AUSQUEST LIMITED — Capital/Financing Update 2016

Jul 3, 2016

July 4[th] , 2016 ASX Release

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DRILLING UPDATE – PERU COPPER-GOLD PROJECTS

Major diamond drilling program continuing with three rigs now operating across two prospects at the Puite-Colorada Joint Venture in the south of Peru

Further to its announcement of 16 May regarding the start of drilling at the Puite porphyry copper-gold prospect in the south of Peru under the Puite-Colorada Joint Venture Agreement with Compania Minera Zahena SAC (“Zahena”), AusQuest Limited (ASX: AQD) is pleased to advise that a third diamond drilling rig has now arrived on site with drilling continuing at both the Puite prospect (2 rigs) and the Colorada prospect (1 rig).

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Figure 1: Prospect locations in the Ilo area in the south of Peru

Drilling at the Puite Prospect has been slower than anticipated with three holes (~1900m) completed to date and a further six holes still to be drilled. Preliminary reports from the first drill-holes confirm the presence of porphyry-style alteration (weak sub-propylitic to strong propylitic) within diorite host rocks. This suggests the potential for a porphyry copper system nearby, which is an encouraging result so early in the programme.

Visual copper oxide and sulphide minerals have been reported within veinlets, but at this stage only in trace amounts. Drilling is continuing (see Figure 2 ).

The Colorada Prospect , located approximately 10km NNE of Puite, represents the second porphyry copper-gold target to be tested under the Puite-Colorada Joint Venture. Drilling is designed to test a range of targets as a first step to evaluating the potential of this prospect.

These include areas with anomalous Cu (+/-Mo) values in both rock and soil samples that are associated with altered dioritic dykes, IP chargeability anomalies located beneath epithermal veins containing anomalous Cu (+/-Au), and complex structural settings ( Figure 3 ).

AusQuest Limited 8 Kearns Crescent Ardross WA 6153 (T): 08 9364 3866 (F): 08 9364 4892 www.ausquest.com.au

Under the Puite-Colorada Joint Venture Agreement, a total of 10,000m of diamond drilling – or expenditure of not less than US$1.5 million – must be completed before the end of 2016.

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Figure 2: Puite porphyry copper-gold prospect showing drill-holes

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Figure 3: Colorada porphyry copper-gold prospect showing drill-holes

AusQuest Limited 8 Kearns Crescent Ardross WA 6153 (T): 08 9364 3866 (F): 08 9364 4892 www.ausquest.com.au

The commencement of drilling operations under the Cardonal Joint Venture Agreement with Zahena is still pending receipt of the final drill permits for the Ventana and Cardonal prospects. The Company has been advised that these permits are now very close to being issued.

The table below summarises planned drilling (20,000m) in Peru between now and the end of 2016:

Joint Venture	Prospect	Drilling	Drill Permit	Drilling Completed by
Puite-Colorada	Puite -	10,000m	Granted	December – 2016
	Colorada		Granted	December – 2016
Cardonal	Ventana	10,000m	Pending	October – 2016
	Cardonal		Pending	October – 2016

The Company is very pleased that target drilling is progressing at a steady pace with earlystage results supporting AusQuest’s view that the area is highly prospective for porphyry style copper – gold mineralisation.

AusQuest’s Managing Director, Graeme Drew, said the initial results from drilling at Puite were very encouraging given that this was the first-ever drilling to be completed in the area.

“We are excited about the opportunities ahead, with up to 20,000m of diamond drilling scheduled to be completed across four of our key copper-gold prospects in the Ilo area during the remainder of the year,” he said. “That should make for a very busy second half, with regular news-flow and updates as drilling progresses.”

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Graeme Drew

Managing Director

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 2012 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 report 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.

AusQuest Limited 8 Kearns Crescent Ardross WA 6153 (T): 08 9364 3866 (F): 08 9364 4892 www.ausquest.com.au

JORC Code, 2012 Edition – Table 1 report, Diamond Drilling at Puite in Peru Section 1 Sampling Techniques and Data

(Criteria in this section apply to all succeeding sections.)

	Criteria	JORC Code explanation	Commentary
	Sampling	 Nature and quality of sampling (eg cut channels, random chips, or specific specialised	 The entire cored hole is sampled. Composite samples are
	techniques	industry standard measurement tools appropriate to the minerals under investigation,	collected over 3 metre intervals.
		such as down hole gamma sondes, or handheld XRF instruments, etc). These examples	 Core is cut in half with half sent for analysis and half
		should not be taken as limiting the broad meaning of sampling.	retained for geological and quality control purposes
		 Include reference to measures taken to ensure sample representivity and the appropriate	 Sample intervals are measured by tape from depth
		calibration of any measurement tools or systems used.	intervals shown on core blocks labeled by the drillers, as
		 Aspects of the determination of mineralisation that are Material to the Public Report.	per standard industry practice.
		 In cases where ‘industry standard’ work has been done this would be relatively simple
		(eg ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was
		pulverised to produce a 30 g charge for fire assay’). In other cases more explanation
		may be required, such as where there is coarse gold that has inherent sampling
		problems. Unusual commodities or mineralisation types (eg submarine nodules) may
		warrant disclosure of detailed information.
	Drilling techniques	 Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger,	 Diamond Drilling to produce continuous core.
		Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of	 HQ and NQ drill rods used to produce 63.5mm and
		diamond tails, face-sampling bit or other type, whether core is oriented and if so, by	47.6mm diameter core respectively. The hole starts with
		what method, etc).	HQ core and changes to NQ at the appropriate depth
			depending on drilling conditions.
			 Down-hole surveys are read at ~ 50m intervals.
	Drill sample	 Method of recording and assessing core and chip sample recoveries and results	 Core recovery is determined by comparing core lengths
	recovery	assessed.	measured against drilled intervals shown on core blocks
		 Measures taken to maximise sample recovery and ensure representative nature of the	and recorded on the logs.
		samples.	 Experienced diamond drillers are engaged to ensure
		 Whether a relationship exists between sample recovery and grade and whether sample	maximum core recovery.
		bias may have occurred due to preferential loss/gain of fine/coarse material.	 Sample recovery is high negating any sample bias due to
			recovery.
	Logging	 Whether core and chip samples have been geologically and geotechnically logged to a	 Drill core and sample chips are logged by experienced
		level of detail to support appropriate Mineral Resource estimation, mining studies and	geologists to identify key rock types, alteration and
		metallurgical studies.	mineralisation styles.
		 Whether logging isqualitative orquantitative in nature. Core(or costean, channel, etc)	 Core loggingisqualitative with visual estimates of

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	Criteria	JORC Code explanation	Commentary
		photography.	mineralisation made for later comparison with assay
		 The total length and percentage of the relevant intersections logged.	results.
			 All core is logged and photographed.
	Sub-sampling	 If core, whether cut or sawn and whether quarter, half or all core taken.	 Samples are collected by splitting the core in half along
	techniques and	 If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or	its length and sampling over 3 metre intervals. In sections
	sample preparation	dry.	where core cannot be cut, representative core chips are
		 For all sample types, the nature, quality and appropriateness of the sample preparation technique.	collected for assay.  Duplicate samples are collected from the core every 40th
		 Quality control procedures adopted for all sub-sampling stages to maximise	sample for quality control. The duplicated sample is split
		representivity of samples.	from the same length as the original sample with 30% of
		 Measures taken to ensure that the sampling is representative of the in situ material	the core used as the original and 30% used as the
		collected, including for instance results for field duplicate/second-half sampling.	“duplicate”. 40% is retained in the core box.
		 Whether sample sizes are appropriate to the grain size of the material being sampled.	 The sample sizes are appropriate for the geological
			materials being sampled.
	Quality of assay	 The nature, quality and appropriateness of the assaying and laboratory procedures used	 N/A for this report – Sample analysis has not been
	data and	and whether the technique is considered partial or total.	undertaken.
	laboratory tests	 For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters	 Certified Laboratory Standards are inserted with low-
		used in determining the analysis including instrument make and model, reading times,	medium-high grade resolution. The Company inserts its
		calibrations factors applied and their derivation, etc.	own “blind” standards within each batch of samples on a
		 Nature of quality control procedures adopted (eg standards, blanks, duplicates, external	1 in 20 basis.
		laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and	 Blanks are inserted as per standard industry practice
		precision have been established.
	Verification of	 The verification of significant intersections by either independent or alternative company	 N/A for this report – Assay results are pending.
	sampling and	personnel.
	assaying	 The use of twinned holes.
		 Documentation of primary data, data entry procedures, data verification, data storage
		(physical and electronic) protocols.
		 Discuss any adjustment to assay data.
	Location of data	 Accuracy and quality of surveys used to locate drill holes (collar and down-hole	 Drill hole collars including elevation are located by hand
	points	surveys), trenches, mine workings and other locations used in Mineral Resource	held GPS to an accuracy of approximately 5m.
		estimation.	 Down hole surveys on angled holes are carried out every
		 Specification of the grid system used.	50m down hole, and at the end of the hole.
		 Quality and adequacy of topographic control.	 All surface location data are in WGS 84 datum, UTM
			zone 19S.

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	Criteria	JORC Code explanation	Commentary
	Data spacing and	 Data spacing for reporting of Exploration Results.	 Diamond drill-holes were positioned to test targets
	distribution	 Whether the data spacing and distribution is sufficient to establish the degree of	identified by various ground surveys. No systematic
		geological and grade continuity appropriate for the Mineral Resource and Ore Reserve	drilling of targets has been undertaken.
		estimation procedure(s) and classifications applied.
		 Whether sample compositing has been applied.
	Orientation of data	 Whether the orientation of sampling achieves unbiased sampling of possible structures	 Any bias due to the orientation of the drilling is unknown
	in relation to	and the extent to which this is known, considering the deposit type.	at this early stage of exploration.
	geological	 If the relationship between the drilling orientation and the orientation of key mineralised
	structure	structures is considered to have introduced a sampling bias, this should be assessed and
		reported if material.
	Sample security	 The measures taken to ensure sample security.	 Samples security is managed by the operator of the JV.
			Procedures match with Industry best practice.
			 Samples are collected into securely tied bags and placed
			into cable-tied plastic bags for transport to the laboratory.
			Each sample batch has a sample submission sheet that
			lists the sample numbers and the work required to be done
			on each sample.
			 Reputable freight companies are used to transport samples
			to the laboratory.
			 Sample pulps (after assay) are held by the laboratory and
			returned to the company after 90 days.
	Audits or reviews	 The results of any audits or reviews of sampling techniques and data.	 No reviews or audits of the sampling techniques or data
			have been carried out to date.

Section 2 Reporting of Exploration Results

(Criteria listed in the preceding section also apply to this section.)

	Criteria	JORC Code explanation	Commentary
	Mineral tenement	 Type, reference name/number, location and ownership including agreements or material	 The Puite Prospect is centered at 8044500N and 279500E
	and land tenure	issues with third parties such as joint ventures, partnerships, overriding royalties, native	(PSAD56 Zone 19S), approximately 20 km east of Ilo,
	status	title interests, historical sites, wilderness or national park and environmental settings.	Peru.
		 The security of the tenure held at the time of reporting along with any known	 The Puite Prospect is subject to a joint venture agreement
		impediments to obtaining a licence to operate in the area.	with Compania Minera Zahena SAC which includes
			Mineral concessions Pampa de Las Pulgas J,K,O,P,W,

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	Criteria	JORC Code explanation	Commentary
			V, AF.
			 All tenements are held 100% by Questdor SAC a 100%
			owned subsidiary of AusQuest Limited.
			 A drill permit (AIA) has been provided by INGEMMET
			for the drilling programme following environmental, and
			community approvals.
	Exploration done	 Acknowledgment and appraisal of exploration by other parties.	 No historic exploration data is available.
	by other parties
	Geology	 Deposit type, geological setting and style of mineralisation.	 The Puite project is targeting a porphyry copper-gold
			resource associated with diorite intrusions along the
			coastal belt of southern Peru.
	Drill hole	 A summary of all information material to the understanding of the exploration results	 All relevant drill hole data and information are provided
	Information	including a tabulation of the following information for all Material drill holes:	below.
		o easting and northing of the drill hole collar
		o elevation or RL (Reduced Level – elevation above sea level in metres) of the drill hole
		collar
		o dip and azimuth of the hole
		o down hole length and interception depth
		o hole length.
		 If the exclusion of this information is justified on the basis that the information is not
		Material and this exclusion does not detract from the understanding of the report, the
		Competent Person should clearly explain why this is the case.
	Data aggregation	 In reporting Exploration Results, weighting averaging techniques, maximum and/or	 N/A for this report – Assay results are pending.
	methods	minimum grade truncations (eg cutting of high grades) and cut-off grades are usually
		Material and should be stated.
		 Where aggregate intercepts incorporate short lengths of high grade results and longer
		lengths of low grade results, the procedure used for such aggregation should be stated
		and some typical examples of such aggregations should be shown in detail.
		 The assumptions used for any reporting of metal equivalent values should be clearly
		stated.
	Relationship	 These relationships are particularly important in the reporting of Exploration Results.	 N/A for this report. Assays are pending
	between	 If the geometry of the mineralisation with respect to the drill hole angle is known, its
	mineralisation	nature should be reported.
	widths and intercept lengths	 If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg ‘down hole length, true width not known’).
	Diagrams	 Appropriate maps and sections (with scales) and tabulations of intercepts should be	 All drill holes are shown on appropriate plans and

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	Criteria	JORC Code explanation	Commentary
		included for any significant discovery being reported These should include, but not be	included in the ASX release.
		limited to aplan view of drill hole collar locations and appropriate sectional views.
	Balanced reporting	 Where comprehensive reporting of all Exploration Results is not practicable,	 N/A for this report. Assays are pending
		representative reporting of both low and high grades and/or widths should be practiced
		to avoid misleading reporting of Exploration Results.
	Other substantive	 Other exploration data, if meaningful and material, should be reported including (but	 The relationship between current drilling and previously
	exploration data	not limited to): geological observations; geophysical survey results; geochemical survey	reported exploration data is shown in the report.
		results; bulk samples – size and method of treatment; metallurgical test results; bulk
		density, groundwater, geotechnical and rock characteristics; potential deleterious or
		contaminating substances.
	Further work	 The nature and scale of planned further work (eg tests for lateral extensions or depth	 Drilling is continuing to test a range of targets associated
		extensions or large-scale step-out drilling).	with the Puite Prospect as reported in previous ASX
		 Diagrams clearly highlighting the areas of possible extensions, including the main	releases.
		geological interpretations and future drilling areas, provided this information is not	 Future drill hole locations are shown on the plans
		commercially sensitive.	included within the ASX report

Hole No.	Easting	Northing	Azimuth	Inclination	Depth
PUT01	280747	8042827	0	90	500
PUT 02	280571	8043193	70	-60	670
PUT 03	280347	8043157	70	-60	719

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