GIP Gippsland

RNS Number:5627H
Gippsland Limited
13 November 2007

13 November 2007

                Gippsland Limited ("Gippsland" or the "Company")

                       TEN YEAR TANTALUM OFFTAKE CONTRACT

*       10 year tantalum sale contract with German major HC Starck GmbH

*       600,000 pounds tantalum pentoxide per year

*       Price escalation clauses covering production cost increases underpin
        long-term viability of project

*       Significant scope to increase revenue through expansion and
        diversification

*       Project tantalum & tin sales over initial 10-year period in excess of
        US$530 million


Gippsland Limited (ASX & AIM: "GIP"), the Egyptian focused tantalum developer,
today announces that its 50% owned subsidiary Tantalum Egypt JSC has secured a
10 year contact ("Offtake Agreement") with the German major HC Starck GmbH ("HC
Starck") for the supply of six million pounds of tantalum pentoxide ("Ta2O5")
from its 40 million tonne Abu Dabbab project in Southern Egypt.

The milestone Offtake Agreement covers the delivery of 600,000 pounds of Ta2O5
per annum - almost the entire expected initial annual production of 650,000
pounds of Ta2O5 from the project.  As is traditional for the tantalum industry,
the Ta2O5 Offtake Agreement prices are confidential however based upon present
Ta2O5 spot prices the Abu Dabbab project is expected to generate Ta2O5 revenue
in excess of US$280 million over the initial 10-year period of operations.

In addition to Ta2O5, the Abu Dabbab project will produce approximately 1,530
tonnes of tin metal per annum which will be sold on the open market or via the
London Metal Exchange.  Based upon the present LME tin price Abu Dabbab project
is expected to generate tin revenue of approximately US$250 million over the
initial 10 years of its estimated 20 year mine life.

Importantly, the Ta2O5 Offtake Agreement contains price escalation clauses tied
to production cost increases and a floor Ta2O5 price which will largely underpin
the on-going viability of the project.  The Offtake Agreement also contains a
formula for the Ta2O5 offtake price to be varied to reflect a premium to spot
market prices.

The Directors have ensured that the Offtake Agreement forms a solid foundation
from which the Abu Dabbab project can diversify and expand significantly
creating a focal point for world Ta2O5 production.

Discussions with a number of German and English project finance banks have been
on-going during the negotiation of this expanded offtake agreement.  The Company
is well placed to finalise project finance arrangements early in 2008.  The
capital cost for the project, including financing during construction is
estimated to be US$125 million which is expected to be funded on an attractive
80% debt and 20% equity basis.

The Offtake Agreement signed on 12 November 2007 replaces the smaller Ta2O5
offtake agreement between Gippsland and HC Starck referred to in the Company's
announcement dated 13 January 2005 for the supply of 480,000 pounds of Ta2O5 per
annum for a period of 5 years.

The Offtake Agreement is subject to a number of standard conditions precedent
including the placement of orders for SAG (Semi Autogenous Grinding) and Ball
Mills by 30 April 2008, Execution of an Engineering, Procurement, Construction
Management and Commissioning Services (EPCM) by 31 July 2008 and Commencement of
siteworks construction by 31 January 2009.

Gippsland executive Chairman Jack Telford said "This expanded agreement is a
major development for the Company and its shareholders which include the
International Finance Corporation, the commercial arm of the World Bank.  It is
a great pleasure to announce this long-term contract with HC Starck, a company
which represents the epitome of metallurgical excellence."

This is a significant milestone in the development of the Abu Dabbab project.
The offtake agreement largely protects Gippsland shareholders from production
cost escalations, significantly reducing market risk.  Additionally, the Abu
Dabbab tantalum and tin extraction process is based upon industry standard
gravity separation techniques which affords considerable protection against
technical risk ".

Mr Telford added "We are fully focussed on taking this world-scale project into
production and becoming a major, lowest cost supplier to the steadily growing
global tantalum market ".

The Egyptian Minister for Petroleum and Mineral Resources His Excellency Eng.
Sameh Fahmy stated "This agreement, which is a major milestone for the Egyptian
mineral resources sector, has been made possible by our concerted efforts to
attract top quality companies to assist in unlocking Egypt's mineral wealth.
The Abu Dabbab project has the potential to become the world's leading producer
of tantalum which is an essential component in the manufacture of many items
used in our lives every day.  We are fully committed to working with our joint
venture partners Gippsland to bring the Abu Dabbab project into production in
the shortest possible time frame."


RJ (Jack) Telford
Executive Chairman

For further information please contact:

Jack Telford, Executive Chairman                         Fiona Owen
Gippsland Limited                                        Grant Thornton Corporate Finance
T: +61 (0)8 9340 6000                                    T: +44 (0)20 7383 5100
jtelford@gippslandltd.com                                E: Fiona.Owen@gtuk.com

Luke Cairns, Director, Corporate Finance                 Richard Hail, Head of Corporate Finance
Hoodless Brennan plc                                     Fox-Davies Capital
T: + 44(0)20 7510 8600                                   T: +44 (0)20 7936 5200
E: l.cairns@hbcorporate.co.uk                            E: richard.hail@fdcap.com

Jane Stacy / Ed Portman                                  Warrick Hazeldine
Conduit PR                                               Purple Communications
T: +44 (0)20 7429 6605 / 6607                            T:  +61 (0)8 9485 1254
E: jane@conduitpr.com                                    M: +61 (0)417 944 616
E: ed@conduitpr.com                                      E: whazeldine@purplecom.com.au
                                                         M: +61 (0)417 944 616


Notes to Editors:

About Gippsland Limited

Gippsland is an Australian based company listed on the Australian Stock Exchange
and the London Stock Exchange AIM and also trading on the PLUS Markets (UK)
platform, under the code of "GIP".  Gippsland owns 50% of the 40 million tonne
Abu Dabbab and the nearby 98 million tonne Nuweibi Tantalum deposits via an
equal joint venture with the Egyptian Government.  Gippsland maintains board and
management control of the joint venture company Tantalum Egypt JSC for the life
of the project.  The project will operate in its own Egyptian Free Trade Zone
which will provide numerous benefits including relief from taxation, royalties,
customs import duties and export/import licensing.

Gippsland has completed a definitive Abu Dabbab feasibility study based on an
initial mill-feed rate of 2 million tonnes per annum producing approximately
650,000 pounds of Ta2O5 per annum.  All permitting has been finalised while all
required environmental studies have been completed to World Bank standards.

Abu Dabbab is expected to have a mine life of 20 years with the nearby 98
million tonne Nuweibi deposit providing an opportunity to greatly extend this
mine-life and increase the rate of production.  Based upon present spot prices,
the Abu Dabbab and Nuweibi deposits have a combined in-situ Tantalum and tin
value of approximately US$2.9 billion.

About HC Starck GmbH (www.hcstarck.com)

HC Starck is the world's leading consumer of tantalum pentoxide, and produces a
unique range of powders of refractory metals such as tungsten, molybdenum and
tantalum.  Headquartered in Goslar, Germany, it has annual sales approaching
Euro 1 billion.

The International HC Starck Group which has more than 3,400 employees in 15
locations world-wide was sold by the Bayer Group during February 2007 to a
consortium formed by leading global financial investors Advent International and
The Carlyle Group for approximately Euro 1.2 billion.

Tantalum Applications

Tantalum is a grey metal, has a high dielectric, which makes it highly valuable
in the manufacture of capacitors for the electronics industry.  Tantalum
capacitors form an essential component in the production of cellular telephones,
telecommunication infrastructure, laptop computers, auto-electrics and still and
video digital cameras.

Tantalum is classed as a refractory metal because it is resistant to chemical
attack.  For industrial use, its important properties are a high melting point,
ductility which allows it to be drawn into wire, and malleability which allows
sheets and tubes to be made.  Once exposed to air, the metal is covered with a
thin layer of oxide which allows it to resist fluids in the human body, and also
acids and other corrosive liquids, in the chemical industry.

Because of the metal's resistance to corrosion it is used in chemical plant and
equipment.  Its high melting point (2,997oC) and low thermal coefficient of
expansion make it a crucial component of jet engine turbine blades.  As tantalum
carbide, one of the hardest substances known to man, it is used for cutting
tools.

Tantalum Market

The majority of the world's Ta2O5 is sold by way of long-term offtake agreements
between the miner and the tantalum refiner/metal producer.  Tantalum is not sold
via a regulated market as is the case with gold, copper, zinc and tin.  The
global Ta2O5 market is estimated to be in the order of 5 - 7 million pounds
(approx. 2,700 tonnes) per annum for the years 2005-2006.  Industry commentators
suggest that the market is growing at a rate of about 7% to 10% per annum.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

CNTFFDFAESWSELF

Gippsland (LSE:GIP)
Historical Stock Chart
From Jun 2024 to Jul 2024

Gippsland (LSE:GIP)
Historical Stock Chart
From Jul 2023 to Jul 2024