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Development of the Enterprise nickel deposit commenced in September 2006 following a positive Bankable Feasibility Study (‘BFS’) and receipt of the necessary government permits and approvals.

The Enterprise project will produce approximately 10,000 - 10,500 pa of nickel in concentrate from a 1,200,000 tpa underground mining operation involving straightforward extraction methods and conventional processing technology. Enterprise forms the initial part of the Munali growth strategy, targeted to economically exploit the other identified lower grade nickel deposits at Munali through the effective application of additional process technology such as Dense Media Separation (‘DMS’).

The Munali Project is one of only a very few new nickel sulphide developments planned worldwide in the next few years. The project will deliver a high quality bulk concentrate into a market characterised by strong demand and limited supply. Munali is expected to be low on the cost curve of nickel producers, with a final direct cash operating cost of approximately US$3 per pound of nickel in concentrate.

A highlight of 2007 was the Official Ground-Breaking Ceremony for the Munali project by His Excellency Levy Mwanawasa SC, the President of Zambia in the company of many distinguished guests from the diplomatic, political, commercial and local communities in Zambia, as well as Albidon’s project partners.

The following paragraphs summarise the progress on key elements of project construction, as well as the Relocation Action Plan (‘RAP’), through the course of 2007/2008.

Construction of site infrastructure was commenced at Munali and substantial progress was made during the year. Key developments include the establishment of the following major infrastructure components:

• Road construction and perimeter fencing are complete;
• Construction of accommodation blocks, offices, stores and security buildings are close to completion;
• Commissioning of the Munali Concentrator is to be completed in the second half of 2008 and ramp up of mine production to full capacity early 2009.
• The permanent water supply to the concentrator is complete and has been tested;
• 4 MVA diesel power generator sets are currently on site supporting construction, with the long term dedicated sub-station currently in testing phase; and
• The underground support infrastructure is in place.

The Enterprise decline has advanced to 1040mL and 1020mL levels and developments are being made along strike through the ore body. The north and south decline developments were also extended towards the third mining level of 995mL, with the ore being intersected two month ahead of schedule. It is clear from the underground exposures that there is potential for mining additional mineralisation in the hangingwall. A major campaign is planned for 2008 to define the extent of hangingwall ore and to assess the economics of extracting it.

The initial project, Munali phase 1, is based solely on the Indicated portion of the Enterprise Resource which is located at the southeast corner of the Munali Intrusion. The present project design does not rely on, but can be modified to accommodate, possible future production from the Inferred Resource portion of the Enterprise Deposit.

From the outset, mine design and planning have been undertaken to allow maximum flexibility in project development, in particular expansion of mine production. Following completion of commissioning by mid-2008 it is expected that optimisation of the project and expansion of production will be a major focus for the Munali team.

The Enterprise mine is an underground operation accessed via a 25m deep‘boxcut’ excavation leading to a nominal 5.0m x 5.5m twin decline at a gradient of 1 in 7. The mine design utilises highly mechanised up-hole benching and long-hole open stope mining methods, resulting in efficient ore extraction and low mining costs.

These mining methods allow for mining from the top down which maximises early production of ore. Cleaning and hauling methods are also highly mechanised with applied tele-remote loading techniques in support of the drive for zero tolerance on safety. The principal mining contractor is Byrnecut Mining International Limited, a group that is highly experienced in these mining methods and operating in Africa.

Drilling was continued throughout 2007 with the objective of providing better detail of the mining reserve at Enterprise for the start-up of production, and also to provide an initial resource estimate for the Voyager deposit which is located some 600m to the north of Enterprise. Current published Indicated and Inferred Resources for the deposits at a revised cutoff grade of 0.6% Ni are as follows:

Enterprise Deposit:

9.1Mt @ 1.23% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3 g/t Pt.

Voyager Deposit:

1.2Mt @ 0.9% Ni, 0.1% Cu, 0.05% Co, 0.7g/t Pd, 0.4g/t Pt.

Total Resource:

10.3Mt @ 1.2% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3g/t Pt.

This amounts to a current metal inventory at Munali of 123,500 tonnes of Ni and 246,800 ounces of platinum group metals (‘PGM’). Over 70% of this total resource has been classified in the Indicated Resource category under the JORC Code.

Revised long term commodity price assumptions have lowered the cut-off from 0.7% to 0.6% Ni.

The ore will be processed through a conventional flotation concentrator, comprising a simple crushing and grinding circuit, rougher, scavenger and cleaner flotation cells, followed by concentrate and tailings thickeners, producing a high grade nickel, copper, cobalt and PGM concentrate for sale to the Jinchuan Group of China for smelting.

Construction of the Munali Concentrator has been done by GRD Minproc.

First Concentrate was produced in the second quarter of 2008. Following an initial ramp-up period through 2008, production will comprise approximately 10,000 to 10,500 tonnes of Ni, 1,650 tonnes of Cu, more than 480 tonnes of Co and 18,000 ounces of PGM in concentrate per annum.

Scoping studies are underway to assess the potential for further improvements to the process flow circuit. These studies include: mining at lower cutoff grade and head grade of ore; and optimisation of material flow.

The objective is to increase the mineable resource and annual production output, and to maximise metal recoveries.

Indicative specifications for nickel concentrate product from the Enterprise Deposit are as follows:

Ni: 13%; Cu: 2%; Co: 0.7%; Pt: 1.9g/t; and Pd: 7.9g/t.

In addition, the concentrate is free of deleterious element impurities and also has low MgO content and a high Fe/MgO ratio, features that are particularly attractive for operators of flash-furnace type nickel smelters.

Offtake partner Jinchuan Group is currently assessing the feasibility of building a smelter in southern Africa and if this eventuates there may be scope to further optimise the project by increasing metal recoveries and concentrate tonnages by reducing the grade of metals in concentrate.

An Offtake Agreement was signed in December 2006 with Jinchuan Group, China’s largest producer of nickel, cobalt and platinum group metals and a major producer of copper. The offtake arrangements include substantial project funding commitments from Jinchuan, as detailed below.

Albidon has successfully managed the construction of the Munali Nickel Project to be delivered ahead of time and with a capital cost increase of ~25% realised for the project to date when compared to the estimate developed in the Bankable Feasibility Study in 2006.

The increase in costs is attributable to the continuing escalation of costs in the mining industry worldwide. Cost increases cover all facets of the project, including raw materials, equipment, labour, power and fuel.

This area of cost management will receive close attention through 2008 and beyond.

An Offtake Agreement was signed in December 2006 with Jinchuan Group, China’s largest producer of nickel, cobalt and platinum group metals and a major producer of copper. The offtake arrangements include substantial project funding commitments from Jinchuan, as detailed below.

The Munali project is being funded by a mix of debt and equity as follows:

Equity funding: US$40 million was raised from Albidon shareholders, US$15 million from Jinchuan Group and US$10 million from ZCCM Investment Holdings plc.

Debt financing: up to US$80 million of senior debt is being provided by Barclays Capital and the European Investment Bank as joint lead arrangers for the project. The Jinchuan Group will provide an additional US$20 million in subordinated debt.

The Munali Project is being constructed and operated in accordance with the Equator Principles and the conditions and guidelines approved by the Environmental Council of Zambia. The Environmental Management Plan (“EMP”) is currently in draft format and is scheduled to be submitted for approval in April 2008. Environmental programmes are already in place in support of the EMP and environmental audits have been conducted with satisfactory results.

The Relocation Action Plan (‘RAP’) is a key component of the overall Munali project. The RAP is the result of a detailed Social Impact Assessment undertaken as part of the Bankable Feasibility Study and it has as its primary objective the comfortable resettlement of members of the Munali community that formerly occupied areas that will be physically affected by the operations.

Planning for, and implementation of the RAP has involved continuous close consultation with the local community and its representatives. The Company particularly wishes to acknowledge the high level of support and cooperation it has received from the Munali community and the people throughout the Southern Province of Zambia.

Phase 2 of the RAP program is now complete and an additional 18 households are in the process of being re-located. Phase 2 included the establishment of road infrastructure, water boreholes, a local brick factory, cement brick houses and preparing maize and other product fields in support of the traditional culture of the surrounding community.

Phase 3 is scheduled to start in mid-April 2008 and the company has decided to train and employ the local community as the RAP construction team. The programme is fully supported by the community, the traditional leaders, local and central government.

The community development programme is also scheduled to start early in 2008 and will include the HIV/AIDS awareness and prevention programme and the Malaria Rollback programme, already implemented in December 2007. Initiatives such as a mobile clinic in conjunction with the government unit and the construction of a skills training centre are scheduled in the programme.

During the recent floods in the Southern Province region, the Company assisted the flood victims in local communities through the provision of food and other needs.

The Malaria Rollback programme started in October 2007 with the assistance of government support groups and has focused mainly on the following initiatives to date:

• Spraying of houses and buildings on site and community villages against mosquitos to a radius of 25 kilometers;
• Providing free testing to all employees, contractors and the community; and
• Providing free anti-malaria treatment to employees, contractors and the community through the establishment of a mobile clinic taking the service to the villages.

This effort has reduced the level of recorded malaria cases and the programme is scheduled to continue with the input and support of local leaders and government.

A number of initiatives have commenced to investigate options for the future growth of Munali.

A Scoping Study is underway to examine development options for the Voyager deposit which could either increase the annual production rate at Munali or alternatively could extend the life of the project beyond 10 years. Additional drilling will be undertaken in 2008 with the objective of locating more ore between Enterprise and Voyager and down-dip of both deposits.

The Company has recently approved an upgrade to the concentrator to increase production from the project to 10,000 - 10,500 tonnes of nickel in concentrate per annum. The concentrator capacity will be upgraded to 1,200,000 tpa. Capital costs for the upgrade are estimated at US$2.5 million and the upgrade will be funded from cash reserves.

The application of Dense Media Separation (DMS) at Munali is currently being investigated through a Scoping Study. Preliminary testwork shows that Munali Enterprise ore performs well when subjected to DMS. The use of the DMS process will potentially allow the profitable processing of lower grade nickel ores, thereby increasing overall contained nickel tonnes. The application of a lower cut off grade will require a re-focus on the exploration potential of the Munali Intrusion.

This exploration refocus will include the Enterprise Mine and Voyager resource, as well as targets to the north of Voyager such as Intrepid (previously known as the North West Target) and Defiant. Enterprise, Voyager and Intrepid will be subject to additional drilling programmes in 2008 to update the resource definition.

As mentioned above, drilling continued at Enterprise and Voyager in 2007 and was successful in increasing the confidence in the Enterprise resource and in providing an initial resource estimate for the Voyager deposit. This programme will be continued in 2008 with the objective of locating additional ore between these two deposits and also down-dip.

Drilling will also be directed at assessing the resource potential of the Intrepid and Defiant target areas in the northern part of the Munali Intrusion, based on the fact that the geological setting of the mineralisation intersected along the southwestern side of the Munali Intrusion is consistent, with the same controls on nickel sulphides over the entire length of the intrusion (over 2.5km).

The exploration programme for 2008 will include ground electromagnetic surveys aimed at locating new zones of mineralisation to the north of the Munali Intrusion, based on structural geological work that suggests the Intrusion may plunge in a northerly direction.

Exploration drilling in the northwest portion of the Munali Intrusion near the Intrepid and Defiant exploration targets indicates a north-western plunge to the Munali intrusion. Ground EM is planned to cover the potential extension of the Munali intrusion to the northwest. Ongoing drilling and scoping work are planned for the Intrepid Target as potential sources of additional ore for the Munali plant.

Revised mapping at Munali has updated the geologic map of the Munali Gabbro.

An evaluation of the Munali Fault Zone was initiated in the second quarter of 2006, commencing with an electromagnetic (VTEM) survey on a 60km corridor along the fault. This survey identified a number of conductive targets which were systematically evaluated through reconnaissance geological mapping and, where warranted, by geochemical soil sampling. The results generally indicated prospectivity for sediment hosted copper mineralisation rather than for mafic to ultrarmafic hosted nickel.

These programmes led the Company to focus exploration efforts in the Chikani area, approximately 25km to the south of Munali. Three reconnaissance diamond drill holes drilled in 2006 identified a zone of approximately 35m drilled width containing sulphide bearing black shales with copper bearing sulphides. This appears to be the source of the copper anomalism in the stream and soil sampling. Ongoing work is focused on evaluating the potential for sediment hosted copper style targets similar to the Copperbelt.

Further interpretation of regional data led to the recognition of three additional major fault structures, as well as the south-easterly continuation of the Munali Fault. An extensive programme of stream sediment sampling to evaluate these four structures was commenced in 2006 and completed in 2007 with 1,575 stream sediment samples collected during the 2007 survey.

Drainages with copper values greater than 50ppm copper are clustered in the Chikani and Luwanya areas. This is the current focus of ongoing field work. Anomalous drainages were field checked and locations for grid soil sampling were selected in the Chikani and Luwanya areas. Approximately 2,400 soil samples were collected in late 2007 and the results are currently being evaluated. This will form the basis for the evaluation of drill targets in 2008.

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information contained in this report has been presented in accordance with the JORC Code and references to “Indicated”, “Inferred Resources” and “Probable Ore Reserves” are to those terms as defined in the JORC Code.

Information in this report relating to exploration results and mineral resources is based on data compiled by Mike Dunbar (a consultant to the Company and full time employee of the Mitchell River Group) and John Schloderer (an employee of the Company), who are both members of The Australasian Institute of Mining and Metallurgy. Mike Dunbar and John Schloderer both have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person under the 2004 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Mike Dunbar and John Schloderer consent to the inclusion of the data in the form and context in which it appears.