TITANIUM SANDS LIMITED — Capital/Financing Update 2006

Sep 25, 2006

26 September 2006

PRECIOUS METALS AUSTRALIA LIMITED ABN 65 009 131 533

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

Dear Sir

Purchase of Capital Equipment

The Company is pleased to announce the early acquisition of further key items of capital equipment for its Windimurra Vanadium Mine redevelopment in Western Australia, as part of an innovative strategy to lock in current prices and expedite the construction phase.

The capital acquisition program has continued with the opportunistic acquisition of a 200-tonne Hitachi 1900-5 hydraulic excavator as the first component of PMA's Windimurra mining fleet.

The Hitachi excavator – which was purchased at a cost well below the $$2.6$ million estimated in the recently completed Feasibility Study for the Windimurra Project – is expected to arrive at Windimurra in November 2006 and will be available to carry out construction work prior to being used as the primary machine in the recommencement of mining operations in late 2007. Early delivery of the fleet will facilitate activities such as the expansion of existing tailings dams and other civil works, which will also enable PMA to save on the cost of mobilising contractors' equipment for this work.

Windimurra will be an owner-operated mining operation, with the cost of the mining fleet estimated in the Feasibility Study at \$22.8 million, although PMA believes that substantial savings can be made by purchasing existing, near-new equipment.

The decision to opt for owner-mining rather than traditional contract mining at Windimurra follows an extensive engineering review. The selected fleet comprises unusually large equipment for a mine as undemanding as Windimurra, which will enable the increased 3.4mtpa mining rate to be achieved on day-shift only with mining taking place in only 3 out of every 4 weeks.

Level 4, 76 Kings Park Road West Perth Western Australia 6005

PO Box 620 West Perth Western Australia 6872

Telephone: +61 8 94231900 +61 8 94231999 Facsimile:

http://www.pmal.com.au

The large mining fleet will enable us to potentially double production in future with no additional capital expenditure, by simply working an extra shift. The Windimurra mine is unusual in that there is no overburden or requirement for waste rock mining, and the ore can be free dug with no need for blasting, which is a situation enjoyed by very few mines and certainly no other vanadium mine in the world. The Windimurra open pit is already developed with haul roads and a ROM pad in place.

The purchase is part of a \$20 million budget which has been allocated by the Company for calendar 2006 for detailed engineering work, early site works and procurement of long-lead items ahead of the finalisation of the funding package for the project – which is expected to be concluded within the next two months.

Yours sincerely PRECIOUS METALS AUSTRALIA LIMITED

RODERICK J H SMITH Managing Director

PMA ANNOUNCES KEY EARLY EQUIPMENT ACQUISITIONS FOR WINDIMURRA VANADIUM MINE

Ferro-alloys company Precious Metals Australia Limited (ASX: PMA - "PMA") today announced the early acquisition of key items of capital equipment for its Windimurra Vanadium mine redevelopment in Western Australia as part of an innovative strategy to lock in current prices and expedite its construction phase.

The capital acquisition program has continued with the opportunistic acquisition of a 200-tonne Hitachi 1900-5 hydraulic excavator as the first component of PMA's Windimurra mining fleet. This is part of a \$20 million budget which has been allocated by the Company for calendar 2006 for detailed engineering work, early site works and procurement of long-lead items ahead of the finalisation of the funding package for the project – which is expected to be concluded within the next two months.

The Hitachi excavator - which was acquired at a cost well below the \$2.6 million estimated in the recently completed Feasibility Study for the Windimurra Project - is expected to arrive at Windimurra in November 2006 and will be available to carry out construction work prior to being used as the primary machine in the recommencement of mining operations in late 2007. Early delivery of the fleet will facilitate activities such as the expansion of existing tailings dams and other civil works, which will also enable PMA to save on the cost of mobilising contractors' equipment for this work.

Windimurra will be an owner-operated mining operation, with the cost of the mining fleet estimated in the Feasibility Study at \$22.8 million, although PMA believes that substantial savings can be made by purchasing existing, near-new equipment.

The Windimurra Feasibility Study was completed earlier this year by consulting engineers Hatch Associates Pty Ltd, concluding that the Project is robust and viable. PMA's development schedule envisages commencement of early construction in November 2006 with commissioning and first production in the last quarter of 2007. An early program of site work has already commenced.

PMA's Managing Director, Roderick Smith, said the early and opportunistic acquisition of the excavator and other long-lead items represented an important part of the Company's strategy to safeguard the project against industrywide increases in capital, labour and equipment costs, as well as significant supply bottlenecks and delays in obtaining materials and equipment.

"The Windimurra Project has significant competitive advantages, being essentially a redevelopment of a previous mining operation, however we are ensuring that we employ strategies to contain capital costs, avoid long-lead times associated with obtaining mining equipment and keep the project development on schedule on and on budget," Smith said.

"The early capital acquisition program runs parallel with the other important component of our strategy to underpin the long-term viability of the Windimurra Project through the recently announced Vanadium Sales and Marketing Agreement with Noble Group Limited, which provides an effective pricing floor for our vanadium production for the first seven years," he added.

The decision to opt for owner-mining rather than traditional contract mining at Windimurra follows an extensive engineering review. "In the current environment of labour and equipment shortages and rising contractor margins, owning and operating our own mining fleet will deliver the lowest cost," Smith said. "The selected fleet comprises unusually large equipment for a mine as undemanding as Windimurra, which will enable the increased 3.4mtpa mining rate to be achieved on day-shift only with mining taking place in only 3 out of every 4 weeks."

"In addition, the large mining fleet will enable us to potentially double production in future with no additional capital expenditure, by simply working an extra shift. The Windimurra mine is unusual in that there is no overburden or requirement for waste rock mining, and the ore can be free dug with no need for blasting, which is a situation enjoyed by very few mines and certainly no other vanadium mine in the world," Smith continued. The Windimurra open pit is already developed with haul roads and a ROM pad in place.

"Windimurra is one of the most straightforward open pit mining operations in Australia," Smith commented. We're also confident that with the mine only a 50 minute direct flight from Perth, Windimurra will be more attractive to workers than other, more distant operations such as those in the Pilbara."

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 100%-owned Windimurra Vanadium Mine, located 600km north-east of Perth in Western Australia's Mid West region.

PMA has a strategic alliance and off-take agreement with leading global supply chain manager, Hong Kong-based Noble Group Limited, which has 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 current mineable reserves 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 commencement of construction scheduled for late 2006 and first production in 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 approximately $60\%$ more (per pound of pure vanadium), which will improve the economics of the operation.

Windimurra will produce some 6,200 tonnes per annum of ferrovanadium, which contains 80% pure vanadium. 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 \$40 million. The Company has 74.7 million shares on issue, with a market capitalisation of approximately \$125 million.

-ENDS-