Ann: Scheme of Arrangement and Demerger, page-60

The high cost of developing the KML first phase 8 mtpa mine was also caused by the management decision to over build the infrastructures such as port, rail line, water and power supplies for up to 16 mtpa capacity. If Ansteel is to takeover 100% ownership of KML, other shareholders of GBG should be reimbursed of this additional mine development costs which could be in ten or hundred of AUD$ millions. Ansteel should treat this reimbursement as part of the mine upgrading costs from existing 8mtpa to 12 mtpa or 16 mtpa since this had been paid in the first phase.

These additional infrastructures capacity will greatly reduce the mine upgrading cost and duration to 12mtpa or 16mtpa with minimum interruption to the existing mine operation. This was the justification given by the original management overseeing the first phase project back in 2010 or earlier.

Now is best time to upgrade the mine capacity since Mt Gibson Mines has closed down its mine in the Midwest resulting in 4m tonnes free capacity per annum at Geraldton Port and possibly rail transport.

This is another rip off if Ansteel were to take over GBG at AUD$0.026.