EGM - 05/10/15

Hey peeps,

Just returned home from the EGM for NSL today. Was packed out. Whole 4 of us haha

In attendance was Sean Freeman, Peter Richards and Tim Lee. Apologies from Cedric, who was on his way to India from Melbourne.

All three are really nice guys, very friendly and more than happy to answer any questions. Much more approachable than I thought, so don't ever be afraid to ring up and ask a couple of questions.

They were prepared with my questions, as Sean had already grabbed a copy off HC and provided them to Peter, who chaired the meeting.

I didn't really want to record their answers, as it might make it uncomfortable for them to answer, so I just grabbed a pen and scribbled down notes.

Question 1: How much did the company have to do with the recent delegation to Telangana at which NSL was reportedly discussed?

Answer 1: The company had zero presence in regards to the delegation to Telangana. Funnily enough, there was also a delegation to AP at the same time, but this received little publicity. The company did not require a presence and no prompting was required to discuss NSL Consolidated, as the Australian Government are very much behind the company as the only Australian foreign success story in the sector within India. AP was apparently an even bigger delegation, but the AP government are more concerned about getting things done, than just talking about them in the media. After AP was split in two, the notion that AP14 is a critical infrastructure project was carried over to the new government of Telangana, with both states desperate to grow their mining industry. There was a bit of a stall due to bureaucracy over 12-18 months as the state split in two, as there was a lot of red tape to unravel, in addition to the countries elections at the time. This has now subsided though and it's a lot easier to do business.

Question 2: The Magna funding deal entitles them to "receive a 7.5% of gross revenue royalty for the life of the Kurnool plant." Does this mean the new wet plant only or does it include the existing dry plant? ie anything that is sold and goes out the gate at Kurnool.

Answer 2: The gross revenue royalty for the life of the Kurnool plant does include both the dry and wet plant. Essentially anything sold ex mine gate out of Kurnool is included in the royalty. This however does not include any of the companies other tenements or operations.

Questions 3: Last year the company was talking about purchasing a low capex mobile dry plant to be located at AP23. This has not been mentioned for some time....is this still the plan?

Answer 3: This is still the plan, however the priority right now is the commissioning of the wet plant.

Question 4: Is there any chance the company could in future possibly make "Go To Meeting" available for AGM's etc so that interstate shareholders can listen and ask questions?

Answer 4: They are happy to do this, if the cost benefit is there. As there are only likely to be 5-10 interstate shareholders willing to dial in, it might not be worth the expense to get such a system implemented. The company however are happy to look into it, but based on the physical no shows and that less than 10% of people sent in proxy forms for the resolutions, it's unlikely it would be worth the cost.

Question 5: What has been the primary hold up with getting the purchase orders from BMM Ispat? India love face to face and they love Aussies. There is nothing wrong technically, operationally or financially with the BMM Ispat purchase orders going ahead. There is literally the issue of being a small fish in a big pond. The current system for BMM to source it's ore is through auction, which takes up nearly all of the time of BMM staff who need to source at least 40,000 tonnes of ore per day. This makes NSL a low priority, since they will only be providing an initial supply of 200,000 tonnes per annum. There is a slow transition taking place in the sector from auction to ex mining gate.
Cedric is heading to India now to meet face to face, and will hopefully be able to raise the priority of the purchase orders going ahead. They will go ahead, it's all about priority to BMM.

Question 6: The announcement in early august said that the PO for 5000t Monthly to Sri Pipes would be concluded in coming weeks... We are 8 or 9 weeks on and there has been no update since the test ore was dispatched. Has it been kiln tested yet? Have negotiations ceased?

Answer 6:  The ore has undergone testing with Sri Pipes. The company are still working out technicals, like suitability for their kilns and their processes. They are a very small company, only needing thousands of tonnes per month, as opposed to BMM needing hundreds of thousands and JSW Steel needing millions per month. Sean is in discussion with several other potential clients for the same product, so either way something should come of this.

Sean also mentioned that there is still a massive imbalance between supply and demand in the industry. Only about 1/3 of the industry is close enough to the coast to capatilise on the lower global price of ore. They are thankfully in a very comfortable position, with demand greatly outweighing supply.

Question 7: Since being supplied funding by Magna at the start of 2015 and the end of the financial year, they had sold approximately 76% of the shares issued to them. You stated in the Annual Report that their further funding is a "tremendous show of support". What are your thoughts on the the downward pressure, as the single largest seller, Magna have created by selling their holdings, causing extra dilution to shareholders due to their discount conversions?

Answer 7: This was my favorite answer. I didn't notice it myself, but Magna pretty much used the last of their available conversions under the original agreement, which was announced on the same day as the Annual Report. I didn't notice this as I was more concerned about the Annual Report coming out. This means that Magna can now only really convert based on the new financing arrangement, which comes with a 200% premium to the 5 day VWAP. This is very good news.

It's important to note that Tim Lee stayed on top of Magna over the past 9 months, and Magna even changed brokers at one stage as they were unhappy with the affects of the share price. This is great that it has been managed and shows NSL are serious about keeping downward pressure to a minimum.

Magna have adjusted their model with NSL and instead of only being in for short term gains, are now interested in longer term ones which is evident in their new funding arrangement. This is great news, as it removes the shadow that the original funding arrangement was casting over the issued shares.

So overall, a very short and helpful meeting for myself. The company are working hard and have a very promising future. They believe the share price will begin to appreciate once they get money coming in (makes sense) and are happy with the progress they are making. It will only take the first purchase order to open a lot more doors.

Hopefully I have summarised their answers accurately. Was great to finally meet Sean, really genuine guy.

Good learning experience for myself, reminded me that these are real people and are doing real work. I always look back a year, every year and think how immature I was. The past year is another one of those years haha, but I will endeavor to deal with things more maturely in the future.

Starting by making more of an effort to pop in and ask the guys questions in person over the next year.