2002-02-07 ASX Announcement Prospectus - Shareholder Update

PROSPECTUS -NEW ISSUE

The Board of Directors of Gippsland Limited ("Gippsland or Company") hereby announce that Gippsland will lodge today at the ASIC and ASX a placement prospectus for the issue of up to 10,000,000 shares in Gippsland at the issue price of 12 cents each to raise up to approximately $1,200,000.

The issue is not underwritten. There is no minimum level of subscription pursuant to the issue. No oversubscriptions will be accepted. Gippsland however is in negotiations with a broking firm which is a member corporation of the Australian Stock Exchange Limited, to arrange the placement on a best endeavours basis. These negotiations are expected to conclude shortly. Gippsland will pay a placement fee of 5% (plus GST) of the amount subscribed (and accepted by Gippsland) to any holders of dealers licences in respect of application forms bearing the stamp of such dealers. No brokerage or stamp duty will be payable by applicants subscribing for shares.

The purpose of the issue is to raise funds for the following:

to fund a bankable feasibility study upon the Abu Dabbab tantalite project located in Egypt in which the Company has a 50% interest by way of an incorporated joint venture with the Egyptian Government; administration of the Company; and working capital.

This issue opens today and will close on 14 February 2002 or as otherwise determined by the directors of Gippsland.

The immediate effect of this issue (should it be fully subscribed) will be to increase cash reserves by approximately $1,200,000 (less the expenses of this issue) to enable the Company to pursue its objectives.

If the maximum number of shares issued pursuant to this Prospectus are issued they will constitute 14.06% of the presently issued share capital which currently totals 71,131,127 shares. When aggregated with the number of options previously issued by the Company which totals to 500,000 options, the total percentage of shares in the Company the subject of this issue will constitute approximately 12.3% of the expanded issued capital of the Company on a fully diluted basis.

The new ordinary shares will rank equally with other ordinary shares on issue and will participate fully in any dividends announced after the date of allotment. No assurance is given by the directors of Gippsland as to future dividends since they are dependent on earnings, the financial condition of Gippsland and other factors.

ABU DABBAB TANTALITE PROJECT

In order to keep the market fully informed of the scale and detail of the Abu Dabbab project, the Company is pleased to provide further details with respect to geology, past exploration and the determination of the measured, indicated and inferred resources announced to the market on 22 January 2002.

Geological Description

The Ta-Nb-Sn mineralization of Abu Dabbab occurs as disseminated cassiterite and niobio-tantalite, hosted in a stock of apogranite. The apogranite has been emplaced along a NW trending shear zone within a sequence of basic to-ultrabasic rocks and volcano-clastic sediments. No significant mineralization is present in the country rocks surrounding the apogranite, and for modelling purposes, the deposit limits correspond to the outline of the apogranitic body.

The apogranite is leucocratic, holocrystalline, white grey to greenish blue, is mostly fine to medium grained, and in part shows a porphyritic texture. The deposit has been subjected to various alteration processes which are manifest in the form of greisenization, microclinization, silicification and albitization.

Previous exploration

As reflected in previous ASX announcements, a significant amount of exploration work has been previously completed at Abu Dabbab by successive Egyptian, Russian and Italian expeditions. The work was very comprehensive and included in part the items listed in Table 1.

An Egyptian-Russian resource/reserve estimation for Abu Dabbab was completed according to the Soviet protocol at that time. Resources were estimated for the C1 and C2 categories (Table 2).

Table 2: Abu Dabbab Resource Estimate

A second resource estimate was undertaken by an Egyptian-Italian team which incorporated the additional sampling data. The method used was geostatistical in that semi-variograms were determined using the adit sampling data which were then applied to a block. The results which were quoted as reserves (unclassified) and are summarised in Table 3 and include only that part of the resource above the level of the adits.

Table 3 Abu Dabbab Resource estimate

Gippsland has recently completed a resource estimate for the Abu Dabbab tantalite deposit. The estimate, which involved a complete reassessment of all of the available geological data generated from past exploration programs, brought the resource categories into line with the JORC Code.

The resources were calculated using a cut-off of 0.01% Ta2O5. Upper cuts were applied to the metals based on probability plots of metal distribution. The method of estimation was oreblock modelling within a wire frame. Grade interpolation was by inverse distance squared with appropriate search radii and orientation determined by semi-variography.

Assignment to the resource categories was based on sampling density and extent of exploration work completed. The resource estimation parameters and criteria are summarised in Attachment "A". As announced to the ASX on 22 January 2002, the resource determinations are summarised in Table 4.

Table 4: Resource Determinations

Note: minor mismatch in totals due to rounding of tonnes and grade

Reserve Determinations

The Company is currently preparing to conduct pit optimisation studies on the deposit as part of the resource to reserve conversion.

Tantalum Prices - Scoping Study

As is the case with all metals, the price of tantalum is subject to fluctuation, however contrary to most industrial metals, the Directors recognise that the tantalum price is in the long term on a secular up trend:

Table 5: Tantalum Price Trend

Source Reference:

TANTALUM - ANALYSIS OF THE METAL & THE MARKET
Robert L Hunziker, M.A. Economic History
Co-Manager NRJ Investment Group Ltd
Los Angeles, California, USA
September 26, 2001

Current long-term contract prices for tantalum pentoxide (Ta2O5) are generally believed to be in the order of US$65-75 per pound (US$143 - 187/kg). Whilst current spot prices for Ta2O5 are in the order of US$40/lb, due to the long standing price up-trend for the metal, the Company employed a price of US$50/lb in the recent Abu Dabbab scoping study details of which were released to the ASX market on 4 February 2002.

Whilst the scoping study used the above somewhat depressed price of US$50/lb for Ta2O5, the Directors are of the opinion that the long-term price for the material will be in the order of US$65-75/lb.

It should be noted that the in-situ value of approximately US$590 million stated in the Company's ASX announcement dated 22 January 2002 was based upon the Ta2O5 price of US$70/lb. Had the current depressed spot Ta2O5 price of US$50/lb been employed, the in-situ value would total approximately US$412 million. It should be noted also that the value of in-situ metal does not in itself imply viability but gives an indication of the scale and potential of the deposit.

FEASIBILITY STUDY

The Directors are presently considering a number of proposals from overseas and Australian based companies wishing to undertake the feasibility study. The result of these deliberations is expected to be announced prior to the end of February 2002.

Yours sincerely
John (Jack) Telford
Executive Chairman

Note: In accordance with Listing Rule 5.10 of the Australian Stock Exchange Limited, the geological information in this report that relates to mineral resources and ore reserves is based on information compiled by Gippsland Director Dr John Chisholm, who is a Fellow of the Australasian Institute of Mining and Metallurgy, with over 25 years experience in the mining industry.

ATTACHMENT "A"

Resource Estimation Parameters and Criteria Chronology of previous exploration

ASX 02.02.07