ABSOLUTELY COMPELLING ECONOMICS, page-713

@OutResourced - I think we will have to wait a little longer for the updates on the financial metrics - I assume that unless its fully supported by a PFS or BFS or similar, ASX rules might prevent what might be considered speculative comments by management.

There are a few things to consider when looking at the 2017 PFS and the outcome of the BFS currently underway:

• I agree that costs would have gone up since the 2017 PFS and 25%+ is reasonable to assume - that would apply to construction and operating costs (other than where there are changes like rail to slurry pipeline).
• Offsetting increased operating costs is the increased demand for premium iron ore and the premium that might be paid for 69-70% Fe.
• Also offsetting increased operating costs will be some economies of scale and the slurry pipeline to port without rail.
• Whilst a 350km pipeline will cost more to build, don't forget the 2017 PFS included a 60-70km slurry pipeline to Broken Hill - therefore the cost of some pipeline construction and dewatering the slurry would already be included in the PFS.
• There will be operating and construction costs not incurred by not having to load and unload for rail.
• There could be savings on port construction and operating costs if SA Ports build and operate the port - as opposed to PFS which may have included costs to adapt Port Pirie for transhipment barges etc.

Given the likely economies of scale from going to 10Mtpa to 20Mtpa, I would be surprised if the construction costs per Mtpa and the operating costs are higher than the PFS. Apply your current views on long term iron ore prices to the PFS which was based on 65%Fe prices of US$85.40 (and note that was 65% not 62% Fe) and I think you will see some significant improvements to the financial metrics of the project. I note the PFS allowed a premium of US$13/t to go from 65% to Hawsons Supergrade and a higher premium may now be applicable.

And given you said you like iron ore - I'm interested in what you think long term prices will be for 62%, 65% and Hawsons Supergrade (69-70%) - what prices might they adopt for the PFS and what you think the trading range might be.