METRO MINING LIMITED — Interim / Quarterly Report 2010

Apr 29, 2010

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MetroCoal Limited ABN 45 117 763 443

QUARTERLY REPORT MARCH 2010

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METROCOAL QUARTERLY REPORT MARCH 2010

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CORPORATE DETAILS

METROCOAL LIMITED | ABN 45 117 763 443

Quarterly Financial Report for the period ended 31 March 2010 ASX CODE: MTE

Issued Capital (31/03/2010)

141,683,663 shares issued

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

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

871 Shareholders

Top 20 Shareholders

Hold 71% 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 Forbes-Mackenzie – Exploration Manager

Largest Shareholders

Metallica Minerals Limited 56.4% Bank of America 5.1%

Cash Balance

As at 31 March 2010, MTE’s cash balance was approximately $9.05 million

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METROCOAL QUARTERLY REPORT MARCH 2010

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HIGHLIGHTS FOR THE QUARTER

CORPORATE

• MetroCoal signs $30m Joint Venture Agreement with China Coal subsidiary

• MetroCoal signs Co-Development Agreement with Arrow Energy Limited.

EXPLORATION & EVALUATION

• Underground coal mining resource announced in Bundi project area.

• MetroCoal’s drilling program in the Bundi and Norwood project areas begins.

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CHINA COAL JOINT VENTURE AGREEMENT

On 8 April 2010, MetroCoal announced it had signed a Joint Venture Agreement ( JVA ) with China Coal Import & Export Company ( CCIEC ), a wholly owned subsidiary of China National Coal Group Corp ( China Coal ).

Under the terms of the Agreement, CCIEC acquired 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.

Bringing CCIEC in as a joint venture partner is a significant milestone for the company, as it meets its stated strategic objective, as set out in its 2009 Prospectus, of developing projects with substantial partners as well as complementing its overall strategy to confirm its Exploration Target of between 2.5 and 3.5 billion tonnes*.

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.

The transaction has already been approved by the Australian Foreign Investment Review Board (FIRB) but is subject to approvals from several Chinese Government agencies for the setting up of an Australian Subsidiary company and the transfer of the $30 million in funds to the Australian subsidiary company. The process for obtaining these approvals is underway and is required to be completed within three months of the date of signing of the Joint Venture Agreement. Other salient aspects of the Joint Venture Agreement are:

• within 10 days of receipt by CCIEC of the $30 million, MetroCoal will amend the ownership of EPC 1165 with Queensland Mines and Energy;

• after the first $4 million has been expended, either party may withdraw from the joint venture and the withdrawing party will forfeit its interest in the Joint Venture;

• when the $30 million has been fully expended each party will be required to contribute in proportion to their respective Joint Venture interests;

• CCIEC will be the Manager of the Joint Venture; and

• CCIEC will also have first right to enter into a Joint Venture over the other MetroCoal tenements.

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.

* Under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (Paragraph 18) the Company is required to make the following statement with regard to Exploration Targets – the potential quantity and quality is conceptual in nature, and that there has been insufficient exploration to define a Mineral Resource of Ore Reserve and that it is uncertain if further exploration will result in the determination of a Mineral Resource of Ore Reserve.

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EXPLORATION & EVALUATION

Underground Coal Mining Resource Announced in Bundi Project Area

MetroCoal announced on 27 January 2010 an initial Inferred Resource of 58Mt* in its Bundi Project area that as a result of drill data released by Queensland Mines and Energy together with data obtained through data swaps with other companies and data from MetroCoal’s earlier drilling program.

The Bundi Project area, within EPC 1164 Wandoan West, in the Surat Basin is down dip of Northern Energy Ltd’s (ASX- NEC) Elimatta and Xstrata Ltd’s Wandoan mining project areas and covers an area of some 240km[2 ] (see Figure 3). The 58 Mt Inferred Resource* is contained within an area of approximately 18km[2] and is MetroCoal’s maiden underground coal mining resource.

The resource was identified while updating the geological model ahead of the planned exploration program. The data density has proved to be sufficient for estimation of an Inferred Resource compliant with the JORC Code.

The primary target is an underground mining resource in the Macalister Upper Seam of the Juandah Coal Measures within the Bundi Project Area. The Inferred Resource estimate is based on a working section used comprising the MU30, MU40 and MU50 plies. The Macalister Lower Seam and other coal seams and splits have been excluded from the resource estimate.

� See MTE ASX Announcement 27th January 2010 “MTE announces an Underground Coal Mining Resource for Bundi”

MetroCoal’s Surat Basin Drilling Program begins

Following the delay due to heavy rains in the area MetroCoal began its drilling program of 30 holes in the Surat Basin on 8 April 2010. With the improvement in ground conditions following the exceptional wet season in the region, two drill rigs are now in place and operating.

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The drilling programme of 30 holes will be focussed on five priority areas being Bundi, Norwood, Miles West, Miles North and Miles East project areas (see Figure 3 & 4), all highly prospective for underground mining targets which are also close to planned rail infrastructure.

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CORPORATE STRATEGY

MetroCoal has an extensive portfolio of wholly owned tenements in the Surat Basin. MetroCoal’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 .

*Under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (Paragraph 18) the Company is required to make the following statement with regard to Exploration Targets - 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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RESOURCES

Resource Area	Indicated Resource (MT)	Inferred Resource (MT)	Total Resource (MT)	Potential Thermal Coal Exploitation Method
Juandah1	22.5	149.2	172	UCG
Bundi2		58	58	Underground

�� See MLM ASX Announcement 28th May 2009 “MLM Initial resource for MetroCoal`s Juandah UCG Project” � See MTE ASX Announcement 27th January 2010 “MTE announces an Underground Coal Mining Resource for Bundi”

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Competent Person Statement

* The information in this Announcement that relates to the 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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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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