A.B.N. 51 002 529 160Level 5, 47 York StreetSydney NSW 2000...

A.B.N. 51 002 529 160
Level 5, 47 York Street
Sydney NSW 2000 Australia
Tel: +61(02) 9290 2400
Fax: +61(02) 9299 6733
Email [email protected]
Manager
Company Announcement Office
Australian Stock Exchange Limited
Level 4, 20 Bridge Street
Sydney NSW 2000
10 July 2006
STOCK EXCHANGE ANNOUNCEMENT
Kaolin Sales Update
Skardon River
The Company continues the steady sales trend established late last year with approximately 5 new customers being established each month. Our target of 75 active customers for 30 June 2006 compares with an actual of 67 customers. While this is below expectations there are a considerable number of ongoing customer discussions in process, with many at advanced stages. Therefore we continue to expect this growth target to be approximately correct and achievable over the medium term.
More importantly, from the point of view of cash generation, is the conversion of customers from initial small orders to medium or larger sized shipments. When establishing our current forecast last November we had expected this conversion process to commence about March/April of this year. One customer has so far converted and a number of others have indicated an intention to do so. However we are running about 60 days behind our anticipated sales establishment cycle.
Our Chinese agency sales continue on target and we expect this business to well complement our Skardon product suite as it widens the range of kaolin products which we can offer to customers.
We have recently strengthened our sales team with an experienced senior kaolin Business Development Manager being appointed to oversee the European markets. A sales office has been established in Luxembourg. For some time we have been seeking an experienced business development executive for Asian markets to complement our Technical Sales Group based in Cairns. We are pleased to announce that a senior appointee will commence in September 2006 whose background covers this responsibility area as well as a taking up a wider role in the Company.
Swan River
Our pilot plant construction was accomplished on target in terms of cost and time, however, a critical item of hired imported plant was delayed well beyond the promised delivery date and when finally delivered was found to totally inoperable and in a state of serious disrepair. Fortunately our site manager is thoroughly experienced in the plant operations and was able within a few weeks to effect the necessary rebuild. This programme has been recovered and the plant has been successfully commissioned. Production of products has been on specification and there is scope within the processing routine to confidently assure meeting product standards on a continuing basis regardless of any unexpected ore body variations. Samples have been shipped to paper mills commencing July 2006.
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Cash Position
The Company is preparing to redeem $5 million of its debenture issue by September 2006 and to add further funding to working capital recognising the extended period of negative cash flow as a result of the extended sales development period. As this will involve dilution to existing shareholders it is intended to raise this additional funding by way of a rights issue prospectus in order to provide an equitable means of participation for all shareholders. Over the last half year the Company has raised approximately $5 million as pre-IPO funding for the ACC clay business. This funding allows for continued development of the Swan River kaolin project, development of our Chinese kaolin agency business and market development at Skardon River.
C V Alexander
Managing Director
About MSC:
MSC has commissioned a world class china clay (kaolin) project at Skardon River, in northern Queensland which is currently in the marketing roll out stage. Additional premium quality kaolin projects are being developed in China and Western Australia which will transform MSC into a leading regional based supplier with a full range of exceptionally high grade kaolin products for the paper, paint, polymer, cosmetic, pharmaceutical and ceramic industries focused on S. E. Asia and selected world markets.
Contact: Vic Alexander, CEO Tel: 02-9290 2400