quarterly report - s3-us-west-2.amazonaws.com

Quarterly Report to 31 Dec 2012

ASX Release31 January 2013

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

ASX:MLM

ISSUED CAPITAL (31/12/12) 145,785,327 Ordinary Share 15,400,000 Options* 2,900,000 Performance Rights* *See Appendix 5B for more detail (Lodged 29/01/13)

SHAREHOLDERS (31/12/12) 2,216 shareholders

Top 20 shareholders hold 56%

LARGEST SHAREHOLDERS Jien Mining Pty Ltd 19.1% Victorian Ferries Pty Ltd 11.8% Golden Breed Pty Ltd 6.7% Bondline Limited 3.4%

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

CASH BALANCE As at 31/12/12, MLM’s cash balance was approximately $7.56M ($1M debt was repaid in full on 31/01/13 and the A$5M debt facility terminated)

SCONI – PHASED DEVELOPMENT STRATEGY TO DELIVER;

` Reduced Capital Cost

` Improved Fundability

` Scandium Focus

` Simplified Processing

Following a comprehensive review of the SCONI project Metallica has taken the prudent decision to implement a new Phased Development Strategy for the SCONI project.

Under the Phased Development Strategy the Company now plans to develop the SCONI project as follows;

SCONI Phase 1 Approximately 200ktpa throughput plant producing 50-65tpa of Scandium (Sc) oxide only (no Ni-Co) processing high grade scandium resources (see Table 2) from the Lucknow deposit utilising delivered third party acid (no acid plant).

SCONI Phase 2 750ktpa (Full Scale) throughput brownfield expansion producing Nickel (Ni), Cobalt (Co) & Sc oxide products from Resources (see Appendix 1, Tables 5 & 6) mined from Greenvale, Kokomo and Lucknow deposits with an on-site acid and power plant.

Recent scandium market research indicates that the new Phased Development Strategy will be more in line with the pace of developments expected from the scandium needs of end users in the early years of operation. Further, the phased approach more effectively adapts to the capital cost challenges of the Full Scale project, due mainly to the ongoing cost increases associated with developing new projects in Australia.

SCANDIUM MARKET DEVELOPMENTS

` Secured binding Heads of Agreement with Bloom Energy for 30-60tpa of scandium oxide.

` Formed strategic alliance with KBM Affilips to develop the market for scandium containing aluminium alloys for use in aerospace and other industries.

` KBM Affilips produced scandium containing aluminium master alloy using Metallica’s high purity scandium oxide which was obtained from the SCONI pilot run earlier in 2012.

` Scandium marketing is ongoing in Europe, North America and Asia for further interest from the aluminium alloy and fuel cell sectors.

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

2 Metallica Minerals Limited December Quarterly Report 2012

UPDATE ON SCONI FULL SCALE PROJECT (NOW SUPERCEEDED)

` Technical components of SCONI Pre-Feasibility Studies (PFS) complete.

` Preliminary capital cost estimate for SCONI Full Scale project was expected to exceed A$800M.

` SCONI Phase 1 PFS (~200ktpa plant) now being fast-tracked in preparation for Definitive Feasibility Study (DFS).

HighlightsCONTINUED

Weipa

Gladstone

Gold CoastBRISBANE

QNI Yabulu Nickel Refinery

Townsville

N

0 200 400

Queensland

Weipa 100%

Oresome Australia Weipa Zircon-Rutile HMS

Project

SCONI 100%

Scandium-Cobalt-Nickel Flagship Project

Figure 1: Project locations

CORPORATE DEVELOPMENTS

` Appointment of Cutfield Freeman & Co, financial advisors for SCONI Project (Oct 2012).

` Raised cash of $3.25M (before costs) to progress SCONI Project (Oct 2012).

` Received A$2.65M cash from Federal Government’s Research and Development (R&D) Tax Incentive program (Nov 2012).

` Company repays A$1M in debt and terminates loan facility on 31st January 2013.

Metallica Minerals Limited December Quarterly Report 2012 3

FOCUS ON SCONI PHASE 1 PFS

As a result of the Phased Development Strategy, work on completing the PFS for the Full Scale 750ktpa throughput plant is now superseded. The Company has completed the key technical components of the Full Scale plant (in the areas of permitting, geology, mining, metallurgy, process engineering, infrastructure and environmental impacts etc). The key focus of the Company is now on fast tracking the Phase 1 scandium-only business case and completion of the Phase 1 PFS in order to freeze project parameters before the planned commencement of a Definitive Feasibility Study (DFS) expected to start by the second quarter of 2013.

KEY DRIVERS FOR A PHASED APPROACH

Reduced capital cost, improved fundability & simpler scandium-only process focus

` Capital costs for SCONI Phase 1 will be substantially less than the previously proposed Full Scale SCONI operation due to; the decrease in plant size; a simplified flow sheet (see Figure 2) with no acid plant (by using delivered purchased acid); elimination of the entire Ni-Co extraction and recovery process components; and the reduction of raw water and social infrastructure requirements.

` Preliminary capital cost estimates for the Phase 1 plant processing ~200ktpa indicates a range of $180M to $260M (whereas a Full Scale greenfields Ni-Co-Sc operation would have been in excess of $800M in the current expensive Australian project construction environment).

` The ability to attract satisfactory financing arrangements for the project will be significantly improved by the substantially lower capital costs associated with SCONI Phase 1.

` Current and potential scandium oxide offtake partners have been very encouraging of the scandium-focused project, with the Phase 1 proposal more likely to match expected scandium oxide demand in the early years of operation.

` Metallica’s scandium market research and regular dialogue with market end-users has recently indicated that the now superseded Full Scale (now Phase 2) operation would likely have produced more scandium than the expected demand for scandium in the early years of its operation. However as demand for scandium increases, the Company can initiate the large Phase 2 operation as a brownfields expansion to maintain its scandium market position.

` Given SCONI Phase 1’s simplified flowsheet and the reduction in major process components, there is potential to achieve scandium production earlier than the previously studied Full Scale SCONI Ni-Co-Sc operation which had a commissioning target of late 2015. This assumes availability of adequate and timely funding.

SCONI Project Update100% OWNED

Acid Plant

Power Station

Electro-winning

Ni, Co OreStockpile

C 2CD CCD7CCD3CCD1

ROM Pad

Crushing

Waste Sc OreLUCKNOWStockpile

Scrubber

Lime

Final Neutralisation

Water Treatment

SlurryStorage

Limestone

Flash

SO2

Nickel Metal to marketCobalt PrecipitationCobalt Saltto Refinery

Acid

Process Water

ProcessWater Pond

DamRiver

Steam

Sulphur

Power

Raw Water

Pre heat

Delivered Acid

Air

Residue storage facility

Process

Mining

Low GradeRejects

Decant Water

Steam

Autoclave

ScandiumOxide

SAL or CMNPROCESS

MHP Intermediate

LimeMg0

IronRemoval

MixedHydroxide

Presipitation

SX

Refinery

Sc ProcessFilter

TreatedWater

End User

Electricity supply from existing electricity grid

LPG/LNG for process steam

METALLICA MINERALS LIMITED

SCONI Phase 1 (Scandium Only)Process Flowsheet Simplified

(Ghosted is full scale Phase 2 Ni-Co-Sc Flowsheet)

(Ghosted is full scale Phase 2 Ni-Co-Sc Flowsheet)

Figure 2: SCONI Phase 1 Simplified Process Flowsheet


SCONI Project UpdateCONTINUED

SCOPE OF SCONI PHASES

SCONI Phase 1 SCONI Phase 1 will have a throughput of ~200ktpa producing 50-65tpa of Sc oxide only (no Ni-Co) processing high grade scandium resources (see Table 2) from the Lucknow deposit utilising delivered third party acid (no acid plant).

Phase 1 will be designed to be a commercially standalone project which could form the basis of a much larger Phase 2 brownfields expansion at a later date, subject to economic conditions at the time.

SCONI Phase 1 studies will also evaluate the alternatives of having the scandium refinery located either at the Greenvale project site or near Townsville. This refinery will process the planned high-value SCONI Phase 1 scandium product and potentially other third party scandium containing intermediates, into high purity (>99.9%) scandia using Metallica’s 100% owned proprietary technology. The capability of processing intermediates in Townsville creates an additional business opportunity that could add significantly to shareholder value.

SCONI Phase 2 SCONI Phase 2 is a potential brownfield expansion which is envisaged to process 750ktpa producing Ni-Co & Sc oxide products from Resources (see Appendix 1) mined from the Greenvale, Kokomo and Lucknow deposits utilising an onsite acid and power plants.

The Phase 2 Full Scale processing plant would significantly expand scandium oxide production plus bring on stream nickel and cobalt co-products for tri-metal production. Phase 2 would be large enough to have its own acid and power plants and be of a similar design scope to that previously evaluated by the recent SCONI pre-feasibility studies in second half 2012. The decision to proceed with Phase 2 is likely to occur after the commissioning of Phase 1.

IMPACT OF PHASED APPROACH ON ENVIRONMENTAL APPROVALS

The Company will continue to actively progress its environmental approvals for both phases of the project so that the Company is well positioned to fast track the potential of a SCONI Phase 2 development, when market conditions justify what would then be a brownfield expansion in the future.

The timetable for permitting the SCONI project towards development has not been compromised with the phased approach.

SCONI PHASE 1 LUCKNOW RESOURCE BASE

The proposed plant throughput for SCONI Phase 1 (scandium only) is expected to be in the order of 200ktpa, processing high grade scandium resources (see Tables 1-3) sourced from the Lucknow deposit, with the potential to produce 50 to 65tpa of high purity scandium oxide, and with no nickel or cobalt produced.

Within the Lucknow scandium deposit there is a well defined high grade scandium Measured and Indicated scandium resource of 4.03Mt at 204g/t Sc (see Table 2) using a 130g/t Sc Cut-Off Grade (COG) which can support the SCONI Phase 1 operation for approximately 20 years.

The current Lucknow scandium resources were estimated in January 2012 based on 461 vertical drill holes covering an area approximately 1.7km long by 300m wide. The resources are within a few meters from surface (often at surface), reaching a maximum depth of 35m and averaging 15 to 20m in thickness.

The Lucknow Mineral Resource includes Sc and Ni-Co Mineral Resources that overlap in part. Consequently, the total resource is subdivided into Sc blocks and Ni-Co blocks using the following method:

` Sc Mineral Resource – block grade NiEq <0.7% (NiEq = Ni +2xCo) and >=70g/t Sc; and

` Ni-Co Mineral Resource – block grade NiEq >= 0.7% (NiEq = Ni +2xCo).

Nearly all (96%) of the Sc resource is in the Indicated and Measured Resource category (see Table 1 & 2). The two resource tabulations are exclusive of each other.

The SCONI Ni-Co-Sc Mineral Resource estimate for all three southern deposits (Greenvale, Kokomo and Lucknow - see Figure 3) at two different cut off grades are shown in Table 5 and 6 in Appendix 1. It should be noted that Tables 1 and 2 are a subset of the total SCONI Mineral Resources shown in Appendix 1.

In addition, to the Southern Deposits, the Company has Ni-Co Mineral Resources in the Northern Deposits (Bell Creek & Minnamoolka - see Figure 3) as shown in Appendix 1, Table 7.


Competent Person’s Statement

The SCONI Scandium-Cobalt-Nickel project Mineral Resource estimate(s) is based upon & accurately reflects data compiled, validated or supervised by Mr John Horton, Principal Geologist FAusIMM (CP) who is a full time employee of Golder Associates Pty Ltd. Mr Horton has sufficient experience that is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for the Reporting of Exploration Results, Mineral Resources & Ore Reserves’. Mr. Horton consents to the inclusion of this information in the form and context in which it appears in this document.

LUCKNOW SCANDIUM RESOURCE FOR SCONI PHASE 1

Table 1: Lucknow Sc Resource using a 70g/t Sc COG (excluding Ni-Co Resource)

ClassificationTonnes

(Mt)Sc

(g/t)Ni

(%)Co(%)

Fe(%)

Mg(%)

Sc Metal(t)

Measured 0.6 190 0.17 0.02 31.7 1.7 114

Indicated 6.9 153 0.16 0.02 36.4 1.0 1,056

Inferred 0.3 99 0.14 0.02 32.6 0.7 30

Total 7.8 154 0.16 0.02 35.9 1.0 1,200

Table 2: Lucknow Sc Resource using a 130g/t Sc COG (excluding Ni-Co Resource)

ClassificationTonnes

(Mt)Sc

(g/t)Ni

(%)Co(%)

Fe(%)

Mg(%)

Sc Metal(t)

Measured 0.37 247 0.16 0.02 33.8 1.2 91

Indicated 3.66 200 0.16 0.02 37.8 0.7 732

Inferred 0.02 139 0.16 0.01 29.8 0.4 3

Total 4.05 204 0.16 0.02 37.4 1.0 826

Table 3: Sc grade-tonnage information at various Sc cut-offs (excluding Ni-Co Resource)

ScCut-off(g/t)

Tonnes(Mt)

Sc(g/t)

Ni(%)

Co(%)

70 7.81 154 0.16 0.02

80 7.43 159 0.16 0.02

90 6.76 166 0.16 0.02

100 6.02 174 0.16 0.02

110 5.32 184 0.16 0.02

120 4.65 193 0.16 0.02

130 4.04 204 0.16 0.02

140 3.51 214 0.16 0.02

150 3.04 225 0.16 0.02



Figure 3: SCONI Ni-Co & Sc Mineral Deposit Locations



SCONI PROJECT DEVELOPMENT ACTIVITIES DECEMBER 2012 QUARTER

Safety – There were over 2,900hrs worked on site by MLM staff, visitors and contractors, no incidents were recorded.

Permitting – is progressing well. Mining Lease Applications (MLAs) at Lucknow, Greenvale and Kokomo will require Native Title and Landowner compensation agreements, together with environmental approvals, prior to grant. An Indigenous Land Use Agreement (ILUA) is in place with the Gugu Badhun Traditional Landowners (the SCONI Project ILUA was registered 18th December 2012), and appropriate Cultural Heritage Management Plans (CHMPs) are being developed. Landowner compensation agreements are at an advanced stage.

Environmental Impact Studies (EIS) – Baseline environmental studies are essentially complete and the EIS Terms of Reference have been finalised. Community consultation and social impact assessment activities took place in the December quarter, with the project generally receiving strong support from all stakeholders.

Geology & Mining – Resource drilling (85 holes totalling 1,951m) to upgrade the Inferred Resources at Greenvale, as well as old stockpiles (24 holes totalling 221m), was completed during the quarter (prior to the wet season) with an increased


nickel and cobalt resource base being targeted. IMC Mining were active in developing appropriate mining schedules for the PFS. In addition, a geotechnical study was carried out over the proposed Greenvale and Lucknow mining area.

Metallurgy & Process Engineering – fully integrated pilot plant testwork was completed in the quarter, allowing development of process design criteria for the future DFS. Patent applications for Metallica’s proprietary scandium recovery and purification technology have been lodged.

Engineering & Infrastructure Studies were progressed, to provide the foundation for the future DFS. Investigations into the supply of critical reagents (e.g. sulphur) and long lead items (e.g. autoclave and associated heat exchangers) gave the project team assurance that these aspects can be managed satisfactorily within the feasibility project schedule.

The Ootann lime works feasibility will be scoped and modified as required in line with the SCONI project for the supply of both lime and limestone.

Scandium Market Development activities resulted in the Bloom Energy Off-take Heads of Agreement and KBM Affilips Strategic Alliance being executed in the quarter. Marketing is ongoing in Europe, North America and Asia for further interest from the aluminium alloy and fuel cell sectors.

KBM Afillips representative presenting aluminium-scandium waffle to Metallica Managing Director Andrew Gillies and CEO Gavin Becker


SCANDIUM OFFTAKE AGREEMENT WITH BLOOM ENERGY

` On 2nd October 2012, Metallica signed a binding Heads of Agreement (HOA) for scandium offtake entered into with Bloom Energy a leading USA based manufacturer of Solid Oxide Fuel Cells (SOFCs) and supplier of clean energy.

` The HOA governs the sale of up to 30 – 60tpa scandium oxide from the SCONI project over a 5 year period, with the potential to extend another 5 years at Bloom’s election. The terms of the HOA remain commercial in confidence.

` The scandium oxide offtake with Bloom Energy will underpin the majority of SCONI scandia production.

` Metallica and Bloom Energy have agreed to replace the HOA with a more detailed Offtake Agreement which is still being undertaken.

For further information see ASX Release 2 October 2012.

SCONI SCANDIA USED IN ALUMINIUM-SCANDIUM ALLOYS

` SCONI scandium oxide successfully used to produce a scandium containing aluminium master alloy.

` KBM Affilips used scandium from Metallica’s SCONI pilot plant to manufacture an ingot of aluminium/scandium master alloy (see photo on page 7).

For further information see ASX Release 7 November 2012.

Scandium Market Developments

STRATEGIC ALLIANCE WITH KBM AFFILIPS

` On the 3 October 2012, Metallica entered in to a Non-binding Memorandum of Understanding (MOU) for a strategic alliance with KBM Affilips.

` KBM Affilips, based in The Netherlands is Europe’s leading supplier of master alloys including aluminium-scandium alloys to the aerospace industry and other transport industries. After discussions with KBM Affilips and its existing customers in the aerospace industry, Metallica believes that significant demand for aluminium-scandium alloys is possible subject to a sufficient supply of scandium becoming commercial available.

` KBM Affilips will assist Metallica in developing relationships with key aerospace and component manufacturing companies.

` KBM Affilips and Metallica will enter into good faith negotiations regarding a binding offtake agreement for scandium. The strategic alliance does not preclude Metallica from entering into commercial arrangements with other potential scandium offtake partners.

For further information see ASX Release 3 October 2012.

ABOUT BLOOM ENERGY

Bloom Energy manufactures unique on-site power generation systems called Energy Servers which utilise an innovative new fuel cell technology with roots to NASA’s Mars program.

Bloom’s Energy Servers are among the most efficient energy generators on the planet, providing for significantly reduced electricity costs and dramatically lower greenhouse gas emissions.

For more information on Bloom Energy, please refer to its website www.bloomenergy.com

ABOUT KBM AFFILIPS

KBM Affilips is the marketing and sales organisation for a wide range of specialised master alloys manufactured by its production companies KBM Master Alloys in The Netherlands and Affilips in Belgium, both founded in the early sixties of the last century.

Affilips is the world’s largest manufacturer of non-ferrous master alloys delivering well over 40,000 tonnes of products to 80 different countries.

KBM Affilips has built an excellent reputation in the field of aluminium-, copper-, nickel-, cobalt- and zinc-based master alloys. These master alloys are used in the manufacture of a wide range of metal products, including aluminium aircraft sheet, special steels and super alloys for aircraft engines, products for aerospace applications, nuclear reactors and other demanding or high performance applications.

For more information on KBM Affilips, please refer to its website www.kbmaffilips.com


Oresome AustraliaWEIPA ZIRCON–RUTILE PROJECT 100% OWNED

8,700,000mN

8,800,000mN

8,600,000mN

700,

000m

E

600,

000m

E

ShellburneBay

C O R A L

S E A

EPM18999SANDMAN No. 7

EPM15372EPM15372EPM15372EPM15372EPM15372EPM15372EPM15372EPM15372EPM15372JARDINEJARDINEJARDINEJARDINEJARDINEJARDINEJARDINEJARDINEJARDINE(granted)(granted)(granted)(granted)(granted)(granted)(granted)(granted)(granted)

C A P E

Y O R K

EPM15370JACKSON RIVER

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(granted)(granted)(granted)(granted)(granted)(granted)(granted)(granted)(granted)

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River

River


Vrilya Point

River

River

Ducie

PortMusgrave

Wenlock

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Mission

WEIPAWEIPAWEIPAWEIPAWEIPAWEIPAWEIPAWEIPAWEIPA


EPM18998EPM18998EPM18998EPM18998EPM18998EPM18998EPM18998EPM18998EPM18998SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5SANDMAN No. 5


Skardon




SEE INSET

EPM19047SANDMAN 8

AlbatrossBay

G U L F

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C A R P E N T A R I A

EPM19046SANDMAN 9


Duyfken Point

EPM15268EPM15268EPM15268EPM15268EPM15268EPM15268EPM15268EPM15268EPM15268URQUHART POINTURQUHART POINTURQUHART POINT URQUHART POINT URQUHART POINT URQUHART POINT URQUHART POINT URQUHART POINT URQUHART POINT


NNNNNNNNN0 25Km

Oresome Australia Pty LtdCAPE YORK MINERAL SANDS

TENEMENTS

URQUHART POINTML20669 (Application)

Figure 4: Cape York

HMS Tenements

URQUHART POINT FEASIBILITY & DEVELOPMENT

Metallica’s wholly owned subsidiary Oresome Australia Pty Ltd continued to progress its Urquhart Point zircon and rutile Heavy Mineral Sand (HMS) project near Weipa through feasibility and permitting for future development.

Oresome continued to progress the DFS and EIS for a modest sized mining operation at Urquhart Point (close to the Weipa township).

The DFS is based on a 700,000tpa mining operation to produce a zircon-rutile rich concentrate. Both the zircon and rutile are of a high quality and Metallica does not envisage any significant issues in marketing the Urquhart Point concentrate.

Discussions have progressed well with parties related to the Mining lease Application (MLA) over Urquhart Point, including the Aurukun Shire Council and the Traditional Owners.

The public review of the EIS was completed and 23 submissions were received. An extension of time to respond to these submissions was received from the Department of Environment and Heritage Protection (EHP), and a supplementary EIS has been submitted to EHP for assessment.

Oresome is also progressing its regional tenements straddling the west coast between Weipa and Cape York Peninsular (see Figure 4) to commence regional HMS exploration later in 2013.

ACTIVITIES UNDERTAKEN DURING THE DECEMBER 2012 QUARTER

` High resolution imagery and contour mapping completed by Fugro Spatial Solutions Pty Ltd.

` Development of water monitoring bores and hydrologists report.

` Completion and submission of the Supplementary Environmental Impact Study (SEIS).

CONTINUING ACTIVITIES 2013

` Ongoing refinement and optimization of Urquhart Point feasibility study into a modest size heavy mineral sand operation producing zircon-rutile sand concentrate.

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

` subject to financing the projects development, beginning of site civil works and plant construction.

` Work on granted regional EPMs, to enhance the life of the project.


APPOINTMENT OF FINANCIAL ADVISORS FOR SCONI PROJECT

Cutfield Freeman & Co was appointed on 19th November 2012 to explore financing options for its SCONI project as we prepare to move the project into the next phase of development. Under the terms of the agreement Cutfield Freeman & Co would develop a financing plan and assist with fundraising and in reaching agreements with potential offtakers for the SCONI Project. The initial term of the appointment is 4 months.

Cutfield Freeman & Co is based In London and has offices in Hong Kong and Toronto. The firm and its principals have completed financings for many mining projects over more than two decades.

CAPITAL RAISED

In November Metallica closed a placement of 13,001,552 ordinary shares for 25 cents per share to raise approximately $3.25M (before costs). The placement was made to existing shareholders and institutional and sophisticated investors. These funds will be used to advance the Company’s SCONI project and for working capital.

For further information see ASX Release 5th November 2012.

OPTION ON GIPPSLAND HEAVY MINERAL SAND PROJECT LAPSED

In December 2012, the option for the Gippsland Heavy Mineral Sand project lapsed. The Company decided not to proceed with the acquisition and Oresome Australia Pty Ltd remains focused on the Urquhart Point zircon-rutile Heavy Mineral Sands Project near Weipa.

For further information see ASX Release 17th December 2012.

Corporate & FinancialTO BE READ IN CONJUNCTION WITH APPENDIX 5B (Lodged 29/12/13)

SCONI $2.65M RESEARCH & DEVELOPMENT REFUND RECEIVED

Metallica received $2.65M cash as a tax refund under the Federal Government’s Research and Development (R&D) Tax Incentive program. The R&D Tax Incentive is a targeted self-assessment program that helps businesses offset a portion of costs relating to a certain R&D activities. The incentive is jointly administered by AusIndustry (on behalf of Innovation Australia) and the Australian Taxation Office.

FINANCIAL

As at 31 December 2012, Metallica’s cash balance was approximately $7.56M.

Metallica fully repaid A$1M of debt on 31st January 2013, the A$5M debt facility was consequently terminated.

During the December Quarter $4.97M of expenditure was related to project feasibility and evaluation studies and administration expenditure was $641,000. Total expenditure for the quarter was approximately $5.7M.

Planed estimated administration, evaluation, feasibility and development studies for the March Quarter is approximately $2.35M, with the great majority allocated to the SCONI project.

Metallica currently has 145,785,329 ordinary shares, 15.4M options (see Appendix 5B) and 2.9M Performance Rights on issue.

LISTED INVESTMENTS

Metallica retains investments in two ASX listed resource companies, MetroCoal Ltd and Cape Alumina Ltd, with market value totalling approximately $12.8M (see Table 4 below).

Table 4: Metallica’s ASX Listed Investments

ASX Code Commodity MLM % Number Shares

MLM hold Price (30 Jan) Market Value

MTE MetroCoal Coal 30.8% 64,300,000 $0.16 $10.3M

CBX Cape Alumina Bauxite 19.7% 29,954,405 $0.08 $2.5M


Corporate & FinancialTO BE READ IN CONJUNCTION WITH APPENDIX 5B

Business sized Solid Oxide Fuel Cell (BloomBox Energy ServerTM)

creating efficient green electricity using natural gas in California, USA

ENVIRONMENT

Metallica remained compliant with all its environmental obligations during the period. Following the public submissions received by Department of Environment and Heritage Protection (DEHP), the SCONI EIS draft Terms of Reference (TOR) closed on 30th October 2012. The EIS Terms of Reference were approved by DEHP on the 18th January 2013.

The Company is now focussed on finalising its environmental baseline studies in order to complete the EIS.

SAFTEY

There were no lost time injuries recorded during the December 2012 quarter.

OUTLOOK 2013

Our focus for 2013 will be on progressing SCONI Phase 1, subject to financing, through the planned Definitive Feasibility Study and progressing permitting with the goal of commencing scandium production in late 2015.

In parallel, we will seek to establish further scandium offtake and strategic alliance agreements with end users and to attract funding partners.

Subject to our mining lease application at Urquhart Point near Weipa being granted and conditions suitable for financing the project - develop our Weipa zircon-rutile heavy minerals sands project in order to establish cash flow from the sale of zircon-rutile products.


Appendix 1: SCONI ProjectMINERAL RESOURCE STATEMENTS

Table 5: Mineral Resource Statements for the SCONI Project Southern Deposits Cut-Off Grade >0.7% Ni Eq (Ni + 1.5 Co + 0.01 Sc)

DepositMillion Tonnes

(Mt)Nickel (Ni) %

Cobalt (Co) %

Scandium (Sc) g/t

Ni Metal (kt)

Co Metal (kt)

Sc Metal (t)

Sc Oxide (t)

Kokomo

Measured 2.2 0.57 0.11 80 12.2 2.5 173 260

Indicated 17.2 0.56 0.09 49 95.8 15.5 843 1,264

Inferred 10.2 0.36 0.04 59 36.7 4.5 603 905

Totals 29.5 0.49 0.08 55 144.7 22.5 1,619 2,429

Greenvale Mine Site

Measured 4.8 0.78 0.06 38 37.8 3.0 186 279

Indicated 9.5 0.71 0.05 38 67.0 4.9 360 541

Inferred 1.9 0.71 0.05 34 13.3 0.9 65 97

Totals 16.2 0.73 0.05 38 118.1 8.8 611 917

Lucknow

Measured 1.7 0.45 0.10 103 7.9 1.8 180 271

Indicated 10.6 0.27 0.07 128 28.5 7.2 1,357 2,035

Inferred 1.5 0.40 0.07 41 5.8 1.0 60 90

Totals 13.8 0.31 0.07 116 42.2 10.0 1,597 2,396

Combined SCONI Southern Deposits Resource

Measured 8.7 0.66 0.08 62 57.9 7.2 539 809

Indicated 37.3 0.51 0.07 69 191.3 27.6 2,560 3,840

Inferred 13.5 0.41 0.05 54 55.9 6.4 728 1,092

Totals 59.5 0.51 0.07 64 305.1 41.1 3,827 5,741

Metallica metallurgist Kevin Pery at SGS Pilot Plant


Appendix 1: SCONI ProjectMINERAL RESOURCE STATEMENTS

CONTINUED

Table 6: Updated Mineral Resource Statement SCONI Southern Deposits Cut-Off Grade > 1.0% NiEq (Ni + 1.5 Co + 0.01 Sc)


(Mt)

Nickel (Ni) %

Cobalt (Co) %

Scandium (Sc) g/t

Ni Metal (kt)

Co Metal (kt)

Sc Metal (t)

Sc Oxide (t)

Kokomo

Measured 1.5 0.64 0.14 97 9.8 2.2 149 223

Indicated 8.7 0.60 0.11 75 52.3 9.8 655 983

Inferred 3.7 0.42 0.06 83 15.3 2.2 304 456

Totals 13.9 0.56 0.10 80 77.4 14.2 1,108 1,662

Greenvale Mine Site

Measured 3.2 0.98 0.08 39 30.8 2.4 123 185

Indicated 5.2 0.94 0.07 39 49.3 3.7 206 309

Inferred 1.0 0.94 0.06 35 9.3 0.6 35 52

Totals 9.4 0.95 0.07 39 89.4 6.7 364 545

Lucknow

Measured 1.2 0.44 0.11 139 5.3 1.3 168 252

Indicated 8.5 0.26 0.07 149 21.8 5.7 1,265 1,897

Inferred 0.4 0.37 0.07 71 1.4 0.3 27 40

Totals 10.1 0.28 0.07 145 28.5 7.3 1,459 2,189

Combined SCONI Southern Deposits Resource

Measured 5.9 0.78 0.10 75 45.8 5.9 440 659

Indicated 22.4 0.55 0.09 95 123.4 19.1 2,126 3,189

Inferred 5.1 0.51 0.06 72 26.0 3.1 365 548

Totals 33.4 0.59 0.08 88 195.2 28.2 2,931 4,396

Metallica Minerals, SGS, HRL Testing and Jacobs staff at SGS

Lakefield Oretest Pilot Plant


Appendix 1: SCONI ProjectMINERAL RESOURCE STATEMENTS CONTINUED

Table 7: SCONI Northern Deposits >0.7% Ni Eq (Ni + 1.5 Co) Cut-Off Grade


(Mt)Nickel (Ni) %

Cobalt (Co) %

Ni Metal (kt)

Co Metal (kt)

Bell Creek South

Measured 7.8 0.96 0.07 75.5 5.1

Indicated 0.1 0.81 0.05 1.2 0.1

Inferred

Totals 8.0 0.96 0.07 76.7 5.2

Bell Creek North

Measured

Indicated 2.0 0.86 0.03 16.8 0.5

Inferred

Totals 2.0 0.86 0.03 16.8 0.5

Bell Creek Northwest

Measured

Indicated 2.5 0.81 0.05 20.1 1.2

Inferred

Totals 2.5 0.81 0.05 20.1 1.2

The Neck

Measured

Indicated 0.4 0.84 0.03 3.5 0.1

Inferred

Totals 0.4 0.84 0.03 3.5 0.1

Minnamoolka

Measured

Indicated 4.7 0.82 0.05 38.3 2.1

Inferred 0.9 0.78 0.04 6.7 0.3

Totals 5.5 0.82 0.04 45.0 2.4

Combined SCONI Northern Deposits Resource

Measured 7.8 0.96 0.07 75.5 5.1

Indicated 9.7 0.83 0.04 79.9 4.0

Inferred 0.9 0.78 0.04 6.7 0.3

Totals 18.4 0.88 0.05 162.1 9.4


SGS Pilot Plant processing SCONI Sc & Ni-Co Resource samples

Notes to Table 5 - 7: Competent Persons Statement located at the end of this section

1. Scandium is typically sold as an oxide product. Hence the equivalent scandium oxide has been calculated at 1.5 times contained scandium.

2. The resources for the Southern Deposits of Lucknow, Greenvale and Kokomo are reported at a cut-off grade (COG) of NiEq 0.7% and NiEq 1.0% (Ni + 1.5Co + 0.01Sc). This NiEq COG formula has been calculated using commodity prices of US$10/lb nickel, US$15/lb cobalt and US$1,500/kg scandium oxide, and recoveries of 90% for all three metals.

3. The resources for the Northern Deposits of Bell Creek South, Bell Creek North, Bell Creek Northwest, Minnamoolka and The Neck are reported at a COG of NiEq 0.7% (Ni + 1.5Co). This NiEq COG formula has been calculated using commodity prices of US$10/lb nickel and US$15/lb cobalt, and recoveries of 90% for both nickel and cobalt. The change to the current NiEq COG is to account for current metal prices and ensure that all significant nickel, cobalt and scandium mineralisation is included in the resource estimate. Metallica indicates that the metallurgical testwork to date provides reasonable potential for the nickel, cobalt and scandium to be recovered at similar recoveries to those achieved in the testwork.

4. Variations in total may be present due to rounding factors.

5. No scandium content was estimated in the Northern deposits as Sc assays are generally not available. Limited data indicate the Northern deposits are relatively low in Sc (generally <30ppm Sc).

Competent Person’s Statement

The SCONI Scandium-Cobalt-Nickel project Mineral Resource estimate(s) is based upon & accurately reflects data compiled, validated or supervised by Mr John Horton, Principal Geologist FAusIMM (CP) who is a full time employee of Golder Associates Pty Ltd. Mr Horton has sufficient experience that is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for the Reporting of Exploration Results, Mineral Resources & Ore Reserves’. Mr. Horton consents to the inclusion of this information in the form and context in which it appears in this document.

Appendix 1: SCONI ProjectNOTES TO THE MINERAL RESOURCE STATEMENTS

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

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