The company’s Parys Mountain polymetallic mineral deposit contains an in situ geological resource of 6.5 million tonnes. The total quantities of contained metal and the annual production of each metal are estimated to be as follows:

This chart is derived from Kilborn Engineering’s independent feasibility study which was completed in 1990 and which is based a mine production rate of 1,000 tonnes per day with separate zinc, copper, lead and gold concentrates. The chart has been based on  metal prices current during August 2004, directors’ estimates of future long term treatment charges and an exchange rate of US$1.83 to £1.

The chart (above) shows the sources of revenue for the Parys Mountain mine over the life-of-mine 6.5 million tonne probable and possible resource. It is estimated that using current prices the mine would generate more revenue from copper than from zinc. However in the earlier years of production, the position is reversed and zinc would account for more of the revenue than copper; also over this early period there would be a much more significant contribution from silver and gold. These changing proportions highlight the advantages of the poly-metallic deposit in smoothing the effects of individual metal price variations. Note that a lack of data may be part of the reason for the apparent lower precious metal revenue contributions in the possible resources. Not shown in the chart is the effect of the Welsh gold premium which can be expected from at least part of the gold production. It can also be seen that the mine would benefit from any increase in the future prices of any or all of these metals, particularly zinc and copper.

During the year the dewatering of the higher levels of the old mine workings at Parys Mountain was satisfactorily completed by Anglesey Council and others, and the water quality to the south of the Mountain has improved as a result. The old workings are separate from the area of our resources, however we believe there is useful information to be learned from them; additionally they are adjacent to a significant deposit, the Northern Copper zone, which was explored by major mining companies, including Noranda in the 1960s and 70s. At that time it was reported to contain 36,000,000 tonnes at an average grade of 0.66% copper. It apparently was not assayed for gold.

The operating loss for the year is almost unchanged at £120,005 compared with £121,299 last year before impairment. Of this loss £72,356 represents interest accruing in respect of the working capital loan from Juno Limited, the company's major shareholder, and the balance is the costs of evaluating other projects together with administrative and corporate expenses.

The improvement in metal prices means that there is no requirement to make any further impairment provision in respect of the accumulated costs of the Parys Mountain project this year. Indeed based on current metal prices, the impairment provisions made in the past three years would not have been necessary.

It was encouraging to note that the price of zinc increased substantially during 2003 reaching 45¢ per pound in December, well above the average of 35¢ per pound for 2002. In the first quarter of 2004 the zinc price increased further reaching a high of 52¢ per pound in early March. Devaluation of the US dollar against most producer country currencies was a contributing factor. Nevertheless even these prices are well below the historical medium or long term prices. The recent weakness of the US dollar has led to a rise in the operating costs of most zinc mines.

At the same time, after almost 20 years of excess zinc supply, a major supply gap is thought to be developing in world zinc markets. The opening of the new Century mine in Australia and the Antamina mine in Peru contributed to the oversupply of zinc from 2000 to 2002 but there are now believed to be no new large mine developments in the pipeline. At the same time, in 2002 China changed from being a large net exporter of zinc metal to a net importer with imports of over 370,000 tonnes in 2003, thereby reversing a major negative factor for zinc supply and zinc price. World wide zinc demand increased 4.2 per cent in 2003. China is now the largest consumer of zinc in the world and much of the growth is attributable to metal consumption in China.

At current metal prices approximately 38 per cent of the projected revenue from the Parys Mountain mine is expected to be derived from zinc (more in earlier years of production). Growth in zinc consumption is forecast to be strong in 2004 and Brook Hunt UK in its January Metal Bulletin forecast a supply deficit of over 300,000 tonnes in 2004; this in turn will lead to a reduction in LME inventories which should also lead to an increase in zinc prices

The price of copper increased strongly in 2003 driven largely by economic growth. The rapid growth in developing countries in Asia, and especially China, together with the recovery of the American and European economies, has led to strong growth in consumption at a time of low metal inventories. Copper concentrates in particular remain in tight supply and the shortfall in concentrate has led to significant reductions in treatment charges and reduced metal production. With few new large mines coming into production a continuation of the global economic recovery should sustain copper prices at reasonable levels for the immediate future.

Interestingly, 2003 marks the 15th consecutive year that silver demand has exceeded supply. This long-running consistent supply deficit is a particular characteristic of silver and has led some commentators to predict an eventual dramatic increase in the price of silver when Inventories finally run down. Parys Mountain contains about 8 million ounces of silver with a gross in situ value of over $50 million at today's prices.

For a number of years the directors have felt that the economics of Parys Mountain could be greatly enhanced if the mine production rate could be increased: higher daily production rates lead to better mine economics. There is no doubt that Parys Mountain has excellent potential for the discovery of the further resources needed to support higher production rates and with this in mind a major exploration programme has been planned, with the objective of delineating new mineral zones. Unfortunately, the weakness in metal prices, particularly zinc, which existed for about five years prior to 2004, made financing such an exploration programme difficult, except at share prices that would be very unattractive to existing shareholders. With the improvement in metal prices in 2004, and the projected deficit in zinc supply, which should lead to a longer term sustained increase in the price of zinc, the prospects for Parys Mountain have improved enormously.

To reactivate and advance the project, the following steps are planned, subject to financing:

• An update of the 1990 feasibility study, including examination of a 2,000 tonne per day production scenario (twice the rate used in the feasibility study) and a review aimed at optimising copper revenues.
• A review and reassessment of the Northern Copper zone to determine (a) if the zone contains any reasonable gold levels and (b) if there are any higher grade parts of the zone which could be mined and produced in conjunction with the polymetallic Engine and White Rock zones.
• An assessment of the viability of the early pilot production of gold and silver as part of a second stage underground exploration programme. Parts of the Engine zone near the shaft and current underground development are known to contain high grades of gold that perhaps could be mined and processed in conjunction with further exploratory work.
• A major drilling programme on exploration targets related (i) to the Engine zone to the north and east of the current established resource and (ii) to the west of the adjacent White Rock zone.

We are currently examining a number of options for financing the plans set out above. The directors believe that the company’s current share price, being less than both book value and projected net asset value, does not adequately reflect the value or potential of the company assets, and would be reluctant to issue new shares at this price.

The ability to grant share options under the company’s existing schemes having expired, we are proposing the adoption at the forthcoming AGM of a new share option scheme and recommend shareholders to vote in favour of this proposal which will provide the company with a valuable means of retaining and motivating those contributing to the success of the company.

The improved outlook for metal prices, and market sentiment, has opened the possibility of attracting a joint venture partner to help develop the Parys Mountain mine and this option is also being given careful consideration. At same time the improved outlook has also opened up other new project opportunities for the company. A number of these opportunities have been examined in recent months and this exercise is continuing. I hope be able to report meaningful progress on these objectives in the not-too-distant future.

I would like to thank shareholders for their continued patience and support through the lean times of the past few years. I believe we can now look forward to significant progress and better times ahead.

23 August 2004

Parys Mountain property

Location

The Parys Mountain property is located in the northern part of the island of Anglesey in north Wales. The mineral property is about 3 kilometres in length and covers more than 2 square kilometres. The company holds the freehold, including the mineral rights, to about half of this area. The other half, formerly leased, is subject to negotiation of an agreement over lease payments. The company also has a mining lease from the Crown for gold and silver over a wider area.

The property is located 2 miles south of the town of Amlwch. The port of Holyhead is 18 miles to the west. Access to the property is excellent by road, rail and sea. All necessary services and resources including power, engineering, maintenance facilities and labour are located nearby.

Parys Mountain has been the site of mining activity at various times since the Bronze age. During the 1780s Parys Mountain was believed to be the largest copper mine in the world. Open pit and underground mining were carried out over a strike length of more than 3 kilometres and to depths of about 200 metres, the deepest then achievable by known technologies. Almost all activities ceased by the beginning of the 20th century.

In the 1960s the search for a new mine at Parys Mountain commenced. Exploration in the 1960s and 1970s was focused on the extension of the old open pit workings and was directed towards copper. This exploration utilised a variety of geological, geophysical and geochemical methods together with approximately 285 diamond drill holes totalling about 60,000 metres of drilling. A resource of 36 million tonnes containing about 250,000 tonnes of copper metal (the Northern Copper zone) was identified at depth, however this is regarded as being too low a grade to mine economically unless combined with other deposits.

The modern phase of exploration of Parys Mountain began in the early 1980s when a new important polymetallic zinc, copper, lead, silver and gold area was identified about 1 kilometre west of and totally separate from the old workings. Between 1988 and 1990 a production shaft was sunk in this western area to a depth of 300 metres and 1,000 metres of lateral development were completed on the 280 metre level. Drilling and underground development work from 1988 to 1990 resulted in the identification of the Engine, White Rock and Chapel zones containing a resource of 6.5 million tonnes with a combined base metal (zinc, copper and lead) grade of 10.3%.

Approximately 2,000 tonnes of development ore were hoisted and successfully processed through a pilot plant constructed on the site for metallurgical testing; the concentrate production of about 200 tonnes was sold to the smelter at Avonmouth.

In 1990 Kilborn Engineering completed an independent feasibility study of the project that confirmed the technical and economic viability of a 1,000 tonnes per day (300,000 tonnes per year) mining and milling operation producing zinc, copper, lead and gold concentrates. Kilborn estimated the capital cost of the mine at £22 million. This study was based on a mineable reserve of 1,963,000 tonnes at a grade of 6.43% zinc, 1.30% copper, 3.32% lead, 75 grams of silver and 0.51 grams of gold per tonne and a mine life of seven years. This mineable reserve is in the shaft development area, being only a portion of the identified geological resource of 6.5 million tonnes.

Detailed mine and plant designs were prepared and planning permission obtained. At the same time an environmental protection programme was devised also giving attention to historical and archaeological concerns. Declining metal prices and weakening stock markets in 1991 and 1992 resulted in development of the project being placed on hold. The property has been maintained on a care and maintenance basis since that time.

Geological studies carried out over the past few years have identified new areas, including a possible new zone, with significant exploration potential. An extensive geological reassessment of the property was conducted between 1995 and 2000; this has resulted in the development of new geological models which indicate that there is potential for the discovery of substantial additional mineral resources in largely unexplored areas to the north, west and east of the established resource.

All this work has considerably improved the understanding of the stratigraphic and structural settings of various mineralised zones and significantly enhanced the potential for discovery of further mineralisation.

During 2003 the upper levels of the historic mine workings at Parys Mountain were dewatered and an underground concrete plug removed to facilitate natural drainage of the old workings to the north of the mountain. This work was carried out to reduce any flood risk and has improved water quality to the south significantly. The dewatering has also provided access to hitherto inaccessible areas of the old underground mine; new studies may now be conducted which could help towards a better geological understanding of the total Parys Mountain area.

The potential for the discovery of additional mineral resources in previously largely untested areas of the Parys Mountain property is considered to be very significant.

The Engine zone, which is the principal host of the known resources, has seen little exploration beyond the immediate area of the shaft. Further exploration of the Engine Zone is planned for the northern and north eastern parts of the property which have been largely unexplored to date and where widely scattered massive sulphide intersections demonstrate considerable exploration potential.

In a separate area a potential new zone of disseminated/semi-massive mineralisation has been identified at depth, down-dip from the White Rock Zone, along the western boundary of the volcanic complex, where the potential for continuation of mineralisation is considered excellent. The upper part of this possible new zone lies at a reasonable depth, within close proximity to the existing shaft and within reach of the present underground development.

The results of the geological reassessment and various studies carried out over recent years demonstrate clearly that the Parys Mountain property has strong similarities with other major volcanogenic massive sulphide (VMS) deposits elsewhere in the world and that the property has the potential for new discoveries which would make Parys Mountain comparable to other major volcanogenic hosted polymetallic deposits which are substantial sources of zinc, copper, lead, gold and silver.

Whilst the old workings now exposed by the drainage referred to above are separate from the Engine, White Rock and Chapel polymetallic zones, they are adjacent to the Northern Copper Zone which lies immediately to the north of the old workings. The Northern Copper Zone was extensively explored by major mining companies, including Noranda, in the 1960s and 1970s. At that time it was reported that the Northern Copper Zone contained a large resource of 36 million tonnes at an average grade of 0.66% copper, containing about 250,000 tonnes of copper metal.

The Northern Copper Zone was regarded at the time as being too low grade to mine economically, unless combined with other deposits, however the drill intersections apparently were never assayed for gold. Nevertheless the mineralisation at Parys Mountain is now known to usually contain gold although at a relatively low grade. The gold grade of the 6.5 million tonne polymetallic resource is estimated to be 0.32 grams per tonne, equivalent to 60,000 contained ounces of gold. If it can be demonstrated that the Northern Copper Zone contains even low grade gold it would have a meaningful impact on the potential of that deposit.

It is planned to re-examine the potential of the Northern Copper Zone as well as to undertake a major drilling programme to explore new exploration targets related to the Engine zones which have the potential to transform Parys Mountain into a very significant mineral deposit. Such a drilling programme would be one of the most comprehensive ever undertaken on the property. It would take at least one year to complete and is budgeted to cost about £500,000. However the programme cannot commence until appropriate financing is available.

The principal activity during the year was the maintenance and development of the Parys Mountain property. Operations at the Dolaucothi gold property in south Wales are suspended. Other mineral development opportunities continue to be evaluated.

The loss for the year before taxation was £120,005 (2003 - £2,121,299). The group has no revenues from the operation of its properties. The loss comprises interest, administrative expenses and non-Parys evaluation costs which, in accordance with the group’s accounting policy, are charged to the profit and loss account. There is no impairment provision this year (2003 - £2,000,000) (see below for further details). Included in the loss was £72,356 (2003 -£72,178) in respect of interest due. £49,557 (2003 - £51,260) was expended on corporate costs, administration expenses and the investigation and evaluation of exploration and development opportunities.

The directors’ review of the net value at which the accumulated development costs of Parys Mountain should be carried in the accounts indicates that this value is higher than the amount carried in the balance sheet and no impairment provision (2003 - £2,000,000) has been made this year. The directors’ review was based on calculations of discounted estimated future real cash flows using current estimates of proven and probable reserves and capital and operating costs, together with directors’ estimates of future metal prices and foreign currency exchange rates and in accordance with the provisions of FRS 11. Further details of the valuation of intangible assets are to be found in note 8.

During the year no fixed assets (2003 - £2,000) were acquired, £60,397 (2003 - £61,422) was capitalised in respect of the development of the Parys Mountain property and £500 (2003 - £500) was capitalised in respect of the Dolaucothi property.

For the first time for some years, base metal prices have reached a level where mining of the company’s resources at Parys Mountain is considered to be economically viable. The directors are keeping this situation under review. In the meantime, Juno Limited, the company’s major shareholder has continued to provide funding for the company’s routine expenses under a working capital agreement.

The dewatering (by others) of the historic mine workings at Parys Mountain was completed during the year and is expected to improve water quality to the south of the Mountain significantly.

The group has no revenues and the directors are unable to recommend a dividend. Since the date of the accounts the activities of the group have continued in accordance with the directors' expectations. The directors remain attentive for opportunities to be involved in appropriate new mineral ventures.

The names of directors with biographical details are shown on the inside rear cover. There have been no changes in the year. In accordance with the articles of association, John Kearney and Ian Cuthbertson retire by rotation and, being eligible, offer themselves for re-election.

There are no other contracts of significance in which any director has or had during the year a material interest.

The interests at 31 March 2004 of the directors in the share capital of the company, all of which are beneficial, are set out below. The holdings are expressed as a percentage of 116,241,384 (2003 – 116,241,384) ordinary shares, this being the number of ordinary shares in issue at 18 August 2004.

It is proposed to introduce a new unapproved share option scheme at the AGM, the time for inviting options under company’s other schemes having lapsed. Further information on this proposed new scheme is set out in the Directors’ Remuneration Report.

At 18 August 2004 the following shareholders had advised the company of an interest in the issued ordinary share capital of the company.

The company is aware of a holding of 7,250,000 shares (6.2%) in the name of FGL Asset Management Limited, a Hong Kong based nominee account, which has been notified as being held on behalf of clients none of whom have a beneficial interest in more than 3% of the issued ordinary share capital of the company. So far as the company is aware there are no other interests of more than 3% in the ordinary share capital of the company.

In the light of the company’s limited financial resources and the requirement to raise further funds, the directors wish to have a larger than usual number of shares available for issue. Although the directors would usually wish to allot any new share capital on a pre-emptive basis, they believe that it is appropriate to have a larger amount available for issue at their discretion without pre-emption than is usually the case for other listed companies. Accordingly a resolution will be put to the AGM to renew the directors' authority to allot equity securities for cash without pre-emption. In the case of allotments other than for rights or other pre-emptive issues, it is proposed that such authority will be for up to £290,000, being 29,000,000 ordinary shares, which is equivalent to 25% of the issued ordinary share capital at 18 August 2004. Whilst such authority is significantly in excess of the 5% of existing issued ordinary share capital which is more usual for listed companies, it will provide additional flexibility which the directors believe is in the best interests of the company in its present circumstances.

In August 1997 the freehold of the western part of Parys Mountain was purchased by the company. Obtaining an accurate estimate for the value for this land is difficult, especially given its historical use and that the company’s pre-existing interest in the mineral rights would also have to be taken into account. The land is carried in the accounts at its cost to the company of £120,000. In the opinion of the directors, the market value of this land is unlikely to be significantly less than this figure.

As in previous years the directors have given careful consideration to the appropriateness of the going concern concept in the preparation of the financial statements. The validity of the going concern concept is dependent on finance being available for the continuing working capital requirements of the group and finance for the development of the Parys Mountain property eventually becoming available. The directors believe, based on ongoing support from the major shareholder in respect of continuing working capital requirements, that, whilst there is uncertainty as to whether the conditions above will be met, the going concern basis is appropriate for these financial statements.

The group conducts its business on the normal trade credit terms of each of its suppliers and tries to ensure that suppliers are paid in accordance with those terms. The group’s average creditor payment period at 31 March 2004 was 89 days (2003 - 70 days).

The group made no contributions during the year (2003 - nil).

The group is an equal opportunity employer in all respects.

Deloitte & Touche have indicated their willingness to continue in office and a resolution to re-appoint them and to authorise the directors to fix their remuneration will be proposed at the annual general meeting.

23 August 2004

The remuneration committee is comprised of Howard Miller (chairman) and Danesh Varma. No remuneration consultants were employed during the year.

The board’s aim, implemented by the committee, with regard to executive and non-executive directors’ remuneration, is to provide a package which will attract, retain and motivate directors of the calibre required and be consistent with the group’s limited ability to pay directors in cash. Consequently share options form a major part of the executive directors’ remuneration and all of the non-executive directors’ remuneration.

The time period for issuing options under company’s existing share option schemes having expired, the directors consider it to be desirable and in the best interests of the company that a new scheme be adopted by the company at the forthcoming AGM and that new and replacement share options be granted by the directors under that scheme. A copy of the rules of the proposed scheme is provided with this annual report. The scheme is open to all the directors, employees and consultants working for the company and has no limits on individual option grants but includes an overall limit on the number of options which may be issued under this or any other scheme of the company of 10% of the issued ordinary shares. The grant of share options is at the discretion of the Remuneration Committee and none of the benefits of the scheme are pensionable. The Committee may alter the Scheme at any time provided that no alteration or addition to the advantage of any existing participant or person eligible to participate may be made without prior approval of the shareholders of the company unless such alteration is a minor amendment to benefit the administration of the Scheme.

The directors believe the adoption of this scheme will provide the company with a valuable means of retaining and motivating those contributing to the success of the company.

There are no directors’ service contracts and, except in the case of Ian Cuthbertson, no arrangements in force whereby the group is under an obligation to pay fees, salaries, pensions or any other remuneration to any of the directors.

All directors and employees are eligible to receive options. In determining the amount of options to be granted to each individual, the directors take into account the need for and value of his services, the amount of time he spends on the business of the group and any other remuneration receivable by him from the group.

In respect of those share options marked with an asterisk in the table overleaf, there are performance criteria to be met, namely that the company’s share price performance over the period from grant to exercise must exceed that of the companies in the top quartile of the FTSE 100 index. This index was selected as being an easily available benchmark of general corporate performance. There are no performance criteria to be met in respect of other share options. Each grant of an option was made at a cost to the participant of £1.

This graph shows the total shareholder return over a five year period for the company and for the FTSE Allshare Mining index, being the most appropriate comparative available for the company covering the past five years.

Audited information:

Pension contributions are to a money purchase pension scheme. Benefits are in respect of the provision of a van.

Details of each share option held (all of them beneficial) by all those who were directors at the beginning of the year are set out below. There have been no options exercised during the year. All options are over ordinary shares of 1 pence each.

*Performance condition applies.

The board intends to replace lapsed share options and to grant further options on a specific basis after the adoption of the share option scheme to be proposed at the AGM.

The market price of the ordinary shares at 31 March 2004 was 4.00 pence, the high for the year to 31 March 2004 was 4.50 pence and the low for the year was 1.75 pence. The mid-market price at 18 August 2004 was 4.00 pence.

23 August 2004

The board regularly considers its policies and practices in relation to corporate governance in the light of the Combined Code on Corporate Governance appended to the Listing Rules issued by the Financial Services Authority.

The board supports the highest standards in corporate governance and endeavours to implement the principles of the Combined Code in such a manner as not to hinder the development of the group. This is perhaps harder in a small group than in the larger organisations with which the Combined Code is chiefly concerned.

Throughout the year the group has been in compliance with the Code provisions set out in section 1 of the Combined Code on Corporate Governance issued by the Financial Services Authority, except as set out below:

• The board meets when required and not on a fixed schedule.
• There is no formal nomination committee for appointment of new directors.
• There is no formal schedule of matters reserved for the board, since the board deals with all matters of substance.
• The directors were not appointed for specific terms but are subject to retirement from the
  board by rotation at annual general meetings at intervals of no more than three years.
• John Kearney is the chairman and chief executive. In the light of the size and activity level of the group, the board believes that combining these roles is appropriate for the group at present.

During the year the board was comprised of two executive directors and three non-executive directors. For the purposes of the Combined Code Howard Miller is the senior independent non-executive director and David Lean is an independent director. The audit committee comprises Danesh Varma and David Lean. The remuneration committee comprises Howard Miller and Danesh Varma. The company’s strategy is determined by the whole board.

The board meets when required and all directors have access to the advice and services of the company secretary. All board members are supplied with relevant and timely information. There is an established procedure by which directors may, at the company’s expense, take independent advice in the furtherance of their duties.

The board of directors is responsible for and annually reviews the group’s systems of internal control, financial and otherwise. Such systems provide reasonable and not absolute assurance of the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The key feature of the group's financial control system is that board members directly monitor all payments and transactions as well as budgets and annual accounts. The board considers it inappropriate because of the company’s limited operations to establish an internal audit function at present, however this decision is reviewed annually.

In reviewing the other risks facing the company, the board considers it is sufficiently close to the company’s operations and aware of its activities to be able to adequately monitor risk without the establishment of any formal process. The company may become subject to risks against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons. The board believes the significant risks facing the company are adequately disclosed in these financial statements and that there are no other risks of comparable magnitude which need to be disclosed.

Independent Auditors Report to the members

We have audited the financial statements of Anglesey Mining plc for the year ended 31 March 2004 which comprise the balance sheets, the consolidated profit and loss account, the consolidated cash flow statement and the related notes 1 to 26. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the directors’ remuneration report that is described as having been audited.

This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

As described in the statement of directors' responsibilities, the company's directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. They are also responsible for the other information contained in the annual report including the directors’ remuneration report. Our responsibility is to audit the financial statements and the part of the directors’ remuneration report described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors’ remuneration report described as having been audited are properly prepared in accordance with the Companies Act 1985. We also report if, in our opinion, the directors’ report is not consistent with the financial statements and the part of the directors’ remuneration report described as having been audited, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the company and other members of the group is not disclosed.

We review whether the corporate governance statement reflects the company's compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the group's corporate governance procedures or its risk and control procedures.

We read the directors’ report and the other information contained in the annual report for the above year as described in the contents section including the unaudited part of the directors’ remuneration report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the directors’ remuneration report described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors’ remuneration report described as having been audited.

In forming our opinion we have considered the adequacy of the disclosures in the financial statements concerning the basis of preparation and the recoverability of development costs.

The financial statements have been prepared on a going concern basis, the validity of which depends on:

• the group’s ability to continue its operations;
• the raising of new finance to develop the mine;
• the viability of the operation of the mine; and
• the ability of the group to trade profitably in the future.

The financial statements do not include any adjustments that would result should the above conditions not be met. Details of the circumstances relating to this fundamental uncertainty are described in note 1 to the financial statements.

The financial statements disclose the directors' assumption that the development costs included in intangible fixed assets in the consolidated balance sheet at £5,217,006 (2003 - £5,156,609) and that investments totalling £5,052,457 (2003 - £5,038,060) included in the company balance sheet will be recovered by the operation of the mine. The validity of this assumption depends upon the viability of the operation of the mine, the ability of the group to raise the funding referred to above and the ability of the group to trade profitably in the future. Details of the circumstances relating to this fundamental uncertainty are described in notes 8 and 10 to the financial statements. Our opinion is not qualified in respect of the above fundamental uncertainties.

In our opinion, the financial statements give a true and fair view of the state of affairs of the company and the group as at 31 March 2004 and of the loss of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985.

Consolidated Profit and Loss Account

The group has no recognised gains or losses other than the losses shown above and therefore no separate statement of total recognised gains and losses has been presented.

There is no difference between the loss on ordinary activities before taxation and the retained loss for the year stated above, and their historical cost equivalents.

Consolidated Cashflow Statement

The deferred shares are non-voting, have no entitlement to dividends and have no preferential right to return of capital on a winding up.

A summary of options granted and outstanding, all of which are over ordinary 1 pence shares, is as follows :