MSC 0.00% 6.4¢ minerals corporation limited

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  1. 5,769 Posts.
    Skardon River Progress Report June 2002


    HOMEX - Sydney

    Prior to Minerals Corporation negotiating the purchase of the Skardon
    River Kaolin Project in June 2000, many market rumours were in
    circulation regarding the causes of failure of the previous owners
    Australian Kaolin Limited. Minerals Corporation is pleased that most
    of these issues have been dealt with, however, for purposes of
    keeping the market fully and properly informed, Minerals Corporation
    is pleased to advise the following:


    By April 2001, Minerals Corporation had demonstrated that a
    sufficient proven reserve (per JORC Code) existed at Skardon River
    for 20 years production, and indicated resources were at 100 years
    production (using 150,000 tpa plant production rate). In order to
    provide for an authorative assessment, this work was undertaken with
    advice from leading geologists experienced in kaolin in the USA, UK
    and Australia. The stripping or waste removal ratio at Skardon River
    is 3:1 versus 9-15:1 in USA/UK.


    Skardon River is fortunate that the contamination levels, mainly iron
    and titania, are low by comparison with existing high grade kaolin
    producers. It has been rumoured that Skardon River products have
    excessive potassium levels.

    Over our existing range of four products, the potassium levels range
    from an absolute low of 0.1% to an absolute high of 1.0%. We also
    have another product that ranges up to 1.5% K(2)0 and this product
    application is not potassium critical.

    Existing successful commercial products produced in USA/UK range (per
    their quoted literature) from 0.05% to 2.5%. The Company does not
    regard the potassium level issue to be an issue at all.


    As correctly defined in the report to the Receivers of Australian
    Kaolin Limited, the grit level of the Claystone kaolin resource is
    very low, with an excellent 94% kaolite yield from excavated ore. The
    fluvial resource is an old river system and as expected contains grit
    of 40-60% which is quite typical by world standards.

    A degritting unit was originally planned to be installed after the
    main plant had become successfully operational, and thus extending
    the product range to fluvial feed products. This unit is currently
    being readied for shipment from Cairns. There was no operational
    reason to install it earlier and it is efficient from a cash usage
    perspective to follow this plan.


    We believe it is appropriate to put on public record, (per opinion of
    internal and external engineers), that contrary to rumours,
    Australian Kaolin Limited successfully designed and constructed an
    excellent kaolin processing plant, very appropriate to the
    characterization of the ore feed. All advice is that the plant is
    technically the most advanced and the most labour efficient kaolin
    processing plant of its type worldwide.

    Due to AKL's financial problems and lack of operating expertise,
    numerous plant breakdowns occurred in the original commissioning
    stage. With the assistance of specialist experts Minerals Corporation
    has systematically stripped, checked, recalibrated and where
    appropriate, modified / repaired equipment throughout the plants.
    Since completion in April 2002, both the wet plant and the dry plant
    successfully produced kaolin products as originally envisaged. The
    main plant products are identical to those predicted by pilot plant
    testing in 2000/ 2001.


    Independent expert reviews in 2000 concurred that the Skardon River
    Project should be reasonably assessed as an A$150 million project.
    Monies spent by the previous owners, plus ourselves, will total very
    close to this figure.


    The high grade kaolin markets approximate 10,000,000 tpa. About 50%
    of kaolin production is consumed by the paper industry, Skardon River
    production at full capacity is 150,000 tpa. Our target customer
    segments are initially paint, ceramics, plastics and rubber markets,
    with paper to follow at a later date. Our marketing rationale is that
    the performance attributes of products from the ore body specifically
    suit these higher value specialty segments. Also Asia has major
    industries in these segments, which are growing strongly. Market
    reaction todate from these target customers has been consistently
    very favorable and the Company is now focused on its market
    development programme.


    Depending on product mix, our cash flow break even is at about 30,000
    tpa, representing about 20% of plant capacity. We acknowledge this is
    an unusually good position but represents the extremely low cost
    price to the Company and strong kaolin price increases over the last
    two years.

    C V Alexander

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