Adelaide, June 1, 2006 (ABN Newswire) - Metallica Minerals Limited (ASX: MLM) could extract significant value from its heavy mineral sands tenement, located approximately two kilometres south of Weipa on the west coast of Queenland's Cape York Peninsula, under a farm-out joint venture agreement announced today with ASX-listed Matilda Minerals Limited (ASX: MAL).

"Metallica has signed a joint venture agreement with Matilda - a group with proven experience in successfully exploring and developing modest size mineral sand deposits - that will underpin a substantial exploration program. The joint venture offers future returns in the event of a mining development while allowing Metallica to remain focused on developing its flagship NORNICO nickel project in North Queensland," Metallica Managing Director, Mr Andrew Gillies, said.

The joint venture tenement contains the zircon and rutile rich Urquhart Point mineral sands deposit discovered in the 1950's. The Geological Survey of Queensland reported "the heavy mineral (HM) content ranges up to 70% over sections from two to nine feet deep and averages 32%HM. The HM contains on average 28% zircon and 25% rutile (Area C - the high-grade zone). In addition there are approximately 20 km of largely untested prospective sandplain in the tenement".

"Metallica's high grade Urquhart Point zircon and rutile sand deposit and surrounding prospective areas is the logical starting point for advanced exploration and complements Matilda's strategic presence within a new potentially substantial mineral sands province," Mr Gillies said.


The key terms of the agreement between Metallica's wholly-owned subsidiary, Oresome Australia Pty Ltd, and Matilda over Metallica's tenement, Exploration Permit Minerals Application (EPMA) 15268 are:

1. Matilda will pay $20,000 and issue 100,000 fully paid ordinary shares to Oresome immediately.

2. Matilda will manage all exploration.

3. To earn the 70% interest Matilda must spend $1 million on exploration within 18 months of the grant of the Tenement.

4. The following contingent consideration may also be payable to Oresome:

- issue of 400,000 shares in Matilda upon grant of a mining lease;

- issue of a further 1,500,000 shares in Matilda upon completion of a positive feasibility study leading to a decision to mine.

5. Upon Matilda earning 70% interest in the Tenement, further activities on the Tenement will be undertaken in joint venture ("the Joint Venture") with expenditure funded by the parties in proportion to their respective percentage interests, failing which, dilution will apply. Matilda will manage the Joint Venture.

6. Matilda has the right to withdraw from the Farm-in Agreement if it is not satisfied with exploration results provided that, at the time of withdrawal, it has complied with pro rata expenditure requirements.

7. The Farm-in Agreement is subject to any approvals required under the Mineral Resources Act of Queensland.

EPM 15268 is currently under application only and the joint venture agreement is conditional upon the grant of the tenement.

At recent Matilda share prices around 60 cents, Metallica's potential shareholding of up to two million shares is valued at $1.2 million.

"A successful development on Cape York Peninsula would see Metallica not only retaining a 30% direct share in the joint venture but also gaining a significant stake in one of Australia's specialist mineral sands explorers," Mr Gillies said.

Increased world wide demand for zircon has led to its price strengthening to above US$800 per tonne.

Matilda also has a first right of refusal to farm in to any one or more of Oresome's other Western Cape York EPMA's 15370, 15371, and 15372.

Source:
Peter Gill
Senior Consultant
FIELD PUBLIC RELATIONS

231 South Road
MILE END SA 5031
Tel: 08 8234 9555
Fax: 08 8234 9566
Mb: 0417 784 059
peter@fieldpr.com.au

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