Goondicum Project update

RNS Number:5284O
Monto Minerals Ltd
22 December 2006



                                                                22 December 2006



ASX ANNOUNCEMENT


COUNTDOWN TO PRODUCTION


                            GOONDICUM PROJECT UPDATE

*       Project and water pipeline construction are proceeding to plan

*       On schedule for sales in the second half of calendar 2007

*       Accelerating the development of high value ground feldspar

*       Monto to construct power line resulting in significant operating cost
        savings.  Up to A$6.5m funding required.

*       A$15.5m in funding also required to replace cash which collateralises
        guarantees for infrastructure until bank guarantees can be secured 
        against the Project



Monto Minerals Limited ("Monto" or the "Company"), an emerging producer of
industrial minerals, announces the following update in relation to its Goondicum
project in Queensland, Australia ("Goondicum" or the "Project").



Power line

Monto plans to finance the construction of its own power line extension to the
Goondicum mine site.



Announcing this today, Monto Chairman Mr Peter Slaughter said: "Building the
power line ourselves will result in significant operating cost benefits over the
life of the project and will reduce the level of financial guarantees required.
The power line will also be completed sooner, thus reducing the need for
expensive diesel fuelled power generation during the early stages of the
project's production."



Construction of the power line by an independent contractor will add
approximately A$6.5 million to the capital expenditure of the Project.



Commercial sales

Construction of the Goondicum mine site began in August 2006 and the Project
remains on schedule to commence sales in the second half of calendar 2007.  The
Company intends to supply the domestic and international markets with its core
products, namely ilmenite for manufacturing pigment used in paint, paper and
plastics, apatite for organic fertiliser and feldspar for use in glass
manufacture.  The Company is also developing ground feldspar, a premium product
with global appeal as a paint and powder coating filler, and titanomagnetite, a
product aimed at the domestic market for coal washing.  Commercial tests of
these products are currently being undertaken.  The result will be a project
with a globally unique mix of products from one mining operation.




Acceleration of development of ground feldspar

With feldspar for glass making under severe competitive pressure in Europe,
Monto is accelerating development of the higher value ground feldspar, which
commands a premium price in international markets.  Monto is confident in the
long term growth and development of its ground feldspar product, particularly
due to recent interest from the USA, a market where Monto's silica free feldspar
is particularly suited.  Glass feldspar is the subject of a current price war in
Europe, and increased freight costs and unfavourable exchange rates have added
significantly to the cost of Monto's feldspar exports to glass manufacturers,
resulting in a reduction in projected export sales of glass feldspar.  Reduced
sales projected into the glass market in Monto's revised plan are countered by a
higher confidence in the long term growth and development of ground feldspar.



Requirement for finance

The Company successfully raised approximately A$40 million in May 2006 to fund
the construction of the Goondicum project when it was admitted to the AIM market
of the London Stock Exchange.



The cash balance as at 30 November 2006 was approximately A$31 million,
equivalent to 16 cents (6.5p) per share.  Cash collateralised to date is
approximately A$12.3 million.



It is anticipated that this cash balance will be supplemented by the release of
A$6 million in previously announced direct investment from the Sentient Group
and a A$5.5 million plant and equipment lease.  Both are contingent on the
successful completion of the proposed fundraising outlined below.



With the construction of the power line agreed and finalisation of several
infrastructure agreements, the Company is now seeking to finalise its funding
requirements and structure fundraising in respect of up to:

*       A$6.5 million to fund construction of the power line and;

*       A$15.5 million to replace cash currently collateralising infrastructure
and other guarantees required by parties constructing water, transport and power
supply to the mine site in return for payment of user charges.



Financial guarantees

As part of the original project plan a number of entities were to construct
infrastructure for water, transport and power which will be supplied to Monto in
return for user charges.  At the time of the successful fundraising in May 2006
it had been anticipated, based on discussions with banks, that Monto would be
able to procure guarantees without providing cash collateral.  However, Monto
has not been able to satisfy bank credit requirements and provide a sufficient
level of assurance on contracted and potential sales.  This is predominantly due
to the nature of the Goondicum mine products, which dictate that it is not
possible to conclude contractual commitments from potential customers until a
full-scale operation is established.  Accordingly, cash collateral has been
required.



As previously announced, since the May fund raising, Monto has revisited all
parties who had provided conditional purchase commitments and they have
confirmed their intentions to sign off-take agreements for approximately 45% of
the first year's planned production of ilmenite, apatite and feldspar, with a
similar tonnage committed for the second year, rising to 55-60% if initial
estimated sales of titanomagnetite are secured in 2007.  It is anticipated that
once these current strong indications of potential sales are converted into
contracts, Monto will be in a position to seek guarantees from banks without
cash collateral.  Funds currently being used for this purpose will then be
released for use as working or expansion capital in Monto's business or as a
return to shareholders.







Further announcement

The Company is currently discussing a range of options with its UK and
Australian advisers in respect of the size and structure of the proposed
fundraising.  Negotiations with providers of finance, Sentient and the
Queensland Government (with respect to the terms of the guarantees) are also
continuing.  The Company will make a further announcement(s) in respect of these
negotiations and regarding the fundraising, which it is intended to complete
within two months.



Enquiries to:

Geoffrey Moore
Monto Minerals Ltd             [phone]

Richard Brown
Ambrian Partners Limited        020 7776 6400




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

MSCAKBKKKBDKFBB