For personal use only - ASX · There were no lost time injuries recorded during the June 2013 quarter. ... SCONI Lucknow deposit For personal use only. Metallica Minerals Limited

Quarterly Report to 30 June 2013

ASX Release24 July 2013

Metallica Minerals LtdAn Australian scandium-cobalt-nickel & zircon-rutile resource development Company

ASX:MLM

ISSUED CAPITAL (30/06/13) 159,951,993 Ordinary Share 14,600,000 Options* 2,900,000 Performance Rights* *See Appendix 5B for more detail (Lodged 12/07/13)

SHAREHOLDERS (30/06/13) 2,181 shareholders

Top 20 shareholders hold 56%

LARGEST SHAREHOLDERS Jien Mining Pty Ltd – 25.1% Victorian Ferries Pty Ltd – 10.9% Golden Breed Pty Ltd – 6.2% Bondline Limited – 3.1%

DIRECTORS David K. Barwick – Non Exec Chairman Andrew Gillies – Managing Director John Haley – Exec Director, CFO & Company Secretary Barry Casson – Non Exec Director Shu Wu – Non Exec Director Tao Li – Alternate Non Exec Director

SENIOR MANAGEMENT Gavin Becker – CEO Stewart Hagan – GM Industrial Minerals Julien McInally – Corp Dev Manager

CASH BALANCE As at 30/06/13, MLM’s cash balance was approximately $3.1M

CORPORATE

` Metallica adapted to current weak market conditions by implementing reduced project activities as well as corporate and administration cost cutting

` Rights issue raised $2.1M which was supported positively by our major shareholder Jilin Nickel

` Strong financial position with $8.4M in combined cash and listed investments, no debt and an additional $3M R&D tax refund expected Q4 2013

` Metallica signed an option agreement exercisable by February 2014 to sell its non-core Lucky Break nickel deposit in North Queensland for $1M

SCONI PROJECT (QLD) – 100% OWNED SCANDIUM, NICKEL & COBALT PROJECT

` SCONI Definitive Feasibility Study (DFS) deferred until Company can secure funding support

` Fieldwork for Environmental Impact Statement (EIS) baseline studies for SCONI project completed

` Kokomo Nickel-Cobalt-Scandium deposit mining lease granted

` Company focused on permitting its mining lease applications, scandium off-take agreements and securing project development funding via strategic investors

` No significant field work is planned for the remainder 2013, unless the general equities market improves

WEIPA ZIRCON RUTILE (HMS) PROJECT (QLD) – 100% OWNED

` Permitting advancing with mining lease grant expected in October 2013

` Company is in negotiations for potential zircon-rutile off-take agreements, joint venture partnerships and project development funding for targeted production third quarter 2014

` Exploration expected late in 2013 to evaluate regional exploration targets to potentially enhance the life and size of the Weipa Zircon-Rutile Heavy Minerals Sand (HMS) Project

` Undergoing refinement of a feasibility study for a 700,000tpa HMS processing operation, including potential sourcing of secondhand equipment

Highlights

ABN: 45 076 696 092 | y +61 7 3249 3000 | i +61 7 3249 3001 | [email protected] | ASX:MLMwww.metallicaminerals.com.au | 71 Lytton Road, East Brisbane QLD 4169 | GPO Box 122, Brisbane QLD 4001

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2 Metallica Minerals Limited June Quarterly Report 2013

SAFETY

There were no lost time injuries recorded during the June 2013 quarter.

FINANCIAL POSITION

Metallica has approximately $8.4M in combined cash and listed securities as at 30 June 2013 and no debt. The cash position was approximately $3.1M and the market value of listed securities was approximately $5.3M, as indicated in Table 1 below. The Company’s cash position should be further boosted with a $3M Research and Development (“R&D”) tax refund expected in fourth quarter of 2013.

OUTLOOK 2H 2013

It has been a challenging 2013 for Australia’s junior and major mining resource companies, due to lower commodity prices globally, difficult market and business conditions, falling share prices and sustained difficulties in raising additional equity funds at reasonable prices.

HighlightsCONTINUED

Discussions continue with potential strategic investors and partners in both our SCONI and Weipa Zircon-Rutile Projects. However the Company has not yet attracted project funding to be able to significantly progress either project. Due to these difficulties and delays the Board of Metallica has taken the prudent decision to reduce non-essential project expenditure and administrative costs to conserve cash and to maintain the value in its two advanced projects in Queensland.

The focus for both projects for the second half of 2013 will be mining lease permitting towards grant, off-take agreements, strategic partnering and project development funding. It should be noted that the majority of the fieldwork required for moving from feasibility into development for both the SCONI and Weipa heavy mineral sands (HMS) projects, has already been completed. Hence, Metallica is in a good position to progress these projects into development once funding can be secured.

The Board and management will keep all options open for corporate transactions, which despite market conditions could potentially deliver substantial value and future growth for our shareholders. It is our intention to be well prepared for the next upturn in the resources sector and equity markets.

Table 1: Metallica’s ASX Listed Investments

ASX Code Commodity MLM % Number Shares

MLM holdPrice per share

(1 July 2013) Market Value

MTE MetroCoal Coal 30.8% 64,300,000 5.1 cents $3.3M

CBX Cape Alumina Bauxite 17% 29,954,405 6.7 cents $2.0M

Looking North East to Greenvale township from SCONI Lucknow deposit

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Metallica Minerals Limited June Quarterly Report 2013 3

Weipa

Gladstone

Gold CoastBRISBANE

QNI Yabulu Nickel Refinery

Townsville

N

0 200 400

Queensland

Weipa 100% Owned

Weipa Zircon-Rutile (HMS) Project

SCONI 100% Owned

Scandium-Cobalt-Nickel Flagship Project

Figure 1: Project locations

Project LocationsF

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SCONI (Scandium-Cobalt-Nickel) Project100% OWNED

In spite of the challenges in 2013, Metallica completed a positive Pre-feasibility Study (PFS) on a lower capital cost option for our SCONI Scandium project as outlined and summarised in the March Quarterly Report (released 11 April, 2013).

The PFS found SCONI Stage 1 (scandium only) technically and operationally viable, with positive economics indicating a net present value of $273M and internal rate of return of 20.6% on a pre-tax, 8% real terms discount rate, 100% equity basis. It was our plan to move into the Definitive Feasibility Study (DFS) stage (final study ahead of any proposed development), subject to sufficient additional funding and/or a strategic partnership being obtained. Unfortunately this has not been achieved to date and given the current difficult capital raising market conditions the proposed SCONI DFS commencement has been deferred until it can be fully funded.

While the SCONI project DFS has stalled, Metallica is progressing the permitting of key mining lease applications towards grant

and to this end, the Company was granted the mining lease for SCONI’s Kokomo deposit during the quarter. The Lucknow and Bell Creek Mining Lease Applications (MLA’s) are well advanced towards being granted and the Greenvale MLA is expected to be granted by mid 2014.

In addition to the off-take and funding objective initiatives, the Company will also continue to advance our scandium intellectual property and test work to increase our knowledge and capability. The Company intends to undertake testwork on other additional scandium-bearing materials which could potentially be treated by the proposed SCONI scandium refinery (located at Greenvale or separately in Townsville).

Metallica is also reviewing other options to progress its SCONI Project and scandium interests and is considering strategies and potential opportunities that could enhance its industry position.

Scandium-Aluminium master alloy waffle ~98% Al & 2% Sc produced by KBM Affilips

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Metallica Minerals Limited June Quarterly Report 2013 5

Scandium (Element 21 in the periodic table) is a strategic and critical technological metal, often considered one of the 17 rare earth elements (REE) and one of the most useful and valuable. High-grade, large tonnage, easily mineable scandium deposits with favourable metallurgy and location are scarce, making it a commodity that is difficult to obtain globally in commercial quantities.

Scandium has unique properties that can enhance the world’s technological future. Scandium is one of the most potent strengthening elements that can be alloyed with aluminium to create stronger master alloys with applications in aerospace, automobiles and transport generally (seeking better range and fuel efficiency without compromising performance) and high performance sporting equipment. Scandium-strengthened aluminium alloys produce lighter-weight, higher-strength components and structures with superior weldability, better thermal and corrosion resistance, plus greater durability.

Scandium is also used in the production of solid oxide fuel cells (SOFCs) by companies such as Bloom Energy. As the western world makes the transition towards green energy, SOFCs will become more widely used, providing clean and efficient energy that is driven by the massive worldwide expansion of natural gas usage and distribution infrastructure.

Scandium is used in SOFCs to enhance the efficiency of the zirconia electrolyte for generating electricity and recoverable heat through an electro-chemical process that converts fuel (typically natural gas, methane) and air (oxygen 20%) into electricity and heat without combustion, noise or moving parts. Scandium stabilised zirconia electrolyte provides very high ionic conductivity and efficiency which is not readily achievable with other elements.

The use of scandium has been limited by its scarcity and lack of reliable supply. The current total world supply of scandium is estimated to be around ten tonnes of scandium oxide per annum, all of which is sourced as a by-product from other metals and industrial processes.

High purity scandium oxide currently sells at prices in excess of US$2,000/kg depending on product quantity and purity. However, as evidenced by the Company’s Heads of Agreement with Bloom Energy the potential market for scandium is poised for a step change in demand.

To learn more about the SCONI project and scandium, see the 4 page summary – ‘A New Spice Metal to Enhance Industry & Life’ on the Metallica website.

About Scandium (Sc)THE NEW ‘SPICE METAL’

Business sized Solid Oxide Fuel Cell (Bloombox EnergyServerTM) creating efficient green electricity using natural gas in California, USA

Scandium is a potent aluminium grain refiner, allowing for smaller equigranular crystallisation (see left side) which enhances strength and weldability

KBM Affilips representative presenting aluminium scandium waffle utilising scandium oxide produced by Metallica in its pilot testing

High purity scandium oxide produced in pilot testing by processing Metallica’s material from SCONI, July 2012

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8,700,000mN

8,800,000mN

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NNNNNNNNN0 25Km

Oresome Australia Pty LtdCAPE YORK MINERAL SANDS

TENEMENTS

URQUHART POINTML20669 (Application)

Figure 2 : Cape York HMS Tenements

Weipa Zircon-Rutile Project100% OWNED

The Weipa Zircon Rutile Project, a Heavy Mineral Sands (“HMS”) project in far North Queensland, is being planned for development and is expected to produce a high quality zircon-rutile concentrate for sale to end users of zircon and rutile. The Company has so far identified a modest sized four year mine life project for the Urquhart Point HMS deposit which forms part of the Weipa Zircon Rutile Project. Subject to project off-take and funding agreements, the project could potentially be developed by Q3 2014. The Company is actively progressing through the permitting process and Metallica expects to have a mining lease granted over the Urquhart Point deposit by October 2013.

Metallica has been continuing its feasibility studies on this relatively low capital project (<$20M) which is being designed to process 700,000tpa of zircon and rutile rich HMS (averaging 7% heavy minerals) from a simple mining operation (<3 metres depth). The HMS material will be processed using standard wet gravity spiral separation techniques to produce a high grade (90%) mixed zircon and rutile concentrate for sale.

The Company is seeking off-take agreement(s) and funding partner(s) to develop the project. The Urquhart Point deposit could be in production by Q3 2014 if off-take and funding partners can be secured by the end of 2013. Metallica’s intention is to maintain control of the project while bringing in potential funding partners at the project level in order to maximise returns for shareholders.

The Company has recently initiated regional reconnaissance exploration on radiometric targets in its exploration tenements between Weipa and the tip of Cape York (see Figure 2). Further exploration work is planned for late in 2013 to follow-up the more promising targets that have surface showings of HMS, particularly zircon. This exploration potential could significantly increase the life and scope of the project.

ACTIVITIES UNDERTAKEN DURING THE JUNE 2013 QUARTER

` Continued water monitoring at Urquhart Point.

` Training of traditional land owners to undertake water monitoring and water sampling activities.

` Development of the due diligence data room for attracting project finances and/or partnerships.

` Inspected secondhand equipment options.

CONTINUING ACTIVITIES 2013

` Progressing negotiations with off-take and funding partners.

` On-going refinement and optimisation of Urquhart Point feasibility study.

` Subject to permitting, the grant of ML20669 at Urquhart Point.

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Traditional Owners and Metallica staff pegging the

Urquhart Point Mineral Lease application (MLA 20669)

Traditional Owners and Metallica staff on a site visit to Urquhart Point

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ASX:MLM

Subsidiary companies:NORNICO Pty Ltd ACN 065 384 045Oresome Australia Pty Ltd ACN 071 762 484Lucky Break Operations Pty Ltd ACN 126 272 580Phoenix Lime Pty Ltd ACN 096 355 761Greenvale Operations Pty Ltd ACN 139 136 708Scandium Pty Ltd ACN 138 608 894

An Australian scandium–cobalt–nickel & zircon–rutile resource development Company

ABN: 45 076 696 092 | y +61 7 3249 3000 | i +61 7 3249 3001 | [email protected] | ASX:MLMwww.metallicaminerals.com.au | 71 Lytton Road, East Brisbane QLD 4169 | GPO Box 122, Brisbane QLD 4001

Metallica Minerals Limited

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Documents

For personal use only - ASX · There were no lost time injuries recorded during the June 2013 quarter. ... SCONI Lucknow deposit For personal use only. Metallica Minerals Limited