Interim Results

RNS Number:6737Q
Gold Mines Of Sardinia PLC
08 October 2003


For Immediate Release          8 October 2003



                Gold Mines of Sardinia plc ("GMS plc or GMS")
            Interim results for the six months ended 30 June 2003
(GMS invests in mineral resource projects, primarily gold, in Sardinia, Italy)






DIRECTORS' REPORT - SIGNIFICANT EVENTS





* Full Riches Investments Ltd


Please see separate announcement made earlier today


* Canley Developments Inc - Joint Venture


As announced on 27 March, 2003 the parent company, Gold Mines of Sardinia plc
(GMS plc) and its Italian subsidiary, Sardinia Gold Mining S.p.A. (SGM) entered
into a Heads of Agreement with Canley Developments Inc, a Canadian corporation,
under which Canley had the option to earn up to a 45% equity interest in the
company's Furtei mining and explorations concessions in Sardinia.


On May 28, 2003, as provided for in the Heads of Agreement, the company
announced that it has now executed a more formal Option Agreement and Joint
Venture Terms with Canley, which embodies the terms of the Heads of Agreement.


Under the Option Agreement, Canley has an option over a 45% interest in the
Furtei Project comprising the mine and its surrounding exploration tenements in
return for spending 100% of the exploration and mining expenditure required for
the Furtei project, to an amount of Euro15 million. The term of the option is eight
years. Canley can earn its interest in two stages of 22.5% for each Euro7.5 million
spent, at a minimum rate of Euro1 million in the first year, and Euro2 million in each
successive year.


Canley's earn-in expenditure will be carried out in joint venture ('JV') with
GMS plc and SGM, and SGM will act as manager. The final structure of the joint
venture at Furtei is expected to be effectively 45% each to GMS plc and Canley,
and 10% to Progemisa S.p.A., a corporation owned by the Sardinian Government.
After Canley has earned its 45% interest, it will pay 50% of all future Furtei
project costs, and GMS plc, which presently funds the whole of the project's
expenditure requirements under separate arrangement with Progemisa, the
remaining 50%. If Canley earns only a 22.5% interest, it will pay 25% of project
costs and GMS plc will effectively pay 75%.


Canley also has a right, exercisable for six months, to nominate two areas of up
to 100 square kilometres other than the Monte Ollasteddu prospect. Canley will
then have the exclusive ability for 3 months to negotiate with GMS plc on the
terms of a possible JV for exploration and mining on the nominated areas.


Under the Option Agreement and in addition to operations carried out at Canley's
sole cost, GMS plc retains the right to utilise the Furtei mining plant for
processing material from sources outside the Furtei Project, and also to carry
on operations on its own account, on a total cost recovery basis.



* Canley Developments Inc - Placement


On May 28, 2003, GMS plc announced that it had placed 11,111,111 ordinary shares
to Canley Developments Inc., at a price of 9 pence per share, to raise #1
million. Each share is accompanied by an unlisted warrant, which entitles the
holder to subscribe for one ordinary share in GMS plc at a price of 11 pence,
exercisable for a period of two years from the date of issue.


NB: In July 2003, Canley Developments Inc changed its name to Sargold Resource
Corporation.



* Barrick Gold Corporation / Homestake Mining Company of California


As announced by Gold Mines of Sardinia Pty Limited (GMS Pty Ltd) in January
2002, an agreement was entered into by GMS Pty Ltd, SGM and Homestake Mining
Company of California (Homestake) (now a subsidiary of Barrick Gold Corporation,
pursuant to which options were granted to Homestake to joint venture two areas
in Sardinia.


The first option related to the Monte Ollasteddu area and was exercisable by the
later of 30 June 2003, or 31 days after the primary data from an initial
drilling programme on the area had been received.


GMS plc announced on 5 September 2003 that Barrick / Homestake have now
withdrawn from the Monte Ollasteddu venture for strategic reasons. This decision
was formalised by the execution of a Mutual Release and Termination Agreement
between GMS plc, SGM and Homestake.


The second option for Homestake to joint venture a second area nominated by
Homestake within Sardinia was not exercised and expired on 31 December 2002.



* Bolivar Gold Corporation - Post 30 June 2003 developments

On 5 September 2003, GMS plc announced that it had signed a letter of intent
with Bolivar Gold Corporation. (TSX: BGC) ("Bolivar"). The two companies will
form a JV to develop GMS's Monte Ollasteddu gold project in Sardinia, Italy.
Under the terms of the agreement Bolivar will be able to earn up to a 70%
interest in the project on the successful completion of certain development
milestones. The JV will seek to undertake extensive drilling to quantify the
site's gold resources with a view to the establishment of production.

Under the proposals outlined in the letter of intent, Bolivar will earn a 15%
direct interest in the project upon receipt of all necessary research and access
rights to the Monte Ollasteddu prospect, a further 40% on completion of a
pre-feasibility study and an additional 15% upon completion of a bankable
feasibility study.

Bolivar will finance 100% of project expenditure until the bankable feasibility
study has been completed.

Should Bolivar earn its full 70% interest in the project, GMS plc will retain a
20% participating interest and Progemisa S.p.A. (a corporation owned by the
Sardinian Government) will retain a 10% carried interest.

Completion of the transaction is subject to various regulatory approvals and the
execution of a detailed JV agreement, which is expected to be completed within
60 days.

After the parties have entered into the detailed JV agreement, GMS plc will
grant Bolivar options to acquire GMS plc stock, exercisable for five years at an
exercise price calculated as the weighted average sale price for stock exchange
trades for the ten trading days immediately prior to grant. The number of
options will not exceed the equivalent of 10% of the presently issued share
capital. The options will be exercisable only when Bolivar has commenced a
drilling program approved by the JV for the Monte Ollasteddu project.

* Change of status of subsidiary company


With effect as and from 25 March 2003 Gold Mines of Sardinia Limited converted
in accordance with the Corporations Act 2001 of Australia from a public company
limited by shares to a proprietary company limited by shares. The name of the
company accordingly changed from Gold Mines of Sardinia Limited to Gold Mines of
Sardinia Pty Ltd. The company's Australian Company Number remains unchanged.

There are no other significant changes in the state of affairs of GMS plc and
the group that have not been referred to separately in this report.


REVIEW OF OPERATIONS - FURTEI EXPLORATION

HIGHLIGHTS


   *Reverse Circulation (RC) drilling performed on the Su Masoni deposit at
    Furtei returned positive results of 21m @ 4.85 g/t Au and 16m @ 3.16 g/t Au.
   *Sargold Resource Corporation (formerly Canley Developments Inc.) to
    inject a minimum of Euro1 million in first year and a total of Euro15 million over
    8 years to earn up to 45% of the Furtei Project.
   *A review and interpretation of all existing exploration data sets in
    conjunction with recently completed geophysical self-potential and (micro)
    gravity surveys resulted in the generation of 28 new targets for drill
    testing in the Furtei Mine corridor.
   *New vein structures have been identified in the Bruncu de Didus area in
    the southwest part of Furtei. Rock chip grab samples returned 28.8 g/t Au,
    15 g/t Au, 9.32 g/t Au, 9.0 g/t Au and up to 77 g/t Ag. Best channel samples
    include 3m @ 6.06 g/t Au. The mineralised structures form part of the
    intermediate sulphidation epithermal structures, which can be traced for 2-3
    km along the strike at surface.


EXPLORATION


A short programme of RC drilling was performed at the Su Masoni deposit to close
off high-grade sulphide mineralisation at the eastern end in preparation for
re-evaluation of the resource for open cut mining. A total of four holes were
drilled, best results include:


MAR 213, 21m @ 4.85 g/t Au (from 54m) and

MAR 217, 16m @ 3.16 g/t Au (from 54m).

The mineralisation remains open to the east and at depth. Deeper diamond
drilling is planned as part of the Sargold Joint Venture to test previous high
grade diamond drill results beneath Su Masoni of 5m @7.12 g/t Au from 180m in
drill hole MAD 108 and 3m @ 20.07 g/t Au and 2.98% Cu from 174m in drill hole
MAD 107.

In the southwest of the Furtei area, from Bruncu de Didus to Didus Est (Fig 1)
quartz-carbonate-barite veins crop out in 3 separate structural zones of up to 3
km strike length. These mineralised zones are interpreted to be of intermediate
sulphidation style and contain high gold and silver grades in surface sampling.
Recent sample results include; 3m @ 6.6 g/t Au in channel sampling and 28.8 g/t
Au, 9 g/t Au and 77 g/t Ag from grab samples at Monte Canniu and 15 g/t Au and
9.32 g/t Au from grab sampling at Bruncu de Didus Est.

A comprehensive review and re-interpretation of all previous exploration data
sets such as ground magnetics, geophysical Induced Polarisation surveys,
geochemical sampling, drilling data, Landsat imagery, geological and alteration
mapping has been performed for the Furtei Mine corridor area. This has resulted
in an integrated geophysical, geological and geochemical interpretation to
construct a predictive model on the controls on the three main mineralising
styles at Furtei.

The recently completed geophysical self-potential (SP) survey performed over the
entire Mine corridor area (designed to locate conductive bodies; for example
sulphide mineralisation) shows very good correlation of SP minima with all known
and outcropping high sulphidation styles of epithermal mineralisation. The SP
geophysical technique can potentially detect conductive bodies at depth that
have no surface expression to depths greater than 500 metres below the surface.

There are numerous other SP anomalies that are coincident with favourable sites
for new gold deposits that are interpreted in the mineralisation model above. A
total of 28 new drill targets have been generated and each has the potential to
host significant mineralisation.

A close spaced (micro) gravity survey was completed along with the SP survey. A
close spatial relationship with gravity highs underlies the northeast-southwest
and north-south mineralised trends. In addition, new circular features, possibly
representing ring structures around volcanic centres, have been identified in
between Cima-Est and Bruncu de Didus and major basement faults have been
delineated.

A programme of 7,000m of diamond and RC drilling will commence in September 2003
as part of the recently concluded Joint Venture with Canadian listed Sargold
Resource Corporation. Sargold are to spend Euro1 million in the first year of
exploration and a further Euro14 million over the next 7 years to earn 45% of the
Furtei Project. The initial first year programme is designed to test up to 17
separate targets defined by the complete review of the structural controls of
gold mineralisation in the Furtei mine corridor. Some of the targets are close
to the defined underground reserves at Furtei.


REGIONAL EXPLORATION


Data acquisition and interpretation of previous radiometric surveys completed
over parts of northeastern and southwest Sardinia is nearing completion. The
radiometric data will assist in delineating the strike continuity and new
mineralised gold bearing structures associated with the orogenic gold event
during the Hercynian Deformation. Such mineralised structures occur at the bulk
tonnage gold targets at Monte Ollasteddu and San Vito and the high-grade veins
at Torpe'.

The tenement for Monte Ollasteddu has been granted by the Mines Department.
However, drill permit access to the prospect is presently awaiting formal
approval from the Ministry of Defence in Rome. A programme of RC and diamond
drilling has been planned to test the central and western zones of the 4km long
quartz-sulphide mineralised zone.


FURTEI MINE PRODUCTION

The treatment plant completed treatment of stockpiled ores early in the second
month of the year, leading to the complete suspension of all treatment plant
activities shortly after. This resulted in the treatment plant employees joining
the mine employees in "Cassa Integrazione" which enables them to remain SGM
employees but with a reduced salary paid by the Italian Government.

During the shutdown period maintenance work is ongoing on both the mining fleet
and the treatment plant, and the Dump Leach remains in operation.

Total Gold Production for the half year was 1,153oz.


                             Production Statistics

                                   6 Months to    6 Months to    6 months to
                                   30 June 2003   31 Dec 2002    30 June 2002

Dry Tonnes Milled                        18,763         95,289        117,110
Total Gold Produced (Oz)                  1,153          8,832         11,453
Total Copper Produced (t)                  16.0          384.0          863.0
Total Mine Cash Op Cost (per Oz)        US $473        US $376        US $286


OSILO PROJECT


There was no significant movement in the Osilo Project during the period.







GOLD AND OTHER METAL SALES


A total of 845 ounces of gold was sold during the reporting period; 662 ounces
of gold in bullion and 183 ounces of gold in concentrate (2002: 6,167 oz in
bullion and 6,465 oz in concentrate). The average realised gold price for gold
in bullion and gold in concentrate for the six months to 30 June 2003 was US$345
(2002: US$297). All gold (and silver) sales were at the spot price on the day of
delivery.

 ------ --------------------        ------      --------------    --------------
                                                6 months ended    6 months ended
                                                  30 June 2003      30 June 2002
 ------ --------------------        ------      --------------    --------------
(i)        Bullion Sales
 ------ --------------------        ------       --------------    --------------
        Gold                        Oz                    662             6,167
 ------ --------------------        ------       --------------    --------------
        Silver                      Oz                    103             1,900
 ------ --------------------        ------       --------------    --------------
        Gold Equivalent Factor                             76                64
 ------ --------------------          ------     --------------    --------------
        Gold Equivalent             Oz                    663             6,197
 ------ --------------------        ------       --------------    --------------
(ii)      Concentrate Sales
 ------ --------------------        ------       --------------    --------------
        Gold                        Oz                    183             6,465
 ------ --------------------        ------       --------------    --------------
        Copper                      Tonnes                  -               870
 ------ --------------------        ------       --------------    --------------

 ------ --------------------        ------       --------------    --------------
(iii)       Average Realised
            Price
 ------ --------------------        ------       --------------    --------------
        Gold                        US$/oz                345               297
 ------ --------------------        ------       --------------    --------------
        Silver                      US$/oz                4.5               4.4
 ------ --------------------        ------       --------------    --------------
        Copper in Concentrate       US$/t                 n/a             1,523
 ------ --------------------        ------     --------------      --------------

 ------ --------------------        ------     --------------      --------------
(iv)       Total Sales Revenue
 ------ --------------------          ------     --------------    --------------
        Gold                           US$            228,338         1,835,789
 ------ --------------------          ------     --------------    --------------
        Silver                         US$                467             8,455
 ------ --------------------          ------     --------------    --------------
        Net Concentrate Revenue        US$             62,278           903,158
 ------ --------------------          ------     --------------    --------------









CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2003

                                      6 months to   6 months to 30   Year ended
                                                       June 2002
                                      30 June 2003    (Unaudited)   31 December
                                                                          2002
                                       (Unaudited)           #000     (Audited)
                                              #000                        #000

TURNOVER                                       331          2,711        4,379

Change in stocks of gold in circuit,           (53)          (110)        (181)
refined gold and concentrate
Raw materials and consumables                 (183)          (556)      (1,351)
Other external charges                        (865)        (1,375)      (1,602)
Staff costs                                   (781)          (837)      (1,556)
                                           ---------       --------    ---------
Depreciation and other amounts
written off, tangible and
intangible                                    (232)        (3,727)      (5,166)
                                           ---------       --------    ---------
OPERATING LOSS                              (1,783)        (3,894)      (5,477)
Exceptional item - Scheme of                     -              -         (201)
Arrangement costs
Interest payable                               (26)           (49)         (91)
                                           ---------       --------    ---------
LOSS ON ORDINARY ACTIVITIES BEFORE          (1,809)        (3,943)      (5,769)
TAXATION
Tax on loss on ordinary activities               -              -            -
                                           ---------       --------    ---------
LOSS ON ORDINARY ACTIVITIES AFTER           (1,809)        (3,943)      (5,769)
TAXATION

Minority interests
Equity                                           -             27           25
                                           ---------       --------    ---------

RETAINED LOSS ATTRIBUTABLE TO               (1,809)        (3,916)      (5,744)
SHAREHOLDERS                               =========       ========    =========


Loss per share - basic                        (0.7)p         (1.5)p       (2.2)p
Loss per share - fully diluted                (0.7)p         (1.5)p       (2.2)p


CONSOLIDATED STATEMENT OF TOTAL
RECOGNISED GAINS AND LOSSES
Loss for the financial year                 (1,809)        (3,916)      (5,744)
attributable to members                    ---------       --------    ---------

Exchange differences on
re-translation of net assets of
subsidiary undertaking                      (3,707)          (375)        (169)
                                           ---------       --------    ---------

Total recognised gains and losses           (5,516)        (4,291)      (5,913)
relating to the year                      
                                           =========       ========    =========







CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2003

                                           30 June        30 June           31
                                                                      December
                                              2003           2002         2002
                                       (Unaudited)    (Unaudited)    (Audited)
                                              #000           #000         #000

FIXED ASSETS
Intangible assets                            8,231          7,987        7,480
Tangible assets                              2,572          3,060        2,570
Investments                                      -            240            -
                                          ----------     ----------   ----------
                                            10,803         11,287       10,050
                                          ----------     ----------   ----------

CURRENT ASSETS
Stocks                                         371            556          424
Debtors: amounts falling due within          1,029          1,421        1,315
one year
Cash at bank and in hand                       550          2,482        1,232
                                          ----------     ----------   ----------
                                             1,950          4,459        2,971

Creditors: amounts falling due within         (794)        (1,821)      (1,532)
one year                                  
                                          ----------     ----------   ----------

NET CURRENT ASSETS                           1,156          2,638        1,439
                                          ----------     ----------   ----------

TOTAL ASSETS LESS CURRENT                   11,959         13,925       11,489
LIABILITIES

Creditors: amounts falling due after
more than one year
                                            (3,642)        (3,403)      (3,433)

PROVISIONS FOR LIABILITIES AND              (1,296)        (1,169)        (889)
CHARGES

ACCRUALS AND DEFERRED INCOME                (1,405)        (1,334)      (1,421)
                                          ==========     ==========   ==========

                                             5,616          8,019        5,746
                                          ==========     ==========   ==========

CAPITAL AND RESERVES
Called up share capital                     13,718         13,162       13,162
Merger reserve                              16,712         16,712       16,712
Other reserves                               4,550            730         (280)
Profit and loss account                    (29,364)       (22,585)     (23,848)
                                          ----------     ----------   ----------

Total Shareholders' Funds                    5,616          8,019        5,746
Minority interests (all equity)                  -              -            -
                                          ==========     ==========   ----------

Total capital employed                       5,616          8,019        5,746
                                          ==========     ==========   ==========




CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2003

                                           30 June        30 June           31
                                                                      December
                                              2003           2002         2002
                                       (Unaudited)    (Unaudited)    (Audited)
                                              #000           #000         #000

                                          ----------     ----------   ----------
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES                        (1,168)        (1,052)      (1,690)
                                          ----------     ----------   ----------

RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest paid                                  (26)           (49)         (91)

CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible fixed assets              (46)           (48)         (48)
Sale of investments                              -             95           95
Exploration, evaluation and                   (324)          (318)        (393)
development expenditure
Exceptional item - Scheme of                     -              -         (201)
Arrangement costs                        
                                          ----------     ----------   ----------

NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE AND FINANCIAL
INVESTMENT                                    (370)          (271)        (547)

FINANCING
Issue of ordinary share capital              1,000 *        3,398**      3,398 **
(* By GMS plc ** By GMS Pty Ltd)
Expenses paid in connection with                 -            (25)         (25)
share issues
Receipts from borrowings                         -            175            -
Repayment of borrowings                       (118)             -         (109)
                                          ----------     ----------   ----------
NET CASH INFLOW FROM FINANCING                 882          3,548        3,264
                                          ----------     ----------   ----------

(DECREASE)/INCREASE IN CASH                   (682)         2,176          936
                                          ==========     ==========   ==========






NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS



 1.  The interim financial statements were approved by a Committee of the Board
     of Directors on 3 October 2003. The statements, which are unaudited, have
     been prepared on the basis of the accounting policies published in the
     statutory accounts for the year ended 31 December 2002. The financial
     information set out in this interim report does not constitute statutory
     accounts as defined in section 240 of the Companies Act 1985. The figures
     for the year ended 31 December 2002 have been extracted from the statutory
     accounts which have been filed with the Registrar of Companies. The
     auditors' report on these financial statements was unqualified and did not
     contain a statement under section 237(2) of the Companies Act 1985.

 2.  These interim financial statements have been prepared on a going concern
     basis predicated on the draw-down of a loan which forms part of the
     Business Combination agreement with Full Riches Investments Ltd. ("FRI"),
     details of which were released earlier today. If the Business Combination
     is not completed by March 1, 2004, FRI and GMS have agreed to form a joint
     venture for the exploration and mining of all project areas held by GMS or
     its subsidiaries in Sardinia, Italy at that date, subject to any agreements
     GMS may have entered into with third parties prior to such date. The terms
     of the joint venture are that FRI will receive a 15% vested interest in the
     properties upon forgiving the amount due under the Interim Financing, and
     FRI will have the right to earn up to a total of 60% interest upon
     completion of a bankable feasibility study. Alternatively, FRI could,
     within two weeks following March 1 2004, opt not to go ahead with the JV
     and instead seek repayment of all the Interim Financing within 90 days of
     that date. At this point GMS will seek alternative financing
     arrangements.

 3.  Gold Mines of Sardinia plc (the company) was incorporated on 5 July 2000.
     On 20 November 2002 the company acquired 100% of the issued share capital
     of Gold Mines of Sardinia Pty Ltd (GMS Pty Ltd) following implementation of
     a Scheme of Arrangement (under Australian law). The Scheme of Arrangement
     involved the issue of 1 ordinary share by the company for every 1 ordinary
     share held by the shareholders of GMS Pty Ltd. The Scheme of Arrangement
     has been accounted for using merger accounting principles, as in the
     opinion of the directors it satisfies all the conditions required. The
     Company is entitled to the merger relief offered by Section 131 of the
     Companies Act 1985 in respect of the consideration received in excess of
     the nominal value of the equity shares issued in connection with the Scheme
     of Arrangement. The consolidated financial information above is presented
     as if the Scheme of Arrangement had been effective on 1 January 2001. The
     consolidated profit and loss account combines the results of GMS Pty Ltd
     for the year ended 31 December 2002 with those of the company for the year.
     The comparative figures relate to GMS Pty Ltd as restated for the effect of
     the Scheme of Arrangement. Further detail relating to the Scheme of
     Arrangement can be found on the company's website www.gmsplc.com.

 4.  No tax is payable as a result of the loss for the period. Unrelieved tax
     losses remain available to offset against future taxable profits. These
     losses have not been recognised within the interim financial statements as
     they do not meet the conditions required in accordance with FRS 19. Under
     Italian Law, losses are only available for carry forward for a maximum of
     five years.

 5.  The directors do not recommend the payment of an interim dividend.

 6.  The basic loss per share has been calculated on the basis of the net loss
     after taxation of #1,809,000 (2002: #3,943,000) and the weighted average
     number of shares in issue in the period ended 30 June 2003 of 265,326,614
     (30 June 2002: 263,239,444). The loss attributable to ordinary shareholders
     and the weighted average number of ordinary shares for the purpose of
     calculating the diluted earnings per share are identical to those used for
     the basic earnings per share. This is because the exercise of share options
     would have the effect of reducing the loss per ordinary share and is
     therefore not dilutive under the terms of FRS 14.

 7.  A more comprehensive report will be available on the Company's website
     www.gmsplc.com and a printed copy of that report can be obtained from the
     Company's Registered Office:

     Gold Mines of Sardinia plc
     The Little House
     Quenington
     Cirencester
     GL7 5BW
     UK

     Tel: [phone]
     Fax: [phone]








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