MGX RESOURCES LIMITED — Capital/Financing Update 2006

Oct 18, 2006

Aztec Resources Limited ARN: 45 078 548 562 Suite 4, Level 5, South Shore Piazza 85 The Esplanade, South Perth WA 6151 T: 61 8 9423 0800 F: 61 8 9423 0801 E: azr@aztecresources.com.au W: www.aztecresources.com.au

19 October 2006 ASX Announcement

Project Funding Update

Aztec Resources Limited (ASX and AIM code: AZR) ("Aztec") wishes to advise shareholders that it is now at the final stage of approval with a banking syndicate regarding the provision of finance facilities of A\$100 million to meet the balance of development expenditure commitments and ongoing working capital requirements associated with its Koolan Island Iron Ore Project.

The A\$100 million facility will consist of:

• a senior debt facility of A\$54 million: $\bullet$
• a cost overrun facility of A\$10 million: $\bullet$
• a working capital facility of A\$30 million; and $\bullet$
• an environmental bond facility of A\$6 million. $\bullet$

However, an issue has arisen in respect of certain rights held by Australian Royalties Corporation Pty Limited ("ARC"), the original vendor of 30% of the Koolan Island tenements. These rights include:

• A royalty of A\$1 per tonne for every tonne of iron ore sold from the Project. ARC has recently $\bullet$ lodged caveats over Koolan Island mining tenements to secure this royalty interest.
• An option for ARC to repurchase its original 30% interest in the Koolan Island tenements for a nominal sum if production has not commenced from those tenements by 15 June 2007. Under this option ARC would have the right to exercise its repurchase right if Aztec has not commenced mining and shipping of a minimum of 500,000 tonnes of iron ore by 15 June 2007. Provided the current timetable for production and shipping is maintained, Aztec Directors do not believe this repurchase right will be triggered.

The banking syndicate is not able to finalise the banking facilities unless the risk of ARC exercising its repurchase right is extinguished and ARC's caveats are removed.

In light of these concerns raised by the banking syndicate, Aztec is in negotiations with ARC to acquire its royalty (so as to remove the caveats) and to extinguish the repurchase right.

Aztec shareholders should be aware that any transaction with ARC to acquire its royalty may involve the issue of Aztec shares to ARC. If shares are issued, this may trigger a defeating condition under the takeover offer for Aztec by Mount Gibson Iron Limited (ASX code: MGX) ("Mount Gibson"), Aztec will liaise with Mount Gibson in this regard.

Provided the negotiations with ARC are successful. Aztec believes it will receive credit approval from the banking syndicate shortly after any agreement is executed with ARC. Credit approval from Aztec's banking syndicate will allow immediate draw-down of the first tranche of the senior debt facility. The remainder of this senior debt facility will be available for drawdown as soon as certain conditions subsequent relating to environmental approvals have been met. These are expected to be met within the next 3 weeks.

If the negotiations are not successful, then it is likely the banking facilities will not be available to Aztec. As noted on pages 41 and 47 of Aztec's latest annual report, if Aztec is unable to secure the provision of finance facilities on or around the end of October 2006, there is significant uncertainty as to whether the company and the consolidated entity will be able to continue as a going concern.

Due to the ongoing negotiations with ARC, Aztec this morning requested that its shares be placed in a trading halt, which is to continue after this announcement. It is anticipated that Aztec will make a further announcement regarding the status of these negotiations with ARC before 10am (EST) on Monday 23 October 2006.

Takeover Update - Alternative Proposals

As Mount Gibson is due to announce later this afternoon whether it plans to extend its offer or to change any of the conditions of its offer. Aztec's Directors wish to advise that there are no discussions with third parties presently on foot which are likely to result in an alternative proposal being put forward before the current scheduled close of Mount Gibson's offer.

For further information please contact:

Aztec Shareholder Information Line

Australian Callers: 1800 602 244 International Callers: +61 8 6218 4220

Media Enquiries

Purple Communications Warrick Hazeldine Tel: +61 8 9485 1254 Mob: +61 (0) 417 944 616 E: whazeldine@purplecom.com.au

UK Fiona Owen, Grant Thornton: +44 (0) 870 991 2318