TAX NEWS - June 2010

Metallica Says May Scrap Nickel Mine on Planned Tax

Metallica Minerals Ltd., studying a A$700 million ($592 million) nickel project in Australia's Queensland state, may scrap the mine because of the proposed resource super profits tax.

"If this stupid tax does come in, it threatens the project," Chief Executive Officer Andrew Gillies said in an interview by phone from Queensland. "We may have to look at our options. We are not going to proceed unless we know we are going to make money."

Metallica, backed by China's Jilin HOROC Nonferrous Metal Group Co., joins BHP Billiton Ltd., Fortescue Metals Group Ltd. and Xstrata Plc in reviewing, suspending or slowing projects. These actions may intensify pressure on the government to wind back the proposed 40 percent tax on mine profits.

Shares in the company gained 6.7 percent to 24 cents at 12:32 p.m. Sydney time on the Australian stock exchange. Gillies is also a director of the industry representative body Queensland Resources Council.

Metallica, based in Brisbane, is studying a two-stage development of the Nornico nickel and copper mine that could initially produce 2,900 metric tons of nickel and 200 tons of copper a year. The first stage may cost A$100 million and the second stage may cost between A$500 million and A$600 million, Gillies said. A feasibility study is due next month, he said.