Unit 7, 11 Colin Grove. West Perth, WA 6005 Telephone: +61-8-9463 6656; Facsimile: +61-8-9463 6657

E-mail: admin@malagasyminerals.com Web Site: www.malagasyminerals.com

QUARTERLY REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009

Trading On ASX (Code ‘MGY’) EXPLORATION

• Fotadrevo Vanadium project – 6.5km long mineralised zone identified. Costeaning totalling 1,870 metres completed over 6 targets. Analyses underway with results expected early February 2010. Prospecting extends main zone to 8.0 km;

• Vohibory Project drilling programme – four holes for 620 metres completed. Sampling underway, with assay results expected by mid-February 2010. Assaying of soil geochemical samples underway. Detailed geological mapping completed at 1:10,000 scale for whole project. Additional targets to be drill tested in 2010;

• Ampanihy Ni-Cu - Analysis of potential targets continuing. detailed prospecting of selected targets, corresponding with VTEM anomalies, to be undertaken prior to final selection of VTEM conductors for modelling;

LABRADORITE • Labradorite royalty revenues continue to support operations in Madagascar.

OTHER OPERATIONS

• Intertek-Genalysis and Kirk Petrophysics laboratory facilities both fully operational – resulting in substantial upgrades to company’s facilities.

• Rental income continues to grow, supplementing operation costs in Madagascar.

HIGHLIGHTS

1

EXPLORATION PROJECTS

Malagasy Minerals has maintained an aggressive but economically prudent development programme in respect of its exploration and commercial assets in Madagascar; completing additional important milestones during the December 2009 quarter. A full description of each of the company’s projects can be found on the Company’s website which is located at www.malagasyminerals.com . All of the company’s projects are 100% owned. A summary of activities for the quarter ending 31st December 2009 follows: AMP-Central (Fotadrevo) Vanadium Project

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Malagasy is targeting vanadium and (sulphide-hosted) base metals mineralisation at this project, located in central-western Ampanihy, approximately midway between the Maniry and Ianapera anorthosite intrusives discussed above. Subsequent to previously reported geochemical sampling, the Company successfully defined a 6.5 kilometre long zone of anomalous vanadium mineralisation. During the December quarter, comprehensive first-pass costeaning (trenching) of this mineralized trend has been completed over the initial 6.5 km extent of this zone. Six (6) costeans totalling 1,870 line metres were completed with an average length of over 300 metres per costean. Free-dig depth averaged two (2) to four (4) metres below natural surface. Visual inspection of the exposed rocks in the costeans revealed an encouraging level of apparent mineralisation. Additional prospecting to the south of the existing zone has extended the strike extent of indicative mineralisation for an additional 1.5km to 8.0km. The results of this work are summarised in Figure 1 below. The extent of the 8.0 km main zone is shown as a dashed yellow line. A total of 859 trenching and prospecting samples were collected during this programme. All samples have been submitted to Intertek-Genalysis to be analysed for Ni / Cu / Co / Cr / Fe / Mn / Mg / Pb / Zn / As / Mo / Au / Ag / Pt / Pd / U / Li / P / V / Cd. Results are expected from early February 2010.

Left: Costeaning and sampling in progress at Fotadrevo under geological supervision. Right: Vanadium mineralisation

(green mineral roscoelite) observed in trench samples. Vohibory Cu-Ag VMS Project Malagasy is targeting Volcanogenic Massive Sulphide (VMS) hosted base metals and gold-silver at its 100% owned Vohibory Project. The project overlies Neoproterozoic sediments and mafic –ultramafic sills associated with felsic intrusives. Prior surface prospecting by Company personnel has returned strong rock chip and soil sample results of up to 29% copper, 175gpt silver, 4500ppm nickel and 40ppb platinum, from two sub-parallel north-south trending corridors within the project tenements. During the December 2009 quarter, the company completed diamond core drilling of four (4) holes for 621 metres combined HQ/NQ drilling. The fifth hole originally planned was not drilled due to the onset of the rainy season. The table following overleaf summarises holes completed during this programme:

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Figure 1: Summary of surface sampling to date within MML’s Fotadrevo Vanadium project. Costeans ‘1’ to ‘6’ inclusive are

shown testing a 6.0 km strike of the existing zone. The yellow dashed line shows the 8.0 km extent of the existing zone.

4

5

Summary of drilling completed at Vohibory during 2009:

Sampling of drill cores is continuing. Initial results from VHD003 have shown encouragement; returning 4m grading 10.3g/t silver from surface and 6m grading 1.07g/t silver; 105ppm copper; 540ppm zinc; and 27ppm molybdenum from 184m - hosted in a series of silicified sulphide stringers The latter intercept is associated with the targeted conductor VC-03. A total of 366 samples are currently at Intertek-Genalysis to be analysed for Ni / Cu / Co / Cr / Fe / Mn / Mg / Pb / Zn / As / Mo / Au / Ag / Pt / Pd / U / Li / P / V / Cd. Additional samples will follow by end of January 2010. Assays should be completed by mid-February 2010. Detailed geological mapping at 1:5,000 and 1;10,000 scale, commenced during the September 2009 quarter was completed over the entire project areas during the reported period using 1:10,000 scale IKONOS satellite imagery. Initial programme priority was the area overlying the current ‘Besatrana Trend’ (i.e. VC01 to 06 VTEM targets). These data are currently being digitized for incorporation into the Malagasy database. Numerous small copper gossans and artisanal gold workings were encountered during the mapping programme. A total of 45 additional samples were collected, primarily from the Besatrana Trend area. These are currently undergoing analysis by Intertek-Genalysis for Ni / Cu / Co / Cr / Fe / Mn / Mg / Pb / Zn / As / Mo / Au / Ag / Pt / Pd / U / Li / P / V & Cd, with results expected in early November 2009. Figure 1 summarizes the major units outlined to date; in particular the extent of faulting of the target metasedimentary horizon. Additionally, the southern portion of the project has been systematically sampled via soil geochemistry, with a total of 218 soil samples collected on 200m x 400m spacing. These samples will be analysed in-house by XRF. The table below summarises the current status of the company’s sampling programme:

VOHIBORY – Cu-Zn-Au-Ag 321 Core 03/12/09 From mid-Jan 2010

VOHIBORY – Cu-Zn-Au-Ag 45 Rock 21/12/2009 Mid-Feb 2010

VOHIBORY – Cu-Zn-Au-Ag 218 Soil In-House XRF Late Jan 2010

Project No. Samples Type Submitted Expected

Completion

Not Drilled

Figure 3: Summary of northern Vohibory project area showing location of drill holes.

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4m grading 10.3g/t silver from surface

Left: Corel logging in progress at Vohibory; Right: Sulphides in VHD003 core (yellow pencil)associated with well

developed crack-seal textures. Ampanihy Ni-Cu-PGE Project Malagasy is targeting sulphide-hosted nickel-copper-PGE mineralisation at this project, centred around two large (80 sq km) anorthosite (gabbroic) intrusives in the central south of Madagascar. During the 2008 field season, the Company completed a 3,500 line-km VTEM-Aeromagnetic survey over the margins of these intrusives. This survey delineated numerous target VTEM conductors, some of which are coincident with both anomalous surface geochemistry and observed copper gossans. During the December quarter the company has concentrated on further analysis of previously reported conductors and anomalies of interest. Additional geological data is in the process of being integrated into the Malagasy database preparatory to finalising follow-up programmes for the 2010 exploration season. OTHER PROJECTS

Malagasy Minerals continues to proactively review all forward expenditure with a view to conserving cash and redirecting exploration expenditure to those projects with the strongest prospectivity. To this end the Company retains 1,950 sq km of exploration tenure over the following core project areas:

• Ampanihy (Ni-Cu-PGE – incl. Fotadrevo V) – 1,775km2 • Vohibory (Cu-Ag VMS) – 150km2 • Mahajunga (Ilmenite) – 25km2

Both Ampanihy / Fotadrevo and Vohibory continue to show strong promise, with ongoing target definition and follow-up drilling currently planned for the 2010 field season. Mahajunga has been retained as it is low-cost and is close to the major north western port city of Mahajunga. The company continues to review project opportunities, and while mindful of the need to conserve cash resources, will continue to assess more mature mineral development opportunities as they arise. Additionally, the company continues to receive royalty revenue from Labradorite quarrying operations. COMMERCIAL PROPERTY - ST DENIS HOLDINGS SARL

Since taking possession of the site on 31st July 2008, Malagasy Minerals has continued the process of upgrading the infrastructure at its two (2) hectare compound in Antananarivo. Following the previously reported relocation to new offices within the compound, the Company has now let out a portion of the old office building to new tenants.

7

Several hundred square metres of commercial space remain available for rental and the Company will continue its policy of finding suitable tenants. With the commencement of operations of Kirk Petrophysics, there are now two (2) world class laboratories now fully operational in Madagascar: Intertek – Genalysis (minerals, sample preparation) and Kirk (petroleum tar sands). Significantly, both of these facilities are located within the Company’s compound in Antananarivo. As previously reported, Malagasy is also pursuing possible options for Joint Commercial redevelopment of its property assets, with a view to attracting suitable partners and the possibility of releasing a portion of funds invested. MINING SERVICES SARL (MINSERV) Drilling Operations During the December 2009 quarter, the Company utilised its drilling rigs in advancing its projects in the field. With the completion of the drilling season, all machinery has been returned to Tananarive for servicing, with certain consumables and equipment stored at site. CORPORATE

Malagasy Minerals continues to restructure its commercial property holdings, operational assets and running costs with a view to maximising revenue income and reducing costs, so as to be cash flow sufficient in its Madagascar operations. With Labradorite Royalty and Rental income, the operations in Madagascar are close to being self supporting, leaving exploration and Australian administrative costs to be funded. Total issued capital is 95,000,003 of which 75,375,003 shares are listed with the following securities being escrowed: 19,625,000 Shares escrowed for 24 months until 7/7/10 1,000,000 20c Options escrowed for 24 months until 7/7/10 expiring 27/6/13 4,003.600 20c Options escrowed for 24 months until 7/7/10 expiring 7/7/13 In addition there are 4,000,000 20c unlisted options expiring in 2013 on issue. Political Situation The current political situation in Madagascar remains stable, and international mediation is assisting in the negotiation of a peaceful resolution of the political situation, with the aim of achieving early elections and the re-establishment of normalized relations with the both international community and donor countries. The company’s operations and staff remain secure and business is being conducted on a normal day-to-day basis. Entry and exit to the country continues without impediment. The Company regularly updates its website at www.malagasyminerals.com For and on Behalf of the Board

Steven Goertz Managing Director

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27th January 2010 cc: Directors Competent Persons Statement The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled or reviewed by Mr Steven Goertz, Managing Director Malagasy Minerals Ltd who is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. Mr Goertz has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activities undertaken to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Goertz consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

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Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

MALAGASY MINERALS LIMITED ABN Quarter ended (“current quarter”)

ABN 84 121 700 105 31 DECEMBER 2009

Consolidated statement of cash flows

Cash flows related to operating activities

Current quarter $A’000

Year to date (6 months) $A’000

1.1 Receipts from product sales and related debtors

196 365

1.2 Payments for (a) exploration and evaluation (net) (b) development (c) production (d) administration (net)

(251) - -

(272)

(420)--

(592)1.3 Dividends received - -1.4 Interest and other items of a similar nature received 6 151.5 Interest and other costs of finance paid - -1.6 Income taxes paid - -1.7 Other (TVA recoverable) - -

Net Operating Cash Flows

(321) (632)

Cash flows related to investing activities

1.8 Payment for purchases of:(a) prospects (b) equity investments (c) other fixed assets

- -

(8)

--

(41)1.9 Proceeds from sale of: (a) prospects

(b) equity investments (c) other fixed assets

- - -

---

1.10 Loans to other entities - -1.11 Loans repaid by other entities - -1.12 Other (Payments to MRNL) (69) (118)

Net investing cash flows

(77) (159)1.13 Total operating and investing cash flows (carried

forward)

(398) (791)

+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward) (398) (791)

Cash flows related to financing activities

1.14 Proceeds from issues of shares, options, etc. (Net) – IPO Expenses paid - -

1.15 Proceeds from sale of forfeited shares - -1.16 Proceeds from borrowings - -1.17 Repayment of borrowings (3) (6)1.18 Dividends paid - -1.19 Other – Trade Creditors/Debtors - - Net financing cash flows (3) (6)

Net increase (decrease) in cash held

(401) (797)

1.20 Cash at beginning of quarter/year to date 1,040 1,4361.21 Exchange rate adjustments to item 1.20

1.22 Cash at end of quarter 639 639

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Current quarter $A'000

1.23

Aggregate amount of payments to the parties included in item 1.2

76

1.24

Aggregate amount of loans to the parties included in item 1.10

-

1.25

Explanation necessary for an understanding of the transactions

Payments of wages, quarterly Directors Fees and Consultancy Fees to Directors.

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

Nil

2.2 Details of outlays made by other entities to establish or increase their share in projects in

which the reporting entity has an interest

Nil

+ See chapter 19 for defined terms. Appendix 5B Page 2 30/9/2001

Appendix 5B Mining exploration entity quarterly report

Financing facilities available Add notes as necessary for an understanding of the position.

Amount available $A’000

Amount used $A’000

3.1 Loan facilities

- -

3.2 Credit standby arrangements/bonds

10 10

Estimated cash outflows for next quarter

$A’000 4.1

Exploration and evaluation

100

4.2

Development

-

Total

100

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Current quarter $A’000

Previous quarter $A’000

5.1 Cash on hand and at bank 239 240

5.2 Deposits at call 400 800

5.3 Bank overdraft - -

5.4 Other (provide details) - -

Total: cash at end of quarter (item 1.22) 639 1,040

Changes in interests in mining tenements

Tenement reference

Nature of interest Interest at beginning of quarter

Interest at end of quarter

6.1 Interests in mining tenements relinquished, reduced or lapsed

Refer Covering Quarterly Activity Report attached hereto

6.2 Interests in mining tenements acquired or increased

Refer Covering Quarterly Activity Report attached hereto

+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 3

Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. Total number Number

quoted Issue price per security (cents)

Amount paid up per security (cents)

7.1 Preference +securities (description)

Nil Nil - -

7.2 Changes during quarter

- - - -

7.3 +Ordinary securities

95,000,003 75,375,003 Various Fully Paid

7.4 Changes during quarter (a) Increases Through Issue - placement (b) Decreases through return of capital, buy-backs (c) Ex-Escrow

-

-

-

-

-

-

-

-

-

-

-

-7.5 +Convertible debt

securities (description) Nil Nil - -

7.6 Changes during quarter - - - -

7.7 Options Unlisted

1,000,0002,000,0002,000,0004,003,600

----

20c Options20c Options20c Options20c Options

Expiry: 27/6/2013 Expiry: 01/12/2013Expiry: 03/07/2013Expiry: 07/07/2013

7.8

Issued during quarter Unlisted

- - - -

7.9 Exercised during quarter

- - - -

7.10 Expired during quarter

- - - -

7.11 Debentures (totals only) Nil Nil

7.12 Unsecured notes (totals only) Nil Nil

+ See chapter 19 for defined terms. Appendix 5B Page 4 30/9/2001

Appendix 5B Mining exploration entity quarterly report

Compliance statement 1 This statement has been prepared under accounting policies which comply with

accounting standards as defined in the Corporations Act or other standards acceptable to ASX.

2 This statement does give a true and fair view of the matters disclosed.

Sign here: Date: ..….. 27 January 2010.

(Director/Company Secretary) Print name: .........Max D.J. Cozijn...............

== == == == ==

+ See chapter 19 for defined terms. 30/9/2001 Appendix 5B Page 5