METRO MINING LIMITED — Interim / Quarterly Report 2012

Oct 30, 2012

2012 QUARTERLY REPORT September

Corporate details

METROCOAL LIMITED | ABN 45 117 763 443

Quarterly Activities Report For the period ended 30 September 2012

ASX CODE: MTE

Issued Capital (30/09/2012)

208,883,663 shares issued

8,500,000 Unlisted Directors’ Options

6,550,000 Unlisted management and employee options

1,574 Shareholders

Top 20 Shareholders

Hold 76.40% of listed shares

Directors & Management

Mr Stephen Everett - Chairman

Mr Andrew Gillies – Non-executive Director Mr Michael Hansel – Non-executive Director

Mr John Haley – Non-executive Director & Company Secretary Mr Lindsay Ward – Non-executive Director Mr Wang Dongping – Non-executive Director Mr Robert Finch – Alternate Director to Mr. Wang

Mr Mike O’Brien – Chief Executive Officer Mr Theo Psaros – Chief Operating Officer

Mr Neil Mackenzie-Forbes – Joint Venture General Manager Mr Nicholas Villa – Project Manager Mr. Edward Radley – Geology Manager

Largest Shareholders

Metallica Minerals Limited 30.78% Dadi Engineering Development Group 19.63% Merrill Lynch (Australia) Nominees Pty Limited 9.98%

Cash Balance

As at 30 September 2012, MTE’s cash balance was approximately $12.4 million

MetroCoal Quarterly Report September 2012

Highlights for the quarter

• Positive results for MetroCoal’s 100% owned Bundi Project Scoping Study which confirm that the project is technically and financially viable. Based on a mine life of 28 years producing 5 million tonnes per annum, the study resulted in an NPV real, before tax, of between $600 million and $660 million at a 10% discount rate and the IRR, before tax, is between 16% and 17%.

• Total thermal coal resource for all MetroCoal projects now in excess of 4 billion tonnes (see table below) .

• Significant increase in Indicated Resource for Bundi Project from 150.9Mt to 246.3Mt which significantly improves the level of confidence in the thermal coal resource.

• Columboola – Increased Resource including a maiden Indicated Resource of 94.7Mt and a 26% increase in the total resource to 1.7 Billion tonnes

• New shipping channel in Gladstone Harbour declared a “significant project” by the Queensland Government . Up to $400 million will be invested by the Gladstone Port Corporation in this project. This will be a major development for not only all planned projects at Gladstone but potentially for 3TL’s planned coal terminal in which MetroCoal has a twenty per cent (20%) shareholding.

Resources

MetroCoal Underground Thermal Coal Resources

		Norwood	**Bundi1 **	Juandah
						Total Resources
Resource	Columboola³				Dalby West2
Inferred Indicated	1,637Mt (802 Mt)# 94.7Mt (46.4 Mt)#	156 Mt -	1,315.8 Mt 246.3 Mt	224 Mt 24.4 Mt	520Mt	3,852.8 Mt 365.4 Mt
Total	1,732 Mt	156 Mt	1,562.1 Mt	248.4 Mt	520Mt	4,218 Mt

• 1 See MTE ASX Announcement 19 July 2012 – Bundi Resource Upgrade and Project Update

• 2 See MTE ASX Announcement 9 December 2011 – Dalby West Project – Maiden Inferred Resource of 520Mt

3 See MTE ASX Announcement 6 September 2012 – Maiden Indicated Resource for Columboola JV plus 26% increase in Inferred Resource

• MTE JV share = 49%

MetroCoal Quarterly Report September 2012

Bundi Project – Scoping Study

MetroCoal was very pleased to finalise its scoping study for the Bundi Project in the September quarter. Importantly, the scoping study concluded that the Bundi project will be technically and financially viable as coal demand increases in the future. The key outcomes were as follows:

• Mine life of 28 years producing over 5 million sales tonnes on average per year during steady-state production

• Project NPV real, before tax, is between $600 million and $660 million at a 10% discount rate and the IRR, before tax is between 16% and 17%.

• Continuous coal seam amenable to underground longwall mining

• Mining seam section 2.75 – 3.65m

• Average yield from mining study 78% at 6300kcal/kg GAD

• Average cost to FOB $80.72 per tonne, excluding royalties

• Initial Capital expenditure $994 million

Figure 1 Bundi Project Area

MetroCoal Quarterly Report September 2012

The mining scoping study and cost inputs for the underground component of the project was carried out by Mining Consultancy Services (Australia) Pty Ltd (MCS) and the coal handling and preparation (CHPP) scoping study by Sedgman Limited (Sedgman), with reviews of infrastructure and transport costing carried out by Balance Resources and Parson Brinkerhoff. Geological modelling and resource estimation was carried out by GeoConsult Pty Limited (GeoConsult).

In the economic modelling the price forecasts from two commercial institutions, Credit Suisse and Wood Mackenzie, were used. These price forecasts, in MetroCoal’s view, reflect the logical linkage of coal price to the growing international coal market.

Credit Suisse forecast a long term coal price of US$120 per tonne at an exchange rate of 0.85. Based on the Credit Suisse forecasts, the project NPV, real before tax discounted at 10% is $600 million, the IRR is 17% and the payback period is 7 years.

Wood Mackenzie forecast a coal price of US$101.93 per tonne in 2016 increasing in real terms to 2030 with a long term exchange rate at 0.89. Based on the Wood Mackenzie forecasts, the project NPV, real before tax discounted at 10% is $660 million, the IRR is 16% and the payback period is 8 years.

The difference in the financial results between the two price scenarios is due to the higher coal price in the earlier years in the Credit Suisse forecast compared to the higher prices in the later years in the Wood Mackenzie price forecast.

The coal price forecasts have been adjusted to reflect the Bundi coal quality at 5885kcal/kg GAR.

Key data used in the economic model are:

Operating Cost (AUD mid 2012)	Per tonne
Underground mining (per ROM tonne)	$23.45
Coal handling and preparation (per ROM tonne)	$5.35
Other Costs (per ROM tonne)	$2.00
Total (per ROM tonne)	$30.80

Operating Cost (AUD mid 2012)	Per tonne
FOR cost @78% yield (per sales tonne)	$39.42
Rail and Port Costs (per sales tonne)	$37.80
Marketing and Overheads (per sales tonne)	$3.50
Total Cost per sales tonne FOB Gladstone (ex royalty)	$80.72

MetroCoal Quarterly Report September 2012

Capital costs are estimated at $994 million comprised of $662million for the underground mine establishment, $298million for CHPP and site earthworks and $34million of other costs. MCS capital cost estimates for the underground mine establishment have an accuracy of -5% +40% and Sedgman’s CHPP capital cost estimates are within -5% +25%. Financing of the capital cost of the rail and port is provided for in the rail and port tariff.

A Queensland State Government royalty of 7% up to a coal price of $100 per tonne, and 10% of the coal price per tonne thereafter have been allowed for in the financial model. MetroCoal will need to adjust the impact of the recent royalty increase to 12.5% for coal prices of $100 or more.

All activities in the field at Bundi have ceased with only rehabilitation checks of seismic and drilling locations scheduled for the coming months. MetroCoal has completed its seismic program and we are now waiting on the results which will be released before year end. MetroCoal’s Bundi Project team have now been transferred to the Columboola JV Project during the last quarter of 2012.

Columboola JV Project

MetroCoal and its joint venture partner, SinoCoal Resources have now completed 89 drill holes at EPC 1165 Columboola for a total of 31,995m drilled, of which 12,042m was HQ cored.

A Maiden Indicated Resource of 94.7Mt was announced on 5 September 2012 and the total resource for Columboola increased 26% to 1.7 billion tonnes. A concept study for this project is now underway.

Stages 1 & 2 drilling identified a prospective area south of the Cameby Downs open cast mine where the target Macalister Upper Seam (previously call MA1 Seam) was interpreted to be continuous and correlatable at depths between 100m and 200m below surface. This focus area contained a Macalister Upper Seam with an average seam thickness in excess of 4m with a 1° dip and was considered ideal for long wall extraction.

The Stage 3 drilling program consisted of part core holes on a 900m offset grid pattern focussed on an area south of the Warrego Highway in the vicinity of Columboola Creek. The program is largely complete and an Indicated resource of 94.7Mt has been established. This resource is anticipated to increase when coal quality data is available.

While drilling the north east end of the Stage 3 Focus area resource, a well-developed Kogan Seam and Macalister Upper was identified at depths <80m below surface and the cumulative coal thicknesses indicated potential for open cast mining methods. A program of four additional holes was completed in September confirming the presence of the coal seams at shallow depths and further drilling is now being planned.

The Columboola JV is also planning to start EIS activities as soon as a preferred consultancy firm is appointed.

MetroCoal Quarterly Report September 2012

Figure 2 Columboola Project Area

MetroCoal Quarterly Report September 2012

The key drill hole data from recently completed holes is listed as follows:

Hole ID	Stage	Easting (MGA 94)	Northing (MGA 94)	RL	Cored (m)	Total Depth (m)	Coal Roof (mbgl)	Seam Thickness (m)	Interpreted Seam
COL043	2	224925	7040940	300	341.79	455.7	302.62	6.05	MUWS
COL044	2	237525	7044240	323	455.7	690.62	122.87	1.26	MUWS
COL045	2	224207	7035876	305	690.62	466.07	397.47	5.86	MUWS
COL046	2	238425	7042590	326	466.07	474.18	128.16	1.98	MUWS
COL047	2	239325	7040940	328	474.18	442	120.68	3.80	MUWS
COL048	2	239325	7044240	329	443.04	486.19	102.44	1.28	KO10
							111.60	3.55	MUWS
COL049	2	237525	7040940	328	486.23	156.26	138.45	2.68	MUWS
COL050	2	235593	7044200	318	156.44	412.5	118.70	4.89	MUWS
COL051	2	240167.2	7045928	319.13	414.29	528.1	48.50	2.87	KO10
							67.43	3.67	MUWS
COL052	2	235583.7	7037699	314.12	528.96	210.98	198.27	4.83	MUWS
COL053	3	235727	7042572	315.84	210.51	240	135.64	4.97	MUWS
COL054	3	235224.1	7041751	314.6	239.9	497	154.77	3.71	MUWS
COL055	3	236183.5	7041733	319.41	497.81	474	142.52	4.01	MUWS
COL056	3	234921.3	7041085	312.84	474	240.4	167.70	1.59	MUWS
COL057	3	237064.1	7040079	323.7	240.4	489.3	177.22	5.57	MUWS
COL058	3	237911.5	7040129	326.41	489.3	214.54	142.69	3.80	MUWS
COL059	3	236155.8	7040135	317.26	214.54	231.5	163.49	5.31	MUWS
COL060	3	238787.6	7040137	327.78	231.5	234	135.08	3.91	MUWS
COL061	3	237521	7039283	321.09	234	192	163.07	4.60	MUWS
COL062	3	236198.6	7045060	313.71	192	216.2	108.79	4.06	MUWS
COL063	3	235307	7045067	317.82	216.2	203.7	114.48	2.88	MUWS
COL064	3	234817.2	7043403	312.11	203.7	219.5	128.26	5.82	MUWS
COL065	3	235259.3	7044198	315.03	219.5	204.7	118.63	4.39	MUWS
COL066	3	235684.6	7045877	318.27	204.7	216.4	102.30	4.55	MUWS
COL067	3	237887.1	7043406	331.5	216.4	222	138.07	2.12	MUWS
COL068	3	239183.4	7042615	328.38	222	185.7	113.68	1.10	MUWS
COL069	3	235716.2	7043405	315.93	185.7	210.1	124.39	5.92	MUWS
COL070	3	237095.3	7043420	324.93	210.1	191.98	127.80	2.63	MUWS
COL071	3	236242.9	7043425	319.84	191.98	185.7	143.20	2.97	MUWS
COL072	3	238909	7043426	329.55	185.7	180.03	121.60	3.41	MUWS
COL073	3	238873.8	7044269	327.3	180.03	179.7	113.41	4.29	MUWS
COL074	3	238410.5	7044238	326.33	179.7	156.18	117.28	4.22	MUWS
COL075	3	237065.7	7045077	318.28	156.18	157.7	110.69	3.25	MUWS
COL076	3	237970.3	7045068	320.98	157.7	160.92	106.70	1.47	MUWS
COL077	3	236722.7	7044156	319.31	160.92	161.7	133.02	5.19	MUWS
COL078	3	240238.2	7040938	332.54	161.7	150	131.15	3.28	MUWS
COL079	3	237591.9	7042760	321.99	150	149.7	127.61	1.05	MUWS
COL080	3	239687.5	7041745	329.09	149.7	95.7	123.26	2.33	MUWS
COL081	3	240669.5	7045074	321.54	95.7	131.7	59.74	3.02	KO10
							77.12	4.82	MUWS
COL082	3	241162	7045858	319.23	100.5	131.7	34.59	3.46	KO10
							57.57	3.80	MUWS
COL083	3	239478	7045905	317.58	100.5	148.9	34.87	2.65	KO10
							60.84	2.29	MUWS
COL084	3	239775.4	7045065	323.81	117.8	161.7	59.56	1.97	KO10
							82.03	2.92	MUWS
COL085	3	238939.9	7045066	322.3	130.6	161.7	84.94	2.14	KO10
							102.67	4.11	MUWS
COL086*	4G	240445	7046340	320	26.5	94.25	42.14	3.09	KO10
							59.30	2.36	MUWS
COL087*	4G	240666	7045914	319	35	74.1	41.44	3.13	KO10
							63.42	3.85	MUWS
COL088*	4G	240896	7046312	319	12	59	27.38	3.14	KO10
							50.17	2.47	MUWS
COL089*	4G	240902	7045423	320	25	89	50.55	3.11	KO10

• Preliminary Survey MUWS - Macalister Upper Working Section KO10 - Kogan Seam

MetroCoal Quarterly Report September 2012

Corporate Activities

MetroCoal finished the final quarter of 2012 in a strong financial position with $12.4 million cash on hand and having completed very successful drilling programs at Bundi and Columboola, released the results of the Bundi Scoping Study and the completed the Bundi seismic program.

On 12 July 2012, MetroCoal announced the appointment of experienced mining executive Stephen Everett to the position of Independent non-executive Company Chairman. Mr Everett brings to MetroCoal more than 40 years of Board and management experience in the resources and construction industries, holding senior positions with both publicly-listed and private companies, as well as Government Development Boards.

The timing of infrastructure projects indicates that the Surat Basin Rail and port construction remain on schedule to meet MetroCoal’s requirements to be completed in time for Bundi start up in 2018.

MetroCoal also continues to progress discussions with key coal seam gas companies, QGC and Origin to seek finalisation of Co-development agreements on overlapped tenements. The Origin discussions primarily involve EPC 1167, which includes the Norwood Project. The key areas discussed with QGC include both Bundi and Columboola.

The Queensland Government’s announcement on 26 September 2012 that a proposal to build a new shipping channel in Gladstone was declared a significant project by the Queensland Co-ordinator General was a major step forward. This will be a major development for not only all planned projects at Gladstone but potentially for Tenement to Terminal (3TL) planned coal terminal in which MetroCoal has a twenty per cent (20%) shareholding. Gladstone Port Corporation also welcomed the announcement of the duplication of this channel as it had been a key component of its 50 year strategic plan.

The new shipping channel will provide the Gladstone Port with a sound basis upon which to plan the proposed expansions and will be of significant benefit to 3TL and Wiggins Island Coal Export Terminal (WICET).

MetroCoal Quarterly Report September 2012

The position of the possible channel widening is shown in the map below:

Figure 3 – Gladstone Port

MetroCoal Quarterly Report September 2012

Figure 4 – MetroCoal’s Surat Basin Coal Tenements

Competent Person Statement

The information in this Announcement that relates to the Compilation of existing data and Exploration Results is based on information compiled by Mr Ed Radley who is a Member of the Australian Institute of Mining and Metallurgy (MAusIMM) (Membership No 300512). Mr Ed Radley is a fulltime employee of MetroCoal Ltd, in the role of Geological Manager, Mr Ed Radley 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 2003 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Ed Radley has consented in writing for inclusion in this announcement the matters based on the information in the form and context it appears.

The information in this Quarterly Report that relates to Exploration Results and Data 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 MetroCoal’s Joint Venture General Manager. 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 ‘Australiasian 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.

MetroCoal Quarterly Report September 2012

REGISTERED OFFICE

Cnr. Lytton Road and Stafford St, East Brisbane QLD 4169 GPO Box 122 Brisbane QLD 4001 T (07) 3249 3040 F (07) 3249 3041

==> picture [193 x 13] intentionally omitted <==

----- Start of picture text -----

MetroCoal Quarterly Report September 2012 12
----- End of picture text -----