Metals Exploration Regulatory News (MTL)

METALS EXPLORATION PLC

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

Metals Exploration plc (AIM:MTL) (the "Company" or the "Group"), the natural resources exploration and development company with assets in the Pacific Rim region, is pleased to announce its final results for the year ended 31 December 2011.

SNAPSHOT:

In the year ended 31 December 2011:

·; Runruno Declaration of Mining Project Feasibility approved by the Secretary of the Department of Environment and Natural Resources.

·; A Letter of Intent issued to Leighton Contractors (Asia) Limited to enter into an Engineering and Construct contract and a Procurement Agency Agreement contract ("EC&P") to design and construct the Runruno processing plant.

·; Early construction works commence at the Runruno site.

·; Project capital cost estimated to be US$167.8m in Q3 2011.

·; Shareholders agree on a strategy to build the process plant and continue with limited step out exploration drilling.

·; Exploration drilling results at the Runruno project consistently point towards significant mineralisation to the south of the planned pit.

·; Significant molybdenum and copper zones interpreted from ongoing testwork.

·; The remaining 15% shareholding of FCF Minerals Corporation (the Runruno project owning company) not in the control of Metals Exploration plc is acquired for $6,000,000.

·; Fairfax I.S. appointed as the Company's new sole broker.

In the period post 31 December 2011:

·; Negotiations for a debt funding package proceed positively with due-diligence completed and legal documentation in progress.

·; Runruno early works program at required activity levels with the earthworks contractor now at full strength.

·; Work begins on the construction of camp and office buildings.

·; Regional exploration continues within the Runruno FTAA at the Tulingan prospect and in the Magnetite Creek area. 

CHAIRMAN'S STATEMENT

I am pleased to present a summary of the audited results and Annual Report for the financial year ended 31 December 2011, and to share with our investors the positive developments experienced by the Group over the past year and our ongoing activities in the period subsequent to the financial year end date.

Declaration of Mining Project Feasibility

The highlight of 2011 was achieved when the Secretary of the Department of Environment and Natural Resources ('DENR') approved the Runruno Declaration of Mining Project Feasibility ('DMPF') allowing FCF Minerals Corporation ('FCF') to finally move into the design, development and construction phase of the Runruno project (the 'Project'). As required under the Financial or Technical Assistance Agreement ('FTAA') FCF, our Philippine operating subsidiary, submitted written notice to the Mines and Geosciences Bureau ('MGB') a department of the DENR outlining the technical and commercial feasibility of mining and processing to produce gold from the Runruno area. This was filed during the feasibility period and supported by the Mining Project Feasibility Study. It was with great satisfaction that approval of the DMPF was received on 20 October 2011 following which the Board of Directors approved commencement of a program of early construction works at the Project site from 1 December 2011.

Commencement of Early Site Works at Runruno

The early construction works are ongoing and are designed to establish the infrastructure necessary to support the full construction activities and they comprise:,

·; development of the processing plant pad

·; erection of the construction infrastructure

·; the construction of the camp and

·; a program of detailed engineering to advance the processing plant design to a construction ready stage.

Contracts for the site works were awarded to local Philippine contractors with ground work proceeding satisfactorily.

EC&P- GMP Contract

FCF issued a Letter of Intent ('LoI') to Leighton Contractors (Asia) Limited ('Leighton') to enter into an Engineering and Construct contract and a Procurement Agency Agreement contract ("EC&P") to design and construct the Runruno processing plant subject to availability of debt funding, final construction approval from the Board of Directors and full contract documentation. The LoI was issued against Leighton's Guaranteed Maximum Price ('GMP') offer to FCF of US$95.1 million to construct the Runruno processing plant. Leighton's offer is subject to revalidation at the time of execution of the construction contract.

Project Funding

Contemporaneously with the site based work, several financial lending institutions have been approached for the provision of debt funding and the Company has been working closely with one of these institutions since December 2011. There have been extensive negotiations and a technical and legal due-diligence exercise undertaken. It is hoped that the Company will make an announcement in the coming weeks on a debt funding package to support the construction of the process plant. The current outlook is to commence construction in late Quarter 2 or early Quarter 3 of 2012 with gold production commencing in early Quarter 4 2013.

Regional Exploration

Exploration activities for both gold and copper were recommenced within the Runruno FTAA area during the year with two diamond drilling rigs dedicated to the task. In addition to the drill testing of identified targets, a suite of additional geophysical and geological techniques have been applied to the area to identify prospective target areas. 

Work completed to date has been promising with the identification of a significant zone of flatly dipping gold and molybdenum mineralisation measuring between 8-12m thick and grading between 2-3 g/t Au and occurring at depth extending south of the Runruno pit, in excess of 600m to the Tulingan prospect area and perhaps further south. The potential width of the mineralisation has not been established but it has been intersected over 200m in an east west direction. It appears from the data available that the mineralisation is truncated towards the east by the Malilbeg Fault, a possible mineralising structure, but remains open in both a westerly and southerly direction. One diamond drill rig is currently dedicated to establishing the potential of this zone.

At Magnetite Creek in the south of the FTAA a number of diamond drill holes have been bored to test the potential of the area for porphyry copper styled mineralisation. Strongly anomalous gold and copper mineralisation has been intersected over broad zones in a number of the holes with significant copper and gold results being returned over a number of narrower intervals. This work has confirmed the potential of the area for significant copper and gold mineralisation. Drill testing of the area will be continued to test the potential both along strike and at depth below the completed work.

Subscription and Shareholders' Agreement

The execution of a Subscription and Shareholders' Agreement ('SSA') between the Company, Solomon Capital Limited ('Solomon'), and certain of the Company's independent shareholders in March 2011, finally brought closure to the long running attempted takeover of the Company by Solomon. Solomon is a private equity vehicle based in the Channel Islands and owned by Christian Candy. As a result of the SSA the Company raised an incremental £47,474,378 (after costs) after all related party debt was retired and all of the contemplated transactions were completed in August 2011. The SSA was unanimously ratified by those shareholders who voted at a General Meeting on 4 April 2011.

Board Appointments

During the year and pursuant to the SSA the composition of the Board was changed with the addition of Mr. Richard Williams and Mr. Edward Parsons nominated by Solomon and Mr. Guy Walker nominated by RHL.

Corporate Responsibility

The Group was awarded three prestigious awards at the 2011 National Mine Safety and Environment Awards, which is fitting recognition of our personnel who are committed to responsible mining, environmental protection and safety in the workplace. FCF was recognised as an outstanding achiever, winning the following three awards 

·; The 2011 Presidential Mineral Industry Environment Award (Exploration Category).

·; Safest large scale exploration project.

·; Runner-up in the Best Mining Forest award (Exploration Category).

I applaud the efforts of everyone involved and their continued commitment in achieving such high standards for the Group and towards our social and environment programs.

Runruno interest

In November 2011, the Company acquired the remaining FCF shares not in its control and has now secured a 100% shareholding of its main operating subsidiary. A total of 8,999,999 shares were acquired for a $6m consideration as agreed through a contract dated 1 February 2005 and amended as of 14 November 2005. In economic terms this transaction acquired the shares at a price equivalent to $44.94 per reserve ounce and represents excellent value for investors.

Further details and more specific information on each of the above topics can be found in the Chairman's Statement within the Annual Report.

Summary

This has been a year of achievements and we move into a period of transition during which and after which further shareholder value will be realised. I am excited at the prospect of constructing the mining process plant and providing you with further news and information as we progress towards our ultimate goal of gold production. I would like to take this opportunity to thank you our shareholders, our personnel and employees for your continued support and I am confident 2012 will be as successful as 2011.

I R Holzberger

Executive Chairman

15 May 2012

OPERATIONS REVIEW

Activities undertaken throughout the year have been directed to satisfying the Company's objective of the construction of the mine at Runruno with limited stepout drilling and to test the potential of the FTAA for additional mineral resources.

Runruno Gold Project Activities

About Runruno

The Runruno Gold project which is 100% beneficially owned by the Company is located in the Province of Nueva Vizcaya on the Island of Luzon in the Philippines. It is 320km north by road from Manila, the capital city of the Philippines. Based on a feasibility study completed in May 2010 and updated during the year, a mining operation producing around 1.0 million ounces of payable gold over a mine life of 10.3 years is planned to be constructed at Runruno.

The mining operation will be a conventional truck and shovel open pit operation mining 1.75 million tonnes of ore per annum at an operational strip ratio of 5.2:1 (waste to ore). Gold will be recovered from the partially refractory ore using a combined gravity, BIOX® carbon in leach process.

Early development works commenced in December 2011 and are currently proceeding in parallel with debt funding activities to support the full development. The Project capital cost is estimated at US$167.8 million.

The potential to recover a by-product molybdenum salt from the mineral processing is recognised and work is proceeding to define a process which may, if proven to be commercially viable, be added during the operating life of the mine.

The Project is held under a Financial or Technical Assistance Agreement which permits 100% foreign ownership. Under the 1995 Philippine Mining Act the FTAA system provides a stable investment regime for the future development of the Project.

Mineral Resource Update and Mining Reserve Update

Both the Mineral Resource and the Mining Reserve were updated by Mining Associates in March 2011 to include 13,400 metres of infill drilling completed post-feasibility study, comprising 807 drill holes. The current combined estimates of the 'Measured and Indicated' resources of 1,050,000 ounces of gold now represent 75% of the contained gold.

Mine Pit Optimisation

The Runruno mine pit and production schedule were optimised by Gemcom Professional Services using the updated March 2011 Mining Reserves and Mineral Resource and the Whittle 4D optimisation studies undertaken by Whittle Consulting during the feasibility study. This resulted in a significant improvement in the total strip ratio and the operating strip ratio (the strip ratio after netting off the material to be mined to construct the tailing storage facility starter embankment during construction), both being reduced by around 0.7 tonnes of waste per tonne of ore, or 12%. This is expected to positively impact the economics of the Project.

The key pit parameters are shown in table 1 below

Table 1: Estimated pit dynamics

Metallurgical Testwork

Limited metallurgical testwork to optimise the flotation performance of the Runruno ores and to test the likely variability of the ores expected to be mined during the first four years of production, was completed during the year. This data was used to simplify the design of the flotation section of the overall processing plant and to provide early operating criteria for the early years of operations.

Testwork to identify a molybdenum recovery circuit was undertaken at Electrometals Laboratory in Queensland. The testwork resulted in the identification of a potential circuit comprising a two stage process using electrowinning to reduce the iron in solution, followed by recovery of the molybdenum onto resin. The total molybdenum recovery (from run of mine ore) achieved at bench scale using synthetic solutions is estimated to be within the Company's previous guidance of 45-50% of the contained molybdenum.

Before any commitment to use such a processing route can be considered, further work is required to establish the practical feasibility of this new process, test its application on Runruno solutions and to determine the capital and operating cost parameters. This work remains to be completed.

Project Execution Plan

The Project execution plan was revised and updated to enable the Company to commence early construction while the project funding is finalised. The project is now being executed in two parts:

·; Early / pre-sanction works.

These works commenced in December 2011 and are ongoing at the time of this report. These works are being undertaken by Filipino contractors under the management of the Company's owners team and will include site establishment, road development, plant site preparation, construction camp construction, office and workshop construction, establishment of supporting infrastructure and process plant detailed engineering; and

·; The construction phase.

During which the major works including the processing plant, tailings storage facility, mine preparation and final infrastructure will be completed.

The planned early works will significantly advance the Project in readiness for the full construction phase with the site being prepared for occupation by the major contractor and available for the commencement of construction of the process plant immediate on full project funding being available. This early access is expected to reduce the full construction phase by two or three months to about eighteen months duration.

EPC - GMP Contract

The Company engaged Leighton Contractors Asia Limited ("Leighton") to develop an open book estimate of the cost to develop the processing plant component of the Runruno Gold project on a Guaranteed Maximum Price ("GMP"). There are two contracts included, an 'Engineering and Construct' contract and a 'Procurement Agency Agreement' ("EC&P"). Leighton and the Company worked together on cost build which resulted in the definition of a comprehensive scope of work and the optimisation of the planned works. The outcome was Leighton's offer to the Company of US$95.1 million to construct the Runruno process plant under EC&P contracts. The Company is now satisfied that the scope of work has been comprehensively defined and the works optimised.

Leighton's offer was made on the basis of tender packages, pricing and currency exchange rates current at the end of Quarter 1 2011 and will be subject to revalidation at the time of execution of the construction contract. Preparation of the contract documents is well advanced and is expected to be completed in Quarter 2 2012.

The GMP pricing mechanism will facilitate the sharing of any cost under-runs between the Company and Leighton. Any cost over-runs will be to Leighton's sole account, with the exception of variations required by the Company or caused by defined events.

Pending a final review and Board approval of the offer the Company entered into a "Letter of Intent" with Leighton confirming that it will proceed with the contract subject to full Project funding being made available and the Board sanctioning full development.

The construction contract is being prepared in a way which will allow certain 'pre-sanction' works to be undertaken but captured within the GMP-EC&P mechanism including some detailed engineering. These works will significantly advance the Project ahead of commencement of the formal contract offering potential time and cost saving under the main contract.

The Company will have responsibility at the contract commencement date of delivering to Leighton the process plant pad, prepared to levels and parameters provided by Leighton. This work will be undertaken during the early works phase operated by the Company.

Capital and Operating Costs

The Runruno Feasibility Study capital cost was initially estimated in Quarter 4, 2010 after converting prices and the prevailing supply currencies using the estimating currency (US$) exchange rates. This cost has been revised into Quarter 3, 2011 US$ after considering:

·; The Leighton GMP-EPC offer;

·; Prevailing exchange rates;

·; Philippine based cost inflation; and

·; Re-estimation of costs based on tenders in some areas.

The work demonstrated an estimated increase of US$18.5 million from US$149.3 million estimated in the 2010 Feasibility Study to US$167.8 million, a 12.4% increase. The increase in the headline cost is largely attributed to the significant weakening of the US$ against the supply currencies since the Feasibility Study was estimated, with the US$ weakening by -14.2% on average against the major supply currencies.

The estimated capital costs are presented more completely below:

Table 2: Estimated capital costs to build the mining process plant

Early Works

Various early works packages and preconstruction works have been identified which FCF has competitively tendered amongst local and national Philippines contractors and service suppliers. The preconstruction works and certain other works packages commenced in December 2011 and will continue for a period of five or six months in advance of Leighton commencing construction of the process plant.

The program consists of eight key activities:

·; Site earthworks;

·; Processing plant pad earthworks;

·; Construction camp;

·; Construction power;

·; Potable water system;

·; Erection of a concrete batching plant;

·; Acquisition of selected units of the mobile fleet; and

·; Detailed engineering in relation to the processing plant being undertaken by Leighton.

Environment & Community Relations

The Company follows the World Bank Guidelines and the Equator Principles in all aspects of its environmental and community related work.

The Group supports and makes donations to the Runruno Livelihood Foundation, a non-profit organisation with a well staffed community relations group which works closely with the local communities to instigate sustainable health, life and business development programmes to the benefit of these communities. The proposed development at Runruno is supported by all impacted local communities.

The Metals Exploration Group of Companies received a number of awards across the year for its environment, social, community and occupational health and safety programs. The highlight of the year was the Company's Philippine operating subsidiary, FCF being recognised as an outstanding achiever at the 2011 Presidential Minerals Industry Environmental Awards at the conclusion of the National Mine Safety and Environment Conference.

Exploration- Runruno

Exploration within the Runruno FTAA recommenced during the second quarter of 2011. A program of ground mapping, geochemistry, surface sampling, airborne and ground geophysics and diamond drilling was commenced to test the area for further gold mineralisation of the Runruno style, and to assess for the potential of porphyry copper mineralisation. This program has continued into 2012.

The work completed in 2011 successfully identified a number of areas justifying drill testingand 2 diamond drill rigs were active throughout 2011. A total of 33 holes were drilled in 2011 within the Runruno FTAA defined region which covered 7,737 metres of assays.

Table 3: Diamond -drill holes completed during 2011 assessing the existing Runruno resource area and the wider Runruno FTAA boundary.

Table 4: Metres diamond-drilled during 2011 in the existing Runruno resource area and the wider Runruno FTAA boundary.

Malilibeg South

Drill testing for extensions to the Runruno resource area to the south of the planned pit extended the potential for significant mineralisation further to the south.

With the information available from the holes drilled during the year it appears possible to interpret a significant zone of flatly dipping gold and molybdenum mineralisation measuring between 8-12m thick and grading between 2- 3 g/t Au and occurring at depth extending south of the Runruno pit for 600m plus to the Tulingan prospect area and perhaps further. The potential width of the mineralisation has not been established but it has been intersected over 200m in an east west direction. It appears from the data available that the mineralisation is truncated towards the east by the Malilbeg Fault, a possible mineralising structure, but remains open in both a westerly and southerly direction. Of significant interest is that though the mineralisation is broadly analogous to and may be projected back into the main Runruno mineralisation through a zone of disturbance marking the southern end of the Runruno mineral resource, the character of the mineralisation is unique. The mineralisation appears to exhibit slightly higher gold grades, displays much higher molybdenum grades and contains low but significant levels of copper unlike the Runruno mineralisation.

While the gold molybdenum mineralisation has been intersected at depths of between 75-180m below the surface the indicated widths and grades make it a potential target for underground mining.

Drilling to more fully test the potential of the zone is ongoing.

Magnetite Creek

This area is within the Runruno FTAA boundary but is 2km south of the Runruno orebody and it is considered potential for porphyry copper styled mineralisation. Drilling activities have confirmed this potential with significant copper and gold zones identified in the drilling. This work clearly demonstrates the potential of the area.

Bocboc

Bocboc is located is in the North East quadrant of the Runruno FTAA. A gold in soil anomaly was identified in this area along with local outcrops of argillicaly-altered alkaline igneous lithologies. These rock types are considered to be prospective for mineralisation similar in nature to that at the Runruno resource area.

Two diamond drill holes have been completed which outline a number of zones of gold and copper anomalism. Further assessment will be undertaken.

Other Exploration Projects

Dupax

The Dupax project is covered by EXP-000016II encompassing two blocks totalling 8,856 hectares in area; Dupax (5,042 hectares) and Solano (3,814 hectares). The Dupax block contains a previously identified and partially mined open pit zinc-copper-gold massive sulphide deposit. Surface mapping and geochemical and rock chip sampling by the Company has returned grades up to 45.7% zinc, 3.89% copper, and approximately 4 g/t gold from outcrop.

The mineralisation occurs as a massive sulphide body in agglomerate and disseminated sulphide in silicified sediments, predominantly underlain by marine clastics intercalated with pillow basalts and pyroclastics. This package is intruded by dykes and sills of intermediate to basic composition.

Drill targets have been defined on this project. No drilling has been undertaken to date.

Sulong

The Sulong project is covered by EXP-000017II, encompassing an area of 6,963 hectares to the east of Solano in Nueva Viscaya province. Since the 1970s the area has been mined for manganese, which is interpreted as being the near surface oxidised portion of an extensive vein-fault system.

The area is considered prospective for gold associated with a large gold-bearing vein-fault system and porphyry copper and gold mineralisation. The Company has undertaken surface mapping and geochemical sampling with some areas anomalous for gold being outlined.

Other Exploration Permit Applications

The Company also has an Exploration Permit Application ("EPA") covering the Worldwide project. Applications that the Company had made over the Capaz, Puray areas were refused by the MGB as part of its current programme to "cleanse" its register of 2,000 dormant applications out of a current 2,700 applications. The MGB has in place a 12 month moratorium on the application for new Exploration Permits. There is no financial impact to the Company arising from the refusal to grant the EPAs.

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME for the year ended 31 DECEMBER 2011

CONSOLIDATED BALANCE SHEET as at 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 DECEMBER 2011

Equity is the aggregate of the following:

·; Share capital; being the nominal value of shares issued

·; Share premium account; being the excess received over the nominal value of shares issued less direct issue costs

·; Shares to be issued reserve; being the credit side of the entry relating to the expense recognised in the income statement for share based remuneration

·; Translation reserve; being the foreign exchange differences on the translation of foreign subsidiaries

·; Profit and loss account; being the cumulative loss attributable to equity shareholders

·; Acquisition of non controlling interests reserve; being an acquisition of 15% of FCF Minerals Corporation's shares after previous acquisitions which had provided the Group with control of the board of the subsidiary company.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 DECEMBER 2010

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 DECEMBER 2011

NOTES

Loss per share

The loss per share was calculated on the basis of net loss attributable to equity shareholders divided by the weighted average number of ordinary shares. The basic and diluted loss per share is the same, as the exercise of share options and warrants would reduce the loss per share and therefore, are anti-dilutive.

Annual report and accounts

A copy of the annual report and accounts will be sent to shareholders shortly and will also be available from the Company's registered office, 200 Strand, London WC2R IDJ, and on the Company's website; www.metalsexploration.com. Notice of an annual general meeting of the Company to be held at 2.00 p.m. on 13 June 2012 will be posted together with the annual report and accounts.

Financial Information

The financial information set out in this announcement does not comprise the Group's statutory accounts for the year ended 31 December 2011 or for the year ended 31 December 2010.

The financial information has been extracted from the statutory accounts of the Group for the year ended 31 December 2011 and the year ended 31 December 2010. The auditors reported on these accounts. Their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

The statutory accounts for the year ended 31 December 2010 have been delivered to the Registrar of Companies, whereas those for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's annual general meeting.

This is a summary of the Operations Review and a more complete version is included in the Annual Report.

Investor Communication

The Company has a policy of communicating with investors by email as much as possible and if any investor wishes their email address to be included in the Company's mailing list, it is kindly requested they forward their email address and other contact details to the company's email address; info@metalsexploration.com.

Enquiries:

Metals Exploration PLC

I R Holzberger +44 (0)207 963 9540

Executive Chairman +61 (0)418 886 165

Liam A. Ruddy

Company Secretary +44 (0) 7911 719960

Nominated Adviser

Westhouse Securities Limited

Martin Davison +44 (0)207 601 6114

Broker

Fairfax I.S. plc

Ewan Leggat +44 (0)207 598 5368

Public Relations

Tavistock Communication +44 (0)207 920 3150

Edward Portman / Jos Simson +44 (0)7733 363 501