DIATREME RESOURCES LIMITED - Capital/Financing Update 2018

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ASX ANNOUNCEMENT

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2 October 2018

High‐tech markets eyed for Cape Bedford silica

2,000m in‐fill resource drilling program planned to commence during October at Cape Bedford Silica/Heavy Minerals Project, North Qld
Drilling to target upgrade of maiden Inferred Mineral Resource for Nob Point Resource
New offshore bulk testwork planned to confirm potential high‐tech applications for high‐grade silica sand

Emerging miner a l sands min e r Diatreme Resources L imited (ASX : DRX) announced today p lans for fur t her exploration drilling at its Ca p e Bedford S i lica/Heavy M inerals Pro j ect, along w ith additional testwork t o be under t aken to ide n tify pot e ntial high‐t e ch applicati o ns for its high‐quality silica sand.

This follows Diatreme’s ann o uncement o f a maiden Inferred Mineral Resour c e for the pr o ject’s Nob P oint Prosp e ct of an e s timated 21.6 million tonnes at > 99% purity silica (refer AS X announce m ent 13 Au g ust 2018) a n d bulk sam p le process testwor k results confirming the p roject is ca p able of pro d ucing high‐quality silic a sand at 99.9% SiO2 (re f er ASX announcem e nt 16 August 2018).

The C ompany is now planni n g to commence a furth e r extensive d rilling prog r am at Nob P oint in late October, w h ich is b e ing underta k en to pote n tially allow a n upgrade o f the initial resource fr o m an inferr e d to an indicated or measured resou r ce categor y , thereby in c reasing the level of con f idence in the nature an d size of the resource.

Diat r eme’s expl o ration drilli n g team are planning a p rogram of s o me 100 ad d itional air‐c o re holes for a total tar g et of app r oximately 2 , 000m drilli n g metres to be complet e d. This will be undertaken on a no m inal 50 x 50 m grid wher e top o graphy allo w s and will p otentially increase confidence in th e lateral and vertical con t inuity of th e high‐grade silic a sand.

The d rilling program will be s ubject to further exten s ive sample t esting to m e et JORC co d e requirem e nts for an upg r ade and to a llow furthe r detailed pl a nning for p o tential min i ng and per m it applicati o n activity.

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Fig 1 – Map show i ng drill hole locations and the Inferred R esource outl i ne from the m aiden resou r ce (ASX relea s e 13 August 2 018)

Previous Bulk Sampling

During July 201 8 (refer ASX r elease 16 A u gust 2018) a 1.8 tonne r epresentative bulk sam p le extracte d from the C ape Bed f ord Inferre d Mineral Re s ource usin g Diatreme’s air core dril l rig was submitted to IH C Robbins (I H CR) for tes t ing, with 104 samples of an aver a ge weight o f 17.3kg del i vered to IH C R’s process testwork fa c ility. All ma t erial recov e red fro m each 3m d r ill interval w as included in the samp l e.

Fig 2 . Process te s t results fo r MG12 spiral separator (silica product highlighted)

M G12	Wt	Wt %	TiO2	Fe2O 3	SiO2	Al2O3	Cr2 O3	MgO	MnO	ZrO 2	P2O5	U XRF	Th XRF	Th XRF
			%	%	%	%	%	%	%	%	%	ppm	pp m
Conc	2.1 4	3.5	1.39	0.5 7	97.3	0.44	0.0 1	0.05	0.03	0. 23	0.01	0		0
Mid	5.0 1	8.2	0.06	0.0 5	99.4	0.12	0.0 0	0.02	0.00	0. 00	0.00	0		0
Tail (P rod)	53.9 4	88.3	0.03	0.0 2	99.9	0.07	0.0 0	0.01	0.00	0. 00	0.01	0		0
Feed	61.0 9	100.0	0.08	0.0 4	99.7	0.08	0.0 0	0.01	0.00	0. 01	0.01	0		0

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Testing Outcomes

During t e sting, one p ass of Mineral Technol o gies MG12 s piral produ c ed a high q u ality (99.9 % SiO2) silica product with a reco v ery of 88% f rom the No b Point Res o urce
The bul k sample tes t work also d e monstrate d that the processing plant is likely t o be relative l y simple du e to negligible oversize, m inimal hea v y minerals ( 0.19%), low level of slimes (3%), an d excellent r e moval of h e avy mineral s on spiral separators.

Further Priority Bulk Testing

Diat r eme has id e ntified pot e ntial high‐t e ch applicati o ns for the N ob Point sil i ca resource following r e cent meeti n gs in China with a nu m ber of high purity silica sand end u s ers and pro d uct sales a g ents.

The manufactur e of photov o ltaic panels (solar panel s ) requires certain speci f ic product c h aracteristi c s which incl u de a minimum silica c ontent of 9 9 .9 % and a low Fe (iron) content which gives the glass the hi g h transpar e ncy needed for efficient operati o n of the pa n els.

Diat r eme’s previous bulk sa m ple testing (as per Fig 2 .) showed a Fe level of 0.02 % (200 p pm) on its p rimary tails pro d uct. These c haracteristi c s already meet and exc e ed require m ents for hi g h end float, container a n d automoti v e glas s production. However f u rther lowering of the si l ica’s Fe level under 200 p pm has the potential t o attract a significant price p remium as the products market us a ge can the n expand to include sola r panels , LC D and optica l glas s production.

Diat r eme has id e ntified a sp e cialist inde p endent tes t ing lab in C h ina that cer t ifies a signi f icant portion of the low Fe silic a product co m ing into C h ina. It has a s sisted a nu m ber of larg e internatio n al silica san d producers to access this lucr a tive market by providin g specialist testing, certi f ication and process design assistan c e.

A 350kg sample f or bulk testing by this f a cility is currently being p repared an d will be se n t to China f o r testing an d assi s tance in pr o cess flow sheet design t o see if the N ob Point silica product’ s Fe levels c a n be reduc e d to a level t hat ena b les product i on of a low Fe high puri t y silica san d product.

The t esting und e rtaken on t h e initial bul k sample was undertake n on a singl e pass spiral. However, Diatreme con s iders that increasing th e spiral pass e s may furth e r reduce the Fe conten t , particularl y if it is determined by testing the Fe is “bound” wi t hin the hea v y mineral c o mponent o f the sand. The Compan y therefore i s optimistic o f achi e ving positi v e results on the new tests.

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Res u lts are expe c ted in mid t o late November, subje c t to the off s hore testin g lab’s existi n g work pro g rams, and Diat r eme will ke e p the market fully informed as it pr o gresses further.

Located 200km n orth of Cairns and near the world’s largest silic a sand mine a t Cape Flat t ery, the Ca p e Bedford proj e ct has the p otential to s upply the f a st‐growing A sian marke t s with high‐grade silica s and used i n high‐end glass manufacturing w ithin the automotive, c o nstruction, electronics a nd other sectors. The g lobal silica sand market is see n reaching n e arly US$10 b illion in revenues by 2022, with a h e althy compound annual growth rat e of 7.2% (source: IMARC G roup).

Diat r eme’s CEO, Neil McIntyre said: “Ca p e Bedford c o ntinues to s how excell e nt prospec t s as a potential source of jobs and invest m ent for the l ocal comm u nity and at t he appropr i ate stage a p otential re v enue strea m for Diatre m e.

“To g ether with o ur flagship C yclone Zirc o n Project, w here we ar e currently advancing a d efinitive fe a sibility stud y , we inte n d to position Diatreme t o become a new produ c er of silica a nd mineral s ands products amid a f a vourable p r icing envi r onment of r ising dema n d and constrained supply.”

Neil McIntyre Greg Starr Chief Executive O fficer Chairman

Cont a ct – Mr Neil McIntyre ‐ Ph – 0 7 33972222 Web s ite ‐ diatreme. c om.au E‐ma i l ‐ manager@ d iatreme.com. a u

Forward looking statements: Thi s document ma y contain forwa r d looking state m ents. Forwar d looking state m ents are often, but not alway s , identified by the use of words such a s “seek”, “indi c ate”, “target”, “ a nticipate”, “for e cast”, “believe ” , “plan”, “estim a te”, “expect” a n d “intend” and state m ents that an e v ent or result “ m ay”, “will”, “sh o uld”, “could” or “might” occur o r be achieved a nd other simil a r expressions. Indications of, a nd inter p retations on, future expected e xploration results or technical o utcomes, pro d uction, earning s , financial pos i tion and perfor m ance are also forward-looking stat e ments. The fo r ward-looking s t atements in thi s presentation a re based on c u rrent interpret a tions, expectat i ons, estimates, assu m ptions, foreca s ts and projecti o ns about Diatr e me, Diatreme’ s projects and a ssets and the industry in whic h it operates as well as other f a ctors that m anagement believes to be rel e vant and reas o nable in the ci r cumstances at the date that s u ch statements a re made. The forward-lookin g state m ents are subj e ct to technical, business, economic, competit i ve, political an d social uncerta i nties and conti n gencies and m ay involve kno w n and u nknown risks a n d uncertaintie s . The forward - looking statem e nts may prove to be incorrect. Many known a nd unknown f a ctors could ca u se actual events or res u lts to differ materially from the estimated or a n ticipated even t s or results expressed or impli e d by any forw a rd-looking state m ents. All forw a rd-looking statements made i n this presentat i on are qualifie d by the foregoi n g cautionary s t atements.

Disclaimer: Diatre m e and its relat e d bodies corporate, any of the i r directors, offi c ers, employee s , agents or co n tractors do not make any repre s entation or wa r ranty (either e x press or implied) as to the ac c uracy, correctness, completeness, adequacy, reliability or lik e lihood of fulfil m ent of any f o rward-looking s tatement, or a n y events or re s ults expressed or implied in a n y forward looking statement, e xcept to the extent required b y law. Diatr e me and its rel a ted bodies cor p orate and eac h of their respe c tive directors, o fficers, employ e es, agents an d contractors di s claims, to the maxi m um extent per m itted by law, a ll liability and r e sponsibility for any direct or indirect loss or d a mage which m ay be suffered by any person (including because of fault or neglig e nce or otherwise) through us e or reliance on anything conta i ned in or omitt e d from this presentation. Oth e r than as re q uired by law a n d the ASX Listing Rules, Diat r eme disclaims a ny duty to up d ate forward looking statement s to reflect new developments.

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About Cape Bedford

The C ape Bedfo r d EPM1779 5 is located a pproximat e ly 200km n o rth of Cairn s in North Q u eensland, a nd covers t h e extent of a large Quaternary sand dune f ield, part of which is currently being mined by C a pe Flattery Silica Mines Pty Ltd (CFSM), a w h olly owned s ubsidiary o f Mitsubishi Corporation. Cape Flatt e ry has oper a ted since 1 9 67 and is t h e world's largest s i lica sand mining operation.

The C ape Bedfo r d/Cape Flat t ery region o f north Queensland is d o minated b y an extensi v e Quaterna r y sand mas s and dun e field that s t retches inl a nd from the present co a st for approximately 10 k m and exte n ds 50km fr o m north to south.

Hist o rical explor a tion has fo c used on th e Cape Flatt e ry area, wit h in the Mini n g Leases of CFSM, but reconnaissa n ce expl o ration has b een carried out over th e entire dune field in th e late 1960's and again i n the early 1 9 80's. This expl o ration confirmed the p r esence of b o th silica sa n d and heav y mineral sa n ds, and Dia t reme inten d s to build on the exis t ing data an d initially tar g et those ar e as (e.g. No b Point) where prospective silica san d dunes hav e been iden t ified and access is re a dily available.

Foll o wing the si g ning in 201 7 of a Conduct and Com p ensation A g reement and a Cultural Heritage Ag r eement with the trad i tional own e rs, Hope Vale Congress, Diatreme h a s worked cl o sely with Hope Vale Co n gress to m a ximise the eco n omic benef i ts for the lo c al community.

In A u gust 2018, D iatreme defined a mai d en Inferred Mineral Resource for th e project’s N ob Point Sil i ca Sand Pro s pect loca t ed in the s o uthern area of the tene m ent (refer A SX announ c ement rele a sed 13 Aug u st 2018).

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