Fortesette Metals Group Ltd Ickplume 61862185888 MN. 1102 594 572 hactiunilc , 615621588511 57 MIclaiilc leiracc Fast Perth 11ChSlie11 1111fgl.cu 11estern Australia 60114 I'() Mix 6915, Last Perth, 11'i:stein Mi,tralia 6892 FMG CHICHESTER PTY LTD Community Development Plan August 2008 1. PROJECT DESCRIPTION FMG Metals Group Limited (FMG) is developing the Pilbara Iron Ore and Infrastructure Project in the Pilbara region of Western Australia. The initial project comprises: An open access port facility on the western side of Port Hedland Harbour at Anderson Point,The twin 750 m shipping berths will allow for two 250,000 dead weight tonnes (DWT) vessels to be berthed. One berth will be serviced by a wharf and shiploader whilst the other is a parking berth only, which will be upgraded for future product demand. An open access railway approximately 260kms long connecting the port to the mining operations. Mining operations at Cloud Break in the Chichester Ranges approximately 120km north west of Newman. Initial production is 45 million tonnes per annum of iron ore. During 2008, work commenced on expansion of the project including: o Production of up to 120 million tonnes per annum of iron ore from the Chichester Ranges, based on: o An expansion of output at Cloud Break; and o A new minesite at Christmas Creek. The Project is being developed under two State Agreements: 1. The Railway and Port (The Pilbara Infrastructure Pty Ltd) Agreement Act 2004 which deals with the planning, construction and operation of the railway and port facilities, and 2. The Iron Ore (FMG Chichester Pty Ltd) Agreement Act 2006 which deals with the mining aspects of the Project. FMG Chichester Pty Ltd, a wholly owned subsidiary of FMG, is responsible for developing the mining aspects of the Project. The Pilbara Infrastructure Pty Ltd, a wholly owned subsidiary of FMG, will be the owner of the port and rail facilities. Community Development Plan 2. BACKGROUND TO THE PLAN Clause 7 of the Iron Ore (FMG Chichester Pty Ltd) Agreement obliges FMG Chichester to establish a Community Development Plan ("the Plan"). The intent of the Plan is to set out how FMG Chichester proposes to achieve community and social benefits for the Pilbara communities where we will work throughout the operation of the iron ore project. These communities are inclusive of those in the Shires of East Pilbara and Ashburton. The community and social benefits that must be addressed in the Plan include: 1. Training and guaranteed employment for local residents; 2. Local purchasing of goods and services and regional development; 1 Contribution to community services and facilities; and 4. Developing a regionally based workforce. 3. ACHIEVEMENT OF DESIRED OUTCOMES Results of the Community Development Plan commitments are to be measured through agreed performance indicators. FMG Chichester recognises that some strategies outlined in the Plan require the involvement of Government agencies and the Shires of Ashburton and East Pilbara The successful delivery of some strategies may be influenced by government budgetary decisions. If this occurs, the extent of delivery will be addressed in annual discussions between the Shires and FMG Chichester on performance indicators. FMG Chichester will also ensure that major contractors adopt and support the implementation of this plan. 4. CONTINUING CONSULTATION ARRANGEMENTS From time totime,additional objectiveswillarise and FMG Chichester acknowledges that nothing inthis Community Development Plan precludes discussion initiated by the Shires of Ashburton and East Pilbara or FMG Chichester. Equally, in accordance with Clause 7 (8) of the State Agreement, the Minister and FMG Chichester may confer on possible amendments to the plan. Under the latter circumstances, FMG Chichester will hold discussions with the Shires of East Pilbara and Ashburton before agreeing any amendments with the Minister. Commitments in the plan may be amended or additional schedules may be included, by agreement between the Shires and FMG Chichester. Any changes or additions to the plan have no effect unless approved by the Minister. Community Development Plan By December 31 2008, the Shires of Ashburton and East Pi lbara and FMG Chichester will have completed the following: 1. Development of a preliminary set of Key Performance Indicators (KPI's) and Performance Measures (PM's) against the strategies identified in the Community Development Plan and their relationship to the Shires' annual strategic plans. 2. A joint implementation plan for the implementation of actions leading to achievement of the KPI's. This plan is to include: a. the structure of partnership arrangements, and b. the commitment of FMG Chichester, Shire of Ashburton and Shire of East Pi lbara to the implementation of the actions 3. A joint annual review cycle for the KPI's and Performance Measures and a five yearly review of the Chichester Community Development Plan. Asubstantialchange in scopeorscaleofactivitiesconducted by FMG Chichester, pursuant to the State Agreement; other than for mine closure purposes; will trigger a review of the plan. In any event, the plan will be reviewed at a minimum of every 5 years. The review process will include discussions between the Shires of East Pilbara and Ashburton, FMG Chichester and the Minister. Any changes or additions to the plan have no effect unless approved by the Minister. An annual report on the outcomes of the Community Development Plan commitments will be included in FMG Chichester's Annual Report and provided to the Shires of East Pi lbara and Ashburton, and to the Minister responsible for the Agreement. 5. THE OPPORTUNITIES I BENEFITS The Pilbara Iron Ore and Infrastructure Project provides a number of significant benefits to the State of Western Australia and the Pilbara region. The mining component of the project, to be developed by FMG Chichester, will deliver the following benefits: Payment of royalties to the State Government on the mined iron ore; Full payment of rates to Local Government; Creation of significantdirect andindirect employment opportunities through materials purchase, construction and operation; Secondary processing obligations once specific iron ore production triggers are reached; Community Development Plan Regionalcommunitycapacitybuildingthroughlocalemployment opportunities, including meaningful vocational training and employment for localindigenouspeople,contributionstocommunityinfrastructure, facilities and programmes within the Shires of Ashburton and East Pilbara, procurement fromlocalsuppliersandthrough FMG Chichester's commitment to this Plan. The infrastructure components of the project are to be developed under the Railway and Port Agreement, and will deliver the following additional benefits: The railway and port facilities are to be available to other parties under open access arrangements; and Construction of the railway and port facilities requires expenditure of initially approximately $2 billion, which is a significant contribution to the State's economy. Community Development Plan OUTCOME 1 Training & employment for people living in the Pilbara Strategies 1. Develop in partnership with relevant Federal and State Governments and community organisations, initiatives and projects to assist East Pilbara and Ashburton long term unemployed and unskilled job seekers (including indigenous members of the community) to gain sustainable full-time employment within the company's mining operations, including the construction phase. 2. Develop and enact partnerships with Federal and State Governments to assist FMG in delivering employment and training programmes in accordance with the needs of East Pilbara and Ashburton communities.These programmes may include cadetships, apprenticeships, traineeships, Aboriginal school based traineeships and school based apprenticeships. 3. Give preference to indigenous people from communities surrounding FMG mining operations and guarantee the employment of those indigenous people who successfully complete FMG's Vocational Training and Employment Centre program (VTEC). 4.Ensure that contract briefs include a provision to maximise East Pilbara and Ashburton employment, including indigenous employment opportunities. 5. Work to meet a target for employment of local Pilbara Aboriginal people equal to 20% of FMG's total operational employment base.Aboriginal people, especially those with connections to land surrounding the mining operations, will be given preference in employment. 6. Join with other organisations in developing local solutions to East Pilbara and Ashburton based unemployment (including the provision of necessary skills and experience). Community Development Plan OUTCOME 2 Regional Development & Local Procurement of Goods & Services Strategies 1. Provide the following assistance to Pilbara businesses in tendering for FMG contracts: a. In partnership with the Shires of East Pilbara and Ashburton and relevant organisations, identify business management and partnership opportunities for local business; b. Conduct information sessions about business opportunities with FMG. Include information on contracting policies and procedures, supplier requirements, timing factors and scope of business opportunities; c. Develop and maintain a data base of local industry capabilities to support local businesses in accessing FMG procurement opportunities; d. Pricing preference for local businesses including Aboriginal owned businesses, based on prevailing local Pilbara economic factors; e. FMG will work with