefit because of a contract made by the parent entity, controlled entity, or a related body corporate with a Director, a firm of which a Director is a member or an entity in which a Director has a substantial financial interest. Share options granted to Directors and the most highly remunerated officers At the date of this report there were no unissued ordinary shares under option. Corporate Governance The Directors are responsible to the shareholders for the performance of the Company in both the short and the longer term, and seek to balance these sometime competing objectives in the best interests of the Company as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Company, including its controlled entities, are properly managed. The Board draws on relevant corporate governance best practice principles to assist it to contribute to the performance of the Company. The functions of the Board include: review and approval of corporate strategies, the annual budget and financial plans; overseeing and monitoring organisational performance and the achievement of the Company s strategic goals and objectives; monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company s auditors; appointment of, and assessment of the performance of, the Managing Director / Chief Executive Officer and the members of the senior management team; ensuring there are effective management processes in place and approving major corporate initiatives; enhancing and protecting the reputation of the Company; ensuring the significant risks facing the Company and its controlled entities have been identified and appropriate and adequate control, monitoring and reporting mechanisms are in place; and reporting to shareholders. The Company s Constitution specifies that all directors must retire from office no later than the third annual general meeting following their last election. Where eligible, a director may stand for reelection. CIM Resources Ltd 7

10 DIRECTORS REPORT (Continued) The Board has established an Audit Committee to assist in the execution of its duties and to allow detailed consideration of complex issues. A Policy is in place that is designed to prevent trading in the Company s shares by Directors and Executive Staff who may be in possession of sensitive information concerning the Company s affairs prior to release to the market. Audit Committee During the under review the Audit Committee consisted of the following Directors: M Garness G P May (from 31 July 2001) J C Jooste-Jacobs (until 31 July 2001) The main responsibilities of the audit committee are to: review and report to the Board on the annual report, the annual and half-year financial reports and all other financial information published by the Company or released to the market; assist the Board in reviewing the effectiveness of the Company s internal control environment covering: - effectiveness and efficiency of operations; - reliability of financial reporting; and - compliance with applicable laws and regulations; oversee the effective operation of the risk management framework; and recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, and the scope and quality of the audit. The external auditors are invited to attend the audit committee meetings to ensure that information flow is optimised. relevant agreement for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings. During the financial the Company has paid premiums to insure each of the Directors and employees against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director or Officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The premiums paid are not disclosed as this information is considered commercially sensitive. Rounding of Financial Report The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in the Directors report. Amounts in the Directors Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act This report is made in accordance with a resolution of the Directors. Gavin P May Chief Executive Officer Director Dated this 27t h day of March 2002 Directors and Auditors Indemnification The Company has not, during or since the end of the financial, in respect of any person who is or has been an officer or auditor of the Company or a related body corporate indemnified or made any 8 CIM Resources Ltd

11 STATEMENT OF FINANCIAL PERFORMANCE For the year ended Consolidated $ 000 $ 000 $ 000 $ 000 Notes Revenue from sale of coal 2 93,550 92,765 72,732 72,153 Cost of sales (101,377) (106,001) (80,525) (82,175) Gross Profit (7,827) (13,236) (7,793) (10,022) Other revenue from ordinary activities Other Expenses from ordinary activities Marketing (261) (362) (203) (282) Administration (891) (1,533) (891) (22,427) Borrowing Costs 3 (806) (4,795) (806) (4,795) Profit from Ordinary Activities before income tax expense (9,372) (19,387) (9,372) (37,121) Income tax expense Profit from ordinary activities after income tax expense (9,372) (19,387) (9,372) (37,121) Total change in equity other than those resulting from transactions with owners as owners 20 (9,372) (19,387) (9,372) (37,121) Earnings per share 35 The above statements of financial performance should be read in conjunction with the accompanying notes. CIM Resources Ltd 9

12 STATEMENT OF FINANCIAL POSITION As at Notes Consolidated $ 000 $ 000 $ 000 $ 000 Current assets Cash assets 5 2,198 1,560 2,118 1,476 Receivables 6 8,231 4,011 7,375 3,811 Inventories Other 8 2,892 2,904 2,249 2,259 Total current assets 13,321 9,003 11,742 7,956 Non-current assets Receivables ,029 19,889 Other financial assets ,591 15,591 Property, plant and equipment 12 29,096 33,082 17,357 21,042 Development expenditure 13 24,017 24, Other , ,816 Total non-current assets 53,960 61,265 50,916 60,048 Total assets 67,281 70,268 62,658 68,004 Current liabilities Payables 14 15,920 9,883 11,746 8,068 Interest bearing liabilities 15 2,636 2,636 2,636 2,636 Provisions Total current liabilities 18,616 12,594 14,437 10,774 Non-current liabilities Interest bearing liabilities 17 5,883 5,520 5,883 5,520 Provisions 18 2,000 2,000 1,556 1,556 Total non-current liabilities 7,883 7,520 7,439 7,076 Total liabilities 26,499 20,114 21,876 17,850 Net assets 40,782 50,154 40,782 50,154 Equity Contributed equity , , , ,842 Accumulated losses 20 (80,060) (70,688) (80,060) (70,688) Total equity 40,782 50,154 40,782 50,154 The above statements of financial position should be read in conjunction with the accompanying notes. 10 CIM Resources Ltd

13 STATEMENTS OF CASHFLOWS For the year ended Consolidated $ 000 $ 000 $ 000 $ 000 Notes Cash flows from operating activities Receipts from customers 91,797 94,306 69,539 73,145 Payments to suppliers and employees (90,029) (95,241) (69,568) (74,639) 1,768 (935) (29) (1,494) Interest received Borrowing costs (423) (1,142) (423) (1,142) Net cash (outflow)/inflow from operating activities 34 1,383 (1,787) (414) (2,346) Cash flows from investing activities Payments for development expenditure (513) (1,022) (399) (164) Payments for property, plant and equipment (78) (1,473) (61) (552) Proceeds from sale of property, plant and equipment Loans to related parties - - 1,694 (1,312) Security deposits lodged (556) (122) (556) - Net cash (outflow)/inflow from investing activities (1,109) (2,482) 692 (1,920) Cash flows from financing activities Proceeds from issue of shares - 52,865-52,865 Proceeds from borrowings 3,000 4,801 3,000 4,801 Repayment of borrowings (2,636) (54,773) (2,636) (54,773) Net cash inflow/(outflow) from financing activities 364 2, ,893 Net Increase / (Decrease) in cash held 638 (1,376) 642 (1,373) Cash at beginning of financial year 1,560 2,936 1,476 2,849 Cash at end of financial year 5 2,198 1,560 2,118 1,476 Financing arrangements 17 The above statements of cash flows should be read in conjunction with the accompanying notes. CIM Resources Ltd 11

14 NOTES to the Financial Statements NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. As a result of applying the revised Accounting Standard AASB 1018 Statement of Financial Performance, revised AASB 1034 Financial Report Presentation and Disclosures and AASB 1040 Statement of Financial Position for the first time, a number of comparative amounts were represented or reclassified to ensure comparability with the current reporting. During the previous financial the entity sought and obtained consent from the relevant statutory authorities to change the entities financial year to 31 December. Consequently, the previous financial is for s ended 31 December The current financial year is for a. The financial statements have been prepared on the going concern basis. The Directors believe this to be appropriate following the continued support of UK COAL PLC, the ultimate parent entity. (a) Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by CIM Resources Ltd ( Company or parent entity ) as at and the results of all controlled entities for the year then ended. CIM Resources Ltd and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. (b) Income Tax Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences and the estimated accumulated tax losses of A$63 million are not set aside to the deferred income tax as, given the current circumstances, it is unlikely that the Company will be in a tax paying position in the foreseeable future. (c) Inventories Inventories are stated at the lower of cost and net realisable value. Costs are determined as the cost of acquiring the coal from the contractor and any associated costs of moving the coal to the port. (d) Depreciation of property, plant and equipment Property, plant and equipment is brought to account at cost less, where applicable, any accumulated depreciation or amortisation. The carrying amount of property, plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets being employed and subsequently disposed of. 12 CIM Resources Ltd

15 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. All material depreciable assets are depreciated over the remaining mine life or their useful life whichever is the shorter. Major depreciation s are: Freehold buildings Mine life Mine life Plant and equipment Mine life Mine life Office equipment, furniture and fittings 4-5 years 4-5 years Motor vehicles 4-5 years 4-5 years Leasehold improvements Mine life Mine life Site infrastructure 7-10 years 7-10 years (e) Investments Interests in listed and unlisted securities, other than controlled entities in the consolidated financial statements, are brought to account at cost and dividend income is recognised in the Statement of financial performance when receivable. Controlled entities are accounted for in the consolidated financial statements as set out in Note 1(a). (f) Interests in Joint Ventures The proportionate interests in the assets, liabilities and expenses of a joint venture operation have been incorporated in the financial statements under the appropriate headings. Details of the joint venture are set out in Note 31. (g) Development Expenditure Development expenditure incurred is accumulated in respect of each major identifiable area of interest. Where expenditure has been funded by borrowings, the relevant interest cost is capitalised to the project. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against earnings in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. (h) Site Restoration Costs of mining restoration are the responsibility of the mining contractor and therefore are not provided for. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis reduced by the anticipated benefit of the sale of assets. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. CIM Resources Ltd 13

16 (i) Acquisition of assets The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are required. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity. (j) Cash For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. (k) Derivative financial instruments The consolidated entity enters into forward foreign exchange contracts. The accounting for forward foreign exchange contracts is in accordance with Notes 1(l)(ii)-(iii). (l) Foreign currency translation (i) (ii) Transactions Foreign currency transactions are initially translated into Australian currency at the rate of exchange at the date of the transaction. At balance date amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are brought to account in determining the profit or loss for the year. Specific commitments Hedging is undertaken in order to avoid or minimise possible adverse financial effects of movements in exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods or services, together with subsequent exchange gains or losses resulting from those transactions are deferred up to the date of the purchase or sale and included in the measurement of the purchase or sale. When anticipated purchase or sale transactions have been hedged, actual purchases or sales which occur during the hedged are accounted for as having been hedged until the amounts of those transactions are fully allocated against the hedged amounts. If the hedging transaction is terminated prior to its maturity date and the hedged transaction is still expected to occur, deferral of any gains and losses which arose prior to termination continues and those gains and losses are included in the measurement of the hedged transaction. In those circumstances where a hedging transaction is terminated prior to maturity because the hedged transaction is no longer expected to occur, any previously deferred gains and losses are recognised in the Statement of financial performance on the date of termination. If a hedge transaction relating to a commitment for the purchase or sale of goods or services is redesigned as a hedge of another specific commitment and the original transaction is still expected to occur, the gains and losses that arise on the hedge prior to its redesignation are deferred and included in the measurement of the original purchase or sale when it takes place. If the hedge transaction is redesignated as a hedge of another commitment because the original purchase or sale transaction is no longer expected to occur, the gains and losses that arise on the hedge prior to its redesignation are recognised in the Statement of financial performance at the date of the redesignation. 14 CIM Resources Ltd

17 (iii) General commitments Exchange gains or losses on other hedge transactions are brought to account in the Statement of financial performance in the financial year in which the exchange rates change. Gains or costs arising on entry into hedges of general commitments are brought to account at the time off entry into the hedges and are amortised over the lives of the hedges. (m) Employee Entitlements (i) (ii) (iii) Wages and salaries, annual leave and sick leave 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 services up to that date. Superannuation The consolidated entity s contributions to superannuation plans in respect of employees of the consolidated entity are charged to operating expenses as they fall due. Long Service Leave A liability for long service leave is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wages and salary levels, experience of employee departures and s of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (n) Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. (o) Leases A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the interest expense. The lease asset is amortised on a straight line basis over the term of the lease, or where it is likely that the consolidated entity will obtain ownership of the asset, the life of the asset. Other operating lease payments are charged to the Statement of financial performance in the in which they are incurred, as this represents the pattern of benefits derived from the leased assets. (p) Revenue Recognition (i) (ii) Sales Sales revenue comprises revenue earned from the sale of coal to entities outside the economic entity. Sales revenue is recognised when the coal has been delivered. Rent Rent is recognised when the entity controls the right to receive the consideration. CIM Resources Ltd 15

18 (q) Receivables All trade debtors are recognised at the amounts receivable as they are due for settlement. Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. (r) Recoverable amount of non-current assets The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and outflows 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 written down to its recoverable amount. Where 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. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting in which the recoverable amount write-down occurs. 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. (s) Borrowing costs Borrowing costs are recognised as expenses in the in which they are incurred, except where they are included in the costs of qualifying assets. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity s outstanding borrowings during the year. Borrowing costs include interest on bank overdraft and short and long term borrowings. (t) Earnings per share (i) (ii) Basic earnings per share Basic earnings per share is determined by dividing the operating profit after income tax attributable to members of the Company by the weighted average number of ordinary shares outstanding during the financial, adjusted for bonus elements in ordinary shares issued during the. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial. (u) Interest bearing liabilities Loans and debentures are carried at their principal amounts which represent the present value of future cash flows associated with servicing the debt. Interest is accrued over the it becomes due and is recorded as part of other creditors. 16 CIM Resources Ltd

19 NOTE 2. REVENUE Consolidated $ 000 $ 000 $ 000 $ 000 Revenue from operating activities Sale of coal 111, ,641 86,781 82,168 Foreign exchange losses (18,064) (12,876) (14,049) (10,015) 93,550 92,765 72,732 72,153 Revenue from outside the operating activities Rental Income Interest Sale of non-current assets Other revenue Total revenue 93,963 93,304 73,053 72,558 NOTE 3. OPERATING PROFIT/(LOSS) (a) Net gains and expenses Profit/(Loss) from ordinary activities before income tax expense includes the following specific net gains and expenses: Net gains Net gains on disposal Property, plant and equipment Expenses Depreciation Buildings Plant and equipment 3,876 4,030 3,615 3,691 Total depreciation 3,906 4,058 3,638 3,712 Amortisation Leasehold improvements Development Expenditure Overburden in advance 2,899 3,482 2,255 2,493 Total amortisation 3,857 4,260 3,001 2,528 Other charges against assets Write down of investments to recoverable amount Write down of intercompany receivables to recoverable amount - - 1,166 20, ,166 20,930 Borrowing costs Interest and finance charges paid/payable 806 4, ,795 Other provisions Employee entitlements (15) (161) (15) (128) Rental expense relating to operating leases 532 1, CIM Resources Ltd 17

20 NOTE 4. INCOME TAX Consolidated $ 000 $ 000 $ 000 $ 000 (a) No income tax for the financial year has been charged. The tax reconciliation is: Profit from ordinary activities before income tax expense (9,372) (19,387) (9,372) (37,121) Income tax 30% (2000: 34% / 36%) (2,812) (6,808) (2,812) (13,116) Tax effect of permanent differences: Non-deductible depreciation and amortisation Non-deductible capital losses Other non-allowable items ,180 (2,790) (6,732) (2,440) (5,936) Future income tax benefit on losses and timing differences not brought to account 2,790 6,732 2,440 5,936 Income tax expense attributable to operating profit before income tax The Directors estimate that the potential future income tax benefit at, in respect of tax losses not bought to account is $63 million (December 2000: $59 million). Deferred tax balances are not recognised because there is no virtual certainty as to their eventual recovery. (b) Legislation reducing the Company tax rate from 36% to 34% in respect of the income tax year and then to 30% from income tax year was passed during the year ended 30 June A a consequence, deferred tax balances were remeasured during the year ended 30 June 2000 using the appropriate rates, depending on the timing of their reversal. NOTE 5. CURRENT ASSETS CASH ASSETS Consolidated $ 000 $ 000 $ 000 $ 000 Cash at bank 2,198 1,560 2,118 1,476 NOTE 6. CURRENT ASSETS - RECEIVABLES Trade debtors 4,908 2,932 4,908 2,932 Other debtors 3,323 1,079 2, ,231 4,011 7,375 3,811 NOTE 7. CURRENT ASSETS INVENTORIES Coal stocks at cost CIM Resources Ltd

21 NOTE 8. CURRENT ASSETS - OTHER Consolidated $ 000 $ 000 $ 000 $ 000 Other 2,892 2,904 2,249 2,259 Other assets represent the cost of waste mined in advance of coal mining and is being expensed equally over the remaining of the current contract. NOTE 9. NON-CURRENT ASSETS RECEIVABLES Loans to controlled entities * ,195 40,783 Less: write down of inter-company receivables to Recoverable amount - - (1,166) (20,894) ,029 19,889 * Further information relating to Loans to Controlled Entities is set out is Note 29. NOTE 10. NON-CURRENT ASSETS OTHER FINANCIAL ASSETS Other (non-traded) investments Notes Shares in unlisted corporations - at cost Shares in controlled entities - at cost ,549 15,549 Less: provision for diminution - - (60) (60) Other ,591 15,591 NOTE 11. NON-CURRENT ASSETS - OTHER Other 732 3, ,816 Other assets represent the cost of waste mined in advance of coal mining and is to be expensed equally over the remaining of the current contract. CIM Resources Ltd 19

22 NOTE 12. NON-CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT Consolidated $ 000 $ 000 $ 000 $ 000 Land and buildings Freehold land - at cost 10,294 10,314 4,435 4,435 Buildings - at cost Less: Accumulated depreciation (128) (98) (117) (94) Leasehold improvements at cost Less: Accumulated amortisation (7) (1) (7) (1) Total land and buildings 10,498 10,554 4,580 4,609 Plant and equipment Plant and equipment at cost 26,657 26,874 21,615 21,784 Less: Accumulated depreciation (12,843) (10,228) (12,289) (9,656) 13,814 16,646 9,326 12,128 Office equipment, furniture and fittings at cost Less: Accumulated depreciation (326) (275) (282) (242) Motor vehicles at cost (28) (11) (24) (10) Site infrastructure at cost 8,611 8,538 6,021 5,964 (4,124) (3,021) (2,825) (1,968) 4,487 5,517 3,196 3,996 Total plant and equipment 18,598 22,528 12,777 16,433 29,096 33,082 17,357 21, CIM Resources Ltd

23 NOTE 12. NON-CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT (continued) Reconciliation Reconciliations of the carrying amounts of each class of property plant & equipment at the beginning and the end of the current financial year are set out below. Freehold Leasehold Plant & Office Motor Site Land Buildings Improvements Equipment Equipment Vehicles Infrastructure Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Consolidated Carrying Amount at 1 January , , ,517 33,082 Additions Disposals (20) (20) Depreciation - (30) (6) (2,705) (51) (17) (1,103) (3,912) Other (132) (132) Carrying Amount at 10, , ,487 29,096 Freehold Leasehold Plant & Office Motor Site Land Buildings Improvements Equipment Equipment Vehicles Infrastructur Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Parent Carrying Amount at 1 January , , ,996 21,042 Additions Disposals Depreciation - (23) (6) (2,704) (40) (14) (857) (3,644) Other (102) (102) Carrying Amount at 4, , ,196 17,357 CIM Resources Ltd 21

24 NOTE 13. NON-CURRENT ASSETS - DEVELOPMENT EXPENDITURE Consolidated $ 000 $ 000 $ 000 $ 000 Production phase 10,707 8,061 1,550 1,151 Less: Accumulated amortisation (6,917) (5,965) (1,181) (441) Production phase 3,790 2, Non production phase 20,227 22, ,017 24, The ultimate re-coupment of the costs carried forward in respect of areas of interest is dependent upon successful development or alternatively sale of whole or part of the economic entity's interest in those areas for an amount at least equal to the carrying value. Amortisation of development expenditure has been charged on the production assets in line with the depletion of that reserve. Reconciliation Reconciliations of the carrying amounts of each class of Development expenditure at the beginning and the end of the current financial year are set out below. Consolidated Total Total $ 000 $ 000 Carrying Amount at 1 January , Additions Amortisation (952) (740) Carrying Amount at 24, CIM Resources Ltd

25 NOTE 14. CURRENT LIABILITIES PAYABLES Consolidated $ 000 $ 000 $ 000 $ 000 Unsecured Trade creditors 15,920 9,883 11,746 8,068 NOTE 15. CURRENT LIABILITIES INTEREST BEARING LIABILITIES Secured Bank Loans 2,636 2,636 2,636 2,636 Details of the security relating to the secured liabilities are set out in note 17 NOTE 16. CURRENT LIABILITIES PROVISIONS Employee entitlements NOTE 17. NON-CURRENT LIABILITIES INTEREST BEARING LIABILITIES Secured Immediate 2,880 2,880 2,880 2,880 Ultimate 3,000-3,000 - Bank loans - 2,637-2,637 Debentures ,883 5,520 5,883 5,520 Financial arrangements Bank Loan Facilities Total loan facilities 2,636 5,273 2,636 5,273 Used at balance date 2,636 5,273 2,636 5,273 Unused at balance date The bank loans are secured by a fixed and floating charge over the assets and undertakings of the economic entity. NOTE 18. NON-CURRENT LIABILITIES PROVISIONS Provision for rehabilitation 2,000 2,000 1,556 1,556 CIM Resources Ltd 23

26 NOTE 19. CONTRIBUTED EQUITY No. of Shares No. of Shares $ 000 $ 000 (a) Shared Capital Ordinary shares Fully paid (b) & (c) 1,168,539 1,168, , ,842 (b) Movements in ordinary share capital Date Details Note Number of shares Issue Price $ Opening balance 224,514,504 68, Rights issue (d) 944,024,500 $ , Less: Transaction costs arising on Share Issue (129) Balance 1,168,539, , Closing Balance 1,168,539, ,842 The purpose of the of the rights issue was to repay secured debt, provide financing for the development of Bowens Road North, assist in the financing of Duralie and to provide additional working capital for the Company. (c) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (d) Rights Issue On 26 September 2000 the company invited its shareholders to subscribe to a rights issue of 1,122,572,520 ordinary shares at an issue price of 5.6 cents per share on the basis of 5 new shares for every 1 fully paid ordinary share held, such shares to be issued on 1 November The issue was only partially subscribed. NOTE 20. ACCUMULATED LOSSES Consolidated $ 000 $ 000 $ 000 $ 000 Accumulated losses at the beginning of the financial year (70,688) (51,301) (70,688) (33,567) Net loss attributable to members of CIM Resources Ltd (9,372) (19,387) (9,372) (37,121) Accumulated losses at the end of the financial year (80,060) (70,688) (80,060) (70,688) 24 CIM Resources Ltd

27 NOTE 21. FINANCIAL INSTRUMENTS (a) Off-balance sheet derivative instruments CIM Resources Ltd and certain of its controlled entities are parties to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates. Forward Exchange Contracts In order to protect against exchange rate movements, the consolidated entity has entered into forward exchange contracts to sell US dollars. The contracts are timed to mature when the Company is scheduled to receive US dollar income. At balance date, the details of outstanding contracts are: Sell United Buy Australian Dollars States Dollars Rate Average Exchange Sell United States Dollars Average Exchange Rate Settlement 31-Dec Dec Dec Dec-00 US$ million US$ million Less than s Note 1. Between 12 and 24 months Total Notes 1. These hedges knock out at US$ and knock in below US$0.65 should the currency breach these levels subsequent to 15 November As the currency has traded below US$0.65 the hedges are operative. 2. The spot exchange rate Australian dollar to the United States dollar was US$ as at and US$ as at 31 December (b) Credit Risk Exposure The credit risk on financial assets of the consolidated entity which have been recognised on the balance sheet, other than investments in shares, is generally the carrying amount, net of any provisions for doubtful debts. (c) Net fair value of financial assets and liabilities (i) On-balance sheet The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the consolidated entity approximates their carrying amounts. Equity investments traded on organised markets have been valued by reference to market prices prevailing at balance date. For non-traded equity investments, the net fair value is an assessment by the Directors based on the underlying net assets, future maintainable earnings and any special circumstances pertaining to a particular investment. (ii) Off-balance sheet For forward exchange contracts, the net fair value is taken to be the unrealised gain or loss at balance date calculated by reference to the current forward rates for contracts with similar maturity profiles. On this basis the losses on forward exchange contracts are as follows: Net Fair Value Net Fair Value A$ million A$ million Foreign Currency Contracts Maturing (15.2) Maturing 2002 (15.1) (10.3) (15.1) (25.5) CIM Resources Ltd 25