December 20, 2004 FOR IMMEDIATE RELEASE
ASX Release and Company announcement
METALLICA MINERALS TO SPIN-OFF COAL PROJECT
Metallica Minerals Ltd (ASX: MLM), an emerging Queensland focused resource company,
announced today that it has signed a Letter of Intent with Internickel Ltd for the divestment of
Metallica’s Kingaroy Coal Project.
The project contains a measured and indicated coal resource of 180 Mt strategically situated
near the Tarong Power Station, (see attached map) and the companies intend to proceed
towards a legally binding Heads of Agreement (HOA) as soon as possible.
Internickel proposes to acquire 100% of SE QLD Energy Pty. Ltd, a subsidiary of Metallica,
which will hold the Kingaroy Coal project (EPC 882 tenement) for share consideration with a
value of $6 million, based on 30 million shares at an issue price of 20 cents each.
Internickel will also issue Metallica 30 million options to acquire shares in Internickel at 20 cents
exercisable on or before June 30, 2009. Metallica may, at its discretion, direct that some or all
of these shares and options be distributed to Metallica’s shareholders.
The transaction will be subject to Internickel conducting due diligence and receiving shareholder
approval. It will also be subject to Internickel raising additional capital under a rights-issue
prospectus, being re-listed on the ASX and all other regulatory consents and approvals
A deed of royalty already exists over EPC 882 whereby the holder of the tenement is to pay
Metallica a royalty of $0.40 per ton of any coal produced and this arrangement will remain on
foot for the benefit of Metallica.
Currently suspended Internickel intends to focus its direction towards coal, change its name to
Intercoal Limited, gather a management team of considerable coal experience and refinance
itself in preparation for a possible ASX re-listing in the first half 2005.
Metallica will be entitled to carry out a due diligence review of Internickel.
Metallica Managing Director, Mr Andrew Gillies said: “Subject to the formalisation of a HOA and
due diligence, we believe this is an excellent strategic deal for Metallica under the current
circumstances for a number of reasons:
1. The Directors believe the Kingaroy coal project’s value and potential has not currently
been recognised in Metallica possibly due to the Company’s multi-commodity portfolio.
2. The new company (Intercoal Limited) proposes bringing in a very experienced
management team focused on the development of this project as a coal and energy
3. Metallica had budgeted only $125,000 on the coal project’s evaluation expenditure,
whereas to advance the commercial potential in the short term the project requires
considerably more than this amount over the next two years to have the coal reserve
ready for exploitation or a production decision.
4. This transaction fits perfectly with Metallica’s value-adding strategy.”
Kingaroy Coal project
The Kingaroy coal project covers a major portion of the Tarong Coal Basin and includes the
Taabinga coal resource and other drilled coal prospects. A measured and indicated thermal coal
resource of 181.9 Mt (JORC compliant and based on approximately 200 drill holes) was
estimated earlier this year by Runge Ltd.
The Taabinga coal resource is only 25 km from the Tarong coal fired power station which
supplies approximately 30% of Queensland’s electricity, however, as Tarong Energy does not
own a coal deposit within easy trucking distance of its Tarong Power Station it is dependent on
purchasing coal from the Meandu coal mine which is held by another company. It will be
Intercoal’s strategy to investigate the ability to secure a portion of this local coal market
estimated to be in excess of 6 Mt’s per annum, which is also likely to expand.
Significance to Metallica
Metallica Chairman, Mr David Barwick said: “The proposed agreement will give Metallica a $6
million investment in a listed vehicle and effectively a controlling interest in this coal project
through which there is considerable upside.”
“This will allow Metallica to more effectively focus its resources on our NORNICO and Lucky
Break nickel projects. We also have the benefit of not having to dilute our share capital to raise
funds to progress the coal project. Basically we believe this option should speed up the
evaluation, permitting and development of the coal project.”
Mr Barwick further stated that on the basis of the $6 million share issue by Internickel (and
Metallica having approximately 62 million shares on issue), the proposed transaction equated to
approximately 9 cents per Metallica share.
Metallica Minerals Ltd listed on the ASX on 23 November after an IPO priced at a 20 cent issue
price. In addition to its flagship nickel project, Metallica also has major interests in bauxite,
scandium, limestone and precious metals, all located in Queensland.
Issued by Further information
Tony Hill Andrew Gillies
Tony Hill & Associates (Public Relations) Managing Director
Office: 07 3378 0633 Metallica Minerals Ltd
Mobile: 0410 643 328 Office: 07 3211 7366
www.metallicaminerals.com.au Mobile: 0416 137 556