METRO MINING LIMITED — Interim / Quarterly Report 2011

Oct 26, 2010

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MetroCoal Limited ABN 45 117 763 443

QUARTERLY REPORT SEPTEMBER 2010

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METROCOAL QUARTERLY REPORT SEPTEMBER 2010

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CORPORATE DETAILS

METROCOAL LIMITED | ABN 45 117 763 443

Quarterly Activities Report For the period ended 30 September 2010

ASX CODE: MTE

Issued Capital (30/09/2010)

141,683,663 shares issued

61,050,200 shares listed (additional 80,633,463 shares escrowed)

3,500,000 Unlisted Directors’ Options (Director Shares escrowed if options exercised) 2,750,000 Unlisted management options

1,047 Shareholders

Top 20 Shareholders

Hold 75.5% of listed shares

Directors & Management

Mr David Barwick – Chairman

Mr Andrew Gillies – Non-executive Director

Mr Michael Hansel – Non-executive Director

Mr John Haley – Non-executive Director

Mr Mike O’Brien – Chief Executive Officer

Mr Theo Psaros – Chief Operating Officer & Company Secretary Mr Neil Mackenzie-Forbes – Exploration Manager

Largest Shareholders

Metallica Minerals Limited	56.5%
ANZ Nominees Limited	6.8%
National Nominees Limited	3.3%

Cash Balance

As at 30 September 2010, MTE’s cash balance was approximately $6.8 million

As at 27 October 2010, MTE’s cash balance was approximately $12.8 million

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METROCOAL QUARTERLY REPORT SEPTEMBER 2010

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HIGHLIGHTS FOR THE QUARTER

CORPORATE

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• China Coal received final approval from the relevant Chinese government agencies for the $30m Joint Venture Agreement. The Columboola Joint Venture has become unconditional and the first Joint Venture Committee meeting has been held.

EXPLORATION & EVALUATION

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• The Bundi Project area coal resource increased from 292Mt to 381Mt.

• MetroCoal’s total thermal coal resource base in the Surat Basin expanded to 709Mt incorporating its Bundi, Norwood and Juandah Project areas.

• Inferred resource of 156Mt announced in the Norwood Project Area.

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Figure 1
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METROCOAL QUARTERLY REPORT SEPTEMBER 2010

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RESOURCES

MetroCoal’s total Resources are now as follows:

Resource1	Norwood (Underground Coal)	Bundi2 (Underground Coal)	Juandah (UCG)	Total (UG & UCG)
Inferred Indicated Total	156 Mt - 156 Mt	381Mt - 381Mt	149 Mt 23Mt 172 Mt	686Mt 23Mt 709Mt

1. See MTE ASX Release 18 October2010 – Annual Report 2010

2. See MTE ASX Release 19 October 2010- 30% increase in Bundi Resource to 381Mt

CHINA COAL JOINT VENTURE AGREEMENT

On 15 September 2010, MetroCoal announced that the Joint Venture with China Coal Import & Export Company (CCIEC), a wholly owned subsidiary of China National Coal Group Corp (China Coal) became unconditional. During the quarter, the Joint Venture with China Coal received all major approvals from the Chinese Government including National Development Reform Commission (NDRC), Ministry of Commerce and the State Administration of Foreign Exchange.

MetroCoal and CCIEC’s Australian subsidiary, Sinocoal Resources Pty Ltd, held their first JV Committee meeting in Brisbane on 4 October 2010. MetroCoal and Sinocoal have designed an initial exploration program to test the entire Walloon Sub-group inclusive of the highly prospective Macalister Seam(s) of the Juandah Coal Measures and the deeper Taroom Coal Measures. The program will concentrate on the most prospective areas within Columboola to achieve the Exploration Target of between 830Mt to 1165Mt*.

Under the terms of the Joint Venture Agreement (JVA), CCIEC acquires a 51% interest in MetroCoal’s EPC 1165 Columboola in the Surat Basin, Queensland (Figure 2) for an agreed expenditure of AUD$30 million on EPC 1165. The funds will be used for exploring and evaluating the potential for future commercialisation options within the Columboola tenement and also opens up the opportunity for participation in MetroCoal’s other tenements. The Columboola JVA requires a minimum expenditure of $4 million within the first two years of the agreement.

China Coal is a substantial company producing in excess of 100 million tonnes of coal a year. With access to this strong mining base CCIEC will bring valuable technical skill and expertise into the joint venture, particularly in underground coal mining. CCIEC is a subsidiary of China Coal, who in 2009, ranked second in terms of coal production and sales revenues in the Chinese coal industry for six consecutive years and has ranked 76[th] among China’s top 500 industrial enterprises in 2009. China Coal was established in 1982 and its core businesses comprise coal production and trading, coal chemical, coal-bed methane exploitation, pit mouth power generation, coal mine construction, coal mining equipment manufacturer and relevant engineering technical services. In 2009, China Coal turned out 125 million tons of raw coal and made profits 10.3 billion RMB(A$166 million), China Coal has set 200 million as the target of turn out in 2014.

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*The potential quantity and quality is conceptual in nature, and that there has been insufficient exploration to define a Mineral Resource or Ore Reserve and that it is uncertain if further exploration will result in the determination of a Mineral Resource or Ore Reserve

OTHER CORPORATE ACTIVITIES

Capital Raising

On 15 October, MetroCoal announced it has agreed to place 35 million shares at an issue price of 30 cents per share to raise a gross amount of funds totalling $10.5 Million. Part of the placement is subject to shareholder approval at the forthcoming AGM.

The proceeds of the capital raising will be used for:

• acceleration of the exploration activity across MetroCoal’s extensive tenement portfolio including a focus on the Bundi Project area;

• funding early commitments for planned infrastructure participation, namely the expansion of Stage 2 of Wiggins Island;

• additional working capital; and

• offer costs.

The Placement is being done to institutional and sophisticated investor clients under the provisions of Section 708 of the Corporations Act with Patersons Securities Limited acting as Lead Manager to the offer.

Infrastructure

Eighteen (18) coal producers who are shareholders in Wiggins Island Coal Export Terminal Pty Ltd ( WICET ) executed a Framework Deed with the Queensland Government and Gladstone Ports Corporation in December 2009. This allowed for the progress of the next phase of the development of the Wiggins Island Coal Export Terminal in Gladstone.

On 30 September 2010, WICET announced that eight (8) coal producers had signed capacity commitments totalling 27Mtpa for Stage 1 of the terminal expansion.

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MetroCoal has lodged an Expression of Interest (EOI) to WICET for Stage 2 of the terminal expansion. Capacity of 5Mt has been applied for the Bundi Project in EPC 1164 and 5MT for the Columboola Project in EPC 1165. Further discussions will be held with WICET leading into the feasibility planning phase for Stage 2.

MetroCoal has also lodged an EOI to the Surat Basin Rail Joint Venture ( SBRJV ). The SBRJV is planning the construction of a Surat Basin Railway between Wandoan and Banana. The objective of the SBRJV is to construct and operate an open-access, multi-use rail link to facilitate the export of coal and freight through to the Port of Gladstone.

SBRJV have advised that they have provided the Queensland Government with all information the Queensland Government requires before it can declare a State Development Area (SDA) for the Surat Basin Railway. If approved at Ministerial level, the SDA would be declared under section 77 of the State Development and Public Works Act 1971 (SDPWO Act). Once declared the SDA would give SBRJV a legal entitlement to utilise the SDA to build a 210km railway line within a defined corridor between Banana and Wandoan. The proposed Banana-Wandoan line is a missing link which will connect with QR National’s existing Moura system to the port of Gladstone.

EXPLORATION & EVALUATION

Maiden Inferred Resource of 156Mt in Norwood.

On 17 August 2010 MetroCoal announced that a maiden Inferred Resource of 156Mt [3] had been defined from its current completed drill program in the Norwood Project Area which lies in EPC 1167. The Norwood project area is an extension of the Pony Plains deposit and is west of MetroCoal’s Bundi project (see Figure 1 on Page 3).

According to raw coal quality data obtained up to the time of this publication indications are that the resource shall be well suited to production of a typical Surat Basin export quality thermal coal.

The estimate of 156Mt is based on a working section comprising the MU10, MU20 and MU30 – all of which are Macalister Upper Seams. Other Macalister Upper Seams (MU40 and MU50) along with the Kogan Seam and Macalister Lower Seam in addition to others have been excluded from the resource estimate. The working sections lie at a depth of between 81m and 291m.

Future exploration drilling and modelling are planned and results are expected to increase the resource from this current conservative estimate.

Bundi Project progressing and Inferred resource increased to 381Mt

MetroCoal announced on 19 October 2010 a 30% increase in the Bundi Project resource to 381Mt[4] .

The Bundi Project area, within the Company’s EPCs 1164 & 1251 Wandoan West in the Surat Basin, is the down dip extension of the Elimatta and Xstrata Ltd’s Wandoan mining project areas (see Figure 1 on Page 3). Further drilling and geological modelling has confirmed the correlation and continuity of the Macalister Upper (MU) Seam and extended the resource area. Exploration planning is underway to increase the borehole density within the Bundi resource. The next drilling program for the Bundi area is planned to increase the resource confidence to an ‘Indicated’ category via a staged process commencing in 2011.

Although the primary focus remains on the Macalister Upper seam it is becoming apparent that the Kogan and Macalister Lower Seams are correlatable in some areas and there may be scope to include these additional seams in the resource through the planned, closer spaced drilling.

3. See MTE ASX Release 17 August 2010 – Maiden Resource for 100% owned Norwood thermal coal project 4. See MTE ASX Release 19 October 2010 – 30% Increase in Bundi Coal Resource to 381Mt

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CORPORATE STRATEGY

MetroCoal has an extensive portfolio of wholly-owned tenements in the Surat Basin. Metro Coal’s initial exploration and analysis of historical exploration conducted over the tenements indicates the existence of prospective thermal coal seams located at various depths to the surface. The broad range of thermal coal seam depth has allowed MetroCoal to formulate and implement a unique business plan to further explore and assess the commercial feasibility of the tenements and if appropriate, exploit the tenements through:

1. Conventional opencast and underground mining techniques; and 2. Underground Coal Gasification ( UCG ).

Based on the geological information from the historic drilling programs and its own drilling results, * MetroCoal has an exploration target defining between 2 and 3.5 billion tonnes by December 2011 .

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*The potential quantity and grade is conceptual in nature, and that there has been insufficient exploration to define a Mineral Resource or Ore Reserve and that it is uncertain if further exploration will result in the determination of a Mineral Resource or Ore Reserve.

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Competent Person Statement

** The information in this Announcement that relates to the Exploration Results and Exploration Targets is based on information compiled by Mr Neil Mackenzie-Forbes who is a Member of the Australian Institute of Geoscientists (Membership No 2035). Mr Mackenzie-Forbes is currently the exploration manager of MetroCoal. Mr Mackenzie-Forbes has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which 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 Resources and Ore Reserves’. Mr Mackenzie-Forbes has consented in writing to the inclusion in this announcement of the matters based on the information in the form and context it appears.

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METROCOAL QUARTERLY REPORT SEPTEMBER 2010

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TENEMENT SCHEDULE

Tenement	Project Name	Holder/ Applicant	Status (Expiry date)	No. Sub Block	Commodity Targeted
EPC 1152	Lockyer Valley	MetroCoal Limited	Granted (11/12/2012)	150	Thermal Coal & UCG
EPC 1159	Injune Creek	MetroCoal Limited	Granted (11/12/2010)	237	Thermal Coal & UCG
EPC 1164	Wandoan West	MetroCoal Limited	Granted (11/12/2010)	215	Thermal Coal & UCG
EPC 1165	Columboola	MetroCoal Limited	Granted (9/12/2010)	294	Thermal Coal & UCG
EPC 1166	Dalby West	MetroCoal Limited	Granted (11/12/2012)	97	Thermal Coal & UCG
EPC 1167	Roma North	MetroCoal Limited	Granted (11/12/2010)	289	Thermal Coal & UCG
EPC 1251	Wandoan West 2	MetroCoal Limited	Granted (16/9/2013)	19	Thermal Coal & UCG
EPC 1501	Dugandan	MetroCoal Limited	Granted (28/9/2014)	20	Thermal Coal & UCG
EPCA 1609	Wandoan West 3	MetroCoal Limited	Application	18	Thermal Coal & UCG
EPCA 1640	Pentland South	MetroCoal Limited	Application	114	Thermal Coal & UCG
MDLA 406	Juandah	MetroCoal Limited	Application	4986 ha	Thermal Coal & UCG
MDLA 417	Elle	MetroCoal Limited	Application	24534.86 ha	Thermal Coal & UCG
MDLA 418	Kay	MetroCoal Limited	Application	1837.5 ha	Thermal Coal & UCG
MDLA 419	Jay	MetroCoal Limited	Application	4254.85 ha	Thermal Coal & UCG

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METROCOAL QUARTERLY REPORT SEPTEMBER 2010

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www.metrocoal.com.au

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METROCOAL QUARTERLY REPORT SEPTEMBER 2010