Galalar Silica Project

The Cape Bedford EPM17795 is located approximately 200km north of Cairns in North Queensland, and covers the extent of a large Quaternary sand dune field, part of which is currently being mined by Cape Flattery Silica Mines Pty Ltd (CFSM), a wholly owned subsidiary of Mitsubishi Corporation. Cape Flattery has operated since 1967 and is the world's largest silica sand mining operation.

The Cape Bedford / Cape Flattery region of north Queensland is dominated by an extensive Quaternary sand mass and dune field that stretches inland from the present coast for approximately 10km and extends 50km from north to south.

Historical exploration has focused on the Cape Flattery area, within the Mining Leases of CFSM, but reconnaissance exploration has been carried out over the entire dune field in the late 1960's and again in the early 1980's. This exploration confirmed the presence of both silica sand and heavy mineral sands, and Diatreme intends to build on the existing data and initially target those areas (e.g. Nob Point) where prospective silica sand dunes have been identified and access is readily available.

The Company executed a Conduct and Compensation Agreement (CCA) in January 2017, and a Cultural Heritage Agreement (CHA) in June 2017 with the traditional owners, the Hopevale Congress. The CCA allows access for ground disturbing exploration activity and ensures the traditional owners share in the potential economic benefits of this new project, while the CHA sets out the protocol for cultural heritage issues.

Cultural heritage surveys for the first proposed exploration program were undertaken in August and subsequent exploration access granted in September 2017.

Diatreme’s reconnaissance samples confirm the potential of the widespread silica sand dune material to generate high-quality silica sand. Reconnaissance samples, together with the observation of HM slicks on some of the exposed beaches, suggests that HM mineralisation may be present at several locations within the EPM. Preliminary metallurgical testwork on a mineralised bulk sample from near Elim Beach indicates the sands to be amenable to the use of standard mineral sands process methodologies and equipment.

Following the process defined by the CHA, Diatreme assisted with a Cultural Heritage survey in August 2017 over the proposed reconnaissance exploration area in the Nob Point to Elim Beach area in the southern part of EPM17795. A reconnaissance exploration program was subsequently approved, and Diatreme commenced exploration in September 2017 utilising a Company-owned and operated air-core drilling rig.

Reconnaissance drilling was planned alongside established roads and tracks, with line clearing and reconnaissance drilling also planned over a dune system in the southern part of the EPM.

The exploration program was developed based upon encouraging results from historical exploration in the 1970’s and 1980’s (although this was itself reconnaissance in nature), encouraging observations from Diatreme’s site visits, and the ease of access due to several roads and tracks traversing the area.

During September 2017, 29 holes were drilled along Elim Road and a related beach access track, for a total of 606m with an average hole depth of 21m. The logged geology was reasonably consistent in defining large areas of fine grained quartz sand, but sand colour was variable, with a variety of coloured sands particularly apparent towards Elim Beach.

This is not surprising, as Elim Beach itself is known for its exposures of eroded high dune cliffs displaying “coloured sands”. Widespread, but low-grade HM mineralisation was observed in most of the roadside reconnaissance drilling. The beach access track runs alongside a broad elongate swamp, and holes drilled here encountered quartz sands with a shallow water table (~3m) and typically white sands on surface and tannin stained light brown to brown sands below water table.

Holes drilled along the central part of the Elim Road returned good thicknesses of fine grained white quartz sands from surface, and assay results support the logging with an average 99% SiO2 reported for the samples submitted for analysis.

A table of summary XRF assay results from the September 2017 drilling is presented below:

The assay results are considered highly encouraging in light of the fact they are as-drilled samples, with no sample preparation (e.g. washing, HM removal) as would typically be carried out for silica sands. Minor amounts of HM (ilmenite dominant) were observed during logging, as evidenced by the iron and titanium assay results reported.

Widespread, but low-grade HM mineralisation was observed in most of the roadside reconnaissance drilling, with a visual estimate of background HM grades averaging around 0.3% for the drilled areas.
However, some holes showed higher levels of HM in visual logging, and 60 samples were submitted for HM analysis to assess the economic potential of the observed HM.

Significant results are shown below:

The HM mineralisation observed to date confirms the presence of HM in the region and the potential of the area to host mineralisation, but is not considered to be economically significant within the area currently being explored.

During October, 26 holes were drilled along cleared access tracks over a dune complex near Nob Point, for a total of 670m with an average hole depth of 26m. The logged geology was reasonably consistent in defining large areas of fine grained quartz sand, but sand colour was variable throughout the drilled area of the dune system, suggesting a complex depositional (and erosional) history for the dune complex.

Several large zones of white, fine grained quartz sand extending over 400m in length along the dune ridges were evident from surface down to 30m depth, and although these do not form a continuous body of white sand along the entire length of the dune ridges that were drilled, they do have potential to represent a body of sand with sufficient size that may allow large scale sand extraction for commercial purposes.

A table of summary XRF assay results from the October 2017 drilling is presented below:

The assay results are considered encouraging given they are as-drilled samples, with no sample preparation (e.g. washing, HM removal) as would typically be carried out during silica sands processing.

The reconnaissance air-core drilling has allowed a general understanding of the dune geology, and returned results that confirm both the exploration potential of a significant silica sand deposit in the area, together with more localised occurrences of HM mineralisation.

Bulk samples of approximately 100kg each from six separate drill holes were submitted for preliminary metallurgical testwork to assess the potential to generate a high-quality silica sand product from the white quartz sands intersected from the October drilling program.

Technical information relating to the reconnaissance exploration program is available in the ASX announcement released 31 January 2018. Positive testwork results were announced to the ASX on 2 March 2018.

Planning for the next stage of exploration drilling in the southern EPM area is underway, with a vegetation survey partially completed in January 2018 to assess the presence of a threatened vegetation species within the NW extension of the Nob Point dunes drilled in October.

A second target area is yet to be surveyed, and given the timeline for the vegetation survey, reporting and subsequent applications for vegetation clearing, no further drilling is likely until after the tropical wet season (Q2 of 2018).

Compilation of the reconnaissance data together with a high-resolution satellite image (and related topographic data processing) that was acquired in September 2017, will facilitate detailed planning for the next stages of exploration.

During 2018, Diatreme intends to carry out regional reconnaissance drilling over accessible areas of the EPM. This proposed exploration will be subject to appropriate (cultural heritage sweeps) approvals being obtained from Hopevale Congress to proceed with exploration activity.