TITANIUM SANDS LIMITED — Interim / Quarterly Report 2004

Apr 29, 2004

OUARTERLEY REPORT For the Quarter Ended March 31, 2004

Highlights

• Vanadium pentoxide price soars to \$US6/lb
• PMA owns 15% net profit interest in Windimurra vanadium mine
• Xstrata placed Windimurra on care and maintenance at price of US\$1.40
• PMA demanded detailed cost information from Xstrata

Windimurra Vanadium Project

The Windimurra vanadium project has been the focus of the company's activities during the quarter.

Background

The Windimurra vanadium mine was developed by Precious Metals Australia Limited as manager, with its partner Xstrata AG of Switzerland. The plant cost was approximately \$120m and the total investment in the project over \$170m. In addition, others, including the Western Australian State Government, Western Power, AGL and the Australian Pipeline Trust provided a gas pipeline, power station and other infrastructure at a cost of approximately \$60m. Commissioning delays and historically low prices of vanadium led to PMA selling its then 40% equity interest in the mine to Xstrata in December 2000.

PMA accepted payment for its interest of approximately \$30m plus a 15% net profit interest, on the basis that it could earn a substantial return on its investment when vanadium prices returned to normal levels. A minimum of \$500,000 per annum is payable.

Xstrata completed commissioning and continued to operate the mine, which in 2002 accounted for about 10% of world production. Xstrata also owns the Rhovan vanadium mine in South Africa.

Production Suspended

Xstrata announced in its December 2002 results that operating costs at Windimurra had been reduced successfully by 56%, but despite this, production at Windimurra would be suspended in February

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Home Page: http://www.pmal.com.au 2004 due to historically low vanadium prices and the strengthening Australian Dollar. X strata has continued to pay the minimum royalty as required by the royalty agreement.

Vanadium Price Soars, Vanadium Shortage

As shown by the attached graph, in 2004 vanadium prices have returned to the levels seen when Windimurra was first given the go ahead. The vanadium pentoxide price quoted by Metal Bulletin in April 2004 is US\$6.05 to US\$6.20 compared to approximately US\$1.40 at the time production at Windimurra was suspended. Metal Bulletin also report a world-wide shortage of vanadium.

The vanadium pentoxide price assumed in the original Windimurra feasibility study was \$US3.50/lb. At current price levels, Windimurra would be a highly profitable operation.

Windimurra Should Re-open

The Windimurra plant remains on care and maintenance and production could readily be restarted. It is PMA's view that the suspension of production should be lifted and operations recommenced. PMA wrote to Xstrata on 25 February 2004 asking for confirmation of its plans to reopen the mine. No response was received

On 24 March 2004 Australian Pipeline Trust notified ASX that Xstrata had advised that it intends to permanently cease production from Windimurra. As a result, PMA wrote to Xstrata asking it to confirm its intentions with regard to the future of Windimurra, advising that, in PMA's view, the royalty agreement does not give Xstrata the sole discretion to cease operating the mine permanently and asking Xstrata to give PMA 14 days notice of any proposed termination to give it the opportunity to protect its interests.

Xstrata has not, to date, advised PMA of its intentions in relation to Windimurra. Xstrata also claims that it can close the Windimurra mine permanently at its sole discretion and has refused to give an undertaking that it will give PMA advance notice of permanent closure.

Detailed Financial Information Sought

Under the Royalty Agreement, Xstrata is required to provide a detailed financial statement, certified by its auditor, in respect of each year's operations. These statements would enable PMA to monitor its royalty interest in the Windimurra project and to check and verify the calculation of royalties paid by Xstrata.

PMA contends that Xstrata has not provided the detailed statements in respect of any of the years 2000, 2001, 2002 and 2003 as required under the royalty agreement and has requested that Xstrata provide them. PMA is now seeking to have the matter dealt with by an Expert determination, in accordance with the procedures set out in the royalty agreement

The carrying value of the Windimurra Royalty in PMA's books is \$2,000,000. PMA has requested its auditors to calculate the historical cost of its royalty interest in Windimurra, which exceeds \$20,000,000.

During the quarter, the directors invited Mr R J H Smith to join the board Mr Smith is an acknowledged world expert on the vanadium industry having given papers at numerous international ferro-alloys conferences. He paid a major role over a 12 year

period in the initial research and development, feasibility studies and ultimate development of the Windimurra vanadium mine.

Kvarra Gold - Garden Gully - Meekatharra

During the quarter the company completed its review of detailed geological information in relation to this project. Unfortunately it was concluded that the proposed RC drilling programme was unlikely to significantly change the order of magnitude of indicated resources and that insufficient open cut tonnage was potentially available for the scale of any near term mining operation to meet PMA's investment criteria.

Other Projects

Whilst the company's focus this quarter was on the Windimurra project as outlined above exploration and evaluation work during the quarter was limited to a review of existing data.

Yours sincerely

Earl of Warwick Chairman