DIATREME RESOURCES LIMITED — Capital/Financing Update 2007

Oct 15, 2007

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DIATREME RESOURCES LIMITED

ABN 33 061 267 061

Level 2, 87 Wickham Terrace, Spring Hill, Qld, 4000 PO Box 10288 Brisbane Adelaide Street Queensland 4000

Telephone : 61 7 3832 5666 Facsimile : 61 7 3832 5300 Email : manager@diatreme.com.au Website : www.diatreme.com.au

ASX Code: DRX, DRXO

Company Announcement Office Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000

16 October 2007

REPLACEMENT “DRXO” OPTION EXERCISE FORM REVISED OPTION EXERCISE PRICE

As a courtesy follow-up to the Final Notice documentation dispatched on 3 October 2007 to all “DRXO” option holders, the Company has today mailed holders on the Register as at 15/10/07 a replacement “Notice of exercise of Option” reflecting the new 22 cent exercise price.

A copy of the notice is attached.

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DAVID H HALL Executive Director – Operations

Attach:

Diatreme Resources Limited, as an Australian ASX listed company based in Brisbane, Queensland, operates as a diversified mineral explorer with advanced commodity holdings in zircon, copper and gold. The Company is currently exploring the southern Australia “Eucla Basin HMS Project”, the Queensland “Clermont Copper Project” and the “Bellfield Base Metals Project”. By conducting substantial exploration over its quality projects, the Company aims to bring successful projects to production status at the same time as increasing shareholder wealth.

THIS FORM REPLACES THE NOTICE OF EXERCISE OF OPTIONS FORM MAILED TO “DRXO” OPTIONHOLDERS ON 3[RD] OCTOBER 2007

DIATREME RESOURCES LIMITED

ABN 33 061 267 061

NOTICE OF EXERCISE OF OPTIONS

EXPIRING 5.00PM BRISBANE TIME 31 OCTOBER 2007

HIN:

The Directors Diatreme Resources Limited PO Box 10288, Brisbane Adelaide Street, Qld, 4000

I/We whose full name(s) and address appears above give notice of the exercise of the options specified below:

Insert number of 31 October 2007 Options being exercised at 22 cents per option

to subscribe for ordinary shares in the capital of Diatreme Resources Limited.

$

I/We request that the company allot to me/us the shares to which I/we are entitled in accordance with the terms and conditions of the options held by me/us. I/We agree to accept the shares allotted to me/us subject to the Constitution of the Company.

If this Notice is signed by an Attorney, the Attorney declares that no notice of revocation has been received in respect of the Power under authority of which this Notice is signed.

SIGNING REQUIREMENTS

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----- Start of picture text ----- I/We authorise you to act in accordance with my/our instructions above.Security Holder 1 (Individual) Security Holder 2 (Individual) Joint Security Holder 3(Individual)Sole Director and Sole Company Secretary Director Director/Company SecretaryDATE / /Day Month Year----- End of picture text -----

In the case of joint Optionholders each Optionholder must sign.

Where the Optionholder is an incorporated body its Common Seal and Attestation Clause are to be affixed and the Attestation Clause signed by its authorised signatories.

Cheques must be in Australian currency, payable to "Diatreme Resources Limited, and crossed "Not Negotiable”. The application for shares on exercise of the Options with the appropriate remittance should be lodged with the Company at its registered office, Level 2, 87 Wickham Terrace, Spring Hill, Qld, 4000 or mailed to Diatreme Resources Limited, PO Box 10288, Brisbane Adelaide Street, Qld, 4000.

Contact Name: ……………………………… Contact Telephone No: ………………………

THIS FORM REPLACES THE NOTICE OF EXERCISE OF OPTIONS FORM MAILED TO “DRXO” OPTIONHOLDERS ON 3[RD] OCTOBER 2007

TERMS AND CONDITIONS OF OCTOBER 2007 OPTIONS ASX CODE “DRXO”

Holders of Options are entitled to subscribe for and be allotted one ordinary Share in the capital of Diatreme Resources Limited (Diatreme) on the following terms:

Shares issued on Options exercise

Each Option entitles the Optionholder to subscribe for one new Share upon exercise of the Option and payment of the Exercise Price.

Option period

The Options are exercisable at any time prior to 5:00 pm Brisbane time on 31 October 2007, the Expiry Date, by completing the Option Exercise Form and delivering it together with the payment for the number of Shares in respect of which the Options are exercised to the registered office of Diatreme.

Exercise price

The exercise price of the Options is $0.22 (22 cents) per Option.

Transferability

Subject to the Corporations Act, the ASX Listing Rules (if appropriate at the time) and the Constitution of Diatreme, Options are freely transferable. An application has been made to the ASX for Official Quotation of the Options upon the completion of any escrow period imposed by ASX, if appropriate at the time.

Class of Share

All ordinary fully paid Shares issued upon exercise of Options will rank pari passu in all respects with Diatreme’s then issued ordinary fully paid Shares. Diatreme may apply for Official Quotation by ASX of all Shares issued upon exercise of Options, subject to satisfaction of any applicable restriction requirements.

There are no participating rights and entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Options. Diatreme will ensure that Optionholders will be allowed at least 10 business days notice to allow for the conversion of Options prior to the Record Date in relation to any offer of securities made to shareholders.

In the event of any reconstruction or reorganisation of capital (including consolidation, subdivision, reduction or return) of the issued capital of Diatreme prior to the Expiry Date, rights of the holders of the Options, the number of Options and/or the exercise price of the Options shall be changed to the extent necessary to comply with the ASX Listing Rules (if applicable at the time) applying to the reorganisation of capital at the time of the reorganisation.

Dividends

Upon exercise of the Options, the Shares allotted will rank pari passu in all respects with Diatreme’s existing fully paid ordinary Shares on issue.

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DRXO_22cent_Options Exercise Form_151007.doc