Essential Power…Infinite Possibilities

December 31, 2010

Formation Metals Closes $77.7 Million Bond Issue for Idaho Cobalt Project

Vancouver, B.C., December 31, 2010 Formation Metals Inc. (FCO-TSX) (“Formation”) is pleased to announce that its wholly owned subsidiaries, Formation Capital Corporation, U.S. (the “Company”) and Essential Metals Corporation, will be the sole beneficiaries of US $77.7 million in Federal Stimulus Program Recovery Zone Facility Bonds that were issued prior to their December 31, 2010 deadline (see Formation News Release dated December 16, 2010). Proceeds from the sale of the bonds are to be used exclusively for the development of its 100% owned Idaho Cobalt Project (“ICP”). Formation continues to work to secure credit approval for long term bank financing (see news release dated November 30, 2010) and raise the additional capital required to complete construction of the ICP. The capital costs of the project are estimated in the ICP feasibility study at $138.7 million.

The bonds were issued by The Industrial Development Corporation of Lemhi County, Idaho and The Industrial Development Corporation of Shoshone County, Idaho, after meetings were held on December 27 and December 30, 2010 in Lemhi and Shoshone Counties respectively. The investment bankers Thornton Farish Inc, acted as the underwriter for the Recovery Zone Facility Bonds.

“I am pleased that we were able to get these bonds issued before they expired”, stated Mari-Ann Green, Formation’s Chairman and C.E.O. She continued, “These types of bonds are ideally suited for mine financing, as many tax exempt bonds carry low floating interest rates which typically use the SIFMA Municipal Swap Index as a benchmark and are long term, in our case in excess of 25 years. Having this money in place will go a long way to helping the Company secure the credit approval and the remaining funds required. I am excited for the people of Idaho and in particular, the local Lemhi and Shoshone County residents that will benefit from the 200 or so jobs the cobalt project is expected to generate during the life of the mine as well as the additional positions that will be required for construction. We expect construction will begin in earnest this spring.”

The 100% owned Idaho Cobalt Project is a unique, fully permitted primary cobalt deposit that will be capable of producing high purity cobalt metal. Cobalt is used in a wide variety of environmental and high-tech applications that include the re-chargeable battery and aero-space sectors.

Formation Metals Inc. 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.

For further information please contact:
E.R. (Rick) Honsinger, P.Geo., V.P. Corporate Communications
Formation Metals Inc., 1730 — 999 West Hastings Street, Vancouver, BC, V6C 2W2
Tel: 604-682-6229 - Email: inform@formationmetals.com — Web: formationmetals.com

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This press release contains “forward-looking statements” within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on the Company is available at www.sedar.com.

The statements contained in this news release in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.’s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to the parties as of such date. It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.

View the Previous News Release:
December 16th, 2010, Formation's Stimulus Act Recovery Zone Bond Allocation Increased to US $77.7 Million by State of Idaho
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View the Next News Release:
January 6th, 2011, Formation Signs EPCM Letter of Intent with JDS for Idaho Cobalt Project