chairman, page-3

Dear Shareholders,

In introducing Shane McBride, the Managing Director of Matrix Metals to you, I would
like to pay a tribute to his predecessor, Mr Andrew Chapman whose ill health led him to
retire in February this year. It was Andrew who founded the company, acquired our
territory in the Mount Isa area and who raised the initial capital of the company. He
recruited excellent senior staff, including Shane McBride and led an intensive
exploration effort and reinvigorated the Mount Cuthbert plant. He was involved
(together with our exploration manager Bob Dennis) in the discovery and development
of the Mount Watson mine. We wish Andrew all the best for the future.

Highlights of our performance since the end of the 2006/2007 financial year are

Leichhardt Project We have successfully completed the major refurbishment works at Mount
Cuthbert heap leach and electro winning operations.
We have reached steady state production at the rate of 5,500 tonnes per annum
of first quality premium electro won copper metal.
We have a well developed pit at Mount Watson and are delivering ore from the
mine to the heaps at Mount Cuthbert, in the form of high quality agglomerate.
The haul road, cartage and crushing operations are performing well. We are
stock piling sufficient ore to get us through the coming wet season to ensure,
hopefully, we continue production unabated at the rate of 5500 tonnes per
annum during the wet season.
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]



2
Our first proceeds from copper sales were received from our off take partner
Glencore Limited, in August 2007. We realised on average US $3.49 (AUD
$4.06) per pound of copper in the September quarter.
Our operating cash flow is positive.
We hedged our foreign exchange receipts at a US$ to AUD $ rate of 84.1 cents
to the US$ to protect all copper revenues for the period November 2007 to
March 2008. Hedging achieved a positive mark to market adjustment of AUD
$1,048,000 in the September quarter. The need for further non-speculative, low
cost hedging is kept under constant review by the Board and Management.
Your company maintains its historic policy of not hedging the USD copper
metal price and accordingly our fortunes will fluctuate with the world USD
copper price.
In order for us to grow your company and to produce a higher level of income to
cover our cost of operation, and produce greater net cash flow and profits, we
are in the final stages of assessing an expansion of production. Expansion of
stage one will bring production to 9,000 tonnes per annum of premium value
copper cathode. This expansion requires no additional technical assessment and
will use the same process as, and common plant with, current operations. Some
additional equipment will be installed with much of that equipment already
owned.
I visited the Leichhardt operations in early November and I can assure you that
the production activities are progressing well and that they look very ship shape.
Shane’s presentation will include some photos taken during that trip.

Future Projects
We recognise the urgent need to develop and protect our very large tenement
holdings. To achieve our growth objectives your board has approved the
preparation of two major studies.

1. To convert the current resources in the Mount Watson deposit to a
reserve. Geotechnical and metallurgical drilling has recently been
completed. Once column leaching testwork has been completed, we will
be in a position to form a conclusion on the economics of an extension to
the life of the project and/or further expansions to the Leichhardt
processing plant.

Hopefully, a positive conclusion will substantially extend the life of the
mine at Mount Watson, with a consequential positive effect on cash flow
and profitability, and

2. To continue with exploration in the remainder of the Leichhardt area
and also the Cloncurry tenement area. Exploration successes provide the
life blood of every mining company.


3

We have for many years carried out substantial exploration programmes on our
prospective territory.

We have a need to discover a big project. We believe we have such an
opportunity in the Prospector area. Prospector is located 35 kilometres south of
Mt Cuthbert and comprises, to date, the discovery of a number of Iron Oxide
Copper Gold (IOCG) occurrences. This style of deposit is similar to the copper
deposits at Ernest Henry and Olympic Dam. There are many other smaller
IOCG deposits in the Mount Isa Inlier district.

Discovery techniques to date have included soil and rock chip sampling,
geological and structural mapping and airborne magnetic surveys. An extensive
drilling programme is planned for early 2008.

We believe the targets investigated, so far, in the Prospector area have high
potential for the discovery of both heap leachable copper mineralisation, and
primary copper gold mineralisation.

Joint Venture - Uranium

Our uranium Joint Venture Partner – Deep Yellow Limited is conducting
substantial sophisticated exploration for uranium on Matrix Metals properties.

Of 56 targets identified by Deep Yellow, 12 have ranked as immediate drill
targets, and a further 23 targets will be followed up in the remainder of 2007 and
in 2008. Further highly encouraging assay results were announced on 20
November 2007.

The results of work undertaken by the Joint Venture to date are regarded as
highly encouraging by Deep Yellow and our own technical team.

Deep Yellow can earn up to 80% interest is the uranium JV provided they
complete defined expenditure and work programmes.

Joint Venture - Copper Sulphides

Our partner in this Joint Venture is Xstrata, drilling and electronic testing has
proceeded in accordance with the joint venture agreement.

Further information on the progress and results of our sulphide exploration
programmes will be provided to shareholders and the stock market, as
information is gathered or at least on a quarterly basis.

These are significant programmes and are likely to be intensified in 2008 and onwards
to take advantage of the high demand and price for our products.



I believe that production from the Leichhardt processing plant, the planned new projects
and planned exploration will put Matrix on a sound footing to achieve its goal of a
substantial increase in its sustainable production and profitability.


4

General

On a more general level, I have the following comments regarding the broader business
environment.
Global prosperity is at a uniquely high level and is sustainable in my view. Australia is a major beneficiary of this prosperity. The emergence of many countries around the world over the last, say, twenty
years, from stagnation and repression is due to political change brought about
by some courageous individuals. But is made possible by modern means of
communication. It is also due to skilled business management and the
emergence of workplace entrepreneurship. To great improvements in
information flow, computing and mechanical means of production. These
factors lead over time, to greatly improved standards of living. Economic and
social progress is also due to strong scientific and design advances in all forms
of goods and services.

I believe Australia is an exemplar of this progress and prosperity, which will continue,
provided the current free conditions of employment, trade and competition are also
allowed to continue.

I believe your company will support and participate in the benefits existing
governmental and corporate policies are achieving.

A benchmark which illustrates the degree of change that is occurring is the recent report
which pointed out that five of the ten largest commercial corporations in the world,
spanning, banking, insurance, petroleum, gas and chemical manufacturing, are now
Chinese. These companies are quoted on recognised stock exchanges and compete
globally. This illustration shows the rapid and fundamental change philosophy and
financial performance in China – and in the rest of the developing and developed world.
As I said earlier the benefits of such progress are flowing to Australia and are beneficial
to the demand for copper.

I should like to thank Shane and all our staff and our contractors who have all worked
very hard, and as a team to bring to the shareholders the great opportunities I see for our
company in the future. Shane has performed magnificently in picking up the reigns as
CEO and bringing the mine and plant into production.

Thank you,

David Humann
Chairman
Matrix Metals