TITANIUM SANDS LIMITED — Capital/Financing Update 2006

Oct 9, 2006

ABN 65 009 131 533

10 October 2006

Company Announcements Office Australian Stock Exchange Limited Exchange Plaza Sherwood Court PERTH WA 6000

Dear Sir/Madam

PMA SECURES \$20M IN ADVANCED VANADIUM PROCESSING EQUIPMENT

Precious Metals Australia Limited has taken a further key step in the early capital acquisition program for its \$175 million Windimurra Vanadium Mine in Western Australia after finalising an agreement with South African-based Drytech International for the design and manufacture of new high-tech vanadium processing equipment worth \$20 million.

The capital acquisition program – which commenced last month with PMA securing the first items for the proposed mining fleet for Windimurra - is designed to expedite the construction phase of the project and mitigate against industry-wide cost pressures impacting on the supply of key materials and equipment.

The equipment to be supplied by Drytech will be manufactured using the latest state-of-the-art technology in South Africa, avoiding construction and fabrication bottlenecks in Australia. The equipment includes an ammonium metavanadate flash dryer, a pair of reactors, magnetite flash drver (which uses waste heat from the kiln) and a liquor evaporator (which uses waste heat from the gas turbine power station).

The equipment being supplied by Drytech is new to the project and would be utilised in the production of vanadium trioxide and its conversion to ferrovanadium as a final product. The previous operation at Windimurra produced vanadium pentoxide $(V_2O_5)$ , however in the revised process, vanadium trioxide $(V_2O_3)$ will be formed as an intermediate step to the final product - which will then be converted to ferrovanadium (FeV) in a refractory lined arc furnace.

This will add significant value to the product stream, as ferrovanadium achieves a significant price premium over V₂O₅.

Drytech is the most experienced supplier of the critical vanadium trioxide $(V_2O_3)$ reactor required for cost effective production of ferrovanadium. The contract with Drytech provides PMA with an exclusive licence for use of their technology in Western Australia.

Level 4, 76 Kings Park Road West Perth Western Australia 6005 PO Box 620 West Perth Western Australia 6872 Telephone: +61 8 9423 1900 Facsimile: +61 8 9423 1999

Other enhancements being introduced at Windimurra for the first time include the use of waste heat from the kiln for the flash dryer, which dries and pre-heats the magnetite concentrate prior to roasting. This reduces greenhouse gas emissions, reduces gas consumption and increases kiln capacity. In addition, the liquor evaporators will use waste heat from the gas turbine generators to concentrate the leach liquor, thus reducing reagent consumption and energy consumption.

The heat recovery equipment is a world-first in vanadium production and exploits the use of clean, pure gas as a fuel, greatly increasing the overall energy efficiency of the operation.

PMA's early capital acquisition program is continuing ahead of the finalisation of the financing package for the Windimurra Project, which is expected to be concluded within the next two months. The project received a major boost recently after Noble Group exercised its options to acquire a 10% direct equity interest in the Windimurra Mine for \$13.5 million. The funds were received earlier this week from Noble, increasing the cash position of PMA and its subsidiary to approximately \$50 million.

The Company is targeting completion of construction at Windimurra before the end of calendar 2007.

Yours sincerely PRECIOUS METALS AUSTRALIA LIMITED

RODERICK SMITH Managing Director

PMA SECURES \$20M IN ADVANCED VANADIUM PROCESSING EQUIPMENT FOR WINDIMURRA

Ferro-alloys company Precious Metals Australia Limited (ASX: PMA - "PMA") today announced a further key step in the early capital acquisition program for its \$175 million Windimurra Vanadium Mine in Western Australia after finalising an agreement with South African-based Drytech International for the design and manufacture of new high-tech vanadium processing equipment worth \$20 million.

The capital acquisition program - which commenced last month with PMA securing the first items for the proposed mining fleet for Windimurra - is designed to expedite the construction phase of the project and mitigate against industry-wide cost pressures impacting on the supply of key materials and equipment.

The equipment to be supplied by Drytech will be manufactured using the latest state-of-the-art technology in South Africa, avoiding construction and fabrication bottlenecks in Australia. The equipment includes an ammonium metavanadate flash dryer, a pair of reactors, a magnetite flash dryer (which uses waste heat from the kiln) and liquor evaporator (which uses waste heat from the gas turbine power station).

PMA's Managing Director, Mr Roderick Smith, said all of the equipment being supplied by Drytech was new to the project and would be utilised in the production of vanadium trioxide and its conversion to ferrovanadium as a final product. "In the previous process used at Windimurra, this product was vanadium pentoxide $(V, O₅)$ , however in the revised process, vanadium trioxide $(V₂O₃)$ will be formed as an intermediate step to the final product – which will then be converted to ferrovanadium (FeV) in a refractory lined arc furnace," he said.

"This represents one of the key enhancements of the new Windimurra vanadium production process, and effectively takes the process one step further through to production of ferrovanadium," he added. "This will add significant value to the product stream, as ferrovanadium achieves a price premium over $V_2O_5$ which we expect will significantly enhance the economics of the operation."

Drytech is the most experienced designer and manufacture of the critical vanadium trioxide $(V, O₃)$ reactor required for cost effective production of ferrovanadium. The contract with Drytech provides PMA with an exclusive licence for use of their technology in Western Australia.

Other enhancements being introduced at Windimurra for the first time include the use of waste heat from the kiln for the flash dryer, which dries and pre-heats the magnetite concentrate prior to roasting. This reduces greenhouse gas emissions, reduces gas consumption and increases kiln capacity. In addition, the liquor evaporators will use waste heat from the gas turbine generators to concentrate the leach liquor, thus reducing reagent consumption and energy consumption.

"The heat recovery equipment is a world-first in vanadium production and exploits the use of clean, pure gas as a fuel, greatly increasing the overall energy efficiency of the operation," Mr Smith said. "Our objective is to establish Windimurra as the most technically advanced vanadium mine and processing plant in the world, using state-ofthe-art technology to maximise the project's competitive advantages. These advantages also include the use of natural gas and the patented use of sodium oxalate as the flux in roasting of the ore."

PMA's early capital acquisition program is continuing ahead of the finalisation of the financing package for the Windimurra Project, which is expected to be concluded within the next two months. The project received a major boost recently after Noble Group exercised its options to acquire a 10% direct equity interest in the Windimurra Project for \$13.5 million. The funds were received earlier this week from Noble, increasing the cash position of PMA and its subsidiary to approximately \$50 million.

The Company is targeting commencement of construction at Windimurra before the end of calendar 2006, with first production by late 2007.

Released by: Nicholas Read Jan Hope & Partners Telephone: (+61-8) 9388-1474

On behalf of: Precious Metals Australia Limited Roderick Smith - Managing Director Telephone: (+61-8) 9423 1900 Web: www.pmal.com.au

Background Information

Precious Metals Australia Limited ("PMA") is an Australian ferro-alloys company based in Perth, Western Australia and listed on the Australian Stock Exchange (ASX: PMA). PMA's focus is the redevelopment of its 90%-owned Windimurra Vanadium Mine, located 600km north-east of Perth in Western Australia's Mid West region. Global supply chain manager, Hong Kong-based Noble Group Limited, holds a 10% stake in the Windimurra Project.

PMA has a strategic alliance and off-take agreement Noble Group, which has also agreed to purchase the total vanadium output of the Windimurra mine, at prevailing market prices. During the first 7 years of production, Noble will pay the greater of market price or the cash cost of producing vanadium at Windimurra, providing a solid price floor for the project.

Originally discovered by PMA in 1985, Windimurra contains the largest reported vanadium Proven Ore Reserve in the world with a proven mineable reserve of 56 million tonnes at a bulk grade of $0.46\%$ V₂O₅ (vanadium pentoxide), which will underpin an initial mine life of 16 years at the proposed mining rate of 3.4mtpa. A total of 148 million tonnes of resources have been modelled in order to meet at least the first 20 years of mining.

The current reserve/resource inventory is contained within just 5km of a total 25km strike length of a prospective ore horizon, with significant potential to increase production and/or extend the mine life in future.

The Windimurra mine was built by PMA with a joint venture partner in 1999, and, whilst operating, was the world's largest primary vanadium mine, producing some 30 million pounds of vanadium pentoxide during its 2.5 years of operation (approximately 10% of world production), and gaining recognition as one of the highest-quality sources of vanadium in the world market.

Following the mine's controversial closure in early 2003 and partial de-commissioning in 2004, PMA successfully fought to gain full ownership of the Windimurra mine in August 2005.

PMA has completed a Feasibility Study for the \$175 million redevelopment of the Windimurra mine, with completion of construction scheduled for late 2007.

It will be based on one of the simplest and most straightforward mining operations in Australia, with the ore commencing at surface. The production process is straightforward, comprising crushing, grinding and classification followed by roasting and leaching. PMA has upgraded the previous production flow-sheet and will now produce a value-added product, ferrovanadium (FeV80) from $V_2O_3$ rather than $V_2O_5$ like the previous operation. Ferrovanadium sells for a premium over vanadium pentoxide, which will improve the economics of the operation.

Windimurra will produce some 6,200 tonnes per annum of ferrovanadium, which contains 80% pure vanadium with 20% iron. This represents annual production of approximately 20 million pounds of vanadium pentoxide equivalent, representing approximately 8% of world demand.

PMA is currently debt free and has cash resources exceeding \$50 million. The Company has 75.2 million shares on issue, with a market capitalisation of approximately \$135 million.

-ENDS-