Head Office Monto Minerals Ltd Monto Office Our Ref: O/050304 24 March 2005
Dear Shareholder,
STRATEGY FOR THE FUTURE
With a General Meeting scheduled for 21 April, it is timely to update shareholders on the Company and explain the strategy that lies behind the current initiatives for issuing options.
Monto Minerals is now well and truly on the “Countdown to Production”, as our recent announcements have proclaimed. We have come a long way over the last two years as we have sought to build a substantial business on the development of the Goondicum industrial minerals deposit identified a decade ago by the company’s founders. Realising that it had the potential to succeed as a multi-product business, we changed the focus towards the production and marketing of three major products – feldspar, ilmenite and apatite. Through diligent marketing and operation of the Demonstration Plant, we have achieved letters of intent from willing customers for more than 60% of the planned first two years’ total production of more than 220,000 tonnes a year. Goondicum is a large and valuable resource. It is close to road, rail and power, located only 100 km south of the major industrial port city of Gladstone and some 80 km west of Bundaberg. The resources established to date should support a mine life of more than 19 years in a low risk operation utilising proven, simple processing techniques. A feasibility study to confirm the project’s viability is currently in the final stages and on schedule for completion by the end of April. Subject to the outcome of the study, we plan to be in commercial production in early 2006. In this “Countdown to Production” period, we will be raising the capital necessary to take us to commercial production and we will be working to substantially increase the value of the company. It is important that shareholders have the opportunity to benefit in this crucial value-adding phase. As announced to the ASX, you will shortly be offered options so that you can increase your holdings at a potentially attractive price, and at the same time you will be participating in the capital raising. A prospectus will be sent to shareholders about 15 April. Briefly, however, shareholders will be able to buy options at 0.1 cent each which they can convert to shares for 5 cents each at any time up to 29 September 2006 (1 option for 7 shares held for all shareholders, and an additional 1 for 1 for those shareholders who participated in the share placement announced last week). The offer is being structured to give shareholders the maximum opportunity to benefit from their investments in Monto. Our plan is to list the options so that you will be able to sell the options on the Stock Market at any time after they are listed (allocation is planned for 5 May 2005). Using the traditional Black and Scholes methodology for valuing options the estimated value is approximately 0.5 cents. Of course, as an alternative, you will be able to convert them to shares. ABN 71 063 144 865 Level 6, 303 Coronation Drive 5 Newton Street Milton Qld 4064 PO Box 1791 Monto QLD 4630 Australia Telephone: 61 7 3858 6100 MILTON BC QLD 4064 Telephone: 61 7 4166 3500 Facsimile: 61 7 3858 6199 Facsimile: 61 7 4166 3137 Email: [email protected] Website: www.montominerals.com 2 These options would raise more than $3 million for the company if fully converted. That will comprise about a third of the $10 million in working capital that the company is expected to require, an important contribution from shareholders to the capital raising and provided in the form of potentially very good value equity for shareholders. (The initial capital cost of the project construction is estimated to be an additional $25 to $27 million – subject to confirmation from the feasibility study.) In addition to the 71 million options being made available to shareholders, it is proposed to issue a total of 19 million options to the Executive Directors (Geoff Moore and myself), Directors Richard Cottee and Peter Dowling and Alternate Director Phil Wright. We have chosen not to receive directors’ fees and salaries totalling almost $600,000 over the last two years in order to conserve the company’s financial resources. This is a substantial sum of money that your directors have put at risk but it demonstrates their support of and confidence in the Company’s strategy. Notwithstanding the absence of payment it has been satisfying to work with Geoff in an executive capacity and with the non-executive directors Richard, Peter and Phil, all of whom have brought to Monto the benefit of lifetimes of experience and expertise in the running of mining and energy companies. All five of us have gained considerable satisfaction from directing Monto towards the goal of being a profitable operating mining company. However, Monto is a business for which professional input should be remunerated and risk should carry with it the prospect of reward. The options, for which approval is being sought at the forthcoming General Meeting, will provide some financial incentive for directors to bring the development of the Goondicum project to fruition. For shareholders, this will provide a tangible alignment of the interests of executive and non-executive directors with those of shareholders. The options only vest to directors when financial closure for the project is in effect, expected to be mid-2005. They will be exercisable over five years at a price that is the average of the Monto closing share price on the 30 days preceding the 21 April meeting. Events are moving rapidly towards targeted commercial production in early 2006. Elements of the feasibility study are drawing to conclusion. We are looking forward to increased sales commitments as a result of several marketing initiatives for feldspar in the manufacture of glass containers and paint, and we are exploring other applications for the Goondicum product streams. We are pursuing several alternative courses to generate early cash flow and improve the longer-term profitability of the project. As the “Countdown to Production” continues, we will keep shareholders informed, and look forward to having you aboard when Monto takes its place as a profitable and growing industrial minerals producer. Yours sincerely, MONTO MINERALS LTD PETER J SLAUGHTER Executive Chairman
MOO Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
