DIATREME RESOURCES LIMITED - Interim / Quarterly Report 2021

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ASX

ANNOUNCEMENT

QUARTERLY ACTIVITIES REPORT

FOR THE PERIOD ENDED 30 June 2021

30 July 2021

Quarterly Highlights

Galalar Silica Project, Qld

Mining Lease (Infrastructure) Application lodged for Nob Point export solution to facilitate export of premium quality silica
Co‐operation agreement signed with Hopevale Congress Aboriginal Corporation RNTBC and Native Title holders, confirming mutually desired mine and marine infrastructure development exporting via Nob Point
New Memorandum of Understanding signed for supply of 250,000 tonnes per annum of photovoltaic‐grade silica, highlighting strength of Asian demand for Galalar product
Positive initial testwork results received for Galalar’s definitive feasibility study, with results highlighting ability to produce premium product for fast‐growing solar PV and other high‐end glass markets

Cyclone Zircon Project, WA

Talks continuing to formalise potential project participants’ interests amid rising prices and constrained supply outlook for zircon and titanium.

Corporate

Annual General Meeting (AGM) held at Diatreme’s head office in Brisbane, Qld, with all resolutions approved
Investor presentation to Noosa Mining and Exploration Investor Conference, as Company advances investor relations activities.

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COMING SEPTEMBER QUARTER ACTIVITIES

Diatreme’s operational focus for the September quarter 2021 comprises the following:

Galalar Silica Project
Lodgement of draft Environmental impact Study (EIS) for adequacy review by The Department of Environment and Science (DES)
Commencement of public notice period on draft EIS
Delivering a maiden ore reserve and improved mineral resource consistent with proposed mining plan programs and extensions.
Release of Preliminary Feasibility Study (PFS) incorporating Nob Point Barge Ramp and Cape Flattery Port solutions to product export.
Preparation for lodgement of marine/offshore permitting
Further engagement on business development and environmental programs with project partners, Hopevale Congress, affected native title holders and relevant regulatory/government agencies.
Finalisation of mining project agreements (MPA) with Native Title Holders and Hopevale Congress.
Further progress towards formalising offtake and marketing agreements.
Further specialist metallurgical upgrade studies on silica beneficiation assessing ultra‐low iron high purity silica products.
Cyclone Zircon Project
Assemble optimum mix of commercial parties to facilitate project’s development or divestment, amid rising demand for zircon and titanium products.

GALALAR SILICA PROJECT, QLD

Diatreme further advanced the development of its flagship Galalar Silica Project in the June quarter 2021, amid increasing demand from Asia’s fast‐growing solar PV market for premium‐quality silica sand.

On 8 April 2021, Diatreme announced it had engaged industry specialist Mineral Technologies (MT) to undertake final metallurgical testwork for the Galalar Silica Project’s definitive feasibility study (DFS).

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The objective is to develop a process flowsheet using the physical mineral separation processes of screening, gravity, attritioning, classification and magnetic separation to produce a high purity, low iron silica product with a target grade of 99.9% SiO2 and =<100ppm Fe2O3. The DFS metallurgical testwork will produce a balanced metallurgical flowsheet suitable for use in DFS level engineering plant design and estimation of process plant capital and operating costs.

Other goals of the testwork include determining high purity, silica final product specifications to be further used for continued marketing of the product, together with obtaining the overall yield of the high purity silica product from the ore that is planned to be mined. The test results will be incorporated into the DFS study underway.

On 22 April 2021, Diatreme announced positive first phase results from the initial testwork. MT has completed the first two stages (screening and spirals) of metallurgical testwork on the one tonne bulk sample for the project’s DFS. The bulk sample was taken from air core drill holes across the first two years of the planned start‐up mine area.

Results to date have exceeded expectations, showing positive results for particle size distribution and the reduction of impurities using only simple screening and spiral separators. These are key factors in developing a high quality product for the solar PV and other high‐end glass markets, capable of attracting premium pricing.

New offtake MOU

On 19 May 2021, Diatreme announced the signing of a new Memorandum of Understanding (MOU) for offtake from Galalar. The MOU with Jiangxi Kangjia New Material Technology Co., Ltd (Jiangxi Kangjia) concerns the supply of 250,000 tpa of photovoltaic grade (=<100ppm Fe2O3 silica product) from the Galalar project at mine start‐up, with potential for further offtake volume post start‐up, subject to mutual agreement.

The proposed cooperation under the MOU is for an initial duration of 12 months from the date of signature, with an intention to move to binding arrangements within that period and with its renewal subject to mutual agreement.

MLA lodged for Nob Point export solution

On 10 June 2021, Diatreme further advanced Galalar’s development with the lodging of a Mining Lease Application (Infrastructure) encompassing the associated Nob Point Barge Ramp (NPBR), Hopevale Community boat ramp and temporary stockpile area to facilitate the export of high purity silica sand.

Significantly, the NPBR option minimises community and environmental impacts as well as reducing transport costs compared to the alternate Scoping Study option (refer ASX release 9 September 2019), which anticipated road

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transport and barging via Cooktown. The NPBR option has been strongly backed by local stakeholders, most importantly Native Title holders directly affected by the mine’s development.

The Nob Point Mining Lease Application adjoins the Galalar Mining Lease Application (MLA) minimising product transport to 3.5km along a Haulage Access Road. Trucks or an alternate conveyor system would be loaded at the stockpile area located in the south‐western corner of the Galalar mine, with dry product delivered onto awaiting barges moored at the end of the NPBR. Barges would then transport product to a designated transhipment point for export.

Enhancing the Company’s stakeholder engagement, Diatreme also executed a Memorandum of Co‐operation (MOC) with Hopevale Congress Aboriginal Corporation (Congress), together with the Thiithaarr and Gamaay People, who have established a committee of the Native Title holders.

The parties to the MOC have highlighted that Nob Point is their preferred export solution and are working together towards favourable approval outcomes with the various State and Commonwealth regulatory agencies. This ensures the project development is consistent with the aspirations of the Native Title holders as traditional custodians of matters related to the land and sea.

Under an agreement with Diatreme, the Native Title holders have a 12.5% ‘free carried’ project interest, ensuring mutual benefits are delivered through maximising the project’s economic outcomes. This agreement does not replace the Mining Project Agreement (MPA) which is progressing well with an expected conclusion late third quarter 2021, following additional on‐site community meetings and briefings. Completion of the MPA is required prior to grant of both MLA’s.

The process involves final Native Title consents for mine development, outlining all related issues including compensatory arrangements and will include a detailed Cultural Heritage Management Plan. The agreement also aligns Caring for Country environmental obligations with anticipated conditioning on Environmental Management over Galalar and Nob Point.

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