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.
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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.
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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
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