Quarterly Update to 31 December 2019

METALS EXPLORATION PLC

QUARTERLY UPDATE TO 31 DECEMBER 2019

Metals Exploration plc (AIM: MTL) ("Metals Exploration", the "Company" or the "Group"), the natural resources exploration and development company with assets in the Pacific Rim region, today provides a quarterly update on matters relating to the operations of its Runruno gold project ("Runruno" or the "Project") in the Philippines.

Summary

· Gold production of 18,941 ounces achieved in Q4 2019, being the most gold produced in a quarter since production commenced.

· Gold sales of US$27.0 million achieved in Q4 2019, being the highest quarterly gold sales achieved since production commenced.

· Annual gold production and sales for FY 2019 significantly exceeded previous year:

· Gold production of 68,983 ounces, up 43.5% from FY 2018;

· Overall gold recoveries of 70.8%, up 22.2% from FY 2018;

· Gold sales of 67,356 ounces, up 45.3% from FY 2018; and

· Gold receipts of US$94.3 million, up 53.5% from FY 2018.

· Positive net cash income of US$18.4 million and positive net cash flow of US$7.3 million recorded for FY 2019.

· Post-quarter end the US$68.5 million senior bank debt facility was acquired by companies associated with the mezzanine debt lenders (who are also the Company's two largest shareholders).

· Total interest bearing debt liabilities as at 31 December 2019 were, in aggregate, US$125.8 million.

· Discussions with lenders on the terms of an ongoing standstill and the restructuring of the Group's overall debt position continue. Any restructuring is expected to include a debt:equity swap as the current debt structure is not sustainable.

Finance and corporate

· 18,247 ounces of gold were sold during Q4 2019 at an average realised gold price of US$1,481 per ounce.

· US$27.0 million in gold receipts received in Q4 2019.

· Proceeds from gold sales for FY 2019 were US$94.3 million, a 53.5% increase over FY 2018.

· Post quarter end the Company's two mezzanine lending groups (which also comprise the Company's two major shareholders) acquired the Group's US$68.5 million senior debt facility.

· Discussions with these lenders on the terms of an ongoing standstill and the restructuring of the Group's overall debt position continue. Any restructuring is expected to include a debt:equity swap. 

· Total interest bearing liabilities as at 31 December 2019 were, in aggregate, US$125.8 million (US$68.5 million in senior debt and US$56.7 million in mezzanine debt).

· Cash at bank as at 31 December 2019 was US$5.4 million.

Mining Operations

· Mining for Q4 2019 of 3.32Mt of ore and waste with total ore mined of 572kt, exceeding budgeted ore mined by 88kt.

· Mining for FY 2019 of 11.78Mt of ore and waste with total ore mined of 1.82Mt, exceeding ore mined in 2018 by 435kt, representing an increase of 26.8% over FY 2018.

· Key mobile fleet equipment rebuilds that commenced in Q3 2019 are progressing into Q1 2020, although there have been delays in sourcing certain replacement parts. Cost reductions resulting from less reliance on rental equipment are expected from Q1 2020 onwards.

· On-ground activities in relation to access development to mine plan Stages 3 & 4, and resettlement of illegal miners away from mine plan Stages 3 & 4 continued in Q4 2019. Further actions in relation to the access development and resettlement activities will be made in the forthcoming quarter s.

Processing Operations

· 18,941 ounces of gold poured during Q4 2019.  

· Throughput for Q4 2019 exceeded budget by 51kt.

· Notwithstanding significant maintenance issues experienced during FY 2019 (predominately tails line related as reported in previous FY 2019 quarterly updates) total throughput of 1.78Mt was an increase of 17.7% over FY 2018.

· Gold recovery for FY 2019 was 70.8%, a 22.2% improvement on FY 2018.

· Solutions to historical frothing issues in BIOX® and CIL have been determined and gold production levels are expected to be sustained during FY 2020. Studies into additional improvements are continuing.

· The gravity circuit achieved 27.4% gold recovery in Q4 2019.

· Flotation improvement has benefited overall recovery by 11% moving from 76.6% in FY 2018 to 88% in FY 2019.

· BIOX® oxidation rates are still below design with an average oxidation rate for FY 2019 of 68%.  System air capacity has been identified as a major issue to rectify, however, capital upgrades, funded by cashflow, are only expected to be in place by the end of Q4 2020. Management expects to see an improvement in the oxidation rates once further system upgrades are completed.

· CIL recovery improved to average 84% for FY 2019 against 70% for FY 2018, although still being affected by BIOX oxidation rates.

Production and Finance Summary