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                                                                                            Date: May 10, 2006
 Australian Investors Are Waking Up To Wedgetail Exploration As It Moves To Gold Production Next

 Earlier this week a reader from Australia asked why the shares of Wedgetail Exploration were not showing
 more life at a time when the company has announced a very positive bankable feasibility study for its
 Nullagine gold deposit. Minews is not in the business of giving investment advice, but could point to the
 repeated comments of our Man in Oz on the dull Australian gold sector in his weekly round-ups of the moves
 and shakers of the Australian mining scene. Gold exploration and production companies seem to have been
 left out in the cold despite the fact that the gold price is now in sight of US$700/oz or A$880/oz. The answer
 seems to lie in the fact that Australian investors now seem to have so much to choose from – iron ore, coal,
 uranium and beach sands to name but a few.

 Peter Woodman, the recently promoted chief executive of Wedgetail does not disagree with this theory, but
 points out that the share price of his company has been moving forward in recent weeks. This is hardly
 surprising as the latest news is that the company has signed by Thyssen Krupp of Australia to supply and
 install a new SAG mill for the processing plant at Nullagine. This has to be taken as a sign of confidence as the
 development capital has yet to be raised, but the mill is the longest lead item for the processing plant and the
 directors now know that it will be in place by March next year. A new one is being bought as it is regarded as
 the single most important item in the processing plant. The chances of mechanical failure are thus minimised
 and the mill can be tailor made in terms of size and power for the ore to be treated which simplifies the flow

 Wedgetail announced that its bankable feasibility study had been successfully completed at the beginning of
 April. The Nullagine gold project was pronounced as robust and the directors gave it the go -ahead. A 1
 million tonne/year carbon-in-leach processing plant was specified and the capital cost was estimated at A$43
 million. There should be no problem is raising these funds as the project is expected to deliver an operating
 cash flow of between A$81 million and A$105 million depending on the hedged gold price. Yes, there is bound
 to be hedging as the company wants to avoid further dilution for shareholders by seeking around 80 per
 cent of the money from banks and institutions. This inevitably means hedging, but as Peter Woodman points
 out it would be foolish to ignore the opportunity to lock in gold sales at around A$1000/oz.

 The data from the bankable feasibility study was based on a spot gold price of A$800/oz and a hedged price
 of A$880/oz. Production at a rate of 70,000 ozs/year at a cash cost of A$513/oz would give a cash operating
 margin ranging from A$287 to A$367/oz based on these two prices, but they have already been left well
 behind. Thus the internal rate of return of 42 per cent calculated on the hedged price can be looked on as a
 minimum. In addition to this the current capacity of the processing plant of 1 million tonnes/years will also
 prove conservative as a result of the softer oxide and transitional ore that is planned to be processed in the
 first two years of the currently planned initial 5 year mine life.

 The current resource for the project stands at 13.26 million tonnes grading 2.02 g/t to give 860,000 ozs of
 which 590,000 ozs is in the measured and indicated category. Exploration is continuing around the project in
 order to increase this resource, but Wedgetail has a total of more than 1,500 sq kms covering 45 kms of the
 Middle Creek shear zone in the Central Pilbara where it is the dominant landholder. This zone is highly
 prospective and underdeveloped and Peter Woodman is confident that a number of Greenfield discoveries will
 be made. He cites the Falcon prospect which is is located north of the historic Billjim mine and was identified
 by systematic soil sampling last September. Inclined rotary air blast drilling across the 600 metre long trend
 of the soil anomaly in October returned a series of high-grade intercepts including 16 metres grading 5.78
 g/t Au from a depth of only 8 metres. This is now being drilled and there are a number of other near-surface,
 high grade oxide targets which will be tested.

 Australian investors may choose to ignore gold companies such as Wedgetail while they enjoy a surfeit of
 opportunities in other metals and minerals, but this is a company moving fast to profitable production. As
http://www.minesite.com/storyFull5_print.php?storySeq=3502                                             10/05/2006
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 Peter Woodman puts it “It can no longer be regarded as yet another cheeky explorer.” There is little doubt
 that the project will expand as more resources are brought to book and the directors have decided to mark
 this quantum leap by changing the name from Wedgetail Exploration to Wedgetail Mining. In the autumn the
 company will be doing a roadshow around London and Europe and the presentation should be worth hearing.

 Companies featured in this Story
 Wedgetail Exploration NL (ASX-WTE)

http://www.minesite.com/storyFull5_print.php?storySeq=3502                                       10/05/2006

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