Metallica Minerals : Urquhart Bauxite Pre-Feasibility Study

ASX RELEASE 30 DECEMBER 2016

STRONG PRE-FEASABILITY STUDY SUPPORTS 1.5 MTPA URQUHART BAUXITE DEVELOPMENT HIGHLIGHTS

• Independent Pre-Feasibility Study (PFS) supports development of the Urquhart Bauxite project
• PFS estimates pre-tax project NPV10 of A$78.4m on sales of 6.5 Mt of Urquhart Bauxite's Proved and Probable Reserves
• Start-up capital limited to working capital requirements of ~$1.1 M for all cases
• Strong cash margins of +A$12/t on the Base Case from mining Proved and Probable Reserves in Area A
• Potential to increase pre-tax NPV10 to A$86.9m via additional options of mining of Inferred bauxite inventory and screening stockpiled transitional lower grade material
• Highest margin bauxite in Area A slated for first production in Q2 2017
• Target production rate of 1.5 million tonnes per annum (mtpa) by 2019

Brisbane bauxite developer, Metallica Minerals Limited (Metallica) (ASX:MLM), is pleased to announce the results of the recently completed Pre-Feasibility Study (PFS) for the Company's 50%- owned Urquhart Bauxite project (UBx), five kilometres southwest of Weipa on Queensland's Cape York and slated for first production and DSB shipment by mid next year.

Based on forecast AUD-USD exchange rates starting at A$0.75 for calendar 2017, the PFS Base Case points to a potential revenue stream nearing A$300 million across 5.5 years of production, delivering a total operating margin (allowing for all costs including royalties) of around A$12 per tonne with payback of just five months.

The PFS was independently prepared by Brisbane-based international consultancy, IMC Mining Pty Ltd (IMC), which also completed Urquhart Bauxite's recently upgraded JORC (2012) resources estimate (see ASX Release 14 November 2016). London based independent metals analyst, CRU International estimated the Free On Board (FOB) USD price of bauxite received utilising the Life of Mine (LOM) schedule produced by IMC.

The results of the PFS are summarised in Table 1 below.

Item	Unit	Scenario 1 (Base Case)	Scenario 2	Scenario 3
Mining Proved & Probable Reserves in Area A	Additional mining of Inferred resource in both Area A and Area B	At end of mine life, screening transitional stockpiled material
Total Saleable Product	dry kt	6,532	8,672	10,296
Total Al2O3	%	52.7	51.6	51.2
Total SiO2	%	13.3	14.7	15.4
AAl*	%	40.6	39.1	38.1
RSi**	%	5.7	6.1	6.1
Total Revenue	A$m	295.5	364.5	416.9
EBITDA	A$m	81.8	82.6	90.8
NPV10 Pre Tax	A$m	78.4	78.9	86.9
NPV10 Post Tax	A$m	53.9	54.2	59.9
LOM Capital	A$m	2.7	3.0	3.1
Avg FOB Cost***	A$ tonne	32.72	32.51	31.67
Avg FOB Received	A$ tonne	45.24	42.03	40.49
Payback	months	5	5	5

• AAl - Available Alumina @ 150◦C

  ** RSi - Reactive Silica @ 150◦C

  *** Includes all operating costs, royalties and other payments

  Table 1 - Summary of 2016 PFS Results-Urquhart Bauxite Project

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  Each member of the Cape York HMS & Bauxite Project Joint Venture (JV) is responsible for their portion of mine start-up costs. Metallica is currently in discussions with various parties to deliver its portion of the capital and ensure the Company has adequate funds to develop the project. At this stage negotiations remain incomplete, however due to the very low capital nature of the project the Company remains confident of securing funding.

  As of 30 June 2016, Metallica has accumulated tax losses of A$17.6 million that are also capable of being offset against income earned from Urquhart Bauxite.

  The JV has commenced discussions with potential off-take partners and is in the process of delivering samples for customer verification prior to more undertaking more detailed off-take negotiations. It is envisaged that off-take will be secured prior to commencing development in Q2 2017.

  Metallica CEO, Mr Simon Slesarewich:

  "We were confident that the PFS for Urquhart Bauxite would show the attractiveness of the project and justify progressing development plans in parallel with the PFS. Utilising contractors to deliver the mining as well as the nearby and operational Hey Point barge loading and transhipping facility delivers a nimble and low capital development with targeted production starting from Q2 2017, will deliver direct shipping bauxite into a tightening market, thereby maximising returns for our shareholders."

  URQUHART BAUXITE RESERVES AND RESOURCES

  The Urquhart Bauxite project is situated approximately 5km southwest of Weipa on Queensland's Western Cape York Peninsula. Western Cape York is world-renowned for its extensive deposits of high-quality, export grade pisolitic bauxite.

  The maiden Inferred Mineral Resource was announced on 11 May 2015, precipitating a subsequent favourable mine planning internal assessment. Infill drilling of the main resource in August 2016 upgraded the Inferred Mineral Resource classification to a Measured and Indicated Resource (see ASX Release 14 November 2016).

  The project's Weipa-type pisolitic bauxite is of high quality export grade with high alumina content (>50% Al2O3) that is well known and accepted by Chinese and other alumina refineries.

  UBx consists of two (2) bauxite plateaus, known as Area A and Area B; both of which are wholly contained within EPM15268, held 50% by Oresome Australia Pty Ltd (a wholly-owned subsidiary of

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  Metallica) and 50% by Ozore Resources Pty Ltd. The completion of the PFS allows for a maiden JORC (2012) Reserves Statement (see Table 2) contained within Mining Lease Application (MLA) 100044.

  Area Direct Shipping Bauxite (Low Temp)

  Al2O3 SiO2 THA Low Temp

  RSi

  Dry kt % % % %

  Proved A 2,964 53.7 12.3 42.3 5.4 Probable A 3,568 51.9 14.2 39.1 5.9 Ore Reserve A 6,532 52.7 13.3 40.6 5.7 Table 2 - Urquhart Bauxite project Reserves

  The Proved and Probable Reserves (Base Case), wholly contained in Area A, delivers attractive returns. The PFS has identified that if Inferred material in both Area A and B is mined (Production Target) then the mine life increases by a further 1.5 years (Scenario 2). Further upside is derived by stockpiling transitional material that is dry screened at the end of the mine life (Scenario 3). Both Scenarios 2 and 3 have a lower confidence level than the Base Case as there is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of indicated mineral resources or that the production target itself will be realised, and further investigation is required to increase the confidence in this material. The PFS allows for capital to undertake these investigations.

  A summary of the key assumptions used in including the Inferred Mineral Resource in Scenarios 2 and 3 are:

  • The Urquhart Bauxite Project has a successful history of converting Inferred Resources into Indicated Resources.

  • The mining is sequenced in such a way that the Proved and Probable Ore Reserves form the majority of production for the initial years of operation, whilst the scheduled material sourced from Inferred Resources (which together with the Ore Reserves makes up the Production Target for scenario 2 and scenario 3) is at the end of the mine operations.

  • The modified Inferred Mineral Resources and screened material included in the Production Target are not a determining factor in the project viability but should be considered as upside.

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