METRO MINING LIMITED — Interim / Quarterly Report 2012

Jan 30, 2012

2011 QUARTERLY REPORT December

Corporate details

METROCOAL LIMITED | ABN 45 117 763 443

Quarterly Activities Report For the period ended 31 December 2011

ASX CODE: MTE

Issued Capital (31/12/2011)

208,883,663 shares issued

8,500,000 Unlisted Directors’ Options

2,550,000 Unlisted management options

1,445 Shareholders

Top 20 Shareholders

Hold 75.61% 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 & 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 Ltd 14.51%

Cash Balance

As at 31 December 2011, MTE’s cash balance was approximately $23.8 million

MetroCoal Quarterly Report December 2011

Highlights for the quarter

• MetroCoal surpasses its 2009 Prospectus Exploration Target* of between 2.5Bt and 3.5Bt of Inferred category for all tenements including the Columboola JV project

• MetroCoal’s combined Total Thermal Coal Resource increased to 3.78 Billion tonnes inclusive of JV partner 51% share (see Total Resource Table on following page)

• Maiden Inferred Resource of 520 Mt Thermal Coal established in Dalby West

• The Bundi Project resource increases to 1,561.8Mt (Indicated 150.9Mt and Inferred 1,410.9Mt)

• The Columboola Project resource increases to 1,297 Mt of which MTE holds a 49% interest DADI Engineering Development (Group) Co. Ltd (DADI) completes its $24 million investment in MetroCoal

• MetroCoal welcomes to the Board, Mr Lindsay Ward as an Independent Director, Mr Wang Dongping from Dadi and Mr Robert Finch as Mr Wang’s alternate Director

Figure 1

• *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.

MetroCoal Quarterly Report December 2011

Resources

MetroCoal’s total Resources are now as follows:

						Total Resources 3,607 Mt 174.9 Mt 3,782.8 Mt
					Dalby West³
						Total
Resource	Norwood1	**Bundi1 **	**Juandah1 **	**Columboola2 **
						Resources
Inferred Indicated	156 Mt -	1410.9Mt5 150.9Mt	224 Mt 24Mt	1,297Mt (635 Mt4) -	520Mt	3,607 Mt 174.9 Mt
Total	156 Mt	1561.8Mt	248 Mt	1,297 Mt	520Mt	3,782.8 Mt

1. See MTE ASX Announcement 3 November 2011 - BUNDI PROJECT – MAIDEN INDICATED RESOURCE OF 150.9Mt

2. See MTE ASX Announcement 18 November 2011 – COLUMBOOLA JV INCREASES RESOURCE BY 757 MILLION TONNES TO 1.297 BILLION TONNES

3. See MTE ASX Announcement 9 December 2011 – DALBY WEST – MAIDEN INFERRED RESOURCE OF 520 Mt

4. MTE JV share = 49%

5. See MTE ASX Announcement 14 December 2011 - BUNDI PROJECT – 230% INCREASE IN RESOURCE TO 1561.8Mt

Other Corporate Activities

MetroCoal marketing a JV interest in EPCs 1164/1251, Wandoan West

The process of seeking a JV partner in EPC1164 and EPC 1251 is continuing. MetroCoal recognises that the process is taking longer than anticipated in 2011. However, the interest from a number of foreign and Australian parties remains positive. Visits to the Bundi Project have taken place and negotiations will continue into early 2012.

MTE remains committed to securing a JV partner on beneficial terms to MTE shareholders.

Successful placement to Dadi Engineering

MetroCoal announced on 6 September 2011 that it had secured a placement of 32.0 million shares to Dadi at $0.75 per share to raise funds of $24.0 million. On 16 September 2011, MetroCoal advised that it had received funds of $2.4 million from the initial placement of 3.2 million shares to DADI Engineering (Group) Hong Kong Co. Ltd on an unconditional basis. On 14 November 2011, MetroCoal announced that all Chinese Government regulatory approvals had been received. The balance of the placement being 28.8m shares ($21.6m) was conditional on MetroCoal shareholder approval which was overwhelmingly received at the MetroCoal Annual General Meeting on 24 November 2011 with Dadi Engineering Development Group of China becoming the company’s second largest shareholder

MetroCoal Quarterly Report December 2011

MetroCoal announces key appointments to the Board of Directors

The first Board appointment in October 2011 was Mr Lindsay Ward (pictured).

Lindsay Ward has 25 years broad experience holding executive positions in resources, ports, rail and logistics, all of which are relevant to MetroCoal’s Surat Basin and future coal projects. His experience includes General Manager Mining of the Yallourn Energy open cut coal mine in Victoria and senior mining engineering roles including with BHP Australia Coal. Mr. Ward is currently Managing Director of Dart Mining NL (ASX-DTM), a Victorian based molybedeum-copper-silver explorer.

Following the very successful placement to Dadi, MetroCoal welcomed Mr Wang Dongping (pictured) to the MTE Board.

Wang Dongping is also Chairman of Dadi Engineering Development Group. Mr. Wang is a highly renowned coal processing expert working at the highest level within the Chinese coal industry for 30 years. Mr Wang will bring extensive management experience and an intimate knowledge of modern coal processing technology to MetroCoal.

MetroCoal also welcomes Mr Robert Finch, (pictured) as the alternate Director to Mr Wang.

Robert Finch brings more than 23 years of Management experience including over 17 years in the Australian and Chinese coal industries. Mr Finch is Managing Director of Aury Australia, a coal process equipment manufacturing company based in Queensland and a subsidiary of Dadi.

MetroCoal Management team grows

During the December quarter MetroCoal also welcomed two new members to its Management team – Alistair Robertson, who takes on the position of Community Relations Manager and Ryan Wagner, becoming the Environmental & Safety Manager. Both of these new members have taken up residence in the local area – Alistair at Dalby and Ryan at Roma so as to maintain a highly proactive relationship with the Wandoan community and stakeholders.

MetroCoal Quarterly Report December 2011

Corporate Advisor visit to the Surat Basin

MetroCoal hosted a visit to its Surat Basin thermal coal project areas in November 2011. In attendance were Mark Gross, RBS Morgans Corporate Finance, Sydney, Clive Briggs, RBS Morgans Edward Street office in Brisbane and Graham Teague, Bell Potter Adelaide. The visit provided an opportunity for the MTE teams in the Surat to brief the advisors.

Left to right – Graham Teague, Clive Briggs, Nicholas Villa (MTE Project Manager) and Mark Gross

Investment in Tenement to Terminal Limited (3TL)

Work continues on the master planning for the coal terminal in Gladstone. The GHD studies were completed earlier in January and MetroCoal awaits receipt of these reports. It is now planned that this information will be released early February.

3TL have recently issued a request to a number of coal producers, seeking their interest in participating in the feasibility phase of the planned coal port.

Figure 2 – Proposed 3TL Export Terminal

MetroCoal Quarterly Report December 2011

EXPLORATION & EVALUATION

Bundi Project

MetroCoal Limited (ASX: MTE) announced a substantial increase in its 100% owned Surat Basin Bundi Project Area. The increase in the Inferred Resource Category of 900 Mt increases the Bundi Project coal resource estimate to 1561.8 Mt (1410.9 Mt Inferred and 150.9 Mt Indicated) as shown in the Table on page 4. The 2011 exploration program in Bundi included 71 partially cored holes drilled in the Bundi Project Area. The close spaced exploration holes drilled during the first part of 2011 provided the data for modelling MetroCoal’s Indicated resource, announced to the ASX on 3 November 2011. The wider spaced drilling carried out during the latter part of the year has provided the basis to expand the footprint, defining the additional Inferred Resources announced to ASX on 14 December 2011.

Resource definition drilling efforts in 2012 will focus on expanding the Resource Model and extending the conceptual level mining study area.

Figure 3 Bundi Project Area

MetroCoal Quarterly Report December 2011

Columboola JV Project

Figure 4 – Columboola EPC 1165

MTE and its Columboola JV partner, SinoCoal Resources Pty Ltd, (a subsidiary of the China Coal Group) announced a significant increase in the inferred resource of 757 Mt for the Columboola Project. The increase lifted the total inferred resource for the Columboola Project from 540Mt to 1.297Bt. Drilling results continue to confirm a potentially economic and mineable Macalister Seam has been identified within the Columboola Project Area.

Drilling on the Stage 1 program has continued on a 3.6km offset grid to cover the larger part of the Columboola exploration permit (EPC 1165) and enable the JV to identify and focus on the most prospective future mining areas. Stage 2 drilling has commenced and is designed to increase resource confidence in the target areas on a 1.8km offset grid.

Drilling continued during early January but it is expected that the current wet weather may see a delay in the program. However, analysis of the geological data continues with the scope for further resource increases.

Dalby West Project

Figure 5 – Dalby West Project

During the quarter, MTE also announced a maiden resource for the Dalby West project, EPC1166, with a 520Mt Inferred Resource, following completion of the 2011 exploration drilling program.

During this exploration program, MTE completed two drill holes totalling 689 metres on the Dalby West tenement. The aim of the exploration program was to establish correlation of the known seams within EPC1166. All recognised coal seams from the Juandah and Taroom coal measures were intersected by both holes. In calculating the JORC compliant Inferred Resource for Dalby West, MetroCoal was able to use publicly available data from a further 85 holes drilled previously on the tenement. This enabled a total of 28,316 metres of drill hole data to be utilised

MetroCoal Quarterly Report December 2011

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)	74	Thermal Coal
EPC 1159	Injune Creek	MetroCoal Limited	Renewed (11/12/2012)	237	Thermal Coal
EPC 1164	Wandoan West	MetroCoal Limited	Renewed (11/12/2012)	215	Thermal Coal
EPC 1165	Columboola	MetroCoal Limited – 49%	Renewed (9/12/2012))	294	Thermal Coal
EPC 1166	Dalby West	MetroCoal Limited	Granted (11/12/2012)	97	Thermal Coal
EPC 1167	Roma North	MetroCoal Limited	Renewed (11/12/2012)	289	Thermal Coal
EPC 1251	Wandoan West 2	MetroCoal Limited	Granted (16/9/2013)	19	Thermal Coal
EPC 1501	Dugandan	MetroCoal Limited	Granted (28/9/2014)	20	Thermal Coal
EPCA 1609	Wandoan West 3	MetroCoal Limited	Application	18	Thermal Coal
EPCA 1640	Pentland South	MetroCoal Limited	Application	114	Thermal Coal
EPCA 2187	MacMillan	MetroCoal Limited	Application	20	Coking Coal
EPCA 2234	Wandoan West 4	MetroCoal Limited	Application	3	Thermal Coal
EPCA 2786	Cooloomala	MetroCoal Limited – 49%	Application	101	Thermal Coal
MDLA 406	Juandah	MetroCoal Limited	Application	4986 ha	Thermal Coal & UCG

Competent Person Statement

The information in this Announcement that relates to 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 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 December 2011

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

MetroCoal Quarterly Report December 2011

Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001, 01/06/10.

	Name of entity	Name of entity	Quarter ended (“current quarter”) 31/12/2011	Quarter ended (“current quarter”) 31/12/2011
	METROCOAL LIMITED
	ABN 45 117 763 443 Consolidated statement of cash flows
			31/12/2011
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid and GST refunded 1.7 Other (provide details if material) Net Operating Cash Flows		Current quarter $A’000		Year to date (6 months) $A’000
		0 (2,946) 0 0 (493) 0 212 0 337 0		0 (6,457) 0 0 (1,032) 0 309 0 475 0
		(2,889)		(6,704)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		(1,316) (57) 0 0 0 0 0 0		(3,095) (108) 0 0 0 0 0 0
		(1,373)		(3,203)
		(4,262)		(9,907)
1.13 Total operating and investing cash flows (brought forward)		(4,262)		(9,907)

• See chapter 19 for defined terms.

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Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) - Issue costs Net financing cash flows	21,638 0 0 (1,000) 0 (1,357)	24,050 0 0 (1,000) 0 (1,564)
	19,281	21,486
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of quarter	15,019 8,141 0	11,579 11,581 0
	23,160	23,160

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		71
		Nil
1.25	Explanation necessaryfor an understandingof the transactions
	Directors’Fees

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

Nil

• 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Nil

• See chapter 19 for defined terms.

Appendix 5B Page 2

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Appendix 5B Mining exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1	Loan facilities
3.2	Credit standby arrangements

Amount available		Amount used
$A’000		$A’000
	--		--
	--		--

Estimated cash outflows for next quarter

Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	3,000,000
	0
	0
	450,000
Total	3,450,000

Reconciliation of cash

Reco (as s flows follow	nciliation of cash at the end of the quarter hown in the consolidated statement of cash ) to the related items in the accounts is as s.	Current quarter $A’000	Previous quarter $A’000
5.1 5.2 5.3 5.4	Cash on hand and at bank Deposits at call Bank overdraft Other (provide details)	3,030	2,141
		20,130	6,000
		0	0
		0	0
	Total: cash at end of quarter(item 1.22)	23,160	8,141

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

• 5.1 Cash on hand and at bank

• 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details) Total: cash at end of quarter (item 1.22)

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed	Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter

• See chapter 19 for defined terms.

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Appendix 5B Page 3

Appendix 5B Mining exploration entity quarterly report

6.2 Interests in mining tenements acquired or increased

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions	--	--	--	--
	--	--	--	--
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs	208,733,663	208,733,663
	28,800,000	28,800,000	0.75	0.75
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted	--	--	--	--
	--	--	--	--

• See chapter 19 for defined terms.

Appendix 5B Page 4

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Appendix 5B Mining exploration entity quarterly report

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

7.7 Options Exercise price Expiry date
(description 5,700,000
and conversion unlisted options 25 cents 4 December 2012
500,000
factor)
unlisted options 25 cents 4 December 2014
3,250,000
unlisted options 40 cents 19 November 2013
750,000 unlisted
options 50 cents 18 May 2014
2,500,000
Unlisted options 75 cents 25 November 2013
2,500,000
Unlisted options 78 cents 25 November 2013
7.8 Issued during 2,500,000 75 cents 25 November 2013
quarter Unlisted options
2,500,000 78 cents 25 November 2013
Unlisted options
7.9 Exercised
during quarter
7.10 Expired during
quarter -- -- -- --
7.11 Debentures
(totals only) -- --
7.12 Unsecured
notes (totals -- --
only)
----- End of picture text -----

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).

• 2 This statement does give a true and fair view of the matters disclosed.

==> picture [215 x 39] intentionally omitted <==

Sign here: ............................................................ Date: 30 January 2012 (Company secretary) Print name: JOHN HALEY

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent

• See chapter 19 for defined terms.

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Appendix 5B Page 5

Appendix 5B Mining exploration entity quarterly report

which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

• See chapter 19 for defined terms.

Appendix 5B Page 6

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