2Q 2016 OPERATIONS REVIEW

MDL's primary asset is a 50% interest in the TiZir joint venture ('TiZir'), which owns the Grande Côte mineral sands operation ('GCO') in Senegal, West Africa and the TiZir Titanium & Iron ilmenite upgrading facility ('TTI') in Tyssedal, Norway. ERAMET of France is MDL's 50% joint venture partner in TiZir.

KEY POINTS

• Record sales of zircon, rutile and leucoxene

• GCO mining operations achieved a record average throughput in June of 7,350tph

• Sustained ramp up progress at TTI

• Improving high grade titanium feedstock markets

• Exited position in World Titanium Resources, realising proceeds of A$6.45 million in April

GCO

Mining operations at GCO continued to demonstrate the ability to deliver nameplate targets (with the dredge, for example, averaging a throughput rate of 7,350tph for the month of June). Efforts focused on ongoing optimisation projects and achieving operational consistency. A new mine manager is being appointed to assist in the timely delivery of these objectives.

In the mineral separation plant ('MSP'), zircon yields were back on par with the record production levels achieved in 4Q 2015 and rutile & leucoxene production also increased throughout the quarter. These improving yields follow the

completion of a number of optimisation projects successfully commissioned during the quarter, including an up‐current classifier in the feed prep circuit and middling circuit upgrade in the primary dry mill circuit at the MSP. Quarterly MSP activity also focused on optimising the product specification of GCO ilmenite consumed by TTI which, in turn, will enhance titanium slag quality at TTI. Implementation of these modifications is partly responsible for the decrease in ilmenite production during the quarter.

Record sales volumes for zircon and rutile & leucoxene were achieved during the quarter. The sales team continued its initiatives to take advantage of the high quality zircon produced at GCO. Sales volumes of ilmenite in 2Q 2016 were significantly higher than 1Q 2016 sales, due largely to timing of shipments.

GCO production volumes

Mineral Deposits Limited ABN 19 064 377 420

Level 17 530 Collins Street Melbourne VIC 3000 Australia T +613 9618 2500 F +613 9621 1460 E [email protected] Wmineraldeposits.com.au

GCO sales volumes

Grande Côte Operations, Senegal, West Africa

TTI

The ramp up of operations at TTI continues to proceed well, with the operation of the furnace in particular exceeding expectations.

Performance in 1H 2016 was impacted by the ramp up of production following the reline and capacity expansion project undertaken at the end of 2015. However, titanium slag production reached levels close to those achieved in 1H 2015, reflecting the continued success of TTI's ramp up program. There were periods during the quarter when the furnace was operating close to its expanded nameplate capacity. Optimisation projects aimed at maintaining the performance of the operations at its expected capacity will continue throughout 2016.

Despite the ramp up of operations, TTI achieved a positive EBITDA of US$6.0 million for the first half of the year, on the back of a strong sales performance. The new products from TTI have been well received by the market. This result is a significant achievement given the commencement of chloride slag production in January and the prevailing market conditions throughout 1H 2016.

TTI physical volumes

TiZir Titanium & Iron ilmenite upgrading facility, Tyssedal, Norway

MARKETS

Strong sales in the quarter from both GCO and TTI demonstrate improving market conditions in the mineral sands sector.

In respect of high grade titanium feedstocks, the sector has benefited from a strong supply side response among other developments in recent times. These included:

• plant closures, idled capacity and inventory destocking particularly by major producers

• a lack of available capital which has undermined the development of both greenfield and brownfield projects

• closure of mining operations due to ore body depletion

• financial pressures encouraging consolidation and rationalisation

  Titanium dioxide inventories have also been reported by several producers to have reached normal levels for the first time in four years.

  This supply side response is finally being recognised on the demand side with price rises being achieved by pigment producers in recent pricing negotiations. Strong margins are currently being enjoyed by downstream pigment users, providing a further indication that a demand recovery is underway.

  While the demand for zircon remained steady and GCO benefited from the high quality of its zircon product, the price decreases announced by some major producers for standard and lower grade zircon products negatively impacted 2Q 2016 prices. While North American and European markets have slowed, they are showing signs of stabilising; in particular, positive signs are appearing in the European tile market.

  A strong increase in HPPI prices occurred in April followed by a correction in May. June prices appear to have stabilised.

  TIZIR

  At 30 June 2016, external borrowings (excluding shareholder loans) by TiZir amounted to US$362.7 million, comprising the senior secured bonds (including accrued interest) due September 2017 and amounts drawn under TTI's and GCO's working capital facilities.

  TiZir's cash and cash equivalents at 30 June 2016 were US$5.1 million, giving external net debt of US$357.6 million.

  OUTLOOK

  The joint venture will continue to focus on maximising production at GCO and ramp up activities at TTI in order to consolidate the benefits of integrating the two assets. A number of optimisation projects are expected to come to fruition in 3Q 2016. Cost reduction initiatives, to ensure product competitiveness and operational sustainability, will also remain ongoing at both operations.

  MDL CORPORATE

  As announced (ASX Releases: 4 March 2016 and 26 April 2016), the Company exited its position in World Titanium Resources Limited ('WTR'), with the proceeds from the sale amounting to A$6.45 million, and contributed US$4 million to ERAMET in part repayment of the US$11 million in funding that ERAMET has provided to TiZir on behalf of MDL.

  On 8 April 2016, MDL announced the appointment of Robert Sennitt as Managing Director, effective from that date. In association with this appointment, Executive Chairman Nic Limb relinquished his executive role and became non‐executive Chairman at the Annual General Meeting ('AGM') of the Company held 20 May 2016. Nic will continue in his role as Chairman of TiZir.

  Long‐serving director David Isles also retired at the AGM and, as a consequence, Bobby Danchin has assumed the role of Audit & Risk Committee Chairman and Nic Limb has been appointed as a member of the Nomination & Remuneration Committee.

  As announced on 20 May 2016, all AGM resolutions were passed by the requisite majority of the Company's Shareholders on a poll. Subsequently, the Company granted a total of 1,170,000 unlisted performance rights to members of its Executive team as long‐term incentives.

  MDL corporate position as at 30 June 2016:

• issued shares were 103,676,341

• unlisted unvested performance rights totalled 1,170,000

• cash was US$6.7million (approx. A$9.0 million)

• secured debt of US$7.2 million