The Extension Hill Magnetite Project

Global Iron Ore & Steel Forecast Perth March 2013

The Extension Hill Magne?te Project Asia Iron

Disclaimer

This Document is Confiden?al and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person, or published, in whole or in part, for any purpose without prior wriMen approval from Asia Iron Australia Pty Ltd and its subsidiaries (“AIA”).

AIA makes no representa?ons or warranty (express or implied) as to the accuracy, reliability or completeness of this document. AIA and its respec?ve directors, employees, agents and consultants shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, informa?on or maMers (expressed or implied) arising out of, or contained in or derived from, or for any omissions from this document, except liability under statute that cannot be excluded.

This document contains reference to certain forecasts, projec?ons, inten?ons, expecta?ons and plans of AIA, which may or may not be achieved. They are based on certain assump?ons which may not be met or on which views may differ. The performance and opera?ons of AIA may be influenced by a number of factors, uncertain?es and con?ngencies many of which are outside the control of AIA and its directors.

No representa?on or warranty (expressed or implied) is made by AIA or any of its respec?ve directors, officers, employees, advisers or agents that any forecasts, projec?ons, inten?ons, expecta?ons or plans set out in this document will be achieved, either totally or par?ally, or that any par?cular rate of return will be achieved.

This Document is not a Prospectus nor an Offer to Subscribe for Shares.

JORC Consents

The informa?on in this presenta?on that relates to Mineral Resources is based upon informa?on compiled by David Milton. David Milton is a member of the Australasian Ins?tute of Mining and Metallurgy (MAusIMM) and has sufficient experience which is relevant to the style of mineralisa?on and type of deposit under considera?on and to the ac?vity to which he is undertaking to qualify as a competent person as defined in the 2004 edi?on of the “Australasian Code for Repor?ng of Explora?on Results, Mineral Resources and Ore Reserves”. David Milton consents to the inclusion of the maMers based on his informa?on in the form and context in which it appears.

Statements referring to explora?on targets that refer to poten?al quan?ty and grade are conceptual in nature and there has been insufficient explora?on to define a Mineral Resource at this ?me. It is uncertain if further explora?on will result in the determina?on of a Mineral Resource.

Agenda

• The Asia Iron Group • Asia Iron’s Assets • The Extension Hill Magne?te Project • Opportuni?es and Challenges

Agenda


The Asia Iron Group

• Unique 100% Chinese owned partnership – 60% State Owned Enterprise Conglomerate

• Shareholders are: – Steel producer; – Clean energy investor; and – Foreign trade and economic coopera?on enterprise

• Ul?mate Parent is the Municipality of Chongqing

– 40% Privately Owned Enterprise • Raw materials trader and resource investor

• HK Holding Company Shareholder’s Agreement – Vo?ng rights – Financing – Offtake

• “One Team” management based in Perth

7

Chongqing

• 1,500 km upstream Yangtse River

• 30+ million popula?on

• Focus of China’s “Go West” Policy

• Autonomous Region • Rapid Urbanisa?on

• Massive Infrastructure Build

Agenda


Asia Iron Assets

Agenda


Extension Hill Magne?te Project Configura?on

• Located on Badimia land:

• Stage 1 project configura?on: – Accommoda?on village and airstrip; – An open pit magne?te iron ore mine; – Concentrator producing 10 Mtpa of magne?te concentrate;

– 288 km slurry pipeline to Geraldton Port; – Concentrate storage and shipping facili?es at Geraldton Port; – 160 km water supply pipeline and borefield; – 141 km 330kV power transmission line;

– Power supply from the South West Interconnected System.

Extension Hill Magne?te Project Stage 1 Status

" Environmental Approvals " State approvals " Federal approvals

" Granted Mining Leases

" Water Licenses " Groundwater extrac?on licenses

issued

" Land Use Rights " Heritage agreements " Na?ve ?tle agreements " Private landowner agreements

" Key Regulatory Approvals " WA Environmental Approval

" Commonwealth Environmental Approval

" FIRB Approval " NDRC Investment Approval

" Transport Mine to Port secured " Private slurry pipeline corridor

approved

" Power Transmission " Network applica?on accepted " Private spur line approved " Governmental network upgrade

approved and commiMed

" Port Services Secured " 10 Mtpa MoU with Geraldton Port

Authority

" >AUD$100 M expenditure since Oct 2010

" Early works commenced " Highway relocated

" 120 person village constructed " Airstrip, borefield, village acquired

Extension Hill Magne?te Project Substan?al Mineral Resource

JORC Mineral Resources

Measured 293 Mt 43.4 % DTR

Indicated 372 Mt 35.3 % DTR

Inferred 882 Mt 36.0 % DTR

Total 1,547 Mt 37.2 % DTR

Ini>al Pit Ore Reserves

Proved 260 Mt 45.2 % DTR

Probable 210 Mt 42.0 % DTR

Total 470 Mt 43.8 % DTR

Conc Grade 67.4 % Fe

Strip Ra?o 1.66

Extension Hill Magne?te Project Compe??ve Project Economics

• Capital Intensity ($ per annual tonne concentrate) – Southdown 10 Mtpa ± AUD$ 290 – Extension Hill 10 Mtpa ± AUD$ 300 – Karara 8 Mtpa ± AUD$ 320 – Sino Iron 27.6 Mtpa > AUD$ 330

• Opera?ng Cost ($ per tonne concentrate) – Extension Hill ± AUD$ 54 – Southdown ± AUD$ 59 – Karara > AUD$ 74 – Sino Iron ???

The Extension Hill Magne?te Project Flight to Quality

To be successful during the coming flight to quality, project proponents will need to meet a more rigorous combina;on of financial, commercial and risk hurdles. In addi;on to sound project economics, investors will demand:

— A resource base of a size and quality comparable to other regional and global resource projects.

— An asset that can support mul;ple brownfield expansions once the ini;al development is complete.

— Quality and depth of management with a track record in developing and opera;ng similar assets.

— Loca;ons which benefit from rela;vely simpler logis;cs plans or have access to infrastructure or infrastructure rights.

— Partners with sufficient financial capacity to support the project development and manage the comple;on and market risks.

ANZ Insight, Issue 2; October 2012; “Quality MaMers : A Progress Report on Australia’s Natural Resources Export Opportunity”; page 11.

Mineral Resource

A resource base of a size and quality comparable to other regional and global resource projects – JORC Resource Size

1. Jack Hills 3.2 Bt

2. Karara 2.4 Bt 3. Extension Hill 1.6 Bt (6 to 8 Bt poten>al)

4. Southdown 1.2 Bt

– Ore Quality (mass % recovery) 1. Extension Hill ± 44% 2. Karara <40%

3. Southdown <35%

4. Jack Hills <35%

Expansion Poten?al

An asset that can support mul?ple brownfield expansions once the ini?al development is complete

1.6 Bt JORC +/-‐ 6 to 8 Bt

Management Team

Quality and depth of management with a track record in developing and opera;ng similar assets – Relevant experience

• Bulk commodi?es • Greenfields • Brownfields • Infrastructure

– Discipline specialists • Technical • Commercial • U?li?es • Opera?ons • Development

– “One Team” • Australian and Chinese Integrated Management

Loca?on and Infrastructure

Loca;ons which benefit from rela;vely simpler logis;cs plans or have access to infrastructure or infrastructure rights. – Slurry transport to port (280 km)

• Very low cost, mature technology of choice

• Private corridor, full control – MoU to u?lise Geraldton Port

• Load and discharge port constraints matched

– Access to SWIS • Regulated transmission and genera?on market

• Private corridor – INDEPENDENT OF OAKAJEE PORT FOR STAGE 1

Financial Capacity

Partners with sufficient financial capacity to support the project development and manage the comple;on and market risks. – Chinese SoE majority ownership – Chinese SoE offtake – Chinese Regulatory approvals – Chinese Debt finance available

– Development ?metable has been delayed due to delays associated with the poli?cal changes that have, and are occurring in the City of Chongqing

Agenda


Chinese investors have generally not done well

• Michael Komesaroff, former Rio Tinto execu?ve: – “State-‐owned miners have wasted billions of dollars on ill-‐

conceived ventures in Australia and elsewhere, because they have mistakenly aLempted to copy their methods at home in a foreign seMng.”

• Chang Zhenming, Chairman Ci?c Pacific: – “Ci;c Pacific is clearly disappointed with the performance of

MCC to date.” – "MCC is very experienced but working in the Australian

environment is very challenging for them indeed"

• Colin BarneM, Premier Western Australia: – “… the ini;al Chinese investment in Western Australia had failed

due to lack of experience. It seemed to me at the ;me that China had failed to dis;nguish between what might have worked in a developing African country na;on and what was required in a Top 20 na;on such as Australia.''

Project Expecta?ons have not been met

• Karara suffered significant cost and schedule overruns • SinoIron cost and schedule overruns are catastrophic

Investment Expecta?ons have not been met

• Karara and SinoIron are yet to reach commercial produc?on – Unlikely that SinoIron will return its investment

• MCC wrote $360M off the value of its Cape Lambert Project investment in December 2012 – The Project is now for sale

• Sinosteel paid $1.4 Bn to acquire Midwest Corpora?on – Weld Range Project suspended indefinately

– Koolanooka /Blue Hills produc?on rate ± 2 Mtpa • Project life ± 5 years

Chinese Investors face unique challenges

• Most Chinese business is between SoE’s – Government is always involved – SOE business decisions are not always market driven

• Chinese governance is fundamentally different – “We will never copy a Western poli;cal system”1

• China is going through a transi?on from a planned economy to a market-‐oriented economy – Western-‐style corporate governance did not exist in China

before 1984 – The first Company Law in China was introduced in 1993

• 2006 Revision has 219 clauses and 21,000 words • 2012 Australian Corps Law has 1,538 clauses and 690,000 words • Is our beMer????

1Hu Jintao, Opening Address; 18th Na?onal Congress of the Communist Party of China (CPC) 8 November 2012

SoE Challenge # 1 “It’s Complicated”

Challenge #2 “It’s Foreign”

• Its more than foreign language: – Overcome with transla?on and interpreters

• Its more than cultural differences: – Different social norms and values must be respected

• Its concepts that are foreign: – Different paradigms – Issues go beyond experience and knowledge – Same term has different meaning – “Corporate governance is an alien concept for China” 1

1 Young et al; 2007; Corporate Governance in China: The Role of the State and Ideology in Shaping Reforms; The Company Lawyer Volume 28, No. 7, p.204

Things we take for granted

• Role of Government – Set and enforce rules

• Transparent Legal Rights – Rules made are interpreted by courts

• Contractual Obliga?ons – Contracts underpin business rela?onships

• Financial Statements – Balance Sheets show Liabili?es as well as Assets

• Decision Making – Authority and accountability are delegated

Keys to Success

• Mutual understanding and respect is cri?cal – Acknowledge that differences exist; – Not arguing right or wrong, beMer or worse; – Compromise outcome must be achieved;

• Adapt to the host country business environment – Governance frameworks are fundamentally different; – Role of government is fundamentally different; – Cost structures and supply chains are fundamentally different.

• Learn from others that have succeeded – Premier BarneM advised Chinese investors to follow the Japanese model: ''Buy small shares of big projects with quality partners.”

Closing Remarks

• Extension Hill Magne?te Project: – Is a quality project; – Stage 1 will be a major project in its own right; – Will reach its full poten?al through Oakajee Port development.

• Foreign Investment is essen?al, but Australia must address its falling compe??veness: – Australia’s resource endowment alone will not guarantee market

share or ongoing investment.1 • Chinese investors must understand and adapt to host

country business environment: – China needs to learn more about the world, and the world also

needs to learn more about China. I hope you will con;nue to make more efforts and contribu;ons to deepening the mutual understanding between China and the countries of the world.2

1 Port Jackson Partners, Opportunity at risk: Regaining our compe??ve edge in minerals resources, MCA, Canberra, September 2012. 2 Communist Party General Secretary Xi Jinping at the Politburo Standing CommiMee Members' mee?ng with the press at the Great Hall of the People in Beijing

Thank You

Extension Hill Magne?te Project

For more informa?on:

www.asiairon.com.au

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The Extension Hill Magnetite Project