Metro Mining : March Quarter 2016 - Quarterly Activities & Cash Flow Report

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Metro Mining Limited (ASX:MMI)

Quarterly Activities Report | March 2016

Highlights

Bauxite Hills 4Mtpa* PFS Results Released

Expanded project requires only minor changes

to CAPEX, OPEX and equipment requirements. The environmental impact is not materially changed from previous smaller 2Mtpa* model. PFS delivers compelling financial outcomes

The Environmental Impact Statement

On 11 April 2016 the EIS was submitted to

the Queensland Government Department of Environment and Heritage Protection.

Bauxite Hills Native Title Agreement Signed

Agreement was reached with the Ankamuthi

People and Old Mapoon Aboriginal Corporation (OMAC) and is a key milestone to granting of the Mining Leases. This agreement demonstrates the continued

excellent community support.

Transhipment Agreement

Metro has entered into an agreement with BTS Pty Ltd for the provision of transhipment services for the Bauxite Hills Project.

Bauxite Hills Definitive Feasibility Study (DFS) The DFS for an expanded project is on track for completion mid-2016 and progressing in line with the permit application process. Offer to Merge with Gulf Alumina Limited

On the 8 March 2016 the offer was declared unconditional and Metro now owns 22% of unlisted company Gulf Alumina.

Tranship Ore 10km down Skardon River for transhipment 10km out to sea to bulk carrier for transport to China

*MMI confirms all material assumptions underpinning production target & corresponding financial information continue to apply & have not materially changed as per Listing Rule 5.19.2

E nvir onmental Im pact Stateme nt

Bauxite Hills Project

Increase to 4Mtpa* Enhances Project Economics Environmental Impact Statement Lodged

Refer 27 January 2016 ASX Announcement

Refer 11 April 2016 ASX Announcement

The expanded 4Mtpa* production model released by Metro showed significant advantages and required very little change to capital, operational and equipment needs.

It also showed:

• The environmental impact for a 4Mtpa* project is not materially different to smaller 2Mtpa* project.

• Overall footprint is similar to a 2Mtpa* and 24hr mining operations and higher frequency barge movements cause minimal environmental impact.

• Significant economies of scale gained by inclusion of night shift in mining operations. Equipment fleet and barge loading facility require only minor upgrades for 4Mtpa*.

• Expanded production delivers lower unit operating costs across all operating aspects.

  4Mtpa* PFS Key Results***
  NPV10 (post-tax)	A$582m
  IRR	156%
  Payback Period	1.2 years
  Capex (inc 15% contingency)	A$40.1m
  Steady State Production	4Mtpa
  LOM Production	49.1Mt
  Mine Life	13 years
  LOM Average Annual EBITDA	A$133.6m
  LOM Average Total Operating Costs	A$18.8/t
  LOM Average Operating Margin	A$33.6/t
  *MMI confirms all material assumptions underpinning production target & corresponding financial information continue to apply & have not materially changed as per Listing Rule 5.19.2 | ** Refer 6 April 2016 ASX release | *** Refer 27 Jan 2016 ASX Release

• 13 year mine life using existing DSO Reserve of 48.3Mt**. Potential to extend mine life utilising an announced 11.7Mt** Indicated Resource at nearby deposit, and from further exploration.

In a major milestone in the Bauxite Hills approval process, the Environmental Impact Statement (EIS) was submitted to the Queensland Government DEHP on 11 April 2016.

The EIS submission marks the commencement of the Queensland Government's assessment phase for the project under the bilateral agreement with

the Commonwealth Department of the Environment.

The submitted project is for a 5Mtpa Direct Shipping Ore (DSO) mine with no beneficiation.

The project requires no dredging or bed levelling of the Skardon River & operates only in the dry season.

The environmental impacts associated with the project have been assessed by a team of specialist consultants, led by CDM Smith. All potential environmental impacts have been identified and Metro has either changed the mine plan to avoid the potential impact, or proposed mitigation and management controls to ensure no significant environmental harm from the proposed activities.

The Bauxite Hills Project is classified as a Project of Regional Significance by the Qld Government.

DEHP and relevant referral agencies will assess the adequacy of the EIS in meeting the project Terms of Reference (TOR). If the EIS is deemed to meet the TOR, it will be placed on public display for a 30 day period.

The Company anticipates that the display period will commence within 2 months. During the display period, the public and Queensland Government agencies, as well as DOTE, will be provided with an opportunity to submit comments on the EIS.

The Company's response to each submission, together with the Company's final statement of commitments, will be lodged for approval by both DEHP and DOTE.

Recent timeframes for determination of similar projects indicate a target date for determination of the EIS late Q4 2016 is achievable.

Native Title & Land Access Agreement Secured

Early in the quarter Metro executed a Native Title and Land Access Agreement, jointly reached with the Ankamuthi People and the Old Mapoon Aboriginal Corporation (OMAC). The Agreement is a key milestone to granting of Mining Leases whilst

setting sound foundations for a long term relationship with the Ankamuthi People, Traditional Owners and OMAC (the Trustee owner of the land).

The Agreement includes a Cultural Heritage Management Plan, the provision of employment

& training opportunities for traditional owners, busi- ness development and contracting opportunities for Ankamuthi businesses, and payment of mining benefits to the Ankamuthi People and OMAC for the life of the Project.

The Agreement also contains employment and training targets and Metro will work with stakeholders and contractors to ensure these are met. Metro will also work with the stakeholders to identify business opportunities for the Ankamuthi and other local enterprises.

Metro is committed to the smooth transition into operations and the establishment of a Liaison Committee to manage communications regarding all aspects of the operation is a key component of the Agreement. All parties will be represented on the Liaison Committee, which will meet regularly throughout the life of the Project.

Bauxite Hills Project

The mining benefits are based on a percentage of the Free on Board (FOB) price received per tonne of bauxite and will be used to fund long term programs and benefits to a broad cross section of the Ankamuthi People and their organisations.

Refer 21 January 2016 ASX Announcement

Land rehabilitation is included as an integral part of the Agreement with progress being continually monitored by the Liaison Committee.

The Agreement demonstrates excellent community support for the Bauxite Hills Project.

Transhipment Agreement Signed

Refer 2 February 2016 ASX Announcement

Metro announced it has entered into an agreement with Bauxite Transhipment Services Pty Ltd (BTS) for the provision of transhipment services relating to the Bauxite Hills Project. BTS is a joint venture company between Transhipment Services Australia (TSA) and Dadaru SR (Dadaru).

The Agreement with BTS provides Metro with many benefits including:

• Allows Metro to minimise capital expenditure. BTS will provide all tugs and barges required for the operation;

• De-risks the Bauxite Hills operation by utilising a proven and experienced contractor to undertake marine operations;

• Delivers a low cost and low risk transhipment solution that does not require any dredging or bed levelling of the Skardon River.

The involvement of Dadaru, an indigenous company with extensive experience in ship loading, will maximise employment opportunities for local people. The Agreement is binding on both parties, subject to Metro obtaining the necessary project approvals and funding.

Bauxite Hills Project

The terms of the agreement provide the flexibility to expand the transhipping to expand the transhipping operation as production increases.

The financial details of the contract are commercial in confidence however the rates are extremely competitive.

BTS specialises and offers a service in the niche market of the transhipment method of transporting cargo from a land based loading facility to a bulk carrier ship offshore that is moored or at anchor using barges. The BTS management team have extensive experience in transhipment operations at remote locations around the world. TSA and Dadaru recently provided transhipment services at the Ridges Iron Ore project in Wyndham, Western Australia, successfully loading 119 bulk carrier ships to export the iron ore to China.

Definitive Feasibility Study Progressing

The Definitive Feasibility Study for Bauxite Hills is continuing in parallel with the permit application process and is expected to be completed

mid-year.

The Bauxite Hills 4Mtpa* PFS showed considerable benefits in an expanded production model. The PFS confirmed a 13 year mine life based on existing DSO resources of 53.6Mt**. There may be potential to extend mine life utilising an announced 11.7Mt** Indicated Resource at a nearby deposit, and from further exploration.

Metro expects to finalise designs in preparation for the construction tendering process later this year.

Metro is seeking approval for production up to 5Mtpa in its EIS application.

*MMI confirms all material assumptions underpinning production target & corresponding financial information continue to apply & have not materially changed as per Listing Rule 5.19.2 | ** Refer 9 Dec ASX Release

Corporate

Offer to Merge with Gulf Alumina Limited

Transaction to Create Leading Independent Cape York Bauxite Company

On 24 December 2015, Metro Mining Limited (Metro) announced an offer (Offer) to acquire all of the ordinary shares in Gulf Alumina Limited (Gulf).

The offer was 3.3 shares in Metro for every one share in Gulf. On 8 March 2016, the Offer was declared to be free of all conditions, and it was noted that Metro has an interest in 22% of Gulf's shares on issue.

As announced by Metro in its Second Supplementary Bidder's Statement, dated 6 April 2016, Metro intends to increase the consideration offered under the Offer to 3.5 shares in Metro for every one share in Gulf, subject to the conditions which are set out in the Second Supplementary Bidder's Statement (Improved Offer).

On 11 March 2016, the Takeovers Panel (Panel) made a declaration of unacceptable circumstances in relation to the affairs of Gulf and issued orders re- quiring Gulf to, among other things, either provide a comparative value of Gulf as a stand-alone entity

on the one hand and Metro offer on the other hand, or appoint an independent expert to consider whether Metro's Offer is fair and reasonable. Gulf chose to appoint an independent expert.

On 7 April 2016, Gulf successfully applied to the Panel to vary those orders so as to allow the independent expert more time to prepare its report. Metro now expects Gulf to release a Supplementary Target's Statement, including the independent expert's report, by 9 May 2016.

To give Gulf shareholders more time to consider the findings of the independent expert's report, Metro has extended the close of the Offer period to 7.00pm on 19 May 2016.