17 July 2008 Company Announcements Office Australian Securities Exchange Limited Requirements for Finance Offer Advancing �� Requirements for Finance offer for Balmoral South Iron Ore Project advancing �� Advisory bank to be appointed to review Bankable Feasibility Study �� Shougang engineering arm engaged to present full construction submission �� In-fill drilling program continues to upgrade the Mineral Resource �� Deep water port study at Cape Preston near completion �� Increased iron ore price significantly boosts the Project’s prospects �� Capital raising to be considered in coming months Australasian Resources Ltd (the Company), through its wholly-owned subsidiary, International Minerals Pty Ltd (IM), is working closely with Shougang to advance a Finance Offer for the Balmoral South Iron Ore Project (Project). This work is gaining momentum after the recent issue of the Feasibility Notice to Shougang on 20 June 2008. Advisory Bank IM plans to appoint an internationally-recognised investment bank in an advisory capacity during this month. Proposals from a number of leading banks with extensive experience in the structuring and financing of mining projects are currently under review. The advisory bank’s role will include a review of the Bankable Feasibility Study in the context of the likely requirements of Chinese banks that are expected to be the most likely source of funding for the Project. Shougang Groups Beijing Shougang International Engineering Technology Co. Ltd (BSIET) has been engaged by IM to: �� present a full Engineering Procurement Construction (EPC) submission to construct and locate the proposed pellet plant in China; and �� to assist China Shougang International Trading and Engineering Corporation (CSITEC) with the preparation of their Construction Proposal to support the Finance Offer. Within the Construction Proposal, IM anticipates that Shougang will propose additional enhancements to the Project based on its extensive experience in magnetite mining and processing. Furthermore, a group of representatives from the Shougang groups mentioned are scheduled to arrive in Perth during July to progress key discussions with IM in relation to implementation planning. In-fill Drilling An in-fill diamond drilling program is in progress that is designed to further upgrade the classification of the Project's Mineral Resource. An upgrade to the existing resource base will provide the opportunity for the Company to increase the reported Ore Reserve estimate of 680 Mt (Probable Reserve)1 towards its target of 1 Bt. The current Ore Reserve represents an estimate within the current Mineral Resource estimate (Indicated 67%; Inferred 33%) of 1.16 Bt.2 Since April 2008, 3,200 metres of drilling has been completed within the current programme and a further 6,800 metres is proposed (10,000 metres total). Updates of the Mineral Resource and Ore Reserve estimates will be available after re-analysis of selected samples which are required for quality assurance purposes and then subsequent independent review and sign-off. Deep water Port Study Near Completion CCCC First Harbor, China’s largest port construction and design company, is finalising a study for the development of a deep water port at Cape Preston to support the Project. This represents an alternative to the base case barge loading and trans-shipping port option included in the Feasibility Study. The port study work is on track to deliver a port design solution for review by the IM Board in July 2008. 1 Per ASX Announcement 20 August 2007 2 Per ASX Announcement 29 May 2007 Page 2 A review meeting was held the first week of July in Tianjin, China to evaluate the preliminary outcomes of the study before the report is finalised. The study will consider current planned throughput of 12 Mtpa as well as additional capacity. Concentrate Test work Independent Chinese laboratory test work has been completed on a 16 tonne representative sample of iron ore from the Project by the Changsha Research Institute of Mining and Metallurgy, in China, which produced a four tonne representative sample of iron ore concentrate. IM and Shougang have accepted the results from the tests performed on the 4 tonnes of concentrate produced, demonstrating that the target product quality of Fe >67.5% and SiO2 <4.5% has been achieved using the proposed concentrator plant process design. This verification test work is consistent with previous test work and has provided confidence in the Project’s process design parameters and clearly demonstrates the high quality and value of the proposed concentrate product. Iron Ore Price Increase The announcement on 24 June 2008 that iron ore price negotiations were concluded between Rio Tinto and Baosteel implying a 96.5% rise to the price of lump iron ore, and a 79.9 % rise to the price of fines iron ore (average reported as 85% rise) has been considered in relation to recent results announced for the Project Feasibility Study.3 Price assumptions in the Financial Model used for the Bankable Feasibility Study were based on a 65% increase to the fines price for the 2008/9 iron ore year. In broad terms, a further 20% increase translates to an increase in the forecast Project Return as follows in comparison to previous announced results4: �� Discount Rate 8% �� NPV (after tax) $6,370M �� IRR (after tax) 23.5% �� Average annual EBITDA $1,546M �� Average annual NPAT $972M Based on the proposed Joint Venture arrangements contemplated with Shougang if it elects to proceed, the Company’s returns, based on the estimated real Project returns, are: �� NPV8% (after tax) $3,660M (up 21%) Overall, the price increase provides a significant boost to the prospects of the Project. 3 Per ASX Announcement 18 June 2008 4 Refer ASX Announcement 18 June 2008 Page 3 Proposed Capital Raising Subject to an ongoing review of prevailing market conditions and the Company’s working capital levels, the Company plans to complete an equity raising within the next three months to support the continuing development of the Project. The amount raised will be limited to funds required to sustain the business in advance of the anticipated election and funding by Shougang. Andrew Caruso Managing Director Page
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