SIPA RESOURCES INTERNATIONAL NL , page-2

From:   IBG Research Support 
Sent:   Tuesday, 25 June 2002 5:44 PM


Subject:        Sipa Resources - Waugh ore reserve estimate; exploration update - on behalf of Ian Prentice

These notes have been approved for external distribution

Stock:                                  SRI
Price:                                  $0.32
Market Capitalisation:                  $65 million
Current Valuation/Price Target: NPV $0.37 per share, S/T target +$0.50 per share
Recommendation:                         Speculative S/T Outperform, L/T Outperform

Event:          Waugh ore reserve estimate; exploration update

Details:

SRI has announced a reserve of 415,000t at 7.75g/t for 103,300oz for the Waugh deposit.  About 97% of the reserve is within the wholly owned Sipa ground, with the balance in the Limerick Hill Joint Venture with NCM.
Mining at Waugh is slated to start in mid August and take about 12 months to complete.  SRI has estimated cash costs of $250/oz.  The high grade Waugh ore will be blended with medium and low grade stockpile material (290,000t at 1.98g/t medium grade and 780,000t at 1.21g/t low grade).
Based on the Waugh reserve and the stockpile material, the Paraburdoo project will have a life of at least 2.5 years and produce about 150,000oz.
Recent exploration at Waugh has been aimed at sterilising areas to be used for waste dumps etc.  This work returned some deep intersections to the north of the proposed pit (best 13m at 4.9g/t from 116m) and surface gold mineralisation 500m west of Waugh at the newly defined Connie's Find Prospect (rock chip results up to 34g/t).
NCM, Limerick Hill JV operator, is currently drilling near Waugh (depth extent, eastern strike extension and the Connie's Find Prospect) and will be testing the Diligence Nose North and South Prospects.  SRI will begin drilling on four wholly owned targets (Diligence Dome South, Dinosaur, Marcus and Dragonfly) within about two weeks.

Impact:
Production from Paraburdoo based on the announced reserves and stockpiles is set to deliver cashflow of about $40 million (assuming a $560/oz gold price) over 2.5 years, with the majority of this cash in the first year. 
The discovery of additional mineralisation near Waugh, from the waste dump sterilisation program, underpins the prospectivity of the region.  Tthe Connie's Find Prospect highlights the potential to extend mining in the Waugh region, however as it is located on the Limerick Hill JV a deal with NCM would ultimately be required.
SRI's wholly owned exploration targets, all within a 5km radius of the treatment plant, have ore grade surface sample results combined with geology similar to either Waugh or Mount Olympus.  The upcoming drilling program should provide an early indication of the potential of these targets to host an economic orebody
The forecast cashflow of $40 million combined with the current cash position of about $17 - $18 million underpins the SRI share price.  The share price upside is in the exploration potential, with minimal value assigned to the exploration currently underway at Paraburdoo (on both the wholly owned and Limerick Hill JV ground).

Regards

Ian Prentice
Resource Analyst

Macquarie Financial Services
L28  Allendale Square
77 St Georges Terrace
Perth  WA

ph: (08) 9224 0701
mobile: 0412 414 931
fax: (08) 9224 0735