Mount Gibson (Extension Hill)

For the quarter ended, reported results from reverse circulation resource infill drilling. Hole EHRC072 intersected 9m @ 57.6% Fe from 0m. Results to date suggest mineralisation extends further to the north than previously recognised. Also reported that construction works for the Extension Hill Project remain suspended Regulatory submissions & approvals during the quarter were: - The State Environment Minister formally approved the Extension Hill ˇV Hematite Transport Proposal; - The Extension Hill - Mining Proposal (Department of Mines & Petroleum) has been amended to incorporate the Extension Hill ˇV Hematite Transport Proposal Ministerial Conditions; and - The Extension Hill ˇV Project Management Plan (Department of Consumer & Employee Protection) has been amended to incorporate the Extension Hill ˇV Hematite Transport Proposal Ministerial Conditions Extension Hill Mine Site - The accommodation camp and main office complex for the Extension Hill mine site remain in storage; - Primary communications equipment and the communications tower for the mine site remain in storage pending recommencement of project works; and - Numerous items purchased directly by the Company for the Extension Hill mine site continue to be delivered in accordance with the various purchase orders issued prior to suspending work and the company has leased facilities to store this equipment until such time as project work recommences. Transport Corridor - Components purchased and / or fabricated for the GNH bridge overpass were delivered during the quarter and are in storage; - Westnet undertook minor works associated with upgrading the existing rail line between Perenjori and Geraldton during the quarter to allow for ongoing grain transportation. All other work on the rail upgrade remains suspended; and - The first 120 new rail wagons for the Extension Hill project were delivered during the quarter. Fabrication and delivery of the remaining wagons is scheduled to occur in the next quarter. Geraldton Port ˇV Berth 5 Storage Facility - Items purchased directly by the Company for the new Berth 5 Storage facility continue to be delivered in accordance with contracts entered into and purchase orders issued prior to suspending work and Mount Gibson has leased suitable lock up facilities to store this equipment until such time as project work recommences. GPA Rail Unloader Upgrade - Work on the Rail Unloader Upgrade remains on hold pending a formal decision to proceed with the Extension Hill project.

Reverse circulation resource infill drilling commenced in late November, following long awaited approval of Programs of Work by DoIR. A total of 504 holes are planned for 21,000m (figure 19). At the end of December 79 holes had been completed for 3382m. The failure of a number of Mount Gibson’s customers to collect iron ore cargoes in accordance with binding purchase agreements combined with lower demand for iron ore as a consequence of the global financial crisis and the slowing Chinese economy resulted in Mount Gibson suspending, in a structured approach, all works associated with the Extension Hill Project during the quarter. Mount Gibson has tentatively scheduled a 12 month suspension of the Extension Hill project and expects that first ore from the Extension Hill mine will now be shipped in the March quarter of 2010 Regulatory submissions & approvals during the quarter were: • Federal environmental approval was granted for the Extension Hill – Environmental Management Plans; • The State Environment Minister dismissed the outstanding objections to the Extension Hill – Hematite Transport Proposal and issued draft conditions in relation to this proposal; • Approval of the Extension Hill - Mining Proposal (Department of Industry & Resources) is pending approval by the Environment Minister of the Hematite Transport Proposal; • Approval of the Extension Hill – Project Management Plan (Department of Consumer & Employee Protection) is pending approval by the Environment Minister of the Hematite Transport Proposal; • An environmental “Permit to Take” DRF within the approved project footprint area was granted by the Department of Environment and Conservation; • Approval to recommence resource definition drilling at Extension Hill was granted by the environment division of Department of Industry & Resources; and • Approval to realign Great Northern Highway around the Extension Hill mine site was granted by the Main Roads Department Design & engineering work during the quarter were: • Detail design for the realignment of a section of the planned haul road between the mine site and Perenjori rail siding as required by the DIA Section 18 approval completed; and • Detail design work for site infrastructure and services (camp, administration buildings, workshops, communications system, power supply, water supply, site roadways, etc) completed. Construction: Extension Hill Mine Site • The accommodation camp and main office complex for the Extension Hill mine site have been delivered and are currently in storage pending recommencement of project works; • Primary communications equipment and the communications tower for the mine site were delivered during the quarter and are in storage pending recommencement of project works; • Numerous items purchased directly by the Company for the Extension Hill mine site continue to be delivered in accordance with the various purchase orders issued prior to suspending work and the company has leased facilities to store this equipment until such time as project work recommences; • The potable and process water supply bores for the project were equipped and commissioned during the quarter; and • A 21,000 metre resource definition infill drilling program commenced in December and will continue for the next 3 months.

Reported that some construction activities at Extension Hill will be deferred, whilst commencement of ore production is rescheduled to the March quarter, 2010