ozl strategy, page-13

Hi DB1,

This is where I go from having most of the facts to supposition and opinion; and so what follows are some of my thoughts.

Mid tier miners need to be careful that they do not "bite off more than they can chew". OZL is not a BHP, and does not have the cash flow to manage 17 projects at one time. Also, OZL needs to be careful. All it's eggs are currently in one basket. If there was a catastrophic plant failure at P Hill, OZL has no other income stream during that 6 or 9 month outage and needs cash to repair the failure. That is a significant risk that needs to be managed with cash in reserve for a rainy day.

The other risk that OZL needs to manage is that being a pure copper play, it is very exposed to that commodity. If copper fell heavily, cash flow would be crimped and having cash in reserve for a rainy day would also be prudent.

So, with those risks in mind...

What does OZL have in assets? P Hill, C, SFR stake, $750m cash.

What does OZL have currently in projects? C resource defn, Ankata development, Munda study, exploration at P Hill and Cobar.

We also know that any mine development in Aust is expensive. So if Munda is feasible, (and IMO, it is), then it will need , (I guess) at least $500m cash to develop. We also know that the C resource is huge, but could need up to $2B to bring to market (RXM is forecasting $800m for open pit, remember).

So, it all boils down to managing risk. Could OZL buy RXM - yes. Does OZL have the expertise to build the RXM facility? Yes. Is it the best use of OZL capital? I do not know?

Modelling of Munda vs modelling of SFR purchase, vs modelling of RXM (all NPV ebit models) would tell you which is the one to give the best return to shareholders in the short term.

Again, going to IMO thinking, I would put my money on Munda. Why? A brownfield development is normally cheaper than a green field buy and build. There are normally no unknown's. This reduces the risk significantly.

We all know that extension of income past P Hill is by C (at a minimum). Takeovers are always very dependent on the sp. It would need to be an absolute bargain to be positive to OZL holders.

Would be interested in alternate comments and points of view. Happy to be persuaded differently.

HT1