MGX RESOURCES LIMITED — Capital/Financing Update 2002

Dec 16, 2002

P.01/02

Mount Gibson Iron Limited

ABN 87008670817

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First Floor, 7 Havelock Street West Perth 6005, Western Australia

PO Box 55, West Perth WA 6872

Telephone: 61-8-9485 2355 Facsimile: 61-8-9485 2305 E-mail: admin@mtglbsoniron.com.au

17 December 2002

1300 300 021 VIA FACSIMILE:

No. Pages $=$ 2

The Manager Company Announcements Australian Stock Exchange Limited Level 10, 20 Bond Street SYDNEY NSW 2000

LETTER TO OPTIONHOLDERS

Please find attached a copy of a letter being mailed to Optionholders today regarding the fully underwritten pro-rata non-renounceable rights issue to raise approximately \$11.36 million.

Yours sincerely, MOUNT GIBSON IRON LIMITED

Angela Dent Company Secretary

Mount Gibson Iron Limited

ABN 87 008 670 817

First Floor, 7 Havelock Street West Perth 6005, Western Australia

PO Box 55, West Perth WA 6872

Telephone: 61-8-9485 2355 Facsimile: 61-8-9485 2305 E-mail: admin@mtgibsoniron.com.au

17 December 2002

Dear Optionholder

Mount Gibson Iron Limited ("MGI") has determined to proceed with a fully underwritten pro-rata non-renounceable rights issue to raise approximately \$11.36 million. The funds will be used to retire existing loans, redeem convertible notes and apply funds to the development costs of Tallering Peak, construction of an iron ore storage facility and working capital.

The purpose of this letter is to advise you that MGI has announced the non-renounceable rights issue to the ASX and advised that a rights issue prospectus will be sent to shareholders on 7 January 2003. Shareholders will be invited to subscribe for shares on a 1:1 basis at 9 cents per new share. The record date for determining shareholders' entitlements to participate in the rights issue is 2 January 2003.

If you wish to participate in the rights issue, you must be a shareholder as at the record date. If you are not already a shareholder, you must first either purchase shares or exercise your options on or before this record date (2 January 2003).

For further information, please contact the Company Secretary, Angela Dent on 9485 2355.

Yours sincerely, MOUNT GIBSON IRON LIMITED

William B Willis Chairman