QUARTERLY REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2003 SUMMARY • Coal sales of 558,000 tonnes for the quarter. • Large upgrade in coal reserves and resources at Sebuku. Straits Resources Limited ABN 22 056 601 417 • Highly encouraging initial drill results from Mt Muro, Indonesia at the Juking Sopan prospect. 1st Floor 35 Ventnor Avenue • Completion of purchase of the ex MIM Australian West Perth WA 6005 tenement package from Xstrata. PO Box 1641 West Perth WA 6872 • Three high priority North Queensland gold targets Australia acquired through the ex MIM purchase ready for drill testing. Telephone (61 8) 9480 0500 Facsimile (61 8) 9480 0520 • Investigating the development of a salt project in the www.straits.com.au Exmouth Gulf, WA. • Updated reserve announced for Tritton copper project - with project development expected in 2004 subject to finalising funding package. Further information can be obtained from our website: www.straits.com.au PRODUCTION PRODUCTION / Quarters Ended Year to Date SALES 30 Sep 30 Jun 31 Mar 30 Sep 30 Sep 2003 2003 2003 2003 2002 Copper Cathode Nifty (Jan & Feb 03) Tonnes 3,190 3,190 17,135 Girilambone Tonnes 0 262 333 595 1,448 Total mine production Tonnes 0 262 3,523 3,785 18,583 Straits – Total sales Tonnes 28 262 3,492 3,782 18,580 Sebuku Coal Mine Coal mined ‘000t 506 584 560 1,650 1,793 Product coal ‘000t 457 452 545 1,454 1,494 Sales ‘000t 558 357 529 1,444 1,455 Revenue Sales revenue A$’000 16,540 11,077 25,783 53,400 103,437 Other revenue A$’000 1,080 5,490 159,291 165,861 Girilambone Copper Mine, New South Wales ML 1280, 1383, MPLs 294 and 295 (Straits Resources Limited - 100%) Girilambone operations ceased in July 2003. The processing plant is on care- and-maintenance in preparation for a move to Whim Creek. Sebuku Coal Mine, Indonesia (Straits Resources Limited – 80%) Coal Co-operation Contract Sebuku coal production was 457,000 tonnes for the September quarter and sales were 558,000 tonnes. This compares with 579,000 tonnes and 625,000 tonnes respectively for the previous corresponding period. The main impact on production for the quarter was due to changing over of the mining contract. The new contractor mobilised sufficient equipment to commence mining in mid September and mine production is expected to ramp up to full scale in October concurrent with full mobilisation of equipment. Expectations are that coal production and sales for 2003 will be approximately 1.9 million tonnes, slightly less than the 2.0 million tonnes sold in 2002 but still a credible result given the contractor change out. Significant cost savings will result from the cost reduction initiatives implemented over the last six months and this will underpin the financial results for Sebuku in 2004. Further cost savings are anticipated in 2004 from a review of the coal preparation plant operating arrangements and also coal barging operations. At the same time, spot prices have recently recovered in the thermal coal market and this improvement in prices is expected to continue and should bode well for 2004 price negotiations. Sebuku was particularly active in the market in the last quarter approaching potential new customers in the Korean and Japanese markets. This activity was initiated as a result of resource definition work confirming a trend in future coal quality towards lower sulphur levels. Previously, BCS had been denied access to the full range of potential customers due to higher than average sulphur levels in its coal. Production of new, lower sulphur coal opens up the opportunity to put in place longer term, high quality contracts with new customers. The benefits of this are expected to be seen in 2004. Coal resources and reserves were updated at 30 September 2003 as a result of the success of the coal exploration program. As previously advised, significant extensions to the coal resource in the northern Tanah Putih area have been discovered and these are reported below. Open Cut Coal Resource and Reserve Sebuku Coal Mine Coal Reserves t’000 Coal Resources t’000 Recoverable (ROM) Marketable Seam Measured in Indicated in Total in Proven Probable Total situ situ situ Main Pit 3,184 3,184 3,066 3,066 2,666 Tanah Putih 19,140 19,140 17,110 17,110 14,268 ROM 74 67 Port 123 123 GRAND TOTAL 22,324 22,324 20,176 20,373 17,124 (As of 30 September 2003) The life-of-mine plan is currently being revised on the basis of the new resources. Preliminary indications are that mine life has been extended by an additional 5 or 6 years to 2011 from the original mine closure date of 2005. Further prospective exploration targets on Sebuku Island still require drilling and the current exploration program envisages this work being concluded in 2004. PROJECTS Whim Creek (Straits Resources Limited – 100%) M47/236, M47/237, M47/238, M47/443, L47/36, E47/916 and E47/976 (applications) Straits has updated the Whim Creek feasibility study incorporating the use of the Girilambone plant. The project is now being considered for development in early 2004. Mt Muro Gold Project Contract of Work 70% A review of the remnant resources around the existing plant has shown there to be some potential to produce supplementary feed from this source. Resources are summarised in the table below. Mt Muro Resources September 30, 2003 (at a 1.4 g/t gold equivalent Cut-off) Measured Indicated Inferred Total Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au equiv equiv equiv equiv 185,817 4.9 1,270,172 3.5 259,930 4.3 1,715,919 3.8 Drilling has commenced in the Juking Sopan region, a virgin prospect 25 kilometres to the west of the Mt Muro minesite. The prospect area had previously been defined by mapping, geochemical and geophysical surveys and found to contain numerous vein systems covering an area of over 5 by 5 kilometres. Outcropping veins up to 6m wide occur and are individually interpreted to be up to 700m long with many kilometres of vein strike outlined, with Channel samples of up to 4m @ 23 g/t Au reported. The first drill holes in the area have targeted the Tasat and Mandi vein system over a 400m strike length (see Fig. 1). Initial drilling results on the Tasat vein are very encouraging and have confirmed the width and grade of the surface sampling with a number of intercepts encountered down hole (see Table 1, Fig. 2). Drilling at the Mandi vein has confirmed the high grade surface trench results were from large boulders sourced from nearby. Hole East North RL Dip Azi from (m) to (m) intercept g/t Au JUS001 188516 9928810 71 -45 90 25.27 26.05 0.78m @ 1.70 42.15 47.1 4.95m @ 17.25 53.4 60.2 6.8m @ 2.69 JUS002 188497 9928860 87 -45 90 15.1 20.75 5.65m @ 2.87 23.75 24.75 1m @ 1.60 39.9 41 1.1m @ 1.67 53.4 56.5 3.1m @ 4.09 58.65 71.1 12.45m @ 8.25 74.2 76.2 2m @ 1.48 JUS003 188481 9928840 74 -60 90 26.3 26.85 0.55m @ 3.64 75 75.9 0.9m @ 14.60 79 80.2 1.2m @ 1.08 107.55 110.55 3m @ 3.80 113.45 116.45 3m @ 1.79 JUS004 188461 9928960 124 -45 90 87.4 100.8 13.4m @ 3.22 JUS008 188539 9928850 65 -45 90 37.7 38.7 1m @ 1.71 58.1 59.1 1m @ 2.70 Results at a 1ppm cut off with 2m internal cut-off Table 1. Intercepts from drilling at Juking Sopan Fig. 1 Juking Sopan region vein interpretation pre-drilling, with inset location of current holes. Fig. 2 Cross Section of Hole JUS1 at Juking Sopan showing drill results. The drill results are highly encouraging for the discovery of a substantial shallow gold system that can be a new mining centre to produce ore for treatment at the Mt Muro plant. Three rigs are currently drilling at the Juking Sopan system and continue to define the vein systems with results pending. A field program has begun at the Tumbang Lahung region, 12 kilometres west of the mine site where a further multiple vein system has been outlined. Work will focus on developing drill targets for early testing of the potential of the region. Exmouth Salt Project During the quarter the company announced it is investigating the development of a new solar salt project in Western Australia. Straits has applied for exploration licenses on the eastern margin of the Exmouth Gulf, an area identified as a potential solar salt field. It is expected that exploration licenses will be granted early in 2004. Investigations are proceeding as planned and it is expected that a scoping study will be completed by the end of the year. EXPLORATION Bushranger, New South Wales (Straits Exploration (Australia) Pty Ltd – 100%) EL 5574 No work was undertaken on this project during the quarter Cowra Project (Straits Exploration (Australia) Pty Ltd- earning 70%) EL5514. Work has continued on the joint venture with Gateway Mining over the Cowra Project in the Molong Volcanic Belt in the Lachlan Fold Belt in New South Wales. During the quarter a drilling programme of 22 holes for 2,854m was undertaken in the Kiola region which has tested a number of geological, geochemical and geophysical targets. During the initial 18 hole program further skarn alteration and mineralisation was intersected at a number of anomalies. Anomalous intercepts from the initial program include : Hole Easting Northing Dip Azi Depth Depth Interval Au Cu Zn Name From To m ppm % % KRC5 6218415 660075 60 60 12 36 24 0.2 2.4 KRC11 6215600 659100 60 256 52 82 30 0.6 0.5 KRC16 6213200 660750 60 26 34 38 4 1.0 Results are pending from the four follow up drill holes to test the anomalous zones. A program is underway to assess the regional prospectivity focussing on mineralised skarn outcrops and covered aeromagnetic skarn targets. Kuda Gold Project (Straits Resources- 75%) A drilling program is currently in progress at the Kuda Joint Venture with PT Aneka Tambang in West Java. Six holes of a ten hole program have so far been completed and results are pending. The holes are testing a number of vein systems at Cibaliung and a strongly anomalous silica cap at Cijulang. Xstrata Exploration Assets (formerly MIM’s Exploration Portfolio) in Australia During the quarter agreement was reached with Xstrata to purchase the former MIM’s exploration portfolio in Australia including the technical databases but excluding the tenements associated with Xstrata’s existing operations. A sales agreement has been finalised and the 100% held tenements and databases are being transferred. Agreement for assignment has been reached with a number of the joint venture parties and transfer of rights is underway. Priority areas for exploration are being highlighted and drilling targets being defined for testing during the next quarter. High priority projects which are predominantly in north east Queensland are as follows : Clermont/Capella, Queensland Straits Exploration (Australia) Pty Ltd 100% EPMA’s 14116, 14117 The tenements cover the southern end of the prospective Drummond Basin with a window of Devonian volcanics exposed under shallow Tertiary cover. Previous exploration has defined the Ayers rock prospect with outcropping anomalous gold in low sulphidation veins exposed over 600m strike. Previous drilling has intersected anomalous gold over 1 g/t in six of fifteen holes in fences spaced over 100m apart. Best results include 30m @ 3.9 g/t Au from 20m depth in hole ARC9 which includes 2m @ 33 g/t and 2m @ 19 g/t Au. A further program of IP and drilling was completed adjacent to the prospect by Australian Goldfields. These data were never reported and are not currently available due to the company going into receivership. Six Mile Creek/Kokomo, Queensland Straits Exploration (Australia) Pty Ltd earning 70% EPM 10699 sub-block, EPMA 13873 Agreement has been reached with Metallica Minerals Ltd to assign MIM’s interest and to earn a 70% interest in the tenements. The tenements lie north-east of Greenvale and cover a large hydrothermal system with intense silicification and quartz veining with highly anomalous gold and base metals. A number of prospects are defined including the Black Dingo prospect where numerous rockchips samples yield greater than 2 g/t Au over 3 kilometres of strike. Geochemical data is being compiled to define drill targets for testing as soon as possible. Gill Creek, Queensland Straits Exploration (Australia) Pty Ltd earning 100 % EPM’s 11836, 11699 Agreement has been reached with Depuro and P.W. English to assign MIM’s interest to purchase 100% of the tenements. The project contains a number of outcropping low sulphidation epithermal veins including the untested 700m long Spencers Ridge vein where rock chips have reported up to 4.3 g/t Au. The tenement has recently been granted for low impact exploration and a drill program is planned during the next quarter to test the vein system at depth. Tick Hill, Queensland Straits Exploration (Australia) Pty Ltd 100 % EPM’s 11013, 9083 The tenements surround the closed Tick Hill operation that produced over 500,000 oz of gold at a head grade of 23 g/t. Potential for further short strike length, high grade veins will be re-evaluated during the quarter with a detailed review of all the previous work to assess the potential for any further high priority drill targets. Quartz Circle, Western Australia Straits Exploration (Australia) Pty Ltd earning 70 % E46/541 Agreement has been reached with International Goldfields for the transfer of MIM’s interest to earn 70 % of the tenement in the Pilbara of West Australia. Previous exploration has defined a small copper resource, strong zinc intersections and outcropping gold veins. The tenement encompasses a large alteration system with a plus 1km2 geochemical copper-gold anomaly co-incident with a significant chargeable and resistive anomaly generated by MIM’s in-house MIMDAS geophysical system. A drill program is planned as soon as agreement is reached on a heritage survey. Further ex-MIM Interests Straits Exploration (Australia) Pty Ltd 100 % EPM 13883, ML6750, ML5631 Qld EL5973, 5914, 5997, 6029, NSW EL3055 S.A. Exploration programs are being planned for the remaining 100% held tenements in Queensland, New South Wales and South Australia. Negotiations are continuing on transferring MIM’s interest in the other projects and the situation will be clarified during the December quarter. Fig. 3 Location of Straits Projects Exploration Expenditure Total exploration expenditure during the quarter amounted to $254,043 CORPORATE Tritton A new reserve and resource estimate was announced for the Tritton Project (Straits 58%) during the quarter A feasibility study was independently audited by RSG Global who agreed with the findings. Subject to concluding a financing package (debt and equity) which is expected to be completed by the end of the year, development of the Tritton Project will proceed early in 2004. The Tritton Project is located 17 kilometre from Straits’ Girilambone Copper Mine in New South Wales. The feasibility study indicates a mine life of 11.5 years yielding approximately 22,000 tonnes per annum (tpa) of copper-in-concentrate. Mining will be by underground methods (access via decline) supplemented by a small open pit (Murrawombie). Tonnes of ore mined are forecast at 660,000 tpa initially, ramping up to 900,000 tpa from year 5. Processing will yield a copper concentrate (25% copper) which will be trucked 18 kilometres and then railed to Newcastle. A concentrate off-take agreement has been signed. Capital start up costs are estimated at $38.5 million, including a 10 per cent contingency. The company is also evaluating potential cost reductions to the project through the use of second hand equipment. The project is financially sound with payback of capital forecast to be in less than two years from first production. Indicated cash costs average approximately US$60 cents per pound of copper produced and taking an Australian dollar copper price of A$1.31/lb, pre-tax cash flow of $102 million is forecast over the life-of-mine, after payment of all capital and operating costs. The project has a pre- tax internal rate of return of 44%. Exploration potential is excellent both in areas close to the Tritton ore body, and regionally within the 1300km2 of granted exploration licenses. RISK MANAGEMENT All currency and commodity hedge contracts were discharged with the sale of Nifty. No new contracts were entered into during the June quarter. By Order of the Board Milan Jerkovic Chief Executive 14 October 2003 References in this report to “Straits Resources Limited”, “Straits” and “Company” include, where applicable, its subsidiaries. This report notes, and contains a table referring to, resources and/or reserve estimates. The information is based on, and accurately reflects, information compiled by a Competent Person as defined in the 1999 Edition of the "Australasian Code for Reporting Mineral Resources and Ore Reserves", being, Mr Peter Storey, who is a Member of the Australasian Institute of Mining and Metallurgy and has more than five years relevant experience.