ARIKA RESOURCES LIMITED — Interim / Quarterly Report 2019

Jan 30, 2020

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ASX RELEASE: 31 January 2020

December 2019 Quarterly Activities Report

HIGHLIGHTS

• Two drilling programmes completed at the Kookynie Gold Project:

• Results released in the quarter include:

  • Leipold: LPRC0001 - 9 metres @ 7.31 g/t Au from 34 metres

    - **Including 3m @ 7.91 g/t Au from 34 metres & 4m @ 10.4 g/t Au from 39 metres**
    
    - **including 1 metre returning 31.2 g/t Au from 40 metres**
    

  • McTavish: McTRC0002 - 3 metres @ 1.41 g/t Au from 73 metres

  • Champion: CPRC0002 - 1 metre @ 1.35 g/t Au from 127 metres

• Results released post quarter end but drilled during the quarter:

  • McTavish: McTRC0005 – 5 metres @ 17.9 g/t Au from 48 metres, inc. 1 metre @ 80.17 g/t Au from 51 metres.

  • Leipold: LPRC0003 – 6 metres @ 9.4 g/t Au from 26metres, inc. 2metres @ 19g/t Au from 26metres.

  • Champion: CPRC0004 – 2 metres @ 25.2 g/t Au from 28 metres to end of hole, inc.

    • 1 metre @ 42 g/t Au from 28 metres

• Significant additional tenements acquired at the Kookynie Gold Project:

• During the quarter – an additional 496 hectares of strategic and highly prospective tenements were acquired.

• Post quarter end – an additional 3,300 hectares within the prolific Kookynie-Niagara Trend.

• Land holding now doubled at the Kookynie Gold Project to over 7,000 hectares since entering into the Kookynie & Yundamindra Gold Project Farm In agreement.

CORPORATE

• Rights Issue and Share Placement Completed that raised approximately $270,000

• End of quarter cash balance of approximately $255,000.

• All tenement consolidation efforts contribute towards the Farm-In Agreement with Nex Metals

• (ASX:NME) to spend $5 million over 5 years for 51%[1] .

Metalicity Limited (ASX: MCT) (“MCT” or “Company”) is pleased to provide the quarterly activities report for the period ending 30 December 2019, which saw the Company continue to actively explore the Kookynie Gold Project.

1 Please refer to ASX Announcement “ Metalicity Farms Into Prolific Kookynie & Yundamindra Gold Projects, WA ” dated 6th May 2019 with Nex Metals Explorations Ltd, ASX:NME.

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

www.metalicity.com.au Level 3, 30 Richardson Street West Perth WA 6005

Commenting on the quarter, Metalicity managing director Mr Jason Livingstone said:

“ The December quarter has set Metalicity up for a game changing 2020. With every drilling programme performed to date, we have hit the mineralised structure. This coupled with our ability to procure strategic and highly prospective tenements at minimal cost, is demonstrating that we are well advanced in our stated aim to consolidate this gold field and deliver value. ”

“ When Metalicity first entered the farm in arrangement, the deal was for approximately 2,400 hectares of granted tenements. Since entering into that agreement, we had identified a historical impediment to effective exploration and development was the fractured ownership of tenements throughout this area. Having essentially tripled our land holding, we are well poised to explore and deliver value through resource delineation and exploration upside through potential discovery. ”

Kookynie and Yundamindra Gold Projects

Metalicity has continued to actively develop its Kookynie and Yundamindra Gold Projects, located in the Goldfields district of Western Australia.

The Kookynie Project, which is located approximately 50 km south of Leonora is host to six historic, largeproducing historical mines: Champion, McTavish, Leipold, Diamantina, Cosmopolitan and Cumberland.

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Figure 1 – The Kookynie & Yundamindra Tenement Map

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The Company has successfully completed three drilling campaigns at the project to date, which have intersected significant gold mineralisation beyond the boundaries of the historic activities.

The most recent follow-up drilling campaign consisted of three RC drill holes at the Leipold, McTavish and Champion projects (See ASX Announcement dated 2/10/19).

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MGA 94 Zone 51 South
Prospect Hole ID Hole Type Easting Northing RL EOH Dip Azi From (m) To (m) Down Hole Width Grade (Au g/t) Comments
34 43 9 7.31 9m @ 7.31 g/t Au from 34m
34 37 3 7.91 3m @ 7.91 g/t Au from 34
Leipold LPRC0001 RC 350,744 6,752,130 420 48 -60 250
39 43 3 10.4 3m @ 10.4 g/t Au from 39
40 41 1 31.2 1m @ 31.2 g/t Au from 40m
McTavish McTRC0002 RC 350,647 6,754,098 424 84 -60 270 73 76 3 1.41 3m @ 1.41 g/t Au from 73m
Champion CPRC0002 RC 352,265 6,757,582 416 138 -60 250 127 128 1 1.35 1m @ 1.35 g/t Au from 127m
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Table 1 – Significant Drill Hole Intercepts

At Leipold the Company intersected the mineralised structure but also confirmed the high-grade nature of the prospect, with a broad intercept of 9 metres @ 7.31 g/t Au from 34 metres. This intercept included a very high-grade metre at 31.2 g/t Au from 40 metres down hole. The very shallow nature of these results also highlights the possibility of open pit mining options.

The Company completed a single RC drill hole at the McTavish prospect to a depth of 84 metres, down dip from historical exploration and along strike from Metalicity’s maiden intercept. Drilling at McTavish returned 4 metres @ 6.4 g/t Au from a depth of 67 metres, as well as also intersecting the mineralised structure.

A single 138-metre-deep RC hole has also targeted down plunge mineralisation at the Champion prospect. The drill hole encountered the structure as well as quartz veining with significant pyrite, chalcopyrite and pyrrhotite sulphide mineralogy. Results from Champion returned 1 metre @ 1.35 g/t Au from 127 metres.

The results complement the maiden drilling campaign, which was also completed during the period, with the exploration programme consisting of three holes into the Diamantina-Cosmopolitan-Cumberland trend (DCC trend) and a single hole into McTavish and Champion (See ASX Announcement dated 31/07/19).

The initial drilling campaign has also demonstrated the extension of the mineralised structure and the existence of gold mineralisation across the various prospects.

Results from this programme included 2 metres @ 22.1 g/t Au from 76 metres at Cosmopolitan, 4 metres @ 6.4 g/t Au from 67 metres at McTavish and 2 metres @ 1.4 g/t Au from 72 metres at Cumberland

The table below summarises significant intercepts returned from all programmes to date:

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MGA 94 Zone 51 South
Down
Grade
Hole From To Hole
Prospect Hole ID Tenement Easting Northing RL EOH Dip Azi (Au Comments
Type (m) (m) Width
g/t)
(m)
-60 250 34 43 9 7.31 9m @ 7.31 g/t Au from 34m
including 34 37 3 7.91 inc. 3m @ 7.91 g/t Au from 34m
LPRC0001 RC 350,744 6,752,130 420 48
including 39 43 3 10.4 inc. 3m @ 10.4 g/t Au from 39m
including 40 41 1 31.2 inc. 1m @ 31.2 g/t Au from 40m
-60 250 18 22 4 7.1 4m @ 7.1 g/t Au from 18m
Leipold LPRC0002 M40/22 RC 350,760 6,752,040 431 42 including 19 21 2 10.8 inc. 2m @ 10.8 g/t Au from 19m
-60 250 26 29 3 3.4 3m @ 3.4 g/t Au from 26m
-60 250 24 30 6 9.4 6m @ 9.4 g/t Au from 24m
LPRC0003 RC 350,766 6,752,030 431 42
including 26 28 2 19 inc. 2m @ 19 g/t Au from 26m
-60 250 38 46 8 3.2 8m @ 3.2 g/t Au from 38m
LPRC0004 RC 350,785 6,752,027 431 60
including 38 41 3 6.3 inc. 3m @ 6.3 g/t Au from 38m
-60 270 67 71 4 6.4 4m @ 6.4 g/t Au from 67m
McTRC0001 350,647 6,754,118 423 112
RC including 67 68 1 15.47 inc. 1m @ 15.47 g/t Au from 67m
McTRC0002 350,647 6,754,098 424 84 -60 270 73 76 3 1.41 3m @ 1.41 g/t Au from 73m
McTavish McTRC0003 M40/77 RC 350,576 6,754,153 423 30 -60 270 14 15 1 1.9 1m @ 1.9 g/t Au from 14m
McTRC0004 RC 350,596 6,754,153 423 48 -60 270 33 35 2 2.2 2m @ 2.2 g/t Au from 33m
-60 270 48 53 5 17.9 5m @ 17.9 g/t Au from 48m
McTRC0005 RC 350,618 6,754,083 424 66
including 51 52 1 80.17 inc. 1m @ 80.17 g/t Au from 51m
CPRC0001 352,224 6,757,503 417 112 -60 270 Stope fill intersected - structure present but mined out.
RC
CPRC0002 352,265 6,757,582 416 138 -60 250 127 128 1 1.35 1m @ 1.35 g/t Au from 127m
CPRC0003 RC 352,158 6,757,586 417 48 -60 270 31 33 2 1.8 2m @ 1.8 g/t Au from 31m
-60 270 28 30 2 25.2 2m @ 25.2 g/t Au from 28m to EOH
Champion CPRC0004 M40/27 RC 352,149 6,757,566 417 30
including 28 29 1 42.04 inc. 1m @ 42.04 g/t Au from 28m
16 17 1 1.3 1m @ 1.3 g/t Au from 16m
CPRC0005 RC 352,167 6,757,631 417 42 -60 270
39 40 1 2.1 1m @ 2.1 g/t Au from 39m
CPRC0006 RC 352,167 6,757,649 417 54 -60 270 Assays Pending
167 168 0.72 3.1 0.72m @ 3.1 g/t Au from 167m
RC/DD
CDRCDD0001 M40/61 Tail 354,377 6,753,209 427 186 -60 270 173.1 173 0.21 8.8 0.21m @ 8.8 g/t Au from 173.07m
174.9 176 1.15 1.5 1.15m @ 1.5 g/t Au from 174.85m
DCC Trend
CLRC0001 M40/61 RC 354,153 6,754,058 429 136 -60 270 72 74 2 1.4 2m @ 1.4 g/t Au from 72m
CDDD0001 E40/332 DD 354728 6753398 432 530 -60 270 Structure diluted by Proterozoic Dolerite Dyke
CDRC0001 M40/61 RC 354284 6753513 430 148 -60 270 76 78 2 22.1 2m @ 22.1 g/t Au from 76m
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Table 2 – All Drill Hole Intercepts to date

Throughout the period, Metalicity also continued to expand its tenure at the Kookynie and Yundamindra Projects, making efforts to consolidate its landholdings in an area which has historically been characterised by fractured ownership.

Importantly, all of funds used through its acquisition and farm-in activities at Kookynie and Yundamindra will be included and contribute towards Metalicity’s arrangement with NEX Metals to spend $5 million to earn 51% ownership of the projects.

At Kookynie, the Company has outright acquired the exploration license E40/390 which is immediately west of the lease hosting the main Kookynie Project area, see Figure 2.

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Figure 2 – Kookynie Area Tenement Map

Through our monitoring of competitor activity within the Kookynie area, we identified that this area was due for renewal. This ground was not renewed and therefore we subsequently used the Department of Mines, Industry Regulation and Safety tenement application process to acquire this ground. The exploration license is host to a historical production site named “Wandin”, that during 1903, produced 40 tonnes at an average head grade of 12 g/t Au (reference MINEDEX –

https://minedex.dmirs.wa.gov.au/Web/sites/details/36B9915A-1818-49C0-AFC0-A04A3DCD52A3)

The setting of this tenement application highlights that it hosts the strike extents of Ardea Resources ‘Mulga Plum’ Prospect coupled with the structural complexity illustrated by the regional geophysics in the area. With the acquisition of this strategic and highly prospective tenure, the Company has significantly increased its presence within the region and now commands a prominent land holding. The regional geophysics illustrate similar signatures to the prolific and well-endowed Niagara Trend which is host to significant gold mineralisation.

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To date, all of Metalicity’s acquisitions and tenement pegging activities contribute towards the $5 million required to earn 51% of the original farm-in agreement with Nex Metals (please refer to ASX Announcement “Metalicity Farms Into Prolific Kookynie & Yundamindra Gold Projects, WA” dated 6th May 2019).

Regional Projects

During the quarter, the Mandora, Desert Queen and the Pandora Projects were relinquished. After marketing the Projects to potential joint venture/farm-in partners, the feedback received and lack of interest in these two Projects led Metalicity to relinquish and see a rental reimbursement.

Warburton and North Fraser Range were progressed through to grant and executing a native title agreement to allow access is ongoing. However, Metalicity is experiencing significant delays due to this process and post quarter end, Metalicity will be relinquishing these Projects.

The relinquishment of the Projects allows Metalicity to solely focus on the Kookynie Gold Project whereby the Company can concentrate its efforts to maximising the value in this prolific and well-endowed gold Project.

Kimberley Mining Limited – Admiral Bay

As announced on the 21 November 2019 (please refer to ASX Announcement titled “ Kimberley Mining Update ”), Kimberley Mining Limited (KML) decided to not pursue the TSX-V IPO. This was the advice given and with the backdrop of 13 mining related IPO’s performed within the Canadian Capital Markets which collectively raised circa CAD$8 million. With our assistance, KML has reduced all its costs and the Project is on “care and maintenance”.

However, the main Exploration License, E04/1610 was granted a two-year extension in September 2019. This, with Metalicity highlighting fundamental positives within the Project through increased prospectivity of higher grading domains, we are exploring options value maximising options and continue to monitor the Canadian market, along with other markets, to ensure that value is created for Metalicity and KML shareholders alike.

We will keep the market abreast of any developments through our efforts to monetise this asset.

Financial

During the period Metalicity announced a share placement and a 1-for-4 non-renounceable Rights Issue to raise a total of circa $1.1 million before costs. The primary focus of the offer, if fully subscribed, is to fund a large programme of (predominately) reverse circulation (RC) and diamond drilling (DD), at the Kookynie Project to confirm and extend zones of known mineralisation at the defined Cosmopolitan, Diamantina, Cumberland, Champion, McTavish and Leipold prospects.

Assuming the rights issue is fully subscribed and after completion of the placement, a total of 156,105,619 shares and 31,221,124 new options will be issued.

Eligible shareholders will be given the opportunity to apply for additional securities in excess of their entitlement, which shall be allocated at the absolute discretion of the board.

Cash balance at the end of the quarter was approximately $263,000, with the most significant costs incurred during the quarter relating to exploration with 76% of expenditure falling into this category

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Corporate

On the 4[th] October 2019, we announced a placement to a sophisticated investor took place for $203,063 @ an issue price of $0.006. The approach and rationale for the investment was an endorsement not only for the Kookynie Gold Project, but also how we were operating and exploring this tenure.

Furthermore, Metalicity closed the rights issue having issued 25,867,569 shares to existing shareholders that raised approximately $270,000.

Quarter end cash balance stood at $255,000.

ENQUIRIES

Investors

Jason Livingstone MD & CEO +61 8 6500 0202 jlivingstone@metalicity.com.au

Competent Persons Statement

For relevant Competent Person Statements, please refer to the announcement referenced.

Forward Looking Statements

This announcement may contain certain “forward-looking statements” which may not have been based solely on historical facts, but rather may be based on the Company’s current expectations about future events and results. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have reasonable basis. However, forward-looking statements:

(a) are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies;

(b) involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward-looking statements. Such risks include, without limitation, resource risk, metals price volatility, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, as well as political and operational risks in the countries and states in which the Company operates or supplies or sells product to, and governmental regulation and judicial outcomes; and

(c) may include, among other things, statements regarding estimates and assumptions in respect of prices, costs, results and capital expenditure, and are or may be based on assumptions and estimates related to future technical, economic, market, political, social and other conditions.

The words “believe”, “expect”, “anticipate”, “indicate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and similar expressions identify forward-looking statements.

All forward-looking statements contained in this presentation are qualified by the foregoing cautionary statements. Recipients are cautioned that forward-looking statements are not guarantees of future performance and accordingly recipients are cautioned not to put undue reliance on forwardlooking statements due to the inherent uncertainty therein.

The Company disclaims any intent or obligation to publicly update any forward-looking statements, whether as a result of new information, future events or results or otherwise.

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