Metminco Regulatory News (MNC)

METMINCO LIMITED

ABN 43 119 759 349

AND ITS CONTROLLED ENTITIES

ANNUAL REPORT FOR THE YEAR ENDED

31 DECEMBER 2014

Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 31 December 2014.

Board Composition

The qualifications, experience and expertise relevant to the position of each director who is in office at the date of the annual report and their term of office are detailed in the Directors' Report.

The names of the independent directors are: Timothy Read, Phillip Wing, Roger Higgins and Francisco Vergara-Irarrazaval.

When determining whether a non-executive director is independent the director must not fail any one of the following materiality thresholds:

· less than 10% of company shares are held by the director and any entity or individual directly or indirectly associated with the director;

· no sales are made to or purchase made from any entity or individual directly or indirectly associated with the director; and

· none of the directors' income or the income of an individual or entity directly or indirectly associated with the director is derived from a contract with any member of the economic entity other than income derived as a director of the entity.

Directors have the right to seek independent professional advice in the furtherance of their duties as directors at the Company's expense. Written approval must be obtained from the Chairman prior to incurring any expense on behalf of the Company.

Ethical Standards

The Board acknowledges and emphasises the importance of all directors and employees maintaining the highest standards of corporate governance practice and ethical conduct.

A code of conduct has been established requiring directors and employees to:

· act with utmost integrity and honesty and in good faith;

· carry out their roles in a professional and conscientious manner to achieve highest standards of performance;

· adhere to professional codes of conduct where these are provided;

· ensure that information is recorded honestly and accurately so as to enable the Company to meet its obligation to keep the market accurately informed about its activities;

· exercise due care and diligence in fulfilling the functions of office;

· avoid conflicts and make full disclosure of any possible conflict of interest;

· respecting all people and their customs with whom they have dealings, and observing the laws of the state or country in which they operate;

· encourage the reporting and investigating of unlawful and unethical behaviour; and

· comply with the Company's policies and procedures including the share trading policy as disclosed below.

Directors are obliged to be independent in judgment and ensure all reasonable steps are taken to ensure due care is taken by the Board in making sound decisions.

Trading Policy

The Company's policy regarding directors and employees trading in its securities is set by the Audit and Risk Committee. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security's prices.

In compliance with AIM Listing Rules, directors and officers of the Company are also not permitted to trade in the Company's securities for the periods as follows:

· two months preceding the publication of the Company's annual results or, if shorter, the period from its financial year end to the time of publication;

· two months immediately preceding the notification of the Company's half-yearly report or, if shorter, the period from the relevant financial period end up to and including the time of the notification; or

· one month immediately preceding the notification of the Company's quarterly results or, if shorter, the period from the relevant financial period end up to and including the time of the notification.

Diversity Policy Statement

Metminco's workforce consists of people from diverse backgrounds with a range of skills, values and experiences. Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company recognises the organisational strength, deeper problem solving ability and opportunity for innovation that this diversity brings. The Company is committed to providing an environment in which all employees are treated with fairness and respect, and have equal access to opportunities available at work.

As the Group only has four staff based in Australia it is not practical to set measurable targets for diversity.

However, the Company aims to continue with this diversity policy as director and senior executive positions become vacant and appropriately qualified candidates become available.

Gender composition: In 2014, the proporation of women on the board and in senior management was zero per cent and in the overall workforce ten per cent.

Performance Evaluation

The Board regularly receives reports from management on shareholder meetings including feedback on the performance of the Company and the Board.

The Managing Director undertakes an annual review of the performance of each senior executive against individual tasks and objectives. The report is considered by the Remuneration and Nomination Committee. Performance evaluations of the key executives were undertaken in the 2014 financial year.

Board Roles and Responsibilities

The Board of Directors is responsible for the corporate governance of the Group and operates in accordance with the principles set out in its Charter, which is available in the corporate governance section of Metminco's website. To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board. These responsibilities include:

· Setting the strategy for the Group, including operational and financial objectives and ensuring that there are sufficient resources for this strategy to be achieved;

· Appointing and, where appropriate, removing the Managing Director, approving other key executive appointments and planning for executive succession;

· Overseeing and evaluating the performance of the Managing Director and the executive team through a formal performance appraisal process having regard to the Group's business strategies and objectives;

· Monitoring compliance with legal, regulatory, environmental, social and occupational health and safety requirements and standards;

· Overseeing the identification of key risks faced by the Group and the implementation of an appropriate internal control framework to ensure those risks are managed to an acceptable level;

· Approving the Group's budgets, including operational and capital budgets, and the approval of significant acquisitions, expenditures or divestitures;

· Approval of the annual and half-yearly financial reports; and

· Ensuring the market and shareholders are fully informed of material developments.

The roles of Chairman and Managing Director are separated and clearly defined. The Chairman leads the Board and is responsible for ensuring the effectiveness of governance practices. The Chairman is also responsible for the conduct of Board and shareholder meetings. Responsibility for the operations of the Company is delegated to the Managing Director who manages the Company within the policies set by the Board. The levels of authority for management are also documented.

To ensure that the responsibilities of the Board are upheld and executed to the highest level, the Board has established the following sub-committees:

· Audit and Risk Committee.

· Remuneration and Nomination Committee.

· Safety, Health and Sustainable Development Committee.

Sub-committees are able to focus on a particular responsibility and provide informed feedback to the Board. Each of these sub-committees have established Charters and operating procedures, which are reviewed on a regular basis. The Board may also establish other sub-committees from time to time to deal with issues of special importance.

Shareholder Rights

Shareholders are entitled to vote on significant matters impacting on the business, which include the election and remuneration of directors, changes to the constitution and receipt of annual and interim financial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meetings of Metminco Limited, to lodge questions to be responded to by the Board, and are able to appoint proxies.

Risk Management

The Board considers identification and management of key risks associated with the business as vital to maximise shareholder wealth. A yearly assessment of the business's risk profile is undertaken and reviewed by the Board, covering all aspects of the business from the operational level through to strategic level risks. The Chief Financial Officer has been delegated the task of implementing internal controls to identify and manage risks for which the Board provides oversight. The effectiveness of these controls is monitored and reviewed regularly.

The Managing Director and Chief Financial Officer have signed a declaration in accordance with S295A of the Corporations Act that internal compliance and control systems of the Company and Consolidated Entity to the extent they relate to financial reporting are operating efficiently and effectively, are founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to the reporting of financial risks.

Remuneration Policies

The Remuneration Policy, which sets the terms and conditions for the key management personnel, was developed by the Remuneration and Nomination Committee after seeking professional advice from independent consultants and was approved by the Board. All executives receive a base salary, superannuation and subject to achievement of targets performance incentives. The Remuneration and Nomination Committee reviews executive packages annually by reference to Company performance, executive performance, comparable information from industry sectors and other listed companies and independent advice. The policy is designed to attract the highest calibre executives and reward them for performance, which results in long-term growth in shareholder value.

Executives are also entitled to participate in any employee share and option arrangements.

The amount of remuneration for all key management personnel for the Company is detailed in the Directors' Report under the heading Remuneration Report. All remuneration paid to executives is valued at the cost to the Company and expensed. The Company has in place a Long Term Incentive Plan (LTIP) approved by shareholders at the Annual General Meeting for the year ended 31 December 2013  As yet no entitlements have been granted under the LTIP.

The Board expects that the remuneration structure implemented will result in the Company being able to attract and retain the best executives to manage the Consolidated Group. It will also provide executives with the necessary incentives to work to grow long-term shareholder value.

The payment of bonuses, entitlements and other incentive payments are reviewed by the Remuneration and Nomination Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. The Board can exercise its discretion in relation to approving incentives, bonuses and entitlements and can recommend changes to the committee's recommendations. Any changes must be justified by reference to measurable performance criteria.

Audit and Risk Committee

An Audit and Risk Committee has been established by the Board. The Committee's role and operations are documented in a Charter which is approved by the Board.

The Committee's Charter provides that all members of the Audit and Risk Committee must be Non-Executive Directors with the majority being independent Directors, and that the Chair cannot be the Chairman of the Board.

The names and qualifications of those appointed to the Audit and Risk Committee are included in the Directors' Report.

The role of the Committee is to:

· Ensure the integrity of the Group's internal and external financial reporting including compliance with applicable laws, regulations and codes of conduct;

· Ensure that financial information provided to the Board is of a sufficiently high quality to allow the Board to make informed decisions;

· Ensure that appropriate and effective internal systems and controls are in place to ensure proper financial governance and manage the Group's exposure to risk;

· Oversee the appointment, compensation, retention and oversight of the external auditor, and review of any non-audit services provided by the external auditor;

· Regularly review the performance of the external auditor regarding quality, costs and independence; and

· Oversee the frequency, significance and propriety of all transactions with related parties.

The Audit and Risk Committee is required under the Charter to meet at least twice per year and otherwise as necessary. The Committee met three times during the year and Committee members' attendance records are disclosed in the Directors' Meetings section of the Directors' Report.

The Managing Director, Chief Financial Officer and external auditor also attend the Committee meetings by standing invitation. Other Directors and management are invited to attend Committee meetings and participate in discussion relating to specific issues that they have an interest in. At least twice per year the Committee meets with the external auditor without management present.

The Committee is authorised to obtain independent legal advice at the Group's expense if it considers it necessary in fulfilling its duties.

Remuneration and Nomination Committee

The names of the members of the Remuneration and Nomination Committee and their attendance at meetings of the committee are detailed in the Directors' Report.

The role of the Committee with respect to its remuneration function is to assist the Board in determining appropriate remuneration arrangements for the Directors and executive management.

These responsibilities include:

· Reviewing the adequacy and form of remuneration of Non-Executive Directors,

· Ensuring that the remuneration of the Non-Executive Directors reflects the responsibilities and the risks of being a Director of the Group;

· Reviewing the contractual arrangements of the Managing Director and the executive management team including their remuneration;

· Comparing the remuneration of the Managing Director and executive management to comparable groups within similar industries to ensure that the remuneration on offer can attract, retain and properly reward performance which will translate into long term growth in shareholder value;

· Annually review key performance indicators of the Managing Director and executive team to ensure that they remain congruent with the Group's strategies and objectives;

· Reviewing the basis for remuneration of other Executive Directors of the Group for their services as Directors;

· Reviewing incentive performance arrangements when instructed by the Board; and

· Reviewing proposed remuneration arrangements for new Directors or executive appointments.

The Committee will submit their recommendations to the Board regarding the remuneration arrangements and performance incentives for the Managing Director and executive team. The Board will review these recommendations before providing their approval.

Details of the Group's remuneration structure and details of senior executives remuneration and incentives are set out in the Remuneration Report contained within the Directors' Report.

There are no schemes for retirement benefits other than statutory superannuation for two executive directors.

Safety, Health and Sustainable Development Committee

The names of the members of the Safety, Health and Sustainable Development Committee and their attendance at meetings of the committee are detailed in the Directors' Report.

The role of the Committee is to review and make recommendations to the Board on:

· The adequacy, integrity and effectiveness of the policy, critical systems, internal controls, and processes and procedures used to manage occupational health and safety, social and environmental matters;

· Risk control management and information systems in connection with occupational health and safety, social and environmental concerns;

· The adequacy of the Group's (including its joint ventures) compliance programmes to ensure compliance with all applicable laws, regulations and standards and any other regulatory requirements in respect of the environment, social and occupational health and safety matters;

· The existence of a culture designed to build and foster environment, social and occupational health and safety leadership and appropriate behaviours consistently at all levels within the Group;

· The performance of the Group including reports on material issues such as serious injury or death, significant environmental incidents or social matters associated with the Group's operations; and

· The impact of changes and emerging issues in occupational health and safety, social and environment legislation, community expectations, research findings and technology.

The consolidated entity's operations are subject to significant environmental and other regulations. The consolidated entity has a policy of engaging appropriately experienced contractors and consultants to advise on and ensure compliance with environmental regulations in respect of its exploration and development activities. There have been no reports of breaches of environmental regulations in the financial year and at the date of this report.

Other Information

Further information relating to the Company's corporate governance practices and policies has been made publicly available on the Company's website at www.metminco.com.au

Make timely and balanced disclosure

Metminco has established policies and procedures to ensure timely and balanced disclosure of all material matters concerning the Group, and ensure that all investors have access to information on the Group's financial performance. This ensures that the Group is compliant with the information disclosure requirements under the ASX Listing Rules and the AIM Rules.

These policies and procedures include a comprehensive Disclosure Policy that includes identification of matters that may have a material impact on the price of Metminco's securities, notifying them to the ASX and AIM, posting relevant information on the Group's website and issuing media releases. These policies are available on Metminco's website under www.metminco.com.au/corporate governance.

Matters involving potential market sensitive information must first be reported to the Managing Director either directly or via the Company Secretary. The Managing Director will advise the other Directors if the issue is important enough to warrant the consideration of the full Board. In all cases the appropriate action must be determined and carried out in a timely manner in order for the Group to comply with the Information Disclosure requirements of the ASX and AIM.

Once the appropriate course of action has been agreed upon, either the Managing Director or Company Secretary will disclose the information to the relevant authorities, being the only authorised officers of the Group who are able to disclose such information. Board approval is required for market sensitive information such as financial results, material transactions or upgrading/downgrading financial forecasts. This approval is minuted in the meetings of the Board of Directors.

The Directors present their report together with the financial statements of the Group being Metminco Limited (Metminco or the Company) and its controlled entities, for the financial year ended 31 December 2014.

Directors

The following persons held the office of director at any time during or since the year ended 31 December 2014 to the date of this report:

Directors have been in office since the start of the year unless otherwise stated.

Company Secretary

Philip Killen was the Company Secretary for the financial year and is in office at the date of this report.

Principal activities and significant changes in the nature of activities

The Principal activities of the Group during the financial year were as a diversified mineral explorer focussing on prospects in South America. The Group has a significant portfolio of projects located in Chile and Peru, primarily focused on porphyry copper style deposits, but including exposure to gold, molybdenum and zinc.

Operating results

The consolidated loss of the Group for the year was A$12,922,938 after providing for income tax (31 Dec 2013: loss of A$36,072,302).

Operations Report

Overview

Since having established a presence in South America in mid-2005, Metminco has built an asset base comprising two development opportunities (Los Calatos and Mollacas) and two prospective exploration projects (Vallecillo and Loica) located in Chile and Peru. These projects are held through the Company's wholly owned subsidiaries Minera Hampton Chile Limitada (Mollacas, Vallecillo and Loica projects) and Minera Hampton Peru SAC (Los Calatos Project) (hereinafter "Metminco"). Figure 1 below shows the location of the aforementioned projects.

Figure 1: Location of Projects.

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In Chile, Metminco holds a 100% interest in the Mollacas Project, which comprises a potential open pit, heap leach, SX/EW operation that is expected to produce up to 8,000 tonnes per annum of copper cathode over a period of 7 years. During 2014 an updated (internal) scoping study was completed, which indicates that the project is financially robust, with a low pre-production capital requirement of US$47M, a cash operating cost of US$1.23/lb Cu, an NPV (8% discount rate) of US$74.9M (after tax) and an IRR of 37.2% (ungeared). The planned Feasibility Study and an Environmental Impact Study has been delayed pending resolution of a dispute pertaining to land access with one of the surface title holders. The Company holds all other surface titles and sufficient water rights required for the development of the Mollacas Project.

In Peru, Metminco has a 100% interest in the Los Calatos Project which has the potential to be developed as a large scale mining operation. In late 2013 an independent consultancy group identified a mining scenario with a life of mine of 34 years, following the conclusion of a detailed mining study. Over the latter life of mine, the envisaged operation would process 811mt of material at a copper grade of 0.47% and molybdenum grade of 0.03%, which would be sourced from an open pit that transitions into an underground block cave mining operation, producing 3.4mt copper (7.4 billion lbs Cu); 162kt molybdenum; 538koz gold; 18.1moz silver and 406t rhenium. The estimated cash operating cost for the preferred mining scenario is US$1.12/lb (after by-product credits), with a pre-production capital spend of some US$1,320 million. In view of the latter capital requirement and the cost to complete both a Pre-Feasibility Study and a Feasibility Study, the Company persists with their endeavours to secure a funding partner to progress the project further. Whilst a number of companies have reviewed the project, the downturn in the resource sector and heightened market sensitivity to capital intensive projects, has precluded a transaction from being effected.

As an alternative to the large scale mining scenario, the Company initiated a program in October 2014 aimed at constraining the high grade copper and molybdenum zones developed within the Los Calatos Porphyry Complex to create the basis for evaluating a development option comprising an initial, smaller, high grade mining operation with a lower pre-production capital requirement. This program is expected to be completed by late June 2015.

Corporate Strategy

During 2014, the Board reviewed Metminco's development strategy in light of the challenges facing the Company in terms of the status quo of its two key assets and its cash reserves.

The Company's initial strategy was to advance Mollacas into production by early 2017, which would generate a free cash flow that would in part fund the planned work program at Los Calatos, as well as Metminco's longer term growth strategy. In late March 2014 the Court of Appeal IV Region, Chile ("Court of Appeal"), upheld an appeal by the owner of the surface title over the planned position of the open pit, and ruled that the Company's land access for mining purposes previously granted by a lower court to be void. The Company was granted leave to appeal to the Chilean Constitutional Tribunal on the grounds of the Court of Appeal's interpretation of various mining and civil codes, and its application of the rules of evidence. The planned Feasibility Study and Environmental Impact Study have been delayed pending resolution of this matter.

At Los Calatos, and in the absence of a funding partner, the Company delayed the commencement of the planned Pre-Feasibility Study as it relates to the large scale development scenario identified in 2013. However, in late 2014 the decision was made to evaluate an alternative development scenario for Los Calatos as a high grade, small tonnage, starter operation that focuses initially on the high grade copper and molybdenum zones developed within the Los Calatos Porphyry Complex. The work in support of this commenced in October 2014 with the re-logging of the 125,000 metres of drill core, aimed at better constraining the high grade mineralisation within the identified anhydrite breccias, and is scheduled for completion in June 2015 following the conclusion of a Preliminary Economic Assessment ("PEA"). Should the PEA return favourable results, the opportunity exists to accelerate the development of the project at a lower pre-production capital spend, whilst maintaining optionality of the more substantial mineral resource estimated in 2013.

The key objective of the Company in terms of its strategy is to achieve an attributable copper production of 50,000 tonnes by 2020, which would generate sufficient cash flow to ensure sustainability of the Company, and the payment of dividends to shareholders. It is envisaged that this production target will be achieved by developing Mollacas and Los Calatos in combination with the acquisition of projects that meet specific project selection criteria - where the timing of such an acquisition (or acquisitions) would be dictated by the rate at which the Company's own projects are developed. One of the key criteria in considering an acquisition opportunity is the ability to generate an attributable free cash flow in excess of US$15 million per annum within a period of two years.

As mentioned previously, the develoment of the Mollacas Project represented a key component of the Company's strategy. Hence, to address the delay at Mollacas, and as part of the staged strategy to achieve the 2020 production target, Metminco aggressively embarked on an acquisition strategy, having evaluated in excess of 30 opportunities over the past year located in Australia and South America. Of the opportunities evaluated to-date, the Company has identified two opportunites that broadly comply with its defined project selection criteria, and are currently the subject of detailed due diligence.

Furthermore, and in order to minimise cash outflow whilst maintaining the integrity of the Company's projects and key technical skills, Metminco continues to reduce operating costs by implementing cost saving strategies in addition to withdrawing from prior projects that were at an early exploration stage.

It is clear that under current market conditions, particularly as it impacts on the junior resource sector, Metminco's strategy needs to have a measure of flexibility to accommodate developments in the context of its own projects, as well as to take advantage of potential acquisition opportunities as they arise. As such, considerable time and effort has been invested, with the support of RFC Ambrian and others, in developing funding strategies that will facilitate the attainment of the Company's future growth plans.

LOS CALATOS PROJECT

Location and Access

The Los Calatos Project ("Los Calatos") is located in southern Peru near, and in a similar geological setting to, three large operating copper-molybdenum open pit mines, namely Cuajone, Toquepala and Cerro Verde (Figure 2).

Production from mines in this region exceeded 600,000 tonnes of copper metal in 2013. With the proposed upgrade to the Toquepala, Cuajone and Cerro Verde mines and the development of the Tia Maria and Quellaveco projects, production from this belt is expected to increase to more than 1.3 million tonnes of copper metal per annum. Molybdenum constitutes a significant by-product of copper mining from this belt.

Los Calatos can be accessed via the Pan American Highway from Moquegua, and a 50 kilometre unsealed road north of the highway to the Project. The port of Ilo is located approximately 160 kilometres by road to the southwest of the project area (Figure 2).

Figure 2: Locality Plan - Los Calatos Copper Project and neighbouring mines.

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The Project, which covers an area of 234 square kilometres, is located on state owned land approximately 80 kilometres to the southeast of Arequipa and 33 kilometres northwest of Moquegua, and occurs at an altitude of approximately 2,900 metres above mean sea level.

In July 2013 the Peruvian Government approved an increase in the area that Metminco may purchase under the Project of National Interest designation from 2,800 ha to 12,700 ha to accommodate the surface infrastructure required to exploit the Los Calatos deposit.

Following the conclusion of a Mining Scoping Study by NCL Ingeniería y Construcción Ltda ("NCL") and a Mine Production Study by Runge Pincock Minarco ("RPM") in 2013, Los Calatos is well placed for development as a low cost, long life, mining operation in an investment friendly jurisdiction.

Furthermore, the project is highly deliverable, with the designated status of a Project of National Interest by the Peruvian government that allows Metminco to acquire the surface title required for the planned mining infrastructure by direct purchase from the State. In addition, there is no competing land usage, seawater is planned to be used for metallurgical processing purposes, and power costs are low by comparison to similar operations in Chile.

Mineral Resources

During 2012 Metminco completed a 65,677 metre diamond drill program which culminated in an updated Mineral Resource Estimate announced on 4 March 2013. The Mineral Resource Estimate, which was completed by SRK Consulting (Chile) S.A. ("SRK"), incorporates the drilling results from 134 drill holes totalling 125,376 metres, of which 103 drill holes intersected the interpreted mineralised unit.

The Mineral Resource Estimate provides for mineral resources that are amenable to open-pit mining and underground bulk mining. Mineral resources amenable to open-pit mining are identified as those resources occurring near surface to a vertical depth of 700 metres (viz. above an elevation of 2,300 metres above sea level), whereas the resources amenable to underground bulk mining are identified as those resources occurring below this depth (Appendix 1: Tables 1 and 2). The total Mineral Resource, inclusive of Inferred Mineral Resources, is sumarised in Table 1 below.

Table 1: Total Mineral Resource - Open Pit and Underground Mining Operations.

Note:

i) Modified after SRK Consulting (Chile) S.A. February 2013 Mineral Resource Statement.

ii) Open Pit: Mineral Resource Estimate reported at a 0.15% CuEq cut-off grade.

iii) Underground: Mineral Resource Estimate reported at a 0.35% CuEq cut-off grade.

RPM Mine Production Study

Following the completion of a Mining Scoping Study by NCL in March 2013, Metminco commissioned RPM to review the work completed by NCL with the objective of further optimising production rates, operating costs and capital expenditure. The results of this work were announced by the Company on 12 August 2013, and presently constitute the reference base for the project going forward.

RPM focussed primarily on optimising operating costs and capital expenditure. To this effect, they evaluated the opportunity to increase production rates from the open pit and underground block cave operations, as well as the opportunity to delay underground development until such time as production from the open pit had commenced.

Accordingly, RPM reviewed the pit optimisation work conducted by Metminco post the conclusion of the NCL Study, as well as the underground production schedule developed by NCL. Based on the results of their Mine Production Study, RPM concluded that production rates of 75ktpd and 70ktpd are achievable for the open pit and underground block cave operations respectively, and that the planned underground development could be delayed until such time as production has commenced from a larger open pit operation ("Optimised L3_Model"). Figure 3 shows a section through the Los Calatos Block Model, demonstrating the position of the open pit and the planned underground block cave stopes.

Furthermore, RPM adjusted prior operating and capital cost estimates to accommodate the increased production rates.

Optimised L3_Model

Open Pit Operation

In an endeavour to increase the life of the open pit operation, Metminco conducted a series of additional pit optimisation runs using Whittle 4D Lerchs-Grossman software to determine the approximate shape of a deeper, near-optimal, pit shell based on applied cut-off grade criteria and acceptable pit slope angles and strip ratios.

RPM reviewed the results of the pit optimisation work and resultant mining schedule, and concluded that a deeper open pit was feasible, as well as a production rate of 75ktpd run-of-mine. Table 2 below summarises the results of this work.

Table 2: Key Results - Open Pit Optimised L3_Model.

Underground Block Cave

Having reviewed the production schedule developed by NCL for the underground block cave operation, RPM concluded that, with an average drawpoint extraction rate of 120tpd, the production rate could be increased to a maximum rate of 70ktpd. In addition, and with the increased life of the open pit to 14 years, it was confirmed that the planned underground development could be delayed until such time as production from the open pit had commenced, with a consequential reduction in the pre-production capital expenditure estimated by NCL.

Based on the work completed by RPM, a total of 449Mt was scheduled over the life of the underground block cave operation of 21-years (Table 3).

Table 3: Key Results - Underground Block Cave Optimised L3_Model.

From the work completed by RPM, it is clear that further refinement of the production schedule is required, which will necessitate detailed mine design and planning, that is to be undertaken during the planned Pre-Feasibility Study. In addition, further exploration drilling and geotechnical and hydrological work is required to realise the full potential of Level 1300.

The eventual use of the sub-level caving mining method to access several high grade areas that do not meet the minimum size specifications for block caving would also be assessed during the Pre-Feasibility Study.

Figure 3: Section 10300E showing the Los Calatos Block Model, the planned Open Pit and certain of the underground Block Cave Stopes.

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Life of Mine - Optimised L3_Model

The key operating parameters for the Optimised L3_Model developed by RPM are summarised in Table 4, notably of which are the competitive cash operating costs (US$1.12/lb) and the Unlevered Free Cash Flow over the Life of Mine (US$5.5bn).

Table 4: Life of Mine - Key operating parameters Optimised L3_Model.

Note:

i) Cash operating costs exclude government royalties, but include all other costs and royalties.

ii) By-product credits based on commodity prices Cu = US$2.95/lb, Mo = US$12.78/lb, Au = US$1,348/oz, Ag = US$25.00/oz and Re = US$5,773/kg.

The envisaged life of mine for the Optimised L3_Model can be summarised as follows:

· The project development schedule allows for construction of the surface infrastructure and the metallurgical plant to be undertaken simultaneously with the development of the open pit operation;

· The life of the open pit is estimated to be 14-years during which time a stockpile will be established, which will supplement production from the underground operation during the underground ramp-up stage (Years 11 to 19);

· The annual contained copper and molybdenum metal in concentrate is expected to average 98.4kt and 4.8kt respectively over the life of mine;

· Cash operating costs, net of by-product credits, are expected to average US$1.12/lb of copper over the life of mine, and compare favourably with global cash costs, ranking the project in the lowest quartile of global producers;

· The initial capital requirement for the establishment of the open pit, surface infrastructure and metallurgical plant is estimated at US$1,320 million, which includes a contingency of 25% by virtue of the current developmental status of the project. Sustaining capital will be funded from cashflow while the development of the underground mining operation may well be financed through a combination of debt and equity to maximise project returns and free up cashflow from the operation;

· The underground mine infrastructure will consist of a twin decline system, one for personnel and equipment, and an adjacent conveyor system for ore extraction. Four vertical raise-bored ventilation shafts will support the underground operation. Ore will be crushed through a primary crusher to be located underground; and

· The tonnes mined and treated over the life of the mine total 811 million tonnes, which will be processed through a conventional sulphide flotation plant using seawater for flotation purposes. Copper and molybdenum recoveries into separate concentrates are estimated to be 87% and 68% respectively based on initial metallurgical testwork.

Metallurgical testwork

A preliminary metallurgical testwork program was conducted on 11 sulphide composites (derived from drill core samples) in 2009 at the SGS Lakefield Laboratories in Santiago. The results provided a provisional indication of the expected recoveries and likely concentrate grades for a commercial operation, namely:

· 87% recovery for Cu (Concentrate grade = 25%);

· 68% recovery for Mo (Concentrate grade = 50%); and

· By products include gold, silver and rhenium.

A second, more detailed, metallurgical testwork program (Phase 2) is to take place during the planned Pre-Feasibility Study. To facilitate this the main 'ore-types' which are planned to be mined during the open pit mining phase at Los Calatos, as well as Level 2005 of the underground block cave operation, were differentiated into 9 geo-metallurgical units. The geo-metallurgical units were differentiated on the basis of those criteria that may impact on the copper extraction process such as low-grade and high-grade copper equivalent zones, supergene and primary material, lithology and alteration type, and the presence of potentially deleterious elements.

The planned metallurgical program will include both grinding and flotation testwork, and will confirm the relevant metallurgical parameters for the planned Feasibility Study. All of the proposed metallurgical tests will be carried out using sea water, as this will be the fluid medium of choice for the extraction process in the main commercial plant. Metallurgical tests will, however, also be conducted using potable water for comparative purposes.

Metallurgical Circuit

Based on the preliminary metallurgical testwork conducted to-date, the planned metallurgical circuit will be identical to that of other porphyry hosted copper-molybdenum operations in the Region, producing separate copper and molybdenum concentrates.

Due to sensitivities revolving around the use of potable water, the Company plans to use seawater as the principle processing medium in the flotation circuit. However, a reverse osmosis plant would be required to produce clean water for the processing of the molybdenum concentrate.

In order to access seawater, a 75 kilometre pipeline is planned to the coast, which will be used to pump water to the site. In addition, a parallel pipeline would be used to pump concentrate to a filtration plant and loading facility located on the coast. The installation of the two pipelines and the associated infrastructure would require a "Right of Access", which is currently under review. The cost of this infrastucture has been provided for in the estimated capital cost for the Project.

Alternative Development Option

The Company initiated a detailed drill core re-logging program in October 2014 aimed at better constraining, and estimating, the high-grade mineral resources associated with the Los Calatos Porphyry Complex. It is anticipated that this work will introduce additional optionality for the development of Los Calatos.

The drill core re-logging program at Los Calatos has been completed and an updated mineral resource estimate and PEA is expected to be completed in June 2015. The PEA will evaluate the technical and financial merits of developing Los Calatos as an initial, smaller tonnage, high grade mining operation, whilst maintaining optionality on the larger mineral resource estimated by SRK in 2013. This in turn would facilitate a broader spectrum on financing options for the advancement of the project, particularly if (as one would anticipate) there is a material reduction in the pre-production capital.

The program to-date has identified a series of sub-vertical monzonite porphyry dykes and associated anhydrite breccia complexes, which collectively form two elongate, NW-SE trending sub-vertical bodies which contain the significantly higher copper and molybdenum grades encountered in the drilling. Figure 4 graphically depicts the geometry of the two main anhydrite breccia complexes that contain the high grade copper and molybdenum mineralisation. Appendix 1 (Table 3) provides an indication of the tonnage and copper and molybdenum grades at a 1% CuEq cut-off grade as reported from the current February 2013 Mineral Resource Estimate.

Figure 4: Schematic Cross-Section through the Los Calatos Porphyry Complex showing the position of the high grade anhydrite breccia units.

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MOLLACAS PROJECT

Location and Access

The Mollacas Project, which occurs at an altitude of 1,500 metres above sea level, covers an area of 33 square kilometres and is located in Region IV, Chile, approximately 65 kilometres east of the town of Ovalle near the small settlements of Valdivia and Las Mollacas, and 160 kilometres by road from the port of La Serena. The project can be accessed from Ovalle via a 53 kilometre asphalt road to the town of Rapel, and then by 12 kilometres of a well-maintained dirt road east of Rapel.

Title

The Company holds title to 21 Exploitation Licences covering the Mollacas deposit and surrounding area, as well as 181 hectares of surface rights, the latter of which were acquired for the establishment of mine infrastructure such as the leach pads, processing plant, administration facilities and mine workshops. Importantly, Metminco owns the water rights to approximately 187 litres/sec from two canals which traverse the property. The estimated water usage for the planned mining operation is 40 litres/sec.

Mineral Resource Estimate

With the completion of the final drilling program at Mollacas in early 2012, a further mineral resource was estimated by SRK on 06 July 2012, which incorporates the results from 119 drill holes (16,280 metres), of which 95 holes are diamond drill holes (12,784 metres) and 24 are reverse circulation holes (3,496 metres). The mineral resource estimate for the oxide and secondary sulphide zone (Appendix 1: Table 4) has been classified in accordance with the JORC Code (2004) for reporting Mineral Resources and Mineral Reserves.

The Measured and Indicated Mineral Resource for the oxide and secondary sulphide zone at a 0.2% Cu cut-off grade is 15.5 million tonnes at a CuT grade of 0.51%, containing 79,111 tonnes of leachable copper. Of the leachable copper, an estimated 61,650 tonnes is soluble.

Figure 5 represents an east-west section through the Mollacas Block Model showing the distribution of copper grades by ore type.

Figure 5: East-West section through the Mollacas Block Model.

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Metallurgical Testwork

Metminco has completed three separate phases of metallurgical column leach testwork on the different ore types identified at Mollacas over a period of 4 years. The Phase 1 testwork was designed as a preliminary test program to determine whether the Mollacas oxide and chalcocite ore types leached, and whether any major problems existed in a possible leach environment. The columns used in this phase were 2 metre columns.

The Phase 2 testwork program used 6 metre columns, and although recoveries were acceptable, the columns remained flooded throughout the program. Hence, whilst recoveries were acceptable, acid consumption was high due to the fact that ferric leaching of the chalcocite ore was suppressed by the lack of oxygen in the system, principally due to the high solution application rate.

The Phase 3 testwork was conducted within tightly controlled operating parameters so as to create the most conducive environment for ferric leaching of the chalcocite ore, and to determine the optimum acid addition strategy so as to minimise acid consumption - as the results of the Phase 2 testwork clearly demonstrated how sensitive the gangue rock is to the acid concentration applied to the ore.

The most significant findings arising from the Phase 3 testwork can be summarised as follows:

· All rock-type composites tested in the 6 metre columns performed similarly and satisfactorily both with respect to their hydraulic characteristics (that is,  

· Bacterial activity was improved significantly in comparison to the Phase 2 testing, by adhering to the ore depth and dry-bulk density parameters recommended by the consultants IDIEM; 

· Additional hydraulic characterisation conducted by MINTEK, South Africa, also showed the leached residue to have positive characteristics with respect to percentage saturation and dry-bulk density under the anticipated 6 to 10 metre load for single-lift leaching; 

· The "sequential" assay procedure appears to be ideally suited to modelling the "leachable" copper resource with consistency of recovery in the column testing; 

· There is a slight "soluble" copper grade versus recovery relationship which, together with the "net" gangue acid consumption, should be used to determine the cut-off grade and modelling of the "leachable" ore reserves; 

· Testing shows that the commercial extraction rate should attain 80% to 85% of the deposit-average, "sequential", assayed copper content - provided all the recommended operating parameters are met; and

· Acid consumption, with strict control of both the amount added in agglomeration and via the raffinate solution, should be 12 kg/t to 14 kg/t in total, although the possibility exists that this can be reduced further by 2.5 kg/t to 5 kg/t.

Additional column leach testwork is planned to determine the lowermost limit of acid addition in the agglomeration stage with the objective of determining whether the acid consumption can be reduced further.

Life of Mine Financial Model

With the benefit of the pit optimisation study completed by the Company in 2013, and the Phase 3 metallurgical testwork results, the Scoping Study completed by SRK in 2008 was updated, inclusive of revised operating costs and capital estimates.

The Life of Mine production schedule incorporated the results of the pit optimisation work completed in 2013, with a modelled inventory of 14.5 million tonnes at a CuT grade of 0.52% (0.42% Cu_Sol), with an in situ soluble copper content of 60,753 tonnes. However, as the pit optimisation study of 2013 does not provide for the updated mining and processing costs, and given the substantial changes in the acid consumption rate, further optimisation work is to be undertaken during the planned Feasibility Study.

At a mining rate of 6,108 tonnes per day, the project has a Life of Mine of some 7 years, producing up to 8,000 tonnes of cathode copper per annum. The results of the Life of Mine Financial Model are summarised in Table 5 below, which support the robust nature of the economics, and hence the decision to progress with a Feasibility Study and Environmental Impact Assessment.

Table 5: Summary of results - Life of Mine Financial Model (March 2014).

Note: Effective tax rate of 20% assumes profits are not repatriated.

Feasibility Study and Environmental Impact Assessment

Based on the encouraging results from the Life of Mine Financial Model, the decision was made to proceed with a Feasibility Study, as well as an Environmental Impact Assessment. Work that has been completed on the project to-date in support of the planned Feasibility Study includes the following:

· Updated Scoping study;

· Resource definition drill programs;

· Oxide and secondary sulphide resource upgraded to Measured and Indicated Mineral Resource categories;

· Phase 3 metallurgical testwork program (tall column leach testwork, permeability and saturation testing and derivation of acid consumption rates);

· Geotechnical design work for proposed heap leach pads;

· Geotechnical work in support of the 3-D modelling of the planned open pit and associated slope angles;

· Environmental base line study; and

· Freehold rights for planned infrastructure purchased and supporting water rights.

Following the ruling by the Court of Appeal that the Company's First Easement Extension granting the Company land access rights was invalid, Metminco has delayed further work on the project pending resolution of the land access matter.

Land Access and Title

Metminco holds title to 21 Exploitation Concessions covering the Mollacas deposit and surrounding area, as well as surface title over 180 hectares of land adjacent to the proposed open pit operation. The Company also owns water rights to approximately 187 litres/sec from two canals which traverse the properties, albeit that the estimated water usage for the envisaged mining operation will be 40 litres/sec.

The surface title on which the proposed open pit is to be located is held by a private land holder (100 hectares), who since 2004 has filed various actions in relation to land access matters all of which had been unsuccessful until the decision of the Court of Appeal in March 2014 (Figure 6).

Metminco is progressing the granting of land access rights at the Mollacas Project through the courts, with a decision on the Company's appeal to the Chilean Constitutional Tribunal anticipated to be handed down shortly, and in parallel, by direct negotiation with the owner of the surface titles.

Figure 6: Mineral and surface rights held by Metminco.

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OTHER PROJECTS

Vallecillo Project

The Vallecillo Project covers an area of 156 square kilometres, and is located approximately 50 kilometres northeast of Ovalle and some 25 kilometres north of the Mollacas Project, at an altitude of 1,800 to 2,500 metres above mean sea level.

The project hosts porphyry related base and precious metal mineralisation that occurs in an arcuate polymetallic belt that has been defined on the basis of a soil geochemical sampling program conducted by Metminco during 2009 and 2010. Four polymetallic targets have been identified (namely targets V1 to V4), of which the V1 target (La Colorada deposit) has been drilled extensively, such that a mineral resource has been estimated in accordance with the JORC Code (2004). Appendix 1 (Table 5) summarises the mineral resource estimate for La Colorada as at October 2012.

On the basis of the exploration work conducted to-date, the resultant mineral resource estimate and preliminary financial modelling, it is clear that additional mineral resources need be identified to justify the establishment of an economically viable mining operation.

Whilst the possibility exists for the identification of further La Colorada type polymetallic deposits, no further exploration work was conducted during the reporting year. The Company does not plan to undertake any work during the forthcoming year and consequently the carrying value of this project was written off in full ($5,101,672).

Loica Project

The Loica Project covers an area of 35 square kilometres and is located approximately 100 kilometres to the southeast of Ovalle, 30 kilometres south of the Mollacas Project, and occurs at an altitude of 2,000 to 2,800 metres above mean sea level.

The Loica-Victoria area comprises a hydrothermal alteration system measuring 5 by 2.5 kilometres, which hosts a "porphyry copper" style of mineralisation. The deposit is related to a dacitic porphyry which has intruded volcanic and volcaniclastic rocks. The outcropping lithological units have been mapped, and indicate the presence of a large hydrothermal alteration system with a potassium silicate nucleus surrounded by an extensive envelope of quartz-sericite altered rocks, which are in turn enclosed within a propylitically altered halo.

Over the period June 2006 to early 2007 Metminco completed 8 inclined Reverse Circulation drill holes (4,426m) and 3 inclined diamond drill holes (2,001m). All of the drill holes intersected low grade mineralisation over large drill intercepts within a depth range of 0 to 659 metres. The best results returned were from drill hole LR 07 (Reverse Circulation) located near the core of the porphyry system (32 metres at 0.36% Cu and 128ppm Mo).

An exploration program is required that incorporates deep-penetrating geophysical methods and a staged diamond drilling program in order to confirm the geometry of the porphyry system and to assess the tenor of the porphyry style mineralisation at greater depths than those tested to-date.

No exploration work was undertaken during the reporting year. The Company does not plan to undertake any work during the forthcoming year and consequently the carrying value of this project was written off in full ($2,051,837).

APPENDIX 1

Mineral Resources

Summarised below are the mineral resources that have been estimated by SRK Consulting (Chile) S.A. in accordance with the JORC Code (2004) for the Company's most advanced projects, namely Los Calatos, Mollacas and Vallecillo (La Colorada deposit).

This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

Los Calatos Project

Table 1: Mineral Resource Statement - Mineral Resources to a vertical depth of 700 metres below surface (above 2,300 masl).

Note:

i) Open Pit: Mineral Resource Estimate reported at a 0.15% CuEq cut-off grade.

ii) Modified after SRK Consulting (Chile) S.A. February 2013 Mineral Resource Statement.

iii) Rounding may result in minor discrepancies.

Table 2: Mineral Resource Statement - Mineral Resources sub-700 metres below surface (below 2,300 masl).

Note:

i) Underground: Mineral Resource Estimate reported at a 0.35% CuEq cut-off grade.

ii) Modified after SRK Consulting (Chile) S.A. February 2013 Mineral Resource Statement.

iii) Rounding may result in minor discrepancies.

Table 3: Los Calatos Project Grade - Tonnage Table (SRK Mineral Resource - February 2013)

Note: CuEq% = Cu% + [((PMo x RecMo) / (PCu x RecCu)) x Mo%] using a Cu Price (PCu)= US$2.75/lb, Mo Price (PMo) = US$15.00/lb, Cu Recovery (RecCu) = 87% and Mo Recovery (RecMo) = 68%. Thus, the formula used is: CuEq% = Cu% + [4.2633 x Mo%]

Mollacas Project

Table 4:  Mineral Resource Statement, July 2012 (Copper Leach Project - Oxides & Secondary Sulphides).

Note:

i) Reported at a cut-off of 0.20% Cu.

ii) Mineral Resource estimated by SRK Consulting (Chile) S.A.

iii) Rounding may result in minor discrepancies.

Vallecillo Project (La Colorada deposit)

Table 5: Mineral Resource Statement, October 2012.

Note:

i) Reported at a cut-off of 0.20g/t Au.

ii) Mineral Resource estimated by SRK Consulting (Chile) S.A.

iii) Rounding may result in minor discrepancies.

Competent Person's Statement

Metminco

The information in this report that relates to Exploration Results and Mineral Resources is based on information compiled by Colin Sinclair, BSc, MSc, who is a Member of the Australasian Institute of Mining and Metallurgy, and is currently employed by the Company in Chile.

Colin Sinclair has sufficient experience (over 30 years) which is relevant to the style of mineralisation, type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results'. Mr Sinclair, as Competent Person for this report, has consented to the inclusion of the information in the form and context in which it appears herein.

SRK Consulting (Chile) S.A.

Metminco supplied SRK with a geological model and the drill data. Precious and base metal grades were estimated into a block model using ordinary kriging with GEMCOM software.

The information provided in this report as it relates to Exploration Results and Mineral Resources is based on information compiled by George G. Even, Principal Geologist of SRK Consulting in Santiago, Chile. Mr Even, a Qualified Person for JORC 2004 compliant statements, reviewed the technical information presented in this document. Mr Ernesto Jaramillo, Principal Resource Geologist with SRK Santiago, performed the resource estimation. Mr Even has sufficient experience that is relevant to the style of mineralisation and type of mineral deposit under consideration, and to the activity which was undertaken, to make the statements found in this report in the form and context in which they appear.

Mr Even and Mr Jaramillo have consented to be named in this report, and have approved of the inclusion of the information attributed to them in the form and context in which it appears herein.

Forward Looking Statement

All statements other than statements of historical fact included in this report including, without limitation, statements regarding future plans and objectives of Metminco are forward-looking statements. When used in this report, forward-looking statements can be identified by words such as ''anticipate", "believe", "could", "estimate", "expect", "future", "intend", "may", "opportunity", "plan", "potential", "project", "seek", "will" and other similar words that involve risks and uncertainties.

These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this report, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, its directors and management of Metminco that could cause Metminco's actual results to differ materially from the results expressed or anticipated in these statements.

The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this report will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. Metminco does not undertake to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this report, except where required by applicable law and stock exchange listing requirements.

Corporate

The Consolidated Group after tax loss for the full year ended 31 December 2014, including an impairment of A$7,204,568, was A$12,922,938.

Following an assessment of expenditure priorities the Company has determined to not to undertake any significant work on its Vallecillo and Loica projects in the forthcoming year.

Accordingly the Company recorded a write off in the carrying value for Vallecillo ($5,101,672), Loica ($2,051,837), Isidro ($22,926) and its other projects ($28,133).

The Company has recently further restructured its operations to reduce the Company's operational expenditure, whilst maintaining its projects (Los Calatos, Mollacas, Loica and Vallecillo) and its capacity to evaluate near term cash flow assets and manage due diligence on these opportunities.

Funding

During the year the Company raised approximately A$1.1 million by issue of 93,186,903 fully paid ordinary shares ("Shares") in accordance with the funding agreement with New York based Bergen Global Opportunity Fund ("Bergen"), announced 31 July 2014. The Company issued 12,786,097 Shares and 5,000,000 options to acquire a Share at A$0.0302 per Share on or before 1 August 2017 in lieu of facility fees.

In December 2014 the Company and Bergen by mutual agreement agreed to a postponement of the Bergen Facility.

Subsequent to the year end, on 18 February 2015 the Company announced the completion of a A$1 (£0.5) million capital raising ("the Placing"). A total of 179,191,151 new fully paid ordinary shares ("Shares") were placed by RFC Ambrian at a price of A$0.006 (£0.003) each with an unlisted option to acquire an additional Share at A$0.006 (£0.003) per Share no later than 3 calendar months after the date of issue of the option ("New Options").

The Placing comprises of two tranches with 75,335,833 Shares and attached 75,335,833 New Options issued on 20 February 2015 and, subject to shareholder approval at a General Meeting to be held on or about 24 March 2015, the Company will issue 103,855,318 Shares and 103,855,318 New Options on or about 27 March 2015.

The Company also announced that a non-renounceable pro-rata rights issue of one (1) new Share and one (1) New Option for every 3.25 Shares held by Australian, United Kingdom and New Zealand shareholders registered on the share register of Metminco on the same terms as the Placing, to raise up to A$3 million, will be made shortly.

Cash Position

Metminco's cash position as at 31 December 2014 was A$1.2 million (US$1.0 million).

At the project level work commenced on an evaluation of the Los Calatos Project with a view to assessing the economic viability of a smaller, high grade, starter mining operation that focuses on the higher grade copper and molybdenum zones that occur within discrete anhydrite breccia zones. In December 2014 the Company completed re-logging work at Los Calatos as a precursor to undertaling a preliminary economic assessment of development options for the Los Calatos Project. The Company also incurred legal and other costs associated with pursuing mining access rights at its Mollacas copper leach project in Chile. Feasibility study expenditure at Mollacas is on hold while the Company progresses mining access rights. Expenditure at Vallecillo and Loica was limited to payment of licence fees.

During the year the Company incurred expenditure in relation to evaluation of various merger and acquisition opportunities and is in advanced discussions with third parties in relation to a potential transaction. These discussions may or may not result in a successful transaction for the Company.

The Consolidated Group has made a loss for the year of $12,922,938 including a $7,204,568 write off of its Vallecillo and Loica projects. Metminco is an exploration Company currently without an operating cash inflow and the net cash position of the Group will continue to decrease until such time as the Group has an operating cash inflow. The net cash flow outflow for the year including payments for exploration was $7,115,711 and the cash balance at the end of the year was $1,192,693. These conditions give rise to a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern.

Nothwithstanding the material uncertainty the Directors are of the opinion, having made due and careful enquiry, that there are reasonable grounds to form the view that the Company will, taking into account the Placing and the Pro Rata Rights Issue Offer announced 18 February 2015, have sufficient working capital for its present requirements.

In forming this view the Directors have considered in detail a number of potential scenarios including cash to be raised from the Placing, potential funds raised pursuant to the Pro Rata Rights Offer, the restructure of the Company's operations as well as other merger and acquisition strategies in play. In addition funds pursuant to the exercise of the Placing Options and the Pro Rata Rights Issue Offer Options may provide further funding.

The Company continues with discussions with third parties in relation to merger and acquisition opportunities and will be continuing expenditure on evaluation of opportunities during the current quarter. These discussions may or may not result in a successful transaction for the Company. The Company is evaluating a number of strategies with respect to potential acquisitions and funding its strategies and ongoing operations.

Change of Nomad and Broker

On 22 October 2014 the Company appointed RFC Ambrian as Metminco's Nominated Advisor to the AIM market and joint broker to the Company.

RFC Ambrian is a leading independent global mining and energy corporate advisory business and provides highly-rated equity research. RFC Ambrian has particular focus on the Australian and London equity markets.

Expiry of Options

On 5 December 2014, 2,500,000 unlisted options exercisable at A$0.215 per fully paid ordinary share lapsed unexercised.

On 5 December 2014, 2,500,000 unlisted options exercisable at A$0.260 per fully paid ordinary share lapsed unexercised.

Significant Changes in State of Affairs

There are no significant changes in the state of affairs during the year other than as disclosed in this report.

Dividends paid or recommended

No dividends were paid or declared during the year by the Company. The Directors do not recommend paying a final dividend for the year ended 31 December 2014.

Events subsequent to reporting date

On 18 February 2015 the Company announced the completion of a A$1 (£0.5) million capital raising ("the Placing"). A total of 179,191,151 new fully paid ordinary shares ("Shares") were placed by RFC Ambrian at a price of A$0.006 (£0.003) each with an unlisted option to acquire an additional Share at A$0.006 (£0.003) per Share no later than 3 calendar months after the date of issue of the option ("New Options").

The Placing comprises of two tranches with 75,335,833 Shares and attached 75,335,833 New Options issued on 20 February 2015 and, subject to shareholder approval at a General Meeting to be held on or about 24 March 2015, the Company will issue 103,855,318 Shares and 103,855,318 New Options on are about 27 March 2015.

The Company also announced that a non-renounceable pro-rata rights issue of one (1) new Share and one (1) New Option for every 3.25 Shares held by Australian, United Kingdom and New Zealand shareholders registered on the share register of Metminco on the same terms as the Placing, to raise up to A$3 million will be made shortly

No other material events have occured subsequent to the end of the financial period.

Likely future developments

The Group will continue exploration activities and further advancement of mineralised deposits in Chile and Peru, focussing primarily on advancing the Los Calatos and Mollacas projects.

Environmental regulations

The Group's operations are subject to significant environmental regulations under the laws of Australia, Chile and Peru. The Directors are not aware of any breaches of the legislation during the year that are material in nature.

In Chile the Environmental Act provides a framework for environmental policy and in Peru environmental policy is governed by the Environmental Regulation for Mining Exploration Projects (Supreme Decree N 020-200-EM).

Information on Directors

Company Secretary

Meetings of the Board

The Board of Directors held 9 meetings during the year ended 31 December 2014. Attendances of Directors at these meetings are shown in the table below:

Meetings of Board Committees

The number of board committee meetings held and the number of meetings attended by each director (who are members of board committees) during the year ended 31 December 2014 were as follows:

Indemnification of Directors and Officers

Under the provisions of the Constitution of the Company every officer (and former officer) of the Company is indemnified, to the extent permitted by law, against all costs expenses and liabilities incurred as an officer providing it is in respect of a liability to another person (other than the Company or a related body corporate) where such liability does not arise out of conduct involving a lack of good faith and is in respect of a liability for costs and expenses incurred in defending proceedings in which judgment is given in favour of the officer or in which the officer is acquitted or is granted relief under the Law.

The Company has paid premiums to insure the Directors and Officers against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in their capacity as officers of the Company other than conduct involving a wilful breach of duty in relation to the Company. The premiums amounted to A$22,211 for the year ended 31 December 2014 (for the year ended 31 Dec 2013: A$21,853).

Indemnification of Auditors

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an auditor of the Company.

Options

At the date of this report, the unissued ordinary shares of Metminco Limited under option are as follows:

Unlisted Options

Option holders do not have any right to participate in any issues of shares or other interests in the Company or any other entity. There have been no unissued shares or interests under option of any controlled entity within the Group during the reporting period. For details of options issued to directors and executives as remuneration, refer to the Remuneration Report.

Non - audit services

The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

· all non-audit services are reviewed prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

· the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

No fees were paid or are payable to Grant Thornton for non-audit services provided during the year ended 31 December 2014.

Auditor's Independence Declaration

The lead auditor's independence declaration as required under section 307C of the Corporations Act 2001 for the year ended 31 December 2014 is set out on page 38, and forms part of this report.

Proceedings on behalf of the Company

No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

REMUNERATION REPORT (Audited)

Remuneration Policy

The remuneration policy of Metminco has been designed to align remuneration arrangements with strategic business objectives, empowering employees by differentiating top performers, whilst achieving simplicity and transparency in the design and communication of remuneration. Key management personnel are provided with a fixed remuneration component and specific long-term incentives based on key performance areas affecting the Company's financial results. The Board of Metminco believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Company, as well as create goal congruence between directors, executives and shareholders.

The Board's policy for determining the nature and amount of remuneration for key management personnel of the Company is as follows:

· The remuneration policy is to be developed by the Remuneration and Nomination Committee and approved by the Board. The overriding responsibility of the Remuneration and Nomination Committee is to create the remuneration policies and practices that achieve the best value for shareholders. Pay and incentives have to be set at the right level to attract and retain good management and to fully incentivise outstanding management performance, but at levels that are in line with the sector in general, and that provide a fair return to shareholders.

· The Remuneration and Nomination Committee reviews key management personnel packages annually by reference to the Group´s performance, executive performance and comparable information from industry sectors. For the purposes of assessing the appropriate level of executive remuneration, the Remuneration and Nomination Committee references the McDonald & Company independent remuneration reports on the resources sector companies. The McDonald & Company reports are considered the most relevant source of comparator information as it comprises organisations broadly comparable to Metminco. Additional references are also made to other relevant supplementary comparator groups.

The performance of key management personnel is measured against criteria agreed with each executive. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Committee's recommendations. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth.

Australian resident management personnel receive a superannuation guarantee contribution required by the Superannuation Guarantee legislation, and do not receive any other retirement benefits.

Upon retirement, key management personnel are paid employee benefit entitlements accrued to the date of retirement. All remuneration paid to key management personnel is valued at the cost to the Company and expensed.

The Board's policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Remuneration and Nomination Committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on the McDonald & Company reports, market practice, duties and accountability.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting.

There is currently no relationship between remuneration and the entity's performance due to the exploration phase of the entity.

Performance based Remuneration

The Company did not pay performance based remuneration to executive, non executive directors or any other key management personnel during 2014.

Employment Details of Members of Key Management Personnel and Other Executives

The following table provides employment details of persons who were, during the year, members of key management personnel of the Group. The table also illustrates the proportion of remuneration that was performance and non-performance based and the proportion of remuneration received in the form of options.

The employment terms and conditions of key management personnel are usually formalised in contracts of employment.

Terms of employment require that the relevant group entity provide an executive with their contractual entitlements.

A contracted person employed on a permanent basis may terminate their employment in accordance with their contract by giving three month's prior written notice and by the Company by giving six month notice. Termination payments are not payable on resignation or under the circumstances of unsatisfactory performance.

Non-Executive Directors are not subject to contracts. Termination payments are at the discretion of the Board.

Changes in Directors and Executives Subsequent to 31 December 2014

There were no changes in Directors or Executives subsequent to 31 December 2014.

Remuneration Details during the year ended 31 December 2014

The following table of benefits and payments, in respect of the financial year details, the components of remuneration for each member of the key management personnel of the Consolidated Group.

* From 1 July 2014 onwards 10% of the monthly remuneration has been voluntarily deferred ($85,361). Mr Read has deferred 100% of fees for services. Effective 1 January 2015, Directors and executives have voluntarily agreed to increase the deferal to 50%. Deferred amounts are payable the earlier of termination and availability of funding in excess of the Company's needs.

Securities Received that are not Performance Related

No members of key management personnel are entitled to receive securities which are not performance-based as part of their remuneration package.

Cash Bonuses, Performance-related Bonuses and Share-based Payments

Options and Rights Issued, Granted & Exercised

There were no options or rights issued or granted to directors and employees, or exercised by directors and employees during the year.

The number of options held by each key management personnel of the Group during the full year is as follows:

* Antonio Ortuzar resigned as a Director and Chairman on 30 June 2013

** William Etheridge resigned as a Director on 8 October 2013

The number of shares held by each key management personnel of the Group during the full year is as follows:

* Antonio Ortuzar resigned as a Director and Chairman on 30 June 2013

** William Etheridge resigned as a Director on 8 October 2013

*** Roger Higgins was appointed as a Director on 8 October 2013

Long-Term Incentive Plan

A Long-Term Incentive Plan (LTIP) for employees of the Company was approved by shareholders at the 2013 Annual General Meeting held on 29 May 2014. At this stage no entitlements have been issued under the LTIP.

Use of remuneration consultants

No remuneration consultants were used during the year.

Voting and comments made at the company's 2013 Annual General Meeting (AGM)

The company received 72% "For" votes on its remuneration report for the 2013 financial year. No other specific feedback was received at the AGM on its remuneration report.

End of audited remuneration report.

This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.

William Howe

MANAGING DIRECTOR

11 March 2015

SYDNEY

Auditor's Independence Declaration

To the Directors of Metminco Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Metminco Limited for the year ended 31 December 2014, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the audit.

GRANT THORNTON AUDIT PTY LTD

Chartered Accountants

C F Farley

Partner - Audit & Assurance

Sydney, 11 March 2015

The financial statements should be read in conjunction with the accompanying notes.

The financial statements should be read in conjunction with the accompanying notes.