Ferret's Stock to Watch: PRECIOUS METALS AUSTRALIA LTD08:55,...

Ferret's Stock to Watch: PRECIOUS METALS AUSTRALIA LTD
08:55, Wednesday, 22 November 2006

PRODUCTION AT THE WORLD'S BIGGEST VANADIUM MINE IN COMEBACK

Sydney - Wednesday - November 22: (RWE Aust Business News)
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OVERVIEW
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Precious Metals Australia Ltd (ASX:PMA) has an appropriate name
in light of its 100 per cent ownership of the world largest vanadium
deposit at Windimurra in WA.

The enormity of the vanadium mineralisation at Windimurra is
hard to comprehend.

It is 26km long; the deposit is so large it can be seen from
space, within a massive system of vanadiferous titanomagnetite protruding
from the earth.

Only 15 per cent of the deposit has ever been drilled, giving
what is already the world's largest proven ore reserve of vanadium.

Vanadium consumption will continue to grow strongly, according
to the company's managing director Roderick Smith, who has just returned
from a three-week roadshow in Europe.

"Because of the cost and resource constraints of existing supply
sources, I believe we will see a significant and growing supply
shortfall emerge over the coming years," Mr Smith said.

"Shortages of vanadium have in the recent past been met by
growth in high-cost co-production, substitution by other metals and a
plethora of environmentally unsustainable, high cost producers in China.

"There are a number of potential sources for increased
production, but only increased primary production from a new or expanded
mine is feasible for the scale and timing required," Mr Smith declared.

"Of the possible new mines, Windimurra is the only one already
under construction."

Mr Smith said the almost pure vanadium is used for hardened
steel, titanium alloys, jet engines, airframes, rockets, golf clubs and
nuclear reactors.

Other uses include chemicals, catalysts for sulphuric acid,
plastics, dyes and pigments and glass.

A visit to the mine at Windimurra reveals a huge amount of
equipment left by former partner Xstrata after it tried to ensure the
mine would never operate again.

But Mr Smith is proving Xstrata wrong.

Windimurra hosts a significant and unique, world-class vanadium
deposit and will support, at a sustainable cost, a processing operation
that will produce the high-quality vanadium products needed for the long
term.

PMA has already taken a further key step in the early capital
acquisition program for its $175 million Windimurra Vanadium Mine after
finalising an agreement with South African-based Drytech International
for the design and manufacture of new high-tech vanadium processing
equipment worth $20 million.

The capital acquisition program - which began last month with
PMA securing the first items for the proposed mining fleet for
Windimurra - is designed to expedite the construction phase of the
project and mitigate against industry-wide cost pressures affecting the
supply of key materials and equipment.

SHARE PRICE MOVEMENTS
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Shares of Precious Metals yesterday were untraded at $2.26.
Rolling high for the year is $2.90 and low $1.22. The company has 75.2
million shares on issue with a market cap of $188 million.

The equipment to be supplied by Drytech will be manufactured
using the latest state-of-the-art technology in South Africa, avoiding
construction and fabrication bottlenecks in Australia.

The equipment includes an ammonium metavanadate flash dryer, a
pair of reactors, magnetite flash dryer (which uses waste heat from the
kiln) and a liquor evaporator (which uses waste heat from the gas
turbine power station).

The equipment being supplied by Drytech is new to the project
and will be utilised in the production of vanadium trioxide and its
conversion to ferrovanadium as a final product.

The previous operation at Windimurra produced vanadium pentoxide
(V2O5).

However, in the revised process, vanadium trioxide (V2O3) will
be formed as an intermediate step to the final product - which will then
be converted to ferrovanadium (FeV) in a refractory lined arc furnace.

This will add significant value to the product stream, as
ferrovanadium achieves a significant price premium over V2O5.

Drytech is the most experienced supplier of the critical
vanadium trioxide (V2O3) reactor required for cost effective production
of ferrovanadium.

The contract with Drytech provides PMA with an exclusive licence
for use of its technology in Western Australia.

Other enhancements being introduced at Windimurra for the first
time include the use of waste heat from the kiln for the flash dryer,
which dries and pre-heats the magnetite concentrate prior to roasting.

This reduces greenhouse gas emissions, reduces gas consumption and
increases kiln capacity.

In addition, the liquor evaporators will use waste heat from the
gas turbine generators to concentrate the leach liquor, thus reducing
reagent consumption and energy consumption.

The heat recovery equipment is a world-first in vanadium
production and exploits the use of clean, pure gas as a fuel, greatly
increasing the overall energy efficiency of the operation.

PMA's early capital acquisition program is continuing ahead of
the finalisation of the financing package for the Windimurra Project,
which is expected to be concluded within the next two months.

The project received a major boost recently after Hong Kong-based
Noble Group - one of the world's leading commodities and supply chain
managers - exercised its options to acquire a 10 per cent direct equity
interest in the Windimurra Mine for $13.5 million.

The funds were received last month from Noble, increasing the
cash position of PMA and its subsidiary to about $50 million.

The company is targeting completion of construction at
Windimurra before the end of calendar 2007.

In addition to the direct investment in Windimurra, PMA is now
able to call at any time on an $8.2 million three-year, unsecured
convertible note.

A condition predecent to drawing upon this convertible note was
the completion by Noble of due diligence on Windimurra, which Noble
formally advised had been favourably completed.

The investment by Noble in Windimurra provides additional
funding for the development of the project, which the company is
continuing to advance at a rapid pace.

The deal includes a sales and marketing agreement whereby Noble
has agreed to purchase the entire output of Windimurra at prevailing
market prices.

During the first seven years of production, Noble will pay the
higher of the current market price or the actual cash cost of
production, guaranteeing cash costs are met.

Noble will also exclusively market and handle all distribution
logistics for Windimurra vanadium through its international network of
offices.

BACKGROUND
**********

Precious Metals Australia Limited based in Perth and has been
listed on the Australian Stock Exchange since 1988.

PMA's core asset is the Windimurra Vanadium Project, located
600km northeast of Perth, with the nearest town being Mt Magnet.

The Windimurra Vanadium Project is 100 per cent owned by PMA, and
is based on the largest reported vanadium proven ore reserve in the
world.

The Windimurra mine was built by PMA and its partner in 1999 at
a total cost including infrastructure of over $270 million and whilst
operating was the world's largest primary vanadium mine, producing 10 per
cent of world production.

The mine produced over 30 million pounds of vanadium pentoxide
which was sold to consumers throughout the world.

Windimurra product was recognised by customers as the highest
quality produced by any mine.

The mine closed in early 2003 in controversial circumstances,
and was partly decommissioned in 2004.

After a protracted legal dispute, PMA regained full ownership of
the mine, remaining plant and equipment, intellectual property and
designs and records in August 2005.

PMA is debt free, has cash resources exceeding $40 million and
has engaged Hatch Engineers to complete a detailed engineering study into
the optimisation and rebuilding of Windimurra.

Since 2003 world demand for vanadium and the price of the
commodity have increased strongly, largely driven by growth in Chinese
steel production.

PMA will re-build and re-open the Windimurra Mine by late 2007,
when it is anticipated to produce approximately 8 per cent of the worlds
growing demand for Ferrovanadium, and high purity Vanadium Pentoxide.

It is the company's intention that Windimurra will once again be
the most technically advanced vanadium mine and processing plant in the
world, using state of the art technology maximising the project's
competitive advantages which include use of natural gas and the patented
use of sodium oxalate in the salt roast of ore.

ENDS

Copyright © 2006 RWE Australian Business News. All rights reserved.