Ann: Letter to Shareholders-KBL.AX, page-25

I am very sceptical of the plan going forward and the explanations in this letter to shareholders. Some key points that people need to keep in mind (as someone familiar with the area):

- Pearse North has no current approval from the NSW government. Getting approvals for new Mining Leases and modifying Mine Operating Plans (MOPs) is notoriously difficult, and can take years (at worst). This is a massive risk to new investment, especially as they are relying on it for any positive cash flow in the future. What is the contingency if approvals are not received in time?

- The Company has reported a reserve for Pearse North that is approximately 40% of the grade of the current Pearse reserve. Normal grade/recovery relationships could indicate lower extraction from this ore.

- KBL does not indicate what the stripping ratio will be for this new reserve. Previous announcements have shown the Pearse North resource is much narrower and deeper, possibly resulting in significantly higher stripping ratios and higher mining costs.

- The A Lode at SOZ is polymetallic, and dominated by lead and zinc. The Company has historically had a lot of issues processing these ores (see Parkers Hill). It is still largely inferred (thus the need to drill).

These are of course my own opinion but it doesn't look like a very appealing proposition to me.