Overview

Diatreme Resources Limited (Diatreme) has been an active Australian mineral explorer for over 14 years. Its principals have also been in the exploration business for many years. Diatreme's principal focus is on heavy mineral sands (zircon in particular), copper-gold and base metals.

Heavy Mineral Sands

Eucla Basin

Diatreme's Eucla Basin Project covers a discontinuous 300 km length along an ancient "fossil" shoreline of the Eucla Basin of Tertiary age commanding areas the Company has assessed as containing the most favourable depositional environments for heavy mineral sands deposits. The "fossil" shoreline occurs along the northern perimeters of the Eucla Basin, straddling the common boundary of Western Australia and South Australia.

The Company's digital elevation model strongly indicates the existence of a long "fossil" shoreline and also a series of very extensive old river drainages (represented today as paleovalleys in the hinterland of the fossil shoreline) which would have flowed into, and deposited their contents into an adjacent shallow sea.

The paleovalleys are believed to represent an important source of heavy minerals along the fossil shoreline. The paleostreams are believed to have been active over geologic time draining three major mineral provinces including the Gawler Craton, Musgrave Mineral Province and the Yilgarn Block, the latter hosting the Kalgoorlie Goldfields, a very large producer of gold, nickel and platinoid metals on a world scale. On the eastern margins of the Yilgarn Block rare earth carbonatite deposits have been discovered which have similar chemistry to the diamond bearing kimberlites and lamproites. This means the region is also prospective for diamonds.

There are ten indicated major paleovalley catchments which have drained into the 500 km linear arc in the central portion of the fossil shoreline.

The Company currently holds a significant number of granted exploration tenements covering 300 linear km of potentially the most productive parts of the central 500 km portion of the shoreline. It also holds applications in place for further exploration tenements throughout the Basin.

The northern Eucla Basin fossil shoreline represents one of the last major heavy mineral target provinces that has not been comprehensively explored in Australia.

Exploration by other parties has identified heavy mineral concentrations along the fossil shoreline. The best assays recovered along the shoreline outside of the Company's project area were up to a grade of 27.2% heavy mineral sands with 51% zircon, 43% ilmenite and 3% rutile on which a microprobe analysis returned an average of TiO2 assay of 66.2%. Previous drilling within the Company's project area by previous explorers has recovered up to a grade of 2.85% heavy mineral sands with up to 47% zircon, 31% ilmenite and 2% rutile recovered within the mineral assemblage. These grades compare very favourably with the high grade occurrences along the Western Australian seaboard.

The Company believes the project has very high potential to locate economic heavy mineral deposits along the fossil shoreline, and more importantly that gold, platinum metals and possibly diamonds are likely to be accessories to the economic mineral assemblage.

Copper

Base Metals

Some large Proterozoic base metal deposits form at or near the ground surface within fine-grained sediments adjacent to large fault zones which existed at the time of sediment deposition. Hot hypersaline solutions, probably derived from buried salt deposits, leach the metals from rocks and carry them to the surface where they form metal sulphide deposits. Large domal features commonly occur in the vicinity of the deposits. Basalts may be an important source of metal for copper deposits.

The search for such deposits usually involves recognition of a favourable geological setting (presence of fine grained evaporitic sediments of Proterozoic age with adjacent large faults), geochemical and geophysical surveys and drilling. Proterozoic aged rocks are hosts to many of the larger base metal deposits in Australia and Diatreme considers that these rocks are the best place to explore for base metal deposits in Australia. Diatreme's major base metal project, the Bellfield Project, is situated in Proterozoic rocks to the southwest of Georgetown in north Queensland. The aim of the Bellfield Base Metal Project is to discover a major Mount Isa style copper-lead-zinc-silver deposit.