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Foundry Daily News

21. March 2007

Gossan Options

New Magnesium Production Process

Gossan Resources Limited has entered into a Memorandum of Understanding to acquire up to a 100% exclusive interest in the worldwide rights to a new technology for the production of magnesium metal from dolomite.

The Memorandum of Understanding defines the terms and conditions of a licensing arrangement for a new high efficiency magnesium production process being developed by Douglas J. Zuliani. Gossan controls large deposits of high grade dolomite and silica sand in Manitoba, Canada, both key raw materials used in magnesium metal production. Zuliani who holds a Ph.D. in Metallurgical Engineering from the University of Toronto, has over twenty years of experience in magnesium technology and business development. From 1985 to 2000, he held a number of senior executive positions with Timminco Ltd., an internationally recognized leader in the production of high purity magnesium using the Pidgeon silicothermic vacuum reduction process which recovers magnesium metal from briquettes containing ferrosilicon and calcined dolomite . Zuliani and Gossan began joint collaboration to develop the new magnesium process in early 2004. As part of their agreement, Gossan retains an option to secure exclusive worldwide rights to the process.

Zuliani's technology is projected to significantly reduce the direct operating cost of magnesium metal production by as much as 25% compared to a typical Chinese Pidgeon process plant which, with China producing over 80% of the world's magnesium, has now become the industry norm. The new process is based on an efficient adaptation of the original Pechiney and Alcoa Magnatherm process which still remains the only successfully proven high temperature method for producing magnesium metal by silicothermic vacuum reduction of molten slag containing magnesia. By using an enhanced Magnatherm approach, the process can employ low cost hydro electricity abundantly available in Manitoba as its principle energy source.

The Zuliani process is designed to achieve dramatic operating cost savings by process efficiency improvements that significantly reduce both energy and key raw material requirements. These enhancements to the traditional Magnatherm method should materially improve both magnesium recovery and silicon reduction efficiency without the need for a vacuum. Energy use is reduced by development of a technically straightforward method that will ensure highly efficient condensation of liquid magnesium metal thereby avoiding the need to melt solid magnesium which has been a major problem plaguing both the Pidgeon and Magnatherm processes. The Zuliani process can be commercialized in 10,000 tonne per annum production increments which will reduce initial investment risk and allow expansion of production capacity in tune with market demand.

In order to prove out the technology prior to commercialization, Gossan is undertaking a three phase evaluation process. Initially thermodynamic modelling is being used to verify the process fundamentals. The second phase will involve final bench scale testing and thereafter a third phase of pilot plant testing to demonstrate commercial viability. Gossan may seek a joint venture partner to assist in the pilot plant testing and subsequent commercialization of the process.

In May of 2006, Gossan conducted a 27-hole drill program on its 1633-hectare Inwood Magnesium Dolomite Property, located 80-km north of Winnipeg. Watts, Griffis and McOuat Limited (WGM), consulting geologists, have calculated a number of Mineral Resource Estimates for high purity dolomite at the Inwood Property. A National Instrument 43-101 Report is currently being finalized at which time it will be posted on SEDAR.

WGM's resource estimates for two zones are summarized in the table below.

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