Mid-West Iron Ore BookSteeling the Limelight from the Pilbara

August 2006

Andrew MuirResources Analyst

Andrew RowellResources Analyst

Simon TonkinResearch Analyst

Cover Photograph

Ore Train Photograph courtesy of Mount Gibson Iron Limited

Hartleys initiates coverage of the Mid-West iron ore sector with the 2006 Mid-West Iron Ore Book – “Steeling the Limelight from the Pilbara”. This Iron Ore Book profiles emerging iron ore companies that are looking to capitalise on high iron ore prices by developing multi-stage projects in the Mid-West region of Western Australia. This edition covers a selection of five ASX-listed iron ore companies that are all currently mining, or planning to mine, iron ore from deposits in the Mid-West region of WA. The current producers included are Mount Gibson Iron Limited (MGX) and Midwest Corporation Limited (MIS). Companies currently developing or planning operations, included in the 2006 Mid-West Iron Ore Book, are Gindalbie Metals Limited (GBG), Murchison Metals Limited (MMX) and Golden West Resources Limited (GWR).

The price of iron ore products has increased significantly over the past three years due to increasing demand for iron ore from China. In 2004, iron ore producers were able to secure an 18.6% increase in the price of lump and fines products, a 71.5% increase was achieved in 2005 and a further 19% this year. These higher iron ore prices have increased the attractiveness of the sector to new participants. This has led to a number of junior and mid-sized exploration companies in the Mid-West and Pilbara focussed on defining iron ore resources.

In the Mid-West region of Western Australia, iron ore mining first commenced in 1966 at Koolanooka. Soon after, however, the size and grade of the Pilbara deposits overshadowed the region and mining ceased in 1972. Efforts by Kingstream Steel to recommence mining in the Mid-West in 2002 were not successful due to the high cost of establishing infrastructure and the downturn in the Asian economy.

The latest group of iron ore aspirants, led by first-mover MGX, are better positioned than Kingstream to progress their projects into production due to the collaborative approach to infrastructure management. The five companies highlighted in the Mid-West Iron Ore Book have formed the Geraldton Iron Ore Alliance. The aim of the alliance is to determine infrastructure requirements that are optimal for the region as a whole and implement plans for infrastructure to be developed on a common access basis.

We believe that the current strong iron ore prices, the involvement of Chinese, Malaysian and Korean partners and the support of the WA Government for the development of infrastructure on a common access basis presents a number of opportunities for the emerging Mid-West iron ore producers. We believe that there is good potential for the value of these companies to increase by multiples of their current share prices. This is critically dependant upon the construction of the rail and port infrastructure in a timely manner to accommodate the larger second stage projects.

NOTE: As this book went to press, MGX announced a takeover for Aztec Resources Limited (“AZR”), an emerging iron ore producer at Koolan Island in Western Australia. If successful, the merged company has the potential to have a production base of 8Mtpa from three mines.

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Table of Contents

Investment Highlights 1

Introduction 2

Company Summaries and Comparisons 4

Iron Ore Pricing 7

Strategic Alliances 9

Geraldton Iron Ore Alliance

Asian Steelmaker Alliances

Infrastructure Alliances

Mid-West Mining Infrastructure 11

Iron Ore Market 14

Iron Ore Types 16

Iron Ore Products 17

Iron Ore Contaminants and Parameters 18

Glossary of Terms 19

Company Reports

Gindalbie Metals Limited (GBG) 25

Golden West Resources Limited (GWR) 33

Mount Gibson Iron Limited (MGX) 37

Midwest Corporation Limited (MIS) 45

Murchison Metals Limited (MMX) 53

Disclaimers and Disclosures Inside Back Cover

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Investment Highlights

Mt Gibson Iron Limited (MGX - $0.785) BUY Valuation: $1.04 • First mover status means that MGX is capitalising on the current strong iron ore prices.

• Sale of stake in higher risk Extension Hill Magnetite Project for $52.5m provides funding for lower risk Extension Hill Hematite Project development.

• MGX is not reliant on Oakajee development for its expansion plans and will continue to export its product through the Port of Geraldton.

• Relatively low capital costs, therefore MGX has capacity to fund and is able to retain 100% equity in its projects.

Murchison Metals Limited (MMX - $0.68) SPECULATIVE BUY Valuation: $1.54 • Stage 1 production to commence in H2 CY2006. Stage 1 provides cashflow for the development of Stage 2

in 2010.

• The bulk of the valuation is generated by the Stage 2 development at Jack Hills, where 25Mtpa is planned to be mined over a 15 year period.

• The construction of the Oakajee deepwater port and Jack Hills railway is critical for the development of Stage 2.

• Offtake agreement and strategic alliance with POSCO provides confidence that infrastructure projects will be constructed.

Gindalbie Metals Limited (GBG - $0.585) SPECULATIVE BUY Valuation: $0.69 • GBG is ~15 months away from commencing production from the Karara Hematite Project. The Hematite

Project provides cashflow for the development of the larger Magnetite Project.

• GBG’s plans for the Magnetite Project include a 4Mtpa pellet plant to be constructed near Geraldton. GBG also plans to export a further 4Mtpa of concentrates.

• Major risk for GBG is large capital requirement for Stage 2 ($1,135m), although this risk is partially mitigated by alliance with Chinese steelmaker Ansteel.

• AnSteel Alliance includes an offtake agreement and commitment to assist in funding of Magnetite Project.

Midwest Corporation Limited (MIS - $0.50) SPECULATIVE BUY Valuation: $0.89 • Producer status achieved in February 2006 with export of stockpiled fines material from Koolanooka. MIS

intends to export this material for two years before developing a mining operation at Koolanooka.

• Larger Weld Range Project, planned to commence in 2010 at 20Mtpa, is dependant on the construction of Oakajee Port and associated rail infrastructure.

• Jack Hills and Koolanooka Magnetite provide growth potential, however, both are early stage projects.

Golden West Resources Limited (GWR - $1.05) SPECULATIVE BUY • Highest risk project due to large distance from port. GWR is currently planning to export its Stage 1 material

through the Port of Esperance. For Stage 2, GWR is investigating the potential to utilise Oakajee via a rail connection to Jack Hills.

• Despite the distance, GWR’s main attraction is its grade. With a grade of +67% Fe for the Stage 1 material, the additional transport cost is compensated by higher revenue.

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Introduction

Welcome to the first edition of the Hartleys 2006 Mid-West Iron Ore Book. We have specifically targeted the Mid-West region of Western Australia as we believe that the proposed projects offer investors excellent leverage to record iron ore prices. The strong demand for iron ore from China has resulted in increased iron ore prices over the past three years. These higher prices, coupled with the oligopoly strength of Rio Tinto, BHP Billiton and CVRD, has in turn seen Asian steelmakers attempt to diversify supply away from the big three producers by entering into strategic alliances with smaller iron ore companies.

These large steelmakers are seeking to secure long-term supply of iron ore through commitments to provide funding and offtake agreements for the development of new iron ore mines in the Mid-West. It is through these alliances, and the collaborative approach to infrastructure access, that we believe there is a good potential for the large capital infrastructure projects, such as the Oakajee port, will be developed.

Most of the iron ore aspirants are developing multi-stage projects based around the development of the Oakajee port and associated infrastructure. We believe that there are excellent prospects for these companies to generate strong early cashflow from the Stage 1 projects. Dependant on infrastructure construction, this will be followed by large scale expansions in Stage 2 that should deliver exceptional returns.

The most significant risk for the development of the Stage 2 projects for MIS, MMX and GWR is the construction of a deepwater port at Oakajee and a major new rail line to service the Jack Hills, Weld Range and Wiluna West projects. If this infrastructure is not constructed or is considerably delayed, this will have a material impact on the valuations of MIS, MMX and possibly GBG.

Figure 1: Mid-West Iron Ore Project Locations

Source: Geraldton Iron Ore Alliance

(MMX)

(MIS)

(MGX)

(GWR)

(MIS)

(MIS)

(MGX)

(GBG)

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The 2006 Mid-West Iron Ore Book aims to give clients of Hartleys a guide to value within the Mid-West iron ore sector through a series of peer comparisons and statistical analyses. Table 1 outlines our recommendations for companies within the Mid-West Iron Ore Book.

Table 1: Hartleys 2006 Mid-West Iron Ore Book Recommendations

Company ASX Code Recommendation Hartleys Valuation

Market Price1

(21 July 2006)

Gindalbie Metals Limited GBG Speculative Buy $0.69 $0.585

Golden West Resources Limited GWR Speculative Buy N/A $1.05

Mount Gibson Iron Limited MGX Buy $1.04 $0.785

Midwest Corporation Limited MIS Speculative Buy $0.89 $0.50

Murchison Metals Limited MMX Speculative Buy $1.54 $0.68

Source: Iress

Note: Unless otherwise specified, all dollar values throughout this book are in A$.

As there are different levels of uncertainty and risk between the Stage 1 and Stage 2 projects, we have risk adjusted our valuations for the Stage 2 projects. For Stage 2 projects that are currently the subject of feasibility studies, we have modelled the projects using standard DCF methodology and then discounted the valuation by 70%. Once the feasibility study has been completed and approvals are in place, we would look to reduce the discount to 30% and then ultimately to zero.

Table 2 illustrates the liquidity measure of the stocks included in the Hartleys 2006 Mid-West Iron Ore Book. This provides a measure of the turnover of shares during the last twelve months and indicates to investors the ease in which the shares can be converted to cash without creating a substantial change in price.

Table 2: Liquidity Measure

Company ASX Code Ordinary Fully Paid Shares *

(millions)

Avg. Daily Value

Avg. Daily Turnover (shares)

Liquidity Measure1 (%)

Gindalbie Metals Limited GBG 430.8 $0.90m 2.65m 136%

Golden West Resources Limited GWR 30.7 $0.03m 0.08m 5%

Mount Gibson Iron Limited MGX 402.0 $1.30m 1.69m 110%

Midwest Corporation Limited MIS 257.9 $0.20m 0.40m 41%

Murchison Metals Limited MMX 301.7 $0.50m 1.16m 101%

1 Liquidity Measure refers to the volume of shares traded in one year in respect to the total ordinary shares on issue excluding options.

* Ordinary Fully Paid shares are not on a fully diluted basis and exclude escrowed shares

Source: Iress

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Company Summaries and Comparisons The following comparatives have been collated for the five Mid-West iron ore companies featured in this Book. They are designed to highlight the similarities and differences between the companies, given that all are working on different timelines and producing different products and volumes. Due to the stage of development, Golden West Resources (GWR) has not been included in all comparatives.

Market Capitalisation

The market capitalisation of the selected iron ore companies ranges from A$53m (GWR) to A$345m (MGX) (Figure 2). MGX has the largest market capitalisation due to the fact that it is the largest producer in the region with an operating mine that is producing cashflow. MMX has commenced mining at Jack Hills, with first ore expected to be shipped in Q3 CY2006. GBG’s market capitalisation has increased to >$200m in the past six months due to the progression of the hematite project as well as the offtake and funding agreement it has struck with AnSteel. The market capitalisation of MIS is significantly lower than GBG, MMX and MGX despite currently producing iron ore from low-grade stockpiles at Koolanooka. GWR’s market capitalisation reflects the early stage nature of the project and potentially reflects the additional risks associated with transporting ore over a large distance to port.

Project Timelines

The strength in iron ore prices over the past two years has accelerated the development plans of many of the Mid-West iron ore companies. A key component of the development timelines is the construction of key infrastructure in the region. The upgrade of Berth 5 at the Port of Geraldton is due to be completed in September 2007, whilst many of the larger second stage projects are highly dependant on the construction of the Oakajee Port and Jack Hills railway by mid-2010.

MGX commenced mining at Tallering Peak in 2004 and still has at least six years of mine life left. MGX is now focussed on the development of a second hematite operation at Extension Hill after selling its equity in the company that held the magnetite rights to the deposit and several others. Whilst the Extension Hill Hematite Project is at the Scoping Study level, we forecast that it will be in production at an annualised rate of 3Mtpa by FY2008.

MMX has commenced mining at Jack Hills at an initial Stage 1 rate of ~2Mtpa. Ore will be transported ~600km to the Port of Geraldton by road trains. The larger Stage 2 project, with a planned output of 25Mtpa, will require the development of the deepwater port at Oakajee as well as a dedicated rail line to Jack Hills. Stage 2 is planned to commence in mid-2010 to coincide with the expected completion of Oakajee.

GBG is planning to commence mining at Mt Karara from Q1 CY2008 at a rate of 1.5Mtpa. Ore will be trucked to Morawa or Perenjori and then transported by rail to the Port of Geraldton. The larger Stage 2 Magnetite Project, expected to commence in Q1 CY2010 as a 50:50 joint venture with AnSteel, involves the mining and beneficiation

Figure 2: Market Capitalisation

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Source: Iress

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of 20Mtpa of ore to produce 8Mtpa of concentrate. This concentrate is then to be transported as a slurry via a pipeline to Oakajee or Geraldton where GBG intend to construct a 4Mtpa pellet plant.

MIS commenced the production of iron ore fines from stockpiles at Koolanooka in February 2006. Plans are underway to recommence mining at Koolanooka in 2008 at a rate of 1Mtpa. The Stage 2 project involves the development of the larger Weld Range Hematite Project, located 100km from MMX’s Jack Hills Project. It is anticipated that a spur line will be constructed off the main Jack Hills railway and ore is to be transported to the new Oakajee port for export. We expect Weld Range to come on-line in 2010.

GWR has joined the Geraldton Iron Ore Alliance as it believes that it may define sufficient resources at the Wiluna West iron ore project that would justify the construction of a large rail spur from Jack Hills. Initially, however, GWR is planning to develop a smaller scale 1Mtpa DSO operation, exporting its high grade (~65-70% Fe) via road and rail to Esperance. GWR has indicated that it may be in a position to commence mining in FY2008.

Production Rate and Mine Life

The four companies that are planning to develop Stage 1 projects through the Port of Geraldton will not be able to ramp up to full production levels until the upgrade of Berth 5 is complete in September 2007. Issues with the reliability of the rail unloader and shiploader have restricted output capacity through Berth 4, which is also used for the export of other mineral products.

Based on Hartleys’ modelling, we forecast that 2.95Mt of lump and 2.55Mt of fines product will be exported through the Port of Geraldton in FY2007. We believe that this will increase to 4.75Mt of lump and 4.35Mt of fines product in FY2008 and will then remain relatively constant at this level until mid-2010 when Oakajee is expected to be operational.

With the timing of most of the Stage 2 projects dependant on significant infrastructure development, we forecast that there will be an immediate increase in exported iron ore product from the region from mid-2010. We expect that MGX will continue to utilise the Port of Geraldton after 2010, however we expect that MMX and MIS will move all of their ore through the Oakajee port. GBG has announced that it will have sufficient capacity at Geraldton for the Stage 2 project, however, it w ill keep open the option of using Oakajee.

The expected Mid-West iron ore production levels are shown in Figure 3. If all of the projects are progressed through to production as planned, we forecast that ~65Mtpa of iron ore will be exported through Oakajee with a further 6-8Mtpa through Geraldton.

Figure 3: Production Rates

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Source: Hartleys’ Estimates, Company data

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Capital Costs

The cost of developing an iron ore operation is dependant on a number of factors, most notably deposit type and location. With respect to deposit type, DSO hematite deposits have a considerably lower capital cost than magnetite projects as there is very little processing required prior to export. Ore is simply crushed and screened into lump and fines before being loaded for export. Location has a major impact on the capital cost due to the distances required to transport the ore to the port. Major location related capital costs include road upgrades, provision of power and water, slurry pipelines, railway construction, rolling stock for rail, rail passing loops, rail sidings or road train wagons.

GBG’s capital cost for Stage 2 is well in excess of the capital requirements of the other iron ore companies due to the anticipated construction of a 4Mtpa pellet plant near Geraldton or Oakajee. The pellet plant and slurry pipeline for the Magnetite Project is expected to cost A$550m out of the total Stage 2 capital budget of $1.14b.

At the other end of the scale, MGX’s capital estimate for the Extension Hill Hematite Project is expected to be around A$65m due to the utilisation of existing infrastructure and a low strip ratio. The capital requirements for the Stage 1 and Stage 2 projects is shown in Figure 4.

For the Stage 2 projects, there are two very large capital items being contemplated – the $700m+ Jack Hills rail line and the $500m+ Oakajee Port. It is the preference of the WA Government that these two capital projects are developed as common user access projects with no single mining company having control over the assets. The Geraldton Iron Ore Alliance is currently investigating the feasibility of these two projects with the aim of having third party financing and environmental approvals in place by end of CY2007.

Operating Costs

For the hematite projects, operating costs are largely a function of strip ratio, transport distance and transport method. Large, wide orebodies tend to have lower strip ratios, therefore less waste removal is required and the operating costs are lower. For transport distance, the further that the product is required to be transported by rail or road to port, the higher the operating costs. Finally, the choice of transport method will have a large bearing on operating costs. Rail is considerably cheaper than road transport, however it is only an attractive option for projects within 100km of a rail line. Crushing ore into a slurry and transporting via a pipeline is considered even cheaper than rail, however there is a relatively large capital cost with this option and throughput flexibility is limited.

MMX and MIS are initially planning to transport ore to the Port of Geraldton via road, whereas GBG and MGX are planning a combination of road and rail. GWR is currently considering transporting its Stage 1 ore via road to Leonora and then via rail to Esperance.

Hartleys’ has modelled the various mine proposals and developed operating cost estimates for each operation. Figure 5 shows the expected average received price and expected operating margin. Note that the combined bars on the chart reflects the average realised price. This is different from company to company depending on the iron ore product and the iron ore grade.

Figure 4: Capital Requirements

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Source: Hartleys’ Estimates, Company data

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Figure 5 shows that the Stage 2 projects are expected to have a lower received price. Whilst most of the projects have a similar cost structure forecast for Stage 1 and Stage 2, the operating margin for MMX increases as a result of lower transport costs and a larger production base.

Iron Ore Pricing

Iron ore is usually sold in US currency expressed as US cents per dry tonne unit or per dry long ton unit. A 'unit' is one percent iron. To convert price per unit to price per tonne, the unit price is multiplied by the dry percentage iron in the ore. The ore is sold on an FOB basis (that is, loaded at the seller's wharf on a vessel supplied by the buyer), or CIF (delivered to the buyer's wharf in a vessel supplied by the seller).

The majority of ore is sold on long term contract with annual quantities varying slightly in line with contract terms, but with prices being re-negotiated each year. Prices are set in annual negotiations between the major Australian producers and the Asian steel mills. Concurrent negotiations are usually conducted between major Atlantic Basin producers and major European steel mills. Such settlements fix a ‘benchmark’ for prices that year. A small proportion of ore is sold on a 'spot' basis.

Typically, in Asia, the price is settled for standard Australian fine ore ex-BHP Iron Ore or Hamersley Iron, with a 'lump' premium to cover the extra value recognised for lump ore. Other buyers and sellers settle quickly on the basis of typical and pre-agreed 'quality' merits or demerits.

The major pellet buyers negotiate a blast furnace 'pellet' premium with pellet producers in Sweden, Canada, South America and elsewhere, and later a 'direct reduction pellet' premium is also agreed. These agreements become industry standard for the year.

Prices are negotiated on a calendar year basis for the European market and on a year commencing 1 April basis for the Asian market. In the event of prices not being agreed before the start of the period, it is common to continue shipping and issue provisional invoices. In the past few years, the European negotiations have been completed before the Asian negotiations, providing a lead for the Asian markets.

Figure 5: Operating Costs and Operating Margin

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Source: Hartleys’ Estimates, Company data

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Hartleys Price Assumptions

The current strength of the iron ore market, as demonstrated by the price rises over the past two years, has had a significant impact on the economic viability of iron ore projects in WA’s Mid-West region. Increased global demand for iron ore, particularly out of China, has seen the prices for internationally traded iron ore products increase. In 2005, benchmark prices for lump ore increased by 71.5%, whilst the 2006 price negotiations have resulted in a 19% rise (Figure 6).

We are believers in the ‘resources super-cycle’ and believe demand from China will remain strong in the medium term. However, we expect some easing of iron ore prices over time as producers increase production in order to capitalise on higher iron ore prices. Therefore, we have maintained a flat profile for 2007 and 2008, followed by a 10% drop in 2009 and a 20% drop in 2010 (Table 3).

Table 3: Financial Parameter Assumptions

FY07 FY08 FY09 FY10 FY11

A$: US$ 0.735 0.735 0.735 0.725 0.720

Iron Ore Price – Lump (USc/dmtu) 93.7 93.7 84.4 67.5 67.5

Iron Ore Price – Fines (USc/dmtu) 73.5 73.5 66.2 52.9 52.9

Iron Ore Price – Concentrate (USc/dmtu) 80.9 80.9 72.8 58.2 58.2

Iron Ore Price – Pellets (USc/dmtu) 113.2 113.2 101.9 81.5 81.5

Source: Hartleys’ Estimates

(Note: Prices are converted to US $/t by multiplying by the iron ore grade (%))

Figure 6: Historic Iron Ore Prices and Hartleys Forecast

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Source: Hartleys’ Estimates, Company data

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Strategic Alliances

Geraldton Iron Ore Alliance

There are five companies in the Mid-West region that are currently producing iron ore or plan to do so within the next two years. These companies are:

Company Code Project Product

Gindalbie Metals Limited GBG Mt Karara Hematite/Magnetite

Mount Gibson Iron Limited MGX Tallering Peak/Extension Hill Hematite

Murchison Metals Limited MMX Jack Hills Hematite

Midwest Corporation Limited MIS Koolanooka, Blue Hills, Weld Range Hematite/Magentite

Golden West Resources Ltd GWR Wiluna West Hematite

Most of these companies are planning to establish projects in two stages, with a smaller initial development plan to generate cashflow followed by a larger second stage expansion. Stage 1 output is targeted to be exported through the upgraded Berth 5 facility at Geraldton. The second stage projects involve significantly larger volumes, which exceed the capacity of the Geraldton Port. To counter this obstacle, it has been proposed that a new port be constructed 25km north of Geraldton at Oakajee, which is capable of handling Cape size (160kt-230kt) vessels.

With most of these companies planning to use components of the same infrastructure, the Geraldton Iron Ore Alliance (“Alliance”) was formed to investigate infrastructure and other project aspects (ie environmental) that are common between the projects. It is hoped that the Alliance will be able to more effectively plan for the infrastructure needs of the region and reduce the cost and time required for implementation. Recently, a sixth member, Royal Resources Limited, has joined the Alliance.

Initially, the role of the Alliance is to:

• Liaise with governments, industry groups, non-government organisations and community groups, particularly relevant departments and agencies of the WA Government, the WA Chamber of Minerals and Energy and the Association of Mining and Exploration Companies on key issues of infrastructure, regional development and community relations;

• Promote the development of appropriate common user and other infrastructure and work closely with all stakeholders in the region to optimise the utilisation of existing infrastructure;

• Work closely and cooperatively with the Geraldton Port Authority and other stakeholders to enhance the efficiency and capacity of the port; and

• Liaise with community groups and stakeholders including Government agencies to address issues arising from the expansion of the iron ore industry.

The major areas for consideration and assessment by the Alliance are:

• Geraldton Port Infrastructure – Optimising capacity of the shiploader and rail unloading facilities;

• Oakajee Port Construction – Determine optimal size and layout of port; prepare studies based on third party funding and operating the development on an open access basis;

• Existing Rail Infrastructure – GBG and MGX are using or intend to use the current narrow gauge rail system operated by WestNet for Stage 1. The main items for assessment are capacity, scheduling, unloading and passing loops.

• Proposed Rail Infrastructure – MMX is contemplating a new rail line from Jack Hills to Oakajee, with MIS investigating a spur line off this to its Weld Range project. Items for investigation are the proposed route, rail gauge, funding and operatorship.

• Environmental – Each of the iron ore projects being assessed for development occurs in a BIF formation that generally has a higher relief than the surrounding area. The alliance is pooling its environmental knowledge to determine the prevalence of different species and the impact that mining could have on them.

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Asian Steelmaker Alliances

A number of the Mid-West iron ore companies have developed strategic alliances with Asian steelmakers. These alliances have been sought by both producers and steelmakers.

For the emerging iron ore producers, a strategic alliance with a large Asian steelmaker provides offtake assurance, project credibility and assistance with funding. For the Asian steelmakers, the alliances provide access to long-term alternative sources of iron ore, and a strategic foothold that can be used to influence iron ore pricing negotiations.

The following section details the various strategic alliances in place in the Mid-West iron ore sector.

Murchison Metals – POSCO Alliance

In April 2006, Murchison formed a strategic alliance with the Pohang Iron & Steel Company Limited (POSCO) as a critical part of MMX’s Stage 2 development of Jack Hills. POSCO is a wholly owned subsidiary of one of the world’s largest iron and steel producers, POSCO Limited of South Korea.

Under this alliance, POSCO acquired shares and options in Murchison and secured the right to purchase up to 10Mtpa of iron ore over a 25 year period from Murchison. POSCO has also indicated that it will purchase a 50kt trial shipment of iron ore from Jack Hills Stage 1 in 2006.

POSCO is a leading steel-manufacturing company engaged in the production and selling steel products, including hot-rolled and cold-rolled products, plates, wire rods, silicon steel sheets and stainless steel products. Established in 1968, POSCO is one of the world's largest and most profitable steel manufacturers. A Global 500 company, POSCO has an annual crude steel production capacity of 28Mt and annual revenues of US$10.6b.

Midwest Corporation – Sinosteel Alliance

In June 2005, MIS entered into a framework agreement with Sinosteel Corporation (“Sinosteel”), one of the largest state owned enterprises in China’s steel industry.

The framework agreement covers Midwest’s two major projects, the Weld Range Hematite project and the Koolanooka Magnetite project. The involvement of Sinosteel in the projects provides surety over sales and provides confidence that the larger projects can be financed.

Subject to the feasibility of the project, Sinosteel will enter into an offtake agreement to purchase the iron ore products from the Weld Range and Koolanooka projects on commercial terms. The projects will be financed by limited recourse project finance and Sinosteel will lead the procurement of this finance.

Sinosteel is a central enterprise under the administration of China’s State-Owned Assets Supervision and Administration Commission. Sinosteel is engaged in developing, mining and processing of metallurgical mineral resources; trading and logistic of metallurgical raw materials and other related products; conducting research, application and service of metallurgical technologies etc. Sinosteel also trades in chrome ore, DRI, fluorspar, coke, manganese ore, scrap, steel products, magnetite and rare earths.

Gindalbie Metals – AnSteel Alliance

In April 2006, GBG entered into a Joint Venture for the Karara Iron Ore Project with China’s Anshan Iron and Steel Group Corporation (“AnSteel”). The JV Agreement has been structured in two parts and covers both the Hematite Project and Magnetite Project. AnSteel has the right to earn 50% equity in both projects through a combination of offtake and funding support for the projects.

AnSteel is China’s second largest steel producer and the major steel producer in the north-east region of China. One of China’s oldest (first established in 1916) and the world’s most influential steel company, AnSteel has recently announced a merger with Benxi Steel, also based in Liaoning Province. The completion of this merger is expected in 2006 under the merged name of ANBEN Steel Group Company. ANBEN is expected to have total steel production capacity of 30Mtpa by 2010.

Under current Chinese Central Government policies, AnSteel is considered to be one of the country’s key growth companies and has strong support in securing new sources of long-term iron ore supply through international investment. It reports that it has financial support for its investments with the China National Development Bank.

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Infrastructure Alliances

Northern Infrastructure Alliance – Midwest Corporation, Murchison Metals

MMX and MIS have formed a consortium with POSCO Engineering and Construction Company Limited (POSCO E&C), Toll Holdings (Toll) and Japan's Mitsubishi Corporation to conduct a feasibility study into the development of new rail and port infrastructure in the Mid-West region of Western Australia.

The consortium has been established through a formal non-binding memorandum of understanding (“MOU”). Under the MOU, the parties have agreed to contribute resources and expertise to determine the requirements for building the rail and port infrastructure. The infrastructure will include construction of Oakajee and new rail links from Jack Hills to Oakajee. The feasibility study is due to be completed by Q2 CY2007.

Gindalbie – Thiess Alliance

In February 2006, Gindalbie entered into a Project Alliance Agreement with integrated engineering and services group, Thiess Pty Ltd, a subsidiary of Leighton Holdings Limited (LEI). The aim of the alliance is to facilitate the completion of an integrated DFS for development of both the magnetite and hematite components of the Karara Iron Ore Project. Completion is planned before the end of calendar 2006.

The Project Alliance Agreement provides for a collaborative approach to the management and completion of all studies, covering both the Karara magnetite/pellet project and the Karara hematite DSO project. GBG anticipates the alliance will lay the foundation for a subsequent agreement with Thiess for the design, construction, commissioning and operation of Karara, subject to achieving acceptable cost estimates, and development schedules and securing funding.

Mid-West Mining Infrastructure

Whilst iron ore mining first occurred in the Mid-West in the 1960’s, there was a subsequent hiatus of activity in the region from 1972, when attention shifted to the Pilbara. This has resulted in only minor new mining related infrastructure being developed over the past forty years. The narrow gauge railway throughout the Mid-West essentially services the agricultural sector, whilst most mineral related products (mineral sands, Cu-Pb-Zn concentrates and talc) are exported through Berth 4 at the Port of Geraldton.

The Stage 1 development plans being contemplated by the various iron ore companies involve a major increase in the utilisation of the narrow gauge rail system and an upgrade to Berth 5 at Geraldton into a dedicated iron ore facility.

Existing Narrow Gauge Railway

MGX are currently using the existing narrow gauge railway to transport Tallering Peak ore from Mullewa to Geraldton. GBG also plans to use the rail line, connecting at either Morawa or Perenjori. The line, operated by WestNet, has sufficient capacity to handle both companies planned output, however GBG will be required to provide the rolling stock (rail wagons) for its ore transport. GBG estimates that it will require 90 wagons initially.

Depending on scheduling and conflicts with other users, there may be a requirement for these companies to contribute to the cost of establishing passing loops along the line, estimated at ~$2m each.

Jack Hills Railway

The existing narrow gauge rail system essentially services the region to the east and south of Geraldton. Projects to the north and north-east, such as MIS’ Weld Range deposit and MMX’s Jack Hills deposit, are currently isolated from rail infrastructure. Whilst MMX is planning to develop a Stage 1 development at Jack Hills based on trucking ore around 600km to Geraldton, the Stage 2 expansion, involving up to 25Mtpa is planned as a rail project.

MMX and MIS, through the Northern Infrastructure Alliance, are investigating the potential for the construction of a rail link between Jack Hills and Oakajee, with a spur line connecting to Weld Range. We understand that the cost of developing this railway will be ~A$700m. It is anticipated that the rail line would be constructed by a third party with MMX, MIS and others entering into long-term agreements to access the line.

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Geraldton Port Facilities - Berth 5 Expansion

The WA State Government has recently committed to a $35m upgrade of Berth 5 at Geraldton, converting it into a dedicated iron ore facility with a capacity of 12Mtpa (Figure 7). This is sufficient to meet the needs of the Stage 1 projects being contemplated by the Mid-West iron ore companies. MGX has an established shed at Berth 4 and exclusive use of the land behind Berth 5. MMX and MIS have established sheds at Berth 4 capable of meeting their Stage 1 needs.

GBG has an agreement with the Geraldton Port Authority whereby it has land reserved at Berth 7 for its use. Berth 7 is currently not a functional berth and consists of reclaimed land next to Berth 6. We believe it is possible that GBG will backfill the area and use Berth 7 for its storage shed, transporting the ore to berth 5 via conveyor.

An issue that is yet to be settled is the underperformance and capacity of the rail unloader at the Port of Geraldton, located adjacent to Berth 4. It will need to be upgraded to meet the needs of the various producers and we understand a $12m upgrade has been proposed.

Oakajee Port

The proposed Oakajee Port is located ~25km north of Geraldton (Figure 8). It was first proposed by Kingstream Steel and is now being investigated by the Geraldton Iron Ore Alliance as a suitable port for export of Stage 2 products. Both the junior iron ore companies and the Government are keen for the $500m port to be constructed as a common access facility, funded and operated by a third party. There has been strong interest from Japanese and Chinese steel producers to construct the port as well as from domestic infrastructure funds.

The full scale of the port is yet to be determined, however work has been developed on the final port structure consisting of 3 x Cape size (180kt) berths and up to 7 x Panamax (60kt) berths, capable of ultimately exporting 120-140Mtpa of product, which is double the current forecast.

In order to meet the mid-2010 target completion date, Government and financing approvals will be required by September 2007, with construction to commence in January 2008.

Figure 7: Shiploading facilities at the Port of Geraldton

Source: Gindalbie Metals Limited

Figure 8: Digital Orthophoto of Geraldton and Proposed Oakajee Port

Source: Geraldton Iron Ore Alliance

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Slurry Pipelines

As an alternative to the current narrow gauge rail system, both GBG and MGX have contemplated the use of slurry pipelines for the transport of magnetite ore to port (noting that MGX has subsequently divested its interest in the Extension Hill magnetite project to Chinese iron ore trader Sinom Investments Limited). A slurry pipeline was deemed to be the most cost efficient and capable solution. The current rail system was not considered suitable and the cost of constructing a new rail line was not economically feasible. The disadvantages of the slurry pipeline are the requirement for large volumes of water, the need to keep it fully utilised and the lack of flexibility with regards to expansion.

The proposed slurry pipelines involve crushing and grinding the ore down to ~25µm, forming a slurry and then pumping it 250km to either Geraldton or Oakajee. The slurry will be dewatered and the water returned to site via a return pipeline. The pipeline would be buried to a depth of 3m with pastoralists being able to re-use the land above the pipeline once constructed.

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Iron Ore Market (Source: ABARE Economics: Australian Commodities, June 2006; Hartleys Research)

The world iron ore market is dominated by three producers – BHP Billiton, Rio Tinto and CVRD – that account for ~460Mt of global iron ore production. These companies are the determinants of iron ore prices through annual negotiations with European and Asian steelmakers. The negotiated outcome is then used by the rest of the industry as a benchmark from which individual contracts are determined.

Iron ore benchmark prices rose by a record 71.5% in 2005 to US61.72c/dmtu for fines and US78.76c/dmtu for lump. An increase of a further 19% has recently been settled for 2006, taking prices to US73.45c/dmtu and US93.73c/dmtu respectively. This is higher than previously forecast owing to significant disruptions to supply from some regions arising from poor weather conditions, the need to replace damaged equipment, and civil unrest. Iron ore prices are forecast to remain at record highs into 2007, indicating continued strong demand from iron and steel producers, and the inability of iron ore producers to rapidly increase production. In the medium to longer term, however, prices are expected to come under downward pressure as many iron ore operations ramp up production from next year.

Supply

ABARE forecasts that world iron ore production will grow by 9% to 1.43bt in 2006 despite major disruptions to supply in the first quarter of the year. Output of iron ore is forecast to increase by a further 115Mt in 2007, sourced predominantly from Australia, Brazil, China and India.

A severe cyclone season in the North-West of Australia caused March quarter production from the Pilbara region to drop 11% from the previous quarter, to 56.8Mt. This decrease occurred despite ongoing infrastructure upgrades and mine expansions to increase capacity.

Brazil’s CVRD also reported a drop in exports of around 1Mt in the March quarter, caused by protests leading to damage to the Carajas mine rail link to Ponta da Madeira in Brazil. April supply was constrained by diminished loading capacity following an accident at Ponta da Madeira.

CVRD reported that it had lost 0.5Mt in exports but hoped to counter the loss with increased exports in the following months.

Australia

The severe cyclone activity experienced in the Pilbara region in the first quarter of 2006 has led to a downward revision of iron ore production and export forecasts for 2006. For the remainder of CY2006 and CY2007, difficulties in obtaining some mining equipment (particularly haulpak tyres) and skilled labor are expected to slow the ongoing expansion of Australia’s iron ore industry. This is likely to be the case for both the Pilbara and Mid-West iron ore producers.

Production of iron ore in Australia is forecast to reach 282Mt in CY2006, and rise again to almost 314Mt in CY2007. To put it into context, the full scale production level of 60Mtpa from the Mid-West region will be less than 5% of global production and less than 20% of Australian production.

Figure 9: World Iron Ore Outlook

Source: ABARE Economics

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Historically high iron ore prices have boosted the profits of major Western Australian iron ore producers, enabling them to invest heavily in mine expansion and infrastructure upgrade plans in an attempt to meet international demand for iron ore in the short to medium term.

Rio Tinto is investing in Stage 2 of the Dampier port expansion that will increase export capacity by 24Mt by the end of CY2007. Rio Tinto is also exploring the possibility of going ahead with Stage 2 of the Cape Lambert port upgrade. If feasible, this project will increase capacity by 19Mt, with completion likely in the first half of CY2007. Rio Tinto is also undertaking a rail duplication project in the Pilbara to allow increased volumes of iron ore to be transported efficiently to port.

Rio Tinto has two mine expansions currently under way in the Pilbara. Mine capacity at Yandicoogina is being increased from 36 to 52Mt at a cost of $722m and scheduled to be completed by late CY2007. Boosting production in the short term will be the additional 15Mt capacity from Tom Price, Nammuldi and Marandoo mines that is due late in CY2006.

BHP Billiton has two separate rail, port and mine upgrades under construction and due to ramp up production in late CY2006 and late CY2007 respectively. Rapid Growth projects 2 and 3 are expected to increase capacity by 8Mt late in CY2006 and by a further 20Mt late in CY2007.

Other projects commencing in Western Australia include: Stage 1 of MMX’s Jack Hills mine (1.5Mtpa from mid-2006); MIS’ initial production from Koolanooka (1Mtpa from Feb 2006), GBG’s Karara Hematite Project (1.5Mtpa from Q3 CY2007), MGX’s Extension Hill mine (3Mtpa from Oct 2007) and Aztec Resources Limited’s Koolan Island mine that will progressively ramp up to 4Mt capacity from late 2006. OneSteel Limited’s Project Magnet in South Australia’s Middleback Ranges is also expected to contribute to Australian production in the short term with 6.5Mt of capacity coming online in 2007.

Demand

Of the total 151Mt increase in crude steel production forecast for 2006 and 2007, around 108Mt is expected to be sourced from China, 9Mt from India, and 8Mt from the Russian Federation and the Ukraine.

China

China’s steel fabrication is forecast to increase by about 59Mt to over 407Mt in 2006, and increase almost 49Mt to over 456Mt in 2007. Blast furnaces are expected to account for about 90% of this increase in steel production, reflecting their cost advantage in producing large quantities of crude steel. Blast furnace production is also preferred to electric arc furnace production in China. At present, blast furnace production is less power intensive and therefore less susceptible to constraints in China’s electricity supply.

China’s production of crude steel is, for the first time, expected to exceed its consumption in 2006. China’s net exports are forecast to be over 8Mt in 2006 and to increase to over 11Mt in 2007 as China’s production grows more rapidly than steel consumption growth.

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Iron Ore Types Iron ore is primarily found as the oxides or iron, notably hematite and magnetite; and hydroxides as goethite and limonite. Small amounts are found as the carbonate siderite, the sulfides as pyrites and silicates as chamosite and greenalite.

Broadly, iron ores may be grouped as:

• Direct shipping ore (“DSO”) generally better than 58% iron (Fe), which is mined and used in blast furnaces requiring only simple preparation.

• Beneficiable ore which contain as little as 25% Fe though upgradable to around 60% Fe by magnetic or heavy media separation.

In Western Australia, most iron ore deposits are hosted in banded iron formation rocks (BIFs). These black, red and grey banded chemical sedimentary rocks were laid down about 2,500 million years ago and consist of alternating iron-rich and silica-rich layers.

Around 2,500 million years ago, seawater was rich in dissolved silica. This precipitated on the seafloor as white or grey chert. The iron in the black and grey/red layers was supplied by nearby volcanoes. The presence of free oxygen determined whether iron was precipitated in the oxidised form (Fe3+) in mineral haematite, or the reduced state (Fe2+) in magnetite.

The iron-rich layers are composed of black magnetite (Fe3O4) and dark grey/red hematite (Fe2O3), whereas the silica-rich layers comprise fine grained quartz or chert. In the Mid-West, iron ore occurs as either hematite or magnetite, both common ore types in iron ore mining in Australia. Other ore types, such as channel iron deposits (“CID”) that are found in the Pilbara, are either absent in the Mid-West or not commercially attractive.

The iron content of BIF is about 30% – generally not high enough to be considered an ore. In places throughout the Pilbara and Mid-West, secondary enrichment by removal of non-iron components has increased the iron content to over 60%.

The presence of impurities such as sulphur, phosphorous, titanium, silica and alumina, and the friability influences and even preclude any commercial value.

• About 75% of ore mined in WA contains more than 55% Fe and is of the Hematite type. This ore is found in BIF where the silica in the primary BIF (of 30% Fe) has been replaced by iron oxide to contain more than 60% Fe.

• About 20% of ore is of the limonite form which is of similar iron content to the hematite ore of around 55 to 60% iron but containing some water.

• About 5% is of the clastic hematite form is found on islands in Yampi sound and has a high average iron content of 67% Fe (and little phosphorus).

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Iron Ore Products

Iron ore is primarily used as a raw material in the production of steel. Iron ore may occur as a massive rock which must be broken into smaller lumps to facilitate handling, thereby creating some fine ore (Figure 10); or naturally as a fine material; or finely divided in a silica host rock from which it must be extracted by a beneficiation process. This usually entails crushing and grinding the ore to a fine powder.

About 1.4bt of iron ore in its various forms are produced worldwide each year. Most of this ore is used in steelmills in Europe and Asia. Some 400Mt of iron ore, however, is internationally traded. The "captive" ore business is concentrated in the previously centrally planned economies of eastern Europe, CIS, the Peoples Republic of China, and also the USA. The internationally traded iron ore business is highly competitive, with vigorous and growing trade between major iron ore miners in Brazil, Australia, India, South Africa, Canada, Sweden and Venezuela, and steelmills in Europe, Asia and the USA.

Typically, iron ore is smelted in blast furnaces using pre-heated air as a medium and coke as a reductant. Iron ore is added to the furnace as either a lump product (>6mm) or as fines (<6mm). Unfortunately, blast furnaces do not perform well when processing large quantities of fine material. Consequently, fine material is separated from the raw feed before it is charged into the blast furnace, and is agglomerated into either pellets or sinter to make it suitable as charge material. Pellets are created by balling very fine ore with a suitable binder, then burning the resultant balls into spheres of nominally 16-20 mm diameter. Pellets may also contain fluxes to aid smelting. Sinter is created by burning a mixture of iron ore and flux (eg. limestone, dolomite, serpentine.) and then breaking the resultant "cake" into "fist sized" pieces.

Direct Shipping Ore (>58% Fe) is crushed and screened prior to shipping into lump and fines (Figure 11). Both products are usually bought by the steelmakers, with lump being directly fed into the blast furnace, whilst the fines are converted to either sinter or pellets prior to addition to the furnace.

Magnetite ore, which can have as little as 25% Fe, requires beneficiation to remove the silica before being suitable for steelmaking. The beneficiation process involves crushing, grinding and screening to a fine product (<1mm), with the silica removed by either heavy media or magnetic separation. This process often results in a concentrate with an iron content of >60% Fe.

The decision to sinter or pelletise the fine ore depends primarily upon the physical characteristics of the ore. Very fine ores are usually pelletised; coarse ore is usually sintered. Pellets usually travel and handle better (ie. yield less fine material) than sinter and therefore attract a price premium over concentrates.

Figure 10: Lump Iron Specimen Figure 11: Lump and Fines Stockpiles

Source: Midwest Corporation Limited Source: Mount Gibson Iron Limited

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Iron Ore Contaminants and Parameters Ideally, iron ore contains only iron and oxygen. In nature, this is rarely the case. Typically, iron ore contains a host of deleterious elements which are unwanted in modern steel. Table 4 shows the desirable levels to look for when assessing iron ore projects.

Silica

Iron ore typically contains silicates, usually in the form of quartz. Silica is undesirable because silicon does not bond with carbon during the smelting process and can remain in the iron after it is refined. Historically, siliceous iron ore created wrought iron, a malleable and strong form of iron used by blacksmiths throughout history.

Modern steelmaking techniques generally use lime and other fluxes to help remove the silica from the molten iron ore, and form a slag on the surface of the molten metal. This slag can then be removed.

Phosphorus

Phosphorus is a deleterious metal because it makes steel brittle, even at concentrations of as little as 0.5%. Phosphorus cannot be easily removed by fluxing or smelting, and so iron ores must generally be low in phosphorus to begin with. The iron pillar of India which does not rust, however, is protected by a phosphoric composition. Phosphoric acid is used at a rust converter because phosphoric iron is less susceptible to oxidation.

Alumina

Alumina (Al2O3) is generally present in iron ores as clay. This is usually removed by washing the iron ore, and by fluxing. However, again, iron oxide deposits must be relatively low in alumina in order to be considered ore.

Sulphur

Sulphur is unwanted because it produces undesirable sulphur dioxide gases in the flue emissions from a smelter and interferes with the smelting process.

Loss on Ignition (LOI)

Whilst it is desirable to have low contaminant levels of the elements mentioned above, it is considered the opposite for an LOI measure. Essentially, the LOI is a measure of the water content of the ore, which evaporates when the ore is fed into a blast furnace.

A typical iron ore analysis should include an LOI determination at 1000ºC, normally undertaken by Thermogravimetric Analyser (TGA). This allows for an addition of the oxides, generated at the ignition temperature and the LOI, to arrive at a total (oxides plus LOI). The LOI is due to the loss of water from hydrated minerals (goethite, gibbsite and kaolinite), decomposition of carbonates (calcite, siderite and dolomite) and the volatilisation of organic compounds. The LOI may be offset to some extent by the weight gain due to oxidation of reduced iron and manganese mineral phases.

Table 4: Desirable Contaminant and Grade Levels

Fe

%

SiO2

%

P

%

S

%

Al2O3

%

LOI

%

Hematite Ore > 55 < 5 < 0.1 < 0.05 < 2 7-10

Magnetite Ore > 30 < 0 < 0.1 < 0.05 < 2 7-10

Source: Hartleys’ Estimates

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Glossary of Terms

Agglomerate – To bind a fine material into a form that is easier to handle. In steelmaking, the two most common forms of agglomeration are sintering and pelletizing.

Alumina - A light, silvery-white, ductile metal with high electrical conductivity and good resistance to corrosion. Obtained from bauxite.

Banded Iron Formation (BIF) - Iron formation that shows marked banding, generally of iron-rich minerals and chert or fine-grained quartz. Generally abbreviated to BIF.

Beneficiation - The dressing or processing of ores for the purpose of (1) regulating the size of a desired product, (2) removing unwanted constituents, and (3) improving the quality, purity, or assay grade of a desired product.

Blast furnace - A shaft furnace in which solid fuel is burned with an airblast to smelt ore in a continuous operation.

Cape size vessel – A ship with a capacity of greater than 180kt.

Channel iron deposit – A type of iron ore deposit that forms when iron accumulates in ancient channels as runoff from iron rich rocks. Over time, the iron accumulation silicifies into a hard rock. This hardness often results in less erosion over time with channel iron deposits often found as small hills.

Chert - A hard, dense, dull to semivitreous, microcrystalline or cryptocrystalline sedimentary rock, consisting dominantly of interlocking crystals of quartz less than about 30µm in diameter; it may contain amorphous silica (opal). It has a tough, splintery to conchoidal fracture, and may be white or variously colored. Chert occurs principally as nodular or concretionary nodules in limestone and dolomites, and less commonly as layered deposits (bedded chert); it may be an original organic or inorganic precipitate or a replacement product.

CIF – Cost, Insurance and Freight. The seller is responsible for export customs clearance, insurance, delivering the goods to the named port of destination and unloading the goods from the ship, including all port charges.

Coke - Bituminous coal from which the volatile constituents have been driven off by heat, so that the fixed carbon and the ash are fused together. Commonly artificial, but natural coke is also known

Concentrate – Produced when ore is processed and unwanted elements are removed through mechanical or chemical processes. The resulting concentrate will have a significantly higher grade of the desire element than the inputted ore feed.

DCF methodology – Discounted cashflow methodology is a commonly used financial modelling technique whereby future cashflows of a project are modelled, discounted into today’s dollars and then discounted for risk. It is often used in the determination of the value of a project and is used to guide a company as to whether it should commit to it.

Decrepitation –Decrepitation occurs when the internal pressure within the fluid inclusion exceeds the strength of the host mineral. This process occurs when iron ore is added to the blast furnace.

Direct Shipping Ore (DSO) – Ore that requires little processing prior to delivery to the customer. For DSO iron ore, the ore is crushed and screened, with material <6mm classed as fines and >6mm classed as lump.

dmtu – dry metric tonne unit. Used in the determination of iron ore pricing.

Electric arc furnace - A furnace in which material is heated either directly by an electric arc between an electrode and the work, or indirectly by an arc between two electrodes adjacent to the material.

Fines – Describes iron ore material that has been crushed and screened with the resulting product <6mm diameter.

FOB – Free on Board. A shipping term that indicates that the customer pays for the sea freight component.

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Goethite - A common weathering product of iron-bearing minerals; a major constituent of limonite and gossans, and a source of iron and a yellow ochre pigment. A hydrous oxide mineral of iron.

Grade – A term that describes the quality of the ore. An iron grade of 55% means that for every 1t of ore there will be 55% or 550kg of iron metal contained within it.

Haul pack – A large truck, with capacity of between 100t and 300t that is used to transport ore out of the open pit to a stockpile.

Heavy media separation - Separation of relatively light (floats) and heavy (sinks) particles, by immersion in a bath of intermediate density. This is the dense or heavy media, a finely ground slurry of appropriate heavy material in water.

Hematite - The principal form of iron ore; consists of ferric oxide in crystalline form; occurs in a red earthy form. Hematite is the most common form of iron ore in Australia.

Iron ore - A naturally occurring mineral from which iron (Fe) metal is extracted in various forms.

Iron ore price – Iron ore prices are typically negotiated between the seller and the buyer (however there also exists a spot iron ore market). Each year, the major iron ore producers (Rio Tinto, BHP Billiton, CVRD) enter into sales negotiations that will determine the prices for the following year. Prices are usually agreed for lump and then the other prices are determined from this price. Smaller producers often enter into contracts with buyers based on the negotiated price that the major producers achieve.

JORC-compliant – Term that is used to describe mineral resource reporting in Australia. The Code for Reporting of Mineral Resources and Ore Reserves (the JORC Code) is widely accepted as a standard for professional reporting purposes in Australia and is a minimum standard for ASX-listed companies.

Liquidity - This provides a measure of the turnover of shares during the last twelve months and indicates to investors the ease in which the shares can be converted to cash without creating a substantial change in price.

Live Capacity – The maximum storage capacity at any point in time.

Loss On Ignition (LOI) - As applied to chemical analyses, the loss in weight that results from heating a sample of material to a high temperature, after preliminary drying at a temperature just above the boiling point of water. The loss in weight upon drying is called free moisture; that which occurs above the boiling point of water, loss on ignition.

Lump - Describes iron ore material that has been crushed and screened with the resulting product >6mm diameter.

Magnetic separation - The separation of magnetic materials from nonmagnetic materials, using a magnet. This is an especially important process in the beneficiation of iron ores in which the magnetic mineral is separated from nonmagnetic material.

Magnetite - A major mineral in banded iron formations and magmatic iron deposits. Magnetite ores have magnetic properties and generally contain 30-35% Fe.

Mid-West Region – A geographical region in Western Australia that extends inland from Geraldton across to Cue.

Narrow gauge railway – Used to describe a railway with a gauge (rail separation) of <1430mm. Narrow gauge railways can generally handle light axle loads of around 20-30t.

Ore – Term that describes material that contains elements that can be extracted economically.

Panamax size vessel – Ships that have a capacity of ~60kt

Passing loop – Term used in railways to describe a section of rail that is duplicated to allow trains to pass each other when travelling on a single railway line.

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Pellets – Pellets are created by balling very fine ore with a suitable binder, then burning the resultant balls into spheres of nominally 16-20mm diameter. Pellets may also contain fluxes to aid smelting. Pellets are used in blast furnaces as an alternative to lump.

Pellet plant – A processing facility that converts very fine ore into pellets. Pellets are normally produced in the form of globules from very fine iron ore (normally –100 mesh) and mostly used for production of sponge iron in gas based plants, though they are also used in blast furnaces in some countries in place of lump iron ore.

Phosphorous - A nonmetallic element of the nitrogen group. Symbol P. Never found free in nature, but is widely distributed in combination with minerals.

Quartz - A very hard mineral composed of silica, SiO2, found worldwide in many different types of rocks, including sandstone and granite. Varieties of quartz include agate, chalcedony, chert, flint, opal, and rock crystal.

Road train – A truck that contains several trailers connected one behind the other to transport material over large distances. Road trains that carry iron ore often have 3 trailers.

Reserves – A mining term that describes material that can be economically extracted from its natural state at a profit. There needs to be a high degree of confidence that the ore is of the size and quality expected, which is usually based on a high density of representative sampling.

Resources – A mining term that describes the continuity, size, grade and quality of a mineral deposit. Resources are classified based on the quality and density of data used in the estimation ranging from the high quality term of Measured through to Indicated and then the lower confidence category of Inferred.

Rolling stock – The wagons on a railway used to carry ore.

Silica - An igneous rock composed essentially of primary quartz (60% to 100%), e.g., a quartz dyke, segregation mass, or inclusion inside or outside its parent rock.

Sinter - Sinter is created by burning a mixture of iron ore fines and flux (eg. limestone, dolomite, serpentine.) and then breaking the resultant "cake" into "fist sized" pieces. It is used as an alternative to lump or pellets in blast furnaces.

Slurry – Describes an emulsion whereby ore is ground very fine and then mixed with water. The resulting slurry can then be transported via a pipeline.

Slurry pipeline – A buried pipeline that transports ore that has been ground up and mixed with water. Slurry pipelines are used to transport ore over significant distances where the fine grinding does not affect the ore properties. For iron ore, the slurry is transported to the end location and then either sold as a fines product, a concentrate or is processed further into a pellet or sinter.

Strip Ratio – A mining term that describes the ratio of waste to ore in an open pit deposit. A strip ratio of 3:1 means that over the life of the pit three times as much waste as ore will be extracted. It is desirable to have as low a strip ratio as possible.

Sulfur - A pale yellow nonmetallic element occurring widely in nature in several free and combined allotropic forms. It is used in black gunpowder, rubber vulcanization, the manufacture of insecticides and pharmaceuticals, and in the preparation of sulfur compounds such as hydrogen sulfide and sulfuric acid.

$/dmtu – The measure by which iron ore prices are quoted. This measure is then multiplied by the iron ore grade of the saleable product to arrive at the price per tonne of material.

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Company Reports

Gindalbie Metals Limited (GBG) 25

Golden West Resources Limited (GWR) 33

Mount Gibson Iron Limited (MGX) 37

Midwest Corporation Limited (MIS) 45

Murchison Metals Limited (MMX) 53

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Date 21 July 2006 ASX Code GBG Share Price 58.5cps Valuation 69cps Market Cap (fully diluted) $252.0m ($265.5m) Issued Capital (fully diluted) 430.7m shares (453.9m) Cash (as at 30 June 2006) $36.0m Directors George Jones (Executive Chairman) David McSweeney (Managing Director) Michael O’Neill (Non-Exec Director) Didier Murcia (Non-Exec Director) Tunku Ya’acob BT Abdullah (Non-Exec Director) Top Two Shareholders Melewar Steel Ventures Ltd (19.2%) Westpac Custodian Nominees Ltd (4.4%)

Over the past two years, Gindalbie Metals Limited (“Gindalbie”, “GBG”, “Company”) has transformed itself from a gold producer into an emerging iron ore producer, focussed on the Karara Iron Ore Project. The project is being planned as a two-stage development, with the Stage 1 Hematite Project due to commence production in September 2007. The Hematite Project is envisaged to be a 1.5-4Mtpa operation, utilising the existing Mid-West rail and Geraldton Port infrastructure.

The Stage 2 Magnetite Project will see a significant expansion of operations, based on the development of the 737Mt magnetite resource. Under the plan, ore would be crushed and milled before being transported via slurry pipeline to the Port of Geraldton and/or the planned Oakajee Port for pelletisation and export. The staged development of the projects allows Gindalbie to extract early cashflows, whilst working within the timeframes of the regional infrastructure upgrades. Based on GBG trading at a significant discount to our successful development case valuation of $0.69 per share, we rate Gindalbie Metals Limited as a Speculative Buy.

Investment Highlights

• Hematite Project to Deliver Early Cashflows – GBG expects to have the Hematite Project in production by Q1 CY2008 at a rate of 1.5Mtpa, lifting to 4Mtpa by 2009. We expect the project to payback the initial $75m capital cost in just over one year.

• Magnetite Project a Company Maker – Commencing in 2010 and coinciding with the proposed timeframe for the development of adeepwater port at Oakajee, the Karara Magnetite Project is envisaged as a long-life project, producing 4Mtpa of pellets plus 4Mtpa concentrates.

• Key Management Appointed – Gindalbie have secured the services of Peter Freund (ex-OneSteel) to head the pellet plant development, whilst experienced Operations Manager, Andrew Munckton and mining engineer David Morgan will head up the Stage 1 Hematite Project. All have considerable experience in developing large scale projects.

• Infrastructure Development Crucial – Stage 1 production is expected to be exported through the planned Berth 5 expansion at Geraldton, whilst Stage 2 production is anticipated to be exported from Geraldton or the proposed Oakajee Port, 25km north of Geraldton.

Earnings Summary FY2007F FY2008F FY2009F FY2010F

Revenue A$m - 56.3 165.9 611.0

EBITDA A$m (2.5) 22.6 72.1 344.8

NPAT A$m (2.5) 15.0 46.3 187.3

Free Cash Flow A$m (17.6) (140.9) (229.9) 63.2

EPS A¢ (0.5) 2.8 8.6 34.8

EPS Growth % chg na na 207.4 304.6

PER x na 20.9 6.8 1.7

DPS cents - - - -

Dividend Yield % - - - -Franking % - - - -

Sources: IRESS, Company Announcements, Hartleys' Estimates

Gindalbie Metals Limited Speculative Buy Karara Development a Company Maker

Share Price Performance

GINDALBIE METALS LTD (GBG)

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Background

Gindalbie Metals Ltd (formerly Gindalbie Gold NL) listed on the Australian Stock Exchange in April 1994, rapidly establishing itself as a successful minerals explorer and producer. It has operated the Two Boys gold operation near Higginsville and the Minjar Gold Mine, located in the Mid-West region of Western Australia.

Principal Assets

Karara Iron Ore Project

The Karara Iron Ore Project is located in the Mid-West region of Western Australia, approximately 500km north-east of Perth and 220km east of Geraldton (Figure 12). Iron ore was first mined in the Mid-West in the early 1960’s at Koolanooka. Western Mining Corporation (“WMC”) made the Blue Hills discovery and mined 0.45Mt in 1972/73 from the Mungada and Mungada West hematite deposits located a few kilometres west of GBG’s hematite deposits.

GBG has two main projects at Mt Karara, the Hematite Project and the Magnetite Project. The smaller Stage 1 Hematite Project, anticipated to commence in Q1 CY2008, plans to produce 1.5-4Mtpa of direct shipping ore (“DSO”) of hematite for export through Geraldton. The larger Stage 2 Magnetite Project, expected to commence production in 2010, involves the establishment of crushing and milling facilities on site as well a slurry pipeline to a large new pellet plant located at or north of Geraldton. The Stage 2 Project envisages the export of pellets and concentrates through a proposed open access port at Oakajee, 25km north of Geraldton.

Karara DSO Hematite Project

The Karara hematite mineralisation occurs as small areas of structurally controlled supergene martite-goethite enrichment in the banded iron formations (“BIF”). GBG has tested 8km of strike length of these BIF horizons with a further strike length of 50km still to be tested. Eight mineralised zones have been identified to date (MR1-MR6, BH1-BH2) (Figure 13).

Gindalbie is aiming to identify an initial resource of 10-15Mt of hematite DSO in Q3 CY2006. This should be sufficient to allow mining to occur at a rate of 1.5Mtpa of DSO from Q1 CY2008, increasing to 4Mtpa by CY2010. GBG expects the average strip ratio for the hematite project to be ~2-3:1, with the final product consisting of 50% lump and 50% fines.

After mining via open cut, ore is to be crushed and screened on site. Road trains are to be used to transport the ore 85km along the existing Mungada haul road to Morawa (however Perenjori is still being considered). From either Perenjori or Morawa, ore is to be transported by rail via Mullewa to Geraldton along the existing narrow gauge railway.

Figure 12: Karara Project Location

Source: Gindalbie Metals Limited

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At the Port of Geraldton, Gindalbie plans to utilise Berth 5, which has recently been approved by the WA Government for upgrade into a dedicated iron ore facility. Gindalbie has guaranteed the Geraldton Port Authority that it will export a minimum of 1.5Mtpa of ore, with a desired full scale level of 4Mtpa. Gindalbie is currently assessing locations for a storage shed at the Port. The Port Authority has given GBG an option over the vacant Berth 7 land. GBG plans to use Panamax size ships (60kt) for the Hematite Project.

Karara Magnetite and Pellet Project

The larger Magnetite Project is based around the development of a 737Mt magnetite resource at Mt Karara. The magnetite deposit is located a few kilometres west of the hematite mineralisation. Mineralisation occurs on the western end of the Karara BIF in a north plunging synclinal fold and has a defined strike length of 4km (Figure 14). The distribution of mineralisation in the system is one of its best attributes.

Mineralisation is continuous and uniform over the strike length of 1.8km, width of 500m and depth to over 300m. The low impurities in the ore (<0.05% S, <0.01% P, <1% Al2O3) are extremely good for a magnetite deposit. GBG estimates that the strip ratio of the Magnetite Project will be extremely low at ~0.5:1.

GBG has estimated a resource for the project down to 300m vertical depth, however deeper drilling shows excellent continuity for at least a further 300m. GBG is currently completing a drilling program aimed at increasing the resource to >1bt by the end of CY2006.

The scale of the Magnetite Project is considerably larger than the Hematite Project and involves the mining of ~25Mtpa of ore over a 40 year life, starting in CY2010. Ore is to be crushed and milled down to 25µm on site utilising high pressure grinding roll (“HGPR”) technology currently being used at Argyle and the Boddington Expansion Project. From site, GBG intends to transport the ore to Port via a slurry pipeline, similar to that used by OneSteel at Whyalla in South Australia and also at Savage River in Tasmania.

Rather than just ship magnetite concentrate, GBG intends to value add to its magnetite product by also producing pellets. These pellets are used in blast furnaces and attract a higher price due to the uniformity of the product and consistent properties. Gindalbie’s 50% Joint Venture partner, AnSteel (see below) has agreed to take the entire 4Mtpa of pellets and 4Mtpa of concentrate product produced for a total of 8Mtpa. GBG is planning to build a 4.0Mtpa pellet plant.

Given the volumes, the Port of Geraldton is suitable for the export of product from the Magnetite Project. If the new port at Oakajee, located 25km north of Geraldton is approved it will become an option for Gindalbie to access the larger Cape size ships. The port is now being assessed as a common access port by companies in the Geraldton Iron Ore Alliance (see below). This alliance of emerging and current iron ore producers is commissioning feasibility studies for the development of the port, to be funded by external parties. The preferred scenario for government and industry is for an infrastructure fund or large international group to fund the development of the port in return for a long term management lease over the facility.

Figure 13: Hematite Project Location

Source: Gindalbie Metals Limited

Figure 14: Magnetite Project Location

Source: Gindalbie Metals Limited

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Project Development Timetable

The following timetable is an indicative measure of the milestones for the Karara Iron Ore Project.

Jun quarter 2006 Phase 2 drilling complete

Sep quarter 2006 Geraldton Berth 5 Upgrade Commences

Dec quarter 2006 Hematite Resource Estimate

Mar quarter 2007 Board Approval and Financing

Jun quarter 2007 Stage 1 Environmental Approvals

Sep quarter 2007 Stage 1 Mining Commences

Mar quarter 2008 First Stage 1 Ore Delivered from Geraldton

Mar quarter 2010 Stage 2 Production Commences

Gindalbie Infrastructure Requirements

Rail

For Stage 1, GBG intends to use the existing narrow gauge railway from either Morawa or Perenjori to Geraldton. The line, operated by WestNet, has sufficient capacity to handle GBG’s planned 4Mtpa output from the Hematite Project, however, GBG will be required to provide the rolling stock (rail wagons) for ore transport. GBG estimates that it will require 90 wagons initially.

Depending on scheduling and conflicts with other users, there may be a requirement for Gindalbie to contribute to the cost of establishing passing loops along the line, estimated at ~$2m each.

Geraldton Port

The WA State Government has recently committed to a $35m upgrade of Berth 5 at Geraldton, converting it into a dedicated iron ore facility with a capacity of 12Mtpa. This is sufficient to meet the needs of the Stage 1 projects being contemplated by the Mid-West iron ore companies. MGX has an established shed at Berth 4 and exclusive use of the land behind Berth 5. MMX and MIS have established sheds at Berth 4 capable of meeting their Stage 1 needs.

GBG has an agreement with the Geraldton Port Authority whereby it has land reserved at Berth 7 for its use. Berth 7 is currently not a functional berth and consists of reclaimed land next to Berth 6. We believe that GBG will backfill the area and use Berth 7 for its storage shed, transporting the ore to berth 5 via conveyor.

An issue that is yet to be settled is the underperformance and capacity of the rail unloader at the Port of Geraldton, located adjacent to Berth 4. It will need to be upgraded to meet the needs of the various producers and we understand a $12m upgrade has been proposed.

Slurry Pipeline

For the Stage 2 Magnetite Project, GBG has assessed the various methods of delivering ore to port. A slurry pipeline was deemed to be the most cost efficient and capable. The current rail system was not considered suitable and the construction a new rail line was not economically feasible due to costs.

The proposed slurry pipeline involves crushing and grinding the ore down to 25µm, forming a slurry and then pumping it 250km to Geraldton or Oakajee. The slurry will be dewatered and the water returned to site via a return pipeline. The pipeline would be buried to a depth of 3m with pastoralists being able to re-use the land above the pipeline once constructed. The main risk with the slurry pipeline is the lack of flexibility with regards to capacity.

Pellet Plant

Pellets currently attract a price premium of ~40% over concentrates due to its suitability for use in blast furnaces. Whilst the cost of the pellet plant is substantial at A$350m, we estimate that the price premium for 4Mtpa of product equates to an additional A$176m revenue per annum. There is also a 0.5% reduction in the royalty rate payable to the WA State Government as an incentive to value-add.

GBG has an option over an 80ha site at the industrial park at Narngulu and intends to construct the pellet plant at Narngulu or adjacent to the proposed Oakajee port in an industrial estate planned by the Government, should the Oakajee development proceed. The plant would use existing technology and, although relatively large in scale, it will be constructed as a modular operation.

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Capital Development Costs

Stage 1 Hematite Project

The capital development required for the Stage 1 Hematite Project has been estimated at A$75m. This includes, $26m for a storage shed at Geraldton, $13m for rolling stock and $10m for mine development.

We have assumed that the mining is undertaken on a contract basis, therefore no mining capital is included in the estimate. We have also included $2m in the storage shed estimate to allow for backfilling and site preparation of the Berth 7 site.

Stage 2 Magnetite Project

The Stage 2 Magnetite Project requires a significantly higher capital commitment, currently estimated at ~A$1,135m. The high capital cost is balanced by a long project life and significantly lower operating costs. Larger capital items in Stage 2 include $340m for an on-site concentrator, $300m for a 4Mtpa pellet plant, $225m for a slurry pipeline and $100m for a power plant.

We have assumed that the Oakajee Port will be constructed by a third party, with GBG paying for access on a unit basis with a minimum take-or-pay provision. Whilst we have included $100m for the construction of a power plant on site, we believe that, with increased competition in the WA power generation sector, there is good potential for this component to be funded by a third party on a long term contract basis. Countering this may be the inclusion of an owner operated mining fleet, given the scale and life of the project. Preliminary investigations indicate that the cost of a mobile mining fleet may be ~$100m.

Strategic Alliances

In order to progress the Karara Iron Ore Project to development, GBG has forged a number of key alliances with groups that have interests aligned to that of the Company. GBG has entered into a funding and offtake alliance with AnSteel, an infrastructure co-ordination, promotion and lobbying alliance with other Mid-West iron ore companies and an engineering alliance with Thiess, as managers of the Karara Feasibility Study.

AnSteel Alliance

In early April 2006, GBG announced that it had entered into a Joint Venture for the Karara Iron Ore Project with China’s number two steel producer, Anshan Iron and Steel Group Corporation (“AnSteel”). The JV Agreement has been structured in two parts and covers both the Hematite Project and Magnetite Project. AnSteel has the right to earn 50% equity in both projects through a combination of offtake and funding support for the projects.

Stage 1 – Feasibility Agreement

As part of the first stage of the Agreement, AnSteel and GBG have committed to complete the ongoing Definitive Feasibility Study (“DFS”) on a 50:50 basis. The DFS is being co-ordinated by Thiess Pty Ltd under the Karara Project Alliance for both the magnetite and hematite phases of the project.

Gindalbie recently announced an initial JORC compliant Inferred Resource of 737Mt at 37.1% Fe for the Karara magnetite deposit, covering approximately half the total strike length of the deposit.

Upon the successful completion of the DFS for the Karara Concentrate Pellet Project by February 2007 and a decision to mine being made by both parties, the second stage of the Agreement will commence.

Stage 2 – Decision to Mine

The second stage of the Agreement involves the commencement and construction of the Karara Concentrate Pellet Project. While the final funding requirements for the project will be determined by the DFS currently in progress, it is estimated that the capital cost will be approximately A$1.14b. Funding is to be structured on a 70% debt: 30% equity basis.

Once operating joint venture agreements, sales and marketing agreements for all the expected output and all necessary financing arrangements are in place, the second stage of the agreement will commence. Upon all documentation and financing being put in place, AnSteel will then earn its 50% interest in the Karara Iron Ore Project.

The key terms of the second stage of the Agreement are that AnSteel, to secure its 50% interest in the Karara Concentrate Pellet Project, will provide 75% of the equity funding component of this project and assist Gindalbie in securing its 25% share of equity funding, if requested by GBG. AnSteel has also indicated its willingness to provide

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all necessary debt funding for the project, if requested by the joint venture partners, providing adequate security can be provided by the joint venture partners.

Geraldton Iron Ore Alliance

There are five companies in the Mid-West region that are currently producing iron ore or plan to do so within the next two years. These companies are:

Company Code Project Product

Gindalbie Metals Limited GBG Mt Karara Hematite/Magnetite

Mount Gibson Iron Limited MGX Tallering Peak/Extension Hill Hematite

Murchison Metals Limited MMX Jack Hills Hematite

Midwest Corporation Limited MIS Koolanooka, Blue Hills, Weld Range Hematite/Magnetite

Golden West Resources Ltd GWR Wiluna West Hematite

Most of these companies are planning to establish projects in two stages, with a smaller initial development plan to generate cashflow followed by a larger second stage expansion. Stage 1 output is targeted to be exported through the upgraded Berth 5 facility at Geraldton. The second stage projects involve significantly larger volumes, which exceed the capacity of the Geraldton Port. To counter this obstacle, it has been proposed that a new port be constructed 25km north of Geraldton at Oakajee, which is capable of handling Cape size (160kt-230kt) vessels.

With most of these companies planning to use components of the same infrastructure, the Geraldton Iron Ore Alliance (“Alliance”) was formed to investigate infrastructure and other project aspects (ie environmental) that are common between the projects. It is hoped that the Alliance will be able to more effectively plan for the infrastructure needs of the region and reduce the cost and time required for implementation. Recently, a sixth member, Royal Resources Limited, has joined the Alliance.

Thiess Alliance

In February 2006, GBG entered into a Project Alliance Agreement with integrated engineering and services group, Thiess Pty Ltd, a subsidiary of Leighton Holdings Limited (LEI), to facilitate the completion during calendar 2006 of an integrated DFS for development of both the magnetite and hematite components of the Karara Iron Ore Project.

The Project Alliance Agreement provides for a collaborative approach to the management and completion of all studies – including preliminary engineering design, planning, procurement, cost estimates, scheduling, permitting, stakeholder management and technical and commercial risk management – covering both the Karara Magnetite/Pellet Project and the Karara Hematite DSO Project.

Financial Analysis

In February 2006, GBG placed 90m shares at 37cps, raising $33.3m for use in completing the Karara drill-out and Feasibility Study. In April 2006, Gindalbie agreed to sell the Minjar gold assets to Monarch Resources for staged payments of $10m (all moneys currently outstanding). Gindalbie currently has 430.7m shares on issue and a further 23.2m Employee Options that are in the money.

As at 30 June 2006, the Company had $36m cash.

Valuation

We have modelled Stage 1 and Stage 2 separately, assuming that both projects are delivered on time. Due to the timing of the project and relative risks, the Stage 1 Hematite Project has been valued using an 8% discount rate, whilst the Stage 2 Magnetite Project uses 10%. Given the risks involved with Stage 2 and the level of detail that has been completed, we have further discounted the Magnetite Project by a factor of 30%.

For Stage 1, we have used a capital cost of $75m, with production commencing in Q1 CY2008 at an initial rate of 1.5Mtpa, increasing to 4Mtpa by 2010. We expect Stage 1 to be equity funded, with $75m raised at $0.75 per share to fund development and working capital. We have modelled that GBG has 100% equity initially and that AnSteel will exercise its option to take 50% equity in 2009 via the repayment of $39m in capital costs.

For Stage 2, AnSteel will have 50% equity and GBG 50%. As per the AnSteel agreement, we have modelled that 70% of the $1.14b capital cost will be funded by debt, with GBG liable for 50% of this amount. For the remaining 30%, we believe that AnSteel will contribute 75% and GBG will fund its 25% commitment out of Stage 1 cashflows.

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Table 5: Hartleys’ Valuation

A$m cps

Hematite Project 112.8 20

Magnetite Project 125.3 23

Exploration 50.0 9

Vital Metals Investment 0.4 -

Cash 36.0 6

Minjar Sale Proceeds 10.0 2

Corporate Overheads (26.0) (5)

Debt (0.1) -

Tax Losses 1.6 -

Options & Other Equity 74.3 13

Total 384.3 69

Source: Hartleys’ Estimates

(Valuation assumes the issue of 100m shares at $0.75 to fund development)

Our modelling of the Stage 2 Magnetite Project only extends for 20yrs, rather than the 40yrs projected by the Company. Due to the potential for significant replacement capital, we are not confident of projecting as far into the future, however note that there is good potential for increased value with additional life.

We have currently assigned $50m exploration value to GBG, a relatively conservative amount considering the value of the two main projects. We note that the projects have minimum lives of 10 years, with any exploration discovery either adding incremental years to the project or being significant enough to warrant a standalone operation or expansion of the current planned capacity.

We value GBG at $0.69 per share (Table 5). Our 12-month target price for GBG is $1.07 per share.

Conclusions

Over the past two years, Gindalbie Metals Limited has transformed itself from a gold producer into an emerging iron ore producer, focussed on the Karara Iron Ore Project. The project is planned as a two-stage development, with the Stage 1 Hematite Project due to commence production in Q1 CY2008. The Hematite Project is envisaged to be a 1.5-4Mtpa operation, utilising the existing Mid-West rail and Geraldton Port infrastructure.

The Stage 2 Magnetite Project will see a significant expansion of operations, based on the 50:50 joint venture development of the 737Mt magnetite resource with AnSteel. Under the plan, ore would be crushed and milled before being transported via slurry pipeline to the Port of Geraldton and/or the planned Oakajee Port for pelletisation and export.

The emergence of the Mid-West region as a significant iron ore province is a combination of attractive prices and a collaborative approach to developing infrastructure for the region. As stand-alone operators, it is unlikely that it would be feasible for any of the second stage plans to be developed. The common access proposals for both rail and ports are likely to see new infrastructure developed and operated by third parties, thus reducing the burden on capital for the iron ore producers.

The staged development of the projects allows Gindalbie to extract early cashflows whilst working within the timeframes of the regional infrastructure upgrades. GBG is trading at a significant discount to our successful development case valuation of $0.69 per share. We rate Gindalbie Metals Limited as a Speculative Buy.

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Gindalbie Metals Ltd Share PriceGBG $0.585 SPECULATIVE BUYKey Market Information Directors Company Information

Share Price $0.585 George Jones (Exec Chairman) Ground Floor, 10 Kings Park RoadMarket Capitalisation $311m David McSweeney (Managing Director) West Perth, WA, 600552 Week High-Low $0.78-$0.575 Tunku Ya'acob BT Abdullah (Non-Exec Director) Tel: +61 8 9480 8700Issued Capital 455.8m Michael O'Neill (Non-Exec Director) Fax: +61 8 9481 2395Issued Capital (fully diluted inc. ITM options) 478.9m Didier Murcia (Non-Exec Director) Web: www.gindalbie.com.auOptions 23.1m@$A0.27Hedging - Top 10 Shareholders m shares %Yearly Turnover/Volume $249.9m/707.6m sharesLiquidity Measure (Yearly Turnover/Issued Capital) 156% 1 Melewar Steel Ventures Ltd 74.09 19.2Valuation $0.69 2 Westpac Custodian Nominees Ltd 16.98 4.4

3 ANZ Nominees Ltd 16.45 4.3Financial Performance Unit FY2007F FY2008F FY2009F FY2010F 4 National Nominees Ltd 15.01 3.9

5 Osson Pty Ltd 11.11 2.9Net Revenue A$m - 56.3 165.9 611.0 6 Connemarra Investments Pty Ltd 11.11 2.9Total Costs A$m (2.5) (33.8) (93.8) (266.2) 7 Mr J Janowski 8.05 2.1EBITDA A$m (2.5) 22.6 72.1 344.8 8 Mr D McSweeney 7.22 1.9Depreciation/Amort A$m - (2.4) (10.5) (23.3) 9 Merrill Lynch (Aust) Nominees Ltd 7.10 1.8EBIT A$m (2.5) 20.1 61.6 321.4 10 Colorado Conversions Pty Ltd 3.54 0.9Net Interest A$m - 1.9 4.5 (53.8)Pre-Tax Profit A$m (2.5) 22.0 66.1 267.6 Reserves & Resources Mt %Fe %SiO2Tax Expense A$m - (7.0) (19.8) (80.3)NPAT A$m (2.5) 15.0 46.3 187.3 Karara HematiteAbnormal Items A$m - - - - Resources (expected to be published Q3 CY2006)Reported Profit A$m (2.5) 15.0 46.3 187.3

Karara MagnetiteResources 737.00 37.10 41.95

Financial Position Unit FY2007F FY2008F FY2009F FY2010FProduction Summary Unit FY2007F FY2008F FY2009F FY2010F

Cash A$m 95.4 79.5 74.8 138.0 *AttributableOther Current Assets A$m 0.4 10.0 14.2 45.2 Iron Ore - Fines Production 000t - 400 1,167 1,000 Total Current Assets A$m 95.8 89.5 89.1 183.2 Iron Ore - Lump Production 000t - 400 1,167 1,000 Property, Plant & Equip. A$m 18.8 185.3 492.5 595.9 Iron Ore - Concentrate Sales 000t - - - 500 Exploration A$m 14.9 17.8 20.0 20.4 Iron Ore - Pellet Production 000t - - - 1,100 Investments/other A$m 0.0 0.0 0.0 0.0 Cash Cost $A/t - 39.10 39.15 38.83Tot Non-Curr. Assets A$m 33.7 203.1 512.6 616.4 Total Assets A$m 129.5 292.6 601.6 799.5 Price Assumptions Unit FY2007F FY2008F FY2009F FY2010F

Short Term Borrowings A$m (0.1) (0.1) (0.1) (0.1) AUDUSD A$/US$ 0.75 0.74 0.73 0.72 Other A$m (2.4) (18.5) (38.3) (25.6) Received Price - Fines A$/t - 61.88 60.74 53.64 Total Curr. Liabilities A$m (2.5) (18.5) (38.4) (25.6) Received Price - Lump A$/t - 78.96 77.51 68.45 Long Term Borrowings A$m - (125.0) (350.0) (350.0) Received Price - Pellets A$/t - - - 89.38 Other A$m (0.5) (7.5) (25.1) (48.4) Received Price - Conc. A$/t - - - 65.33 Total Non-Curr. Liabil. A$m (0.5) (132.5) (375.1) (398.4) Average Received Price A$/t - 70.56 69.26 61.39 Total Liabilities A$m (3.0) (151.0) (413.4) (424.0)

Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)Net Assets A$m 126.5 141.6 188.2 375.5

Base Case 0.74 15.0 6.1 7.1Cashflow Unit FY2007F FY2008F FY2009F FY2010F Exchange Rate +10% 0.59 24.7 4.8 5.8

Exchange Rate -10% 0.91 39.6 7.7 8.7Operating Cashflow A$m 3.3 29.1 87.7 301.1 Iron Ore Price +10% 0.89 38.8 7.6 8.6Income Tax Paid A$m - - (2.3) (57.0) Iron Ore Price -10% 0.58 24.0 4.7 5.7Interest & Other A$m - (6.0) (45.2) (53.8) Operating Costs +10% 0.65 27.5 5.4 6.4Operating Activities A$m 3.3 23.1 40.2 190.3 Operating Costs -10% 0.82 35.3 6.9 7.9

*N.B. NPAT, EPS, CFPS forecasts are for FY2008Property, Plant & Equip. A$m (16.9) (160.8) (267.1) (125.9)Exploration and Devel. A$m (4.0) (3.3) (3.0) (1.3)Investments A$m - - - - Share Price Valuation (NAV) Est. $m Est. $/shareInvestment Activities A$m (20.9) (164.0) (270.1) (127.2)

Hematite (NPV @ 8%) 112.8 0.20Repayment of Borrowings A$m - - - - Magnetite (NPV @ 10%) 125.3 0.23Proceeds of Borrowings A$m - 125.0 225.0 - Exploration 50.0 0.09Equity A$m 76.8 0.0 0.3 - Vital Metals Investment 0.4 0.00Dividends Paid A$m - - - - Cash 36.0 0.06Financing Activities A$m 73.1 125.0 225.3 - Forwards 0.0 0.00

Corporate Overheads (26.0) (0.05)Net Cashflow A$m 55.5 (15.9) (4.6) 63.2 Total Debt (0.1) (0.00)

Tax Losses 1.6 0.00Ratio Analysis Unit FY2007F FY2008F FY2009F FY2010F Options & Other Equity 74.3 0.13

Total 384.3 0.69Cashflow Per Share A¢ (0.5) 3.3 10.6 39.2Cashflow Multiple X (114.7) 18.0 5.5 1.5Earnings Per Share A¢ (0.5) 2.8 8.6 34.8Price to Earnings Ratio X (114.7) 20.9 6.8 1.7Dividends Per Share A¢ - - - -Dividend Yield % - - - -Net Debt / Equity % -75% 32% 146% 56%Interest Cover X - (10.8) (13.5) 6.0Return on Equity % na 11% 25% 50%

Analyst: Andrew RowellPhone: +61 8 9268 2837

Sources: IRESS, Company Information, Hartleys Research

July 2006

Last Updated: 21/07/2006

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Date 21 July 2006 ASX Code GWR Share Price 105cps Market Cap (fully diluted) $55.3m ($83.8m) Issued Capital (fully diluted) 52.7m shares (79.8m) Cash (as at 31 March 2006) $2.5m Management John Daniels (Chairman) Gary Hutchinson (Managing Director) Mick Wilson (Executive Director -Exploration Manager) Top Two Shareholders Lingchip Pty Ltd (38%) Falak Holdings (13.3%)

Golden West Resources Limited (“GWR”, “Company”) is focussed on the development of its Wiluna West Hematite Project. It has five separate banded iron formation (“BIF”) horizons with a cumulative strike length of 125km. At this stage, the project is under explored with only two of the horizons sparsely drilled. Recent drilling and rock chip sampling has provided encouragement regarding the potential of the project to host a large high grade iron ore resource. The project is located 700km from port and has limited infrastructure, therefore transport costs will make up a significant portion of the operating costs for any potential development. The Company aims to develop the project in two stages. GWR’s strategy for Stage 1 is to obtain near-term cashflows in order to take advantage of strong iron ore prices by utilising existing infrastructure and limiting the need for upfront capital. Stage 2 is a significantly larger scale project and will require the construction of major infrastructure. Unlike its Geraldton Iron Ore Alliance peers, GWR is examining two export routes for Stage 2, Oakajee or Esperance. Given the strength of the iron ore market and large potential of the project, albeit at a relatively early stage, we rate Golden West Resources Limited as a Speculative Buy.

Investment Highlights

• Stage 1 Project Utilises Existing Infrastructure – GWR plans to initially define a JORC-compliant resource of 3 to 5Mt of +60% Fe hematite orelocated within its granted mining leases. We expect GWR to release an initial resource/reserve estimate by the end of August 2006. It is envisaged that the Stage 1 project would have a 5 year mine life and would require modest infrastructure at the mine site and a $15m storage shed at the Port of Esperance where it has an option agreement to use the facilities to export Stage 1 ore. Production could get underway as early as June quarter 2007.

• Large Hematite Project Provides Growth Potential - For Stage 2, GWRis targeting a much larger scale operation, however the likelydevelopment of such project will be entirely dependent upon significant exploration success. Given the contemplated size of the project and its large distance from port, the Stage 2 project will require significant rail infrastructure to be built. In order to achieve this, GWR is examining the viability of exporting ore through either Esperance or Oakajee.

• Infrastructure Development Critical for Stage 2 – The Port of Esperance option would involve the construction of a 300km railway between Wiluna and Leonora. Funding of the railway may be shared given there are a number of mining companies along the route. With the Oakajee Port option, GWR is reliant on connecting a 300km rail line to either the Murchison Metals Limited or Midwest Corporation’s proposed rail facilities.

• Recent Drill Intercepts Provide Encouragement – In early July, GWR released some encouraging results from its ongoing exploration and resource drill programme. Resource drilling at the Bowerbird prospect (located within a granted mining lease) returned near surfacemineralisation with consistent intercepts (~10-15m) and grades above 67% Fe. Exploration drilling also provided encouragement with zones of up to 90m (ending in mineralisation, assays pending). Geological mapping suggesting the mineralisation width is ~100m.

Golden West Resources Limited Speculative Buy Multiple Development Options

Share Price Performance

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Figure 16: Plan Showing Prospective Units Containing Iron Mineralisation at the Wiluna West Project

Source: Golden West Resources Limited

Figure 15: Location of GWR’s assets

Source: Golden West Resources Limited

Background

Golden West Resources Limited (“GWR”) listed on the ASX in December 2004 with a focus on gold exploration at its Wiluna West project. However, the Company soon discovered that the project had a number of Banded Iron Formations (“BIF”) with excellent potential for large hematite deposits. Although the project is a significant distance away from both the Geraldton and Esperance ports, record iron ore prices and recent high grade drill results have given encouragement that the small scale Stage 1 project can be brought into production. It is envisaged that Stage 1 will not need any major infrastructure construction. Further upside exists in the possible development of a large scale hematite mining operation in Stage 2. However, this will require a significant investment in infrastructure in the area and considerable drilling to confirm the high grade nature of the mineralisation.

Principal Assets

Wiluna West Project

The Wiluna West Iron Project is located 40km west of the township of Wiluna in the North Eastern Goldfields of Western Australia and is 450km north of Kalgoorlie (Figure 15). The project consists of a granted mining lease (to the west) surrounded by an exploration licence (440km2).

Recent rock chip sampling has confirmed the potential for the project to host a large high grade iron deposit within five separate BIF horizons (A-E) that have a cumulative strike length of 125km (Figure 16). Unit B and Unit C are the only units to be mapped and sampled in any detail. This covers only over the northern, well exposed portions, representing only 30% of the prospective strike. Results of this work suggest that the project has the potential to host a major high grade iron deposit of 200 to +250Mt.

In July 2006, GWR released some excellent results from its ongoing exploration and resource drilling programme. Resource drilling at the Bowerbird prospect (Unit B - located in the mining lease) returned shallow mineralisation with consistent intercepts (~10-15m) and grades above 67% Fe. This material will likely be included in the resource estimate for Stage 1. As the true width of the high-grade intercepts are relatively modest (estimated at 6-11m), and the BIF units are dipping subvertically, strip ratios to recover any significant tonnage are likely to be relatively high.

Exploration drilling at Unit C also resulted in excellent intercepts of up to 90m (ending in mineralisation). Previous, geological mapping suggests the mineralisation width could be up to 100m. Should the pending assays confirm the high grade nature of the mineralisation this material is likely to underpin the Stage 2 development.

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Stage 1

In Stage 1, GWR plans to initially identify a JORC-compliant resource of 3 to 5Mt of high-grade direct shipping ore. It is envisaged that the initial operation will have a 5 year mine life, with ore mined at the rate of 500ktpa to 1Mtpa. GWR has signed an option agreement with the Esperance Port Authority to lease an area to construct a 300kt live capacity storage shed, which is expected to cost $15m. This is a more attractive option for GWR in comparison to the Port of Geraldton given the distance to existing rail, spare shipping capacity, room for an additional storage sheds and unloading facilities. The Esperance route would involve trucking the ore to Leonora (300km), and then loading onto rail for the 500km journey to port for overseas markets. If this option is adopted, additional capital will be required to upgrade rail loading facilities at Leonora. Given the significant road/rail transport costs associated with getting ore to the port from Wiluna operating margins will be subject to pressure from variable costs such as fuel. Overall, we estimate upfront capital costs for Stage 1 are likely to be in the range of $25-35m.

GWR aims to have a JORC-compliant resource defined by the end of August. This will be followed by a Feasibility Study, which is expected to be completed by the end of CY2006. Production is possible in the June quarter 2007, however this is dependent upon a number of variables including the construction of the shed at the Port of Esperance (6 months to construct), negotiation to utilise the railway and the delivery of rolling stock.

Stage 2

Stage 2 will involve significant infrastructure planning, as it will be based on exporting 10 to 12Mtpa, either through the Esperance or Oakajee Ports. GWR aims to develop a major iron ore project of at least 160Mt to 220Mt recoverable ore. GWR has joined the Geraldton Iron Ore Alliance with four other iron ore companies that have projects in the Mid-West region. These companies, jointly through the Alliance, are lobbying for approval from the WA Government for the construction of common access rail facilities in the Mid-West region and a new port at Oakajee, approximately 25km north of the existing port at Geraldton. These infrastructure projects are expected to be funded by third parties. For the export of ore in Stage 2, GWR is investigating two export options.

Option 1: Esperance

Given that GWR recently signed an option agreement to use the facilities at the Port of Esperance, it is conceivable that it could expand its shed capacity to cater for Stage 2. The concept is to rail the ore from Wiluna to the Esperance Port. This will require construction of a new rail line from Wiluna to Leonora (300km) to connect the already established railway from Leonora to Esperance. We estimate this could cost between $300m to $600m. However, with the project in close proximity to several other mining operations such as Mt Keith, Magellan and the proposed Honeymoon Well development, it is possible that GWR may not have to sole fund this railway. This would significantly reduce the cost to GWR of establishing such a railway. Rail upgrades would need to be completed on the existing track, together with additional unloading facilities and storage sheds at Esperance.

Option 2: Oakajee

The Western Australian Government has approved the site location for the Oakajee Port with port design and connecting rail corridors under discussions. GWR would need to build a railway to connect its Wiluna Iron Project to either Murchison Metals Limited (“Murchison”) or Midwest Corporation Limited’s (“Midwest”) proposed rail facilities. Murchison and Midwest recently announced they had chosen to jointly participate in the Northern Infrastructure Feasibility Study, which is investigating the optimal development of rail and port infrastructure.

Offtake Agreements

We understand there has been strong interest from Asian mills to establish alliances, enter into joint ventures or off-take agreements. We believe it would be beneficial for GWR to form a major alliance, which could help fund both Stages 1 and Stage 2.

Other Projects

Doherty's Gold Project (GWR 100%)

The Doherty's Gold Project is located in the Barrambie Greenstone Belt, approximately 100km south west of the Wiluna West project and 65km north of Sandstone. The project contains an Indicated Resource of 25,700t at 23.8 g/t Au for a contained 20,430 ounces of gold.

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Resources

GWR is aiming to release a resource for the Stage 1 Hematite Project in Q3 CY2006. It is initially targeting a resource of 3 to 5Mt of >60% Fe material, capable of supporting the development of the Stage 1 project. For Stage 2, GWR is targeting a >60% hematite resource of at least 100Mt, which it aims to mine at the rate of 10-12Mtpa.

In addition, GWR has some minor gold resources in the area. These include Wiluna West, which has a resource of 788,000t at 3.5g/t Au containing 87,000oz Au and Doherty’s, which has a small indicated resource of 20,430oz Au.

Financial Analysis

GWR had a modest cash balance of $2.4m in the bank at the end of March. Given the high levels of exploration activity and resource definition work currently underway, we expect the Company will need to raise equity in the next few months or form a strategic alliance for additional funding for the Stage 1 project.

GWR currently has a relatively tight capital structure with 52.7m shares on issue, of which 21.9m shares are escrowed until 24 December 2006. There are 22.8m tradable options under the ASX code GWRO that are exercisable at 20 cents and expire on 31 December 2007. In addition, there are a further 4.35m options at exercisable at various prices that are escrowed until 24 December 2006.

Conclusions

Golden West Resources Limited is focussed on the development of its Wiluna West Hematite Project. It has five separate banded iron formation (“BIF”) horizons with a cumulative strike length of 125km. At this stage, the project is under explored with only two of the horizons sparsely drilled. Recent drilling and rock chip sampling has provided encouragement regarding the potential of the project to host a large high grade iron ore resource. The project is located 700km from port and has limited infrastructure, therefore transport costs will make up a significant portion of the operating costs for any potential development. The Company aims to develop the project in two stages. GWR’s strategy for Stage 1 is to obtain near-term cashflows in order to take advantage of strong iron ore prices by utilising existing infrastructure and limiting the need for upfront capital. Stage 2 is a significantly larger scale project and will require the construction of major infrastructure. Unlike its Geraldton Iron Ore Alliance peers, GWR is examining two export routes for Stage 2, Oakajee or Esperance. Given the strength of the iron ore market and large potential of the project, albeit at a relatively early stage, we rate Golden West Resources Limited as a Speculative Buy.

Date 21 July 2006 ASX Code MGX Share Price 78.5cps Valuation 104cps Market Cap (fully diluted) $315.6m ($329.8m) Issued Capital (fully diluted) 402.1m shares (420.1m) Cash (estimated as at 31 May 2006) $10m Management Luke Tonkin (Managing Director) Alan Rule (Finance Director) Top Two Shareholders Sun Hung Kai Investments (18.7%) Citicorp Nominees Pty Ltd (5.5%)

Mount Gibson Iron Limited (“MGX”, “Company”) is the Mid-West’s largest iron ore producer. The Company is focussing on sustainable production growth to take advantage of strong iron ore prices. MGX is the first mover in the region, having established access agreements for road, rail and port infrastructure with sufficient capacity for the current expansion plans at Tallering Peak. In addition, MGX is currently completing a Desktop Study on the Extension Hill Hematite Project, which is expected to become its second production centre from December 2007. The Company recently signed an agreement to sell its indirect share of the Extension Hill Magnetite Project to Sinom Investments Limited (“Sinom”) for $52.5m. The proposed sale removes the financial and execution risks involved with the development of such a large project and will allow MGX to focus on the Extension Hill Hematite Project. MGX is currently trading 28% below our valuation of $1.04 per share. We see Mount Gibson Iron Limited as a lower riskinvestment option in comparison to its peers and rate it as a Buy.

Investment Highlights

• Excellent Leverage to Strong Iron Ore Prices – MGX is able to take advantage of strong iron ore prices through its 100% ownership of the Tallering Peak mine. Tallering Peak hematite production is expected to double from the initial 1.6Mtpa to 3Mtpa during the send half of CY2006. A proposed second operation at Extension Hill will lift production to 5-6Mtpa by December 2007.

• Operating Profit Expected to More than Double in FY2007 – With production expected to double and a 19% increase in iron ore prices this year, we forecast an operating profit of $55m in FY2007, up from an expected $23m in FY2006.

• Access to Existing Infrastructure – MGX has a competitive advantage compared to its Mid-West peers due to existing infrastructure contractsand agreements for long term access to existing road, rail and port facilities. MGX’s expansion plans are not dependent on the development of the Oakajee Port. At the Port of Geraldton, MGX has an existing shed at Berth 4 and land behind the soon to be upgraded Berth 5. This land is earmarked for storage of ore from its second hematite mine at Extension Hill.

• Trading at Discount to Valuation – Our valuation model assumes the successful doubling of production at Tallering Peak and the developmentof Extension Hill (discounted by 70%). MGX is trading at a significant discount to our valuation of $1.04 per share.

Mount Gibson Iron Limited Buy Ahead of the Pack

Share Price Performance

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Earnings Summary FY2006F FY2007F FY2008F FY2009F

Revenue A$m 100.6 222.5 316.7 406.0

EBITDA A$m 46.4 121.0 170.2 201.9

NPAT A$m 22.8 54.2 81.4 83.5

Free Cash Flow A$m (23.9) 18.8 74.6 169.6

EPS A¢ 5.7 13.2 19.6 19.9

EPS Growth % chg na 132.6 48.4 1.3

PER x 13.8 5.9 4.0 4.0

DPS cents - 2.0 10.0 16.0

Dividend Yield % - 2.5 12.7 20.4Franking % - - - -

Sources: IRESS, Company Announcements, Hartleys' Estimates 37

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Figure 17: Location of MGX’s assets

Source: Mount Gibson Iron Limited

Background

Mount Gibson Iron Limited (“MGX”) listed on the ASX in January 2002 as a specialist iron ore exploration company. In 2003, MGX made an opportunistic purchase of a number of Mid-West iron ore tenements. As a result, MGX was able to rapidly bring its flagship operation at Tallering Peak into production.

Significant exploration was conducted in the Mid-West in the 1960’s, which resulted in the identification of a number of deposits. However, this did not result in the establishment of significant mining operations due to high inland freight charges, lack of infrastructure and a shift in focus to the large high grade resources of the Pilbara. In 2002, plans to resurrect large scale iron ore mining in the Mid-West by Kingstream Steel (“Kingstream”) failed due to high capital costs and a weak Asian economy. This presented an opportunity for MGX to purchase a number of assets/tenements from the Kingstream receivers. MGX was able to leverage off Kingstream’s previous work to bring the Tallering Peak project into production in early 2004. At the same time, iron ore prices began to appreciate rapidly and MGX enjoyed improved margins. In addition, the WA Government privatised the rail system, which made freight more economical. As the first mover, MGX is currently focussed on sustainable hematite production growth to take advantage of strong prices. MGX is in the process of increasing production at Tallering Peak from 1.6Mtpa to 3Mtpa. A proposed second operation at Extension Hill could lift production for MGX to 5-6Mtpa by December 2007.

MGX has made a considerable investment towards infrastructure in the area, including the construction of storage facilities at Geraldton, road upgrades, a rail terminal at Mullewa and mine establishment.

MGX has announced the divestment of its 73% interest in Asia Iron Holdings Limited (“Asia Iron”), which owns 100% of the Extension Hill Magnetite Project and a number of other projects in the area apart from the Tallering Peak Hematite project. MGX will retain the rights to mine all the hematite at Mt Gibson including the Extension Hill hematite (Figure 17). Initially, the $52.5m cash deal for the divestment was with Shougang, China’s third largest steel maker; however, Sinom Investments Limited (“Sinom”), a minority shareholder in Asia Iron exercised its pre-emptive rights. Sinom is an established customer of MGX and as such they have a good working relationship. The proposed sale is a result of incoming management’s assessment of the Extension Hill Magnetite project and the unacceptable debt and dilutionary effects the project had on MGX’s market capitalisation. Furthermore, it negates the financial and execution risks involved with developing a large, high up-front capital project. The funds raised from the sale will be used towards the development of the Extension Hill Hematite Project.

Principal Assets

Tallering Peak Mine

The Tallering Peak Iron Ore mine is located 130km north east of Geraldton in the Mid-West region of Western Australia. The Tallering Peak operation involves mining from several open pits, which have a life of mine strip ratio of 6:1 (although the current strip ratio is 14:1). From the mine, the ore is transported 65km south by road-train to Mullewa and loaded onto rail wagons. It is then transported 107km to the Port of Geraldton, where it is stockpiled in MGX’s 150,000t live capacity storage shed. From there, the ore is loaded onto Panamax-sized ships for transportation to China.

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Figure 19: Aerial View of the Tallering Peak Mining Operations

Source: Mount Gibson Iron Limited

Figure 18: Aerial View of the Tallering Peak Mining Operations

Source: Mount Gibson Iron Limited

MGX is well advanced in the process of increasing production from Tallering Peak from 1.6Mtpa to 3Mtpa. This process commenced in January 2006 and involves the cutback of the T3 and T4 open pits that will merge into one large pit identified as T6 (Figure 18). During the cutback, production has been reduced due to the mining of lower grade material and limited access to ore. MGX is currently addressing these ramp up issues and it is expected to reach the 3Mtpa throughput during the second half of CY2006.

Further exploration upside exists at Tallering Peak with potential at the T1 pit to add to existing reserves (Figure 19). Any additional material would add incremental tonnes and ultimately extend mine life. T1 is expected to be drilled towards the end of CY2006.

Tallering Peak ore is of relatively high grade and low in contaminants, being hard sharp ore with minimum degradation in handling or decrepitation in the blast furnace. The mine is currently producing lump and fines at a ratio of 65:35, which is 30% higher than the average in Western Australia. Lump ore is sold at a higher price than fines, which must be sintered or pelletised before feeding to a blast furnace.

All ore produced has been contracted for the life of the Tallering Peak mine, with about 50% going to two trading companies, Stemcor (S.E.A.) Pte Ltd and Sinom (Hong Kong) Ltd, and 50% to two end-users, Shanghai Industrial and Prosperity Minerals (Asia) Limited. Prices are linked to the prevailing published FOB prices for iron ore sold by Hamersley Iron from its Pilbara ports. These prices are reviewed annually for adjustment on 1 April of each year.

Extension Hill Project

The Extension Hill Project is located 270km south east of the Port of Geraldton and 220km south east of Tallering Peak (Figure 1). Although the Extension Hill project is further from the Port of Geraldton than Tallering Peak, the lower strip ratio (1:1) is expected to offset the extra haulage costs and lower lump to fines ratio (45:55). The project consists of a shallow hematite cap overlaying magnetite. With the recent divestment of the magnetite project, MGX is now focussed on the development of a hematite operation. The current hematite Resource within the Extension Hill tenements is 12.8Mt at 61.35% Fe. Extensions to the known mineralisation are expected, which could ultimately add to the resource base.

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MGX is currently in the process of a Desktop Study into the viability of establishing a hematite operation at Extension Hill. We believe that MGX will initially target a 3Mtpa operation for a mine life of at least 5 years. We estimate total up-front capital expenditure for the project at $65m. It would likely involve the construction of an 85km private haul road to a railhead at Perenjori, which we estimate to cost approximately $11m. In addition, we have allowed $20m for mine start-up and rail wagons. We estimate capital of $22m for a second ore storage shed at Geraldton with $12m for contingencies and the feasibility study. MGX has already made significant progress in design and engineering, licensing and approval through the Extension Hill Magnetite Feasibility Study. We expect the results of the Desktop Study to be released by mid-August.

Divestment of Extension Hill Magnetite

MGX recently announced that it has signed an agreement for the sale of its 73% stake in Asia Iron Holdings Limited (“Asia Iron”) to Sinom for $52.5m (subject to Foreign Investment Review Board approval). Sinom is an established customer of MGX and as such they have a good working relationship. The proceeds of the sale will be held in escrow until environmental approval for Extension Hill is finalised. This is expected to occur during the December 2006 quarter.

The main reasons for the divestment are:

• Negate the risks involved with the development of such a large capital project. It is estimated that equity funding in excess of $175m would have been required by MGX to develop the project;

• Provide funding for the Extension Hill hematite project; and

• Bring forward dividend payments to shareholders.

We understand that the agreement also outlines mining arrangements between the hematite and magnetite ore at Extension Hill and the use of MGX’s port facilities by Sinom for the export of magnetite. However, given the size of the magnetite project, Sinom would likely prefer to use the larger Cape size vessels and to do this would require the proposed Oakajee port. Overall, we believe that the divestment was an astute move and negates the financial and execution risks involved with such a large project for a Company of MGX’s market capitalisation.

Resources/Reserves

Table 6 – Tallering Peak JORC Compliant Reserves (as at 30 June 2005)

Grade Deposit Tonnes (Mt)

Fe % SiO2% Al2O3 % P % LOI % S %

T3 5.8 64.26 3.88 2.20 0.015 1.23 0.023

T4 0.7 66.32 3.09 2.04 0.010 1.22 0.023

T5 1.0 60.90 6.76 2.59 0.070 2.36 0.210

T6 11.1 63.58 4.26 1.91 0.029 1.57 0.046

TOTAL 18.6 63.75 4.23 2.04 0.026 1.49 0.047

Source: Mount Gibson Iron Limited

Table 7 – Tallering Peak JORC Compliant Resources (as at 30 June 2005)

Grade Deposit Tonnes (Mt)

Fe % SiO2% Al2O3 % P % LOI % S %

T3 6.2 64.17 3.90 2.23 0.015 1.25 0.027

T4 1.4 65.81 3.33 2.29 0.013 1.40 0.115

T5 1.5 60.32 7.22 2.60 0.080 2.25 0.290

T6 11.7 63.49 4.35 1.94 0.030 1.57 0.053

TOTAL 20.8 63.62 4.35 2.10 0.028 1.51 0.067

Source: Mount Gibson Iron Limited

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Table 8 – Extension Hill JORC Compliant Resources (as at 30 June 2005)

Grade Category

Tonnes (Mt)

Fe % SiO2% Al2O3 % P % LOI % S %

Indicated

(Extension Hill > 57%) 10.5 61.12 4.49 1.53 0.065 6.15 See note

Inferred

(Extension Hill >57% Fe) 2.7 59.84 6.27 1.78 0.049 5.66 See note

Indicated

(Iron Hill > 60%) 2.0 63.82 4.43 0.69 0.050 3.10

TOTAL 15.2 61.25 4.80 1.46 0.060 5.66

Note: Sulphur grades at Extension Hill have not been estimated as less than 50% of the mineralised dataset has been analysed for sulphur. A simple analysis of available data for >50% Fe samples indicates a maximum of 0.42% S with an average of 0.06%. Some near-surface material may exhibit sulphur grades up to double the average due to the presence of organic material

Source: Mount Gibson Iron Limited

Further upgrades to the Extension Hill Resource estimate are likely once extensional drilling has been completed. Further infill drilling will be required at Extension Hill to upgrade the resource to reserve.

Infrastructure Requirements

Rail

MGX currently utilises the narrow gauge rail system operated by WestNet for its Tallering Peak operation. Further negotiations will be required to use the rail system from Perenjori to the Port of Geraldton should the Extension Hill Hematite Project operation move into production. The main items for assessment are the ordering of rolling stock, scheduling, unloading and passing loops.

Geraldton Port

The WA State Government has recently committed to a $35m upgrade of Berth 5 at Geraldton, converting it into a dedicated iron ore facility with a capacity of 12Mtpa. This is sufficient to meet the needs of MGX for the development of a second mining operation at Extension Hill. MGX has an established shed at Berth 4 which is sufficient to handle the 3Mtpa of iron ore from Tallering Peak. It also has executed an option agreement to use the land behind Berth 5.

Other Infrastructure

Given the recent divestment of the Extension Hill Magnetite Project, MGX no longer needs to consider a slurry pipeline, pellet plant or access to the Oakajee Port.

Capital Development Cost Estimates

We estimate that the Tallering Peak expansion including waste development currently underway will cost in the order of $45m. In addition, the capital required for the Extension Hill development is estimated at $65m. The major items are listed below in Table 9.

Table 9: Extension Hill Capital Requirements

Item Cost (A$m)

Feasibility Study 6

Haul Road Upgrade (85km) 11

Mine Development (access roads, pre-strip, camp upgrade, sheds, offices and services) 8

Rolling Stock (70 wagons initially) 10

Rail Siding (Perenjori) 2

Geraldton Port Storage Shed (50kt live capacity) 22

Contingency (10%) 6

TOTAL 65

Source: Hartleys’ Estimates

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Table 10: Hartleys’ Valuation

A$m cps

Tallering Peak (NPV @ 8%) 322.3 77

Extension Hill (70% discount of NPV @ 10%)

32.1 8

Exploration 25.0 6

Cash 10.3 3

Extension Hill Magnetite Sale Proceeds

52.5 12

Corporate Overheads (7.0) (2)

Debt (10.6) (3)

Tax Losses - -

Options & Other Equity 11.4 3

Total 436.0 104

Source: Hartleys’ Estimates

Geraldton Iron Ore Alliance (“Geraldton Alliance”)

There are five companies in the Mid-West region that are currently producing iron ore or plan to do so within the next two years. These companies are:

Company Code Project Product

Gindalbie Metals Limited GBG Mt Karara Hematite/Magnetite

Mount Gibson Iron Limited MGX Tallering Peak/Extension Hill Hematite

Murchison Metals Limited MMX Jack Hills Hematite

Midwest Corporation Limited MIS Koolanooka, Blue Hills, Weld Range Hematite/Magnetite

Golden West Resources Ltd GWR Wiluna West Hematite

Most of these companies are planning to establish projects in two stages, with a smaller initial development plan to generate cashflow followed by a larger second stage expansion. Stage 1 output is targeted to be exported through the upgraded Berth 5 facility at Geraldton. The second stage projects involve significantly larger volumes, which exceed the capacity of the Geraldton Port. To counter this obstacle, it has been proposed that a new port be constructed 25km north of Geraldton at Oakajee, which is capable of handling Cape size (160kt-230kt) vessels.

With most of these companies planning to use components of the same infrastructure, the Geraldton Iron Ore Alliance (“Alliance”) was formed to investigate infrastructure and other project aspects (ie environmental) that are common between the projects. It is hoped that the Alliance will be able to more effectively plan for the infrastructure needs of the region and reduce the cost and time required for implementation. Recently, a sixth member, Royal Resources Limited, has joined the Alliance.

Financial Analysis

MGX is in a sound financial position with $10m cash in the bank at the end of May. In addition, once environmental approvals are received for the Extension Hill Project, $52.5m in cash will be paid to MGX for the sale of its interest in Asia Iron. This will effectively fund the capex requirements for the Extension Hill Hematite Project. We believe consideration will be given to paying dividends in the near future.

MGX currently has 402.0m shares on issue with 7.3m tradable options under the ASX code MGXOA. In addition, there are a further 17.8m executive options.

Valuation

In our assessment of MGX, we have modelled both the Tallering Peak operation and the proposed Extension Hill mine (Table 10).

For the Tallering Peak mine, we have assumed a remaining six year mine life based upon existing reserves at the rate of 3Mtpa. We expect the production ramp up to 3Mtpa to be complete in H1FY2007 with total capex spent in the order of $45m, which includes waste development and the acquisition of a crusher. During the expansion, we have modelled production affected by the cut back of T3 and T4. As a result revenues for FY2006 will be modest. We expect a net profit after tax of $23m for FY2006. However, from FY2007 we expect operating profit to more than double as a result of the expansion.

For the Extension Hill Project, we have modelled a five year mine life for the Hematite Project at the rate of 3Mtpa. This is based upon the assumption that further extensional and infill drilling will convert 100% of current resources to reserves. We believe that this is a likely scenario given the low strip ratio and excellent exploration potential in the area. MGX is currently working on a Desktop Study for the project which is

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expected to be complete in August 2006. The project is at an advanced stage in terms infrastructure planning for the project. MGX expects to be able to produce from Extension Hill by December 2007. However, due to the current stage of development and uncertainties, we have discounted the value of the Extension Hill Hematite Project by 70%. As further work is completed and the economics become firmer, this discount factor will be reduced.

We have assigned $25m exploration value to MGX, a relatively conservative amount considering that both Tallering Peak and Extension Hill have good exploration potential. In addition, Tallering Peak is in production with any additional exploration discovery either adding incremental years to the project or further expansion of the current planned activity.

This has resulted in a valuation for MGX of 104cps.

Conclusions

Mount Gibson Iron Limited is the Mid-West’s largest iron ore producer. MGX is the first mover in the region, having established access agreements for road, rail and port infrastructure with sufficient capacity for the current expansion plans at Tallering Peak. In addition, MGX is currently completing a Desktop Study on the Extension Hill Hematite Project, which is expected to become its second production centre from December 2007. The Company recently signed an agreement to sell its indirect share of the Extension Hill Magnetite Project to Sinom Investments Limited for $52.5m. The proposed sale removes the financial and execution risks involved with the development of such a large project and will allow MGX to focus on the Extension Hill Hematite Project. MGX is currently trading 28% below our valuation of $1.04 per share. We see Mount Gibson Iron Limited as a lower risk investment option in comparison to its peers and rate it as a Buy.

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Mount Gibson Iron Limited Share PriceMGX $0.79 BUY

Key Market Information Directors Company Information

Share Price $0.79 Mr William B Willis (Chairman) Level 1, 7 Havelock StMarket Capitalisation $318m Mr Luke Tonkin (Managing Director) West Perth, WA 600552 Week High-Low $0.82-$0.59 Mr Brian Johnson Tel: +61 8 9485 2355Issued Capital 402.1m Mr Ian Macliver Fax: +61 8 9485 2305Issued Capital (fully diluted inc. ITM options) 420.1m Mr Craig Redhead Web: www.mtgibsoniron.com.auOptions 25.1m@$A0.57 Mr Alan RuleHedging -Yearly Turnover/Volume $339.9m/433.9m sharesLiquidity Measure (Yearly Turnover/Issued Capital) 108% 1 Top 10 Shareholders (as at June 2006) m shares %Valuation $1.04 2

3 Sun Hung Kai Investment Services Limited 75.32 18.7Financial Performance Unit FY2006F FY2007F FY2008F FY2009F 4 Citicorp Nominees Pty Ltd 22.25 5.5

5 National Nominees Limited 14.05 3.5Net Revenue A$m 100.6 222.5 316.7 406.0 6 Westpac Custodian Nominees Limited 10.79 2.7Total Costs A$m (54.2) (101.5) (146.5) (204.1) 7 JP Morgan Nominees (Aust) Limited 10.12 2.5EBITDA A$m 46.4 121.0 170.2 201.9 8 Chemco Pty Ltd 6.00 1.5Depreciation/Amort A$m (23.2) (42.0) (52.3) (81.2) 9 Dominant Holdings 6.00 1.5EBIT A$m 23.2 79.0 117.9 120.7 10 Link Enterprises (Holdings) Pty Ltd 5.53 1.4Net Interest A$m 0.8 (1.6) (1.5) (1.4) Marico Holdings (BV) 4.98 1.2Pre-Tax Profit A$m 24.0 77.4 116.3 119.3 HSBC Custody Nominees (Aust) Limited 4.37 1.1Tax Expense A$m (1.1) (23.2) (34.9) (35.8)NPAT A$m 22.8 54.2 81.4 83.5 Reserves & Resources Mt %Fe %SiO2 %S %PAbnormal Items A$m - 50.0 - -Reported Profit A$m 22.8 104.2 81.4 83.5 Tallering Peak

Reserves 18.6 63.75 4.23 0.047 0.026 Resources 20.8 63.62 4.35 0.067 0.028 Extension Hill

Financial Position Unit FY2006F FY2007F FY2008F FY2009F Resources 15.2 61.25 4.80 0.060

Cash A$m 10.3 80.0 125.2 243.1 Production Summary Unit FY2006F FY2007F FY2008F FY2009FOther Current Assets A$m 16.9 27.6 43.1 42.5 *AttributableTotal Current Assets A$m 27.2 107.7 168.2 285.6 Total Ore Mined Mt 1.72 3.00 4.39 5.80 Property, Plant & Equip. A$m 85.8 129.2 148.4 91.7 Iron Ore - Fines Production 000t 462 1,065 1,691 2,185 Exploration A$m 38.4 37.9 40.2 35.3 Iron Ore - Lump Production 000t 1,259 1,935 2,697 3,615 Investments/other A$m 2.7 2.7 2.7 2.7 Cash Cost ($A/t ore mined) $A/t 31.49 33.82 33.39 35.18 Tot Non-Curr. Assets A$m 126.9 169.8 191.3 129.7 Total Assets A$m 154.1 277.5 359.5 415.3 Price Assumptions Unit FY2006F FY2007F FY2008F FY2009F

Short Term Borrowings A$m (3.6) (3.6) (3.6) (3.6) AUDUSD A$/US$ 0.75 0.74 0.74 0.74 Other A$m (14.9) (16.7) (21.9) (20.3) Received Price - Fines A$/t 53.19 61.76 61.33 59.82 Total Curr. Liabilities A$m (18.4) (20.3) (25.5) (23.9) Received Price - Lump A$/t 70.13 80.98 78.99 76.15 Long Term Borrowings A$m (15.7) (30.5) (52.5) (78.0) Average Received Price A$/t 65.71 74.31 72.33 70.13 Other A$m (0.7) (0.7) (0.7) (0.7)Total Non-Curr. Liabil. A$m (16.4) (31.2) (53.1) (78.7) Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)Total Liabilities A$m (34.9) (51.5) (78.6) (102.6)

Base Case 1.04 54.2 13.3 23.6Net Assets A$m 119.3 225.9 280.9 312.8 Exchange Rate +10% 0.87 41.4 10.1 20.3

Exchange Rate -10% 1.24 70.9 17.3 27.5Cashflow Unit FY2006F FY2007F FY2008F FY2009F Iron Ore Price +10% 1.22 69.3 16.9 27.1

Iron Ore Price -10% 0.85 40.1 9.8 20.0Operating Cashflow A$m 40.0 112.2 160.0 200.9 Operating Costs +10% 0.95 48.7 11.9 22.1Income Tax Paid A$m - (4.4) (10.0) (10.3) Operating Costs -10% 1.13 60.6 14.8 25.0Interest & Other A$m 0.3 (1.6) (1.5) (1.4) *N.B. NPAT, EPS, CFPS forecasts are for FY2007Operating Activities A$m 40.3 106.1 148.4 189.2

Property, Plant & Equip. A$m (51.0) (73.8) (60.3) (6.0) Share Price Valuation (NAV) Est. $m Est. $/shareExploration and Devel. A$m (13.1) (13.6) (13.6) (13.6)Investments A$m 1.0 52.5 - - Tallering Peak (NPV @ 8%) 322.3 0.77Investment Activities A$m (63.1) (34.9) (73.9) (19.6) Extension Hill (NPV @ 10% Discounted by 70%) 32.0 0.08

Exploration 25.0 0.06Repayment of Borrowings A$m (5.0) (4.0) (3.0) - Cash 10.3 0.02Equity A$m 6.7 2.5 2.5 2.8 Mt Gibson Magnetite Proceeds 52.5 0.12Dividends Paid A$m - - (29.0) (54.4) Forwards 0.0 0.00Financing Activities A$m 0.6 (1.5) (29.5) (51.6) Corporate Overheads (7.0) (0.02)

Total Debt (10.6) (0.03)Net Cashflow A$m (22.2) 69.8 45.1 118.0 Tax Losses 0.0 0.00

Options & Other Equity 11.4 0.03Ratio Analysis Unit FY2006F FY2007F FY2008F FY2009F Total 435.9 1.04

Cashflow Per Share A¢ 11.4 23.5 32.2 39.2Cashflow Multiple X 6.9 3.4 2.5 2.0Earnings Per Share A¢ 5.7 13.2 19.6 19.9Price to Earnings Ratio X 13.9 6.0 4.0 4.0Dividends Per Share A¢ - 2.0 10.0 16.0Dividend Yield % - 2.5 12.7 20.3Net Debt / Equity % 0.0 na na naInterest Cover X na 49.6 76.2 84.4Return on Equity % 19% 24% 29% 27%

Analyst: Simon TonkinPhone: +61 8 9268 2826

Sources: IRESS, Company Information, Hartleys Research

July 2006

Last Updated: 21/07/2006

Date 21 July 2006 ASX Code MIS Share Price 50cps Valuation 89cps Market Cap (fully diluted) $79.0m ($81.6m) Issued Capital (fully diluted) 157.9m shares (163.2m) Cash (as at 31 March 2006) $14.5m Management Jesse Taylor (Chairman) Bryan Oliver (CEO) Top Two Shareholders Amardale Offshore Inc (15.3%) Vital Rays Investments Ltd (9.0%)

Midwest Corporation Limited (“Midwest”, “MIS”, “Company”) is the Mid-West’s newest iron ore producer, commencing production in February 2006. Midwest’s portfolio of assets includes the historic Koolanooka mine where WMC first produced iron ore in the 1960’s. As with the other Mid-West iron ore companies, MIS has developed a staged development plan, starting from 1Mtpa production in 2006 and potentially increasing to 20Mtpa from 2010. Based on the near-term cashflow appeal and long-term growth potential, we rate Midwest Corporation Limited as a Speculative Buy.

Investment Highlights

• Early Cashflow from Koolanooka - MIS commenced production of iron ore fines from Koolanooka stockpiles in February 2006 at a rate of 1Mtpa. We expect that this low-cost operation will deliver good early cashflows that will be used to develop a small mining operation at Koolanooka.

• Growth Potential at Weld Range - MIS believes that there is good potential to expand the 132Mt resource to in excess of 400Mt, sufficient for the development of a 20Mtpa operation from 2010. The construction of a 390km railway and deepwater port at Oakajee are critical to project development.

• Magnetite Potential at Koolanooka - MIS has completed a Scoping Study on the development of the magnetite deposit at Koolanooka(430Mt at 35% Fe). We expect that MIS will further investigate its potential, however, it remains focussed on delivering on the direct shipping ore (“DSO”) hematite projects.

• Infrastructure Development Crucial - Koolanooka hematite production is expected to be exported through the planned Berth 5 expansion at Geraldton, whilst Weld Range production is anticipated to be exported from the proposed Oakajee Port, 25km north of Geraldton.

• Trading at Significant Discount to Valuation - Our valuation model assumes the successful development of Koolanooka Hematite and Weld Range. Given the strong WA Government support for development of an iron ore industry in the Mid-West, we are confident of the projects realising their potential. MIS is trading at a significant discount to our valuation of $0.89 per share.

Midwest Corporation Limited Speculative Buy Back to Where it all Began

Share Price Performance

M IDWEST CORPOR ATION L IM ITE D ( MIS)

0.0

1.0

2.0

3.0

4.0

5.0

Jul-0

6

Mar

-06

Nov

-05

Jul-0

5

3 0

3 5

4 0

4 5

5 0

5 5

6 0

6 5

V o l u m e MIS

Source: Iress

Shar

e Pr

ice

(cps

)

Vol

ume

(m s

hare

s)

Earnings Summary CY2006F CY2007F CY2008F CY2009F

Revenue A$m 45.4 43.8 59.6 61.4

EBITDA A$m 14.2 8.1 21.1 14.9

NPAT A$m 8.8 3.2 11.5 6.2

Free Cash Flow A$m (7.7) (11.5) 8.9 (80.1)

EPS A¢ 5.6 2.0 7.2 3.9

EPS Growth % chg na 258.6 na na

PER x 8.9 24.9 6.9 12.9

DPS cents - - - -

Dividend Yield % - - - -Franking % - - - -

Sources: IRESS, Company Announcements, Hartleys' Estimates

45

Hartleys Limited

46

Background

Midwest Corporation Limited was listed in September 2003, following the completion of a reconstruction, reconstitution and recapitalisation for Kingstream Resources NL. Since listing, MIS has been developing its iron ore projects in the Mid-West Region of Western Australia.

In October 2005, the Company signed a joint venture agreement with Sinosteel Corporation (“Sinosteel”) to jointly undertake feasibility studies for the Weld Range Hematite and Koolanooka Magnetite projects. Once completed, these studies are expected to result in a $1.5b investment in the Mid-West Region of Western Australia.

In February 2006, the Company's first shipment of 58,000t of iron ore fines left the Port of Geraldton bound for China.

Principal Assets

Koolanooka/Blue Hills DSO Hematite Project

The Koolanooka/Blue Hills Direct Shipping Ore (“DSO”) Hematite Project, located 160km south east of Geraldton, incorporates the historic mining areas previously mined by Western Mining Corporation from 1966-1972 (Figure 20). MIS has identified a Reserve of 7Mt at 58% Fe, comprising 2Mt of stockpiled fines material and a further 5Mt in situ.

Production from the stockpiled Koolanooka fines material commenced in early 2006, with 2Mt of fines expected to be produced over two years.

Ore is transported 220km to the Port of Geraldton via road train. New railway crossings, boom gates, intersection realignments and some sealing of existing Shire roads was required to allow road train transport. The transport of ore via road to Geraldton came into question earlier in 2006, when Alannah MacTiernan, WA Minister for Planning and Infrastructure, indicated a preference for ore to be transported via rail if the mine is within 100km of an existing rail line. MIS is investigating the potential to transport ore via rail from April 2007 and is negotiating a rail access agreement and the procurement of rolling stock. MIS has constructed an 85kt storage shed adjacent to Berth 4 at Geraldton capable of delivering 1Mtpa (Figure 21). We believe that the truck receival facility at Geraldton has now been completed and is operational.

Whilst stockpile production is underway, Midwest is also completing studies for the development of a mining operation to extract a further 5Mt of undeveloped reserves at Blue Hills (3.03Mt) and Koolanooka (1.87Mt). These reserves have an iron grade of 58%, low contaminants, low strip ratio (1:1) and a lump/fine ratio of 50/50. Existing haul roads are in place at Blue Hills, which we expect will be refurbished and utilised by both Midwest and Gindalbie Metals Limited.

MIS is targeting an additional 5Mt of resources at Blue Hills or Koolanooka. Drilling will commence in Q3 CY2006 to establish an expanded resource with the aim of increasing production to 2Mtpa, once the Berth 5 upgrade has been completed at the Port of Geraldton.

Figure 20: Midwest Project Locations

Source: Midwest Corporation Limited

Figure 21: Loader in the Geraldton Storage Shed

Source: Midwest Corporation Limited

Hartleys Limited

47

Weld Range Hematite Project

MIS’ Weld Range project area is located 65km south west of Meekatharra and 50km north west of Cue in Western Australia. This project is also included in the Sinosteel / Midwest Studies Joint Venture.

The Weld Range tenements comprise of a series of hills that rise up to 250m above the surrounding plains. The range is up to 3km wide and extends for up to 60km long from south west to north east. The range consists of a series of parallel ridges with deeply incised valleys.

The iron ore potential of Weld Range has been recognised for over 100yrs. Modern exploration commenced in 1959, and drilling programs conducted between 1970 and 1981 together with the driving of two exploration adits identified a number of deposits in the Madoonga and Beebyn areas.

High grade iron ore mineralisation occurs within the Weld Range area as a series of outcropping massive goethite-hematite lodes. To date, sixteen of these outcrops have been identified within the Company's tenements. MIS acquired the W14 deposit at Madoonga and the W7 to W12 lenses at Beebyn in 1997. The total identified JORC-compliant mineral resource for the Madoonga W14 deposit is 132.1Mt at 55.6% Fe, however, grades of up to 65% Fe have been recorded.

Weld Range is a DSO project with good potential for resource additions due to major high grade outcrops over a 60km strike length. The current resource represents only 3km of the strike length. MIS believes that the project has potential for 400 to 500Mt of resources and a planned shipment rate of 15-20Mtpa over 15+ years.

The successful implementation of a project of this scale will require the construction of a deepwater port at Oakajee and the construction of a new rail line. Both of these infrastructure projects are currently being assessed by the Geraldton Iron Ore Alliance (see below). We expect that these projects will be funded by third parties with common access provisions. We believe the most likely scenario is a single line will be developed to Murchison Metals’ Jack Hills Project, with a spur line connecting to Weld Range.

The timeframe for the development of the port and rail line means that capacity is available from mid-2010. MIS is using this timeframe as a guide for the potential development of the Weld Range Hematite Project.

Key activities undertaken on the project during the past six months have included:

• Reconnaissance sampling and mapping of MIS’ tenements to determine drill sites for the planned extensive drilling program;

• Entering into agreement with Hampton Hill Mining NL (Hampton) whereby the two companies will co-operate in the exploration and potential development of their adjacent tenement holdings situated in the Weld Range;

• Progressed port designs and discussions with all stakeholders in the port; and

• Continued discussions with the Native Title Party and representing Land and Sea Council covering the Company's Weld Range tenements.

• JV with Sinosteel covering feasibility studies.

Results from initial sampling confirmed multiple outcrops of high-grade material grading up to a maximum of 67.4% Fe from the Beebyn area.

The Hampton agreements give the Company the right to explore for and gain majority ownership of any iron ore resources that may occur on the Hampton tenement holdings while Hampton will have the opportunity to explore for and own any non-ferrous minerals occurring within some of the Company's tenement holdings.

Heritage Surveys over several of the Company's most prospective Weld Range tenements were completed in March 2006.

Figure 22: Weld Range Field Sampling

Source: Midwest Corporation Limited

Hartleys Limited

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Koolanooka Magnetite Project

The proposed Koolanooka Magnetite Project forms the second stage in the development of the Koolanooka resource. This project is included in the Sinosteel / Midwest Studies Joint Venture.

The total identified JORC-compliant mineral resource is 430Mt at an average grade of 35% Fe. MIS believes that the project potential is 4.5Mtpa of iron ore concentrate and/or pellets over 20+ years. The DSO Hematite projects have a higher priority than the magnetite project due to the high capital cost involved and the increased level of risk. The Koolanooka Magnetite Project is not expected to be developed until at least 2015.

Key activities undertaken on the project during the past six months have included further metallurgical testwork on the composite samples previously taken leading into the completion of the Scoping Study for the project in March 2006, which has been presented to the Sinosteel/Midwest Joint Venture Operating Committee for review and approval of the forward work programme.

Resources Table 11: Midwest Resources and Reserves (as at 31 December 2005)

Koolanooka and Blue Hills DSO Hematite Resources and Reserves

Resources Reserves

Class Tonnes Fe % Class Tonnes Fe %Measured 1,240,000 59.0 Proved 940,000 58.4 Indicated 65,000 58.1 Probable 220,000 56.2 Inferred 20,000 55.8

Koolanooka Hematite Zone

Total 1,325,000 58.9 Total 1,160,000 58.0

Measured 1,305,000 52.1 Proved 710,000 52.1 Indicated 1,000 52.6 Probable - - Inferred 14,000 52.0

Koolanooka Detrital Zone

Total 1,320,000 52.2 Total 710,000 52.1

Fines Stockpile Measured 2,140,000 57.0 Proved 2,140,000 57.0

Measured 950,000 60.6 Proved 710,000 60.3 Indicated 141,000 60.3 Probable - - Inferred 96,000 56.7

West Mungada Hematite Zone (Blue Hills)

Total 1,187,000 60.3 Total 710,000 60.3

Measured 2,590,000 60.0 Proved 2,320,000 60.0 Indicated 535,000 56.5 Probable - - Inferred 125,000 56.2

East Mungada Hematite Zone (Blue Hills)

Total 3,250,000 59.3 Total 2,320,000 60.0

Measured 8,225,000 57.9 Proved 6,820,000 58.0 Indicated 742,000 58.1 Probable 220,000 56.2 Inferred 255,000 56.1

TOTAL RESOURCE / RESERVE ESTIMATES Total 9,222,000 57.9 Total 7,040,000 58.0

Koolanooka Magnetite Resources Class Tonnes Fe %

Measured - - Indicated 427,000,000 35.0 Inferred 3,000,000 29.0

Koolanooka

Total 430,000,000 35.0

Weld Range Hematite Resources

Class Tonnes Fe % Measured 93,000,000 55.9 Indicated 39,000,000 54.9 Inferred 100,000 55.8

Madoonga W14

Total 132,100,000 55.6

Source: Midwest Corporation Limited

Hartleys Limited

49

Other Projects

Jack Hills Project

The Jack Hills project is located 380km north-east of Geraldton. The Company has tenements that cover approximately 35,000ha, which surround the tenements held by Murchison Metals Limited (“Murchison”). MIS’s ground contains the north-east and south-west strike extensions of Murchison’s Jack Hills deposit. Midwest considers the tenements to be highly prospective for iron ore. Heritage surveys have been completed for tenement E20/209 and drilling is planned during CY2006.

Strategic Alliances

The Mid-West iron ore sector has differentiated itself from other mining regions in Australia due to the collaborative approach that all of the major players have to infrastructure and funding. MIS has entered into two key alliances with respect to its activities.

In June 2005, the Company announced that it had entered into a framework agreement with one of the largest state owned enterprises in China’s steel industry, Sinosteel Corporation. In November 2005, the various iron ore companies in the Mid-West formed the Geraldton Iron Ore Alliance to investigate and lobby for the construction of key rail and port infrastructure in the region.

Sinosteel Agreement

The framework agreement covers Midwest’s two major projects, the Weld Range Hematite project and the Koolanooka Magnetite project. The involvement of Sinosteel in the projects provides surety over sales as well as providing confidence that the larger projects will be able to be financed.

The joint development comprises three stages for each project:

1. A pre-study stage preparatory to signing a ‘Co-operation Agreement’.

2. A study stage during which scoping, pre-feasibility, and bankable feasibility studies are to be completed and the interest of each party in the projects will be agreed and the development costs of the projects will be determined. The study stage is to commence on execution of the ‘Co-operation Agreement’ and end on the completion of the bankable feasibility study.

3. The operational stage during which the projects are to be developed and operated.

Subject to the success of the above mentioned three stages, Sinosteel will enter into an off-take agreement to purchase the iron ore products from the two projects on commercial terms. The Weld Range and Koolanooka projects will be financed by limited recourse project finance and Sinosteel will lead the procurement of this finance.

Sinosteel will contribute an amount comparable with agreed Midwest contributions to date on the projects. Following this, all contributions will be on a 50/50 basis. As at 30 June 2005, Midwest had spent $16.3m on the project, plus an additional $0.7m to 31 January 2006. Therefore, Sinosteel will need to contribute the first $17m towards studies before Midwest is required to contribute further.

At the completion of pre-feasibility studies (“PFS”), the two projects are to be valued and Midwest will be compensated by Sinosteel in return for a 50% interest in the projects. This is unlikely to be in the form of a cash payment, but rather as a contribution towards funding and/or funding guarantees.

Geraldton Iron Ore Alliance

There are five companies in the Mid-West region that are currently producing iron ore or plan to do so within the next two years. These companies are:

Company Code Project Product

Gindalbie Metals Limited GBG Mt Karara Hematite/Magnetite

Mt Gibson Iron Limited MGX Tallering Peak/Extension Hill Hematite

Murchison Metals Limited MMX Jack Hills Hematite

Midwest Corporation Limited MIS Koolanooka, Blue Hills, Weld Range Hematite/Magnetite

Golden West Resources Ltd GWR Wiluna West Hematite

Hartleys Limited

50

Table 12: Hartleys’ Valuation

A$m cps

Koolanooka Hematite 63.5 22

Weld Range Hematite 75.6 26

Koolanooka Magnetite 25.0 9

Exploration 25.0 9

Cash 14.5 5

Corporate Overheads (12.2) (4)

Debt (0.1) (0)

Tax Losses 2.1 1

Options & Other Equity 65.4 22

Total 258.7 89

Source: Hartleys’ Estimates

Assumes that 130m shares are issued at $0.54 per share to fund Weld Range development

Most of these companies are planning to establish projects in two stages, with a smaller initial development plan to generate cashflow followed by a larger second stage expansion. Stage 1 output is targeted to be exported through the upgraded Berth 5 facility at Geraldton. The second stage projects involve significantly larger volumes, which exceed the capacity of the Geraldton Port. To counter this obstacle, it has been proposed that a new port be constructed 25km north of Geraldton at Oakajee, which is capable of handling Cape size (160kt-230kt) vessels.

With most of these companies planning to use components of the same infrastructure, the Geraldton Iron Ore Alliance (“Alliance”) was formed to investigate infrastructure and other project aspects (ie environmental) that are common between the projects. It is hoped that the Alliance will be able to more effectively plan for the infrastructure needs of the region and reduce the cost and time required for implementation. Recently, a sixth member, Royal Resources Limited, has joined the Alliance.

Financial Analysis

In May 2005, MIS completed a placement of 68m shares to institutions, 10.8m shares to shareholders under a Shareholder Purchase Plan and 14.6m shares from the conversion of convertible notes. These shares, issued at 37cps, raised $29m. Midwest currently has 157.9m shares on issue and a further 3.55m options that are currently in the money.

As at 30 June 2006, MIS had an estimated cash position of approximately $26m cash.

Valuation

We have modelled both Koolanooka DSO Hematite and Weld Range, assuming that both projects are delivered on time and on budget. As Koolanooka has commenced production, we have valued it using a discount rate of 8%. Weld Range has a slightly higher discount rate of 10%, however, we have also applied a 70% discount to the project recognising that the DFS has yet to be completed; the particulars relating to construction of rail and port infrastructure are yet to be settled; financing still has to be finalised; and the project is four years away from commencement. In time, as each of these items are finalised, we will adjust the level of discount on the project.

We have modelled the production of Koolanooka stockpiles for 2 years followed by the development of a mining operation at Koolanooka.

At Weld Range, we assume that production will commence in 2010 coinciding with the anticipated completion of the railway and Oakajee port. The agreement with Sinosteel allows it to earn 50% equity by compensating MIS at the completion of the PFS. From a valuation perspective, there is no difference in modelling Midwest’s ongoing equity at 100% or at 50% with the other 50% payable at the completion of the pre-feasibility study. However, the valuation will change if MIS is not compensated in cash or if the project parameters change after the completion of the PFS.

We have applied a conservative valuation of $25m to the Koolanooka Magnetite Project due to the timeframe that the company expects it to be developed in (post 2015). This project has the potential to be a large development in its own right.

Hartleys Limited

51

Conclusions

Midwest is Australia’s newest iron ore producer after commencing production in February 2006. Midwest’s portfolio of assets includes the historic Koolanooka mine where WMC first produced iron ore in the 1960’s. MIS has a staged development plan, starting from 1Mtpa production in 2006 and potentially increasing to 20Mtpa from 2010.

The offtake agreement with Sinosteel provides cashflow surety and confidence that the Weld Range Hematite Project should be developed. The current timing of the Koolanooka Magnetite Project of 2015 indicates that it is a lower priority project, however the planned development of other magnetite projects and processing infrastructure in the region may lead to this project being brought forward or developed in association with one of the other groups.

Based on the near-term cashflow appeal and long-term growth potential, we find MIS to be an attractive investment proposal. However, due to a large component of the valuation being dependant on the development of Weld Range, the risks associated with the development of the rail and port infrastructure and the sensitivity of the valuation to movements in the iron ore price, we rate Midwest Corporation Limited as a Speculative Buy.

Hartleys Limited

Midwest Corporation Limited Share PriceMIS $0.50 SPECULATIVE BUYKey Market Information Directors Company Information

Share Price $0.50 Jesse Taylor (Chairman) Suite 2, 1st Floor, 32 Kings Park RdMarket Capitalisation $144m Francis Ng (Deputy Chairman) West Perth, WA, 600552 Week High-Low $0.65-$0.38 Stephen de Belle (non-Exec Director) Tel: +61 8 9226 2033Issued Capital 287.5m Richard Hock (Non-Exec Director) Fax: +61 8 9226 3388Issued Capital (fully diluted inc. ITM options) 291.1m Stephen Chong (Non-Executive Director) Web: www.midwestcorp.com.auOptions 3.6m@$A0.40 David Seng (Non-Executive Director)Hedging - Top 10 Shareholders m shares %Yearly Turnover/Volume $53.3m/103.8m sharesLiquidity Measure (Yearly Turnover/Issued Capital) 36% 1 Amardale Offshore Inc 24.12 15.3Valuation $0.89 2 Vital Rays Investments Ltd 14.15 9.0

3 Westpac Custodian Nominees Limited 10.04 6.4Financial Performance Unit CY2006F CY2007F CY2008F CY2009F 4 Dawn Star Ventures Limited 8.33 5.3

5 Bluebay Investments Group Corporation 6.66 4.2Net Revenue A$m 45.4 43.8 59.6 61.4 6 Bryan Hughes and Vincent Smith Kingstream 5.89 3.7Total Costs A$m (31.3) (35.7) (38.4) (46.5) 7 Steel Limited Creditors A/C 0.00 0.0EBITDA A$m 14.2 8.1 21.1 14.9 8 Swee Pook The 3.60 2.3Depreciation/Amort A$m (1.7) (2.9) (3.4) (4.0) 9 Citicorp Nominees Pty Limited 3.20 2.0EBIT A$m 12.5 5.2 17.8 10.9 10 Chin An Lau 2.99 1.9Net Interest A$m 0.1 (0.7) (1.4) (2.0) McNeil Nominees Pty Limited 2.98 1.9Pre-Tax Profit A$m 12.6 4.5 16.4 8.9Tax Expense A$m (3.8) (1.4) (4.9) (2.7) Reserves & Resources Mt %FeNPAT A$m 8.8 3.2 11.5 6.2Abnormal Items A$m - - - - Koolanooka HematiteReported Profit A$m 8.8 3.2 11.5 6.2 Resources 9.22 57.9

Reserves 7.04 58.0 Koolanooka MagnetiteResources 430.00 35.0

Financial Position Unit CY2006F CY2007F CY2008F CY2009F Weld Range HematiteResources 132.10 55.6

Cash A$m 17.0 5.5 15.3 5.2 Other Current Assets A$m 5.6 4.4 5.9 5.7 Production Summary Unit CY2006F CY2007F CY2008F CY2009FTotal Current Assets A$m 22.6 9.9 21.2 10.9 *AttributableProperty, Plant & Equip. A$m 22.4 38.1 41.2 139.3 Iron Ore - Fines Production 000t 815 1,000 875 500 Exploration A$m 30.3 32.3 34.8 37.2 Iron Ore - Lump Production 000t - - 125 500 Investments/other A$m 0.1 0.1 0.1 0.1 Iron Ore - Concentrate Sales 000t - - - - Tot Non-Curr. Assets A$m 52.8 70.4 76.1 176.6 Iron Ore - Pellet Production 000t - - - - Total Assets A$m 75.4 80.4 97.2 187.5 Cash Cost $A/t 34.44 32.49 35.22 43.30

Short Term Borrowings A$m (0.0) (0.0) (0.0) (0.0) Price Assumptions Unit CY2006F CY2007F CY2008F CY2009FOther A$m (4.0) (4.5) (4.1) (15.3)Total Curr. Liabilities A$m (4.1) (4.5) (4.1) (15.4) AUDUSD A$/US$ 0.74 0.73 0.74 0.73 Long Term Borrowings A$m (0.1) (0.1) (0.1) (70.1) Received Price - Fines A$/t 55.74 43.77 57.57 53.98 Other A$m (9.1) (10.5) (15.4) (18.1) Received Price - Lump A$/t - - 73.46 68.89 Total Non-Curr. Liabil. A$m (9.2) (10.6) (15.5) (88.1) Average Received Price A$/t 55.85 43.86 59.67 61.56 Total Liabilities A$m (13.3) (15.1) (19.5) (103.5)

Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)Net Assets A$m 62.1 65.3 77.7 84.0

Base Case 0.89 11.5 7.2 9.3Cashflow Unit CY2006F CY2007F CY2008F CY2009F Exchange Rate +10% 0.62 7.9 5.0 7.1

Exchange Rate -10% 1.21 16.0 10.0 12.1Operating Cashflow A$m 9.1 9.7 19.3 26.4 Iron Ore Price +10% 1.18 15.5 9.7 11.9Income Tax Paid A$m - - - - Iron Ore Price -10% 0.59 7.5 4.7 6.9Interest & Other A$m 0.1 (0.7) (1.4) (2.0) Operating Costs +10% 0.66 9.2 5.8 7.9Operating Activities A$m 9.2 9.0 17.9 24.4 Operating Costs -10% 1.11 13.7 8.6 10.8

*N.B. NPAT, EPS, CFPS forecasts are for FY2008Property, Plant & Equip. A$m (13.0) (17.0) (5.0) (100.5)Exploration and Devel. A$m (3.9) (3.5) (4.0) (4.0)Investments A$m - - - - Share Price Valuation (NAV) Est. $m Est. $/shareInvestment Activities A$m (16.9) (20.5) (9.0) (104.5)

Koolanooka_Blue Hills Hematite (NPV @ 8%) 63.5 0.22Repayment of Borrowings A$m - - - - Weld Range (NPV @ 10%) 75.6 0.26Proceeds of Borrowings A$m - - - 70.0 Koolanooka Magnetite 25.0 0.09Equity A$m - 0.0 0.9 0.0 Exploration 25.0 0.09Dividends Paid A$m - - - - Cash 14.5 0.05Financing Activities A$m - 0.0 0.9 70.0 Forwards 0.0 0.00

Corporate Overheads (12.2) (0.04)Net Cashflow A$m (7.7) (11.5) 9.8 (10.1) Total Debt (0.1) (0.00)

Tax Losses 2.1 0.01Ratio Analysis Unit CY2006F CY2007F CY2008F CY2009F Options & Other Equity 65.4 0.22

Total 258.7 0.89Cashflow Per Share A¢ 6.7 3.8 9.3 6.4Cashflow Multiple X 7.5 13.1 5.4 7.8Earnings Per Share A¢ 5.6 2.0 7.2 3.9Price to Earnings Ratio X 8.9 24.9 6.9 12.9Dividends Per Share A¢ - - - -Dividend Yield % - - - -Net Debt / Equity % -27% -8% -20% 77%Interest Cover X (83.5) 7.6 13.0 5.4Return on Equity % 14% 5% 15% 7%

Analyst: Andrew RowellPhone: +61 8 9268 2837

Sources: IRESS, Company Information, Hartleys Research

July 2006

Last Updated: 21/07/2006

52

Date 21 July 2006 ASX Code MMX Share Price 68cps Valuation 154cps Market Cap (fully diluted) $205.2m ($269.2m) Issued Capital (fully diluted) 301.7m shares (395.9m) Cash (as at 30 June 2006) $5m Management Paul J Kopejtka (Chairman) Trevor Matthews (Managing Director) Robert Vagnoni (Exec. Director) Top Three Shareholders ANZ Nominees (12.4%) Westpac Custodian Nominees (6.9%) National Nominees (6.7%)

Murchison Metals Limited (“Murchison”, “MMX”, “Company”) has made large steps towards becoming an iron ore producer at its Jack Hills Iron Ore Project in the Mid-West region of WA. Jack Hills is planned as a two-stage development. Stage 1 is due to commence production in Q3 CY2006 as a 1.5-2Mtpa operation, involving road transportation of the ore to the existing Port of Geraldton. Stage 2 involves a major expansion of production to 25Mtpa, which will require the construction of a new rail system and a deepwater port at Oakajee. By developing Jack Hills in two stages, Murchison can access early cashflows whilst working towards the major regional infrastructure upgrades required for Stage 2. Based on MMX trading at a significant discount to our valuation of $1.54 per share, we rate Murchison Metals Limited as a Speculative Buy.

Investment Highlights

• Jack Hills Stage 1 First Ore From August 2006 - Production from Jack Hills is due to commence in the September quarter. Stage 1 is expected to generate an average cashflow of $18mpa based on cash costs of $56/t. First year production is scheduled at 1.5Mtpa, scaling up to 2Mtpa in the second year.

• Stage 2 Generates Significant Cashflow - Once production has commenced, Stage 2 is expected to generate an average cashflow of $388mpa over 15.5yrs from mid-2010. Average cash costs are forecast to be $24.30/t with capital expenditure of $250m.

• Several Key Alliances Formed - In order to progress Stage 2 of Jack Hills and the associated infrastructure required, Murchison has formed a number of strategic alliances:

• The Geraldton Iron Ore Alliance (“Geraldton Alliance”) with other emerging Mid-West Iron Ore producers,

• An iron ore off-take agreement with Pohang Iron & Steel Company Limited (POSCO),

• An infrastructure alliance with POSCO Engineering and Construction, Toll Holdings and Mitsubishi Corporation.

• Valuation for MMX of $1.54 per share - Our valuation of $1.54 per share includes a value of $44.3m (11cps) for Stage 1, $550.6m (139cps) for Stage 2 and $20m (5cps) for exploration. We have applied a 70% discount to Stage 2 due to the numerous hurdles that need to be overcome. This discount will be reduced over time, which could lead to significant upgrades to the valuation.

Earnings Summary FY2007F FY2008F FY2009F FY2010F

Revenue A$m 118.4 149.1 145.3 129.2

EBITDA A$m 23.2 23.7 20.2 5.2

NPAT A$m 6.7 3.4 0.2 (22.6)

Free Cash Flow A$m (18.9) 4.0 (15.3) (220.1)

EPS A¢ 2.0 1.0 0.1 (5.7)

EPS Growth % chg na na na na

PER x 33.4 71.1 1246.1 na

DPS cents - - - -

Dividend Yield % - - - -Franking % - - - -

Sources: IRESS, Company Announcements, Hartleys' Estimates

Murchison Metals Limited Speculative Buy Road Trains Full of Cash

Share Price Performance

M U R C H I S O N M E T A L S L I M I T E D ( M M X )

0

2

4

6

8

1 0

1 2

1 4

Jul-0

6

Mar

-06

Nov

-05

Jul-0

5

1 0

2 0

3 0

4 0

5 0

6 0

7 0

8 0

V o l u m e MMX

Source: Iress

Shar

e Pr

ice

(cps

)

Vol

ume

(m s

hare

s)

53

Hartleys Limited

54

Background

MMX is an emerging Australian iron ore producer that listed on the ASX in April 2005. It is aiming to bring into production the Jack Hills iron ore deposit in the Mid-West region of Western Australia, enabling it to capitalise on the current strong demand for high quality iron ore in major Asian markets. The Company is planning to commence production from Stage 1 of Jack Hills in Q3 CY2006, with expanded production from Stage 2 scheduled for commencement in mid-2010.

Principal Assets

Jack Hills

The Jack Hills Project is located 380km north-east of Geraldton in the Mid-West region of Western Australia (Figure 23). The project was previously explored in the 1970’s when the potential for a number of deposits of high grade hematite ore within banded iron formations (BIF) was identified. There are two main mineralised areas at Jack Hills, the Mt Hale area and the Noonie Hills area. Exploration to date has focussed on the Mt Hale area, and in particular, the H3, H4 and Brindal Horizons.

Stage 1

Production for Stage 1 of the Jack Hills project will commence at 1.5Mtpa for the first year, increasing to 2Mtpa in subsequent years, with a mine life of five years. The Company anticipates that the first shipment of ore will occur in Q3 CY2006.

In Stage 1, iron ore will be mined using an open cut contract mining fleet, with a strip ratio of approximately 4:1, producing a lump to fines ratio of 67:33. The ore is to be crushed and screened on site, and then transported by road haulage to the Port of Geraldton using existing roads. The Company will store ore at Berth 4 where it has constructed an ore storage shed. The ore will be transferred to Berth 5 via a conveyor and loaded on to Panamax (60kt) size ships.

Murchison has signed four fixed-price contracts for the supply of iron ore. The contracts provide for the shipment of 1.2Mt of iron ore annually to cover the first five years of production. The first year’s production has been sold at US$58/t for both lump and fines, which is at a premium to the market. Contracts for the remaining uncontracted production are currently being negotiated.

The Company believes it can produce iron ore at an average cash operating cost of A$56/t over the life of Stage 1, generating an average operating margin of A$19/t. Capital expenditure for Stage 1 is expected to be A$41m.

Stage 2

In Stage 2, Murchison plans to expand Jack Hills to 25Mtpa with a 15+ year mine life. To significantly reduce transport costs, Stage 2 ore is to be transported by rail rather than road haulage. To facilitate this, a railway line will need to be constructed from Jack Hills to the port. As the Port of Geraldton does not have the capacity to process these volumes, a new deepwater port at Oakajee, located 25km north of Geraldton, is proposed.

The pre-feasibility for Jack Hills Stage 2 indicated that cash operating costs would be A$13.66/t excluding royalties, depreciation and amortisation. Capital costs were estimated at approximately A$1.8b, which cover all mine infrastructure (A$250m), construction of the rail line from Jack Hills to Oakajee, and the Oakajee port, all of which would be funded by Murchison.

The WA Government and companies in the Geraldton Alliance (see below) are proposing Oakajee as a common access port with a berthing for Cape size ships (180kt) and capacity for a throughput in the order of 140Mtpa. This capacity would enable Oakajee to take all the ore from the various Stage 2 iron ore projects in the Mid-West region. This alliance of emerging and current iron ore producers is commissioning studies for the development of the port, to be funded by external parties. The preferred scenario is for an infrastructure fund or large international group to fund the development of the port in return for a long term management lease over the facility.

Figure 23: Jack Hills Project Location

Source: Murchison Metals Limited

Hartleys Limited

55

If other parties build the port and rail, the capital cost for Jack Hills Stage 2 applicable to Murchison would be reduced to approximately A$250m, though the cash operating costs will increase due to higher access costs for the port and rail.

Murchison is currently undertaking a definitive feasibility study (DFS) for Stage 2 using international engineering group Maunsell AECOM. The DFS will include extensional drilling to significantly expand current resource and reserve inventories. Murchison aims to define sufficient reserves to sustain the higher production rate over the 15+ year mine life. The DFS is expected to be completed by Q2 CY2007 and will cost approximately $20m. Murchison anticipates that construction will commence in early CY2008, with commissioning and first ore shipments from the new facilities expected in mid CY2010.

Weld Range

Whilst the Jack Hills Project is the focus of Murchison’s current mine development, the Company also has prospective iron ore holdings at Weld Range, south of Jack Hills. Murchison believes there is potential for significant lower grade hematite iron ore mineralisation at the project, as evidenced by Midwest Corporation Limited’s resources of 132.1Mt @ 55.6% Fe nearby. Initial exploration activities are planned to be conducted at Weld Range in the coming year.

Resources/Reserves

Previous explorers estimated a non-JORC compliant resource at Jack Hills of 380mt @ 62% Fe. The project was not developed due to the then low iron ore prices and the ready availability of iron ore from the Pilbara region. Subsequent work delineated a JORC compliant resource of 67mt @ 62% Fe (Table 13).

The mineralisation is characterised by a low level of contaminants and a good iron grade. The high quality of the iron ore means that Jack Hills is amenable to a direct shipping ore (DSO) operation, requiring minimal on-site beneficiation.

Table 13 – Jack Hills JORC Compliant Resource

Grade Category

Tonnes (Mt) Fe % S % P % LOI % SiO2 % Al2O3 %

Measured 8 62 <0.05 <0.05 1-2 <3 <2

Inferred 59 62 <0.05 <0.05 1-2 <3 <2

TOTAL 67 62 <0.05 <0.05 1-2 <3 <2

Source: Murchison Metals Limited

After listing, MMX has concentrated on converting some of the existing Jack Hill resource into an initial JORC compliant Reserve. Close-spaced drilling at Mt Hale generated a Reserve of 8.5mt @ 63% Fe (Table 14). Only 30% of the 67Mt resource was targeted for reserve conversion. The current Resources and Reserves do not cover the full strike extent of the Jack Hills mineralisation. MMX expects to increase both Resources and Reserves with in-fill and extensional drilling during calendar 2006.

Figure 24: Jack Hills

Source: Murchison Metals Limited

Hartleys Limited

56

Table 14 – Jack Hill JORC Compliant Reserve

Grade Category

Tonnes (Mt) Fe % S % P % LOI % SiO2 % Al2O3 %

Probable 8.5 63 0.01 0.06 2.7 4.7 0.5

TOTAL 8.5 63 0.01 0.06 2.7 4.7 0.5

Source: Murchison Metals Limited

Strategic Alliances

In order to progress the Jack Hills Iron Ore Project, MMX has developed a number of key alliances with groups that have interests aligned to that of the Company.

Geraldton Iron Ore Alliance

There are five companies in the Mid-West region that are currently producing iron ore or plan to do so within the next two years. These companies are:

Company Code Project Product

Gindalbie Metals Limited GBG Mt Karara Hematite/Magnetite

Mount Gibson Iron Limited MGX Tallering Peak/Extension Hill Hematite

Murchison Metals Limited MMX Jack Hills Hematite

Midwest Corporation Limited MIS Koolanooka, Blue Hills, Weld Range Hematite/Magnetite

Golden West Resources Ltd GWR Wiluna West Hematite

Most of these companies are planning to establish projects in two stages, with a smaller initial development plan to generate cashflow followed by a larger second stage expansion. Stage 1 output is targeted to be exported through the upgraded Berth 5 facility at Geraldton. The second stage projects involve significantly larger volumes, which exceed the capacity of the Geraldton Port. To counter this obstacle, it has been proposed that a new port be constructed 25km north of Geraldton at Oakajee, which is capable of handling Cape size (160kt-230kt) vessels.

With most of these companies planning to use components of the same infrastructure, the Geraldton Iron Ore Alliance (“Alliance”) was formed to investigate infrastructure and other project aspects (ie environmental) that are common between the projects. It is hoped that the Alliance will be able to more effectively plan for the infrastructure needs of the region and reduce the cost and time required for implementation. Recently, a sixth member, Royal Resources Limited, has joined the Alliance.

POSCO Alliance

Murchison has also formed a strategic alliance with the Pohang Iron & Steel Company Limited (POSCO) as a critical part of MMX’s Stage 2 development of Jack Hills. POSCO is a wholly owned subsidiary of one of the world’s largest iron and steel producers, POSCO Limited of South Korea.

Under this alliance, POSCO acquired shares and options in Murchison and secured the right to purchase up to 10Mtpa of iron ore over a 25 year period from Murchison. POSCO has indicated that it will purchase a 50kt trial shipment of iron ore from Jack Hills Stage 1 in 2006.

As part of the alliance, POSCO has the right to nominate a representative to the MMX’s board if POSCO’s shareholding increases to 19.9%.

Infrastructure Consortium

Murchison has formed a consortium with POSCO Engineering and Construction Company Limited (POSCO E&C), Toll Holdings (Toll) and Japan's Mitsubishi Corporation to conduct a feasibility study into the development of new rail and port infrastructure in the Mid-West region of Western Australia.

Hartleys Limited

57

Table 15: Hartleys’ Valuation

A$m cps

Stage 1 44.3 11

Stage 2 550.6 139

Exploration 20.0 5

Cash 5.0 1

Corporate Overheads (12.3) (3)

Debt (30.0) (8)

Tax Losses 0.9 0

Options & Other Equity 30.0 8

Total 608.5 154

Source: Hartleys’ Estimates

The consortium has been established through a formal non-binding memorandum of understanding (MOU). Under the MOU, the parties have agreed to contribute resources and expertise to determine the requirements for building the rail and port infrastructure. The infrastructure will include construction of Oakajee and new rail links from Jack Hills to Oakajee. The feasibility study is due to be completed by Q2 CY2007.

Financial Analysis

In November 2005, MMX completed a placement of 10m shares and 30m options to POSCO raising $3m. This raising was part of the strategic alliance negotiated with POSCO. In December 2005, Murchison placed 87.5m shares at 32cps raising $28m to fund a bankable feasibility study into Stage 2 and for working capital for Stage 1. Murchison currently has 280.7m shares on issue and a further 104.3m options that are currently in the money.

As at 30 June 2006, the Company had an estimated cash position of approximately $5m cash.

Valuation

We have modelled Stage 1 and Stage 2 separately, assuming that both projects are delivered on time and on budget. As Stage 1 is due to go into production in the near future, we have valued it using a discount rate of 8%. Stage 2 has a slightly higher discount rate of 10%, but we have also applied a 70% discount to the project recognising that: it does not yet have a JORC-compliant resource of sufficient size; the DFS has yet to be completed; the particulars relating to construction of rail and port infrastructure are yet to be settled; financing still has to be finalised; and the project is 4 years away from commencement. In time, as each of these items is finalised, we will reduce the level of discount on the project.

Stage 1

For Stage 1, most of our assumptions are similar to those stated by MMX. We have production commencing in Q3 CY2006 at an initial rate of 1.5Mtpa for the first year, increasing to 2Mtpa for the next 4 years, with a five year mine life. We have allocated capital costs of $41m plus $5m required for working capital, $30m of which is debt financed, with the remainder drawn from funds already raised.

We have used a cash operating cost for Stage 1 of A$56/t before royalties and depreciation. Stage 1 is expected to generate an average cash operating margin over the life of the project of A$19.90/t.

Based on these assumptions, we value Stage 1 at $44.3m, or 11.2cps.

Stage 2

For Stage 2, we have assumed a reserve of 380Mt of ore at 62% Fe. We have production ramping up each quarter from Q3 CY2010 to achieve 18.25Mt in the first year, then 25Mtpa of iron ore thereafter over a 15.5 year mine life. We have assumed that third parties will construct the port and rail infrastructure, leaving MMX with a capital expenditure of $276m, which includes the $20m to fund the DFS currently underway. We have assumed that $220m will be debt funded, and the rest funded from cash flows generated from Stage 1.

We have used a cash operating cost of $A24.30/t before royalties. This is higher than the $13.66 the company forecast due to the inclusion of additional port and rail access charges levied by the third party operators. We derive an average cash operating margin over the life of the project of around A$26/t.

Applying a 70% discount, we value Stage 2 at $550.6m, or $1.39 per share.

We have currently only assigned $20m exploration value to MMX, a relatively conservative amount considering the value of the Stage 2. Any further exploration success at Mt Hale, Noonie Hills or Stuart Bore will add incremental years to the project. Due to its location, exploration success at Weld Range will depend on the size of the deposit and may be reliant on sharing infrastructure with Midwest Corporation.

We value Murchison Metals Limited at $1.54 per share (Table 15).

Hartleys Limited

58

Conclusions

Since listing on the ASX in April 2005, Murchison Metals Limited has made large steps towards becoming an iron ore producer from its Jack Hills Iron Ore Project. Stage 2 involves a major expansion in production to 25Mtpa, which will require the construction of a new rail system and deep water port at Oakajee.

By forming alliances with other iron ore companies and infrastructure parties relating to the construction of the port and rail infrastructure, the Company has increased the likelihood that these developments will go ahead, whilst significant reducing the capital outlay required for Stage 2.

By developing Jack Hills in two stages, Murchison can access early cashflows whilst working towards the major regional infrastructure upgrades required for Stage 2. Based on MMX trading at a significant discount to our valuation of $1.54 per share, we rate Murchison Metals Limited as a Speculative Buy.

Hartleys Limited

59

Murchison Metals Ltd Share PriceMMX $0.68 SPECULATIVE BUYKey Market Information Directors Company Information

Share Price $0.68 Chairman - Paul J Kopejtka Level 2, 18 Richardson StMarket Capitalisation $205m MD - Trevor Matthews West Perth, WA, 600552 Week High-Low $0.73-$0.29 Exec Dir. - Robert Vagnoni Tel: (08) 9483 0500Issued Capital 301.7m Fax: (08) 9481 7966Issued Capital (fully diluted inc. ITM options) 395.9m Web: www.mml.net.auOptions 94.3m@$A0.35Hedging - Top 10 Shareholders m shares %Yearly Turnover/Volume $148.6m/308.3m sharesLiquidity Measure (Yearly Turnover/Issued Capital) 102% 1 ANZ Nominees Limited 37.68 12.4%Valuation $1.54 2 Westpac Custodian Nominees Limited 20.91 6.9%

3 National Nominees Limited 20.23 6.7%Financial Performance Unit FY2007F FY2008F FY2009F FY2010F 4 J P Morgan Nominees Australia Limited 19.78 6.5%

5 HSBC Custody Nominees (Australia) Limited 16.68 5.5%Net Revenue A$m 118.4 149.1 145.3 129.2 6 POSCO Australia Pty Ltd 10.00 3.3%Total Costs A$m (95.1) (125.4) (125.1) (124.0) 7 Resource Capital Fund 10.00 3.3%EBITDA A$m 23.2 23.7 20.2 5.2 8 Taswa Pty Ltd 8.36 2.8%Depreciation/Amort A$m (7.5) (10.6) (11.4) (12.9) 9 Hebei Qianjin Steel Group (Australia) Pty Ltd 7.14 2.4%EBIT A$m 15.8 13.1 8.8 (7.7) 10 Eriditus Pty Ltd 6.83 2.3%Net Interest A$m (6.1) (8.3) (8.1) (14.9)Pre-Tax Profit A$m 9.6 4.8 0.7 (22.6) Reserves & Resources Mt % FeOTax Expense A$m (2.9) (1.5) (0.5) -NPAT A$m 6.7 3.4 0.2 (22.6) Jack HillsAbnormal Items A$m - - - - Reserves 8.5 63.0Reported Profit A$m 6.7 3.4 0.2 (22.6) Resources 67.0 62.0

Production Summary Unit FY2007F FY2008F FY2009F FY2010F*Attributable

Financial Position Unit FY2007F FY2008F FY2009F FY2010F Iron Ore - Fines Production 000t 501 668 668 668 Iron Ore - Lump Production 000t 999 1,332 1,332 1,332

Cash A$m 36.6 45.2 30.0 43.0 Cash Cost $A/t 56.00 56.00 56.00 56.00 Other Current Assets A$m 11.5 13.9 13.5 11.9 Total Current Assets A$m 48.1 59.1 43.4 54.9 Price Assumptions Unit FY2007F FY2008F FY2009F FY2010FProperty, Plant & Equip. A$m 66.4 64.4 82.6 298.6 Exploration A$m 15.3 17.3 18.8 20.9 AUDUSD A$/US$ 0.74 0.74 0.74 0.73 Investments/other A$m 1.9 1.9 1.9 1.9 Received Price - Fines A$/t - 78.92 62.96 61.38 Tot Non-Curr. Assets A$m 83.6 83.6 103.2 321.4 Received Price - Lump A$/t - 78.92 80.34 78.32 Total Assets A$m 131.7 142.7 146.7 376.3 Average Received Price A$/t - 78.92 0.07 0.07

Short Term Borrowings A$m (5.0) (5.0) (5.0) (10.0)Other A$m (9.5) (11.0) (14.3) (33.4) Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)Total Curr. Liabilities A$m (14.5) (16.0) (19.3) (43.4)Long Term Borrowings A$m (62.9) (64.3) (64.9) (279.9) Base Case 1.54 6.7 2.4 4.1Other A$m - - - - Exchange Rate +10% 1.16 0.5 0.1 1.9Total Non-Curr. Liabil. A$m (62.9) (64.3) (64.9) (279.9) Exchange Rate -10% 2.00 16.4 4.9 6.7Total Liabilities A$m (77.4) (80.4) (84.2) (323.3) Iron Ore Price +10% 1.93 7.8 2.4 4.1

Iron Ore Price -10% 1.14 7.8 2.4 4.1Net Assets A$m 54.3 62.3 62.5 53.0 Operating Costs +10% 1.29 1.9 0.6 2.3

Operating Costs -10% 1.78 13.7 4.1 5.9Cashflow Unit FY2007F FY2008F FY2009F FY2010F *N.B. NPAT, EPS, CFPS forecasts are for FY2007

Operating Cashflow A$m 13.2 22.8 23.9 25.8Income Tax Paid A$m - - - - Share Price Valuation (NAV) Est. $m Est. $/shareInterest & Other A$m (6.1) (8.3) (8.1) (14.9)Operating Activities A$m 7.1 14.5 15.8 10.9 Jack Hills Stage 1 (NPV @ 8%) 44.4 0.11

Jack Hills Stage 2 (NPV @ 10%) 550.7 1.39Property, Plant & Equip. A$m (24.0) (6.6) (27.1) (227.1) Exploration 20.0 0.05Exploration and Devel. A$m (2.0) (4.0) (4.0) (4.0) Cash 5.0 0.01Investments A$m - - - - Forwards 0.0 0.00Investment Activities A$m (26.0) (10.6) (31.1) (231.1) Corporate Overheads (12.3) (0.03)

Total Debt (30.0) (0.08)Repayment of Borrowings A$m - - - - Tax Losses 0.9 0.00Proceeds of Borrowings A$m 35.0 - - 220.0 Options & Other Equity 30.0 0.08Equity A$m 15.0 4.6 - 13.1 Total 608.7 1.54Dividends Paid A$m - - - -Financing Activities A$m 50.0 4.6 - 233.1

Net Cashflow A$m 31.1 8.6 (15.3) 13.0

Ratio Analysis Unit FY2007F FY2008F FY2009F FY2010F

Cashflow Per Share A¢ 4.3 3.9 3.3 (2.5)Cashflow Multiple X 15.9 17.3 20.8 (27.7)Earnings Per Share A¢ 2.0 1.0 0.1 (5.7)Price to Earnings Ratio X 33.4 71.1 1246.1 (11.9)Dividends Per Share A¢ - - - -Dividend Yield % - - - -Net Debt / Equity % 52% 32% 56% 457%Interest Cover X 2.6 1.6 1.1 naReturn on Equity % 12% 5% 0% na

Analyst: Andrew MuirPhone: +61 8 9268 3045

Sources: IRESS, Company Information, Hartleys Research

July 2006

Last Updated: 21/07/2006

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Research Helmut Engelhard Senior Industrial Analyst,

Research Manager +61 8 9268 3052

Kristy Grosser Research Assistant +61 8 9268 2831 Andrew Muir Resources Analyst +61 8 9268 3045 Andrew Rowell Resources Analyst +61 8 9268 2837 Tamara Stretch Industrial Analyst +61 8 9268 3048 Simon Tonkin Research Analyst +61 8 9268 2826

Corporate Finance Richard Simpson Managing Director &

Head of Corporate Finance +61 8 9268 2824

Martin Pyle Director-Corporate Finance +61 8 9268 2821 Grey Egerton-Warburton

Director-Corporate Finance +61 8 9268 2851

Paul Fryer Assoc Director-Corp Finance +61 8 9268 2819 Dale Bryan Corporate Finance Manager +61 8 9268 2829 Ben Wale Corporate Finance Executive +61 8 9268 3055

Registered Office Level 6, 141 St Georges Tce Perth WA 6000 Australia Postal Address GPO Box 2777 Perth WA 6001 Australia Contact Details Telephone: +61 8 9268 2888 Facsimile: +61 8 9268 2800 Website: www.hartleys.com.au Email: info@hartleys.com.au Note: personal email addresses of company employees are structured in the following manner: firstname_lastname@hartleys.com.au

Hartleys Recommendation Categories

Strong Buy Significant share price appreciation anticipated Buy Share price appreciation anticipated Speculative Buy Share price appreciation anticipated but is considered high

risk Accumulate Buy in periods of weakness Hold Take no action Reduce Sell in periods of strength Sell Significant price depreciation anticipated

Institutional Sales Rob Brierley +61 8 9268 2822 Carrick Ryan +61 8 9268 2864 Darren Reed +61 8 9268 3053

Wealth Management Stephen Anastos +61 8 9268 2871 Nicola Bond +61 8 9268 2840 Bradley Booth +61 8 9268 2873 Davide Bosio +61 8 9268 3042 Nathan Bray +61 8 9268 2874 Sven Burrell +61 8 9268 2847 Simon Casey +61 8 9268 2875 Tony Chien +61 8 9268 2850 Travis Clark +61 8 9268 2876 David Cross +61 8 9268 2860 Nicholas Draper +61 8 9268 2883 John Featherby +61 8 9268 2811 Nathan Featherby +61 8 9268 2823 Ben Fleay +61 8 9268 2844 Robin Forbes +61 8 9268 2813 John Georgiades +61 8 9268 2887 John Goodlad +61 8 9268 2890 Brian Gow +61 8 9268 2836 Andrew Gribble +61 8 9268 2842 Neil Inglis +61 8 9268 2894 Murray Jacob +61 8 9268 2892 Gavin Lehmann +61 8 9268 2895 Shane Lehmann +61 8 9268 2897 Andrew Macnaughtan +61 8 9268 2898 Joanne Malaxos +61 8 9268 2820 Christian Marriott +61 8 9268 2828 Scott Metcalf +61 8 9268 2807 David Michael +61 8 9268 2835 Nicole Morcombe +61 8 9268 2896 Jamie Moullin +61 8 9268 2856 Chris Munro +61 8 9268 2858 Ian Parker +61 8 9268 2810 Margaret Radici +61 8 9268 3051 Charlie Ransom +61 8 9268 2868 James Robinson +61 8 9268 2859 Conlie Salvemini +61 8 9268 2833 Darryl Smalley +61 8 9268 2808 David Smyth +61 8 9268 2839 Greg Soudure +61 8 9268 2834 Sonya Soudure +61 8 9268 2865 Dirk Vanderstruyf +61 8 9268 2855 Peta Winkless +61 8 9268 2857 Marlene White +61 8 9268 2806

Disclaimer/Disclosure

The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice mentioned in publications to clients.

Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.

Hartleys Corporate Directory

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