Ann: High Grade Extension East Of Altan Tolgoi, page-6

Great to hear from you in all this silence SilentO.

My understanding is:

The Kharmagtai tenement is owned 100% by Oyut Ulaan LLC.

Oyut Ulaan LLC is owned 90 % by Mongol Metals LLC subject to a final payment of US10 million to Turquoise Hill Resources (THR) by December 2015, and 10% by THR. THR is the owner of Oyu Tolgoi (ie RIO 67% and Mongolian Government 33%)

Mongol Metals LLC is a joint venture between XAM (85%) and a director of XAM Mr. Ganbayar (15%). It is important to know that Mr. Ganbayar was instrumental in the founding of XAM and the early exploration 3 or 4 years before XAM listed on the ASX.

The slightly difficult part in the ownership is that Mr. Ganbayar has already contributed his 15% (US$4 million) of the capital of Mongol Metals but XAM has not paid its share. XAM must contribute US$12.667 million in exploration expenditure and $10 million for the final payment to THR by December 2015. What happens if it doesn't is complicated. According to the Grant Thornton Independent Report on the transaction neither Mr Ganbayar's 15% nor XAM's 85% ownership of the JV is effective if the $10 million payment is not made, a sort of mexican standoff?

This means that if it meets its funding commitments, XAM will own 90% x 85% = 76.5% of Oyut Ulaan LLC which is the lease holder of Kharmagtai.

Mr. Ganbayar will own 90% x 15% = 13.5% and THR will own 10%.

I am working on the assumption that if Kharmagtai is advanced enough for XAM to raise 20 or 30 million in the next year or so to meet its commitments to the joint venture. If it can't then the future for XAM is very uncertain. But I am also assuming that Mr.Ganbayar, a very experienced Mongolian geologist, would not have already contributed US4million without being fairly certain this is a winner. Seems a good enough reason to thing that the project is going to fly.

Hope this helps.