Ann: Board Changes and Company Update, page-3

Well we have our explanation in relation to Mr. G & where he stands. Again many thanks Ian.

That still leaves us all speculating as to the motive and timing of the ECMR move.

One would have thought the logical chain of events would have been, if ECMR had any grievances or concern in regard to the scheduled start of development activities or the performance of the previous alluvial tin operation or the reduced scale of the new 400K Development Plan, these would have been brought up at TE Board level, dialogue opened and Gippsland afforded the opportunity to respond or make adjustments to its plan to satisfy ECMR, after all, it is a joint venture.

Instead, it sounds like the TE Board process has been by-passed, and we have been served with what amounts to an eviction notice.

a) ECMR are voicing concern about the alluvial operations shut down only now, yet mining has been over for nearly eight months. Why now when conditional financing is to hand ?

b) Grievance in relation to scheduled start of development activities -
Why was this not brought up at TE Board level allowing time to adjust or remedy the situation to mutual satisfaction ? Instead straight to termination notice.

c) The reduced scale of the new 400K Development Plan -
It seems to have escaped the bureaucrats this is a staged development to a higher production necessitated greatly by the fact, there is and remains, very little local or international appetite to invest in a country which has recently undergone so much upheaval (Arab Spring and Egyptian revolution) and when also coupled with the background of other world financial crisis's. Their own Egyptian banking consortium could not come up with the funds. ( Just as a side bar, I wonder what the Egyptian Banking Consortium would now make of the 400K plan and financing a lesser $7mio Stage One and $28mio stage Two ? ).

The other strange part of the equation, is that if there were some internal Egyptian Government move to claw back more mineral rights into Egyptian control, the proposed transaction takes Egyptian participation from 50% to 75%.

Then there is the timing, on the cusp of development they want to pull the pin.
I would like to hope that our Egyptian legal team also work into their defence, why Abu Dabbab has been singled out which has considerable site development, past alluvial production and documented finance negotiations, against, as by my reckoning, we have done nothing at all on Wadi Allaqi for over 7 years.

Just my opinion, I sincerely hope is does not get to the arbitration phase, however, given all international and Egyptian events of the last seven years, I cannot see any arbitrator siding with ECMR, I also believe any arbitrator would take a very dim view of the timing of all this when the company is on the door step to tantalum production and greater local employment opportunities.

Notwithstanding, it appears a reconstruction and re-capitalisation is coming our way, 1:10 ?? and new broker's clients lined up with fresh capital that will respond to the tenure air being cleared, finance being in place (albeit conditional) and a step up production plan. Personally, I have no problem with that, it is realistic no matter how much us long termer's want to grumble, as long as it finally gets off the ground into production I am for it, we can only but hope Mike comes up with a plan that does not dilute us too much but equally satisfies ECMR and gets Abu Dabbab into production.

TPG