significant expansion of copper production at … · significant expansion of copper production at...

1131 Hay Street, West Perth, W.A. 6005 PO Box 1036 West Perth, W.A. 6872 Tel: (08) 9486 7100 Fax: (08) 9486 7300. Website: www.matrixmetals.com.au Email: [email protected]

7 December 2007 Manager Company Announcements Company Announcements Office ASX Limited Level 10, 20 Bond Street SYDNEY NSW 2000

ABN 42 082 593 235

Electronic delivery No of pages: 3

ANNOUNCEMENT

Significant Expansion of Copper Production at Leichhardt Project

Summary Matrix Metals Limited (“Matrix” or “the Company”) is pleased to announce that:

• Matrix has resolved to immediately commence an increase in the Leichhardt processing plant production capacity to 9,000 tpa of copper cathode, from current levels of 5,500 tpa, where it is currently operating at name plate capacity. This Stage One Expansion requires no further ore resources, no change to the technical parameters of the ore body, and will process the same total tonnes as in the current mine plan but at a increased rate. The expansion will generate significantly increased cashflows for Matrix.

• Matrix already owns the electrical and SX/EW equipment which are the long

lead time and significant capital items in respect of the capacity upgrade, and consequently the upgrade will be undertaken relatively quickly and inexpensively, with the upgraded capacity expected to be completed during the June Quarter 2008, for a cost of $5.5 million. Production at current capacity is expected to continue uninterrupted through that period.

• Matrix has resolved to place up to 72,000,000 ordinary shares in Matrix at an

issue price of $0.105 per share (“Placement Price”), to raise up to $7,560,000 (“the Placement”), principally to international and domestic institutional and sophisticated investor clients of Hartleys Limited, and major shareholders of Matrix.

• Matrix has resolved to undertake a Share Purchase Plan (“SPP”) of up to

30,000,000 at the Placement Price, to allow eligible shareholders to acquire additional Matrix shares.

Stage One Expansion - 9,000 tpa Copper Cathode Production Over the last twelve months, Matrix has funded, refurbished and commissioned the Leichhardt project, which is now operating at its name plate capacity of 5,500 tpa of copper cathode. The Stage One Expansion at Leichhardt will increase the processing

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2 plant capacity to 9,000 tpa of copper cathode, from current nameplate of 5,500 tpa. The capital requirement for the expansion of $5.5 million will be funded by the Placement. Following completion of the Placement, the Stage One Expansion will commence immediately, with the expanded plant capacity expected to be completed during the June Quarter 2008, whilst production at current capacity is to continue through that period. The Stage One Expansion requires no further ore resources, no change to the technical parameters of the ore body, will process the same tonnes as in the current mine plan but at an increased rate and will generate significantly increased cashflows for Matrix. The Stage One Expansion is based on the mining and treatment of only 2.1 million tonnes of the existing 8.8 million tonne copper resource at Mt Watson and surrounds. Since commencement of mining operations in April 2007, 265,000 tonnes of that copper resource has been mined. Stage Two Expansion Study – Life Extensions In addition to the Stage One Expansion, the Stage Two Study is progressing well. Stage Two will aim to complete the conversion of the remainder of the Mt Watson resource to reserve status and progress conversion of other known resources. Conversion of current resources to reserves will potentially provide a minimum 6 year mine life at the expanded production rate of 9,000 tpa copper cathode, with previously identified prospects at Mt Earl, Mt Wonder, Tewinga and Boomerang all offering potential for significant mine life extensions/production rate increases in the short term. Geotechnical drilling (the first stage of the geotechnical assessment) was completed during the September quarter and metallurgical drilling (the first stage of the metallurgical testing) was completed during October 2007. Column test work will now be carried out during 2008 as part of the Stage Two study. If the study indicates that the project meets the Company’s investment hurdles, then life extensions will result for the Leichhardt processing plant. Placement and SPP Matrix has resolved to place up to 72,000,000 ordinary shares in Matrix at an issue price of $0.105 per share, to raise up to $7,560,000, principally to international and domestic institutional and sophisticated investor clients of Hartleys Limited and major shareholders of Matrix. The Placement shares will be within the Company’s 15% placement capacity in accordance with ASX Listing Rule 7.1. In addition, and to allow all eligible shareholders to acquire Matrix shares at the Placement price, Matrix has resolved to undertake a SPP of up to 30,000,000. The record date for the SPP is 7 December 2007. More information will be provided in the offer letter which will be mailed to shareholders. Funds raised pursuant to the Placement and SPP will be used to contribute to the Leichhardt Stage One Expansion, Stage Two Study, exploration and working capital. Please also find following a Investor Presentation with regard to Matrix, its expansion options and exploration potential.

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3 Yours faithfully

Shane McBride Managing Director The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Bob Dennis. Mr Bob Dennis is a Member of the Australasian Institute of Mining and Metallurgy and is a full-time employee of the Company. Mr Dennis has sufficient experience which is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which they is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code”. Mr Dennis consents to the inclusion in the report of the matters based on information in the form and context in which it appears.

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Matrix Metals Limited – Investor Presentation

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Disclaimer

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The material used is this presentation is intended to be a summary of selected geological data, current and proposed activities, as well as resource estimates based on information available to Matrix at the time. It does not include all available information and should not be used in isolation as a basis to invest in Matrix. Any potential investors should refer to Matrix Metals Limited ASX releases and statutory reports before considering investing in the company.

The presentation includes information relating to a feasibility study which is in progress and includes “forward looking statements’ which include, without limitation, estimates of potential copper production based on mineral resources that are currently being evaluated. While the Company has reasonable basis on which to express these estimates, any forward looking statement is subject to risk. Risks include, without limitation: copper metal prices, foreign exchange rate movements, project funding capacity, copper product offtake contracts and estimates of future capital and operating costs. The Company does not undertake to release publicly any revisions to forward looking statements included in this presentation to reflect events or results after the date of this presentation, except as may be required under applicable securities laws.

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Corporate Overview

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Ordinary SharesUnlisted OptionsMarket CapitalisationBased on price of $0.13 / share

702.5m19.7m

$91.3 million

CashDebt (Glencore)

$5 million$8 million

Independence GroupLinQ Resources FundGlencore

17.7%8.8%5.9%

Top 20 43.2%

Capital Structure Substantial Shareholders

$0.00

$0.02

$0.04

$0.06

$0.08

$0.10

$0.12

$0.14

$0.16

$0.18

$0.20

Jan 06 Mar 06 May 06 Jul 06 Sep 06 Nov 06 Jan 07 Mar 07 May 07 Jul 07 Sep 07 Nov 07-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Volume Share price

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Board & Management

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Board of Directors Senior Management

Non-Executive Director

David HumannShane McBrideClive Donner

ChairmanManaging DirectorNon-Executive Director

Ronald Hing

Geoffrey Jones Non-Executive Director

Richard Procter Non-Executive Director

Shane McBrideIan GoldbergBob Dennis

Chief Executive OfficerChief Financial OfficerGM - Operations

Paul Monaghan Leichhardt Ops MgrBarry Cloutt Project Manager

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Mt Isa Inlier – World Class Base Metals Province

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Leichhardt Project Summary

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Leichhardt 5,500tpa SX/EW plant is in steady state production processing Mt Watson copper oxide resource at nameplate capacity

Glencore International to buy 100% of production over life of mineCashflow from copper sales commenced in August 2007Total leachable copper resources in the Leichhardt Project total 8.8 million tonnesStage 1 has 2.1 million tonnes of Mt Watson ore to be treated over 4 - 5 years at 5,500tpa (only 25% of Leichhardt total resource utilised in Stage 1)Plant upgrade for Stage 1 expansion estimated at approximately $5-6 million to increase production to approximately 9,000tpa. Most equipment for plant upgrade is already owned by Matrix. This option uses exactly the same orebody as Stage 1, no change is made to the technical aspects of the orebody mined, however the mining rate is increasedStage 2 will see an extension to mine life and/or increase in production ratesGeotechnical and metallurgical drilling for Stage 2 has been completed and column test work will start soonResource inventory increase to 8.8 million tonnes to come (Mt Watson, Hidden Treasure, Mighty Atom, Mt Earl, Mt Wonder, Tewinga, Boomerang)For

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Mt Watson from the West to East

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Overall Stage 2 pit length 1.5km

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Leichhardt Production Activities

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Leichhardt Project Milestones

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Leichhardt Project mining study completed October 2006

Leichhardt Project funding completed November 2006

Mining operations commenced at Mt Watson in April 2007

Process plant started commissioning and crushing operations commenced June 2007

Copper cathode production commenced June 2007

Processing plant refurbishment and commissioning complete June 2007

First copper cathode sales in July 2007

Cashflow commenced in August 2007

Nameplate production of 5,500 tpa achieved from late September

Steady state production achieved October

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Leichhardt Stage 1 Project to Date

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Ramp up progressed on schedule

Mined grades and widths reconcile with the resource model

Copper cathode production at nameplate capacity

Stage 1 ore of 2.1mt @ 1.2%

Nameplate Production RateGrade (% Cu)

5,500 tpa1.17

Operating Cost - US$/lb- A$/lb

$1.59$2.18

5,500 tpa1.16

FeasibilityStudy July – Sep 07

Total Revenue (A$) $163 million $6.8 million

Feasibility Study Prices Average 2.66 $16 million

Cu PriceUS$/lb

Annual NetOperating Cashflow

Spot Prices 3.42 $20 million

15 months

Capital $ PaybackTime

14 months

$1.71$1.99

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Leichhardt Stage 1 Expansion

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Stage 1 development utilising only 2.1 million tonnes @ 1.2% Cu of the existing Mt Watson leachable resource of 8.8 million tonnes @ 1% Cu

The current mining inventory of 2.1 million tonnes is not a JORC compliant reserve, however it is expected to be a reserve during January 07

Plant capacity to increase from 5,500tpa to approximately 9,000tpa of copper cathode

Plant upgrade capital estimated at approximately $5-6 million

Utilise EW equipment already owned by Matrix

No additional ore feed is required to justify this production upgrade

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Leichhardt Stage 1 Expansion

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9,000 tpa1.17

Operating Cost -US$/lb $1.54

ScopingStudy 3 years

Total Revenue (A$) $179 million

Scoping Study Prices Average 3.00 $26 million

Cu PriceUS$/lb

Annual Net Operating Cashflow


5 months

Stage 1 ExpansionCapital Payback Time

4 months

Significantly increased cashflow

Same orebody as Stage 1

Minimal capital investment for substantial return

Stage 1 ore of 2.1mt @ 1.2%

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Leichhardt Project – Stage 2

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Stage 1 utilises only 2.1 million tonnes @ 1.2% Cu of the existing Mt Watson leachable resource of 6.5 million tonnes @ 1% Cu

Resource to reserve conversion work is currently underway

Additional ore feed to come from the remainder of the current Mt Watson resource (approximately an extra 4 million tonnes), anticipated growth at Mt Watson and other existing deposits nearby

Depending on the outcome of a feasibility study the plant capacity could increase beyond 9,000tpa

Stage 2 is likely to see a significant reduction in operating costs

Anticipated average grade of Stage 2 ore is 1.00%

Mine life expected to increase to 6 yearsFor

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Projection of Leichhardt Stage 2 Expansion

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9,000 tpa1.0

Operating Cost -US$/lb $1.50

Assumes current studybut with 6 years life

Total Revenue (A$) $360 million

Scoping Study Prices Average 3.00 $26 million

Cu PriceUS$/lb

Annual Net Operating Cashflow


6 Years

Project Life

6 Years

Purely a projection of potential

Mined grades and tonnages assume 70% conversion from resource to reserve

Overall costs are assumed to be similar to the current 9,000 tpa scenario

Mine Life increased from 3 years to 6 years

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Leichhardt Project - Margin

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Operating cost US$1.70/lb

Average operating margin of US$1.50/lb

Operating cost estimated to drop to US$1.50/lb

Average operating margin increasing to US$1.70/lb

Leichhardt Project - Stage 1

Leichhardt Project - Stage 2

Comex Copper US$/lb

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07

Average 2007 Copper Price

Operating Cost $1.70/lb

Margin US$1.50/lb

Margin US$1.70/lb

assumes US$/A$ exchange rate of 80 cents

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Project Locations

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Leichhardt Regional Exploration - Prospector

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Prospector is a Iron Oxide Copper Gold Deposit “IOCG”

Prospector is associated with intense magnetic anomalies

Olympic Dam, Ernest Henry and Selwyn are associated with intense magnetic anomalies and are IOCG mines

Prospector area - Cu ± Au (previous intersection at Leichhardt Prospect by Sons of Gwalia 71.5m @ 1.72% Cu, 0.18g/t Au

Matrix is mapping and sampling the area and have discovered several new zones of mineralisation

Matrix will fly high resolution magnetics to improve the magnetics and allow depth to body modelling

Drill holes have been located

Grid lines = 2 sq kilometre

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Cloncurry Regional Exploration – Sierra Line

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The Sierra Line is a significant fault structure trending NNW from Mt McCabe, which has a string of old prospects along its 12+ km length

Several companies including Matrix have intermittently drilled underneath old prospects with spotty results

Prior to Matrix commencing work in the area only limited systematic mapping or surface sampling had been completed

Matrix’s soil sampling has defined significant anomalies at Sierra and Mt Cyril adjacent to mapped silicified fault structures

The next phase will be geophysics which is currently underway

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Xstrata McCabe JV

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Xstrata to earn 55% interest in the McCabe Project by spending A$5 million prior to September 2009

Xstrata can increase to 75% by spending a further A$10 million within a further 5 year period, or completing a Bankable Feasibility Study during the sole funding period

Historical exploration by Matrix confirms growth potential of the oxide zone of the deposit and sulphide mineralisation at depth of the McCabe deposit

Matrix retains rights to mine oxide and transitional copper to a depth of 100m until a decision to mine is made by the JV

McCabe deposit has a resource of 1.7 million tonnes grading 1.24% CuF

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Deep Yellow JV

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Deep Yellow exploring Matrix’s tenements in the Mt Isa – Cloncurry region for uranium

Deep Yellow has the right to earn 51% in the uranium rights by spending $3 million by February 2009

Deep yellow can acquire a further 29% at any time up until the commencement of a Bankable Feasibility Study for an additional payment of $3 million

After completion of BFS Deep Yellow can buy Matrix’s residual 20% in any single uranium deposit interest for a value equal to 15% of the in-ground value of Matrix’s 20% interest in the resource

Many occurrences in the Ewen EPMA14916 are geologically similar to the Skal and Valhalla uranium deposits

Deep Yellow Limited have commenced drilling -results expected December quarter

Deep Yellow is concentrating its Australian uranium expenditure on the Mt Isa Area

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Matrix Strategy for Growth

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Fast track exploration and accelerate development of Leichhardt Stage 1 Expansion

5,500tpa copper cathode going to 9,000tpa

Extension of project life and possible production

expansion beyond9,000tpa

Leichhardt Expansion Leichhardt Project – Stage 2 Exploration

Stage 1 Production at 5,500tpa Achieved

Matrix Oxide Production- Leichhardt Prodn 5,500 tpa- Leichhardt Expansion- Leichhardt Stage 2- Kuridala Oxide Copper

Oxide Exploration- Matrix Oxide Exploration

Sulphide Exploration- Matrix Sulphide Exploration- McCabe JV – sulphide exploration with Xstrata

Uranium ExplorationNW Queensland JV with Deep Yellow Limited

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