Industrial Minerals Inc. Announces 640,000 Ton Mineral Reserve

    TORONTO--June 17, 2002--Industrial Minerals Inc. (OTCBB:INDM) announced today, through a summary review and geological report completed by Ben Ainsworth P. Eng., that the area that has been investigated for mining potential contains a reserve of 20,000,000 tonnes of mineral containing 640,000 tonnes of flake graphite.
    The qualification of reserves used in this report was made by Kilborn Engineering Ltd. and used by KHD (Canada) in a positive feasibility study in 1989. 700 meters (2310 feet) of trenching and 2100 meters (7000 feet) of diamond drilling were completed for a drill total of 7232 meters (23,900 feet) in 160 holes. Percussion drilling was carried out with 82 drill holes totaling 1207 meters (4000 feet). The drilling was carried out on a grid with a spacing of 64 m x 64 m (215 feet x 215 feet) with infill in higher grade areas at 23 m x 23 m (76 feet x 76 feet). The potential for further reserves exists on the property as the work programs delineating reserves to date have only covered approximately 20% of the known graphitic gneiss zone. Geological mapping of this zone reveals a continuous strike length of approximately 7,000 feet, with an average width of approximately one-half mile.
    The firm of Pincock Allen and Holt reviewed the reserves and developed an initial mine plan in 1990. This work was followed in 1992 by a study completed by Cominco Engineering Services Ltd. that was a review of the metallurgical process development and a preliminary cost estimate. These studies supported the general contentions of the KHD feasibility study. Environmental base-line studies carried out by Environmental Applications Group Ltd. indicate that the rock is not acid generating and no special problems were identified that would require unusual cost for control or remediation. A production rate was proposed in the feasibility study of about 20,000 tonnes of flake graphite per annum. This tonnage could be supplied for more than 30 years from the initial reserve.
    There is potential for a very large increase in the market size for appropriate quality flake graphite related to expected demand for fuel cell usage. An article in Industrial Minerals Magazine (November 2000 issue) projects a short term growth of over 25% for graphite used in high-technology applications. An increase of 80,000 new annual tonnes is projected for electrodes and conductive separators in the fuel cells being developed for the automotive sector. Other growth areas in the graphite markets, amounting to 20,000 new annual tonnes, include the use of flake in magnesia and alumina refractories and its use in the lithium ion battery. Recent increases in price indicate an increase in demand, particularly for good quality flake. The Bissett graphite has the potential to serve the demand for intercalated and exfoliated graphite flake used in the high technology growth areas of the market.
    Among the conclusions contained within the summary review and geological report is the following: "Sensitivity analyses carried out in the financial study show that the mining costs, graphite recoveries and prices would have to fall well out of expected ranges in order to cause financial failure of the project. A compound sensitivity study using a Monte Carlo simulation of financial outcomes was carried out using a range of variable cost, price, recovery and grade values. The ranges included reasonable "worst case" scenarios as well as the better expected values. The simulation, based on 1000 calculation cycles, indicated that the project should be financially robust under most adverse conditions. The Government of Ontario, Canada currently has a generally favourable attitude towards industrial development. Today, this province probably is the best jurisdiction for bringing on a greenfields project in Canada or the USA. The project has sufficient flexibility to be able to survive unforeseen price and cost swings, while requiring a relatively modest capital exposure. The potential for scaling up the size of operations rapidly as markets are developed offers a substantial upside to the future of the project."
    Copies of the summary report may be obtained from the corporate office of Industrial Minerals in Toronto, Canada by contacting John Melnyk at 416-979-4621.
    Industrial Minerals Inc. owns 100% of the undivided interest in the Bissett Creek Graphite patented mineral lease, containing a reserve of 640,000 tons of flake graphite, located in Maria Township in the Province of Ontario, Canada. The property is comprised of 28 patented claims covering an area of approximately 504 hectares (1,245 acres).

    Disclaimer: Statements, which are not historical facts, are forward-looking statements. The Company, through its management, makes forward-looking public statements concerning its expected future operations, performance and other developments. Such forward-looking statements are necessarily estimates reflecting the Company's best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. It is impossible to identify all such factors. Factors which could cause actual results to differ materially from those estimated by the Company include, but are not limited to, government regulation, managing and maintaining growth, the effect of adverse publicity, litigation, competition and other factors which may be identified from time to time in the Company's public announcements.