EQ RESOURCES LIMITED — Interim / Quarterly Report 2012

Jul 30, 2012

First Tungsten Concentrate Shipment – Brisbane

uarterl Activities Re ort Q y p For the Period Ended 30 June 2012

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SUMMARY OF ACTIVITIES AND EVENTS

QUARTER ENDED 30 JUNE 2012

• The first shipment of bulk tungsten concentrate was despatched from the Mt Carbine Tailings Re-Treatment Plant on 28 June 2012. Partial payment for the shipment was promptly received from Mitsubishi Corporation Unimetals Ltd (MCU) after meeting the FOB shipping and contractual requirements during July 2012. The balance of payment for the shipment is expected to be received during August 2012 once the consignment has undergone final assay verification by MCU. This has marked a significant achievement for Carbine Tungsten Limited (CNQ) and confirms the transition of the Company from a predominantly exploration-based company into a mining production company with strong project development capabilities.

• The Company continued with its detailed feasibility and evaluation studies into the Mt Carbine Hard Rock Project, and has engaged a number of independent consultants to assist in evaluating various key components of the study. Part of the study involves the assessment of the resource to be viably re-opened and operated as an open pit mine. This component of the study led to the successful resource upgrade, as detailed in the ASX announcement on 18 June 2012. Drilling results that occurred earlier this year and previously in 2009 have resulted in the Mt Carbine resource being increased by 19% in tonnes and by 4,860 tonnes of contained tungsten (WO3) to 47.4 million tonnes at 0.13% WO3 for a total of 62,305 tonnes of contained tungsten metal at a 0.05% WO3 cut-off.

• The early results of the Hard Rock Feasibility Study appear very encouraging and its key results will be announced during the next quarter. The Tailings Re-Treatment Plant has produced significantly higher-grade concentrate than had been predicted by the project’s feasibility study. The success of the fines slurry processing plant has greatly enhanced the viability of the planned Hard Rock Project by having proven the circuit’s capability to recover high-grade product from the fines.

• The Tailings Re-Treatment Plant has however underperformed its expected production ramp-up targets to-date. This is predominantly due to poor design and incorrect materials of construction pertaining to the front-end of the plant (rotary and vibrating screens) specifically associated with handling of the abrasive and course fraction materials that form a large component of the existing tailings stockpiles. This has presented a challenge to the plant’s production team to overcome as they have attempted to maintain production ramp-up rates whilst simultaneously being required to repair, modify and maintain the plant, which has led to lower plant throughput and low plant availability rates.

• A number of specialist consultants have been engaged to provide solutions to the predominantly materials handling issues of the plant and the Board is studying the recommendations for various upgrade options, which will be required to be implemented in order to improve production output. A plant shut-down period will be required in order to implement these proposed upgrades.

• Tungsten in the fines (tailings) could not be recovered by the previous processing plant’s equipment and CNQ’s present management deemed it critical that this be resolved before commencing hard rock processing again. Hence, the Tailings Re-Treatment Plant was seen as a very important Research and Development Project for the ultimate success of the Hard Rock Project and of the Company as a whole. The CNQ Chairman explained this at the 2011 Annual General Meeting and in the documentation for the two Rights Issue fundraisings. It is therefore pleasing that the Tailings Re-Treatment Plant is a success, and will be used as the back-end of the planned new processing plant in the feasibility study and design. Fines (tailings) will be piped in a slurry form to this plant before final disposal.

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EXPLORATION, PRODUCT MARKETING AND DEVELOPMENT ACTIVITIES

QUARTER ENDED 30 JUNE 2012

EXPLORATION

MT CARBINE TUNGSTEN CONCENTRATE GRADE EXCEEDS FEASIBILITY COST ASSUMPTIONS

The results from product samples forwarded to CNQ’s major customer, MCU, have greatly exceeded the anticipated tungsten content from the Tailings Recovery Feasibility Study. The higher-than-expected grade of concentrate will bring better-than-expected revenue if it is indicative of future production.

The product samples taken from CNQ’s initial production runs from the Tailings Re-Treatment Plant underwent detailed assaying by MCU, who reported values in excess of 70% WO3 in all three trial samples. Portable XRF analyses also indicated that the tungsten recovery was over 60%, well in excess of pilot and laboratory-scale test results.

MT CARBINE RESOURCE UPGRADE

The updated Inferred Resource (in compliance with the JORC Code) now stands at 47.4 million tonnes at 0.13% WO3 at a 0.05% cut-off (see Table 1). This equates to an overall increase of 4,860 contained tonnes of tungsten metal (an 8% increase).

JORC RESOURCE CATEGORY	VOLUME	TONNES	**WO3% **	CONTAINED WO3
Inferred	17,305,000	47,416,000	0.13	62,305

Table 1: Mt Carbine Resource below present pit surface (above 0.05% WO3 cut-off)

The resource was estimated utilising the results of drilling completed earlier this year by CNQ, as well as data acquired from two holes completed in 2009. The resource has been extended to the south-east and north-west at a depth relative to the previously announced Inferred Resource estimate.

PRODUCT MARKETING

MITSUBISHI CORPORATION UNIMETALS LTD (MCU)

The terms of the Letter of Intent provided by MCU were confirmed during a recent visit to Japan by the CEO and Managing Director, Mr Jim Morgan, which stated that MCU would purchase all the production from CNQ’s Tailings Re-Treatment Plant. Subsequent to this, CNQ then signed its initial bulk shipment Sales Contract with MCU, which resulted in the agreed sales price being more favourable than earlier predicted in the Feasibility Study. Payment terms for the first shipment would be 85% upon bill of lading, followed by the balance, which would be paid after receipt of the product by the customer. This final payment would contain an adjustment for any applicable penalties relating to the final bulk assays.

DEVELOPMENT

HARD ROCK PROJECT

Discussions were held with MCU regarding possible opportunities for them to contribute funding and off-take products for CNQ’s 30,000 Metric Tonne Units (MTU) per annum Hard Rock Mine Development Project at the same site. MCU have confirmed their interest and are in the process of arranging another visit to the Mt Carbine site by a team of MCU’s senior technical and financial staff to further discuss and review these options.

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TAILINGS RE-TREATMENT PROJECT, MT CARBINE

The Tailings Re-Treatment process has proven to be highly successful, with the operational design and plant also proving its ability to produce a very high-grade product from the tailings resource. However, low plant availability, as a result of various equipment breakdowns and material handling issues, has hampered the rapid production ramp-up of the plant. CNQ is confident that these challenges, which are often typical during a plant’s ramp-up phase, have relatively standard technical solutions that will be progressively overcome as the plant continues increasing its production rates.

On 24 May 2012 CNQ advised that the Tailings Re-Treatment Plant had significantly improved its peak production throughput capability over the previous two weeks. CNQ considers that the fundamental tailings recovery process is now well proven, and looks forward to further increasing production output and plant reliability in the near future.

GOSSAN HILL GOLD LIMITED – INITIAL PUBLIC OFFERING (IPO)

CNQ shareholders were reminded that the IPO of shares by Gossan Hill Gold Limited (Gossan Hill Gold), pursuant to its Prospectus dated 24 February 2012, was open until 7 May 2012. CNQ shareholders were given a priority right to apply for a minimum of 10,000 shares at the offer price of $0.20 each for a total subscription amount of $2,000.

Gossan Hill Gold has assembled the following strong group of projects targeting multi-million ounce gold deposits:

• Mt Adrah: This project is an Intrusion Related Gold deposit, located between Gundagai and Tumut in southern NSW, exposed at the surface with a current JORC Resource of 239,000 ounces of gold to a depth of 120 metres. The target is similar in nature to the Donlin Creek deposit (Alaska, USA), which currently has reserves of 33 million ounces of gold and a current Net Present Value of US$4.6 billion (at a US$1,700 per ounce gold price).

• Bauloora: This project has an untested, low sulphidation epithermal gold vein system (the Mee Mar vein), near Cootamundra, NSW, with an exposed width at the surface of up to five metres and a minimum strike length of over two kilometres.

• Peel Fault: The Peel Fault, in central-northern NSW, consists of a crustal-scale shear bounded greenstone belt, marked by substantial alteration of serpentinites to listwanite and orogenic lode gold veins on second order structures connected to, and immediately to the east of, the Peel Fault. Numerous gold-bearing quartz veins are exposed at the surface, and the size and potential of the Peel Fault is considered by Gossan Hill Gold to represent a system potentially as large and endowed as the California Motherlode system in the USA.

• Weabonga: This project is analogous to the Wattle Gully deposit of central Victoria. Targets are small, high-grade shoots capable of yielding half a million ounces of gold resources at greater than 1 ounce per tonne. The Weabonga area is east of Tamworth, NSW.

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Figure 1: Mt Carbine Inferred Resource – perspective view of the 2012 block model showing the distribution of blocks above 0.1% WO3, the pit, topographic surface and the bounding South Wall Fault.

EXPLORATION, PRODUCT MARKETING AND DEVELOPMENT ACTIVITIES

SINCE 30 JUNE 2012

PRODUCT MARKETING

FIRST SHIPMENT OF CONCENTRATE LEAVES MT CARBINE’S TAILINGS RE-TREATMENT PLANT The first consignment of bulk tungsten concentrate was despatched to Brisbane for shipment from CNQ’s Tailings Re-Treatment Plant on 28 June 2012. Payment terms are 85% from bill of lading, with the date for sailing being 8 July 2012. The 15% balance of payment is subject to final adjustment once the shipment is received and assayed by the end-use customer.

The 1,134 MTU of tungsten have undergone inspection by representatives of CNQ’s major customer, MCU. The grade of concentrate produced greatly exceeded the anticipated WO3 content expected from the Tailings Re-Treatment Feasibility Study.

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Mt Carbine Tailings Recovery Facility

Part consignment en-route to Brisbane

DEVELOPMENT

HARD ROCK PROJECT

The successful confirmation of the tailings recovery process and the better-than-predicted recovery results will have significant, positive, financial implications for CNQ’s Hard Rock Project Financial Model.

MCU, and a number of other key potential project participants, are visiting Mt Carbine from the end of July 2012 to review the Company’s Hard Rock Feasibility Study and discuss funding options for the Hard Rock Project phase.

CNQ intends to commence construction activities on its Hard Rock Project in early 2013 and to be producing 250,000 MTU per annum of high-grade tungsten concentrate commencing in 2014.

Jim Morgan

CEO and Managing Director

COMPETENT PERSONS’ STATEMENT

The information in this report that relates to Mineral Resources has been compiled by Mrs Fleur Muller who is a Member of the Australasian Institute of Mining and Metallurgy, is a fulltime employee of Geostat Services Pty Ltd, and produced the Mineral Resource Estimate based on data and geological information supplied by Carbine Tungsten Limited. Mrs Muller has sufficient, relevant experience to the style of mineralisation and type of deposit under consideration, and to the activity that she is undertaking to qualify as a Competent Person, as defined in the 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mrs Muller consents to the inclusion in this report of the matters based on her information in the form and context in which it appears.

The information in this report that relates to Exploration Results is based on information compiled by Dr Kris Butera who is a Member of the Australian Institute of Geoscientists (MAIG), is a fulltime employee of Carbine Tungsten Limited and its subsidiary / affiliate companies, and has sufficient experience relevant to the styles of mineralisation and types of deposits under consideration, and to the activity he is undertaking to qualify as a Competent Person, as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Butera consents to the inclusion in this report of matters based on his information in the form and context in which it appears.

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CARBINE TUNGSTEN LIMITED AT A GLANCE

Directors

Dr Leon Pretorius, Chairman Mr A J (Jim) Morgan, CEO and Managing Director Dr Andrew White, Non-Executive Director

Company Secretary

Mr Robert Waring

Registered Office Cairns Office Suite 505, Level 5, 35 Lime Street 50 Scott Street Sydney NSW 2000 Australia Bungalow, Cairns QLD 4870 Australia Telephone: +612 9279 1252 Telephone: +617 4052 2400 Facsimile: +612 9279 2727 Facsimile: +617 4052 2444

Website and Emails

Please visit Carbine Tungsten Limited’s website for the latest announcements and news: www.carbinetungsten.com.au. To receive Carbine Tungsten Limited’s announcements by email, email: info@carbinetungsten.com.au.

General Enquiries

Contact Mr Jim Morgan on 0487 144 834.

Issued Capital and Market Capitalisation

At 23 July 2012 Carbine Tungsten Limited’s issued capital was 256,982,719 ordinary shares, and 4,560,870 unlisted options exercisable at between 14 and 44 cents. At a share price of $0.089 (24 July 2012) the market capitalisation was $22.9 million.

Number of Shareholders and Major Shareholders

At 23 July 2012 Carbine Tungsten Limited had 1,219 shareholders. The share register records the following as major shareholders at 23 July 2012 accounting for 32.99% of the issued shares:

Shareholder	%
Leon Eugene Pretorius	12.27
Baglora Pty Ltd	4.31
Neil Kenneth Watson and Margaret Helen Moroney	3.43
Stephen Bruce Bartrop and Associates	2.65
David John Hanks	2.46
Andrew Hewlett White and Associates	1.89
Silva Pty Ltd	1.60
Bullock Point Pty Ltd	1.59
Alan Scott Nominees Pty Ltd	1.40
Fallon Nominees Pty Ltd	1.39

Cash Balance

At 30 June 2012 Carbine Tungsten Limited’s cash balance was approximately $975,000.

Shareholder Enquiries

Matters relating to shares held and changes of address should be directed to the share registry:

Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street, Abbotsford VIC 3067 Telephone (within Australia): 1300 850 505 Telephone (international): +61 3 9415 4000

ASX Listing Code

The Company’s ASX listing code is CNQ (Carbine North Queensland).

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