buy sell or hold, page-8

oscarWon,

I am dazzled how you come to a figure of 10 to 20 times the current share price. The only reason the share price went up so high was the hype in iron ore just like uranium last year.

AGO is only capped at around $134 million and has $100 million in the bank with no debt and on the surface it looks very very cheap. But they will need further money as time progresses to expand. How can they expand in this current economic climate?

But just to give you an indication of the size of AGO compared to RIO, BHP and FMG see below.

RIO produces approximately 150 million tonnes of iron ore annually expanding to approximately 200 million tonnes by 2011. (diversified miner). It has positive cash flow. We are talkng $billions of profits and cash flow

BHP produces approximately 120 million tonnes of iron ore annually, I'm not sure of expansion plans (diversified miner). It has positive cash flow. Again $billions!

FMG will produce approximately 20 million tonnes of iron ore to the end of December this year. Looks to produce between 45 - 55 million tonnes by end of 2009. (iron ore pure play). Would need to see Dec 31 Accounts to establish if it is cash flow positive or negative.

AGO will produce 1 million tonnes of iron ore. (iron ore pure play). It will have negative cashflow as it doesnot have enough revenue to fund exploration. The only way it will be able to expand is to raise capital again, further diluting shareholders' holdings.

AGO are nowhere near as low a cost producer as BHP, RIO and FMG. They use Road trains as opposed to the cheaper alternative of rail like BHP, RIO and FMG. They are looking to expand to 9 million tonnes by 2011. This would require hundreds of millions of dollars if not a billion dollars.

FMG has borrowings of just over $6 billion and is a producing at 55 million tonnes per annum by end of 2009. It also raised billions of dollars over the last few years.

So, if all the major low cost producers of iron ore are cutting back on production because of weak demand how will an AGO operation be able to sustain production and further more make profits?

Takeover talks are mere speculation and if it does happen you would be lucky to even get 90 cents per share.

I think you are very optimistic about your views with AGO.

Cheers