Australian Silica Quartz : December 2021 Quarterly Activities and Cashflow Report

AUSTRALIAN SILICA QUARTZ GROUP LIMITED DECEMBER 2021 QUARTERLY REPORT

HIGHLIGHTS

only	SILICA PROJECTS
Albany White Hill Silica Sand Project
	 Scoping Study for exports of 0.5 - 1.0 million tonnes per annum is progressing
		with assessment of metallurgy, infrastructure requirements, approvals
		timing, and product market conditions.
	 JORC Inferred Resource 11.6Mt with >99.9% SiO2 and <50 ppm Fe203.
	 Current efforts focus on establishing the feasibility of slurry pumping the sand
use		from the deposit to the South Coast Highway for road haulage to Albany Port.
 The Silica Sand resource is within a tree farm on private freehold land with an
	exploration and mining access agreement in place and no clearing of native
		vegetation required for mining.
	Other Silica Projects
		Silica sand offtake enquiries remain strong, indications are current high
		international sea freight rates will soften in 2022.
personal	 Hardrock quartz projects in Western Australia and Queensland advancing
	with rockchip samples up to 99.99% SiO2
	R&D testwork continues with the aim of achieving a High Purity Silica product
		(>99.99% SiO2).
	JULIMAR ASQ DEVEX 50/50 JV NICKEL COPPER PGE's
	 Joint Venture partner DevEx have defined an extensive differentiated mafic-
		ultramafic intrusion by air-core (AC) drilling, extending over a strike length of
		12km located on ASQ's E70/3405, between Chalice Mining Ltd's (ASX: CHN)
		Julimar discovery to the south and Caspin Resources Ltd's (ASX: CPN)
		Yarawindah Brook Project to the north.
	 An extensive ground-based electromagnetic (EM) survey underway to test for
		massive sulphide nickel-copper-PGE(Ni-Cu-PGE) mineralization.
		Three stratigraphic diamond drill holes completed during the quarter
		demonstrate a thick and extensive sequence of differentiated mafic-
		ultramafic intrusive rocks which, together with confirmation of Fe-Ni-Cu
		sulphide mineralisation, supports the potential for the 12-kilometre intrusion
		to host significant concentrations of Ni-Cu-PGE mineralisation
For	 Assays of the diamond drill cores have confirmed several zones of low-grade
	disseminated Ni and Cu sulphide mineralisation within gabbronorite-norite
	and pyroxenite rocks

SOUTH STIRLING NICKEL COPPER PROJECT

 ASQ believes the South Stirling Nickel/Copper Project has the potential for Ni/Cu magmatic sulphide mineralisation associated with mafic-ultramafic intrusions emplaced into granulite facies country rocks.

 Land access negotiations are underway and a Program of Works approval has been received for initial aircore drilling. The Company is looking to complete this work during the current summer field season.

FINANCIAL

• Cash at bank at 31 December 2021 was $5.2m. The Company has no debt and additional assets including two unencumbered rural properties in the Bindoon area of Western Australia recently valued at $2.26m.

28 January 2022

ASX Code: ASQ

AUSTRALIAN SILICA QUARTZ GROUP LTD

ABN: 72 119 699 982

DIRECTORS:

Robert Nash

Non Executive Chairman

Luke Atkins

Non Executive Director

Neil Lithgow

Non Executive Director

Pengfei Zhao

Non Executive Director

CHIEF EXECUTIVE OFFICER AND COMPANY SECRETARY:

Sam Middlemas

Head Office:

Suite 10, 295 Rokeby Road

Subiaco WA 6008

Mail:

Suite 10, 295 Rokeby Road

Subiaco WA 6008

1. [phone]

1. [phone]

1. [e-mail]

1. www.asqg.com.au

Share Registry:

Automic Group

GPO Box 5193

Sydney NSW 2001

1. 1300 288 664 (within Australia)

1. [phone] (international)www.automicgroup.com.au

Suite 10, 295 Rokeby Road, SUBIACO WA 6008

Suite 10, 295 Rokeby Road, SUBIACO WA 6008

Phone: [phone] Fax: [phone] www.asqg.com.au

Phone: [phone] Fax: [phone] www.asqg.com.au

For personal use only

PROJECT LOCATIONS

December 2021

Figure 1: ASQ Project Locations

SILICA SAND PROJECTS - GINGIN, ALBANY AND ESPERANCE

The Gingin Silica Sand Project consists of one application exploration licence located 20km north of Perth, the Albany Silica Sand Project consists of three granted exploration licences and four application exploration licences within 10-80 km of the Port of Albany, the East Esperance Silica Sand Project consists of two granted exploration licences 15-50 km East of the Port of Esperance.

Albany White Hill Silica Sand Project

The Company has entered into an Exploration and Mining Access agreement ("Access Agreement") on a private freehold property located 70km east of Albany (See Figure 2). This property was selected following extensive desktop assessment and roadside reconnaissance over +18 months.

The Access Agreement covers an area of 189 Ha located on ASQ's 100% owned exploration licence E70/5262 and covers access for both exploration and also for mining should the project progress to development. The project area is currently used for tree farming and has been previously cleared of native vegetation.

The Company has completed a Mineral Resource Estimate totalling 11.6 Mt with >99.9% SiO2 and <50 ppm Fe2O3 and extends over a strike length of 1,650m and has a maximum width of 1,565m (ASQ (2021). Maiden High Grade, Low Iron, Silica Sand Resource. ASX Release 28 January 2021).

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Suite 10, 295 Rokeby Road, SUBIACO WA 6008 Phone: [phone] Fax: [phone] www.asqg.com.au

For personal use only

Table 1: Albany White Sand Hill Silica Sand Deposit January 2021 Inferred Mineral Resource Estimate

Size	Tonnes	Yield	Fe2O3	Al2O3	TiO2	CaO	K2O	Na2O	MgO	∑Ox.	SiO2
+LOI
Fract
Mt	(%)	ppm	ppm	ppm	ppm	ppm	ppm	ppm	%	%
Fine	8.2	70.6	46	145	410	12	16	19	10	0.07	99.93
Coarse	3.4	29.1	43	137	668	6	12	19	3	0.09	99.91

Metallurgical testwork results indicate the silica sand is readily processed by conventional washing and gravity separation to produce a very high grade silica sand product that has potential for industries such as general and specialty glass making including solar panel cover glass and optical glass. Other potential applications include foundry and filter sands, electronics component manufacturing and engineered stone manufacturing. The sand is expected to be high yielding with little waste produced (ASQ (2021). Maiden High Grade, Low Iron, Silica Sand Resource. ASX Release 28 January 2021).

A Scoping Study looking at the suitability of the deposit for development into a 0.5 - 1.0 Mtpa export operation is progressing. Preliminary assessment of metallurgy and process plant design, environmental assessment, water supply, the sand market and port access has given the Company confidence that these aspects of the project are achievable within the expected economic and regulatory constraints.

The transport of the sand 15-20km from the deposit to the South Coast Highway for road haulage into the Albany Port requires ongoing further investigation. The Company has completed a desktop scoping study looking at the options for trucking or slurry pumping the sand away from the mining operation. Slurry pumping is currently the preferred option and several routes have been identified. Discussions with the relevant landholders is underway. It is expected that preliminary engineering design on the slurry pumping operation will be completed prior to finalising the Scoping Study outcomes.

Albany White Hill

Silica Sand Project

Figure 2: Location of the Albany White Hill Silica Sand Project on E70/5262 east of Albany. ASQ South Stirling Ni-Cu Sulphide tenements shown for context. Other holder tenements not shown.

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Suite 10, 295 Rokeby Road, SUBIACO WA 6008 Phone: [phone] Fax: [phone] www.asqg.com.au

For personal use only

ASQ/URBAN RESOURCES BUSINESS VENTURE - SILICA SAND PROJECT

ASQ continues to market the two high grade silica sand products developed from the 10.7 million tonnes

• 99.8% SiO2 JORC 2012 Inferred Mineral Resource it delineated at the Bullsbrook tenement M70/326(1) (ASQ (2020). Marella Road Silica Sand Deposit Maiden Resource. ASX release 23 April 2019 & Silica Sand Testwork. ASX Release 29 January 2020). ASQ entered into a binding Heads of Agreement with Urban Resources Pty Ltd on 19 January 2019 ("HOA") to jointly exploit Urban's silica sand deposit.
  The HOA continues to be subject to a number of conditions precedent including binding offtake sales, which when satisfied will lead to a formal agreement between the parties.

The Company continues to receive a high level of enquiry for the Marella Road silica sand. The potential end users report that the sand is suitable for their operations and the ASQ pricing structure is fair, however unusually high international bulk freight rates (associated with increased global shipping demand and Covid-19 related costs) have persisted throughout 2021 and is a challenge for end users based in Asia looking to import bulk sand from Australia. It is expected that these high freight rates will ease through 2022 and put the Company in a favourable position to secure bulk export offtake commitments from customers. Sales of low volumes of washed silica sand in containers continues and provides valuable feedback and information on the silica sand market.

JULIMAR ASQ/DEVEX JOINT VENTURE - NICKEL COPPER PGE'S

ASQ and DevEx Resources Limited ("DevEx", ASX: DEV), are engaged in a joint venture, (JV) on the portion of the Sovereign magnetic complex located on ASQ's E70/3405 with DevEx earning-in to the non-bauxite rights of the tenement by an initial spend of $3m to earn a 50%. Once DevEx has earnt its initial 50% interest, ASQ may elect to contribute to further exploration to maintain its 50% interest, or opt to allow DevEx to spend an additional $3m to earn a further 20% interest with ASQ diluting (ASQ (2020). ASQ Reaches Agreement for Exploration Funding of its Tenement in Julimar Region, WA. ASX Release 1 June 2020).

E70/3405 and the Sovereign magnetic complex is located along strike from the globally significant Chalice Mining Ltd (ASX: CHN) nickel-copper-platinum group elements (Ni-Cu-PGE) Julimar discovery to the south and the Caspin Resources Ltd (ASX:CPN) Yarawindah Brook Ni-Cu-PGE project to the north (see Figure 3).

The sovereign intrusion has been outlined by aircore drilling and has a near surface strike of at least 12km in length with elevated palladium + platinum (PGE), multi-element geochemistry and petrology all consistent with the upper portions of a differentiated mafic-ultramafic intrusion, ranging from leuco- gabbro to mela-norite, gabbronorite and olivine pyroxenite (metamorphic equivalent).

These rocks are likely analogous to the western margin of Chalice Mining Limited's Gonneville Intrusion (located 40km to the south), where gabbronorite and pyroxenite rocks form the upper differentiated layer with the lower, more-Ni-Cu-PGE rich serpentinite (harzburgite) lying beneath and forming the lower layer.

DevEx completed the drilling of three stratigraphic diamond drill holes for 1,507.3m during the quarter which demonstrate a thick and extensive sequence of differentiated mafic-ultramafic intrusive rocks and with confirmation of low grade disseminated Ni-Cu sulphide mineralisation within gabbronorite-norite and pyroxenite rocks, supports the potential for the 12-kilometre intrusion to host significant concentrations of Ni-Cu-PGE mineralisation (ASQ (2021). Disseminated Ni-Cusulphides in drilling - Sovereign Project. ASX Release 10 November 2021, and Drilling Results Confirm Prospective Intrusion at Sovereign. ASX Release 23 December 2021).

1. Mining lease M70/326 is held by Stefanelli Developments Pty Ltd. An agreement between Urban and Stefanelli grants Urban the exclusive right to conduct mining on M70/326 subject to an owner royalty and options up to 30 June 2022. Negotiations are continuing to extend the agreement for an additional 5 years to 30 June 2027.

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Suite 10, 295 Rokeby Road, SUBIACO WA 6008

Phone: [phone] Fax: [phone] www.asqg.com.au

For personal use only

Caspin Resources

SOVEREIGN

Figure 3: Location of Julimar Complex Sovereign Project with existing Ni-Cu-PGE discoveries on Aeromagnetic RTP image

Figure 4: Location of three diamond drill holes 21SVDD01 (Hole 1) - 21SVDD03 (Hole 3). Local grid provided for context to Figure

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Suite 10, 295 Rokeby Road, SUBIACO WA 6008

Phone: [phone] Fax: [phone] www.asqg.com.au