<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>subscription_agmt-110706.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
                                                                    EXHIBIT 10.1
                                                                    ------------
CLAYTON UTZ


                                                                  EXECUTION COPY




SUBSCRIPTION AGREEMENT

FMG CHICHESTER PTY LTD
ABN 83 109 264 262

FMG


LEUCADIA NATIONAL CORPORATION


Subscriber


FORTESCUE METALS GROUP LTD
ABN 50 002 594 872

Fortescue











The Clayton Utz contact for this document is
KAREN EVAN-CULLEN ON +61 2 9353 4000


Clayton Utz
Lawyers
Levels 19-35  No. 1 O'Connell Street  Sydney  NSW  2000  Australia
PO Box H3  Australia Square  Sydney  NSW  1215
T +61 2 9353 4000  F +61 2 8220 6700


WWW.CLAYTONUTZ.COM


Our reference  838/12963/80035314








<PAGE>



TABLE OF CONTENTS


1.     DEFINITIONS AND INTERPRETATION..........................................1

       1.1         Definitions.................................................1
       1.2         Interpretation..............................................4
       1.3         Matters required to be done other than on a Business Day....5

2.     CONDITION PRECEDENT.....................................................5

       2.1         Condition...................................................5
       2.2         Benefit and waiver of Condition.............................5
       2.3         Notice in relation to satisfaction of Condition.............5
       2.4         Failure of Condition........................................6

3.     SUBSCRIPTION AND ISSUE OF SUBSCRIPTION SHARES AND NOTES.................6

       3.1         Agreement to subscribe for the Subscription Shares
                   and Notes...................................................6
       3.2         Agreement to issue the Subscription Shares and Notes........6
       3.3         Completion..................................................6
       3.4         Matters to occur on or before Completion....................6
       3.5         Interdependence of obligations at Completion................7
       3.6         Matters to occur after the Completion Date..................7
       3.7         Specific performance........................................7

4.     APPOINTMENT OF NOMINEE DIRECTORS........................................7

5.     REPRESENTATIONS AND WARRANTIES..........................................8

       5.1         General.....................................................8
       5.2         Fortescue entity Warranties.................................9
       5.3         Fortescue Warranties........................................9
       5.4         Subscriber Warranties......................................10
       5.5         Further warranties imported................................11
       5.6         Warranties separate........................................11
       5.7         Survival...................................................12
       5.8         Future Events..............................................12
       5.9         Warranty Certificates......................................12
       5.10        Reliance...................................................12
       5.11        Indemnity..................................................12
       5.12        Entire Agreement...........................................12
       5.13        No reliance................................................13

6.     PRE-EMPTIVE RIGHT......................................................14

7.     DELIVERY OF SHARES.....................................................14

       7.1         On Completion..............................................14
       7.2         Undertaking by Fortescue...................................14

8.     CONFIDENTIALITY AND ANNOUNCEMENTS......................................14

       8.1         Provisions to remain confidential..........................14
       8.2         Permitted disclosure.......................................15
       8.3         Announcements..............................................15

9.     GST....................................................................15

       9.1         Interpretation.............................................15
       9.2         Reimbursements and similar payments........................15
       9.3         GST payable................................................16

10.    ASSIGNMENT.............................................................16

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<PAGE>

11.    NOTICES................................................................16

       11.1        How notice to be given.....................................16
       11.2        When notice taken to be received...........................17

12.    GENERAL................................................................17

       12.1        Amendments.................................................17
       12.2        Waiver.....................................................17
       12.3        Further acts and documents.................................18
       12.4        Consents...................................................18
       12.5        Indemnities................................................18
       12.6        Counterparts...............................................18

13.    GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS.....................18

       13.1        Governing law..............................................18
       13.2        Jurisdiction...............................................18
       13.3        Service of process.........................................19

SCHEDULE 1 -- NOTE DEED POLL..................................................21


SCHEDULE 2 - APPLICATION.......................................................1


SCHEDULE 3 - TENEMENTS.........................................................2




                                       ii


<PAGE>


SUBSCRIPTION AGREEMENT MADE ON

PARTIES        FMG CHICHESTER PTY LTD ABN 83 109 264 262 of Level 2, 87 Adelaide
               Terrace, East Perth, Western Australia  ("FMG")

               LEUCADIA NATIONAL CORPORATION of 315 Park Avenue South, New York,
               NY 10010 ("SUBSCRIBER")

               FORTESCUE METALS GROUP LTD ABN 50 002 594 872 of Level 2, 87
               Adelaide Terrace, East Perth, Western Australia ("FORTESCUE")

BACKGROUND

A.          Fortescue is a public company incorporated under the Corporations
            Act and listed on the ASX.

B.          FMG is a wholly-owned subsidiary of Fortescue.

C.          Subscriber has agreed to subscribe for, and FMG and Fortescue have
            agreed to issue and allot the Notes and the Subscription Shares,
            respectively upon the terms and conditions of this Agreement.

D.          This Agreement sets out the terms upon which such subscription,
            issue and allotment of the Subscription Shares are to be made, and
            certain agreements as to the conduct of the affairs of FMG,
            Fortescue and Subscriber.

OPERATIVE PROVISIONS

--------------------------------------------------------------------------------
1.          DEFINITIONS AND INTERPRETATION

1.1         DEFINITIONS

            In this Agreement:

            "APPLICATION" means an application in the form of Schedule 2.

            "ASX" means the Australian Stock Exchange Limited ABN 98 008 624
            691.

            "BUSINESS" means the business or businesses conducted by Fortescue
            and its Subsidiary Entities, including the exploration and mining of
            iron ore.

            "CLAIM" means, in relation to any person, any allegation, debt,
            cause of action, liability, claim, action, proceeding, suit or
            demand of any nature made against the person, however arising, and
            whether present or future, fixed or unascertained, actual or
            contingent whether at law, in equity, under statute or otherwise.

            "COMPLETION" means completion of each subscription, allotment and
            issue of any of the Subscription Shares and the Notes.

            "COMPLETION DATE" means the date on which the Condition is satisfied
            or waived in accordance with clause 2 or such other date agreed
            between the parties in writing.

            "CONDITION" means the condition specified in clause 2.1.

            "CORPORATIONS ACT" means the Corporations Act 2001 (Commonwealth).

                                       1
<PAGE>

            "ENCUMBRANCE" means a mortgage, charge, pledge, lien, encumbrance,
            security interest, title retention, preferential right, trust
            arrangement, contractual right of set-off, or any other security
            agreement or arrangement in favour of any person.

            "END DATE" means 31 December 2006 or such other date agreed between
            the parties in writing.

            "EQUITY PROPORTION" in relation to the Subscriber and its Nominees,
            means a fraction, (expressed as a percentage) the numerator of which
            is the total number of Fortescue Shares held by the Subscriber and
            its Nominees and the denominator of which is the total number of
            Fortescue Shares (including Fortescue Shares held by the Subscriber
            and its Nominees) on issue.

            "EVENT OF INSOLVENCY" means in relation to a company means each of
            the following events:

            (a)   a "controller" (as defined in section 9 of the Corporations
                  Act), trustee, liquidator, provisional liquidator,
                  administrator or similar officer is appointed in respect of
                  the company; or

            (b)   the company enters into, or resolves to enter into, a scheme
                  of arrangement, deed of company arrangement or composition
                  with, or assignment for the benefit of, all or any class of
                  its creditors, or it proposes a reorganisation, moratorium or
                  other administration involving any of them; or

            (c)   the company resolves to wind itself up, or otherwise dissolve
                  itself, or gives notice of its intention to do so, except to
                  reconstruct or amalgamate while solvent or is otherwise wound
                  up or dissolved; or

            (d)   the company is or states that it is unable to pay its debts
                  when they fall due; or

            (e)   the company is, or makes a statement from which it may be
                  reasonably deduced that that company is, the subject of an
                  event described in section 459C(2)(b) or section 585 of the
                  Corporations Act; or

            (f)   the company takes any step to obtain protection or is granted
                  protection from its creditors, under any applicable
                  legislation or an administrator is appointed to that company
                  or the board of directors of that company propose to appoint
                  an administrator to that company or that company becomes aware
                  that a person who is entitled to enforce a charge on the whole
                  or substantially the whole of that company's property proposes
                  to appoint an administrator to that company; or

            (g)   anything analogous or having a substantially similar effect to
                  any of the events specified above happens under the law of any
                  applicable jurisdiction.

            "FINANCIAL CLOSE" means the first date on which:

            (a)   funds are available for use by Fortescue or its Subsidiary
                  Entities through the issue of the Senior Secured Notes; and

            (b)   Fortescue or its Subsidiary Entities have been offered one or
                  more credit approved lease facilities pursuant to which they
                  may enter into lease agreements for the lease of equipment,

            either one of which or the combination of which has a total value of
            not less than $2,000,000,000, on terms which are reasonably
            acceptable to the Subscriber, and provided that the all in blended
            cost on these funds and leases is not more than 9.5% per annum. For
            the purposes of determining the all in blended cost on these funds
            and leases for this definition, the yield on an operating lease will


                                       2
<PAGE>



            be determined as that portion of the operating expenses arising from
            the relevant operating lease attributable to interest that would be
            incurred if the relevant assets the subject of that lease had been
            purchased with borrowed money.

            "FMG FINANCE" means FMG Finance Pty Ltd ACN 118 887 835.

            "FORTESCUE SHARE" means an ordinary share in the capital of
            Fortescue of the same class in all respects as those shares in
            Fortescue listed on the ASX.

            "GOVERNMENT AUTHORITY" means any government or any governmental or
            semi governmental entity, authority, agency, commission, corporation
            or body (including those constituted or formed under any Statute),
            local government authority, stock exchange, administrative or
            judicial body or tribunal.

            "GST" means any tax imposed on the supply of any goods, services,
            real or personal property or other things or similar tax under any
            GST law as defined in section 195(1) of A New Tax System (Goods and
            Services Tax) Act 1999 (Commonwealth), as affected or interpreted by
            any other applicable legislation and any public or private ruling of
            the Commissioner of Taxation.

            "NOMINEES" means one or more Related Entities of the Subscriber (if
            any) nominated by the Subscriber to subscribe for the Subscription
            Shares or the Notes pursuant to clause 3.1

            "NOTE DEED POLL" means the note deed poll in the form set out in
            Schedule 1 to this Agreement.

            "NOTEHOLDER" in relation to a Note means the person or persons
            registered as the holder of that Note in any register maintained by
            FMG or, if there is no such register, in whose name a Note
            certificate is issued.

            "NOTES" means notes with an aggregate total face value of
            $100,000,000 on the terms and conditions set out in the Note Deed
            Poll.

            "NOTE SUBSCRIPTION PRICE" means $100,000,000.

            "PROJECT" means development of one or more iron ore mines on the
            Tenements and the related rail, port and infrastructure project.

            "RELATED ENTITY" of a corporation means:

            (a)   a related body corporate of that corporation within the
                  meaning of Division 6 of Part 1.2 of the Corporations Act; and

            (b)   a trust that would be a related body corporate of that
                  corporation within that meaning assuming that the trust were a
                  body corporate and that a subsidiary meant a Subsidiary Entity
                  for the purposes of that meaning.

            "REPRESENTATIVES" means, in relation to a party, its officers,
            employees, professional advisers and agents of the party and those
            of its Related Entities.

            "SECURITIES ACT" means the US Securities Act of 1933, as amended.

            "SENIOR SECURED NOTES" means the senior secured notes to be issued
            by FMG Finance under Rule 144A(d)(4) under the Securities Act
            pursuant to an indenture to be dated on or about the Completion
            Date, without regard to any amendment thereto.

            "SHAREHOLDER" means a registered holder of Shares in Fortescue.



                                       3
<PAGE>



            "SHARE SUBSCRIPTION PRICE" means $300,000,000.

            "SUBSIDIARY ENTITY" of a corporation means:

            (a)   a subsidiary of that corporation within the meaning of
                  Division 6 of Part 1.2 of the Corporations Act;

            (b)   a trust that would be a subsidiary of that corporation within
                  that meaning if the trust were a company limited by shares,
                  equating for this purpose:

                  (i)   shares with the beneficial interests or units held in
                        the trust; and

                  (ii)  the board of directors with the trustee; or

            (c)   a body corporate or subtrust owned or held as an asset of a
                  trust, where the body corporate or subtrust would be a
                  subsidiary of that corporation under paragraph (a) or (b) if
                  the trust were a body corporate.

            "STATE" means the State of Western Australia.

            "SUBSCRIPTION SHARES" means 26,400,000 Fortescue Shares.

            "TENEMENTS" means the mining tenements set out in Schedule 3.

1.2         INTERPRETATION

            In this Agreement headings and words in bold are for convenience
            only and do not affect the interpretation of this Agreement and,
            unless the contrary intention appears:

            (a)   a word importing the singular includes the plural and vice
                  versa, and a word indicating a gender includes every other
                  gender;

            (b)   the word "INCLUDING" or any other form of that word is not a
                  word of limitation;

            (c)   if a word or phrase is given a defined meaning, any other part
                  of speech or grammatical form of that word or phrase has a
                  corresponding meaning; and

            (d)   a reference to a "PERSON" includes an individual, the estate
                  of an individual, a corporation, an authority, an association
                  or a joint venture (whether incorporated or unincorporated), a
                  partnership and a trust;

            (e)   a reference to a party includes that party's executors,
                  administrators, successors and permitted assigns, including
                  persons taking by way of novation and, in the case of a
                  trustee, includes any substituted or additional trustee;

            (f)   except with respect to the Senior Secured Notes, a reference
                  to a document (including this Agreement) is to that document
                  as varied, novated, ratified or replaced from time to time;

            (g)   a reference to a party, clause, schedule, exhibit, attachment
                  or annexure is a reference to a party, clause, schedule,
                  exhibit, attachment or annexure to or of this Agreement, and a
                  reference to this Agreement includes all schedules, exhibits,
                  attachments and annexures to it;

            (h)   a reference to a statute includes any regulations or other
                  instruments made under it ("DELEGATED LEGISLATION") and a
                  reference to a statute or delegated legislation or a provision
                  of either includes consolidations, amendments, re-enactments
                  and replacements;

                                       4
<PAGE>



            (i)   a reference to a "LIABILITY" incurred by any person includes
                  any liability of that person arising from or in connection
                  with any obligation (including indemnities and all other
                  obligations owed as principal or guarantor) whether liquidated
                  or not, whether present, prospective or contingent and whether
                  owed, incurred or imposed by or to or on account of or for the
                  account of that person alone, severally or jointly or jointly
                  and severally with any other person;

            (j)   a reference to a "LOSS" incurred by any person includes any
                  loss, liability, damage, cost, charge, expense which the
                  person pays, incurs or is liable for and any other diminution
                  of value of any description which the person suffers,
                  including all liabilities on account of Taxes or Duties, all
                  interest, penalties, fines and other amounts payable to third
                  parties and all legal expenses (on a full indemnity basis
                  without necessity of taxation) and other expenses in
                  connection with investigating or defending any claim, action,
                  demand or proceeding, whether or not resulting in any
                  liability, and all amounts paid in settlement of any such
                  claims;

            (k)   a reference to "$" or "DOLLAR" is to the currency of the
                  United States of America;

            (l)   a "BUSINESS DAY" is a day on which banks are generally open
                  for business in the State and which is not:

                  (i)   a Saturday;

                  (ii)  a Sunday; or

                  (iii) a gazetted public holiday,

                  in the State; and

            (m)   this Agreement must not be construed adversely to a party just
                  because that party prepared it or caused it to be prepared.

1.3         MATTERS REQUIRED TO BE DONE OTHER THAN ON A BUSINESS DAY

            Where the day on or by which any sum is payable or any act, matter
            or thing is to be done under this Agreement is a day other than a
            Business Day, that sum will be paid or that act, matter or thing
            will be done on the first Business Day after that day.

--------------------------------------------------------------------------------
2.          CONDITION PRECEDENT

2.1         CONDITION

            Clause 3 does not become binding on the parties and has no force and
            effect, and Completion must not take place, until Financial Close
            has occurred.

2.2         BENEFIT AND WAIVER OF CONDITION

            The Condition in clause 2.1 is for the benefit of the Subscriber and
            may only be waived by the Subscriber by notice in writing to the
            other parties.

2.3         NOTICE IN RELATION TO SATISFACTION OF CONDITION

            Each party must in relation to the Condition notify the other party
            in writing upon becoming aware of:

            (a)   the satisfaction of the Condition, in which case the notifying
                  party must also provide reasonable evidence the Condition has
                  been satisfied; and

                                       5
<PAGE>



            (b)   any fact or circumstance which results in the Condition
                  becoming incapable of satisfaction or may result in the
                  Condition not being satisfied in accordance with its terms.

2.4         FAILURE OF CONDITION

            Subject to clause 3.7, if the Condition:

            (a)   becomes incapable of satisfaction; or

            (b)   has not been satisfied or waived in accordance with clause 2.2
                  before the End Date,

            then this Agreement will terminate and no party has any claim on any
            other party arising out of any such termination.

--------------------------------------------------------------------------------
3.         SUBSCRIPTION AND ISSUE OF SUBSCRIPTION SHARES AND NOTES

3.1         AGREEMENT TO SUBSCRIBE FOR THE SUBSCRIPTION SHARES AND NOTES

            (a)   The Subscriber will, or will procure that one or more Related
                  Entities of the Subscriber nominated in writing to Fortescue
                  will, subscribe for the Subscription Shares at the Share
                  Subscription Price and the Notes at the Note Subscription
                  Price on the terms of this Agreement.

            (b)   The Subscriber or Nominee who is issued the Subscriber Shares
                  becomes bound by the Fortescue constitution on the issue and
                  allotment to it of the Subscription Shares.

3.2         AGREEMENT TO ISSUE THE SUBSCRIPTION SHARES AND NOTES

            Fortescue agrees to issue to the Subscriber or Nominee(s) the
            Subscription Shares, and FMG agrees to issue to the Subscriber or
            Nominee(s) the Notes, on the terms of this Agreement.

3.3         COMPLETION

            Completion will take place on the Completion Date at the same place
            at which Financial Close in respect of the Senior Secured Notes
            takes place or, if the Condition is waived and Financial Close does
            not occur, at the offices of Fortescue at Level 2, 87 Adelaide
            Terrace, Perth, Western Australia (or such other place as the
            parties agree).

3.4         MATTERS TO OCCUR ON OR BEFORE COMPLETION

            Subject to clause 3.5:

            (a)   the Subscriber must:

                  (i)   on or before the Completion Date, lodge with, or procure
                        a Nominee to lodge with, Fortescue a duly executed
                        Application for the Subscription Shares;

                  (ii)  on the Completion Date, pay to:

                        A.    Fortescue the Share Subscription Price in
                              consideration for the issue of the Subscription
                              Shares; and

                        B.    FMG the Note Subscription Price in consideration
                              for the issue of the Notes,


                                       6
<PAGE>



                  in cash or by bank cheque or other cleared funds.

            (b)   Fortescue must, on the Completion Date:

                  (i)   allot and issue Shares to the Subscriber or Nominee(s)
                        in respect of each application lodged for the
                        Subscription Shares;

                  (ii)  take such other legal action as may be required, if any,
                        to constitute the Subscriber or Nominee(s) as the holder
                        of the Subscription Shares; and

                  (iii) execute the Note Deed Poll; and

            (c)   FMG must, on the Completion Date, execute the Note Deed Poll
                  and issue the Notes to the Subscriber or Nominee(s).

3.5         INTERDEPENDENCE OF OBLIGATIONS AT COMPLETION

            In respect of Completion:

            (a)   the obligations of the parties under clauses 3.4 are
                  interdependent; and

            the obligations of the parties under clause 3.4 will be taken to
            have occurred simultaneously on the Completion Date.

3.6         MATTERS TO OCCUR AFTER THE COMPLETION DATE

            Subject to the parties fulfilling their obligations under clause
            3.4, immediately after the Completion Date, Fortescue must:

            (a)   apply to ASX for the official quotation of the Subscription
                  Shares;

            (b)   give the Subscriber a statement showing it as the holder of
                  the Subscription Shares; and

            (c)   give ASX a notice which complies with subsection 708A(6) of
                  the Corporations Act.

3.7         SPECIFIC PERFORMANCE

            If Completion does not occur in accordance with this clause 3
            because of the failure of any party (the "DEFAULTING PARTY") to
            satisfy any of its obligations under this clause 3 then, Fortescue
            or FMG (where the Defaulting Party is the Subscriber) or the
            Subscriber (where the Defaulting Party is Fortescue or FMG) is
            entitled to, in addition to any other remedies available at law or
            in equity, seek specific performance of this Agreement.

--------------------------------------------------------------------------------
4.       APPOINTMENT OF NOMINEE DIRECTORS

            (a)   Immediately after the Completion Date and for as long as the
                  Subscriber and any Nominee are the holders in aggregate of:

                  (i)   Notes with a face value of $50,000,000 or more; or

                  (ii)  13,200,000 Fortescue Shares, adjusted to take into
                        account any corporate action undertaken by Fortescue
                        after the date of this Agreement which affects the
                        Fortescue Shares including, but not limited to, any
                        stock split or consolidation, stock dividends, reverse
                        stock split, and the like.


                                       7
<PAGE>


                  the Subscriber will be entitled to nominate:

                  (iii) one person to act as a director of Fortescue; and

                  (iv)  another person or persons to act as an alternate
                        director for the person nominated in clause 4(a)(iii),

                  subject to each person's consent to act in that capacity.

            (b)   Subject to the exercise by the directors of Fortescue of their
                  fiduciary duties, the board of directors of Fortescue will
                  appoint:

                  (i)   the person nominated by the Subscriber in clause
                        4(a)(iii) as a director of Fortescue; and

                  (ii)  the person or persons nominated by the Subscriber in
                        clause 4(a)(iv) as an alternate director of the person
                        appointed as a director in clause 4(b)(i),

                  as a casual vacancy.

            (c)   If Shareholders do not approve any person nominated by the
                  Subscriber to act as a director under clause 4(a) at a general
                  meeting, the Subscriber will be entitled to nominate another
                  person to act as a director of Fortescue pursuant to clause
                  4(a).

--------------------------------------------------------------------------------
5.          REPRESENTATIONS AND WARRANTIES

5.1         GENERAL

            Each party represents and warrants to each of the other parties that
            each of the following statements will be true and correct and not
            misleading as at the date of this Agreement and as at Completion:

            (a)   (INCORPORATION) it is a body corporate validly existing under
                  the laws of its place of incorporation;

            (b)   (POWER) it has the power to enter into and perform its
                  obligations under this Agreement and to carry out the
                  transactions contemplated by it;

            (c)   (CORPORATE ACTION) it has taken all necessary corporate action
                  to enter into and perform this Agreement;

            (d)   (AUTHORISATIONS) all approvals and authorities that may be
                  required to permit it to enter into this Agreement and to
                  carry out the transactions contemplated by this Agreement have
                  been obtained and such authorisations remain valid and
                  subsisting; and

            (e)   (BINDING OBLIGATION) this Agreement constitutes its legal,
                  valid and binding obligations and subject to any necessary
                  stamping is enforceable against it in accordance with its
                  terms, except as the enforcement thereof may be limited by
                  bankruptcy, insolvency, fraudulent transfer, reorganisation,
                  moratorium and other similar laws relating to or affecting
                  enforcement of creditor's rights generally.


                                       8
<PAGE>


5.2         FORTESCUE ENTITY WARRANTIES

            Fortescue and FMG each represent and warrant to the Subscriber that,
            as at the date of this Agreement and as at Completion, it is not and
            has never been subject to an Event of Insolvency.

5.3         FORTESCUE WARRANTIES

            Fortescue represents and warrants to the Subscriber that each of the
            following statements is true and correct and not misleading:

            (a)   as at the date of this Agreement and as at Completion:

                  (i)   it is in compliance with ASX Listing Rule 3.1;

                  (ii)  it is not relying on an exception in ASX Listing Rule
                        3.1A in respect of any information not disclosed to ASX,
                        other than as disclosed by or on behalf of Fortescue to
                        the Subscriber or its advisers;

                  (iii) it is able to issue a notice that would comply with
                        subsection 708A(6) of the Act, and that upon issue of
                        that notice, subsection 708A(1) would apply with respect
                        to an offer for the sale of any Subscription Shares;

                  (iv)  all returns, notices and other documents required to be
                        lodged or given by Fortescue under the Corporations Act
                        or the Listing Rules of the ASX have been duly and
                        properly prepared and lodged or given and are in all
                        material respects accurate and not misleading and
                        deceptive;

                  (v)   other than information referred to in paragraph (vi)
                        below, all written information given with respect to
                        Fortescue or any of its Subsidiary Entities by or on
                        behalf of Fortescue to the Subscriber or to any
                        director, agent or adviser of the Subscriber before the
                        date of this Agreement was, when given, accurate in all
                        material respects and not misleading in any particular,
                        whether by inclusion of misleading information or
                        omission of material information or both;

                  (vi)  each forecast or projection given in writing with
                        respect to Fortescue or any of its Subsidiary Entities
                        by or on behalf of Fortescue to the Subscriber or to any
                        director, agent or adviser of the Subscriber before the
                        date of this Agreement was at the time of writing:

                        A.    made after due and careful consideration by its
                              author;

                        B.    based on information which the author reasonably
                              believed was reliable; and

                        C.    based on assumptions that were reasonable in the
                              context of the forecast or projection;

                  (vii) that the Tenements listed in Schedule 3:

                        A.    are the same as the tenements to be included in
                              the offering memorandum in relation to the Senior
                              Secured Notes;

                        B.    relate to Cloud Break and Christmas Creek
                              deposits;

                        C.    are owned by FMG; and


                                       9
<PAGE>



                        D.    are all of the tenements that relate to the
                              Project.

                 (viii) except as otherwise disclosed by or on behalf of
                        Fortescue to the Subscriber or to any director, agent or
                        adviser of the Subscriber, or disclosed publicly by
                        Fortescue to the ASX, before the date of this Agreement:

                        A.    neither Fortescue nor any of its Subsidiary
                              Entities are in breach of any provision of the
                              Corporations Act, the Trade Practices Act 1975
                              (Cth), the Income Tax Assessment Act or any other
                              applicable law to an extent that is material to
                              Fortescue or the price or value of the
                              Subscription Shares; and

                        B.    no litigation, arbitration, dispute or
                              administrative proceeding has been commenced, is
                              pending or threatened against Fortescue or any of
                              its Subsidiary Entities which may have a material
                              adverse effect on the financial position or
                              financial prospects of Fortescue and its
                              subsidiaries as a whole; and

                  (ix)  it reasonably considers that the issue of the
                        Subscription Shares in accordance with this Agreement
                        does not require the approval of the members of
                        Fortescue or the provision of notice of the proposed
                        issue to the Foreign Investment Review Board under the
                        Foreign Acquisitions and Takeovers Act 1975 (Cth);

            (b)   as at the date of this Agreement, except as disclosed to the
                  Subscriber in writing before the date of this Agreement,
                  Fortescue is not aware of any fact which may have a material
                  adverse effect on any assumption or may require a material
                  adverse revision of any forecast or projection;

            (c)   as at the date of Completion, the Subscription Shares will be
                  validly issued fully paid and will from the date of issue rank
                  equally with all existing Fortescue Shares and will, once
                  issued, be less than 10% of the total number of Fortescue
                  Shares then on issue;

            (d)   as at the date of issue of the offering memorandum in relation
                  to the Senior Secured Notes, it has not disclosed to the
                  Subscriber or its advisers any information which, following
                  the issue of the offering memorandum is inside information for
                  the purpose of Division 3 of Part 7.10 of the Corporations
                  Act; and

            (e)   as at the date of this Agreement, it has on issue 237,711,961
                  Fortescue Shares.

5.4         SUBSCRIBER WARRANTIES

            The Subscriber represents and warrants to Fortescue and FMG that:

            (a)   it understands that the offer and sale to it of the
                  Subscription Shares and the Notes have not been and will not
                  be registered under the Securities Act or the laws of any
                  state or other jurisdiction in the United States. Therefore,
                  the Subscriber agrees that it will not offer, sell, pledge,
                  transfer or otherwise dispose of any Subscription Shares or
                  the Notes in the United States or to, or for the account or
                  benefit of, any U.S. person (as defined in Regulation S under
                  the Securities Act) unless and until the Subscription Shares
                  or the Notes, as the case may be (i) are registered under the
                  Securities Act (which you acknowledge Fortescue and FMG have
                  no obligation to do) or (ii) are offered, sold, pledged,
                  transferred or otherwise disposed of in a transaction exempt
                  from, or not subject to, the registration requirements of the
                  Securities Act and the laws of any state or other jurisdiction
                  in the United States.


                                       10
<PAGE>



            (b)   it is an "accredited investor", as such term is defined in
                  Rule 501(a) under the Securities Act, and it is purchasing the
                  Subscription Shares and the Notes for its own account and not
                  with a view to any resale or distribution thereof.

            (c)   it agrees that, in the future, if it decides to sell or
                  otherwise transfer any Subscription Shares or the Notes, it
                  will only do so if the offer and sale of such Subscription
                  Shares or the Notes, as the case may be, are (i) registered
                  under the Securities Act (which the Subscriber acknowledges
                  Fortescue and FMG have no obligation to do), (ii) made in a
                  transaction exempt from the registration requirements of the
                  Securities Act or (iii) made in regular way brokered
                  transactions on the ASX or otherwise outside the United States
                  in offshore transactions in accordance with Regulation S under
                  the Securities Act and, in the case of (i) or (ii) above, in
                  accordance with any applicable securities laws of any state of
                  the United States or any other jurisdiction.

            (d)   except for the sale of Subscription Shares in regular way
                  brokered transactions on the ASX, it agrees that it will
                  obtain agreement for the benefit of Fortescue and FMG of any
                  person to whom any Subscription Shares or Notes are sold or
                  otherwise transferred, prior to any such transfer, that such
                  person will be bound by the provisions of the immediately
                  preceding paragraph.

            (e)   it understands that the Subscription Shares and the Notes will
                  constitute "restricted securities" within the meaning of Rule
                  144 under the Securities Act, and for so long as they remain
                  "restricted securities", such Subscription Shares may not be
                  deposited in any unrestricted American Depositary Receipt
                  facility with respect to the ordinary shares of Fortescue.

            (f)   it acknowledges that an investment in the Subscription Shares
                  and the Notes involves a degree of risk and it has considered
                  the risks associated with the Subscription Shares and the
                  Notes and the particular income tax consequences of
                  purchasing, owning or disposing of the Subscription Shares or
                  the Notes in light of its particular situation in deciding
                  whether to purchase any Subscription Shares or the Notes. It
                  further acknowledges that it has had access to and have
                  received all information that it believes necessary or
                  appropriate in connection with, and for an adequate time prior
                  to, its purchase of Subscription Shares and the Notes, and
                  have been given the opportunity to ask such questions of, and
                  receive answers from, representatives of Fortescue and FMG, so
                  as to be able to make an informed investment decision with
                  respect to an investment in the Subscription Shares and the
                  Notes.

5.5         FURTHER WARRANTIES IMPORTED

            Each representation and warranty given by Fortescue and FMG in the
            note purchase deed relating to the Senior Secured Notes are deemed
            to be repeated in full in this Agreement and given in favour of the
            Subscriber as at the date that those representations and warranties
            are first given to a party to a transaction document relating to the
            Senior Secured Notes and as at Completion.

5.6         WARRANTIES SEPARATE

            Each representation and warranty in this Agreement is to be treated
            as a separate representation and warranty and is not limited by
            reference to any other representation or warranty or any other
            provision of this Agreement.


                                       11
<PAGE>



5.7         SURVIVAL

            Each representation and warranty in this Agreement will remain in
            full force and effect after the date of this Agreement and a Claim
            under any such representation or warranty is not limited to breaches
            identified prior to the date of this Agreement.

5.8         FUTURE EVENTS

            If anything occurs or arises which results or may result in any of
            the representations and warranties given by a party under this
            Agreement being unfilled, untrue, incorrect or misleading, that
            party must immediately give notice of it to the other parties.

5.9         WARRANTY CERTIFICATES

            On Completion:

            (a)   FMG and Fortescue must give separate certificates to the
                  Subscriber that each representation and warranty given by that
                  party is true, correct and not misleading as at Completion;
                  and

            (b)   the Subscriber must give a separate certificate to FMG and
                  Fortescue that each representation and warranty given by it is
                  true, correct and not misleading as at Completion.

5.10        RELIANCE

            Each party acknowledges that the other parties have entered into
            this Agreement in reliance on the representations and warranties
            given by it.

5.11        INDEMNITY

            (a)   The Subscriber indemnifies FMG and Fortescue against all loss
                  arising from, or which FMG or Fortescue otherwise suffers or
                  incurs or may suffer or incur in connection with:

                  (i)   a breach of any obligations of the Subscriber under this
                        Agreement;

                  (ii)  any breach of a representation and warranty given by the
                        Subscriber under this Agreement.

            (b)   Fortescue and FMG indemnify the Subscriber against all loss
                  arising from, or which the Subscriber otherwise suffers or
                  incurs or may suffer or incur in connection with:

                  (i)   a breach of any obligations of Fortescue or FMG under
                        this Agreement;

                  (ii)  any breach of a representation and warranty given by
                        Fortescue or FMG under this Agreement.

5.12        ENTIRE AGREEMENT

            The parties acknowledge and agree that:

            (a)   this Agreement constitutes the entire agreement between the
                  parties in relation to its subject matter including the
                  subscription for the Subscription Shares and the Notes;

            (b)   to the maximum extent permitted by law, all terms, conditions,
                  warranties and statements (whether express or implied,
                  written, oral, collateral, statutory or otherwise) not


                                       12
<PAGE>



                  contained in this Agreement are excluded and the parties
                  disclaim any liability in respect of them;

            (c)   to the maximum extent permitted by law, the Subscriber will
                  not make, waive any right to make, and releases Fortescue, FMG
                  and their Representatives in respect of any claim under the
                  Corporations Act, the Australian Securities and Investments
                  Commission Act 2001, the Trade Practices Act 1974, the Fair
                  Trading Acts of the various Australian States and Territories,
                  or comparable clauses in any legislation in any other
                  jurisdiction outside Australia.

5.13        NO RELIANCE

            The Subscriber acknowledges and otherwise agrees in favour of
            Fortescue, FMG and their Representatives that:

            (a)   at no time has Fortescue, FMG or its Representatives made,
                  given or undertaken, any conduct, representation, warranty,
                  promise, statement, forecast or undertaking in connection with
                  the subject matter of this Agreement or the operations and
                  affairs of the Business other than the representations and
                  warranties given by Fortescue and FMG or referred to under
                  this clause 5 and any other terms of this Agreement;

            (b)   no conduct, representation, warranty, promise, statement,
                  forecast or undertaking:

                  (i)   has induced or influenced the Subscriber to enter into
                        this Agreement;

                  (ii)  has been relied on by the Subscriber or any of their
                        Representatives;

                  (iii) has been represented or warranted to the Subscriber as
                        being true or accurate;

                  (iv)  has been taken into account by the Subscriber or any of
                        their Representatives as being important to its decision
                        to enter into this Agreement or to agree to any of its
                        terms,

                  other than the representations and warranties given by
                  Fortescue and FMG or referred to under this clause 5 and any
                  other terms of this Agreement;

            (c)   it has made, and relies on its own searches, investigations,
                  enquiries and assessment of the operations and affairs of the
                  Business other than as set out in this Agreement in addition
                  to the representations and warranties given by Fortescue and
                  FMG or referred to under this clause 5; and

            (d)   in relation to any opinions, estimates, projections, business
                  plans, budget information or other forecasts or forward
                  looking statements which the Subscriber or its Representatives
                  has received in respect of the operations and affairs of the
                  Business:

                  (i)   there are uncertainties inherent in attempting to make
                        these estimates, projections, business plans, budgets,
                        forecasts or forward looking statements and it is
                        familiar with these uncertainties; and

                  (ii)  other than the representations and warranties given by
                        Fortescue and FMG under clause 5 and any other terms of
                        this Agreement, it has made its own independent
                        evaluation of all estimates, projections, business
                        plans, budgets, forecasts and forward looking statements
                        furnished to it.


                                       13
<PAGE>


--------------------------------------------------------------------------------
6.          PRE-EMPTIVE RIGHT

            (a)   If Fortescue wishes to issue any Fortescue Shares or
                  securities which are convertible into Fortescue Shares
                  ("SECURITIES") other than to employees or on conversion or
                  exercise of any convertible securities or options which are on
                  issue at the date of this Agreement, Fortescue must also offer
                  the Subscriber or a Nominee its Equity Proportion of the total
                  number of Securities to be issued.

            (b)   Any offer of Securities by Fortescue under clause 6(a) must:

                  (i)   be on the same terms of issue as provided to all other
                        potential offerees and allow the Subscriber to accept
                        for the whole or part of the number of Securities
                        offered; and

                  (ii)  allow the Subscriber 5 Business Days to accept (in whole
                        or part) or reject the offer.

            (c)   If the Subscriber or a Nominee accepts the offer in respect of
                  some or all of the Securities offered to it, the Subscriber
                  must pay the agreed subscription amount by the due date for
                  receipt of all other subscription amounts under the offer,
                  such date to be no earlier than 5 Business Days after the date
                  that Fortescue notifies the Subscriber of the offer of
                  Securities..

            (d)   If the Subscriber rejects or does not accept in full an offer
                  made to it under clause 6(a), then the Securities in respect
                  of which that offer was not accepted can be offered by
                  Fortescue to such persons as it thinks fit on terms no more
                  favourable than those offered to the Subscriber.

--------------------------------------------------------------------------------
7.          DELIVERY OF SHARES

7.1         ON COMPLETION

            If on the Completion Date, the Subscription Shares represent 10% or
            more of the ordinary share capital of Fortescue to be issued and
            outstanding after such issuance, then the Subscription Shares shall
            be proportionately reduced so that the Subscription Shares to be
            delivered at Completion will represent 9.99% of the issued and
            outstanding ordinary share capital of Fortescue, giving effect to
            such issuance, and the Share Subscription Price shall be accordingly
            reduced.

7.2         UNDERTAKING BY FORTESCUE

            Fortescue undertakes to the Subscriber that, following Completion,
            it will not take any action with respect to any Fortescue Shares if
            that would result in the Subscriber and its Nominees holding, at any
            time, more than 9.99% of the issued and outstanding ordinary share
            capital of Fortescue without the consent of the Subscriber.

--------------------------------------------------------------------------------
8.          CONFIDENTIALITY AND ANNOUNCEMENTS

8.1         PROVISIONS TO REMAIN CONFIDENTIAL

            Subject to clauses 8.2 and 8.3, no party may disclose the content or
            effect of this Agreement without the prior written consent of the
            other parties.


                                       14
<PAGE>



8.2         PERMITTED DISCLOSURE

            Any party may disclose matters referred to in clause 8.1:

            (a)   if reasonably required to perform its obligations under this
                  Agreement;

            (b)   to those of its employees, officers, professional or financial
                  advisers and bankers as the party reasonably thinks necessary
                  but only on a strictly confidential basis and in accordance
                  with the terms of any confidentiality agreement entered into
                  between any of the parties;

            (c)   if required by law or the rules of any recognised stock
                  exchange, after the form and terms of that disclosure have
                  been notified to the other parties and, where the relevant law
                  or rules permit, those other parties have had a reasonable
                  opportunity to comment on that form and terms.

8.3         ANNOUNCEMENTS

            (a)   Immediately after the execution of this Agreement, Fortescue
                  will issue an announcement to ASX in a form agreed by the
                  Subscriber in writing.

            (b)   Other than as provided in paragraph (a), no party may make or
                  authorise a press release or public announcement relating to
                  the negotiations of the parties or the subject matter or
                  provisions of this Agreement unless:

                  (i)   it is required to be made by law or the rules of a
                        recognised stock exchange and before it is made that
                        party has:

                        A.    notified each other party; and

                        B.    where the relevant law or rules permit given that
                              other party a reasonable opportunity to comment on
                              the contents of, and the requirement for it; or

                  (ii)  it has the prior written approval of each other party.

--------------------------------------------------------------------------------
9.          GST

9.1         INTERPRETATION

            (a)   Except where the context suggests otherwise, terms used in
                  this clause 9 have the meanings given to those terms by the A
                  New Tax System (Goods and Services Tax) Act 1999 (as amended
                  from time to time).

            (b)   Any part of a supply that is treated as a separate supply for
                  GST purposes (including attributing GST payable to tax
                  periods) will be treated as a separate supply for the purposes
                  of this clause.

            (c)   Any consideration that is specified to be inclusive of GST
                  must not be taken into account in calculating the GST payable
                  in relation to a supply for the purpose of this clause.

9.2         REIMBURSEMENTS AND SIMILAR PAYMENTS

            Any payment or reimbursement required to be made under this
            Agreement that is calculated by reference to a cost, expense, or
            other amount paid or incurred will be limited to the total cost,


                                       15
<PAGE>



            expense or amount less the amount of any input tax credit to which
            an entity is entitled for the acquisition to which the cost, expense
            or amount relates.

9.3         GST PAYABLE

            (a)   If GST is payable in relation to a supply made under or in
                  connection with this Agreement then any party ("RECIPIENT")
                  that is required to provide consideration to another party
                  ("SUPPLIER") for that supply must pay an additional amount to
                  the Supplier equal to the amount of that GST at the same times
                  as other consideration is to be provided for that supply or,
                  if later, within 5 Business Days of the Supplier providing a
                  valid tax invoice to the Recipient.

            (b)   If the GST payable in relation to a supply made under or in
                  connection with this Agreement varies from the additional
                  amount paid by the Recipient under clause 9.3(a) then the
                  Supplier will provide a corresponding refund or credit to, or
                  will be entitled to receive the amount of that variation from,
                  the Recipient. Any ruling, advice, document or other
                  information received by the Recipient from the Australian
                  Taxation Office in relation to any supply made under this
                  Agreement shall be conclusive as to the GST payable in
                  relation to that supply. Any payment, credit or refund under
                  this paragraph is deemed to be a payment, credit or refund of
                  the additional amount payable under clause 9.3(a).

            (c)   Where the consideration is specified to be inclusive of GST,
                  the Recipient need not make a payment for the GST component of
                  the supply made under or in connection with this Agreement
                  until it receives a tax invoice for the supply to which the
                  payment relates.

--------------------------------------------------------------------------------
10.         ASSIGNMENT

            (a)   Subject to clause 10(b), a party cannot assign, novate or
                  otherwise transfer any of its rights or obligations under this
                  Agreement without the prior consent of each other party.

            (b)   The Subscriber may assign, novate or otherwise transfer any of
                  its rights or obligations under this Agreement at any time to
                  any Related Entity provided that the Related Entity agrees to
                  be bound by the terms of this Agreement.

--------------------------------------------------------------------------------
11.         NOTICES

11.1        HOW NOTICE TO BE GIVEN

            Each communication (including each notice, consent, approval,
            request and demand) under or in connection with this Agreement:

            (a)   must be in writing;

            (b)   must be addressed as follows (or as otherwise notified by that
                  party to each other party from time to time):

                  (i)   if to FMG or Fortescue:

                        Address: Level 2, 87 Adelaide Terrace,
                        East Perth  WA  6000, Australia

                        Fax number: +61 6218 8880

                        Attention:  Company Secretary


                                       16
<PAGE>



                  (ii)  if to the Subscriber:

                        Address: 315 Park Avenue South, New York, NY 10010, USA

                        Fax number:  +212 598 4869

                        Attention: Joseph S. Steinberg, President

                        with a copy to:

                        Weil, Gotshal and Manges LLP
                        767 Fifth Avenue
                        New York  NY  10153  USA

                        Fax number:  +212 310 8007

                        Attention:  Andrea A. Bernstein

            (c)   must be signed by the party making it or (on that party's
                  behalf) by the solicitor for, or any attorney, director,
                  secretary or authorised agent of, that party; and

            (d)   must be delivered by hand or posted by prepaid post to the
                  address, or sent by fax to the number, of the addressee, in
                  accordance with clause 11.(b).

11.2        WHEN NOTICE TAKEN TO BE RECEIVED

            Each communication (including each notice, consent, approval,
            request and demand) under or in connection with this Agreement is
            taken to be received by the addressee:

            (a)   (in the case of prepaid post sent to an address in the same
                  country) on the third day after the date of posting;

            (b)   (in the case of prepaid post sent to an address in another
                  country) on the fifth day after the date of posting by
                  airmail;

            (c)   (in the case of fax) at the time in the place to which it is
                  sent equivalent to the time shown on the transmission
                  confirmation report produced by the fax machine from which it
                  was sent; and

            (d)   (in the case of delivery by hand) on delivery,

            but if the communication is taken to be received on a day that is
            not a working day or after 5.00 pm, it is taken to be received at
            9.00 am on the next working day ("working day" meaning a day that is
            not a Saturday, Sunday or public holiday and on which banks are open
            for business generally, in the place to which the communication is
            posted, sent or delivered).

--------------------------------------------------------------------------------
12.         GENERAL

12.1        AMENDMENTS

            This Agreement may only be varied by a document signed by or on
            behalf of each party.

12.2        WAIVER

            (a)   Failure to exercise or enforce, or a delay in exercising or
                  enforcing, or the partial exercise or enforcement of, a right,
                  power or remedy provided by law or under this Agreement by a
                  party does not preclude, or operate as a waiver of, the


                                       17
<PAGE>



                  exercise or enforcement, or further exercise or enforcement,
                  of that or any other right, power or remedy provided by law or
                  under this Agreement.

            (b)   A waiver or consent given by a party under this Agreement is
                  only effective and binding on that party if it is given or
                  confirmed in writing by that party.

            (c)   No waiver of a breach of a term of this Agreement operates as
                  a waiver of another breach of that term or of a breach of any
                  other term of this Agreement.

12.3        FURTHER ACTS AND DOCUMENTS

            Each party must promptly do all further acts and execute and deliver
            all further documents (in form and content reasonably satisfactory
            to that party) required by law or reasonably requested by another
            party to give effect to this Agreement.

12.4        CONSENTS

            A consent required under this Agreement from a party may not be
            unreasonably withheld, unless this Agreement expressly provides
            otherwise.

12.5        INDEMNITIES

            (a)   Each indemnity in this Agreement is a continuing obligation,
                  separate and independent from the other obligations of the
                  parties, and survives termination, completion or expiration of
                  this Agreement.

            (b)   It is not necessary for a party to incur expense or to make
                  any payment before enforcing a right of indemnity conferred by
                  this Agreement.

12.6        COUNTERPARTS

            This Agreement may be executed in any number of counterparts and by
            the parties on separate counterparts. Each counterpart constitutes
            an original of this Agreement, and all together constitute one
            agreement.

--------------------------------------------------------------------------------
13.         GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS

13.1        GOVERNING LAW

            This Agreement is governed by and must be construed according to the
            law applying in Western Australia.

13.2        JURISDICTION

            Each party irrevocably:

            (a)   submits to the non-exclusive jurisdiction of the courts of
                  Western Australia, and the courts competent to determine
                  appeals from those courts, with respect to any proceedings
                  that may be brought at any time relating to this Agreement;
                  and

            (b)   waives any objection it may now or in the future have to the
                  venue of any proceedings, and any claim it may now or in the
                  future have that any proceedings have been brought in an
                  inconvenient forum, if that venue falls within clause 13.2(a).



                                       18
<PAGE>



13.3        SERVICE OF PROCESS

            The Subscriber irrevocably appoints Allens Arthur Robinson Corporate
            Advisory Pty Ltd (or such other person as the Subscriber may
            nominate with the consent of Fortescue, such consent not to be
            unreasonably withheld) as its agent in Australia for service of
            process.

EXECUTED as an agreement.

EXECUTED by FMG CHICHESTER PTY LTD ABN
83 109 264 262 by or in the presence of:





-------------------------------------   ----------------------------------------
Signature of Director                   Signature of Secretary/other Director



-------------------------------------   ----------------------------------------
Name of Director in full                Name of Secretary/other Director in full


--------------------------------------------------------------------------------


-------------------------------------   ----------------------------------------

-------------------------------------   ----------------------------------------



Signed for and on behalf of LEUCADIA NATIONAL CORPORATION
by its duly authorised officer


---------------------------------------------------
Signature



---------------------------------------------------
Name and title




                                       19
<PAGE>



EXECUTED by FORTESCUE METALS GROUP LTD
ABN 50 002 594 872 or in the presence of:






-------------------------------------   ----------------------------------------
Signature of Director                   Signature of Secretary/other Director



-------------------------------------   ----------------------------------------
Name of Director in full                Name of Secretary/other Director in full














                                       20
<PAGE>



SCHEDULE 1  --  NOTE DEED POLL

CLAYTON UTZ

                                                                      SCHEDULE 1

FORM OF NOTE DEED POLL

FMG CHICHESTER PTY LTD
ABN 83 109 264 262


Issuer




FORTESCUE METALS GROUP LTD
ABN 50 002 594 872


Guarantor








Clayton Utz
Lawyers
Levels 19-35 No. 1 O'Connell Street Sydney NSW 2000 Australia
PO Box H3 Australia Square Sydney NSW 1215
T +61 2 9353 4000 F +61 2 8220 6700

WWW.CLAYTONUTZ.COM






<PAGE>



                                TABLE OF CONTENTS

                                                                            PAGE


1.       DEFINITIONS AND INTERPRETATION.......................................1

         1.1      Definitions.................................................1

         1.2      Interpretation..............................................1

2.       NATURE AND STATUS OF NOTES...........................................1

         2.1      Constitution of Notes.......................................1

         2.2      Terms of Notes..............................................1

         2.3      Entry in the Note Register..................................2

3.       GUARANTEE OF PAYMENT AND PERFORMANCE.................................2

         3.1      Guarantee...................................................2

         3.2      Indemnities.................................................2

         3.3      No requirement to take steps against Issuer.................2

         3.4      Continuing effect...........................................2

         3.5      No reduction of liability...................................3

         3.6      Obligations.................................................3

4.       ENFORCEABILITY.......................................................4

         4.1      Noteholder may enforce......................................4

         4.2      Noteholders bound...........................................5

         4.3      Independent enforcement.....................................5

5.       GOVERNING LAW AND JURISDICTION.......................................5

         5.1      Governing law...............................................5

         5.2      Jurisdiction................................................5


SCHEDULE 1 NOTE CONDITIONS....................................................6
ANNEXURE A...................................................................18
ANNEXURE B...................................................................19


                                       i

<PAGE>


NOTE DEED POLL MADE AT _______ ON _______________

BY FMG CHICHESTER PTY LTD ABN 83 109 264 252 a company registered in Western
Australia with an office at Level 2, 87 Adelaide Terrace, East Perth, Western
Australia ("ISSUER")

and

FORTESCUE METALS GROUP LTD ABN 50 002 594 872 a company registered in Western
Australia with an office at Level 2, 87 Adelaide Terrace, East Perth, Western
Australia ("GUARANTOR")

BACKGROUND

A.       The Issuer may from time to time issue Notes on the terms and
         conditions contained in the Note Conditions.

B.       The Guarantor has agreed to guarantee to the Noteholders the
         obligations of the Issuer under the Notes and this Note Deed Poll.

C.       If the Issuer issues Notes it is intended that the Noteholders will
         have the benefit of this Note Deed Poll.

OPERATIVE PROVISIONS

1.       DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS

         In this Note Deed Poll:

         (a)      "NOTE CONDITIONS" means, generally, the terms and conditions
                  contained in Schedule 1; and

         (b)      words and expressions defined in the Note Conditions have the
                  same meanings when used in this Note Deed Poll.

1.2      INTERPRETATION

         Condition 1.2 of the Note Conditions applies to the interpretation of
         this Note Deed Poll as if every reference to "these Note Conditions" is
         replaced with "this Note Deed Poll" and to a "Condition" is replaced
         with a "clause".

2.       NATURE AND STATUS OF NOTES

2.1      CONSTITUTION OF NOTES

         Each Note is a debt obligation of the Issuer constituted by, and owing
         under, this Note Deed Poll.

2.2      TERMS OF NOTES

         Each Note is issued on, and subject to, the provisions of this Note
         Deed Poll and the Note Conditions relating to that Note.




                                       1
<PAGE>



2.3      ENTRY IN THE NOTE REGISTER

         Each entry in the Register in respect of a Note constitutes an
         unconditional and irrevocable covenant by the Issuer in favour of the
         person whose name is so registered that the Issuer will:

         (a)      (MAKE ALL PAYMENTS): make all payments of principal, interest
                  and other amounts in respect of the Note in accordance with
                  this Note Deed Poll and the Note Conditions relating to that
                  Note; and

         (b)      (PERFORM OTHER OBLIGATIONS): perform all of its other
                  obligations in full, and by the due dates, referred to in this
                  Note Deed Poll and the Note Conditions relating to that Note.

3.       GUARANTEE OF PAYMENT AND PERFORMANCE

3.1      GUARANTEE

         The Guarantor unconditionally and irrevocably guarantees to the
         Noteholders:

         (a)      the payment by the Issuer of all present and future monetary
                  liabilities of the Issuer due or payable to the Noteholder
                  under this Note Deed Poll and the Note Conditions; and

         (b)      the performance by the Issuer of each other obligation of the
                  Issuer under this Note Deed Poll and the Note Conditions;

         and if the Issuer fails to pay such monies or fails to perform such
         obligation on the due date for payment or performance the Guarantor
         must immediately on demand by the Noteholder pay such monies to the
         Noteholder in the manner specified in this Note Deed Poll and the Note
         Conditions or procure the performance by the Issuer of such obligation,
         as the case may be.

3.2      INDEMNITIES

         As separate, independent and additional liabilities, the Guarantor
         indemnifies the Noteholder against all loss arising from, or which the
         Noteholder otherwise suffers or incurs or may suffer or incur in
         connection with, any failure of the Issuer to pay any monetary
         liability or to perform any other obligation of the Issuer under this
         Note Deed Poll and the Note Conditions on the due date.

3.3      NO REQUIREMENT TO TAKE STEPS AGAINST ISSUER

         Each Noteholder may make a demand under the guarantee in clause 3.1 or
         the indemnity in clause 3.2 without first taking any steps against the
         Issuer.

3.4      CONTINUING EFFECT

         The guarantee contained in this clause 3 is a continuing guarantee of
         the Guarantor, is not wholly or partially discharged at any time by the
         payment of any monies or the performance of any obligations guaranteed
         under it and remains in full force and effect until all monetary
         liabilities and other obligations guaranteed under it have been fully
         paid and performed.



                                       2
<PAGE>



3.5      NO REDUCTION OF LIABILITY

         The guarantee contained in this clause 3 and the liability of the
         Guarantor under such guarantee is not affected at any time by:

         (a)      the Noteholder under the guarantee granting to the Guarantor,
                  the Issuer or any other person any waiver, extension of time
                  or other indulgence;

         (b)      any other or further security or guarantee now or after the
                  date of this document held or taken by the Noteholder under
                  the guarantee;

         (c)      the loss or release by the Noteholder under the guarantee of
                  any other collateral or other security or guarantee;

         (d)      the Noteholder under the guarantee failing or neglecting to
                  recover by the realisation of any collateral or other security
                  or otherwise any of the money guaranteed under this clause 3;

         (e)      the insolvency, bankruptcy or winding up of any Issuer in
                  relation to that guarantee.

3.6      OBLIGATIONS

         For so long as the Notes are outstanding:

         (a)      Subject to clause 3.6(b), the Guarantor and the Issuer must
                  ensure that -

                  (i)      the Issuer (which owns the Tenements); and

                  (ii)     any person or person, who directly or indirectly own
                           the shares in the Issuer,

                  do not Dispose of all or substantially all of either the
                  assets of the Issuer (including the Tenements) or the direct
                  or indirect shareholding in the Issuer (whether by way of one
                  or more connected transactions) without first procuring that
                  the party or parties acquiring such interests (the
                  "Transferee") gives a guarantee and indemnity in favour of the
                  Noteholders on the same terms, as the guarantee and indemnity
                  given by the Guarantor under clause 3 of the Note Deed Poll
                  and on the basis that after the giving of that guarantee and
                  indemnity the Transferee will be jointly and severally liable
                  with the Guarantor. The giving of such guarantee and indemnity
                  shall not serve to release the Guarantor or the Issuer from
                  its obligations in respect of the Notes.

         (b)      Clause 3.6(a) does not apply to -

                  (i)      any Disposal arising from or pursuant to the
                           enforcement of any Encumbrance granted by the
                           Guarantor or the Issuer in accordance with the terms
                           of the Senior Secured Notes or any Refinancing
                           whether

                           A.       to recover amounts owing under the Senior
                                    Secured Notes or any Refinancing; or

                                       3
<PAGE>



                           B.       to recover amounts owing in connection with
                                    any other financial indebtedness secured by
                                    the same Encumbrances as provided for under
                                    the terms of the Senior Secured Notes or any
                                    Refinancing; and

         (c)      Subject to clause 3.6(d), if the Guarantor or the Issuer wish
                  to sell any of the Tenements or any of the direct or indirect
                  shareholding in the Issuer (other than the sale of all or
                  substantially all of the assets of or shareholding in the
                  Issuer which is regulated by clause 3.6(a)), they must first
                  obtain the consent to such Disposal from the Noteholders
                  holding no less than 50% of the aggregate face value of all
                  Notes on issue.

         (d)      Consent is not required to be obtained under clause 3.6(c) to
                  a Disposal arising from or pursuant to the enforcement of any
                  Encumbrance granted with respect to any bona fide financing
                  facility or accommodation entered with respect to the Project
                  or for the corporate benefit of the Guarantor or the Issuer if
                  at the time of entering into that financing facility or
                  accommodation Leucadia National Corporation and/or its Related
                  Entities had ceased to hold at least 50% of the aggregate face
                  value of all Notes on issue at that time.

         (e)      Any Person or Group of Persons that acquires Control of the
                  Guarantor or the Issuer (whether directly or indirectly) shall
                  be automatically and without further action be deemed to have
                  given a guarantee and indemnity in favour of the Noteholders
                  on the same terms as the guarantee and indemnity by the
                  Guarantor under clause 3 of the Note Deed Poll and on the
                  basis that after the giving of that guarantee and indemnity,
                  such Person or Group of Persons will be jointly and severally
                  liable with the Guarantor. Notwithstanding the foregoing, the
                  Guarantor and the Issuer must ensure the procurement of such
                  guarantee and indemnity. The giving of such guarantee and
                  indemnity shall not serve to release the Guarantor or the
                  Issuer from its obligations in respect of the Notes.

                  For purposes of this clause (e), the terms "Person" and
                  "Group" shall have the meaning used in Section 13(d) of the
                  Securities Exchange Act of 1934 and the rules and regulations
                  thereunder, whether or not such Section 13(d) applies to any
                  securities of the Guarantor or the Issuer, and "Control" means
                  the power, directly or indirectly, to vote or direct the
                  voting of securities having 50% or more of the ordinary voting
                  power for the election of directors of the Guarantor or the
                  Issuer.

                  Clause 3.6(e) shall not require FMG Pilbara Pty Ltd, which as
                  at the date of this Agreement holds all of the issued shares
                  in the capital of the Issuer, to grant a guarantee and
                  indemnity in accordance with clause 3.6(e).

4.       ENFORCEABILITY

4.1      NOTEHOLDER MAY ENFORCE

         This document operates as a deed poll and is enforceable against the
         Issuer and the Guarantor in accordance with its terms by each
         Noteholder in respect of the Notes held by it, even though the
         Noteholder is not a party to, or is not in existence at the time of
         execution and delivery of, this Note Deed Poll.

                                       4
<PAGE>



4.2      NOTEHOLDERS BOUND

         Each Noteholder, and each person claiming through each Noteholder, is
         bound by, and is deemed to have notice of, the provisions of this Note
         Deed Poll and the Note Conditions.

4.3      INDEPENDENT ENFORCEMENT

         Each Noteholder may enforce its rights under this Note Deed Poll and
         the Note Conditions in relation to their Notes independently from each
         other Noteholder, subject to any limitations imposed by this Note Deed
         Poll and the Note Conditions.

5.       GOVERNING LAW AND JURISDICTION

5.1      GOVERNING LAW

         This Note Deed Poll is governed by and must be construed according to
         the law applying in Western Australia.

5.2      JURISDICTION

         The Issuer, the Guarantor and each Noteholder irrevocably:

         (a)      submits to the non-exclusive jurisdiction of the courts of
                  Western Australia, and the courts competent to determine
                  appeals from those courts, with respect to any proceedings
                  which may be brought at any time relating to this Note Deed
                  Poll and the Notes; and

         (b)      waives any objection it may now or in the future have to the
                  venue of any proceedings, and any claim they may now or in the
                  future have that any proceedings have been brought in an
                  inconvenient forum, if that venue falls within clause 5.2(a).


EXECUTED AS A DEED

EXECUTED by FMG CHICHESTER PTY LTD ABN
83 109 264 252 in accordance with section 127
of the Corporations Act by or in the presence
of:


----------------------------------------   -------------------------------------
Signature of Secretary/other Director      Signature of Director or Sole
                                           Director and Secretary


----------------------------------------   -------------------------------------
Name of Secretary/other Director in full   Name of Director or Sole Director and
                                           Secretary in full





                                       5
<PAGE>


EXECUTED by FORTESCUE METALS GROUP LTD
ABN 50 002 594 872 in accordance with
section 127 of the Corporations Act by or in the
presence of:



----------------------------------------   -------------------------------------
Signature of Secretary/other Director      Signature of Director or Sole
                                           Director and Secretary


----------------------------------------   -------------------------------------
Name of Secretary/other Director in full   Name of Director or Sole Director and
                                           Secretary in full














                                       6
<PAGE>



SCHEDULE 1
NOTE CONDITIONS


1.       DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS

         In these Note Conditions:

         "ACCUMULATED INTEREST" means the Interest that the Issuer has been
         unable to pay to the Noteholders in accordance with Condition 5(c)
         together with any interest accruing on that amount pursuant to
         Condition 5(c);

         "CORPORATIONS ACT" means the Australian Corporations Act 2001 (Cth).

         "CONTROL" means the term as defined in Clause 3.6(e).

         "DEFAULT INTEREST" means the amount of the Interest paid or accrued for
         the 2 Interest Periods prior to the time at which notice is given under
         Condition 8.2(a) multiplied by the number of years (and any portion
         thereof) between the end of the later of the two Interest Periods
         referred to above and the Maturity Date.

         "DISPOSE" means to transfer, sell, assign, convey or otherwise dispose
         of by any means whatsoever (including by way of declaration of trust in
         favour of any other person).

         "ENCUMBRANCE" means a mortgage, charge, pledge, lien, encumbrance,
         security interest, title retention, preferential right, trust
         arrangement, contractual right of set-off, or any other security
         agreement or arrangement in favour of any person.

         "EVENT OF INSOLVENCY" means in relation to a company means each of the
         following events:

         (a)      a "controller" (as defined in section 9 of the Corporations
                  Act), trustee, liquidator, provisional liquidator,
                  administrator or similar officer is appointed in respect of
                  the company;

         (b)      the company enters into, or resolves to enter into, a scheme
                  of arrangement, deed of company arrangement or composition
                  with, or assignment for the benefit of, all or any class of
                  its creditors, or it proposes a reorganisation, moratorium or
                  other administration involving any of them;

         (c)      the company resolves to wind itself up, or otherwise dissolve
                  itself, or gives notice of its intention to do so, except to
                  reconstruct or amalgamate while solvent or is otherwise wound
                  up or dissolved;

         (d)      the company is or states that it is unable to pay its debts
                  when they fall due;

         (e)      the company is, or makes a statement from which it may be
                  reasonably deduced that the company is, the subject of an
                  event described in section 459C(2)(b) or section 585 of the
                  Corporations Act;



                                       7
<PAGE>



         (f)      the company takes any step to obtain protection or is granted
                  protection from its creditors, under any applicable
                  legislation or an administrator is appointed to the company or
                  the board of directors of the company propose to appoint an
                  administrator to the company or the company becomes aware that
                  a person who is entitled to enforce a charge on the whole or
                  substantially the whole of the company's property proposes to
                  appoint an administrator to the company; or

         (g)      anything analogous or having a substantially similar effect to
                  any of the events specified above happens under the law of any
                  applicable jurisdiction.

         "FINANCIAL CLOSE" means the date on which funds first become available
         for use by FMG Finance Pty Ltd under the Senior Secured Notes.

         "GOVERNMENT AUTHORITY" means any government or any governmental or semi
         governmental entity, authority, agency, commission, corporation,
         department or body (including those constituted or formed under any
         Statute), local government authority, stock exchange, administrative or
         judicial body or tribunal.

         "GOVERNMENT ROYALTIES" means for the relevant Interest Period all
         royalties payable in respect of the Project during that Interest Period
         under the Mining Act 1978 (WA) .

         "GROSS SALE PROCEEDS" means as at the end of the relevant Interest
         Period the amount in US Dollars determined by multiplying the Price by
         the Tonnes Sold.

         "GROUP" means that term as defined in Clause 3.6(e).

         "GUARANTEE" means the guarantee provided by the Guarantor under the
         Note Deed Poll.

         "INTEREST" means the interest provided for in Condition 5(a) together
         with any Accumulated Interest accruing on that amount pursuant to
         Condition 5(c).

         "INTEREST PAYMENT DATE" has the meaning given in Condition 5(b).

         "INTEREST PERIOD" means in relation to a Note:

         (a)      the period commencing on the date of issue of the Notes and
                  ending on the first to occur of 30 June or 31 December; and

         (b)      each subsequent six month period (or portion thereof)
                  commencing on the day after the final day of the previous
                  Interest Period, until the Notes are redeemed or repaid.

         "IRON ORE" means beneficiated ore, fine ore or lump ore.

         "MATURITY DATE" means 13 years from the date of Financial Close.

         "MATURITY REDEMPTION AMOUNT" in relation to a Note means the face value
         of the Note together with Interest (if any) accrued and unpaid to the
         Maturity Date.

         "NET REVENUE" means Gross Sale Proceeds minus Government Royalties.

         "NOTE" means an obligation of the Issuer to a Noteholder in respect of
         indebtedness of the Issuer to that Noteholder which is recorded in or
         evidenced by an entry in the Register.



                                       8
<PAGE>



         "NOTE CERTIFICATE" means a certificate in the form set out in Annexure
         A.

         "NOTE CONDITIONS" means these terms and conditions.

         "NOTE DEED POLL" means the Note Deed Poll under which the Notes are
         constituted.

         "NOTEHOLDER" in relation to a Note means the person or persons
         registered as the holder of that Note in any register maintained by the
         Issuer or, if there is no such register, in whose name a Note
         Certificate is issued.

         "PERSON" means that term as defined in Clause 3.6(e).

         "PRICE" means the FOB Port Hedland price payable by the purchaser of
         the Tonnes Sold as set out in the invoice relating to the sale of those
         Tonnes Sold which, if not stated in US Dollars, must be converted into
         US Dollars using the prevailing exchange rate on the date on which the
         ship containing the Tonnes Sold sails.

         "PROJECT" means development of one or more iron ore mines on the
         Tenements and the related rail, port and infrastructure project.

         "REFINANCING" means a refinancing of the Senior Secured Notes for no
         greater principal amount than that issued under the Senior Secured
         Notes, at an interest rate no greater than that payable under the
         Senior Secured Notes and with a maturity of no longer than 10 years
         after the date of Financial Close.

         "REGISTER" means the register of Noteholders maintained by the Issuer.

         "SENIOR SECURED NOTES" means the senior secured notes to be issued by
         FMG Finance Pty Ltd means the senior secured notes to be issued by FMG
         Finance under Rule 144A(d)(4) under the US Securities Act 1933 (as
         amended) pursuant to an indenture to be dated on or about the date on
         which the first of the Notes is issued, without regard to any
         amendments thereto.

         "STATUTE" means any legislation of the Parliament of the Commonwealth
         of Australia or of any State or Territory of the Commonwealth of
         Australia in force at any time, and any rule, regulation, ordinance,
         by-law, statutory instrument, order or notice at any time made under
         that legislation.

         "TAXES" means all taxes, levies, imposts, deductions, charges and
         withholdings assessed, imposed, collected or withheld under any
         legislation and, in each case, all interest, fines, penalties, charges,
         fees or other amounts in respect of them.

         "TENEMENTS" means the tenements set out in Annexure B.

         "TONNES SOLD" means for the relevant Interest Period the tonnes of Iron
         Ore produced from all of the Tenements and invoiced for sale during the
         relevant Interest Period.

         "TRANSFEREE" means the term as defined in Clause 3.6(a).



                                       9
<PAGE>



1.2      INTERPRETATION

         In these Note Conditions:

         (a)      headings are for convenience only and do not affect
                  interpretation;

         and unless the context indicates a contrary intention:

         (b)      "PERSON" includes an individual, the estate of an individual,
                  a corporation, a Government Authority, an association or a
                  joint venture (whether incorporated or unincorporated), a
                  partnership and a trust;

         (c)      a reference to a person includes that person's executors,
                  administrators, successors, and permitted assigns, including
                  persons taking by way of novation;

         (d)      except with respect to the Senior Secured Notes, a reference
                  to a document (including these Note Conditions) is to that
                  document as varied, novated, ratified or replaced from time to
                  time;

         (e)      a reference to amending a term, condition or a document
                  includes supplementing, deleting or replacing the term,
                  condition or document (as the case may be);

         (f)      a reference to "$" "US$", "DOLLARS" "DOLLAR" and "US DOLLARS"
                  is to the currency of the United States of America;

         (g)      a reference to a Statute includes its delegated legislation
                  and a reference to a Statute or delegated legislation or a
                  provision of either includes consolidations, amendments,
                  re-enactments and replacements;

         (h)      a word importing the singular includes the plural (and vice
                  versa), and a word indicating a gender includes every other
                  gender;

         (i)      a reference to a clause, Condition, schedule, exhibit,
                  attachment or annexure is a reference to a clause, Condition,
                  schedule, exhibit, attachment or annexure to or of these Note
                  Conditions, and a reference to these Note Conditions includes
                  all schedules, exhibits, attachments and annexures to it;

         (j)      if a word or phrase is given a defined meaning, any other part
                  of speech or grammatical form of that word or phrase has a
                  corresponding meaning;

         (k)      where the day on or by which any sum is payable or any act,
                  matter or thing is to be done is a day other than a Business
                  Day, that sum must be paid and that act, matter or thing must
                  be done on the immediately succeeding Business Day;

         (l)      a reference to time is to local time in Perth, Western
                  Australia ;

         (m)      where time is to be determined by reference to a day or event,
                  that day or the day of that event is to be excluded; and

         (n)      "INCLUDES" in any form is not a word of limitation.



                                       10
<PAGE>



2.       THE NOTES

2.1      ACKNOWLEDGMENT OF INDEBTEDNESS

         The Issuer acknowledges its indebtedness in respect of, and promises to
         pay all amounts due in relation to, each Note on the terms contained in
         the Note Deed Poll and these Note Conditions.

2.2      COVENANT TO PERFORM OBLIGATIONS

         The Issuer covenants in favour of each Noteholder from time to time
         that it will perform its obligations in full, and by the due dates,
         referred to in the Note Deed Poll and these Note Conditions.

2.3      STATUS OF NOTES

         (a)      (DIRECT UNSECURED OBLIGATIONS): each Note constitutes direct,
                  unconditional and unsecured obligations of the Issuer in
                  accordance with these Note Conditions; and

         (b)      (RANKING): the Notes at all times rank pari passu and without
                  any preference amongst themselves and at all times rank after,
                  and are subordinated to, the Senior Secured Notes or any
                  Refinancing thereof.

2.4      DENOMINATION AND CURRENCY OF NOTES

         Each Note will be have a principal amount of, and be issued in minimum
         denominations of US$2,000 and integral multiples of US$1,000 in excess
         thereof.

2.5      NOTES NOT INVALID IF IMPROPERLY ISSUED

         No Note is invalid or unenforceable on the ground that it was issued in
         breach of these Note Conditions.

2.6      LOCATION OF THE NOTES

         The property in a Note for all purposes is situated where the Register
         is located.

2.7      NO RIGHTS BEFORE PAYMENT

         Unless and until the Issuer receives or has the benefit of the
         consideration agreed to be provided in respect of the issue of a Note,
         no Noteholder nor any other person has any right, title or interest to
         the Note.

3.       NOTE CERTIFICATES

3.1      ISSUE

         The Issuer must issue a Note Certificate to each person who is issued a
         Note.

3.2      CONDITIONS OF ISSUE

         The terms of the Note Deed Poll and the Note Conditions are deemed to
         be included or endorsed on each Note Certificate.



                                       11
<PAGE>



3.3      EXECUTION OF NOTE CERTIFICATES

         Subject to any requirement of the Corporations Act, each Note
         Certificate must be executed by any officer of the Issuer duly
         authorised to do so by a resolution of the directors of the Issuer, and
         any signature required for such execution or authentication may be a
         facsimile which is printed as part of the Note Certificate or which is
         applied by mechanical or other means.

4.       REGISTER

         The Issuer must establish and maintain a Register. There must be
         recorded in the Register the names and addresses of the Noteholders and
         the date of issue or transfer of such Notes and the amount of Notes
         held by each Noteholder.

5.       INTEREST

         (a)      The interest payable on each Note in respect of an Interest
                  Period is:

                  4% of Net Revenue                         the face value
        --------------------------------------------    X   of the relevant
         aggregate face value of all Notes on issue              Note
            on the relevant Interest Payment Date

         and accrues on a daily basis.

         (b)      Subject to paragraph (c), Interest is payable semi-annually in
                  arrears 30 days after the end of the relevant Interest Period
                  ("INTEREST PAYMENT DATE") .

         (c)      Interest is only required to be paid to the Noteholders after
                  the payment restrictions in the Senior Secured Notes have been
                  satisfied. If the Issuer is unable to pay Interest at any time
                  due to the restrictions in the Senior Secured Notes, the
                  Noteholders' right to Interest will accumulate until such time
                  as the Issuer is permitted under the terms of the Senior
                  Secured Notes to pay such Interest. Each Interest payment
                  which is unpaid will accrue simple interest from the due date
                  for payment until the date it is paid at the rate of 9.5% per
                  annum.

         (d)      As soon as permitted under the terms of the Senior Secured
                  Notes, the Issuer will pay to the Noteholders the Accumulated
                  Interest.

6.       CALCULATION OF INTEREST

         (a)      The Issuer must on the relevant Interest Payment Date provide
                  any Noteholder holding no less than 25% of the aggregate face
                  value of all Notes on issue with a certificate signed by a
                  director of the Issuer and the chief executive officer of the
                  Guarantor setting out in reasonable detail how the Interest
                  was calculated for the relevant Interest Calculation Period
                  and attaching to it copies of all relevant sales invoices.

         (b)      The Issuer must implement and maintain such procedures and
                  maintain such records as are reasonably necessary to ensure
                  that at all times the amount of the Interest payable in
                  respect of the Notes can be accurately calculated.

         (c)      Any Noteholder holding no less than 25% of the aggregate face
                  value of all Notes on issue, or any person authorized by it in
                  writing, may at any time within 30 days of receiving a
                  certificate under paragraph (a), upon reasonable notice to the


                                       12
<PAGE>



                  Issuer, inspect the property comprising the Tenements and the
                  books and records maintained by the Issuer in relation to the
                  Tenements for the sole purpose of determining and verifying
                  the amount of the Interest the subject of that certificate and
                  any variable or factor necessary to determine the amount of
                  the Interest the subject of the certificate.

         (d)      If following any inspection or audit made pursuant to
                  paragraph (c), the Noteholder believes that the amount paid by
                  FMG to a Noteholder is less than the amount required by these
                  Conditions to be paid, the Noteholder must notify FMG and the
                  Noteholder and FMG must endeavour to agree the amount which
                  should have been paid within 21 days of the notice being
                  given. If the parties are unable to agree within that period,
                  an independent expert must be appointed to determine the
                  amount required by these Conditions to be paid.

         (e)      If the parties are unable to agree to the independent expert
                  to be appointed within 7 days after expiration of the 21 day
                  period in paragraph (d), then the expert shall be appointed at
                  the request of either party by the President for the time
                  being of the Australasian Institute of Mining and Metallurgy
                  ("EXPERT").

         (f)      The Expert shall be acting as an expert and not an arbitrator
                  and the Expert's decision will be final and binding on the
                  parties.

         (g)      If the Expert determines that there was a shortfall in the
                  amount that the Issuer was required to pay under these
                  Conditions, the Issuer must immediately pay to all Noteholders
                  the shortfall owing plus interest as calculated pursuant to
                  Condition 5(c).

         (h)      If the Expert determines that the Issuer paid more than it was
                  required to pay under these Conditions, the Issuer will be
                  entitled to deduct from the next payment of Interest to all
                  Noteholders the amount of such excess plus interest at the
                  rate of 9.5% per annum from the date of the last payment of
                  Interest to the date of the next payment of Interest.

         (i)      If the Expert determines that the shortfall in payment to the
                  Noteholder is in excess of 5% of the amount which had
                  initially been paid:

                  (i)      the Issuer must immediately reimburse the Noteholder
                           for all expenses incurred in connection with the
                           audit or inspection which disclosed that shortfall
                           (including, but not limited to, reasonable accounting
                           and legal fees); and

                  (ii)     the Issuer must reimburse the Noteholder for all
                           expenses connected with the next three (if any)
                           subsequent audits or inspections made pursuant to
                           paragraph (c) (including, but not limited to,
                           reasonable accounting and legal fees), irrespective
                           of whether such subsequent audit or inspection
                           reveals any shortfall in any payment.

         (j)      All payments made under this clause are without prejudice to
                  any other remedies that a Noteholder or the Issuer may have
                  under this Note Deed Poll or otherwise.



                                       13
<PAGE>



7.       REDEMPTION

7.1      REDEMPTION ON MATURITY

         Each Note will be redeemed or repaid (as the case may be) on its
         Maturity Date at its Maturity Redemption Amount and, unless clause 8.2
         applies, cannot be redeemed or repaid before that time.

7.2      CANCELLATION OF NOTES

         All Notes that are redeemed will automatically be cancelled on
         redemption and may not be re-issued.

8.       EVENTS OF DEFAULT

8.1      EVENTS OF DEFAULT

         Each of the following events is an Event of Default, whether or not the
         cause is beyond the control of the Issuer or any other person:

         (a)      the Issuer fails to pay within 10 days after the due time on
                  the due date any amount payable under any Note in the manner
                  specified in the Note Conditions;

         (b)      the Issuer defaults in fully performing and observing any of
                  its other obligations in respect of any Note other than a
                  provision requiring the payment of money as contemplated by
                  Condition 8.1(a), and if that default is capable of remedy, it
                  has not been remedied within 45 days of its occurrence;

         (c)      if there is an acceleration by holders in payment of the
                  principal of the Senior Secured Notes or any Refinancing
                  thereof;

         (d)      unless the Senior Secured Notes have been Refinanced, there
                  occurs, at any time after all of the Senior Secured Notes have
                  matured or been redeemed, an event which, if the Senior
                  Secured Notes had not matured or been redeemed, would have
                  been an event of default under the Senior Secured Notes;

         (e)      if the Senior Secured Notes have been Refinanced, there occurs
                  at any time after all of the notes issued to Refinance have
                  matured or been redeemed, an event which, if those notes had
                  not matured or redeemed, would have been an event of default
                  under those notes; or

         (f)      an Event of Insolvency occurs in relation to the Issuer or the
                  Guarantor.

8.2      RIGHTS ON AN EVENT OF DEFAULT

         (a)      Subject to paragraph (b), if any Event of Default occurs and
                  is continuing in relation to a Note, then Noteholders who
                  alone or in aggregate hold at least 50% of the aggregate face
                  value of all Notes on issue may by written notice to the
                  Issuer declare the face value of the Notes together with all
                  accrued Interest, Default Interest and other moneys in
                  relation to a Note to be immediately due and payable.



                                       14
<PAGE>



         (b)      Noteholders shall not be entitled to accelerate repayment
                  after an Event of Default until the earlier of the date (i)
                  the Senior Secured Notes have been paid in full, (ii) 360 days
                  following missed interest payments on the Notes, (iii) of
                  acceleration of the Senior Secured Notes, or (iv) one business
                  day following maturity of the Notes if all amounts of
                  principal and interest have not been paid in full; provided,
                  however, Noteholders may accelerate payment of the Guarantee
                  under the Note Deed Poll if Fortescue no longer guarantees the
                  Senior Secured Notes.

9.       TRANSFER OF NOTES

9.1      FORM OF TRANSFER

         The Notes may be transferred:

         (a)      by written transfer instrument in any usual or common form or
                  in any other form approved by the directors of the Issuer; and

         (b)      to a person or entity that has executed and delivered to the
                  Issuer an undertaking to observe, perform and be bound by the
                  terms of this deed.

9.2      EXECUTION OF TRANSFER

         A written transfer instrument must be executed by the transferor.

9.3      REGISTRATION OF TRANSFER

         A written transfer instrument must be forwarded for registration to the
         Issuer together with the Note Certificate for the Notes to be
         transferred. Subject to compliance with Condition 10.5 and the
         provisions of any relevant Statute relating to stamp duties, the Issuer
         must register the transfer and issue a Note Certificate to the
         transferee for the number of Notes comprised in the transfer.

9.4      TRANSFERS WHERE NOTES ARE QUOTED

         If the Notes are, at the time of transfer, quoted on a financial
         market, then the Notes may alternatively be transferred in accordance
         with the rules of that financial market and the Corporations Act.

9.5      TRANSFER RESTRICTIONS

         It is understood that the Note Certificates may bear one or all of the
         following legends:

         (a)      "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
                  AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW,
                  AND THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
                  THAT THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
                  TRANSFERRED ONLY (1) TO FORTESCUE METALS GROUP LTD OR FMG
                  CHICHESTER PTY LTD, (2) SO LONG AS THIS SECURITY IS ELIGIBLE
                  FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
                  ("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES
                  IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A),
                  (3) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE


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<PAGE>



                  904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT,
                  (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE
                  WITH RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (5)
                  PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
                  SECURITIES ACT, OR (6) PURSUANT TO AN AVAILABLE EXEMPTION FROM
                  THE REGISTRATION REQUIREMENTS IF THE SELLER SHALL HAVE
                  FURNISHED SUCH CERTIFICATIONS AND/OR OPINION OF COUNSEL AS THE
                  ISSUER MAY REASONABLY REQUEST, IN EACH SUCH CASE IN ACCORDANCE
                  WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
                  STATES OR OTHER JURISDICTIONS."

         (b)      Any legend required by applicable state "blue sky" securities
                  laws, rules and regulations.

         To the extent a Note bears the legend set forth in (a) above, the
         Issuer shall be entitled to require such certifications and/or opinions
         as it may reasonably request in connection with the registration of
         transfer of any Note.

         In order to permit resales pursuant to Rule 144A of the Securities Act,
         the Guarantor agrees that, for as long as any Notes are "restricted
         securities" within the meaning of Rule 144(a)(3) under the Securities
         Act, during any period in which the Guarantor is neither subject to
         Section 13 or 15(d) of the US Securities Exchange Act of 1934, nor
         exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the
         Guarantor shall supply to (i) any holder of Notes or beneficial owner
         of a Note or (ii) a prospective purchaser of a Note or a beneficial
         interest therein designated by such holder or owner, the information
         specified in, and meeting the requirements of Rule 144A(d)(4) under the
         Securities Act.

9.6      COMPLIANCE WITH LAW

         Notes may not be transferred within any jurisdiction in a manner which
         would result in a breach of any applicable securities legislation in
         that jurisdiction.

10.      PAYMENT TO NOTEHOLDERS

         Redemption moneys and any other moneys payable on or in respect of any
         Notes must be paid in US dollars by:

         (a)      cheque sent to the address of the Noteholder on the Register;

         (b)      deposit to an account with any bank in Australia or the United
                  States that the Noteholder, by written notice to the Issuer,
                  may direct; or

         (c)      any other method of transferring money agreed by the Issuer
                  and the relevant Noteholder from time to time.

11.      DEDUCTION OF TAXES

11.1     WITHHOLDING TAX

         The Issuer, or any person making payments on behalf of the Issuer, may
         deduct any Tax imposed by the Commonwealth of Australia or any foreign
         Government Authority under the Tax Act or any applicable laws from


                                       16
<PAGE>



         payments of interest in respect of the Notes where the Issuer, or such
         person, considers this is required in accordance with the Tax Act or
         such laws.

11.2     NO GROSS-UP

         No additional payment will be made to a Noteholder with respect to any
         amounts deducted from payment to that Noteholder under this Condition
         11.

12.      JOINT NOTEHOLDERS

         (a)      Joint Noteholders will be entitled to one Note Certificate
                  only in respect of Notes held by them jointly and the Note
                  Certificate will be delivered to the joint Noteholder whose
                  name stands first in the Register.

         (b)      If several Persons are entered in the Register as joint
                  Noteholders in respect of a Note the receipt by any one of
                  such Persons for the payment or satisfaction of any principal
                  or interest from time to time payable or repayable to the
                  Joint Noteholders will be as effective a discharge to the
                  Issuer as if the Person accepting the payment were a sole
                  Noteholder in respect of that Note.

         (c)      The Issuer will not be bound to register more than three
                  Persons as the joint holders of any Notes.

         (d)      Subject to these Note Conditions, all of the joint Noteholders
                  in respect of any Note must execute any transfer form of the
                  relevant Note.

13.      TITLE TO NOTES, NON-RECOGNITION OF EQUITIES

         (a)      Subject to these Note Conditions, the Issuer will recognise
                  only the Noteholder whose name appears in the Register as the
                  absolute owner of the Note in respect of which the Noteholder
                  is entered in the Register.

         (b)      The Issuer will not, except as otherwise ordered by a Court of
                  competent jurisdiction or as required by statute, be bound to
                  take notice of any trust or equity to which a Note may be
                  subject or otherwise affecting the ownership of a Note or
                  rights incidental thereto.

         (c)      The receipt of a Noteholder or one of Joint Noteholders for
                  interest in respect of and for any money payable on the
                  redemption of a Note will be a good discharge to the Issuer
                  despite any notice the Issuer may have, whether express or
                  otherwise, of the right, title or interest of any person to or
                  in that Note or money.

14.      MISCELLANEOUS

14.1     TERMS AND CONDITIONS BINDING

         Each Noteholder, and the Notes are issued on the condition that each
         Noteholder, is bound by the terms and conditions of the Note Deed Poll
         and the Note Conditions relating to the Notes held by that Noteholder.



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<PAGE>



14.2     SEVERANCE

         If at any time any provision of the Note Deed Poll or these Note
         Conditions is or becomes illegal, invalid or unenforceable in any
         respect under the law of any jurisdiction, that will not affect or
         impair:

         (a)      the legality, validity or enforceability in that jurisdiction
                  of any other provision of the Note Deed Poll or the Note
                  Conditions; or

         (b)      the legality, validity or enforceability under the law of any
                  other jurisdiction of that or any other provision of the Note
                  Deed Poll or the Note Conditions.

14.3     REMEDIES CUMULATIVE

         The rights and remedies conferred by the Note Deed Poll and the Note
         Conditions on the Issuer are cumulative and in addition to all other
         rights or remedies available to the Issuer by Statute, by general law
         or by virtue of any other document.

14.4     WAIVER

         (a)      A failure to exercise or enforce, or a delay in exercising or
                  enforcing, or the partial exercise or enforcement of, a right,
                  power or remedy provided by law or under the Note Deed Poll or
                  these Note Conditions by the Issuer does not preclude, or
                  operate as a waiver of, the exercise or enforcement, or
                  further exercise or enforcement, of that or any other right,
                  power or remedy provided by law or under the Note Deed Poll or
                  these Note Conditions.

         (b)      A waiver or consent given by the Issuer under the Note Deed
                  Poll or these Note Conditions is only effective and binding on
                  the Issuer if it is given or confirmed in writing.

         (c)      No waiver of a breach of a term of the Note Deed Poll or these
                  Note Conditions operates as a waiver of another breach of that
                  term or of a breach of any other term of the Note Deed Poll or
                  these Note Conditions.

14.5     SURVIVAL OF WARRANTIES

         The warranties, representations and covenants of the Noteholders
         contained in or made pursuant to the Note Conditions shall survive the
         execution and delivery of the Note Deed Poll and shall in no way be
         affected by any investigation of the subject matter thereof made by or
         on behalf of the Noteholders, the Issuer or the Guarantor.

14.6     SUCCESSORS AND ASSIGNS

         Except as otherwise provided herein, these Note Conditions shall inure
         to the benefit of and be binding upon the respective successors and
         assigns of the parties (including transferees of any Notes). Nothing in
         the Note Deed Poll, express or implied, is intended to confer upon any
         party other than the parties hereto or their respective successors and
         assigns any rights, remedies, obligations, or liabilities under or by
         reason of the Note Deed Poll, except as expressly provided in the Note
         Deed Poll.



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<PAGE>



14.7     COUNTERPARTS

         The Note Deed Poll may be executed in two or more counterparts,
         including counterpart facsimile pages, each of which shall be deemed an
         original, but all of which together shall constitute one and the same
         instrument.

14.8     AMENDMENT

         The Note Deed Poll or the Note Conditions may be amended by the Issuer
         at any time with the approval of Noteholders holding in aggregate 50%
         of the aggregate face value of all Notes on issue. However, without the
         consent of each Noteholder affected thereby, no amendment may:

         (a)      reduce the principal amount of Notes,

         (b)      reduce the rate of or extend the time for payment of Interest
                  on any Note;

         (c)      reduce the principal of, or extend the maturity of, any Note;

         (d)      make any Note payable in money other than US dollars;

         (e)      impair the right of any Noteholder to institute suit for the
                  enforcement of any payment on or with respect to such
                  Noteholder's Notes or any Guarantee;

         (f)      subordinate the Notes or the Guarantee to any other obligation
                  of the Issuer or Guarantor; or

         (g)      make any change to the Guarantee that would adversely affect
                  the Noteholders.

15.      OBLIGATIONS IN RELATION TO THE NOTES

15.1     LISTING ON AN EXCHANGE

         (a)      Subject to paragraph (b), the Issuer agrees that, if the
                  Senior Secured Notes are listed on any stock exchange, the
                  Issuer will, to the extent permitted by law and the rules of
                  the relevant stock exchange, use its best endeavours to obtain
                  a listing of the Notes on such stock exchange, provided that
                  the Notes satisfy the requirements of the relevant stock
                  exchange for listing and, if reasonably required by
                  Noteholders holding in aggregate 50% of the face value of all
                  Notes on issue, use its best efforts in connection with a
                  listing or otherwise, to cooperate in connection with a
                  secondary sale by such Noteholders of the Notes, including the
                  preparation of an offering memorandum, making management
                  reasonably available for investor presentations and the entry
                  into a customary purchase or underwriting agreement.

         (b)      The Issuer will not have an obligation to obtain a listing of
                  the Notes under paragraph (a) if the Issuer determines, acting
                  reasonably, that satisfying the requirements for such a
                  listing would be unduly onerous for the Issuer. In these
                  circumstances, the Issuer will identify another exchange
                  reasonably acceptable to Noteholders holding in aggregate 50%
                  of the face value of all Notes on issue on which the Notes may
                  be listed and in respect of which the Issuer is reasonably
                  satisfied that the listing requirements would not be unduly
                  onerous.




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</TEXT>
</DOCUMENT>
