Ann: Scheme of Arrangement and Demerger, page-98

The Mole,

I just wonder the Karara magnetite deposit should be added to the claims. Karara has about 2,400 million tons of magnetite deposit and about 100 million tons deposit have been mined so far, leaving a balance of 2,300 millions tons to be mined and processed into about 900 millions tons of 65.5%fe magnetite concentrate.

GBG shareholders exclude Ansteel have 32.15% of this production or about 290 million tons of magnetite concentrate.

Since Karara is a producing mine and the management has stated in the NOTES 2. e) TO THE FINANCIAL STATEMENTS For the year ended 31 December 2017 that "KML's cash flow forecast as of the date of this report indicates that KML is projecting cash operating surpluses for 2018 and 2019", royalties could be a suitable method of valuing this 290 million tons of magnetite concentrate at 1-2% rate.

Currently the price of 65.5%fe magnetite concentrate is around A$140 per ton and at 2% rate, the royalties derive from the existing 8 mtpa plantwill be around A$8 millions for next 100 years (290 / 100 * 140 *2%) or A$16 millions for next 50 years if the plant is upgraded to 16 mtpa.

The NPV of A$8 millions royalties for next 100 years based on 8 mtpa would be A$196 millions or A$343 millions based on 16 mtpa, A$16 millions royalties for next 50 years.


This mining asset value could be viewed as credit offsetting the liabilities related to GBG's investment in KML.