Operational Update

    RNS Number : 0085C
  Van Dieman Mines plc
  26 August 2008
   
    

    26 August 2008
    VAN DIEMAN MINES PLC (the "Company")

    Operational Update

    The Board is pleased to report that, since it last issued an operational update on 16 May 2008, significant progress has been made in
implementing its revised mine development plan to bring its Scotia alluvial tin and sapphire mine in Tasmania into production.

    Following Board changes earlier this year and a detailed review of the Scotia project, the resulting operational update announced on 16
May 2008, summarised various recommendations and a revised mine development plan to optimise mining and simplify ore transport methods at
Scotia. This was necessary as it had been identified during construction of the Scotia project that the processing plant, equipment and
mining methods originally adopted were inappropriate due to the alluvial wash and much of the overburden being water saturated. In addition,
it was announced that a drilling programme would be planned with the objective of confirming historical Tasmanian Mines Department drill and
assay data on which the Scotia resource is currently based. 

    Progress to date and the expected overall schedule to production are summarised below. Progress has been encouraging with the programme
to progressively dewater and strip the overburden well underway, and planning to deliver ore to the primary process plants in a slurry form
well in hand. Modifications have also been made to the primary process plant as it was originally designed to receive dry feed. The
Directors currently believe that production at Scotia is expected to commence in December 2008, with ramp up to full production achieved in
January 2009.

    Although the modifications to the plant and mining activities have yet to be completed or become fully operational, the Company expects
that there will be material benefits to both the Scotia and Endurance Projects that will result in reduced capital and operating costs. 
Commissioning of half of the primary processing plant is expected to take place during October and November, with modifications to the
second half of the plant to commence in October and final commissioning of the full plant in November and December.

    A presentation and a video providing additional information and a visual update are available on the Company's website
(www.vandiemanmines.com) as at the date of this announcement.

    Overburden Dewatering Trials Successful
    Very good progress has been made on the dewatering trials at the location of initial mining of the orebody at Scotia, and on the
earthworks that will provide the necessary access as the orebody is exposed. The dewatering trials have confirmed that the overburden can be
progressively dewatered by the sump and pump method. It is expected that initial access to the orebody will take place during September,
allowing bulk sampling for grade confirmation and determination of likely processing characteristics. The progressive stripping of the
overburden has also provided additional information on the location of the mineralised channel where mining will commence, thereby reducing
some of the requirement for immediate additional drilling.

    New Mining Method at Scotia Approved by Regulatory Authorities
    On 6 August 2008, the Tasmanian Government regulatory authorities gave approval to proceed with the modified mining method. They will
monitor progress via normal reporting and inspection procedures. The two principal government agencies involved have been very supportive,
and the Company will work closely with them as the mine plan progresses and is further refined. 

    Treatment Plant Modifications Well Advanced
    
The Scotia primary treatment plant that has been installed comprises two parallel processing facilities or *sides* with a total capacity of
300 cubic metres per hour. The Company has made substantial progress on the modifications to *side B* of the plant to both simplify it and
modify it to take a pumped slurry feed. The mechanical engineering works are nearing completion and the electrical and water/tails piping
modifications have been designed and tendered, and will commence in the near future. Side B is expected to be ready for commissioning during
October, and to be in production in December. Modifications to Side A will commence in October, with the objective of commissioning in
November/December and achieving full production in January 2009. Modifications and upgrades to the secondary treatment plant or *Tin Shed*
are also underway, and will be brought on-line progressively to match this commissioning and production timetable.

    Commencement of Confirmatory Drilling
    The process of completing the loan facility over recent months and the consequent delay in accessing the Company's preferred contractor
means that drilling will now commence at Scotia in mid-September. This is highly specialised drilling and the Company, following a review of
all other options, is committed to using this contractor because of the equipment and experience that they can provide.

    Initially, the Company will be limiting the planned drilling programme to about 1,000m, covering the area proposed for mining in the
first year. This drilling will provide the necessary confirmation of orebody or "wash" grade, thickness and extent, and is expected to be
completed by mid October. It will also provide information to fine-tune mining options, assist with dewatering, and enhance mine planning.

    Assay Protocol & Turnaround Agreed with Laboratory
    The bulk sample plant and two smaller pilot plants have been refurbished by the Company, and samples from the overburden and from tails
from historic mining are being processed. A processing, sampling and assay protocol for concentrate from these plants and samples from the
proposed drilling programme has been agreed by our consultants and a nearby assay laboratory. It is expected that the Company will achieve 1
to 2 week turnaround from drilling/bulk sampling to receiving the tin assay by undertaking much of the sample preparation on site.

    Plan to Expand Production
    The Board is actively reviewing ways to significantly increase production rate and reduce production risk at Scotia following
commissioning. Increasing production is important because the financial performance of the project, and the Company, are highly leveraged to
increased production as revenues increase at a much faster rate than do costs.  The key components of the potential expanded production are
access to multiple mining sites, increasing plant efficiency and throughput, and increasing mining and plant operating hours. All three of
these are currently being addressed, and the Company is confident of a positive outcome.

    Other Developments
    In the period since May, negotiations have been carried out with a local earth moving contractor and a basis for undertaking contract
mining is now in place. The Directors believe that this will provide significant savings, and reduced capital risk, relative to the
owner-operated mining method originally planned, as well as providing the flexibility to potentially scale up to take advantage of multiple
mining locations. 

    A management review of employment contracts and occupational health and safety (OHS) systems and procedures uncovered significant
deficiencies, and led to a voluntary stand-down at the Gladstone/Scotia site in early August. The OHS systems and procedures have been
reviewed and revised with a specialist consultant, and new employment contracts prepared for presentation to the workforce. The former will
ensure that the Company and its operations are fully compliant with industry best practice in OHS, and the latter will provide the Company
and its employees with greater flexibility as it moves to an expanded production plan.

    Further to the announcement of 18 August 2008, in which the Company announced the decision to close the Company's Sydney office and to
transfer the bulk of the administration and financial control functions to Tasmania, the Board is pleased to announce the appointment of a
new Chief Financial Officer and Company Secretary, Ms Lisa Norden, effective from 1 October 2008. Ms Norden is a CPA and a member of the
Australian Institute of Company Directors and will head up the Company's financial team.

    Endurance
    We anticipate that the Endurance Project will be a major beneficiary of the modifications being implemented at Scotia such that it will
be able to take full advantage of these benefits. 
    The Endurance Development Plan and Environmental Management Plan is currently under consideration by the regulatory authorities, but on
the understanding that there are likely to be variations in the final mining method adopted. 

    Subject to permitting approval and changes to the mine plan, we are now planning for the Endurance Project commencing production in
around mid 2009.

    Enquiries

 VAN DIEMAN MINES PLC
 Mike Etheridge, Chairman            Tel: [phone]
 Ron Goodman, CEO and Managing       Tel: [phone]
 Director
 GRANT THORNTON UK LLP
 Gerry Beaney / Fiona Owen           Tel: [phone]
 FOX DAVIES CAPITAL LIMITED
 Richard Hail, Corporate Finance     Tel: [phone]



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