Dear Shareholder,
The past 12 months have been challenging for mineral explorers globally due to uncertainty in the economic recovery of major economies and the slowing in China’s rate of economic growth. We have seen large global mining houses pull back on planned major expansions.

In Western Australia a number of large resource development projects have been deferred or cancelled. The aluminium industry has suffered a downturn due to lower than projected demand in China combined with a significant over supply of aluminium. Despite these concerns about the global conditions, the Company remains optimistic about the outlook for bauxite and alumina in the medium to longer term. Industry projections are that there will be increased demand from China for bauxite in the years to come. It is also expected that there will be increased political restraints on the availability of Indonesian bauxite which has been a major supplier of bauxite to China in recent years. Australian producers stand to benefit, given our geographical proximity to China.

In the last year significant progress has been made towards the Company’s ambitions of establishing itself as a significant player in the alumina industry and as a supplier into the export bauxite market. The Company and its JV partners for the 12 month period to 30 June 2013 achieved a 96% increase in JORC compliant bauxite resources. The total JORC compliant bauxite resource base presently stands at 256.4 million tonnes. Significantly, of that total resource base, the Company’s 100% owned bauxite resources have substantially increased following focussed exploration on its Fortuna project which began at the start of this year. The Fortuna bauxite resource is now 39.5 million tonnes and is expected to increase further. It has the added advantage of being geographically close to the existing Felicitas deposit and also close to existing road and rail infrastructure.

It is extremely difficult to compare our reported bauxite resources with companies operating in regions outside the Darling Range. It is not as straight forward as simply comparing total and available alumina levels. Some companies report their alumina levels on a post beneficiation basis. The Company does not do that because of the inherent uncertainties involved and the potential risk of the market being misled by the practice. The quality of a bauxite resource is also not solely governed by the reported percentage of total or available alumina. There are other factors that need to be borne in mind such as the mineral form in which it is found (eg; gibbsite, boehmite, diaspore), the level of reactive silica at both low temperature and high temperature digestion, and the other refining characteristics of the bauxite in question. The Company is increasingly confident, based on the mineralogical testing work done to date, that its bauxite will prove to have good refining qualities and will be very marketable to an informed market.

In April of this year, your Board resolved to put in place the on-market share buy-back program which commenced in May. The decision to do that was based on the view that the Company’s shares were trading at a substantial discount to their asset backing. At the time, the shares were trading between 10 and 12 cents, giving the Company a market capitalisation of between $23m and $28m. Given that the Company’s cash resources alone (without regard to resources or land holdings) substantially exceeded its market value, the Board determined that the on-market share buy-back program could only enhance the value of the shares held by its committed, loyal and long term investors. In addition to its substantial resource base, the Company has approximately $43m cash at bank, owns two farming properties in the Chittering area, owns valuable laboratory assets used at the Nagrom laboratory, and has no debts. The Company’s shares at the time of writing were trading at 14 cents giving the Company a market capitalisation of $32m.

Your Board remains of the view that for the foreseeable future the preservation of the Company’s cash resources is of the utmost importance. The Board is keen to ensure that where money is spent, it is spent in a disciplined way that is accretive of value to shareholders.

The Company’s strategic focus from now is to:

• cut back on the greenfields exploration of its large tenement package by focussing and limiting any future exploration to those areas which the Company has identified as highly prospective;
• rationalise its tenement holdings to ensure that only those that are highly prospective are kept thereby reducing the total tenement expenditure obligations;
• focus on strategies to monetise for shareholders the substantial bauxite resources that the Company and its JV partners have established over the last two or three years;
• keep expenditure disciplined and focussed with a view to preserving its substantial cash resources; and
• to be open to any mining investment/acquisition opportunities that may be presented to the Company if (and only if) they are assessed to have substantial value enhancement for shareholders.

Earlier this year, the Board appointed our new Chief Executive Officer, Peter Canterbury, who commenced with the Company in May 2013. Peter brings to the Company some 20 years of experience in the Bauxite and Alumina industry. Peter has considerable commercial acumen and your Board is confident that he is well qualified to pursue and bring to fruition our strategic objectives.

The Board believes that its executives and employees interests should be aligned as closely as possible to shareholder interests. It is for that reason that management personnel of the Company were not offered salary increases this year but rather it is proposed, subject to shareholder approval, that they will be granted Share Performance Rights under the newly proposed Performance Rights Plan. I encourage shareholders to support this proposal.

An important matter which the Board addressed following last years’ AGM has been the level of remuneration being paid to its non-executive directors. The total remuneration now being paid to the Board has reduced by $230,000 per annum as a result of reduced directors’ fees and the reduction of the number of Board members by one. A number of the Board of the Company also sit on Joint Venture committees and on the Board of the Bauxite Alumina Joint Venture Company. I am also very pleased that both Yankuang Group and HD Mining have nominated new nominees to the Board of the Company who are both Perth based, namely Qingwei Zhan and Chenghai (David) Yang. Both Mr Zhan and Dr Yang are well known to the Board, having acted as locally based alternate directors on the Board for some time.

I wish to record my sincere appreciation to Mr Barry Carbon AM who was Chairman of the Company for nearly four years until his retirement on 9th August 2013. The Board is grateful for Barry’s leadership and commitment to the Company over that period and for his wise counsel and steady hand during some of the more challenging periods we faced. I also thank the other retiring directors Mr Yan Jitai and Mr Ding Feng for their contributions to the Company.

On behalf of your Board I thank our shareholders for your support over the past year. Your Board looks forward to supporting our executive team in making real progress towards the achievement of our strategic goals to enhance real shareholder value over the next 12 months.

Yours sincerely

Robert Nash
Chairman

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