The Build-Operate-Transfer (BOT) contract calls for the installation of a turnkey metals extraction and recovery-processing system, to be operated by MR3 during the training and treatability period, and then transferred to Fluor Hanford personnel for continued treatment of chromium VI contaminated groundwater.

On September 22, 2004, MR3 and Fluor Hanford completed its first media generation cycle as specified in the BOT contract, in which extracted chromium VI is stripped from the MR3 processing system, reduced to chromium III, and removed for permanent disposal.

The MR3 modular chromate removal system was installed ahead of schedule and has treated over 3 million gallons of contaminated groundwater at the 100 D area, the site of old plutonium reactors, on the Nuclear Reservation since it began operations in late July of this year.

The first regeneration of an MR3 adsorbent media column was successfully completed in September and the column was returned to service, marking a significant milestone in the project.

Dr. William C. Tao, MR3's CEO, commented: "We are extremely pleased that this collaboration between Fluor Hanford and MR3 Systems has led to such a successful implementation of our innovative metals recovery and remediation technology."

"We look forward to completing the BOT contract on October 1, 2004, and transferring operations of our system to Fluor Hanford personnel. MR3 will continue to support Fluor Hanford in training and expanding the current 50 gpm system for further applications in this environmental market sector."

The turnkey system is completely automated and the control software has been extensively enhanced over previous versions. This enhanced MR3 system was developed in conjunction with Fluor Hanford to remove hexavalent chromium from groundwater entering the bottom sediments of the Columbia River as it runs through the site.

These sediments are prime spawning grounds for salmon. Concentrations as high as 100 micrograms per liter have historically been measured in the bottom sediments of the river as it runs through the Reservation.

Hexavalent chromium is extremely toxic to aquatic life and is a carcinogen for humans. Laboratory testing indicates that water treated with the MR3 system at the Hanford site has no detectable levels of hexavalent chromium in the effluent.

This new approach to treating the groundwater has tremendous potential to significantly reduce the costs associated with using adsorbents to effect the removal of the toxic form of chromium from large volumes of contaminated water.

Based on current results, the Company believes that its approach could ultimately cut current treatment costs by over 90%. In the MR3 system, the toxic form of chromium is separated from the groundwater and converted to the less toxic trivalent form of chromium.

It is then converted to a solid, which can be safely put in a landfill. Management believes that its successful implementation of an MR3 environmental metals remediation system at commercial operating levels positions the Company to be a prime candidate for similar global remediation projects.

MR3 met the challenge of an accelerated deployment schedule to provide an installed operational system by August 1, 2004. The 100D treatment operation at Hanford is scheduled to expand in FY 2005, through a new Request for Proposal, to accommodate 200 gallons per minute flow, up from the current 50 gallons per minute.

Management believes that MR3 is poised to become a major technology provider in future expansion of pump and treat operations at Hanford and numerous other sites where groundwater has become contaminated with metals.

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