Andromeda Metals : December 2016 Quarterly Activities Report

Andromeda Metals Limited

ABN: 75 061 503 375

Corporate Details

ASX Code:

ADN (ordinary shares)

Cash at 31 December 2016:

$0.298 million.

Issued Capital

at 31 December 2016:

405,767,063 ordinary shares

Directors

Colin G Jackson

Non-executive Chairman

Chris Drown Managing Director

Nick Harding

Executive Director and Company Secretary

Jonathan Buckley

Non-executive Director

Contact Details

69 King William Road, Unley, South Australia 5061

PO Box 1210

Unley BC SA 5061

Tel: [phone]

Fax: [phone]

[e-mail] www.andromet.com.au

Quarterly Report

Period ending 31 December 2016

Overview Eyre Peninsula gold (100%interest)

• A reverse circulation drilling programme at the Baggy Green prospect,

  located near the Barns deposit, returns the best intersections recorded to date.

• Adjacent 50 metre spaced holes BGRC‐1222 and BGRC‐1223 recorded 16 metres at 5.72g/t gold and 11 metres at 9.32g/t gold respectively.

• Modelling of the Baggy Green exploration data confirms it can materially increase the local resource base in the Barns Gold Camp, with Mineral Resource estimation for Baggy Green now underway.

• Metallurgical testwork programme for the Barns deposit nearing completion.

  Rover Joint Venture (100% interest diluting to 49%)

• Heads of Agreement pursuant to a Farm‐in and Joint Venture executed

  with Emmerson Resources Limited catalysing a renewed period of exploration on this highly prospective project.

• Emmerson will sole fund $2.0 million within 3 years of execution to earn a 51% equity position, following which it can elect to sole fund a further

  $2.0 million over an additional 3 year period to increase its equity to 75%.

  Finance

• The Company's available cash position stood at $0.298 million at 31 December 2016.

• Receipt of a $179,529 research and development refund during the quarter.

  Corporate

• Shareholders approved a change of Company name from Adelaide Resources Limited to Andromeda Metals Limited effective from 1 January 2017. The "ADN" ASX ticker remains unchanged.

Chris Drown Managing Director 11 January 2017

Direct enquiries to: [phone] or

0427 770 653

Managing Director's review

On 11 September 2016 Adelaide Resources Limited celebrated 20 years as an ASX listed company. Throughout its history it has diligently maintained an active programme

of exploration with the single goal of increasing shareholder wealth through mineral discovery.

Over the years the Company has found mineral deposits of various commodities in a range of locations, confirming its ability to successfully discover metal. It has perhaps lacked the important element of luck that delivers results so compelling, that the market sees clear potential for mine development at a very early stage, and then revalues the stock aggressively.

Despite the continuing release of promising exploration results, in recent times the Company has struggled to maintain market attention to the detriment of its share price.

Consequently, following shareholder approval, the Company's name has been changed to Andromeda Metals Limited with the goal being to present the Company to the market in a fresh new light. Andromeda is a galaxy and serves as a metaphor for our efforts to reach for the stars as we unearth metals.

Unearthing gold was what we achieved during the quarter, with drilling at the Baggy Green prospect on Eyre Peninsula delivering the best results yet recorded. Our aim at Baggy Green

is to define mineralisation to build our resource position in the Barns Gold Camp and increase the economic robustness of this project.

New modelling of Baggy Green confirms it can materially add to the local resource position, and estimation of a JORC 2012 reportable Mineral Resource is now underway.

We have also executed a Heads of Agreement pursuant to a farm‐in and joint venture deal with Emmerson Resources Limited on the Rover project, a development that will see this highly prospective but in recent times, idle asset reinstated to the active category.

We look forward to enthusiastically pursuing our programmes and progressing shareholder interests in 2017, and trust that all have had an enjoyable festive season.

Eyre Peninsula gold

Andromeda Metals' Eyre Peninsula gold project comprises eight tenements securing an area

of 2,807 km2 in the Gawler Craton.

The Company's efforts on Eyre Peninsula are directed toward advancing the wholly owned Barns Gold Camp, a cluster of gold prospects including Barns, White Tank and Baggy Green, into production.

Last quarter the Company released a Mineral Resource estimate for the Barns deposit of 2.11 million tonnes at 1.6g/t gold for 107,000 ounces of gold using a 0.5g/t gold cut‐off grade(1).

An assessment of the Barns resource by independent mining consultants found that increasing the resource base in the Barns Gold Camp by adding further shallow resources would improve the robustness of the project.

The Baggy Green prospect offered a good opportunity to deliver additional resources, and a reverse circulation drilling programme was completed during the quarter.

Baggy Green RC drill programme

The Baggy Green drill programme totaled

23 holes for 1,515 metres. The majority of holes tested around historical gold intersections in

the southern part of the prospect, while six holes were drilled at Baggy Green North.

As one of the goals of the programme was the definition of shallow ounces, drilling targeted mineralisation commencing within 100 metres of the surface. Additionally, hole spacings were designed to be close enough for use in mineral resource estimation.

Results from the main southern target included the two best intersections recorded to date from the prospect. Adjacent 50 metre spaced holes BGRC‐1222 and BGRC‐1223 recorded

16 metres at 5.72g/t gold and 11 metres at 9.32g/t gold respectively.

The drilling confirms the presence of a gently dipping, coherent zone of gold mineralisation which persists for 500 metres along strike, and remains open to the north, south, and

at depth.

Within the mineralised zone between one and three sub‐parallel gold lodes of variable grade are present. Variable gold grade within the plane of the mineralised structure is a common feature of gold deposits, and at Baggy Green

this grade variation is interpreted to indicate the presence of high grade gold shoots.

Drilling at Baggy Green North intersected only weak mineralisation, however the results are consistent with a mineralised zone striking east‐ west and dipping to the north, requiring a re‐ oriented drill pattern for future evaluation.

Baggy Green mineral resource estimation

3‐D modelling of the main southern mineralised zone at Baggy Green, incorporating the recent RC programme results, has been completed.

While the deposit remains open in three directions, the modelling confirms that the

500 metre long area now drilled in some detail shows excellent potential to deliver shallow resources that can materially build on the 107,000 ounce gold Mineral Resource at the nearby Barns deposit.

Consequently, the Baggy Green exploration database and the deposit model have been presented to independent consulting group Mining Plus Pty Ltd for block modelling, grade interpolation and estimation of a Mineral Resource which can be reported in accordance with the 2012 JORC Code. Announcement of the resource is anticipated in early 2017.

Barns metallurgical testwork

Three composite samples, one from

the supergene gold zone and two from the underlying primary gold zones, were prepared from diamond drill core from the Barns deposit and submitted to a specialist laboratory for metallurgical testing.

The results of the testing will assist in determining gold recoveries using a range

of metallurgical flow sheet options, providing information that can be incorporated in future economic assessments of the deposit.

The various components of the metallurgical study were completed late in December 2016, with announcement of the results anticipated in early 2017.

Rover copper‐gold

On 15 November 2016 the Company announced that it had executed a Heads of Agreement with Tennant Creek focused explorer Emmerson Resources Limited ("ERM") to form the Rover Farm‐in and Joint Venture over the Company's 100% owned Rover copper‐gold project in the Northern Territory.

Under the terms of the Agreement, ERM will sole fund $2.0 million within 3 years

of execution to earn a 51% equity position, following which it can elect to sole fund

a further $2.0 million over an additional

3 year period to increase its equity to 75%.

An unincorporated joint venture can be formed once ERM has spent $2.0 million, after which each party will contribute to expenditure

in accordance with their respective equity, or dilute using a standard industry formula.

ERM must spend at least $0.5 million in the first year of the farm‐in before it has a right to withdraw, and will act as manager and operator during the farm‐in and thereafter while it holds majority equity.

The deal with Emmerson will see a renewed period of exploration activity on these highly prospective copper‐gold tenements.

Drummond epithermal gold

In early 2016 the Company applied for two tenements to significantly expand its holdings in the Drummond Basin. Both of these titles have now been granted, allowing on‐ground exploration to commence once landowner consents have been established.

Subject to funding, the Company remains committed to drill testing the Bunyip, Roo Tail, Poppi's and East Central Limey gold targets.

Thurlga Joint Venture

The Thulga Joint venture over EL 5149

on the norther Eyre Peninsula is managed

and operated by Investigator Resources Limited.

During the quarter a Heritage Clearance Survey was completed, allowing drill testing of several targets in early 2017.

Lithium projects

Hard rock lithium tenements -NT & WA

A preliminary rock chip sampling programme on exploration licence application EL31211

in the Davenport Province in the Northern Territory failed to find lithium but recorded significant tungsten, tantalum and niobium.

Ore grade tungsten up to 1.41% WO3 was recorded in samples collected from a quartz‐ tourmaline vein at the Juggler prospect.

A successful trial FPXRF soil survey identified anomalous tungsten coincident with the vein outcrop, suggesting this method can be used as an effective low cost exploration tool.

Whether the Company pursues this opportunity in its own right or with a qualified partner is yet to be determined.

Lithium brines ‐ SA

In light of likely ground access impediments, and the increasing number of successful lithium exploration programmes being reported in

Australia and elsewhere which have potential to significantly impact supply, the Company has resolved not to advance any South Australian salt lake tenement applications to grant.

Moonta copper‐gold

Negotiations with a third party interested in the copper dominant Moonta project continue.

Finance and corporate

The Company had $0.298 million in available cash at 31 December 2016, with a continued focus placed on the implementation of cost saving measures in order to conserve cash.

During the December quarter, the Company received a $179,529 research and development refund from the ATO for the 2015/16 financial year.

(1) See ADN's ASX release dated 19 July 2016 titled "Maiden 107,000 ounce gold resource estimated for Barns deposit" for full JORC information.

Competent Person Statement and 2012 JORC Compliance Notes

The information in this report that relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Chris Drown, a Competent Person, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Drown is employed by Drown Geological Services Pty Ltd and consults to the Company on a full time basis. Mr Drown has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Drown consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information contained in the report relating to exploration completed prior to 1 Dec 2013 by the Company and other explorers was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The information contained in the report relating to exploration completed since 1 Dec 2013 has previously been reported in accordance with the JORC Code 2012, see ADN's ASX releases dated 3 November 2016, 15 November 2016, 28 November 2016,

and 29 November 2016.