ASX RELEASE 24 MAY 2016

HIGH PURITY AND RECOVERY FROM TESTWORK ON THE ESMERALDA GRAPHITE PROJECT IN NORTH QLD

Highlights

• High grade concentrate of 97.8% Total Carbon (TC) produced

• Standard floatation delivers 91.5% TC concentrate with a 91% recovery

• Potential to increase concentrate grade via optimization of conventional processing methods

Metallica Minerals Limited ("Metallica") (ASX:MLM) is pleased to advise the delivery of high purity and high recovery rates in the first metallurgical tests on the Company's wholly-owned and unique hydrothermal-style Esmeralda graphite project located south of Croydon in north Queensland.

The tests follow completion of the maiden graphite exploration drill program in late 2015 at Esmeralda, with assays returning thick graphite drill intersections from the deposit - a style unique because of its rarity and general high purity in either flake or crystalline form.

Results, including those from the Mineral Liberation Analysis, show that 97.8% TC purity product can potentyially be even further improved by removing impurities via conventional processing methods, including additional purification stages.

The test work followed standard procedures that involved crushing and preparation of representative drill core samples for bench scale floatation testwork. With the addition of standard floatation reagents, a concentrate grade of 91.5% TC (90.6 % Graphitic Carbon - Cg) was able to be produced at a 91% recovery.

The floatation concentrate underwent purification to produce a concentrate grade of 97.8% TC. Purification involved a single stage caustic bake and wash.

97.8% TC concentrate following purification

Metallica's CEO, Mr Simon Slesarewich:

"The test work has clearly delivered on our goal of demonstrating the ability to produce a high purity graphite concentrate from Esmeralda, that may be valuable in high end applications. With the knowledge that a high purity product can be produced, work will now focus on the large graphitic granite contained within the Esmeralda tenement package to identify areas of likely high concentrations of graphite that are near to surface. Following on from the spectacular drill intercept of 95.0 m @ 6.5%1 Cg from 71 meters in late 2015."

Table 1 - Results

*Not availablae due to insufficent sample for check Cg analysis

For more information please contact:- Simon Slesarewich

Chief Executive Officer

Phone: + 61 7 3249 3000

Email: [email protected]

John Haley CFO/Company Secretary Phone: + 61 3249 3000

Competent Person's statement

The technical information contained in this report of a mineral exploration and evaluation nature, has been compiled and/or supervised by Mr Andrew Gillies B.Sci (Geology) M.AusIMM (Director of Metallica Minerals Ltd) who is a Competent Person and a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM). Mr Gillies has relevant experience in the exploration for this style of mineralisation and exploration results being reported on to qualify as Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Gillies consents to the inclusion of this information in the form and context in which it appears in this release.

The Company has relied on independent consultants Nagrom Brisbane Labs Pty Ltd who are specialists in mineral processing, metallurgical testwork and analysis. Nagrom laboratory Manager Mr Chris Bucknell of Nagrom Brisbane Labs Pty Ltd has consented to the inclusion of this information in the form and context in which it appears in this release.

Caution regarding forward-looking statements

Certain statements made in this announcement contain or comprise certain forward-looking statements. Although Metallica believes that the visual interpretation and other estimates and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements in this release.

1 Using a cut off grade of 3% Cg

Background on the Esmeralda Graphite Project

In July 2015, Metallica Minerals Ltd ("Metallica") was granted Exploration Permits for Minerals (EPMs) 25779, 25806, 25807 and 25990, which make up the Esmeralda Graphite Project. The project, located near Croydon in north Queensland, covers a combined area of over 750 km2 and is held 100% by Metallica's subsidiary, Touchstone Resources Pty Ltd.

Metallica has identified significant graphite occurrences within the Esmeralda granites in the project area. These occurrences were first identified in 2006 by Metallica during a drilling program that targeted precious and base metals within well-defined airborne and ground-defined intense electromagnetic (EM) anomalies.

Igneous or hydrothermal-style graphite deposits, such as Esmeralda, are rare. The more common metamorphic-style graphite deposits make up about 95% of the world's known graphite deposits. Hydrothermal-style graphite deposits are typically of high purity graphite in either flake or crystalline form. Examples of this style of mineralisation include the high-grade, narrow-vein Sri Lankan deposits and the granite hosted Albany graphite deposit in Canada.

Metallica has developed a predominantly hydrothermal and assimilated meta-sediment mineralisation model for the Esmeralda granite based on work completed by the Bureau of Mineral Resources (BMR) in 1988 and the recent (2013) discovery of the Albany graphite deposit.

The Company completed its maiden graphite exploration program in December 2015. The assay results confirm thick graphite (Cg) mineralised intervals in the first two exploration holes. The core was assayed for graphite content and total carbon. In summary, both drill holes (in a vertical two-hole drilling program) intersected significant broad graphite mineralisation with continuous intercepts of:

WD001 - 95.0 m @ 6.5%2 Cg from 71 m WD002 - 29.1 m @ 7.8%2 Cg from 72 m

An independent petrology study has also been completed on six representative samples from the mineralised zones.

The petrology study identified the same distinctive alteration and mineralisation style present in both holes which is associated with consistent grades indicating that the graphite mineralisation may be continuous for 1.2 km or more.

These results add strong support to the Company's belief that the Esmeralda deposit is very large and would be uniquely amenable to large-scale bulk mining. WD001 ended in significant graphite mineralisation (4.1% Cg), with mineralisation open in all directions.

2 Using a cut off grade of 3% Cg

S e c t i o n 2 R e p o r t i n g o f E x p l o r a t i o n R e s u l t s

(Criteria listed in the preceding section also apply to this section.)