Ann: RIU Conference Presentation, page-65

Hi Ducky,

Hedging is done at the futures price for the time frame of when the hedges will be used less a margin of $250 / tonne to cover the hedge providers costs and profit for setting up the other side of the transaction with a copper user.

The futures price will also include a margin for the person taking the risk on what the future will bring.

Essentially hedging is all about risk management and is driven by the need to have price certainty when making investment decisions.

Its driven by the price that is necessary to allow the company to cover its costs of production and forecast capital expenditure requirements to produce the copper that is providing the revenue.

As I understand it the calculation will involve a percentage of the forecast production being sold at spot prices which for the risk management calculations will be priced at the worst possible forecast future price and the rest will be hedged at a price that lifts the average price to a point above forecast break even. If hedging can't do that job then the project is not viable.

The percentage hedged will vary with the net hedge price that is achievable.

If all the forecast prices are correct ( a big call) the hedging costs only the margins of the hedge provider and the future price fixer. Probably about $500 / tonne. Insurance is expensive but a necessary part of risk management.

Is it worth hedging some of the sales. I guess the simple answer is the board wouldn't be doing their job properly without firming up future revenues sufficient to adequately fund the projecs forecast production. The cost of being careful can be significant if the futures price proves to be way too low or can be a small price to pay if the futures price turns out to be way too high.