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Hardman Resources Ld (HNR)

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Tuesday 26 October, 2004

Hardman Resources Ld

September 2004 Quarterly

Hardman Resources Limited
26 October 2004


RELEASE DATE: 26 October 2004

CONTACT: Ted Ellyard

TELEPHONE: Within Australia: 08 9261 7600
International: +61 8 9261 7600


Please find attached September 2004 Quarterly Activities and Cash Flow Report
for Hardman Resources Ltd.


                             HARDMAN RESOURCES LTD
                               ABN 98 009 210 235

                             REPORT TO SHAREHOLDERS
                    FOR THE QUARTER ENDED 30 SEPTEMBER 2004

This report summarises the activities of Hardman Resources Ltd and its
controlled entities ('Hardman' or 'the Company') during the quarter ended 30
September 2004.


  • Mauritania (2004 Drilling Campaign): The 2004/early 2005 drilling
    programme utilising two deep water rigs commenced with the arrival in
    Mauritania of the West Navigator rig on 12 September, followed by the Stena
    Tay rig on 15 September. The drilling programme will comprise up to 22 wells
    including six planned exploration wells, up to four appraisal wells on the
    Tiof discovery and up to twelve Chinguetti production and water/gas
    injection wells.
  • Mauritania (Tevet Oil Discovery): The first exploration well to be
    drilled in the 2004 programme, Tevet-1, has intersected a gross hydrocarbon
    column of 114 metres, comprising a 70 metre gas leg and a 44 metre oil leg.
    Hardman holds 21.6% interest in the Tevet discovery.

  • Mauritania (Dorade-1 Unsuccessful): The Dorade-1 exploration well
    drilled in PSC Block 2 encountered good quality Late Miocene sands but these
    were water bearing with no hydrocarbon shows.
  • Mauritania (Tiof Appraisal Drilling): The Tiof-3 appraisal well has
    intersected a gross oil column of 134 metres. This result is in line with
    pre-drill predictions and the well is being sidetrack drilled to obtain core
    samples and to flow test the reservoir.
  • Mauritania (Chinguetti Field Development): The Chinguetti-8 water
    injection well was drilled and suspended for future use in the field
    development. This well is the first deviated well to be drilled at
    Chinguetti and successfully confirmed the drilling technique for future
    development drilling in the next quarter.
  • Mauritania (3D Seismic): Joint venture participants have approved large
    3D seismic surveys in the Woodside operated PSC Block 6 (3,000 square
    kilometres) and in the Dana Petroleum operated PSC Block 8 (1,816 square
    kilometres). Both surveys are expected to be completed by end 2004 and will
    define drilling targets for subsequent years. The acquisition of the PSC
    Area B survey (2,000 square kilometres) was completed on 13 July 2004 and an
    additional 3,055 square kilometre survey is currently underway in PSC Area
  • Australia, North Perth Basin: Hardman has exercised its Put Option to
    sell its remaining 12% interest in EP413 and the Jingemia Oil Field to ARC
    Energy Limited. Total consideration was A$5.4 million to be adjusted for oil
    revenue received and development expenditure incurred during the option
    period from 1 March to 1 October 2004.
  • Australia, Timor Sea:

AC/P25: A 2D seismic survey comprising 425 kilometres was completed and is being
AC/P26: Preparations are continuing to drill the Marloo-1 exploration well using
the Ocean Bounty semi-submersible rig with operations expected to commence early

  • Eritrea: The signing of a Production Sharing Contract (PSC) for the
    Massawa Block in the Red Sea has been delayed, but is expected to be signed
    later this year.
  • Falklands: The joint venture comprising Hardman (22.5%) and the newly
    listed UK company, Falklands Oil & Gas plc have agreed to shoot 2D seismic
    survey comprising approximately 4,000 line kilometres over the defined leads
    and prospects.
  • Guyane (French Guiana): Discussions with potential farmin partners to
    fund the drilling of the first exploration well in the permit are

  • New Zealand: It is now considered unlikely that the drilling commitment
    can be completed in the work programme timeframe required, and Hardman will
    need to be prepared to withdraw from the project if required.
  • Uganda: Planning has commenced to shoot a small 2D seismic survey in the
    onshore portion of Block 2 to more accurately delineate a drilling location
    for late 2005.

                               CORPORATE ACTIVITY

On 25 October 2004, Hardman Resources Limited relocated its Perth office to
Level 1, 50 Kings Park Road, West Perth. The new telephone number is + 61 8 9261
7600, facsimile and email addresses remain unchanged.

Hardman Resources won the 'International Company of the Year' awarded by AIM
London Stock Exchange. This prestigious award is a measure of the acceptance of
the Company in the UK investment community.

Two other awards received during the quarter were the RIU Good Oil 'Deal of the
Year Award 2004' and RIU Good Oil 'Explorer Award 2004', presented at the Good
Oil Conference held in Perth in September.

                              REVIEW OF OPERATIONS


Overview: Hardman has interests in Production Sharing Contracts ('PSCs') in
eight offshore blocks in Mauritania, with the first PSC being signed in 1996.
These blocks cover over 60,000 square kilometres, extend along 540 kilometres of
coastline and include the majority of the prospective offshore basin area.

Over the past three years, eleven wells have been drilled including seven
exploration wells. These exploration wells included four discoveries being
Chinguetti in 2001, Banda in 2002, Tiof and Pelican in 2003. Three exploration
wells targeting older Cretaceous aged sandstones did not result in commercial
discoveries of hydrocarbons. Overall, the success rate for initial exploration
drilling has exceeded 50% which is high by industry standards. The two appraisal
wells and early development well at Chinguetti have been successful and the Tiof
West step-out/appraisal well confirmed and expanded the potential of the Tiof

Hardman is currently involved in a drilling programme comprising up to 22 wells,
with Woodside and its joint venture partners, which includes exploration and
appraisal wells and the Chinguetti development drilling (see further details

Chinguetti Oil Field: The Chinguetti Oil Field lies in the deep water part of
Block 4 in PSC Area B in which Hardman has a 21.6% interest. Chinguetti is a
typical salt dome structure with a vertical relief at the oil reservoir level of
over 300 metres. The primary oil zone at Chinguetti is contained within
Miocene-aged deep water turbidite sandstones which were deposited prior to the
salt uplift. The proven and probable (2P) recoverable reserve has been
independently estimated at 123 million barrels.

Of particular significance during the previous quarter was the decision by the
Woodside operated joint venture in PSC Area B to proceed with development of the
Chinguetti Oil Field. Capital investment is expected to be about US$600 million
for Phase 1 of the project, including contingency amounts for capital cost
overruns. In May 2004 the government of Mauritania awarded a production licence
covering the Chinguetti Oil Field area for an initial period of 25 years.

The initial Chinguetti field development will include six production wells and
five water injection wells for reservoir pressure support, with flowlines to a
leased floating production, storage and offtake vessel ('FPSO') moored over the
field in about 800 metres of water. Surplus gas not required for fuel will be
returned to a nearby reservoir via a gas injection well. Based on the award of
contracts and anticipated timing of vessel availability, first oil production is
expected by first quarter 2006.

During the quarter the Chinguetti-8 development well was drilled in a location
downdip and west of the Chinguetti 4-5 well and is intended as a water injector
for pressure support during production. The Chinguetti-8 development well was
spudded on 14 September 2004 by the Stena Tay rig and was drilled to total depth
of 3,100 metres (measured depth) and wireline logs were run. After review of the
logs it was decided to suspend the well for future use in the field development.

Drilling of the other Chinguetti development wells is expected to recommence in
early December 2004 with both the West Navigator and Stena Tay rigs operating in

Chinguetti Development Financing: Hardman is in the final stages of completing a
bank financing facility for its 21.6% share of the Chinguetti development
capital (estimated at up to US$130 million, including contingencies). Subject to
completing the final due diligence, the loan documentation and required joint
venture and other third party agreements, ANZ Banking Group (which has been
working with Hardman on this transaction for the last two years) is expected to
both underwrite and participate in the loan. The finance facility to be provided
is expected to be between US$90 million and US$100 million. Hardman has budgeted
to provide the balance of funds, expected to be up to US$30 million.

Tiof Oil Discovery: The Tiof-1 oil discovery was made in November 2003 and the
significance of the discovery was confirmed by the Tiof West step out/appraisal
well in December 2003. The Tiof Prospect is an independent structural closure
within a Miocene channel sandstone system and is located approximately 25
kilometres north of the Chinguetti Oil Field. Based on the initial results from
the Tiof-1 and Tiof West wells and prior to consideration of development
options, the Hardman internal P50 estimate of field size is 300 - 350 million
barrels recoverable oil. (Hardman's net 21.6% share is 65 - 75 million barrels
of technically recoverable oil).

The 2004 appraisal programme will include the drilling of up to four wells on
the Tiof structure, one of which will be completed and tested in a similar
manner to the successful Chinguetti 4-5 Early Development Well ('EDW'). Drilling
at Tiof commenced on 23 September 2004 with the West Navigator rig drilling and
casing the top hole section for the Tiof-4 well to a depth of 2,108 metres. The
rig then moved to the Tiof-3 well and successfully drilled both the top and
bottom hole sections to a total depth of 2,960 metres.

Evaluation of the wireline data, including reservoir pressures and oil samples
indicate that Tiof-3 has intersected a gross oil column of 134 metres containing
several individual sands of variable thickness. This result is in line with
pre-drill predictions and the well was then sidetrack drilled, as planned to
obtain core samples and to test the reservoir. The results of this year's
appraisal programme, including the well test, are important factors in the
definition of the field and confirmation of the potential field size.

2004 Exploration Drilling Programme: The exploration wells approved for the 2004
programme are in PSC Areas A and B, where two and three wells respectively will
be drilled, and in PSC Block 2, where one well will be drilled. All the selected
exploration prospects have Miocene reservoir targets, but range from lower risk
prospects within the two Miocene channel systems proven by the Chinguetti and
Tiof discoveries, through to prospects that will test the new Miocene channel
areas which have been mapped in the deep water parts of PSC Area A and PSC Block
2. In PSC Area B, wells are planned for the Tevet, Merou and Capitaine
prospects; the Sotto and Bogue prospects are the most likely targets in PSC Area
A (but may be replaced by others as a result of the extensive 3D surveys
recorded this year). The Dorade Prospect in Block 2 has now been drilled.

For the exploration and Chinguetti development wells, the drilling programme is
using the technique of 'batch drilling' where both drilling rigs work in tandem.
In the 2004 programme it involves the West Navigator rig drilling the top hole
sections of a number of wells through to the base of the 171/2 inch hole
diameter section which is the first 600 to 1,000 metres. The well is then cased,
cemented and suspended, whilst the rig moves onto the next well. In this case
the West Navigator rig is still set up to drill the 171/2 inch well section for
the next well and therefore the rig crew does not need to change the drilling
equipment on the rig floor, which is a considerable saving in terms of drill
time and well cost. The second rig, the Stena Tay, then moves onto the well some
2-3 weeks later to drill the bottom section of the well (including the target
zone) in 121/4 inch hole size. The second rig is already equipped to drill these
smaller hole sizes again saving time and cost.

The West Navigator commenced work on 12 September by drilling the top hole on
Dorade-1 (PSC Block 2), followed by the top hole sections for Capitaine-1,
Tevet-1 and Tiof-4. The rig then moved to the Tiof-3 appraisal well and drilled
that well to total depth. Operation problems were encountered with the
Capitaine-1 top hole section which will require re-drilling.

The Stena Tay rig moved to the Tevet well on 30 September 2004 and drilled the
bottom hole section of the well to total depth of 2,715 metres. Following
wireline logging the well was declared a new oil discovery (see below) and was
then plugged and abandoned as planned. The rig then moved to the Dorade-1 well
in PSC Block 2 to drill the bottom hole section of that well.

Dorade-1 (PSC Block 2) was drilled to a total depth of 2,660 metres in 1,670
metres water depth. Evaluation of the wireline data indicates that the well
encountered some good quality Late Miocene sands but they were water bearing
with no hydrocarbon shows. The well was plugged and abandoned.

After completing operations on Dorade-1 the Stena Tay moved to the Capitaine-1A
location in PSC Area B to drill that well to total depth.

Joint Venture participants in the 2004 drilling programme are as follows:

Company                               PSC A         PSC B          PSC Block 2
No. of Exploration Wells                  2             3                    1
Woodside Energy (Operator)           53.846%       53.846%                48.0%
Hardman Resources Ltd                24.300%       21.600%                28.8%
BG Group                             13.084%       11.630%                   -
Premier                                   -         9.231%                   -
Premier (Sterling Energy)             4.615%            -                    -
ROC Oil Company                       4.155%        3.693%                 3.2%
Energy Africa                             -             -                 20.0%

Tevet Oil Discovery (PSC Area B): The Tevet-1 exploration well tested a
structural/stratigraphic trap in sands of the same Miocene channel fairway that
comprise the reservoir at Chinguetti and Banda. The Tevet Prospect is located
approximately 80 kilometres southwest of Nouakchott, the Mauritanian capital, 10
kilometres northeast of the Chinguetti Field and 10 kilometres west of the Banda
oil and gas discovery. The Tevet-1 well lies within potential tie-back distance
to the Chinguetti field. Tevet-1 was drilled to a total depth of 2,715 metres in
a water depth of 489 metres.

Evaluation of the wireline data, including reservoir pressures and oil and gas
samples indicate that Tevet-1 has intersected a gross hydrocarbon column of 114
metres, comprising a 70 metre gas leg and a 44 metre oil leg. An oil water
contact is inferred to have been intersected on the basis of pressure data. The
well was not drilled in a crestal location but was located to intersect
predicted fluid contacts. The pre-drill prediction of contacts and fluid types
has been confirmed by the well.

Dana Joint Venture Areas: The Dana joint venture areas comprise three PSC areas
covering Block 1 which is situated immediately to the south of the Woodside
joint venture areas, and Blocks 7 and 8 which are north of the Woodside joint
venture areas. In each PSC, Dana Petroleum plc ('Dana') is operator and Hardman
has an 18% interest in Blocks 1 and 8 and 16.2% in Block 7.

  • Block 1: A number of prospects have been identified from the 3D seismic
    acquired in late 2002. It is expected that the joint venture will agree to
    drill the first exploration well as part of the 2004 drilling campaign,
    however due to rig availability the well may not be drilled until early

  • Block 7 and the Pelican-1 Gas Discovery: In December 2003 the Pelican-1
    well was drilled to a total depth of 3,825 metres in 1,700 metres water
    depth. Evaluation of the wireline logs and pressure data indicated that the
    Pelican-1 well intersected a gross gas column of approximately 370 metres
    and within the gross interval a number of gas bearing sands are present. The
    gas bearing sands are interpreted to be Upper Cretaceous in age and are
    therefore older and geologically distinct, compared to the Miocene aged
    sandstone systems that host the Chinguetti, Tiof and Banda discoveries
    located approximately 150 kilometres to the south.

During the quarter the joint venture incorporated the results of the Pelican-1
well into the interpretation of the 3D and 2D seismic. Interpretation and
computer enhancement of the 3D seismic data indicate that the channel sand
systems which form the trap at Pelican extend further to the east into shallower
water depths. Available 2D data also suggest a continuation of this play concept
to the east. The joint venture is therefore planning to shoot an additional 3D
seismic survey to the east of the existing 3D data to delineate potential
prospects for drilling in 2005/2006. It is likely that this new 3D seismic
survey will be shot in the next 3 to 6 month period.

  • Block 8: This Block is geologically different from the other offshore
    Mauritanian blocks, and the most prospective area is a carbonate platform
    with seismically mapped large structural closures.

A request for a twelve month extension of the PSC has been approved by the
Government. This extension will allow the acquisition of a large 3D seismic
programme over the identified carbonate leads. This survey comprising 1,816
square kilometres of 3D seismic has commenced during the quarter. Also during
the quarter, Dana announced that it has farmed out a 38.5% interest to
Wintershall AG, a major German oil and gas company.


Hardman holds a 12.86% working interest in two PSCs offshore Gabon which were
awarded in November 1999 and are known as Iris Marin and Themis Marin. The PSCs
cover a combined area of approximately 2,000 square kilometres and are located
in a proven and well established petroleum province.

3D seismic was acquired over the two blocks in early 2003. Detailed processing
of this data to produce depth image maps of the reservoir targets beneath
shallow salt layers has now been completed. The prospects identified from this
work are generally smaller than expected (less than 20 million barrels); but
some are still considered to lie within economic limits. The drilling of the
first well in the Iris Marin Block is now likely to be deferred until 2005. In
the Themis Marin Block the joint venture has agreed to acquire a further 210
square kilometres of 3D seismic in the southern portion of the Block during the
next quarter.


Hardman is operator and holds a 50% interest in Block 2 which is located in the
northwest of the country. The licence covers the northern part of Lake Albert
and the surrounding onshore area.

A marine 2D seismic survey comprising approximately 1,000 line kilometres in the
Block 2 portion of Lake Albert was completed in 2003 and has successfully
identified several highly ranked prospects within the lake area. A large
prospect trend lies adjacent to the shoreline and could potentially be drilled
with an onshore drilling rig situated at the lake edge. Hardman is now planning
to shoot a small onshore seismic survey in early 2005 to more accurately locate
the well for drilling in the second half of 2005. This survey will also target
the continuation of the structural trend onshore.


In January 2004 Hardman signed a Memorandum of Understanding ('MOU') with the
Government of Eritrea over the 11,550 square kilometres Massawa Block offshore
Eritrea. Negotiations on the terms for the Production Sharing Contract (PSC)
have been completed however, signing of the PSC documents had been delayed but
is expected to be signed later this year. Hardman will hold a 30% interest in
the project once the PSC is granted.

After the award of the PSC, the exploration programme in the Massawa Block will
commence with re-mapping of the existing seismic data and seismic reprocessing
(if necessary), followed by the acquisition of new seismic data.


Hardman was awarded an Exclusive Exploration Licence ('EEL') offshore Guyane in
June 2001 and holds a 97.5% interest. The EEL covers a large area of
approximately 65,000 square kilometres and includes the major part of the
offshore basin of Guyane. It extends from the twelve mile territorial waters
limit to the 3,000 metre water depth contour. The EEL provides for a seven year
exploration programme with a well commitment due by December 2004.

Acquisition of 7,500 kilometres of new 2D seismic was completed in mid February
2003. The new seismic is of excellent quality and has confirmed the existence of
a thick sedimentary section in the basin and identified a number of hydrocarbon

Of particular interest is a large structure with multiple objectives referred to
as the 'Matamata Prospect'. The Guyane project is currently being presented to a
selected group of potential farmin partners and several are reviewing the


Hardman is a member of a consortium which in July 2002 was awarded several
contiguous offshore exploration licences covering an area of over 30,000 square
kilometres to the south and south east of the Falklands.
The existing joint venture partners have reached agreement with a UK based
finance company to restructure the joint venture interests and provide funding
for a large 2D seismic survey to be shot over the permit area in 2005. Under the
terms of the agreement, a new UK company, Falklands Oil and Gas Limited, has
been formed which will hold 77.5% equity in the project. Hardman will retain a
22.5% interest but be required to fund only 20% of the seismic survey.


Hardman holds a 55% interest in Petroleum Exploration Permit 38215 which was
awarded in August 2001. During the year a 2,000 kilometre 2D seismic survey was
completed to define potential drilling prospects, however this data is yet to be
received by the joint venture parties.

It is now considered unlikely that the drilling commitment can be completed in
the work programme timeframe required, and Hardman will need to be prepared to
withdraw from the project if required.


Hardman has interests in the Timor Sea area, situated in Commonwealth waters
offshore northern Western Australia.

Timor Sea Permits:
In the fourth quarter 2003, Hardman purchased for a total payment of $150,000 an
interest in three permits and now holds the following equity:

   • AC/RL1 (Talbot) 100%
   • AC/P25 95%
   • AC/P26 98.75%

AC/RL1: AC/RL1 encompasses the Talbot Oil Field which was discovered in 1989 by
Santos Limited with the Talbot-2 appraisal well drilled in 1990. Hardman's
current internal estimate of recoverable reserves ranges from 2 to 4 million
barrels which has previously been considered to be uneconomic for a stand-alone
development. However, the potential for development is currently being
re-assessed in view of the current high oil price.

AC/P25: During the quarter a 2D seismic survey comprising 425 kilometres was
completed over several leads in the permit. The new seismic will further
delineate potential drilling candidates for drilling a well in 2005.

AC/P26: Hardman has agreed to increase its interest in the permit to 100%
working interest (98.75% final equity), following the withdrawal of the other
joint venture partners.

Preparation work is continuing for the drilling of a well to test the Joeys
Prospect which is to be named the Marloo-1 exploration well. The Ocean Bounty
semi-submersible rig is to be contracted to drill the well in early 2005. An
option to drill a second well is also being negotiated with the contractor but
would only be drilled following success in the Marloo-1 well.



26 October 2004

Note: In accordance with Australian Stock Exchange Limited listing requirements,
the geological information supplied in this report has been based on information
provided by geologists who have had in excess of five years experience in their
field of activity.

                                   HARDMAN RESOURCES LTD
                                Level 1, 50 Kings Park Road
                             West Perth Western Australia 6005
                       TELEPHONE FACSIMILE     +61 (0) 8 9261 7600
                       EMAIL                   +61 (0) 8 9321 2375
                       WEB SITE                [email protected]

                                                                        Rule 5.3

                                  Appendix 5B

                   Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

ABN                          Quarter ended ('current quarter')
-------------------          ------------------
98 009 210 235               30 SEPTEMBER 2004
-------------------          ------------------

Consolidated statement of cash flows

                                                     ------------   ------------
Cash flows related to operating activities           Current        Year to
                                                     quarter        date
                                                     $A'000         (3 months)
                                                       ------------ ------------

 1.1   Receipts from product sales and related              1,257        1,257
 1.2   Payments for 
       (a) exploration and evaluation                      (5,756)      (5,756)
       (b) development                                    (20,173)     (20,173)
       (c) production                                        (214)        (214)
       (d) administration                                  (2,650)      (2,650)
       (e) other operating expenses not                         -            -
       included above
 1.3   Dividends received                                       -            -
 1.4   Interest and other items of a similar nature         2,594        2,594
 1.5   Interest and other costs of finance paid                 -            -
 1.6   Income taxes paid                                   (1,777)      (1,777)
 1.7   Other (provide details if material)                      -            -
                                                       ------------ ------------
       Net Operating Cash Flows                           (26,719)     (26,719)
 ----- -----------------------                         ------------ ------------
       Cash flows related to investing activities
 1.8   Payment for purchases of: 
       (a) prospects                                            -            -
       (b) equity investments                                   -            -
       (c) other fixed assets                                (306)        (306)
 1.9   Proceeds from sale of: 
       (a) prospects                                            -            -
       (b) equity investments                                   -            -
       (c) other fixed assets                                   -            -
1.10   Loans to other entities                                  -            -
1.11   Loans repaid by other entities                           -            -
1.12   Other (provide details if material)                    (47)         (47)
                                                       ------------ ------------
       Net investing cash flows                              (353)        (353)
 ----- -----------------------                         ------------ ------------
1.13   Total operating and investing cash flows           (27,072)     (27,072)
       (carried forward)
 ----- -----------------------                         ------------ ------------

 ----- -----------------------                         ------------ ------------
1.13   Total operating and investing cash flows           (27,072)     (27,072)
       (brought forward)
 ----- -----------------------                         ------------ ------------
       Cash flows related to financing activities
1.14   Proceeds from issues of shares, options, etc.        4,361        4,361
1.15   Proceeds from sale of forfeited shares                   -            -
1.16   Proceeds from borrowings                                 -            -
1.17   Repayment of borrowings                                  -            -
1.18   Dividends paid                                           -            -
1.19   Other (provide details if material)                      -            -
                                                       ------------ ------------
       Net financing cash flows                             4,361        4,361
 ----- -----------------------                         ------------ ------------
       Net increase (decrease) in cash held               (22,711)     (22,711)
1.20   Cash at beginning of quarter/year to date          328,695      328,695
1.21   Exchange rate adjustments to item 1.20              (6,794)      (6,794)
                                                       ------------ ------------
1.22   Cash at end of quarter                             299,190      299,190
 ----- -----------------------                         ------------ ------------

Payments to directors of the entity and associates of the directors

Payments to related entities of the entity and associates of the related
1.23   Aggregate amount of payments to the parties included in             270
       item 1.2                                                    -------------
1.24   Aggregate amount of loans to the parties included in item             -
------ 1.10                                                        -------------
1.25   Explanation necessary for an understanding of the transactions
       Payments in item 1.23 are consulting and related costs (excluding GST)
       paid during the quarter to directors of the entity and their

Non-cash financing and investing activities

2.1   Details of financing and investing transactions which have had a material
      effect on consolidated assets and liabilities but did not involve cash

2.2   Details of outlays made by other entities to establish or increase their
      share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.
                                    -------------             -------------
                                    Amount available          Amount used
                                    $A'000                    $A'000
                                    -------------             -------------
3.1   Loan facilities                                     -                  -
                                                -------------      -------------
3.2   Credit standby arrangements                         -                  -
----- -----------------------                   -------------      -------------

Estimated cash outflows for next quarter
4.1   Exploration and evaluation                                        59,000
4.2   Development                                                       32,300
----- -----------------------------                           ------------------
                                            Total                       91,300
----- -----------------------------                           ------------------

Reconciliation of cash
-------------------------                            ------------- -------------
Reconciliation of cash at the end of the quarter (as Current       Previous
shown in the consolidated statement of cash flows)   quarter       quarter
to the related items in the accounts is as
                                                     $A'000        $A'000
                           ------------------------- ------------- -------------
5.1   Cash on hand and at bank                             2,497        14,106
                                                     ------------- -------------
5.2   Deposits at call                                   296,693       314,589
                                                     ------------- -------------
5.3   Bank overdraft                                           -             -
                                                     ------------- -------------
5.4   Other (provide details)                                  -             -
----- ----------------------                         ------------- -------------
      Total: cash at end of quarter (item 1.22)          299,190   * 328,695
----- ----------------------                         ------------- -------------

* Note that 'total cash at end of quarter' for the previous quarter (June 2004)
differs from that released in the June Quarterly Report due to reclassification
of funds held in secured deposits in the form of guarantees over the Company's
projects and commitments at year end. For further details please refer to the
Company's Annual Financial Statements.

Changes in interests in mining tenements

                           -------------        ---------- --------    --------
                           Tenement reference   Nature of  Interest at Interest
                                                interest   beginning   at end of
                                                (note (2)) of          quarter
                               -------------    ---------- --------  --------
6.1   Interests in mining  Falkland Islands -   Working           30%     22.5%
      tenements            (PL10, PL11, PL12,   ----------    --------  --------
      relinquished,        PL13, PL14, PL15 &
      reduced or lapsed    PL16)
                           EP413                 Working          12%      Nil
                           L14 (Jingemia Field)  Working          12%      Nil
                                                ----------    --------  --------
6.2   Interests in mining  Timor Sea - AC/P26   Working       49.375%    98.75%
      tenements acquired   -------------        ----------    --------  --------
      or increased

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights
together with prices and dates.
                        ----------    ----------    -----------     -----------
                        Total         Number        Issue price per Amount paid
                        number        quoted        security (see   up per
                        ----------    ----------    note 3) (cents) security
                                                                    (see note 3)
                                                    -----------     (cents)

 7.1   +Preference                -             -
                          ----------    ----------     -----------   -----------
 7.2   Changes during             -             -
       (a) Increases              -             -
       through issues
       (b) Decreases
       through returns    ----------    ----------     -----------   -----------
       of capital,
 7.3   +Ordinary        650,305,919   650,305,919               -             -
 ----- -----------        ----------    ----------     -----------   -----------
 7.4   Changes during     2,654,412     2,654,412           $1.10         $1.10
       (a) Increases      1,310,000     1,310,000           $1.10         $1.10
       through issues
       (b) Decreases
 ----- through returns    ----------    ----------     -----------   -----------
       of capital,
 7.5   +Convertible               -             -
                          ----------    ----------     -----------   -----------
 7.6   Changes during
       (a) Increases
       through issues
       (b) Decreases
 ----- through            ----------    ----------     -----------   -----------
 7.7   Options            2,972,176             -   Exercise price  Expiry date
       (description and
                          8,305,000             -           $1.10      31/12/04
                                                            $1.10      31/12/06
                          ----------    ----------     -----------   -----------
 7.8   Issued during              -             -               -             -
       quarter            ----------    ----------     -----------   -----------
 7.9   Exercised during   2,654,412             -           $1.10      31/12/04
                          1,310,000             -           $1.10      31/12/06
                          ----------    ----------     -----------   -----------
7.10   Cancelled during           -             -               -             -
 ----- quarter            ----------    ----------     -----------   -----------
7.11   Debentures                 -             -
       (totals only)
 ----- -----------         ----------    ----------
7.12   Unsecured                  -             -
       (totals only)
                           ----------    ----------

Compliance statement

1 This statement has been prepared under accounting policies which comply with
accounting standards as defined in the Corporations Act or other standards
acceptable to ASX (see note 4).

2 This statement does give a true and fair view of the matters disclosed.

Sign here: ............................................................ 
Managing Director

Print name: TED ELLYARD


1 The quarterly report provides a basis for informing the market how the
entity's activities have been financed for the past quarter and the effect on
its cash position. An entity wanting to disclose additional information is
encouraged to do so, in a note or notes attached to this report.

2 The 'Nature of interest' (items 6.1 and 6.2) includes options in respect of
interests in mining tenements acquired, exercised or lapsed during the reporting
period. If the entity is involved in a joint venture agreement and there are
conditions precedent which will change its percentage interest in a mining
tenement, it should disclose the change of percentage interest and conditions
precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not
required in items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive
Industries and AASB 1026: Statement of Cash Flows apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International
Accounting Standards for foreign entities. If the standards used do not address
a topic, the Australian standard on that topic (if any) must be complied with.

                                 == == == == ==

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