Sinosteel turns up the heat on Midwest

China's Sinosteel has turned up the heat on its takeover target Midwest Corporation Ltd which today announced it was withdrawing a potentially lucrative proposal to grant options to its non executive directors.

In a letter to Midwest shareholders, Sinosteel said the Midwest options plan was "beyond the score of even the most extravagant companies in Australia."

This afternoon Midwest issued its own statement saying it would not progress with the options for its non executive directors but would proceed with an options plan for its senior executives.

Statements from both Midwest Corporation and Sinosteel are pasted below:

From Sinosteel:

Dear Midwest Shareholder,

Sinosteel's offer of $5.60 cash for your Midwest shares is now open

You should have now received the bidder's statement which includes our offer to buy all your shares in Midwest
Corporation Limited for $5.60 cash per share.

The offer is now open and will close on 15 May, unless extended.

We encourage you to accept the offer without delay by completing and returning an acceptance form and take
advantage of this certainty of return on your investment.

Value needs substance

The Midwest directors are on the record as saying that our offer price undervalues Midwest's assets, but they
haven't provided you with any information of substance to justify that claim.

Midwest's directors must provide you with a reasonable basis for their statements on the value of Midwest's assets.

Sinosteel looks forward to seeing the Midwest directors' valuation of the assets in the target's statement supported by an independent expert's report.

Without this, we will assume they have no reasonable basis for their assertion that $5.60 cash per share is not a fair price.

Our offer provides a premium of 79.8% to the one month VWAP* share price of Midwest prior to it formally
becoming a takeover target.

This offer premium already anticipated the large increase in iron ore prices which has now been achieved by some producers, and we are still prepared to pay it even though many global stock markets are facing the biggest correction since 1987.

You should also be aware that we purchased nearly 20% of Midwest's shares in late January, mostly from
sophisticated institutional investors, at prices below the current offer price.

The offer provides you with a premium to what those investors achieved, and a signifi cant premium to the pre-bid price in an uncertain market.

Risks become reality

On 7 April, Midwest announced delays in the drilling programme supporting its pre-feasibility study for its
principal asset, the Weld Range Project, as a result of wet weather and challenging drilling conditions.

These setbacks are not uncommon in the mining industry and highlight the risk and uncertainty of being a Midwest
shareholder.

The signifi cant increase in global interest margins is another issue that Midwest needs to overcome at a time when it needs to consider how best to fund and manage large potential developments.

Midwest's dispute with Yilgarn is not in your interests

Sinosteel wants to ensure that the board of your company is acting in your best interests at all times.

As a major shareholder, Sinosteel is concerned by Midwest's posturing in relation to its nomination of Yilgarn
Infrastructure Limited to contest the right to develop the Oakajee port and rail infrastructure.

It's an approach that may jeopardise Midwest's ability to win the right to participate in the infrastructure development.

Based on Midwest's own announcements, the exclusivity it has granted Yilgarn does not allow it to nominate anyone else; Sinosteel is concerned that your Board may be acting against your interests.

Your directors have also announced an extraordinary plan to reward themselves with options that is beyond the scope of even the most extravagant companies in Australia.

You deserve better.

Offer free of regulatory approval conditions

As previously advised, we have received:
- confi rmation from FIRB that there is no objection to our offer from the Australian Treasurer; and
- approval from the National Development and Reform Commission in China (NDRC).

We are also pleased to advise that the State Administration of Foreign Exchange (SAFE) has approved the offer and that Chinese Ministry of Commerce (MOFCOM) approval is no longer required.

Accordingly, the offer will be freed of the Chinese Regulatory Approval condition in Section 12.6(2) of our replacement bidder's statement.

ACCEPT OUR OFFER OF $5.60 CASH FOR YOUR SHARES.

From Midwest:

The Board of Midwest Corporation Ltd will not progress at this time a proposal for a share option plan for Non-Executive Directors.

Under the proposal announced on 27 February 2008, Non-Executive Directors would have been granted options that would have vested when Midwest's shares traded at a price above $7.00 per share and with an exercise price of $5.60 per share.

Midwest Chairman Jesse Taylor said the original intention was to incentivise Non-Executive Directors to enhance the share price above the indicative offer from Sinosteel.

"As Sinosteel has now launched an unsolicited Offer for Midwest, the Board's view is that the share option plan for Non-Executive Directors should not be seen or used to distract share holders from the core issue of the Offer which is the value of the future potential of Midwest's five major iron ore projects.

"The Board also wishes to ensure complete alignment between the interests of Directors and shareholders when considering the merits of the Sinosteel Offer.

On the Sinosteel Offer, the board of Midwest continues to advise shareholders to TAKE NO ACTION and will provide further advice in the target's statement next week.

"In originally proposing the structure of the share option plan for Non-Executive Directors, the Board was indicating it believed a Midwest share price of $7.00 was achievable in the foreseeable future based on expectations of the current exploration program and the outlook for price and demand for iron ore.

"The Non-Executive Directors would not have received any benefit from the options proposal below the value of $5.60, which had already been indicated by Sinosteel.

Executive Directors and Senior Management

Midwest announced on 25 June 2007 its intention to implement a share option plan for Executive Directors and Senior Management.

The Company has been operating since that date on the basis that these share options would be approved by Midwest shareholders but deferred progressing a shareholder approval vote because of the Murchison Metals Limited takeover proposal.

The Board believes the Executive Directors and Senior Management share options plan has been vital to retaining and incentivising senior executives in the face of onerous demands from rapid exploration and project development, and alternative offers from competitors in a booming sector.

The Murchison Metals Limited bid has now lapsed.

The Midwest Board still intends to submit the share option plan for Executive Directors and Senior Management for shareholder approval.

Employee Option Scheme

Retention of employees is critical to the delivery of shareholder value through the successful development of Midwest's five projects.

Therefore the Board of Midwest has determined to progress the establishment of a new Employee Option Scheme, which the Midwest Board intends to submit for shareholder approval.

If approved by Midwest shareholders, the Board will be authorised to establish the Employee Option Scheme and issue up to 1,500,000 Employee Options to eligible employees, including during the current Sinosteel bid Offer Period, if the bid Offer Period is extended.

The purpose of the Employee Option Scheme is to incentivise eligible employees to provide dedicated and ongoing commitment to the Company, align the interests of employees and Shareholders, and reward eligible employees for their efforts.

The Directors of the Company will not be eligible to participate in the Employee Option Scheme.

It is proposed that a total of 1,000,000 Employee Options be issued to employees already identified, with an exercise price of $5.16 calculated using an 8 week VWAP.

The issue price of each Employee Option is nil.

The Employee Options proposed to be issued to eligible employees under the Employee Option Scheme will vest over a period of 4 years.

The remaining 500,000 Employee Options may be issued to eligible employees at an exercise price equal to the 8 week VWAP prior to the date of issue of those Employee Options.