22 September 2010
Dear Shareholder,
UPDATED RECOMMENDATIONS OF NQM DIRECTORS
North Queensland Metals Limited (NQM) is writing to you in respect of a number of developments in relation to the offer made by Conquest Mining Limited (Conquest) for NQM Shares, and to provide the updated recommendations of Neville Thomas, Michael Tilley and Bruce Kay in respect of the actions which shareholders should take.
The updated recommendations of Mr Thomas, Mr Tilley and Mr Kay are also set out in NQM's fourth supplementary target's statement in relation to the Conquest Offer, which was lodged with ASX on 20
September 2010. A copy of the fourth supplementary target's statement is available from the ASX website: www.asx.com.au.
RECENT DEVELOPMENTS
On 13 September 2010, Heemskirk Consolidated announced that its offer for North Queensland Metals had lapsed on 10 September 2010.
On 16 September 2010, Conquest announced that it had entered into:
An agreement with Shandong Guoda Gold relating to the offtake of concentrate produced from the V2 deposit which forms part of its Mt Carlton Project; and
An agreement with Heemskirk to acquire its 40% interest in the Pajingo joint venture for $37 million.
On 20 September 2010, Conquest announced that:
Its relevant interest in NQM Shares had increased to 32.76% and that it expected to shortly receive an acceptance for a further 2.01% of NQM Shares held by Acorn Capital Limited; and
despite the agreement entered into with Shandong Guoda Gold, it has not made a final development decision in relation to the Mt Carlton Project, and funding is not guaranteed.
Further, the $1 billion revenue figure it had quoted in relation to the agreement with Shandong Guoda Gold is simply a calculation reflecting a number of assumptions. Actual revenue may differ materially.
On 21 September 2010, Conquest announced that its relevant interest in NQM Shares has increased to 37.49%.
DIRECTORS RECOMMENDATIONS TO SHAREHOLDERS
Neville Thomas, Bruce Kay and Michael Tilley held a number of concerns in relation to the Mt Carlton Project which are detailed in the Original Target's Statement and the First Supplementary Target's Statement. They continue to hold these concerns despite the agreement that Conquest has announced with Shandong Guoda Gold. They particularly note Conquest's further announcement of 20 September 2010 in relation to the agreement with Shandong Guoda Gold.
Mr Thomas, Mr Tilley and Mr Kay ask that NQM Shareholders give careful consideration to the issues relating to the Mt Carlton Project before deciding whether to accept or reject the Conquest Offer. The acquisition of Heemskirk's 40% interest in the Pajingo joint venture also remains subject to approval by both Conquest and Heemskirk shareholders. Until these approvals are provided, there is no certainty that Conquest will acquire Heemskirk's interest in the Pajingo joint venture.
However, Mr Thomas, Mr Tilley and Mr Kay accept that it is now likely that Conquest will obtain control of NQM and the Pajingo mine. They do not consider that it would be in the best interests of NQM Shareholders to continue to hold NQM Shares where Conquest is the controlling major shareholder.
Further, since Conquest's announcements on 16 September 2010 which are described above, Conquest Shares have traded in a range of $0.475 - $0.57. This means that the implied value of the Conquest Offer has been $0.388 - $0.435, which is in or close to the value range determined by Deloitte in its independent expert's report accompanying NQM's target's statement in relation to the Heemskirk Offer.
On this basis, Mr Thomas, Mr Tilley and Mr Kay recommend that NQM Shareholders accept the Conquest Offer.
They currently intend to either accept the Conquest Offer in respect of the NQM Shares that they hold or control, or alternatively to sell their NQM Shares on market.
Mr Thomas, Mr Tilley and Mr Kay note that the Conquest Offer will remain open for acceptance until at least 1 October 2010.
Don Walker has accepted the Conquest Offer in respect of all NQM Shares that he held or controlled.
Mr Walker recommends that NQM Shareholders accept the Conquest Offer.
If you have any further questions in relation to NQM and the takeover offer by Conquest, please call our shareholder information line on 1300 089 796.
Yours faithfully
Neville Thomas
Chairman
