D avid Trebeck Andrew Fletcher

PO Box 9545 5 Scott Creek Road

DEA KIN A CT 2600 Heathfield SA 5153

M obile: 0404 822311 M obile: 0419 865363

Email: dt rebeck@bigpon d.comEmail: flet cher@kin gsbrae.n et


2 January 2013
Dear fellow Penrice shareholder,

Cast your vote now and have a say in the future of your company

As your incumbent non executive directors, we are seeking your support, and asking
you to vote for our re-election, at the extraordinary general meeting (EGM) to be held in Adelaide on 25 January.
The importance of this EGM vote for the future of Penrice - and therefore for your investment - cannot be overstated.
We urge you to vote FOR us (resolutions 1 and 2) and AGAINST the other three candidates nominated by London City Equities (resolutions 3, 4 and 5) to ensure the best possible future for Penrice and your investment in the company.
You would be aware from previous correspondence that the 25 January meeting has been necessitated by the vote on the company's remuneration report at the annual general meeting (AGM) last October.
While we share all shareholders' disappointment with Penrice's recent unsatisfactory financial performance, we cannot turn back the clock - we must look to the future. We, and Penrice's senior management team, remain utterly focused on the only plan that has the capacity to solve the underlying problems facing us. Conversely, the three alternative candidates lack public company governance experience and are unlikely to bring any new insights into Penrice and its operating environment.
A detailed account of why Penrice has been suffering as it has, and our plans, are provided in presentations given to the October AGM, along with the annual report. These documents have previously been sent to shareholders - and remain available on the company's website. Please refresh your memory of them.
To reiterate, your company has three businesses that are either:

performing well - in the case of sodium bicarbonate, with profitable

expansion opportunities,

performing adequately, but with potential once the construction cycle turns -

in the case of the quarry business at Angaston, or
- 2 -

have considerable potential if we can secure a major future contract - in the
case of our innovative selective salt recovery (SSR) technology for the removal
of salts from coal seam gas water streams.
Outweighing this positive outlook is the problem-ridden soda ash business, a price-
driven commodity that has been smashed by the high $AUD, both directly (soda ash
imports are now much cheaper) and indirectly (most recently, export of more bulk
wine for bottling overseas, hence less glass demand, hence less soda ash demand;
plus the contraction of local detergent manufacture). The soda ash business has also
suffered from unreliable plant performance and significant one-off costs following
the Gawler-Adelaide rail line upgrade and a catastrophic steam supplier failure.
Penrice's debt, which increased to fund expansions prior to the GFC, is clearly unacceptable, more so now given the $AUD-driven reduction in earnings having impeded the company's ability to pay interest costs. Our attempt over the past year to reduce debt by selling the quarry business was scuttled by the widespread construction industry downturn. Throughout this difficult period, our banks have remained supportive, although cash flow, as always, is paramount.
Flowing from this, our turnaround plan in 2013 is to:

secure the company's first commercial scale SSR contract,
continue the sound performance of the sodium bicarbonate business, including further expansion in 2014,

restructure the soda ash business, and
pursue alternative arrangements with our banks.
We are well advanced. We believe we have a fighting chance to meet these challenges in a manner that will produce some upside for long-suffering Penrice shareholders. We look forward to conveying specific details to shareholders soon.
It is also our intention to identify an additional director with appropriate skills and experience (in part to replace John Hirst who regrettably was not re-elected at the recent AGM). It has not been practical to approach potential candidates with the present EGM uncertainty hanging over your company. If we thought any of the three alternative candidates standing for election at the EGM were suitable, we would gladly have endorsed them. Unfortunately, we do not have that confidence.
In addition, it would be quite inappropriate for three candidates nominated by a minor, disgruntled shareholder (London City Equities) to be elected to the board. This shareholder has displayed consistent hostility against your company over recent years (including taking legal action, through to regular personal insults against company representatives). It has not made one positive or forward-looking
- 3 -
suggestion, and its actions have been costly and distracting for us. Its representative now even refuses to engage with the chairman or CEO in any way.
If all of the alternative candidates were elected to the board, this would constitute a majority and be, in effect, a takeover of the company without a formal offer being made (or a price premium being paid). In all likelihood, board discussions would become dysfunctional and the current constructive relationships would be destroyed. None of this would advance your interests as shareholders.
Shareholders should also be aware that one of the conditions of the company's banking arrangements is the continued employment of Guy Roberts, the managing director and CEO. Were any of the alternative candidates to be elected, this may be in doubt, with obvious consequences for the company and its shareholders.
As it is, we have great confidence in the work that the CEO and his executive team are doing to position Penrice for a more profitable long term future.

Casting your vote on line

To assist shareholders wishing to vote on line, the following steps, which are more specific than those outlined on the proxy form, should be taken:

Go to Link Market Services (linkmarketservices.com.au). Towards the bottom of the page (on the left) click 'Vote Online'.

In the Single Holding box, insert 'Penrice' as the Issuer Name, insert your HIN/SRN (from the proxy form or other Penrice/Link correspondence) - if you don't have this, see below - and your postal address post code. Retype the security code and tick the 'I have read and agree to the terms and conditions' box. Click on 'log in'.

Click on 'Voting'. On the next page, click on 'Vote'. Click the declaration, and 'Next'. Click 'Next'

again.

Click on 'For' for resolutions 1 and 2 (Trebeck and Fletcher) and 'Against' on resolutions 3, 4 and 5 (Harvey, McQuade and Carter). Your voting box will then look like the following:

Resolutions

For

Against

Abstain

Open

1

ELECTION OF DIRECTOR MR DAVID TREBECK

9

2

ELECTION OF DIRECTOR MR ANDREW FLETCHER

9

3

ELECTION OF DIRECTOR MR JOHN HARVEY

9

4

ELECTION OF DIRECTOR MR SHAY MCQUADE

9

5

ELECTION OF DIRECTOR MR MIKE CARTER

9

- 4 -

Click to appoint the Chairman of the meeting as your proxy; click on 'Next'. This will confirm your

vote, following which you should receive a confirming email.

If you don't have your HIN/SRN for the step above, you will have to obtain it from Link - phone

1300 554 474.

If you have any queries or difficulties, please do not hesitate to contact either of us at the address, email or phone numbers shown above, or the company secretary, Ms Marnie Brokenshire, on 08 84027205.

Conclusion

Finally, the attached recent press articles on Penrice, from the Adelaide Advertiser (29
December) and The Australian (26 December) amplify some of our comments and may be of interest. We also include a commentary (10 December) by the respected New Zealand investment adviser, Market Analysis, which has previously recommended Penrice as a turnaround possibility, as its independent assessment may also be informative for shareholders. Many of Market Analysis' clients, including many based in New Zealand, are shareholders in Penrice.
In conclusion, we remain confident in the future of Penrice and are determined to do everything at our disposal to ensure that this positive future is achieved. We are motivated by one objective only: acting in the best interests of your company and you, as its shareholders.
We may not have welcomed this EGM or the distraction it has caused, but we are more determined than ever to stay the course.
With your help and support, this objective can be achieved. Please exercise your voteas soon as possible!
Thank you for your attention.
Yours sincerely Yours sincerely

David Trebeck Andrew Fletcher
Chairman Dep u ty Ch air m an

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BRIEF PENRICE

PAGE 1

Penrice boss backs directors ahead of looming spill vote

EXCLLSIVE


0 IO hll:-.11

li\:t 1 CTlRI'(;

TIlichtef execultn.• of Penrice Soda lloldmgs.the lirsl company forced lo spill ils hoard under the feder:tl go1ernment"s contro ­ lt.>rsialliO-stril-.1?' n1lt.> on eecu tive rt.>muneratwn has made a

hi.b mtlhon last ye: r. tncludmg a $'i6.l1m impatrmenl dtarge rhe group carries $100m in tlt>bl with


:t m:trJ..el c:tptlalisalion or less than$bm

'Lnfortun:tlel). dem: nd for


lx>en cnllcal ol lhe management of lhe company has nomin:tled John llarvey. Sha) McQuade ami 1ih..e Carler as alternative dtrectors

llowe1e r. LCI:suffered a set ­

plen lo shareholders lo spare ht

oda ash has reduced dr:lmali­ bart.. of ilsown on riday when ils

incumhtml directors w ho he snvs ha1epulled thecompnn) lhrough "t h e ''orsi business condillons Austr: han manufarluring h: s endured.. '



C uy Roberts. tlw eh ief execu ti1eofthe naliononh makerof soda ash and bic:trhonnle. said chatrman Dal"id lrebecJ.. and non ewculive d1reclor and De fence SA chief eecuti1e Andrew Flelcher - w ho are now up for re·elt>l'lton-had ..demonslrnted prudt>nt governance nnd strong leadt.>rshipatalllimes''



"Penrice·s linancinl diflìcullies derile from lhe w orsl busi ne•" condillons Auslralian manufac­ luring has endured. not from the absence of diligent (lirectors or executives." he told shareholders in lhe nolice of meeting ahead of lheJ: nuary 25spill 10te

"Thal lhe comp:m has sur ­ vived, while mwigalmg negat11e cashllow. wilh the suppor!of its banh is solelv due lo the sound dectston maJ..ing and tenacill of Lhe hoard ami e't'Culinteam·

. .P nrtct> posted a nel loss of

cally as Auslralian manufactur­

mg customer.. go oul of hustness.

11hile the worsl construction de­ cline m 2'i vears h;s cruellt>d m me sales." Mr 'Rohertssaid

I l e notetl lhat lhe group's rhemic;l piMl had now heen re­ lurned lo il'malmum potenttal

; ntl ils Angaston mine was well piann ed : nd ellictentl) ntn.

Some 62 per cen t of share­ holders 'Oled againsl this year's remunerlllton reporl. afier per cenldid lhesilmem 2011.

t 1nder the federai go1ern

ment's lwo slrikes rule. an auto­ malie sptll molion is Lrig)tered when more than 2'i per cent of shareholder.. vole against lhe reporl.

This wr cen l


of shareholders. lhrowint oul : Il of Penrice Soda s non ·e.eculm direclors ami forcing the com­


pany lo hold nn extraordinary generai meeting wtlhtn lhree months lo vote for everv hoard posilion. ·

Dissidenl Pt>nnce sh: reholder l.ondon Cih l:qutlles. \hich has

two·year bid to inspecl Penrict>'s

hooJ..s fai led.

l( l· revealed m Oclober 2010 lhal ti wa.s planning lo apph to

lhe Federai Court for an order under section 247A of lhe Corporalions Acl lo inspect the hooJ..s of Pennce lwcause of con ­ cerns ahoul Ct'rlain information promlt>d by lhe company antl the conduci oflhe director .

l.Cl' w: nled lo inspecl lht> booJ.., lo delermine whelher tb concerns were warra n led ami. if so.whelherlhere w eregrounds lo

hring appropriale proceedings.

Pt>nrice resisted the cl:i m :n d l.CI: was required hv the courtto relurn ali of Pen.rìce·s book'

(togt>ther wilh ali coptes made) h) May 2'i this year

While l.Cl:had assured Pen · nce th al il had dont' so. one of tls directors indìcaled m commenl in

Atlelaide·s lndath onhne ne1" paper lasl month thal il stili had some documents

Penrtce then applied Lo lhe



courl lo force I.CI:lo swear an afltd:wil slaling il no longer pos ses:-.ed any oflhe relevanl docu menh which ildid on Friday

"I.C l: application under sec­

lton 247.- of lhe Corporaltons

Acl 2001 b concluded." Penrice said in a slatemenl on 1--riday, noling that no proceedings hatl



hl'l'n foreshadowed againsl am dirt.'Clors h I.CI:. ,

"LCI s appliration. its failed



allempl to oblam lurlher docu· menb from Penrice ami ils com­ menls Lo lndaily have ali forced Penrice lo ìncur substanltallegal costs LCI:conduci has a l'o re­ quired stgnilicanllime commil­ mentson lhepartofPennceper­ sonnel which Pennce ht>lieves should h:we been spenl more produclivt>ly in Penrice·s oper­ ations. Pennce no1 looJ.., for­ ward lo foclLsing on the imporl­ ant tssues racmg the company and reinvtgoraling ils bustness."

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Penrice and board in fight for survival

CAMERON ENGLAND

Adelaide Advertiser, Adelaide

29 Dec 2012, by Cameron England

Business News, page 67 - 567.61 cm²

Capital City Daily - circulation 224,976 (MTWTFS-)

ID 175878164 PAGE 1 of 2


Penrice and board in fight for survival

CAMERON ENGLAND

A BID to topple the Penrice Soda board at a crucial time in the company's battle to survive is an unwelcome dis- traction, chairman David Trebeck says.

Mr Trebeck and the man- agement team, led by manag- ing director Guy Roberts, are working to turn around the fortunes of the Osborne chemicals company, which has been hit the high dollar and a drop in demand from its key customers.

But a minority of Penrice shareholders, led by long- time dissident shareholder London City Equities, voted down the company's re- muneration report for the second time at this year's annual meeting.

The dissidents then sup- ported bringing on a general meeting to consider replac- ing the board, a move which would remove Mr Trebeck and non-executive director and Defence SA chief execu- tive Andrew Fletcher.

Director John Hirst's bid for re-election was also voted down at the annual meeting.. Mr Trebeck says he is dis- appointed that a device de- signed to comment on execu- tive remuneration - which has been static at Penrice - has been used for other

purposes.

''Our senior management

has effectively not had an

increase in pay for more than

two years,'' he said.

Mr Trebeck said the com-

pany had also been stripping

out management costs more

generally.

He stressed the board and

management took responsi-

bility for the company's poor

performance, including a

$63.5 million loss last year,

but that the current team was

the best one to ensure the

company's survival.

Penrice's business is made

up of four divisions: the dom-

inant soda ash division; so-

dium bicarbonate; quarrying;

and an experimental, but po-

tentially ''company trans-

forming'' selective salts re-

covery (SSR) division which

has developed a technology

to remove the salts from coal

seam gas water.

The sodium bicarbonate

and quarrying divisions are

both profitable, despite a 21