Gindalbie reports on quarterly activities

GINDALBIE REGIONAL EXPLORATION

Phase Two drilling at Shine Prospect completed. Phase Three drilling planned for the December quarter. Resource calculations, pit optimisation and pit design works to follow Phase Three drilling.

KARARA IRON ORE PROJECT (AnSteel earning 50%)

Project Financing

AnSteel contributes further equity payment of A$123.38 million, taking total contributions to A$228.38 million.

Negotiations on project financing terms and conditions continue to advance well.

Delegation of 10 China Development Bank (CDB) officials and three AnSteel senior executives visit Perth and Project for final project finance due diligence.

Approvals

Hematite phase Public Environmental Review (PER) process completed. Final Environmental Protection Authority assessment expected in the December Quarter 2008.

PER document for magnetite phase released for four-week public review on 15 September, 2008.

Project Development

Worley Parsons engaged as Project Management Contractor.

Front End Engineering and Design contract for magnetite concentrator awarded to Bateman and ProMet jointly.

Orders to proceed with additional crushing and grinding equipment issued to suppliers at a total value of approximately A$40 million, taking long lead item orders to approximately $110 million. Further equipment orders, totalling approximately A$100 million, expected to be placed in the December Quarter 2008.

Exploration

Magnetite resource upgraded to 1.853 billion tonnes grading 35.4% Fe. Probable Ore Reserve revised to 522 million tonnes grading 36.3% Fe, taking into account updated pit design.

GINDALBIE CORPORATE



At 30 September, 2008 cash reserves of A$129.9 million, including proportionate consolidation of Gindalbie's share (50%) of Karara Mining Limited cash reserves.

GINDALBIE METALS LTD ABN 24 060 857 614 SEPTEMBER QUARTERLY REPORT Page 1

OVERVIEW

The Company holds approximately 1,900 square kilometres of prospective tenements and iron ore rights in the Mid West Region of Western Australia both wholly owned and in Joint Venture.

The Company's aim is to be a substantial iron ore producer within the next 2 years. This will be achieved through the development of the Karara Iron Ore Project in joint venture with Anshan Iron & Steel Group Corporation (AnSteel), China's second-biggest steel maker and biggest iron ore producer. Karara consists of an initial start-up hematite operation, followed by a substantial magnetite concentrate operation.

The Company is also undertaking extensive exploration over its substantial portfolio of prospective iron ore tenements to extend its current resource base and outline future production opportunities.

Figure 1 - Gindalbie's Substantial Mid West Landholding

GINDALBIE REGIONAL EXPLORATION

Regional exploration activities during the Quarter saw the completion of the second phase of drilling at the Shine Prospect, approximately 40km north of Karara. This deposit is partially situated on M59/406, a tenement 100% owned by Gindalbie. The Shine deposit extends to the south across the tenement boundary onto E59/1330 owned by the Warriedar Joint Venture (WJV) between Gindalbie (60%) and Royal Resources (40%).

Shine is the initial focus of Gindalbie's strategy to increase its resource base of hematite Direct Shipping Ore (DSO) on tenements outside the Karara Joint Venture with AnSteel. Gindalbie controls a tenement portfolio of 1900km2 in the Mid West region of Western Australia and, as previously announced, is in the process of a program aimed at delineating exploration targets totalling 80-100 million tonnes at 55-66% Fe across those tenements. The company's geologists believe that small-to-medium sized DSO orebodies (5-15Mt) represent the principal exploration target within the Company's Mid West tenure.

Phase Three drilling is currently planned to commence on the Shine Prospect during the December Quarter. Resource calculations, pit optimisation and pit design works will be undertaken following the completion of Phase Three drilling.

The upgrading of facilities at the exploration camp at Karara are well advanced with construction work by Pindan Contracting currently ahead of schedule.

The upgraded camp will have room capacity for 120 personnel, a new kitchen and 60-seat mess facility, refurbished buildings including recreation room, gymnasium and additional laundry facilities and upgraded power, water and sewage systems.

GINDALBIE METALS LTD ABN 24 060 857 614 SEPTEMBER QUARTERLY REPORT Page 2

The new kitchen is expected to be operational by around the end of October and the upgraded camp is scheduled to be fully commissioned by the end of November 2008.

Figure 2: Karara exploration camp upgrade

Shine Prospect M59/406 (Gindalbie 100%)

On the Shine Prospect, three diamond tails to RC pre-collars totalling 452.8 metres were completed during the Quarter to complete the Phase Two drilling program to nominal 100 metre by 50 metre spacing.

Assay results were returned for the drill holes completed at the northern end of Shine during the June Quarter and these results confirmed both the strike continuity and the consistency of iron enrichment within the main banded iron formation (BIF) host rock at the northern end of the deposit. These assay results are listed in Table 1. No Davis Tube Recovery (DTR) results were returned during the Quarter.

m m m

Note: A nominal cut-off of 57% Fe with a maximum of 2m internal waste was used to locate significant ore intersections

Table 1: Shine (Gindalbie 100%) RC Results - September Quarter 2008

GINDALBIE METALS LTD ABN 24 060 857 614 SEPTEMBER QUARTERLY REPORT Page 3

Shine Prospect E59/1330 (Gindalbie 60%, Royal Resources 40%)

Phase Two diamond drilling continued at Shine within the WJV tenure with 7 holes for 584 metres completed. This drilling confirmed the high grade nature of Direct Shipping Ore (DSO) mineralisation which continues down dip from RC holes drilled during the June Quarter.

RC assay results were also returned from all unreported drilling from the June Quarter. These results continued to highlight zones of hematite enrichment over the 700 metres of the prospect that has so far been outlined over E59/1330. These assay results are tabulated in Table 2.

m m m

Note: A nominal cut-off of 57% Fe with a maximum of 2m internal waste was used to locate significant ore intersections

Table 2: Shine (Warriedar JV) RC and Diamond Results - September Quarter 2008

Overall, the Shine Prospect is demonstrating a number of mineralised (+57% Fe) zones with both strike and dip continuity over the current 100 metre by 50 metre hole spacing. Further drilling is planned for the December Quarter 2008 to infill drill lines and to provide materials for metallurgical testwork, as part of the Phase Three drilling assessment of the project.

Resource calculations, pit optimisation and pit design works are planned to be undertaken following the completion of Phase Three drilling.

RC drilling was also undertaken at the Lister Prospect which is situated 6km south of Shine and located on E59/807. In total 29 holes were completed for 2735 metres. Drilling encountered narrow zones of iron enrichment associated with the same BIF unit which hosts the Shine mineralisation. No assay results are available due to delays resulting from the current record levels of work being experienced by the assay laboratories.

Mt Mulgine Tungsten Project (Gindalbie 30%, Vital Metals Ltd 70%)

No drilling was carried out on JV ground during the Quarter however two Heritage Surveys were completed by the Badimia and Widi groups for forthcoming RC and sampling programs.

KARARA IRON ORE PROJECT (Ansteel earning 50%)

Project Financing

Equity

During the quarter AnSteel contributed a further equity payment of A$123.38 million to the joint venture company, Karara Mining Limited (KML), bringing its total contribution to A$228.38 million to date. Gindalbie also made its first equity instalment of A$18.38m from existing cash reserves.

GINDALBIE METALS LTD ABN 24 060 857 614 SEPTEMBER QUARTERLY REPORT Page 4

At the end of September 2008, KML had cash reserves of $208.4 million.

The final contributions of Gindalbie (A$143.68 million) and AnSteel (A$143.68 million) are due in October 2008. Arrangements for the funding of the contribution are expected to be finalised in October.

Debt

Significant progress has been made with project financing during the Quarter with China Development Bank (CDB). Subsequent to the end of the Quarter, ten senior CDB officials, accompanied by 3 senior AnSteel executives, visited Perth to complete the final stages of due diligence for the project financing facility.

The visit included:

1.

A meeting with a senior WA Government Minister

2.

Project presentations from senior KML management

3.

Karara site visit

4.

Geraldton tour with presentations from key port and rail infrastructure providers

5.

Meetings with other international financial institutions

Detailed negotiations on terms and conditions of the project debt facility continue to advance well.

The financial strength of AnSteel, which will act as guarantor until project completion, is expected to result in a very competitive financing package. The access to finance through AnSteel and CDB is a significant advantage for Gindalbie in these times of market upheaval and restricted global credit markets.