SKY METALS LIMITED — Capital/Financing Update 2004

Dec 13, 2004

14 December 2004

The Manager Companies Australian Stock Exchange Limited 20 Bridge Street Sydney NSW 2000

(1 page by email)

Dear Madam

RE: IMMINENT CBM PRODUCTION AT EAST ESPONDA

The Directors are pleased to advise that the gas line and compression facilities at the Company's East Esponda Project's joint venture with Kennedy Oil have been completed.

With the successful pressure testing of the newly constructed gas line, the operator is currently running plastic 'pigs' through the line to remove any water present. Next week the line will be charged with gas to purge air from the line. At the completion of this process the line will be ready to commence pumping gas into the main line for sale.

For further information, contact Norman Seckold or Bruce Riederer on (61-2) 92475112.

Yours sincerely

Peter J. Nightingale Director

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