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Gippsland Ltd: Third Quarter Activities Report

Friday, May 1st, 2009

The Directors of Gippsland Limited provide the following activities report for the period January – March 2009 plus details of events up to the date of this report.
ASX Limited
During the quarter, the Directors elected to delay the submission of the Company half year accounts to the ASX until sufficient working capital had been secured. Consequently trading of the Company’s securities on the ASX was suspended on 17 March 2009.
On 20 April 2009, Gippsland shares recommenced trading on the ASX following the announcement of funding arrangements and the lodgement of the Company’s half year accounts.
Abbotsleigh – AU$800,000 Funding
On 16 April 2009, the Company announced that it had obtained a funding facility from Abbotsleigh Pty Ltd, a company associated with Melbourne businessman Ian Gandel, for an advance of AU$800,000 to the Company for working capital purposes. The principal terms of the funding facility (“Facility”) are:
• The Facility will be made available in two tranches, the first being AU$439,695 and the second, AU$360,305.
• The first tranche of AU$439,695 has been received.
• The term of the Facility is 12 months.
• The amounts owing under the Facility may at the election of the Lender be converted into fully paid ordinary shares in the Company at a conversion rate of one share for every AU$0.01 of the amount outstanding under the Facility.
• The Facility will accrue interest at 10% per annum.
• The Facility will be secured by a share mortgage granted by the Company over its shares in its subsidiary, Tantalum International Pty Ltd, which will also grant a fixed and floating charge to the Lender as security.
• Provision of the second tranche is conditional upon prior shareholder approval by no later than 30 June 2009 to allow the conversion into Shares that is not currently within the Company’s placement capacity should the Lender elect to convert the second tranche.
• If the Company merges with another company or disposes of its operations to another company, the Lender may elect to have the amount outstanding under the Facility paid in full prior to the merger or disposal or require its rights of conversion under the Facility to be transferred to equivalent rights of conversion in the other company.
• The Lender is being granted a first and last right of refusal to tender for any further funding needs the Company may have, which right shall expire on the earlier of the date the Company completes a capital raising of AU$40 million and two years after all Shares are issued pursuant to the Lender’s conversion rights under the Facility.
Delisting from AIM
The quarter saw the delisting of the Company’s securities from the London Stock Exchange AIM following the resignation of the Company’s UK advisor and brokers. The prime reason for the delisting related to lack of working capital.
The Directors estimate that the delisting from AIM will largely eliminate the need for UK advisors, brokers and servicing fees, thus saving the Company approximately AU$330,000 (≈UK£150,000) per year.
The Company will retain the use of its extensive network and contacts for marketing and future fundraisings in the United Kingdom and Continental Europe.
Transfer of Shares from United Kingdom to Australian Registry
On 6 April 2009, the Company announced that Shares and Depository Interests representing those shares (as the case may be) previously traded on the London Stock Exchange AIM (“AIM Shares”) will be transferred on 11 May 2009 from the Company’s UK Registrar and Depositary, Computershare Investor Services PLC, to Security Transfer Registrars Pty Ltd in Australia.
On 6 April 2009, the Company also advised Depository Interest Holders and Shareholders (“AIM Shareholders”) wishing to transfer their AIM Shares to the Company’s Australian register prior to 11 May 2009 to contact their UK stockbroker requesting that a “Removal to Principal Register” form be completed and forwarded to Computershare Investor Services PLC.
Once the AIM Shares are transferred, AIM Shareholders will be eligible to trade their shares freely via the ASX through an Australian stockbroker or a UK stockbroker affiliated with an Australian stockbroker.
Allocation of Feldspar Portsite
On 14 January 2009 the Company announced that the Egyptian National Centre for Planning and Usage of State Land has permitted the use of the Port Turumbi portsite for the Company’s 44.5 million tonne Abu Dabbab tantalum-tin-feldspar project in Egypt.
Under the agreement, Gippsland’s joint venture vehicle Tantalum Egypt JSC will enjoy exclusive use of Port Turumbi for the planned export of approximately 1.5 million tonnes per year of ceramic grade feldspar produced as a by-product of tantalum and tin production at Abu Dabbab. The allocation of Port Turumbi was supported by the office of His Excellency Eng Samey Fahmy, Minister for Petroleum and Mineral Resources.
The Egyptian National Centre for Planning and Usage of State Land, the principal Egyptian Authority that answers directly to His Excellency Prime Minister Dr Ahmed Nazif, issued instructions for the land covered by the application to be released to the Egyptian Mineral Resources Authority, which is part of the Ministry of Petroleum and Mineral Resources. Terms of the transfer are presently being negotiated, however the parties involved recognise that the allocation will be based upon a long-term peppercorn lease arrangement.
The definitive feasibility study undertaken by Lycopodium Engineering Pty Ltd, determined that the Abu Dabbab project has the capacity to produce 650,000 pounds of tantalum pentoxide and 1,530 tonnes of LME grade tin metal per year, over a likely mine life of 20 years. Gravity separation techniques will be employed to extract the tantalum and tin from the Abu Dabbab mineralisation.
Testwork commissioned by Gippsland in Australia and Italy has demonstrated that the waste (or tailings) generated from the tantalum and tin production can be utilised to produce up to 1.5 million tonnes per year of premium grade feldspar suitable for the manufacture of ceramic tiles and sanitary wear. The production of feldspar will result in the Abu Dabbab project having a waste stream consisting of only 20% of all ore mined. At full production, the net revenue from feldspar is expected to make a significant positive contribution to the project’s cash-flow.
Abu Dabbab due Diligence
During the past quarter, Gippsland’s activities have been primarily focussed upon matters related to the Company’s AIM and ASX listings plus funding of the Company. With the conclusion of these matters, the Directors will now focus on the completion of the Abu Dabbab project funding due diligence process being undertaken by the German bank KfW-IPEX Bank GmbH.
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