EQ Resources : Quarterly Activities and Cash Flow Report December 2021

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EQ Resources Limited

Quarterly Activities Report

Quarter ended 31 December 2021

EQ Resources Limited is the 100% owner of the Mt Carbine Tungsten Mine near Cairns, Australia's only primary producer of tungsten, a critical metal. Production recommenced in 2020 with dual product streams of tungsten concentrate and by-producthigh-quality specialised aggregate and road-making materials.

HIGHLIGHTS

MT CARBINE OPERATIONS

• Positive results from EQR's Bankable Feasibility Study for the Mt Carbine Expansion Project, which is predicted to produce operational pre-tax cash flow of $38 million and $95 million in years 3 and 4 respectively, with an NPV of $131.5 million and an IRR of 154%.
• Moved to double its high-techX-rayOre-sorting (XRT) capacity with the acquisition of a second TOMRA XRT Sorter.
• Continued to develop its 'green aggregates' business which turns waste rock into vital construction materials for Far North Queensland.
• Completed the commissioning of the upgraded power line at the Mt Carbine site during December 2021 allowing the XRT Sorter to operate on a 24-hour basis which resulted in the Company achieving additional monthly production.
• Record tungsten concentrate production achieved from its rejuvenated Mt Carbine mine.

EXPLORATION

• Entered into a binding Farm-In and Joint Venture Agreement with Sozo Resources Pty Ltd whereby Sozo can earn up to an 80% interest in EQR's Panama Hat and Crow Mountain Projects (EL6648 & EL8024) by completing expenditure of A$1.6M over 4 years
• A regional program of mapping, rock chip sampling and ground magnetics have been completed on the Mt Carbine Mining Leases and surrounding EPMs. The results of these programs are in the process of being analysed and will inform the next work program for this area.

EQ RESOURCES LIMITED ABN 77 115 009 106 (ASX: EQR)

REGISTERED OFFICE: Office 06-110, Level 6 25 King Street, Bowen Hills Queensland 4006

PRINCIPAL PLACE OF BUSINESS: 6888 Mulligan Highway, Mt Carbine Qld 4871

POSTAL ADDRESS: PO Box 1496, Mareeba Qld 4880

T: [phone] F: [phone] W: eqresources.com.au

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MT CARBINE OPERATIONS

MT CARBINE BFS DELIVERS POSITIVE RESULTS

In December 2021, EQR announced positive results from its Bankable Feasibility Study ("BFS") for the Mt Carbine Expansion Project ("Project"), which focused on the open pit development with high-grade ore from the Company's 100%-owned Andy White Open Pit and supplemented with the processing of the 12 million tonne Low-Grade Stockpile ("LGS") which is a 50:50 joint venture with global metals group Cronimet.

The BFS contemplates a 12-year operation with the focus on production from its high-grade open pit ore being processed in years 3 and 4 where it is expected to produce operational pre-tax cash flow of $38 million and $95 million respectively. The Project delivers impressive economics including an NPV of $131.5 million and an IRR of 154%.

The Open Pit BFS only utilises approximately 15.5% of the Mt Carbine In-Situ Mineral Resource covered in the production forecast and provides significant underground potential. The BFS outlines a phased investment approach. Phase 1 and Phase 2 will allow the Company to restart the open pit and to generate positive cash flow without over-capitalising the Project, in advance of Phase 3 which plans to expand the pit and rehabilitate underground workings.

The Project comprises the low-cost expansion of existing crushing, screening and XRT Sorting operations, as well as further expanding the existing processing plant.

A potential expanded Ore Reserve from the open pit, as well as conceptual design and costing for an underground mining operation (Phase 3) will be developed in a separate Scoping Study that the Company will be preparing throughout the first quarter of 2022.

The Company has set out a clear pathway for a work program aiming to convert more of its resource into the reserve category as well as expanding the overall Mineral Resource through additional drilling commencing in early 2022.

The BFS had been prepared by independent Lead Study Manager, JukesTodd Pty Ltd. The full BFS is available on the Company's website.

HIGH-TECH ORE SORTING CAPACITY TO BE DOUBLED

In October 2021, the Company announced the doubling of its XRT Sorter capacity through the acquisition of a second TOMRA XRT Sorter.

The installation and commissioning of the first XRT Sorter was a game changer for the Company throughout the pilot studies conducted. The XRT Sorter expansion is a key element for the overall production expansion from the Low-Grade Stockpile. EQR's strong relationship with TOMRA led to this opportunity to mobilise an additional unit for EQR, where TOMRA will ensure that the machine is equipped with TOMRA's latest technology features.

The unit comes as part of a fully operational system including all electrical and utility supply units. The 'COM Tertiary XRT' type machine was operational at another site in Queensland and will undergo reassembly and installation at Mt Carbine during early 2022. The second unit will work in tandem with EQR's ongoing sorting operations with the installation designed to minimise production disruptions.

QUARRY DELIVERIES CONTINUED FROM REPURPOSED MINE WASTE

EQR continued to develop its 'green aggregates' business which turns waste rock into vital construction materials for Far North Queensland.

Quarterly Activities Report Quarter ended 31 December 2021

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The December 2021 quarter is one of the busiest periods for the Quarry as developers and contractors aim to complete projects before the start of the annual wet season. In the first months of this financial year (until end of November 2021) the Quarry booked sales above $1 million (including GST) and had approximately $400,000 (including GST) of awarded contracts to be fulfilled in early 2022.

The Mt Carbine Quarry operations repurposes various materials from historic stockpiles and waste rock from the Company's tungsten operations, first mined more than 100 years ago. EQR continues to develop its quarry business using a multitude of by-product materials and is tendering on regional as well as export-oriented projects.

The largest tender awarded to the Quarry this financial year has been the Newell Beach Boat Ramp Project, north of Port Douglas, which has received 7,500 tonnes of various repurposed products. Demand for Mt Carbine rock and aggregate is being driven by increased regional infrastructure investment by the government.

While EQR is aiming for a leadership role in the sustainable development of critical minerals projects, we are continuously looking at non-conventional waste treatment options. The Quarry provides a complementary revenue stream to the Company's primary product being tungsten concentrate. Additional revenue drives down unit costs and helps Mt Carbine build a mine for the future. EQR's ambition is to build a mine with low impact and maximum use of mined materials, a truly circular enterprise.

UPGRADED POWER LINE COMMISSIONED, LEADING TO RECORD PRODUCTION

In December 2021, EQR completed commissioning of the upgraded power line at the Mt Carbine site. The upgrade allowed the XRT Sorter to operate on a 24-hour basis and led the Company to achieve a new monthly production record of tungsten concentrate from its rejuvenated Mt Carbine mine. A successful debottlenecking strategy and Early Works investment targeting the crushing, screening and XRT Sorting capacity contributed to the production of a record >40 tonnes of 50% WO3 concentrate in December 2021, showing the positive impact of the continuous improvements at Mt Carbine.

Upgrade works on the power line at site were supplemented with further investment in modern earth moving equipment, followed by additional high-volume screening equipment from Sandvik and larger-size conveying systems for expanded production volumes. The completed power upgrade will allow 24/7 operation of all major processing circuits being the crushing, screening, XRT Sorting and gravity separation plant. Installation of various component upgrades are also ongoing and directly contributing to the increased production rates seen in December 2021.

Mt Carbine is ramping up production into a firm market for tungsten concentrates and a strong, stable price for the major end product APT, currently around US$325/MTU, compared with US$230/MTU a year ago.

EQR is expanding its production and team at Mt Carbine as it creates a sustainable mine for the future.

EQR is expecting production to be reduced in the coming quarter while it ties in key pieces of equipment to the existing plant during the wet season but with the Early Works being completed in the coming weeks, the Company will be on target with an anticipated production upgrade of +/-90 tonnes of concentrate per month.

SAFETY PERFORMANCE AT MT CARBINE

Safety at Mt Carbine continues to improve during the quarter with no lost time incidents. Several employees were trained and upskilled on various aspects of the operation both formally and informally. The Company continues to track both lead and lag safety indicators for its safety performance and to understand safety trends around the Mt Carbine site. The Company continues to engage with mining safety consultants, Impress Solutions Pty Ltd, on an ad hoc basis and is receiving support where required in HSE training preparation.

Quarterly Activities Report Quarter ended 31 December 2021

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ENVIRONMETAL ACTIVITIES AT MT CARBINE

During the quarter several shallow monitoring bores were installed on the Mt Carbine Mining Leases to collect data during the wet season for the open pit expansion project. Rehabilitation trials have also been commissioned with the Company's environment consultants, NRA. Ongoing monitoring of surface water, ground water, dust and noise as well as biological sampling continue.

EXPLORATION ACTIVITIES

BINDING FARM-IN AND JOINT VENTURE AGREEMENT WITH SOZO RESOURCES PTY LTD

In November 2021, EQR entered into a binding Farm-In and Joint Venture Agreement (the "Agreement") with Sozo Resources Pty Ltd ("Sozo") whereby Sozo can earn up to an 80% interest in EQR's Panama Hat and Crow Mountain Projects (EL's 6648 and 8024) by completing expenditure of A$1.6M over 4 years.

Sozo is a privately owned mineral exploration company focused on the discovery of economic copper, gold, and nickel deposits within Eastern Australia.

Panama Hat is located approximately 25km southeast of Broken Hill in New South Wales and comprises the historical Huonville Gold Field which lies within the Proterozoic Broken Hill Block which is recognised as one of the richest metallogenic regions in the world.

Crow Mountain is located approximately 30km southeast of Barraba in northern New South Wales and covers a significant strike length of the crustal scale, gold endowed Peel Fault, a potential analogue of the Mother Lode system in California, USA.

Introducing a farm-in partner allows the Company to solely focus on its 100%-owned Mt Carbine Tungsten Mine.

Key Terms of the Farm-In and Joint Venture Agreement between EQR and Sozo Resources Pty Ltd can be found in the ASX release here.

MT HOLMES

A regional program of mapping and rock chip sampling located 14 quartz veins up to 8m in width and strikes from 200-1,200m in length. It is interesting that these veins are orientated in the same direction as the mineralisation at Mt Carbine albeit more than 20km away. Several of these veins showed visible tin and old workings with reconnaissance sampling commenced via the collection of 82 rock chip samples. The samples have been submitted for assay and will determine the next work program for this area.

MT CARBINE MINING & EPM'S

An intense program of ground geophysics was completed with a line spacing of 25m and readings at 2m intervals along the lines. This close spaced ground magnetics was designed to help understand the structures of the Mt Carbine geology and to define regional targets for exploration. In all, the program totalled 342-line kilometres that covered the blue boundary shown on the brownfields map below.

Quarterly Activities Report Quarter ended 31 December 2021

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The Company is reviewing the magnetics to identify targets for ongoing drill testing. This will be combined with detailed soil geochemistry that is currently underway and will cover the same area as the geophysics. To date more than 2,200 soil samples have been collected during this quarter from the 3,500-sample program.

TENEMENT INTERESTS

In accordance with ASX Listing Rule 5.3.3, the following table is submitted with respect to tenements held by the Company and its controlled entities:

Location	Holding Entity	Area	Expiry Date
Queensland, Australia
ML 4867	Mt Carbine Quarries Pty Ltd	385.5 ha	31/07/2022
ML 4919	Mt Carbine Quarries Pty Ltd	7.891 ha	31/08/2023
EPM 14871	Company	10 sub-blocks	12/12/2025
EPM 14872	Company	21 sub-blocks	11/12/2025
EPM 27394	Company	4 sub-blocks	01/06/2025
New South Wales, Australia
EL 6648	Company	9 Units	19/10/20201)
EL 8024	Company	19 Units	29/11/2024

ML = Mining Lease; EPM = Exploration Permit for Minerals (Qld); EL = Exploration Licence (NSW)

1) Renewal application submitted and acknowledgement letter dated 19 October 2020 has been received from Regional NSW - Mining, Exploration and Geoscience (Division).

Quarterly Activities Report Quarter ended 31 December 2021

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