TITANIUM SANDS LIMITED — Capital/Financing Update 2006

Sep 27, 2006

PRECIOUS METALS AUSTRALIA LIMITED ABN 65-009-131-533

28 September 2006

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

Dear Sir

Noble Invests \$21.7m in Windimurra Vanadium Mine Redevelopment

Precious Metals Australia Limited (ASX: PMA) is pleased to advise that it has taken a further important step towards commencing its Windimurra Vanadium mine redevelopment in Western Australia after Hong Kong-based Noble Group exercised its options to provide \$21.7 million in funding.

In addition, PMA shareholders vesterday approved the issue of shares and a convertible note to Noble Group representing key elements of the Strategic Alliance between PMA and Noble.

Noble Group Limited, which is one of the world's leading supply chain managers, has formally advised PMA that it is satisfied with the results of its detailed due diligence investigation of the Windimurra Mine and of PMA, and has exercised its options to:

• acquire a 10% direct equity stake in the Windimurra Project for a consideration of A\$13.5 million: and
• provide an unlisted, unsecured convertible note with a face value of A\$8.2 million to PMA. The convertible note has a 3-year term and is convertible into 3,728,548 fullypaid PMA shares, equivalent to an issue price A\$2.20 per share.

The acquisition of a direct equity stake in the Windimurra Project by Noble represents a significant step forward for the project, following the recently announced Vanadium Sales & Marketing Agreement with Noble which will underpin the financing and development of the Project.

Under this Agreement, Noble has agreed to purchase the entire output of the Windimurra mine, at prevailing market prices. During the first seven years of production, Noble will pay the higher of the current market price or the actual cash cost of producing vanadium at Windimurra based on the forecast production schedule - providing a solid price floor for the project.

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

At a General Meeting of members in Perth yesterday, PMA shareholders approved a series of resolutions including the issue of 3,728,549 fully-paid ordinary shares in PMA equal to 4.99% of the Company's issued capital at an effective price of \$2.68 per share, representing a once-off fee of A\$10 million in consideration for Noble entering into the Vanadium Sales & Marketing Agreement.

PMA shareholders also approved the issue to Noble of a unlisted, unsecured convertible note with a face value of A\$8.2 million and ratified the recent appointment of experienced Australian mining executive, Michael Kiernan, to PMA's Board as a Non-Executive Director,

PMA's Board of Directors believes that Noble Group's decision to exercise its option to acquire the 10% equity stake represents a significant vote of confidence in the Windimurra Project following completion of detailed due diligence.

The Company is pleased to have Noble as a direct partner in the Project, further complementing the long-term sales and off-take agreement which was announced earlier this year. PMA has now cemented its strategic alliance with one of the world's leading commodities and supply chain managers.

This alliance will ensure the development of the Windimurra Project as a competitive longlife, world-class mine producing high-quality vanadium at a sustainable cost.

The involvement of Noble Group adds significant value to the project by applying their global contacts and expertise to the marketing of Windimurra Vanadium. Noble will exclusively market and handle all distribution logistics for Windimurra Vanadium worldwide through its international network of offices.

Noble's global experience will complement PMA's marketing team, which will focus on servicing end users requirements, new high-value product development and promoting Windimurra Vanadium as a product of choice and a strong brand within the international vanadium industry.

Yours sincerely PRECIOUS METALS AUSTRALIA LIMITED

RODERICK J H SMITH Managing Director