METALLICA MINERALS LIMITED ABN 45 076 696 092 GPO Box 122, Brisbane QLD 4001 Tel: +61-7 32493000

“KOKOMO” EPM 10699

FINAL REPORT

HELD BY: NORNICO PTY LTD

MANAGER: METALLICA MINERALS LIMITED

AUTHOR: MICHAEL TYNDALL

PROJECT: KOKOMO

COMMODITIES: NICKEL, COBALT, SCANDIUM

MAP SHEETS: 1:250,000, EINASLEIGH (SE 55-9) 1:100,000, VALLEY OF LAGOONS (7960)

DATE: November 2013

DISTRIBUTION: DEPARTMENT OF NATURAL RESOURCES AND MINES (DNRM)

Final Report for EPM 10699 – Kokomo 1

Table of Contents

1.0 Summary ...... 6 2.0 Introduction ...... 9 2.1 Location, Access and Infrastructure ...... 9 2.2 Climate, Vegetation and Topography ...... 12 2.3 Relevant Landowner Contacts ...... 12 2.4 Relevant Maps ...... 12 2.5 Tenure ...... 13 2.6 Joint Venture Agreements...... 17 2.7 Royalties Payable ...... 17 2.8 NORNICO – Native Title Influences ...... 17 3.0 Tenement Geology ...... 18 3.1 Mineralisation – Nickel and Cobalt ...... 20 3.2 Mineralisation – Scandium ...... 20 4.0 Previous Exploration ...... 20 4.1 Exploration by Metallica during the 2003 to 2004 period ...... 22 4.1.3 Drilling ...... 22 4.1.2 Orientation Programme ...... 23 4.1.3 Soil Sampling Programme ...... 23 4.1.4 Scoping Study ...... 25 4.2 Exploration by Metallica during the 2004 to 2005 period ...... 26 4.3 Exploration by Metallica during the 2005 to 2006 period ...... 29 4.4 Exploration by Metallica during the 2006 to 2007 period ...... 29 4.4.1 Drilling ...... 29 4.4.2 Assay Results ...... 35 4.5 Exploration by Metallica during the 2007 to 2008 period ...... 35 4.5.1 Assay Results ...... 37 4.6 Exploration by Metallica during the 2008 to 2009 period ...... 41 4.7 Exploration by Metallica during the 2009 to 2010 period ...... 43 4.7.1 Diamond Drilling ...... 43 4.7.2 RC Drilling Results ...... 44 4.7.3 Mineral Resource Estimate ...... 45 4.7.4 Metallurgical Test Work ...... 48 4.7.5 Kokomo Dry and Wet Season Environmental Surveys ...... 48 4.7.6 Mining lease Application ...... 48 4.7.7 Black Dingo Drilling – Gold Prospect ...... 50 4.8 Exploration by Metallica during the 2010 to 2011 period ...... 51 4.9 Exploration by Metallica during the 2011 to 2012 period ...... 51 4.9.1 Mineral Resource Re-tabulation ...... 52

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4.9.2 Metallurgical Test Work ...... 53 4.9.3 Low Grade Ore and Waste Stockpile Environmental Test Work ...... 55 4.9.4 Dry and Wet Season Environmental Surveys ...... 56 4.10 Exploration by Metallica during the 2012 to 2013 period ...... 57 5.0 References ...... 58

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Table of Figures

Figure 1 Tenement and Locality Map ...... 8 Figure 2 SCONI Location Map ...... 11 Figure 3 EPM 14070 Tenement Boundary and Topography ...... 14 Figure 4 EPM 14070 Tenement Outline and Sub-blocks ...... 16 Figure 5 Regional Geology Map and Latest Tenement Boundaries ...... 19 Figure 6 Kokomo Geology Map and Soil Geochemistry ...... 24 Figure 7 Kokomo Drill Holes and Scandium Intercepts (Prior June 2005) ...... 28 Figure 8 Kokomo Drill Hole Locations ...... 34 Figure 9 Kokomo Drilling and extent of Mineralised Areas ...... 39 Figure 10 Kokomo Cross-Sections ...... 40 Figure 11 Kokomo Inaugural Mineral Resource Map ...... 42 Figure 12 Kokomo Drill Hole Locations and High Grade Zones ...... 46 Figure 13 Cross-Section through the Mona Prospect ...... 47 Figure 14 MLA 10342 Location and boundary ...... 49 Figure 15 Sample Sites for potential Ore Variability Metallurgical Test Work ...... 54

Tables Table 1 Schedule of Tenements (NORNICO Pty Ltd - Holder) ...... 15 Table 2 Kokomo EPM 10699 – latest list of Sub-Blocks ...... 15 Table 3 Black Dingo Drilling Results ...... 22 Table 4 Initial High Grade Scandium Intercepts ...... 26 Table 5 Significant Assay Results – Kokomo drilling (May 2005) ...... 27 Table 6: Laterite Intercepts – KKDDH-003 and 004...... 35 Table 7: Kokomo Drilling Campaigns up until 2008 ...... 36 Table 8: Inaugural Kokomo Mineral Resources ...... 41 Table 9: 2009 Diamond Drill Hole Details ...... 44 Table 10: Kokomo 2010 Mineral Resource Estimate (0.7% NiEq1 COG) ...... 45 Table 11: Kokomo Scandium Resource (using a 70ppm Sc COG) ...... 47 Table 12: Black Dingo Drill Parameters ...... 50 Table 13: Black Dingo Significant Intercepts ...... 51 Table 14: Kokomo 2012 Resource (0.70 NiEq COG) ...... 53 Table 15: Samples for Metallurgical Test Work on potential Ore Variability ...... 54

Plates

Plate 1 Plate 2

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Note:

This report complies with the MRA reporting regulations as prescribed in sections 13B, 13C or 13D of the Mineral Resources Regulation 1989. The exploration work completed on this tenement complies with the Work Program in the tenure document or variations have been lodged and approved accordingly.

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1.0 Summary

Since 1997, Metallica Minerals Limited (Metallica), through NORNICO Pty Ltd and Greenvale Operations Pty Ltd, acquired several projects with identified nickel-cobalt resources and areas which were thought to be prospective for nickel laterite mineralisation between Greenvale and Mt Garnet in North . All these tenements were collectively referred to as the NORNICO ( Nickel Cobalt) Project Area, but since September 2012, known as the SCONI (Scandium, Cobalt, Nickel) Project, which incorporates the following tenements:-

1. EPM 11285 “Bell Creek”

2. ML 4187 and ML 4188, within the Bell Creek EPM.

3. MLA 20549 “Bell Creek Consolidated”

4. MDL 387 “Minnamoolka”

5. EPM 13873 “Six Mile”

6. EPM 10699 “Kokomo”

7. ML 10342 “Kokomo”

8. EPM 14066 “Greenvale South”

9. EPM 14070 “Greenvale North”

10. EPM 14181 “Lucky Downs”

11. EPM 14381 “Greenvale South 2”

12. MLA 10368 “Greenvale”

13. EPM 11223 “Greenvale”

14. EPM 10680 “Lucknow South”

15. EPM 10860 “Lucknow North”

16. MLA 10366 “Lucknow”

17. EPMA 17893 “Broken River South”

18. EPM 18175 “Pinnacles Consolidated”

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The SCONI Project (Figure 1) is favourably located with respect to infrastructure and is situated relatively close to the coast and to most services. The SCONI South area, within which EPM 10699 is located, can be accessed from the Greenvale Township which is located approximately 240 km by sealed road from Townsville.

The Kokomo deposit is an important and strategic mineral asset for Metallica’s SCONI Project, containing Inferred, Indicated and Measured Resources of 29.5Mt at 1.15% Nickel Equivalent (NiEq) (NiEq = Ni% + 1.5Co% + 0.01Sc g/t) using a Cut-off Grade of 0.7% NiEq. A Mining Lease Application (MLA 10342) is current for Kokomo and is located over the Mineral Resources with sufficient additional space for future mine related infrastructure. The requirement for EPM 10699 therefore does not apply and hence its relinquishment and accompanying Final Report is justified.

Historical data accumulation before Metallica’s involvement and subsequent new data obtained through primarily drilling activities has allowed Metallica to focus on the current Mineral Resources estimated for the Kokomo deposit. A final review of the data was completed in 2012 allowing Metallica to make the decision to relinquish EPM 10699.

Metallica has also previously reduced and is currently reducing expenditure on its grass roots exploration tenures due to its decision in 2012 to move away from being an exploration focused company to that of Mineral Resource development and SCONI Project feasibility studies centred around Greenvale. Recent financial pressures brought about by SCONI Project funding constraints have also contributed to the reduced tenure holding.

This final report summarises Metallica’s exploration over EPM 10699 – Kokomo since August 2006. During this period, this tenement was reported annually together in a combined annual report with EPM 11285 – Bell Creek, EPM 10235 – Minnamoolka and MDL 387 – Minnamoolka, due to these tenements having the same anniversary date. The final combined annual report will also be submitted to the DNRM in November 2013 and will reference the work carried out involving EPM 10699 during the latest year of tenure. EPM 10699 expired on 21 August 2013due to the most important areas containing the Mineral Resources and associated geological features, being incorporated into ML 10342.

Metallica has completed extensive rehabilitation of all drill holes, grab samples and other ground disturbances in EPM 10699.

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Figure 1 Tenement and Locality Map

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2.0 Introduction

EPM 10699 formed part of Metallica’s SCONI exploration and development project area in 2012 and was annually reported as part of a combined report for the NORNICO North Project. The exploration activities carried out within this tenement over the last seven years are summarised in this report.

The SCONI project’s current EPMs are located over a strike length of 160 km, stretching from the Broken River in the South to Mt Garnet in the North, (Figure 1). The tenements are located along strike and in a similar geological setting to the Greenvale Nickel Mine (now expired); a large high-grade nickel cobalt deposit which produced approximately 40 Mt of nickel ore grading 1.56% Ni and 0.12% Co over an 18 year period.

EPM 10699 has a long period of tenure extending back to August 1995 when it was held by Dominion Metals Pty Limited. Metallica’s involvement with the deposit started through a Joint Venture (JV) agreement with Straits Resources who held a sub-block within EPM 10699 for a “highly prospective” area for gold.

EPM 10699 became wholly owned by Metallica after the JV agreement ended and soon afterwards, nickel, cobalt and particularly scandium were discovered through an extensive drilling campaign on prominent hilltops containing laterite deposits, resulted in Ni-Co-Sc Mineral Resources being declared.

Kokomo is currently a significant deposit in the SCONI Project and therefore during the project’s preliminary Scoping Studies, a Mining Lease Application (MLA10342) was submitted. The need then for an underlying EPM over a greater area was not subsequently required and therefore it fell into Metallica’s relinquishment list.

2.1 Location, Access and Infrastructure

The Kokomo tenement is located approximately 60 km north-east of Greenvale in North Queensland and 40 km south of Minnamoolka. Access to the tenement is via the Gregory Development Road, which connects Greenvale Township to The Lynd Junction (Figure 2). From Greenvale access is via a gravel road bypassing the Valley of Lagoons Station and then by a minor vehicle track from the south. Within the property itself, most areas can be reached by several tracks accessing the Mineral resource areas.

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Cattle grazing is the main form of farming in the area. The region has a mining history, particularly at Greenvale (Nickel-Cobalt), and Kidston (gold) and Mt Garnet (Tin and Zinc). Kagara Ltd has four operation hubs at Mungana, Mt Garnet, Balcooma and Thalanga, all now under administration.

Final Report for EPM 10699 – Kokomo 10

Figure 2 SCONI Location Map

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2.2 Climate, Vegetation and Topography

The climate of the area is sub-tropical, being warm and dry in winter and hot and sporadically wet in summer. Two-thirds of the annual rainfall occurs between December and March. The average maximum daily temperatures range from approximately 21ºC in July to 35º C in January.

Open woodland Eucalypts and savannah grassland dominate most of the region. Spear grass (Heteropogon contortus) is the main grass species.

Physio-graphically, the region consists of flat to gently undulating tableland, forming part of a Tertiary laterite land surface. The land surface is in an advanced state of dissection, with the laterite capping having been partially stripped off, revealing scattered low hills and small ranges of pre-Tertiary rocks. The area contains a variety of physiographic features, including hills, small ranges, mesas, buttes, plateaus and valleys.

2.3 Relevant Landowner Contacts

The principal landholder is:-

Thomas & Judith Sheahan “Vally of Lagoons Station”, QLD 4850 Phone (07) 4788 5514

Ingham: (07) 4777 4176

2.4 Relevant Maps

Relevant maps and aerial photography for the NORNICO Project area include: -

 1:250,000 Geology Sheets

Einasleigh SE 55-9

 1:100,000 Geology and Topographic Sheets

Valley of Lagoons (7960)

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2.5 Tenure

The Kokomo tenement is located approximately 55 km north-east of Greenvale in North Queensland and 40 km south of Minnamoolka. The Kokomo project area is covered by EPM 10699 which is 100% owned by NORNICO Pty Ltd. The project area comprises 21 sub-blocks and lies entirely within the Valley of Lagoons pastoral property. A map outlining the tenement boundary and topography is presented in Figure 3.

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Figure 3 EPM 10699 Tenement Boundary and Topography

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The latest tenement details are listed in Table 1 and tenement outlines and sub-block locations are presented in Figure 4. These 21 sub-blocks are listed in Table 2 below:-

Table 1 Schedule of Tenements (NORNICO Pty Ltd - Holder) Tenement Name Commenced Expired Sub-blocks EPM 10699 Kokomo 22nd August 1997 21st August 2013 21

Table 2 Kokomo EPM 10699 – latest list of Sub-Blocks Region Block Sub Blocks No TOWN 2174 k, p, t, u, y, z 6 TOWN 2175 a, b, c, d, f, g, h, l, m, q 10 TOWN 2246 d, e, j, o 4 TOWN 2247 a 1 TOTALS 21

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Figure 4 EPM 10699 Tenement Outline and Sub-blocks

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The Kokomo tenement was granted on the 22nd August 1995. The tenement was held by Dominion Metals Pty Ltd, subsequently Whim Creek Consolidated N.L. (a subsidiary of Plutonic Resources Ltd – Homestake Mining Company, now Barrick Gold) and the title was transferred to NORNICO Pty Ltd on 3 July 1997. The original tenement size of 364 sub blocks was reduced to 21 sub blocks. An application was made on 11 April 2008 to renew these 21 sub-blocks for a further 5 years until 2013 and this was granted in April 2009.

2.6 Joint Venture Agreements

On the 1st September 2004, Metallica and Straits Resources signed two Joint Venture Agreements. One specific to Sub-block 2247-A, within EPM 10699, covering a highly prospective area for gold in the east of the tenement and the second, covering the Kokomo tenement for Scandium mineralisation. A summary of these JV agreements are disclosed in the eleventh combined annual report for the period 28/8/06 to 27/8/07.

2.7 Royalties Payable

To acquire some of its tenements, Metallica entered into agreements with third parties which include obligations to pay royalties to previous owners on Bell Creek, Minnamoolka and Kokomo. The royalties are payable to the previous owners of the respective EPMs based on tonnes of ore eventually mined.

2.8 NORNICO – Native Title Influences

The impact of Native Title (NT) on the SCONI Project is likely to be minimal, provided correct procedures are undertaken. At Kokomo, the area is classified as a pastoral holding which is subject to NT. Metallica has negotiated an Exploration Indigenous Land Use Agreement (ILUA) with the Gugu Badhun people, the local NT claimants of the area. The ILUA was signed on 24 February 2005 and is valid for 20 years.

In July 2012, Metallica entered into an ILUA with the Gugu Badhun People, the native title holders for Greenvale and the surrounding region. The agreement is a milestone event and an essential step in the development of the SCONI project. The ILUA provides Metallica with a clear native title process for the grant of all exploration and mining tenure within the ILUA area. This will facilitate the permitting, development and mining of the SCONI project.

Final Report for EPM 10699 – Kokomo 17

3.0 Tenement Geology

The belt which hosts the Kokomo mineralisation is a north north-east striking ultramafic complex approximately 16 km long and up to 800 m wide which was tectonically emplaced within steeply dipping metasediments and basic volcanics of the Wairuna Formation. The ultramafic rocks vary compositionally from peridotite to pyroxenite. The ultramafic closely resembles a series of sill-like bodies.

Prolonged post Cretaceous weathering has led to the development of a strong lateritic profile over the ultramafics. These laterites occur as a series of plateaus, which have distinctive vegetation and red soils. Deep weathering and the potential for lateritic Ni-Co development and enrichment occurs along the entire 16 km length of the ultra-mafic unit but is most pronounced in a 4 km section in the central portion of the complex, centred on 306,800E, 7,947,600N, which is referred to as the Central Plateau. Away from this central section the weathering profile is narrower or has been eroded and the nickel laterite development is less pronounced. The ultra-mafic unit at Kokomo is bounded by faults on the eastern and western sides of the plateau which can be traced for in excess of 10 km and which may be responsible for the increased thickness of lateritisation and mineralisation on the plateau edges.

The composition of the nickel laterite is not uniform with distinct variations across and along the strike of the deposit. There are deeper zones of lateritiation which are richer in iron, manganese, nickel, cobalt and chrome on the eastern and western margins of the plateau and shallower more siliceous and magnesium rich laterites occurr in the central part of the deposit. The eastern margin of the Kokomo deposit also contains elevated, scandium, gold, platinum and palladium geochemistry. This variation in the composition of the laterite may be due either to a variation in the basement geochemistry of the precursor ultramafics (due to differentiation in the original ultra-mafic intrusive) and or as a direct result of the latiterisation process.

Lateritised ultra-mafics have also been intersected in a series of holes drilled in low-lying areas between the plateaus. These low lying areas are covered with between 10 to 19m of alluvial sediments and overlay 10 - 12 m of elevated nickel, cobalt, manganese and scandium geochemistry. The regional geology of the tenement is presented in Figure 5.

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Figure 5 Regional Geology Map and Latest Tenement Boundaries

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3.1 Mineralisation – Nickel and Cobalt

High grade nickel cobalt mineralisation was first intersected at the Kokomo prospect where previous drilling recorded up to 27 m @ 0.37% Co and 0.84% Ni. Drilling by Metallica in 2000-2001 targeted economic mineralisation between two drilled section lines approximately 500m apart. Highlights of this programme which included high grade cobalt intercepts were:

KK-11 20 m @ 0.77% Ni and 0.93% Co from 2 to 22 m depth

KK-26 15 m @ 1.09% Ni and 0.71% Co from 6 to 21 m depth

Previously due to a low drill density a resource for the Kokomo Ni – Co laterite was not calculated. However, a preliminary estimate of 4 Mt at 1.0% Ni and 0.25% Co was calculated by previous explorers. Subsequent drilling completed by Metallica was within this pre-resource area and results from this work developed into the thinking behind an application for a Mineral Development or Mining Lease application in the future.

3.2 Mineralisation – Scandium

In 2001, Metallica discovered a high grade scandium deposit as part of its exploration of the Kokomo nickel-cobalt laterite deposits. The scandium was found to be enriched above a pyroxenite basement (which also contains unusually high grades of scandium, typically between 80-100 g/t Sc) in the laterite profile (typically between 100 and 500 g/t Sc with individual samples up to 700 g/t Sc).

The scandium mineralisation was found adjacent to the Kokomo nickel-cobalt laterite mineralisation. The high scandium values were first located along the eastern edge of the main Ni/Co laterite mineralisation where there has been major faulting. The underlying basement rock is a scandium-rich olivine-pyroxenite. The laterisation of this unit may have contributed t this zone of enrichment of scandium.

4.0 Previous Exploration

The Kokomo deposit has been subjected to several drilling programs since the deposit was first identified in the early 1970’s. Below is a summary of the companies which explored and drilled the prospect and the various drilling methods that were used.

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Laloma Ltd Corporation N.L

Laloma drilled the Kokomo prospect in the early 1970’s, exploring for base metals, including nickel and cobalt. Laloma drilled 50 shallow irregular and widely spaced Reverse Airblast holes (RAB) on the laterite capping the ultra-mafic rocks. These 50 holes covered a strike length of 13 km. Metallica does not have data from this drilling.

Queensland Nickel Management Pty Ltd (QNM)

QNM drilled the Kokomo deposit in 1992. They completed 4 widely spaced drill lines across the central portion of the deposit. QNM completed 56 holes for 928m and intersected some thick intersections of high grade nickel – cobalt mineralisation, for example, KK-4-1, which intersected 25m @ 0.39% Co and 0.87% Ni.

Dominion Mining Ltd

Between 1994 and 1995, Dominion Metals Ltd completed drilling on 11 northwest– southeast orientated lines. Dominion also drilled infill holes on the same lines drilled by QNM in 1992. Dominion completed 29 RAB and 53 Reverse Circulation holes (RC) for a total of approximately 1,900m. (holes 95KORC01-95KORC53 ). These holes were drilled by Professional Drilling Services. The majority of the holes were vertical with some angled holes. Metallica has all the cross sections from the drilling programme, and used some of this data to plan the 2008 drilling program.

Many of the historical holes could not be located on the ground and due to changes in assay methods from a three acid digest to the more accurate 4 acid digest method used by Metallica none of these historical drill holes were included in the Metallica database.

Scandium was first discovered at Kokomo in 2000 by Metallica and an initial pre-JORC resource of 350,000t @ 240ppm Sc was delineated at Kokomo in 2003.

Further drilling to test the extent of the Sc mineralisation was completed in 2005 and a recently completed drilling programme by Metallica intersect high grade scandium mineralisation.

Details of all the exploration work completed on the Kokomo tenement prior to 2003 were included in previous annual reports and have not been summarised in this final report due to the amount of time periods and more significant exploration results received since then which in effect, supersedes that work.

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4.1 Exploration by Metallica during the 2003 to 2004 period

The following work packages were carried out within EPM 10699:

• A ten hole drilling programme at the Black Dingo Prospect;

• An orientation-type soil sampling and stream sediment sampling programme over the scandium mineralisation area;

• A more extensive soil sampling programme covering the Kokomo Serpentinite to determine the extent of the scandium mineralisation; and

• A preliminary Scoping Study on the scandium mineralisation at Kokomo.

The following sections elaborate more on the work out lined above:

4.1.3 Drilling

Drilling at the Kokomo tenement during this year of tenure was confined to the Black Dingo prospect located within what was known as the “Kokomo sub–block”. Black Dingo was a gold prospect where rock chip samples from the area have returned results up to 21.7 g/t Au. The drilling programme was designed to test a zone of high grade rock chip geochemistry associated with coincident magnetic and IP features.

The RC drilling programme consisted of 10 holes totaling 755m and was completed in December 2003 by Drill Torque. The drill holes predominantly intersected basalts containing minor quartz veins. No zones of economic gold mineralisation were encountered with the best intersects being 3m at 1.88 g/t Au, (BDRC-006 from 3m) and 3m at 1.63 g/t Au (BDRC-005 from 30m). Although ore grade mineralisation was not intersected, the drilling did confirm the presence of a porphyry related hydrothermal system. Table 3 summarises the results of the drilling programme.

Table 3 Black Dingo Drilling Results Hole No. From (m) To (m) Intercept (m) Au g/t BDRC005 30 33 3 1.63 inc 30 31 1 3.66 BDRC006 3 6 3 1.88 BDRC014 15 18 3 2.76 BDRC010 27 30 3 0.80

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A report detailing the geology, drilling programme and results of the drilling at Black Dingo was included as Appendix 6 in the annual report for the period.

4.1.2 Orientation Programme

In March 2004 Metallica’s joint venture partner, Straits Resources completed a soil orientation programme over the zone of scandium mineralisation outlined in a previous drilling programme. The aim of the programme was to determine the applicability of -80# soil and stream sampling to delineate zones of anomalous scandium geochemistry for future exploration.

Results from the programme indicated that exploration for scandium is possible using simple -80# stream and soil sampling methods. The stream sampling showed clear downstream dispersion features with a high of 76 ppm Sc occurring within 500 m of the known scandium mineralisation and a low of 42 ppm occurring one kilometre further downstream. The soil sampling effectively delineated the boundary of the main zone of scandium mineralisation and there was good correlation between soil tenor and elevated scandium mineralisation in the drill hole.

Additional details of this programme and a more complete discussion of the results is included as Appendix 7 in the annual report for the period.

4.1.3 Soil Sampling Programme

As a result of the positive correlation between the – 80# soil sampling programme and elevated scandium mineralisation in the drill holes Straits completed a more extensive soil sampling programme over the Kokomo area. In excess of 600, -80# soil samples were collected on approximately 40 east-west lines at 50 m intervals over an 11 km strike length of the lateritised serpentinite. Over the main area of interest centred on 307300E and 7918000N, the soil lines were spaced at 50 m intervals and this increased to 500m line spacing away from this zone. The samples were assayed for Au, Co, Cr, Cu, Fe, Mg, Mn, Ni, Pb, S, Sc, Ti, V and Zn, by ALS in Townsville. The results are included as Appendix 8 in the annual report for the period. A geology map of Kokomo and soil contour maps for scandium, cobalt and nickel are presented as Figure 6.

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Figure 6 Kokomo Geology Map and Soil Geochemistry

Probability Plots were generated from the nickel, cobalt and scandium data and in each case three populations were defined. Soil geochemistry maps for each of these elements were

Final Report for EPM 10699 – Kokomo 24 produced based on the probability analysis. These plots are included as Appendix 9 in the annual report for the period.

The soil sampling by Straits indicates that anomalous (+38ppm) scandium occurs over a strike length in excess of four kilometres. The scandium anomalism appeared to occur in two narrow linear zones striking northeast–southwest, which merge into a wider zone at the northeast end of the sampled zone, figure. The two zones of anomalism could represent either faults or two possible serpentinite sills or dykes.

The highest zone of scandium mineralisation identified by the programme was located 500m northwest of and along strike of the area identified by previous drilling. The highest scandium value in this zone was 182 ppm Sc (average 86 ppm Sc) compared to a high of 127 ppm Sc (averaging 89 ppm Sc) in the area that had been drilled. The soil sampling also defined a three kilometre long and 500m wide +1,440 ppm Ni anomaly containing elevated nickel mineralisation. The nickel anomaly occurred as a “central core” between the two sub-parallel zones of scandium anomalism and could represent a separate lithological unit.

Anomalous cobalt values were also identified in the programme. The high cobalt values were associated with the elevated nickel geochemistry however cobalt anomalism is patchy and semi continuous NE-SW striking lenses of elevated cobalt occur within the broader zone of nickel anomalism. North–South striking zones of cobalt anomalism also occurred and could possibly represent more intense laterisation along fractures or faults.

4.1.4 Scoping Study

In July 2004, Straits Resources completed a Scoping Study on what was then called the Kokomo Scandium Project. That study provided details of the existing resources at the prospect, metallurgical test work which was completed on drill samples containing elevated scandium mineralisation and a preliminary marketing report which discussed the potential uses and global market size for scandium metal. The report also detailed a future work programmes to progress the project further. A complete copy of the scoping study was included as Appendix 10 in the annual report for the period.

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4.2 Exploration by Metallica during the 2004 to 2005 period

Prior to May 2005, 13 holes drilled adjacent to the nickel/cobalt laterite defined a very high-grade scandium zone, with drill intercepts of up to 48m (0-48m) at 202 g/t Sc (Table 4).

Table 4 Initial High Grade Scandium Intercepts From Interval Scandium Hole No. Northing Easting (m) (m) (g/t) KK-10 7948107 307291 12 21 201 KK-13 7947981 307268 0 11 282 KK-14 7948040 307330 13 36 182* KK-30** 7948041 307330 12 22 147 KK-31 7948041 307329 12 48 128* KK-32 7948032 307304 0 33 238* KK-34 7947950 307263 0 4 74 KK-35 7948010 307282 0 12 393 KK-36 7948062 307338 0 48 202* KK-37 7948068 307313 0 20 246 KK-38** 7948326 307067 0 6 113 KK-29 7947513 307112 8 8 141 Note:- * (Ended in mineralisation) ** (Angle hole 55-60 degrees)

A photograph of the drilling is shown in Plate 1

Plate 1: Early Drilling by Metallica on the Kokomo Deposit

Subsequent geological projections indicated that further drilling should increase the deposit along strike and at depth and that the mineralisation appeared to be co-genetically related to boundary faults and the pyroxenite underlying the Kokomo laterite which has a strike length of 16 km.

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In May 2005, a total of 18 RC holes were drilled for a total of 573m. Some of the drill holes did not reach planned depth due to difficult ground conditions, particularly when silica box-work material was encountered. A complete list of the significant drill hole results is included as Table 5 and drill hole locations and prospective geology and scandium intersections are presented on Figure 7.

Table 5 Significant Assay Results – Kokomo drilling (May 2005)

Hole From To Interval Ni Co Sc Comments Number (m) (m) (m) (%) (%) (ppm) KK-039 1 5 4 0.60 0.12 57 Testing scandium soil anomaly 7 14 7 0.02 0.01 109 KK-040 1 34 34 0.02 0.005 72 Testing scandium soil anomaly (EOH) KK-041 NSR - - - - - Ni to 0.28%, Co to 0.03%, Sc to 8 ppm KK-042 NSR - - - - - Ni to 0.16%, Co to 0.01%, Sc to 6 ppm KK-043 NSR - - - - - Ni to 0.34%, Co to 0.07%, Sc to 12 ppm KK-044 3 7 (EOH) 4 1.16 0.10 32 Hole Abandoned at 7m due to adverse ground conditions – testing a 0.12% Cobalt anomaly KK-045 0 5 5 0.45 0.18 11 Hole testing a 0.12% Cobalt anomaly KK-046 0 3 3 0.55 0.11 21 Testing Cobalt anomaly KK-047 NSR Ni to 0.39%, Co to 0.04%, Sc to 12 ppm KK-048 NSR Ni to 0.37%, Co to 0.04%, Sc to 12 ppm KK-049 0 19 19 0.23 .07 178 Testing Scandium soil anomaly 15 49 34 0.90 0.34 48 KK-050 0 6 6 0.35 0.14 76 Testing Scandium soil anomaly 4 16 12 0.79 0.10 25 KK-051 0 9 9 0.71 0.36 19 Testing Co anomaly KK-052 0 5 5 0.06 0.02 63 Testing Scandium soil anomaly KK-053 0 8 8 0.36 0.06 148 Testing Scandium soil anomaly KK-054 0 17 17 0.15 0.07 182 Testing Scandium soil anomaly 15 18 3 0.69 0.49 145 KK-055 11 23 12 0.61 0.101 131 Testing Scandium soil anomaly 17 25 8 0.45 0.08 213 KK-056 0 4 4 0.27 0.02 71 Testing Scandium soil anomaly

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Figure 7 Kokomo Drill Holes and Scandium Intercepts (Prior June 2005)

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4.3 Exploration by Metallica during the 2005 to 2006 period

Metallica drilled another 20 hole RC drilling programme (KK-058 to KK-076) at the Kokomo nickel-cobalt prospect totalling 772 m during this period. Drilling was concentrated on the central portion of the ultramafic unit where laterite development was the most pronounced. None of these holes intersected any significant zones of scandium mineralisation.

During that fieldwork, significant quantities of silica box-work (free silica bearing ore) were encountered. Silica box-work is typically a common ore type that has and is still expected to have reasonable expectations to beneficiate well with screening to provide a higher nickel - cobalt grade by removing the low grade silica rich oversize fraction. Details of this drilling programme were included in the previous year’s annual report.

4.4 Exploration by Metallica during the 2006 to 2007 period

In the 2006 – 2007 year of tenure Metallica completed four diamond drill holes totalling 546 m at the Kokomo prospect. Two holes (KKDDH-001 and 002), were drilled to test an Electromagnetic (EM) anomaly located on the western margin of the tenement and two holes (KKDDH-003 and 004) were drilled to test a northwest – southeast trending fault where previous drilling intersected anomalous gold mineralisation.

4.4.1 Drilling

The four diamond holes (KKDDH-001 to 004) were either HQ or NQ in size and the drilling was undertaken by AED based in Charters Towers. The drilling was completed by a small diamond core rig mounted on a log skidder (Plate 2). The parameters of the four holes drilled at Kokomo are listed in table 9 below and hole locations are presented on figure 15.

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Plate 2: The AED Diamond Rig used at Kokomo

The two holes drilled to test the Kokomo West EM anomaly (KKDDH-001 and 002) intersected variable geology which is summarised below:-

KKDDH-001 intersected:- 0-102m - Black graphitic shale from this has been partially brecciated in places and been intruded by narrow (0.5m to 2m wide) medium grained dolerite dykes, but predominantly massive graphitic shale with 0.5 – 1.0% finely disseminated pyrite 102-159.2m (EOH) – Black Shale inter-bedded with coarser grained sand and grit horizons, contains occasional rounded sandstone, grit and dolerite clasts.

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KKDDH-002 intersected: - 0-103.70m - Black Shale inter-bedded with grey silts, sands and gravels, evidence of graded bedding, cut by minor calcite veins and trace pyrite. 103.70-147.20m – Light Grey – white quartz breccia – extremely hard, contains angular and rounded lasts in a quartz matrix, matrix shows evidence of multiple intrusions – possible a fault breccia – has strong haematite staining along joint and fracture plains and trace to 1% pyrite.

The likely cause of the ground and airborne EM anomaly was considered to be the presence of the graphitic black shales which were intersected by both holes. No Down-hole EM surveys were completed on these holes as it was apparent by the hole geology that the anomaly had been tested. Plate 3 shows a section of the core recovered where it interested a quartz breccia.

Plate 3: Quartz Breccia from KKDDH-002

Holes KKDDH-003 and 004 were drilled next to RC hole KK-049. KK-049 was drilled in 2005 and intersected anomalous gold mineralisation at the base of the hole. The hole was

Final Report for EPM 10699 – Kokomo 31 terminated in silica box-work due to adverse ground conditions, and was still in anomalous nickel, cobalt and gold mineralisation at the base of the hole. The two diamond holes were drilled to obtain samples for metallurgical test work, determine the geology of the basement rocks below the laterite and test a distinctive fault zone (KKDD-004) located east of KK- 049.

KKDDH-003 intersected:- 0-68.00m - Brown – nickel laterite, high limonite content and with decreasing clay content down-hole, cut by magnesite veins and moderately fractured. 68.00-120m - Green – black fine to medium grained ultra- mafic rock trace pyrite mineralisation on fractures, weakly magnetic.

KKDDH-004 intersected:- 0-36.80m – Brown yellow strongly weathered nickel laterite, from 0-17.3m the laterite is iron rich (Lfe) and from 17.3m to 35.7m it is more saprolitic (Lsap). 36.80 – 39.4m – Fault – ground intensely fractured rock broken up to rubble, also undergone - epidote alteration. Rock is predominantly saprolite. 39.4-56.0m - Brown green – weathered ultra-mafic, still strongly fractured with core broken up to rubble – still in fault zone. 56.0- 69.40m – Brown green meta sediment of the Wiruna formation? – partially oxidised, minor qtz veining 69.40-120.0m (EOH) - Purple green partially weathered ultramafic – becoming fresher to the EOH. Strongly fractured and veined to 100m with quartz stock - work evident. Fractures lined with chlorite and Talc.

Plate 4 shows the core recovered from KKDDH-003 where it intersects typical laterite material. A map showing the locations of the diamond drill holes and the RC holes drilled to date is shown in Figure 8.

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Plate 4: Nickel laterite Mineralisation – KKDDH-003

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Figure 8 Kokomo Drill Hole Locations

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4.4.2 Assay Results

The HQ and NQ core from the four holes was cut in half and sampled at 2m intervals, (with the exception of the lateritic material intersected in holes KKDDH-003 and 4). The samples were then despatched to SGS Laboratories in Townsville and assayed for a suite of elements including: Pt, Au, Pd by the FAI505 method and Ag, As, Ba, Ce, Cu, Co, Ni, Zn, Fe, Mg, by ICP40Q.

Fillet samples were obtained from the laterite zones of KKDDH-003 and 004 and assayed for Ni, Co, Fe, Mg. Sc, Sc, Cr, Al, Ca, and Mn using the ICP41Q method at SGS in Townsville. The remainder of the laterite samples from KKDDH-003 and 004 were split in half and bagged with the bags stored for future metallurgical testwork.

No zones of anomalous primary nickel sulphide mineralisation, gold or associated PGE’s were intersected in holes KKDDH-001 to 004. Only the lateritic zones in holes KKDDH- 003 and 004 contained anomalous nickel, cobalt and scandium anomalism. The results are tabulated below in Table 6.

Table 6: Laterite Intercepts – KKDDH-003 and 004.

Hole From To Interval Ni Co Sc Fe Mg Number (m) (m) (m) (%) (ppm) (ppm) (%) (%) 0 10 10 0.23 195 198 50.08 0.16 KKDDH-003 10 53 43 0.80 1526 27 23.90 2.26 0 30 30 0.26 261 149 48.60 0.18 KKDDH-004 31 38 7 0.73 2320 75 38.57 1.81

Copies of the drill hole logs, and assay results for KDDH -001 to KKDDH-003 are included in Appendix 10 and photographs of the core are included as Appendix 11 of the annual report for that period.

4.5 Exploration by Metallica during the 2007 to 2008 period

In the 2007–2008 year of tenure, Metallica drilled 250 RC holes (KK-077 to KK-335) for a total of 8,438m. A summary of the various drilling programs completed at Kokomo prior to this period is listed in Table 7.

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Table 7: Kokomo Drilling Campaigns up until 2008 Holes Number of Drilling Year Drilled Holes (From) Metres Drilled (To) Holes Method 2000 KK-001 KK-29 29 1,012 RC 2002 KK-030 KK-038 9 365 RC 2005 KK-039 KK-056# 18 573 RC 2006 KK-057 KK-076 20 772 RC 2007 KKDDH-003 KKDDH-04 2 240 PQ Core 2008 KK-077 KK-606 530 15,323 RC 2008 KKDDH-005 KKDDH-008 4 170.80 PQ Core Totals 612 19,456

Drilling in this period started in June 2008 with the aim being to determine the extent of the mineralisation in the central part of the Kokomo nickel laterite deposit and drill the deposit out to ultimately estimate a Mineral Resource. The drilling programme was completed in mid-November 2008 with a total of 540 holes drilled totalling 15,324m. Only the details for the drilling completed up 22nd August 2008 were presented in the appropriate annual report. All holes drilled were vertical and drilled on a nominal 100m by 40m grid. Infill and step out drilling was undertaken adjacent to where zones of significant nickel-cobalt mineralisation were previously identified.

All the samples were despatched to SGS laboratories in Townsville and assayed for Al, Ca, Cr, Co, Cu, Fe, Mg, Mn, Ni and Sc using the ICP 41Q method. Plate 5 shows one of the drill rigs used in this campaign.

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Plate 5: RC Drilling at Kokomo – 2008 (Drill Torque rig)

4.5.1 Assay Results

The results of the drilling at Kokomo identified several high grade zones of nickel-cobalt with the most persistent zone occurring on the eastern side of the deposit. Better results include:-

KK-085 (10-37m) 27m @ 1.19% Ni and 0.29% Co KK-087 (11-21m) 10m @ 1.35% Ni and 0.13% Co KK-100 (1-14m) 13m @ 1.01% Ni and 0.26% Co KK-104 (0-14m) 14m @ 0.89% Ni and 0.55% Co KK-107 (1-14) 13m @ 0.82% Ni and 0.09% Co KK-128 (3-24) 21m @ 0.78% Ni and 0.14% Co KK-129 (1-17m) 16m @ 1.24% Ni and 0.06% Co KK-199 (24-40m) 16m @ 1.26% Ni and 0.09% Co KK-227 (0-14m) 14m @ 0.65% Ni and 0.35% Co KK-233 (0-22m) 22m @ 0.79% Ni and 0.14% Co KK-256 (4-14m) 10m @ 1.33% Ni and 0.17% Co KK-284 (8-40m) 32m @ 0.87% Ni and 0.20% Co KK-316 (26-44m) 18m @ 1.01% Ni and 0.05% Co KK-317 (0-31m) 31m @ 0.73% Ni and 0.31% Co

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Figure 9 shows the extent of drilling and the mineralised area at Kokomo up to this date. Identified cross sections of the deposit are shown on Figure 10. Drill hole locations for entire Kokomo deposit were presented on Plans 5 and 6 at the back of the annual report and the drill hole parameters and a table of significant results were included as an appendix. The drill hole logs and assay results for the holes drilled in the 2007-2008 year of tenure were also included as appendix in the annual report.

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Figure 9 Kokomo Drilling and extent of Mineralised Areas

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Figure 10 Kokomo Cross-Sections

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4.6 Exploration by Metallica during the 2008 to 2009 period

On completion of the drilling program in this reporting period of 475 RC holes (KK-336 to KK-810) for 12,504m an independent Mineral Resource estimate was undertaken for the Kokomo deposit by Golder Associates of Brisbane (see Table 8). The Resource is based on results from a total 606 drill holes, with the mineralised zones around the drill holes digitized and a wire-frame model constructed. The wire-frame was filled with 10m x 10m x 1m blocks and nickel, cobalt, iron, scandium, manganese and magnesium grades were estimated by ordinary kriging. A minimum of four and a maximum of 15 composites were used to estimate each block, with a maximum of three composites from any one drill hole used, at least three drill holes were used to estimate each block grade.

Golders did not calculate a separate Mineral Resource for scandium at Kokomo and the scandium value which appeared in the Resource reflects the scandium content for the entire Kokomo Ni – Co Resource.

Table 8: Inaugural Kokomo Mineral Resources Resource Category Tonnes (Mt) Sc (ppm) Ni (%) Co (%) Fe (%) Mg (%) Mn (%) Indicated 5.2 38 0.69 0.13 23.5 3.7 0.70 Inferred 7.0 36 0.66 0.11 20.5 3.7 0.70 Total 12.2 37 0.67 0.12 21.70 3.70 0.70

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Figure 11 Kokomo Inaugural Mineral Resource Map

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4.7 Exploration by Metallica during the 2009 to 2010 period

Between the 28th August 2009 and the 27th August 2010 Metallica completed the following work on EPM 10699:-

• Drilling of 245 RC holes (KK-811 to KK-1054) for 5,105m;

• Four diamond drill holes (KKDDH-009 to KKDDH-012) were drilled to provide material for metallurgical test work and bulk density determination;

• Survey pick up of all the holes drilled by Metallica;

• Completion of an updated Mineral Resource estimation for Kokomo;

• Initial metallurgical test work on Scandium and Nickel – Cobalt material;

• Mining Lease application MLA 10342 lodged;

• Dry and wet season environmental studies completed; and

• Drilling of 5 RC holes at the Black Dingo prospect.

Between 28th August and 17th November 2009, infill drilling of the Kokomo prospect was completed with an additional 245 holes (KK-811 to KK-1054) totalling 5,105m being drilled. The central part of the Kokomo deposit has now been drilled out on a nominal 50m by 50m grid with three selected areas, referred to as Blueberry, Mona and Wild Honey, drilled on a 25m by 25m grid.

Only details of the drill holes completed between 28th August 2009 and 17th November 2009 were included in this reporting period as data from holes drilled prior to this date were included in a previous Annual Report.

In 2009 one drill rig (from Drill Torque in Townsville) was used for the drilling programme. All the drill hole locations were presented in Plans 1-4 at the back of that report.

4.7.1 Diamond Drilling

In addition to the RC drilling, four PQ diamond holes (KKDDH-009 to 012) were drilled at Kokomo. The holes were designed to provide material for metallurgical test work, bulk density data and more detailed geological information. The holes were drilled within 2 and 5m of existing RC holes so comparisons of the nickel–cobalt grades between the RC and

Final Report for EPM 10699 – Kokomo 43 diamond drilling could also be made. Details of the four diamond holes drilled are presented in Table 9 below:-

Table 9: 2009 Diamond Drill Hole Details

Hole No Easting Northing Depth (m) Dip Azimuth KKDDH-009 307,040 7,947,750 15.5 -90º 000° KKDDH-010 307,160 7,947,750 40 -90º 000° KKDDH-011 307,180 7,947,600 24.8 -90º 000° KKDDH-012 306,740 7,946,850 31 -90º 000°

All the diamond holes were geologically logged and geotechnical data was collected as was bulk density data. XRF readings for each metre were also collected. The diamond drill logs were included as Appendix 1 in the Annual Report for this period.

4.7.2 RC Drilling Results

Drilling at the Kokomo Ni- Co laterite deposit identified several high grade zones of nickel–cobalt mineralisation with the most persistent zone occurring on the eastern side of the deposit. Better results from the holes drilled in the previous year of tenure include:-

Mona Prospect

KK-835, 20m @ 1.02% Ni & 0.21% Co KK-854, 10m @ 1.13% Ni & 0.22% Co KK-865, 10m @ 1.00% Ni & 0.36% Co KK-876, 10m @ 1.15% Ni & 0.38% Co KK-886, 22m @ 0.75% Ni & 0.24% Co KK-900, 17m @ 1.11% Ni & 0.31% Co KK-909, 8m @ 1.12% Ni & 0.54% Co KK-929, 10m @ 1.85% Ni & 0.33% Co KK-944, 13m @ 1.36% Ni & 0.52% Co KK- 996, 17m @ 1.60% Ni and 0.21% Co

Wild Honey

KK- 828, 19m @ 400ppm Sc KK- 861, 25m @ 240ppm Sc KK- 1013, 25m @ 292ppm Sc KK- 1020, 28m @ 438ppm Sc

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KK- 1037, 12m @ 340ppm Sc

A complete list of drill results and the hole parameters for all the RC holes drilled in the previous year of tenure are included in Appendix 4 of that report and the raw assay data for the drilling completed in this year of tenure are included as Appendix 5 (also in that report).

4.7.3 Mineral Resource Estimate

Golder Associates of Brisbane completed an Independent updated Mineral Resource estimate on the Kokomo nickel-cobalt laterite project in January 2010. The combined Measured, Indicated and Inferred Kokomo Ni – Co Mineral Resource was upgraded to 16.3 Mt @ 0.67% Ni and 0.12% Co, (using a 0.70% Ni Eq cut-off grade). Of this total 1.3Mt @ 0.81% Ni and 0.17% Co is classified as Measured with 11.7 Mt @ 0.66% Ni and 0.12% Co classed as Indicated, see Table 10. All of the nickel and cobalt Resource are located within 60m of the land surface.

Table 10: Kokomo 2010 Mineral Resource Estimate (0.7% NiEq1 COG) Classification Mt Ni% Co% Fe% Mg% Sc(ppm) Measured 1.3 0.81 0.17 20.4 4.6 59 Indicated 11.7 0.66 0.12 21.9 3.2 34 Inferred 3.2 0.63 0.10 19.1 3.0 30 Total 16.3 0.67 0.12 21.2 3.3 36 1 Ni equivalent value obtained using 1Ni + 3Co and is based on recent nickel and cobalt prices of around $7/lb for nickel and a cobalt price of $21/lb.

The Mineral Resource was estimated using data from 1,058 drill holes comprising 26,384 individual assays. The bulk of the Kokomo deposit was drilled out on a nominal 50m (North South) by 40m (East – West) grid, which was sufficient to classify the resource as Indicated. Infill drilling to 20 m by 20 m centres was completed over two areas of high Ni- Co mineralisation (Blueberry and Mona) and one zone of high grade scandium mineralisation (Wild Honey) see Figure 12 and this resulted in the Resources in these areas being predominately classified as Measured. Figure 13 shows a cross-section through the Mona Prospect.

Final Report for EPM 10699 – Kokomo 45

Figure 12 Kokomo Drill Hole Locations and High Grade Zones

                          7,949,000mN                                  N                           0 500m                                          Wild Honey                               (Sc Rich Zone)                                Section "A"               7,948,000mN                                                                                               Outcropping                      Nickel Laterite                                                                                                                      Mona 7,947,000mN                              (High Grade Ni - Co                          Rich Zone)                       Section "B"                                                                        EPM10699                             Blueberry         7,946,000mN          (Narrow High Grade

          Ni - Co Zone)                                                                                            LEGEND 7,945,000mN  Infill Drillholes 2009

 All previous Drillholes Significant Ni - Co Mineralisation

           7,944,000mN

 



305,000mE 307,000mE 308,000mE 306,000mE 

   304000

EPM10699 - KOKOMO DRILL HOLE LOCATIONS

Final Report for EPM 10699 – Kokomo 46

Figure 13 Cross-Section through the Mona Prospect

306,850mE

306,750mE 306,800mE

580m RL KK-913 KK-975 KK-976  KK-543 KK-974   KK-973   KK-978 KK-972    Nickel Laterite  F KK-979  

Ni - Co Rich Zone Wiruna Fm Sst and Quartzite

Weathered 560m Ultramafic 16m Unit 19m 19m 9m @ 1.16% Ni 0.61% Co 22m 5m @ 1.35% Ni Ni - Co 0.21% Co 25m Rich Zone East Boundary Fault 2m @ 2.07% Ni 2m @ 3.12% Ni 0.86% Co 6m @ 1.10% Ni 1.06% Co 0.25% Co 7m @ 1.09% Ni 0.45% Co 34m 34m 31m 540m 34m 5m @ 0.74% Ni 0.21% Co F 0 25m 12m @ 1.17% Ni 0.13% Co Vert Exaggeration = 2

KOKOMO - MONA PROSPECT DRILL SECTION "B" 7,946,820mN (Looking North)

The scandium mineralisation at Kokomo either occurs separately or overlaps the nickel – cobalt and was also subject to a JV between Metallica and Straits Resources. As a result a separate Mineral Resource for the Kokomo scandium mineralisation has been estimated.

The Scandium Resource at Kokomo was estimated to be 9.0 Mt at 109 g/t Sc containing approximately 980 tonnes of Sc metal or 1,500 tonnes of scandium oxide (see Table 11). Within this resource there is a discrete higher grade portion at Wild Honey containing 475,000 tonnes of ore at 192 g/t Sc. The Scandium Resource was estimated using a 70g/t Sc cut-off grade.

Table 11: Kokomo Scandium Resource (using a 70ppm Sc COG) Classification Tonnes Sc Ni% Co% Fe% Mg% (Mt) (ppm) Measured 0.7 154 0.22 0.03 36.0 0.6 Indicated 3.8 121 0.32 0.05 29.0 2.1 Inferred 4.4 91 0.18 0.02 13.0 6.0 Total 9.0 109 0.24 0.03 22.0 4.0

Final Report for EPM 10699 – Kokomo 47

4.7.4 Metallurgical Test Work

Following Metallica’s decision not to progress the study for a 1.0 Mtpa agitated atmospheric acid leach (AAL) project at Bell Creek and the purchase of the Greenvale Mine and Lucknow tenements, metallurgical test work had been conducted to support the NORNICO stage 1 Ni-Co and Sc internal Scoping Study. This study was based on a modest sized 180,000tpa project located at the old Greenvale nickel mine site using heated agitated Atmospheric Acid Leaching (AAL) processing, with acid supply trucked from Townsville and then using solvent extraction (SX) to recover the nickel, cobalt and scandium and produce nickel sulphate, cobalt sulphide and scandium oxide products.

All metallurgical test work was conducted at HRL Testing Pty Ltd’s facilities in Brisbane. A summary of metallurgical test work conducted included:

• Bench scale agitated atmospheric acid leach (AAL) tests on the Kokomo high scandium ore;

• Larger scale agitated atmospheric acid leach (AAL) tests on the Kokomo high scandium ore;

• Precipitation test work on high scandium pregnant liquor solution (PLS); and

• Solvent extraction test work on a PLS from the high scandium ore from Kokomo.

The leaching test work had confirmed that good extractions of nickel, cobalt and scandium can be achieved with moderate to high acid consumption.

4.7.5 Kokomo Dry and Wet Season Environmental Surveys

In the last year of that tenure a dry season and wet season flora and fauna survey was completed at Kokomo by AARC of Brisbane. The final environmental report had not been finalised during this reporting period.

4.7.6 Mining lease Application

A Mining Lease application (MLA 10342) was lodged with the Mines department for the Kokomo Ni-Co and Sc deposit. Figure 14 shows the location and boundary of the proposed mining lease.

Final Report for EPM 10699 – Kokomo 48

Figure 14 MLA 10342 Location and boundary

Final Report for EPM 10699 – Kokomo 49

4.7.7 Black Dingo Drilling – Gold Prospect

The Black Dingo gold deposit is located in the west part of the EPM 10699 and abuts the Six Mile EPM (EPM 13873). The Black Dingo prospect was included in a JV agreement between Metallica Minerals and Straits Resources. Straits relinquished their rights to the area in 2008.

The Black Dingo area had been extensively explored after the discovery of high grade gold rock chips associated with quartz gossans that cropped out on surface. This exploration work culminated in the drilling of 10 RC holes for a total of 755m of RC drilling by Straits Resource. Four of the ten holes intersected narrow zones of gold mineralisation with results summarised below:-

BDRC005 3m @ 1.63 g/t Au from 30 to 33m BDRC006 3m @ 1.88 g/t Au from 3 to 6m BDRC014 3m @ 0.84 g/t Au from 15 to 18m BDRC010 3m @ 0.25 g/t Au from 27 to 30m

In August 2009, Metallica drilled 5 RC holes for 119m at the Black Dingo prospect. The holes were drilled to intersect near surface quartz veins which had returned high grade gold values and the idea was to try and trace these veins down dip to better understand their orientation. The drill parameters are tabulated below in Table 12.

Table 12: Black Dingo Drill Parameters Prospect Black Dingo Hole No Easting Northing Depth Dip Azimuth BDRC-015 307,890 7,943,795 13 -60º 174º BDRC-016 307,890 7,943,815 25 -60º 174º BDRC-017 307,895 7,943,835 37 -60º 178º BDRC-018 307,870 7,943,815 22 -60º 172º BDRC-019 307,920 7,943,810 22 -60º 172º Total 119

Results from the Black Dingo drilling were encouraging. Drilling confirmed the existence of narrow shallow dipping gold bearing veins in relatively unaltered meta-basalts with grades of up to 8.70 g/t Au. The presence of these narrow high grade gold bearing quartz veins was encouraging and therefore it was deemed possible that there may be an area which could be delineated where there is a sufficient concentration that a mineable deposit.

Final Report for EPM 10699 – Kokomo 50

The continuity of the quartz veins and the relatively un-altered nature of the host rocks indicated that these veins were distal from the source of the mineralisation and it is possible that a potential ore body is located within the exploration target areas. Significant assay results for the holes drilled by Metallica are included in table 9 below.

Table 13: Black Dingo Significant Intercepts From To Interval Au Ag Zn Pb Cu As Hole No. (m) (m) (m) (g/t) (g/t) (%) (%) (%) (%) BDRC-015 8 9 1 0.26 0.79 0.51 0.08 0.05 0.11 BDRC-016 18 19 1 8.70 8.07 0.95 1.12 0.31 3.57 BDRC-017 29 30 1 1.34 4.01 1.39 1.20 0.26 0.90 BDRC-018 12 13 1 3.03 4.15 1.08 0.32 0.20 1.06 BDRC-019 15 17 2 3.59 5.30 0.44 1.36 0.21 2.37

The geological logs for Black Dingo and chip tray photographs are included in Appendix 7 of the annual report and the raw assay data in Appendix 8 of that report. The chip trays are held in the storage facility at Bell Creek, located 30 km south of Mt Garnet.

Additional drilling is required to further test this target and it was recommended that deep (+200m holes) should be drilled at the Black Dingo Prospect to determine if the quartz veining and alteration increases with depth.

4.8 Exploration by Metallica during the 2010 to 2011 period

Between the 28th August 2010 and the 27th August 2011, Metallica completed minimal work on EPM 10699 (Kokomo) because all the drilling was finalised in the previous year. Finalisation of desk top studies was also completed.

4.9 Exploration by Metallica during the 2011 to 2012 period

In the 2011 – 2012 year of tenure, Metallica completed the following work programs on Kokomo EPM10699:-

• Publishing the re-tabulation of the Mineral Resources for SCONI (previously the NORNICO project) which incorporated the resources within the NORNICO North and South project areas;

• Collection of a series of grab samples on EPM 10699 “ Kokomo” using a back hoe excavator for ongoing metallurgical test work for ore variability analyses;

Final Report for EPM 10699 – Kokomo 51

• Collection of a series of grab samples on EPM 10699 “Kokomo” for stockpile environmental contamination test work to fulfil the requirement of the EIS for the SCONI project feasibility studies; and

• A Fauna and Flora survey, archaeological survey for cultural heritage requirements, dust and noise monitoring and surface water sampling, all carried out on EPM 10699 “Kokomo” by external consultants as part of the SCONI project’s EIS and Feasibility Studies.

4.9.1 Mineral Resource Re-tabulation

The Kokomo deposit is part for the current SCONI project and therefore has been incorporated into the Scoping Study completed in July 2012 and the current pre-feasibility studies. The completion of the Scoping Study in the reporting period significantly improved Metallica’s understanding of the SCONI project.

The current Mineral Resource estimate which includes the Kokomo Mineral Resource has contributed to the economic feasibility of the project. Metallica commissioned Golder Associates to re-tabulate the SCONI Mineral Resources for each deposit. Previously, Metallica reported nickel-cobalt and scandium resources separately using the following cut- off grades:

• Ni-Co resources – 0.7% Nickel Equivalent such that the ; and

• Sc resources – 70g/t.

The relative value of Cobalt has changed with time from the original resource statements for each deposit, such that NiEq = Ni + 3Co for Kokomo, Minnamoolka and Bell Creek and Ni+2Co for Greenvale and Lucknow. The Scoping Study and the metallurgical test work provided Metallica with technical and economic confidence to recover nickel, cobalt and scandium from the SCONI laterite ores.

Improvements in Metallica’s ability to extract scandium as well as nickel and cobalt has prompted the inclusion of scandium in the NiEq calculation to maximise the value of the deposit for the scoping study by considering marginal grade nickel-cobalt and marginal scandium material which combine to provide high value and therefore improving the revenue potential of the project.

Final Report for EPM 10699 – Kokomo 52

In addition over time the value of cobalt relative to nickel had changed and has been re- evaluated for current price scenarios. The SCONI Resources were re-tabulated by combining the nickel, cobalt and scandium grades using a new nickel equivalent cut-off grade of 0.7% where: NiEq = Ni + 1.5Co + 0.01Sc. The then current Mineral Resource Statement for Kokomo is shown in Table 14.

Table 14: Kokomo 2012 Resource (0.70 NiEq COG) Classification Mt Ni% Co% Fe% Mg% Measured 2.2 0.57 0.11 26.4 3.1 Indicated 17.2 0.56 0.09 25.9 2.8 Inferred 10.2 0.36 0.04 16.2 4.8 Total 29.5 0.49 0.08 22.6 3.5 1 Ni equivalent value obtained using 1Ni + 1.5Co and is based on recent nickel and cobalt prices of around $10 / lb for nickel and a cobalt price of $15 / lb.

4.9.2 Metallurgical Test Work

During August 2012 a series of two 1,000kg samples and seven 100kg samples were excavated using a backhoe on EPM 10699 “Kokomo”. These samples were used for ongoing metallurgical test work for ore variability analyses at SGS Lakefield Oretest in Perth. This work was part of a second round of HPAL pilot plant test work.

All the ‘mini pits” excavated were filled in after the sample was taken and the sites completely re-habilitated. The sample sites relative to the tenements are shown in Figure 15.

Final Report for EPM 10699 – Kokomo 53

Figure 15 Sample Sites for potential Ore Variability Metallurgical Test Work

Table 15 is a list of the samples taken for metallurgical ore variability test work showing the position data and selection criteria.

Table 15: Samples for Metallurgical Test Work on potential Ore Variability

RC Drill Drill Hole Position Sampling Sample Size Selection Criteria Hole ID Easting Northing Depth (m) 1,000kg split into First site for mining identified in KK-173 307,001.09 7,947,305.70 2 to 4 2 bulky bags of Scoping Study schedule. High nickel 500kg each grades. Variable cobalt and scandium. 1,000kg split into High magnesium. Suggest extracting KK-706 307,017.00 7,947,303.00 1 to 3 2 bulky bags of 500kg sample from both sites 500kg each respectively. 100kg split into High nickel, scandium and KK-568 306,721.08 7,947,048.99 2 to 4 two interwoven magnesium. Low cobalt. bags of 50kg each KK-127 306,402.53 7,947,195.01 3 to 4 As above High nickel, cobalt and magnesium. Low scandium. Different lithologies. KK-129 306,316.89 7,947,202.44 1 to 2 As above Suggest extracting 100kg from each site. High scandium but low nickel, cobalt KK-256 306,475.17 7,946,597.31 3 to 4 As above and magnesium. Must go as deep as possible. High nickel, cobalt and magnesium. KK-331 306,939.34 7,948,302.62 0 to 3 As above Low scandium. High scandium but low nickel, cobalt KK-035 307,392.58 7,948,187.30 2 to 4 As above and magnesium. Different lithology.

Final Report for EPM 10699 – Kokomo 54

High scandium, average cobalt, but KK-249 307,637.04 7,948,902.13 2 to 3 As above low nickel and magnesium. Geographically northernmost. KK-927 306,254.00 7,946,255.00 2 to 3 As above Good nickel, high cobalt, low magnesium and scandium. Suggest KK-1053 306,236.00 7,946,236.00 1 to 2 As above extracting 100kg from each site. Isolated area. KK-646 306,053.00 7,945,447.00 2 to 4 As above Good nickel, mixed magnesium and low scandium. Suggest extracting 100kg from each site. Different KK-650 306,033.00 7,945,450.00 2 to 3 As above lithologies. Geographically southernmost.

4.9.3 Low Grade Ore and Waste Stockpile Environmental Test Work

In the latter part of the reporting period (July and August 2012), a series of small 2kg to 3kg grab samples were collected from the Kokomo deposit (Plate 6). This material represents low grade and waste material that is planned to be excavated during the mining process and will most likely to be stockpile indefinitely on site for several years. This material was sent for environmental characterisation analysis by RGS Environmental in Brisbane as part of the EIS for the SCONI project.

The samples consisted of eight samples representing low grade ore and five samples representing waste material that is scheduled to be excavated during mining at Kokomo.

Final Report for EPM 10699 – Kokomo 55

Plate 6: Sample excavation for Environmental Test Work

A collection of a series of grab samples were also taken on EPM 10699 for stockpile contamination environmental test work to fulfil the requirement of the EIS for the SCONI project feasibility studies

4.9.4 Dry and Wet Season Environmental Surveys

During the latter part of the reporting period various consultants have visited the Kokomo site to carry out the following test work and data collection:

• Fauna and Flora survey work and is still underway (Plate 7);

• Archaeological surveys for cultural heritage requirements;

• dust and noise monitoring instruments were installed and are currently collecting data; and

• surface water sampling for water quality baseline studies.

All this work is part of the SCONI project’s EIS and feasibility studies.

Final Report for EPM 10699 – Kokomo 56

Plate 7: Aquatic Fauna and Flora Environmental Studies

4.10 Exploration by Metallica during the 2012 to 2013 period

No field work apart from continued aquatic and fauna and flora survey and data collection work was carried out in EPM 10699 during this period. This work was part of the continued monitoring for Environmental Impact Studies for the SCONI project. Pre-feasibility Studies for a full scale SCONI Project and a smaller Phase 1 SCONI Project were completed during this reporting period.

Final Report for EPM 10699 – Kokomo 57

5.0 References

Agatzini-Leonardou, S. & Dimaki, D., 1999. Heap leaching of poor nickel laterites by sulphuric acid at ambient temperature.

Anderson, C., Brooks, R., Stewart, R., Simcock, R. & Robinson, B., 1999. The phytoremediation and phytomining of heavy metals, Proc. PACRIM’99 Conference, Bali, 127-135.

R. J. Allen & J. K. Wright. June 1973. Treatment of nickel oxide ore - Stage 2, Amdel report No 934, for A. O. (Australia) Pty Ltd.

Alta Metallurgical Services, May 1997. Nickel Cobalt Laterites, The ‘How To’s” of Project Development.

Alta Metallurgical Services, May 1997. Nickel Cobalt Pressure Leaching and Hydrometallurgy Forum.

A. O. (Australia) Pty Ltd, 1972. Report on Authority to Prospect 67M. Queensland Department of Mines and Energy CR 3894.

Ashton Mining. November 1990. Drill logs Internal company data QLD Gold Pty Ltd.

Berger, P.A., 1995. The Greenvale Nickel Laterite Orebody, In Beams, S.D., Mineral Deposits of Northeast Queensland: Geology and Geochemistry, EGRU Contribution 52, 17th IGES, Townsville.

Fletcher, K & Cooper, J. 1975. Greenvale Nickel laterite, North Queensland, In Knight, C. L. (Editor): Economic Geology of Australia and Papua New Guinea I. Metals, The Australasian Institute of Mining and Metallurgy, Melbourne. 995 -1001.

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Smith, P, January 2008. Eleventh Combined Annual Report “Bell Creek” EPM 11285, “Minnamoolka” EPM 10235, “Minnamoolka Extended” EPM 13663, “Kokomo” EPM 10699, NORNICO Project, North Queensland. Annual Report for the period 28/8/06 to 27/8/07, Metallica Minerals LTD (Unpubl. Co. Rept.).

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