Energy Efficiency Opportunities KML Expansion Project August 2013

Table of Contents About Karara Iron Ore Basics Base Plant – Mine and Concentrator KML’s Magnetite Process Requirements for a Viable Project Operating Cost The Approach The Process and Outcomes Overall Outcome In Closing

Located in the Mid-West Region of Western Australia, 215 km east- southeast of Geraldton and 320km north-northeast of Perth Australia’s second magnetite project World class project with ~2.5bt resource and 30+ year mine life A Joint Venture and Partnership between Gindalbie and Ansteel About Karara

Iron Ore Basics Not all iron ore projects are the same –Hematite –Magnetite Hematite –Reddish – black mineral –Chemical formula Fe 2 O 3 –Key property is that the mineral is Non Magnetic –Found in large high grade deposits 55-62% Fe Low impurities – but these vary depending on the ore body –No two ore bodies are the same –Often referred to as DSO – Direct Shipping Ore Mining, crushing and screening required to produce lump and fines products

Iron Ore Basics Magnetite –Black grey mineral –Chemical Formula Fe 3 O 4 –Occurs with other minerals, predominantly silica bearing minerals Ore grades vary 10-30% Fe KML ore averages 36.5% Fe Not commercially saleable in the raw state –Key physical property is that the mineral is Magnetic –Intensive processing is required to produce a commercially saleable product Liberation size microns High energy input required to grind the ore –Magnetite concentrates typically >64% Fe KML’s magnetite premium products –68% Fe, 4.75% SiO 2 with low other impurities

–Mining at a rate of 30mtpa, one of WA’s single biggest mining operations –Commissioning completed and ramp-up well advanced –Ability to produce 8mtpa premium magnetite concentrate Base Plant - Mine and Concentrator

–Flythrough Base Plant - Mine and Concentrator

The Magnetite Process High energy intensive process KML’s magnetite process involves the following unit processes: –Primary crushing –Secondary crushing and screening –High Pressure Grinding (HPGR) and screening –Rougher Magnetic separation –Primary Grinding –Intermediate Magnetic separation –Fine Grinding –Reverse flotation, regrind –Concentrate thickening and filtration –Tails thickening, filtration and stacking

Requirements for a Viable Magnetite Project Ore body –Large ore body - long life of mine to support the capital expenditure –High magnetite grade with low impurities 36% Fe SiO2, AlO3 –High metallurgical recovery Capable of generating a product that is commercially saleable –68% Fe, 4.75% SiO2 and low impurities –Quality will dictate if the business is a price maker or taker Access to infrastructure –Power –Water –Rail –Port

Requirements for a Viable Magnetite Project Financial –Operating Cost < Product Revenue Payback capital (including interest) in an acceptable time Return value to shareholders Price volatility

The Approach KML’s Approach –Establish the overall expansion strategy for the company –Develop a design concept –Develop a design approach –Establish the Owner’s team Expansion Strategy –Board mandate was to expand magnetite production to >30Mtpa by approximately 2020 Design Concept –Design a plant that is readily expandable in modules whilst causing minimal interruption to the operating plant during construction, commissioning and operation

The Approach Design Approach –Build on the “groups” collective design, construction and commissioning experience –Learn from past mistakes –Undertake all activities during the Feasibility Study to ensure a seamless transition into FEED and detailed engineering design (DED) No shortcuts, dot the “i”’s and cross the “t” approach –Leverage of the current engineering design as far as practical Specifications, detailed drawings, 3D model, calculations –Consider constructability during design Be able to construct without impacting on the operating plant –Consider value engineering opportunities to reduce capital cost, improve operability and reduce unit operating cost.

The Approach

KML’s Owners Team –Establish a core multidiscipline engineering team to manage the execution of the works –Headed by the Project Director, the core team positions are Project Director Project Manager Principal Process Engineer Principal Mechanical Engineer Manager Optimisation Principal Civil / Structural Engineer –The competency of the Owner’s team is key to delivering the project on-budget, on-schedule and to the required quality. As a project moves from the study phase into execution, the Owner’s team expands accordingly to deliver the project. Legal and Commercial Approvals Document control Scheduling Cost Control

The Process Staged program centered around the evaluation of the Base Plant and equipment in order to identify value adding opportunities to reduce capital and operating costs Program of work –Base Plant expandability review –Concentrator process design review –Mining – In pit crushing and conveying study –Port and Rail capacity modeling –Metallurgical testwork and simulations –Value Engineering –Definitive Feasibility Study

The Process Base Plant Expandability Review –High level expandability review of the Base Plant to ascertain if the plant can be upgraded or expanded to achieve the overall expansion strategy –Outcomes A tightly constrained plant layout. Expansion of the mine concentrator is physically constrained by; –Run of Mine pad to the East –Rail to the West –Tailings disposal to the South –Incoming High Voltage power to the North

The Process

–Outcomes Bottlenecks identified in the process flowsheet. Bottlenecks are typically major capital equipment that cannot be easily upgraded, replaced by larger equipment, or additional equipment installed such as; –High pressure grinding rolls –Ball mills –Concentrate and tailings thickening

The Process Concentrator Process Design Review –Detailed review of the Basis of Design to verify and establish a suitable BOD for the expansion –The review involved a review of available data and additional metallurgical testwork –Outcome(s) Modified process Basis of Design Simplified process flowsheet

The Process In Pit Crushing and Conveying (IPCC) –External consultant engaged to assess IPCC compared to conventional Haul To Surface (HTS) operation Previous study completed by Coffey Mining in 2008 reported a significant operatig cost saving for IPCC compared to HTS Cost savings increase with both rate of production and also in the event that fuel, tyres and labour costs increase at a rate in excess of other operational costs – IPCC options considered –Start 2016 stage 2 Expansion –Start 2018 stage 3 Expansion

The Process Port and Rail Capacity Modeling –External consultancy engaged to model the rail and port system to estimate the true capacity at the port 16Mtpa capacity based on 60kt shipments at 100hrs average vessel TAT. –KML’s modeling shows Mtpa using combination of larger vessels - Panamax/Kamsarmax.

The Process Value Engineering –External engineering consultant engaged to: Rationalise a plant layout that is expandable with minimal interruption to the operating plant Identify, assess and rationalise equipment selection by considering upsize opportunities that were not available during the original design Reduce capital cost Reduce operating cost Improve performance and operability

The Process –Outcomes Improved concentrator layout –Modular and expandable design to meet expansion schedule –Engineering easily duplicated at minimal cost –Improved maintainability –Within existing KML tenements –Fully incorporated magnetite and hematite stockpile, reclaim and train load out facility Process flowsheet retained with equipment alternatives and up- size opportunities considered –Reduced flowsheet complexity –Improved operability and maintainability –Lower operating cost –Lower capital cost

The Process HPGR’s confirmed as the lowest power consumer compared to other commercially available equipment such as; –SAG Mills –AG mills Increasing the Ball Mill transfer size from the original design value of 55 µm to 120 µm and allowing for additional power in the Tower Mills reduces the overall installed power requirement by approximately 8.6 MW

The Process Definitive Feasibility Study (DFS) –External engineering consultant engaged to undertake the DFS –Outcomes Robust modular design to meet the overall expansion methodology Capital and Operating cost estimate to 15± accuracy Approx 20% lower operating cost compared to the Base Plant due to improved design –Economies of scale due to better use of existing infrastructure and contacts –Improved utilisation and distribution of high power consuming equipment in the process plant

Viable plant design that meets the project objectices Overall Outcome

Mining projects are margin driven business The cost of production must be significantly lower than product revenue Efficiency (energy, process) is a key driver in the design phase of every project Lowest cost of production targeted at all times Highest operating cost area are the focus Improvement in efficiency for existing mining operations is difficult due to; High sunk capital cost Efficiency typically comes from economies of scale Bigger equipment Requires capital expenditure that needs to meet investment hurdles In Closing