time table shifted again, page-40

DPH,

I have been away from the office today so apologies for the delayed response.

It's a tough question to answer but IMO I do not think the deal will go through.

I believe there has been a fundamental structural change in the last few months regarding the way the Chinese go about investing in major projects.

They got burned very, very badly with Sino Iron, Sinosteel Midwest, and to a lesser degree, Karara & Moly Mines.

I believe the Chinese now understand that they do not do major project aquisition and delivery very well. And Hanlong, who are rank amateurs, have no chance of getting the project delivered on time or anywhere near budget.

The NDRC, via the central banks, are starting to demand a much higher level of due diligence on project acquisitions. And, importantly, the NDRC are fed up with being fed BS from the likes of Citic, MCC, Sinosteel etc who are always going back cap in hand asking for more money.

What I think will happen, and this would be better for SDL shareholders in the long run, is that the Chinese will go back to the model that worked for the Japanese and worked for the Chinese themselves before they embarked on a new model of 100% ownership - that model being minority JV partner with offtake agreement.

Having an offtake agreement ensures security of supply which is strategic goal number 1. Providing some of the project financing via a JV arrangement helps to get projects off the ground thereby increasing market supply (thus keeping a lid on prices) which is strategic goal number 2.

Owning and developing the projects themselves has not worked so they will go back to what does work.

Here is my prediction. Once the conventions are in the bag the NDRC will not approve finance for Hanlong. Instead, the NDRC will tell Hanlong to go jump and then direct one of the mills to negotiate a JV & offtake agreement with SDL.

SDL will still be in a hole somewhat because they won't get financing from anywhere else but China, and they will be told which steel mill will be their new partner.

But it is a better position than being 100% owned by Hanlong.