MINERAL COMMODITIES LTD — Interim / Quarterly Report 2013

Oct 30, 2013

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Q U A R T E R LY R E P O R T 3 1 O C T O B E R 2 01 3

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C O R P O R AT E D I R E C T O R Y

M I N E R A L C O M M O D I T I E S LT D

ACN 008 478 653 ABN 39 008 478 653

A D D R E S S

40 Murray Road North Welshpool WA 6106, Australia PO Box 235, Welshpool DC WA 6986, Australia Telephone: 61 8 6253 1100 Facsimile: 61 8 9258 3601 Email: info@mncom.com.au Web: www.mncom.com.au

30 September 2013

Australian Stock Exchange Company Announcements Office

Q U A R T E R LY A C T I V I T I E S R E P O R T

F O R T H E P E R I O D E N D E D 3 0 S E P T E M B E R 2 01 3

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S U M M A R Y

• E N T I T L E M E N T I S S U E I N I T I AT E D . C O M P L E T E D P O S T Q U A R T E R E N D , H E AV I LY O V E R S U B S C R I B E D

T O R M I N P R O J E C T R E M A I N S O N S C H E D U L E A N D O N B U D G E T

• C O N C E N T R AT I O N F R O M P I L O T P L A N T P R O D U C E D A N D S O L D U N D E R O F F TA K E A G R E E M E N T W I T H W O G E N PA C I F I C

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T O R M I N M I N E R A L S A N D S P R O J E C T ( S O U T H A F R I C A )

To r m i n o n t i m e a n d o n b u d g e t

The focus of the Company’s management for the quarter remained centred around Tormin. The project remains on track with its development schedule and to date the project remains under budget. Commissioning of the beach mining and processing infrastructure is set to commence in the next quarter. Commissioning of the secondary concentration plant is expected in November 2013, with full production starting in December 2013.

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E n g i n e e r i n g , D e s i g n a n d P r o c u r e m e n t

By the end of the quarter, all engineering, plant and infrastructure designs had been completed and issued to contractors. Purchase orders for all equipment and construction packages had also been awarded – all at or below budget.

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P r i m a r y B e a c h C o n c e n t r a t o r s ( P B C s )

Fabrication of the PBCs was completed by the end of September and they had been pre-assembled prior to delivery to site. Both PBCs units are due to be delivered in October for commissioning. The first material is expected to be processed by the PBCs by the end of October 2013.

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S e c o n d a r y C o n c e n t r a t o r P l a n t ( S C P )

Fabrication and construction of the SCP infrastructure, plant and plate-work continued through the quarter and remains on schedule. The process water dams were completed and erection of the steel progressed well. By the end of the quarter the first floor had been completed and the Derrick Screen, Trash Screen and Spirals had been installed. The remaining mechanical equipment installation will be undertaken as the equipment arrives on site according to a pre-agreed schedule. Commissioning of the SCP will commence in November 2013 with full production expected in December.

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M o b i l e E q u i p m e n t , L i g h t Ve h i c l e s a n d G e n e r a t o r s

The Company successfully concluded agreements with Caterpillar (equipment and generators) and Toyota (light vehicles). All of this equipment, which started to arrive on site by the end of the quarter, will be supplied under operating leases with maintenance support provided by the principals.

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D e v e l o p m e n t T i m e t a b l e

The development schedule for Tormin remains on track and on schedule with full production to commence December 2013.

	Jan	Feb	March	April	May	June	July	Aug	Sep	Oct	Nov	Dec
Engineering + Procurement
Construction
PBC’S
SCP
Commissioningand Scale Up
PBC’S
SCP

R e g u l a t o r y A p p r o v a l

As previously reported the zoning departure was the only remaining regulatory approval for Tormin. During the quarter all necessary stakeholders and government departments unanimously supported the zoning application and formal notification of the zoning departure was received. Tormin now has all the permits necessary to commence mining operations.

S a l e s a n d M a r k e t i n g

The Tormin mine plan and engineering processing design provides for primary beach concentration of 1.2Mtpa producing approximately 48,000 tonnes of Non-Magnetic Concentrate grading up to 80% Zircon and 10% Rutile.

The first shipment of Non-Magnetic Concentrate was processed through the Company’s pilot plant during the quarter. A shipment of 100 tonnes of this Non-Magnetic Concentrate was sold under the Marketing Agreement with Wogen Pacific Limited and was shipped to China for tertiary processing. The Company is awaiting final processing results of the Non-Magnetic Concentrate to confirm the final recoveries from the down-stream processing in China although initial feedback has been extremely encouraging. The Company is encouraged that the final processing in China will further enhance the economics of the Tormin Project.

The Non-Magnetic Concentrate also includes the valuable rare earth, Xenotime, which reports to the non-magnetic fraction of the ore body.

The Company is confident of its product sales forecast; with the prices of Zircon / Rutile holding in accordance with the Company’s financial model projections and market indications showing that the Zircon supply chain has substantially de-stocked and that output from various producers has started to increase. This would appear to point to the bottom of the cycle having been reached and that prices are expected to stabilise at current levels before increasing slightly on the back of enhanced demand.

MRC continued discussions during the quarter with potential offtake partners for the Ilmenite product which could be produced from Tormin subject to construction of additional dry plant processing infrastructure. The Company remains confident that it will conclude an economically attractive offtake agreement for the Ilmenite in the near future that will justify the investment in the additional plant.

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O f f s h o r e P r o s p e c t i n g A c t i v i t i e s a t To r m i n C o n t i n u e

MRC has previously reported that a prospecting right for the offshore area immediately adjacent to Tormin was awarded towards the end of 2012. The offshore prospecting area covers an area of 12 square kilometers and extends 1km out to sea from the lowwater mark and covers the full length of the existing 12km Tormin tenement.

The established geology of the region confirms that the source of the Tormin beach deposits is a Heavy Mineralrich offshore zone and that the dynamic coastline serves to replenish the beaches by transporting sediment from deeper waters.

The offshore prospecting right represents the first step in MRC’s initiatives to significantly extend the Tormin Life of Mine. Consequently, since the award of the prospecting right, the Company has undertaken a series of informal replenishment tests. These tests involved excavating trenches at various intervals along the beach deposit and then allowing them to be filled from the offshore ore body. Assays of the samples taken at each stage were compared to each other and the original Tormin resource test work.

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MRC is very encouraged by the results which indicated replenishment to within 10% of the existing heavy mineral gradings. The Company has used the results from the tests to plan formal replenishment studies in conjunction with various specialists, including Professor A Rozendal (Economic Geologist, Stellenbosch University) who co-authored the research study, “The Geelwal Karoo heavy mineral deposit: a modern day beach placer”.

The study indicated that:

“The locally high, total heavy mineral content and the favourable ore to gangue mineral ratio, coupled with he possibility of replenishment style mining, make this an attractive resource.

A prominent headland, forming a J-bay just south of the source, prevents large scale dispersion of these sediments by the northward flowing littoral current. The result is an offshore trail of heavy mineral-enriched sand, which is then transported to the beach by wave action. There it is repeatedly sorted and further upgraded to be re-deposited on the beach face during mild weather conditions.

The implementation of replenishment mining of this active beach appears to be a realistic possibility. It is, after all, regularly practised by off-shore diamond mining in several favourable localities. This alternative could considerably increase the reserves and sustain mining for an extended period.”

Subsequent to the end of the quarter, MRC has received a formal proposal from Professor Rozendal to formally study the extent of beach replenishment. This work will commence in conjunction with initial mining operations in October. The Company is optimistic that these tests will show that replenishment from, or exploitation of this area, could at least double the expected Life of Mine of Tormin.

H e a l t h a n d S a f e t y

The Company is pleased with its health and safety record through the construction and development phase of Tormin. During September the Company celebrated completing 50,000 man hours on site without a lost time injury.

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H u m a n R e s o u r c e s

To date the only senior positions remaining open are the metallurgist and geologist. Every effort is being made to fill these vacancies with suitably qualified people as soon as possible.

Through the construction phase, the Company has employed 3 people from the Xolobeni community. As the mine moves into production a further 16 Xolobeni members will start at the mine between October and December 2013. A further representative will start work in November at the Cape Town office as a resource development officer working primarily on the Tormin offshore right and Xolobeni mining right applications.

Consequently 21 members of the Xolobeni community will be employed as a consequence the MRC projects. The company plans to train these employees at Tormin to enable them to assume more senior positions at the Xolobeni Mineral Sands Project in due course.

The community liaison manager also commenced recruitment for the plant operators from the local community in the quarter. Many of these people have never worked before and an extensive induction and training process will be undertaken in the next quarter to get them ready for work.

L o g i s t i c s

The supply chain team has made significant progress with the SA rail operator, Transnet, and a proposal for a dedicated rail service that could handle up to 100,000tpa has been received.

The full economics are currently being assessed, but the link is likely to lead to significant savings in relation to transport, storage and handling costs from the mine site to the port in Cape Town.

B a c k g r o u n d

Tormin is located on the west coast of South Africa, approximately 400km north of Cape Town. The predominant minerals of value are Zircon and Rutile which are contained in a high grade beach placer deposit north of the Oliphants River outfall.

A DFS commissioned by MRC demonstrated that Tormin can produce an enriched Non-Magnetic. Concentrate containing predominately Zircon and Rutile. The base case derived from the DFS provides for hydraulic mining and primary concentration of the deposit through spiral plants on the beach. Thereafter, the concentrate will be transferred to a SCP where it will be further upgraded by spirals, wet magnetic separation (LIMS and WHIMS), and screens before being bagged prior to shipment to destination markets.

MSP Engineering completed the process engineering, including PFD’s, P&ID’s, Mass Balances and Process Design Criteria, based on the DFS and submitted designs for the PBCs based on the beach and the SCP.

The engineering design provides for primary beach concentration of 1.2 Mtpa producing approximately 48,000 tonnes of Non-Magnetic Concentrate grading up to 80% Zircon and 10% Rutile. Provision was also made to produce various magnetic concentrates for further processing through a dry plant should the project economics for those products allow.

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X O L O B E N I M I N E R A L S A N D S P R O J E C T ( S O U T H A F R I C A )

The Xolobeni Mineral Sands Project (Xolobeni) is located in the Eastern Cape Province of South Africa approximately 300km north of East London and 200km south of Durban.

The Xolobeni resource is 346 million tonnes of 5.0% heavy mineral, with 65% of this resource in the Measured category.

Xolobeni is therefore regarded as one of the largest undeveloped mineral sands resources in the world containing in excess of 9,000,000 tonnes of Ilmenite.

B a c k g r o u n d

In November 2011 the DMR extended the prospecting rights over Xolobeni, excluding the Kwanyana block, for a further period of 3 years. During the first quarter of 2012, this right was executed and subsequently registered by the DMR in the third quarter of 2012.

MRC has advised that the DMR had withdrawn the previously granted Conditional Mining Right over the Kwanyana block and that it was engaging with the DMR and Minister in relation to these matters. The Company subsequently withdrew all previous applications in respect of the Kwanyana block and immediately applied for a new prospecting right over the same block.

The benefit of this approach is that the Kwanyana block will be re-aligned with the rest of Xolobeni which will enable the Company to progress its application to develop Xolobeni in its entirety and, in so doing, demonstrate that this can be undertaken responsibly and sustainably.

The DMR accepted the new prospecting right application (PRA) over the Kwanyana block in the first quarter of 2012 and, in accordance with prevailing legislation, directed the Company to submit an Environmental Management Plan (EMP) for the prospecting work and details of its engagement with all stakeholders with an interest in the project. The Company compiled an EMP for the Kwanyana block prospecting work and undertook a comprehensive stakeholder engagement process (SEP) during the second quarter of 2012. The EMP and SEP report were also lodged with the DMR in accordance with the required timetable.

A number of objections to the PRA were received. Accordingly, the DMR was required to call a meeting to consider the objections and a representations made by the Company. This meeting was held on 28 November 2012.

Based on the information presented at that meeting, the DMR instructed the Company to undertake additional consultation. In keeping with local traditions, a series of pre-meetings were held with the traditional leaders in the Xolobeni area to update them on developments with the project, brief them on the planned consultation process and gain their approval for the process.

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X o l o b e n i P u b l i c P a r t i c i p a t i o n S u c c e s s f u l l y C o m p l e t e d

Having obtained the traditional leadership’s approval of the planned process, the public consultation process took place in March and April 2013. Subsequently, feedback from all the meetings has been collated into a comprehensive issues and response trial which has been incorporated into a stakeholder engagement report (SER). The SER was completed in the last quarter and submitted to all relevant parties and the DMR for evaluation.

The Company has not yet been advised when the DMR will meet to consider the SER and other matters relating to the Kwanyana PRA. However, the Company remains optimistic that the DMR will award a new prospecting right over the Kwanyana block in the final quarter of 2013 which will enable the Company to do the final work necessary to submit a mining right application for the entire Xolobeni tenement as soon thereafter as possible.

B a s e l i n e S t u d i e s

In the interim, work has commenced on preparation for the various baseline studies that are required as part of the prospecting works programme and in preparation for and application for a mining right for Xolobeni. By end of the quarter MRC had appointed a specialist to commence a water study on the Xolobeni area. The Company expects this work to be completed in early 2014.

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C O R P O R AT E

M R C F u n d i n g – E n t i t l e m e n t I s s u e

MRC announced in September 2013 that it was undertaking an Entitlement Issue (Offer). The Offer comprised of a 1 for 4 non-renounceable entitlement issue of approximately 80,988,228 fully paid ordinary shares to raise approximately $6.4 million. The price of the new shares under the Offer was $0.08 each.

The purpose of the Offer was to raise up to $6.4million to fund the completion, commissioning and start up working capital for the Tormin Mineral Sands Project.

The Offer included a shortfall offer allowing eligible shareholders to subscribe for any shortfall shares over and above their entitlement. The Offer was also fully underwritten by the Company’s two largest shareholders prior to the Offer, Zurich Bay Holdings Pty Ltd and Au Mining Limited.

The Offer closed after the period end and MRC was pleased to advise that the Offer and shortfall offer were oversubscribed with subscriptions received for approximately 102 million shares for $8.1 million. The Board is very pleased with this outcome and the continued support of its shareholders.

Phase 1 of the Tormin Zircon / Rutile Mine Development and Secondary Processing Plant and associated infrastructure is therefore now fully funded.

C a s h a n d M a r k e t a b l e S e c u r i t i e s

At 31 September 2013, MRC had A$5.6 million in cash and $0.5 million in marketable securities.

S e c u r i t i e s o n I s s u e

Issued securities at quarter-end comprise:

• ������������������������������������������������������������� �����������������������������������������������������������������������������������

• ����������������������������������������������������������������������������������

A further 80,988,228 fully paid ordinary shares were issued subsequent to year end pursuant to the Entitlement Issue. The total shares on issue at the date of this report is 404,941,571.

For enquiries in connection with this release please contact:

A n d r e w L a s h b r o o k e - C E O

Mineral Commodities Limited alashbrooke@mrc-res.co.za +27 21 4171700

C o m p e t e n t P e r s o n s

The information in this announcement which relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosciences (“AIG”), a Corporate Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) and independent consultant to the Company. Mr Maynard is the Director and principal geologist of Al Maynard & Associates Pty Ltd and has over 30 years of exploration and mining experience in a variety of mineral deposit styles. Mr Maynard 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, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code). Mr Maynard consents to inclusion in the report of the matters based on this information in the form and context in which it appears.

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M R C R E S O U R C E S TAT E M E N T

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Ilmenite Zircon Rutile Garnet
PROJECT Category Ore Mt HM%
(% in HM) (% in HM) (%in HM) (%i HM)
Tormin Indicated 2.7 49.4% 21.4% 6.9% 1.4% 51,2%
Xolobeni Measured 224 5.7% 54.5%
Indicated 104 4.1% 53.7%
Inferred 18 2.3% 69.6%
346.0 5.0% 54.0%
Total MRC 348.7 5.3% 51.7%
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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.!

	Nameofentity	Nameofentity	Nameofentity	Nameofentity
	MINERALCOMMODITIESLTD
	ABN Quarterended(“currentquarter”) 39008478653 30September2013 Consolidatedstatementofcashflows
			30September2013
Cashflowsrelatedtooperatingactivities 1.1 Receiptsfromproductsalesandrelated debtors 1.2 Paymentsfor (a)exploration&evaluation (b)development (c)production (d)administration (e)Discontinuedacquisition 1.3 Dividendsreceived 1.4 Interestandotheritemsofasimilarnature received 1.5 Interestandothercostsoffinancepaid 1.6 Incometaxespaid 1.7 Other(providedetailsifmaterial) NetOperatingCashFlows			Current quarter $A’000	Ninemonthsended 30September2013 $A’000
		(378) (4,742) (582) Y 39		(458) (7,272) (1,949) 189
		(5,663)		(9,490)
Cashflowsrelatedtoinvestingactivities 1.8 Paymentforpurchasesof: (a)prospects (b)equityinvestments (c)otherfixedassets 1.9 Proceedsfromsaleof: (a)prospects (b)equityinvestments (c)availableforsaleassets 1.10 Loanstootherentities 1.11 Loansrepaidbyotherentities 1.12 Other(providedetailsifmaterial) Netinvestingcashflows 1.13 Totaloperatingandinvestingcashflows (carriedforward)		Y (2) Y Y		(60) (216)
		(2)		(276)
		(5,665)		(9,766)

+!See!chapter!19!for!defined!terms.!

30/9/2001!

App

Appendix(5B( Mining(exploration(entity(quarterly(report(

1.13 Totaloperatingandinvestingcashflows (broughtforward)	(5,665)	(9,766)
Cashflowsrelatedtofinancingactivities 1.14 Proceedsfromissuesofshares,options,etc. 1.15 Proceedsfromsaleofforfeitedshares 1.16 Proceedsfromborrowings 1.17 Repaymentofborrowings 1.18 Dividendspaid	1,274 2,222	5,463 2,222
1.19 Other(providedetailsifmaterial)
Netfinancingcashflows
	3,496	7,685
Netincrease(decrease)incashheld 1.20 Cashatbeginningofquarter/yeartodate 1.21 Exchangerateadjustmentstoitem1.20 1.22 Cashatendofquarter	(2169) 7,854 Y	(2,081) 7,769 (3)
	5,685	5,685

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

entities	entities
1.23 Aggregateamountofpaymentstothepartiesincludedinitem1.2 1.24 Aggregateamountofloanstothepartiesincludedinitem1.10		Currentquarter $A'000
		151
		Y
1.25	Explanationnecessaryforanunderstandingofthetransactions

NonJcash(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! 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!

Financing(facilities(available(

Add%notes%as%necessary%for%an%understanding%of%the%position.%

Amount!available! Amount!used! $A’000!! $A’000!

+!See!chapter!19!for!defined!terms.!

Appendix!5B!!Page!2!

30/9/2001!

Appendix(5B( Mining(exploration(entity(quarterly(report(

3.1 Loanfacilities 3.2 Creditstandbyarrangements Note:TheCompanycompletedan entitlementissuesubsequenttoqtrend raisingapprox$6.4million.Revenuealso expectedinDec2013.	Nil	Nil
	Nil	Nil

Estimated(cash(outflows(for(next(quarter(

4.1 Explorationandevaluation 4.2 Development 4.3 Production 4.4 Administration DiscontinuedOperations	$A’000
	120
	7,071
	2,827
	650
Total	10,668

Reconciliation(of(cash(

Reconciliationofcash
Reconciliationofcashattheendofthequarter(as shownintheconsolidatedstatementofcashflows) totherelateditemsintheaccountsisasfollows.	Currentquarter $A’000	Previousquarter $A’000
5.1 Cashonhandandatbank 5.2 Depositsatcall 5.3 Bankoverdraft 5.4 Other(providedetails)	5,685	7,854
Total:cashatendofquarter(item1.22)	5,685	7,854

Changes(in(interests(in(mining(tenements(

6.1 Interestsinmining tenementsrelinquished, reducedorlapsed 6.2 Interestsinmining tenementsacquiredor increased	Tenement reference	Natureofinterest (note(2))	Interestat beginning ofquarter	Interest atendof quarter

Issued(and(quoted(securities(at(end(of(current(quarter(

+!See!chapter!19!for!defined!terms.!

30/9/2001!

App

Appendix(5B( Mining(exploration(entity(quarterly(report(

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

	Totalnumber	Numberquoted	Issueprice persecurity (seenote3) (cents)	Amountpaid uppersecurity (seenote3) (cents)
7.1 Preference +securities (description) 7.2 Changesduring quarter (a)Increases throughissues (b)Decreases throughreturns ofcapital,buyY backs, redemptions
7.3 +Ordinary securities 7.4 Changesduring quarter (a)Increases throughissues (b)Decreases throughreturns ofcapital,buyY backs	323,953,343	323,953,343
7.5 +Convertible debtsecurities (description) 7.6 Changesduring quarter (a)Increases throughissues (b)Decreases through securities matured, converted
7.7 Options (descriptionand conversion factor) 7.8 Issuedduring quarter Unlisted Options Unlisted Options 7.9 Exercised duringquarter 7.10 Expiredduring quarter
	10,000,000 1,000,000		Exerciseprice $0.20 Exerciseprice $0.35	Expirydate 31/12/2015 Expirydate 31/12/2015
7.11 Debentures (totalsonly)

+!See!chapter!19!for!defined!terms.!

Appendix!5B!!Page!4!

30/9/2001!

Appendix(5B( Mining(exploration(entity(quarterly(report(

7.12! Unsecured( notes %(totals% only)%

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!/does!not*! (delete%one)% give!a!true!and!fair!view!of!the! matters!disclosed.!

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Sign!here:!! ............................................................! Date:!31!October!2013! (Director/Company!secretary)!

Print!name:!! Peter!Torre!

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!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.!

30/9/2001!

App