AUSQUEST LIMITED — Capital/Financing Update 2011

Oct 20, 2011

October 21, 2011 ASX Release

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Exploration Commences in Peru Under Joint Venture with Cliffs Natural Resources

Diversified Australian-based exploration company AusQuest Limited (“AusQuest” or “the Company”, ASX: AQD) is pleased to advise that significant new exploration programs have commenced in south-western Peru, South America, following the completion of an exploration joint venture (the “Joint Venture”) with Cliffs Natural Resources Exploration Inc. (“CNRE”), a wholly owned subsidiary of Cliffs Natural Resources Inc. (NYSE: CLF) (Paris: CLF) (“Cliffs”).

As contemplated by the term sheet signed by the parties and previously announced on June 3, 2011, AusQuest has now signed a binding agreement with CNRE to identify, explore and evaluate potential Iron Oxide Copper Gold (IOCG) and other mineral deposits in southwestern Peru.

Peru is considered to be a highly prospective country for large IOCG and porphyry copper deposits and yet is relatively under-explored when compared to its neighbour Chile, which is the world’s largest copper producer.

A regional aeromagnetic survey has been flown over the joint venture area and priority targets identified for acquisition. This is the first time, to the Company’s knowledge, that such a regional survey has been flown in this coastal region, and the Company believes that targets identified by the survey will provide significant new exploration opportunities for the Joint Venture.

Magnetic targets being secured under tenement applications will be the focus of initial exploration programs. A selection of these prospects is attached reflecting potential IOCG targets with no prior exploration activity recorded.

A total of 114 Prospecting Licence applications covering approximately 1100km² have been submitted to secure 13 areas considered prospective for IOCG and other mineral deposits.

Initial field reconnaissance of target areas is scheduled to commence in November 2011 to start prioritising areas for detailed ground investigation and drill target definition work which is expected to commence in early 2012 when a sufficient number of tenements are expected to have been granted.

AusQuest looks forward to reporting on the progress of exploration activities in Peru over the coming months.

Background

This agreement extends the existing strategic alliance between AusQuest and Cliffs, which was originally established in September 2008. Cliffs, through a wholly-owned subsidiary, currently holds a 30% equity interest in AusQuest.

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The Board of AusQuest is pleased to be partnering with CNRE to explore south-western Peru, building further on the existing alliance between the companies. The new Joint Venture has the potential to add significant value to the Company while at the same time reducing the risks associated with early stage exploration.

Each party will bring particular expertise and capabilities to the joint venture, namely CNRE’s financial and operational capabilities and AusQuest’s exploration expertise including staff with extensive IOCG experience.

[Cliffs is an international mining and natural resources company. A member of the S&P 500 Index, Cliffs is a major global iron ore producer and a significant producer of high- and lowvolatile metallurgical coal. Cliffs operates iron ore and coal mines in North America and two iron ore mining complexes in Western Australia. Cliffs also has a 45% economic interest in a coking and thermal coal mine in Queensland, Australia. In addition, Cliffs has a major chromite project, in the pre-feasibility stage of development, located in Ontario, Canada.]

Summary of Joint Venture Terms

Initial exploration under the joint venture will be undertaken in two stages:

Stage 1 Exploration requires each party to contribute US$1 million (total US$2 million) towards the initial exploration program. At the end of Stage 1, each party can elect to withdraw or contribute to Stage 2.

Stage 2 Exploration requires each party to contribute up to a further US$1 million (total US$2 million) towards ongoing exploration programs.

During Stages 1 and 2 Exploration, AusQuest will be the operator of the Joint Venture with exploration programs and budgets to be approved by a Technical Advisory Committee consisting of both AusQuest and CNRE representatives.

Initial participating interests in any properties acquired by the joint venture during either Stage 1 or 2 Exploration will be owned by CNRE – 70% and AQD – 30%.

Properties that are believed to show potential for an economic IOCG deposit based on agreed parameters will be presented to CNRE as candidates for further investigation. In general, this will be prior to substantive drilling being undertaken on the property.

Should CNRE elect to accept the property as a Property of Merit (PoM) CNRE will be required to:

• spend a minimum of US$750,000 (including a US$500,000 commitment) on exploration activities within the first year after acceptance; and

• spend a total of US$4 million (including the US$750,000 referred to above) on exploration activities within a three year time period after acceptance.

If CNRE fails to meet the above funding requirements, AusQuest will have the right to acquire full ownership of the PoM for no cash consideration.

If CNRE elects not to accept the property as a PoM, then AusQuest will be entitled to pursue that property in its own right; however CNRE will have a Right of First Offer should

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AusQuest subsequently elect to dispose of the property. The transfer of any property interests, or equity in any companies holding property interests, from AusQuest to CNRE will be subject to AusQuest shareholder approval if required.

Should CNRE spend between US$1 million and US$3 million on the PoM and elect to withdraw, it will retain a 0.5% net smelter royalty. If CNRE spends between US$3 million and US$4 million on the PoM and elects to withdraw, it will retain a 1.0% net smelter royalty.

If CNRE meets all of its funding contribution targets with respect to a PoM it will have an option to increase its equity in that PoM from 70% to 80% by completing a pre-feasibility study in a further three year period subject to AusQuest shareholder approval if required.

Each PoM will be governed by a separate joint venture agreement which contains terms and conditions commonly agreed to by international companies engaged in mining activities.

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Graeme Drew Managing Director AusQuest Limited

COMPETENT PERSON’S STATEMENT

The details contained in this report that pertain to exploration results are based upon information compiled by Mr Graeme Drew, a full-time employee of AusQuest Limited. Mr Drew is a Fellow of the Australasian Institute of Mining and Metallurgy (AUSIMM) and has sufficient experience in the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Drew consents to the inclusion in the report of the matters based upon his information in the form and context in which it appears.

FORWARD LOOKING STATEMENT

This announcement contains forward looking statements concerning the projects owned by AusQuest Limited. Statements concerning mining reserves and resources may also be deemed to be forward looking statements in that they involve estimates based on specific assumptions. Forward-looking statements are not statements of historical fact and actual events and results may differ materially from those described in the forward looking statements as a result of a variety of risks, uncertainties and other factors. Forward looking statements are based on management’s beliefs, opinions and estimates as of the dates the forward looking statements are made and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates should change or to reflect other future developments.

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Potential IOCG targets

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