Magma Metals Limited: Quarterly Report for the Period Ended March 31, 2012

PERTH, WESTERN AUSTRALIA -- (Marketwire) -- 04/27/12 -- Magma Metals Limited (TSX: MMW) (ASX: MMW) -


HIGHLIGHTS

Thunder Bay North Platinum-Palladium Project, Ontario

- 71,000 platinum-equivalent ounces added to underground resources, a 53% increase to:

Indicated Resources: 1.37Mt @ 3.67g/t Pt-Eq for 162,000oz Pt-Eq
Inferred Resources: 0.47Mt @ 2.97g/t Pt-Eq for 45,000oz Pt-Eq


This represents a 10% increase in the project's overall resources to:

Indicated Resources: 9.83Mt @ 2.34g/t Pt-Eq for 741,000oz Pt-Eq
Inferred Resources: 0.53Mt @ 2.87g/t Pt-Eq for 49,000oz Pt-Eq


- A drilling program to test a number of regional ZTEM and magnetic airborne geophysical targets is in progress.

- Significant progress was made during the quarter on engineering work to enhance the economics of the project.


Western Australian Projects

- Drilling and geochemical surveys have been planned for a number of projects in the June quarter.


Corporate

- Panoramic Resources Limited announced an unsolicited conditional all-scrip takeover offer for Magma Metals. Magma's directors have unanimously recommended that shareholders REJECT the offer.

- A$9.8 million cash retained at the end of the quarter.


Magma Metals Limited ("Magma" or the "Company") is pleased to provide its activities and cash flow report for the quarter ended March 31, 2012. Field activities included drilling at the Thunder Bay North ("TBN") platinum-palladium-copper-nickel project in north-western Ontario, Canada (Figure 1). These activities and plans for further exploration work are described in this report.

To view Figure 1, please visit the following link: http://media3.marketwire.com.


NORTH-WESTERN ONTARIO, CANADA

Thunder Bay North Platinum-Palladium-Copper-Nickel Project

(Magma 100%, with options to acquire 100% of various additional claims)


Mineral Resource Upgrade

An internal geostatistical mineral resource estimate was compiled during the quarter for the East Beaver Lake Zone (Figure 2) (refer Magma announcement of February 23, 2012). This zone covers a 450m strike length of the Current Lake Intrusive Complex immediately east of the underground mineral resources estimated by AMEC Americas Limited ("AMEC") (refer to Magma announcements of September 6, 2010 and February 7, 2011 for details of the AMEC mineral resource estimates).

On a platinum-equivalent (Pt-Eq) basis, the East Beaver Lake Zone resources were estimated to be:

Indicated Mineral Resource: 0.34Mt @ 4.25g/t Pt-Eq for 46,000 Pt-Eq ounces
(1.71g/t Pt, 1.64g/t Pd, 0.08g/t Rh, 0.11g/t Au, 3.3g/t Ag, 0.55% Cu, 0.26%
Ni & 0.011% Co)

Inferred Mineral Resource: 0.26Mt @ 2.95g/t Pt-Eq for 25,000 Pt-Eq ounces
(1.26g/t Pt, 1.22g/t Pd, 0.06g/t Rh, 0.09g/t Au, 2.2g/t Ag, 0.38% Cu, 0.15%
Ni & 0.007% Co).


This increased the total underground resources by 53% to:

Indicated Mineral Resource: 1.37Mt @ 3.67g/t Pt-Eq for 162,000 Pt-Eq ounces
(1.65g/t Pt, 1.54g/t Pd, 0.08g/t Rh, 0.11g/t Au, 2.6g/t Ag, 0.43% Cu, 0.24%
Ni & 0.016% Co)

Inferred Mineral Resource: 0.47Mt @ 2.97g/t Pt-Eq for 45,000 Pt-Eq ounces
(1.32g/t Pt, 1.25g/t Pd, 0.06g/t Rh, 0.09g/t Au, 2.1g/t Ag, 0.36% Cu, 0.19%
Ni & 0.011% Co).


The total open pit and underground resources for the project increased by 10% to:

Indicated Mineral Resource: 9.83Mt @ 2.34g/t Pt-Eq for 741,000 Pt-Eq ounces
(1.12g/t Pt, 1.06g/t Pd, 0.05g/t Rh, 0.07g/t Au, 1.7g/t Ag, 0.27% Cu, 0.18%
Ni & 0.014% Co)

Inferred Mineral Resource: 0.53Mt @ 2.87g/t Pt-Eq for 45,000 Pt-Eq ounces
(1.30g/t Pt, 1.24g/t Pd, 0.06g/t Rh, 0.09g/t Au, 2.1g/t Ag, 0.35% Cu, 0.19%
Ni & 0.011% Co).


To view Figure 2, please visit the following link: http://media3.marketwire.com.

The underground mineral resource is open to the east and wide-spaced drilling in the December quarter 2011 delineated mineralization for a further 550m to the east of the resource (Figure 2) (refer to Magma announcement of December 22, 2011). This drilling indicates substantial potential to further add to the underground mineral resources. Infill drilling will be conducted in this area to provide sufficient information for resource estimation.


Regional Exploration Drilling

Magma is conducting a regional exploration program both within the intrusive complexes covering an area of about 80km2 in the TBN project and in the broader Canadian Midcontinent Rift region. Some of the outcomes of this work were previously described in Magma's announcement of December 22, 2011.

A ZTEM (Z-axis Tipper Electro-Magnetic) geophysical survey flown over the intrusive complexes in the TBN project mapped several anomalies of interest, which defined new target areas. A drilling program is in progress to test these targets. Drilling is also in progress to test an interpreted mafic-ultramafic magma conduit target in the Greenwich Lake Joint Venture (Figure 3).

To date, six drill holes have been completed for 2,524 metres in this program. A warm winter, with poor ice formation over swamps and watercourses, and subsequent recent heavy rainfall, have resulted in poor ground conditions through the quarter and delayed completion of this drilling program. It is likely that some of the five remaining planned holes will be deferred until the next winter drilling season. Down-hole EM surveys are planned for all holes drilled in this program.

Results from the drilling indicate that three of the four ZTEM anomalies tested to date appear to be related to structural zones rather than mineralisation. However, an encouraging intercept of 0.75m @ 0.27g/t Pt, 0.29g/t Pd & 0.19% Cu from 297.15m was intersected in drill hole LIL12-10 at the base of a peridotite unit in the Lone Island Lake Intrusive Complex.

To view Figure 3, please visit the following link: http://media3.marketwire.com.


Project Strategy and Engineering Studies

An independent positive Preliminary Economic Assessment (PEA) based on a potential open pit mine was completed early last year by AMEC (refer to the Company's announcement of February 7, 2011).

Since the results of this PEA were released, Magma has been undertaking additional work with the objective of substantially enhancing the economics of the project. This work is ongoing and includes the following strategies:

- Growing the resource base through step-out drilling to extend the proposed mine life;

- Including the underground resources in a proposed mine plan by utilizing appropriate cheaper and more efficient mining methods than those considered previously; and,

- Simplifying the mineral processing flowsheet to improve metal recoveries and reduce project costs and risks.


Progress on these initiatives is summarised below.


Growing the Mineral Resource Base

Since completing the PEA, and as noted above, step-out drilling has extended the strike length of mineralization by 1km to the southeast, 71,000 platinum-equivalent ounces have been added to the mineral resource base and there is clear potential for further additions. The strategy for growing the resource base is demonstrably working and is likely to have a significant positive impact on the project's mine life and overall economics.


Including Underground Resources in the Mine Plan

The mine plan developed by AMEC for the PEA featured approximately 10Mt of material at a grade of 1.9g/t Pt-Eq, for 600,000 platinum-equivalent ounces, being extracted over a seven-year mine life from an open pit. The open pit included mineralization from the Current Lake Zone, Bridge Zone and the shallower western part of the Beaver Lake Zone. The deeper mineralization in the Beaver Lake Zone was considered by AMEC in the February 2011 PEA to be a marginal economic proposition for extraction by drift and fill underground mining methods and was excluded from the mine plan. The mineral resources in this area at the time comprised approximately 135,000 platinum-equivalent ounces.

P&E Mining Consultants Inc. (P&E) of Brampton, Ontario, has completed a technical review of the PEA mine plan. P&E concluded that the open pit developed by AMEC for the PEA is optimal for the metal pricing assumptions used. They also reviewed the viability of including the underground resources in the mine plan and identified an alternative relatively cheap and efficient approach involving a combination of long hole (80%) and drift and slash (20%) mining methods. These methods are significantly lower cost than the drift and fill method considered by AMEC.

Since the PEA, and as noted above, the underground resources have been enlarged by successful exploration to approximately 207,000 platinum-equivalent ounces. Subject to further detailed review, an underground mine plan for these resources has the potential to increase the ore available for processing and extend the planned mine life to approximately 8.5 years.


Simplifying the Mineral Processing Flowsheet

To help guide future mineral processing work, Dr Louis Cabri, an expert in platinum group mineralogical studies in Canada, was engaged to conduct mineralogical characterization and deportment work on a TBN composite sample, similar in composition to that used for the PEA test work. Dr Cabri identified the Ni, Cu and PGM minerals present in the sample and provided insight into their distribution and liberation characteristics. This work indicated that a coarser primary grind size and two-stage flotation could potentially be incorporated in the process flowsheet for TBN.

A flotation optimization program was subsequently initiated in late 2011 and is nearing completion. This program, which is being conducted by G & T Metallurgical Services Ltd of Kamloops, British Columbia, has made excellent progress. Forty-five tests have been conducted to date on an average grade open pit sample composited from 198 samples taken from 112 holes within the pit area defined in the PEA. These tests have examined various flowsheet configurations, grind sizes and reagent regimes and have identified a two-product flowsheet as being optimal. This process would produce a saleable high-grade copper concentrate and a low-grade, but high-recovery, bulk concentrate.

This optimized flowsheet incorporates a significantly coarser primary grind size (k80=185 micrometres) and a simplified reagent regime, compared with that in the AMEC PEA, and is expected to result in significant capital and operating cost savings. The copper concentrate may be sold to a smelter or combined with the bulk concentrate for hydrometallurgical processing.

In addition to simplifying and optimizing the flotation circuit, Magma also investigated alternative hydrometallurgical processes to the Platsol? treatment option recommended in the PEA. The Kell Process has been identified as a potentially superior alternative; this consists of three key stages, as shown in Figure 4:

1. Pressure oxidation to leach base metal sulphides;
2. Thermal treatment to condition the PGM minerals; and,
3. Atmospheric leaching of the precious metals in chloride media.


The final products are copper and nickel cathode, cobalt cathode rounds, and a mixed PGM oxide for sale to refineries.

To view Figure 4, please visit the following link: http://media3.marketwire.com.

Kell amenability tests on a sample of TBN flotation concentrate have shown the potential for this process to improve recoveries and reduce project costs and technical risks compared with Platsol?. Results are provided in Table 1, below.


Table 1. Results of Kell Process amenability tests

----------------------------------------------------------------------------
Element                                Pt   Pd   Rh   Au   Ag   Ni   Cu   Co
----------------------------------------------------------------------------
Overall Extraction (%)                 97   99   95   96   96   99   99   99
----------------------------------------------------------------------------

Given Magma's progress to date it is anticipated that a revised PEA, incorporating an updated mineral resource, a combined open pit and underground mine plan, and an optimized mineral processing flowsheet will be completed in 2012.


WESTERN AUSTRALIA

A number of exploration programs have been planned for the June quarter, 2012, on the Company's gold projects in Western Australia. These are summarised below.


Roe Project

Four diamond drill holes are planned at two gold prospects in the Roe project 120km east of Kalgoorlie. Some historical drilling at the prospects, Claypan and Goat Dam, intersected gold mineralization associated with alteration (Figures 5 and 6). Further drilling is required at the prospects to determine their potential for significant gold mineralization. The objective of the diamond drilling is to obtain geological information on the alteration, structural geology and gold mineralization to assist in the evaluation of these prospects and targeting of further drilling programs.

To view Figure 5, please visit the following link: http://media3.marketwire.com.

The drilling at Roe is planned to commence in the next few days.


Griffins Find Project

A single diamond drill hole is planned at this project, 320km southeast of Perth. The diamond hole is designed to gather geological information on the style of gold mineralization in high grade intercepts in two RC holes drilled 75m apart on one section in the northern part of the Ridge prospect (Figure 7). These holes returned intercepts of:

Drill hole MGFRC026: 3m @ 7.65g/t gold from 41m, including 1m @ 21.7g/t
gold;

Drill hole MGFRC027: 2m @ 23.8g/t gold from 77m, including 1m @ 46.2g/t
gold.


The intercepts were reported in a Company announcement on June 7, 2010. The diamond hole is scheduled to be drilled following completion of the drilling program at the Roe project noted above.

To view Figure 6, please visit the following link: http://media3.marketwire.com.


Lake Grace Project

An auger geochemistry survey is planned to extend a previous survey which defined a large group of gold anomalies at the Lake Magenta prospect in the southern part of the Lake Grace project (Figure 8). The gold anomalies comprise a linear zone approximately 15km long, associated with an interpreted regional shear zone, and a large oval-shaped zone at the northern end of the linear zone, which covers an area of some 15km2. Limited reconnaissance drilling in these anomalies by previous explorers returned several gold intersections which have not been followed up.

Once the results of the planned survey have been received and interpreted, a drilling program will be planned to test priority targets within the gold anomalies. The auger survey will commence in the next few weeks.

To view Figure 7, please visit the following link: http://media3.marketwire.com.


Laura River Project

There are two principal targets at the Laura River project, 35km southwest of Halls Creek in the Kimberley, the north-eastern strike extension of the shear zone hosting the Nicholson's Find gold deposit and an iron-oxide copper-gold (IOCG) target centred on the Amphitheatre and Dim Whiddy prospects (Figure 9).

A large hematite alteration zone has been mapped at the IOCG target and historical surface sampling and drilling have identified copper, gold and uranium mineralization in the vicinity of Amphitheatre and gold, silver and copper mineralization at Dim Whiddy. Magma has previously reported magnetite mineralization in drilling near Amphitheatre (refer to Magma announcement of April 27, 2010).

A multi-element auger geochemistry program has been planned to cover the large hematite alteration zone, which appears to encompass this IOCG target (Figure 9). The survey will cover an area of approximately 16km2 and will commence when the Lake Magenta survey has been completed. The results will be used to plan further drilling in the target area.

To view Figure 8, please visit the following link: http://media3.marketwire.com.

To view Figure 9, please visit the following link: http://media3.marketwire.com.


CORPORATE

Panoramic Takeover Bid

On February 3, 2012, Panoramic Resources Limited (Panoramic) announced its intention to make a conditional offer to acquire all the Magma shares it does not own. Subsequently, Panoramic and Magma have released their respective Bidder's and Target's Statements and Supplementary Statements, as well as various announcements and letters to shareholders in relation to the bid. The current offer closes on May 10, 2012.

Magma's Directors remain firmly of the view that the bid is opportunistic and undervalues the Company's assets. This is supported by the conclusion of the Independent Expert appointed by Magma, BDO Corporate Finance (WA) Pty Ltd, that the Panoramic offer is "NEITHER FAIR NOR REASONABLE" to Magma shareholders. The Independent Expert estimated a value range of between $0.265 and $0.475 per Magma share, with a preferred value of $0.37 per Magma share. Based on the closing price of Panoramic shares on the ASX on April 26, 2012 of $1.07, its offer of 2 Panoramic shares for every 17 Magma shares equates to an approximate value of only $0.126 per Magma share.

As at the date of this report, Panoramic had received acceptances (including commitments under its institutional acceptance facility) for only 7.8% of Magma shares.

The Board continues to unanimously recommend that Magma shareholders REJECT the Panoramic offer.


Court Proceedings - Laverton Project

As previously announced on April 10, 2012, Magma has commenced proceedings in the Supreme Court of Western Australia against Crescent Gold Ltd and Indago Resources Pty Ltd to protect its rights under its Concurrent Rights Agreement for Ni-Cu-PGM on its Laverton Project.


Capital Structure and Cash on Hand

As of March 31, 2012, Magma Metals Limited had 267,380,923 shares on issue. In addition, there were 13,705,000 unlisted options outstanding.

Magma retained A$9.8 million in cash at the end of the quarter.

The aforementioned cash flow report for the quarter ended March 31, 2012 is available on the Company's website at www.magmametals.com.au and is filed under the Company's profile on SEDAR at www.sedar.com.


Technical Information

Additional information on Magma and its projects, including descriptions of its quality control and assurance procedures, is available on its website at www.magmametals.com.au and in technical reports filed under the Company's profile on the SEDAR website www.sedar.com.

Drill-hole location and detailed assay data for all drill-holes mentioned in this report but not provided herein have been provided in previous announcements during the quarter. These are available on the Company's website at www.magmametals.com.au. Drill hole collar and depth information for vertical drill hole LIL12-10 is as follows: Easting 349446m, Northing 5400717m, depth 351m. All drill intercepts referred to in this report are down-hole thicknesses and may not represent true thicknesses.

Assays for samples from Canada were conducted at the ALS Laboratory Group facility in Vancouver, British Columbia, following sample preparation at their facility in Thunder Bay, Ontario. Sample preparation and assays for samples from Australia were conducted at the ALS Laboratory Group facility in Perth, Western Australia.

For further information on the mineral resource estimates referred to in this report, including calculation of platinum equivalents (Pt-Eq), refer to the Company's announcements of September 6, 2010, February 7, 2011 and February 23, 2012.


Competent & Qualified Persons' Statement

The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled, reviewed or prepared by Dr Keith Watkins and/or Mr Ralph Porter, the Managing Director and General Manager Exploration - Australia of Magma Metals Limited, respectively. Dr Watkins is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists; Mr Porter is a Member of the Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists. Dr Watkins and Mr Porter are each a "qualified person" as such term is defined in National Instrument 43-101 - Standards of Disclosure for Mineral Projects. Both Dr Watkins and Mr Porter have sufficient experience, which is relevant to the style of mineralization and type of deposit under consideration and to the activities undertaken to qualify as Competent Persons as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC Code). Dr Watkins and Mr Porter consent to the inclusion in the report of the matters based on this information in the form and context in which they appear.


Cautionary Statement Regarding Forward Looking Statements

Certain information contained in this report constitutes "forward-looking information" under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects", "is expected", "estimates", "intends", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Although management believes that the expectations expressed in such forward-looking information disclosed herein are based on reasonable assumptions, these statements are not guarantees of future performance. A number of factors could cause actual results, performance or achievements to differ materially from those in the forward-looking information. Such factors include future metal prices, exploration and evaluation results, future availability of capital and general economic, market or business conditions, government regulation of mining operations, failure of equipment or processes to operate as anticipated, risks inherent in mineral exploration and development including unusual or unexpected geological formations. Descriptions of these risks can be found in the Company's various statutory reports, including its Annual Information Form available on its website at www.magmametals.com.au and on the SEDAR website www.sedar.com.

ABN 72 114 581 047



Contacts:

Magma Metals Limited
Keith Watkins, Managing Director & CEO
+61 (0)8 9287 7300 (Perth)
+61 (0)8 9287 7370 (FAX)
keith.watkins@magmametals.com.au

Magma Metals Limited
Greg Taylor, Investor Relations
+1-905-337-7673 (Toronto) or Mob: +1-416-605-5120
gtaylor@magmametals.ca
www.magmametals.com.au