Mineral Commodities Ltd

ACN 008 478 653

ABN 39 008 478 653

Quarterly Activities Report

for the Period Ended 30 June 2015

For enquiries regarding this report please c ontac t: Mark Caruso
+61 8 6253 1100

40 M urray Road N orth

Welshpool WA 6106, Australia PO Box 235, Welshpool DC WA 6986, Australia Telephone: 61 8 6253 1100

Facsimile: 61 8 9258 3601

Email: info@mineralcomm odi ti es.com
Web: w w w .mineralcommodities.com

Note 1:- Includes reconciled March 2014 production statistics, adjusted for commissioning.

TORMIN - OPERATIONAL PERFORMANCE

Safety, Environment & Community

There were no LTI's reported for the quarter.
The Company has now ac hieved 1,066,303 hours without a lost time injury (LTI)
sinc e Oc tober 2013.
As previously advised, the Environmental Management Program ("EMP") Amendment for the Tormin mine was granted by the Department of Mining and Resourc es ("DMR") on 14 April 2015.
The Company proc eeded to finalise the rezoning of the additional area granted under the EMP with the Matzikama Munic ipality and finalised all other authorizations to access the additional land area. The Company has been advised that it c an proc eed to develop the expanded area and has c ommenc ed to c lear the 9.8ha of land as approved in the EMP102 amendment.
During the quarter the Xolobeni Mining Right Applic ation was ac c epted by the DMR. The Company also c ommenc ed the Xolobeni Projec t Mining Right Applic ation Public Partic ipation Proc ess for the Environmental Sc oping Report, whic h was submitte d in April 2015 with all interested and affec ted parties' c omments.
Good progress has been made on the ground at Xolobeni between the anti-mining and pro-mining protagonists who have c ollec tively and of their own volition, forme d a Steering Committee to manage all aspec ts of the Mining Right Applic ation.

Mining

During the June quarter 456,624 tonnes (20% above Budget) of Run of Mine ("ROM") ore grading 40.50% Valuable Heavy Mineral ("VHM") was mined c onsisting of a garnet grade 24.50%, ilmenite grade 12.08% and zirc on grade 3.40%.
An inc reased understanding of the mining methodology c onsistent with the dynamic s of the beac h replenishment c yc le is providing for a more refined mining operation. This will result in a more dedic ated pre-stripping of the light-heavy sands whic h are deposited as part of the replenishment cyc le.
Proposals were rec eived by various international and loc al South Afric an c onsultants to c onduc t bathometric offshore surveys and wave refrac tion studies with a view to providing requisite information to identify the best method of undertaking surf zone sampling for offshore resourc e definition and to investigate mining tec hniques of the surf zone area that lies between the low tide mark and wave break zone. The studies intend to be c ommenc ed during Q3 of 2015.
The primary purpose of these studies is to determine the deposition of VHM, whic h is known, and develop a sampling and exploration tec hnique whic h will allow a Resourc e Categorization.

Processing

Heavy Mineral Conc entrate ("HMC"), produc tion through the two Primary Beac h
Conc entrators ("PBC") produc ed 112,216 tonnes for the June quarter. This was
26.5% below budget. The balanc e of Sec ondary Conc entrator Plant ("SCP") feed of some 36,979 tonnes was sourc ed as direc t feed from high grade ROM material, whic h required no primary c onc entration.
The reduc ed HMC produc tion was due to bottle nec king of the tailings return system whic h was found to be installed with inc orrec t motor sizing, whic h limited PBC through put by some 25%-30% for the first 4-6 weeks of the quarter. Further performanc e stability on the PBCs should be evident in the c oming months due to the installation of an Anac onda mobile feeder sc reener unit whic h arrived in early June, and whic h will assist in the removal of gravel oversize material.
The Company proc essed 149,194 tonnes through the SCP in the June quarter, whic h was slightly (2.3%) below budget.
The disc harge of tailings to the shorter route in front of the SCP is working well. Sea water intake is stabilised and final c onstruc tion of the extension to the sea water groyne by some 20 metres took plac e.
SCP plant rec overies were well above budget for Rutile and Ilmenite and slightly below for Zirc on and Garnet.
Zirc on/Rutile c onc entrate produc tion for the quarter was 11,314 tonnes versus budget of 14,056 tonnes. Contained zirc on in the c onc entrate of 73.4% was in line with budget target at 74% zirc on, whilst rutile was above budget at 12.94% c ontained rutile in c onc entrate.
For the June quarter, ilmenite c onc entrate produc tion was 29,483 tonnes versus budget of 29,316 tonnes, and garnet c onc entrate produc tion was 61,847 tonnes versus budget of 75,949 tonnes.
The deposition of heavy minerals via the replenishme nt c yc le during the aggressive winter storm season also resulted in some Zirc on/Garnet rec overy issues in the PBCs due to the c hanging dynamic s of the ROM material and the requirement to adjust spiral settings on the PBCs. This was further exac erbated by the stoc kpiling of some Garnet and Ilmenite c onc entrates on the beac h, whic h resulted in the mobilization of the stoc kpile through tidal movements and some c ontamination of mining areas. Ac c ess to EMP102 expanded footprint area to fac ilitate bulk c onc entrate stoc kpiling at the plant site, as opposed to the beac h, will assist in alleviating most of these issues.

Cash Costs

Total ex-works mining, proc essing and site administrative unit c ash c ost per tonne of Zirc on/Rutile c onc entrate for the quarter was US$442.68/t ZR c onc entrate produc ed, being above budget of US$311.68/t ZR c onc entrate due primarily to the lower produc tion volumes.

Tormin Sales and Marketing

Sales revenue for the June quarter was US$8.37 million, below the budget of
$11.91 million.
Tormin shipments / sales for the June quarter were:

• 11,622 tonnes of Zirc on/Rutile c onc entrate.

• 66,312 tonnes of Garnet c onc entrate, sold as an interim stoc kpile to Garnet

International Resourc es Pty Ltd ("GMA").
Sales revenue was impac ted by the lower Zirc on/Rutile c onc entrate produc tion, a c arry-over of Zirc on/Rutile c onc entrate quality c laims from Q1, and a revised interim pric e for Garnet stoc kpile sales to GMA.
As announc ed during the quarter, the Pre-Financ e and Marketing Agreement between the Company and Wogen Pac ific Limited ("Wogen") dated 31 July 2013 ("Agreement") was terminated.
The termination of the Agreement meant that the Company was free to sell its non- magnetic Zirc on/Rutile c onc entrate to buyers on an unrestric ted basis. The Company c ompleted Q2 Sales through a marketing agent and expec ts to undertake Q3 sales direc tly with c ustomers, with no c ommissions being paid on these sales.
Further analysis and sampling of the quality c laims for c ertain shipments of its Zirc on / Rutile c onc entrate in Q1 are ongoing. The Company is c onfident of its quality management proc esses in terms of sampling and analysis.
The Company's Zirc on/Rutile c onc entrate produc t remains in strong demand, with demand outstripping supply for the forthc oming quarter.
Garnet c onc entrate produc tion will c ontinue to be supplied and sold under the c ontrac t with GMA and stoc kpiled within South Afric a. The Garnet c onc entrate will then be shipped at GMA's disc retion. The revenues for stoc kpiled Garnet are initially lower with full sales value rec eived upon shipment.
The Ilmenite market remains in oversupply, whic h has stalled the Company 's moves to sell its produc t. Notwithstanding this, there is still a demand for the Company's Ilmenite c onc entrate produc t, if it is able to tertiary proc ess finished Ilmenite.

Tormin Resource and Offshore Prospecting Activities

The Company published its full annual resourc e assessment in its Annual Report for the year ended 31 Dec ember 2014. Full details c an be viewed in the Annual Report whic h was lodged with the ASX on 24 April 2015.
The assessment provided that the total tonnages mined during 2014 (1.07 millio n tonnes) replenished and were re-c lassified as an Inferred Resourc e as follows:

Note: individual minerals are reported as a perc entage of the total resourc e.
The inferred resourc e is based on the reasonable prospec t for the ec onomic extrac tion of the material, as has oc c urred during the past year.
The Company c ontinues to c onduc t grade rec onc iliation and sample grading on a daily basis as part of the mining operation to c orrelate between stated Resourc e and ac tual Resourc e in terms of quantity, grade and replenishment.
Whilst initial exploration work has been undertaken on the replenished areas, the fac t remains that the beac h c onstantly c hanges with both tidal movement and mining.
The Company c ompleted all Regulatory requirements in relation to its Prospec ting
Right Applic ation whic h extends its prospec ting area 10km seaward, or a total of
120km2.
A dec ision relevant to the granting of the Prospec ting Permit is still pending.
During the quarter, the Company's subsidiary Mineral Sand Resourc es Pty Ltd ("MSR") submitted a prospec ting applic ation for heavy mineral sands over 24km stretc h of c oastline just to the north of its Tormin Mine. The applic ation was ac c epted by the Department of Mineral Resourc es - Western Cape.
The area under applic ation enc ompass approximately 398ha and extends from the northern boundary of the Tormin Mining Lic enc e area up to 24km northwards near Jakkalshok - only a few kilometres south of the Tronox heavy mineral sand mine - Namakwa Sands. The area under applic ation is known to host heavy mineral sand deposits and have been the subjec t of previous exploration work done by Trans Hex.
MSR is c urrently busy with a sc oping level environmental assessment and full public partic ipation exerc ise. This is required as the prospec ting applic ation inc ludes bulk sampling whic h is a listed ac tivity requiring environmental authorisation under the National Environmental Management Authority ("NEMA").

CORPORATE

The Blastrite matter was heard in Court in South Afric a in early June. The Company's Advoc ates strenuously opposed the applic ation. The Company's legal advoc ates are c onfident of a positive verdic t and a judgment is expec ted towards the end of August 2015.
The c onstruc tion of the Tailings Sc avenger Spiral Circ uit ("TSP") was c ommenc e d during the quarter and is on sc hedule and budget to be c ompleted and c ommissioned by end-September 2015. Whilst the TSP c apital c ost is able to be financ ed out of operating c ash flow, an in princ iple agreement has been reac hed with a financ ier for a sale and leasebac k arrangement on c ommissioning of the plant.
The test work has shown that the introduc tion of the TSP will result in an inc rease in total heavy mineral rec overy from 66% to 89% with the inc orporation of the sc avenger c irc uit. This equates to 147.0ktpa of additional HMC produc tion for both PBC units, grading 87.4% HM, whic h inc ludes 57,861 tonnes Garnet, 58,350 tonnes Ilmenite, 1,783 tonnes Rutile and 10,546 tonnes Zirc on.
The test work also showed an inc rease in Zirc on rec overy from 83.8% to 95.18%. The Garnet Stripping Plant ("GSP") expansion initiatives were delayed due to the
EMP102 regulatory approval proc esses. Now that the approvals are in plac e and
subjec t to final financ ing, the GSP is now expec ted to be implemented in the first half of 2016. Initial engineering design and ordering of some long lead items has c ommenc ed.
The Company is well advanc ed with the development of its financ e options for the GSP. The major Shareholders who previously provided a working c apital fac ility and have extended the term of the loan to 30 September 2015 will be c onsulted to allow the Company to c ontinue to explore all options with traditional financ iers and to provide suffic ient time to c onc lude the initiatives.
On a c ounter-c yc lic al investment strategy and given the downturn in the mining industry, the Company c onsiders there to be investment opportunities in strategic base minerals. To this end the Company c ontinues to investigate ac tively other projec ts whic h fit within its area of expertise and mineral development profile.
The Company is also c onsidering its dividend polic y, and based on a solid operational performanc e in its first 18 months, expec ts this polic y to be finalised in the sec ond half of FY15.

Cash Flow

At 30 June 2015, the Company had US$2.0 million in c ash, a dec rease of US$0. 1 million from the previous quarter. Trade and other rec eivables at 31 Marc h 2015 of US$6.4 million inc reased to US$7.5 million as at 30 June 2015.

Xolobeni

The ac c eptanc e of the Mining Right Applic ation in April triggered the Public Partic ipation Proc ess for the Environmental Sc oping Report Submission. The Public Partic ipation Proc ess resulted in the submission of the Environmental Sc oping Report during the quarter.
Notwithstanding a negative public press c ampaign, inc orporating intense lobbying by anti-mining and pro-environmentalist groups that resulted in an interruption to the c ommenc ement of the next phase of the projec t development studies, for a period of four weeks the Company made good progress with its c onsultants to c onduc t all nec essary baseline and tec hnic al studies to move the projec t through to the submission of an Environmental Impac t Assessment Report, whic h is required as part of the Mining Right Applic ation proc ess.
Enc ouragingly, meetings were held in June between the Amadiba Crisis Committ e e ("ACC") and pro-mining members, resulting in the formation of a Steering Committee whic h have allowed a peac eful and c oordinated ac c ess for c onsultants undertaking public partic ipation proc esses. The Steering Committee will meet regularly to deal with all aspec ts of the mining right approval proc ess that affects the c ommunity.
The Company is maintaining its efforts to c onc lude baseline studies within the regulatory timeframes.

Outlook

Sales guidanc e for the c oming quarter should be in the order of 11,000 to
12,000 tonnes of Zirc on/Rutile c onc entrate, and its entire produc tion of Garnet c onc entrate at c irc a 70,000 tonnes.
The Company produc es the highest grade Zirc on/Rutile c onc entrate imported into China. The strong demand for Q3 produc tion of c irc a 12,000 tonnes from Chinese Buyers and independent marketing of the Company's produc tion c ontinues to see inc remental inc reases in the pric ing.
In addition the Company has initiated a Sc oping Study in c onjunc tion with GMA for the c onstruc tion of a Mineral Separation Plant ("MSP") plant to produc e final ilmenite, zirc on, rutile and garnet produc ts from its Tormin mine. The Company is of the opinion that this will be a signific ant value add opportunity.

Securities on Issue

Issued sec urities at quarter-end c omprise:

• 404,941,571 fully paid ordinary shares listed on the ASX.

• 10,000,000 Unlisted Options exerc isable at $0.20 on or before 31 Dec embe r

2015.

• 1,000,000 Unlisted Options exerc isable at $0.35 on or before 31 Dec embe r

2015.

• 5,000,000 Unlisted Options (issued during the quarter) exerc isable at $0.20 on or before 30 May 2018 and subjec t to the following vesting c onditions:

Terms and Explanations

ACC Amadiba Crisis Committee

ASX Australian Stoc k Exc hange

EMP Environmental Management Program DMR Department of Mining and Resourc es GSP Garnet Stripping Plant

HM Heavy Mineral

HMC Heavy Mineral Conc entrate

LTI Lost Time Injury

MRA Mining Right Applic ation

NEMA National Environmental Management Authority

MSP Mineral Separation Plant

MSR Mineral Sands Resourc es Pty Ltd PBC Primary Beac h Conc entrator ROM Run of Mine

SCP Sec ondary Conc entrator Plant

TRS Tailings Return System TSP Tailings Sc avenger Plant VHM Valuable Heavy Mineral WMT Wet Metric Tonnes

APPENDIX 1 - RESOURCE STATEMENT

The Tormin and Xolobeni Mineral Resourc es based on mined material rec onc iliation as at 31 Dec ember 2014 for the Tormin Resourc e is as follows - note individua l minerals reported as a perc entage of the total heavy mineral c onc entration.
The mineral resourc e estimations previously reported under JORC 2004 for the
Tormin Resourc e, are re-presented with updated disc losure of Table 1 from JORC
2012.

APPENDIX 2 - LISTING OF TENEMENTS

The following information is provided pursuant to ASX Listing Rules 5.3.3:

The Company has no interests held in any farm-in or farm-out agreements.

Competent Persons Statement

The information in this announc ement whic h relates to Exploration Results, Minera l Resourc es or Ore Reserves for Xolobeni is based on information c ompiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosc ienc es ("AIG"), a Corporate Member of the Australasian Institute of Mining & Metallurgy ("AusIMM") and independent c onsultant to the Company. Mr Maynard is the Direc tor and princ ipal geologist of Al Maynard & Assoc iates Pty Ltd and has over 35 years' of exploration and mining experienc e in a variety of mineral deposit styles. Mr Maynard has suffic ient experienc e whic h is relevant to the style of mineralisat io n and type of deposit under c onsideration and to the ac tivity whic h he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasia n Code for reporting of Exploration Results, Exploration Targets, Mineral Resourc es and Ore Reserves" (JORC Code). This information was prepared and first disc losed under the JORC Code 2004. It has not been updated sinc e to c omply with the JORC Code 2012 on the basis that the information has not materially c hanged sinc e it was last reported. Mr Maynard c onsents to inc lusion in the report of the matters based on this information in the form and c ontext in whic h it appears.
The information in this announc ement whic h relates to Exploration Results, Minera l Resourc es or Ore Reserves for Tormin is based on information c ompiled by Mr Adriaan du Toit, who is a Member of the Australian Institute of Mining & Metallurgy (AusIMM) and an independent c onsultant to the Company. Mr du Toit is the Direc tor and princ ipal geologist of AEMCO PTY LTD and has over 23 years' of exploration and mining experienc e in a variety of mineral deposits and styles. Mr du Toit has suffic ient experienc e whic h is relevant to the style of mineralisation and type of deposit under c onsideration and to the ac tivity whic h he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resourc es and Ore Reserves (JORC Code,
2012 Edition). The information from Mr du Toit was prepared under the JORC Code
2012 Edition. Mr du Toit c onsents to inc lusion in the report of the matters based on this information in the form and c ontext in whic h it appears.