Metro Mining : Bauxite Hills Reserve Doubles to 96Mt

ASX ANNOUNCEMENT

18 January 2017

Bauxite Hills Mine Reserve Doubles to 96Mt

Metro Mining Ltd (ASX:MMI) is pleased to announce the first stage of the combination of its Bauxite Hills Project with Gulf Alumina Ltd's (Gulf) Skardon River Project has led to a significant increase in the resources and reserves of the project.

The combined projects have been renamed the Bauxite Hills Mine. The Direct Shipping Ore (DSO) Reserve for The Bauxite Hills Mine is 96.5 million tonnes (Mt)

Reserves	Dry DSO Tonnes (Mt)	Al2O3%	SiO2%	Available Al2O3 % (THA)	Reactive SiO2 %
Metro Reserves1.	48.2	50.5	11.2	38.4	6.4
Gulf Reserves2.	48.4	49.4	14.7	40.3	6.1
Total	96.5	49.9	12.9	39.4	6.3
Includes 41.8Mt Proved and 6.4Mt Probable Reserves from BH1 and BH6 deposits announced to the ASX on 2/6/2015. Gulf's Proved and Probable Reserves are described on page 2 below.

Resources	Dry DSO Tonnes (Mt)	Al2O3%	SiO2%	Available Al2O3 % (THA)	Reactive SiO2 %
Metro Resources1.	65.3	50.3	12.4	38.4	6.4
Gulf Resources2.	63.5	49.6	14.3	40.4	6.1
Total	128.8	49.9	13.3	39.4	6.3
Includes the combined 41.8Mt Measured, 20Mt Indicated and 3.4Mt Inferred Resources from BH1, BH2 and BH6 deposits announced to the ASX on 2/6/2015 and 9/12/2015. The Resources are inclusive of Reserves. Gulf's Measured, Indicated and Inferred Resources are described on page 2 below. The Resources are inclusive of Reserves.

The addition of the Gulf material, with its indicated higher THA and lower reactive silica levels, potentially allows the company to offer a diverse product to its customers suited to both high and low temperature refineries.

Based on the increased Resource and Reserve, work is underway on a bankable feasibility study (BFS) for the Bauxite Hills Mine which is set to become a globally significant bauxite mining operation within the internationally acclaimed Weipa bauxite producing region.

Mine construction is planned to commence in the second half of 2017.

Metro currently owns 99.9% of Gulf. As per its announcement on 20 December 2016, Metro has commenced compulsory acquisition of the remaining Shares in Gulf not owned by Metro.

BACKGROUND INFORMATION Gulf Alumina's Previous Stand-Alone Skardon River Project As Gulf Alumina Ltd is an unlisted public company it was not previously required to publicly release the Resource & Reserve estimates for its stand-alone Skardon River Project. Metro is now pleased to announce the Skardon River Project Measured, Indicated and Inferred Resources & Proved and Probable Reserves.

The Resource estimate was generated for Gulf Alumina Limited by consultancy company Geos Mining in 2015 in accordance with the requirements of the JORC Code (2012).

The Ore Reserves estimate was prepared by Australian Mine Design and Development Pty Ltd (AMDAD) for Gulf Alumina in 2016 in accordance with requirements of the JORC Code (2012).

The Skardon River Project Resource and Reserve Estimates are:

Resource Type	Dry Tonnes (Mt)	SiO2%	Al2O3%	Reactive SiO2% (at 1480C)	Available Al2O3% (at 1480C)
Measured	16.6	13.9	50.2	5.9	41.7
Indicated	32.3	14.5	49.4	6.2	40.0
Inferred	14.6	14.3	49.4	6.1	39.8
Total Resources	63.5	14.3	49.6	6.1	40.4
Note 1: Based on minimum thickness of 0.5m; ≤20% SiO2; ≥40% Al2O3; ≤8% Reactive SiO2

Reserve Type	Dry Tonnes (Mt)	SiO2%	Al2O3%	Reactive SiO2 % (at 1480C)	Available Al2O3 % (at 1480C)
Proved	16.6	14.3	49.8	6.1	41.4
Probable	31.8	15.0	49.2	6.4	39.8
Total Reserves	48.3	14.7	49.4	6.3	40.3
Note 1: Based on minimum thickness of 0.5m; ≤20% SiO2; ≥40% Al2O3; ≤8% Reactive SiO2 Note 2: The Proved and Probable Reserves are included in the Mineral Resource

Resource and Reserve Details

The Mineral Resources being reported are the Measured, Indicated and Inferred Resources of Direct Shipping Ore (DSO) at the Skardon River Bauxite Project of Gulf Alumina Limited. The Resource estimate was generated for Gulf Alumina Limited by consultancy company Geos Mining in 2015 in accordance with the requirements of the JORC Code (2012). As Gulf Alumina was an unlisted public company at the time it was not required to publicly release the Resource estimate.

The Ore Reserves being reported are derived from the Mineral Resource estimated by Geo Mining using only the Measured and Indicated blocks. The Ore Reserves estimate was prepared by Australian Mine Design and Development Pty Ltd (AMDAD) for Gulf Alumina in 2016 in accordance with requirements of the JORC Code (2012). As Gulf Alumina was an unlisted public company at the time it was not required to publicly release the Ore Reserves estimate.

The area of the Mineral Resource estimate and its classifications is shown in Figure 1 which also shows the outline of the Ore Reserve estimate derived from the Mineral Resource estimate.

Geology and Geological Interpretation

The deposit type is lateritic bauxite derived from the weathering of aluminous sediments in a tropical to sub-tropical environment. The mineralisation within the Skardon River Bauxite Project forms part of the Weipa Plateau, a widespread area of aluminous laterite on the west coast of Cape York Peninsula that includes Rio Tinto Alcan's Weipa, Andoom and Amrun bauxite deposits as well as Metro Mining's adjacent Bauxite Hills BH1, BH2 and BH6 deposits.

The bauxite deposits generally consist of a single flat-lying pisolitic bauxite layer, generally 0.5m - 3m thick that is underlain by a kaolin horizon. Within the resource area the average bauxite thickness is 1.6m. The bauxite deposits are overlain by lateritic overburden and topsoil. Under the bauxite deposits there is often a ferruginous cemented layer and a kaolin clay layer. Kaolin, sandy clays and minor quartz sand deposits occur beneath the bauxite layer and extend beyond the bauxite areas, beneath the Namaleta Creek flood plain.

The geological model is grade-based using a cut-off of ≤20% total SiO2 and ≤8% reactive SiO2 (at 1500C)

Drilling Techniques

Both sonic and aircore drilling methods were used in several drilling programs between 2005 and 2015.

Both methods used a HQ diameter bit to produce a ~90mm hole. The sonic method utilises high frequency vibration of the drill stem to effect penetration and no pressurised air is used ensuring samples are recovered in situ. The aircore method utilises low pressure air flow to force the sample up the inside of the drill rods and permits the penetration of the rods into the earth. All drill holes are vertical and intersect the mineralisation at 900.

The sonic drilling method also produced samples that were utilised for bulk density measurements.

Hole collars have been surveyed using a differential GPS which has horizontal accuracy of +- 40cms. Vertical accuracy is much greater at ~80cms. Data is collected with reference to the GDA94 datum and recorded as Zone 54 metric coordinates.

In early 2015, LiDAR data was obtained and elevation data was inserted into the database as a more accurate measure of RL.

The distribution of the drill holes that were used in the Mineral Resource estimate are shown in Figure 2.

Sampling and Sub-sampling Techniques

In the sampling technique used in the aircore method the entire sample was collected at 0.25m intervals in clear plastic bags, tightly fitted to the cyclone outlet. Samples were logged and the airtight bags were sealed with cable ties to retain moisture.

With the Sonic drilling method sampling was carried out in 0.25m intervals. Samples were collected within a custom designed 'sausage' bag that is inserted into the barrel. The sample is retrieved after completing the drilling run which varies from 0.5m to 1.5m. The 'sausage' is laid out on a table then the length measured and compared to the actual down hole depth. The sample is then divided into equal lengths of 0.25m, immediately logged then placed into airtight clear plastic bags and sealed with cable ties to retain moisture.

Geological logging is carried out on every 0.25m sample, noting major/minor lithology, colour, percentage cemented material and bauxite. Data is recorded on a field portable laptop.

Sample Analysis

Samples were assayed for a suite of elemental oxides and Loss on Ignition by ALS. Analyses are carried out by XRF Fusion (code ME-XRF13n). ALS includes laboratory standards and blanks in their standard operating procedures.

Assaying of low temperature available alumina and reactive silica was carried out using ALS pulps but analysed by SGS Laboratories in Perth. The method used is a laboratory modified 'Bayer Process'.

Estimation Methodology

A gridded seam model was created using Micromine software whereby each bauxite unit in each hole is assigned a mid-point coordinate and a thickness. A single layer bauxite gridded seam model is created after using the Ordinary Kriging method of interpolation. This 'blank' model was then populated with Al2O3, SiO2, dry bulk density, available alumina and reactive silica values using Ordinary Kriging of the filtered (bauxite) analyses. A considerable proportion of assays from beneficiated samples have been used to obtain correlated raw sample assays; the correlation coefficient is considered moderate at best.

Once the Kriging results have been loaded into the block model, the blocks are cut, according to the appropriate selection criteria eg an upper cut-off of 20% SiO2 and 8% reactive silica. The remaining blocks are classified (using the average search distance and the determination of whether assays are measured or correlated) into one of the following three classifications: Measured, Indicated, Inferred. Previous estimates have used the kriging standard error and points per block to determine these categories. In 2013 it was observed that the kriging error has reduced by a factor of 4 implying higher confidence in the resource model.

Key Assumptions are:

• The bauxite is essentially a flat layer with only minor and localised perturbations in the footwall. There is no evidence of faulting. Recent exploration has indicated that in detail the base of the bauxite may be quite irregular

• There is good horizontal continuity of mineralisation and grade within the deposit although it is recognised from drilling that there are a number of very low grade bauxite zones

• Cemented bauxite is erratically distributed vertically throughout the weathered profile and laterally along the haul road and south of Namaleta Creek

• There are both internal and basal zones of ferruginous laterite development; within the bauxite these tend to be irregular thin (0.25-0.5m thick) layers while the basal mottled/ ferruginous zone is often more continuous.

  Key Parameters are:

• Block dimensions of 50 metres by 50 metres have been used.

• Model is limited by tenement boundaries, areas of wetlands or Category B Environmentally Sensitive Areas (ESAs) and where drilling indicated that bauxite was not developed.

• Search radius of 800m was used for each block with minimum points set at 2 and maximum at 20. A sub cell factor of 4 was used.

• Definition of bauxite is guided by geological logging but modified according to total/ reactive silica content.

Mining and Metallurgy

Ore Reserves are derived from the Mineral Resource by application of a mine plan using a strip and block layout for mining by loaders and trucks. The mine design is based on bauxite quality and economic analyses after application of mining loss and dilution adjustments.

The bauxite will be mined by large front end loaders loading 200 to 350 tonne road trains. Topsoil will be mined by scrapers and the subsoil immediately overlying the bauxite will be mined by front end loaders loading rigid body trucks. No blasting is required.

Pit depths vary from 0.5 to 6.7 metres with 95% less than 3.5 metres. Pit widths are 1 to 5 km. The floor is near level. No geotechnical analysis was required for the very shallow walls and the reserves assume they are vertical.

The Direct Shipping Ore (DSO) bauxite is defined by alumina and silica content which are laterally consistent over more than 100 metres through the pits. Vertically the DSO resource is defined by less than or equal to 20% SiO2 in the drill holes which are sampled on 25cm intervals. There is very little internal dilution vertically within the DSO horizon. Mining loss and dilution will occur on the roof and floor of the DSO horizon which averages 1.6 metres thickness. Mining loss and dilution are modelled as a 10cm loss and 10cm dilution skin on both the roof and floor. Roof dilution grades for silica and alumina were modelled from the first 25cm drill hole sample above the DSO horizon and floor dilution grades from the first 25cm sample below the DSO horizon. Loss grades were modelled from the 25cm drill hole samples in the top and base of the DSO horizon.

Grade control drilling on a 20 x 20 metre grid is planned ahead of mining to define the DSO roof and floor which will be cut by GPS guided machines to meet the ±10cm tolerance in the mining loss and dilution model.

The Ore Reserve model uses the single layer 50 x 50 metre blocks from the Mineral Resource model. A margin ranking model was prepared to assess the value of each block by deducting the mining, port, barging, site and royalty costs from the free on board (FOB) value of run of mine (ROM) bauxite in the block. Mining costs are from a detailed estimate for clearing, topsoil, subsoil and bauxite including variable ore haulage costs to the port. All other costs were supplied by GAL. Bauxite pricing is based on current Australian sales to China and includes alumina and silica penalties and sea freight. The margin rank model shows the defined pits to be positive value at 85% of the bauxite price used in GAL's financial model.

The Life of Mine schedule in the Pre-feasibility Study includes Inferred Resources. However these are almost entirely in the last 5 years of a 14 year mine life and the location of Proved and Probable Reserves would still allow them to be mined even if none of the Inferred were ever mined. Checks were done to ensure that the project is technically and commercially viable even if none of the Inferred is included.

Mining costs assume contract mining. The mining cost estimate was validated against three budget quotations received in late 2014 based on a scoping study for a similar mine plan.

The bauxite will be sold as a Direct Shipping Ore without processing other than sizing to -150mm and removal of tramp wood and metal.

Reference qualities used for pricing on a dry basis (namely CIBX) are 45% available alumina and 5% reactive silica. The average grades of the Ore Reserves are 40.3% total alumina and 6.3% reactive silica. These qualities are saleable and return positive block values when expected quality penalties are applied.

Most of the DSO Reserve is expected to be free flowing pisolitic and fines bauxite. Up to 30% may be weakly cemented. The planned port facility includes sizing to ensure the minus150mm specification is maintained.