ARIKA RESOURCES LIMITED — Capital/Financing Update 2016

Jul 27, 2016

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ASX RELEASE: 27 JULY 2016

POSITIVE ADMIRAL BAY SCOPING STUDY

Scoping Study for Admiral Bay completed by expert technical consultant, SRK Consulting

Confirms Admiral Bay has the potential to support a large, long life and low cost zinc/lead/silver operation Metalicity’s preliminary hurdle rate of 20+ year mine life with an ore throughput of 3-5Mtpa*

Highly capital efficient development options considered

Flat lying deposit geometry based on latest resource, potentially favourable for low cost automated mining Conventional flotation processing with high projected metal recoveries

Expected high quality zinc and lead concentrate products with strong demand characteristics Pre-Feasibility Study and process to seek a joint venture partner for Admiral Bay to commence Admiral Bay is currently the 4th largest undeveloped zinc deposit in the world 100% owned by Metalicity

Metalicity Limited (“Metalicity” or “the Company”) advises that it has received positive results from the recently completed Scoping Study on its 100%-owned Admiral Bay Zinc Project in the Kimberley region of Western Australia.

The Scoping Study, completed by expert technical consultant SRK Consulting, has confirmed the view of the Metalicity Board that the Admiral Bay deposit has the potential to support a long life and low cost zinc/lead/silver operation of world class scale.

Key outcomes of the completed Scoping Study include:

• ─ A new geological model and Inferred Mineral Resource Estimate – approximate 30% increase in ZnEq grade and 100% increase in ZnEq contained metal (see Metalicity ASX release 4 July 2016)

• ─ Open stoping (with backfill) as the base case mining method with recommended PFS option to evaluate longwall mining given rock properties, latest deposit geometry and further automation/cost benefits

• ─ The ore does not currently demonstrate deleterious metallurgical behaviour and high projected metal recoveries (90-95%) through a conventional flotation processing route, PFS underway to optimise

• ─ Sealed container trucking and shipping through existing Port Hedland facilities the preferred export path

As a measure of viability, Metalicity requires Admiral Bay to have a potential mine life in excess of 20 years at a targeted ore throughput rate of 3-5Mtpa.* The Metalicity Board believes the Scoping Study has demonstrated the Admiral Bay project is potentially viable and could achieve this hurdle rate and will commence of a PreFeasibility Study (PFS) on the Admiral Bay Zinc Project.

• This is an Aspirational Statement with reference to the ASIC Information Sheet (IS 214) and Metalicity does not yet have reasonable grounds to believe the statement can be achieved. The Scoping Study referred to in this announcement is based on lower-level technical assessments and is insufficient to support estimation of Ore Reserves, or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised.

Metalicity Limited ASX Code: MCT ABN: 92 086 839 992

www.metalicity.com.au 6 Outram Street West Perth WA 6005

The initial focus of the PFS work will be refinement of the preferred PFS pathway, including more detailed evaluation of specific development options and mining techniques. In parallel, Metalicity will be undertaking a process to seek a joint venture partner to participate in the PFS process and allow acceleration of the targeted Admiral Bay development timeline.

Metalicity Managing Director, Matt Gauci, commented,

“We are excited that the Scoping Study has confirmed Admiral Bay as capable of delivering a large, long life and potentially low cost zinc and lead operation of world class scale. The Study has demonstrated that the project has the clear potential to achieve Metalicity’s required hurdle rate.

The strategic nature of Admiral Bay needs to be understood in the context of the long-term fundamentals for zinc and lead markets. The recent and imminent closures of world-class, large scale zinc mines are expected to create a significant supply shortage in the global zinc market.

There are very few large, long-life and potentially low cost zinc projects located in stable, first world mining jurisdictions that can be brought into production to address this supply shortage.

Most industry analysts are forecasting strong zinc price fundamentals in the near future and the Company is now focussed intently on progressing the Pre-Feasibility Study at Admiral Bay in conjunction with seeking a joint venture partner for the project.”

Figure 1: Sunrise at Admiral Bay

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Source: Metalicity

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BACKGROUND

The Admiral Bay Zinc Project is located in the Kimberley region of Western Australia, approximately 140 km south of Broome. The general area in which the Project is located is characterised by low elevation and fairly flat terrain.

The total Project area of 3,443 km[2 ] consists of granted mining leases (MLs) and exploration licences (ELs), and exploration licence applications (ELAs), and is 100%-owned by Metalicity. The existing Inferred Mineral Resource Estimate of 170 Mt at 7.5% ZnEq for Admiral Bay is delineated on the granted MLs and ELs.

Figure 2: Admiral Bay Zinc Project: Tenement Holdings and Historical Drilling

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Source: Metalicity

The Project was acquired by Metalicity from the liquidators of Kagara Limited (“Kagara”) in September 2015. Kagara had previously completed a Pre-Feasibility Study (PFS) on the basis of a 10-year mine life at an ore throughput of 2.5 Mtpa from a 2.1km strike length of the deposit, in conjunction with technical consultant RSV Australia Pty Ltd (RSV), and announced the key results in July 2010.

The Scoping Study undertaken by Metalicity was commenced in October 2015 and has been completed in conjunction with expert technical consultant, SRK Consulting. The recently revised Inferred Mineral Resource Estimate for Admiral Bay was completed by Ridley Mineral Resource Consulting Pty Ltd.

The Scoping Study has been prepared with reference to the previous Kagara/RSV study, as well as additional historical data that has been made available to Metalicity. The Study process included a review of all historical Project data for adequacy and completeness and the provision of technical expertise by SRK Consulting, across all key development and operating aspects of the Project. The Study document includes a range of feasibility options for more detailed evaluation and a recommended scope of work for the PFS.

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GEOLOGY AND RESOURCES

The Admiral Bay deposit is located in the Central Canning Basin, a major long-lived intracratonic basin with multiple sub-basins and two main rift episodes, one in the late Lower to early Middle Ordovician and the other in the Lower to Middle Devonian.

The Admiral Bay deposit occurs on the margin of the Broome Arch and the Willara sub-basin within a series of west-northwest half-grabens. To the southeast of the deposit there are a series of southwest trending faults interpreted as a series of basin bounding faults marking the edge of the Broome Arch and the Kidson subbasin.

Figure 3: Admiral Bay Zinc Project: Mineralised Zones

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Source: Metalicity

The Canning Basin has undergone a number of basin uplift events with no associated deformation or compression. Given this uplift, unusually, there is no evidence of unconformities or erosional surfaces. An antiform extends along the axis of the Admiral Bay Fault Zone (ABFZ) and is interpreted as a stratigraphic consequence of an elongate basement high which broadly aligns with the strike of the ABFZ. Mineralisation from previous drilling has identified this antiform as a key depositional control. The extent of mineralisation both laterally and vertically over a relatively large stratigraphic interval has hampered definition of the deposit into a narrow deposit type within the family of sediment hosted sulphide deposits.

The lack of compressional events or crustal shortening has left the stratigraphy unusually ‘level’ along the line of the ABFZ within the Goldwyer, Nita and Bongabinni Formations allowing interpretation of mineralised

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volumes between drill holes over a large distance. The mineralisation also appears to conform to the shape of the antiform, with mineralisation dipping and pinching out away from the axis of the antiform towards the edges of the antiform limbs.

Mineral Resource Estimate

Metalicity announced a resource estimate for the Admiral Bay deposit on 4 July 2016 (see Metalicity ASX announcement). This estimate incorporates the increased understanding on the unusual lateral continuity of the almost flat lying Ordovician Formations.

The Inferred Mineral Resource Estimate (MRE) totals 170 Mt at 4.1% Zn, 2.7% Pb and 25g/t Ag. In zinc equivalent (ZnEq) terms, based on May 2016 LME metal prices and Metalicity metal recovery estimates, the Inferred MRE stands at 170 Mt at 7.5% ZnEq (as announced by Metalicity on 04/07/2016). The MRE extends between mining leases M04/244 and M04/249. It is contained along an 18km mineralised corridor over the strike extent of the Admiral Bay Fault Zone (ABFZ).

The 18km extent of the MRE exhibits sedimentary formations that host the mineralisation that vary by less than 50m in elevation along the trend of the ABFZ. As discussed above, this package of almost flat lying host rocks along the axis of the ABFZ forms an antiform dipping gently to the north and south. The MRE is interpreted within the southern limb of the antiform.

The resource has been extrapolated an arbitrary distance of 500m along strike beyond mineralised drill hole intersections at each end of the antiform. As the resource extends for 18km, the 500m extrapolated extents conservatively form 7% of the resource.

The main resource zone (MZ11) was extended a maximum of 50m down dip from the mineralised drill intersections along the modelled south limb west of EL04/249. As this zone varies in width from 900m at the western end to 500m over the eastern end of the southern limb of the antiform, the 50m extrapolation down dip on the southern limb conservatively forms 7% of MZ11 zone resource.

Exploration Target Range**

A revised Exploration Target Range (ETR) has also been estimated for Admiral Bay (as announced by Metalicity on 04/07/2016). The ETR is exclusive of the MRE and covers the central and northern limbs of the interpreted antiform. The ETR is 160 Mt to 210 Mt at 7.2% ZnEq to 7.8% ZnEq.

Although the Scoping Study assessed only the MRE, due to the predictability of the mineralised host stratigraphy, exploration potential outside the MRE is considered high.

** The potential quantities and grades in the ETR estimates are conceptual in nature and there has been insufficient exploration to estimate Mineral Resources in the Exploration Target areas. It is uncertain whether further exploration in these areas will result in estimation of Mineral Resources.

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Figure 4: Admiral Bay Zinc Project – MRE and ETR

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Source: Metalicity

Figure 5: Admiral Bay Zinc Project - MRE 3D view looking North

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Source: Metalicity

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MINE ACCESS AND DEVELOPMENT

Three key development options were examined in the Scoping Study:

• traditional decline development,

• tunnel bored machine decline development and

• vertical shaft sinking.

Based on existing geotechnical and hydrogeological knowledge, it is considered that a vertical access shaft system would be the most suitable access route. However, all three options are planned to be evaluated in more detail during the PFS phase.

Given the elevated geothermal gradient at Admiral Bay a conceptual ventilation assessment was undertaken by BBE Consulting. This study assessed the viability of equipping the secondary access as a bratticed shaft with production conveyance and operating as a downcast/fresh airway. In addition, the Project includes a refrigeration plant in order to achieve the ventilation requirements for the underground workings.

MINING AND GEOTECHNICAL

Potential mining methods previously evaluated for Admiral Bay include: room and pillar, modified sub level caving and open stoping. Open stoping (with backfill) has been conservatively selected as the base case for the Scoping Study, driven in part by geotechnical considerations.

Figure 6: Proposed shaft access and open stope mining method

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Source: Metalicity

Based on the latest resource model the Scoping Study also recommends the feasibility evaluation of longwall mining given rock properties, deposit geometry and further automation/cost benefits that would flow from such an approach.

Geotechnical reports from KRA and RSV were reviewed, presenting reasonable data for the Scoping Study assessment. The intact rock is indicated to be weak-to-moderate in strength. The uniaxial compressive strength (UCS) of the main units indicatively varies between 26 and 44 MPa. Future feasibility work is planned to include a detailed geotechnical core logging and geotechnical surface drilling campaign with collection of in-situ geotechnical and stress data.

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Based on previous hydrogeological study work (Pennington, S 2009), the three regional groundwater systems identified are consistent with the SRK project team’s groundwater knowledge of the region (Broome Sandstone, Wallal Sandstone and Grant Group). The proposed mine access shaft will penetrate at least two significant regional aquifers to access the planned mine workings that will sit below a sequence of mudstones and shales. Further evaluation work is planned to confirm the type of aquifer system (i.e. confined/unconfined), groundwater recharge, discharge and transport processes, and physical and chemical properties of the aquifer systems.

PROCESSING AND METALLURGY

The metallurgical and mineral processing test work carried out to date consists of a test work program by CRA in 1988 and the test work program for the Kagara 2010 PFS. While that study work was insufficient to generate typical engineering deliverables the test results delivered positive initial conclusions:

• ─ The material does not currently demonstrate any deleterious metallurgical behaviour

• ─ It appears readily amenable to processing through a simple, conventional flotation plant to achieve high zinc, lead and silver recoveries

• ─ Preliminary metal recovery expectations are in the range of 90-95% across zinc, lead and silver

• ─ Concentrate product grades were good (Pb +60% and Zn +48%), although selectivity of zinc and lead was not ideal and there is scope for further optimisation

The selected processing flowsheet consists of two stage crushing and two stage grinding to produce milled flotation feed. The flotation plant consists of lead rougher, scavenger cleaning and re-cleaning to produce a lead sulphide concentrate. The lead scavenger tails are subject to zinc rougher, scavenger, cleaning and re-cleaning to produce a zinc sulphide concentrate. The flowsheet is considered relatively low risk.

Figure 7: Flotation processing flowsheet

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Source: Metalicity

The initial testwork results and benchmarking against similar ore types indicates confidence in the ability to process the Admiral Bay ores using the simple and conventional flowsheet selected. Optimisation of the PFS flowsheet and future consideration of fluorine removal is required. This will ultimately require confirmation through more detailed testwork.

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INFRASTRUCTURE AND EXPORT LOGISTICS

The Project is located in excellent proximity to world class transport and export infrastructure in the region.

The sealed Great Northern Highway is located approximately 80 kilometres west of the Project area, along the McLarty track. Lead and zinc concentrate products are proposed to be trucked via this route in standard sealable sea containers.

The preferred export pathway is through public access facilities at Port Hedland. Other potential port options include Broome and Derby. The PFS is plans to review these alternative port options in more detail.

Indicative power demand for the Project has been estimated at 96 MW (including 47MW for refrigeration) for the base case mining and plant capacity of 5 Mtpa. The Scoping Study is prepared on the basis of a typical third party build-own-operate (BOO) solution for the gas-fired power station and pipeline infrastructure.

Given the availability of water from the Broome Sandstone Aquifer and the potential requirement for material mine dewatering from lower aquifers, sourcing sufficient water for the mine development appears to pose minimal project risks.

The requirement for a 500 person camp facility on site has been estimated on the basis of base case development personnel requirements. It has been assumed that a fly-in, fly-out (FIFO) village will be constructed.

ENVIRONMENTAL

The Project site is located in the northern reaches of the Great Sandy Desert biogeographic region, within the McLarty subregion. The Great Sandy Desert comprises a Quaternary sandplain overlying Cretaceous and Jurassic sandstones. The gently undulating plain is dominated by longitudinal dunes of varying frequency, tending mainly west-northwest to east-southeast. Soils are mainly red earthy sands and red siliceous sands, with local exposures of ironstone gravels. The McLarty subregion is characterised by mainly open spinifex hummock grasslands.

A preliminary flora and vegetation survey conducted in 2011 recorded seven plant communities and a total of 99 plant taxa from 35 families and 71 genera within area covered by the granted MLs. None of these vegetation types are listed as, or analogous to, any Threatened Ecological Communities or Priority Ecological Communities under the EPBC Act or the Wildlife Conservation Act 1950. Vegetation condition across the majority of the ML and EL areas was rated as “very good”.

A wet and dry season flora and vegetation, vertebrate fauna and a short range endemic (SRE) survey is proposed for the PFS phase as part of an environmental early works program. This would provide updated baseline data for use by the project design team and assist in reducing assessment lead times.

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ENQUIRIES

Investors Media Matt Gauci Michael Vaughan Managing Director Fivemark Partners +61 8 9324 1053 +61 422 602 720 mgauci@metalicity.com.au michael.vaughan@fivemark.com.au

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IMPORTANT NOTICES

No New Information

Metalicity confirms that the Exploration Results and the Inferred Mineral Resource at the Admiral Bay Zinc Project were prepared and disclosed under JORC Code 2012 on 4 July 2016. The information has not materially changed since last reported on 4 July 2016. Metalicity is not aware of any new information or data that materially affects the information included in that announcement and that all material assumptions and technical parameters underpinning the estimates in that announcement continue to apply and have not materially changed.

Competent Person’s Statement

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘JORC Code’) sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The Information contained in this announcement has been presented in accordance with the JORC Code and references to “Measured, Indicated and Inferred Resources” are to those terms as defined in the JORC Code.

The information in this report that relates to Geology and Exploration Results is based, and fairly reflects, information compiled by Mr Michael Hannington, who is a Member of the Australian Institute of Geoscientists. Mr Hannington is a fulltime employee of Metalicity. Mr Hannington has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Hannington consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this report that relate to the Mineral Resource and Exploration Target Range is based on, and fairly represents, information which has been compiled by Mr James Ridley. Mr Ridley is a Director and Principal Geologist at Ridley Mineral Resource Consulting Pty Ltd and a Member of the Australasian Institute of Mining and Metallurgy. Mr Ridley has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being undertaken to qualify as Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Ridley consents to the inclusion in this report of the matters based on his information in the form and context in which they appear.

All parties have consented to the inclusion of their work for the purposes of this announcement. The interpretations and conclusions reached in this report are based on current geological theory and the best evidence available to the authors at the time of writing. It is the nature of all scientific conclusions that they are founded on an assessment of probabilities and, however high these probabilities might be, they make no claim for absolute certainty. Any economic decisions which might be taken on the basis of interpretations or conclusions contained in this report will therefore carry an element of risks.

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