Ann: June Quarter 2009 Activities and Cashflow Re, page-45

re: Ann: June Quarter 2009 Activities and Cas... HT,

OZL did indeed get a good Q for PH, and very creditable to them being their first. Not enough to judge on imho though.

PNA had a poor Q by any measure, but seems a lot was to do with the ores they were processing earlier in the Q, plus the motor. They needed to be able to tell us July was going better. Off course we need to watch this closely.

However I will be watching to see if they can meet the 60kt for the FY, hopefully exceed it. Although I can dismiss the last Q in isolation, I can't if it forms a pattern. If they can't make 16, preferably 18 to 20 kt this Q then I will indeed be disappointed, and my faith in management will be diminished. It is now a credibility issue for them and that is why I hope and believe they have given the downgraded guidance - so that they can exceed it.

With OZL I still have grave concerns whilst Cussack is still on board, at least until I see the style and substance of the new CEO. The asset looks hugely attractive, however I am expecting Ban Houayxai before the UG expansion at PH. C1 costs for PH may be a bit better than Phu Kham, but a rising poo (Phu Kham uses hydro electricity) and $A could quickly reverse that. The GRAM connection may also help with some future costs.

Both are essentially starter projects in hugely underexplored regions. They are the only two copper companies I am currently comfortable with (or in the case of OZL nearly comfortable with. Will take longer to get over the mismanagement, and the lies we were fed). EQN and KZL have too high a cost structure for me, EQN also too many risks, and KZL too complicated and too zinc orientated.

EL