Annual General Meeting

The Chairman
Gindalbie Metals Limited

Dear Sir,

It would be appreciated if you would make these views known to the Ansteel appointed directors on the Karara Board and to the chairman of the holding company of Ansteel.

The proposal to be put to the shareholders of GBG that shareholders approve a transaction which is neither fair nor reasonable should be withdrawn.

The proposal can be withdrawn at the request of Ansteel and Ansteel can withdraw its request to GBG that GBG provide the security requested.

As a GBG shareholder I am grateful for the financial support provided by Ansteel. However I am also mindful that the project would not be possible without the resource provided by GBG.

Ansteel has been the senior participant in the development of Karara and must shoulder the significant part of the economic downturn. Karara has been substantially adversely affected by engineering decisions which have contributed to Karara’s financial underperformance. These engineering decisions are, in substantial part, attributable to Ansteel.

While Ansteel’s ability to provide credit support for financing to address this financial under performance is greatly appreciated, Ansteel should not use these circumstances to improve its position.

This amounts to Ansteel taking advantage of adverse circumstances for which it is partly, if not primarily responsible.

If Ansteel does not cause the motion to be withdrawn, the substantial element of trust on which the Karara project is based will be severely damaged. The breach of trust will not only adversely affect the future of Karara, but will also have an adverse on all future joint China/Australia projects.

Conversely, the trust between the Chinese and Australian economies, would be greatly enhanced by the gesture of Ansteel causing the motion to be withdrawn.

Ansteel and a GBG should ensure that the ownership of GBG in Karara is not further diluted. It would be preferable for the companies to state that they are looking at ways to restore the 50-50 equilibrium.

I invested in GBG because I support it the concept of a joint venture where Australian resources were brought together with the financial and industrial strength of China in a manner which recognised the essential nature of each party’s contribution.

For Ansteel to take advantage of the underperformance of Karara to improve its position, is a breach of trust should be a cause for great shame.

Finally, the pricing for magnetite, which governs the commercial relationship between Karara and Ansteel, should be revised. The pricing was based on assumptions about the relationship between haematite and magnetite, with magnetite achieving a premium for quality. The market for haematite has now be significantly disrupted by the behaviour of the major ore companies. Therefore the price of haematite is no longer an appropriate basis for pricing magnetite. Magnetite adds significant advantage in the steel making processes. Those advantages should be reflected in the price paid for magnetite, thus deriving greater revenue for Karara.

Thank you