1st quarter Activity report, page-2

Thank god someone else out there is keeping an eye on EMP. I was unlucky enough to dive in, in a big way the day before PPT sold 4million shares into the market. Oh Well, I am comfortable for the mid to long term. It just hurts big time when you are 1 day too early in your purchase. Below is some responses I received fromt eh company regarding the hedging policy and the sale of PPT shares.

Q:
Sorry mate I forgot to ask what price the hedged production is set at?
Is it in $US or $Australian?
No problems.
The average price is A$566/ounce.

Please do not hesitate to contact me if you require any additional information.
Regards
Andrew J Cooke
Company Secretary
Emperor Mines Limited
Suite 904, Level 9
50 Margaret Street
Sydney NSW 2000
Tel (61 - 2) 9299 7422
Fax (61 - 2) 9299 7433
Mob (61) 0412 090 826

Thank you very much for clarifying PPT sales in such a quick response.
At what point/timeframe does EMP have to pay their 350000 ounces back to the hedgor?

Repayments are 85,140 ounces per annum through to 2005/2006 and then 21,285 ounces in 2006/2007.

Regards
Andrew J Cooke
Company Secretary
Emperor Mines Limited
Suite 904, Level 9
50 Margaret Street
Sydney NSW 2000
Tel (61 - 2) 9299 7422
Fax (61 - 2) 9299 7433
Mob (61) 0412 090 826

I have been a long-term shareholder of Emperor and have a few concerns over the hedge book of this company and the recent ASX announcements. I currently own 55000 shares in your company and have watched Perpetual dump their holding into the market over the last 4 weeks.

It appears to me that the notice for change as at the 20th September stated that PPT still held over 6 million shares.

You gave notice that they had sold their holding down to a non significant holder. What intrigues me is that the notice of PPT failing to be a substantial shareholder on the 25th of September occurred a few days before about 6 million shares in very large orders hit the market both during the normal course of the day and also after 4pm. The largest trades went through after the announcement of the 25th of September. The days after this notice there were some exceptionally large sell orders that went through. Either the notice of PPT no longer being a substantial shareholder was pre emptive of them selling their holding or someone else has sold 4,000,000 shares after this announcement, without you making announcement to the ASX. Can you please explain?

Please be aware that a Substantial Holder is defined as a person/entity holding 5% or more of the issued capital.
Accordingly the Notice of Ceasing to be a Substantial Holder given by PPT on 26 September 2002 indicated that they no longer held 5% of more – but could very well have still held up to 5% (5.6 million shares). PPT may have sold these shares after 26 September 2002.
The Company does not give Substantial Holder notices and has not stated or given notice “that they had sold their holding down to a non significant holder”.
The Company does not intend to increase its current hedge position, which at this stage represents less than 10% of resources.
Please do not hesitate to contact me if you require any additional information.

Regards
Andrew J Cooke
Company Secretary
Emperor Mines Limited
Suite 904, Level 9
50 Margaret Street
Sydney NSW 2000
Tel (61 - 2) 9299 7422
Fax (61 - 2) 9299 7433
Mob (61) 0412 090 826



The below article underlines the distinct possibility that the manipulators and major world hedgers may be in for a torrid time. My questions regarding the hedge book of Emperor are

1.. Is there any consideration to reduce this further and, if so, what time period.

2.. The effect on the company with gold reaching and sustaining a price above $350USDL per ounce.

3.. Does the increase in POG put Emperor in a poor position as far as Spot Sales.

It appears to me that the general investor population in gold is staying clear of Emperor. The only reason I can see is that companies making good headway in their share price are typically those with a minimal or no hedge policy.



October 18 - Gold $312.50 up $1 - Silver $4.35 up 2 cents

Gold Demand Very Strong / Sons of Gwalia In Big Trouble As Advertised?

Right now the markets are full of noise. The only meaningful changes this week are that the gold fundamentals got better and better, while the economic news got worse and worse.

The Gold Cartel is on its last legs and this will be another failed attempt at blowing the gold house down. What we are witnessing is nothing more than pre-election market rigging and Wall Street rah-rah. After all the corruption news this past year and scandal after scandal, little has really changed as far as the US Government and Wall Street are concerned. It is really business as usual. How grotesque!

Besides the increasing stories all over the world of STRONG demand for physical gold, the big story has to be this one on Sons of Gwalia from Australia:

Hi Bill,
Just got this from a mate,
Right now SGW.AX has fallen 27.13% and its one hour past lunch
I think the shareholders are trying to tell them something and it ain’t nice
!!!!!
best
Steve Jenkins

Later, on Dow Jones:

1455 [Dow Jones] Nothing acting to prop up Sons of Gwalia (SGW) shares, which still down 24% at A$3.38 on volume of 4.3 million after miner issues FY03 profit warning citing technical problems at gold mine and fall in tantalum demand. However, chart shows major support at session low of A$3.16 (December 1997 low). SGW cuts tantalum sales projections by 300,000 pounds to 2 million pounds; company's comment that it expects 2H profit to exceed 1H not reassuring investors. (MDB) -END-

Sons of Gwalia is one of the world’s most prolific hedgers. I believe they are hedged as far out as 10 years to some degree. Now, isn't it interesting that, like BARRICK, Sons of G is all of a sudden having gold output problems? Why is it the large hedgers are having these problems at the same time? Is it a coincidence that their mines are having problems at the same time derivative counterparty JP Morgan Chase is under siege?

I told chairman Peter Lalor at the Denver Gold Group Conference 3 years ago that if he did not change his hedging ways, his firm was headed for the toilet. Once gold takes out $330, it will be time to flush.

Mr. Lalor did not take his own advice. From a mining story last year:

Nov 16, 2001
"I would imagine that counter-party banks would be starting to worry," said Peter Lalor, executive chairman of Sons of Gwalia Ltd (ASX: SGW), Australia's number five gold miner and a big hedger. "There are a lot of them (banks) out there and I imagine the scale of the business is obviously going to be reduced."

Over the past year, the price of gold has risen around $37. Since the beginning of this year, the share price of Sons of Gwalia has crashed from the $6/$7 area to the $3.25 area and is about to make 5-year lows (9-year lows in Aussie dollars). Big hedger Placer Doom is near 5-year lows too. The share price of mega hedger Barrick is dreadful. This is NOT a coincidence. There are major problems in the derivatives arena. When the price of gold takes out $330, the gold derivative neutron bomb will go off, which will set off even more problems in the rest of the derivatives world. Many of the major gold hedgers are flirting with total disaster. Café members have known that for a LONG time. Thank goodness!

Anyone wishing to bone up on this topic may do so by doing a Sons of Gwalia SEARCH (see bottom of Le Menu).

PS
EVEN if this really is a gold mine production problem, how does Sons of Gwalia handle their massive derivatives short position on gold they will not produce?

Somebody find our bugler for this beleaguered Aussie firm: Taps it is!