market update and highlights december 2005 quarter Market Update...

market update and highlights december 2005 quarter Market Update and Highlights December 2005 Quarter:

• Establishment of operations base inside Garden Island Naval Base in Sydney – one of the few contractors awarded such privilege - announced today

• WA Water Corporation to move to field trials - announced today

• US’s highest verification level approved for our technology – announced today

• First hull painting project secured – reflecting diverse application of our technology

• First breakthrough into lucrative oil and gas maintenance market

• $2m Federal grant awarded

• Category winner in 2005 WA Premier’s Awards for Excellence

• Extended Darwin Marina project awarded

• Certified as a Quality Assured Company to ISO 9001:2000

Garden Island Naval Base established in Sydney

Effective immediately, Neptune Marine has established an operational facility within the perimeter of the Royal Australian Navy’s flagship docking and maintenance site at Garden Island within Sydney Harbour. Neptune is one of the few external contractors granted such privilege – the move reflecting the increasingly close co-operation between the Company and Navy in meeting quality assurance, time and security parameters applicable to naval defence repair and maintenance needs where our technology is at the forefront. Establishment of the facility, headed by newly appointed Project Manager, Mr Andrew Brown, is expected to generate the Company’s first regular flow of repair and maintenance contracts, covering underwater welding, underwater painting, general marine maintenance, dive operations and other applications of our technology currently under development.

WA Water Corporation to move to field trials

Neptune Marine and the Water Corporation will early this year move to field trials of applying our technology on water pipe infrastructure common throughout the Perth metropolitan area. Design and test work to redevelop our weld housing to fit Water Corporation pipe types has been successfully progressed in the past three months at our R&D centre. The Neptune technology allows more rapid connections of new, tie-in or replacement pipe sections, or repair of pipe fractures in-situ, and has the potential to provide long-term growth for the Company. Water conservation is a global issue and the Company sees this as having licensing potential world-wide.

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US verification for our technology

Neptune Marine is pleased today to announce that the American Bureau of Shipping, based in Houston and recognised in the global maritime industry as a leader in quality assurance verification, has awarded a Product Design Assessment criteria to the Company’s technology. The classification is the highest available to a non-manufacturing entity involved in maritime repair and maintenance. The approval is valid for the next five years and is viewed by Directors as sending a strong message to our potential global markets. It also validates the original aspirations by the Company that its unique technology was attractive to equity markets and an ASX listing because of its international application across several sectors.

Asian alliance yields first breakthrough

The Company’s nine month old alliance with the IEV Group of Companies in Malaysia has yielded its first measurable success, with Neptune Marine establishing a diver training centre at Batan on Pilau Island, just east of Singapore. The facility will be used to train IEV staff in subsea repair work, including for oil and gas infrastructure. The three year alliance was struck in April last year with IEV for its exclusive use of the Company’s technology throughout 11 countries in Asia where it is a major participant in the maritime sector. The alliance is seen by Neptune as a natural partnership of our engineering and technical skills combined with IEV’s existing marketing and operational presence in the key Asian geographic.

First hull painting project secured

The Australian Navy awarded Neptune Marine the Company’s first hull painting project, on a vessel in port at Garden Island, south of Perth. This reconfiguration of the existing welding housing allows large areas of hull to be painted underwater in-situ without threat to the environment, reduces drying times and minimises the need for vessels to be dry docked for similar maintenance. The Company sees this as a major future source of revenue with a strong focus towards international naval and military assets. At the time of this release the project is currently being undertaken.

First breakthrough into lucrative oil and gas maintenance market

A fuel line repair project secured in the Cocos Islands represents our maiden breakthrough into the lucrative oil and gas repair and maintenance market. Awarded by a leading oil, gas, energy and shipping company, the task involved repairing a 4” diameter, stainless steel subsea pipe positioned between 6 -10 metres underwater. The Company’s repair procedures for the project had to satisfy Australian Standards 4041 and 2885 and be ratified by an independent NATA approved testing company, as part of securing the Cocos Island contract. At the time of this release the project is currently being undertaken.

$2m Federal grant awarded

The Company is well progressed on now developing its technology to operate in deeper waters as opposed to the shallower waters of Asia, after securing during the period under review, a $2 million Commonwealth Government grant to assist the international commercialisation of our weld housing. The funds were provided under the Commercial Ready program and are a quantum leap forward for Neptune in achieving overseas contract growth benchmarks on a nearer, rather than longer-term basis. Key outcomes from this research, which includes the use of more exotic materials (stainless steel variants for example) at depth, are expected to establish new cornerstone revenue drivers for the Company. The Cocos Island job and recent painting project are examples of our continuous R&D focus.

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Category winner in 2005 WA Premier’s Awards for Excellence

Neptune Marine was awarded the Innovation Excellence Award at the 2005 WA Premier’s Awards for Excellence, one of 14 categories in the annual Western Australian Industry and Export Awards. The Award recognised that the Company’s weld technology has Australian and international marine industry potential.

Extended Darwin Marina project awarded and completed

The Company successfully secured additional contract work to repair gates at the Cullen Bay Marina in Darwin for the international engineering group, Kellogg Brown and Root. This was repeat client business for Neptune Marine and indicative of market opportunities generally. This project was completed in December 2005 and revenue was in excess of $1 million.

Gained Quality Assurance to ISO 9001:2000

As of December 2005, the Company’s quality management system has been certified to the Quality Management System Standard ISO 9001:2000 through Det Norske Veritas. This certification is valid for the repair of structures, vessels, marine craft and subsea assets including the provision of in-situ underwater dry welding services. The Company sees this as a major achievement as many of the major oil and gas companies consider ISO 9001:2000 certification as a pre-requisite for their preferred suppliers.

Imminent appointment of new Chief Executive Officer

The selection of a new Chief Executive Officer for the Group is well advanced and the
Company is confident of making an announcement shortly.

READERS NOTE: Garden Island is referenced twice in this report. It applies both to the Navy’s Sydney Harbour facility, and the facility just offshore from Fremantle, south of Perth.