MHM Company Progress and Development Update
Dear Shareholder,
As you may be aware MHM has received a considerable amount of publicity recently regarding its silica project and the potential for the establishment of a large silicon smelter in Tasmania. MHM is bound by confidentiality agreements regarding any discussion on the silicon smelter proponent or any of the commercial terms. The purpose of this brief is to give a non-confidential background into this project and to provide some additional information on the Company’s other projects.
Silica Project
MHM is in negotiations with three parties who have expressed an interest in the company’s silica areas. The Company has provided samples for testing with excellent results. The thermal stability and grades in excess of 99% SiO2 has resulted in discussions for off-take contracts and the Company is pursuing a firm proposal from the parties and we feel confident of positive outcomes in this respect.
Silicon metal is a commodity that has experienced significant growth of demand in recent years due to its high-tech and renewable energy applications. Silicon metal is the primary ingredient for the production of computer circuitry (semiconductors) and the production of photovoltaic cells (solar panels), among a vast number of other uses.
MHM has acquired three areas of high purity quartzite that have either previously been mined for silicon metal production or analysis has identified that the silica is of a purity and thermal stability that deems it suitable for silicon metal production. Whilst silica is the second most abundant mineral on earth, deposits of silica with the requisite high purity and thermal stability are not.
MHM has supplied samples to a number of parties for trial smelting and chemical analysis, and the results have been extremely encouraging. As detailed in our announcement to the ASX on 2 October 2009, Wacker Chemie AG is one such party. Wacker is a multi-national chemical company listed on the Deutsche Bourse Exchange (XETRA:WCH.DE) with 2007 gross revenues in excess of €4.0 billion and operations in 28 countries.
MHM continues to progress off take discussions on a number of fronts and will provide the market with further updates if and when supply contracts are finalised.
Aluminium Project
When MHM was listed on the ASX nearly two years ago it was stated at that time that the Company was targeting a cash flow within two years. I am happy to report that MHM is in the final stages of negotiations for the acquisition of an aluminium processing business, a proprietary technology to process the aluminium smelter by-product and a resource of some 160,000 tonnes of aluminium by-product. The technology processes the waste material and converts it into its three primary constituents, aluminium, salt and “non-metallica product” (which may be used in the production of cement), all saleable products. The technology turns waste into valuable commodities and the process provides for no resultant landfilling. The project will provide an income to the Company commencing this calendar year. In addition MHM will secure the global rights to the technology and plans to expand into North America by 2011 and Europe as soon as practical thereafter. MHM has been discussing additional global sites with a number of parties concurrent to its negotiation for the acquisition of this Australian business.
Net income from the 60,000 tonne per annum Australian aluminium project is expected to be $5.0 million per annum rising to $8.0 million by 2011 and continuing forward. Contracts are being entered into with aluminium smelters on three year rolling basis into the future and the 160,000 tonne deposit will take six years to process. The process capacity in North America is expected to be in the region of 150,000 to 200,000 tonnes per annum giving a potential profit margin of USD 20.0 million to USD 30.0 million per annum. Once achieved these projects will provide substantial value to shareholders.
The income from the Aluminium Project will be used to fund the ongoing expansion of the Aluminium Division, development of the Silica Project and ongoing exploration of the Company’s highly prospective exploration targets in Tasmania.
The Company is close to finalizing the terms for the acquisition and will provide specific details of the deal to the market when possible.
Exploration
The Company plans to expand its exploration for gold and nickel on its tenements south of Macquarie Harbour in 2010. Research has shown considerable potential for these metals, with free gold panned out of sediments near a highly faulted acid volcanic and ultramafic host rock contact. The MHM exploration area contains a 25-kilometre ultramafic structure with known nickel sulphide occurrences. The program in 2010 is planned to provide drilling targets for 2011.
I take this opportunity to thank the supporters of the company over the past eighteen months and look forward to your continued support into the future.
Yours sincerely
Frank Rogers
Managing Director
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