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METALS AUSTRALIA LTD Interim / Quarterly Report 2012

Jul 30, 2012

65344_rns_2012-07-30_5775cd7e-7905-4ba9-a168-a1eb9fc47ec7.pdf

Interim / Quarterly Report

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QUARTERLY A CTI V ITIES REP O RT for th e perio d ende d 30 Ju n e 201 2

H I G H L I G H T S

  • High-grade surface samples up to 13,912 ppm U3O8 from Mile 72.

  • New areas of high grade uranium extend Kudu-Impala to the south and west.

  • Kudu-Impala now has a length and width of over 10km by 2km.

  • RC drilling at Mile 72 has confirmed uranium mineralisation within the basement alaskite, granites and schists.

  • Metals has entered a new phase of exploration at Mile 72, focusing exclusively on delineating granite-hosted primary uranium mineralisation

  • Deeper drilling planned to test for Rössing-style primary uranium mineralisation.

  • Geophysical targets confirmed at Manindi Zinc Project have potential to substantially expand the resource.

  • High quality data from regional aeromagnetic surveys of western Victorian gold projects received.

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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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U R ANIUM PROJEC T S, NAM IBIA

Dur i ng the Jun e 2012 quart e r, very pos i tive results wer e returned in the final batch of 154 assays rec e ived from t h e trench s a mpling at t h e Mile 72 Project in Namibia (Figure 1). Assays were also rec e ived from the pilot shallow R C drilling pro g ramme of 2 31 drillhole s for 1,023m at Mile 72 whi c h showed strong ano m alism awa y from the mai n Kudu-Imp a la prospect.

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At the Engo Valley Pr o ject (Figu r e 1) the env i ronmental c learance and access permit for surf a ce explora t ion work w h ich were s u bmitted in Jan u ary 2012 a r e still await e d.

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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 ou t crop and in sha l low pits at M ile 72. Met a ls Australia has entered into a new phase of explo r ation, targe t ing a large hig h -tonnage moderate gra d e primary d eposit of a similar style to t h e Rössing a nd Husab m ines to the sou t h.

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

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Sur f ace trench i ng

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Ne w surface s a mpling res u lts receive d during the qua r ter from th e Kudu-Impala area (Fig u re 2, Table 1) h ave again highlighted the high g r ade values ach i eved over significant intervals a t Mile 72. Gra d es were a s high as 13,912 ppm U3O8 , and inte r vals of up to nearly 300 m in length with in excess of 900 ppm U3O8 have bee n identified. Mo s t importantl y , many of these high-grade results are located out s ide the pre v iously defin e d extent of the K udu-Impal a prospect a r ea.

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Figure 2 – Hand-dug sa m pling of subcr o pping the K udu-Impal a prospect a r ea. weath e red rocks in th e NE Extension area. All o f the high-grade zones are in area s of outcrop p ing or subc r opping schi s ts, granite s and ala s kite, and in s ome cases in areas of b asaltic cov e r. The min e ralisation o c curs as car n otite within gypcrete, as it is at all other localities of high grade mineralisation at M i le 72.

Ass a y results r e ceived duri n g the quar t er included 23 sample s (out of 15 4 ) that exce e ded 1,0 0 0 ppm U3O 8 (Table 1). T hese sam p les have allowed the d e finition of s e veral new highgra d e zones th a t substanti a lly extend K udu-Impala (Figure 3). One example of a new high gra d e zone in c ludes the n orthwest e x tension of Line 5 whi c h recorde d an avera g e of 947 . 1 ppm U3O 8 from 71 sa m ples over 3 00 m of len g th on Line 5 (this resul t is not quot e d as an i n tercept as s ampling wa s taken from individual pits rather th a n as a conti n uous sample).

2

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Figure 3 – Uranium distributions deter m ined by Metal s Australia thro u ghout the Mil e 72 licence a rea. Assay results are plotte d over a conto u red plot of U3 O 8[ distribution] [s] . New work r e ported here i n corporates sa m pling along li n es 2A throug h 10A (outlined by stippled lines). Total stri k e length of ur a nium anomali s m now excee d s 10km and w idth is over 2km in places.

Table 1 - Highlights of last 154 assay results from sampling at Mile 72 (samples exceeding 1,000 ppm U3[O] 8[) ]

Li
N
ne
o
Sample
No
6
X1540
5
X1573
X1575
X1576
X1579
X1580
X1582
X1586
X1588
X1590
X1595
X1599
U308
(ppm)
1651
2511
1639
2865
1262
1698
13912
2877
1710
1117
2782
1081
Easting
No
408071
75
407562
75
407555
75
407549
75
407542
75
407540
75
407534
75
407527
75
407523
75
407518
75
407510
75
407499
75
rthing
81416
81185
81191
81196
81202
81203
81208
81215
81218
81220
81226
81234
L
ine
No
Sample
No
U308
(ppm)
Easting
No
rthing
X1604
X1606
X1607
X1608
X1615
X1617
X1631
X1635
X1636
1957
2452
2665
1262
1127
1071
1486
1627
2653
407485
7
407482
7
407479
7
407478
7
407466
7
407459
7
407380
7
407370
7
407369
7
581243
581246
581248
581249
581259
581262
581313
581320
581321
2A
X1672
X1684
1320
1556
407136
7
407080
7
579821
579862

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Pil o t shallow R C drilling p r ogramme

A short pilot pr o gramme of s hallow RC d rilling was completed at Mile 72, late in the March qua r ter. The pr o gramme w a s designed to test for s hallow sec o ndary calcr e te-hosted u r anium min e ralisation within ch a nnels; th a t is, min e ralisation o f a similar style to L a ngerHei n rich in Na m ibia and Y e elirrie in W estern Aus t ralia. The programm e is part o f the sys t ematic ap p roach being taken b y the Co m pany to thoroughly e x plore all p o ssible styl e s of uraniu m mineralisa t ion at Mile 7 2.

Table 2 - High
lights of RC D
rill hole assay
s
Table 2 - High
lights of RC D
rill hole assay
s
Table 2 - High
lights of RC D
rill hole assay
s
Table 2 - High
lights of RC D
rill hole assay
s
(sam
ples exceedin
From
T
g 100
o
ppm U3O
U308
**8) **
Hole No. (m) (m
)
(ppm
)
M
72RC0167
3 4 324.2
M
M
M
72RC0213
72RC0054
72RC0067
2
1
2
3
2
3
317.2
316.0
292.4
M
72RC0162
3 4 241.7
M
72RC0046
2 3 221.7
M
72RC0213
0 1 220.5
M
M
72RC0047
72RC0061
3
0
4
1
214.6
187.5
M
72RC0067
3 4 187.5
M
M
M
72RC0077
72RC0029
72RC0049
2
0
2
3
1
3
158.0
141.5
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

Alth o ugh some v ery encour a ging result s were M 72RC0067 3 M 72RC0077 2 rec e ived (Tabl e 2), it is clear, in the areas M 72RC0029 0 test e d, that th e re is no significant c a lcrete- M 72RC0049 2 hos t ed deposi t present in the shallow M 72RC0087 3 sub s urface. The presence of u r anium M 72RC0049 1 min e ralisation within th e bottom- o f-hole M 72RC0144 2 M 72RC0054 2 sa m ples sugg e sts that there is ample opp o rtunity for d eeper Rössing-style mi n eralisation i n the drilled a reas.

The gravel are a s targeted by the dril l ing were i m mediately a djacent to areas of k n own sub c ropping ur a nium anom a lism. All h o les were a b le to penetrate the gr a vels, which vary fro m 0-5m thick (Figure 8).

Anomalous ura n ium minera l isation occ u rs in the b a se-of-hole sampling in s everal loca t ions. The s e encoura g ing results c onfirm ura n ium mineralisation in th e underlying basement r ocks whi c h are mostl y alaskite, g r anite and bi o tite schist.

Ass a y results f r om the drilling were r e ceived in M ay 2012 and sevente e n (17) of these sa m ples excee d ed 100 pp m U3O8 (Tabl e 2). Despit e the wide spacing of th e lines, ther e are distinct north-easterly correl a tions of bot t om-of-hole results between lines. T h ese correlations dire c tly follow t h e north-ea s terly strike of the schi s ts, granites and alaskit e throughout the Project area.

A n e w phase o f exploration at Mile 7 2 The elimination o f Langer H e inrich-style calcrete-ho s ted mineralisation from t he present list of targ e ts at Kudu-Impala mea n s that Met a ls has mov e d into a ne w phase of e x ploration at Mile 72. The clear t a rget is now primary ur a nium miner a lisation wit h in the gran i te-schist-al a skite bas e ment sequ e nce. Prima r y mineralis a tion within t he licence a rea 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 0.25-0.6 k g /t U3O8). A s such, the g rades enco u ntered at s u rface 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.

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Figure 7 – Satellite image of the Mile 7 2 licence are a , showing the r ecent RC drill fences. At K u du-Impala, N E Extension, a n d Central Areas, “weathered rock” areas h ave been tr e nch sampled and an initial 231 drillhole p rogramme has been comple t ed in the “gravel” areas in t he current pro g ramme.

Met a ls is prese n tly reviewin g in detail all historic an d recent data collected a t and around Mile 72. S ome of the key finding s to date incl u de:

  • A regio n al geological assessm e nt shows t h at the Mil e 72 area h a s an equivalent propen s ity to gener a te alaskites (the hosts to uranium m ineralisatio n ) as the Al a skite Alley ar e a that cont a ins Rössing and Husab.

  • 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, do n o t extend far beyond the EPL3308 licence bound a ry.

  • 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.

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  • For a mineralised p r ofile in this t ype of weat h ering envir o nment, we w ill expect t o see very high grades at surface, foll o wed by a z one of depl e tion (mayb e 20-50 m d e pth) that contains very lit t le or no mi n eralisation, f ollowed by fresh primar y mineralisat i on.

  • Several targets hav e been iden t ified that re q uire further refining an d analysis pr i or to drilling a nd we expe c t to identify several mo r e as work p r ogresses.

Met a ls will co n tinue to assess and i n vestigate t he Mile 72 licence u s ing all methods nec e ssary. Pre p aration is p resently u n derway for a high-res o lution aero m agnetic s u rvey whi c h is sched u led to be undertaken in the com i ng quarter. This will b e used to refine targ e ting in ide n tified drill target areas. T he forthco m ing drilling programme will compri s e an array of deep (around 80-100 m), widely spaced hol e s over the c hosen targ e t areas. Thi s first pas s drilling pr o gramme will serve as a precursor to subseque n t more su b stantial res o urce defi n ition programmes.

TH E ENGO VA L LEY URANIUM PROJ E CT

The Engo Vall e y project ( E PL3306) is located in t he remote northwest o f Namibia i n the Skeleton Coast (National) P a rk. Access Permits are required to v isit the Sk e leton Coast Park and there are n o roads and n o habitable sites within the 16,000 k m[2] park.

In January 201 2 , Metals s u bmitted a d etailed Environmental O verview a n d Environmental Ma n agement Pl a n docume n t to the Na m ibian Minis t ry of Enviro n ment and T ourism (MET) to app l y for an En v ironmental Clearance a nd Access Permit to c o mmence surface exploration wor k at Engo V alley. Unf o rtunately, t h e quarter p assed with o ut receivin g the nece s sary per m its from th e MET on th e granting o f the cleara n ce. Metals i s continuing to liaise wit h the ME T and is m a king every endeavour to ensure t he early gr a nting of the Environmental Cle a rance and A ccess Per m it for Engo Valley. On c e granted, a programm e of field w o rk to ma p , sample a n d assess t h e Engo Va l ley Project area has b e en planned and is rea d y to co m mence at s h ort notice.

BASE MET A L PROJECTS, WE STERN AUSTRALIA

Met a ls currentl y holds an interest in two base met a ls projects i n Western A ustralia (Fi g ure 3).

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 expanding the existing resources and examining t h e project's c opper pote n tial.

The Sherlock B a y base me t al joint ven t ure project is l o cated in t he Pilbara region an d is being ma n aged and explored by A ustralasian Resources Ltd (ARH). The project sur r ounds ARH s Sherlock Bay nickel depo s it.

MANINDI ZIN C PROJECT

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Figure 3 – L ocation of the W estern Australian base m etals projects.

Dur i ng the qua r ter, a serie s of Fixed- L oop Timedo m ain Electro M agnetic (F L TEM) geo p hysical sur v eys were performed a t Manindi. These

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sur v eys were d esigned to validate a n d expand u pon the a n omalies d e tected duri n g 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 perform e d in the pr e vious quart e r.

The FLTEM su r veys confir m ed each o f the VTE M anomalies, providing a number o f drill targ e ts at Mani n di. These t a rgets have the potential to significantly upgrad e the resour c e at Ma n indi and ha v e been ran k ed for futur e drill testing

The Manindi zinc project is a significant resource lo c ated in the M urchison District of We s tern Aus t ralia, 20 km southwest o f the defun c t Youanmi g old mine.

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 following
categories
(at a 1% Zin
c cut-off):

divided into
the following
categories
(at a 1% Zin
c 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

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.

AR H have advi s ed that the r eview of th e recent ma p ping and biogeochemic a l survey w o rk is still being concl u ded.

As a means to further und e rstand the newly attai n ed biogeochemical dat a and pote n tially gen e rate additi o nal targets a series o f Hyperspe c tral studies were com m issioned i n the pre v ious quarte r .

The company h as now been able to combine th e information generate d by Global Ore Dis c overy (proc e ssed HyM a p data) wit h the DTM d ata and the biogeoche m ical assay d ata. As a result of t h is work a biogeochemi c al sampling programme has been designed to c over all tenements w ithin the S h erlock proj e ct area. Fi g ure XX bel o w shows h ow HyMap data cle a rly identifie s the margin of the Cain e s Well Gra n ite on the northern part of E47/176 9 , an are a that will be tested in th e coming bio g eochemical programm e .

Approximately 2 ,600 samples are ex p ected to b e collected in the co m ing quarter and sub m itted to G e nalysis for a ssay. Field work is ex p ected to span approxi m ately five w eeks and assays are l ikely to be r e ceived earl y in the four t h quarter.

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Bio g eochemical sampling h a s been sh o wn to identify nickel anomalism as s ociated wit h the Sherlock Bay Nickel Deposi t . With seve r al areas of a nomalism i d entified bey o nd the Sherlock dep o sit area by previous s a mpling pro g rammes it is hoped th e currently p lanned wor k will giv e the compa n y a number of targets s u fficient to ju s tify a combined drilling p rogramme.

G O LD PRO J ECTS, VICTORI A

Met a ls holds t w o low impa c t exploratio n licences i n western V i ctoria (Figu r e 4). The S outh Arn a ud (EL524 2 ) and Wedderburn (E L 5243), proj e cts contain significant h istoric wor k ings that have received little mo d ern and sys t ematic exploration. During the quar t er the Scar s dale (EL 5 244) and M oyston (EL5245) proj e cts were s urrendered as they d i d not mee t the Co m pany’s exploration crite r ia.

The results of the regional aeromagne t ic surveys w ere receiv e d at the e n d of the q u arter (Figure 5). The data is of very high q uality and w ill enable identificatio n of gold targets throughout the project ar e as. Analysi s and inte r pretation o f the data is schedul e d to co m mence shortly.

The Victorian Goldfield s wer e discovere d in the gol d rus h es of the mid-1800s , with all sign i ficant gol d min i ng activity ceased b y 193 0 . Govern m ent record s sho w that nu m erous gol d pro s pects, m ines an d occ u rrences ar e document - ed w ithin the lic e nce areas.

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Figure 4 – Location of the Wedderb u rn and Sout h Arnaud projects in wes t ern Victoria. Yellow dots represent gold de p osits and prospects, and t heir distributio n highlights the rich gold belts o f Victoria.

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Figure 5 – Results of the magn e tic surveys ov e r the Wedder b urn (top right) and South Arnaud (bottom l e ft) projects in w estern Victoria.

Norman Grafton

Company Secretary Metals Australia Ltd

For further information please contact

Nor m an Grafton – Compan y Secretary + 6 1 8 9481 7833

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 information compile d by Mr Kieron Munro, Exploration Manager for Me t als Australia and a full time consulltant to Metals A u stralia. Mr M u nro is a membe r of The Australia n Institute of Geo s cientists, a Recognised Professio n al Organisation bby the Australasi a n Joint Ore R eserves Committee, who has sufficient experie n ce relevant to t he style of min e ralisation and tyypes of deposits under consi d eration and to t h e activity which is being underta ke n to qualify as a Competent Per s on as defined in the 2004 Editio n of the “Aust r alasian Code for Reporting of Exploration Results, M ineral Resource s and Ore Reserv e s”. Mr Munro connsents to the incl u sion in this r e port of the matte r s based on his in f ormation in the f o rm and context i n which it appear s . Forward-Looking Statements

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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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