Metallurgical testwork aiming to reduce the capital cost of the Merlin Project commenced during the quarter and is continuing, with the aim of being completed by the end of the current quarter. The work is being undertaken at the Ian Wark Research Institute at the University of South Australia in Adelaide, a centre of excellence for research into mineral processing. The goal of the work is to increase the grade of the molybdenum concentrate produced at Merlin to levels which would allow savings in capital construction costs of the processing plant. This work is continuing in the current quarter.

A mining review at Merlin has been undertaken which suggests that there is potential to alter the planned mining methodology in parts of the orebody to reduce mining costs and increase annual mining volumes. Further work is required to confirm these initial results.

A sales and marketing study by a leading molybdenum and rhenium consultancy company was also commenced during the quarter. This study will provide insights into both the molybdenum and rhenium markets.

Our work to reduce the capital and mining costs indicates that at long-term molybdenum and rhenium pricing, the Merlin Project can provide strong financial returns. An update on the Merlin Project remains on track for delivery late in the second quarter, 2013.