announcement You have to admire the honesty of management, if...

announcement You have to admire the honesty of management, if only all company management told us exactly how it is.



23 November 2005

Chairman’s Presentation at 2005 Annual General Meeting
on 24 November 2005

Ladies and Gentlemen
At the last year’s Annual General Meeting, we predicted a profit for the financial year
2004/05. It is with great pleasure, I address today, that we did fulfil that task. As you
are aware we generated a net profit of $2 million dollars for the year.

The results were possible due to the following major favourable factors:
1) High demand for our products selenium and tellurium, both reaching
historically high LMB prices over the last 12 months.
2) During the latter part of the financial year, the company negotiated an
interim increase in the treatment fee with our Electric Arc Furnace (EAF)
dust clients. The EAF dust is treated at our Unanderra NSW operation. The
6 month interim period ended on 31 October 2005.
In the current financial year, we now have a much bigger challenge ahead of us i.e.
to sustain this situation and also to grow the business with more projects.

To date in this first half year of the financial year 2005/06, we have experienced
some marketing difficulties with our selenium and tellurium products compared to 6
months ago. This likely situation was predicted in my Chairman’s Report to the
shareholders, indicating some evidence of price resistance by the market and the
end users. Recent efforts to sell our selenium even with a reasonable discount has
been somewhat unsuccessful. Despite the above market situation, the metal
quotation price (the LMB price) for selenium remains at the higher level U$46/lb. The
present market conditions confirm the need to understand and carefully evaluate the
situation and to move to selenium and tellurium chemicals to optimise returns and
minimise sales at a discount on the LMB price.
We believe that there is an over supply of selenium and that the oversupply will
continue for at least for the next few months.

Unfortunately, short term lack of sales
and subsequent stockpiling of product selenium may affect HydroMets’ revenue and
profit in the first half of this financial year. We remain cautiously optimistic about the
overall performance of Hydromet in the 2006 financial year. However currently held
stock of finished selenium product with market value of over $2.5 million which is
expected to be sold in the second half of the financial year or alternatively to convert
to value added products for increased value.

Facing the current situation, our management is taking appropriate steps to mitigate
the affect of these issues.
Some steps taken are as follows:
1) In the past we produced only crude grade selenium which had the purity of
98%. This product had a very limited market and is normally a feed source
for selenium chemical producers. We are in the process of upgrading our
standard product to 99.5% which has a wider market. We are also in the
process of producing selenium shots which again has a wider market
application.
2) We have begun to produce selenium chemicals such as sodium selenite
and selenate which command a premium above the LMB price.
3) We are identifying other sources of low grade, more complex type
selenium feed materials from other generators around the world, where we
could attract higher treatment fees for processing these residues and
achieve a lower cost for selenium recovered. We have recently had some
success in this area.

In regard to our EAF dust project, we have just completed the evaluation period of 6
months with increased treatment fees. Development work completed during this
period was very successful. We are now in negotiation with our clients to reach a
reasonable fee increase on permanent basis. This outcome will be very important to
the profitability of our Unanderra Operation in treating EAF dust. We are optimistic
that satisfactory agreements can be reached with clients and the regulators satisfied
with our service.

In the past, the overall business of Hydromet has relied heavily on two major income
streams i.e. selenium and EAF dust projects. We are now taking a strategic step to
diversify into other areas as follows:
1) The Board has resolved to establish a Used Lead Acid Battery Stripping
Operation at Unanderra with the initial capacity of 12,000Mt/year. We
expect to place the order for the supply of the Battery Shredding
Equipment within the next 10 days and expect to commission this facility by
the end of the financial year. This plant is of a design capacity of 25,000
Mt/year, providing us spare capacity to expand in the future.
2) After completion of successful laboratory and plant trials we are now
preparing an application to NSW EPA for the proposed treatment of two
streams of arsenic waste from Western Australia at our Unanderra facility.
3) We are also preparing to commence the mercury stabilisation project at
Zinifex site in Hobart and expect to commence processing in February
2006. This project has been delayed due to the prolonged period required
for Zinifex to secure a suitable landfill site for disposal of the treated
material. Furthermore, we are also exploring other residue streams within
the Zinifex operations that are suitable for processing in the same facility.
4) We are revisiting our cobalt chemical business with a view to establish a
long term business for Hydromet. This is in line with the strategy of
developing our Stanton Resource in Northern Territory.
We believe that if the above objectives can be achieved along with the existing
businesses of Hydromet; we will continue to provide a strong foundation to the future
sustainability of Hydromet.
Finally I would like to say thank you to our shareholders for your patience and
support.
Dr Lakshman Jayaweera
Chairman/Technical Director