DIATREME RESOURCES LIMITED — Capital/Financing Update 2011

Feb 22, 2011

DIATREME RESOURCES LIMITED

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ABN: 33 061 267 061

Postal Address: P.O Box 10288 Brisbane Adelaide Street QLD 4000 Registered Office: Level 2 87 Wickham Terrace Spring Hill QLD 4000 PH: +61 (0)7 3832 5666 FX: +61 (0)7 3832 5300 www.diatreme.com.au manager@diatreme.com.au

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ASX : DRX

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

23 February 2011

FULLY UNDERWRITTEN NON-RENOUNCEABLE RIGHTS ISSUE

Highlights

Funding:

• 1 for 3 pro-rata rights issue at 8 cents per share with 1 free attaching option (exercisable at 15 cents on or before 30 September 2013) per share allotted to shareholders to raise approximately $7.1 million.

• Application will be made to list the options on ASX.

Underwriting:

• Fully underwritten by Intersuisse Limited.

Purpose of Offer:

• To raise funds for advancement of the Cyclone Heavy Mineral Project through the pre-feasibility stage leading into the feasibility stage and to progress the Company’s other projects.

Diatreme Resources Limited ( Diatreme ) will undertake a 1 for 3 non-renounceable rights issue of ordinary shares at 8.0 cents per share with 1 free attaching option for each new ordinary share ( Rights Issue ) to shareholders to raise approximately $7.1 million. Application will be made to list the options on ASX.

Shareholders will have the opportunity to apply for additional shares (with attaching free options) under the Rights Issue if these are available.

Offer Fully Underwritten

The Offer is fully underwritten by Intersuisse Limited ( Intersuisse ).

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DIATREME RESOURCES LIMITED

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Purpose of the Offer

The majority of the funds raised will be used as follows:

• 1 Cyclone Project

  • conduct flora, fauna surveys, environmental studies and hydrological drilling for water supplies;

  • commence mining lease applications and licensing processes for infrastructure requirements inclusive of airstrip, water pipelines and transport corridors;

  • conduct cultural heritage surveys;

  • commence further detailed metallurgical testwork, along with mining and processing plant design;

  • following completion of the prefeasibility study commence full feasibility studies to mine;

  • conduct exploration in the vicinity of the Cyclone Project to establish further satellite resources;

• 2 Other Projects

  • conduct further regional exploration for mineral sands; and

  • progress Diatreme’s metalliferous projects through joint venture arrangements and/or targeted exploration over the next two years. The Company is currently in discussions with third parties regarding potential joint ventures for its Clermont and Tick Hill projects, however, no binding agreements have been reached.

Prospectus and Offer details

A Prospectus setting out the details of the Offer has been lodged with ASX on 23 February 2011. Eligible shareholders will also be sent a copy of the Prospectus and Entitlement and Acceptance Form in accordance with the timetable below.

The Offer is non-renounceable, which means that rights to participate in the Offer cannot be sold and therefore to the extent that shareholders entitled to participate in the Offer do not take up their entitlement, they will not receive any value in respect of those entitlements not taken up.

Fractional entitlements will be rounded up to the nearest whole New Share and New Option.

Additional shares

Eligible Shareholders who apply for their full entitlement may apply for additional New Shares and New Options in excess of their entitlement. Any additional New Shares and New Options will be allotted at the same time as other New Shares and New Options. Eligible Shareholders may apply for additional New Shares and New Options by completing the Entitlement and Acceptance Form that will accompany the Prospectus. There is no guarantee that shareholders will be successful in being allocated any additional New Shares and New Options.

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DIATREME RESOURCES LIMITED

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Timetable

The New Shares will be offered in accordance with the following timetable:

Event	Date
Diatreme announces Offer	23 February 2011
Diatreme sends notice to security holders containing theinformation required by Appendix 3B	24 February 2011
Existing Diatreme shares quoted on an “ex” basis	28 February 2011
Record Date to determine Offer entitlements (7:00 pm Sydneytime)	4 March 2011
Offer opens	10 March 2011
Prospectus dispatched to eligible shareholders	10 March 2011
Offer closes (5:00 pm Brisbane time)	31 March 2011
Deferred settlement trading begins	1 April 2011
Notice of under subscriptions to ASX	5 April 2011
Allotment of New Shares and New Options and dispatch of holdingstatements	8 April 2011
Commencement of trading on a normal settlement basis	11 April 2011

All dates are subject to change and accordingly are indicative only. The Company reserves the right, subject to the Corporations Act 2001 (Cth) ( Act ) and the ASX Listing Rules and the consent of Intersuisse, to amend the indicative timetable and in particular, to extend the closing date or to withdraw the Offer without prior notice. Any extension of the closing date will have a consequential effect on the date of allotment of New Shares and New Options.

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Anthony J Fawdon Executive Chairman/CEO

Company contact details: Tel : +61 7 3832 5666 Fax : +61 7 3832 5300 Email : manager@diatreme.com.au

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