Primary Metals Inc.
TSX VENTURE : PMI

Primary Metals Inc.

May 31, 2005 18:03 ET

Primary Metals Inc.: Agreement with Majority Shareholder for Financial Support for Tungsten Mine

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 31, 2005) - Primary Metals Inc. ("Primary") (TSX VENTURE:PMI) has concluded an agreement with its majority shareholder Almonty, LLC ("Almonty") pursuant to which Almonty will provide to Primary's indirect wholly owned subsidiary Beralt Tin & Wolfram (Portugal) S.A.R.L. ("Beralt") a US$500,000 convertible credit facility, will assume 50% of Beralt's obligations under a capital lease of equipment for the Beralt's Panasqueira operating tungsten mine in Portugal, will assist Beralt in securing a new sales contract based on specified terms with the purchaser of tungsten concentrate from the Beralt mine and will assist Primary in securing additional capital, as and when necessary, for the improvement and repair of the Beralt mine facility. Subject to Beralt securing a new sales contract on specified terms with an arm's length purchaser of tungsten concentrate produced by the Panasqueira mine, Almonty will be entitled to share equally with Beralt in the increased revenue stream, if any, that Beralt realizes from the new contract.

The Credit Facility will be made available to Beralt at the rate of US$125,000 per quarter, commencing July 15, 2005, to the maximum aggregate amount of US$500,000, will have a five year term, bear interest at the rate of 5% per annum on amounts drawn and will be convertible into units comprising one share and one share purchase warrant at a conversion price fixed at the date of draw down in accordance with the policies of the TSX Venture Exchange.

Assuming the Credit Facility is fully drawn and converted at a price of Cdn$0.65, an exchange rate of US$1.00 equals Cdn$1.25, no other issuances of securities by Primary or exercises of convertible securities and no other acquisition or disposition by Almonty of shares of Primary, Almonty's share ownership would increase by 961,538 common shares to 6,168,230 common shares, representing 54.5% of the issued and outstanding shares, and a further 961,538 share purchase warrants of Primary.

The agreement will provide Beralt with financial support, financial relief under its current capital lease obligations and, if a new tungsten sales contract is entered into on the specified terms, provide Beralt with an immediate increase in revenue from tungsten sales based on current ammonium paratungstate ("APT") prices, the security of a longer term sales contract and the potential to realize further revenue if the price of APT increases.

The Panasqueira mine has a long history of production of high quality wolframite concentrates and is a dominant producer of tungsten concentrates outside China. Mr. Jonathan Carter, President of Primary and Chairman of Beralt, commented, "This agreement will be of significant benefit to Primary and Beralt and provides an immediate opportunity to improve tungsten sales revenue from Panasqueira as well as ensuring the availability of funds for new mine equipment and further development. Beralt is now rebuilding with expectations for a profitable future." Recent news releases and further information concerning Primary and Beralt is available on Primary's website at http://www.primarymetals.ca and under Primary's profile at http://www.sedar.com.

A material change report respecting the transaction has been filed pursuant to OSC Rule 61-501, and can be accessed under Primary's profile on SEDAR at http://www.sedar.com. The transaction may close prior to 21 days following the filing of the material change report if in the opinion of Primary an earlier closing is reasonable and necessary in the circumstances to permit Primary to benefit from the current increase in APT price.

On Behalf of the Board of Directors,

James Robertson, Director

The TSX Venture Exchange does not accept responsibility for the adequacy or the accuracy of this release.

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