Activities Report

    RNS Number : 6164G
  Gippsland Limited
  27 October 2008
   

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

    
    FIRST QUARTER ACTIVITIES REPORT

    July - September 2008

    HIGHLIGHTS
    
    *     ABU DABBAB
    *     11% total Mineral Resource increase from 40 to 44.5 million tonnes
    *     30% increase in total Measured and Indicated Resources
    *     Increase in tantalum grades
    *     Doubling of Ore Reserves from 14.6 to 30.24 million tonnes
    *     Confirmation of high grade 40% tantalum product
    *     Confirmation of low radioactivity tantalum product
    *     Environmental Impact Assessment Study update 
    *     Receipt of EPCM offers
    *     Project funding progress
    *     HEEMSKIRK TIN PROJECT TRANSACTION
    *     SUCCESSFUL PLACEMENT OF SHARES 
    
    ABU DABBAB

    The prime assets of Gippsland (ASX/AIM "GIP") are the world-scale 44.5 million tonne Abu Dabbab and the 98 million tonne Nuweibi
tantalum deposits located in Egypt. The Company, in which the International Finance Corporation ("IFC") part of the World Bank Group is a
substantial shareholder, has completed a definitive Feasibility Study based upon a design mill-feed rate of 2 million tonnes per annum. It
is scheduled to produce 650,000 pounds of tantalum pentoxide (Ta2O5), plus 1,530 tonnes of LME grade tin metal per year.  

    The Company has concluded a 10-year tantalum off-take agreement with the German tantalum major HC Starck GmbH for the supply of 6
million pounds of tantalum pentoxide, representing more than 90% of the total initial tantalum production during this period. The Abu Dabbab
project alone is expected to have a mine life of 20 years, however given that Gippsland's total JORC Code Resources exceed 140 million
tonnes, the Company will look to increase tantalum and tin production substantially following commencement of operations.

    Gippsland Directors are presently engaged in project finance negotiations at an advanced level with the German government owned KfW
Bankengruppe and are targeting an attractive 80% debt 20% equity facility, which the Directors anticipate will be concluded successfully
prior to the close of 2008.

    RESOURCE INCREASE AND UPGRADE

    During the Period all outstanding tantalum and tin assays resulting from a small Abu Dabbab infill drilling programme were received. The
programme was designed to allow an upgrade of the Inferred Resources to the higher Indicated and Measured categories.  

    *     The new drilling has resulted in an 11% global resource increase from 40 million tonnes to 44.5 million tonnes, of which 32.5
million tonnes (73%) are now in the Measured and Indicated categories.
    *     As a result of the new drilling the global tantalum pentoxide (Ta2O5) grade has increased from 243g/t to 250g/t. 

    The March 2008 resource update (Table 1) incorporated the results of the previous drilling plus the initial RC drilling. This confirmed
the previous resource estimate of 40Mt.

    Table 1: Abu Dabbab Resources March 2008 (100g/t Ta2O5 cut-off)
 Category   Million Tonnes  Ta2O5grade(g/t)  Sn grade (%)
 Measured             12.0              261         0.136
 Indicated              13              248         0.066
 Inferred               15              225         0.063
 Total                  40              243          0.09


    Note: Numbers in table may not correlate exactly due to rounding

    The updated resources based on the recently completed diamond drilling are summarised in Table 2 below.

    Table 2: Abu Dabbab Resources update July 2008 (100g/t Ta2O5 cut-off)
 Category   Million Tonnes  Ta2O5grade (g/t)  Sn grade(%)
 Measured             15.2               290        0.143
 Indicated            17.3               250        0.078
 Inferred               12               200         0.03
 Total                44.5               250         0.09


    Note: Numbers in table may not correlate exactly due to rounding

    The combined Measured and Indicated Resources of 32.5 million tonnes extend down to 225RL with the Inferred Resources being confined to
the lower part of the deposit below the 225RL. 

    ORE RESERVE UPGRADE

    Following the 30% increase in the Abu Dabbab Measured and Indicated Resources, pit optimisation studies resulted in a new Ore Reserve
estimation of 30.24 million tonnes grading 255g/t Ta2O5 and 0.109% Sn, an overall 107% increase in total Ore Reserves.

    Table 3: Abu Dabbab Ore Reserves, as at August 2008 
 Category                        Million Tonnes  Ta2O5 grade (g/t)  Sn grade (%)
 Proved Ore Reserve                 15.201              260            0.133 
 Probable Ore Reserve               15.038             250             0.084 
 Total Proved & Probable Ore        30.240             255             0.109 
 Reserve 
     Note: Numbers in table may not correlate exactly due to rounding

    The new optimised pit design includes only Measured and Indicated Mineral Resources with all Inferred Resources located below the
current pit floor. There is no internal dilution due to the even distribution of the mineralisation within the wireframe but an allowance
for 5% dilution at a zero tantalum and tin grade has been included around the margins of the deposit. 

    FAVOURABLE MINING STRIP RATIO

    The new resource and reserve modelling undertaken during the period highlighted the fact that for several years the project will have
almost zero mining waste, as operations will focus on mining the mineralisation outcropping above the wadi floor. The modelling also
determined that overall the project will have a most favourable waste/ore strip ratio of 0.83/1.0.

    HIGH GRADE TANTALUM PRODUCT WITH LOW LEVELS OF RADIOACTIVITY
    Metallurgical testwork and modelling has shown that the Abu Dabbab project will produce a premium grade product having a Ta2O5 content
of 40%.  Most importantly, the work demonstrated that the Abu Dabbab tantalum product will not be classified as an International Maritime
Organisation (IMO) Class 7 radioactive material as the combined U3O8 and ThO2 will be well below the maximum limit of 0.1%, thus enabling
the material to be shipped without restriction.  
    The shipment of IMO Class 7 radioactive materials is highly restricted by IMO regulations to the extent that they are not permitted to
enter the European Economic Zone, Japan and numerous other countries unless shipped in a special purpose vessel. The road transportation of
IMO Class 7 materials within Europe and numerous other jurisdictions is extremely difficult, to the point of being impractical.
    ENVIRONMENTAL IMPACT & SOCIAL ASSESSMENT  

    During the Period the Company took delivery of the updated Environmental and Social Impact Assessment ("ESIA") undertaken by the
Egyptian environmental group Environics. The ESIA update covers changes in the project associated with the relocation of the plantsite to
within 1km of the open pit mine and the use of seawater for the majority of the process plant. The findings of the ESIA were positive, not
raising any areas of significant concern.  

    The ESIA is presently undergoing a final review following which it will be translated into the Arabic language for presentation to the
Egyptian Environmental Affairs Authority ("EEAA") for approval which is expected to be granted within 60 days. The Company does not expect
any delay in securing the EEAA approval as in the main the recent changes to the Abu Dabbab project reduce its overall environmental and
social impact.

    The ESIA has been prepared in accordance with IFC guidelines and World Bank standards.

    DELIVERY OF EPCM OFFERS

    During September and October 2008, the Company took delivery of offers by international engineering groups to undertake the Engineering
Procurement & Construction Management ("EPCM") for the Abu Dabbab project. The offers have been reviewed by the Company's lawyer and are
presently being adjusted to reflect the legal advice.  

    PROJECT FINANCE DUE DILIGENCE

    During the period, the German banks KfW IPEX-Bank GmbH ("KfW") and Deutsche Investitions und Entwicklungsgesellschaft mbH ("DEG")
("Banks"), both being part of the German banking major KfW Bankengruppe, continued their technical due diligence process being undertaken by
Coffey Mining ("Coffey") on behalf of the Banks. Coffey engineers have advised the Company that the technical due diligence is expected to
be completed by mid-November 2008.  

    The Company is advised that the Abu Dabbab legal due diligence being undertaken on behalf of the Banks by City of London lawyers
Milbank, Tweed, Hadley, & McCloy LLP is similarly nearing completion.  

    As a result of the regular contact with the Banks and the due diligence undertaken to date, the Directors believe that the Banks and
Coffey have maintained a positive attitude towards the Project in spite of the recent international financial turmoil.  

    The KfW Bankengruppe, which is 80% owned by the German Federal Government and 20% owned by the Federal German States or Bundesl?er, has
been providing banking services to the private sector and industry world-wide for more than 50 years. 

    DEG has been financing and structuring the investments of private enterprises in developing and transition countries for more than 45
years.  DEG is one of the largest European development finance institutions for the promotion of the private sector.

    HEEMSKIRK TIN PROJECT TRANSACTION

    During the Period, Gippsland and Stellar Resources Limited ("Stellar") announced that Agreement has been reached to merge their
respective Joint Venture interests in the Tasmanian Heemksirk Tin project (formerly known as the Zeehan Tin project) into Stellar's
subsidiary Columbus Metals Limited ("Columbus").

    The Agreement is conditional upon Columbus raising a minimum of A$10 million (*UK£4.8M) and being admitted to the official list of the
ASX on or before 31 December 2008 or such later date as may be agreed.

    The Agreement prescribes that Gippsland will be issued with 15 million fully paid ordinary Columbus shares at an Initial Public Offer
("IPO") price of A$0.25 (*UK£0.12) each or the same number of fully paid ordinary Columbus shares that Stellar will hold in Columbus at the
time of its admission to the official list, if that number is greater than 15 million. Upon listing, Columbus will also invite a nominee
from Gippsland to join the board of Columbus as a non-executive director.

    The Heemskirk Tin Project comprises the Severn, Queen Hill and Montana tin resources within the 6km2 Retention Licence 5/1997, located
adjacent to the mining town of Zeehan in northwest Tasmania. As such, the Heemskirk resources lie within the world renowned Western
Tasmanian tin province which hosts such famous tin mines as Renison, Mt Bischoff and Cleveland. RL 5/1997 is presently owned 60% by Stellar
and 40% by Gippsland.

    Stellar is preparing a Prospectus for the IPO of Columbus, however it is likely that the IPO will only proceed following an improvement
in the equities market.

    SUCCESSFUL SHARE PLACEMENT

    During the period Gippsland completed a placing of 17,080,000 fully paid ordinary shares ("Placing Shares") to UK institutional
investors and Australian investors at a price of 2.5 pence (approximately 5.73 Australian cents) per ordinary share ("Placing"). The
Placing, undertaken by one of the Company's UK brokers Fox-Davies Capital Limited, raised the sum of UK£427,000 (approximately A$978,500)
before costs.  

    The funds raised under the Placing will be used for working capital purposes and for the further development of Abu Dabbab.

    ANNUAL REPORT

    Gippsland's 2008 Annual Report to shareholders is available in the Investor Relations section of the Company's website.


    RJ (Jack) Telford
    Executive Chairman
    Gippsland Limited
    www.gippslandltd.com 

    For further information please contact:


 Jack Telford
 Gippsland Limited
 T: [phone]
 E: [e-mail]  

 Oliver Stansfield                    Richard Hail
 Fox-Davies Capital Limited           Fox-Davies Capital Limited 
 T: [phone]                  T: [phone]
 E: [e-mail]       E: [e-mail] 

 Jane Stacey                          Fiona Hyland
 Investor Relations                   Investor Relations
 M: [phone]                  M: [phone] 
 E: [e-mail]                E: [e-mail]

 Matthew Thomas                       Nandita Sahgal
 Seymour Pierce Limited               Seymour Pierce Limited
 T: [phone]                  T: [phone]
 E: [e-mail]   E: [e-mail] 
        

    Note:  

    In accordance with Listing Rule 5.6 of ASX Limited and Part 2 of the AIM Guidance Notes for Mining, Oil and Gas Companies, the
geological information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data compiled by
Dr John Chisholm, a Fellow of The Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists.
Dr Chisholm who is an Executive Director of Gippsland with over 25 years experience in the mineral industry including the evaluation of
exploration data, mineral resources and ore reserves, has consented to the issue of the information in this report in the form and context
in which it appears. 

    Appendix 1: Resource Estimation Methodology

    The Abu Dabbab resources were estimated by the ordinary kriging method using 25m x 25m x 10m blocks and upper cuts of 800g/t Ta2O5 and
0.55% Sn within a wireframe model of the mineralised body. The primary search ellipse was oriented at 85° towards 100° with search distances
of 7m to 206m. Search axes 2 and 3 were oriented 00° towards 190° and -05° towards 100° respectively with search distances of between 4.5m
and 125m. A global density of 2.6 was applied.

    The resource categories were applied on the basis of sample density with Measured Resources being those above 325RL, Indicated Resources
between 325RL and above 225RL with Inferred Resources located below 225RL.

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