questions 1st june 2012, page-25

Hi Statsman,

The $16/t for material moved is a very conservative (meaning a high number) estimate provided by Pluton. Cockatoo is a high fixed cost/ low volume operation.

Costs are high due to location and the operation supports a townsite using FIFO. On top of this stage 4 total material moved is 1.2mt ore and about 1.3mt waste. These are very low tonnages and the mining fleet is very small in size due to the tight nature of the orebody behind the seawall.

I agree with the expert that our mining costs are very high and we should be able to get these down. We used a high number to stretch our valuation to ensure stage 4 would cover the full cost of acquisition/ rehabilitation. This was important to justify the transaction. So the numbers we used would be very worst case.

thanksfully while mining costs are high the crusher and shiploader are located next to the mine so there are offset savings.

We estimated a total operating cost of $52/tonne but I expect we can knock $10/t off that, we will see.

However, it should be noted, low volume mines in outback regions are inherently high cost, but you also have to look at the big picture. That is, the additional revenue from such a high grade more than offsets the higher operating costs. We are mining 68.5% Fe dirt not 62% Fe dirt.

As to NPV, as I said above we were very conservative in out inputs into our financial model. It is prudent to do this.

Also VERY IMPORTANT TO NOTE: The NPV is based on stage 4 mining only of 1.2mt, and this has to carry the full purchase and full rehabilitation of Cockatoo. It does this, and still provides an NPV of $11.9m. That means we get all infrastructure and all tonnage upsides for NOTHING.

I can talk more about our plans for Cockatoo next month when we plan major roadshows. Until we finalise the purchase of Cockatoo over the next couple of weeks I am not at liberty to say anything further on this.

Cheers, Tony.