VYSARN LIMITED — Capital/Financing Update 2014

Sep 29, 2014

MHM Metals Limited 80 Buckley Grove Moolap VIC 3221 AUSTRALIA

T: +613 5248 2002 F: +613 5248 3498 E: info@mhmmetals.com www.mhmmetals.com

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ASX Announcement

For immediate release

Tuesday 30th September 2014

**2014

Strategic
Review,
impairment
of
non-­‐current
assets
&
rehabilitation
provision**

**Key

points:**

1. Future
of
Alreco
plant
dependent
on
processing
Alcoa
landfill.

2. Expansion
overseas
is
currently
sub-­‐economic.

3. Impairment
charges
and
rehabilitation
provisions
totalling
$6.695
million.

The
closing
of
the
two
main
secondary
aluminium
smelting
operations
on
the
east
coast
of Australia
has
forced
the
Company
to
undertake
another
strategic
review
following
the
one completed
in
late
2012.

The
2014
Strategic
Review
has
been
wide
ranging
and
included
examination
and
analysis
of Moolap’s
current
operation,
an
‘ideal’
process,
environmental
liabilities,
Alcoa’s
landfill
as ongoing
feedstock,
expansion
opportunities,
potential
for
Alreco
to
process
alternate materials
and
improving
the
value
of
NMP.

The
2014
Strategic
Review
is
continuing
however
the
Company
provides
the
following synopsis
of
the
status
quo:

i)
Current
Moolap
operations

The
current
operations
work
adequately
enough
to
process
the
salt
slag
into
three
discrete products,
however
it
is
far
from
‘world
class’.
The
existing
plant
employs
equipment
that
is
old and,
in
some
instances,
not
fit
for
purpose.
Some
equipment
has
been
updated,
in
particular the
new
filter
press,
but
since
the
Yennora
closure
announcement
no
further
substantive
work has
been
completed.

A
thorough
analysis
of
downtime,
quality
and
throughput
was
undertaken
which
provided
a clear
picture
of
the
current
operational
efficiency
and
identification
of
the
causes
of operational
issues.
Additional
process
controls
were
installed
to
improve
the
ability
of management
to
monitor
the
entire
process.
The
Company
now
has
a
clear
understanding
of the
existing
operation
and
has
taken
significant
steps
to
improve
the
efficiency
and subsequent
profitability.
This
has
provided
the
Company
with
the
confidence
that,
properly maintained,
the
Moolap
plant
has
sufficient
life
to
process
the
160,000
tonnes
of
material
in

MHM
Metals
Limited ABN
41
124
212
175

Registered
Office:
80
Buckley
Grove,
Moolap,
VIC
3221
|
Tel:
03
5240
8999
|
Fax:
03
5248
3498
|
E:
info@mhmmetals.com
| www.mhmmetals.com

Alcoa’s
landfill
in
the
event
that
Alcoa
and
the
EPA
determine
that
this
is
required
(refer
iii below).

ii)

Legacy
stockpile
&
EPA

On
9
December
2013,
the
EPA
issued
a
Pollution
Abatement
Notice
(PAN)
due
to
the
Moolap plant
site
exceeding
its
licensed
limit
of
storage
of
salt
slag.
An
agreement
was
reached
with the
EPA
whereby
on
or
before
1
July
2015,
the
Company
will
have
reduced
its
store
of
salt
slag to
be
within
the
3,000
tonne
license
limit.
This
situation
is
a
legacy
of
the
former arrangements
involving
the
Project
Development
Corporation
Joint
Venture.
The
Company has
developed
and
implemented
a
work
plan
to
reduce
environmental
and
associated
legacies including,
as
announced
to
ASX
on
22
September,
the
issuance
of
demands
on
several
claims to
recover
substantial
funds
against
a
number
of
entities
including
PDC
and
its
Joint
Venture parties.

iii)

Alcoa’s
Landfill

It
is
estimated
that
Alcoa
has
approximately
160,000
tonnes
of
unprocessed
salt
slag
material at
Moolap.
The
Company
reviewed
the
available
data
and
how
it
could
best
deal
with
this
salt slag
using
its
current
operations
at
Moolap.
The
economics
of
processing
the
Alcoa
Landfill were
also
reviewed
to
determine
at
what
level
of
aluminium
content
the
Alcoa
Landfill
would become
economical.

The
2014
Strategic
Review
concluded
that
the
Company
is
adequately
equipped
to
treat
the Alcoa
Landfill
material.
The
Company
has
actively
engaged
with
Alcoa
and
the
EPA
to understand
the
requirements
of
treating
this
landfill
and,
to
date,
awaits
a
decision
as
to whether
or
not
the
Alcoa
Landfill
is
required
to
be
processed.
In
the
event
that
the
Company secures
this
remediation
work,
it
will
provide
several
years
of
feedstock
for
Moolap
to process.
In
addition
it
would
allow
the
Company
to
(i)
further
improve
the
Moolap
plant’s production
efficiency,
(ii)
complete
its
current
investigations
to
value-­‐add
the
NMP,
and
(iii) provide
a
longer
timeline
regarding
the
potential
for
international
or
other
expansion.

iv)

Expansion
opportunities

The
Company
undertook
a
review
of
expansion
options
in
the
USA
and
other
jurisdictions where
salt
slag
is
generated.
The
process
used
at
the
Moolap
site
was
further
reviewed
to determine
whether
an
‘ideal’
process
could
be
implemented
in
a
greenfield
operation
at
its existing
Kentucky
site
in
the
USA.
This
‘ideal’
process
was
modelled
to
determine
the feasibility
and
economics
of
establishing
such
a
USA
based
operation
and
compared
to
the competing
options
available
to
secondary
smelters
in
the
USA.

Taking
into
consideration
the
current
regulatory
environment
in
USA
(i.e.
unprocessed
salt slag
can
be
landfilled)
and
the
significant
investment
required
to
establish
a
greenfield operation
(approximately
$20
-­‐
$30
million),
the
directors
concluded
that
expanding
to
the USA
in
the
short
term
is
not
realistic.
Should
the
environment
in
USA
change,
the
Company can
reassess
the
opportunity.

MHM
Metals
Limited ABN
41
124
212
175 Registered
Office:
80
Buckley
Grove,
Moolap,
VIC
3221
|
Tel:
03
5240
8999
|
Fax:
03
5248
3498
|
E:
info@mhmmetals.com
| www mhmmetals com

The
possibility
of
expanding
into
other
jurisdictions
was
also
explored
and
where
the competitive
landscape
is
‘open’
or
would
accommodate
another
entrant.
In
particular,
the Middle
East
was
examined
where
landfill
costs
are
relatively
high
but
potential
volumes
lower. Again,
the
directors
concluded
that
the
economics
are
marginal,
a
joint
venture
party
would be
required
and
the
capital
investment
significant.

v)
Value-­‐add
of
non
metallic
product
(NMP)

A
review
of
possible
‘value
add’
processes
that
could
be
undertaken
on
the
NMP
was conducted.
This
included
reviewing
processes
used
by
current
purchasers
of
the
NMP
as
well as
other
applications
that
would
be
‘new
ground’.
Areas
that
were
reviewed
include metallurgical,
refractory
and
ceramic
products.

In
order
to
make
the
processing
of
salt
slag
more
economically
viable,
the
Company
has looked
at
various
value
add
scenarios
for
the
fine
non
metallic
product
material.
The
Company is
still
actively
pursuing
application
in
the
ceramic
industry
for
the
NMP
and
will
continue
to work
on
this.
The
current
testing
at
CSIRO
is
aimed
at
a
‘proof
of
concept’
level,
the
future
of this
opportunity
is
dependent
on
availability
of
salt
slag
feedstock.

vi)
Transformation

An
initial
review
of
other
possible
waste
streams
that
could
be
treated
with
equipment
at
the Moolap
site
was
undertaken.

Although
the
process
appears
to
have
broader
application,
most
of
the
alternate
waste streams
that
have
been
considered
do
not
have
adequate
volume.
The
Company
will
continue to
look
at
other
waste
streams
as
they
come
to
light
to
determine
if
they
are
applicable
to
the Company’s
Moolap
operation.
Whilst
this
item
is
open
it
will
be
more
reactive
than
proactive.

Conclusions

1. The
   ability
   of
   the
   Company
   continuing
   to
   work
   in
   the
   domestic
   waste
   sector
   treating salt
   slag
   is
   solely
   dependant
   on
   the
   outcome
   of
   decisions
   by
   Alcoa
   (and
   the
   EPA
   of Victoria)
   regarding
   the
   Alcoa
   landfill.

2. In
   the
   event
   that
   the
   Alcoa
   landfill
   opportunity
   does
   not
   eventuate,
   the
   Company
   will activate
   its
   plan
   to
   clean
   up
   the
   Moolap
   site
   including
   the
   removal
   of
   all
   legacy stockpiles.

3. Expansion
   into
   USA
   (or
   other
   jurisdictions)
   is
   currently
   sub-­‐economic
   even
   assuming the
   Company
   could
   secure
   the
   substantial
   capital
   investment.
   Accordingly
   the directors
   have
   determined
   that
   it
   is
   in
   the
   best
   interests
   of
   the
   Company
   to
   sell Russellville
   property
   in
   Kentucky.

MHM
Metals
Limited ABN
41
124
212
175

Registered
Office:
80
Buckley
Grove,
Moolap,
VIC
3221
|
Tel:
03
5240
8999
|
Fax:
03
5248
3498
|
E:
info@mhmmetals.com
| www mhmmetals com

**Impairment

of
non-­‐current
assets
and
provision
for
rehabilitation**

The
directors
have
evaluated
the
ability
of
the
Alreco
processing
facility
to
generate
future cash
flows
beyond
31
December
2014,
the
end
of
the
Alcoa
contract.
The
uncertainty associated
with
the
future
of
the
Alreco
processing
facility
caused
the
directors
to
record
a further
impairment
charge
of
$2,500,000
against
the
carrying
value
of
the
Alreco
plant
and equipment
which,
when
added
to
the
$3,000,000
charge
at
31
December
2013,
brings
the total
impairment
charge
for
the
2014
financial
year
to
$5,500,000.

Further
given
any
future
expansion
into
the
USA
is
currently
sub-­‐economic,
the
directors
have determined
that
the
carrying
value
of
the
Company’s
USA
intangible
assets
of
approximately $500,000
should
be
impaired
to
$Nil.

The
directors
also
have
had
regard
for
the
Company’s
obligations
to
rehabilitate
the
Moolap site
and
have
recorded
a
provision
of
$688,000
as
at
30
June
2014.

END

For
more
information : MHM
Metals
Limited Iain
Kirkwood,
Chairman:
+61
408
473
496 Matthew
Keen,
CEO:
+61
3
5240
8999

MHM
Metals
Limited ABN
41
124
212
175 Registered
Office:
80
Buckley
Grove,
Moolap,
VIC
3221
|
Tel:
03
5240
8999
|
Fax:
03
5248
3498
|
E:
info@mhmmetals.com
| www mhmmetals com