QUARTERLY REPORT

HIGHL

GHTS

EXPLORATION ACTIVITIES REPORT QUARTER ENDED 30 SEPTEMBER 2014

CYCLONE ZIRCON PROJECT (WA)

TICK HILL GOLD PROJECT (QLD)

Final cash call payment

received from Perpetual

Meetings held with Glenco re executives to finalise the

Mining Holding

Limited (PMHL), allowing PMHL to

Tick Hill Optio

agreement and facilitate full transfer of

earn a 6% joint venture (JV) participat ng interest in

ML titles and ownership to Diatreme. Internal planning

the Cyclone Project.

commenced for immedi ate activity

on transfer of

Negotiations progressing

with traditional owners the

license assessing alluvi al, colluvial and tailings opportunities on site.

Pila Nguru (RNTBC) for the Cyclone Project Mining

Agreement. Agreement finalisation followed by a signing ceremony planned on site for mid-November.

CAPE BEDFORD HM PROJECT (QLD)

Discussion commenced w ith land owners to facilitate exploration agreement and support for grant of EPM.

PER documentation has

been lodged with EPA.

Project remains an important priority for Diatreme.

Referral lodged under Commonwealth EPBC Act, and

notification received that the proposal does not require further assessment and approval under the EPBC Act.

GRAYS HILL COPPER PROJECT (QLD)

Review of historical exploration data and reports undertaken by consult ant geologist. Opportunity

In-house technical work underway to develop options

identified for

both struc turally controlled epithermal

and

work program for optimisation of

the Cyclone

mineralisation and porphyry mineralisation.

mine plan. Includes CAPEX and OPEX studies for

anticipated significant cost reduction

by use of

TENEMENT REVIEW

improved mine planning and processing technologies.

CLERMONT COPPER PROJECT (QLD)

A review of Diatreme's tenement holdings is underway to ensure any retentions, renewals or new applications

are strictly consistent with the Companies commercial

Ongoing discussions with a third party regarding JV

opportunity at Clermont.

objectives.

Diatreme Resources Limited is an Australian based divers fied mineral explorer with sig ificant projects in WA, QLD, VIC and SA.

Australian Securities Exchange

Codes: DRX, DRXO

Board of Directors

Key Pro jects:

• Cyclo ne Zircon Proje t

• Clerm ont Copper Project

• Tick H ill Gold Project

The Company seeks to develop the Cyclone Zircon

Non-executive:

• Cape Bedford Silica/

MS Project

Depo it in WA,

through a

joint venture

William Wang - Chairman

arrangement, and number of project

onducts exploration over a areas prospective for heavy

Andrew Tsang

Daniel Zhuang

Registe red Office:

Level 2, 87 Wickham Terrace

mineral sands, silica sand, copper a d gold.

Executive:

Spring Hill, QLD 4000

The

Board and senior personnel exhibit wide

Neil McIntyre - Chief Executive

Postal Address:

experience, ranging through the exploration,

devel pment and financing phases of resource project management.

Tuan Do - Chief Financial Officer

Ian Reudavey - Chief Geologist

Joint Company Secretarie : Leni Stanley and Tuan Do

PO Box 10288

Brisban e Adelaide Street

QLD 40 00

Diatrem e Resources Limited Contact: Neil McIIntyre - Chief Executive Phone: +61 7 3832 56 6

Fax: +6 1 7 3832 5300

QUARTERLY REPORT

CYCLONE ZIRCON PROJECT (WA)

Project de-risking activities under the joint venture with Perpetual Mining Holding Limited continued during the quarter with the focus on preparation of the Public Environment Review (PER) documentation and progressing mining agreement negotiations with the Pila Nguru People. On the 16th September 2014 Diatreme received the
final cash call amount from PMHL under the HOA signed in January 2014, thereby completing its initial farm-in commitment on the Cyclone Zircon Project.
The environmental studies and assessment processes for the Project have been completed in accordance with the PER schedule which has been agreed with the Western Australian Environmental Protection Authority (EPA). The PER document has now been lodged with the EPA.
A referral for the Cyclone Project was submitted under the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), and the company has been advised that the proposed action is not a controlled action and therefore does not require further assessment and approval under the EPBC Act.
Negotiations between Pila Nguru and Diatreme for the Cyclone Project Mining Agreement have reached agreement for the principal commercial terms between the parties, with work now moving on to drafting of the encompassing legal agreements. A formal signing on site at Tjuntjuntjara with the Pila Nguru is anticipated for mid November 2014.
In-house technical work is underway to develop options and a work program for optimisation of the Cyclone mine plan. This will include CAPEX and OPEX studies for anticipated significant cost reductions through use of improved mine planning and processing technologies. Significant capital cost savings have been identified through use of various adjustments to mining techniques including the potential use of semi-mobile plant following the mining face saving significant pumping and pipeline costs, and new MSP spiral processing technologies that allow higher mineral recovery rates.
The introduction of the Mining Rehabilitation Fund (MRF) by the WA Mines Department has facilitated full refund of environmental bonds that were lodged for the active exploration tenements that make up the Cyclone Project (i.e. E69/1920, E69/2408 and E69/2425). Similarly, Rehabilitation Reports have been prepared and lodged with the WA Mines Department to for expired WA tenements (i.e. E69/2222, E69/2426, E69/2427, E69/2428, E69/2429) to facilitate refund of outstanding environmental bonds attached to the listed tenements.

CLERMONT COPPER PROJECT (QLD)

A review of the Clermont project, and in particular the Rosevale Porphyry Corridor, is underway - with development of a proposed exploration program and identification of lower priority prospects and project tenement area that could be relinquished.
Data for the project is currently being reviewed by a third party for possible JV opportunity.

TICK HILL GOLD PROJECT (QLD)

Meetings have been held with Glencore personnel to progress the 2007 option agreement and facilitate transfer of the three Tick Hill Mining Leases to Diatreme Resources. Internal planning has commenced for immediate activity on transfer of license to assess mining and processing opportunities for gold associated with alluvial, colluvial and tailings material on site. In addition to this, exploration drilling to test possible faulted offsets of the Tick Hill mineralising structure is planned.
The company anticipates finalisation of transfers and tenement ownership in Diatreme's name by mid-November.

CAPE BEDFORD SILICA/HMS PROJECT (QLD)

Discussions are ongoing with traditional land owners to facilitate an exploration agreement for the Cape Bedford area and a letter of support for grant of EPM. This project has been identified as an important company priority to allow exploration activities to commence as soon as possible on site.

GRAYS HILL COPPER PROJECT (QLD)

A review of historical exploration data and reports for the Wasp Porphyry prospect was undertaken by a consultant geologist familiar with porphyry related mineralisation systems. It is apparent that the Wasp prospect displays classic porphyry alteration together with low grade copper-molydenum mineralisation, but has been discounted by previous explorers in the 1970's and 1980's as not representing potential open pittable
mineralisation.

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QUARTERLY REPORT

An exploration opportunity has been identified for both structurally controlled epithermal mineralisation (which was not recognised/targeted by previous explorers) and porphyry mineralisation beyond the limits of previous drilling. Historical drilling has not fully tested the areal or depth extent of the porphyry as it was typically <150m deep, and focussed on the outcropping south-eastern portion of the granodiorite stock. Field work is required to better assess to exploration opportunity at the Wasp prospect.

PROJECT TENEMENT RATIONALISATION

As part of a review of Diatreme's exploration strategy, Diatreme's tenement holdings and applications have been re-assessed with several tenement applications being withdrawn and non-core tenement holdings recommended for relinquishment. This will reduce tenement administration costs and allow Diatreme to focus on its core projects. Appendix 1 provides details of the exploration tenements disposed during the quarter.
The Noorina 2 (SA) HM tenement was relinquished due to a review of exploration prospectivity which suggested limited potential for significant HM mineralisation.
An application was lodged to relinquish the Elliston (SA) HM tenement due to review of exploration prospectivity which suggested limited potential for significant HM mineralisation, and proposed exploration environmental conditions relating to the presence of the Musgrave Prescribed Wells Area over a large portion of the EL.
The HoA for the Braemar Iron JV on the Anabama tenements in SA has been terminated and Diatreme is planning to relinquish the Anabama tenements in due course.
An ongoing review of Diatreme tenement holdings will ensure that any retentions, renewals or new applications are strictly consistent with the Companies commercial objectives.

CASH POSITION

The Company's cash position at 30 September 2014 (Appendix 5B) was $1,423K, with the final cash call for the
Cyclone Project HOA with PMHL being received during September 2014 quarter.

APPENDIX 1

Appendix 1 provides information required under ASX listing rule 5.3.3 for mineral exploration entities.

Dated 31 October 2014

Neil J McIntyre

Chief Executive

Company contact details:Tel : +61 7 3832 5666

Fax : +61 7 3832 5300

Email : [email protected]

Competent Person Statements

The information in this report, insofar as it relates to Exploration Results from the Grays Hill projects 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 that relates to Exploration Results and Mineral Resources from the Cyclone Zircon Project is based on information compiled by Mr Ian Reudavey, a Competent Person who is a Member of the Australian Institute of Geoscientists. Mr Reudavey is a full time employee of Diatreme Resources Limited. Mr Reudavey has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity being 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 his information in the form and context in which it appears.

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QUARTERLY REPORT

APPENDIX 1

Appendix 1 provides information required under ASX listing rule 5.3.3 for mineral exploration entities.

Mining tenements held at the end of the quarter and their location

Mining tenements acquired and disposed of during the quarter and their location

Beneficial percentage interests held in farm-in or farm-out agreements at end of the quarter

Beneficial percentage interests in farm-in or farm-out agreements acquired or disposed of during the quarter

Abbreviations:

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