Annual Report and Accounts

RNS Number:2962Z
Van Dieman Mines plc
29 June 2007

                                VAN DIEMAN MINES



                           Annual Report and Accounts



Van Dieman Mines plc ("Van Dieman" or "the Company"), an AIM-listed mining and
exploration company developing tin and sapphire resources in Tasmania, announces
its results for the year ended 31 December 2006.



Highlights:



O      Substantial progress made on both the Scotia and Endurance projects



O      Exploration and retention licences in good standing and upgraded in value



O      Mineral interests revalued at A$83 million



O      Scotia mine plan finalised; all plant and equipment ordered



O      Tin offtake contract with Thaisarco in place



O      Tin and sapphire markets remain strong



Post Period:



O      Final approvals for Scotia mine granted



O      Scotia mine development and commissioning commenced



O      Gemstone marketing joint venture agreement signed



The annual report and financial statements of the Company are being posted to
shareholders and are available on the Company's website www.vandiemanmines.com



Clive Trist, Managing Director of Van Dieman Mines plc, commented:



"We have now received the final approvals for the Scotia mine and expect it to
be fully operational in the current year.  The markets for our products remain
strong and agreements are in place for the sale of both the tin and gemstone
production.



Exploration continues to upgrade the status of the Great Northern Plains
resource with a view to commencement of mining within the next three years."



                                 Notice of AGM

The Annual General Meeting of Van Dieman Mines plc will be held at the offices
of Lawrence Graham LLP, 4 More London Riverside, London SE1 2AU on 23 August
2007 at 11.00 am.






ENQUIRIES:

Van Dieman Mines plc
Clive Trist, Managing Director                                   Tel:   + 61 28 908 5103

Grant Thornton Corporate Finance                                 Tel: [phone]
Fiona Owen

Bankside Consultants                                             Tel:  [phone]
Michael Padley/ Libby Moss





                              CHAIRMAN'S STATEMENT



The past year has seen both significant progress and frustrating setbacks for
Van Dieman Mines, in equal measure. It has been an extremely trying period for
management and, of course, for our shareholders.



When I wrote my Annual Statement as Chairman last year, I said the Company had
sufficient reassurance to be able to predict a start to production on the
Company's tin and sapphire leases in north east Tasmania by end 2006.



A year on, I can confirm that we have now cleared the final major hurdles ahead
of bringing our project into production. Development approvals for our first
operation, the Scotia Mine, were finally granted in May and June this year and
permitting attached to those approvals is now well advanced.  With these
obstacles surmounted, we can now prepare the project for production, which we
expect to commence in 2007.



While recognising that some delay in the complex approvals process was
inevitable, the hold-up was compounded by the continuing delays we have
experienced in securing mining and treatment equipment and services. This
created the logjam which has continued to frustrate the Company's efforts to
advance the project according to the planned timetable.



Ironically, the permitting delay came despite the fact that the development has
strong local support within a region that has a strong mining tradition but only
limited employment opportunities.  However, Tasmania does have extremely
demanding regulations on mining development and on its environmental
implications. This is as it should be, but it does create severe challenges for
new operations and especially for a project such as ours which involves mining
in a regional reserve and re-entry into previously mined areas.



The Company's DPEMP (Development Proposal & Environmental Management Plan) was
finally approved by the Tasmanian State Government in May this year, and
subsequently endorsed by the local Dorset Council in mid-June.



The practical consequences of this long wait have been severe, with disruptions
to all phases of the project.  Without these formal approvals, we have not been
able to ship to Tasmania the treatment plant commissioned from Goldfields
Engineering in Utah, USA and ready for delivery. And, while all the plant and
equipment has been ordered and the majority delivered, it awaits assembly and
installation. Similarly, we have until now been unable to proceed with the
development of any of the basic site infrastructure such as access roads and
dams.



All of the key contracts have been secured with power and fuel suppliers and
other service providers. And, with the granting of the final authorities, we are
(mid-July) able to commence construction.



These time constraints have brought some positives, however.  They have given
the Company the opportunity to work towards perfecting the treatment plant
design and construction and to iron out a host of minor technical issues, such
as those arising through differing electrical standards and conventions in the
US and Australia.



The additional time available has provided the opportunity for successful
marketing initiatives in the US for the co-product sapphires, culminating in the
signing of a joint venture jewellery manufacturing and distribution agreement.
Further, it has enabled the Company to identify black gem spinel as a marketable
by-product and an additional source of revenue.  Neither product was included in
the Company's original financial projections at the time of listing.



For tin, our principal product, the LME price continues to be strong and has
remained remarkably stable during recent months at around US$14,000 per tonne,
despite the turbulence in other commodities and financial markets. These
elevated prices inevitably are having an impact on consumer buying, and demand
growth has moderated somewhat this year.



However, with continuing supply shortfalls projected by leading market analysts,
we believe the tin market will remain robust and that the price outlook is
positive.  The Company's entire projected tin concentrate output of 1,350-1,500
tonnes contained tin per year will be sold at prevailing market prices under the
six-year contract with tin smelter-refiner Thaisarco.



For the year to 31st December 2006, the Company recorded a net loss of
#1,016,320 or 1.11p per share, compared with the previous year's net loss of
#604,601 or 0.84p per share.  At the 2006 year-end, the Company had cash
resources of #1,375,598.



As a project with an unusual combination of mineral products, all of which are
experiencing strong market conditions, Van Dieman offers a unique mining
investment opportunity.  Now that mining can commence, and the Company can
anticipate near-term cash flow, your board believes that shareholders' patience
will be rewarded.  We thank you for continuing to stay with us despite the
frustrations of the past year.





Michael Spriggs

Chairman



29 June 2007


                                BUSINESS REVIEW



INTRODUCTION



The Company has been able to re-arrange, with the support of its suppliers,
purchasing and contract schedules to ensure the arrival of plant and equipment
coincides with approvals to commence mining.



This review deals not only with the Company's permitting and mining programmes
but also with the operation of the Company's pilot plant and ongoing exploration
which has added significant value to the status of the Company's mining leases
and exploration and retention licences.



Separate sections of this review detail Marketing, Future Operations, Financial
Review and Risks.



SCOTIA PROJECT PERMITTING



On 15 November 2006, the Company, through its environmental and engineering
consultants SEMF, received permission from the Department of Tourism, Arts and
Environment to lodge its Development Proposal & Environmental Management Plan
(DPEMP) with Dorset Council.  The DPEMP and associated Development Application
were then placed on public exhibition which closed on 15 December 2006 with nil
representations from the public and a number of lengthy submissions from
government agencies.  The agency submissions were addressed in a supplement to
the DPEMP which again was the subject of conflicting and difficult negotiation
with individual agencies.  Final approval of the DPEMP was granted by the Board
of Environmental Management and Pollution Control at its meeting on 4 May 2007.



On 21 May 2007 Dorset Council approved the Company's Development Proposal and
subsequently endorsed it mid June after the expiry of a 14 day statutory public
advertising period. This paves the way for a formal approval to commence
construction of mine infrastructure and the subsequent commencement of mining
operations.  Permitting attached to the approvals is now well advanced and final
permits involving dam construction and forest practices are expected in mid
July.



MINING PROGRAMME



Mine Plan



Early in the year the Company recognised the upsurge in global mining activity
had created long lead times and shortages in the supply of a variety of
equipment and materials, including notably heavy truck tyres.  Further tailings
disposal areas were limited and in the interests of building and operating an
environmentally responsible project the Company recognised the necessity to keep
the mining footprint as small as possible.  The deposits lend themselves to dry
mining and various scenarios were reviewed, including:



*                     The first scenario proposed involved removal of overburden
by excavator and trucks to stockpiles beside the open cut and then removal of
ore zone to a fixed treatment plant site.



Limitations of this proposal - required at least three CAT 777 trucks,
additional roadworks, much higher fuel costs, higher CO2 emissions and
additional staff.



*                     The second scenario looked at removal of part of the
overburden by cross pit bulldozing to beside pit stockpiles, removal of the
balance of overburden using excavators to an in pit conveyor and removal of ore
zone by excavator and trucks to a fixed but regularly movable treatment plant.



Advantages of this method, lower fuel costs, lower CO2 emissions, tighter
overburden control, removal of 75% of the overburden back into the pit behind
the working ore face reducing rehabilitation costs, smaller footprint, less road
infrastructure, etc.  It keeps the pit size very small and the pit walls at
maximum batter as the pit only remains open for 30 days.



Limitations are capital cost of in-pit conveyor (similar capital to trucks but
by comparison very low operating costs), necessity to regularly advance the
conveyor overcome to a large degree by mechanizing using tracks mounted on the
conveyor framework.



The latter technique is used very successfully in coal mines (Griffin Coal in
Western Australia) and in some larger open cut hardrock minerals mines.



The second scenario was chosen and determination of earthmoving machinery types
and numbers was undertaken in house and checked by the local Caterpillar
distributor.  Conveyor design was undertaken by Nepean Conveyors who have
designed, installed and assisted in the operation of similar systems.



The system allows systematic overburden stripping and rehabilitation as follows:



*                     Vegetation mulched to ground level using an excavator
mounted flail mulcher;



*                     Topsoil (0 to 300 mm) plus mulch dozed across pit to near
pit stockpiles;



*                     Sub-Soil Stratum dozed across pit into separate stockpiles
for structured rehabilitation;



*                     Overburden excavated to in-pit conveyor and returned to
behind the working face; ore removed to plant or stockpiles;



*                     Sub-soil dozed back over overburden, then followed by
topsoil and mulch;



*                     Reseeding and replanting.



In support of the above mine plan the following supply contracts were
negotiated:



*                     Earthmoving Plant - dry hire contract, delivery of plant
confirmed;



*                     Conveyors - contract for design, supply, erection and
commissioning agreed;



*                     Diesel Fuel Supply - contract with BP.



Treatment Plants



Early in the year orders were placed for two Treatment Plants and a Tin Shed
Plant to process ore containing Sapphire and Fine Tin with Gold.  The treatment
plants are designed to process 300 cubic meters per hour of ore and to be
portable such that they can be moved at intervals as mining progresses
northwards along the ore body.  The tin shed plant has been designed with the
capacity to process crude ore from both the Scotia and Endurance mines when they
are both in full production.



Currently, the first treatment plant is packed in shipping containers in the USA
awaiting shipment to site once final approval to commence construction is
received.  The second treatment plant is under construction scheduled for
delivery once Endurance permitting is completed in the first quarter of 2008.
The tin shed plant has arrived on site and is installed awaiting commissioning
in readiness for the start up of the Scotia mine.



In support of the treatment plants the following supply contracts were
negotiated:



*                     Electricity - supply contract with Aurora Energy for power
lines to site, sub-station and electricity supply



*                     Standby Power - generator sets for treatment plant standby
power and conveyor main power supply ordered and delivery confirmed



*                     Water Supply - pumps and supply piping ordered and
delivery confirmed



*                     Treatment Plant Electrics - electrics and control systems
designed to Australian standards and pricing agreed



PILOT TREATMENT PLANT



The company has continued to operate the small Goldfield designed pilot plant
and has completed processing a number of 50 m3 bulk samples from locations
within SEL 22 / 1999.  These activities have resulted in the company being able
to ship evaluation  parcels of "Run Of Mine" gem material to Columbia Gem House
(CGH) and Crystal Chemisty in the USA for testing and market studies.



The company has currently some 70,000 carats of spinel being processed and cut
prior to its being marketed by the CGH / Van Dieman joint venture company V
Columbia.



In addition the plant has produced some 100 x 200 litre drums of heavy mineral
concentrate containing fine tin.  This material will be treated through the
company "Tin Clean-up facility" once final permitting for its operation is in
place.  The material in storage will yield a final saleable tin concentrate.



Continuing operation of the pilot plant has enabled the company to:

*           commence training of staff in the operation of an alluvial gravity
plant;

*           trial various plant settings as a guide to the settings that will be
required to achieve optimum recoveries from the main treatment plant;

*           establish protocols for the recovery and removal of gem material
from the top of the

gravity circuit; and

*           establish "Clean-up" and sorting procedures for the "Run of Mine"
gem products



GEMSTONE MARKETING



During the year a Research and Development Agreement between Columbia Gem House
and the Company was put in place with the objective of analysing sapphire
materials originating from the Company's mining operations.  The analysis, in
conjunction with heat treatment analysis, will:



*                     develop a full heat treatment protocol;

*                     assess the best method to cut the sapphire to yield
greatest value;

*                     include cutting and grading multiple heat treatment sample
runs to determine the best heat treatment method; and

*                     develop an initial size, quality and cut grading scale and
three different value assessments which could be applied to projected
production.



This programme has commenced using sapphire samples derived from the Company's
pilot plant operations.



As part of the development of its marketing programmes in the area of
establishing a brand for its gemstone products the name "Tasmin Blue" has been
registered and is the label under which the Company's joint venture marketing
company V-Columbia will market product.



In December the Company was notified that US Modern Jeweller magazine was
profiling, in its January 2007 issue, Van Dieman's Tasmanian sapphire as the gem
of the month.  This article is now being used as the precursor in developing the
branding programme under the "Tasmin Blue" banner.



EXPLORATION



In addition to moving forward with the permitting process and mine start up
programme the Company has maintained its exploration and retention licences in
good standing and in a number of cases has substantially upgraded their value.



Feasibility study updates have been completed in relation to the Scotia and
Lochaber palaeo-channel deposits. These studies were extended to include
sections of the palaeo-channel adjoining to the north, ML 15M /2004 and within
EL 32/2001. Ongoing GIS work, both field data collection and office processing,
and the location of additional old drill hole data, has more accurately
established the position of the tin bearing palaeo-channel in several of the
problem areas within the ML. The palaeo- channel is now located to sub-metre
accuracy in three dimensions; depth and lateral extent.  The company staff  are
now undertaking a review of those data and expect, in 2007, to be able to
announce a JORC Coded upgrade of the "Probable Resource" to "Proved Reserve"
status. The extension of the palaeo-channel in the area north is also being
reviewed, and an upgrade of the "Resource" in that section, the northern
extension of the palaeo-channel outside of the ML, is also expected.



There have also been developments in the Global Mineralisation at Scotia. Recent
work indicates that there is a possibility that the Scoloch section of the
Scotia lead just north of the ML may in fact split around a pronounced basement
high and then rejoin the channel . This was previously interpreted as a point of
entry of a feeder channel. Further the GIS results indicate that the Scoloch
section of the palaeo-channel has a strong marine depositional influence and is
most likely a feeder channel into the  larger Great Northern Plains tin bearing
marine embayment deposits.   The additional data indicates that the northward
extension of the palaeo-channel widens dramatically and deepens with the
potential to further expand the volume of the current resource base



In relation to the Central Ringarooma Projects and in particular Endurance,
ongoing GIS work has confirmed the continuity and width of the main tin bearing
ore channel. The deposit within ML 14M/2004 is now being JORC Coded and is
expected, in 2007, to be re-classified to "Proved Reserve" status. Global
mineralization remains an "Inferred Resource".



Ongoing GIS work on the Pioneer Project has confirmed drill hole locations and
ore body boundaries and feasibility studies based on a similar mining and
processing model to that at Endurance indicate that the Pioneer can be
economically extracted. This should enable the "Measured Resource" to be
upgraded to a "Probable Resource".



GIS activities at the Monarch Project area, RL 6/2005 and EL 59/2004 have
further defined the resource boundaries and confirmed the extension of the
Monarch Resource within RL 6/2005 south eastwards into EL 59/2004.  Further, the
depositional channel defined at Monarch appears to continue north westward into
deeper ground that has some marine characteristics.  The tin bearing deposits at
Monarch are being reviewed and a JORC Code ore resource statement is expected in
mid 2007.



In the Boobyalla section of EL 59/2004 the company has located old drill data in
the area surrounding Dugards Creek adjacent to old alluvial tin workings.  An
assessment of those data indicates the presence of a potential tin bearing
resource of some 20M m3.  Preliminary field testing has established the presence
of fine sapphire and tin in the old surface dumps from Dugards Creek.



The company has completed an assessment of EL 1/2003, Wyniford River, and
established that a small high grade tin and sapphire resource exists in recent
alluvial terraces flanking the Wyniford River.  DGPS survey work and GIS data
compilation are continuing.  That ore deposit will be reviewed and a resource
statement issued in mid 2007.



Work is continuing on the more accurate delineation of the massive Great
Northern Plain and offshore resource areas. Improved Global Positioning System
("GPS") data is currently being entered into the company database and a
recalculation of the resource, based on this more accurate data, is underway.
During the year the company contracted to fly an air magnetic and radiometric
survey over a section of the offshore resource encompassed by MRL-T2.



This survey was conducted at the same time and as part of a larger regional
survey of the north east of Tasmania being undertaken by Mineral Resources
Tasmania.  Results are currently being processed by the contractor.



Bulk testing for gem minerals continues and preliminary results of testing and
marketing studies are beginning to flow back to the company. Preliminary
geophysical test work involving Ground Penetrating Radar ("GPR") and seismic
refraction have been completed over the Scotia and Endurance resource areas.
These are being assessed as possible tools to provide more accurate GIS control
ahead of the advancing mining faces at Scotia and Endurance.



FUTURE OPERATIONS



The Company's principal focus for 2007 is to commence mining operations in the
second half of the year at its Scotia project and through its marketing joint
venture establish reliable outlets for the associated minerals such as Sapphire,
Spinel, Zircon and Gold.



During the second half of 2007 the Company plans, through its environmental and
engineering consultants SEMF, to prepare and lodge a Development Proposal and
Environmental Management Plan for its Endurance project.  This will enable the
Company, subject to the granting of the necessary government permits, to
commence pre-mining works at the Endurance site during the first quarter of 2008
with full production expected by the middle of the year.



The Company will continue to upgrade the status of the Great Northern Plains
resource with a view to commencement of mining within in the next three years.



FINANCIAL REVIEW



During 2006, the Group continued to focus on the development of its mineral
operations and ongoing exploration and development expenditure. Capitalised
exploration and development expenditure during the year amounted to #410,000,
which brings the total capitalised expenditure to date to #2.2 million.



Further acquisitions of plant and land and buildings amounted to #1.947 million.
  This brings the total investment to #2.437 million.



In addition to the group's mining projects, our cash position, totalled #1.375
million at 31 December 2006. Interest earned on this in 2006 totalled #132,381
helping cover part of the administrative costs of the group.



During the year ended 31 December 2006, the group made a consolidated loss of
#1.016 million the major part being ongoing administrative costs for the group.











VAN DIEMAN MINES PLC



CONSOLIDATED PROFIT AND LOSS ACCOUNT



FOR THE YEAR ENDED 31 DECEMBER 2006




                                                    Note           2006                    2005
                                                                      #                   #
TURNOVER

Mining expenses                                                   (220,321)            (16,978)
Administrative expenses                                           (928,380)           (709,325)

OPERATING LOSS                                                  (1,148,701)          (726,303)

Interest received                                                  132,381             121,702

LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION                                                 (1,016,320)          (604,601)

Tax on loss on ordinary activities                                      -                 -

LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION AND
LOSS FOR THE YEAR                                               (1,016,320)           (604,601)


Basic loss per share                                  3           (1.11p)               (0.84p)
                                                                 




All amounts relate to continuing activities.


VAN DIEMAN MINES PLC



CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES



YEAR ENDED 31 DECEMBER 2006


                                                               2006                2005
                                                               #                     #

Loss for the financial year                                  (1,016,320)          (604,601)

Exchange (loss)/gain on consolidation of foreign               (185,793)            189,871
subsidiary

Total movements during the year                              (1,202,113)           (414,730)






VAN DIEMAN MINES PLC


CONSOLIDATED BALANCE SHEET


AS AT 31 DECEMBER 2006


                                                      Note          2006                2005
                                                                        #                #
         FIXED ASSETS
         Tangible assets                                           4,513,003           2,349,706

         CURRENT ASSETS
         Debtors falling due within one year                          85,217             379,259
         Debtors falling due after one year                           66,699              70,258
         Cash at bank and in hand                                  1,375,598           4,123,660

                                                                   1,527,514           4,573,177

         CREDITORS: amounts falling due
         within one year                                             397,377             203,327


         NET CURRENT ASSETS                                        1,130,137           4,369,850


         TOTAL ASSETS LESS CURRENT LIABILITIES                   5,643,140            6,719,556

         CREDITORS: amounts falling due
         after more than one year                                  290,021             168,974

                                                                 5,353,119            6,550,582

         CAPITAL AND RESERVES
         Called up share capital                                 916,921                916,577
         Share premium account                                 6,497,169              6,492,863
         Profit and loss account                              (2,060,971)             (858,858)


         TOTAL SHAREHOLDERS' FUNDS                             5,353,119             6,550,582




The financial statements were approved and authorised for issue by the Board of Directors
on   29 June, 2007


Director



VAN DIEMAN MINES PLC



CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006


                                                                Note         2006                       2005
                                                                              #                        #
                NET CASH OUTFLOW FROM
                OPERATING ACTIVITIES                                           (961,521)           (646,625)

                RETURNS ON INVESTMENTS AND
                SERVICING OF FINANCE
                Interest received                                               132,381             121,702

                CAPITAL EXPENDITURE AND
                FINANCIAL INVESTMENT
                Payments to acquire tangible fixed assets                    (2,167,167)           (486,619)

                NET CASH OUTFLOW
                BEFORE FINANCING                                             (2,996,307)         (1,011,542)

                FINANCING
                Issue of ordinary share capital                                 344,650           2,450,559
                Finance lease & hire purchase commitments repaid               (33,369)             (34,032)

                                                                                311,281           2,416,527

                MANAGEMENT OF LIQUID RESOURCES
                Increase /(decrease) in cash on short term deposits           2,767,831          (1,712,670)

                INCREASE/(DECREASE) IN CASH                                      82,805           (307,685)


                RECONCILIATION OF NET CASH FLOW
                TO MOVEMENT IN NET FUNDS

                Increase/(decrease) in cash in the period                       82,805            (307,685)
                Increase/(decrease) in short term deposits                  (2,767,831)          1,712,670
                Cash movements from net decrease in debt                        33,369              34,032

                Movement in net funds due to cash                           (2,651,657)          1,439,017

                Inception of finance leases                                   (166,292)           (177,838)
                Inception of bank loan                                         (35,302)            (55,628)
                Translation differences                                        (53,636)            114,805

                MOVEMENT IN NET FUNDS                                       (2,906,887)          1,320,356

                Net funds at 1 January 2006                                  3,924,226           2,603,870

                NET FUNDS AT 31 DECEMBER 2006                                1,017,339           3,924,226




VAN DIEMAN MINES PLC


NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2006


1.     GENERAL

Van Dieman Mines Plc is a public limited company incorporated in the United Kingdom and listed on the AIM in
the UK. The company was incorporated on 24 May 2004. On 15 September 2004 the company acquired all the
issued capital of Van Dieman Mines Pty Limited, a company incorporated in Australia.

2.     ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared under the historical cost convention, and in accordance with
applicable United Kingdom Accounting Standards.

Basis of consolidation

The financial statements consolidate the accounts of Van Dieman Mines Plc and its subsidiary undertakings.
The results of the subsidiary are included from the date of acquisition.

The company has taken advantage of the exception allowed under section 230 of the Companies Act 1985 and has
not presented its own profit and loss account in the financial statements.  The parent's loss for the
financial year was #232,498 (2005: #149,085).

Application of the going concern basis

The group's principal activity is the exploration for tin and sapphires and to develop and operate mining
activities in Northern Tasmania, Australia.  In common with many mining companies, the successful outcome of
this project is dependent upon the granting and maintenance of mining leases, sourcing adequate finance,
controlling development costs and realising income from production in line with its business plan.

During the year the group encountered unforeseen delays in the process of securing permitting for the
development and operation of the Scotia mine.  However, permitting and approvals from the Tasmanian
Department of Arts, Tourism and Environment and the Dorset Council have now been secured which allow for the
early commencement of construction and mining at the Scotia project.

Key items of plant and equipment for the Scotia mine have either arrived in Tasmania or are packed ready for
shipment from overseas suppliers.  However, further finance is now required to complete the development of
the Scotia mine, develop the Endurance mine and provide adequate working capital until the group achieves
positive operating cash flows.  The directors currently intend to use convertible loan and lease finance to
provide the required funds and have (received suitable indicative offers) which they believe will be
successfully completed.

The directors have therefore concluded that it is appropriate to prepare the accounts on a going concern
basis, although there can be no certainty that the finance will be raised or the sufficiency of the finance,
for as with many projects of this nature, there remain significant uncertainties as to the timing and amount
of forecast cash flows.

Basis of consolidation

The financial statements consolidate the accounts of Van Dieman Mines Plc and its subsidiary undertakings.
The results of subsidiaries are included from the date of acquisition.

The company has taken advantage of the exception allowed under section 230 of the Companies Act 1985 and has
not presented its own profit and loss account in the financial statements.  The parent's loss for the
financial year was #232,498 (2005: #149,085).





Deferred taxation

Deferred taxation is recognised in respect of all timing differences that have originated at the balance
sheet date where transactions or events have occurred at that date that will result in an obligation to pay
more, or a right to pay less or to receive more tax with the following exception.

Deferred tax assets are recognised only to the extent that the directors consider that it is more likely
than not that there will be suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the
periods in which the timing differences reverse, based on tax rates and laws enacted or substantively
enacted at the balance sheet date.

Tangible fixed assets and depreciation

Depreciation is calculated to write down the cost of all tangible fixed assets less estimated residual
values by equal annual instalments over their expected useful lives.  The periods generally applicable are:


        Buildings                                      40 years
        Mining plant and equipment                     3-15 years
        Office Equipment, Fixtures and Fittings        3 years
        Computers                                      3 years

Investments

Investments are recorded at cost less amounts written off.

Foreign currency

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the
contracted rate if the transaction is covered by a forward exchange contract.  Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date or if appropriate at the forward contract rate and differences taken to the profit and
loss account.

The accounts of the overseas subsidiary undertakings are translated at the rate of exchange ruling at the
balance sheet date.  The exchange difference arising on the retranslation of opening net assets are
eliminated against reserves.

Operating leases

Operating lease rentals are charged to the profit and loss account on a straight line basis over the term
of the lease.

Liquid Resources

In accordance with FRS 1 "Cash Flow Statements", for cash flow purposes, cash includes net cash in hand and
other bank deposits payable on demand within one working day, and liquid resources include all of the
group's other bank deposits.

Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of
interest.  These costs are only carried forward to the extent that they are expected to be recouped through
the successful development of the area or where activities in the area have not yet reached a stage that
permits reasonable assessment of the existence of economically recoverable reserves.  Accumulated costs in
relation to an abandoned area are written off in full against the result in the year in which the decision
to abandon the area is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to
carry forward costs in relation to that area of interest.

Development expenditure

When the technical and commercial feasibility of an area of interest has been demonstrated and the
appropriate mining licence has been issued, the area of interest enters its development phase.  The
accumulated costs are transferred from exploration and evaluation expenditure and reclassified as
Development Expenditure.

Once mining commences the asset is amortised on a depletion percentage basis.  Provision is made for
impairments to the extent that the asset's carrying value exceeds its net recoverable amount.


Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments.  A geographical
segment is engaged in providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating in other economic
environments.


Financial liability and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into.  Debt instruments issued which carry a right to convert to equity are divided
into their respective equity and liability components and disclosed accordingly in the balance sheet.


Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from
share premium from the proceeds.

Finance leases

Assets held under finance leases and other similar contracts, which confer rights and obligations similar
to those attached to owned assets are capitalised as tangible fixed assets and depreciated over the shorter
of the lease terms and their useful lives.  The capital elements of future lease obligations are recorded
as liabilities, while the interest elements are charged to the profit and loss account over the period of
the lease, to produce a constant rate of charge on the balance of capital repayments outstanding.



3.   EARNINGS PER SHARE


                                                                          2006                  2005


  Basic loss per share                                                    (1.11p)             (0.84p)
                                                                           ======              ======


  The calculation of basic loss per share is based on a loss for the year of #1,016,320

  (2005 #604,601) and on 91,658,607 ordinary shares (2005: 71,693,807 ordinary shares), being the
  weighted average number of ordinary shares in issue during the year.

  There is no dilutive effect of share options or warrants.

                                                                                                   Company
                                                                                      2006            2005
                                                                                         #               #
           Shares in subsidiary
           undertakings                                                           4,561,158         4,561,158



Details of the investments in which the group or the company hold 20% or more of the nominal value
of any class of share capital are as follows:

Subsidiary undertakings

                                         Voting rights Country of        Nature of
                                                       incorporation     holding
Name of subsidiary                                                                       Business

Van Dieman Mines Pty Limited             100 %         Australia         Ordinary shares Tin and sapphire
                                                                                         exploration






                      This information is provided by RNS
            The company news service from the London Stock Exchange
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