Ann: Results of Annual General Meeting , page-73

Starline/Poet Plus

I have another scenario that may be worth considering.
Firstly, let's have a look at some points of the original announcement back on 19/8/10

"The final agreement has been signed and will be executed as a partnership with Vale being granted exclusive exploration rights for up to 3 years. On satisfying conditions precedent, Vale will have earned the right to exercise an option to acquire sole ownership of the property.
KEY PROVISIONS OF THE AGREEMENT
1. For a two year option term, Vale will pay Avanco a non-refundable fee of US$350,000 on signing and receipt of regulatory permissions to drill.
2. Vale should drill at least 2,500m at Trindade North within the first year.
3. After one year Vale must pay Avanco US600,000 for the second year. To retain and extend the option for a third year, Vale must make a further payment of US$1,000,000 to Avanco.
4. Based on drilling results Vale will pay Avanco a royalty for any in-situ JORC compliant iron ore resources in the measured and indicated categories.
5. On Avanco receiving funds from Vale inclusive of 1, 3 and 4 (above) estimated at US$10,000,000 or more, Vale will have satisfied conditions precedent and will have earned the right to complete the acquisition for sole ownership of Trindade North. The total sum of all qualifying payments to Avanco is capped at a maximum value of US$40,000,000.
6. In the event economic mineralisation other than iron ore is discovered, both parties will renegotiate terms with Vale retaining preferential rights to first refusal.
7. Avanco can elect a representative to participate in the exploration programme."

The first point I would like to make is that the agreement was signed as a partnership.

The second point is what happens to that partnership if economic mineralisation was discovered.It would appear to me that Vale only have rights to purchase 100% of the iron ore and a first right of refusal only to other minerals should AVB wish to sell them.

Let's now look at the announcement on 21/7/11

"The BIF situated within Avanco's tenement makes up the southern portion of a much larger mineralised structure which straddles the common Vale-Avanco tenement boundary. To facilitate any future exploitation of the iron ore, the
Company believes that practicalities will dictate that the Vale and Avanco resources will have to be mined concurrently."

The announcement talks about the BIF being part of a larger "Mineralised" structure. If Vale only have rights to the BIF could this mean that the comment "the Vale and Avanco resources will have to be mined concurrently" may actually be referring to the fact that the BIF is imbedded in a mineralised structure that contains other minerals such as copper or gold which AVB retain the rights to.

If the drilling only contained iron ore and Vale are going to 100% ownership of TN why would AVB need to make any comment about how Vale would mine the Vale-Avanco tenements. It shouldn't be a concern to them once they have been paid.

To guage the likelihood that other minerals have been discovered in the drilling I have looked at the nearby Rio Nove tenenments which are located approx 2-3 kilometres due west of TN and discovered a report that confirms the presence of copper imbedded in BIF. The following is an extract from that report.

"At RN-7, Teck drilled two holes, 800 metres apart, to test a copper in soil anomaly, which is flanked to the south by banded iron formation (“BIF”). At surface the BIF is largely hematitic, recrystallised and locally cut by hydrothermal magnetite-hematite veins. Borehole RN-29 intersected 102 m @ 0.66% Cu while hole RN-30 intersected 69 m @ 0.4% copper. In the drill core, veinlets and stringers of chalcopyrite occur randomly throughout the iron formation (Figure 11). Values up to 3.1% copper (DH-29) and 2.4% copper (DH-30) were intersected."

The attached core sample picture makes interesting viewing.

The advance negotiations that TP has alluded to only seem to make sense in the context that Vale and AVB are having to agree the joint mining of Iron Ore and copper and/or gold mineralisation as this was an unknown quantity in the original agreement. I doubt that they are negotiating the payment based on Iron Ore alone as I believe that the agreement would have been relatively clear cut on this.(i.e. there would have been a sliding scale of payments based on the resource tonnage identified. AVB would only have had to confirm the competant persons statement).

If my guess is correct we may soon be looking at a second joint venture mining arrangement unless, of course, Vale offer more money for any other mineralisation they may have found.

On the other hand, I was not at the AGM and TP may have confirmed no other mineraliastion was discovered other than Iron Ore in which case I have just wasted an hour typing all of this.

I look forward to others feedback if this is indeed a possibility.