SUMMARY
During the year under review significant advances were made by the company in
bringing the An Feng Kingstream Steel Project to fruition and in taking further
steps toward transforming the group into a fully integrated steel company.

Highlights during the year were:

An Feng Steel Co., Ltd ("An Feng") paid $8.4 million into an Australian
bank account to fund all expenditure relating to the An Feng Kingstream
Steel Project leading up to the formal raising of the debt and equity
finance for the project.
The company allotted and issued 10,715,714 ordinary shares of 50 cents each
fully paid at a price of 70 cents to An Feng thereby raising $7,501,000.
The Company and An Feng commenced the preparation of a revised 2.4 million
tonne per annum steel slab feasibility study using Signet Engineering Pty
Ltd,a wholly owned subsidiary of Fluor Daniel Australia Pty Ltd, in conjunction
with specialist steel project advisers Hoogovens NV.
As part of the revised feasibility study, the company continued the drilling
program at Koolanooka for the purpose of confirming information compiled
by Western Mining Corporation Limited, identifying the volume or iron 
formation, extending the areas not previously explored by Western Mining
and recovering a bulk sample for pelletisation, beneficiation and reduction
testwork.
Detailed negotiations were undertaken with the State Government of Western
Australian in relation to procuring a State Agreement for the An Feng
Kingstream Steel project, receiving the governments broad support.
The Western Australian Government announced its intention to proceed with
a detailed study of the proposed Oakajee Industrial Estate and the associated
deep water port as prefered site for the An Feng Kingstream Steel Project.
The company and An Feng entered into the formal joint venture in respect
to the An Feng Kingstream Steel Project.
The company exchanged letters of intent with An Feng and secured conditional
support from An Feng's principal shareholders, for the merger of the company
and An Feng, creating a major fully integrated international steel company
based in Perth, Western Australia.
The company appointed Grant Samuel & Associates Pty Ltd as the independent
expert to shareholders on the proposed merger with An Feng.
The company and An Feng entered into the Iron & Steel (Mid West) Agreement
("State Agreement") with the State of Western Australia.
The State Agreement was introduced into State Parliament for ratification.
The company and St Barbara Mines Limited entered into an Option Deed for
the disposal by St Barbara and the acquistion by the company of an iron
ore resource in the Weld Range province of Western Australia.
The company and An Feng both received advice from The Treasury that they
have no objection to the merger proposal between the company and An Feng
in term of the Governments investment policy.
Grant Samuel & Associates Pty Ltd, the independent expert appointed by the
company to report on the merger between the company and An Feng, concluded
that the proposed merger was both fair and reasonable. They found that the
strategic logic of the merger was compelling and the merger proposed
enhanced the prospects of the An Feng Kingstream Steel Project.
The revised feasibility study on the An Feng Kingstream Steel Project was
completed.
The company executed a letter of intent with Epic Energy Pty Ltd in respect
of the provision of gas transportation services for the total gas requirements
of the An Feng Kingstream Steel Project.
Shareholders approved the merger between the company and An Feng.
The Iron & Steel (Mid West) Agreement was ratified by State Parliament.

Subsequent to year end:

The company made an offer to all An Feng shareholders to acquire all of
their shareholding in An Feng, subject to a 92% minimum acceptance condition.
An Feng shareholders representing 92.3% of the issued shares in An Feng
subscribed for 567.6 million fully paid ordinary shares in the company
at an issue price of $1.3 per share, together with 5.8 million $1.10 option
exercisable 5 years from the date of grant.
The company received from An Feng shareholders,representing 92.3% of the
issued capital of An Feng, acceptances to the offer by the company to
acquire all of their shareholding in An Feng and on 14 July 1997 the company
remitted the funds to acquire these shares( being the same amount as
subscribed by the An Feng shareholders refered to above ).
The company effected its change of status from a no liability company to
a limited company and changed its name to "An Feng Kingstream Steel Limited".




AN FENG KINGSTREAM STEEL PROJECT
As is evident from the highlights during the year considerable progress was
made toward commencement of the An Feng Kingstream Steel Project. The steel
plant is expected to be constructed at Oakajee, approximately 25 kilometers
north of Geraldton in the State of Western Australia. The plant will occupy
approximately 200 hectares and is designed to produce 2.4 mtpa of steel slab.
It is expected that all of the steel slab produced will be used in the company's
hot-rolled mill for down-stream processing in Taiwan.

During the year a formal Joint Venture Agreement was executed between the company
(30%) and An Feng (Australia) Pty Ltd (70%) although this remained conditional
on the execution of a take or pay contract, a ratified State Agreement from
the State of Western Australia, a revised feasibility study, FIRB approval
and obtaining acceptable financing for the project.

While discussions and due diligence investigations were continuing on the
outstanding conditions under the Joint Venture Agreement, the company and
An Feng began to discuss the benefits of a merger rather than a joint
venture. The outcome of these discussions was the merger proposal approved
by shareholders in June 1997. The merger was completed in July 1997.


State Agreement
The State Agreement between the State of Western Australia, the company and
An Feng (Australia) Pty Ltd was executed on 12 March 1997 and assented to
by the Western Australian parliament on 27 June 1997. The State Agreement
provides a comprehensive framework for the An Feng Kingstream Steel Project
to ensure long term of tenure for mining tenements, access to all necessary
services and infrastructure and a secure means of supply of all consumables
including gas, electricity and water.


The Plant
The plant will be constituted by a steel slab production facility with a
capacity of 2.4 mtpa.

The major components of the plant are:

Handling and storage facilities for incoming materials including iron ore
in the form of lump, fines and concentrate, scrap steel, various additives
including quicklime, ferro alloys and carbon.
A pellet plant in which the iron ore fines are converted to pellets suitable
for direct reduction. The pellet plant will have the capacity to produce 2.8
mtpa of pellets.
The steel plant will include two direct reduced iron process units, each
with the capacity to produce 1.2 mtpa of direct reduced iron.
There will be one melt shop which will contain two Electric Arc Furnaces
and two Ladle Furnaces.
There will be a casting plant located adjacent to the melt shop,in which
the liquid steel is cast into slabs.

Other major components of the Steel Plant are:

a product storage area where slabs will be stockpiled prior to export;
a combine cycle gas turbine power station;
water and waste water treatment facilities and cooling towers;
a cryogenic oxygen plant; and
administration and maintenance facilities.




Resources

The An Feng Kingstream Steel Project will source iron from deposit at
Tallering Peak, the Weld Range, Koolanooka and Blue Hills.
A summary of these deposits is as follows:

AN FENG KINGSTREAM STEEL PROJECT - IRON ORE RESOURCES
Site
Mining Lease/
Exploration
Licence
Category
Million tonnes
Grade
(Fe %)
Tallering
70/896
Measured
20.2
63,9%
Peak
 
Indicated
7.9
59.7-64.5%
(High Grade)
 
Inferred
0.7
56.2%
Weld Range
TR3902H
Indicated
38.0
58.9%
 
20/176
Inferred
8.4
59.4%
 
20/209
 
 
 
Koolanooka
70/1212
Indicated
137.3
36.9%
 
 
Inferred
342.3
36.3%
Blue Hills
59/462
Estimated
120.0
37.0%



Mining Operation

The Iron ore deposits at Tallering Peak are planned to be mined by open
pit methods using a contract miner. A production level of approximately
3.6 Mtpa is anticipated from Year 2. The feasibility study provides for
a beneficiation plant to be constructed at Tallering Peak together with
other associated plant and infrastructure. The beneficiation plant will
have a capacity of 3.6 Mtpa run of mine at the crushong and screening
stage and 3.1 Mtpa at the fines grinding and desliming stage.

It is proposed that the Weld Range and Koolanooka deposits will be mined
by open pit methods.


AN FENG STEEL CO. LTD

An Feng is a major Taiwanese steel manufacturer, principally engaged in
the manufacture of hot rolled steel coil in Hsiao Kang district, Kaohsiung,
an important port city of Taiwan. Its hot-rolled steel coil manufacturing
plant has a rated production capacity of 2.0 mtpa and employs approximately
700 people. The plant occupies approximately 200,000 square metres and
include a hotstrip mill line, a temper and recoiling line, a roll shop,
a waste water treatment plant, a steel slab yard and a coil yard. An Feng
is developing a galvanising line and a pre-painted galvanised line which
are expected to commence production in 1998. The introduction and sales mix
thereby reducing reliance on sales of hot-rolled steel coil.

In the year ended 31 December 1996, the An Feng plant produced 1.7 million
tonnes of hot-rolled coil and the six months ended 30 June 1997 has achieved
an equivalent annualised production of 1.94 million tonnes.

An Feng has adopted a strategy to grow by vertical integration and, in recent
years, has sought opportunities in both upstream and downstream projects.
To this end, An Feng has:
กด commenced installation of the galvanising lines and pre-painted galvanising
   line for its Kaohsiung plant;
กด acquired a 40% interest in Jenn An, a company which is developing a plant
   which will manufacture cold-rolled steel coil and galvanised steel coil; and
กด completed the merger with An Feng Kingstream, hence securing a direct interest
   in the An Feng Kingstream Steel Project.

Jenn An Steel Co., Ltd was established in June 1994 to develope a 1.3 mtpa
cold-rolled steel coil and galvanising plant adjacent to An Feng's offices
in Kaohsinug, Taiwan. Construction of the plant commenced during 1996 and
it is expected to being commercial production in 1998. This plant is being
established to:

กด meet a shortfall in the supply of certain high quality cold-rolled steel
   coil products in Taiwan; and
กด meet current and forecast increased demand in Taiwan for hot dipped
   galvanised steel coil in the production of corrosion protected steel
   products.

An Feng's investment in Jenn An is an integral part of its long term strategy
to vertically integrate its steel operations.


Business Operations

The company's operation will ultimately encompass production of:
กด iron ore;
กด pellets;
กด DRI;
กด steel slab;
กด hot-rolled steel coil;
กด cold-rolled steel coil;
กด galvanised coil; and
กด colour coated coil.

Initially, business operations will comprise hot-rolled steel coil manufacturing
in Taiwan and, from 1998, cold-rolled steel coil manufacturing and galvanising
in Taiwan. Eventually, the completed An Feng Kingstream Steel Project in
Western Australia will poduce steel slab to feed these manufacturing operations
creating a fully integrated steel business.


Other

The company also holds minor interests in the Philippines which comprise:
กด A 59.5% interest int the Montalban alluvial gold and gravel project in
   the Philippines which comprise a tenement area of approximately 1,600
   hectares located on a large alluvial fan approximately 20 kilometres
   from Manila. The alluvial fan consists of gravel, sand, boulders and
   placer gold. The directors have resolved that once the operation is
   established they will consider selling the interest in this project.
กด An 80% interest in the Agno River alluvial gold prospect in the Philippines
   which comprises a tenement area of approximately 3,400 hectares on the
   alluvial plain of the Agno River on Luzon Island. The Directors have resolved
   to sell the interest in this project in conjunction with any sale of the
   Montalban Project.

Considerable difficulty has been encountered over a long period in respect
of the Philippines projects and both have been fully provided for in the
accounts of the company.