Variscan Mines : Quarterly Activities and Cash Flow Reports

Quarterly Report - March 2022

ASX Code: VAR

ACN: 003 254 395

Issued Shares: 267m

Unlisted Options: 19.5m

VARISCAN EXPANDS HIGH-GRADE ZINC MINERALISATION AT SAN JOSE MINE DURING MARCH

Performance Rights: 2.5m

QUARTER

At 31 March 2022

Cash Balance: $3.0M

HIGHLIGHTS

Directors

• • Phase 2 drilling has expanded new zones of high-grade zinc mineralization in the Central Zone of the San Jose Mine

Dr Foo Fatt Kah Stewart Dickson Michael Moore

168 Trend

Mr Nicholas Farr-Jones AM

• • Discovery of upper level to 168 Trend with unexploited high-grade zinc mineralization

  Company Secretary

• • Upper level vertically enlarges 168 Trend with further potential extensions above and below

  Mark Pitts

• • Future drilling expected link-up 168 Trend with adjacent highly mineralized lenses

Top Shareholders Citicorp Nominees Slipstream Resources Delphi

Los Caracoles Trend

• • Southerly extension of Los Caracoles Trend defined below the main gallery level

• • Lower lenses now confirmed to run the whole length of known Caracoles Trend of +300m; representing 2x enlargement since initial discovery

  FELDI Limited SL Hisbanibal Lightning Jack Pty Ltd Effective Investments Pty Ltd

• • Strong prospectivity for further extensions of stacked lenses above and below main gallery level

Drilling Programme Update

Top 20 Shareholders: 58.9%

Further assay results from underground diamond drilling are pending; encouraging zinc mineralization observed

Buenahora Expoloration License

3 year extension of the license has been granted by the Government of Cantabria, northern Spain

Head Office

Variscan Mines Limited

Suite 8, 7 The Esplanade Mount Pleasant WA 6153

T [phone] [e-mail]

www.variscan.com.au

Variscan Mines Limited ("Variscan" or the "Company" or the "Group") (ASX:VAR) is pleased to provide its Appendix 5B for the quarter ended March 31 2022 along with the following operational update.

OPERATIONS

SPAIN - NOVALES-UDIAS ZINC PROJECT

Strategy

Variscan has a clear strategy to execute the 2-fold opportunity that the Novales-Udias project presents:

• 1. Quantify near term zinc production opportunities at the San Jose-Novales Mine

• 2. Define a regionally significant mineral resource similar in size and grade to the former producing and proximal Reocín Mine

Figure 1. Novales-Udias Project proximal to Reocín Mine

During the quarter, the Company continued to receive strong assay results from the Phase 2 underground diamond drilling programme at its San Jose Mine located in Cantabria, northern Spain.

Expansion of high-grade zinc mineralization at San Jose Mine

On 15 March 2022, Variscan announced that Phase 2 drilling has uncovered new zones of high-grade zinc mineralisation expanding the Central Zone of the San Jose Mine.

The highlights of these discoveries include:

168 Trend

• • Discovery of upper level to 168 Trend with unexploited high-grade zinc mineralization:

o	DDH NOVDDT012:	4.4m @ 22.7% Zn
o	DDH NOVDDT011:	6.0m @ 10.2% Zn
o	DDH NOVDDT007:	4.0m @ 13.9% Zn
o	DDH NOVDDT013:	4.0m @ 6.8% Zn
o	DDH NOVDDT002:	2.0m @ 15.42% Zn

Los Caracoles Trend

• • Southerly extension of Los Caracoles Trend defined below the main gallery level:

o	DDH NOVDD093:	11.0m @ 4.9% Zn
o	DDH NOVDD095:	3.0m @ 6.1% Zn
o	DDH NOVDD095:	5.0m @ 2.4% Zn

The Phase 2 diamond drilling programme, with over approximately 2,300m now completed, has achieved its primary objective of expanding the footprint of Zn-Pb mineralisation within the San Jose Mine.

The previously un-tested 168 Trend is an area of significant high-grade mineralisation; now enhanced by the discovery of an upper level with unexploited high-grade zinc mineralization. For further details, see the ASX announcement dated 15 March 2022.

Securing of 3-year extension for the Buehahora Exploration License

During the quarter, the Company also announced that the Consejería De Industria, Turismo, Innovación, Transporte y Comercio - del Gobierno de Cantabria (the Government of Cantabria, in northern Spain) has approved a 3 year extension of the Buenahora Exploration License, within the Novales-Udias Project in northern Spain.

Securing the renewal of the license is an important milestone in the Company's efforts to explore and develop its Spanish zinc assets.

The Buenahora Exploration License is also further validation of the benefits of the close engagement that Variscan has undertaken with local authorities to secure the municipal approvals needed before drilling can commence. Following the award of final permits, the Company is preparing for surface drilling of this highly prospective license area, which was previously controlled by Asturiana de Zinc (Xstrata-Glencore) until 2003.

The surface drilling will test regional targets across the Buenahora Exploration License. For further details, see the ASX announcement dated 1 March 2022.

Next Steps

The Company's 2022 exploration program on the Novales-Udias Project is advancing. To date, it has been led by the Phase 2 underground drilling at the San Jose Mine.

Follow-on activities and deliverables include:

• • Underground drilling of step-out targets in historic near-surface mines

• • Returning assay results as soon as possible for market reporting

• • Reporting the results of the geophysical survey of the Buenahora license area

• • Delivery of pending municipal approvals to undertake surface drilling covering the Buenahora license area

• • In support of the above activities, the delivery of associated environmental, social and governance ("ESG") initiatives

Project Summary

The Novales-Udias Project is located in the Basque-Cantabrian Basin, some 30km southwest from the regional capital, Santander. The project is centred around the former producing San Jose underground mine with a large surrounding area of exploration opportunities for a number of satellite deposits based on underground and surface workings, our substantial database of some 88,000m of historic drilling and multiple areas of zinc anomalism identified from recent and historic geochemical surveys. Variscan has defined the NE-SW Novales Trend over 9km with a parallel mineralised trend over at least 3km of strike.

Novales-Udias Project Highlights

• • Near term zinc production opportunity (subject to positive exploratory work)

• • Large tenement holding of 68.3 km2 (including several granted mining tenements)

• • Regional exploration potential for another discovery analogous to Reocin (total past production and remaining resource 62Mt @ 8.7% Zn and 1.0% Pb1,2)

• • Novales Mine is within trucking distance (~ 80km) of the Asturias zinc smelter

• • Classic MVT carbonate hosted Zn-Pb deposits

• • Historic production of high-grade zinc; average grade reported as ~7% Zn3

• • Simple mineralogy of sphalerite - galena - calamine

• • Ore is strata-bound, epigenetic, lenticular and sub-horizontal

• • Reported historic production of super high grade 'bolsas' (ore bags) commonly 10-20% Zn and in some instances +30% Zn4

• • Assay results of recent targeted grab samples taken from within the underground Novales Mine recorded 31.83% Zn and 62.3% Pb5

• • Access and infrastructure all in place

• • Local community and government support due to historic mining activity

SPAIN - GUARAJAZ ZINC-RICH POLYMETALLIC PROJECT

The Guajaraz Project is a prospective brown-field zinc-rich polymetallic opportunity with known mineral occurrences.

1 Velasco, F., Herrero, J.M., Yusta, I., Alonso, J.A., Seebold, I. and Leach, D., 2003 - Geology and Geochemistry of the Reocin Zinc-Lead Deposit, Basque-Cantabrian Basin, Northern Spain: in Econ. Geol. v.98, pp. 1371-1396.

2 Cautionary Statement: references in this announcement to the publicly quoted resource tonnes and grade of the Project are historical and foreign in nature and not reported in accordance with the JORC Code 2012, or the categories of mineralisation as defined in the JORC Code 2012. A competent person has not completed sufficient work to classify the resource estimate as mineral resources or ore reserves in accordance with the JORC Code 2012. It is uncertain that following evaluation and/or further exploration work that the foreign/historic resource estimates of mineralisation will be able to be reported as mineral resources or ore reserves in accordance with the JORC Code 2012.

3 Anecdotal evidence from original Novales miners interviewed during the WAI Due Diligence supported with historical production data from the School of Mines in Torrelavega historical archives.

4 Anecdotal evidence from original Novales miners interviewed during the WAI Due Diligence supported with historical production data from the School of Mines in Torrelavega historical archives.

5 Refer to ASX Announcement of 19 December 2019

The project is located in the highly mineralised Central Zone of the Iberian Massif, which ranks as one of the most mineralised geological units globally and represents the internal zone of the prolific European Variscan Orogenic belt.

An application for a 3-year extension of the current exploration licence over the Guarajaz tenement area has been with the authorities in Castilla-La Mancha. Under Spanish regulations the licence remains valid during the extension application process

CHILE - ROSARIO COPPER PROJECT

The Rosario Project is located approximately 120 kilometres by road east of the port city of Chanaral in the Atacama Region of northern Chile. Chile is a proven mining jurisdiction and is the largest producer of copper globally. The Rosario project lies about 20 kilometres north of the El Salvador mine (owned by Codelco). It is one of the country's larger copper operations, within a region of dense mining activity (all scales) and good copper endowment.

The Rosario project comprises three granted exploitation concessions, Rosario 6, Rosario 7 and Salvadora, one granted mineral exploration licence (Abandonara) and an exploration concession under application (Rosario 101). These concessions cover two outcropping copper trends (Zones A and B) over a combined strike length of approximately 6 kilometres.

No significant activities were conducted on the Rosario Copper project during the quarter.

AUSTRALIA

The Company continues to hold minority interests in a number of areas of eastern and central Australia. No specific activities were undertaken by the Company in these areas during the quarter.

FINANCIAL & CORPORATE

CASH

Cash at bank at the end of the quarter was $3.01 million.

SUMMARY OF EXPENDITURE ON EXPLORATION ACTIVITIES

For the quarter, the Group spent $470,000 on exploration activities, substantively all of which related to the Group's Spanish zinc projects. These exploration activities related to:

• • Underground drilling programme;

• • Technical consulting fees;

• • Tenement administration, reporting and management; and

• • Directly-attributable corporate overheads and administration costs.

In accordance with ASX Listing Rule 5.3.2, the Company advises that no Mining Development or Production activities were conducted during the quarter.

SHARE CAPITAL

The total number of shares on issue at the end of the quarter was 266,732,024.