FOCUS MINERALS LIMITED (ASX: FML)

ASX RELEASE                  21 October 2008

Activities Report for the Quarter Ended

30 September 2008

HIGHLIGHTS

CORPORATE & FINANCIAL

?        Cash flow positive for the September Quarter through revenue from gold operations of $654,000

?        Hedging of a further 6,000 ounces at an average price of  $1,140/oz to take advantage of current high gold prices.

?        Revenue for the Quarter of A$4.13 million generated from the sale of 4,281oz of gold at an average received price of A$966/oz.

?        Cash and bullion of A$7.4 million on hand as at 30 September 2008.

PRODUCTION

?        Latest milling campaign completed in early October generated 5,898 ounces for a project to date total of 10,354 ounces.

?        Ore drive development completed at Perseverance Gold Deposit in early September enabling the commencement of full-scale production to begin.

?        Metallurgical recoveries for Perseverance ore over the quarter of 91%.

?        Average direct cash cost of A$537/oz for the Quarter which represents a good achievement in the current environment and ensures solid operating margins.

?        Focus targeting gold production of approximately 54,000 ounces in FY09 through Perseverance stoping and accelerated development of adjacent Coolgardie deposits.

EXPLORATION & DEVELOPMENT

Gold

?        Optimisation of a number of nearby open cut projects underway to take advantage of historically high gold prices.

?        Development in progress at Countess Deposit including short decline access from the existing Empress workings. Development of a short strike drive to begin during December 2008 Quarter.

?        Step-out drilling at Perseverance encounters further high-grade intersections including 1.66m @ 33.78g/t, 2.24m @ 40.16g/t, 2.97m @ 17.60g/t and 10.19m @ 6.31g/t, which is expected to further extend the life of the Perseverance deposit.

?        Infill drilling at Countess encounters additional high-grade intersections including 7m @ 8.49g/t and 8.87m @ 8.07g/t.

Nickel

?        Feasibility Study completed at Nepean, however a commercial decision to mine has been deferred in order to capture a potentially greater return from the project from expected nickel price increases later next year

?        Planning continues for deep exploration at Nepean to target extensions below the current mine workings to determine the extent of mineralisation at deeper levels

OPERATIONAL REVIEW

GOLD ? COOLGARDIE GOLD PROJECT

Production Update

The latest Perseverance milling campaign was very successful and generated gold production of 5,898 ounces. This increases total gold production to 10,354 ounces since production began in April 2008. Due to maintenance of the Greenfields Mill, the milling campaign ran one week into October (Gold Produced - Sept: 3,982oz / Oct 1,916oz)

A summary of gold production for the September Quarter is shown in Table 1 below:

Table 1 ? September Quarter Gold Production

^[1] Due to maintenance of the Greenfields Mill the September milling campaign ran one week into October (Gold Produced -  Sept: 3,982oz  / Oct 1,916oz)

*Gold production is actual gold refined during the period.

# Cash operating cost refers to the cost of refined gold and includes all expenditures directly incurred on mining, crushing and processing including site administration costs. 

Perseverance ore is being processed at the nearby Greenfields Mill under a priority milling contract with Higginsville Mining Pty Ltd. The milling contract gives the Company priority milling to a maximum of 480,000 tonnes per annum until June 2017.

Revenue

Revenue for the Quarter was A$4.13 million generated from the sale of 4,281 ounces of gold at an average price received of A$966/oz. This achieved a gross cash margin of A$429/oz before development and capital expenditure.

Stoping

The final preparations for long-hole stoping at the Perseverance deposit were completed during the September Quarter with the mobilisation of a long-hole drilling rig and the completion of cable bolting. Stope production commenced in September from the 300RL level. This production will continue into the 275RL and 250RL levels, with ore production to be progressively developed to achieve full production during December 2008.

Production Outlook

Focus is targeting increased production for the December Quarter as a result of increased volumes of ore produced through stoping. The mine plan currently developed for the Perseverance deposit forecasts an annual production rate for the financial year to June 2009 of approximately 54,000 ounces of gold.

Countess Deposit ? Development Underway

In the March 2008 Quarter, Focus announced a substantial increase in Inferred and Indicated Resources at the Company?s Countess Gold Project, located within the Tindals Mining Centre of the Coolgardie Gold Project. The resource at Countess currently consists of a JORC-compliant estimated Indicated Resource of 256,200t @ 4.4g/t for an estimated 36,000 ounces and an estimated Inferred Resource of 196,700t @ 3.4g/t for approximately 21,700 ounces.

A Pre-Feasibility Study was undertaken on the Countess Resource which was aimed at determining the economic viability of the new resource and the synergies of potentially mining Countess in conjunction with Perseverance. Based on the results of the Pre-Feasibility study, the Company decided to develop the Countess deposit in a staged approach to gain further geological information.

Development of a short strike drive during the December Quarter will also establish drilling positions to determine deeper extensions of the Tindals and Empress deposits with a view to adding additional JORC-complaint resources to those already defined. The development work for Stage 1 at Countess has now been completed with first mining and production to commence in October.

Exploration

During the September 2008 Quarter step out drilling at Perseverance continued. This drilling was targeted at the depth and southern extensions of the Perseverance ore body (which had not been closed off).

Results to date include 1.66m @ 33.78g/t, 2.24m @ 40.16g/t, 2.97m @ 17.60g/t and 10.19m @ 6.31g/t. An updated interpretation of the Perseverance ore body commenced towards the end of the September 2008 Quarter. This drilling highlighted the upside potential at Perseverance. Further step-out drilling will target these areas and an updated mining reserve and resource for Perseverance is expected to be completed during the December 2008 Quarter.

Table 2 ? Summary of Perseverance step out drill intercepts, July-September 2008

A small infill drill program was conducted at Countess ? a diorite-hosted ore body within ultramafic rocks ? late in the September 2008 Quarter to confirm the widths of the ore body at the location of the first strike drive and to provide core for metallurgical testing. Results received to date include 7m @ 8.49g/t and 8.87m @ 8.07g/t. An updated interpretation of the results will be done early in the December 2008 Quarter prior to the commencement of the first strike drive.

Table 3 ? Summary of Countess infill drill intercepts, July-September 2008

A re-interpretation of the Brilliant Deposit highlighted a number of potential targets where the mineralisation is open along strike and on parallel structures to the east of the deposit. An RC drill program commenced on the last day of the September 2008 Quarter at Brilliant.

Once the Brilliant drilling has been completed the rig will move onto the seven highest priority targets from the extensive ground Electo-Magnetic (EM) survey conducted during the March 2008 Quarter over the Redemption corridor and the Tindals Area (drilling has been brought forward from 2009).

GOLD - THE MOUNT GOLD PROJECT

Situated on the eastern edge of the prolific Widgiemooltha Dome, The Mount Gold Project includes the historic underground Mount Gold Mine, which was operated over two extensive periods, 1921-1986 and 1990-2003.

The 900ha project has an approximate inferred gold resource of 2Mt @ 5.5 g/t Au, for 370,000 ounces of gold. Mineralised zones remain open below 225m, where drilling has returned intersections including 2m @ 24.75 g/t Au at 250m vertical depth. Untested host structures also continue along strike to the north and south of the mine.

Additional high-grade gold intercepts from The Mount include:

• 11m @ 21.7 g/t Au;
• 20m @ 12.8 g/t Au;
• 19m @ 14.0 g/t Au;
• 12m @   6.3 g/t Au; and
•   4m @ 37.9 g/t Au.

The narrow high-grade nature of the mineralisation at The Mount has made it difficult for Focus to decide on the correct mining method for the ore body. It is not likely that further drilling will make this decision any easier.

To discover the true nature of the ore body and to determine the best mining method, it has been decided to drive across several of these lodes (refer Figure 2 below) from the existing underground workings. This in effect will give the Company a 3m x 3m horizontal drill hole at a depth of 60m and will give the best geological information possible. From this, a decision can be made as to whether to pursue a small scale underground mine, a large underground mine or possibly an open cut mine

NICKEL ?  NEPEAN NICKEL PROJECT

The 100%-owned Nepean Nickel Project is located 25 kilometres south of Coolgardie in Western Australia and is centred on the historic Nepean nickel mine which produced 32,303 tonnes of nickel metal between 1970 and 1987 at a recovered grade of 2.99% nickel. The Project had an inferred ore estimate of 409,000 tonnes of ore at 2.39% nickel at the time of the mine closure in 1987, contained within underground remnant blocks and the crown pillar. 

In addition to the historical mine, which remains open at depth, the Nepean tenement package incorporates a 30km strike length of Kambalda-style komatiites with significant nickel sulphide mineralisation potential.

Due to a continuing decline in the nickel price over recent months and the outlook for a further decline into the near future, Focus has taken a commercial decision to defer commencement of full-scale operations until the nickel price outlook improves.

In the meantime, work continues on obtaining operational permits for the mine, which will allow mining operations to commence as soon as the nickel price environment and outlook improves to a level deemed appropriate by Focus. It is anticipated that full regulatory approvals should be in place during the December Quarter.

With the deferral of full scale mining, planning has begun for the next phase of exploration at Nepean which will target extensions below the current mine workings to determine the extent of mineralisation at deeper levels. Focus is confident of achieving positive results from this work, which would significantly enhance the overall potential of a future modern mining development at Nepean. 

CORPORATE

Cash and Bullion

As at the end of the September Quarter, Focus had cash and bullion worth approximately $7.4M

Hedging

Hedging of a further 6,000 ounces at an average price of $1,140/oz was completed during the Quarter. This takes the total amount of hedging to 38,000 ounces, providing Focus with protection against downward variations in the gold price whilst still retaining exposure to the spot market.

ENDS

COMPETENT PERSON?S STATEMENT

The information in this report relating to Resources are based on work supervised by Dr Garry Adams who is a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Dr. Adams has the relevant experience as a ?Competent Person? as defined in the 2004 edition of the Australasian Code for Reporting of Mineral Resources and Ore Reserves in relation to the mineralisation being reported. Dr. Adams is Geology Manager of Focus Minerals Ltd and consents to the inclusion of the material in the form and content in which it appears.

BACKGROUND INFORMATION ? FOCUS MINERALS LTD

Focus Minerals Ltd (ASX: FML) is an Australian-based exploration and development group whose focus is to become a significant gold and nickel producer in the Coolgardie-Kalgoorlie-Widgiemooltha region of Western Australia.

Focus Minerals is the largest landholder in the Coolgardie Gold Belt located in Western Australia, 560km east of Perth and 35km west of the ?Super Pit? in Kalgoorlie-Boulder. More than 2.6 million ounces of gold has been produced from the Coolgardie gold belt alone since 1892. Focus holds the mineral rights to more than 210sq km of tenements including an extensive inventory of Measured, Indicated and Inferred gold resources as well as the 1.2mtpa Three Mile Hill processing plant.

Focus Minerals is also fast tracking development of its wholly-owned Nepean Nickel Project (current estimated resource totaling 591,300t @ 2.2% Ni) located 25km south of Coolgardie.

Fig 1. Plan View of The Mount                                            

Fig 2. Proposed Decline Development

The Mount Cross Section ? 4890N

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