Location and Tenure

The two Perenjori tenements E70/2858 (Alken) and E70/2227 (Feral) are subject to a farm-in agreement with the Devereux Syndicate, whereby Quest Minerals can earn 80% interest in each of Alken and Feral by spending $1.3M and $1.0M respectively. Quest Minerals has fulfilled its initial obligations and will continue with exploration and assessment of Perenjori as a magnetite project.

The properties are located 15 km northeast of the northern wheat-belt town of Perenjori, which lies on a mid-west railway line that feeds Geraldton Port, 235 line-kms away. This railway has recently been upgraded to carry Mt Gibson iron ore, which is loaded at a siding at Perenjori. The Karara Iron Ore Magnetite Project (Gindalbie Metals Ltd / Ansteel) is located 40km northeast of Feral prospect and is scheduled for commissioning in late 2012. Quest’s Perenjori project is well located in regard to regional infrastructure (Figure 1).

Figure 1: Perenjori Project location map

Geology

The Perenjori Project focuses on banded iron formations (BIF) within typical Archaean greenstone terrain. Multiple BIF units define a prominent V-structure conspicuously defined by high-resolution aeromagnetics (Figure 2). Detailed geological mapping (Figure 3) shows this to be a stacked duplex thrust system. Most previous drilling has focused on the eastern belt which has two prominent BIF units up to 60m in outcrop width. The eastern belt and the southern convergence of the V-structure provide the area of the initial Inferred Resource, and identifies the core BIF Zone for project scoping.

Figure 2: High-Resolution Aeromagnetics

Figure 3: Detailed Geological Mapping

Initial Inferred Resource

Resource modeling has only been applied to the parts of the eastern and western belts within Feral EL, where there is sufficient drilling to construct a geological model. The Inferred Resource was modeled by CSA Global using an IDW interpolation of a block model constrained by the best interpretable geological surfaces. A 20%Fe cut-off was applied, this being a natural geological cut-off. In the absence of direct density measurement from drill core, a conservative density of 3.2g/cc was used. Resources include the oxide and transition zone.

Domain	Mt	Fe	Al2O3	SiO2	S	P205
Western Thrust Belt	19	29.71	3.19	47.21	0.31	0.09
Eastern Thrust Belt	128	37.81	1.26	41.26	0.07	0.11
Total Inferred Resource	147	36.77	1.51	42.02	0.1	0.11
Table 2: Inferred Resource of the total Perenjori tenements

The two resource zones were estimated over 5.7 strike-km on the eastern belt and 4.1 strike-km on the western belt.

Despite the large number of holes, and closeness of the Red River drilling pattern in some places, the resource is classified only as inferred because not all of the upper and lower bounds of the BIF units have been intersected by drilling.

The 128Mt Inferred Resource of the Eastern Belt extends 6,300m (from 6748260mN to 6754560mN) and captures mostly BIFe1.

All resource statements are in accordance with JORC guidelines, and have been reported as ASX releases.

Global Exploration Target

The Inferred Resource covered only 5.7km of a 9km strike length on the key eastern belt as interpreted from detailed aeromagnetic surveys. Similarly there is 4.1km of un-drilled BIF on the western limb. Consequently Quest asked CSA Global to estimate an Exploration Target for these un-drilled segments, in accordance with JORC guidelines. In Jan 2012 CSA advised the following:

Exploration License	Category	Tonnage range (Mt)	Grade range (Fe%)
70/2227	Exploration target	300 – 340	32 - 37
70/2858	Exploration target	20 – 25	25 - 30
Total	Exploration target	320 – 360	30 - 36
Table 3: Exploration target results for Perenjori – tonnage estimates above -175RL

The Exploration Targets were estimated using the high-resolution (200m line spacing, 50m ground clearance) aeromagnetic imagery and extrapolation of the 88 RC drill holes that contributed to the previously released resource estimate. These “tonnage targets” were done prior to the detailed mapping of the individual BIF units, but are significant in that they validly imply the project has potential to host half-billion tonnes of magnetite ore.

Initial Scoping Study

In 2012 Quest commissioned Management Consultants Mining (MCM) to undertake a Preliminary Scoping Study on the Feral BIFe1 with a focus on alternative processing routes to deliver a saleable iron ore product. This study concluded that, providing densimetric beneficiation was successful, the project economics were quite robust.

The study focused on a 3.8km segment of BIF that averages 50m in width, which is ideally suited for mining because of its elevation above the surrounding plains. The study invokes an innovative approach to processing involving densimetric beneficiation, rather than the more conventional and expensive route of fine grinding and magnetic separation.

Conceptually, the plant would be sited 14km from an existing railway of sufficient standard and capacity to rail the product to Geraldton Port. The operation would be well serviced in regard to communications, airport, sealed roads and worker accommodation.

MCM estimated CAPEX and OPEX to an accuracy of ±25%, and modeled two processing scenarios of 3Mt/y and 5Mt/y. At a product value of $120/t Fe, and a conservatively low yield of 42%, the initial results are:

Tonnes throughput	6.9Mt/y	11.5Mt/y
Tonnes product	3Mt/y	5Mt/y
Potential mine life	17 years	11 years
OPEX /tonne of feed	$39.4/t	$39.4/t
CAPEX	$233M	$265M
NVP (10%)	$90M	$233M
IRR	+22%	+31%

The NPV is very sensitive to process plant yield (recovery), such that a 2% increase in yield nearly doubles the NPV for the 3Mt/y case. Overall the Initial Scoping Study has shown the project is quite positive.

Preliminary discussions with potential off-take partners, particularly in China, indicate that there is a likely market for the beneficiated product and financing.

Resource Drilling Program

Quest is planning a resource drilling program of the Core BIF zone involving systematic drill lines, each with two holes approximately 40m apart, angled to the east. One line will comprise two diamond holes 40meters apart, of HQ size (63.5mm) angled into the BIF on the one line, in order to provide core samples for metallurgical and geotechnical analysis through the oxide-transition-primary zones. Metallurgical testing is considered to be the highest priority.

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