gtm feedback re spp & gtmo

Afternoon all - a few of you have asked to see GTM's feedback to my questions and further to some legal advice I obtained this morning there are no issues with releasing this information. However - I have removed my name and that of the individual who replied.

3 May 2004
Dear Mr ,
Thank you for your feedback which will be relayed to the Board.
Without comments, whether they are favourable or not it is impossible to gauge the thinking
of our shareholders. I also apologise for the delay in responding; we have had many
comments and queries about the SPP
You have asked a range of questions, some of which I am able to address.
With respect to the June 04 options, the Share Purchase Plan, can, under the Corporations Act
only be made available to shareholders The Board is considering whether any further action
can be taken to extend or replace the June 04 options.
As to the question “why do it now”, versus waiting until after the options were either
exercised or expired, let me try to explain the complexities of the broader issues.
The Company has implemented a rigorous (formal) strategic planning process designed to
identify opportunities and risks, as it must to meet the ASX listing rules relating to Corporate
Governance, which now require the Company to formally identify (and document) the key
risks facing Giants Reef and to take steps to address (and mitigate) those risks. It is in this
context that the Company has acted.
The key risk, at the moment, is mine life and how we act to extend it.
Currently, Chariot has a base case mine life through to the March 07 quarter. We are moving
to a new mining method-Avoca, which lowers operating costs and potentially accelerates
production. As you will have seen in the quarterly report, we have drilled in the past month
what we call Chariot East, with the expectation of adding additional mine life. We plan to
drill Chariot Deeps, - an area below the current mine envelope, in the next 3-4 months with a
similar objective in mind. As we have advised the market before, the deposit is open at depth.
We have also discovered Malbec, some 900 metres from Chariot, and are developing some of
the smaller, high-grade satellite deposits (eg Edna Beryl and Cat’s Whiskers).
However the worst case scenario is that without further discoveries the operations cease in
early 2007, or earlier if production accelerates.
Therefore, the Company needs to explore on multiple fronts in order to minimise that scenario
eventuating. I am sure you will agree this is in the best interest of all shareholders. This will
require additional funding.
As announced, we are drilling the Chariot Mineralised Corridor now. The Comstock-
Eldorado Corridor follows. The Company is committed to its exploration program and, like
all explorers, remains hopeful that further ounces at Chariot and other satellites are “just
around the corner”. However, we must consider the situation in the event that exploration
success does not occur.
The next thing to bear in mind is that the “wet” season in the Northern Territory shuts down
active exploration for up to 6 months every year. The window opens in April and closes again
around the end of October.
Finally, in the residual copper/gold assets we have the potential (subject to the announced
study) to add further production (and mine life) to the Company. (I leave it to you to do the
sums as to what may or may not be possible).
That is by way of background. There are some other issues for the Company and its
shareholders, as “co-owners” of the business, to consider.
Do we act now to fund the copper growth strategy or wait until after 30 June, -knowing that
there is a lead time (preparation, lodgement with the regulators, printing, opening and closing
dates etc) of around 8 weeks on an SPP and at least 13 weeks on a rights issue?. Or, do we
take the easier path and pitch it at institutions and give them the sole running to the exclusion
of the small shareholders?. Last year the small shareholders asked the questions - "what about
us ? - why can't we participate?", when we placed stock (at a discount) to the institutions.
The Company believed that the small shareholders should have the opportunity to contribute
fresh capital at a discount to the market price prior to the ASX announcement.
The problem of timing becomes critical given the "wet" season. A delay to post July would
have resulted in a delay until September before we could fund the program, leaving only a
matter of weeks for exploration (assuming we could obtain a drilling rig) for a modest pre
"wet" program. In effect we would be delaying the commencement of the program until April
2005. Then we need to add the months necessary to implement the strategy (i.e. explore,
finalise the study and design, get the necessary permits, construct and commission), knowing
that a worst case scenario indicates that we could exhaust reserves in less than 18 months
from April 2005.
(I leave it to you calculate, knowing how long it took to finalise the development of Chariot
and re-commissioning of Warrego).
Also, copper as a commodity runs in price cycles; - our advice from those far more
knowledgeable on copper was it was better to move now, rather than later.
However, as a Company we believe that it is in the interests of all shareholders to act now to
give us the time to implement the strategy. Waiting until after 1 July, even though it was some
3 months away, was seen as an imprudent gamble with shareholder’s money. The risk was
unacceptable, and good corporate governance required decisions to be made now.
The Company believed, I understand, that a failure to act would be seen (in hindsight) as a
questionable decision. The Board firmly believed that a delay until the June 30 expiry of the
options could potentially be to the detriment of the shareholders. The directors were very
conscious of their legal obligation to act in the interests of ALL shareholders.
I hope this might give you a better understanding of the background on this matter and why
the Board felt it was in the best interest of all shareholders to act now rather than delay.
Kind regards,