DNI Metals Inc. : DNI Expands Buckton Zone Inferred Resource to 4.9 Billion Tons and Also Reports an Initial Indicated Resource on its Alberta Polymetallic Black Shale Project.

NEWS RELEASE

DNI METALS INC. -  August 27, 2013

DNI EXPANDS BUCKTON ZONE INFERRED RESOURCE TO 4.9 BILLION TONS AND ALSO REPORTS AN INITIAL INDICATED RESOURCE ON ITS ALBERTA POLYMETALLIC BLACK SHALE PROJECT

DNI METALS INC. (DNI:TSX-Ven)( DG7:FSE) announces results of its NI-43-101 compliant resource study just completed which updates and expands the mineral resource at the Buckton Zone on its Alberta polymetallic black shale project. The Updated and Expanded Buckton Mineral Resource Study (the "Updated Resource Study") successfully expands the inferred resource at the Buckton Zone from 3.5 billion short tons to 4.9 billion short tons, in addition to upgrading a portion of it to the indicated resource class by delineating a 300 million short ton indicated mineral resource. The inferred and indicated resources together extend over 21.9 square kilometres (approximately a 3kmx8km area), 20.4 square kilometres of which represents the aerial extent of the inferred resource. 

The updated Buckton mineral resources are hosted in two near-surface stacked black shale horizons which are mineralized with recoverable Mo-Ni-U-V-Zn-Co-Cu-Li-REEs-Y-Th-Sc, and are partly exposed on surface. The Buckton Zone is one of six mineralized systems, or zones, identified on DNI's 2,720 square kilometre Property in northeast Alberta.

The Updated Resource Study updates the Buckton mineral resource based on results from DNI's 2012 drilling over the Buckton Zone and with the benefit of preliminary guidance from the scoping study in progress. It significantly expands, supersedes and replaces all prior resource estimates announced from the Buckton Zone. The updated and expanded Buckton mineral resource forms the basis for the preliminary economic assessment scoping study which is in progress and expected to be completed in September. The scoping study is being prepared by P&E Mining Consultants Inc. with input from Hatch which was retained to review DNI's metals recovery testwork to provide process engineering guidelines toward formulating metals recovery flow sheets and related operating cost estimates.

The mineral resources being announced are based on a base cut-off of US$11/tonne and US$12.5/tonne for the Labiche and the Second White Speckled Shale Formations, respectively, reflecting the different operating cost estimates related to leaching of metals from the two Formations. Unlike prior resource studies from the Zone which were arbitrarily constrained by a maximum mineable depth of 75m, the resources reported in the current study comprise all mineralized tonnages which represent sufficient gross recoverable value exceeding the base cut-off to accommodate removal of overlying cover waste material. The Updated Resource Study also uses more current metal prices than those in prior studies, as well as higher base cut-offs and more conservative metals recoveries believed to better represent bioheapleaching field conditions. The Updated Resource Study relies on initial findings from the scoping study which is in progress, and incorporates preliminary mine engineering design and operating cost estimates into revised base cut-offs as well as mining depth criteria for the purposes of classifying mineralized material as resources.

The Updated and Expanded Buckton Mineral Resource Study was prepared by Apex Geoscience Ltd ("Apex"), Edmonton, under the supervision of Mr.Roy Eccles PGeol, Mr.Michael Dufresne PGeol, Mr.Steven Nicholls MAIG and Kyle McMillan PGeol, who are the Qualified Persons in connection with its preparation and are independent of DNI. The Study relies on the collective of DNI's drilling programs over the Buckton Zone, together with historic drilling from the area from which all archived drill core were previously re-sampled and re-analyzed by DNI in 2009 and 2012. All of the foregoing drilling campaigns were implemented by Apex under the supervision of Mr.Dufresne. The Updated Resource Study complies with National Instrument 43-101 and CIM resource estimation guidelines. 

This press release is a summary of salient conclusions from the Updated Resource Study report which will shortly be filed to SEDAR and will be available from www.sedar.com. The report will also be available from DNI's website www.dnimetals.com once it is filed.

The updated and expanded Buckton mineral resource consists of 4,894,386,000 short tons (4,440,112,000 tonnes) of inferred resource extending over 20.4 square kilometres, and 299,760,000 short tons (271,938,000 tonnes) of indicated resource extending over 1.5 square kilometres. The resources comprise a wedge of continuous mineralization hosted in the Labiche Formation and underlying Second White Speckled Shale Formation, which are two flat-lying black shale Formations that are stacked to comprise a continuous thick zone of mineralized shale. The resources are mineralized with recoverable Molybdenum (Mo), Nickel (Ni), Uranium (U), Vanadium (V), Zinc (Zn), Copper (Cu), Cobalt (Co), Lithium (Li), Scandium (Sc), Thorium (Th) and Rare Earth Elements Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Yttrium (Y). The Updated Resource Study estimates that the inferred and the indicated resources are overlain by 1,732,104,000 short tons (1,571,338,000 tonnes) and 31,320,000 short tons (28,413,000 tonnes) of glacial till overburden, respectively. Details of the inferred and indicated resources are tabulated at the end of this announcement.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all or any part of the mineral resource reported herein will be converted into a mineral reserve. The metal recoveries reported represent preliminary mineral recovery testing results collated from the collective bench scale laboratory testwork completed by DNI to date and may not reflect actual process recoverability that might be achieved in a mineral production operation, all of which is the subject of ongoing studies.

The updated Buckton mineral resources consist of an Upper, lower-grade, mineralized horizon hosted in the Labiche Formation which directly overlies a higher-grading horizon hosted in the Second White Speckled Shale Formation beneath it. The two Formations together comprise an approximately 13m-140m thick wedge of mineralized black shale, extending westward from the eastern erosional edge of the Birch Mountains where they are exposed on surface but are under progressively thicker cover westwards.

The updated and expanded Buckton inferred resource is distributed between the Upper and Lower portions as follows (also tabulated separately at the end of this announcement): (a) 3.9 billion short tons (2.5 billion metric tonnes) in the Upper, lower grade, portion hosted in the Labiche Formation ranging 13m-115m in thickness (ultimate thickness of the Labiche Shale at the Property is unknown as near-surface portions of it have been locally scoured away by glaciation); and (b) 1 billion short tons (0.9 billion metric tonnes) in the Lower, higher grade, portion hosted in the Second White Speckled Shale Formation ranging 13m-26m in thickness. Details of the Upper and Lower portions comprising the inferred resource are tabulated at the end of this press release.

The Buckton indicated resource is distributed between the Upper and Lower portions as follows (also tabulated separately at the end of this announcement): (a) 228 million short tons (207 million metric tonnes) in the Upper, lower grade, zone hosted in the Labiche Formation ranging 13m-115m in thickness (ultimate thickness of the Labiche Shale at the Property is unknown as near-surface portions of it have been locally scoured away by glaciation); and (b) 72 million short tons (65 million metric tonnes) in the Lower, higher grade, zone hosted in the Second White Speckled Shale Formation ranging 13m-23m in thickness. Details of the Upper and Lower portions comprising the indicated resource are tabulated at the end of this announcement.

The Buckton inferred resource is open to the north, northeast and south, and eastward to the erosional edge of the Birch Mountains over a large area with thin overburden cover where mineralization intermittently outcrops at surface or is intermittently exposed throughout several kilometres of valley walls. The inferred resource is open to the south over the approximately seven kilometres separating it from the Buckton South Zone mineral resource (announced January 11, 2013) and available surface exploration information suggests that the two Zones may well be connected. The indicated resource is surrounded by the inferred resource and is, as such, open in all directions into mineralization which may be upgraded into the indicated class subject to infill drilling. 

The Updated Resource Study concludes that the updated Buckton inferred and indicated mineral resources represent mineralization which has a reasonable prospect for extraction in the future. These resources comprise all Labiche and Second White Speckled Shale resource blocks for which the combined gross value of recoverable contained Mo-Ni-U-V-Zn-Co-Cu-Li-REEs-Y-Th-Sc exceeds the base cut-offs of US$11 and US$12.5 per tonne for the Labiche and Second White Speckled Shales, respectively, relying on interim metals recovery results from DNI's leaching testwork in progress at Canmet (press April 16, 2012), and for which the combined gross value of recoverable contained metals is sufficiently high to accommodate costs of removal of overlying cover waste material. Metal prices used are the two year trailing commodity price averages to May 31, 2013.

Modelling and estimation of the updated Buckton mineral resources was carried out using 3-dimensional block model based on geostatistical applications using commercial mine planning software MICROMINE. The model relies on an aggregate of seventeen vertical core holes distributed over an area of approximately 20 square kilometres, and spaced approximately 240m-2km apart (averaging 1km), and was generated using the combined drill hole data derived from drilling campaigns conducted in 1997, 2011 and 2012. The Updated Resource Study concludes that mineralized black shale in the area shows good lateral uniformity for many of the contained metals over large distances across the Property, that the spacing and number of drill holes over the Buckton Zone are sufficient for the determination of an inferred resource, and that extrapolation of grades between the drill holes is supported by statistical variography examined during the Study. It also concludes that the spacing and number of holes over a portion of the Zone are sufficient for the delineation of an indicated resource, and that extrapolation of grades between the drill holes is also supported by statistical variography examined during the Study. Considering that leaching tests completed by DNI to date on samples from the Labiche and Second White Speckled Shale formations report different recoveries for the metals of interest, the resource modelling treated the two shale units separately. 

Variography was conducted on the composited drill hole data within the Labiche and Second White Speckled Shale domains to produce spherical semivariogram's. Each element was modeled individually to determine the continuity and orientation of mineralization. As a result of the wide hole spacing a parent model block size of 250mx250mx3m was chosen for the resource estimate. The block model extents were extended far enough past the mineralized wireframe to encompass the entire domain. The recoverable grades for the metals were translated into a US$ value for each block and sub-block relying on the metals recoveries from DNI's leaching tests and two-year trailing average metal/oxide prices to May 31, 2013, and the values were aggregated into a collective gross recoverable value for each block and sub-block to enable testing against the block value base case cut-off for each Formation.

While the collective work from the Buckton Zone indicate that none of the metals present in the Buckton Zone occurs in sufficiently high enough concentration to be of economic merit by itself, the metals of interest collectively represent sufficient recoverable gross value on a combined basis to place the resources identified at the Buckton Zone within reach of economic viability provided the metals are efficiently recovered on a combined basis. DNI's leaching testwork has already demonstrated that the metals can be collectively extracted from the shale but clear communication of overall bulk grade has been a challenge considering the polymetallic nature of the mineralization of merit. In the foregoing regard, the Updated Resource Study notes, with concurrence from DNI, that given the absence of a single metal to represent bulk of the overall recoverable value of the mineralized shale, reporting of its overall grade as a traditional "metal equivalent" would be arbitrary and misleading. Of necessity, the Resource Study has, accordingly, opted instead to communicate overall grade by aggregating the individual gross recoverable values represented by each of the metals of interest into a single gross recoverable total per tonne value to characterize the resource and enable its discussion and testing against a base cut-off for the purposes of resource estimation. The reader is cautioned that disclosure of gross values discussed in this announcement and in the Resource Study does not comply with Section 2.3(1c) of National Instrument 43-101 since the figures are gross and the term may be misleading in the absence of proven production costs. The recoverable gross values are quoted for convenience of communicating overall grade and are otherwise conceptual in nature and do not represent economic worth of the resource being reported from the Buckton Zone. The reader is also reminded that the values are based on recoverable metal grades per bench scale leaching tests and do not imply that economic viability of the recoveries has been determined and they may not reflect actual recoveries which might be achieved in an ultimate mineral production operation. 

Polymetallic black shale is an emerging deposit type which has gained recognition over the past decade mainly due to advances in application of bioleaching procedures to extract low grade metals from shale by bulk-heap leaching. Worldwide, there is one active mining operation extracting polymetals via bio-heapleaching and two other scoping stage projects that are exploring/developing polymetallic deposits in black shale. These operations provide the only resource estimation and operating cost guidelines, particularly with respect to base cut-off values, that are relevant to evaluating the mineral resource hosted in the Buckton Zone.

The US$11 and US$12.5 per tonne base cut-offs used by the Updated Resource Study are considered to be reasonable benchmarks which are higher than cut-offs utilized by recent mineral resource estimates and a scoping study for other open pit mineable poly-metallic black shales in Sweden and Finland as the break-even point and lower cut-off. These base cut-offs are guided by initial preliminary findings from DNI's ongoing scoping study for the Buckton Zone, and incorporate operating costs from the only available operation worldwide of bulk mining and bioheapleaching exploitation of a polymetallic black shale deposit. The cut-offs also include a nominal cost for refining of REEs into saleable final products relying on estimates from other REE projects. Considering a scenario of possible open pit mining in northeast Alberta along the eastern edge of the Birch Mountains, with potential for a low strip ratio at startup, the likely free-dig nature of the poorly consolidated shale bedrock, the potential for easy access to multiple working faces, the location of the project with respect to access, power and other important infrastructure, the foregoing base cut-off values are considered reasonable for the purposes of mineral resource estimation as base case thresholds which also capture a relatively continuous mineralized zone with favourable bulk mining configuration.

DNI's leaching testwork demonstrated that the Buckton Zone mineralization is recoverable by a single bulk leaching method from the shale and that REEs and Specialty Metals are incidentally leached from the shale as co-products of leaching of base metals. Considering that REEs account for a significant proportion of the recoverable gross value of the resource, especially for the Upper portion of mineralization in the Labiche shale, the ultimate economics of the resource are, accordingly, subject to uncertainties of long term REE pricing and viability of demand, the unknown effect of new production on REE markets, and the cost of separating REEs from pregnant leaching solutions once they have been leached from the shale and their refinement into saleable final products. Although the base cut-offs used in the Updated Resource Study include a nominal cost for separation of REEs relying on estimates from other REE projects, a sensitivity analysis was conducted to investigate sensitivity of the Buckton resources to cost fluctuations by testing the resource model against progressively higher arbitrary base cut-offs.

The resource model was iterated and tested at progressively higher arbitrary base cut-offs to determine the commensurate tonnages that can be classified as mineral resources against any given base cut-off. The entire shale package resource model was, accordingly, tested at base cut-offs of US$12.5, US$15, US$20, US$25, US$30, US$35, US$40 and US$50 per tonne, and the respective tonnages that can be classified as a mineral resource were estimated. The sensitivity analysis demonstrated that the tonnage and distribution of the shale package is virtually intact between base cut-offs of US$11 per tonne and approximately US$20 per tonne, and that the aggregate gross recoverable value of contained metals exceeds the base cut-off, but that at progressively higher base cut-offs the tonnage of the Upper (lower grade) portion of the resource which is hosted in the Labiche shale rapidly decreases and distribution of resource blocks lose cohesion and ultimately virtually none of the Upper zone in Labiche shale can be classified as a mineral resource since the aggregate gross recoverable value of the contained metals is less than the cut-off.

The sensitivity analysis successfully demonstrated that as the spatial distribution of the Labiche resource decreases, progressively larger portions of Labiche would be regarded as cover waste material to be removed for the purposes of any mining operations to extract the underlying resource in the Second White Speckled Shale Formation. Considering that distribution of the Upper zone hosted in Labiche shale will affect distribution and tonnage of what might be realistically mined from the underlying Lower zone resource hosted in the Second White Speckled Shale, the resource model was tested at the higher base cut-offs to simulate a scenario for which the Upper portion of the resource hosted in Labiche shale is deemed to be waste and would have to be removed together with the overburden to gain access to the underlying higher grade mineralization in the Second White Speckled Shale. In these iterative scenarios, the Lower portion of the resource hosted in the Speckled Shale is the only mineralization of interest and the resource identified within it remains intact between base cut-offs of US$11 per tonne and US$35, but gradually loses cohesion at higher base cut-offs such that at a base cut-off of US$50 per tonne virtually none of it can be classified as a mineral resource since the aggregate gross recoverable value of contained metals is less than the base cut-off.

The Updated Resource Study concludes that the inferred and indicated resources announced herein at the Buckton Zone have excellent potential for expansion with further drilling. The Study recommends implementation of infill drilling over the Buckton Zone to upgrade additional material to the indicated class, along with exploratory drilling to test the seven kilomtres separating the Buckton Zone resources from the mineral resource Buckton South Zone (announced February 28, 2013). The Study also recommends that DNI's ongoing leaching testwork be expanded and that DNI give consideration to commencing baseline environmental studies relating to the Buckton Zone. 

In a statement Mr.S.Sabag, DNI's president & CEO, commented: "… we are excited to announce this expanded mineral resource from the Buckton Zone, and look forward with equal excitement to concluding the preliminary economic assessment scoping study which is scheduled for completion in September".

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all or any part of the mineral resources reported herein will be converted into a mineral reserve. An 'Inferred Mineral Resource' is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An 'Indicated Mineral Resource' is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for geological and grade continuity to be reasonably assumed. The metal recoveries reported represent preliminary mineral recovery testing results collated from the collective bench scale laboratory testwork completed by DNI to date and may not reflect actual process recoverability that might be achieved in a mineral production operation, all of which is the subject of ongoing studies.

The Qualified Persons in connection with the preparation of the Updated and Expanded Buckton Mineral Resource Study are Mr.Roy Eccles PGeol, Mr.Michael Dufresne PGeol, Mr.Steven Nicholls MAIG and Kyle McMillan PGeol, who are independent of DNI. The Qualified Person in connection with this press release and in respect of the Alberta polymetallic black shale projects is Mr. Shahé F.Sabag PGeo, President and CEO of DNI, who is responsible for verification and quality assurance of the exploration information disclosed in connection with the projects and this release.

Analyses by Activation Laboratories Ltd., Ancaster, ON. Canmet = Canmet Mining and Minerals Science Laboratories, Ottawa. The 2012 drill core analyses and re-analysis of historic core intercepts included an appropriate number of analytical standards, blanks and duplicates, and no analytical issues were identified. Analytical results from the 2012 drilling were announced on Jan31/2013, along with details of DNI's analytical quality assurance and quality control parameters. Prior resource estimates from the Buckton Zone were announced Oct24/2011, Jan16/2012, Sep12/2012 and Jan11/ 2013. Ton=short ton; lb = pound; tonne = metric tonne = 1000kg.

Metal/Oxide commodity prices used to establish bulk recoverable values for cut-off grade thresholding tests are the two year trailing average to May 31, 2013 (three year for Tm Geomega 2011). Metals/Oxide commodity price data for Mo-V-Co from www.metal-pages.com, Ni-Zn-Cu from www.northernminer.com, U from www.cameco.com, Li from www.asianmetal.com, La-Ce-Pr-Nd-Sm-Eu-Gd-Tb-Dy-Y from www.metal-pages.com, Ho-Er-Yb-Lu-Sc from www.asianmetal.com, Th per USGS Mineral Commodity Summaries, Tm from Montviel Core Zone REE resources study 2011 by SGS Canada Inc. Metal prices vary among various commodity information sources and in all conflicting instances the lower pricing was used.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

DNI - TSX Venture
DG7 - Frankfurt
Issued: 74,857,022

For further information, contact: 
DNI Metals Inc. - Shahe Sabag, President & CEO or Denis Clement, Chairman - 416-595-1195
email ir@dnimetals.com. Also visit www.dnimetals.com

We seek Safe Harbour. This announcement includes forward looking statements. While these statements represent DNI's best current judgment, they are subject to risks and uncertainties that could cause actual results to vary, including risk factors listed in DNI's Annual Information Form and its MD&As, all of which are available from SEDAR and on its website.