AUSQUEST LIMITED — Interim / Quarterly Report 2012

Jan 30, 2012

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Quarterly Report – 31 December 2011

GOLD DRILLING SET TO RESUME IN WEST AFRICA IN FEBRUARY 2012 AS EXPLORATION CONTINUES IN AUSTRALIA AND PERU

HIGHLIGHTS

WEST AFRICAN GOLD (Burkina Faso)

• AusQuest acquires 100% equity in the Comoe Project which includes the Phaco Hill gold-silver prospect.

• New drilling targets identified within the Tondoura and Komoe tenements as a result of recent soil sampling results.

• Drilling operations due to re-commence in February 2012 testing gold-soil anomalies located by the 2011 sampling program.

AUSTRALIA – GOLD, BASE METALS & MANGANESE

• Broad zones of highly anomalous base metals including peak values of 26g/t silver (Ag), 4200ppm zinc (Zn), 772ppm lead (Pb), 2570ppm copper (Cu) and 100ppb gold (Au) reported from RC drilling at the Dundas Project east of Norseman WA.

• Potential for poly-metallic deposits highlighted in the Dundas Project area.

• RC drilling at the Stanley manganese project was postponed until April 2012 due to poor access conditions. Additional title secured over structural and stratigraphic targets at the western end of the Earaheedy Basin.

PERU – COPPER-GOLD

• Magnetite veins located within a porphyry intrusive during initial follow-up of a potential Iron Oxide Copper Gold (IOCG) target.

• Mapping and sampling of potential IOCG targets planned to commence in the first Quarter 2012.

• Further tenement applications submitted over magnetic targets identified along the southern coastal belt of Peru.

CORPORATE

• Strong cash position of approximately $8.1M as at 19[th] January 2012 following receipt of the second payment ($1.125M ) from the sale of the Rocklea Iron Project.

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Figure 1: Project Locations – Australia and West Africa

OVERVIEW

AusQuest Limited (ASX: AQD) has a diversified portfolio of gold, base metal and bulk commodity projects in West Africa and Australia ( Figure 1 ) and has recently embarked on a new exploration venture in Peru, South America in conjunction with its strategic alliance partner, Cliffs Natural Resources.

During the December 2011 Quarter, the Company’s exploration efforts focused on Australia and the newly established exploration venture in Peru as field programs in Burkina Faso, West Africa were suspended while negotiations to finalise the equity ownership structure of the Comoe Joint Venture were finalised. These negotiations resulted in AusQuest moving to 100 per cent ownership of the Project, as reported to the ASX on 19 January 2012.

Compilation and interpretation of results from the Comoe Project continued throughout the Quarter and plans were put in place to re-commence field programs in February 2012.

In Australia, drilling at Plenty River (Caroline base metals prospect) and the Dundas Gold Project was completed with drilling at the Stanley Manganese Project

suspended due to access. At Dundas, the potential for base metals and gold was highlighted by results of the initial drilling but no significant assays were reported at Caroline.

In Peru, initial field inspection of potential iron oxide-copper gold (IOCG) targets identified from the Company’s regional aeromagnetic survey commenced and is planned to accelerate during the first Quarter of 2012.

GOLD (WEST AFRICA)

Comoe Project (AQD 100%)

The Comoe Project is located in south-west Burkina Faso, West Africa, within a NNE trending greenstone belt, approximately 20km east of the town of Banfora. The area is relatively unexplored except for extensive historical surface sampling programs and scattered artisanal gold workings along the belt. Burkina Faso is emerging as a significant new West African gold province.

During the Quarter, the Company completed a Share Sale and Royalty Agreement with Endeavour Exploration Limited (“Endeavour”) to purchase its shares in E&A Resources Pty Ltd., the entity holding the Project, in exchange for a 1.5% Net Smelter Royalty, payable to

Endeavour out of future production revenue.

This transaction resulted in the joint venture being dissolved and AusQuest acquiring 100 per cent ownership of the Comoe Project, which includes the Phaco Hill gold-silver prospect.

Previous drilling at Phaco Hill has outlined gold (+/silver, lead and zinc) mineralisation associated with a laterally extensive zone (1,000m x 400m) of sulphidic and aluminous alteration that is typical of gold-bearing volcanogenic massive sulphide (VMS) systems found elsewhere in the world.

At least three separate higher grade gold bodies have been identified by drilling within the Phaco Hill mineralised system.

At this stage, all of the gold bodies remain poorly defined and are open in all directions.

New drilling targets were identified within the Tondoura and Komoe tenements as a result of soil sampling programs completed in 2011.

During the Quarter, assay results received from the regional soil sampling program (400m x 100m) over the Tondoura tenement identified numerous +100ppb gold values (maximum 1.4g/t Au) defining several strike extensive targets sub-parallel to the structural grain of the area including extensions to known artisanal workings.

Field reconnaissance is planned to prioritise targets ahead of drilling.

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Figure 2: Gold-soil anomalies within the Tondoura tenement.

Assay results from detailed sampling (125m x 50m) north of Phaco Hill outlined an extensive (>1km) gold-soil anomaly

(>100ppbAu) 3km north of the Siniko Central prospect, along the interpreted extension of the Siniko Shear zone, as well

as a new gold/tin soil anomaly 3km further to the north. Both these anomalies will be tested as part of the 2012 drilling program.

Compilation and interpretation of available data continued across all the tenements in order to set priorities for RAB and auger drilling to be completed in 2012. Approximately 14,000 metres of RAB drilling and 5,000 metres of auger drilling are planned to test up to 12 gold-soil targets. This program is scheduled to commence in late February 2012 and will take several months to complete.

In-fill and reconnaissance soil sampling are also planned to upgrade selected gold-soil targets to the drilling stage and to test structural targets highlighted by the aeromagnetic data that have had no previous sampling coverage. Approximately 5,000 samples will be collected.

The Company is pleased to have finalised the agreement with Endeavour and looks forward to re-commencing field operations in Burkina Faso over the coming weeks.

MANGANESE

Stanley Project ( 100% AQD )

The Stanley Project is located 170km east of Wiluna in Western Australia within the Earaheedy Basin. The Project comprises 16 granted Exploration Licences and three Exploration Licence Applications covering a total area of approximately 4,400km². Manganese mineralisation in the area occurs at several different stratigraphic locations around the basin and is often associated with carbonate units that are located stratigraphically above the iron formations which occur near the base of the Frere Formation.

RC drilling of VTEM and gravity targets commenced in late November but was suspended after only six (490m) out of a possible 47 holes had been completed due to access problems caused by heavy rains in the area.

The drill-holes completed represented single-hole tests of low level VTEM anomalies in the Windida area and intersected calcareous siltstones with no obvious signs of manganese oxides.

The stronger VTEM targets located at the Dome and Niminga prospects could not be tested due to access difficulties. These targets are interpreted to reflect possible manganese (Mn)/clay alteration along structures intersecting the stratigraphic package containing high background levels of manganese (3 to 5%Mn).

The drilling program is being scheduled to recommence in the second Quarter of 2012 subject to access and drill rig availability.

GOLD AND BASE METALS

Dundas Gold (100% AQD)

The Dundas Gold Project is located approximately 100km east-southeast of Norseman in WA and covers an area of ~1,100km² within a structurally complex region 200km southwest of the Tropicana gold discovery. The tenements occur within the Dundas Nature Reserve, which is under the control of the Department of Environment.

During the Quarter, a reconnaissance RC drilling program comprising 20 holes for 1,916 metres was completed to test gold (+/- Cu, Zn and Ag) anomalies outlined by an earlier shallow RAB drilling program (35m average hole depth).

Widely spaced (>800m) drill sections were completed over four targets with single section tests over the two central anomalies ( see Figure 3 ). Two drill sections were completed over the southernmost target. Drilling depths varied from 80 to 100 metres.

Thick zones (up to 30 metres) of highly anomalous silver and base metal values were reported from the central targets, including higher grade intervals of:

• 5m @ 14g/t Ag, 2,582ppm Zn, 594ppm Pb, 58ppb Au (RC07); and

• 11m @ 2.5g/t Ag, 434ppm Zn, 1,657ppm Cu, 16ppb Au (RC011).

• In addition, a narrow gold interval of 2 metres @ 1.3g/t Au (RC02) was returned from a bottom-of-hole sample (88 to 90m) on the southernmost anomaly.

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Figure 3: Dundas RC drilling results showing gold and base metal targets

The anomalous base metals occur within coarse-grained metamorphosed felsic gneisses and are associated with increased sulphide content.

These results are considered highly encouraging given the thickness of the intersections, the metal associations reported in the samples, and the fact that only limited drill testing has been completed in the area.

The targets are extensive (>1km) based on interpretation of the earlier RAB results and further testing is planned.

Ground electromagnetic surveys are scheduled to commence in February 2012 to locate massive sulphide targets for drilling. Results of this work are expected by the end of February.

Plenty River Base Metal Project (100% AQD)

The Plenty River Project is located 250km east of Alice Springs in the Northern Territory.

During the Quarter, diamond drilling (2 holes for 1,305 metres) was completed at the Caroline prospect to test a coincident EM/gravity anomaly believed to reflect a possible base metal sulphide target.

Drilling intersected sulphidic and graphitic laminated mudstones at target depth (~450m) containing elevated zinc values (>200ppm Zn) and occasional elevated copper (150ppm Cu) and occasional veinlets with anomalous metals. No further work is planned in the area.

Mt Ramsay Nickel Project (AQD 100%)

The Mount Ramsay Project is located between 60km and 120km south west of Halls Creek in the Kimberley Region of WA.

During the Quarter, VTEM anomalies which were previously thought to reflect possible nickel sulphide targets within

ultramafic rocks based on available geological maps, were found to coincide with highly deformed metasediments from the Halls Creek Group, downgrading their potential. No further work is being planned at this stage.

Earoo Nickel Project (AQD 100%)

The Earoo Project is located approximately 130km northwest of Southern Cross in the Yilgarn region of WA. Interpretation of regional aeromagnetic data identified a large mafic intrusion which is believed to form part of the Warakurna Large Igneous Province (WLIP), which has been suggested may include intrusive rocks in the Musgrave area some of which are known to host nickel sulphide occurrences.

Modelling of ground EM data confirmed one anomaly of possible interest close to the contact of the mafic sill with the remaining anomalies reflecting large, flatlying, low conductivity features close to the interpreted lower contact of the sill.

The character of these anomalies is not compatible with significant massive sulphides but may reflect lesser mineralisation.

- Teriwa Copper Gold Project (100% AQD)

The Teriwa project is located approximately 350km southwest of Mt Isa and 100km northwest of the Diamantina Project in western Queensland. It represents an Olympic Dam-style geophysical target at depths of approximately 500 metres depth below the surface.

A detailed gravity survey is planned to identify targets for drilling late in 2012.

- Finke Copper Gold Project (AQD 100%)

The Finke project is located approximately 40km southwest of Tarcoola and 20km south of the Trans-Australian Railway within the Yellabinna Regional Reserve in South Australia. The Company’s tenement

covers a linear trend of magnetic targets thought to reflect ironstone bodies with the potential for copper and gold mineralisation.

Assessment of available data highlighted a major NNE trending structural zone

containing seven discrete magnetic targets which have never been drill tested.

An initial site visit with the Traditional Owners to check on access has been postponed.

PERU

Peru is considered to be a highly prospective country for large Iron Oxide Copper Gold (IOCG) and porphyry copper deposits but is relatively under-explored when compared to its neighbour Chile, which is the world’s largest copper producer. AusQuest recently embarked on a new exploration venture in Peru in conjunction with its strategic alliance partner, Cliffs Natural Resources Exploration (CNRE), to explore the southern coastal region which is largely under cover. A regional aeromagnetic survey flown by the joint venture has been used to identify areas for follow-up.

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Figure 4: Project Location Plan

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Example of Magnetic Targets in Peru

During the Quarter, 13 magnetic targets were selected from this survey and a total of 116 Prospecting Licence applications submitted covering an area of approximately 1060km². All applications are currently being processed by INGEMMET (Institute of Geology Mines and Metallurgy), although the Company has been advised that tenement grants are currently being delayed due to possible regulatory changes.

Initial field reconnaissance of target areas commenced in December and will be accelerated during the first Quarter of 2012 to prioritise areas for more detailed ground investigation. A brief inspection of one target area north of Ilo located magnetite veins within an intrusive porphyry where available geological maps had only indicated outcrops of barren volcanics. Further work is being planned in this area.

AusQuest looks forward to reporting on the progress of this new exploration initiative over the coming months.

BUSINESS DEVELOPMENT

KEY ACTIVITIES – JANUARY 2012 QUARTER

The following field activities are planned for the January 2012 Quarter:

The Company continues to evaluate opportunities both within Australia and offshore with the aim of adding significant value to the Company.

In Australia, project generation work is being increased and new opportunities are being sought to renew the Company’s portfolio of projects with an emphasis on advanced exploration properties with drillready targets.

• Comoe (gold) – Commence RAB and auger drilling of gold targets;

• Comoe (gold) – Soil sampling and mapping of key areas to upgrade to drill status;

• Dundas (gold & base metals) – Ground EM survey to identify targets for drilling; and

• Peru (IOCG) – Field reconnaissance of IOCG and porphyry copper targets.

CORPORATE

AusQuest’s cash reserves as at the 19[th] January 2012 were approximately A$8.1 million , following receipt of the second payment ($1.125M ) from the sale of the Rocklea Iron Project.

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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 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 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.

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

AUSQUEST LIMITED

ABN 35 091 542 451

Quarter ended (“current quarter”) 31 December 2011

Consolidated statement of cash flows

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 Net Operating Cash Flows	Current quarter $A ‘000	Year to date (6 months) $A ‘000
	- (1,279) - - (792) - 80 - - -	- (4,006) - - (878) - 412 - - -
	(1,991)	(4,472)
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)	- - (6) - - - - - -	- - (27) - - - - -
	(6)	(27)
	(1,997)	(4,499)

1.13 Total operating and investing cash flows (brought forward)	(1,997)	(4,499)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from unissued shares, options etc 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (share issue costs) Net financing cash flows	- - - - - -	- - - - - -
	-	-
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end of quarter / year to date	(1,997) 8,933 -	(4,499) 11,435 -
	6,936	6,936

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

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A ‘000
		259
		-
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

None.

• 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

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

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration Total	$A’000
	1050
	-
	-
	250
	1300

Reconciliation of cash

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)	665	1,728
	6,271	7,205
Total: cash at end of quarter(item 1.22)	6,936	8,933

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed	Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
	E69/1949 E69/1950 E69/2469 E69/2738 E80/4428 E80/4436 E80/4437 E15470 E15472 E15782 E15787		100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%	Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

6.2 Interests in mining tenements acquired or increased

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	228,312,235	228,312,235
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	500,000 1,250,000 1,350,000 1,150,000 500,000 500,000 1,750,000	- - - - - - -	Exercise price 30 cents 35 cents 20 cents 40 cents 30 cents 40 cents 40 cents	Expiry date 31 Jan 2012 31 Dec 2012 1 Dec 2013 1 Dec 2013 30 Nov 2013 30 Nov 2013 30 Nov 2013

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: (Company secretary)

Date: 30 January 2012

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.

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