DIATREME RESOURCES LIMITED - Capital/Financing Update 2016

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15[th] June 2016

Project Enhancement and Update Study by independent consultants shows NPV of $121m, payback in under 3 yrs
Potential for further cost savings from improved industry and market conditions.

In a further boost for its flagship Cyclone Zircon Project, Diatreme Resources Limited (ASX:DRX) announced today the results of a Project Enhancement and Update Study completed by independent consultants which reaffirms the project’s financial viability.

Based on the study undertaken by independent consultants Sedgman Limited and internally by DRX, the Eucla Basin’s largest undeveloped zircon project now has a projected net present value of $121 million, an internal rate of return of 23% and payback in 2.8 years based on an updated estimate of processing plant capital and operating costs, shipping and diesel costs, with revenue streams adjusted for current product pricing.

Current industry and market conditions also present further opportunities for cost savings on key capital and operating expenditures, compared to the Prefeasibility Study estimates (refer ASX announcement 20 March 2012).

Commenting on the results, Diatreme’s CEO Neil McIntyre said: “This latest study has confirmed the feasibility of our flagship project and its potential to deliver economic benefits for all stakeholders.

“Following the expected award of environmental approvals this month, we can now move confidently towards the completion of the Definitive Feasibility Study (DFS) and the delivery of this valuable new mine for Western Australia.”

Confidence in Cyclone’s future has also been boosted by Ruidow’s recent “Global Zircon Conference 2016” held in Nanjing, China, from May 24-26, which indicated that an upturn in China’s residential market has lifted demand for ceramics, with leading producers anticipating higher prices for zircon from the third quarter of 2016.

Analysis by research company Beer & Co. has suggested the zircon price could reach US$1,500 a tonne by late 2018, and with forecasts of a looming supply deficit within three years, Cyclone is set to commence production amid favourable pricing conditions for its key product.

CYCLONE ZIRCON PROJECT

Project Enhancement and Update Study

DRX continues to advance its Cyclone Zircon Project with the completion of a “Project Enhancement and Update Study” by independent consultants Sedgman Limited. The study identified opportunities for cost reductions and evaluated the project economics for a possible construction schedule which would commence on completion of the DFS. Cyclone is currently the largest undeveloped zircon project in the Eucla Basin and is the flagship project for Diatreme.

DRX engaged Sedgman Limited, a leading provider of mineral processing and associated infrastructure solutions to the mineral sands industry, to undertake the study. Sedgman has reviewed work undertaken for the PFS and subsequent studies and provided an updated assessment of process plant, some infrastructure and shipping costs and assumptions at a technical and commercial level. This has provided Diatreme with a greater understanding of the project’s potential commercial returns while current industry and market conditions provide an opportunity for cost savings on key capital and operating expenditures.

Using the previous PFS financial model the study outcomes demonstrated the following financial results for the project:

NPV of $121M
IRR of 23%
Payback in 2.8 years

The project analysis was based on sale of heavy mineral concentrate (HMC) to processors in China and the HMC price was determined by calculating a reasonable proportion of the value of the contained final products based on the financial model previously developed by Diatreme for the PFS in 2012.

Current industry and market conditions have presented considerable opportunities for cost savings on key capital and operating expenditures, compared to the Prefeasibility Study. Sedgman’s study revealed reduced transport and operating costs resulting from the changed global economic circumstances during the four years since the Cyclone PFS was completed. A reduction in the price for diesel fuel will provide lower energy costs for diesel powered generators, earthmoving equipment and land transport systems.

Sedgman reviewed the capital cost of the WCP which was based on the PFS testwork and the WCP flowsheet completed by Mineral Technologies in 2011. The $60M estimate for the capital cost of the plant using similar technology separating equipment was verified by Sedgman as a valid current estimate. Sedgman recommended additional bulk sample testwork using reflux classifiers as a potential new technology capable of improving metallurgical performance and reducing capital and operating costs. Sedgman indicated from previous experience a potential capital cost saving of up to 20-25% if bulk sample testwork produced positive metallurgical results.

Based on this updated work, the revised cost estimates for the project are:

$161M project capital expenditure
$72M average annual operating cost.

As part of the overall study Diatreme reviewed the mining schedule and a revised schedule was produced to increase the average grade mined during the first three years of the operation.

The joint study has confirmed the viability of the Cyclone Project and provides DRX with an independent consultant’s financial analysis which shows improvements to the project economics.

Environmental Approval

The Western Australian EPA has provided Diatreme’s subsidiary Lost Sands Pty Ltd (“Lost Sands”) with draft conditions relating to environmental approvals for the Cyclone Zircon Project. Lost Sands has reviewed the draft conditions and submitted comments to the EPA on 30 May 2016 for its consideration when finalising the conditions for the EPA’s recommendation to the WA Environment Minister. The Minister is expected to review the EPA’s recommendation for a period of two weeks and then grant the licence. This process is expected be finalised by the end of June 2016.

Grant of the environmental licence will provide Lost Sands with environmental conditions for developing and operating the Cyclone Mineral Sands Mine, including open cut pits, mining and processing infrastructure, airstrip, accommodation camp, bore fields and the haul road from the mine site to the Forrest rail siding.

Mineral Resource and Ore Reserve

DRX has successfully expanded the life of the Cyclone Zircon Project to 14 years with the acquisition of the Cyclone Extended resource (tenement R69/1) from Image Resources Ltd. The addition of Cyclone Extended increased the size of Diatreme’s mineral sands project in Western Australia’s Eucla Basin to a mineral resource of 211 Mt with an average grade of 2.3% HM (ASX announcement 9 April 2015). This is an effective 60% increase in contained heavy minerals over the original DRX Cyclone resource. A summary of the current mineral resource is provided in Table 1.

A Probable Ore Reserve (ASX announcement 14 December 2015) of 140 Mt at an average grade of 2.5% HM was announced in December 2015, representing a 75% conversion rate from the HM tonnes contained in the mineral resource. The mine design includes 84 Mbcm of overburden with an average strip ratio of 1:1. The strip ratio is considerably lower in the early years of the mine operation where mining is scheduled to commence in a higher grade area of the ore reserve.

The integration of Cyclone Extended into the Cyclone Project allows for a wider range of options in mine planning and design including targeting higher grade ore at the commencement of mining and could also include higher production levels while maintaining a long life operation.

An update to the Probable Ore Reserve was completed as part of the Project Enhancement and Update Study, with a Probable Ore Reserve estimate for the Cyclone Project now reported as 138 Mt at 2.6% HM, including 0.72% Zircon, containing 3.5 Mt of HM, including 1 Mt of Zircon. The revised estimate primarily relates to the adoption of a revised mining schedule which reduces the amount of lower grade “Nearshore” mineralisation (and associated interburden) mined from the deeper parts of the mine path and omits some lower grade “Beach” mineralisation on the western batter of the mine path in the first three years of operation.

The Ore Reserve is based upon mine planning parameters developed for the Cyclone Prefeasibility Study (ASX announcement 20 Mar 2012), with appropriate recognition of subsequent metallurgical testwork and process flowsheet development undertaken by Mineral Technologies.

The design parameters for the open pit were developed based on simultaneous assessment of a number of economic and mining factors:

A nominal 0.4% Zircon cut-off grade was applied. Lower grade material was included in areas with less overburden and where required to create a practical pit geometry for dozer trap mining.
Areas with higher stripping ratios required a higher grade ore to be economic.
The base of induration (within the Quaternary weathering profile) was used as the top of the ore zone to exclude indurated material (with poor quality HM) from mining.
Low grade interburden material, which was not part of the Mineral Resource, was included in the pit design to allow mining of the Beach and Nearshore mineralisation in a single pass.
Pit wall design used batter angles of 35° for ore and interburden (both unconsolidated sand) and 45° for overburden (variably indurated sandy loam).

The Ore Reserve has been classified as Probable based on the accuracy of the cost estimate (PFS quality) and additional work required for the marketing of Cyclone HMC in China. However, 90% of the Ore Reserve is derived from Measured Resource, and there is a high level of confidence in the other modifying factors applied.

The mining factors are based on preliminary designs by personnel with extensive experience in mineral sands. Proven techniques with low technical risk have been selected. The mining method comprises overburden removal by truck and shovel, and ore mining by dozer push to in-pit traps and slurry pumping. Infrastructure requirements are minimal and will consist of a network of temporary haul roads, electricity and water reticulation to the mining unit and a mobile slurry pipeline.

Mining dilution was built in to the Ore Reserve by the inclusion of ‘waste’ material in the mine design, both as roof and floor dilution and internal waste (interburden) which occurs between the beach and nearshore mineralisation. No mining recovery factor has been used as ore loss is negligible when using dozer push methods.

Metallurgical testwork and process flowsheet design has been carried out by Mineral Technologies (MT) in Carrara on representative bulk ore samples (one from the life of mine, the other from the initial 2-year path). MT have proposed the use of conventional wet concentrator plant (WCP) for mineral sands, primarily utilising spiral separation with secondary screening and classification to achieve high HMC quality. A recovery factor to HMC of 68% for HM and 95% for Zircon has been utilised. MT has proposed the use of a conventional mineral separation plant (MSP), primarily utilizing magnetic and electrostatic separation with secondary screening and gravity separation to generate mineral products. Hot acid leach of the HM is required to achieve optimal recovery and product quality, due to the presence of coated grains.

The Ore Reserve estimate is based on the Cyclone Mineral Resource estimate, released to ASX on 9 April 2015 and described in the attached JORC 2012 – Table1. The modelling techniques used for the Cyclone Mineral Resource Estimate are considered to align with industry best practice.

The Cyclone Mineral Resource (ASX announcement 9 April 2015) comprises 211 Mt at an average grade of 2.3% HM. The Probable Ore Reserve has been estimated at 140 Mt at an average grade of 2.5% HM, representing a 75% conversion rate for contained HM tonnes. The pit design includes 83 Mbcm of overburden with a strip ratio of 1:1. The strip ratio is considerably lower in the early years of the mine operation.

Supporting Information for the Cyclone Ore Reserve includes:

Table 1: Cyclone Project Resource & Reserve Estimate Appendix 1: Cyclone Project, Annualised Ore Reserve Attachment: JORC Code, 2012 Edition - Table 1

TABLE 1: CYLONE PROJECT RESOURCE & RESERVE ESTIMATE

MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE	MINERAL RESOURCE
Resource Category	HM cut-off %	Material	HM	HM	Slime	OS			Head Grade				Zircon Kt
		Mt	%	Mt	%	%	Zircon %	Rutile %	Leuc %	HiTi %	Alt Ilm %	Si TiOx %
MEASURED	1.0	156	2.4	3.79	4.2	5.1	0.69	0.08	0.17	0.52	0.26	0.55	1,070
INDICATED	1.0	55	1.8	0.99	4.1	4.5	0.36	0.06	0.06	0.50	0.11	0.31	200
TOTAL	1.0	211	2.3	4.78	4.2	4.9	0.60	0.08	0.14	0.51	0.23	0.50	1,270
Mineral Assemblage							27%	3%	6%	23%	10%	22%

ORE RESERVE
Reserve Category	Zircon cut-off %	Material	HM	HM	Slime	OS			Head Grade				Zircon Kt
		Mt	%	Mt	%	%	Zircon %	Rutile %	Leuc %	HiTi %	Alt Ilm %	Si TiOx %
PROBABLE	0.4	138	2.6	3.52	4.6	5.3	0.72	0.07	0.17	0.59	0.32	0.57	990
TOTAL	0.4	138	2.6	3.52	4.6	5.3	0.72	0.07	0.17	0.59	0.32	0.57	990
Mineral Assemblage							28%	3%	7%	23%	13%	22%

Table Notes

Rounding may generate differences in last decimal place
A constant SG of 1.7 has been used to derive material tonnes
Slime refers to material typically <53um
OS refers to oversize material typically >2mm
Mineral Assemblage derived from QEMSCAN® analysis
Leucoxene (Leuc) – Ti-oxides containing 85 – 95% TiO2, HiTi - Ti-oxides containing 70 - 85% TiO2, Altered Ilmenite (Alt Ilm) - Ti-oxides containing <70% TiO2, Si-bearing Ti-Oxide (Si TiOx) – Ti-oxides containing >10% silica rich Ti minerals.
Resources are inclusive of Reserves

Mining Lease

On 24 November 2014 DRX announced that the WA Department of Mines and Petroleum had granted a Mining Lease (ML69/141) for the Cyclone Zircon Project on 18 November 2014. The mining lease covers the original Cyclone resource area including sufficient additional area around the resource for operational activities including tailings, infrastructure and services. The mining lease covers sufficient resources for the first 10 years of mining and an additional lease will be obtained to cover the Cyclone Extended area as part of the DFS. The Cyclone Extended resource is currently held under a Retention Licence (R69/1).

Areas for other infrastructure and services more distant from the mine including the airstrip, accommodation camp and road will be secured under two Miscellaneous Licences. An application for the first Miscellaneous Licence for the airstrip, accommodation camp, and a section of the haul road has been submitted to the DMP and is expected to be granted by 30 June 2016. An application for the second Miscellaneous licence for the remainder of the haul road including the section through the nature reserve will be submitted following grant of the environmental licence.

Water Supply

The availability of a suitable water supply for the Cyclone project was confirmed in late 2013 with the discovery of a massive high yielding groundwater aquifer in the Officer Basin sediments beneath the planned mine area. A bore was constructed to a depth of 812 metres to test the sediments and discovered high yielding sandstone formations which commenced at a depth of 530 metres and continued for the full depth of the bore.

An estimated flow rate up to 40 litres per second was obtained from the bore using the drill rig to air lift the water. The water quality at 25,000 ppm total dissolved solids is better than expected and is a good quality supply for the mine and processing plant. The potable water supply for the accommodation camp will require a desalination plant which will use the bore water.

The test bore is planned to be used as a production bore to form part of the Cyclone project borefield. The current estimate is for a network of at least ten bores to a depth of approximately 650 metres to supply the 7.8 gigalitres of water required for the mine, wet concentrator plant, and all other site uses each year. The test bore results confirmed that the capital cost estimate for water supply used in the financial evaluation of the project was appropriate. A pump test will be completed as part of the DFS to confirm the borefield design and obtain information to confirm the operating costs for the water supply system.

Native Title and Mining Agreement

A Native Title and Mining Agreement between Lost Sands and the Pila Nguru (Aboriginal Corporation) (RNTBC) representing the Spinifex People was signed at a ceremony held at Tjuntjuntjarra WA on 15 November 2014. The Spinifex People are the traditional owners of the Cyclone Project area,

The agreement provides enormous opportunities for the Spinifex People. Diatreme expects the mine will create around 100 jobs in both the construction and operational stages and the company has committed to a medium term target of recruiting 20% of the operational workforce from the local Indigenous community.

The agreement also provides for direct cash compensation payments, contracting opportunities to tender on various mine contracts and vocational benefits through direct employment on the project and traineeships. In addition, an educational trust fund will support the Spinifex People’s education and training activities and a number of cultural initiatives are also planned. Payments associated with the agreement have been included in the Cyclone project financial model since execution and were also included in the recent financial evaluation by Sedgman.

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Definitive Feasibility Study

The Cyclone Project has now been effectively de-risked subject to the WA Environment Minister’s grant of the environmental licence. The de-risking process has mitigated key project risks identified in the PFS and during the early stage of the DFS. DRX can now move confidently towards completing the DFS with the knowledge and comfort provided by the de-risking process.

In summary the key risks that have been mitigated and related management measures are listed below:

Native Title and Mining Agreement - Agreement executed with the Native Title holders on 15 November 2014.
Mining Lease - Granted by the WA Department of Mines and Petroleum on 18 November 2014.
� Environmental Approval - Draft environmental conditions received, EPA finalising these for a recommendation to the WA Environment Minister, licence expected by 30 June 2016.
Water Supply - A massive water supply discovered and test bore completed at the Cyclone mine site, detailed water supply design to be completed in the DFS.
Mine Life - Acquisition of Cyclone Extended has increased the mine life to 14 years at a mining rate of 10 million tonnes per year.
Independent Update and Assessment - The Project Enhancement and Update Study by Sedgman Limited has revealed cost reductions and demonstrated robust financial results. Sedgman has highlighted other opportunities for improving the Cyclone Project economics.

For further information, please contact:

Neil McIntyre, CEO

About the Cyclone Zircon Project

Discovered in 2007, the Cyclone Zircon deposit is located along the Barton shoreline within the Wanna Lakes area of the northern Eucla Basin, 25 kilometres from Western Australia’s state border with South Australia and 220 kilometres north of the transcontinental railway.

Following the acquisition of the Cyclone Extended Heavy Mineral Resource, the Cyclone Project’s JORC Mineral Resource (Measured and Indicated) has been estimated at comprising 211 million tonnes at 2.3% heavy minerals (1% cut-off grade) containing 4.8 million tonnes HM (refer ASX announcement 9 April 2015). This includes a Measured Resource of 156Mt at 2.4% HM and an Indicated Resource of 55Mt at 1.8% HM (both at 1% HM cut-off grade).

In November 2014, Western Australia’s Department of Mines and Petroleum granted a Mining Lease (ML69/141) for the project, which followed the signing of a Project Agreement with the traditional owners, the Spinifex People.

A Definitive Feasibility Study is underway along with further project specific commercial and operational enhancement studies, with Cyclone representing potentially the largest undeveloped zircon project in the Eucla Basin.

Cautionary Statement

This announcement has been prepared in accordance with the JORC Code (2012) and the ASX Listing Rules. Whilst Diatreme Resources has concluded that it has a reasonable basis for providing the forward looking statements included in this announcement, Diatreme Resources advises that given the current price of zircon and the company’s current market capitalisation (compared to the capital expenditure required in connection with the Cyclone Zircon Project), the production targets and forecast financial information contained in this announcement do not provide an assurance of economic development at this stage. The stated production target and forecast financial information contained in this announcement is based on Diatreme Resources’ current expectations of future results or events and should not be relied upon by investors when making investment decisions.

Competent Person Statement

The information in this report, insofar as it relates to Mineral Resources is based on information compiled by Mr Ian Reudavey, who is a full time employee of Diatreme Resources Limited and a Member of the Australian Institute of Geoscientists. Mr Reudavey has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of ‘The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Reudavey consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

The information in this report, insofar as it relates to Ore Reserves is based on information compiled by Mr Phil McMurtrie, who is a director of Tisana Pty Ltd (a consultant to Diatreme Resources Limited), and a Member of the Australasian Institute of Mining and Metallurgy. Mr McMurtrie has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the 2012 Edition of ‘The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr McMurtrie consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

APPENDIX 1

			APPENDIX 1	APPENDIX 1	APPENDIX 1	APPENDIX 1	APPENDIX 1	APPENDIX 1
			Cyclone Project ‐ Annualised Ore Reserve
Year	Overburden Mm3	Strip Ratio	Ore Mt	HM %	HM kt	Zircon kt	Rutile kt	Leucox kt	HiTi kt	Alt Ilm kt	Si TiOx kt
1	3.3	0.6	10.0	2.7	275	95	10	20	50	25	60
2	4.5	0.8	10.0	3.1	305	105	10	25	55	30	60
3	5.0	0.8	10.0	2.7	265	90	10	20	45	25	60
4	7.0	1.2	10.0	1.9	195	70	10	15	25	15	45
5	7.7	1.3	10.0	2.3	230	80	10	20	35	20	55
6	6.7	1.1	10.0	3.1	305	85	5	15	80	30	80
7	6.8	1.2	10.0	2.8	280	75	5	15	80	35	60
8	7.0	1.2	10.0	2.7	275	75	5	20	70	30	65
9	4.5	0.8	10.0	1.8	180	50	5	10	40	35	35
10	3.6	0.6	10.0	2.2	220	60	10	15	45	30	45
11	4.6	0.8	10.0	2.3	230	50	10	20	55	35	50
12	7.1	1.2	10.0	3.0	300	70	5	20	70	40	80
13	7.7	1.3	10.0	2.5	255	50	5	15	65	55	50
14	7.5	1.6	7.8	2.5	200	25	0	5	90	45	30
TOTAL	82.8	1.0	137.8	2.5	3520	990	105	235	810	445	780

Rounding may generate differences in totals Mineral tonnages reflect contained mineral within mined ore, not product tonnes

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

Attachment

Section 1 Sampling Techniques and Data

Section 1 Sampling Techniques and Data	Section 1 Sampling Techniques and Data
(Criteria in this section applyto all succeedingsections.)
Criteria	JORC Code explanation	Commentary
Sampling	• Nature and quality of sampling (eg cut channels, random chips, or	•	Sampling techniques are considered to be mineral sands “industry
techniques	specific specialised industry standard measurement tools appropriate		standard’ for dry beach sands with low levels of induration and slime.
	to the minerals under investigation, such as down hole gamma	•	Samples are down hole intervals of air-core drill cuttings collected from
	sondes, or handheld XRF instruments, etc). These examples should		cyclone mounted rotary splitter, approximately 2-3kg (representing
	not be taken as limiting the broad meaning of sampling.		~20%) of drill material is sampled.
	• Include reference to measures taken to ensure sample representivity	•	Diatreme samples are 1.5m intervals, Image samples are either 2m or
	and the appropriate calibration of any measurement tools or systems		1m intervals, with visibly mineralised zones typically sampled at 1m
	used.		intervals.
	• Aspects of the determination of mineralisation that are Material to the	•	Sample representivity validated by twin drill holes, sample duplicate
	Public Report.		analysis and bulk sample testwork.
	• In cases where ‘industry standard’ work has been done this would be	•	For Diatreme samples Heavy Mineral (HM) is defined as mineral grains
	relatively simple (eg ‘reverse circulation drilling was used to obtain 1		within 53 to 710 µm size range with an SG greater than 2.9
	m samples from which 3 kg was pulverised to produce a 30 g charge	•	For Image samples Heavy Mineral (HM) is defined as mineral grains
	for fire assay’). In other cases more explanation may be required,		within 63 to 1,000 µm size range with an SG greater than 2.9.
	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	• Drill type (eg core, reverse circulation, open-hole hammer, rotary air	•	Vertical NQ air-core drilling utilizing blade bit, 3m drill runs.
techniques	blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple
	or standard tube, depth of diamond tails, face-sampling bit or other
	_type, whether core is oriented and ifso, by what method, etc). _
Drill sample	• Method of recording and assessing core and chip sample recoveries	•	Visual assessment and logging of sample recovery and sample quality.
recovery	and results assessed.	•	Reaming of hole and clearance of drill string after every 3m drill rod.
	• Measures taken to maximise sample recovery and ensure	•	Sample chute cleaned between samples and regular cleaning of
	representative nature of the samples.		cyclone to prevent sample contamination.
	• Whether a relationship exists between sample recovery and grade	•	No relationship is evident between sample recovery and grade.
	and whether sample bias may have occurred due to preferential
	loss/gainof fine/coarse material.
Logging	• Whether core and chip samples have been geologically and	•	Geological logging of the total hole by field geologist, with retention of
	geotechnically logged to a level of detail to support appropriate		sample in chip trays to allow subsequent re-interpretation of data.
	Mineral Resource estimation, mining studies and metallurgical	•	The total hole is logged; logging includes colour, grain size, sorting,
	studies.		induration and estimates of HM, slimes and oversize utilizing panning.
	• Whether logging is qualitative or quantitative in nature. Core (or	•	Logging is captured in Micromine data tables, with daily update of field
	costean, channel, etc) photography.		database and regular update of master database.
	• _The total length and percentage of the relevant intersections logged. _
Sub-sampling	• If core, whether cut or sawn and whether quarter, half or all core	•	Rotary split on site (approx. 80:20), resulting in approximately 1.5 –
techniques	taken.		2.0kgof drysample(as mineralization occurs above the water table).

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

Attachment

Criteria	JORC Code explanation	Commentary	Commentary
and sample	• If non-core, whether riffled, tube sampled, rotary split, etc and	•	Diatreme sample is then dried, screened and washed to determine
preparation	whether sampled wet or dry.		oversize and slimes content in company sample preparation facility.
	• For all sample types, the nature, quality and appropriateness of the		100g sample for HLS (HM assay) is riffle split from homogenized
	sample preparation technique.		screened and de-slimed sample.
	• Quality control procedures adopted for all sub-sampling stages to	•	Diatreme duplicate HLS splits submitted at 1 in 40, results support
	maximise representivity of samples.		sample representivity.
	• Measures taken to ensure that the sampling is representative of the in	•	Image sample is dried and a 100g split screened and washed to
	situ material collected, including for instance results for field		determine oversize and slimes content in contractor sample preparation
	duplicate/second-half sampling.		facility. The remaining sand fraction is then submitted for HLS (HM
	• Whether sample sizes are appropriate to the grain size of the material		assay).
	being sampled.	•	Sample size is considered appropriate for the material sampled.
		•	Mineralogy samples are typically down hole composites of HM from the
			mineralized zone(s) with multiple hole composites across section for
			some of the thinner mineralized zones.
Quality of	• The nature, quality and appropriateness of the assaying and	•	Diatreme sample preparation laboratory operated by subsidiary
assay data	laboratory procedures used and whether the technique is considered		company with methods and procedures adopted from industry
and	partial or total.		standards.
laboratory	• For geophysical tools, spectrometers, handheld XRF instruments, etc,	•	Diatreme HM analysis undertaken by recognised independent HM
tests	the parameters used in determining the analysis including instrument		laboratory (Diamantina Labs) utilizing TBE.
	make and model, reading times, calibrations factors applied and their	•	Image sample preparation and analysis undertaken by recognised
	derivation, etc.		independent HM laboratory (Western Geolabs).
	• Nature of quality control procedures adopted (eg standards, blanks,	•	Duplicates and external laboratory checks regularly undertaken for HM
	duplicates, external laboratory checks) and whether acceptable levels		analysis, acceptable levels of accuracy and precision have been
	of accuracy (ie lack of bias) and precision have been established.		established.
		•	Mineralogy of the HM fraction determined by QEMScan analysis.
		•	Valuable heavy minerals reported are Zircon, Rutile (Ti-oxides >95%
			TiO2), Leucoxene (Ti-oxides 85 – 95% TiO2, HiTi (Ti-oxides 70 – 85%
			TiO2), Altered Ilmenite (Ti-oxides <70% TiO2) and Si TiOx (siliceous Ti-
			oxides containing >10% silica rich Ti minerals).
		•	Potentially deleterious minerals are also assayed (e.g. andalusite) as
			well as proportions of clean, coated and composite grains.
Verification of	• The verification of significant intersections by either independent or	•	Significant intersections validated against geological logging and local
sampling and	alternative company personnel.		geology / geological model.
assaying	• The use of twinned holes.	•	Significant intersections verified by company personnel.
	• Documentation of primary data, data entry procedures, data	•	Selected significant intersections independently validated as part of due
	verification, data storage (physical and electronic) protocols.		diligence exercise by BaoTi in 2011.
	• Discuss any adjustment to assay data.	•	A number of twinned holes occur across the deposit and these have
			verified the sampling and assaying results.
		•	All data captured and stored in electronic format,with compilation and

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

Attachment

Criteria	JORC Code explanation	Commentary
		storage completed by external contractors.
Location of	• Accuracy and quality of surveys used to locate drill holes (collar and	•All holes initially located using handheld GPS with an accuracy of 5m.
data points	down-hole surveys), trenches, mine workings and other locations	•Subsequent DGPS survey of drill hole collars, accurate to within 1m in
	used in Mineral Resource estimation.	X and Y as survey was often taken of rehabilitated drill site (i.e.
	• Specification of the grid system used.	estimated collar location).
	• Quality and adequacy of topographic control.	•UTM coordinates, Zone 52, GDA94 datum.
		•Topographic surface generated from processing Ikonos satellite
		imagery and DGPS control points, collar RL’s levelled against this
		surface to ensure consistency in the database and with the block model.
Data spacing	• Data spacing for reporting of Exploration Results.	•Diatreme drill lines established at 150m to 300m spacing in interdunal
and	• Whether the data spacing and distribution is sufficient to establish the	swales with holes 50m apart in the beach mineralisation, 50-100m apart
distribution	degree of geological and grade continuity appropriate for the Mineral	in the areas of nearshore only mineralisation and 25-50m apart in the
	Resource and Ore Reserve estimation procedure(s) and	narrower higher grade strand mineralisation.
	classifications applied.	•Image drill lines established at 250m to 500m spacing in interdunal
	• Whether sample compositing has been applied.	swales with holes 50m apart in the main body of mineralisation and 50-
		100m apart on the marginal areas of mineralisation.
		•Drill spacing and distribution is sufficient to allow valid interpretation of
		geological and grade continuity appropriate to the estimation procedure
		and classification applied.
		•Sample compositing (down hole and occasionally across / along
		section) has been undertaken for determination of mineralogy.
Orientation of	• Whether the orientation of sampling achieves unbiased sampling of	•The mineralisation displays an average strike around 340°, whereas the
data in	possible structures and the extent to which this is known, considering	overlying Quaternary dune field has dune ridges dominantly trending
relation to	the deposit type.	80° – 260°. Exploration data is therefore well orientated to sample the
geological	• If the relationship between the drilling orientation and the orientation	mineralised feature without bias.
structure	of key mineralised structures is considered to have introduced a
	sampling bias, this should be assessed and reported if material.
Sample	• The measures taken to ensure sample security.	•Sample collection and transport from the field undertaken by company
security		personnel following company procedures.
		•Diatreme HLS samples dispatched to laboratory in secure packaging
		via Australia Post.
Audits or	• The results of any audits or reviews of sampling techniques and data.	•A prospective JV partner (BaoTi) undertook a geological due diligence
reviews		exercise in 2011 with positive results.
		•A number of experienced mineral sands geologists have been involved
		in generation of the exploration methods, procedures and geological
		database.

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Section 2 Reporting of Exploration Results

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

Criteria	JORC Code explanation	Commentary	Commentary
Mineral	• Type, reference name/number, location and ownership including	•	The Cyclone deposit occurs within adjoining tenements M69/141,
tenement and	agreements or material issues with third parties such as joint		R69/1 and E 69/2425 in Western Australia. M69/141 and E69/2425 are
land tenure	ventures, partnerships, overriding royalties, native title interests,		held by Lost Sands Pty Ltd, a wholly owned subsidiary of Diatreme
status	historical sites, wilderness or national park and environmental		Resources, and R69/1 is held by Diatreme Resources.
	settings.	•	The tenements are in good standing.
	• The security of the tenure held at the time of reporting along with any	•	A Project Agreement is in place with the native title party (Pila Ngaru).
	_known impediments to obtaining a licence to operate inthe area. _
Exploration	• Acknowledgment and appraisal of exploration by other parties.	•	Exploration within R69/1 has been undertaken by Image Resources,
done by other			although exchange of data was first initiated under a MoU in September
parties			2010.
		•	The general drilling, sampling and assaying techniques utilised by
			Image are consistent with those utilised by Diatreme, and as such the
			data is considered to be of similar quality to that generated by Diatreme.
		•	Diatreme acquired all data for R69/1 with the tenement purchase in
			March 2015.
Geology	• Deposit type, geological setting and style of mineralisation.	•	The Cyclone mineral resource comprises a number of stacked and re-
			worked beach strandline mineral sand deposits associated with a
			Tertiary age coastal shoreline feature.
		•	Mineralisation occurs within bimodal near-shore sands, beach / surf
			zone strandlines, homogenous beach sands, and overlying aeolian
			dune sands.
		•	Quaternary cover overlies the deposit, and a shallow weathering profile
			with calcrete and ferruginous induration has developed.
Drill hole	• A summary of all information material to the understanding of the	•	The Cyclone mineral resource has been estimated using data from
Information	exploration results including a tabulation of the following information		1,384 drill holes and it is not considered appropriate to tabulate each
	for all Material drill holes:		drill hole.
	`o` easting and northing of the drill hole collar	•	Representative cross sections along the strike of the mineralization to
	`o` elevation or RL (Reduced Level – elevation above sea level in		illustrate some of the drill data and the nature of the mineralisation were
	metres) of the drill hole collar		attached to previous announcements (23 Jan 2012, 9 Jan 2014, 9 Apr
	`o` dip and azimuth of the hole		2015).
	`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. _

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Criteria	JORC Code explanation	Commentary
Data	• In reporting Exploration Results, weighting averaging techniques,	•Image drill data was composited to 1.5m intervals within corresponding
aggregation	maximum and/or minimum grade truncations (eg cutting of high	geological domains for the purpose of resource estimation.
methods	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	•As the mineralization is associated with marine sands it is essentially
between	Exploration Results.	horizontal, with a maximum slope of 1°.
mineralisation	• If the geometry of the mineralisation with respect to the drill hole	•All drilling is vertical, hence the drill intersection is essentially equivalent
widths and	angle is known, its nature should be reported.	to the true width of mineralization.
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	•A map of the drill collar locations and the outline of the Mineral
	intercepts should be included for any significant discovery being	Resource and Ore Reserve was attached to previous announcements
	reported These should include, but not be limited to a plan view of	(9 April 2015 and 14 Dec 2015).
	_drill hole collar locations and appropriate sectional views. _
Balanced	• Where comprehensive reporting of all Exploration Results is not	•Not applicable, resource estimate considers all material within the
reporting	practicable, representative reporting of both low and high grades	mineralisation domains.
	and/or widths should be practiced to avoid misleading reporting of	•Resource estimate is presented using variable cut-off grade and by
	Exploration Results.	geological domain to allow an understanding of grade distribution.
Other	• Other exploration data, if meaningful and material, should be reported	•Geological observations are consistent with beach placer / strandline
substantive	including (but not limited to): geological observations; geophysical	mineralisation.
exploration	survey results; geochemical survey results; bulk samples – size and	•Several bulk samples (up to 12t) and subsequent metallurgical tests
data	method of treatment; metallurgical test results; bulk density,	have characterized the nature of the mineralisation and confirmed that
	groundwater, geotechnical and rock characteristics; potential	conventional processing techniques can be applied to produce
	deleterious or contaminating substances.	marketable products. Some HM is coated and acid leaching +/-
		attritioning may be required for efficient separation / processing.
		•No bulk density measurements have been undertaken.
		•No groundwater was intersected in the course of drilling.
		•A Quaternary weathering profile including calcrete and rubbly laterite
		has developed above and within the upper part of the mineralisation.
		Minor cementing and silicification of the mineralised sand can occur, but
		the mineralisation is dominantly (>95%) unconsolidated sand.
		•Siliceous coatings and intergrowths on some HM grains are the only
		known deleterious substances. U+Th levels are <500pm for zircon

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Criteria	JORC Code explanation	Commentary
		product.
Further work	• The nature and scale of planned further work (eg tests for lateral	•Not applicable, project is proceeding to feasibility study based on
	extensions or depth extensions or large-scale step-out drilling).	comprehensive exploration program completed to date.
	• Diagrams clearly highlighting the areas of possible extensions,	•The limits of mineralisation have been established by the
	including the main geological interpretations and future drilling areas,	comprehensive exploration program completed to date.
	provided this information is not commercially sensitive.

Section 3 Estimation and Reporting of Mineral Resources

(Criteria listed in section 1, and where relevant in section 2, also apply to this section.)

Criteria	JORC Code explanation	Commentary
Database	• Measures taken to ensure that data has not been corrupted by, for	•Drill data logged electronically in the field, manual and automatic
integrity	example, transcription or keying errors, between its initial collection	validation undertaken prior to loading in to master database.
	and its use for Mineral Resource estimation purposes.	•The master database is managed by external consultants.
	• Data validation procedures used.	•General database validation using Micromine prior to resource
		estimation.
		•Detailed database validation by manual/visual checking using
		Micromine.
Site visits	• Comment on any site visits undertaken by the Competent Person and	•Competent Person has undertaken several site visits and supervised
	the outcome of those visits.	numerous exploration drilling campaigns and is familiar with the terrain,
	• If no site visits have been undertaken indicate why this is the case.	mineralization and geological characteristics of the deposit.
Geological	• Confidence in (or conversely, the uncertainty of) the geological	•A general geological model for mineralisation has been developed
interpretation	interpretation of the mineral deposit.	based on exploration data and published models for beach placer
	• Nature of the data used and of any assumptions made.	development, with minor modification to accommodate locally observed
	• The effect, if any, of alternative interpretations on Mineral Resource	features. This allows high confidence in the geological interpretation of
	estimation.	the Cyclone deposit.
	• The use of geology in guiding and controlling Mineral Resource	•The data is of sufficient density that alternative interpretations will not
	estimation.	materially affect the Mineral Resource estimate.
	• The factors affecting continuity both of grade and geology.	•The deposit has been split in to three domains, based upon geology
		and HM grade, for the purposes of resource estimation.
		•The ‘Beach’ domain comprises beach sands and minor dune and
		reworked beach sands, and typically displays transitional upper and
		lateral boundaries, with a distinct basal contact associated with surf
		zone grit and gravel.
		•The ‘Strand’ domain comprises beach strandline mineralization and
		typicallydisplays transitional upper and seaward lateral boundaries with

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Criteria	JORC Code explanation	Commentary
		a sharp basal contact associated with surf zone grit and gravel, it occurs
		wholly within the Beach domain (i.e. a subset of the’ Beach’ domain).
		•The ‘Nearshore’ domain comprises bi-modal fine grained marine sands
		with grit and typically displays transitional contacts.
		•A nominal 4% HM grade was used to delineate the Strand domain, with
		lower grade material occasionally included to maintain continuity and
		smooth shape.
		•A nominal 0.8% HM grade was used to delineate the Beach and
		Nearshore domain boundaries, with lower grade material sometimes
		included to maintain geological continuity and a smooth geometry.
		•The use of pure geological domains would result in a much larger, but
		lower grade, mineral resource estimate for Cyclone due to the
		transitional grade boundaries.
		•Grade continuity is significantly shorter across strike than along strike
		due to factors relating to deposition and sorting of material in a beach
		environment.
Dimensions	• The extent and variability of the Mineral Resource expressed as	•The Beach domain has two primary ‘arms’ with a strike of around 7.0
	length (along strike or otherwise), plan width, and depth below	and 9.5 km, a width of up to 0.8 km, with the top of ore reaching to 6m
	surface to the upper and lower limits of the Mineral Resource.	below ground surface, and the base of mineralisation typically between
		24 to 30m below ground surface.
		•The Strand domain forms a higher grade core of the Beach domain,
		with 6 individual strands recognized. Strands range from 2.5 to 7km in
		length, from 50 to 400m in width, and 2 to 12m in thickness.
		•The Nearshore domain has a strike of 7.5 km, a width up to 1.1 km, but
		is typically only 4 – 6m thick. It often abuts the base of the Beach
		domain, but can be separated by up to 8m of low grade material, or
		occur without the presence of overlying beach mineralisation.
Estimation	• The nature and appropriateness of the estimation technique(s)	•Resource estimation was undertaken using Micromine software, with
and modelling	applied and key assumptions, including treatment of extreme grade	inverse distance cubed interpolation method used for HM, Slimes and
techniques	values, domaining, interpolation parameters and maximum distance	Oversize, and Nearest Neighbour for mineral assemblage. Mineral
	of extrapolation from data points. If a computer assisted estimation	tonnes are calculated for each block, then total mineral assemblage
	method was chosen include a description of computer software and	calculated i.e. mineral assemblage values applied locally (weighted)
	parameters used.	and not as an unweighted global average.
	• The availability of check estimates, previous estimates and/or mine	•Parent blocks size of 50m x 20m x 2m with 5 x 4 x 4 sub-blocking to
	production records and whether the Mineral Resource estimate takes	neatly fit wireframes.
	appropriate account of such data.	•Three domains (as discussed above) were modelled separately and
	• The assumptions made regarding recovery of by-products.	then combined to form a single block model for reporting purposes.
	• Estimation of deleterious elements or other non-grade variables of	•A minimum 3m thickness was applied to domain shapes, as this
	economic significance (eg sulphur for acid mine drainage	represents a minimum selective mining thickness.
	_characterisation). _	•Aprimarysearch ellipse of 275m x 55m x 5m oriented at 340° with a

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Criteria	JORC Code explanation	Commentary
	• In the case of block model interpolation, the block size in relation to	0.8° dip to the west was used, minimum 3 samples and maximum 16
	the average sample spacing and the search employed.	samples.
	• Any assumptions behind modelling of selective mining units.	•The resource estimate shows good correlation with previous estimates
	• Any assumptions about correlation between variables.	and also with wireframe volumes and raw drill assay data.
	• Description of how the geological interpretation was used to control	•No top cut was applied as the high grade assays are believed to be a
	the resource estimates.	true sample of the grade of well-developed continuous beach
	• Discussion of basis for using or not using grade cutting or capping.	strandlines.
	• The process of validation, the checking process used, the comparison	•The domain boundaries do not extend beyond halfway to the adjoining
	of model data to drill hole data, and use of reconciliation data if	drill hole or drill line.
	available.	•The block model was validated visually and statistically against drillhole
		data.
		•A hard boundary between the ‘Beach’ and ‘Strand’ domains was used
		to estimate grades for the Strand Domain, to prevent excessive dilution
		and smoothing of what is interpreted as a distinct high grade strandline.
		•A soft boundary between the ‘Beach’ and ‘Strand’ domains was used to
		estimate grades for the ‘Beach’ Domain, to reflect the transitional upper
		and seaward contacts of the strandline mineralisation.
Moisture	• Whether the tonnages are estimated on a dry basis or with natural	•Tonnages are estimated on a dry basis.
	_moisture, and the method of determination of the moisture content. _
Cut-off	• The basis of the adopted cut-off grade(s) or quality parameters	•A 1% HM cut-off grade was utilized for reporting of the resource as this
parameters	applied.	is believed to represent an appropriate grade considering the mineral
		assemblage, proposed mining technique and project economics.
Mining factors	• Assumptions made regarding possible mining methods, minimum	•Conventional open pit ‘dry’ mining for mineral sands, with overburden
or	mining dimensions and internal (or, if applicable, external) mining	removal by truck and shovel, and ore mining utilising in-pit dozer traps
assumptions	dilution. It is always necessary as part of the process of determining	and slurry pumping. A minimum mining dimension of 100m width and
	reasonable prospects for eventual economic extraction to consider	3m thickness is considered practical.
	potential mining methods, but the assumptions made regarding	•As the resource estimate has been generated and utilised for feasibility
	mining methods and parameters when estimating Mineral Resources	studies the mining assumptions are considered to be rigorous.
	may not always be rigorous. Where this is the case, this should be
	reported with an explanation of the basis of the mining assumptions
	_made. _
Metallurgical	• The basis for assumptions or predictions regarding metallurgical	•Several programs of metallurgical testwork and process flow
factors or	amenability. It is always necessary as part of the process of	development have been undertaken by Mineral Technologies (MT).
assumptions	determining reasonable prospects for eventual economic extraction to	•Conventional wet concentrator plant for mineral sands, primarily utilising
	consider potential metallurgical methods, but the assumptions	spiral separation with secondary screening and classification to achieve
	regarding metallurgical treatment processes and parameters made	high HMC quality.
	when reporting Mineral Resources may not always be rigorous.	•Testwork indicates >90% recovery of zircon to HMC, the primary
	Where this is the case, this should be reported with an explanation of	economic driver of the resource.
	the basis of the metallurgical assumptions made.	•Conventional mineral separationplant, primarilyutilizingmagnetic and

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Criteria	JORC Code explanation	Commentary
		electrostatic separation with secondary screening, classification and
		gravity separation to achieve mineral products.
		•As the resource estimate has been utilised for feasibility studies the
		metallurgical assumptions are considered to be rigorous.
Environmen-	• Assumptions made regarding possible waste and process residue	•The Cyclone project occurs within a vast vegetated dune field of the
tal factors or	disposal options. It is always necessary as part of the process of	Great Victoria Desert in a remote location and does not display any
assumptions	determining reasonable prospects for eventual economic extraction to	unique environmental characteristics.
	consider the potential environmental impacts of the mining and	•Environmental management practices similar to those currently used in
	processing operation. While at this stage the determination of	the mineral sands industry, but modified for the local environment, will
	potential environmental impacts, particularly for a greenfields project,	be applied.
	may not always be well advanced, the status of early consideration of	•Tailings will initially be disposed of in purpose built facilities, before
	these potential environmental impacts should be reported. Where	reverting to in-pit tailings backfill.
	these aspects have not been considered this should be reported with
	_an explanation of the environmental assumptions made. _
Bulk density	• Whether assumed or determined. If assumed, the basis for the	•Assumed bulk density of 1.7 utilised for tonnage estimates, based on
	assumptions. If determined, the method used, whether wet or dry, the	both the theoretical density of mature sand deposits with relatively low
	frequency of the measurements, the nature, size and	levels of slime and HM, and similar HM deposits in Australia.
	representativeness of the samples.	•The mineralised material is reasonably homogenous over the extent of
	• The bulk density for bulk material must have been measured by	the resource and there is not expected to be material changes in the
	methods that adequately account for void spaces (vugs, porosity,	bulk density throughout the resource.
	etc), moisture and differences between rock and alteration zones
	within the deposit.
	• Discuss assumptions for bulk density estimates used in the
	_evaluation process of the different materials. _
Classification	• The basis for the classification of the Mineral Resources into varying	•The primary factor for resource classification is drill spacing i.e. HM
	confidence categories.	assay data density, as the geological setting and style of mineralisation
	• Whether appropriate account has been taken of all relevant factors (ie	is well understood and relatively consistent.
	relative confidence in tonnage/grade estimations, reliability of input	•Infill drilling during 2011 and 2012 confirmed HM grade continuity and
	data, confidence in continuity of geology and metal values, quality,	allowed higher confidence in the current drill pattern.
	quantity and distribution of the data).	•Additional mineral assemblage data is required to achieve similar levels
	• Whether the result appropriately reflects the Competent Person’s	of confidence and continuity as for HM data.
	view of the deposit.	•The classification used reflects the Competent Persons understanding
		of the deposit.
Audits or	• The results of any audits or reviews of Mineral Resource estimates.	•The 2015 Mineral Resource estimate utilised a similar approach to the
reviews		2010 estimate which was undertaken by an independent technical
		expert.
Discussion of	• Where appropriate a statement of the relative accuracy and	•A high level of confidence is placed on tonnage estimates (for the stated
relative	confidence level in the Mineral Resource estimate using an approach	cut-off grade) as the geometry of mineralisation is well understood and
_accuracy/ _	_or procedure deemed appropriate by the Competent Person. For _	the bulk densityis considered accurate.

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Criteria	JORC Code explanation	Commentary
confidence	example, the application of statistical or geostatistical procedures to	•A high level of confidence is placed on HM grade estimates, due to the
	quantify the relative accuracy of the resource within stated confidence	data density, sample analysis techniques and methods of estimation.
	limits, or, if such an approach is not deemed appropriate, a qualitative	However, there is some evidence from bulk sampling that HM grade
	discussion of the factors that could affect the relative accuracy and	may be under-estimated by drilling / modelling, but this is not unusual
	confidence of the estimate.	for air-core drilling of unconsolidated sand deposits. Further
	• The statement should specify whether it relates to global or local	investigations will be undertaken.
	estimates, and, if local, state the relevant tonnages, which should be	•A high level of confidence is placed on slimes grade estimates, due to
	relevant to technical and economic evaluation. Documentation should	the data density, sample analysis techniques and methods of
	include assumptions made and the procedures used.	estimation.
	• These statements of relative accuracy and confidence of the estimate	•A moderate level of confidence is placed on oversize grade estimates,
	should be compared with production data, where available.	due to the use of mechanised drilling techniques which can
		grind/pulverise indurated material and hence lead to under-estimation of
		oversize. Induration can also occur in an irregular manner and therefore
		be difficult to quantify by drilling alone.
		•A moderate to high level of confidence is placed on the global mineral
		assemblage estimate, as there is a reasonable number of QEMScan
		assays of composite samples from across the full extent of the deposit
		and the grade interpolation method accounts for variation through the
		deposit
		•A moderate level of confidence is placed on the local mineral
		assemblage estimates, as the use of composites may mask short range
		changes in mineral assemblage vertically through the mineralisation.
		Similarly, there exist some significant lateral variations in mineral
		assemblage, and the current data density is not sufficient to accurately
		define the boundary of mineral assemblage domains

Section 4 Estimation and Reporting of Ore Reserves

Section 4 Estimation and Reporting of Ore Reserves	Section 4 Estimation and Reporting of Ore Reserves
(Criteria listed in section 1,and where relevant in sections 2 and 3,also applyto this section.)
Criteria	JORC Code explanation	Commentary
Mineral	• Description of the Mineral Resource estimate used as a basis for the	•Mineral Resource estimate as described above, released to ASX on 9
Resource	conversion to an Ore Reserve.	Apr 2015.
estimate for	• Clear statement as to whether the Mineral Resources are reported	•The modelling techniques used are considered to align with industry
conversion to	additional to, or inclusive of, the Ore Reserves.	best practice.
Ore Reserves		•Mineral Resource is reported inclusive of Ore Reserve.
Site visits	• Comment on any site visits undertaken by the Competent Person and	•Competent Person visited site in August 2011 to view exploration
	the outcome of those visits.	drillingand testpit excavation,and is familiar with the terrain, geological

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Criteria	JORC Code explanation	Commentary
	• If no site visits have been undertaken indicate why this is the case.	setting and the nature of mineralisation.
Study status	• The type and level of study undertaken to enable Mineral Resources	•Pre-Feasibility Study was completed by Diatreme Resources in March
	to be converted to Ore Reserves.	2012 (ASX release 20 March 2012). This study developed a practical
	• The Code requires that a study to at least Pre-Feasibility Study level	mine plan that considered relevant Modifying Factors, and subsequently
	has been undertaken to convert Mineral Resources to Ore Reserves.	generated a financial model that confirmed the economic viability of the
	Such studies will have been carried out and will have determined a	Cyclone Project.
	mine plan that is technically achievable and economically viable, and	•The December 2015 Ore Reserve represents the inclusion of additional
	that material Modifying Factors have been considered.	material from the Mineral Resource within R69/1 (Cyclone Extended),
		which has been subject to development of a practical mine plan as for
		the 2012 Pre-Feasibility Study.
		•This Ore Reserve represents results from a “Project Enhancement and
		Update Study” completed by an independent consultant on the 2012
		Pre-Feasibility Study.
Cut-off	• The basis of the cut-off grade(s) or quality parameters applied.	•A nominal cut-off grade of 0.4% Zircon was applied, based on estimates
parameters		of capital and operating costs, mineral recovery and sales price and
		operating margin. Consideration was given to overburden volume and
		the development of a practical mining path.
Mining factors	• The method and assumptions used as reported in the Pre-Feasibility	•The mining factors are based on preliminary design by experienced
or	or Feasibility Study to convert the Mineral Resource to an Ore	personnel. Mining method comprises overburden removal by truck and
assumptions	Reserve (i.e. either by application of appropriate factors by	shovel, and ore mining by dozer push to in-pit traps and slurry pumping.
	optimisation or by preliminary or detailed design).	Infrastructure requirements are minimal and will consist of a network of
	• The choice, nature and appropriateness of the selected mining	temporary haul roads, electricity and water reticulation to the mining unit
	method(s) and other mining parameters including associated design	and a mobile slurry pipeline.
	issues such as pre-strip, access, etc.	•Ore mining and overburden removal methods selected on the basis of
	• The assumptions made regarding geotechnical parameters (eg pit	personal experience and consultation with experienced mineral sands
	slopes, stope sizes, etc), grade control and pre-production drilling.	mining contractors.
	• The major assumptions made and Mineral Resource model used for	•Practical overburden removal, mining and tailings processes and
	pit and stope optimisation (if appropriate).	sequence developed by experienced personnel to minimize cost whilst
	• The mining dilution factors used.	providing access to higher grade ore in the early stages of the mine.
	• The mining recovery factors used.	Proven techniques with low technical risk have been selected.
	• Any minimum mining widths used.	•Overburden, ore and tailings volumes have been calculated on an
	• The manner in which Inferred Mineral Resources are utilised in	annual basis.
	mining studies and the sensitivity of the outcome to their inclusion. • The infrastructure requirements of the selected mining methods.	•A pit slope angle of 45° has been used for overburden material, based on the induration and minor clay present. A pit slope angle of 35° has been used for ore, based on free-flowing sand. An overall slope angle of
		25° has been used for tailing material to reflect the use of retention
		walls.
		•No groundwater is present within the mine design.
		•Miningdilution was built in to the Ore Reserve bythe inclusion of

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Criteria	JORC Code explanation	Commentary
		‘waste’ material in the mine design, both as roof and floor dilution and
		internal waste (interburden) which occurs between the beach and
		nearshore mineralisation.
		•No mining recovery factor has been used as ore loss is negligible when
		using dozer push methods.
		•Ore Reserve tonnes are inclusive of any dilution and loss.
		•A minimum mining width was not applied given the nature of the
		mineralisation and the proposed mining methods. The pit design has a
		minimum floor width of 80m but averages ~300m, giving ample room for
		efficient mining.
		•No Inferred Mineral Resources were considered in the Pre-Feasibility
		Study, or in this revision and update of the mine plan.
		•The mining method is based on mobile equipment feeding an in-pit
		mining unit that requires power and water supply. Power will be
		supplied via portable cable from the site power station electricity
		network established alongside the mine path, water will be supplied via
		a portable pipeline from the mine borefield.
Metallurgical	• The metallurgical process proposed and the appropriateness of that	•Metallurgical testwork and process flowsheet design has been carried
factors or	process to the style of mineralisation.	out by Mineral Technologies (MT) in Carrara on representative bulk ore
assumptions	• Whether the metallurgical process is well-tested technology or novel	samples (one from the life of mine, the other from initial 2-year path). All
	in nature.	work has been reviewed by experienced personnel.
	• The nature, amount and representativeness of metallurgical test work	•MT have proposed the use of conventional wet concentrator plant
	undertaken, the nature of the metallurgical domaining applied and the	(WCP) for mineral sands, primarily utilising spiral separation with
	corresponding metallurgical recovery factors applied.	secondary screening and classification to achieve high HMC quality.
	• Any assumptions or allowances made for deleterious elements.	•MT has proposed the use of a conventional mineral separation plant
	• The existence of any bulk sample or pilot scale test work and the	(MSP), primarily utilizing magnetic and electrostatic separation with
	degree to which such samples are considered representative of the	secondary screening and gravity separation to generate mineral
	orebody as a whole.	products. Hot acid leach of the HM is required to achieve optimal
	• For minerals that are defined by a specification, has the ore reserve	recovery and product quality, due to the presence of coated grains.
	estimation been based on the appropriate mineralogy to meet the	•Three mineral products have been generated, Zircon, HiTi85 (rutile and
	specifications?	non-mag leucoxene with +85% TiO2) and HiTi65 (mag leucoxene with
		+65% TiO2). Market reports by TZMI and Ruidow suggest all products
		will be readily saleable. The current project strategy is to produce HMC
		for sale and not produce the three final products.
		•Mineral products have low U+Th levels by global standards.
		•QEMScan analysis during the metallurgical testwork allowed calculation
		/ correlation of product recovery with ore reserve estimates.
Environmen-	• The status of studies of potential environmental impacts of the mining	•Detailed environmental studies have been completed to produce a
tal	and processing operation. Details of waste rock characterisation and	Public Environmental Review Report which has is currently in the
	the consideration ofpotential sites, status of design options	assessmentphase with the EPA. The report has been made available

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Criteria	JORC Code explanation	Commentary
	considered and, where applicable, the status of approvals for process	for public comment. Draft environmental conditions for the project have
	residue storage and waste dumps should be reported.	been tabled and are awaiting approval by the Minister
		•The proposed mining and on-site processing methods are consistent
		with industry best practice and any environmental impacts can be well
		managed and mitigated
		•Two off-path tailing storage facilities will be required to accommodate
		overburden and tailings during the initial phase of operations, but will
		revert to pit backfill once space is available. Overburden will be used to
		construct walls to contain tailings slurry. Overburden will comprise a mix
		of sandy loam, sand and lateritic gravel, whilst tailings slurry will
		comprise a mix of sand with minor silt and clay.
Infrastructure	• The existence of appropriate infrastructure: availability of land for	•The project is located in a remote region of WA within dune fields of the
	plant development, power, water, transportation (particularly for bulk	Great Victoria Desert and as such no infrastructure exists. The project
	commodities), labour, accommodation; or the ease with which the	development plan includes construction of a temporary camp for
	infrastructure can be provided, or accessed.	accommodation, airstrip for personnel movement, installation of diesel
		gensets for power generation, drilling of deep bores for water supply
		and construction of a road to the Trans Australia Railway at Forrest for
		logistics and product transportation. The road is planned to pass
		through the Great Victoria Desert Nature Reserve, and the
		environmental approvals process for a road corridor is well advanced.
Costs	• The derivation of, or assumptions made, regarding projected capital	•A total capital cost of $A161 M has been estimated. This capital
	costs in the study.	estimate is lower than the PFS estimate due to removal of the MSP
	• The methodology used to estimate operating costs.	from the project and reductions in wet processing capital. Use of
	• Allowances made for the content of deleterious elements.	recently developed processing equipment has resulted in a modified
	• The derivation of assumptions made of metal or commodity price(s),	plant arrangement and a more efficient wet concentration process.
	for the principal minerals and co- products.	•The average annual operating cost is estimated to be $A72 M.
	• The source of exchange rates used in the study.	•Detailed capital cost estimates for project construction have been
	• Derivation of transportation charges.	derived from multiple sources (including independent consultants) and
	• The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc. • The allowances made for royalties payable, both Government and private.	compiled and checked by an experienced mineral sands project manager. Capital cost estimates were verified by the “Project Enhancement and Update Study”. •Detailed capital and operating cost estimates for mining and general mine support activities have been provided by experienced mineral
		sands mining contractors and validated by the study manager. Cost
		estimates were verified by the “Project Enhancement and Update
		Study”.
		•Detailed capital and operating cost estimates for the WCP have been
		derived by MT and validated by the study manager. The WCP design
		and costs include all processing required to generate high grade HMC,
		and is based on the bulk sample metallurgical testwork. Cost estimates

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

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Criteria	JORC Code explanation	Commentary
		were verified by the “Project Enhancement and Update Study”.
		•Detailed capital and operating cost estimates for a MSP suitable for
		Cyclone HMC have been derived by a Chinese party (BaoTi) based on
		MT’s design and validated by the study manager. The MSP design and
		costs include all processing required to generate saleable product, as
		based on the bulk sample metallurgical testwork. This information is
		required for potential customers of Cyclone HMC.
		•Transportation charges were derived in consultation with recognized
		trucking, rail haulage and port logistics companies and consultants
		•Allowance has been made for Government royalty of 5% of Australian
		revenue. The mining agreement with the Pila Nguru People includes a
		royalty and this royalty has also been considered in the study.
Revenue	• The derivation of, or assumptions made regarding revenue factors	•Project revenue is based on head grade (as determined for resource
factors	including head grade, metal or commodity price(s) exchange rates,	block model), mining and processing recovery (as determined by MT
	transportation and treatment charges, penalties, net smelter returns,	metallurgical testwork and process flow design) and mineral product
	etc.	prices (as below).
	• The derivation of assumptions made of metal or commodity price(s),	•Estimates of future commodity prices were determined by analysing
	for the principal metals, minerals and co-products.	recent reports from various sources including mineral sand producers
		and market analysts. The final product prices ($US) used in the project
		evaluation was, zircon $1,300, HiTi85 $700, and HiTi65 $300. The
		prices were then used to estimate the value of Cyclone HMC.
		•The project has been evaluated with the AUD:USD exchange rate set at
		0.74. This rate is based on the generally accepted outlook for the
		exchange rate.
Market	• The demand, supply and stock situation for the particular commodity,	•The general downturn in the world economy has suppressed demand
assessment	consumption trends and factors likely to affect supply and demand	and prices for these industrial mineral products. The timing of an upturn
	into the future.	is uncertain and new projects will be watching this closely to time their
	• A customer and competitor analysis along with the identification of	entry into the market.
	likely market windows for the product.	•Market studies by TZMI and Ruidow confirm ready market acceptance
	• Price and volume forecasts and the basis for these forecasts.	of the Cyclone mineral products, with China identified as the primary
	• For industrial minerals the customer specification, testing and	market.
	acceptance requirements prior to a supply contract.	•Zircon is suitable for ceramics, foundry and refractory use.
		•HiTi85 is suitable for Ti-sponge or as a blend feedstock for chloride
		pigment plant.
		•HiTi65 is suitable as a blend feedstock for chloride pigment plant.
		•No specific customer testing or acceptance requirements /
		specifications have been undertaken.
		•Iluka Resources is the dominant producer in the zircon market, however
		several smaller scale producers also supply the market and a number of
		HMprojects are undergoingassessment and development. Cyclone is

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

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Criteria	JORC Code explanation	Commentary
		well placed to compete due to its simple low cost mining operation and
		relatively high zircon grade.
Economic	• The inputs to the economic analysis to produce the net present value	•Discount rate of 8% was used and is commonly used with this type of
	(NPV) in the study, the source and confidence of these economic	project under current economic conditions. The exchange rate range of
	inputs including estimated inflation, discount rate, etc.	0.74 AUD:USD is in line with generally accepted outlook. The
	• NPV ranges and sensitivity to variations in the significant	evaluation did not use escalation of prices or costs.
	assumptions and inputs.	•NPV ranges were obtained using a range of mineral prices from the
		current depressed prices to the general outlook for longer term prices.
		The project is marginally viable at current mineral prices. The project
		NPV is $121M for longer term prices of zircon $1,300, HiTi85 $700, and
		HiTi65 $300.
		•The “Project Enhancement and Update Study” completed by an
		independent consultant confirmed the viability of the Cyclone Project
		and provides DRX with an independent consultant’s financial analysis
		which shows improvements to the project economics.
Social	• The status of agreements with key stakeholders and matters leading	•A mining agreement with the Native Title party (Pila Nguru people) was
	to social licence to operate.	finalised, signed and lodged in November 2014.
Other	• To the extent relevant, the impact of the following on the project	•No significant naturally occurring risks have been identified which may
	and/or on the estimation and classification of the Ore Reserves:	impact the estimation of ore reserves
	• Any identified material naturally occurring risks.	•No marketing arrangements have been established for the project
	• The status of material legal agreements and marketing arrangements.	•Permitting process for the access and haul road has commenced, no
	• The status of governmental agreements and approvals critical to the	significant impediments have been identified to date and approval to
	viability of the project, such as mineral tenement status, and	establish a road corridor through the Nature Reserve is anticipated
	government and statutory approvals. There must be reasonable	based on progress with relevant authorities to date,
	grounds to expect that all necessary Government approvals will be	•The Cyclone Mine Lease M69/141 was granted in November 2014
	received within the timeframes anticipated in the Pre-Feasibility or	•The time frame for project development reported in the Pre-Feasibility
	Feasibility study. Highlight and discuss the materiality of any	Study has been delayed while the Public Environmental Review is
	unresolved matter that is dependent on a third party on which	proceeding and development work is scheduled to recommence when
	extraction of the reserve is contingent.	the EPA approval is obtained.
Classification	• The basis for the classification of the Ore Reserves into varying	•The Ore Reserve has been classified as Probable based on the
	confidence categories.	accuracy of the cost estimate (PFS quality) and additional work required
	• Whether the result appropriately reflects the Competent Person’s	for the marketing of Cyclone HMC in China.
	view of the deposit.	•The Probable Ore Reserve appropriately reflects the Competent
	• The proportion of Probable Ore Reserves that have been derived	Persons view of the deposit
	from Measured Mineral Resources (if any).	•Greater than 90% of the Probable Ore Reserve has been derived from
		Measured Mineral Resources
Audits or	• The results of any audits or reviews of Ore Reserve estimates.	•The 2012 Ore Reserve estimate was reviewed by Terence Willstead &
		Associates and verified as an appropriate estimate.

Diatreme Resources Limited ‐ ASX Announcement 14[th] June 2016

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Criteria	JORC Code explanation	Commentary
reviews		•The 2016 Ore Reserve estimate has not been independently reviewed
		in detail but utilises the same project development principles as the PFS
		Ore Reserve Estimate.
		•The “Project Enhancement and Update Study” completed by an
		independent consultant confirmed the viability of the Cyclone Project.
Discussion of	• Where appropriate a statement of the relative accuracy and	•The accuracy and confidence level in the Ore Reserve estimate is
relative	confidence level in the Ore Reserve estimate using an approach or	considered appropriate for the level of supporting studies undertaken for
accuracy/	procedure deemed appropriate by the Competent Person. For	the Pre-Feasibility Study and subsequent resource, metallurgy,
confidence	example, the application of statistical or geostatistical procedures to	heritage, and environmental studies.
	quantify the relative accuracy of the reserve within stated confidence	•The Mineral Resource, Mining and Metallurgical Factors are well
	limits, or, if such an approach is not deemed appropriate, a qualitative	understood and have been developed by experienced mineral sands
	discussion of the factors which could affect the relative accuracy and	personnel familiar with this style of heavy mineral deposit. Details of the
	confidence of the estimate.	Mineral Resource modeling technique and parameters are provided
	• The statement should specify whether it relates to global or local	earlier in this document. Standard mineral sand mining parameters
	estimates, and, if local, state the relevant tonnages, which should be	have been applied to the Mineral Resource block model to produce the
	relevant to technical and economic evaluation. Documentation should	Probable Ore Reserve estimate.
	include assumptions made and the procedures used.	•The project is sensitive to mineral product prices and the AUD:USD
	• Accuracy and confidence discussions should extend to specific	exchange rate. These are the main external factors impacting on the
	discussions of any applied Modifying Factors that may have a	Ore Reserve estimate.
	material impact on Ore Reserve viability, or for which there are
	remaining areas of uncertainty at the current study stage.
	• It is recognised that this may not be possible or appropriate in all
	circumstances. These statements of relative accuracy and confidence
	of the estimate should be compared with production data, where
	_available. _

AI assistant

DIATREME RESOURCES LIMITED Capital/Financing Update 2016

64787_rns_2016-06-14_e9311e5b-82d6-458c-9338-9ba65e2cc74c.pdf

15[th] June 2016

CYCLONE ZIRCON PROJECT

Project Enhancement and Update Study

Environmental Approval

Mineral Resource and Ore Reserve

Table Notes

Mining Lease

Water Supply

Native Title and Mining Agreement

Definitive Feasibility Study

Neil McIntyre, CEO

About the Cyclone Zircon Project

Cautionary Statement

Competent Person Statement

APPENDIX 1

Section 1 Sampling Techniques and Data

Section 2 Reporting of Exploration Results

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

Section 3 Estimation and Reporting of Mineral Resources

Section 4 Estimation and Reporting of Ore Reserves

AI assistant

DIATREME RESOURCES LIMITED — Capital/Financing Update 2016

64787_rns_2016-06-14_e9311e5b-82d6-458c-9338-9ba65e2cc74c.pdf

15[th] June 2016

CYCLONE ZIRCON PROJECT

Project Enhancement and Update Study

Environmental Approval

Mineral Resource and Ore Reserve

Table Notes

Mining Lease

Water Supply

Native Title and Mining Agreement

Definitive Feasibility Study

Neil McIntyre, CEO

About the Cyclone Zircon Project

Cautionary Statement

Competent Person Statement

APPENDIX 1

Section 1 Sampling Techniques and Data

Section 2 Reporting of Exploration Results

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

Section 3 Estimation and Reporting of Mineral Resources

Section 4 Estimation and Reporting of Ore Reserves

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DIATREME RESOURCES LIMITED Capital/Financing Update 2016