SKY METALS LIMITED — Capital/Financing Update 2004

Nov 17, 2004

18 November 2004

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

(4 pages by email)

Dear Madam

RE: POWDER RIVER BASIN ACQUISITION ORIVA-THRONE PROJECT

Planet Gas Limited is pleased to advise its wholly owned subsidiary Pauper's Dream Company ('Company') has acquired a 75.975% Working Interest (60.78% Net Revenue Interest) in 15 producing coalbed methane ('CBM') wells adjoining its Oriva Project in the Powder River Basin, Wvomina, USA.

Approximately 21 kilometres west of Gillette, Wyoming the Oriva-Throne Project consists of 146 hectares (361 acres) in Section 8. Township 50 North, Range 74 West, Campbell County. Current CBM production from the Felix, Smith, Anderson and Wall Coal Seams is 12,000 MCF per month which is expected to increase to 50,000 MCF per month.

The Oriva-Throne Project is operated by Emerald Operating Company and Rocky Mountain Exploration of Denver, Colorado ('EOC-RMEI'). To date EOC-RMEI have successfully drilled and completed 132 CBM wells in Campbell County with another 60 wells scheduled to be drilled over the next eighteen months. EOC-RMIE have the remaining 24.025% Working Interest (19.22% Net Revenue Interest). The entire leasehold interest is subject to a 20% land/mineral owner royalty. The Company is pleased to have EOC-RMEI as operating partner in the Oriva-Throne Project and look forward to our involvement with them.

The Project

CBM International Engineering LLC ('CBMIE'), of Cody Wyoming, has prepared a Reserve and Economic Report dated 8 September 2004 for the Company demonstrating the following reserves by coal seam:

Coal Seam	Reserve Category	Gross GIP Volume (MMCF)	Cumulative Gas Produced (MMCF)	Remaining Recoverable Volume (MMCF)	Net Revenue Volume (MMCF)
Felix	$P-1$	224.0	57.0	121.0	73.4
Smith	$P-1, P-2$	365.2	3.0	286.5	174.3
including (1 well)	$P-1$			54.3	33.0
and (4 wells)	$P-2$			232.2	141.1
Anderson	$P-1$	968.7	50.0	688.0	418.1
Anderson Lower	$P-2$	820.8	0	653.1	397.0
Canyon	$P-4$	1153.1	0	828.8	503.7
Wall	$P - 1$	3361.1	3.0	2678.6	1628.1
TOTAL		6892.9	113.0	5256.0	3194.6

Notes:

Definitions of relevant terms utilised in this table are an extract from the above referenced report:

Reserve Category - The reserve portfolio was defined under standard industry guidelines, moreover^-

P1 -- PDP = Proven Developed Reserves; these reserves are commercially producing assets. The Felix, Anderson, Wall, and a portion of the Smith reserves are represented in this category.

P2 -- PUD = Proven Undeveloped Reserves; these reserves are within one mile of commercial producing gas within the correlative geologic interval or zone. The lower Anderson and a portion of the Smith reserves are represented in this category.

P4 -- POSS = Possible Reserves: these reserves are located beyond the PROB [probable] reserves] locations within the correlative geologic interval or zone. The Canyon reserves are represented in this category.

Gross (GIP) Volume - Volumetric calculation based on total gas in place [prepared by Goolsby Finley & Associates ('GFA'), Casper Wyoming1.

Cumulative Gas Produced - Total gross gas produced to date.

Remaining Recoverable Volume - Recoverable gas volume left to be produced based on 80% recovery factors of GIP [matched to a production decline curve].

Net Reserve Volume - Net Revenue Interests percentage of remaining recoverable gas (60.78%).

MCF - thousand cubic feet.

MMCF - million cubic feet.

The proximity (see map below) of the Oriva-Throne Project to the Company's Oriva Project is of strategic importance, not only for the addition of reserves but to the overall project development with access to existing infrastructure and operations.

The combined projects total 505 hectares (1,248 acres) with 42 wells, inclusive of the 15 current wells, being ultimately completed during total project development with CBM completions in the Felix, Smith, Anderson, Anderson Lower, Canyon and Wall Coal Seams. An additional 16 wells are likely to be developed in the deeper Moyer and Danner Coal Seams when offsetting production testing by others is completed.

Production

The State mandated well spacing of 33 hectares (80 acres) allows the development of the five CBM pads (No's 12, 21, 32, 34 and 41) with multiple wells being permitted at each pad site on this leasehold. There are currently 3 wells located on each pad (15 in total). The primary CBM production target is the Wall Seam with the majority of reserves.

The Wall Seam is presently dewatering with indications of increasing gas from the Pads 21 and 41. The projected gas production graph from CBMIE's Reserve and Economic Report is as follows:

The above graph shows the projected production curve from the current 15 wells (PDP-BASE Forecast) while the other curve is that of an additional 5 wells yet to be completed (see below) as well as the historical production to July 2004. The well field was caused to be shut-in by Western Gas Resource's compressor modifications during the October-November 2003 period. Currently the well field is producing 12,000 MCF per month which is expected to steadily increase to over 50,000 MCF per month over the next two to three quarters when the Wall Seam is more fully dewatered. This does not include the potential production (estimated to be approximately 20,000 MCF per month) from the vet to be completed five additional wells.

It is anticipated that five additional wells need to be completed to produce from the remaining Smith, Lower Anderson, and Canyon Seams. These wells are planned to be completed conventionally with comminaled production.

Additionally, an unguantified potential exists in the deeper Mover and Danner Seams at depths of approximately 750 metres (~2,500 feet) which could add five more wells for additional production. It should be noted that EOC-RMEI are planning well developments in these seams immediately to the north of the Oriva Project in Section 4, Township 50 North, Range 74 West.

Leasehold CBM production is delivered to Western Gas Resources' Richard Compression Station (pictured below) situated in Section 9, Township 50 North, Range 74 West on the Company's wholly owned Oriva Project.

The Acquisition

The cash acquisition cost of US\$2,300,000 equates to a net revenue reserve cost of US\$0.72/MCF. This compares to the current Wyoming Pool price of US\$5.85/MCF on 17 November 2004 for a developed well field.

Other

The information in this report that relates to the CBM reserves and resources is based on information compiled by John W Sinclair, Wyoming Registered Professional Engineer (Petroleum) No. 9233 of CBM International Engineering LLC, Cody Wyoming and Andrew K Finley, Wyoming Registered Professional Geologist No. 2806, of Goolsby, Finley & Associates, Casper Wyoming and supervised by Dr. Richard Haren who is a Member of The Australasian Institute of Mining and Metallurgy and who is a competent person as defined by the 1999 edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves.

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

Yours sincerely

Peter J. Nightingale Director

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