SCIDEV LTD — Interim / Quarterly Report 2006

Apr 26, 2006

ABN 25 001 150 849

Superior and Sustainable Metals Production

Gordon Chiu Building [01 Department of Chemical Engineering Maze Crescent University of Sydney NSW 2006 Australia

Phone: 02-9351-6741 Fax: 02-9351-7180 Email: mail@intec.com.au Website: www.intec.com.au ASX code: INL

27 April 2006

Companies Announcements Office Australian Stock Exchange Limited

Demonstration Plant Technical and Operational Update

Attached is Intec Ltd's Demonstration Plant Technical and Operational Update for the March 2006 quarter.

Yours faithfully Intec Ltd

Philip R. Wood

Philip R Wood Managing Director and Chief Executive Officer

Superior and Sustainable Metals Production

Gordon Chiu Building 101 Department of Chemical Engineering Maze Crescent University of Sydney NSW 2006 Australia

Telephone: +612-9351-6741 Facsimile: +612-9351-7180 Email: mail@intec.com.au Website: www.intec.com.au

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27 April 2006

Companies Announcements Office Australian Stock Exchange Limited

INTEC HELLYER METALS DEMONSTRATION PLANT

TECHNICAL AND OPERATIONAL UPDATE

Purpose

This technical and operational update is made publicly available to all Intec Ltd stakeholders, particularly those with a technical orientation, and to interested minerals processing industry participants. Readers' questions should be addressed, preferably in writing, to the author, Intee's Technical Director John Moyes, at john@intec.com.au

Overview

The Intec Hellyer Metals Demonstration Plant (the Plant) was built to demonstrate the Intec Polymetallic Process (the Process) for application to the Hellyer Metals Project (the Project). The Plant was designed and built over a 9-month period from the beginning of 2005 and was officially opened on 15 September 2005. Following successive three month periods of commissioning which identified the need for a range of equipment modifications, the Plant is now entering a period of "steady state" (Steady State) operation when full representative samples will be taken and analysed for metallurgical evaluation of Plant performance.

The Plant's operation and engineering data will be fed to the Project bankable feasibility study, which is led by WorleyParsons. The Metals and Energy Capital Division of Macquarie Bank, which has been mandated to undertake the Project financing, has appointed Behre Dolbear Australia as its Project technical consultant.

Behre Dolbear Australia has stipulated that the Plant is operating in Steady State when the following criteria are being met:

• 1. All unit Process steps are performing continuously for at least 85% of the time at 95% of design parameters.
• 1. A minimum of 85 kg of zinc cathode is produced daily.
• 1. Feed rates are maintained at a minimum of 95% of design criteria.
• 1. Recoveries of all metals are at least 95% of design criteria.
• 1. Product specifications are met for at least 95% of the tonnage produced.

The Plant should operate in conformance with the above criteria for a minimum of four continuous weeks and longer if possible, with performance steadily improving to 100% of design specification.

The Plant has to date achieved the following outcomes against the Steady State criteria listed above:

• 1. This requirement has been met for in excess of two months.
• 1. The maximum daily zinc cathode production achieved to date is 80 kg during the last week of March 2006, with an average of 79 kg per day over a two-month continuous period.
• 1. Feed rates have been consistently on specification.
• 1. Recoveries within 95% of design specification have been frequently achieved, though not yet sufficiently consistently.
• 1. Products within 95% of design specification have been produced as follows:
  • a. Zinc cathode has been consistently superior to Prime Western Grade (design specification), but some issues remain with consistency of cathode morphology and electrowinning current density.
  • b. Lead/silver cement grade has been variable due to poor reactor performance. Since the installation of a new reactor design and improved control of zinc dust addition, the lead/silver cement grade has very significantly improved to the point where it is regularly within 95% of design specification. Consistency is however not yet ideal.
  • c. Copper precipitate specification is being met and samples have been sent to two external laboratories to demonstrate its conversion to copper sulphate crystals.
  • d. Gold extraction has on average been 85% of specification and it is unlikely that this figure will be bettered. The gold recovery circuit was commissioned in 2005, but due to the resources required to optimise the performance of the remainder of the Plant, has not been operated routinely. Gold recovery will be on line before the Steady State campaign commences.

Although the performance of the aeration system for the leach circuit is not specified in the Steady State criteria, it should be noted that the base metal leach is operating satisfactorily with air addition according to the Process design. However, the pyrite leach has required oxygen for satisfactory operation, which is partly the result of the small size of the reactors (2) $m3$ compared to the commercial plant reactors (600 m3). Nonetheless, it is now considered that oxygen supplementation will be required at the commercial scale.

Commissioning and modification

The Plant was water-tested before Process liquor was prepared. The leach circuit in conjunction with the leach residue belt filter and precipitation circuits were commissioned first. The zinc and lead tenors were allowed to rise as they were leached from the Hellyer tailings feed. Purification and polishing circuits were brought on line when the lead in solution had built up to the level for continuous removal. The zinc electrowinning cell was brought on-line in late September 2005 to close the complete circuit.

Several significant problems were resolved during the 4th quarter of 2005 as summarised below:

• The electrowinning cell operation was initially intermittent as a result of poor control of the purification circuits allowing high levels of contaminants to enter the cell. This has been rectified by implementing the following modifications:
  • o A new dosing system now delivers sufficient Halex TM oxidant to both the iron and copper precipitation circuits to oxidise residual ferrous and cuprous ions.
  • o The zinc dust screw-feeders have been modified in order to control effectively the low dosing rates required.
• Iron precipitation should operate at 95 $\degree$ C to ensure the formation of hematite. $\bullet$ Higher than expected heat losses resulted in a solution temperature of 65 °C and the production of akaganeite. Installation of a portable boiler and heat exchangers has corrected the problem.

After the December 2005 shut down for refurbishment, the Plant has been operating continuously with minimum interruption (apart from a vacuum pump failure) and complete Steady State operation is expected to be achieved during the June 2006 quarter.

Plant operating results

As stated above, operating results to date clearly indicate that all sections of the Plant are either close to or within the Steady State criteria.

Leach extractions are shown in Table 1 for typical periods with a feed composed of Hellyer tailings and electric arc furnace dust (EAFD) supplied by both Smorgon Steel and OneSteel.

	Extraction Efficiency (%)
Element	Target	Hellyer tailings+ EAFD_______________________________________
′n

Table 1: Metal leach extraction efficiency

The modifications to the iron precipitation circuit (as explained above) have been completed and the performance of the circuit over a three-month period is approaching specification as shown in Table 2.

Table 2: Iron precipitation circuit exit-liquor and precipitate composition

	Exit-liquor Assay		Precipitate Assay
Element	Target	NGTE	Target	AGTET
Fe	$<$ 20 mg/L	$5-20$ mg/L	55-65%	Up to $55%$
Zn			$< 0.1%$	$0.1%$
PЬ			$< 0.1%$	$0.1%$
Cи			$< 0.1%$	$< 0.1%$
Ag			$\leq 10$ ppm	2 ppm
Ca			$<$ 2%	0.7%
			$<$ 1%	$1.3%$

The important requirement is that hematite be formed with minimal co-precipitation of the economic metals as the residue is sent to landfill. The residual soluble iron in the process liquor exiting the circuit is within 95% of specification. However, the iron content of the precipitate has so far on average been only 90% of the specified lower limit, which is the result of incomplete conversion of akaganeite to hematite as explained earlier. Hematite formation is controlled by temperature, retention time and seeding. Laboratory trials have clearly shown by chemical and XRD analyses that hematite is produced under the correct conditions. In spite of the iron assay being below target, only the chloride content is outside specification, but at this low level is not of significance.

Modifications to the copper precipitation circuit are the same as those for the iron circuit. however the specifications for the copper oxychloride precipitate are much less critical as it is re-leached during its conversion to high purity copper sulphate, with all co-precipitated metals recycled to the Process. Recent liquor and precipitate compositions are shown in Table 3.

Metal		Eiquor Assay	Precipitate Assay
	121324	Actual	Target	AWARI
Fe	$\leq$ mg/L	4-6 $mg/L$	$<$ 5%	$3 - 5%$
$\mathbb{Z}^n$			$<$ 2%	$3 - 6%$
Pb			$\overline{<}1%$	$0.4 - 1.2%$
Сu	$\leq 50$ mg/L	$20 - 40$ mg/L	30-40%	25-37%
١g			$\leq 10$ ppm	$6-11$ ppm
∴a			$2%$	$1 - 3%$

Table 3: Copper precipitation circuit liquor and precipitate composition

The lead/silver cementation circuit has satisfactorily recovered lead and silver at high efficiency, however zinc dust utilisation has been below specification due to insufficient mixing. New reactors with much improved mixing employing a high level of shear have been installed for both the lead/silver and polishing cementation operations. Small-scale pilot work has successfully produced a cement product with a lead to zinc ratio of 98:1 and this is the target for Plant performance.

Prime Western Grade zinc specifications are based on the product in ingot form. During the electro-deposition of zinc onto the cathode, some process liquor is invariably entrained, which reports to the dross during melting and casting. This can be seen in the assays of cathode, ingot and dross shown in Table 4. This cathode was produced during the development of the electrowinning cell design that used synthetic liquor; however it clearly demonstrates the rejection to dross of Ca, Cl, Mg and Na. The melting process conveniently reduces the copper content of the ingot relative to the cathode and effectively eliminates the aluminium.

Blement	Unit	Cathode	Ingot	Dross	ASTIVER 1976	AS 1242
Al	ppm	44	< 0.1	928	< 100
Ca	ppm	482	25	4810
Cd	ppm	0.3	0.3	6.2	$<$ 2000	$<$ 2000
Cu	ppm	450	200	5500	$<$ 2000
Fe	%	0.02	0.02	0.03	< 0.05	< 0.05
Mg	ppm	19.7	< 0.1	133
Na	ppm	380	< 0.1	1230
PЬ	%	1.258	1.475	0.29	$0.5 - 1.4$	1.4
Zn	$%$	98.50	98.28	90.34	>98	>98.5

Table 4: Chemical composition of zinc cathode, ingot and dross

The zinc cathode produced in the Plant since the re-start in 2006 has been well within the Prime Western Grade (ASTM B-06 and AS 1242) as shown in Table 5. Melting trials will be undertaken as part of the Steady State campaign.

						Zn (%) Pb (%) Cu (%) Fe (%) Cd (%) Al (%)
Plant Cathode	98.9	l J		$0.01 - 0.02$ 0.02 - 0.05	$< 0.002$	Not analysed
IASTM B-06	>98	$0.5 - 1.4$	<a 2<="" td=""><0.05⊲0 2	<0.05	⊲0 2
AS 1242	>98.5	:14		<0.05

Table 5: Chemical composition of Plant zinc cathode

Some uneven distribution of lead across the face of the cathode product has been observed. This is caused by insufficient mixing in the cell, which also causes some dendrite growth requiring a shorter than optimum strip cycle. Mixing is by liquor recirculation with finely dispersed air bubbles injected into a distribution manifold positioned underneath the electrodes. This system simulates the mixing that is automatically generated by oxygen evolution from the anodes in the conventional electrolytic zinc process. Improvements to the liquor recirculation system to effect a more even distribution of liquor have now been installed.

Recovery of metal to saleable products is of paramount importance to the Project economics. Based on the Plant performance to date, the recoveries shown in Table 6 are conservatively predicted for the commercial operation. These are based on a more thorough Process understanding than was previously available from laboratory and pilot plant operations. The predicted individual metal recoveries are all somewhat lower than the recoveries assumed in the Pre-Feasibility Study (PFS). However the major contributors to Project revenue (zinc, lead and silver) are not materially lower while copper and gold are only minor contributors to Project revenue.

Prodnet	Predicted MetalRecovery Based onPlant Porformance	PFS AssumedMetal Recovery
Zinc (as ingot)	94%	96%
Lead (as cement)	96%	98%
Copper (as copper sulphate)	61%	90%
Silver (in lead cement)	84%	90%
Gold (as bullion)	30%	25%

Table 6: Recovery of metals to saleable products

Conclusion

The Hellyer Metals Project is an exciting new hydrometallurgical development aimed at maximising value from an existing tailings resource. Although low grade in respect of each payable metal, the Hellyer tailings contain a suite of five such metals (supplemented by high zinc-bearing oxidised residues such as EAFD) that can be extracted and recovered into saleable products using the Intec Polymetallic Process. The advantages of Intec's proprietary halide leach system include the ability to extract (in addition to zinc and copper) lead, silver and gold into solution and the ability to recover the gold directly onto activated carbon without the need for a separate gold recovery circuit such as a carbon-in-pulp plant and the associated cyanide detoxification circuit.

The Process has no liquid effluents, with all water inputs leaving the process as vapour in the spent air from the leach. The residue from leaching is essentially free of potentially mobile base metals and readily passes environmental requirements for disposal to a tailings dam. Consequently, the environmental impact of the Process will be favourable and about 80 % of the value of the economic metals in the tailings (and a higher proportion from the EAFD) will be recovered while generating a final residue that will be environmentally stable.

Inter has designed, built, commissioned and operated the Plant precisely in order to identify at an early and economically manageable stage the types of equipment and processing problems that we have so far encountered and outlined above. While these have inevitably been frustrating at times, they have all been satisfactorily addressed and we continue to anticipate that Steady State operations will have been successfully concluded by the end of the June 2006 quarter. This will represent a major technical achievement by world class standards and a defining milestone in Intec's corporate development.

Yours sincerely

A John Moves Technical Director Intec Ltd.