Ann: Thunderbird Process Plant Commissioning Underway, page-11

We're in a very different boat - much fewer risks when it comes to the final production commissioning. The biggest difference is that the STA model is relying on producing zircon and premium zircon and SFX is producing a concentrate which is a far simpler process.

1) SFX grade is much higher, providing a much bigger margin for error. Ie STA is processing 1% grade ore and if the plant is not fine tuned and fails to separate 0.5% of the sands that's a 50% haircut on revenue (very significant drop in the early stages when cashflow is key). If on the other hand the ore grade is 4.5% and the SFX plant let's 0.5% of sand through in the initial stages that's only 12% of revenue being lost until the fine tuning happens.

2) SFX has a tailings dam and is not relying on water to drain out of the pit as STA's design does (the water isn't draining out of the pit at a sufficient pace for STA and this seems to be one of the biggest issues they are facing in the short term).

3) the SFX model is only producing zircon concentrate and not relying on producing zircon or premium zircon. The zircon comes out of the MSP which is a seperate processing plant and fine tuning that process is much more complicated compared to getting the concentrate process right.

4) SFX has excess DMU (dozer mining unit) throughput capacity compared to the throughput capacity of the WCP (wet concentrate plant). STA seems to have had a terrible time of feeding enough ore out of their DMU to keep their downstream processing plants running at the required throughput capacity. The STA DMUs seem to have suffered breakages, operator error, positioning issues and more. SFX have a plan that incorporates a ripper to break up any indurated ore which will hopefully keep DMU breakages off the books. The SFX DMU were manufactured by the same group that manufactured STA's DMU (world class Group with much mineral sands experience). As a result SFX through the contractors should have benefited from the STA DMU experience and any similar potentials addressed.

5) because of STA low grade, the model required very high levels of ore throughput in order to be economical, STA due to drainage and DMU issues is struggling to maintain the required throughput. This high throughput requirement is a factor that will continue beyond commissioning.

6) there is a question over the viability of the Coburn deposit (STA), the fact that the grades are so low means that not only does the processing need to be spot on, but the actual ore needs to be very much inline (or above) what the drilling and sampling indicated, any anomalies in the deposit below the expected grade (or quality of ore) will have a big impact on cashflow.

7) opex cost blowout potential for STA relative to their BFS which looked at everything through very very rose coloured glasses. The SFX BFS has if anything over estimated Capex given the indurated nature of their ore in places. The STA recovery assumptions are another example of the rose coloured glasses syndrome.

The STA enterprise value with all this going on is not far off that of SFX's 50% share of TB (STA NPV and 50% of TB are comparable), so in my books SFX is looking very cheap (it always has).

hope this helps somewhat.