Austpac is committed to pursuing commercial arrangements to use its specialised technologies and is evaluating the development of an ERMS synthetic rutile plant with an annual capacity of around 30,000 tonnes per annum (tpa). A plant of this size will establish the market for high grade synthetic rutile, and demonstrate the technology at a commercial scale, thereby underpinning the financing of a large scale project of at least 100,000 tpa capacity.

In October 2003, Austpac announced that it had entered into an agreement with Consolidated Rutile Limited (CRL) for the supply of CRL ilmenite to a proposed 30,000 tonnes per annum ERMS SR plant located on the eastern seaboard of Australia. CRL’s obligation to supply ilmenite under the Agreement is conditional upon completion of a successful independent bankable feasibility study, Austpac obtaining finance and resolution of ilmenite pricing in accordance with the terms of this Agreement.

The CRL Agreement provides the framework for a long-term contract for the supply of 70,000 tonnes per annum (tpa) of a raw, high-chrome ilmenite concentrate produced by CRL’s mineral sand mining operations on North Stradbroke Island.

Previous work at the Company’s Newcastle pilot plant has demonstrated that a very high grade synthetic rutile containing more than 97% TiO2 can be produced from CRL’s ilmenite, and Austpac has for some time been seeking a source of ilmenite to feed the first ERMS SR plant. The Agreement ensures the proposed ERMS SR plant has a long term feedstock supply, which is essential for project viability and funding.

Austpac also announced in October 2003 that it had entered into an agreement with Iluka Resources Limited for sale of the entire ERMS SR output of the plant. Iluka’s commitment to purchase the ERMS SR under this second Agreement is subject to completion of a successful independent bankable feasibility study, Austpac obtaining finance, and Iluka and Austpac reaching agreement on the minimum price for the synthetic rutile product.

The Iluka Agreement outlines a long-term commercial arrangement between the two companies, in which Iluka agrees to purchase the output of the ERMS SR plant. This arrangement will include a minimum price commitment by Iluka to be agreed at the conclusion of the bankable feasibility study. Once the conditions to the Agreement are satisfied Iluka will be granted a non-exclusive licence to use the ERMS SR technology to build and construct future ERMS SR plants, subject always to Austpac’s participating rights outlined further below.

The Iluka Agreement provides that at the successful conclusion of the bankable feasibility study, Iluka has a 15 day option to acquire a shareholding equal to 10.01% of the expanded capital of Austpac, at a 30% premium to the market price. If Iluka exercises this equity option, Iluka’s licence of the ERMS SR Technology will become exclusive, subject to Iluka commencing a bankable feasibility study for an ERMS SR plant of at least 100,000 tpa capacity within twelve months of the successful commissioning of Austpac’s 30,000 tpa plant.

If the equity option is not exercised, Iluka’s licence of the ERMS SR Technology will only become exclusive if Iluka commences a bankable feasibility study for an ERMS SR plant of at least 100,000 tpa capacity within twelve months of the successful commissioning of Austpac’s 30,000 tpa plant. To maintain exclusivity, Iluka must start construction of that 100,000 tpa ERMS SR plant within two years of commencing their feasibility study, and thereafter build another 100,000 tpa ERMS SR plant every five years. Whether Iluka’s licence for ERMS SR technology is exclusive or not, Austpac will have the right to a 10% free carried interest as well as an option to acquire a 20% participating interest in each of the future ERMS SR plants built by Iluka using the ERMS SR Technology.

In addition, for a period of 12 months after the successful commissioning of the ERMS SR Plant, Iluka may negotiate to purchase a controlling interest in the 30,000 tpa plant, and may participate in any expansion of that ERMS SR plant. The Iluka Agreement also recognises Ticor Limited’s existing rights to use the ERMS SR technology.

Iluka produces around 470,000 tonnes of synthetic rutile annually, or about 60% of the world’s production. Iluka’s synthetic rutile is produced by the Becher process and contains 90-94% TiO2. With ERMS SR containing >97% TiO2, the sales contract will give Iluka access to high grade synthetic rutile, which has been identified as a growth area for chloride-route titanium dioxide pigment feedstock. The ERMS SR commercial arrangement between both companies will facilitate the financing of the ERMS SR plant, as will Iluka’s expertise as world leader in the synthetic rutile market.

Planning for the BFS for the proposed 30,000 tpa ERMS SR plant continues and preliminary site selection is in progress. The BFS is estimated to cost $5,000,000, and will take approximately six months to complete. This includes planned modifications to the Kooragang Island pilot plant and testwork on a bulk sample of ilmenite concentrate from CRL’s North Stradbroke Island heavy mineral sand operations. The testwork will be followed by detailed engineering, design and costing of the ERMS SR plant. Project financing will follow a positive outcome and, following a 15 month construction phase, production should commence in 2006.
Austpac is embarking on an exciting new phase of its development as the Company moves toward synthetic rutile production.

Austpac's LTR Technology applied in the Steel Industry

Austpac has progressed commercial arrangements for the use of the Company's Low Temperature Roasting (LTR) technology with an international group to add value to a waste stream from an existing mining operation. In January 2004, New Zealand Steel completed the construction of a 2.5 tonnes per hour (tph) test facility to test the suitability of Austpac's Low Temperature Roasting (LTR) technology for the treatment of mine tailings from New Zealand Steel’s Waikato North Head mine. The LTR technology involves low temperature fluid bed roasting to selectively enhance the magnetic and other properties of specific minerals. LTR testwork for NZ Steel at Austpac’s pilot plant in Newcastle earlier in 2003 showed that some of the iron minerals now being rejected could be recovered and conditioned for use in the steel making process.

The 2.5 tonnes per hour LTR plant operated continuously during the second quarter of 2004 and performed reliably in accordance with design expectations. Approximately 1,500 tonnes of heavy mineral concentrate were processed yielding large parcels of iron minerals for assessment. The stability of the low temperature roasting process has been exceptional and the accumulated operational data will be invaluable in providing a solid foundationfor any future full scale LTR plant. Plant emissions are much lower than statutory requirements. Austpac is pleased that the Company’s LTR technology is now proven, and we are able to provide process guarantees to prospective users of the process.

Austpac's EARS Technology applicable to the Nickel Industry

Late in 2003 Austpac signed an agreement with Inco Limited to evaluate Austpac’s EARS hydrochloric acid regeneration process for the production of nickel oxides from nickel chloride solutions for application to the Goro laterite nickel project in New Caledonia. The first stage of an Inco-funded testwork program was successfully completed at Austpac’s Kooragang Island pilot plant, Newcastle, in December 2003.

In April 2004 Inco completed a detailed evaluation of the acid regeneration options available and concluded that, because of the unique requirements and time constraints of the Goro project and because some of the unique benefits of the EARS process (such as super-azeotrope acid) were not necessary for Goro, they would not proceed with further testwork.

The EARS process was developed for regenerating acid from iron chlorides generated by Austpac’s ERMS SR process, and has been successfully used to process pickle liquor from the steel industry. The work with Inco conclusively demonstrated that the EARS process is applicable to nickel chlorides, so broadening its application to a new industry.

Murray Basin, Australia

Recent mineral sand exploration in Australia has seen a dramatic increase in known reserves in the Murray Basin. The development of these resources should be of direct benefit to Austpac as our technology is the best available to process Murray Basin ilmenite. All ilmenite concentrates from the Murray Basin contain chromite, a contaminant which restricts market acceptance. These ilmenites are readily amenable to upgrading using Austpac's technologies. Austpac has previously conducted a program of testwork for Murray Basin Titanium Pty Ltd aimed at improving the commercial acceptability of ilmenite from the Wemen deposit. The work was undertaken at our Newcastle pilot plant, and demonstrated that Austpac's ERMS technology can produce a high TiO2, low chrome ilmenite, suitable for high quality pigment production by both the sulfate and chloride processes.

During 2002, Austpac undertook LTR Process testwork for BeMaX Resources N.L. to reduce chrome in ilmenite concentrates from the large Ginkgo heavy mineral deposit in the Pooncarie area of the Murray Basin. A large sample (in excess of 1.5 tonnes) of Ginkgo ilmenite grading 60% TiO2 and 1.3% Cr2O3 was evaluated using continuous low temperature fluid bed roasting. Magnetic separation of the roasted ilmenite successfully reduced the less magnetic chrome-bearing minerals, and produced a commercially attractive final ilmenite product. Further testwork has recently been undertaken to complete the optimisation of the final plant design, with the objective of producing an ilmenite concentrate containing over 64% TiO2 and less than 0.4% Cr2O3. BeMaX plans to incorporate Austpac's LTR roasting process into the ilmenite circuit of its mineral separation plant at the Pooncarie Project in the Murray Basin. In April 2002, Austpac and BeMaX reached agreement on the commercial terms for the use of Austpac's ilmenite roasting technology to produce a high TiO2, low chrome ilmenite from Ginkgo concentrate. The agreement also covers Austpac's technical participation in the construction and commissioning of the ilmenite roasting and separation plant. Ausenco Limited has been selected to design and build the mineral separation plant and the LTR roaster for Pooncarie and project startup is currently contingent upon finance. This acceptance of ERMS technology may see several roasters built to treat the ilmenite from other Murray Basin resources, in accordance with individual technology fee agreements.

Exploration Licence 4521, Horsham, Victoria
Austpac Resources N.L holds a 100% interest in Exploration Licence 4521, which contains the WIM 150 deposit within which the 'WIM 150 Core' comprises a Measured Resource of 452 million tonnes containing 5.9% heavy minerals. A two stage drilling program conducted in joint venture with Ticor Limited to seek coarse grained strand line deposits is described in Austpac's 2001 Annual Report. Austpac's 2002 Annual Report reviews the entry of Newcrest Operations Limited to explore for copper and gold within the basement volcanic formations within Exploration Licence 4521. In 2001 Austpac excavated a bulk sample from the mineralised sand horizon in the southern portion of the WIM 150 deposit. The bulk sample pit was rehabilitated for use by the landowner as a farm dam.

Parcels of WIM 150 ore have been progressively shipped to the Kooragang Island pilot plant for sample preparation and magnetic separation of a predominantly ilmenite concentrate. Other samples were shipped to Roche MT's facilities in Queensland for separation by spirals, tables and WHIMS. A series of bench scale roasting and leaching tests have been undertaken, yielding progressively better quality synthetic rutile products. Austpac has produced a synthetic rutile containing more than 95% TiO2 and very low levels of chrome, radio-nucleides and other deleterious elements. Synthetic rutile made from WIM 150 ilmenite is too fine to be used by the chloride process to make TiO2 pigment. Austpac has successfully agglomerated at bench scale this fine grained material to produce acceptably sized, hard synthetic rutile pellets, without using a binder. We believe it will be possible to increase the TiO2 levels and commercially agglomerate the synthetic rutile product as we optimise our process. This work is part of an ongoing program aimed at developing a commercially viable process to treat fine grained heavy minerals.

In February 2004, Austpac signed an agreement whereby Australian Zircon N.L. (formerly Southern Titanium N.L.) will investigate the development of Austpac's WIM 150 heavy mineral deposit near Horsham in Victoria. Australian Zircon will earn an 80% participating interest by completing a bankable feasibility study on WIM 150, after which Austpac may elect to maintain a 20% working interest or convert to a 10% net profit interest.

This alliance will draw on the significant expertise of both parties. From its work at Mindarie in South Australia, Australian Zircon has experience in the testing and design of processes for the recovery of relatively fine grained heavy mineral sands. Australian Zircon has commenced testwork on 3.5 dry tonnes of WIM 150 ore, which will focus on new fine mineral separation processes, and in particular the recovery of zircon.

India

India has ilmenite resources totalling around 300 million tonnes, or almost 20% of the world's known ilmenite. It is estimated that approximately half of this is available for mining and that the deposits generally contain 20-30% heavy minerals which is high grade by world standards. Austpac's ERMS SR Process is ideally suited for upgrading Indian ilmenites.

In 1999, Austpac reached agreement with Indian Rare Earths Limited (IRE), India's largest mineral sand producer, with the aim of constructing a small ERMS synthetic rutile plant adjacent to IRE's ilmenite production facilities at "OSCOM" near Chatrapur in Orissa State. Austpac's Annual Reports for 2000, 2001 and 2002 (available in the "Reports" section of this web site) describe the entry of Ticor Limited to the project, the subsequent $2.5 million program funded by Ticor, which entailed definitive testwork on a bulk sample of Orissa ilmenite, detailed design and costing of a 10,000 tpa plant, and an environmental assessment for the OSCOM site.

However, the AusRutile Joint Venture was unable to obtain approvals for the 10,000 tpa demonstration plant from the Central Government's Foreign Investment Promotions Board, despite strong support from the Orissa State Government, and the project was abandoned.

Austpac continues to elevate a number of opportunities in India on a low-key basis. The Company currently has a Memorandum of Understanding with Ardeshir B. Cursetjee & Sons (ABC) for technical cooperation to evaluate the establishment of a synthetic rutile plant to process ilmenite from a heavy mineral sand deposit held by ABC to the south of Chatrapur, Orissa. This project depends upon sufficient resource information being established by ABC, but earlier work by the Indian Government indicates a resource of over six million tonnes of ilmenite.