Sydney, May 30, 2007 (ABN Newswire) - The Directors of Polaris Metals NL (ASX: POL) today announced details of an agreement which could lead to the development of a new solar salt project in Polaris tenements contiguous with and/or in close proximity to the existing solar salt operations of Onslow Salt in northwest Western Australia.

An agreement has been reached with consulting engineers Project Development and Management Services Pty Ltd ("Prodemas") to undertake a A$50,000 Scoping Study of establishing a new solar salt operation at no cost to Polaris.

Under the terms of the agreement, Prodemas can earn a 10% stake in the Project by completing the Scoping Study. Prodemas will then also have the right to introduce an equity partner to meet the first A$10 million of the Project's development costs, taking Prodemas and its partner's interest in the Project up to 50%. Polaris will hold 50% interest in the Project free carried for the first A$10 million of expenditure.

Prodemas has extensive experience within the solar salt industry. Mr Frank McManus, a founding director of Prodemas, was formerly the International Business Manager, and prior to that the National Engineering Manager, for Cheetham Salt Limited. Cheetham Salt operates 12 solar salt fields throughout Australia. As National Engineering Manager Mr McManus was responsible for quality and safety systems, engineering projects and salt field production.

Polaris Managing Director, Mr Kevin Schultz said, "the potential to develop a solar salt project at Onslow is considered a bonus for the company. The agreement with Prodemas provides a win-win outcome for both parties, providing advancement of the solar salt project by a dedicated partner, whilst allowing Polaris to focus on developing its iron interests in the region."

Polaris holds four exploration licences on the northwest coast of Western Australia, southwest and northeast of the town of Onslow. The area is known to contain a number of deposits of iron-sands, which will remain Polaris' primary focus.

According to Prodemas, the Onslow area is one of the most favourable in Australia for the development of a solar salt field, with shipping distances to major customers similar to those of Dampier and Shark Bay and considerably shorter than competing Mexican salt producers must contend with.

China a Key Driver of interest in Salt

Solar salt from the northwest of Western Australia dominates sales of internationally traded salt. The proximity to growing industrial markets in Asia, particularly China, Korea and Indonesia, and the size and favourable topography of the Polaris tenements, are expected to provide a significant competitive advantage for the proposed facility.

A key driver of interest in salt is the continued growth of China's economy, intensifying demand for a wide range of industrial products throughout Asia. Salt is the fundamental raw material in industrialised economies and is used to manufacture chlorine, caustic soda, soda ash, hypochlorite and other base chemicals. Until 2003, China was a net exporter of salt; but since then, China's industrialization has outstripped the capacity of domestic salt producers, tightening supply.

The key markets for salt in China are for soda ash production and for chlor/alkali production. Soda ash does not require very pure salt, and most of this demand is met by local rock salt suppliers. Chlorine production, on the other hand, requires a relatively pure sodium chloride such as that from solar salt producers Dampier Salt, Onslow Salt, Shark Bay Salt and Mexican salt producer Essa.

The demand for chlor/alkali quality salt is growing at a rate of between 1 and 2 million tonnes per year, with no clear expectation that this rate of growth will slow. On current trends, the shortfall between supply and demand will approach 10 Mtpa within the next 8 years.

Scoping Study Underway

The Prodemas Scoping Study has commenced, with the key issue of environmental protection receiving priority attention. A solar salt operation is already in production at Onslow, and the Polaris tenements are well served in terms of established infrastructure.

As announced in the Polaris Third Quarter Activities Report, an Aboriginal heritage protection agreement has been signed with the indigenous Thalanyji traditional owners in the area. As part of the Scoping Study, Prodemas will maintain and broaden the dialogue that Polaris has commenced with the Thalanyji people, and abide by the heritage protection agreement.

Consistent with the other Western Australian salt projects, a State Agreement will be discussed with governmental authorities as a high priority; and all stakeholders within the project area will be appropriately consulted.

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Map: SOLAR SALT PROJECTS NORTHWEST WESTERN AUSTRALIA
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