Lucky Break Nickel Project

The Lucky Break project comprises two distinct ore bodies, Dingo Dam and Circular Laterite which are covered by mining leases, ML 10324 and ML 10332 and held by NORNICO Pty Ltd, a wholly owned subsidiary company of the Metallica Minerals Limited (MLM). Under a JV Agreement with MLM, MFL will recoup all of its expenditure ie. 100% of surplus, until all capital, development and other costs and interest charges has been repaid. All surpluses after the capital repayments will be divided 50:50 between MFL and MLM.

During Q1 2011 a DFS was completed which addressed significant changes in the scale and process design of the Lucky Break project.

The DFS examines a potential project life of 10 years through the stockpiling and subsequent processing of low grade ore. During years 1 to 6, 60,000tpa of ore at 1.35% Ni will be treated, followed in years 7 to 10 by 100,000tpa of ore at ~0.8% Ni.

The intended process flowshet for the Lucky Break project is relatively simple and contains the following four basic process steps:

Ore Handling – transferring of fresh ore into the leach vats, followed by removal of spent ore to the tailings storage facility once the leaching cycle is complete.

Nickel Dissolution – nickel is leached from the fresh ore in large open vats using a dilute sulphuric acid solution in a three stage, counter-current cycle.

Nickel Purification – the impure nickel solution from the leach vats passed through an ion exchange (IX) resin which concentrates the nickel and removes all impurities from the solution.

Nickel Electrowinning – the high purity, concentrated nickel solution from the ion exchange circuit now goes to electrowinning (EW) cells where LME grade nickel metal is plated on titanium cathodes and subsequently stripped and bundled for transport to the market.

Based on current trends and predictions a price of US$11.0/lb has been modelled for the first two years production beyond which the price reverts to US$10.0lb. The achievement of full LME prices for Lucky Break nickel cathode is not expected to be an issue.

Key project factors in the Company's feasibility study are summarised in the following table:

The financial analysis performed in this study has indicated that the project remains robust even under more adverse conditions than provided for in the base model.

Activities for Q3 2011

MFL are now examining potential funding and offtake arrangements for the Lucky Break project. Once these arrangements are in place a relatively short design, construction and commissioning timetable can be achieved.

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Some preliminary engineering design work has commenced with a mechanical engineer, electrician and surveyor contracted to the project. Development of the water supply for the project has also commenced with an access road to the Burdekin River having been established and several test bores completed. As a means of reducing reliance on diesel generated power a study into the use of renewable energy on site has also been initiated.

It is anticipated that once full funding becomes available, ramp up to full engineering and design can take place quickly, with site earthworks expected to commence in Q4 2011 and construction activities in Q1 2012.