http://www.gippslandltd.com/announcements/documents/Gippsland%20Annual%20Report%202009.pdf

Gippsland Limited

With the onset of the Global Financial Crisis, the past

year has been exceptionally difficult for our Company.

Sacrifices have been made, tough decisions have been

taken, and funds raised in a most difficult market to

ensure the survival of our Company. At the same time, a

combination of depressed consumer demand worldwide

for high-tech consumer goods and lower raw material

prices offered by unscrupulous traders of ‘conflict’

coltan (niobium-tantalum bearing ore), has resulted in

accumulating stockpiles of tantalum concentrates held

by tantalum refiners.

Your Directors determined not to charge directors fees

during this difficult period and Directors Jack Telford

and Jon Starink loaned the Company funds to stay

liquid. This is testament to their belief in and support

for the Company and its projects. I would like to thank

these Directors for their support.

CORPORATE ACTIVITY

During the year, your Company delisted from the

London Stock Exchange AIM, which will result in a

saving of approximately $350,000 per annum.

In accordance with Corporate Governance guidelines,

the joint role of Executive Chairman-Managing Director

has been split into the positions of Non-Executive

Chairman and Chief Executive Officer. Your former

Director, Dr John Chisholm, kindly agreed to step

aside as part of these changes, and continues to

serve the Company as Chief Geologist. Our sincere

thanks go to John Chisholm for his ongoing dedicated

contribution to the Company.

ABU DABBAB TANTALUM PROJECT

Tantalum Market

As noted above, the depressed state of the tantalum

market has resulted in the closure or placement

on care and maintenance of all major ‘non-conflict’

tantalum mines around the world and worldwide

pressure to arrest the supply of ‘conflict’ materials is

building. According to a recent study undertaken by

Roskill Information Services in the UK, the western

world could be facing a severe shortage of tantalum

over the next few years. If this view is correct, our Abu

Dabbab Project is directly in the path of the incoming

tide of demand for tantalum.

Our 44.5 million tonne world class Abu Dabbab

Tantalum-Tin Project is located near the western

shore of the Red Sea. The combined resource base

of 142.5 million tonnes within the Abu Dabbab and

Nuweibi tantalum deposits, including 30.2 million

tonnes of Ore Reserve, places Gippsland in a prime

position to become the leading global tantalum

producer for several decades.

Value-Adding Technology Breakthrough

The past year saw the Company develop plans to

produce a higher value 55% tantalum product or

SynCon at Abu Dabbab, which is a groundbreaking

change for the industry as mining companies have

traditionally produced a relatively low value, low grade,

impure tantalum mineral concentrate. This significant

change to the global tantalum supply chain results

directly from Board members’ practical industrial

experience and depth of knowledge in fields of

chemistry, chemical engineering and metallurgy.

Tantalum Off-Take Agreement

During 2008, a ten year Off-take Agreement was

secured with the German tantalum major HC Starck

GmbH for the supply of six million pounds of tantalum

pentoxide from the Abu Dabbab project, subject

to several conditions precedent. This Agreement

represents 92% of the project’s initial projected annual

tantalum pentoxide production. Discussions are

presently in progress with HC Starck regarding the

pricing for the more valuable high purity SynCon.

Tin and Feldspar

Recent increases in the price of tin metal further

enhance the project.

Additional work on the recovery of feldspar will be

undertaken in the coming months to confirm the

beneficial impact this additional product will have on

the Abu Dabbab revenue stream and thus the overall

profitability of the Abu Dabbab Project.

ABU DABBAB PROJECT FINANCE

Discussions with the German KfW Bankengruppe

have been on-going during the year, and their

mandate extended. Whilst there is no guarantee of

timing, the Directors believe that the project finance

arrangements will be forthcoming when needed for

the project to commence. At present, it is likely that

the Abu Dabbab Project finance will be secured on an

attractive 80% debt and 20% equity basis.

EXPLORATION - ERITREA

The Company has been granted three 100 km

Prospecting Licences in the northern part of Eritrea, in

a region which is along strike and geologically similar

to where a number of large base metal and gold

deposits have recently been discovered, including

the world class Bisha VMS gold-base metal deposit

located some 174 km to the south that contains 1.44

Moz Au and 0.39 Mt Cu. The structural setting of

the area covered by the Licences is also similar to

that found at the 0.94 Moz Zara Gold Project located

some 65 km to the south. The Company’s exploration

programme has been planned, budgeted, and has

commenced.

YOUR COMPANY IN 2010

Your Directors believe that 2009-10 will see significant

progress in the development of the world class Abu

Dabbab Project. If the projected shortage of tantalum

eventuates, Gippsland’s tantalum output will be of

crucial importance to the global tantalum industry. We

will be working on improving the recovery of feldspar

from the process circuit as this has the potential to

significantly enhance project returns.

Your Company will be undertaking exploration

for minerals in prospective terrains in Eritrea with

measured amounts of funds.

Whilst the world capital markets are still turbulent, we

have secured funding that will enable your Company

to move its projects forward. We will be monitoring

the tantalum market constantly, looking to move the

project to a production stage in the shortest possible

time frame.