Monday, August 29, 2011

Formation Metals Signs Agreement for Underground Mining Operations and Provides Construction Update on Idaho Cobalt Project

Vancouver, B.C., August 29, 2011 Formation Metals Inc. (FCO-TSX) ("Formation") announced today that its 100% owned subsidiary, Formation Capital Corporation, U.S., (the "Company") has now signed an agreement for underground mining operations at its 100% owned Idaho Cobalt Project ("ICP") with Small Mine Development, L.L.C. (SMD) and has also been provided an update on the construction progress by JDS Energy & Mining (JDS).

Construction photos provided by JDS can be found in the "Construction Photo Gallery" located on the home pages of both target="_blank">www.idahocobalt.com.

JDS, the Company's project and construction manager, advises that construction is advancing as planned.

Construction Progress - Mine-site and Mill, Salmon, Idaho:

Road Work:

• Upgrading on access roads complete
• Rough grading on site roads and portal bench underway
• Rock crushing for overall construction purposes is on-going

Crusher and Concentrator:

• Located at the top of the mountain in an area called the Big Flat, the ore will be delivered here via the tram and crushed and milled into concentrate
• Crusher and concentrator pads are under construction and nearing completion
• Concrete installation is planned to start in September
• Fabrication of both the concentrator and crusher buildings to follow

Tram:

• The approximately 2,500 foot long aerial tram will hoist the ore 1,000 feet in a 6 cubic yard tram bucket from the mine portal to the crusher and concentrator on the Big Flat
• Construction of tram tower will commence after competitive bids analysed

Powerline:

• Idaho Power Corporation completed work on switch-yard upgrades
• ICP power transmission line construction commencing next week

Portal Bench:

• A level pad is being constructed at the 7,060 foot elevation (mine entrance) which will serve as the platform for a shop, power transformer, facilities for the aerial tram
• Excavation is now in progress
• A mechanically stabilized earth (MSE) wall to support the portal bench is now under construction by Hilfiker Retaining Walls
• MSE wall materials expected to be delivered first week September

Additional Site Earthworks:

• Excavation of wetland mitigation pond on-going
• Tailing and waste rock storage facility (TWSF) construction advancing

Construction Progress - Cobalt Production Facility, Kellogg, Idaho:

Concrete Work:

• Letter of Intent has been signed with Contractors Northwest Inc. (CNI) of Coeur d'Alene, Idaho
• CNI intends to set up mobile work structures and move equipment to the Kellogg site next week

Building Construction:

• Garco Building Systems, out of Spokane, Washington has been selected as the building contractor and the contract negotiations are now in final stages

Contract for Underground Mining Operations:
Small Mine Development, L.L.C., founded in 1982 by Ron Guill, former Marine Corp Officer and Mine Engineer and operating out of Boise, Idaho, are leaders in mechanized underground mining innovation. They pioneered the use of cemented backfill in underhand cut and fill mining which is now widely utilized for underground projects in Nevada and will also be used in the Idaho Cobalt Mine. SMD will be responsible for setting up and operating a dedicated team of mine workers and providing the materials and equipment necessary for safe, productive and cost effective mining operations at the Idaho Cobalt Mine. Bill Scales, President, Formation Capital Corporation, U.S. adds, "SMD has a reputation for safe and efficient mining and we are very pleased to have them join our team".

Formation Metals Inc. is a well established, mineral exploration, development and refining company that is dedicated to the principles of environmentally sound mining and refining practices, and believes that environmental stewardship and mining can co-exist. Formation trades on the Toronto Stock Exchange under the symbol FCO.


FORMATION METALS INC.

"Mari-Ann Green"

Mari-Ann Green,
C.E.O.