Proactive investors

Largest Tin Producer in Australia

Metals X Limited (ASX:MLX) is Australia’s largest tin producer with c.9Kt p.a. of production from the Renison Tin operations in Tasmania (generating c.A$100M of EBITDA) and with scope to grow to >13Kt p.a. total production through the Renison Expansion Project (Rentails).

A successful Renison Expansion Project feasibility would increase production by c.50% to more than 12Kt p.a. at similar cash operating costs to the traditional Renison operations.  A successful feasibility study on the Renison Expansion project would increase overall EBITDA potential to more than A$150M p.a.:

• 2 ore sources lower mining risk: Renison underground mine & Mt Bischoff open cut mine
• Plant processing capacity: of 700,000t p.a.
• Ramping to full production now: First concentrate production and shipments in July, 2008 and
  build upto full capacity complete by Q2 FY09
• Cash operating cost (expected average): A$8,500/t of tin after copper by–product credits.
• Indicative EBITDA margin: A$6,500/t at A$10,500/t (A$14,000 at A$22,500 recent spot price)

Nickel - royalties and world class project

MLX is an emerging major nickel producer with plans to develop the 100% owned world-class Wingellina Nickel Project (1.8Mt contained nickel), a future 40Kt p.a. Nickel and 3Kt p.a. Cobalt operation. The company also has existing nickel earnings from royalty streams over BHP’s WA nickel operations at Mt Keith, Kingston and Kambalda (EBITDA of >A$10M in FY07A).

Mt Keith Royalty (0.375% of sales, operated by BHP Billiton)

• Royalty into perpetuity : of 0.375% of the total contained nickel in concentrate revenue and was
   A$6.54 million in FY07
• Kingston Royalty (0.375% of sales)
• Exploration potential adjacent to Mt Keith tenements: Same royalty structure as Mt Keith, but not
  currently producing income
• Kambalda Royalty (1.375% of sales)
• Royalty ceases 31 August, 2009: Royalty of 1.375% of the total contained nickel in concentrate
  revenue
• Similar size to Mt Keith historically: A$5.9 million in FY07

Total nickel portfolio royalties of $6.8m in 2008.

Wingellina Nickel Project (1.8Mt contained nickel)

Phase 1 feasibility completed September 2008 and a development decision in 2009, initial 20yrs on high grades, first possible prod FY2013.

Globally Significant Resource

• 183 million tonne ore resource at 0.5% cut-off
• 165Million tonne mining reserve
• 78 million tonne ore resource at 1.0% cut-off

Annual expected production:

- Nickel in concentrate: 38,200t p.a. (41,600 tonnes p.a 1st 20 years)
- Cobalt in concentrate: 2,900 tonnes p.a. (3,250 tonnes p.a 1st 20 years)
- Cash operating costs: US$3.34/lb ($150/t sulphur) after cobalt credits. Every US$100/t move in
  sulphur (most recent spot: US$400/t) adds c.US$0.45/lb to costs

Project economics based on Assumptions: Nickel US$20,000/t, Cobalt US$20/lb, AUD 0.85/USD

Wingellina Project Challenges

- Geographically remote: 400km from Adelaide-Darwin Railway and on the state/territory triple
  point – however feasibility has significantly eliminated the perceived disadvantage of location and
  isolation
- Large up front capital: A$2.2bn (5-10x market capitalisation)
- Negative perception of previous Australian Laterite developments: Although Wingellina is
  chemically different to previous Australian laterite developments and has a limonite (“tropical
  laterite”) composition more comparable to deposits such as Moa Bay in Cuba, the likely
  comparison is to the recent troubled Australian developments rather than global peers.

Wingellina is a globally significant mega-project with 1.8 Million tonnes contained nickel, production potential of 40,000 tpa and A$3.4Bn NPV8%.

Shareholders

Chinese Jinchuan & APAC Resources: 32%
GPG Group: 7.6%
Top 50: 80%

Tin Price

Tin prices have almost halved in value in October and financial difficulties have forced traders to dump material, but the market is tight and analysts expect a deficit this year, industry sources said this week.  Tin, widely used in food packaging and to solder electronic products, hit an all-time high of $25,500 a tonne in May this year on supply worries from top producers China and Indonesia.   However, with the financial crisis spreading, the three-month price on the London Metal Exchange (LME) has fallen, along with the rest of the industrial metals, to $10,300 a tonne in late October, its lowest since January 2007.

Tin forecasters ITRI expects to see a shortfall in refined tin at around 20,000 tonnes this year and a deficit also next year.  At some stage the fundamentals should come back and rule this market and the price will recover to $16,000-17,000 a tonne.

At the end of October 2008, LME stocks are once again testing historical lows and tin prices have rallied to be re-tracing recent A$ highs.  External forecasters continue to forecast the tin market to be in deficit for the foreseeable future.

Financial conditions

The Renison  Project is now moving through ramp-up to full capacity which has been slower than anticipated, but is  expected to be achieved midway through the December quarter. The project is now generating regular cash flow and at current prices is expected to improve to be a positive cash generator in the December Quarter.

Significant focus at the Renison project remains on productivity and efficiency outputs, the reduction of operating costs and increasing revenue. Metals X has realigned its core focus and efforts on its revenue producing assets and the preservation of its cash reserves.

Comment by Andrew McCrea

MLX's share price is leveraged to changes in the price of tin.  With shortages of tin stocks and China becoming a net importer of tin and Indonesian tin output falling, tin prices should recover despite weaker demand in the short term.  Trading near a three year low, MLX could be a good upside bet at current prices.

Fast Facts

Share price (ASX:MLX):  $0.14
Shares on Issue (million): 1,187.7
Market capitalisation (M): $166.3
Net cash (no debt): $25.0 (Sept '08)