SKY METALS LIMITED — Capital/Financing Update 2004

Jun 10, 2004

11.June 2004

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

(2 pages by email)

Dear Madam

RE: NEW ACQUISITIONS POWDER RIVER BASIN WYOMING, USA

Planet Gas Limited ("Planet Gas") is pleased to advise of the expansion of its tenure in the Powder River Basin, Wyoming. The acquisition of 1527 acres (618 hectares) was completed through the State and Federal Competitive Oil & Gas Lease Sales. These leases are not restricted to coal bed methane (CBM), but convey all oil and gas rights to Planet Gas.

The State lease (640 acres - 259 Ha) lies ten kilometres directly south of Planet Gas' East Esponda tenements, in Township 47 North, Range 79 West, Johnson County. The primary term of this lease is five vears and subject to a 16.67% State royalty. The primary target for CBM is the Big George Seam at depths of approximately 600 metres. The State lease will be known as the Whisky Draw Project. This project is adjacent to Kennedy Oil's Big Cat Federal CBM field which is currently being brought into production. Although State mandated 80 acre (33ha) well spacing allows up to eight well locations to be completed, if multiple seams are encountered and downhole conditions warrant then more than one well per location may be completed.

The Whisky Draw Project acquisition further consolidates CBM acreage in proximity to Planet Gas' Esponda Project which is currently under development.

The Federal lease (887 acres - 359 Ha) is situated twenty one kilometres west of Gillette Wyoming between the Amos and West Kitty Oil Fields in Township 50 North, Range 74 West, Campbell County, The primary term of this lease is 10 years and subject to a 12.5% Federal royalty. The Federal lease will be known as the Oriva Project.

The Oriva Project is located in a premium CBM production region of the Powder River Basin. In the immediate vicinity substantial drilling has been completed by Kennedy Oil, Williams Production RMT Company, Prima Oil and Gas Company and Emerald Operating Company.

The Oriva Project contains nearly all productive coals in the Powder River Basin: Felix, Smith, and Anderson Seams (depths 60 - 300 metres). Canyon/Cook and Wall Seams (depths 300 - 500 metres). In addition to these primary coal bed targets, there are two deeper seams Moyer & Danner at depths of approximately 750 metres. The area is a likely candidate for developing trapped coal bed generated gas in adjacent sandstone units. Since State mandated 80 acre (33ha) well spacing allows eleven well locations to be completed, the multiple seams present will likely warrant a minimum of two wells per location be completed.

The total lease premium paid for these two projects was US\$572,000. Outside of the State and Federal Royalties, an additional 2% overriding royalty is payable.

The two acquisitions are consistent with Planet Gas' objective to acquire further high quality CBM acreage in the Powder River Basin that can be brought into production with a relatively short period. Given the high confidence of successful development of these leases and the relatively modest purchase consideration, the Company is very pleased to have added these projects to its portfolio.

For further information, please contact either Norman Seckold or Bruce Riederer on (02)9247-5112.

Yours sincerely

Peter J. Nightingale Director

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