"We have provided a detailed explanation of the status of the...

"We have provided a detailed explanation of the status of the hedge, as a result of Lehman
Brothers’ bankruptcy. The corollary has been a change in the way we account for profits, which
may result in significant swings in the income statement. Cash flows will not be affected.
The move by Lehman Brothers to seek payment of the withheld hedge monies, which was
announced last Monday, comes as no surprise. The issues are now:

Will the relevant Lehman Brothers entities emerge from bankruptcy in the foreseeable
future? I would have thought this is unlikely, but time will tell.


Do we have the cash to pay any such enforceable judgement, after all appeals, if it
were to be granted? Yes.
Operation of the convertible notes had not been affected by the bankruptcy of Lehman
Brothers. The notes are repayable in 2011, and, in accordance with their terms, we have begun
to provide a sinking fund for their redemption. The Company also retains the right to convert the
notes into shares under certain conditions; specifically, if the stock price remains above 37.5
cents for 20 consecutive days.

I am pleased to announce that last week we achieved milestone at Homestead, reaching our
first ore some two weeks ahead of schedule. The quartz vein intersected is very impressive, with
a sample showing small specs of free gold. Whilst there is still plenty of work to get to full
production, this is a great start to our first underground project.
During last week we also received good news with respect to our drilling program on our coal
property in the Bowen Basin. We still await the independent expert’s interpretation of the wireline
logs, but it appears we have intersected high-grade coal at the anticipated depths.

Our cash position remains strong, with over $50 million cash available at bank. In addition, we
have $10 million in “escrow” for the redemption of the Convertible Notes, and further substantial
amounts of cash securing environmental bonds. As a result, Norton has a number of options before it, which your board is actively considering. I
am confident that we will see further growth this coming year.