reality, page-22

Pelm,

I have not responded to your comments over the past days/week because they were not inconsistent with my need to accumulate stock. For complete transparency, I sold down a percentage of my holding in the 2.90’s and posted to that effect on another forum on 23 May. You have raised issues of only 4.3MT, contaminants and cutback which were worthy of raising and thus worthy of a response.

All of the upgrade testing conducted by BRM thus far are on core samples obtained from the NW Sector (NWS). Thus the obvious question is why is BRM commencing a startup operation from Rockhole Bore (RHB) and not the NWS? Five points:

1. The 4.3MT is classified by BRM as DSO, but that does not, in my uneducated mind, necessarily preclude them from doing some simple gravity screening/beneficiation prior to shipping it. They appear to have allocated $60m for mine development in the startup project. Surely some of that expense relates to capex aimed at upgrading the resource. If its not, then what is the $60m allocated to?

2. RHB is more amenable to upgrade than the NW Sector. This was taken from the maiden JORC release (24 Oct 2007):

“Mineralisation at Rockhole Bore is predominantly hosted in unconsolidated detrital and pisolitic material, compared to the more cemented nature of the mineralisation at the North-West Sector.”

Thus, the metallurgical update results provided so far (which all pertain to the NW Sector) are arguably going to be exceeded once duplicated at RHB. This is consistent with BRM’s decision to target RHB and not the NW Sector.

3. Contaminants are not the only issue otherwise they would have targeted a blending operation (CID from NWS where the CID has lower contaminant levels compared to Rockhole bore (32% lower on silica and 20% lower on alumina) and detrital from RHB. Alternatively, a blending operation of CID/Detrital conducted entirely at RHB. Tradeoff extra mine cost with price benefits.

4. RHB has detrital at surface – less dig/strip costs. This is not the case at NWS. BRM appears to be targeting lower costs, not lower contaminants or at the very least trading off contaminant penalties with lower dig costs.

5. RHB has a high volume of pisolite in the detrital layer and based on your statements, BRM have no intention to touch the CID. The intention, IMHO, is to get to better understand the lithology of the main ore body before larger scale production

Your comments re the cut back on the boundary are legitimate, but not unknown to BRM and Paterson’s. You had raised this quite a while ago and I looked into it then.

The BRM AGM Presentation (11/5/2007) indicated that BRM would:

“Discuss potential Business strategies with accompanying tenement holders for ore resource extension and optimal mining plans.” By optimal mining plans, its fair to assume they also mean cut back.

It was later taken up as an issue by Paterson’s (Broker Report 6 Nov 2007) as follows:

Potential extension to tenement boundaries? The Marillana ore body is truncated by the YML-BHPB tenement boundary in the south, and to the west by the YML-RIO boundary. While drilling has confirmed the thickest ore zone lies north of the line, YML considers meaningful tonnage is also likely to exist on BHPB’s side. Previous drilling has also returned several ore grade intercepts including 6m @ 57% Fe west of the RIO boundary.

Assuming development of Marillana proceeds, YML will be required to negotiate access for a pit cutback on BHPB’s side of the boundary (YML can mine ore to the tenement boundary). Logic suggests YML would also seek to mine ore on BHPB’s side of the boundary at the same time. Any discussions are unlikely prior to YML establishing a mineable resource however, conceptually there may +/- 20mt of ore south of the boundary with the potential to materially enhance Marillana, while also providing BHPB with a commercial outcome (assuming agreement can be reached). Similarly, it appears mineralisation extends westward into RIO’s tenure. We consider it likely YML will attempt to negotiate access to the west however, YML views the western extension as option value only and is looking to the south-eastern limb of E47/1408 to add incremental tonnage.
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Paterson’s have never raised cut back as a “risk” issue after that release. Perhaps it has been resolved to their satisfaction such that it is no longer an issue. It seems to me that you can view the cut back as a negative or a positive. From a positive perspective, an extension into another tenement increases ore and profit from mining and also has scale implications for the project by reducing average capex cost/improved financing scope (and visa versa from a negative perspective). Its +/- 20MT or there about if Patersons have calculated correctly.

If BRM have not obtained a MOU or a more legally binding agreement on the cut back issue (and mining proximity to the BHP rail line for that matter), it begs the question why they would have so comprehensively drilled the boundary line at significant expense and tied up valuable drilling time. I note also that of the Gravity anomaly’s, only MG1 and 2 and a fraction of MG6 are on the boundary. MG5, 8, 7, 3, 4 and most of MG6 are not near the boundary at all (refer Oct 2007 Presentation). However, I’ll leave it to the mining guru’s to comment on where the best ore is located.

I must admit to some frustration that the company appears to be behaving as if the detrital upgrade is a foregone conclusion, yet it fails to put it in black and white. Perhaps large scale testing and the ore characterisation testwork (thermal analysis/tumble and abrasion testwork and sizing analysis and sinter tests) that they refer to are more extensively required than we realise. I presume it’s a JORC standard that they have to meet as Snowden’s certainly didn’t refer to any upgradability of the ore in their JORC Report. The inferred part of the JORC code does not address ore economics (only mineralisation continuity). Ore economics is addressed when the resource is definitive and/or Bank Feas is complete. Not sure. Its not something they can afford to get wrong as some pretty large capex is going to be incurred based upon the outcome. I’d rather wait and be sure that they have got it right.

Re your $1.XX buy target!! Fair go. $1/$3, pebbles/pellets, pawn/porn its all the same. May see 2.20 if the US tanks as I think it might. Not out of the woods yet.