AUSQUEST LIMITED — Interim / Quarterly Report 2008

Apr 17, 2008

==> picture [97 x 99] intentionally omitted <==

Quarterly Report – 31 March 2008

HIGHLIGHTS

MANGANESE

• Drilling scheduled to recommence at the Table Hill manganese prospect in early May 2008.

• 15-hole drilling program (~4,000m) planned to test the resource potential surrounding drill-hole THD01 (3.9m @ 47.5% Mn).

• Extensive new manganese target areas outlined by reprocessing data from the 2006 GEOTEM survey. Drilling in these areas is planned for the second half of 2008.

• New manganese exploration project secured in the Kimberley region of WA with high grade manganese (up to 55.8% Mn) in historic surface samples.

COPPER-GOLD

• Drilling at the Diamantina iron oxide-copper gold (IOCG) prospect in western Queensland scheduled to start in early May 2008 following successful site clearance and access preparation.

• Deep drilling (1,500 metres) planned to test two strong coincident gravity/magnetic targets located near the southern margin of the Mt Isa Block.

IRON

• Bench-scale test-work confirms that an improvement in product grade is achievable for the Rocklea channel iron mineralisation, 40km west of Tom Price (WA).

• Calcined product (ex LOI) grading 64.4% Fe, 4.1% SiO2, and 2.1% Al2O3 produced over a 24 metre section by a mix of processed and raw samples from test core at Rocklea.

• Iron values ranging from 54 – 60% Fe returned from limited surface sampling of the Marra Mamba Iron Formation highlights potential for buried iron mineralisation close to Tom Price in the Nameless area.

CORPORATE

• Cash reserves of approximately $8.0 million at the end of the Quarter.

==> picture [458 x 396] intentionally omitted <==

Figure 1: Project Location Plan

PROJECTS

AusQuest has a diversified portfolio of bulk commodity, base and precious metal projects (Figure 1) spread across Australia. The Company’s exploration strategy is the discovery of major new deposits and new mineral provinces.

MANGANESE

Table Hill Project (100% AQD)

The Table Hill Project is located 200km east of Newman in Western Australia, within the western Officer Basin sediments. Exploration drilling in the latter part of 2007 highlighted the manganese potential of the area when results from drill-hole THD01 indicated that high-grade manganese (47.5%Mn) was the cause of the laterally extensive electromagnetic anomaly being targeted. The manganese

mineralisation was massive in nature with low impurity levels of iron (<1%Fe) and phosphorous (0.04%P).

During the March Quarter a drilling programme was designed to test the grade, thickness and continuity of the manganese mineralisation intersected in drill-hole THD01 (termed the MN1 target). A total of 30 drill sites were selected to provide flexibility for the drilling programme. Drill holes were positioned within the sand dune corridors to facilitate access on an approximate 1,200m x 400m grid. It is expected that a minimum of 15 holes (4,000m) will be completed, depending on results, to determine the resource potential of the MN1 target.

A site clearance survey over MN1 was completed by the Martu Traditional Owners late in the Quarter, with preliminary clearance advice obtained for the proposed

drilling programme. Access preparations are due to commence in the second half of April with drilling scheduled to commence shortly thereafter.

significantly, suggests they are extensive in size but have lower conductance than the MN1 target. Five drill sites were selected to test these conductors.

During the Quarter, Fugro Airborne Geophysics completed processing of the 2006 GEOTEM data covering this area, outlining a number of additional regional targets for initial drill testing. In particular, areas north of Savory Creek were highlighted as possible strike extensions of the mineralisation intersected in drill-hole THD01.

Modelling of the GEOTEM data indicates that the conductive targets in this area could be less than 150 metres deep and

Extensive shallow-dipping targets with apparent conductance similar to those at anomaly MN1 were also outlined 40km south-east and south of MN1, representing additional priority drill targets for manganese mineralisation. A further 6 drill holes are planned to test these targets during the second half of 2008.

Site clearances for the reconnaissance drillholes will be undertaken during the June Quarter.

==> picture [467 x 327] intentionally omitted <==

Figure 2: Table Hill Conductivity map (150-200m) showing regional Manganese prospects

A literature search undertaken during the Quarter indicated that massive manganese mineralisation is variably conductive with airborne electromagnetic methods used in some locations to outline the ore bodies (eg, at Groote Eylandt in the Northern Territory). A helicopter VTEM survey is scheduled to commence over the MN1

target during the June 2008 Quarter to map out conductivity variations across the broad target zone for correlation with drill results.

Manganese is an attractive exploration target in the current commodity price environment, with prices continuing to strengthen on the back of global supply

shortages and industry consolidation. A recent report by BHP Billiton indicated that contract prices for high grade manganese had increased again with new contract prices effective from March 2008 reaching U$11.20 per dry metric tonne unit (ie, approximately US$540.00 per dry metric tonne for 48% Mn). Manganese prices have increased by over 400% between January 2007 and March 2008.

Skillion Hill Project (100% AQD)

In December 2007 the Company submitted a tenement application covering an area of approximately 525km² within the Wolfe Basin, where historical surface rock chip sampling was reported to have returned high-grade manganese assays. The Skillion Hill project is located approximately 50km east of Halls Creek in the Kimberley region of Western Australia.

During the March Quarter a search of Open File reports revealed that previous exploration in the area had focussed exclusively on base metals (e.g., Pb, Zn, Cu), but that there were also significant manganese anomalies within the geochemical data. Fifteen of the 150 historic rock chip samples collected within AusQuest’s tenement contained more that 15% Mn including four samples with grades in excess of 50% Mn (up to 55.8% Mn).

The manganese concentrations appear to be, at least in part, stratigraphically controlled which suggests there is potential for sheet-like rather than pod-like occurrences of mineralisation and the possibility of significant sized accumulations of manganese.

Historic shallow RAB drilling (42 holes for 1,037m), which was designed to test the base metal potential of the area, reported one 5 metre composite sample (5-10m) which assayed 19% Mn, suggesting that it may have clipped part of a manganiferous horizon.

The Company is very encouraged by these historic results and plans to fast-track exploration in the area once the tenement is granted. It is anticipated this should occur in the second half of 2008 as an agreement on Heritage Clearance has already been reached with the Traditional Owners of the area.

The Company has also reached agreement with privately owned company, Waygood Pty Ltd, to acquire a 100% interest in an adjoining tenement for a cash consideration of $10,000 and the issue of 250,000 AusQuest shares. A review of available data shows this tenement contains significant strike extensions of the prospective target horizon as well as further anomalous manganese assays (38%Mn) from very limited surface sampling.

COPPER and GOLD

Diamantina Project (100% AQD)

The Diamantina Project is located approximately 450km south of Mt Isa along the southern margin of the Mt Isa Block which hosts numerous base and precious metal deposits. The Company controls approximately 2,900 km² of tenements in the area and is targeting large-scale IronOxide-Copper-Gold (IOCG) systems below the Eromanga Basin sediments.

Coincident gravity/magnetic anomalies at Diamantina are consistent with large-scale IOCG systems known elsewhere in Australia which contain copper, gold and uranium mineralisation (eg, Olympic Dam and Ernest Henry).

During the Quarter, site clearance surveys were conducted by the Mithika and Wangkangurru/Yarluyandi Traditional Owners over the two main targets where a program of deep drilling (~1,500 metres) is scheduled for 2008. Access preparations commenced once clearances were obtained, with the Machattie drill site now ready for drilling.

==> picture [458 x 320] intentionally omitted <==

Figure 3: Skillion Hill Manganese Project

It is expected that rotary mud-drilling for the pre-collar (1,000m) will commence in the first half of May with diamond drilling of the target zone scheduled to start in the second half of June 2008.

Applications for funding assistance were submitted to the Queensland Mines Department under their Collaborative Drilling Initiative (CDI), which will fund up to $150,000 or half the direct drilling costs for successful applicants. The outcome of these applications will not be known until May 2008.

The Mt Dobbie Project is located approximately 250km east of Alice Springs in the Northern Territory and is targeting copper-gold mineralisation associated with gravity/magnetic targets within the granitic terrain of the Arunta Block. Field reconnaissance and sampling of target areas is planned for the second half of 2008.

IRON ORE

Rocklea Prospect (75% AQD)

Drummond Project (100% AQD – Rio Tinto claw-back)

The Drummond Gold Project is located 300km south-west of Mackay in central Queensland where exploration is targeting Carlin-style gold deposits.

No further work is planned for this area at this time.

The Rocklea channel iron prospect is located 40km west of Tom Price and straddles the Nannutarra-Wittenoom road.

During the Quarter, bench-scale test-work on selected intervals of drill core (one hole) was completed by Promet Engineers highlighting potential to upgrade some of the more clay-rich samples to a more acceptable product.

Test results showed that:

Mt Dobbie Project (100% AQD)

• sections comprising a mixture of clay and iron pisolite can be upgraded to an acceptable grade product by wet tumbling and removal of the fine fraction (45 and/or 106 micron);

• samples with good Fe, Al2O3 and SiO2 head-grade (~65% Fe, 4.3% SiO2, 1.7% Al2O3 on an ex-LOI basis) were not significantly improved by either dry or wet processing ; and

• highly siliceous samples were difficult to beneficiate.

Compositing samples from the drill hole that was analysed using a mix of wet tumbling and screening (minus 106 microns) for the clay-rich samples and raw analyses for the iron pisolite samples, produces a calcined (ex LOI) product grading approximately 64.4% Fe, 4.1% SiO2, and 2.1% Al2O3 over a 24 metre section.

These results are currently being assessed in the light of previous drilling results and will be used to review the potential of the Rocklea prospect to produce a consistently acceptable product. Selected samples from the second core hole have now been submitted for test-work to help compare results across the prospect.

Tom Price (100% AQD)

The Tom Price Project is located 5km north west of Tom Price in the Pilbara region of Western Australia and contains the Nameless channel iron prospect, which was initially drill tested by AusQuest in 2006.

Following moderately encouraging test results from the Rocklea channel iron prospect, core samples from a diamond drill hole completed in 2007 within the Nameless channel iron prospect were submitted during the Quarter for test-work at SGS Laboratories. Results are expected during the June Quarter 2008.

During the Quarter, a broader review of the Tom Price Project was carried out, resulting in the identification of additional areas with the potential to host mineralised Marra Mamba Iron Formation. Field reconnaissance including scattered rockchip sampling highlighted the eastern portion of the tenement as being the most prospective for buried mineralisation.

Limited surface sampling (4 samples) returned iron values ranging from 54 to 60% Fe from sub-cropping Marra Mamba Iron Formation close to Tom Price. A programme of RC drilling is being planned for the second half of 2008 to test these areas.

NICKEL

Beasley Project (100% AQD)

The Beasley Project is located 50km west of Tom Price in the Pilbara region of WA.

Drilling of a magnetic target located down plunge from the disseminated Ni-Cu-PGE sulphides intersected during the Company’s 2007 drill programme is planned for the second half of 2008.

Bellary Project (AQD 75%)

The Bellary Project is located 20km northwest of Paraburdoo in WA and covers a 40km belt of ultramafic rocks which correlate, in part, with the prospective ultramafic sequence at Beasley.

Surface sampling at the Hardey prospect was postponed due to weather. This programme has been re-scheduled to be completed during the June 2008 Quarter. Several targets identified for testing to the south of the current drill coverage are planned for drilling in the second half of 2008.

Table Hill Project (100% AQD)

The Table Hill Project is located 200km east of Newman in WA. Exploration in this region is targeting Noril’sk-style nickel

sulphide mineralisation associated with the Table Hill Volcanics.

A review of results from the 2007 drilling program indicates that the mafic sills which have been the main focus of exploration attention to date are relatively thin (<200 metres), passive type intrusions, and are unlikely to be the host for significant accumulations of nickel sulphides except in close proximity to their feeder structures.

The Company remains confident about the nickel potential of the area and plans to focus future exploration efforts on feederdyke structures which are interpreted from the magnetics. Any nickel exploration in 2008 will be undertaken in combination with the Company’s manganese drilling programme (see above).

Savory Project (100%AQD)

The Savory Nickel Project is located 150 km south east of Newman in WA and covers an interpreted feeder zone to the Table Hill Volcanics which is believed to be prospective for Noril’sk style nickel sulphide deposits.

A helicopter VTEM survey covering the interpreted nickel sulphide targets is scheduled to commence in April 2008. A total of ~1,000km will be flown along flight lines 500 metres apart. Preliminary results are expected shortly after completion of the survey with final processed data likely to be received before the end of the June 2008 Quarter.

three calcrete uranium prospects. Weakly anomalous uranium values (up to 43.8ppm U3O8) were returned from a silcrete zone intersected on adjacent drill sections, but there were no obvious signs of significant uranium mineralisation.

While there are still a number of uranium targets to be followed up at Sylvania, uranium exploration in this area is currently on hold due to higher priorities elsewhere.

PROJECT GENERATION

The Company is continuing to examine new opportunities in a range of commodities, both within Australia and offshore. Several new tenement applications were submitted and assessment of available data is ongoing.

FIELD PROGRAMMES IN JUNE QUARTER

The following field work is scheduled for the June Quarter 2008:

• Diamond drilling at the Table Hill Project (Mn);

• Pre-collar rotary mud drilling at the Diamantina Project (Cu-Au) followed by diamond drilling late in the Quarter;

• Initial field reconnaissance and sampling at Skillion Hill (Mn);

• VTEM surveying over the Savory Project (Ni);

• Mapping and sampling of iron prospects in the Tom PriceParaburdoo area;

URANIUM

CORPORATE

Sylvania Project (100% AQD)

The Sylvania Project is located 10km south of Newman in the east Pilbara region of WA. The Company controls approximately 1,800 km² of title in this region.

During the Quarter, final assay results were received from the 2007 RC drilling programme (as reported in the December 2007 Quarter), which was designed to test

AusQuest’s cash reserves at the end of March will be approximately $8.0 million.

==> picture [69 x 54] intentionally omitted <==

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 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.

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		Quarter ended (“current quarter”) 31 March 2008	Quarter ended (“current quarter”) 31 March 2008
	AUSQUEST LIMITED
	ABN 35 091 542 451 Consolidated statement of cash flows
			31 March 2008
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration and evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (Govt contribution of exploration expenditure) NetOperating Cash Flows		Current quarter $A ‘000		Year to date (9 months) $A ‘000
		- (774) - - (132) - 83 - - 136		- (3,840) - - (572) - 377 - - 136
		(687)		(3,899)
Cash flows related to investing activities 1.8 Payment for purchases of: (a)prospects (b)equity investments (c) other fixed assets 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 (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		- - (92) - - - - - -		- - (92) - - - - - -
		-		-
		(779)		(3,991)

1.13				Total operating and investing cash flows	Total operating and investing cash flows			(779)					(3,991)
				(brought forward)
				Cash flows related to financing activities
1.14 1.15 1.16 1.17 1.18 1.19				Proceeds from issues of shares, options, etc. Proceeds from unissued shares, options etc Proceeds from borrowings Repayment of borrowings Dividends paid Other (share issue costs)				3,647 (2,982) - - - (8)					6,033 - - - - (308)
				Net financing cash flows				657					5,725
				Net increase (decrease) in cash held				(122)					1,734
1.20 1.21				Cash at beginning of quarter/year to date Exchange rate adjustments to item 1.20				8,114					6,258
1.22				Cash at end of quarter / year to date				7,992					7,992
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								115
1.24					Aggregate amount of loans to the parties included in item 1.10								-
1.25					Explanation necessaryfor an understandingof the transactions
					Executive directors’ salaries and non-executive	directors’ fees and superannuation, consulting fees
					and rental of office space.
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
		On 8 January 2008, 5,333,589 AQDOA options were issued pursuant to Share Purchase Plan as free
		attaching options. The listed options are exercisable at 20 cents and expiring									30 November 2009.
		On 25 January 2008, 1,169,643 AQDOA options					were issued to directors					pursuant to receipt of
		shareholder approval on 17 January 2008 as free attaching						options The listed				options are exercisable
		at 20 cents and expiring 30 November 2009.
2.2		Details of outlays made by other entities to establish or increase their share									in projects in which the
		reportingentityhas an interest
		None.

Financing facilities available

Add notes as necessary for an understanding of the position.

	3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A ‘000	Amount used $A ‘000
		-	-
		-	-

Estimated cash outflows for next quarter

Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development	$A ‘000
	2,000
Total	2,000

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 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (Money market/Term Deposit)	890	4,036
	7,102	4,078
Total: cash at end of quarter(item 1.22)	7,992	8,114

Changes in interests in mining tenements

Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
E45/2490 E45/2491 E45/2492 E45/2493 E74/367		100% 100% 100% 100% 100%	Nil Nil Nil Nil Nil

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 (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Preference +securities (description) 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital,buy-backs	147,134,147	147,134,147
	13,006,464 28,960	13,006,464 28,960	28 cents 20 cents	28 cents 20 cents
7.5 +Convertible debt securities (description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options (description and conversion factor) 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter	104,915,624 8,833,648 1,875,000 5,000,000 3,700,000 500,000 1,250,000	104,915,624 - - - - - -	Exercise price 20 cents 20 cents 30 cents 40 cents 54 cents 30 cents 35 cents	Expiry date 30 Nov 2009 31 Aug 2008 31 August 2009 1 May 2008 30 June 2011 31 Jan 2012 31 Dec 2012
	1,250,000 6,503,232	- 6,503,232	35 cents 20 cents	35 cents 30 Nov 2009
	28,960	28,960	20 cents	30 Nov 2009
7.11 Debentures (totals only)
7.12 Unsecured notes (totals only)

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 (see note 4).

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

Sign here: Date: 18 April 2008 (Company secretary)

Print name: Darren Crawte

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==