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.December 2005 Page 3
Southern Block Magnetite Deposit
Based on aeromagnetics and surface mapping, the Balmoral Southern Block magnetite deposit
appears to be a direct continuation of the adjacent Balmoral Central Block and is therefore assumed to
contain similar quality magnetite ore and stripping ratios. At this stage no ore reserve exists on the
Southern Block, however a key term of the agreement, in the event drilling on the Balmoral Southern
Block is below expectations, is a warranty by Mineralogy to provide the 400Mt from the 2,500,000,000
(2.5 billion) tonnes of JORC compliant magnetite resource delineated in the Balmoral Central Block.
Confirmation of the latest JORC compliant resource (December 2005) and Mineralogy’s previously
announced reserve statement (September 2003) is detailed in Schedule A.
The bankable feasibility study work completed by Mineralogy on the Central Block has proven that a
magnetite concentrate grading up to 71% Fe can be produced from this ore with very low
impurities and a weight recovery factor in the order of 33% (ie 3 tonnes of magnetite ore required to
produce 1 tonne of concentrate).