METALS AUSTRALIA LTD — Interim / Quarterly Report 2012

Jan 28, 2013

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QUARTERLY A CTI V ITIES REP O RT fo r the p e riod e n ded 3 1 Dece m ber 2 0 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

• High Density Airborne Magnetic Survey planned during the previous quarter commenced in the first week of January 2013.

• Survey designed to collect high density information to enable best possible targeting of basement drilling for Rössing-style primary uranium mineralisation.

• Metals has previously confirmed uranium mineralisation within the basement alaskite, granites and schists.

• Survey results and interpretation anticipated during the first quarter of 2013.

• Company is entering an exciting period of exploration at Mile 72.

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

• Re-evaluation of exploration targets at Manindi Base Metal Cu-Zn Project (WA) in light of strong copper and improving zinc markets.

• Victorian Gold projects benefit from appointment of experienced local consultants.

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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

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 Namibia, north o f the city of Sw a kopmund (Figure 1). Some of t h e highest ura n ium grades in the world have been r ecorded in out c rop and in shallow pit s . Metals h a s recently ent e red into a n e w phase o f exploration at Mile 72, targ e ting a lar g e high-ton n age mode r ate grade pri m ary deposit of a similar style to t h e Rössing and Husab min e s to the sou t h.

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In t h e June 20 1 2 quarter, t he Compa n y reported that it had recei v ed very po s itive result s in relation to t h e final batch of 154 as s ays obtain e d from the tren c h sampling at the Mile 72 Project i n Namibia. Figure 1 – Location of t he Mile 72 uranium Ass a y results w ere also r e ceived fro m the pilot pr o ject, Namibia. sha l low RC drill i ng program m e of 231 drillholes for 1,0 2 3m at Mile 72. These showed st r ong anom a lism away from the m a in Kudu-I m pala pro s pect.

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 is entering a new phase of explor a tion at Mile 72 as it targets ura n ium minera l isation host e d within th e granite-sc h ist-alaskite b asement s e quence. Primary min e ralisation w ithin the licence area is most likely t o be of a si m ilar style to the Rössin g and Husab deposits.

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 (see Figure 2).

Met a ls’ geologi s ts have revi e wed all his t oric and recent data collected 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.

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• 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.)

Pre p aration, a p proval and commenc e ment of hi g h density geophysical s urvey Dur i ng the Dec e mber 2012 quarter, a geophysical contractor w as engag e d to compl e te a hig h -resolution 5 0m line-sp a cing aerom a gnetic survey at Mile 72. The peri o d saw a nu m ber of m inor burea u cratic delay s as all gov e rnment ap p rovals were put in plac e for the fli g ht to pro c eed. The s u rvey receiv e d approval i n the last d a ys of 2012, with the sur v ey comme n cing on 7 January 2012.

The new high resolution m agnetics a n d radiome t rics will pr o vide the C o mpany wit h an extr e mely accur a te depictio n of the subsurface at Mi l e 72 (Figur e 3). Interpre t ation of pre v ious low - resolution r e gional mag n etic survey s has identif i ed magneti c low anom a lies that coi n cide with high-grade surface ur a nium mineralisation. M agnetic lo w s coincide with miner a lised ala s kites at Rö s sing and H u sab. Trenc h ing and drilling has alr e ady confir m ed the presence of t h ese rock types in the b asement at Mile 72. It i s expected that this ne w high-resolution sur v ey will provide the necessary detail for accurate drill targeti n g of these a nomalies at Mile 72.

The company w ill use the h igh resoluti o n data being acquired b y the surv e y, in conjunction with the extensi v e geochemical trenchi n g data and radiometric d ata, to refi n e target drillhole loc a tions for a planned d e eper (80-100m deep holes) reverse circulat i on (RC) d r illing pro g ramme exp e cted to tak e place in t h e coming m onths. This first pass d r illing programme will serve as a precursor t o subseque n t more substantial and targeted r e source defi n ition pro g rammes.

The Mile 72 ar e a has an e q uivalent pr o pensity to g enerate al a skites (the h osts to uranium min e ralisation) a s the “Ala s kite Alley” a rea to the south that c ontains Rö s sing and Husab (Figure 2)

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Figure 3 – G eophysics Fli g ht lines planne d over Mile 72, J anuary 2013

TH E ENGO VA L LEY URANIUM PROJ E CT

The Engo Vall e y 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)

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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 c ommence o nce relevant approval s are in pl a ce. Give n the rem o teness of this project , field work at Engo i s not likely to be und e rtaken until the co m pletion of drilling at Mile 72.

BASE MET A L PROJECTS, WE STERN A USTRALIA

Met a ls currentl y holds an interest i n two base met a ls projects i n Western A ustralia (Fi g ure 5).

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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.

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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.

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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.

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

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Figure 6 - Resour c es and FLTE M targets at Ma n indi

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Dur i ng the quar t er, the Company has re v iewed the p reviously g e nerated VT E M targets and is con s idering a m ore active approach to test re m aining ano m alies for c opper and zinc min e ralisation d u e to the str o ng interest in copper a n d increasin g zinc dema n d seen ov e r the pas t six months. Copper-ric h VMS dep o sit discoveries found utilising geoph y sical techniques in W A have gen e rated significant wealth for shareho l ders in the recent past.

There are six n e w and unte s ted geoph y sical anomalies adjacent to the kno w n mineralisation at M anindi whi c h constitut e a number of attractiv e new drill targets for c opper and zinc min e ralisation. F igure 6 sho w s the location of the a r eas contain i ng the defi n ed Resourc e s at Ma n indi and th e highest ra n king new F L TEM anomalies. Thes e new geop h ysical ano m alies hav e the potential to substa n tially expan d the existin g resource.

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

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, samples were still b e ing analyse d for the veg e tation sam p ling progra m me. AR H completed an extensi v e biogeochemical sam p ling programme over t h e Sherlock Bay Ext e nded Proje c t. Samples w ere collect e d and sub m itted to Genalysis Labo r atory in Per t h for ana l ysis, with r e sults for ar o und 20% of the sample s remaining to be receiv e d in the coming qua r ter.

On c e all data is received, th e data will b e analysed i n detail by the consultan t biogeoche m ists. As with all bi o geochemic a l surveys, the raw d a ta is not comparable to regular soil geo c hemical re s ults. All dat a must be r e ceived in or d er to deter m ine element uptake rat e s by diff e rent plant s p ecies throughout the s a mpled area, and the re s ults standa r dised in or d er to pro d uce a com p arable data s et suitable f or interpret a tion and tar g et generati o n.

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E47/1770 E47/1769 Figure 7 – Vegetation sampling over t h e Sherlock Pro j ect area, whic h includes the c e ntral tenemen t (M47/0567, A R H 100%) and the two o utlying Sherlo c k Bay Extend e d tenements ( E47/1769 and E47/1770, ML S 30%, ARH 70%). Red sample point s have been ret u rned from the laboratory. Blu e sample points are pending. G r id = 2500m.

G O LD PRO J ECTS, VICTORI A

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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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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 ceasing b y Figure 8 – Location of 193 0 . Govern m ent record s wes t ern Victoria. Yellow dots represent gold de sho w that nu m erous gol d and t heir distributio n pro s pects, m ines an d occ u rrences are documente d within the l icence area s .

Figure 8 – 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.

Met a ls has secured the services of a very experi e nced local consultant w ho has w o rked pre v iously in th e Wedderburn and Sou t h Arnaud a reas. Durin g the Dece m ber quarte r , the con s ultant has u ndertaken a detailed d e sktop revi e w of histori c al mining a n d explorati o n in

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the St Arnaud a rea (EL524 2 ) ahead of planned fiel d work in 2 0 13, identifyi n g several t a rget are a s that will c o mplement p revious wor k by the Co m pany.

EL5 2 42 –PERC Y DALE FAU L T ZONE, W EDDERBURN

Wo r k this quar t er has foc u sed on his t oric workin g s on EL 5242 that ar e hosted b y the Per c ydale Fault Zone, whic h is a sheare d , altered zone of strong deformatio n that is up t o 500 met r es wide. T h e fault zon e within the licence has regular north-west strik i ng, west di p ping faul t zones that s how a stro n g associati o n with gold m ineralisation.

Wit h in the Perc y dale Fault Z one, repeating zones of strike-parallel quartz veining over 5 t o 20 met r es width a r e apparent. Discrete v e ins within t h is zone ha v e exhibited high grade gold min e ralisation o v er short strike lengths o f 50 to 100 m etres. Gra d es have ty p ically been in the ran g e of 10 to 30 g/t Au, and high v alues of le a d, zinc, copper, and s ilver have been ass o ciated with t he gold mineralisation a t various lo c ations throu g hout the ar e a. .

Lar g e tonnage , moderate g rade gold potential Hist o rical explo r ation in the region was c arried out a t a time of s ignificantly l ower gold p rices by l a rger comp a nies in sea r ch of large tonnage, hi g h grade de p osits. A re v iew of that work sho w s that a se r ies small hi g h-grade bo d ies were identified (3,0 0 0-10,000t r a nge) but di d not ass e ss the pote n tial for larg e r, lower gra d e dissemin a ted gold mineralisation i n the area.

Re a ppraisal of the historic a l work indi c ates there is potential for a 10 to 20 metre w ide, mo d erate grade shear zone to exist bet w een hangi n g wall and footwall fault structures i n the EL a rea (North P ercydale Bl o ck).

Initi a l work by M etals Austr a lia has sho w n rock chi p samples f r om the Gre e nock mine area returned in exc e ss of 3 g/t A u, giving p o sitive indica t ions. The length and orientation of these zon e s is presen t ly unknown but will be s u bject to fur t her work.

Wit h the majorit y of past ex p loration foc u sed on 10g / t or higher grades, the broader low g rade zon e s have be e n dismisse d historically . In conside r ation of the style of go l d mineralis a tion, the Company i s evaluating the most a ppropriate and effecti v e explorati o n and sampling tec h niques, as t he historic a lly used te c hniques m a y not have been the m ost suitable and cou l d have missed significa n t mineralisa t ion.

PL A NNED AC T IVITY IN 2 0 13 ON EL 5 242

Approval is bei n g sought to take soil an d rock sam p les on the unrestricted c rown land w ithin the exploration l icence. On c e acquired, mapping a n d sampling will comme n ce targetin g the Per c ydale Fault Zone in or d er to outline further ta r gets based using the C ompany’s l a rgeton n age, moder a te grade m o del.

For further information please contact:

Vincent Algar

+61 8 9481 783 3

Or consult our website:

w ww.metals a ustralia.co m .au

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Competent Person 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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