Emerging Australian nickel producer, Allegiance Mining NL has started mining of nickel sulphide ore at its 100% owned Avebury Nickel Project near Zeehan West Coast Tasmania.

Mining Contractor Barminco Limited has started mine development and the North Avebury development drive has produced development ore from the main North Avebury orebody.

 This large orebody is approximately 40 metres thick at this point and ground conditions are described as good for mining, as expected. The development ore is being stockpiled in readiness for the mill commissioning in the second half of 2007.

 Bulk earthworks for the process plant site are complete and the construction manager for the plant construction engineers, Metplant Engineering Services Pty Ltd has moved to site. Grid electrical power is reticulated throughout the mine and the underground pump station is fully operational. The main ventilation fan has been secured and is being installed over the Viking ventilation shaft. The smaller services shaft is now equipped and fully functional. The tailings dam is well advanced and is ahead of the critical path schedule at this time.

 Allegiance Nickel chairman Tony Howland-Rose says, "We have taken measures to limit the delays and cost escalations due to the current construction boom, by early ordering of key capital items and a strategy of prequalification and appointing of Tasmanian construction and fabricating contractors.

 "We believe Tasmania has been less affected by the cost inflation and delays seen elsewhere. Whilst not risk free, we feel this is the best route to early production," Tony Howland-Rose says.

 Meanwhile Allegiance Mining NL has agreed to issue by way of placement 7,500,000 fully paid ordinary shares to the Jinchuan Group Ltd at an issue price of A$0.53 per share to raise Aus$3,975,000.

 The share issue will fund the continuing development and construction of the Avebury Project.

 The Jinchuan Group Ltd is China's largest, and the world's fifth largest, nickel refiner producing around 100,000 tonnes of nickel metal per annum. Tony Howland-Rose says this opportunity paves the road to further cement the close relationship between Allegiance Mining NL and the Jinchuan Group Limited.