2001 ANNUAL REPORT - REVIEW OF OPERATIONS

SOUTH AUSTRALIA

1. Musgrave Block
(ELs 2245 and 2435, ELAs 198/96, 260/96, 262/96, 336-343/96, 534/96 and 35/99)

The Company holds two exploration licences designated as EL 2245 - De Rose Hill (1,673 square kilometres) and EL 2435 - Ungalootanna Hill (967 square kilometres) in the Eastern Musgrave Block.

Prospective rocks of Archaean and Proterozoic ages outcrop within the area and anomalous copper, gold, uranium and nickel grades have been reported in equivalent rock units in adjacent areas. Negotiations have been initiated with native title parties for access to both licence areas and exploration targets have been delineated by an interpretation of the regional magnetic and gravity data. Recent drilling by PIRSA in an area adjacent to our De Rose Hill and Ungalootanna Hill areas intersected ultrabasic rocks presumed to be Giles Complex with sulphide mineralisation. This represents a significant
extension of the Giles Complex into the far eastern portion of the Musgrave Block region.

The 13 applications for exploration licences located within the Pitjantjatjara Lands cover 16,080 square kilometres and have been selected on the basis of regional geophysical and geological data as well as previous exploration results. The grant of the licence applications is subject to the Pitjantjatjara Land Rights Act 1981 (S.A.), and accordingly we are awaiting the permission of the Minister for Mines and Energy to negotiate with Anangu Pitjantjatjara for permission to carry out exploration. Primary Industry and Resources South Australia (PIRSA) and Anangu Pitjantjatjara are currently instigating procedures to accelerate the processing of exploration licence applications.

PIRSA has completed flying geophysical surveys over the Mann, Woodroffe and Alberga 1:250,000 sheet areas and has extended the program into the adjacent Birksgate, Lindsay and Everard sheet areas.

The Musgrave Block is a large, under-explored Proterozoic Block with a diversity of geological environments and covers approximately 60,000 square kilometres of the north-west corner of South Australia extending across the border into the Northern Territory and Western Australia. Proterozoic Blocks represent some of the most prospective terrain for mineral exploration in Australia and include the well known mineral provinces of the Mount Isa Inlier, Broken Hill, the Granites-Tanami Block, the Gascoyne Complex and the Tennant Creek Inlier.

Demonstrated potential exists within the Musgrave Block for base metals (copper, lead and zinc), ferrous metals (chromium, nickel, vanadium, titanium) and uranium. Speculative potential also exists for precious metals (platinum, gold, silver), precious stones (diamonds, rubies), heavy mineral sands and rare earths.

Encouraging discoveries of copper, nickel, chromium and uranium were defined by very limited exploration by other companies between 1953 and 1981. Since the proclamation of the Pitjantjatjara Lands Right Act in 1981 there has been virtually no exploration carried out within the area.

Notable exploration results by other companies include:

• Anomalous levels of nickel and chromite have been reported in metamorphic rocks at Tarleecartagun Hill.
  
  
• Several small strata bound copper sulphide deposits have been defined in the eastern Musgrave Ranges. These deposits are considered analogous to Broken Hill and Mount Isa style base metal sulphides.
  
  
• A probable resource of 4.57 million tonnes of 1.5% nickel has been delineated at Claude Hills.
  
  
• Minor copper/gold mineralisation has been found in the Indulkana fault zone north of the Indulkana Range.
  
  
• Gold has been reported in Adelaidean sediments at Moorilyanna and visible copper mineralisation is evident in Adelaidean sediments near Wantapella Well.
  
  
• Anomalously high copper, lead and zinc concentrations have been reported in Cambrian sediments intersected in oil wells drilled in the Officer Basin to the south of the Musgrave Block.

More recently WMC Limited has announced a major discovery of nickel/copper sulphide mineralisation with encouraging grades of platinum group elements (PGE) in the West Musgrave Block. Reported drilling results include 26.55 metres grading 2.45% nickel, 1.78% copper, 0.01% cobalt and 0.14 gms/tonne PGE from a depth of 58 metres. Significant intersections of vanadium, titanium, iron, PGE and gold have also been reported.

A number of priority exploration targets have been defined on Goldsearch tenements. Of particular note is a nickel sulphide target identified by previous exploration by another company in which nickel sulphides were intersected adjacent to a troctolitic dyke which extends for approximately 16 kilometres.
The prospectivity of this target is highlighted by the fact that all significant sulphide mineralisation associated with the giant Voisey’s Bay nickel deposit in Canada is hosted by troctolitic intrusions.

2. Mount Ogilvie
(EL 2267)

The Mount Ogilvie exploration licence covers an area of 240 square kilometres approximately 30 kilometres north-east of Leigh Creek in the northern Flinders Ranges. The area contains several old mines which operated in the 1890’s. High grades of gold have been reported associated with ores of copper, cobalt, nickel and arsenic. Silver has also reportedly been mined at high grades.

A high frequency photo lineament analysis of aerial photographs and satellite imagery has indicated EL 2267 – Mount Ogilvie is located in a favourable lineament setting of high mineral prospectivity.

A field program designed to confirm and investigate anomalous results and to check magnetic features was completed during the year. Selective, hand picked samples were collected from dumps beside old mine workings to characterise the geochemical signature of the mineralisation and to locate previously reported high grade copper, gold, nickel
and cobalt mineralisation. Most old workings exploited groups of narrow quartz-carbonate veins.
At several workings the assay results confirmed high grades of copper (up to 31%) and gold (up to 2.9 gms/tonne), which were accompanied in some samples by elevated nickel (up to 0.10%) and cobalt (up to 0.18%). Stream sediment samples confirmed several anomalous results, including a significant regional zinc result.

3. Gawler Craton (Antakirinja Land Management Aboriginal Corporation joint venture)
(ELs 2212 and 2213)

Exploration licences EL 2212 and EL 2213 are held in the joint names of Goldsearch Limited and Antakirinja Inc representing the native title applicants for the areas. Exploration is being carried out under a joint venture agreement between the Company and the traditional owners and is focussed on investigating the potential for gold and base metal mineralisation in Proterozoic and Archaean rocks of the Gawler Craton. The two areas known as Tallaringa (EL 2212) and Hawks Nest (EL 2213) are located approximately 120 kilometres west of Coober Pedy near Mabel Creek Station.

Primary exploration targets are copper, gold, silver and uranium associations similar to Olympic Dam and Ernest Henry deposit models and gold associated with fault structures and shear zones such as at that found at the Challenger and Tunkillia gold deposits further south in the Gawler Craton.
Untested potential also exists for uranium and mineral sands in paleaochannels which have been delineated within the area.

The Company is investigating options regarding exploration of the areas including participation of other parties.

NORTHERN TERRITORY

1. North Musgrave Block – East Bloods Range and Petermann Joint Venture
(ELAs 9407, 9863, 5701, 5702, 5703, 9443, 6847, 9740, 9741, 10315, 22687, 22688, 22689, 22690 and 22710)

The ELAs are located in the northern Musgrave Block and are considered prospective for base metals, silver and gold. Base metal occurrences (copper and lead) in quartz filled shear zones with some gold and silver were reported in ELA 5701 by the Bureau of Mineral Resources during a reconnaissance survey carried out during 1962. A sample from an undeformed quartz vein collected recently by the Northern Territory Department of Mines and Energy from within ELA 5701 has reported anomalous silver (89gms/tonne), lead (2.1%), copper (1.9%) and gold (101ppb). Elevated chromium (550ppm) and nickel (1000ppm) have been reported for a sample of laterised peridotite collected to the south of the ELAs.

The Company has entered into an agreement to earn an equity in exploration licence applications (ELAs) 5701, 5702, 5703, 9443, 6847, 9740 and 9741 covering an area of approximately 4,550 square kilometres located in the Petermann Range area of south-west Northern Territory. Under the terms of the agreement Goldsearch Limited can earn a 51% equity in any consequential EL by funding exploration for the first year of each licence area. The Company then has the right to increase its equity to up to 75% by funding further exploration. The minimum exploration expenditure commitment for the first year for all seven ELAs amounts to $210,000. The granting of exploration licences is dependant on negotiations for access and exploration agreements with the Central Land Council and the traditional owners.

The Company holds 51% of ELAs 10315, 22687, 22688, 22689, 22690 and 22710 which have been applied for on behalf of the Petermann Joint Venture.
The Central Land Council has refused to consent to the grant of exploration licence application ELA 10315. The Joint Venture intends to continue to hold the exploration licence application and renegotiate in accordance with statutory procedures.

In August, 2001 the Central Land Council advised it had consented to the grant of exploration licence applications ELAs 9407, 5702, 9443 and 9741.
Exploration Licences are expected to be granted in the near future by the Northern Territory Department of Mines and Energy. These licences will be the first granted in the Musgrave Block area of the Northern Territory for more than twenty years.

2. Mount Patricia
(ELA 9636)

This application is currently under veto following a decision by the Central Land Council in October, 1997 to refuse to consent to the grant of an exploration licence. The Aboriginal Land Rights (Northern Territory) Act permits exploration companies to recommence negotiations for an exploration agreement after a period of 5 years. Accordingly the Company will recommence negotiation for an exploration agreement in October, 2002.

QUEENSLAND

1. Duck Creek
(EPM 13336)

The Company has been granted an exploration permit for minerals EPM 13336 covering approximately 131 square kilometres in an area south-west of Cloncurry known as Duck Creek which contains a number of copper and gold prospects.
Anomalous cobalt and bismuth have also been reported in the area. Another permit, EPM 13273, covering approximately 6 square kilometres in the same area has also been granted.
It is proposed to commence exploration of both areas as soon as practicable after native title access agreements have been finalised.

2. Mount Kelly

During the year the Company decided not to commit funding to proceed to earn a 50% equity in the Mount Kelly project located 120 kilometres by road north of Mount Isa. In accordance with the agreement Goldsearch will be issued 1.875 million fully paid shares in Reefway Pty Ltd, ( a subsidiary of Pegmont Mines NL), representing approximately 10% of the issued capital of that company. Reefway Pty Limited holds a number of other exploration permits in the area with base metal potential in addition to those at Mount Kelly.

INDEPENDENCE GOLD NL JOINT VENTURE AGREEMENT

In August, 2000 the Company announced a joint venture agreement with Independence Gold NL (“Independence”) which will increase exploration expenditure on Goldsearch tenements in the highly prospective Musgrave Block and other areas. After assessing the available data and conducting a reconnaissance survey exploration licences located at Mount Ogilvie and in the Gawler Craton were withdrawn from the agreement to allow Independence to focus on the Musgrave Block region. In accordance with the agreement the expenditure commitment for Independence over a two-year period for exploration licences and applications remaining in the agreement has been reduced from $6,716,000 to $5,976,000.

The agreement not only benefits Goldsearch in providing the funding for exploration to proceed but also gives access to the highly experienced team of geoscientists at Independence, substantially increasing our professional capability. The group has experience in exploration for a diverse range of mineral commodities and is particularly attracted to the Musgrave region of central Australia due to its prospectivity and unexplored nature. The Independence team has contributed to the discovery of over 30 gold and base metal deposits. These include Plutonic, Redeemer, Chalice and Challenger.

Independence can earn a 51% equity in the current exploration tenements of Goldsearch located in the Musgrave Block region and at Mount Patricia by funding exploration expenditure equal to twice the statutory annual expenditure commitment assigned to the exploration licence by the issuing authority.
Independence must spend a minimum of $2,000,000 before earning an equity in any licence area. Ranger Minerals Ltd has guaranteed the minimum financial commitment of $2,000,000 for a period of 3 years.

TECHNOLOGY AND INTERNET RELATED INVESTMENTS

1. Capix

Capix is a Melbourne based vendor of banking, broking and corporate treasury software systems on the internet. Goldsearch has purchased a 14.8% interest in Capix for a consideration of $520,000. Due to the downturn in the technology sector the directors of Goldsearch have decided not to commit any additional funding to the investment in Capix.

The previously proposed Initial Public Offer (IPO) and ASX listing are being reassessed with regard to the current position of the technology sector. Capix has restructured its operation to better accommodate the requirements of the industry and maintain its cashflow. It has also embarked on a marketing exercise to better promote its range of products and is considering alternatives for corporate development.

2. VisionZoom Australia

VisionGlobal Corporation is a high-speed broadband wireless network solution provider based in the US.
It is currently developing technology that consists of a routing radio modem. VisionGlobal’s system is aimed primarily at providing low-cost broadband Internet access to consumers and low-end commercial users.

In July 2000, VisionGlobal agreed to fully underwrite the proposed Initial Public Offering (IPO) of shares for VisionZoom Australia, in which it would hold a 75% interest, in return for granting a royalty free, 25 year license to VisionZoom Australia for the exclusive use of its high speed Wireless Broadband System throughout Australia, New Zealand and Indonesia. In return for funding the IPO Goldsearch was to be issued with shares representing 8.8% of the total issued capital of Vision Zoom Australia and Goldsearch shareholders and optionholders were to have an entitlement to subscribe directly for shares representing 16.2% of VisionZoom Australia in the proposed IPO.

VisionGlobal has been unable to complete the raising of necessary capital to finalise the development of its technology through to manufacture and has filed a petition for reorganisation under Chapter 11 of the US Bankruptcy Laws. Whether or not Goldsearch will be able to continue with its agreement with VisionGlobal remains to be seen and is dependent on the success of VisionGlobal’s plan to reorganise the company.