MHM Company Update

MHM UPDATE

ASX Release – 23 February 2012

• 24-hour  processing  underway at Australian  salt cake recycling 

operations

• Current daily plant throughput processing all new material received, in 

addition to 35-40 bags per day of partly processed stockpiled salt cake 

• Daily throughput to increase as new staff gain additional experience

• Potential Alcoa shutdown of Point Henry Smelter would have no impact 

on MHM’s operations

• First AL80 export shipment of 500 tonnes scheduled for 5 March 2012

• Acquisition of  115-acre site for construction of first US salt cake and 

black dross recycling facility

• US plant design and layout complete, preliminary engineering and 

permitting underway

• Timeframes and capital cost of first US facility to be confirmed with US 

engineering consultants

• Preliminary site works commenced

• Additional US supply contract negotiations ongoing and positive

• Project finance favouring non-dilutionary mechanisms. New York 

roadshow commencing 28 February to increase investor awareness and 

on-market support 

AUSTRALIAN ALUMINIUM OPERATIONS UPDATE


Twenty-four hour processing is underway at  the  Geelong salt  cake recycling 
facility.  Current plant throughput is processing all salt cake being  received,  in 
addition to 35-40 bags per day of partly-processed stockpiled salt cake.  Each 
bag of stockpiled material weighs approximately 1.5 tonnes, and the 10,000 
tonne stockpile is expected to take about 3 months to process.  Current daily 
plant throughput is expected to increase as new employees continue to gain 
experience.    Updates of processing rates will be provided by the company.  


When reprocessing the stockpile of partly-processed salt cake is completed, Alreco (MHM’s subsidiary) will 
commence processing Alcoa’s 160,000 tonne salt cake landfill. When landfill processing commences Alreco’s 
earnings are expected to increase in line with the forecast EBITDA of $8 million per annum. 


The potential shut down of Alcoa’s Point Henry Smelter would have no impact on MHM.  All of Alcoa’s 
Australian salt cake is produced at the Yennora Rolling Mill in New South Wales.


Impex has advised that customs paperwork relating to export of AL80, Alreco’s aluminium oxide product, has 
been finalised and that the first shipment of 500 tonnes will depart the Geelong facility on 5 March 2012. The 
initial 500 tonne shipment was the initial volume agreed for shipment by customs, and this will ramp up to 
ensure that all Australian AL80 is exported.  


The completion of customs paperwork is a major achievement for MHM as considerable effort was devoted to 
achieve this goal. The delays were a bureaucratic matter and unrelated to the desire of the end user to 
purchase the product.  While Impex has exclusivity for AL80 only within Australia, it has expressed interest in 
also purchasing all AL80 produced in the US.  MHM has received expressions of interest from other 
companies about purchasing all US-produced AL80.



US ALUMINIUM OPERATIONS UPDATE


US subsidiary MHM Metals Corporation has acquired a 115-acre landholding in Russellville, Kentucky. The 
$838,000 purchase price was funded from existing cash reserves. The site contains existing buildings that 
will decrease the time and expense of plant construction and the site is zoned correctly for its purpose. 
Plant layout and design for the Russellville facility has now been completed and management is working with 
engineering consultants to confirm capital cost and timeframe for completion.  The existing buildings are 
ideally suited for the processing plant, and there is much enthusiasm  in  the  management  team  for  the 
property.  Environmental permitting applications are being prepared and preliminary civil site works, 
renovations of the office facilities and preparation for expedited construction of the rail spur are underway. 
MHM has a conservative preliminary budget estimate of US$25 million for construction of its 250,000 tonne 
per annum plant, though it is expected that the existing site infrastructure and availability of second-hand 
processing equipment could reduce this figure below US$20 million. Targeted earnings for this first US 
facility for salt cake and black dross processing, and aluminium oxide sales and ancillary activities is US$25 
million per annum when operating at full capacity. MHM expects the plant will operate at full capacity of 
250,000 tonnes per annum within 12 months of commissioning. 


MHM continues to negotiate additional supply contracts, and progress is positive.  Management also 
continues to assess the viability of landfilled/stockpiled salt cake for recycling.  The company is examining
opportunities to acquire large volumes of aluminium oxide to produce AL80 for export and additional 
revenue generation.


Consideration of project-financing options is underway and will be finalised when the plant capital cost and 
drawdown schedule are confirmed. Management is confident that a number of options will be available.  As 
always, management is keen to minimise any shareholder dilution to maximise Earnings Per Share and share 
price. 


A New York investor roadshow will commence on 28 February 2012 to inform and engage new investors with 
the MHM story and continue to support the share price.  A number of broking houses are expressing interest 
in publishing research on MHM, which should also benefit the company.


SILICA DIVISION UPDATE


MHM has engaged a corporate adviser to assist with the potential spin-off of the company’s silica division 
and continues to make progress. Another priority is to secure offtake contracts for lump silica and silica flour 
to help underwrite the development of a Tasmanian silicon smelter.   


Considerable effort has also been devoted to securing additional high purity silica reserves to help fast-track 
project development, offtake negotiations and lower production costs.

Aluminum Preferred Over Copper for Cables Helps Rusal, Alcoa: Commodities

Copper has climbed to almost four times the price of aluminum, a record ratio that’s accelerating a switch by manufacturers to using the cheaper metal in electric cables and wires, a United Co. Rusal executive said.
Demand for copper is shrinking by about 400,000 tons a year through substitution, or 2 percent of global use, according to Oleg Mukhamedshin, deputy chief executive officer of Rusal, the world’s largest aluminum producer, who cited market data the company uses in its forecasts.
“More than half of this loss is to aluminum,” Mukhamedshin said in an interview in Moscow. “With copper prices at a record, further substitution is expected.”
The shift is helping the silver-colored metal rise this year after its average price slid 7 percent since 2006. That should increase revenue for producers from Rusal to Alcoa Inc (AA)., the largest U.S. producer, in the $100 billion market for the material used in aircraft, building materials and beer cans.
The current aluminum price is below the cost of production for about 30 percent of the world’s producers, according to Rusal’s data. Alcoa, Rio Tinto Group and their global competitors are cutting production after aluminum prices declined almost 30 percent by the middle of December to $1,962 a ton from the peak of $2,797 a ton in May. Alcoa reported its first loss in two years in January, while Rusal said it may cut 6 percent of its output in 18 months.
The price of copper, half of which is used in wiring, has more than doubled since 2005 to $8,300 a ton and is more profitable for its producers, while aluminum has remained at about $2,200 a ton in the period.

Aluminum Surplus
“Aluminum supply will be in surplus of about 500,000 tons this year, meaning that even relatively small additional demand from the markets, which were traditionally for copper, may support light-metal prices,” Dmitry Smolin, an Uralsib Capital analyst said.
Copper may be in deficit of 160,000 tons this year, which will also be helpful for substitution, which may take place not only in wiring, but also in production of equipment for cars, he said.
London Metal Exchange aluminum forward contracts show that traders forecast the aluminum price to reach $2,530 per ton by the middle of 2015 and $2,900 in a decade. Copper forwards show the opposite trend, with the prices starting to fall by the end of the third quarter of 2013 after reaching $8,500 per ton. Copper may fall to $7,600 per ton in a decade, forwards show.
The ratio of copper’s price to aluminum has jumped to 3.7 from 1 in 1987, tempting customers to switch to the cheaper material, Danemar said.

Copper’s Properties
Copper is at least 65 percent more effective than aluminum in three key properties: electrical conductivity, thermal conductivity and ductility, according to Deutsche Bank. This implies that copper should cost 1.65 times more than aluminum. When that ratio climbs to 2-to-1, an economic incentive to substitute copper with aluminum arises, according to the bank.
About 3 million tons of annual copper demand has been switched to substitutes including plastics, fiber optic and aluminum in 2004 to 2011, according to the estimates of International Copper Association and Deutsche Bank.
“Despite the copper-aluminum ratio rising, the rate of substitution declined post-2007, as most easy-to-accomplish applications have been converted,” Deutsche Bank said in a report last month. Still, there is room to replace copper with aluminum for high-voltage cables and low-voltage use in commercial property and building cladding, according to Alcoa.

Power Lines
Rusal is testing an aluminum-zirconium alloy to provide a substitution to copper in construction of power transmission lines, Mukhamedshin said. The new product will allow the lines to be more resistant to weather conditions, such as low temperatures and heavy snowfalls, he said. The demand may come from Russia’s Siberia and the U.S. which needs to modernize its power grids, Mukhamedshin said.
Even so, analysts are cautious about forecasting a quick comeback.
“Aluminum is plagued by oversupply and we forecast that 2012 will see the sixth consecutive year of supply surplus,” Royal Bank of Scotland said in a report last month. Meanwhile, the copper market “remains in firm supply deficit and it is hard to see this changing within the next one to two years.”
The metal “remains around its cheapest relative to copper in decades,” Nick “Metals” Moore, head of commodity research at Royal Bank of Scotland, said in a report last month. “Consumers have, where possible, been substituting away from copper to aluminum in certain applications such as heat exchangers, cabling and solar panel tubing.”
Vladimir Zhukov, head of the Russian equity research team at HSBC Holdings Plc, said the copper market “is not in danger.” China, the largest consumer of both metals, is still a pure exporter of aluminum, while importing copper, he said.
“It is true that there is space for additional demand for aluminum as a copper substitute, but due to its qualities, the light metal still can’t replace copper in some applications,” Zhukov said.

http://www.bloomberg.com/news/2012-02-07/aluminum-over-copper-for-cables-helps-rusal-alcoa-commodities.html

AL80 first shipment in end of February

MHM should have processed around 40,000t of salt slag/non-salt slag/dross.
Dec 2011 - 4074t ss/nss and 915t dross
Sep 2011 - 3694t ss/nss and 1846t dross
Jun 2011 - unknown (says unknown ~4000t)
Mar 2011 - unknown
Dec 2010 - unknown
Sep 2010 - unknown
Jun 2010 - 6960t
Mar 2010 - 6668t
30%-40% of alox for each tonne of salt slag, then minimum we should have around 12000t of AL80 available (or 8 months min. supply).

US Property Settlement

ASX Release – 2 February 2012


MHM Metals  Limited (ASX:MHM) is pleased to announce the settlement of a 
property purchase contract over  a  115-acre  industrial site  in  Russellville, 
Kentucky. The property is the planned location for construction of MHM’s first 
US salt cake and black dross recycling facility.


The final settlement figure of $838,761 was  funded  from MHM’s existing cash 
reserves.  The company is in the process of finalising process plant design and 
costing, with a number of existing buildings on site expected to  decrease both
time and expense of plant construction.  The site is zoned correctly for its 
purpose.  


After assessing over 30 sites throughout the middle Tennessee and southern 
Kentucky region, the Russellville site  is  the  preferred  location  for  plant 
construction.  Factors included:


• Identification of in excess of 350,000 tonnes per annum of salt slag and 
black dross within an economic radius of the plant site
• Government support and incentives, not only financial but also the probusiness environment in Logan County
• A highly skilled local workforce and availability of workers
• Availability of rail along the property boundary
• Availability of ample electricity supplies to the property for initial and 
future requirements


The large land-holding provides ample opportunity for MHM to grow, and to 
accommodate additional associated technologies under development. 



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.    Management’s  primary  focus  in  the  US  continues  to  be  on  the 
construction of the Russellville Kentucky facility, although with its  high  growth  objectives  the  company  is 
assessing other compelling site alternatives.

January 2012 Top40