The Company’s nickel extraction plant at Palabora in South Africa has been fully installed and commissioned and is now producing high grade nickel sulphate for sale in South Africa and overseas. The successful implementation of the Palabora project is a key milestone for Metals Finance, in that it: 1. Demonstrates the Company’s ability to implement against its     business plan. 2. Will establish recurrent cash flow to Metals Finance.
The project is situated at a copper mine owned by Palabora Mining Company (PMC) in the north east of South Africa. It is South Africa's leading copper producer, and its majority shareholders are Rio Tinto plc and Anglo-American. PMC is South Africa’s only producer of refined copper, with an output capacity of 100,000 tonnes per annum of high quality copper cathode. The purpose of Metals Finances’ facility at the site is the recovery of nickel from waste streams from the copper refinery, as a high grade directly saleable product. The project has been developed through the Company’s 50% owned company in South Africa, Metals Finance Africa Pty.Ltd. (MFA). MFA will receive all surplus cash flow from operations until capital expenditure, including interest at an agreed level, has been repaid. Thereafter the operating surplus will be divided 60% to MFA and 40% to PMC respectively. The agreed life of the operation is 5 years from the date that the plant reaches 80% of design capacity. The successful implementation of the Palabora project has been a key milestone for Metals Finance, in that it demonstrates the ability of the Company to engineer, design and provide a complex hydrometallurgical facility of unique design.
The period since commissioning of the plant has seen severe limitation in nickel supply from the Palabora copper refinery and, although operating on a close to break even basis, has yet to achieve the expected financial result for the Company.  A recent technical review of the nickel supply situation over the past 18 months has highlighted a number of potential causes of the deficiency and the operators of the project, the Rio Tinto controlled Palabora Mining Company, have undertaken to address the issues raised. The cash flow from the project will be used by MFA to commence repayment of loan accounts provided for operating and project development purposes by Metals Finance Limited (approximately A$5 million) and to provide additional working capital for the development of the Metals Finance global business plan.  Further financial information will be provided by the Company once nickel supply issues have been resolved and longer term operation of the plant has been established.