MHM: October 2011

MHM PROGRESS REPORT

ASX Release – 2 September 2011

AUSTRALIAN ALUMINIUM OPERATIONS UPDATE

Operations in Geelong continue to progress. MHM Metals Ltd (ASX:MHM) subsidiary Alreco is pleased that
aluminium recovery from recycled salt slag is far exceeding expectations. This additional volume of recovered
metal has led to refinements to optimise the process. This is not uncommon with commissioning new
processes.
These refinements will soon be completed. Alreco will then commence re-processing the stockpile of stored
partly-processed salt slag, in addition to ongoing receipt of new salt slag, non-salt slag and dross. The
stockpiled partly-processed material was accrued by Alreco as part of the exercise to continue processing
operations in Geelong concurrent with new plant construction.
When this stockpile is reduced Alreco will begin processing Alcoa’s 160,000 tonne salt slag landfill. Landfill
processing will be used by Alreco to balance the throughput of the plant – processing the landfilled salt slag
resource will vary according to the volumes received from Alcoa and Sims. This will enable Alreco to maximise
plant throughput and efficiency. It is expected that the landfill will be processed at about 35,000 tonnes per year
over five years, in addition to the estimated 24,000 tonnes per year from Sims and Alcoa. Alreco is also exploring
opportunities to increase the ‘non-landfill’ feedstock.

Construction of the salt crystalliser is underway, and the technology providers have indicated that the system
will be commissioned at the end of this calendar year.
The first AL80 shipment is awaiting departure.
Alreco continues to host prospective future client visitors from the United States at the Geelong plant. The
company’s priority is to keep building relationships and generate more supply contracts.
US ALUMINIUM OPERATIONS UPDATE
MHM Metals continues to advance salt slag recycling in the United States. The appointment of John Pugh in an
executive role has yielded positive results for MHM, and feedback also suggests this was well regarded by the
US aluminium industry.
The company continues to engage with US salt slag producers. It is evident that a major opportunity presents
to recycle another waste stream from the aluminium industry, known as ‘black dross’. Black dross is a byproduct from reverberatory furnace operations and generally has a similar composition to salt slag, albeit often
with a higher aluminium content. Black dross recycling also presents an opportunity to recover aluminium,
salt/potash and auminium oxides. This product differs from the dross product that MHM has been processing
for Sims in Australia, which does not contain salts. MHM is in dialogue with a number of companies that
produce large volumes of this material, and discussions for closed-loop recycling of black dross are continuing.

MHM is assessing a number of sites in the US for construction of the first salt slag and black dross recycling
plant. This will depend on a number of factors, most importantly the proximity to salt slag and black dross
suppliers. Recent discussions for black dross recycling may have some bearing on site determination. The
company will determine the potential of these additional feedstocks prior to making an unconditional site
acquisition. Irrespective, site due diligence including purchase price and negotiation of acquisition terms
continues on a number of sites.
MHM has identified additional landfilled/stockpiled salt slag that may present opportunities for recycling and
has begun research and entered discussions to assess viability.
MHM recently engaged with a number of companies with operations in the north eastern United States and
south eastern Canada, to assess a further region for salt slag and black dross recycling. A substantial volume of
material has been identified in this region as well as companies that are supportive of MHM’s business and that
share the imperative to cease landfilling.
MHM is also communicating with major US aluminium users such as the beverage can and automobile
manufacturers to encourage support and participation. MHM is evidently creating substantial impact in parts of
the US aluminium industry and receiving some very strong support.

MHM COMPANY UPDATE

ASX Release – 7 October 2011

This is the first of a series of MHM Metals Limited (ASX:MHM) monthly company progress reports. The reports
will strengthen communication with shareholders and hopefully increase stability in the MHM share price by
spreading the confidence and enthusiasm that company management has for MHM’s future. This will give
shareholders a regular and detailed company information source, especially on month-to-month progress.

AUSTRALIAN ALUMINIUM OPERATIONS UPDATE

An important upgrade of the salt slag plant has been successfully completed in order to recover additional
metal. The upgrade enables this additional metal to be removed from the aluminium oxide fraction, thereby
benefitting the quality of MHM’s AL80 product. The upgrade was completed on 23 September except for the
delivery of screens, which were delivered and installed this week. With the upgrade now complete it is expected
that 24-hour production of this section of the plant will commence next week.
Importantly, the plant at Moolap has continued to be operational processing salt slag and dross on a tolling
basis for its customers Alcoa and Sims during the upgrade period.
Upon commencement of 24-hour operations, Alreco will commence re-processing the stockpile of partlyprocessed salt slag, in addition to ongoing delivery of new salt slag, non-salt slag and dross.
When this stockpile is reduced Alreco will begin processing Alcoa’s 160,000 tonne salt slag landfill. Landfill
processing will be used to balance the throughput of the plant – processing the landfilled salt slag resource will
vary according to volumes received from Alcoa and Sims. This will enable Alreco to maximise plant throughput
and efficiency. It is expected that the landfill will be processed at about 35,000 tonnes per year over five years, in
addition to the estimated 24,000 tonnes per year delivered from Sims and Alcoa. Alreco is also exploring
opportunities to increase ‘non-landfill’ feedstock.

Additional salt evaporation ponds continue to be constructed as required with one pond completed and in use
and two other ponds close to completion. Ponds will continue to be constructed over the next 12 months to
provide for salt recovery from the landfill operations.
The order for the salt crystallisation plant has been placed and the design of the building is now underway.
Upon approval by Council, construction of the crystalliser plant and salt storage building will commence.
The first shipment of AL80 is currently awaiting Customs clearance, which has taken longer than anticipated by
Impex, on account of the AL80 being a new product. The timing of this clearance is outside the control of MHM.

US ALUMINIUM OPERATIONS UPDATE

Contract negotiation
Salt slag supply negotiations in the United States are well advanced. MHM has also recently engaged with a
number of additional companies that produce salt slag and black dross.

Black dross is a by-product from reverberatory furnace operations and has a similar composition to salt slag,
albeit often with a higher aluminium content. Black dross would be recycled in the same way as salt slag, using
the same plant and equipment to recover aluminium, salt/potash and AL80. The appointment of US aluminium
industry veteran John Pugh as MHM’s Director of Operations, North America, initiated MHM’s examination of
black dross recycling opportunities. John’s identification of this complementary opportunity and introduction to
additional salt slag producers are of substantial value to MHM in the US.
The opportunity to recycle black dross is entirely complementary to salt slag recycling and is produced by
companies that operate in the same sector as salt slag producers. In some cases the producers of salt slag also
produce black dross. Investigations of opportunities to recycle black dross should not be viewed as a shift of
focus, but as a potentially substantial additional revenue generator for MHM with minimal investment of extra
resources. The recycling of salt slag and black dross go hand in hand.
Company management acknowledges that finalisation of US supply contracts has taken longer than anticipated
and every effort is being made to finish these. The timeframe for contract completion does not undermine the
compelling business case for salt slag recycling in the US. MHM has limited control of contract signing
timeframes but will persist in advancing finalisation as soon as we can.
Dynamics of the US aluminium industry
It is important that investors not lose sight of the magnitude of the opportunity that lies before MHM. Part of
the challenge is that MHM will bring wholesale change to long-standing industry waste disposal practices.
MHM’s task is made more challenging by the fact that companies have tried to recycle salt slag in the past and
failed. This means that it takes time to establish relationships and trust and MHM is making steady progress in
this regard. Another challenge is to convince companies of the volume of aluminium in their salt slag. MHM
has been advocating a ‘tolling’ engagement with most companies, charging a fixed price per tonne, as in
Australia. Without having a plant to run trials and demonstrate the quality of the recovered aluminium and salt
/potash flux, it takes more time to build confidence.
Executive Director Ben Mead is satisfied with MHM’s US progress and is very confident that salt slag and black
dross recycling is the way of the future in the US. At a recent industry conference in Chicago Ben was informed
that the EPA is considering the regulation of salt slag as a hazardous waste at a federal level in the US – this
would be a huge boost to MHM’s business. Regardless, management is very confident that the opportunity
presented to MHM in the US is immense and MHM’s expansion into the US does not depend on changing
regulations.
Site Selection
MHM is assessing a number of sites in the US for construction of the first salt slag and black dross recycling
plant. Site selection is dependent on a number of factors, most importantly the proximity to salt slag and black
dross suppliers. Detailed site due diligence – including purchase price and negotiation of acquisition terms –
continues on a number of sites and final acquisition will be based on completion of supply contract negotiation.
There is more than one potential site for MHM’s first US plant and management will carefully assess the short
list. Management is aware that both supply contract completion and site determination should help stablise
the share price.
Salt slag landfills / stockpiles
MHM has identified additional landfilled/stockpiled salt slag that may present opportunities for recycling and
has begun research and entered discussions to assess viability.
Additional plant location opportunities
MHM continues to engage with a number of companies with operations in north eastern United States and
south eastern Canada, to assess further salt slag and black dross recycling opportunities. A substantial volume
of material has been identified in this region as well as companies supportive of MHM’s business that recognise
the imperative to cease landfilling.
Government grants and incentives
MHM is engaged in advanced discussions on government grants and incentives. However a package will not be
finalised until plant location has been determined as the scope of financial support depends on ultimate plant
location.

31 October 2011

September 2011 quarterly report

20 October 2011