MGX RESOURCES LIMITED — Capital/Financing Update 2002

Dec 16, 2002

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@mtglosoniron.com.au

16 December 2002

Mount Gibson Iron

VIA FACSIMILE: 1300 300 021

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

SUBJECT: RIGHTS ISSUE PROSPECTUS

Please find attached a Prospectus dated 16 December 2002 and lodged with ASIC today.

Yours sincerely, MOUNT GIBSON IRON LIMITED

Angela Dent Company Secretary

No. Pages = $39$

Mount Gibson Iron

MOUNT GIBSON IRON LIMITED

[ABN 87 008 670 817]

PROSPECTUS

Prospectus for a fully underwritten pro-rata one for one non-renounceable Rights Issue of approximately 126.3 million New Shares at 9 cents each to raise approximately \$11.36 million.

OFFER CLOSES AT 5.00PM (PERTH TIME) DN 23 JANUARY 2003 UNLESS EXTENDED

This document is important and requires your immediate attention. Please read it carefully. If you do not understand the contents of this Prospectus you should consult your financial, legal or other professional adviser.

An investment in Mount Gibson Iron Limited should be considered as speculative

UNDERWRITER:

PATERSON ORD MINNETT LTD (ABN 69 008 896 311)

CORPORATE DIRECTORY

BOARD OF DIRECTORS

BILL WILLIS INCRIMEDL, VIAIRB CRAIG READHEAD IAN MACLIVER

Executive Chairman Managing Director Non-Executive Director Non-Executive Director

COMPANY SECRETARY

Annela Dent

REGISTERED OFFICE

Level 1, 7 Havelock Street West Perth 6005, Western Australia Telephone: 61-8-9485-2355 Facsimile: 61-8-9485-2305 E-mail: admin@mtgibsoniron.com.au Web Site: www.mtgibsoniron.com.au

SOLICITORS

Pullinger Readhead Stewart Level 1. Scott House 46-50 Kings Park Road West Perth 6005, Western Australia

ASX CODE

MGX - Shares MGXD - Options

IMPORTANT NOTICE

SHARE REGISTRY

Computershare Investor Services Ptv Limited Level 2, Reserve Bank Building 45 St Georges Terrace Perth 6000. Western Australia Telephone: 61-8-9323-2000 Facsimile: 61-8-9323-2033

AUDITORS

Ernst & Young 152 St Georges Terrace Perth 6000, Western Australia

BANKERS

HSBC Bank Australia Limited 188-190 St Georges Terrace Perth 6000, Western Australia

UNDERWRITER

Paterson Drd Minnett Ltd Level 23, Exchange Plaza 2 The Esplanade Perth 6000, Western Australia

This Prospectus is dated 16 December 2002, and was lodged with the ASIC on 16 December 2002. Neither the ASIC nor the ASX takes any responsibility for the contents of this Prospectus.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make such an offer. In particular, this Prospectus does not constitute an offer to Excluded Shareholders.

No New Shares or Shortfall Options will be issued on the basis of this Prospectus after the Expiry Date, which is 13 months after the date of this Prospectus.

In compliance with Section 713 of the Corporations Act 2001, this Prospectus contains all information which investors and their professional advisers would reasonably require and reasonably expect to find in the Prospectus for the purpose of making an informed assessment of:

. the effect of the Rights Issue on the Company,

• the rights and liabilities attaching to the New Shares and Shortfall Options.

The Corporations Act 2001 imposes liability on persons named in this Prospectus with their consent as having made a statement that is included in this Prospectus or on which a statement made in this Prospectus is based. There are a number of persons referred to in this Prospectus and other than where consents have expressly been given, these persons have not made any statement or provided information on which statements are based. These people did not consent to being named and did not authorise or cause the issue of this Prospectus.

No person is authorised to give information or make any representation in connection with this Prospectus which is not contained in the Prospectus. In making representations in this Prospectus regard has been given to the fact that ASX maintains a file containing publicly disclosed information about the Company and that the Company is a disclosing entity for the purpose of the Corporations Act 2001, and certain matters may reasonably be expected to be known to professional advisers whom potential investors may consult.

PLEASE CAREFULLY READ THE INSTRUCTIONS ON THE ACCOMPANYING ENTITLEMENT AND ACCEPTANCE FORM REGARDING ACCEPTANCE OF YOUR RIGHTS. IT IS IMPORTANT THAT YOU TAKE ACTION IN ACCORDANCE WITH THE INSTRUCTIONS ON THE ENTITLEMENT AND ACCEPTANCE FORM. IF YOU ARE IN DOUBT AS TO THE PROCEDURES TO BE FOLLOWED, YOU SHOULD CONTACT COMPUTERSHARE INVESTOR SERVICES PTY LIMITED ON 1330 557 010, OR YOUR STOCKBROKER.

BEFORE APPLYING FOR NEW SHARES UNDER THIS PROSPECTUS, SHAREHOLDERS SHOULD CONSIDER WHETHER THE NEW SHARES ARE A SUITABLE INVESTMENT FOR THEM.

TABLE OF CONTENTS

SECTION		PAGE
	CHAIRMAN'S LETTER
2	DETAILS OF THE RIGHTS ISSUE	ρ
я	REVIEW OF PROJECTS
	PURPOSE AND EFFECT OF THE ISSUE
5	ADDITIONAL INFORMATION	19
Б	DEFINITIONS	29
	SHORTFALL APPLICATION FORM	З.

KEY DATES FOR OFFER OF NEW SHARES

The following key dates are indicative only and may be subject to change without notice:

	DATE
Lodgement of Prospectus with ASIC and announcement of Rights Issue	16 December 2002.
Record Date for Rights Issue	2 January 2003
Dispatch Prospectus and Entitlement and Acceptance Form	7 January 2003
Rights Issue Closing Date	23 January 2003
Securities quoted on deferred settlement basis	24 January 2003
Acceptances from member organisations close	29 January 2003
New Shares and shareholding dispatch пf Data of issue statements. tor	14 February 2003

Deferred settlement trading ends

* All dates (other than the date of the announcement of the Rights Issue and the date of lodgement of the Prospectus with ASIC) are indicative only. The Directors in consultation with the Underwriter reserve the right to extend the Closing Date, subject to the ASX Listing Rules, without further notice. A change to the Closing Date may cause other key dates to change.

MOUNT GIBSON JRON LIMITED PROSPECTUS

CHAIRMAN'S LETTER 1

Dear Shareholder.

On behalf of my fellow Directors, I have pleasure in enclosing details of an Offer for you to participate in an issue of New Shares by Mount Gibson Iron Limited. The Offer is a fully underwritten non-renounceable pro-rata Rights Issue, which entitles each Shareholder (except those registered holders of Existing Shares who have a registered address in a country other than Australia or New Zealand) to subscribe for one New Share for every one Share held on 2 Januray 2003, at an issue price of 9 cents per New Share.

Details of your Entitlement to New Shares are shown on the accompanying Entitlement and Acceptance Form. Please note that the Closing Date for acceptance and payment is 23 January 2003, unless varied. Applications may also be made for additional New Shares by Shareholders and the general public on the application form attached to. and forming part of, this Prospectus.

As most Shareholders would be aware, the Company recently completed the \$4.53 million acquisition of the Tellering Peak iron deposits in the Mid West region of Western Australia, where it is now progressing the development of a 1.5Mtpa hematite (iron ore) mine. The first shipments of direct shipping grade hematite are planned for mid 2003. and will coincide with the Geraldton Port Authority completing a major dredging program to accommodate Panamax size vessels for the Company's liron ore exports.

The Rights Issue will raise approximately \$11.365 million, before costs. Of these funds, \$2.3 million will be utilised to retire existing loans, and a further \$2.125 million for the redemption of Vendor Convertible Notes with the same face value which were issued to Kingstream Steel Limited (Subject to Deed of Company Arrangement) in August 2002 as part consideration for the acquisition of the Tallering Peak mining tenements.

The balance of the net proceeds from the Issue, together with existing cash resources will be applied to development costs of the Tallering Peak iron one mine, construction of an iron one storage facility at Geraldton and working capital.

The Rights Issue has been fully underwritten by Paterson Ord Minnett Ltd, subject to the termination events described in this Prospectus.

The Board has chosen to raise capital through a rights issue at a discount to the prevailing market (ASX) price in order to reward Shareholders by providing them with an opportunity to acquire Shares in the Company at a very attractive price.

Shareholders and prospective investors should be aware that, although the Company has no contractual obligation to redeem the Vendor Convertible Notes until 3D June 2005, the opportunity exists to do so from the proceeds of the Rights Issue, which will assist the Company in its debt reduction strategy.

The Board also intends to negotiate early redemption of all other outstanding Convertible Notes (\$2.875 million) after contracts for mine development and operations at Tallering Peak have been awarded, to further reduce debt.

It is intended to commence development of the Mt Gibson hematite mine immediately after operations at Tallering Peak have been commissioned, which is expected to be funded from cash flow. The development of the two mines over the next two years with a combined production of 3.0Mtpa of direct shipping grade hematite, with long term sales contracts already in place for two thirds of the production, should establish the Company as a profitable iron ore producer,

Your Board of Directors recommends that you take up your Entitlement to this Offer and share in the future success of the Company.

Yours sincerely.

WILLIAM B WILLIS CHAIRMAN

Mount Gibson Iron

PRO-RATA NON-RENOUNCEABLE RIGHTS ISSUE

Pursuant to this Prospectus, 126,281,008 New Shares are being offered to Shareholders registered at 5.00pm Perth time on the Record Date. The Offer is by way of a pro rata non-renounceable Rights Issue to Shareholders of one [1] New Share for every one [1] Existing Share held at a price of 9 cents per New Share.

The Rights Issue is non-renounceable which means that Shareholders may not sell or transfer any part of their Entitlement to subscribe for New Shares.

Holdings in the same name may be aggregated for the calculation of Entitlements. The number of New Shares to which Shareholders are entitled is shown on the accompanying Entitlement and Acceptance Form. If you wish to subscribe for additional New Shares, you may complete the Shortfall Application Form attached to this Prospectus (see "Shortfall Applications" below).

OPENING AND CLOSING DATES

The Issue will open for receipt of acceptances on 2 January 2002 and close on 23 January 2003 (unless extended). Completed Entitlement and Acceptance Forms and/or Shortfall Application Forms, together with the correct application monies, must be received at the Share Registry by the Closing Date.

SHORTFALL APPLICATIONS

Shareholders and other investors can apply for Shortfall Shares by completing the Shortfall Application Form in accordance with the instructions set out on the form. When completed, please forward your Shortfall Application Form, together with your cheque for the amount payable on acceptance (a separate cheque is required), to reach Computershare Investor Services Ptv Ltd by no later than 5.00pm Perth time on the Closing Date.

To the extent Shareholders do not take up their full Entitlement, the Shortfall will be allocated at the discretion of the the Directors in consultation with the Underwriter. Shortfall Application Forms should be delivered to Computershare Investor Services Pty Ltd, Level 2, 45 St Georges Terrace, Perth, Western Australia 6000 by the Closing Date.

In the event that the applications for Shortfall Shares are not accepted in part or in full, the relevant application funds (without interest] will be promptly refunded by the Company.

Neither the Directors nor the Underwriter guarantee that you will receive any Shortfall Shares.

ACCEPTING YOUR ENTITLEMENT

As a Shareholder you may:

• (i) accept your Entitlement in whole or in part:
• (ii) apply for additional New Shares by completing and lodging the Shortfall Application Form; or
• (iii) do nothing (in which case you will receive no benefit from your Entitlement).

Acceptance of your Entitlement must be made on the Entitlement and Acceptance Form accompanying this Prospectus. Instructions for completion and lodgement of acceptances are set out on the enclosed Entitlement and Acceptance Form, Your completed Entitlement and Acceptance Form must reach the Share Registry by the Closing Date [23 January 2003 unless varied by the Directors).

Pursuant to ASX Listing Rules the Company will allow an extension of three (3) Business Days to member organisations of the ASX to lodge acceptances after the Closing Date.

TERMS OF PAYMENT

The payment of 9 cents per New Share must be made in full on application and must accompany the completed Entitlement. and Acceptance Form and/or Shortfall Application Form.

By post to:	By hand to:
Computershare Investor Services Pty Limited	Computershare Investor Services Pty Limited
GPO Box D182	Level 2, 45 St Georges Terrace
Perth, Western Australia 6840	Perth, Western Australia 6000

Cheques in respect of applications for New Shares must be in Australian currency drawn on an Australian bank, made payable to "Mount Gibson Iron Limited Trust Account" and crossed "Not Negotiable". Applicants must not forward cash. Receipts for payments will not be issued.

A reply paid envelope is included for your convenience.

IMPORTANT NOTES FOR NEW SHARES APPLICANTS

A completed Entitlement and Acceptance Form or Shortfall Application Form and accompanying cheque may be lodged at any time after the issue of this Prospectus and before the Closing Date.

An original, completed and lodged Entitlement and Acceptance Form or Shortfall Application Form for New Shares, together with a cheque for the application money, constitutes a binding and irrevocable offer to subscribe for the number of New Shares specified in the relevant Entitlement and Acceptance Form or Shortfall Application Form.

The Entitlement and Acceptance Form or Shortfall Application Form does not need to be signed to be a valid application. An application will be deemed to have been accepted by the Company upon allotment of the New Shares.

If an Entitlement and Acceptance Form or Shortfall Application Form is not completed correctly, or if the accompanying payment of the appropriate application money is for the wrong amount, it may still be treated by the Company as valid. The Directors' decision as to whether to treat the application as valid and how to construe, amend or complete an Entitlement and Acceptance Form or Shortfall Application Form is final, however an Applicant will not be treated as having applied for more New Shares than is indicated by the amount of the cheque for the application money.

ASX LISTING

Application for official quotation by ASX of the New Shares offered by this Prospectus will be made on the day of announcing the Issue.

If official quotation for the New Shares is not granted by ASX within three months after the date of this Prospectus (or such longer period as may be permitted by the ASICJ, the Company will not issue any New Shares and will repay all application moneys (without interest) as soon as practicable.

An application for quotation of the Shortfall Options will be made within 7 days after the date of the Prospectus [refer "Shortfall Options Issue" below].

Mount Gibson Iron

ALLOTMENT OF SHARES

No allotment of New Shares will be made until the proceeds of the Rights Issue have been received and permission is granted for quotation of the New Shares on ASX. It is expected that the New Shares will be entered into the holders' security holdings no later than 14 February 2003 (unless the Closing Date is extended).

Application moneys will be held in a trust account until the allotment and issue of the New Shares. Any interest earned on the application moneys will be for the benefit of the Company and will be retained by it irrespective of whether any allotment takes place.

MINIMUM SUBSCRIPTION AND OVERSUBSCRIPTION

As the Issue is fully underwritten it is not considered appropriate to specify a minimum subscription for the Issue to be completed.

Over-subscriptions will not be accepted.

OPTIONHOLDERS AND NOTEHOLDERS

Holders of Mount Gibson Iron Options and Convertible Notes may participate in the Rights Issue by exercising any or all of their Options, or converting all or part of their Convertible Notes prior to the Record Date.

If all Options which are capable of exercise were exercised, 40,782,219 Shares would be issued and \$10,195,555 would be raised. If exercised prior to the Record Date, an additional 40,782,219 New Shares would be offered under the Rights Issue, and if taken up, would raise an additional \$3,670,400 before costs.

If all Convertible Notes were converted prior to the Record Date 16,666,667 Shares would be issued, and an additional 16,666,667 New Shares would be offered under the Rights Issue, and if taken up, would raise an additional \$1,500,000 before costs.

Any Entitlement arising from the exercise of Options or conversion of Convertible Notes has not been underwritten.

EXCLUDED SHAREHOLDERS

Mount Cibson Iron has decided that it is unreasonable to make the Offer to Shareholders who have a registered address in a country outside of Australia or New Zealand having regard to the number of Shareholders in such places, the number and value of New Shares they would be offered and the substantial costs of complying with the legal and regulatory requirements of those jurisdictions.

This Prospectus is accordingly being sent to those Shareholders ("Excluded Shareholders") for information purposes only. This Prospectus does not constitute an Offer to Excluded Shareholders.

Non-Resident Shareholders should consult their professional advisers as to whether any formalities need to be observed (either by themselves or the Company) to enable them to subscribe for New Shares offered pursuant to this Prospectus. It is the responsibility of Non-Resident Shareholders to obtain all necessary approvals so they may legally subscribe for (and be issued) New Shares. The return of a completed application form from a Non-Resident Applicant will be taken by the Company to constitute a representation and warranty by the Applicant that all relevant approvals have been obtained and that the Company may legally issue the New Shares to the Applicant.

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Mount Gibson Iron

TAXATION IMPLICATIONS

The Directors do not consider it appropriate to give potential Applicants advice regarding the taxation consequences of applying for New Shares or Shortfall Options under this Prospectus, as it is not possible to provide a comprehensive summary of the possible taxation positions of potential Applicants. The Company, Underwriter and their respective advisers and officers do not accept any responsibility or liability for any taxation consequences to potential Applicants as a result of subscribing for New Shares under the Offer, or Shortfall Options. Potential Applicants should, therefore, consult with their own tax adviser in connection with the taxation implications of applying for New Shares or Shortfall Options.

UNDERWRITING

The Rights Issue has been fully underwritten by Paterson Ord Minnett Ltd on the terms and conditions, including various termination rights, which are summarised in the Additional Information Section of this Prospectus.

The Company will pay the Underwriter fees as detailed in Section 5 of this Prospectus.

Shortfall Options will only be issued pursuant to this Prospectus to parties that have entered into a formal sub-underwriting agreement with the Underwriter ("Sub-Underwriters"). Shortfall options will be issued to Sub-Underwriters on the basis of one [1] Option for every two [2] Shares that the Sub-Underwriters are required to subscribe for after the close of the Issue and only if the Issue closes with a Shortfall of 20% or more [see "Shortfall Options Issue" below).

NEW SHARES

The New Shares will be issued fully paid, and from the date of issue will rank equally in all respects with Existing Shares. By accepting your Rights, you agree to comply with the Constitution in respect of the New Shares issued to you. Details of rights attaching to Shares in Mount Gibson Iron are set out in the Additional Information Section of this Prospectus.

CLEARING HOUSE ELECTRONIC SUB-REGISTER SYSTEM ("CHESS") AND ISSUER SPONSORSHIP

The Company will apply to ASX to participate in CHESS, for those investors who have, or wish to have, a sponsoring stockbroker. Investors who do not wish to participate through CHESS will be issuer sponsored by the Company.

Because the sub-registers are electronic, ownership of securities can be transferred without having to rely on paper documentation.

Electronic registers mean the Company will not be issuing certificates to investors. Instead, investors will be provided with a statement (similar to a bank account statement) that sets out the number of Shares and/or Shortfall Options allotted to them under this Prospectus. The notice will also advise holders of their Holder Identification Number (HIN) and explain, for future reference, the sale and purchase procedures under CHESS and issuer sponsorship.

Further monthly statements will be provided to holders in circumstances in which there have been any changes in their security holding in the Company during the preceding month.

DIVIDEND POLICY

The Company's ability to pay dividends depends on factors such as the earnings, taxation and financial position of the Company. It is the current intention of the Directors to pay dividends if the profitability of the Company's operations permits. The level of franking of any dividends will be determined by the level of tax paid by the Company.

Until the Company generates sufficient profits, it will not be in a position to declare any dividend and, accordingly, the Directors will not formulate a dividend policy until a profit is generated.

a x 200

PRIVACY ACT

If you complete an application for Shares and/or Shortfall Options, you will be providing personal information to the Company (directly or by the Company's Share Registry). The Company collects, holds and will use that information to assess your application, service your needs as a shareholder or optionholder, facilitate the distribution of payments and corporate communications to you as a security holder, and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your securities in the context of takeovers, requistory bodies, including the Australian Taxetion Office, authorised securities brokers, orint service providers, mail houses and the Share Registry.

You can access, correct and update the personal information we hold about you . Please contact the Share Registry if you wish to do so at the relevant contact numbers set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (as amended), the Corporations Act 2001 and certain rules such as the SCH Business Rules. You should note that if you do not provide the information required on the application for Shares and/or Shortfall Options, the Company may not be able to accept on process your application.

INVESTMENT RISK

All investments carry a certain level of risk. To appreciate the types of risk associated with an investment in Mount Gibson, this Prospectus should be read in its entirety.

For further details see the Investment Risks section on page 15 of this Prospectus.

WITHDRAWAL

The Directors may at any time decide to withdraw this Prospectus and the Offer. If this Prospectus and the Offer are withdrawn for any reason, Mount Gibson Iron will return all application money in accordance with the Corporations Act 2001. The Company will be entitled to retain all interest that accrues on the bank account and each Applicant waives the right to claim interest.

ENQUIRIES

If you have any enquiries concerning your Entitlement please contact the Share Registry, Computershare Investor Services Pty Limited, on 1330 557 010 or contact your stockbroker or professional adviser.

SHORTFALL OPTIONS ISSUE

As detailed on pages 21 to 24, Summary of the Underwriting Agreement, it is a requirement of the underwriting that the Company grant one [1] free Option (exerciseable at 25 cents, expiring on 31 December 2003) for every two (2) Shortfall Shares subscribed by any Sub-Underwriter to the Offer (other than if offsetting Vendor Convertible Notes) in the event that the Shortfall is 20% or more of the Offer. The terms and conditions of the Shortfall Options are identical to the Company's listed options, and are detailed on page 20. The impact of the Shortfall Options on the capital structure is detailed on page 14. Shares issued on exercise of the Shortfall Options will rank equally in all respects with existing Shares. The rights and liabilities attaching to the underlying Shares are detailed on pages 19 and 20.

The Shortfall Options Application form will only be distributed to Sub-Underwriters [together with this Prospectus]. The Underwriter will be responsible for issuing instructions to Sub-Underwriters after the close of the Offer, detailing what action they are required to take.

The issue of Shortfall Options may require approval by the Company's shareholders in a General Meeting pursuant to ASX Listing Rule 7.1, in which case neither the Sub-Underwriters nor their associates will be entitled to vote on the relevant resolution. If approval is not required, the Shortfall Options will be issued as soon as practicable following determination of the Shortfall.

Neither the Company or the Underwriter will be liable to any Sub-Underwriter in the event that approval is not secured to issue the total number of Shortfall Options that may arise after the close of the Offer.

医细胞

Mount Gibson Iron

TALLERING PEAK HEMATITE

Location

The Tallering Peak iron deposits are located 130km north east of Geraldton in the Mid West region of Western Australia (refer map on page 8) and were purchased from Kingstream Steel Limited (Subject to Deed of Company Arrangement) ["Kingstream"] for \$4.53 million, which was settled on 1 August 2002.

Resources

Based on results from extensive exploration by Kingstream. and subsequent infill and confirmatory drilling by the Mount Gibson fron Group, a measured and indicated resource of 21Mt of direct shipping grade hematite ore has been establighed

The resource is likely to be increased with further drilling of unexplored targets on the Tallering Peak tenements. Additional tonnage may be secured through beneficiation of lower grade ores, and mining of canga and detrital ore deposits occurring on the flanks of the Tallering Range.

The Company is confident of establishing a mine life of eight to ten years at its intended production of 1.5Mtpa.

Operations

Mining operations are planned to commence in the second quarter of 2003 with mining, crushing and screening of the hematite to two standard product sizes to be undertaken by experienced contractors:

• => 6mm <32mm (lump ore); and
• •< 6mm (fines ore)

The mining contractors will provide all necessary plant and equipment, and their own on-site accommodation facilities.

Ore will be transported by haulage contractors approximately 55km by road trains to a rail load out facility to be constructed 3km west of Mullewa, from where it will be railed 107km to the port of Geraldton.

The Company intends to construct a 150,000 tonne capacity iron ore storage facility on land leased from the Geraldton Port Authority, with the train unloader, conveyor systems and 1,800tph shiploader being provided and operated by the Port Authority at contracted rates.

The Company's staff will be responsible for ongoing mine planning, grade control and product quality.

Ore Quality

Tallering Peak hematite is expected to be one of the best quality iron ores produced in Western Australia, with hard, sharp ore that will not degrade significantly during handling. high iron content, and low levels of Phosphorus and Sulphur.

The target specification is as follows:

3 emice	Weight@@DHy
e crapo sistem
	Lucopi	行航道总
ron (Fe)	64.00	8200	mor
Silica (SIOI) Alumina (AUD)	400 ≜∖эо	الاقتلا 265	max. mex
Phosphorus (R)	10025	0625	市都
Sulphor (S)	uoc	oos	RIGGS
MgD Gáo	8800 O D4	5829 004	thdicetive. indicative
MHD.	GO2	ada	isoicetwe.
KGU	owe	ĐAO	max
Lass on longen (LOR	-1550	HM E 62	高度

The ratio of lump to fines ore is expected to be in the order of 65:35, which will yield a higher proportion of more valuable lump ore than most Western Australian iron deposits.

Marketing

The Company has entered into a contract with a subsidiary of Stemcor Limited, a major international steel and commodity trader (and shareholder of Mount Gibson Iron), to purchase 500,000tpa of lump ore for the life of the Tallering Peak hematite mins at annually adjusted prevailing ore prices.

The Company understands that the ore is intended to be onsold to one or two Chinese steel mills and steel product is to be purchased from the same mills.

Negotiations are proceeding to fix a long term contract with another international iron ore trader for a further 500,000tpa of ore, while the remaining 500,000tpa is planned to be sold to Japanese mills.

The Tallering Peak hematite is of such excellent quality (similar to the premium ore produced by the Sishen mine in South Africa), that the Company is confident it will be in demand to blend with lesser quality ores.

ACIBIETANIS A 瓣 l mong
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PROJECT LOCATIONS

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Mount Gibson fron

Native Title/Aboriginal Heritage

An Aboriginal Heritage survey has been conducted with one of two groups with registered Native Title Claims over Tallering Peak. Agreements have been formalised in respect to exploration, mining access and proposed operations.

The second claimant group's interest in the project area has been addressed by earlier Heritage surveys, and commercial arrangements negotiated with Kingstream.

Mining Approvals

Approvals to mine the Tallering Peak iron deposits were granted to Kingstream by the Department of Mineral and Petroleum Resources ("DMPR") under a formal "Notice of Intent" in 1995, with a subsequent Variation in 2000.

The Company intends to lodge a further Variation, which better describes the smaller scale mining operation now envisaged with significantly reduced areas of surface disturbance.

Based on discussions with DMPR officials, the Company does not expect any problems in the approval process.

Investment

In addition to the acquisition cost for the Tallering Peak iron. deposits, approximately \$1.2 million has been spent on predevelopment costs to date.

A further \$7.4 million will be required for capital works associated with the mine development, including the cost of upgrading the road between the minesite and the railhead at Mullewa, the rail loading facilities, and iron ore storage facilities at Geraldton, and associated project management and administration.

Drilling at Tallering Peak, October 2002.

MT GIBSON HEMATITE

Location

The Mt Gibson iron deposits are located 265km south east. of Geraldton (refer map on page 8), and were acquired by an associate company of Mount Gibson Iron in 1995.

Resources

Since acquisition, approximately \$1D.0 million has been spent on exploration, extensive drilling, metallurgical testwork and evaluation of the potential of the Extension Hill iron deposit, one of nine within the Mt Gibson Range.

Whereas the majority of expenditure has been focussed on the magnetite mineralisation, sufficient work has been done on the overlying hematite at Extension Hill and Iron Hill to establish a combined measured resource of 7Mt of direct shipping grade hematite.

The Company is confident of delineating, with further exploration, sufficient reserves of hematite in the remaining seven iron deposits to justify planning for a 1.5Mtpa mining operation with a ten year mine life.

Operations

Subject to satisfactory results from a proposed exploration program in the second quarter of 2003, it is planned that a mining operation will be established at Mt Gibson by mid 2004.

The 1.5Mtpa Mt Gibson operation will be contractor based. with ore trucked 85km to a railhead at Perenjori and railed 239km to Geraldton for shipping.

The project is reliant on the Government of Western Australia and the Shire of Perenjori upgrading the Mt Gibson to Perenjori road prior to mine development.

Drilling at Mt Gibson, February 2002.

Mount Gibson Iron

Ore Quality

Mt Gibson hematite is expected to be comparable with the better quality pres mined in the Pilbara region of Western Australia.

The target specification is as follows:

Chemical	Weight % Dry
Composition
	Lumo	Mries
Iron (Fe)	64.00	62.50.11mm
Silca (SIO)	GIDC!	4.00 kmax
Alumina (AliOi)	难归也	8 SO) imex
Phosphorus (P1)	olos	D:OG" kmax)
Sulphun (S)	lottici	toko 20 max
Md®	西仁區	512 P.T	inclicative Indicative
73D	owic 400	011 SW 三心似 NEVIEW
Loss on Ignition (LOI)

The ratio of lump to fines ore is expected to be in the order of 47:53.

Marketing

The Company has entered into a contract with Glencore International AG, a major commodities trader, whereby Glencore will purchase the 1.5Mtpa planned production of hematite from Mt Gibson, subject to being satisfied with the chemical composition and metallurgical characteristics of the ore. The sales contract is for five years from mine commencement, renewable for a further five years at the Company's option.

Native Title/Aboriginal Heritage

An agreement has been finalised with the registered Native Title claimants over the Mt Gibson Range, and a Heritage Survey conducted over the proposed Extension Hill and Iron Hill minesites has cleared the areas for mining.

Investment

In addition to the expenditure to date, Mount Gibson Iron will be required to spend a further \$3.0 million on infill drilling, metallurgical testwork, mine planning, and various capital items, to develop the proposed hematite mine.

It is anticipated funds for the development will be sourced from cash flows from the Tallering Peak operations.

MT GIBSON MAGNETITE

Resources

Mount Gibson Iron has established a measured and indicated resource of 181Mt of magnetite at Extension Hill, one of nine iron deposits at Mt Gibson with a combined exploration target of over 500Mt of iron mineralisation. Metallurgical testwork has been conducted which demonstrates the orewill produce high grade magnetite concentrate suitable as feed for production of iron pallets or pig iron.

Standard test procedures carried out on direct reduction grade pellets produced from Extension Hill magnetite concentrate demonstrated good reducibility and produced direct reduced iron with a commercially acceptable chemical composition.

The Company holds a 50% interest in the Mt Gibson magnetite deposits, with the balance under option until 31 December 2005 at a purchase price of \$17.5 million.

Drilling at Mt Gibson, February 2002.

Mount Gibson fron

PURPOSE OF THE RIGHTS ISSUE

The purpose of the Rights Issue is to raise \$11.36 million before costs to provide working capital and fund the development of the Tallering Peak hematite project.

The structure of the capital raising as a Rights Issue provides existing Shareholders, who have supported the Company, with an opportunity to participate in the Issue and acquire further Shares in the Company by subscribing for New Shares in accordance with their Rights and the instructions in this Prospectus.

EFFECT ON FINANCIAL POSITION

As a result of this Rights Issue, the net increase in cash reserves of the Company will be approximately \$6.22 million, leaving the Company with estimated cash reserves of approximately \$11.41 million.

To illustrate the financial impact of the Rights Issue on the Company, set out on the following pages are:

• the 30 June 2002 audited statement of financial position, and a pro forma statement of financial position based on the 31 October 2002 unaudited statement of financial position. The pro forme assumes that the Rights Issue had been completed at 31 October 2002; and

· an estimate of the areas of operation in which it is anticipated the funds raised and other cash reserves of the Company will be expended.

The pro-forma and anticipated use of the proceeds must be read in conjunction with the notes and assumptions set out on page 13 of this Prospectus.

Pillete IBREEERGROEKSENE

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Audited 30 June 2002.	Unaudited 31 October 2002	Unaudited Pro forma 31 October 2002
	s	Æ.	s
CURRENT ASSETS
Cash assets	3,403,260	5,192,772	11,412,772
Receivables	1,071,086	271,289	271,289
Inventory Other financial assets	232,817	123,900	123,900
Other	52,250 46,818	73,265	73,265
TOTAL CURRENT ASSETS	4,806,231	5.661 226	11,881,226
NON-CURRENT ASSETS
Receivables	159,131	159,131	159,131
Other financial assets Property, plant and equipment	7,223,858 190,007	7,223,858 169,707	7,223,858
Acquisition, exploration, evaluation and			169,707
development costs	12,355,774	17,559,995	17,559,995
Other	5,352	13,191	13,191
TOTAL NON-CURRENT ASSETS	19,934,122	25,125,882	25,125,882
TOTAL ASSETS	24,740,353	30,787,108	37,007,108
CURRENT LIABILITIES
Payables	3,877,630	1,729,018	1,729,018
Interest-bearing liabilities	12,948	2,310,228	10,228
Provisions	4,819	7,437	7,437
TOTAL CURRENT LIABILITIES	3,895,397	4.046.683	1,746,683
NON-CURRENT LIABILITIES
Interest-bearing liabilities	76,546	5,075,066	2,950,066
TOTAL NON-CURRENT LIABILITIES	76.546	5,075,066	2,950,066
TOTAL LIABILITIES	3,971,943	9,121,749	4.696,749
NET ASSETS	20,768,410	21,665,359	32,310,359
EQUITY
Contributed equity	21,228,518	23,165,241	33,810,241
Accumulated losses	[460, 108]	[1,499,882]	(1,499,882)
TOTAL EQUITY	20,768,410	21,665,359	32,310,359

Mount Gibson Iron

ANTICIPATED USE OF THE OFFER PROCEEDS

The funds raised will be used for development of the Tallering Peak hematite mine. Consistent with this objective, it is planned that the proceads from this Rights Issue together with the Company's existing cash assets as at 31 October 2002 of \$5.2 million will be applied over the following 12 months approximately as follows:

lle fill	Ø
Funds Available
Cash Assets	िस्ट्रेलिङ (ब) छ। छ)
Proceeds of Fights (ssue)	14,365,000
TOTAL	16365.000
Application of Funds
Costs of the Issue	720000
Iron Ore Storage Facilities — Geraldton	4.400.000
Other Project Costs - Tallering Peak	3.000.000
Pre-Development Expenses - Mt Gibson	500,000
Administration (net of Head Office costs allocated to Project Costs)	600,000
Interest on Convertible Notes.	400,000
Repayment of Current Loans	2,300,000
Redemption of Vendors Convertible Notes	2,125,000
Working Capital	2,520,000
TOTAL	16,565,000

NOTES AND ASSUMPTIONS

The assumptions set out below are those that the Company believes are significant to the pro forma statement of financial position and estimated expenditure referred to above.

The assumptions on which the pro forma statement of financial position is based are as follows:

* Mount Gibson Iron issues 126,281,008 Shares under the Pights Issue reising approximately \$11,365 million [assuming Options and Convertible Notes are not converted to Shares prior to the Record Date);

. Mount Gibson Iron incurs transaction costs of \$720,000 which are written off to the equity account;

. The accounting policies adopted in the preparation of the pro forma statement of financial position are consistent with the accounting policies adopted and described in Mount Gibson Iron's Annual Report for the period ended 30 June 2002. The key assumptions on which the anticipated use of funds disclosures are based include:

• current negotiations with prospective builders of the iron ore storage facilities at Geraldton being concluded at a cost not exceeding the budget of \$4,400,000;

* other project costs related to Tallering Peak, including associated project management and allocated Head Office costs, not exceeding the budget of \$3,000,000;

* agreement by the Mullewa Shire to the standard of upgrade nominated by the Company for the Mullewa - Tallering Peak public mad:

* current loans of \$2,300,000 will be repaid; and

. the Vendor Convertible Notes will be redeemed at their face value of \$2,125,000.

It should be noted that there will usually be differences between estimates and actual results as events and circumstances frequantly do not occur as anticipated, and those differences may be material. It is also possible that matters not currently considered material assumptions by management may become material in the future.

FUTURE FUNDING REQUIREMENTS AND REVENUE EXPECTATIONS

Provided the Geraldton Port Authority completes its current port deepening program in July 2003, and the Company meets its proposed schedule for development of the Tallering Peak hematite mine, Mount Gibson Iron should receive its first proceeds from iron ore sales in September 2003, and be cashflow positive thereafter.

The Company intends to arrange stockpile or similar financing for up to \$5.0 million of iron ore that could be in storage at Geraldton at any given time, which would normally be backed by letters of credit issued by purchasers.

The financing facility, combined with pre-arranged product offtake agreements will minimise the level of working capital required by the Company and allow contractors to be paid on normal commercial terms during the start-up phase of the project.

The funds required for the development of the Mt Gibson hematite project are expected to be provided out of cashflows from the Tallering Peak operations.

Any funds received from the exercise of Options or Shortfell Options will be added to working capital.

IMPACT ON CAPITAL STRUCTURE

The effect of the Rights Issue on Mount Gibson Iron will be that the issued capital of the Company will increase from \$23.2 million, comprising 126,281,008 fully paid ordinary Shares to approximately \$33.8 million, comprising approximately 252,562,016 million fully paid ordinary Shares.

A table of Mount Gibson Iron's capital structure as at 12 December 2002 is set out below:

Mourt Gibson ren Limited Securities	Number
Misted ordinary Shares	MADDOMSDB )
Cinisted ordinary Shares M1	162795061
Current Total Issued Shares:	MEGYPENGEL
ESPeres issued under Alghts Issue (21	126 28 1008
Post Rights Issue Issued Shares [3]
	252532,000

$(1)$ Shares subject to ASX imposed escrow period ending 17 January 2004.

$(2)$ This number assumes that holders of Mount Gibson Iron Options and Convertible Notes do not exercise the Options or convert the Notes to participate in the Rights Issue.

The Company has agreed with the Underwriter thet should the Issue close with a Shortfall of 20% or more, then any $[3]$ Sub-Underwriter (excluding the Vendor Convertible Noteholder) will be granted, for no consideration, one (1) Shortfall Option for every two [2] Shortfall Shares they are required to subscribe for pursuant to their sub-underwriting agreements with the Underwriter. If no Shareholders take up their entitlement, a total of approximately 51.33 million Shortfall Options could potentially be granted.

As at the date of this Prospectus, the Company has on issue a total of 40,782,219 Options, exerciseable as follows.

Frecise Price	Exercise Date / Period	Nota: Cabans
25 rents	Co.or.Before SA December 2003.	Geinervery
«ZE Eents»	Between Mulanuary and 31 December 2003 Mill	SECONOMY
.5.84 cents"	On or before 28 February 2006.	2003.332
		机回形线 40782219

Notes: $[1]$ Issued to Directors or their nominees and exerciseable only if the relevant Director remains in office at 31 December 2002.

Each Option entitles the holder to take up one Share on payment of the exercise price, if exercised within the applicable exercise period. Optionholders do not have any Right or Entitlement to participate in the Rights Issue, unless the Options have vested, are exerciseable and are exercised on or prior to the Record Date. There are no Options on issue which have an exercise price at or below the Rights Issue price. The Entitlement arising from the exercise of any Options has not been underwritten.

Holders of Convertible Notes do not have any Right or Entitlement to participate in the Rights Issue unless the Notes are converted prior to the Record Date. The conversion price for the Convertible Notes is 30 cents, which is above the Rights Issue price. The Entitlement arising from the exercise of any options or conversion of any convertible notes has not been underwritten.

TAX IMPLICATIONS OF THE ISSUE ON MOUNT GIBSON IRON

The Rights Issue is not a tax transaction subject to income tax for the Company. The Rights Issue may have limited GST implications for the Company in respect to the GST payable on certain fees for services rendered by its advisers and Underwriters to the Issue.

INVESTMENT RISKS

An investment in the Company is not risk-free, and prospective Applicants should consider the Risk Factors described in this Section, together with the information contained elsewhere in this Prospectus, before deciding whether to apply for New Shares.

The Directors strongly recommend that Shareholders and other potential investors examine the contents of this Prospectus in its entirety and consult licensed professional advisers before making an investment decision.

The principal risk factors include, but are not limited to:

Hematite Mining

The proposed Tellering Peak hematite project is in the development phase and as a result, the Company will be subject to all of the risks inherent in the establishment of new mining operations including delays in obtaining necessary Government approvals, finalising negotiations with contractors, completion of mine development, and construction of the rail load out facility and iron ore storage facility. A delay in completion of the Geraldton Port Authority's current dredging and port upgrade program may also lead to delay in commencement of iron ore shipments.

The operations of Mount Gibson Iron once it commences production, could be disrupted by a variety of risks, including environmental hazards, industrial accidents, technical failures, labour disputes, unusual or unexpected rock formations, and extended interruptions due to inclement weather conditions, fire, explosions, or other incidents beyond its

These risks or hazards could result in damage to, or destruction of, production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. While the Company intends to maintain insurance within ranges of coverage consistent with industry prectice, no assurance can be given that the Company will be able to obtain such insurance coverage.

Operational

Two matters are still at the negotiation stage, both of which require successful conclusion for the Tallering Peak project to proceed:

• formalisation of a rail access agreement with WestNet, which controls the State's railway network, for the ï] passage of iron ore trains between Mullewa and Geraldton;
• ii) agreement with the Mullewa Shire Council to run road trains of an acceptable capacity on the Mullewa to Tallering Peak country road.

Both negotiations are progressing and are expected to be successfully concluded early next year.

Resource Estimates

Resource estimates are expressions of judgement based on knowledge, experience and industry practice by independent, experienced consultants. However, estimates which were valid when made may change when new information becomes available.

In addition, resource estimates are necessarily imprecise and depend to some extent on interpretations, which may prove to be inacourate. Should Mount Gibson Iron encounter mineralisation or formations different from those predicted by past drilling, sampling and similar examinations, resource estimates may have to be adjusted and mining plans may have to be altered in a way which could effect the Company's future operations.

Iron Ore Price Volatility

All of Mount Gibson Iron's revenue in the short to medium term will be derived from the sale of hematite ore. Consequently, the Company's earnings will be closely related to world iron ore prices, which are denominated in US dollars, and the terms of its iron ore sales agreements. Iron ore prices fluctuate and are affected by numerous factors beyond the control of the Company. These factors include the state of the stee! market, changes in the technology used for steel production, the world demand/supply balance for iron units, and production cost levels in major iron ore producing regions.

In addition, iron ore prices are also affected by macroeconomic factors such as expectations regarding inflation, interest rates and general economic conditions, as well as currency fluctuations. These factors may have an adverse effect on the proposed exploration, development and production activities, as well as its ability to fund these activities. The Company does not currently have currency hedging in place, but will review its policy in relation to hedging prior to commencing development of the Tallering Peak hematite mine.

Environmental Risks

Mount Gibson Iron's projects are subject to Australian and Western Australian laws and regulations regarding environmental issues. As with all mining projects, the proposed hematite mines at Tallering Peak and Mt Gibson would be expected to have a variety of environmental impacts should development proceed. The Company intends to conduct its activities in an environmentally responsible manner and in accordance with applicable laws.

Title

The tenements relating to the Tallering Peak hematite project have been purchased from Kingstream, and are currently held in trust by Kingstream for the Company's wholly owned subsidiary. Mount Gibson Mining Limited, pending consent of the Minister for Mineral & Petroleum Resources to the transfer of title. The Directors see no impediment to the transfer proceeding. In the interim period the Company is permitted to explore and mine the tenements pursuant to a Mining Rights and Sale Agreement with Kingstream.

All of the tenements relating to the Tallering Peak and Mt Gibson hamatite projects will be subject to applications for renewal after expiry of their current terms. The renewal of the term of each tenement is at the discretion of the Minister for Mineral & Petroleum Resources under the WA Mining Act 1976. If a tenement is not renewed, the Company may suffer significant damage through loss of opportunity to discover and develop any mineral resources on the tenement.

Native Title

To the best of the Company's knowledge, two Native Title applications have been accepted and registered under the Native Title Act 1993 (Cth) in respect of the Tallering Peak Mining Tenements. One group of claimants, the Mullewa Wadjari Group, has a pre-existing settlement agreement with Kingstream, which the Company's wholly owned subsidiary, Mount Gibson Mining Limited, has agreed to honour as the new owner of the tenements. The other claimant group, the Wajarri Elders, has executed a formal settlement agreement to which Kingstream, Mount Gibson Iron, and Mount Gibson Mining Limited are parties.

Representatives of both claimant groups have participated in Heritage Surveys over the proposed project area, and consented to the proposed mining operation.

There is one registered Native Title claim, by the Badimia People, covering the Mt Gibson tenements. Mount Gibson Mining Limited signed a settlement agreement with this group in August 2001. Representatives of the Badimia People participated in a Heritage Survey over the proposed hematite project area in November 2001, which cleared the area for mining.

General Economic and Share Market Climate

There are numerous widespread risks associated with investing in any form of business and with investing in the stock market generally. Returns from an investment in the Company will depend on general stock market and economic conditions as well as the specific performance of the Company. Given the stage of development, potential Applicants should be aware that an investment in the Company involves many risks which may be higher than the risk associated with an investment in other companies. There is no quarantee of profitability, dividends, return of capital, or the price on which the Shares and/or Shortfall Options might trade on ASX.

Securities

The Company has entered into a Loan Agreement with Jaronach Pty Limited [summarised on page 24], which is secured by a mortgage over the Tallering Peak tenements, together with a fixed and floating charge over the assets of Mount Gibson Iron. If the Company defaults in its obligations under the Loan Agreement, as extended, the lender has the right to enforce the securities.

The Company has also provided security against future port charges, over the mining tenements at Mt Gibson (see note 19 to Financial Statements - Annual Report 2002). If the Company fails to satisfy the future port charges, the Geraldton Port Authority has the right to enforce this security.

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Mount Gibson Iron

RIGHTS ATTACHING TO SHARES

The New Shares to be issued pursuant to this Prospectus will rank pari passu with existing issued Shares. A summary of the material provisions of the Constitution pertaining to Shares follows:

Votina

Each shareholder holding fully paid Shares or partly paid shares (currently there are none) has the right to yote at shareholders' meetings. Meetings may be attended in person, by proxy or attorney or by a representative fror corporate shareholders). Voting on a motion will, in the first instance be by a show of hands, where each shareholder will have one vote unless a poll is properly demanded. On a poll, a shareholder shall have one vote for every fully paid Share held, or if not fully paid, then the number of votes in respect of such shares will be proportionate to the amount paid up on such shares.

If a call on a partly paid share is due and unpaid, the holder of that share is not entitled to be present, speak or vote at or be counted in the quorum of a meeting of members.

General Meetings

Each shareholder is entitied to receive notice of, attend and vote at general meetings of Mount Gibson Iron and to receive all notices, financial statements and other documents required to be sent to shareholders under the Constitution, the Corporations Act 2001 and the ASX Listing Rules.

Dividends

The Directors may pay any dividends as, in their judgement, the financial position of the Company justifies.

Subject to the rights of any shares issued with any special or preferential rights (at present there are none), all dividends in respect of shares must be paid to shareholders in proportion to the number of shares held, but where shares are partly paid all dividends must be apportioned and paid proportionally to the amounts paid (not credited) on the shares.

Winding Up

If Mount Gibson Iron is wound up, and the property of the Company is more than sufficient to pay all the debts and liabilities of Mount Gibson Iron and the costs of winding up, the liquidator may, with the sanction of a special resolution:

• · divide the assets of the Company among the members in kind;
• . fix the value of assets and decide how they will be distributed between the members and different classes of members; and
• vest assets of the Company in trustees on any trusts for the benefit of the members as the liquidator thinks appropriate.

Transfer

Subject to the Constitution, the Corporations Act 2001, the ASX Listing Rules and the rights or restrictions attached to any shares or class of shares, shares are transferable by a proper SCH regulated transfer, or an instrument in writing which complies with the requirements of the Corporations Act 2001, or in any other form approved by the Board or ASX.

Whichard Washingtown

Directors

The minimum number of Directors is three and the maximum is ten. Currently, there are four Directors. The Directors may appoint a Director either in addition to existing Directors or to fill a casual vacancy, who then holds office until the next annual ceneral meeting. All other Directors, excluding any Managing Director, must retire on a rotational basis so that one third of Directors must retire at each annual general meeting. Any other Director who will have been in office for more than three vears as at the date of the next annual general meeting must also retire. A retiring Director is eligible for re-election.

Decisions of Directors

A resolution of the Board of Directors must be passed by a majority of Directors entitled to vote on the resolution. The Chairman has a casting vote.

Issue of Further Shares

Subject to the Constitution, the Corporations Act 2001 and the ASX Listing Rules, the Directors may issue, or grant Options in respect of, shares to such persons and on such terms as they think fit. The Directors may issue preference shares [including redeamable preference shares) with the rights specified in Schedule 1 to the Constitution, or other rights as approved by special resolution of the Company.

Officers' Indemnity

To the full extent permitted by law and to the extent not covered by insurance, Mount Gibson Iron must indemnify each officer and former officer of the Company against:

· all losses and liabilities incurred by the officer as an officer of Mount Gibson Iron Limited, and its wholly owned subsidiaries, unless the liability arises out of conduct involving a lack of good faith; and

. for costs and expenses incurred in defending civil proceedings in which judgement is given in favour of the officer, or in which the officer is acquitted, or in connection with relief granted to the officer in an application under the Corporations Act 2001.

RIGHTS ATTACHING TO LISTED OPTIONS

Any Shortfall Options issued to Sub-Underwriters pursuant to Clause 4.5 of the Underwriting Agreement (see summary below), will be subject to the same terms and conditions as and rank pari passu with the Company's existing listed Options trading on the ASX under the code "MGXO". The terms and conditions of these listed Options are as follows:

• Each Option entities the holder to subscribe for one Share. [i]
• fiil The Options are exercisable at any time during the period beginning on their date of issue and expiring at 5pm (Perth time) on 31 December 2003 ("Expiry Date") by completing an Option exercise form and delivering it to the Share Registry prior to the Expiry Data together with the payment for the number of Shares in respect of which the Options are exercised.
• fiil The exercise price of each Option is \$0.25 payable in cash.
• The Options are freely transferable at any time in whole or in part. $(iv)$
• All Shares issued upon exercise of the Options will rank equally in all respects with the Company's then issued $[v]$ Shares. The Company will apply for quotation on ASX of all Shares issued on exercise of the Options.
• Optionholders are permitted to participate in any new pro-rata issue of securities of the Company on prior $[v]$ exercise of the Options in which case the Optionholder will be afforded a period of at least 9 Business Days prior to and including the record date to determine entitlements to the issue, to exercise the Options.

A Bibliri (Marshi Al-Bibl

Mount Gibson Iron

• [vii] The Options do not confer on the holder any right to participate in dividends until Shares are allotted pursuant to the exercise of the Options.
• In the event of a reorganisation of the capital of the Company, the Options will be reorganised in accordance [viii] with the Listing Rules iif applicable) and in any case in a manner which will not result in any benefits being conferred on Optionholders which are not conferred on Shareholders.
• The number of Shares to be issued pursuant to the exercise of Options will be adjusted for bonus issues made $\lceil i \mathsf{x} \rceil$ prior to the exercise of the Options so that, upon exercise of the Options the number of Shares received by the Optionholder will include the number of bonus Shares that would have been issued if the Options had been exercised prior to the books closing date for the bonus issues. The exercise price of the Options shall not change as a result of any such bonus issues.

UNDERWRITING AGREEMENT

Parties

The Parties to the Underwriting Agreement are Paterson Ord Minnett Ltd and the Company. The Underwriting Agreement is dated 16 December 2002.

Underwriter's Obligations

The Underwriter has agreed to fully underwrite the Rights Issue. The Underwriter has also consented to the Granier Share Placement proceeding (as announced to ASX on 29 November 2002) and otherwise the Company must not issue or agree to issue securities without the consent of the Underwriter for 15 Business Days after close of the Offer.

Company's Representations, Warranties and Obligations

The Underwriting Agreement contains a number of warranties and representations by the Company in favour of the Underwriter in respect of various matters including the accuracy and completeness of information contained in the Prospectus and the Company's power to allot Shares under the Prospectus.

Indemnity

Under the terms of the Underwriting Agreement, the Company has given an indemnity in favour of the Underwriter, its directors, officers, employees, agents, representatives and advisers in relation to the Underwriting Agreemant, the Prospectus and the Rights Issue.

Underwriter's Fees

The Underwriter shall be entitled to be paid by the Company:

• $a)$ an underwriting commission of 4.25% of the total offer price of the underwritten securities;
• b) a management fee of 1.85% of the total offer price of the underwritten securities;
• the number of Shortfall Options as calculated in accordance with clause 4.5 (see below) to the Underwriter or other C) parties at its direction.

• d) if, after execution of the Underwriting Agreement, the Company does not proceed with the Rights Issue, or the Company causes a material delay in the timetable for the Rights Issue, the Company must pay to the Underwriter with in 7 days after the termination:
• ij. a break fee of 0.85% of the total offer price of the underwritten securities; and
• ii1 any costs and expenses reasonably and properly incurred or accrued by the Underwriter in relation to the Offer up to and including the date of termination.

Shortfall Options

Clause 4.5 of the Underwriting Agreement requires thet if there is a Shortfall of 20% or more after the close of the Issue, the Company must grant one [1] free Mount Gibson Iron Option (exercisable at \$0.25 each expiring on 31 December 2003) for every two (2) Shortfall Shares subscribed by any Sub-Underwriter to the Offer, except to those Sub-Underwriters that offset any amount due to them by the Company pursuant to a Convertible Note against any Shortfall obligation.

The Company must make application for the quotation of these Shortfall Options and in all respects they must renk pari passu with the Company's existing quoted Options trading on the ASX under the code "MGXO".

In the event that Company shareholder approval is required to grant the total number of Shortfall Options determined in accordence with this clause 4.5, the Directors must convene a meeting where such meeting must be held not later than 33 days after the close of the issue or on such other date that has been approved by the Underwriter contemporaneously.

Termination

The Underwriter may, by giving written notice to the Company at any time until the issue of the underwritten securities, including the shortfall securities (and any obligation to grant any Shortfall Options), terminate its obligations under this Agreement if:

• $(a)$ Prospectus: any of the following occurs in relation to the Prospectus:
• $[1]$ it is not lodged with ASIC and ASX by 17 December 2002 (or such later date agreed in writing);
• the Underwriter reasonably forms the view that there is a matarial omission, it contains a material statement $\overline{\text{iii}}$ which is misteading or deceptive, or a material statement has become misleading or deceptive;
• $\left\vert \left\vert \right\vert \right\vert$ the Underwriter reasonably forms the view that any projection or forecast in the Prospectus becomes, to a material extent, incapable of being met or unlikely to be met in the projected time;
• $(iv)$ ASIC gives notice of intention to hold a hearing under section 739(2) of the Corporations Act 2001 or makes an interim order under section 739(3) of the Corporations Act 2001; or
• any person, other than the Underwriter, who consented to being named in the Prospectus, withdraws that $[v]$ consent;
• (b) Supplementary Prospectus: the Underwriter reasonably forms the view that a supplementary or replacement documant (as appropriate) must be lodged with ASIC under section 719 or section 724 of the Corporations Act 2001 and the Company does not lodge a supplementary or replacement document (as the case may be) in the form and content and within the time reasonably required by the Underwriter;
• $\left{ \mathsf{c}\right}$ ASX listing: the ASX does not give approval for the underwritten securities or the Shortfall Optionsto be listed for official quotation, or if approval is granted, the approval is subsequently withdrawn, qualified or withheld;

• ASX Index change: either the All Ordinaries Index or the ASX S&P 200 Materials Index of the ASX is at any time at a (d) level which is 10% or more below its level at the close of trading on the last Business Day immediately before the date of this Agreement.
• market price: if the market price of the Company's Shares as quoted on the ASX under code "MGX" trades at any $[_e]$ time during the Offer period below \$0.09;
• indictable offence: a director of the Company or any Relevant Corporation is charged with an indictable offence or is $(f)$ the subject to a court proceeding which makes an adverse finding as to the conduct, honesty or ability to manage a corporation or is found to have misused his position as an officer of a corporation;
• $\lbrack \mathbf{g} \rbrack$ return of capital or financial assistance: the Company or a Relevant Corporation takes any steps to undertake a proposal contemplated under section 257A or passes or takes any steps to pass a resolution under section 260B of the Corporations Act 2001, without the prior written consent of the Underwriter;
• banking facilities: the Company's bankers not terminating or issuing any demand or penalty notice or amending the $[h]$ terms of any existing facility or claiming repayment or accelerated repayment of any facility or requiring additional security for any existing facility;
• $\left[\mathbf{i}\right]$ change in laws: any of the following occurs:
• fil. the introduction of legislation into the Parliament of the Commonwealth of Australia or of any State or Territory of Australia; or
• the public announcement of prospective legislation, regulation or policy by the Federal Government, $(ii)$ or the Government of any State or Territory; or
• the adoption by ASIC, its delegates, ASX, the Reserve Bank of Australia or any other regulatory fiii1 authority of any regulations or policy; or

which does or is likely to prohibit, restrict or regulate the principal business of the Company, the Offer or the operation of stock markets generally.

• fil failure to comply: the Company or any Relevant Corporation fails to comply with any of the following:
• $[$ i a provision of its constitution;
• $[1]$ any statute;

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• $[iii]$ a requirement, order or request, made by or on behalf of ASIC, ASX or any governmental agency, or
• any material agreement entered into by it other than disclosed in the Prospectus;
• $(k)$ alteration of capital structure or constitution: except as described in the Prospectus, the Company alters its capital structure or its constitution without the prior written consent of the Underwriter;
• hostilities: there is an outbreak of hostilities or a material escalation of hostilities (whether or not war has been $[1]$ declared) after the date of this Agreement involving one or more of Australia, Indonesia, Japan, Russia, the United Kingdom, the United States of America, the Republic of South Africa, India, Pakistan or the Peoples Republic of China, other than hostilities involving Afghanistan, any country bordering Afghanistan or any Arab country (being a country the majority of whose inhabitants are of Arab ethnicity);
• $[m]$ extended force majeure: a force majeure, which prevents or delays an obligation under this Agreement, lasting in excess of 2 weeks occurs:
• $(n)$ default: the Company is in default of any of the terms and conditions of the Underwriting Agreement or breaches any warranty or covenant given or made by it under the Underwriting Agreement;

Atd)b) Heigh Waten Inizo Piv/Ate រែណ

Mount Gibson fron

• $[0]$ adverse change: any adverse change occurs which materially impacts or is likely to impact the operational or financial position of the Company or a Relevant Corporation (including but not limited to an administrator, receiver, receiver and manager, trustee or similar official being appointed over any of the assets or undertaking of the Company or a Relevant Corporation);
• $(p)$ investigation: any person is appointed under any legislation in respect of companies to investigate the affairs of the Company or a Relevant Corporation:
• ${q}$ due diligence: there is a material omission from the results of the due diligence investigation performed in respect of the Difer or the results of the investigation or the verification material are false or misleading;
• $[r]$ prescribed occurrence: a prescribed occurrence occurs, other than as disclosed in the Prospectus;
• $[s]$ Suspension of debt payments: the Company suspends payment of its debts generally;
• $[t]$ event of insolvency: an event of insolvency occurs in respect of a Relevant Corporation;
• $\lceil u \rceil$ Judgment against a Relevant Corporation: a judgment in an amount exceeding \$50,000 is obtained against a Relevant Corporation and is not set aside or satisfied within 7 days; or
• $[v]$ Default by Sub-underwriter: if Kingstream Steel Limited (Subject to Deed of Company Arrangement) or any Company introduced Sub-Underwriter breaches a term or fails to perform in accordance with the terms of its sub-underwriting agreement with the Underwriter unless rectified by the introduction of replacement sub-underwritings able to settle within 5 Business Davs.

EXPENSES OF THE ISSUE

The expenses of the Rights Issue payable by the Company, including the underwriting commission, management, advisory, legal and accounting fees and Share Registry costs, are estimated to amount to approximately \$720,000.

	TOTAL	\$720,000
Miscellaneous, including printing & postage		\$17,000
Leoal Fees		\$10,000
Rights Issue Underwriting Fee		\$463.000
Rights Issue Management Fee		-6210.000

JARONACH LOAN

Ey Loan and Guarantee Agreement made 30 July 2002, Jaronach Pty Ltd ("Jaronach") egreed to make a cash advance of \$2,000,000 ("Loan") available to Mount Gibson Iron to assist Mount Gibson Iron in providing a bank guarantee required under the terms of its Port Services Agreement with the Geraldton Port Authority (and other parties).

The Loan was to be repaid on the earlier of three months after the Loan was provided under the Agreement or a default notice was given by the Lender. Interest accrues on amounts not paid at a default rate being 15% per annum. The Loan is guaranteed by Mount Gibson Iron and its wholly owned subsidiary. Geraldton Bulk Handling Pty Ltd, and the security includes a first ranking third party mortgage in relation to the Tallering Peak tenements and a registered fixed and floating charge over the assets of Mount Gibson Iron.

The Loan was due to be repaid on or about 30 October 2002. Jaronach has since agreed to extend the Loan until 17 February 2003 for payment of an agreed extension fee.

The Loan is repayable on one of three events, which ever is earlier.

• $a)$ one day after funds are made available from the Issue.
• b) one day after funds are received from the Granier placement (see announcement dated 16 December 2002)
• or if the loan is substituted by a third party. $\mathbf{C}$

医血管病 7^4@}@}##{@}\Y}^{{}#{

CONSENTS

The following parties have given their written consent (which has not been withdrawn at the time of lodgement of this Prospectus with ASIC) in the following terms:

. Paterson Ord Minnett Ltd has given its consent to be named as Underwriter in the Corporate Directory and elsewhere in this Prospectus in the form and context in which it is named. Paterson Ord Minnett Ltd was not involved in the preparation of any part of this Prospectus, did not authorise or cause the issue of this Prospectus and expressly disclaims and takes no responsibility for any material in, or omission from, this Prospectus (to the extent permitted by law) and makes no express or implied representation or warranty in relation to the Company, the Prospectus or the Offer and does not make any statement in the Prospectus, nor is any statement in it based on a statement by Paterson Ord Minnett Ltd.

• Ernst & Young has given, its written consent to be named in this Prospectus and any electronic version of the Prospectus as auditors of Mount Gibson Iran, and to the inclusion in this Prospectus of references to the audited accounts of the Company. and references to those accounts in this Prospectus in the form and context in which they appear. Ernst & Young takes no responsibility for any other part of this Prospectus.

. Pullinger Readhead Stewart has given and at the time of lodging this Prospectus has not withdrawn, its consent to be named in this Prospectus and any electronic version of the Prospectus as solicitors of Mount Gibson Iron in the form and content in which it is named. Pullinger Readhead Stewart has acted as corporate legal advisors to Mount Gibson Iron and has assisted with due diligence enquiries in accordance with its usual time based charges.

. Computershare Investor Services Pty Ltd has given, and at the time of lodging this Prospectus has not withdrawn, its consent to be named in the Prospectus and any electronic version of the Prospectus as the Share Registry for Mount Gibson Iron in the form and context in which it is named.

Paterson Ord Minnett Ltd, Ernst & Young, Pullinger Readhead Stewart and Computershare Investor Services Pty Ltd jointly and severally:

• . do not make this Offer;
• . have not authorised or caused the issue of this Prospectus:

. do not make, or purport to make, any statement in this Prospectus, nor is any statement based upon a statement made by them, other than the respective references to their names; and

. to the maximum extent permitted by law, expressly disclaim and take no responsibility for any part of this Prospectus other than the respective references to their names.

INTERESTS OF THE COMPANY'S DIRECTORS

Other then as disclosed in this Prospectus, no Director either in his own right or as a partner in a firm:

. holds or has held in the past 2 years any interest in the formation or promotion of the Company, the Offer or in property (if any) acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or

• has been paid or agreed to be paid amounts either to induce him to become, or to qualify him as a Director, or otherwise for services rendered by him, or any firm of which a Director is a partner, in connection with the promotion or formation of the Company or the Offer.

A diding (0) XV 7 km i 1 i 40) e 1 y 1 y

As at the date of this Prospectus, the interests of the Directors in the Shares and Options of Mount Gibson Iron Limited were:

	Ordinary Shares	Listed Options	Directors' Options "	Other Unlisted Octions
B Willis B Johnson i C Readhead	210.000 177.500	4 327 783 1,265,695	1.000.000 750.000	$\mathbf{r}$ $\overline{\phantom{a}}$ $\bullet$
Macliver	540.833	620.904	750.000	694.444

Directors' interests include relevant interests they have in Shares and Options registered in the name of other persons. Notes: Option terms have previously been disclosed to ASX.

Directors holding Shares will be entitled to participate in the Offer on the same basis as Shareholders.

¹³ Unlisted Options exerciseable at 25 cents between 1 January and 31 December 2003, provided the relevant director is still in office at 31/12/02.

⁽²⁾ Exerciseable at 15.84 cents on or before 28/02/06.

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors and Executive Officers. The maximum total compensation payable to Non-executive Directors is \$150,000 and was approved by Shareholders on 18 December 2001.

Executive Chairman, Mr William Willis is entitled to receive Directors' fees of \$50,000 per year, and further payments pursuant to the terms of a Services Agreement entered into between the Company any Mr Willis on 23 October 2001. During the two years preceding lodgement of the Prospectus with ASIC, Mr Willis has been paid or is due to be paid a total of \$43,833 in respect of Directors' Fees and \$58,488 in respect of additional services provided to the Mount Gibson Iron Group.

Managing Director, Mr Brian Johnson is employed by a consulting company which has been paid or is due to be paid a total of \$271,500 for his services to the Group during the two years preceding lodgement of this Prospectus with ASIC.

Non-executive Directors, Mr Macliver and Mr Readhead are each entitled to receive Directors' fees of \$36,000 per year. Nonexecutive Directors may also be remunerated for additional specialised services performed at the request of the Board. During the two years preceding lodgement of this Prospectus with ASIC, Messrs Macliver and Readhead were paid or are due to be paid amounts of \$56,719 and \$33,000 respectively, in Directors' fees by the Company.

Grange Consulting Group Pty Ltd, of which Mr Ian Macliver is a Director and shareholder, has been paid or is due to be paid \$75,172 by the Group during the two years preceding lodgement of this Prospectus with ASIC, for corporate advisory, company secretarial and financial management services.

Pullinger Readhead Stewart, of which Craig Readhead is a partner, has been paid or is due to be paid a total of \$11,041 during the two years preceding lodgement of this Prospectus with ASIC for professional services rendered to the Group.

INTERESTS OF OTHER PERSONS

Except as disclosed in this Prospectus, no:

· person named in this Prospectus as performing a function in a professional, advisory or other capacity in conjunction with the preparation or distribution of this Prospectus;

• . promoter of the Company, or
• stockbroker or Underwriter to the Offer
• ΪÜ holds or has held within two years before the date of this Prospectus any interest in the formation or promotion of the Company, the Offer or property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer, or
• has been paid or given or will be paid or given any amount or benefit in connection with the formation or promotion of $(ii]$ the Company or the Offer.

A de Aviter de l'Antion

The Underwriters to the Rights Issue will receive fees as set out on page 22. Over the past two years, Paterson Ord Minnett Ltd has rendered corporate advisory and other capital raising services to the Company (including its predecessor, Whittakers Limited) for which it has received, or is entitled to be paid, fees totalling \$2B4,13D excluding GST. Paterson Ord Minnett Ltd has also been reimbursed for expenses incurred at cost during the provision of these services. As at the date of this Prospectus, Paterson Ord Minnett Ltd directors and employees may hold a beneficial interest in Mount Gibson Shares.

Paterson Ord Minnett Ltd, as principal, as at the date of this Prospectus, holds 26,600 shares in Resource Equities Limited, which is a substantial shareholder of Mount Gibson Iron.

Pullinger Readhead Stewart has acted as legal adviser to Mount Gibson Iron in relation to the Rights Issue. Pullinger Readhead Stewart's fees for this work up to the date of lodgement of this Prospectus will be approximately \$10,000 (plus any applicable GST). Pullinger Readhead Stewart will receive additional fees for work done after 16 December 2002 determined on the basis of hours spent at its ordinary hourly rates.

Ernst & Young are auditors to the Company, and during the two years preceding lodgement of this Prospectus with ASIC, Ernst & Young received or are due to receive fees of approximately \$61,457 for audit and other services from the Group.

CONTINUOUS DISCLOSURE DOCUMENTS AVAILABLE FOR INSPECTION

Mount Gibson Iron is a disclosing entity for the purposes of Part 1.2A of the Corporations Act 2001, and as such is subject to regular reporting and disclosure obligations. Copies of documents lodged in relation to Mount Gibson Iron may be obtained from, or inspected at, an office of ASIC.

Mount Gibson fron will provide a copy of each of the following documents free of charge, to any potential Applicant or Shareholder who asks for it during the period from the date of issue of this Prospectus until the Closing Date for applications under this Prospectus:

. the Annual Report of Mount Gibson Iron for the year ended 30 June 2002, being the most recent annual report of Mount Gibson Iron lodged with ASIC before the date of this Prospectus; and

all continuous disclosure notices given by the Company after lodgement of the Annual Report referred to above and before todgement of this Prospectus, which are as follows:

Data of	Headline
Announcement
10/10/2002	Proposed Share Placement
17/10/2002	Notice of AGM and Results of GM held 19/09/02
21/10/2002	Annual Report/Top 20
23/10/2002	Becoming a substantial holder
31/10/2002	Share Placement Re-Scheduled
01/11/2002	First Quarter Activities & Cashflow Report
06/11/2002	Response to ASX Query: Annual Report additional information
11/11/2002	Share Placement Re-Scheduled
25/11/2002	Transmission of Funds from Felina Holdings P/L
25/11/2002	Results of AGM
29/11/2002	Proposed Share Placement
16/12/2002	Proposed Rights Issue

Requests for copies of the above documents should be made to Ms Angela Dent, Company Secretary, on telephone: 61-8-9485-2355, facsimile: 61-8-9485-2305 or e-mail: admin@mtgibsoniron.com.au.

ADDITIONAL INFORMATION

MARKET PRICE OF SHARES

The Company is a disclosing entity for the purposes of the Corporations Act, and its shares are enhanced disclosure securities quoted on ASX.

The highest and lowest market sale prices of the Company's shares on ASX during the 3 months immediately preceding the date of lodgement of this Prospectus with the ASIC and the respective dates of those sales were:

27.5 cents per share on 19 September 2002 Highest:

11.5 cents per share on 11 December 2002 Lowest:

The latest available closing price for the Company's Shares on ASX prior to the lodgement of this Prospectus with the ASIC was 12 cents on 13 December 2002.

AUTHORISATION

In accordance with Section 720 of the Corporations Act 2001, each Director has consented in writing to the lodgement of this Prospectus with ASIC, and has not withdrawn that consent.

Dated 16 December 2002

Signed for and on behalf of Mount Gibson fron Limited.

WILLIAM B WILLIS CHAIRMAN

INNIBING 鼺 ₩ i sanak
Janaan

"Applicant"	A person who submits an Entitlement and Acceptance Form, a Shortfall Application Form or a Shortfall Options Application Form.
"ASIC"	Australian Secunties & Investments Commission.
"ASX"	Australian Stock Exchange Limited (ACN OOB 624 691).
"ASX Listing Rules"	The official listing rules of ASX.
"Board of Directors"	The board of directors of the Company.
"Business Day"	The meaning given to that term in ASX Listing Rules.
"CHESS"	The Clearing House Electronic Sub-Register System operated by ASX Settlement and Transfer Corporation Pty Limited (ACN OOB 504 532).
"Closing Date"	23 January 2003, unless extended.
"Convertible Notes"	Convertible notes issued by the Company on 1 August 2002, convertible to Shares at 30 cents per Share on or before 3D June 2005, with interest payable 6 monthly in arrears at 10%pa. Noteholders has a corresponding meaning.
"Corporations Act 2001"	The Corporations Act 2001 of Australia as amended.
"Director"	A Director of Mount Gibson Iron Limited.
"Entitlement and Acceptance Form"	The Entitlement and Acceptance Form which accompanies this Prospectus.
"Excluded Shareholders"	Shareholders who are registered as holders of Shares on the Record Date but who do not have a registered address in Australia or New Zealand.
"Existing Shares"	Shares on issue on the Record Date.
"Expiry Date"	16 January 2004, being 13 months after the date of this Prospectus.
"Issue" or "Rights Issue"	The issue by way of rights to New Shares pursuant to this Prospectus.
"Mount Gibson Iron" or "the Company"	Mount Gibson Iron Limited (ACN 008 670 817).
"Mount Gibson Iron Group" or "the Group"	Mount Gibson fron Limited and its subsidiaries being Mount Gibson Mining Limited (ABN 87 074 575 885), Geraldton Bulk Handling Pty Ltd (ACN 100 105 388) and Whittakers Timber Pty Ltd (ACN 098 602 343).
"New Shares"	The fully paid Shares to be issued pursuant to this Prospectus.
"Non-Resident"	A person or company domiciled outside of Australia.
"Offer"	The offer of New Shares and, where applicable Shortfall Options, pursuant to this Prospectus.
"Option"	An option to subscribe for Shares. "Optionholders" has a corresponding meaning.
"Prospectus"	This Prospectus dated 16 December 2002.
"Record Date"	5.00pm Perth time on 2 January 2003.
"Relevant Corporation"	Either the Company or a "related body corporate" as that expression is defined in the Corporations Act and includes a body corporate which is at any time after the date of this Agreement a "related body corporate" but casses to be a "related body corporate" because of an amendment, consolidation or replacement of the Corporations Act.
"Rights" or "Entitlement"	The right to subscribe for New Shares pursuant to this Prospectus.
"SCH"	Securities Clearing House.
"Share Registry"	Computershare Investor Services Pty Limited [ACN 078 279 277].
"Shareholder"	A holder of Shares at the Record Date.
"Shares"	Fully paid ordinary shares in the Company.

[@]\Y[_

"Shortfall" Those New Shares not applied for by Shareholders under their Rights, or applied for by other investors, which will be taken up by the Underwriter in accordance with the terms of the underwriting agreement. "Shortfall Shares" has a corresponding meaning. "Shortfall Application Form" The Shortfall Application Form included in this Prospectus. "Shortfall Options" The Options required to be issued by the Company to sub-underwriters under clause 4.5 of the Underwriting Agreement if the Shortfall is 20% or more of the Offer. "Shortfall Options Application The Shortfall Options Application Form which will be distributed by the Form" Underwriter to Sub-Underwriters together with this Prospectus. "g-All dollar amounts are in Australian Dollars, unless otherwise indicated. "Underwriter" Paterson Ord Minnett Ltd (ABN 69 008 896 311). "Underwriting Agreement" Means the Agreement between the Company and the Underwriter dated 16 December 2002 under which the Underwriter has agreed to fully underwrite the Offer. "Vendor Convertible Notes" Means the convertible notes with a face value of \$2,125,000 which were issued by the Company to Kingstream Steel Limited [subject to Deed of Company Arrangement) in August 2002, as part of the purchase consideration for the Tallering Peak mining tenements.

				MOUNT GIBSON IRON LIMITED A.B.N. 87 008 670 817											Broker Stamp
				SHORTFALL APPLICATION FORM											Broker Code			Advisor
				PLEASE READ ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM														Code
	I/We apply for
								Shares in Mount Gibson Iron Limited						at 9 cents per Share
				or such lesser number of Shares which may be allocated to me/us by the Directors.
				I/We lodge full Application Monies
\$						÷,
				Full name (PLEASE PRINT)
				Title, Given Name(s) & Sumarne or Company Name and ABN
				Joint Applicant #2 or
				Joint Applicant #3 or
	Street Number			Postal Address (PLEASE PRINT) Street
	Suburb/Town													State			Post Code
	Contact Name												Telephone Number - Business Hours
E-mail													Telephone Number - After Hours
		CHESS Participant
HIN
				Tax File Number or Exemption			Applicant #2							Applicant #3
		Cheque Details
Drawer						Bank			Branch				BSB			1\$	Amount of Cheque
																\$
										By completing and lodging this Application Form you acknowledge:

Returning the Application Form with your cheque for the Application Monies will constitute your offer to subscribe for Shares
in the Company.

You should read the Prospectus carefully before completing this Application Form.

Mount Gibson Iron

Please complete all relevant sections of the Shortfall Application Form using BLOCK LETTERS

• A) Enter the NUMBER OF SHARES you wish to apply for.
• B) Enter the TOTAL AMOUNT of Application Monles payable. To calculate the amount multiply the number of Shares applied for by the amount per Share (being 9 cents per Share).
• C) Enter the FULL NAME(S) and TITLE(S) of all legal entities that are to be recorded as the registered holder(s). Refer to the Name Standards below for guidance on valid registration.
• Enter the POSTAL ADDRESS for all communications from the Company. Only one address can be recorded. D)
• E) Enter telephone numbers, email address, and a contact person the registry can speak to if they have any queries regarding this Application.
• $F)$ If you are sponsored in CHESS by a stockbroker or other CHESS participant, enter your Holder Identification Number.
• G) Enter the tax file number(s) of the Applicants. With a joint holding, only the tax file numbers of two holders are required,
• Payment must be made in Australian Currency and cheques must be drawn on an Australian Bank. Cheques or bank $H$ drafts must be payable to "Mount Gibson Iron Limited Trust Account" and crossed "Not Negotiable". Cheques not properly drawn will be rejected. Cheques will generally be deposited on the day of receipt. If cheques are dishonoured the Application may be rejected.
• I) Before completing the Shortfall Application Form the Applicant(s) should read the Prospectus to which the Application relates. The Applicant(s) agree(s) that this Application is for Shares in Mount Gibson fron Limited upon and subject to the terms of the Prospectus, agree(s) to take any number of Shares equal to or less than the number of Shares indicated in Box A that may be allotted to the Applicants pursuant to the Prospectus and declare(s) that all details and statements made are complete and accurate. Where the number of Shares allotted is less than the number of Shares applied for, surplus Application monies will be despatched to the applicant within 30 days of the Closing Date. Interest will not be paid on refunded monies.

Forward your completed Application together with the Application Monies to:

Street Address:	Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth, Western Australia 6000	Postal Address:	Computershare Investor Services Pty Ltd GPO Box D182 Perth, Western Australia 6840
			Martin and Conservations must be received by no later than 5:00 pm. Perm Time on January 23 2008. The final marti and an annual control of the first
Name Standards	Only legal entities may be registered as the bolders of securities.

			Only legal entities may be registered as the holders of securities
--	--	--	--------------------------------------------------------------------	--	--	--	--	--	--	--	--	--	--

• The full and correct name of each entity must be shown.
• Salutations such as MR, MRS & MS should be included.
• Securities cannot be registered in the name of a trust and no trust can be implied.
• Securities should not be registered in the name of a minor or a deceased person.
• An account designation can be included. If shown, it must be contained within one line and

within the "< >" symbols. The last word of the designation must be ACCOUNT or A/C.

Type of Investor	Correct Form of Registration	Incorrect Form of
		Registration
Individual (Use given names in full, not initials)	Mr John Alfred Smith	NA Smith
Company (Use the Company's full title, not abbreviations)	ABC Pty Ltd	ABC P/L ABC Co/ or.
Joint Holdings	Mr Peter Robert Williams &	Peter Robert &
Use full and complete names	Ms Louise Susan Williams	Louise S Williams
Trusts	Mrs Susan Jane Smith	Sue Smith Family Trust
Use the trustee(s) personal name(s).
Deceased Estates	Ms Jane Mary Smith &	Estate of late John Smith
Use the executor(s) personal name(s).	Mr Frank William Smlth
		John Smith Deceased
Minor (a person under the age of 18)	Mr John Alfred Smith	Master Peter Smith
Use the name of a responsible adult with an appropriate
designation.

enia

MOUNT GIBSON IRON LIMITED A.B.N. 87 008 670 817 Broker Stamp	Broker Code Advisor
SHORTFALL APPLICATION FORM
PLEASE READ ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM	Code
I/We apply for
lShares in Mount Gibson Iron Limited at 9 cents per Share
or such lesser number of Shares which may be allocated to me/us by the Directors.
I/We lodge full Application Monies \$
$\blacksquare$
Full name (PLEASE PRINT) Title, Given Name(s) & Sumarne or Company Name and ABN
Joint Applicant #2 or
Joint Applicant #3 or
Postal Address (PLEASE PRINT)
Street Number Street
Suburb/Town State Post Code
Contact Name Telephone Number - Business Hours
E-mail Telephone Number - After Hours
CHESS Participant
HIN
Tax File Number or Exemption Applicant #2 Applicant #3
Cheque Details Drawer Bank Branch BSB Amount of Cheque
Ŧ
J.
By completing and lodging this Application Form you acknowledge:

Returning the Application Form with your cheque for the Application Monies will constitute your offer to subscribe for Shares in the Company.

You should read the Prospectus carefully before completing this Application Form.

Mount Gibson Iron

Please complete all relevant sections of the Shortfall Application Form using BLOCK LETTERS

• Enter the NUMBER OF SHARES you wish to apply for. A)
• Enter the TOTAL AMOUNT of Application Monies payable. To calculate the amount multiply the number of Shares B) applied for by the amount per Share (being 9 cents per Share).
• Enter the FULL NAME(S) and TITLE(S) of all legal entities that are to be recorded as the registered holder(s). C) Refer to the Name Standards below for guidance on valid registration.
• Enter the POSTAL ADDRESS for all communications from the Company. Only one address can be recorded. D)
• E) Enter telephone numbers, email address, and a contact person the registry can speak to if they have any queries regarding this Application.
• $F$ If you are sponsored in CHESS by a stockbroker or other CHESS participant, enter your Holder Identification Number.
• Enter the tax file number(s) of the Applicants. With a joint holding, only the tax file numbers of two holders are required. G)
• Payment must be made in Australian Currency and cheques must be drawn on an Australian Bank. Cheques or bank $H$ drafts must be payable to "Mount Gibson Iron Limited Trust Account" and crossed "Not Negotiable". Cheques not properly drawn will be rejected. Cheques will generally be deposited on the day of receipt. If cheques are dishonoured the Application may be rejected.
• Before completing the Shortfall Application Form the Applicant(s) should read the Prospectus to which the Application I) relates. The Applicant(s) agree(s) that this Application is for Shares in Mount Gibson fron Limited upon and subject to the terms of the Prospectus, agree(s) to take any number of Shares equal to or less than the number of Shares indicated in Box A that may be allotted to the Applicants pursuant to the Prospectus and declare(s) that all details and statements made are complete and accurate. Where the number of Shares allotted is less than the number of Shares applied for, surplus Application monies will be despatched to the applicant within 30 days of the Closing Date. Interest will not be paid on refunded monies.

Forward your completed Application together with the Application Monies to:

Street Address: Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth, Western Australia 6000	Postal Address: Computershare Investor Services Pty Ltd GPO Box D182 Perth, Western Australia 6840
	[11] [11] The state supplications must be received by no later than 5.00 pm Perth Time on January 23 2003. See the second state is

Name Standards	Only legal entities may be registered as the holders of securities. ٠
	The full and correct name of each entity must be shown. . .
	Salutations such as MR, MRS & MS should be included. ٠
	Securities cannot be registered in the name of a trust and no trust can be implied. ٠
	Securities should not be registered in the name of a minor or a deceased person. $\bullet$
	An account designation can be included. If shown it must be contained within ane line and

An account designation can be included. If shown, it must be contained within one line and within the "< >" symbols. The last word of the designation must be ACCOUNT or A/C.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual (Use given names in full, not initials)	Mr John Alfred Smith	N A Smith
Company (Use the Company's full title, not abbreviations)	ABC Ptv Ltd	ARC P/L or ABC Co
Joint Holdings	Mr Peter Robert Williams &	Peter Robert &
Use full and complete names	Ms Louise Susan Williams	Louise S Williams
Trusts	Mrs Susan Jane Smith	Sue Smith Family Trust
Use the trustee(s) personal name(s).
Deceased Estates	Ms Jane Mary Smith &	Estate of late John Smith
Use the executor(s) personal name(s).	Mr Frank William Smith
		John Smith Deceased
Minor (a person under the age of 18)	Mr John Alfred Smith	Master Peter Smith
Use the name of a responsible adult with an appropriate
designation.