EGM, page-25

Hi Nextime & Hays,

The main CID hematite is on the sidewalls of SHIP deeper down but also some if it is showing above ground but they aren't interested in that, the 24mt is iron oxide alluvials amongst gravel in the middle of the channel which has formed in the top 11 metres by weathering of the sidewalls over millions of years. If they have 24mt of alluvials one would think the hematite sidewalls hold a significantly larger deposit.
As for Yandi the ore body is 55-60 metres below ground level so there is still a fair bit of carting of waste to get to the ore body and it requires drill and blasting to break it up a bit I would imagine the recovery by excavating the sidewalls would be similar to Yandi but the point is that is much more expensive to start up. The alluvials requires digging down 11 metres along a 7km x at most 3km wide section which is pretty easy to do I don't think you'd even need a geologist floating around knowing where the ore is makes it a whole lot easier to run efficiently.

See page 6 of the linked report for a diagram. They have only drilled the middle iron ore gravels no hard rock hematite or magnetite.

http://www.fairstarresources.com/downloads/research/fas_research_201007.pdf

Steeple Hill was discovered by FairStar in July 2008 about 110 kilometres east of Kalgoorlie. Its located just 24 kilometres from the existing East-West rail line gives it a clear and unfettered path to production with relatively low transport and infrastructure capital expenditure.

The unconsolidated channel iron deposit is unique in the Yilgarn region with no over-burden and extensions to surface making it inexpensive to mine and process.

First phase of mining will involve the low cost recover washing and handling of surface high grade iron ore from surface down to 11 metres, allowing the company to avoid establishing a drill and blast mining operation initially.

This can then be introduced after the company has capitalised on the strong commodity price for iron ore and commence production at Steeple Hill.

Whilst optimistic would be the wrong word having waited around on this one since 2010 they still have the best deposit if SHIP north does contain a further 100mt of alluvials they don't need to go into hard rock mining for 25 years at a 5mt per annum run rate so it will be profitable for 25 years one would imagine.
The biggest issue is no-one is getting finance without port access but it remains to be seen whether YES will stump up $200m without any customers or sign up customers who haven't got finance yet hence I believe the MUIOF may fall over which will ruin Colon Barnett's dreams of 3rd party everyone wins which atm is turning into everyone loses.

The world doesn't work fairly a significant drop in the iron ore price will leave the third party model in tatters as not many of the projects have the economics for a lower iron ore price say $70-80/t I believe that would make most financers tell them they're dreaming as if they haven't been hearing that enough for the last 3 years waiting on MUIOF It is very cost prohibitive to have to move 30 - 60 metres of top soil to get to an ore body.

Just some back of an envelope calculations if they have to move 18mt of iron oxide gravel to get 3mtp/a iron ore then it is only 50000 ton of dirt moved a day could probably do that without running a night shift as the rail would be the bottleneck not how much dirt can be moved. Nickel West Mt Keith and a number of the bigger iron ore mines move upwards of 300000t of dirt a day including waste so 50000t is more than feasible it's only 200 trips with a 250t loaded haul truck and it only needs (probably dry screening as I don't think they have any water) In any event they are actually going overboard with infrastructure they could run this mine a lot cheaper and nastier you could do the majority of this mine with mobile equipment rather than fixed plant.

So the board has us in dire straights not sure how they have managed to keep FAS afloat for the last 18 months heavily indebted but the past errors have cost us very dearly and they must be hanging on by their fingernails.
The GWR shares seized, the 2 failed attempts to find boutique finance instead of going to a real player such as Patrick Teo.

Now our saviour we can only hope is Patrick Teo he waltzes in with finance from Europe and we will give him 1/5th of a possibly 120mt alluvial DSO gold mine. He certainly has a lot of incentive so not all is lost yet but it is most likely to fall into receivership IMO atm.

As a few have mentioned over the years there is no doubt the SHIP & SHIP north alluvial deposits will be mined it's just a question of whether FAS is going to blow the opportunity that has been gifted to them by Mahendra Pal.

Even if FAS profit margin dropped to $10/t so iron ore prices at say $70 a ton they would still make $1.2b from the proposed 120mt alluvials. Leaving SHIP North alluvials out of the equation at $95/t x 24mt with a cost profile of $60/t it's still 840m.

I think the EGM will be a waste unless a Non Executive Director is voted in even if it is just to give them some curry, put them on notice whatever you want to call it. From the outside looking in it is hard to know who is important to not jeopardising finance as I think it is too late to get FAS out of the hole the board has dug but likewise by having a NED on board you can see who is pulling their weight, who is crucial to any deal being reached or who is dead wood.

It'll certainly make for an interesting EGM anyway.

Cheers