Iron Ore Plays – Discussion

Over the past 12 months emerging magnetite concentrate / pellet companies have underperformed
significantly the emerging hematite producers including FMG, MMX and MIS which have seen price
increases >300%, whereas GBG’s share price has only increased by 19%. We are of the view this
underperformance is not justified given key considerations including (i) GBG has access to key road, rail
and port infrastructure (granted loading slots at Berth 5 and dedicated Berth 7 for the Karara project
development) giving the project a distinct advantage over emerging projects that require significant
expenditure on infrastructure (ii) after adjustments for mining waste:eek:re ratios of 0.5:1 and beneficiation
waste:eek:re ratio of 2.7:1 the Karara 1,300Mt magnetite resource is equivalent to a large 500Mt @ 69%Fe
hematite deposit with a strip ratio of 3.2:1(iii) that magnetite concentrate / pellets have excellent exothermic
characteristics and generally lower impurities ideal for steel making (iv) prices received for concentrate and
pellets are at significant premiums to fines and lump ore respectively (v) better processing environmental
behavioural characteristics when compared to iron ore fines sintering and (vi) that GBG by mid 2008 plans
to be a profitable small-medium sized hematite ore producer. The key disadvantages of magnetite projects

are (a) higher capital intensity per unit of output (b) higher processing costs per unit of output and (c)

projects are not scaleable without significant new capital expenditure
. On average pellets cost 2-3 times
more than equivalent hematite production, but prices received are 10% and 40% higher for lump and fine
ore respectively and generally 2-5% higher iron grade.