Cazaly Resources Limited and Echelon Resources Limited have signed a MoU with BHP Billiton Iron Ore Pty Ltd in relation to the long term sale of iron ore from the Shovelanna Iron Ore Project.

The terms of the MOU provide that in the event Cazaly is granted E46/678, Cazaly will deliver to BHP Billiton approximately five million wet tonnes per annum of primary crushed ore, subject to Cazaly delineating a JORC compliant Proven and Probable Reserve of at least 100 million tonnes and such Reserve being compatible with specifications to be agreed.

Cazaly will transfer to Echelon a 14% interest in E46/678 upon Echelon complying with its obligations under the agreement between Cazaly and Echelon.

First production is planned within two to three years of receipt of all necessary consents and approvals for the commencement of exploration at Shovelanna. Within six months of determining the size and quality of a Reserve, BHP Billiton must elect whether to purchase any additional ore in excess of 100 million tonnes on terms and conditions to be agreed. Cazaly may sell additional ore not purchased by BHP Billiton to third parties. BHP Billiton will pay Cazaly a predetermined price based on the Benchmark Price for Mt. Newman Lump and Fines.

Cazaly has calculated that its margin based on current prices will be in the range of $70 million to $85 million per annum. These calculations are based on production of five million tonnes per annum and standard industry contract mining and primary crushing costs.

Cazaly will be responsible for the exploration, mining and primary crushing of ore from E46/678 together with delivery of the ore to an agreed delivery point on or near the boundary between E46/678 and BHP Billiton's adjoining Ore Body 18.