Ann: Production Expansion Update, page-59

Overall, happy with the update.

I did notice a couple of things in the language that was used in this ann:

1. Although consistent with the description used in the last quarterly, 2019 is no longer being mentioned as the target for 2.5mtpa. Rather, the language is generalised, without a specified date. This seems expected now, as we would need to commission 2x1mtpa in 2019 for this target to be met. Does not seem likely. I have no expertise in this field, so who knows.

2. The new plant will target an output greater than the current spec of 58-62% fe. This is different to how it was recently described in the last quarterly - phase 3 producing 63-65%fe targeting 65%fe. Not sure if they have changed the language to manage expectations better or if further analysis by xinhai has revealed limitations with our input/setup. Pure speculation. Hopefully it is the former.

I would think better grades and yields with the the thickening circuit and utilisation of higher grade feed would influence the aforementioned. Management need to confirm if this is the case though.

The exciting takeaway from this ann was the mention of a 600kt pellet plant. Back of the envelop calcs would suggest based on the lower end industry norm of $44 profit per ton of pellets and a p/e of 13 (based on a current fv estimation of 3 cents by morning star someone mentioned here) this would add another 9.2 cents to the share price (44x600kx13/2.6b)x0.70.

In the last quarterly it was mentioned that there would be visits this quarter to China with significant chinese epc companies to discuss the pellet plant project. Hopefully we get something on that by year end.