Dear Chatham Rock Phosphate shareholder,

This letter has just been sent to Green MP Gareth Hughes, filed with NZX and sent to the media.

Regards,

Chris Castle

CEO

Chatham Rock Phosphate Limited

P.O. Box 231, Takaka 7142

Mobile: +64 21 558 185

chris@crpl.co.nz

Skype: phosphateking

www.rockphosphate.co.nz

17 September 2013

Open letter to Gareth Hughes, Green MP

Dear Gareth

I was very disappointed to see you had aligned yourself publicly with the bottom trawling industry in a news item on TV3 at the weekend.

In our briefing to you last year you indicated you had not reached any conclusion about the merits of our project. I would have thought that you would make an informed decision, including discussion of your concerns with us, before going public for the sake of a TV sound bite.

You have publicly said you are not against mining per se and will evaluate each project on its merits. We wonder how much faith to put in that statement if the evaluation is based on so little consultation and so few facts. If you have ruled out this mining project as well as countless others, are there any you do support?

We’re astonished you have formed such a negative opinion about our project given the compelling potential environmental and economic benefits it offers and its minimal environmental impacts.

To remind you:

1. Chatham Rise rock phosphate, as an ultra-low cadmium direct-application fertiliser, has proven to be as effective as processed fertilisers while reducing run-off effects on New Zealand waterways by up to 80%.

2. This resource provides fertiliser security for farming by providing a local alternative source. Most rock phosphate used to make fertiliser now is imported from Morocco.

3. Moroccan rock phosphate is high in cadmium, involves high transport costs and has a significant carbon footprint.

4. New Zealand is predicted to be $900 million richer as a result of our new industry and we’ll be generating annual exports or import substitution of $300 million, plus supporting farming, our biggest earner.

5. By area, the economic value of the phosphate resource is 500 times greater than fishing; it is expected to yield $9.1 million per km2. In contrast, bottom trawling yields less than $20,000 per km2.

So while our operations will have some environmental impacts, they also offer very significant environmental and economic benefits.

The TV3 news item noted your alliance with the fishing industry is an unlikely one. I agree, given bottom trawling’s massive environmental impacts and lack of environmental oversight.

Our proposed mining operation is subject to a rigorous environmental evaluation and monitoring process. The story that should be getting your attention is not the potential environmental impact of our project, but the freedom of the fishing industry to devastate as much of our EEZ as they like (currently about 50,000 km2 per year, or 385,032 km2 or 9.3% of the EEZ since 1989) with no environmental oversight or monitoring.

We wouldn’t consider extracting phosphate nodules from a very limited area of the Chatham Rise if we expected it to cause more than very minor environmental impacts. Our operations will lift the top 30cm of sandy silt and redeposit 85% of it on the same area of seabed after extracting the nodules. Modelling indicates the material returned will not be widely dispersed, and the sediment that doesn’t immediately settle will rapidly dilute to insignificant levels.

Our draft environmental impact assessment (EIA), supported by more than 30 expert reports, has identified no long-term impacts on key spawning, juvenile and young fish habitat. Any potential impacts are predicted to be confined to our limited extraction areas, and are short-term, reversible, and of low environmental risk.

But while bottom trawling – ploughing vast tracts of the EEZ seabed decade after decade - requires no environmental consents, our project needs a mining licence and a marine consent. These cost millions of dollars, require years of research, consultation and official process, and involve full public scrutiny.

Chatham’s planned 15-year extraction project will touch a total of 450 km2, far less than 1% of the Chatham Rise. In contrast, over the same period fishing will bottom trawl 750,000 km2, about three times the size of New Zealand.

Year after year, weighted nets scrape about 50,000 km2 of seabed, with bottom-dwelling animals disturbed or destroyed – mostly repeatedly so areas never have the chance to regenerate. Up to 3,000 km2 of new territory is disturbed annually - an environmental impact 100 times greater than predicted for phosphate extraction. Each year we plan to touch just 30 km2.

Scientific research shows that hoki spawning is concentrated on the West Coast of the South Island and in Cook Strait, and juvenile growth occurs over the entire 189,000 km2 rise. The annual fish trawl footprint on just the Chatham Rise during the 2009-10 fishing year was 19,051 km2.

The Deep Water Group members therefore already know they can continually disturb the ecosystem of 10% of the Chatham Rise area without harming juvenile fish stocks. Chatham’s extra annual 30 km2 are likely to have no significant additional effect on the hoki fishery.

In summary, fishing destroys the benthic habitats of 100 times the area of previously untouched sea floor every year than we plan to, and every year fishing stops regeneration on an area of seafloor almost 2,000 times greater than our planned area of impact.

Thanks partly to Chatham’s $20 million investment, the rise’s benthic environment is now one of the best-known parts of our marine territory, and this information can now inform resource and environmental management decisions, possibly including modifying the location of benthic protection areas. We’ve spent three years collecting data on oceanographic conditions (tides, currents, turbidity), benthic life, and analysing the impacts of disturbances on the seafloor and in the water column so we can design a mining system and operational plan that minimises environmental impacts and protects areas of benthic habitat.

Rather than being of environmental concern, ours is a project of national significance offering significant economic and environmental benefits.

A word or two about BPAs

Benthic Protection Areas were promoted by the fishing industry, for the fishing industry, and were specifically designed to avoid fishing areas, especially those relating to bottom trawling. BPAs include a representative sample of benthic habitats, spread geographically to ensure adequate latitudinal and longitudinal variation. The map shows how they avoid bottom- trawling areas.

BPAs were designed without regard for New Zealand’s other important natural resources such as rock phosphate or massive sulphides.

BPAs were implemented to protect benthic biodiversity, not fish spawning grounds or nurseries, though that may be a side benefit for some species.

BPAs are only covered by fisheries legislation. They do not relate to other legislation covering other ocean activities, such as the newly enacted EEZ legislation, which expressly excludes any direct reference to BPAs. Consideration of the relative importance of BPA’s will be part of the environmental impact assessment process managed by the Environmental Protection Authority.

The fishing industry also used the introduction of the BPAs to substantially reduce its monitoring costs, even though establishing BPAs made no difference to its ability to bottom trawl in the vast majority of the EEZ. In recognition of the contribution BPAs would make to marine protection, the government agreed any research relating to the potential effects of bottom trawling on the benthic environment or its biodiversity should be two-thirds Crown funded and one-third industry funded.

Chris Castle, Managing Director Chatham Rock Phosphate

Attached: graphic showing the fish bottom trawl footprint of the EEZ prior to establishing the BPAs