METALS AUSTRALIA LTD — Interim / Quarterly Report 2012

Oct 29, 2012

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QUARTERLY A CTI V ITIES REP O RT for the period e n ded 3 0 Septe m ber 20 12

H I G H L I G H T S

N A M I B I A U R A N I U M E X P L O R A T I O N

• Shallow RC drilling (~4 m depth) at Mile 72 has confirmed uranium mineralisation within the basement alaskite, granites and schists.

• The shallow drilling followed up previous high-grade surface samples up to 13,912 ppm U3[O] 8[ from M] ile 72.

• Kudu-Impala covers over 200 km[2] of outcropping or subcropping uranium mineralisation.

• The Company is entering a new phase of exploration at Mile 72, focusing exclusively on delineating alaskite-hosted primary uranium mineralisation within the basement sequence.

• A High Density Airborne Magnetic Survey is planned to better target basement drilling for Rössing-style primary uranium mineralisation.

• A U S T R A L I A N E X P L O R A T I O N

• Airborne geophysical (VTEM) targets confirmed at the Manindi Base Metal Cu-Zn Project (WA) have potential to substantially expand the resource.

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Metals Au s tralia Ltd ( A BN 38 008 982 4 74)

www. m etalsaustrali a .com.au

1[st] Floor, 8 Par l iament Place, W e st Perth, WA 60 0 5 ▪ PO Box 161 8 , West Perth, W A 6872 ▪ t: +61 8 9 481 7833 ▪ f: +6 1 9481 7835 ▪ e: m ls@metalsaustr a lia.com.au

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C O RPORA T E

Ale x Clemen, a long-standing director of the Company, died in July and his passing was not e d with regr e t by all co n nected wit h him. The Company’s exploration programme was sev e rely disrupt e d without M r Clemen’s g uidance.

On 2 3 July, Mr M ichael Sci v olo was ap p ointed to fill the vacanc y , and he h a s offered hi m self for election at the Company’s forthcoming annu a l General M eeting as required b y the Co m pany’s con s titution In a ddition, Mr Kieron Mu n ro, the C o mpany’s E x ploration Manager, wh o was bas e d in Na m ibia, left th e country to return to A u stralia, but w ill continue to consult o n an as-ne e ded bas i s.

Subsequent to the end of the quarte r , Mr Vince n t Algar was appointe d to overse e the Na m ibian explo r ation programme.

U R ANIUM PROJEC T S, NAM IBIA

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TH E MILE 72 URANIUM P R OJECT

The Mile 72 U r anium Proj e ct is a lar g e uranium proj e ct on the c o ast of Na m ibia north o f the city of Sw a kopmund. S ome of the h ighest uranium grades in t h e world ha v e been rec o rded in out c rop and in sha l low pits. M e tals has en t ered into a new phase of e xploration, targeting a large hi g h-tonnage mo d erate grade primary de p osit of a si m ilar style to the R össing an d Husab min e s to the so u th.

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In t h e June qu a rter, the C o mpany rep o rted that it had received v e ry positive results in rel a tion to the fina l batch of 1 5 4 assays o b tained from the trench sa m pling at the Mile 72 Project in Nam i bia (Figure 1). A ssay result s were also received fr o m the pilot sha l low RC drill i ng program m e of 231 drillholes for 1,0 2 3m at Mile 7 2 (Figure 3 ) . These sh o wed strong ano m alism awa y from the main Kudu-Impala prospe c t.

Figure 1 – Location of t he Mile 72 uranium pr o ject, Namibia.

A n e w phase o f exploration at Mile 7 2 Foll o wing the c o llection and review of d a ta from the recent surf a ce samplin g and shallo w RC drilling program m e, Metals i s preparing f o r a new ph a se of explo r ation at Mil e 72. The primary exp l oration targ e t is uraniu m mineralisat i on hosted w ithin the granite-schist-alaskite basement seq u ence. Prim a ry minerali s ation within the licence area is mos t likely to be of a similar style to t h e Rössing a nd Husab d e posits.

Gra n ite-hosted primary uranium deposits are typi c ally high tonnage and moderate g rade (25 0 -600 ppm or 0.025-0.06 % U3O8). A s such, the g rades encountered at surface at Mile 72 are not expect e d to be encountered at depth but a re, rather, a surface e n richment fe a ture indi c ative of mineralisation at depth (Se e Figure2).

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Met a ls’ Geologi s ts have reviewed all his t oric and re c ent data col l ected at an d around Mil e 72. So m e of the ke y findings to d ate include :

• The Mil e 72 area has an equi v alent propensity to generate alaski t es (the ho s ts to uraniu m mineralisation) to the A l askite Alley area that contains Rössing and Hus a b.

• Interpre t ation of the Kudu-Im p ala geolog y from geophysics sh o ws that u n ique geologi c al features, which m a y be imp o rtant in th e concentr at ion of uranium mineralisation, occur within the E PL3308 lic e nce boundary.

• Uraniu m that is co n centrated a t surface at Kudu-Impala must be s ourced fro m the basement sequenc e within the licence are a , and has n ot been transported in from elsewh e re.

• Ground w aters may h ave shifted the surface uranium an o malies relat i ve to subsurface mineralisation to a li m ited extent.

• For a m ineralised p rofile in thi s type of weathering e nvironmen t , we will expect to s e e very hig h grades a t surface, f o llowed by a zone o f depletion (maybe 2050 m d e pth) that contains ver y little o r no m ineralisatio n , followe d by fre s h primar y mineralisation.

• U3O8 grades up to 324ppm an d identific a tion of alaskite roc k units in geological l o gging of th e shallow drilling programme ar e good i ndicators o f potenti a l primary baseme n t uraniu m mineralisation.

• Several targets have bee n identifie d that re q uire further refining and anal y sis prior t o drilling a nd we exp e ct to identif y additional targets as wor k progres s es.

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Figure 2 – Areas exhibiting prime geological conditions for the genesis of a laskites. Mile 72 had the same con d itions as tho s e experienced at Husab, R o ssing and Valencia. (Re d = peak condit i ons ideal for g e nesis of a laskite. Pink = peak conditio n s exceeded re q uired con d itions but area still hosts pote n tial for alaskit e s.)

For t hcoming e x ploration a ctivity

Pre p aration is u nderway fo r a high-res o lution 50m line-spacing aeromagn e tic survey w hich will take place a s soon as a ll governm e nt approval s are in pla c e and suit a ble equipm e nt is ava i lable. The r e sults of the programme will be use d in conjunction with exis t ing data in o rder to r e fine drill tar g eting.

Foll o wing comp l etion of the geophysica l programm e and interp r etation of t h e results, d r illing of an array of deep (aroun d 80-100 m), widely spa c ed drillhole s will be carried out over the cho s en target areas. This first pass drilling programme will serve as a precurs o r to sub s equent mo r e substantial and target e d resource d efinition pr o grammes.

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Recent Explor a tion Result s Sur f ace trench i ng

The previously r eported sur f ace sampli n g results fr o m the Kud u -Impala are a highlighte d the sig n ificant valu e s achieved at Mile 72. Grades were as high as 13,912 ppm U3O8 , and inte r vals of up to nearly 300 m in length with in excess of 900 ppm U 3[O] 8[ have ] been ide n tified. The h igh-grade r e sults were located out s ide the pre v iously defi n ed extent o f the Kudu-Impala pr o spect area, significantly increasing the area of p r ospectivity.

Pil o t shallow R C drilling p r ogramme

Dur i ng the March quarter of 2012 the C o mpany completed a short pilot prog r amme of sh a llow RC d rilling at Mi l e 72.

Drilling was ver y shallow, a n d was aim e d at confir m ing or refut i ng the pres e nce of cal c retehos t ed Langer-Heinrich st y le minerali s ation at Mile 72. Mos t drillholes i n the 231 hole pro g ramme were drilled to a depth of 4m or less, w ith only 18 of these dril l ed to a de p th of 10 m .

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Figure 3 – Satellit e image of the Mile 72 licenc e area, showin g the recent R C drill fences. At K u du-Impala, N E Extension, a n d Central Are a s, “weathered rock” areas have b een trench sa m pled and an i nitial 231 drillhole programm e has been comple t ed in the “grav e l” areas in the current progra m me.

The programm e results did not suppo rt the calcre t e-hosted d e posit mode l , but the d r illing ass a y and geol o gical loggi n g results pr o duced so m e very enc o uraging res u lts (Table 1 ). In the areas teste d uranium m ineralisatio n within the bottom-of- h ole sample s suggested that ther e is potenti a l for deeper alaskite ho s ted Rössin g -style mine r alisation in t he drilled areas. Anomalous ura n ium miner a lisation oc c urs in the bottom-of-h o le drill sa m ples in several

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loc a tions. These encouraging results confirm ur a nium mineralisation i n the unde r lying bas e ment rocks which com p rise mostly a laskite, gra n ite and biotite schist.

Ta ble 1 -High	lights of RC	lights of RC	Drill	hole assa ys
(sample s exceeding 10 0 ppm U3O8)
	From		T o	U308
Hole No.	(m)	(m )		(ppm)
M 72RC0167	3		4	324.2
M 72RC0213	2		3	317.2
M 72RC0054	1		2	316.0
M 72RC0067	2		3	292.4
M 72RC0162	3		4	241.7
M 72RC0046	2		3	221.7
M 72RC0213	0		1	220.5
M 72RC0047	3		4	214.6
M 72RC0061	0		1	187.5
M 72RC0067	3		4	187.5
M 72RC0077	2		3	158.0
M 72RC0029	0		1	141.5
M 72RC0049	2		3	134.4
M 72RC0087	3		4	113.2
M 72RC0049	1		2	108.5
M 72RC0144	2		3	107.3
M 72RC0054	2		3	104.3

TH E ENGO VA L LEY URANIUM PROJ E CT Th e Engo Val l ey project (EPL3306) is loc a ted in th e remote northwest of Na m ibia in the Skeleton C oast Natio n al Par k . The proj e ct is locate d close to t h e pro p osed port location at A ngra Fria o n the northern N a mibian coa s t. The proj e ct is prospective f o r uranium located wit h in and below th e Karoo-a g e sedime n ts pre s ent on the licence. A c cess perm i ts are required to visit the S k eleton Co a st National Park a n d there are no roads a n d no h abitable sites within the 16,000 k m 2 par k (See Figur e 4).

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In J anuary 2012, Metals submitted a det a iled Envir o nmental O verview a n d Environmental Manage m ent Pl a n doc u ment to t h e Namibian Ministry of Environment and Tourism ( M ET) to ap p ly for an Enviro n mental Clearance a n d Acc e ss Permit to comm e nce surfa c e Figure 4 – – The Engo V a lley licence ar e exp l oration wo r k at Engo Valley. T h e nec e ssary Environmental Cl e arance an d Access Pe r mits were g r anted in Jul y 2012.

Figure 4 – – The Engo V a lley licence ar e a (EPL3306)

A p r ogramme o f field work t o map, sam p le and asse s s the Engo Valley Proj e ct area has been pla n ned and is ready to commence onc e relevant approvals are in place.

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BASE MET A L PROJECTS, WE STERN A USTRALIA

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Met a ls currentl y holds an interest i n two base met a ls projects i n Western A ustralia.

The Manindi zi n c project is located aro u nd 500 km northeast of Pe r th and is b e ing explore d by Metals with a view to e x panding th e existing re s ources and exa m ining the p r oject's cop p er potential.

The Sherlock B a y base met a l joint vent u re project is loc a ted in the Pilbara regio n and is bei n g managed and explored b y Australasia n Resource s Ltd (ARH). The project surrounds AR H ’s Sherloc k Bay nickel dep o sit.

MANINDI ZIN C PROJECT

The Manindi zi n c project i s a signific a nt resource loc a ted in th e Murchiso n District o f Western Aus t ralia, 20 k m southwest of the defu n ct Youanmi gol d mine.

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Figure 5 – Location of th e Western Aus t ralian base metal s projects.

Dur i ng the qua r ter, the Co m pany finali s ed the inte r pretation of a series of 3-D geoph y sical mo d els based o n a Fixed- L oop Time- d omain Ele c troMagnetic (FLTEM) s urvey previ o usly und e rtaken at M anindi. Th e se surveys successfull y validated a nomalies d e tected during a Ver s atile Time- d omain Elec t roMagnetic (VTEM) ge o physical su r vey over th e entire gro u p of ten e ments that w as carried o ut in the pr e vious quart e r.

The geophysical surveys g e nerated six new anomalies adjacen t to the kno w n mineralisation and provided a number of n ew drill tar g ets at Ma n indi. Figure 6 shows th e location of the are a s containin g the defin e d Resourc e s at Manin d i and the h ighest ran k ing new FLTEM ano m alies. The s e new geo p hysical ano m alies have the potenti a l to substa n tially expan d the existing resourc e .

The deposit is a volcanogenic massive s ulphide zin c deposit, co m prising a s e ries of lenses of min e ralisation t h at have been folded, sh e ared, faulted, and possibly intruded by later dol e rites and gabbros. T h e style of m i neralisation is similar to other base m etal sulphi d e deposits in the Yilg a rn Craton, particularly Golden Gr o ve to the w est of Manindi at Yalg o o, and Teutonic Bor e -Jaguar in the Eastern G oldfields.

Met a ls has prev i ously delineated a JOR C resource o f:

1.354 million tonnes @ 6.04% Zinc, 0.25% Copper, 3.4 g/t Silver & 0.25 g/t Gold

The resource is divided into the followin g categories (at a 1% Zinc cut-off):

Meas ured	4 97,000	tonn es @	7.32% Zinc
Indic ated	4 38,000	tonn es @	6.38% Zinc
Inferr ed	4 19,000	tonn es @	4.14% Zinc

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Figure 6 - Resour c es and FLTE M targets at Ma n indi
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SH E RLOCK BA Y EXTENDED BASE ME T AL PROJE C T

The Sherlock B a y Extended project is c o mposed of two Exploration Licenc e s (E47/176 9 and E47/1770), which surroun d the main Sherlock Bay nickel deposit ( w holly owne d by Aus t ralasian Resources Ltd - ‘ARH’). T h e project is prospective for nickel, c o pper, silve r and gol d mineralisat i on.

The project is a joint ventu r e between A RH (70% interest) and Metals (30 % interest). ARH are t he manage r s of the project, with Metals being ‘f r ee-carried’ through to th e completio n of a ban k able feasib i lity study and the decisi o n to comm e nce comme r cial mining.

Dur i ng the quar t er, ARH co m pleted an e xtensive bi o geochemical sampling programme over the Sherlock B a y Extende d Project. S a mples were collected and submit t ed to Gen a lysis Lab o ratory in P e rth for anal y sis, with res u lts expecte d to be received in the c o ming quart e r.

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G O LD PRO J ECTS, VICTORI A

Met a ls holds tw o low impac t exp l oration li c ences i n western Victori a (Figure ) . The South Arnaud (EL5242 ) and Wedderbu r n (EL5243) , proj e cts contai n significan t hist o ric workings that hav e rec e ived little m odern an d sys t ematic expl o ration.

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Foll o wing the receipt of hig h qua l ity regional 100 m lin e spa c ing aeromagneti c sur v eys in t h e previou s qua r ter ( Error! Reference Figure 7 – Location of the Wedderb u rn and Sout h Arnaud projects in source not found. ) , wes t ern Victoria. Yellow dots represent gold de p osits and prospects, ide n tification of gold target s and t heir distributio n highlights the rich gold belts o f Victoria. by t he interpre t ation of th e dat a throughou t the projec t areas is n o w able to commence. Metals is a lso securin g the ser v ices of a local consul t ant with e x perience a t Wedderburn and So u th Arnaud. The con s ultant has already ide n tified seve r al target a r eas that will complem e nt the targeting exe r cise currently underway using the a e romagnetic data.

The Victorian G oldfields were discovered in the gold rushes of the mi d -1800s, with all sig n ificant gold mining acti v ity ceasing by 1930. Government r ecords sho w that num e rous gol d prospects, m ines and occurrences a re docume n ted within t h e licence ar e as.

For further information please contact: Vincent Algar +61 8 9481 783 3

Or consult our website:

w ww.metals a ustralia.co m .au

Competent Persons Declaration

The i n formation in this release relating to the geology an d exploration res u lts of the project s owned by Metalls Australia Ltd is based on in f ormation compil e d by Dr Matthe w Painter, who is a full time cons u ltant to Metals A ustralia. Dr Paintter is a member of The Austr a lian Institute of G eoscientists, a R e cognised Profes s ional Organisati o n by the Austral a sian Joint Ore Reeserves Committ e e, who has s u fficient experien c e relevant to the style of minerali s ation and types o f deposits under consideration andd to the activity w hich is being undertaken to q ualify as a Competent Person a s defined in the 2004 Edition of the “Australasian n Code for Repo r ting of Exploration Results, Mineral Resources and Ore Reserve s ”. Dr Painter consents to the inclu s ion in this report of the matters b a sed on their i n formation in the form and context in which it appea r s.

Forward-Looking Statements This d ocument may i n clude forward-looking statement s . Forward-lookin g statements include, but are nott limited to, stat e ments conc e rning Metals Aus t ralia Ltd’s plann e d exploration pro g ramme and oth e r statements that are not historical facts. When use d in this docu m ent, the words s uch as "could," "plan," "estimate," "expect," "intend," "may”, "potenti a l," "should," and similar expressi o ns are forwa r d-looking statem e nts. Although M e tals Australia Lt d believes that its expectations refl e cted in these forwward-looking stat e ments are r e asonable, such s tatements involv e risks and uncer t ainties and no a s surance can be g iven that actual rresults will be co n sistent with t h ese forward-loo k ing statements.

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