Ann: Wet Plant Sales Commence, page-84

Hi Tom,

Too early to tell. Company have always predicted A$22 per tonne operating cost, however they are currently using a third party ore, who happens to also be our end customer, to get the grade up to 63% Fe consistently. So, we have no real idea of costs, and they won't likely become evident until a quarterly or two from now.

In the future, all the plants should be capable of achieving the 63%Fe grade using our lower 25-35%Fe feed, as opposed to needing that extra boost at the moment to achieve it consistently. The beauty of beneficiation is we can turn the lower grade stuff into a premium product.

Our EPC contractor Xinhai have a lot of experience in their field, so they should be able to come up with design improvements and process enhancements to get us more for less going forward.

There is an alternative factor that I think we have all overlooked and that has been the input: output ratio. There is potentially room to improve not only how much we get out, but how much we have to put in to get it.

It use to be predicted that it would take about 3:1 ratio for the lower grade ore to achieve 58-62% Fe. I think there was a figure like 700k throughput to get 200k output. I imagine this has improved vastly since we are now putting in higher grade ore, therefore reducing our input quantity and perhaps expanding our output capacity.

Either way, the current model may not make us as much per tonne, but the potential additional tonnes that are produced because of it may make up for that to some degree.

In the future, depending on the economics of production, it may be worthwhile to continue using higher feed in parallel in order to maintain a higher output. All speculation though and only the company know the figures at this point.

What is most important to me is that we are now making money and are refining a process, both in terms of processing and doing business, that will enable NSL to replicate and expand production in the future to fully capitalise on their iron ore mines and the explosive growth of India.