DIATREME RESOURCES LIMITED — Proxy Solicitation & Information Statement 2010

Nov 11, 2010

Diatreme Resources Limited

ABN 33 061 267 061

Notice of a General Meeting of Shareholders

to be held at the office of the Company, Level 2, 87 Wickham Terrace, Spring Hill, Qld, 17 December 2010 at 11:00 am

The details of the resolutions contained in the Explanatory Memorandum accompanying this Notice of General Meeting should be read together with and form part of this Notice of General Meeting.

Business

RESOLUTIONS:

1. RATIFICATION OF PRIOR ISSUE OF SHARES.

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

“That for the purposes of ASX Listing Rule 7.4 and for all other purposes, the issue of 33,906,175 ordinary shares in the capital of the Company, to the investors on the terms described in the Explanatory Memorandum, be ratified.”

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 1 by:

• any person who participated in the issue; and

• any of their associates.

However, the Company need not disregard a vote on Resolution 1 if:

• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

2. APPROVAL OF PROPOSED ISSUE OF PLACEMENT SHARES.

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

“That for the purposes of ASX Listing Rule 7.1 and for all other purposes, the proposed issue of up to 3,150,000 ordinary shares in the capital of the Company to the investors, and on the terms described in the Explanatory Memorandum, be approved.”

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 2 by:

• persons who may participate in the proposed issue and persons who might obtain a benefit except a benefit solely in the capacity of the holder of ordinary shares, if the resolution is passed; and

• any of their associates.

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However, the Company need not disregard a vote on Resolution 2 if:

• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

3. APPROVAL OF PROPOSED ISSUE OF PLACEMENT SHARES TO MRS LIE YOU, A RELATED PARTY OF MR A TSANG, A DIRECTOR.

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

“That for the purposes of ASX Listing Rule 10.11 and for all other purposes, the issue of 2,850,000 ordinary shares in the capital of the Company to Mrs Lie You, a related party of Mr Andrew Tsang, a Director, on the terms described in the Explanatory Memorandum, be approved.”

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 3 by:

• Mrs Lie You; and

• any associate of Mrs Lie You.

However, the Company need not disregard a vote on Resolution 3 if:

• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

By Order of the Board of Directors,

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Leni Stanley Company Secretary

Dated 12 November 2010

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Diatreme Resources Limited

ABN 33 061 267 061 EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of shareholders in relation to the business to be conducted at the general meeting of the Company to be held at the office of the Company, Level 2, 87 Wickham Terrace, Spring Hill, Qld, on 17 December 2010 at 10:00am.

RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE OF SHARES

Under resolution 1 the Company seeks ratification for the purposes of ASX Listing Rule 7.1, of the prior issue of 33,906,175 ordinary shares to investors. The shares were issued by the Company without disclosure under part 6D.2 of the Corporations Act 2001 (Cth) to professional and sophisticated investors who are clients of PhillipCapital Australia (part of the Intersuisse Group), the Company’s corporate advisors.

The shares the subject of resolution 1 were issued as follows:

• on 5 August 2010 the Company placed 1,764,705 shares at an issue price of $0.085 per share;

• • on 12 August 2010 the Company placed 7,058,820 shares at an issue price of $0.085 per share; and

• on 5 November 2010 the Company placed a further 25,082,650 shares at an issue price of $0.07 per share.

All of the shares were issued on the same terms as the Company’s existing fully paid ordinary shares.

The Company raised, before costs, $2.5m from the issue of the shares the subject of Resolution 1. These funds have and will be applied towards the advancement of the Company’s heavy mineral projects, including towards progressing the Cyclone Deposit Project, and for working capital.

Under ASX Listing Rule 7.4 an issue of securities made without approval under ASX Listing Rule 7.1 is treated as having been made with approval for the purpose of ASX Listing Rule 7.1 if shareholder approval is subsequently obtained. Under ASX Listing Rule 7.1 an entity must not issue, or agree to issue, more than fifteen percent (15%) of its capital within a 12 month period without the approval of its shareholders. The issue of the shares the subject of resolution 1 was made within the Company’s 15% limit.

By obtaining Shareholder approval for the issue of the shares the subject of Resolution 1, the Company retains the ability to issue up to fifteen per cent (15%), within a 12 month period, of its capital. This will give it flexibility to issue further equity, including allowing it to take advantage of any capital raising opportunities.

All Directors unanimously recommend that you vote in favour of Resolution 1.

RESOLUTION 2 – APPROVAL OF PROPOSED ISSUE OF PLACEMENT SHARES

Under resolution 2 the Company seeks shareholder approval to issue a further 3,150,000 ordinary shares at an issue price of $0.07 per share to the professional and sophisticated investors referred to below to raise a total of $220,500. These funds will be used for the purposes set out under Resolution 1 above.

Shareholder	Shares to be issued	Amount to be raised from issue (before costs)
ImageResourcesNL	700,000	$49,000
F.W. Holst & CoPtyLimited	1,900,000	$133,000
JapagPtyLtd	500,000	$35,000
IntersuisseHoldingsPtyLtd	50,000	$3,500
Total	3,150,000	$220,500

The investors (other than Intersuisse Holdings Ptt Ltd) are clients of PhillipCapital Australia (part of the Intersuisse Group).

The shares will be issued on the same terms as the Company’s existing fully paid ordinary shares. The shares will be issued as soon as practicable after the Meeting, but in any event, no later than three (3) months after the date of the Meeting.

All Directors unanimously recommend that you vote in favour of Resolution 2.

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RESOLUTION 3 – APPROVAL OF PROPOSED ISSUE OF PLACEMENT SHARES TO MRS LIE YOU, A RELATED PARTY OF MR ANDREW TSANG, A DIRECTOR

ASX Listing Rule 10.11 provides that, subject to specified exceptions, a listed company must not issue shares to a related party without shareholder approval.

Under resolution 3 the Company seeks shareholder approval under ASX Listing Rule 10.11 to issue up to 2,850, 000 shares at an issue price of $0.07 per share to Mrs Lie You, to raise a total of up to $199,500. Mrs Lie You is an existing shareholder of the Company and holds 342,190 ordinary shares in the Company representing 0.13% of the issued share capital of the Company. Mrs Lie You is the mother of Mr Andrew Tsang, a Director, and is therefore a related party of Mr Tsang for the purposes of ASX Listing Rule 10.11. If resolution 3 is approved Mrs You will hold 3,192,190 ordinary shares, representing 1.2% of the Company’s issued share capital (assuming resolution 2 is also approved).

The funds raised will be used for the purposes set out in Resolution 1 above.

Under Chapter 2E of the Corporations Act 2001 (Cth), a company must not give a financial benefit to a related party of the company unless an exception applies or unless the company obtains the approval of its Shareholders. One exception is where the transaction to the related party occurs on ‘arms length’ terms. The Directors have formed the view that shareholder approval under Chapter 2E of the Corporations Act is not required for the issue of shares to Mrs Lie You as the shares are being issued on the same terms and for the same issue price as those shares placed by the Company on 1 November 2010 to unrelated investors.

The shares will be issued on the same terms as the Company’s existing fully paid ordinary shares. The shares will be issued as soon as practicable after the Meeting, but in any event, no later than one (1) month after the date of the Meeting.

If approval is given by shareholders under ASX Listing Rule 10.11, then approval is not required under ASX Listing Rule 7.1. This means that the shares issued to Mrs Lie You will not be included in calculating the 15% threshold for the purposes of ASX Listing Rule 7.1.

This proposed issue of shares, together with the shares subject to Resolution 2, together comprise the 6,000,000 additional shares to be issued subject to shareholder approval, announced to ASX on 1 November 2010.

All Directors (except for Mr Tsang) unanimously recommend that you vote in favour of Resolution 3.

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Voting and Proxies

1. Voting

Diatreme Resources Limited (DRX) has determined in accordance with Regulation 7.11.37 of the Corporations Regulations 2001 that for the purposes of voting at the Meeting securities will be taken to be held by those persons recorded on the Company's share register as at 7:00pm (Sydney time) on 15 December 2010. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

If you have any queries on how to cast your votes then telephone Ms Leni Stanley on 07 3221 6022 or Mr David Hall on 07 3832 5666 during business hours.

2. Proxies

(a) Any member entitled to attend and vote is entitled to appoint not more than two proxies to attend and vote in his or her stead.

(b) If a shareholder appoints more than one proxy, the appointment of the proxy may specify the proportion or number of that shareholder's votes that each proxy may exercise. If the appointment does not specify the proportion or the number of the shareholder's votes each proxy may exercise, each proxy may exercise one half of the votes.

(c) Where a shareholder appoints more than one proxy neither proxy is entitled to vote on a show of hands.

(d) A proxy need not be a shareholder of DRX.

(e) To be effective, DRX must receive the completed Proxy Form and, if the form is signed by the shareholder's attorney, the authority under which the Proxy Form is signed (or a certified copy of the authority) by no later than 48 hours before the commencement of the meeting. Proxy Forms and other documentation may be lodged at the registered office of the Company or as follows:

By posting, delivery or Diatreme Resources Limited Share Registry facsimile: C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Facsimile: (02) 9287 0309 By delivery: Level 12, 680 George Street Sydney NSW 2000

(f) Proxies given by corporate shareholders must be executed in accordance with their constitutions, or under the hand of a duly authorised officer or attorney.

(g) If a proxy is not directed how to vote on an item of business, the proxy may vote, or abstain from voting as he or she thinks fit.

(h) If a shareholder appoints the Chairman of the meeting as the shareholder's proxy and does not specify how the Chairman is to vote on an item of business, the Chairman will vote, as proxy for that shareholder for that item.

NOTE: APPOINTMENT OF PROXY FORM IS ENCLOSED

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LODGE YOUR VOTE

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ABN 33 061 267 061

By mail:  Diatreme Resources Limited  [By fax:][ +61 2 9287 0309] C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia



All enquiries to: Telephone: 1300 554 474

Overseas: +61 2 8280 7454

X99999999999

X99999999999

ShAREhOLDER VOTING FORM

I/We being a member(s) of Diatreme Resources Limited and entitled to attend and vote hereby appoint:

APPOINT A PROXY

STEP 1 APPOINT A PROXY the Chairman OR if you are NOT appointing the Chairman of the of the Meeting Meeting as your proxy, please write the name of the (mark box) person or body corporate (excluding the registered shareholder) you are appointing as your proxy

or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy and to vote for me/us on my/our behalf at the General Meeting of the Company to be held at 11:00am on Friday, 17 December 2010, at Level 2, 87 Wickham Terrace, Spring Hill, Qld and at any adjournment or postponement of the meeting.

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the meeting. Please read the voting instructions overleaf before marking any boxes with an X

STEP 2

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VOTING DIRECTIONS
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For Against Abstain * Resolution 1 Ratification of Prior Issue of Shares Resolution 2 Approval of Proposed Issue of Placement Shares Resolution 3 Approval of Proposed Issue of Placement Shares to Lie You, a Related Party of Mr A Tsang, a Director

 * If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

STEP 3 SIGNATURE OF ShAREhOLDERS – ThIS MUST BE COMPLETED

Shareholder 1 (Individual) Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual) Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

This form should be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

DRX PRX001

hOW TO COMPLETE ThIS PROXY FORM

Your Name and Address

This is your name and address as it appears on the company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person in Step 1. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the company. A proxy may be an individual or a body corporate.

Votes on Items of Business – Proxy Appointment

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s share registry or you may copy this form and return them both together.

To appoint a second proxy you must:

• (a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together.

Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint holding: where the holding is in more than one name, either shareholder may sign.

Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

Corporate Representatives

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the company’s share registry.

Lodgement of a Proxy Form

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 11:00am on Wednesday, 15 December 2010, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy Forms may be lodged using the reply paid envelope or:

 by mail:

Diatreme Resources Limited

C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia



by fax:

+61 2 9287 0309



by hand:

delivering it to Link Market Services Limited, Level 12, 680 George Street, Sydney NSW 2000.

If you would like to attend and vote at the General Meeting, please bring this form with you. This will assist in registering your attendance.