MEDIA RELEASE

Feasibility Study Recommends Development of SAMAG Magnesium Project

14 August 2002

The Directors of Pima Mining NL (soon to be re-named Magnesium International Limited) today announced the results of the Bankable Feasibility Study (BFS) of the 100% owned SAMAG Magnesium Project. The results confirm the financial attractiveness of the venture.

The project, which will have a capital cost of $A761million escalated ($A733 million unescalated), will be designed to produce 71,000 tonnes per annum of magnesium in product from a proposed plant located near Port Pirie in South Australia.

The BFS indicates SAMAG will be able to produce high quality magnesium ingots at a cost that will place the project in the lowest quartile of cash operating costs on the global cost curve. Given the project’s low capital cost, this should allow SAMAG to become the world’s lowest total cost electrolytic producer of magnesium metal.

The project could also be built relatively quickly, with first production commencing 28 months after financial close.

Process Technology

The project will use the commercially proven Dow magnesium process technology, giving SAMAG a significant competitive advantage over other existing or potential magnesium producers.

Pima’s Chairman, Mr. David Karpin, acknowledged the significance of the technology to the project today, “Dow manufactured magnesium from seawater at its Freeport, Texas operations from as far back as 1942 so SAMAG has access to more than 50 years expertise in magnesium production, processing and alloying technology. This significantly reduces the project completion and commissioning risks as the project’s flow sheet is based on proven and well established processes.”

The SAMAG plant will use magnesite as a feedstock instead of the seawater used at Freeport but this would be another positive cost reduction measure for SAMAG. “The initial feed steps are the only process differences between the Dow Freeport and SAMAG flow sheets and the leachability of the Leigh Creek ore has been successfully demonstrated by an extensive programme of continuous testing,” Mr. Karpin said.

The magnesite ore feed for the plant will be mined at Leigh Creek in South Australia, some 300 km from the proposed plant site. The total resource defined within all deposits currently stands at 579 million tonnes grading at 42% MgO. Test work has demonstrated the favourable leaching characteristics of the Leigh Creek magnesite feedstock.

SAMAG has prepared a 20-year mine plan and there are sufficient proven reserves to support more than 50 years of production.

Cost/Returns

Based on the expected capacity of 71,000 tpa, the unit cost of magnesium alloy ingot produced at the plant is expected to average US$0.59 per pound compared to an expected selling price of over S$1.30 per pound. Magnesium price forecasts have been provided by market consultants CRU International.

Based on the assumed exchange rate of A$1.00 = US$0.55 flat, the projected returns on an ungeared 100% equity-funded basis are:

Base Case

Nominal Pretax IRR 20.9%
After tax Real IRR 14.8%
NPV@10% A$750M

The development concept for the project is to construct the initial 71,000 tpa plant then two years or so later - depending upon market demand – expand capacity to 135,000 tpa. Ultimately up to 200,000 tpa of magnesium in product is considered to be achievable and the higher production rate would further improve project economics.

Approvals/Agreements

The proposed Port Pirie plant has been granted development authorisation under both South Australian and Federal government environmental legislation. SAMAG has Native Title Agreements in place for the mine and a Work Area Clearance has been entered into for the plant site.

SAMAG has reached agreement with the South Australian Government for an A$25 million contribution to common user infrastructure. SAMAG has also signed a long-term power purchase agreement with NRG Flinders Pty Ltd for the supply of 170 MW of electricity.

For further information contact:

Gordon Galt
Managing Director
Pima Mining NL
02 9252 1505

Released on behalf of Pima Mining NL By Farington National

David Besier
Phone: 02 9332 4448
Mobile: 0412 473 330

Brian Thornton
Phone: 02 9332 4448
Mobile: 0411 366 668

In accordance with Australian Stock Exchange listing requirements, the geological information in this report has been based on information provided by geologists who are corporate members of the Australian Institute of Mining and Metallurgy or Australian Institute of Geoscientists and who have had in excess of 5 years experience in their field of capacity