METALS AUSTRALIA LTD — Capital/Financing Update 2007

Oct 15, 2007

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1st Floor, 8 Parliament Place West Perth WA 6005 PO Box 1618 West Perth WA 6872 Tel: (08) 9481-7833 Fax: (08) 9481-7835 Email: mls@metalsaustralia.com.au Website: www.metalsaustralia.com.au

16 October 2007

The Manager Company Announcements Office Australian Securities Exchange Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2000

Dear Sir,

MANINDI ZINC PROJECT - DEVELOPMENT PROGRAMME UPDATE

KEY POINTS

• Geological modelling of the Zone A and B ore bodies shows a ‘multi-lode’ envelope with strong potential for additional resource tonnage in parallel positions to the main lode.

• The second phase of diamond drilling at Zone A delineates significant near surface zinc mineralisation including:

MND 049 16.90 m @ 11.82% Zinc, 0.61% Copper and 9.69 gpt Silver

from 24.00 metres.

• Modelling has identified the poorly explored Bandicoot prospect, to the south of Zone A, as a priority drill target.

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Metals Australia Ltd (‘Metals’) is pleased to announce that the development programme continues at Manindi. Following the completion of the diamond drilling, Metals began a detailed development study of the Manindi project, with a view to bringing the project into production. This study includes geological modelling, resource modelling, metallurgical testing, flow circuit design and mine planning.

The initial geological modelling of both the Zones A & B ore bodies has now been completed, with modelling of the Zone D ore bodies nearing completion. This modelling is required in order to provide a framework for the recalculation of the JORC resource.

In addition, a second phase of drilling at Zones A & B has been also been completed, with drilling continuing to intersect significant near surface zinc mineralisation.

RESULTS FROM THE SECOND PHASE OF DIAMOND DRILLING

A second phase of diamond drilling has been completed on the Zone A & B resource areas. This drilling has intersected further ore grade mineralisation.

ZONE A

A second phase of four drill holes has been completed at Zone A to further test the shallow mineralisation encountered during earlier diamond drilling. Drilling tested the ore body along both its northern and southern strike extents, with continued success, including:

MND 047 3.78 m @ 6.79% Zinc from 48.00 metres

MND 048 5.89m @ 5.78% Zinc, 0.31% Copper & 7.57 gpt Silver from 23.91 metres

And 11.60 m @ 3.16% Zinc, 0.28% Copper & 3.37 gpt Silver

from 48.65 metres

MND 049 16.90 m @ 11.82% Zinc, 0.61% Copper & 9.69 gpt Silver from 24.00 metres.

The resource continues to show economic grade and width within the main lode. In addition, parallel lodes become more significant along strike to the south, and lead into the Bandicoot prospect area.

ZONE B

A second phase of three drill holes was completed at Zone B to further test the ore body along its northern strike extents. Drilling continued to intersect ore grade mineralisation, including:

MND 050 0.50m @ 16.70% Zinc from 47.60 metres

MND 052 4.12m @ 5.06% Zinc from 24.00 metres

The Zone B ore body has two dominant ore lenses , the main and footwall lodes, that host the resource. The footwall lode was discovered as part of the recent drilling programme and adds to the existing resource position.

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KULTARR (Zone D Nth)
JORC recalculation in progress
6819000 mN KOWARI (Zone D Sth) 6819000 mN
P 57/934
JORC recalculation in progress
MULGARA (Zone B)
JORC recalculation in progress
M 57/240 WARABI (Zone A)
JORC recalculation in progress
NUMBAT
Massive Sulphide Intersected at depth
6818000 mN 6818000 mN
QUOLL
Parallel lode to Zone A?
MNRC 005 15-18m 3m @ 0.62% Zn
NINGAUI
Interpreted continuation of the
FRC 018 81-94m 13m @ 0.27% Zn
Zone D stratigraphy
BANDICOOT
Continuation of Zone A?
MNRC 002 82-86m 4m @ 1.58% Zn
6817000 mN 6817000 mN
M 57/227
6816000 mN 6816000 mN
METALS AUSTRALIA LTD Manindi Geochem (Zn ppm)
MANINDI ZINC PROJECT 5,000 to 10,000 (4)
CONTOURED GEOCHEM & 1,000 to 5,000 (61)
Date:15/10/2007 500 to 1,000 (94)
Author: TSP DRILL HOLES WITH 250 to 500 (132)
Office: Perth PROSPECT LOCATIONS 100 to 250 (230)
Drawing: TSP FIGURE 1. 50 to 100 (325)
Scale: 1:10000 Projection: MGA Zone 50 (GDA 94) 25 to 50 (587)
1 to 25 (262)
0 100 200 400
metres
663000 mE 664000 mE 665000 mE
663000 mE 664000 mE 665000 mE
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ORE BODY MODELLING

Metals Australia began an in depth geological evaluation of the Manindi ore system following the completion of the recent diamond drilling. Metals have completed over 7,500 metres of drilling in the last 18 months, which has greatly enhanced the geological and geochemical understanding of the ore system.

Metals have engaged Coffey Mining Pty Ltd (formerly RSG Global Pty Ltd) to undertake a detailed geological study of the ore bodies and the regional project area.

ZONE A & B GEOLOGICAL MODELLING

The initial phase of modelling for both the Zone A & B ore bodies has involved both geological and grade modelling. This modelling shows that these two ore bodies were originally one ore system. Faulting and metamorphism has distorted and partially remobilised the ore bodies, as well as dislocating the Zone A ore body some 100 metres to the east of the Zone B ore body (see Figure 1).

(A) GEOLOGICAL MODELLING

Coffey Mining are currently undertaking a detailed review of the Manindi project area in order to create a geological and mineralisation framework for the recalculation of the current JORC resources. This modelling has involved a period of fieldwork, including reconnaissance, surface mapping and some relogging of the older drill core to ensure consistency through the model. A comprehensive ‘desk-top’ study, including an interpretation of the electromagnetic and airborne magnetic data, has also been completed.

The modelling of the Zone A & B mineralisation and geology has demonstrated the following (see Figures 1, 2 & 3):

• The Zone A & B ore bodies appear to be the same ore system , which has been displaced by an east-west fault, offsetting Zone B approximately 100 metres to the west of Zone A.

• The zinc mineralisation occurs within a multi-lode envelope that is both lithologically and structurally controlled.

• Previous drilling had identified the main lode positions in both resource areas but had not recognized the significance of a number of parallel lodes both at depth and along strike.

• The Bandicoot prospect, to the south of Zone A, appears to be a continuation of the Zone A mineralisation . This prospect was previously recognised in the surface geochemistry undertaken by Metals but has yet to be systematically drill tested.

The modelling of the Zone D ore system is well advanced and the results will be released in the coming weeks.

(B) LONG SECTIONAL ANALYSIS

Metals have undertaken a detailed analysis of the ore bodies by utilising the geological modelling to help create revised long sections for the two resource positions (see Figure 4*).

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Zone B
Zone A
Offset Fault Bandicoot
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Figure 2 – A view of the Zone A & B mineralisation from the southwest. This image shows the drill hole traces, the offset fault in grey between the two resources and the main zinc lodes in blue. In addition the recently discovered footwall lodes are shown in green & red, with the Bandicoot prospect to the south.

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Zone A
Zone B
Offset Fault
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Figure 3 – A view of the Zone A & B mineralisation from the northeast. This image shows the drill hole traces, the offset fault in grey between the two resources and the main zinc lode in blue. In addition the recently discovered footwall lodes are shown in green & red, with the Bandicoot prospect to the south.

These long sections model the distribution of zinc mineralisation within the ore bodies and will help to guide the resource modelling and future drilling programmes.

The long section also shows an outline of the area of the mineralisation used in the calculation of the year 2000 JORC resource, which has previously been released.

Figure 4 shows that the drilling undertaken by Metals has increased the physical dimensions of both the Zone A and Zone B mineralisation beyond the resource outline used to calculate the JORC figure in 2000.

*Please note that only the main lode has been modelled at Zone A, while both the main lode and footwall lodes have been modelled at Zone B.

The long sectional analysis demonstrates the following:

ZONE A

• A significant zone of high-grade zinc mineralisation has been delineated at the northern end of the ore body. This mineralisation is near surface and often has a true width of more than 10 metres grading over 10% zinc.

• A new lode has been identified at the southern end of Zone A and appears to lead into the Bandicoot prospect, which has also been identified by the recent geological modelling as a priority drilling target.

• The ore body has only been drilled to around 75 metres below surface, with potential for repetitions of the lodes at depth .

• The previous year 2000 JORC resource calculations covered only a portion of the currently defined mineralisation at Zone A (see Figure 4).

ZONE B

• Three zones of high-grade zinc mineralisation have been identified at Zone B. There are two parallel mineralised zones, both approximately 25 metres below surface, being the main and footwall lodes. There is also a repetition in the main lode at depth.

• The footwall lode was identified by recent Metals drilling, and also carries significant copper credits (over 3% copper).

• The Zone B ore body has only been drilled to around 100 metres below surface and requires further drill testing both along strike and shows possible continuity at depth.

The long sectional analysis of Zone D is now underway and will be released in the coming weeks.

RESOURCE MODELLING

The updated JORC resource modelling is reliant upon the recently completed geological modelling, as well as the validation and review of the Manindi drill hole database. In addition surveying of the drill locations and infill sampling have been undertaken, as is detailed below:

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Manindi LS (Zn%/m)
100 to 1,000 (8)
50 to 100 (9)
25 to 50 (4)
10 to 25 (5) FRC032 FRC034 FWD009
5 to 10 (4) FRC035MND052
2.5 to 0 to 52.5 (13) (1) 2 2.072 MND0039.2303PH001MND021MND02311.32PH0033.206 5.95
FRC011
550 mN -999 to 0 (11) FRC0635.42 MND016 MND017 FRC0121.78 0.02250.388 0.374 86.22360.15 55 0 mN
78.56 FWD010
FRC0334.9425 FRC036
113.623
MNRC01311.32 0.0824
35.6398 MND022
MND015 12.953
0.0283 F R C0 3 7
0.08
FOOTWALL LODE
500 mN 50 0 mN
OUTLINE OF
MNRC009
2000 JORC FOOTWALL LODE 4.335
RESOURCE OUTLINE FRC007 FRC031
MND018
0.644 MND052
MND048 MND008 108.867 MND049 FRC013 0.1668 MND023FRC03520.838
43.6958 MND009 24.359 FWD001 199.74 63.3732 FRC044 MNRC012 70.1224 5.59
24.397 FWD002 46.7755 MND014 MND016 FRC034 96.8 118.83
OPEN TO THE SOUTH 68.1274 MNRMNDC014 0 45 FWD005 1 93.14 8 MNRC008MND01320.08 2.44001FRC032MND050 5.4545 90.92 FRC011
MND010 269.23151.313 67.124 0.226 8.35 2000 JORC 0.856
-1 FRC063 MND021 [MND022]
MND011 0.616 RESOURCE OUTLINE -1 -1
450 mN FWD004 M ND006 43.55 MND015 MND017 45 0 mN
-1 MND047 1.235 MNRC007 23.965 6.78625FWD010
-1 MND012 0.05 44.03 FRC062
MND0040.27062
MND046 68.528
-1 MND007 -1 FRC033
-1 181.455 MND019
FRC01273.2585
MNRC013
180.64
FWD003 FRC043 52 FRC036
-1 -1 FWD008 FRC037 0.1228
-1 0.0456
FRC030 FRC045
0.0142 0.0432
400 mN 40 0 mN
OPEN AT DEPTH
ZONE A ZONE B
FAULT ZONE
6818050 mE 6818100 mE 6818150 mE 6818200 mE 6818250 mE 6818300 mE 6818350 mE 6818400 mE
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350 mN LEGEND

35 ~~0~~ mN METALS AUSTRALIA LTD MANINDI ZINC PROJECT ZONE A & B MAIN LODE Date:15/10/2007 Author: TSP CONTOURED LONGSECTION Office: Perth (ZINC% METRES) Drawing: TSP FIGURE 4 Scale: 1:1000 Projection: Non-Earth (meters)

BOUNDARY OF 2000 JORC RESOURCE APPROX POSITION OF

APPROX POSITION OF PARALLEL FOOTWALL LODE

0 10 20 40 metres

DRILL HOLE SURVEYING

The drill holes at Manindi have been drilled over a considerable time period, with a number of the older diamond drill holes dating back to 1975. These holes were drilled on ‘local grids’, which were at times emplaced by crude and unreliable methods.

Metals have completed a detailed survey of the resource areas. Utilising a Differential Global Positioning System (DGPS), with an accuracy of better than 10cm, Metals has surveyed the precise locations of the drill holes to be utilised in the resource calculations. A large number of the historic drill holes were located and captured. Additionally drill hole collars were checked for their azimuth and dip to assist with the validation of the existing digital database.

This exercise was undertaken to assist in the resource modelling by capturing the exact position of the drill hole in space, thereby allowing accurate estimation of ore block dimensions.

INFILL SAMPLING

The geological and grade modelling of the Manindi ore bodies identified a number of drill holes from previous exploration where the ore lenses should have extended further at depth, along strike or where sampling appeared to only test the high-grade portions of the mineralisation.

A programme of infill sampling was recently completed to test these projected and known zones of mineralisation, with the samples currently being assayed by SGS Australia in Perth.

BULK DENSITY DETERMINATION

In addition to the infill sampling described above, the company has taken a large number of bulk density measurements through all of the ore bodies, testing a range of rock types from massive sulphide ore to gabbro wall rock.

The bulk density (‘BD’) is the measurement of the grams of material in a cubic centimeter. It is needed to accurately calculate the new resource tonnage. The BD is utilised to calculate the overall weight of the ore blocks within the resource, and varies depending upon the style of ore and host rock.

A total of 180 bulk density measurements were taken throughout the resource areas, and range in value from 2.6 for the intrusive pegmatites through to 4.6 for the massive sulphide ores.

Metals continues its work programme on the Manindi Zinc project, with resource modelling to begin as soon as the geological modelling is complete and the assay results of the infill sampling are received. Metal’s looks forward to continuing to update shareholders as our development programme proceeds.

Yours faithfully,

Norman Grafton Company Secretary Metals Australia Ltd

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Competent Person Declaration

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Tim Putt of Exploration and Mining Information Systems, who is a member of The Australasian Institute of Geoscientists. Mr. Putt has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves”. Timothy Putt consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

For further information please contact: Tim Putt, Exploration Manager

Or consult our website:

Phone (08) 9481 7833 www.metalsaustralia.com.au

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