BLACK ROCK MINING LIMITED — Capital/Financing Update 2016

Mar 21, 2016

Black Rock Mining’s Scoping Study delivers US$286m

NPV and 2 year Payback

22 March 2016

Highlights

• Independent Scoping Study returns robust conceptual economics for a 52,000tpa graphite concentrate mining operation over a 25 year mine life

• 2 year payback indicated from US$57.3M
  pre production Capex

• NPV
  of
  US$285.7m and IRR
  of
  62%

• Cash costs of US$458/t and a sales price of US$1,236/t FOB Dar es Salaam

• Board commissions Pre Feasibility Study (PFS)

Black
Rock
Mining
Limited
(ASX.BKT) (“Black
Rock
Mining”
or
“the
Company”) is pleased to announce the completion of an independent Scoping Study over the company’s flagship Mahenge Graphite Project. The Scoping Study was completed by consultant, BatteryLimits Pty Ltd, and confirms strong scoping economics for a long-­‐life, low cost graphite concentrate mining operation at the Mahenge Graphite Project.

Following the receipt of positive results from the Scoping Study, the Board has now commissioned a Pre-­‐ Feasibility Study over the Mahenge Graphite Project. The Company has also commenced more detailed metallurgical test work to continue optimising the process flowsheet and will commence a final drill programme in April to upgrade the current 131.1Mt @ 7.9% Mineral Resource and provide additional metallurgical samples.

Managing Director, Steve Tambanis commented: “The
company
is
extremely
excited
to
announce
the
results from
the
independent
scoping
study
over
the
Mahenge
Graphite
Project.
The
results
provide
further validation
of
the
Company’s
exploration
work
at
the
Mahenge
Graphite
Project
and
underpin
the
potential for
Black
Rock
Mining
to
become
a
significant
Tanzanian
Graphite
Producer.
In
particular,
we
are
excited that
the
Scoping
Study
indicates
that
a
relatively
straightforward
and
small-­‐scale
plant
of
52,000tpa
can offer
potentially
high
returns
due
to
the
high-­‐grade,
near
surface
and
coarse
flake
nature
of
the
resource.
A smaller,
relatively
simple
plant
will
require
less
capital
and
time
to
develop
and
in-­‐turn
decreases commissioning
risk.”

Chairman Stephen Copulos commented: “The
highly
positive
Scoping
Study
is
another
significant
milestone for
Black
Rock
Mining
Shareholders,
following
the
recently
announced
large-­‐scale
JORC
resource
in
February. The
large
resource
with
high-­‐grade
portions,
straightforward
metallurgy
and
coarse
flake
product
are
now further
enhanced
by
positive
Scoping
Study
economics.
The
Company
has
commenced
PFS
activities
and looks
forward
to
updating
Shareholders
over
the
coming
months
with
results.”

Cautionary
Statement: The Scoping Study referred to in this report is based on low-­‐level technical and economic assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised.

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Introduction

The Scoping Study results are summarized in Table 1, indicating potential to establish a long life and low cost mining operation for a 50,000tpa production case.

Description	Unit	50,000 tpa case
Plant throughput	Tpa	500,000
Plant recovery	%	93.0
Feed Grade	%TGC	10.5
Concentrate Production	tpa	52,000
Cash cost of production	US$/t	450
Basket Sales Price	US$/t	1,236
Mine Life	years	25
Capital cost – pre production	US$M	57
Mine strip ratio	Waste: ore	1.23:1
Discount Rate	%	10
NPV	US$M	285.7M
IRR	%	62%
Payback	years	2

Table
1.
Summary
of
key
financial
results
from
Scoping
Study

The primary objective of the scoping study was to identify the most efficient development opportunity that would yield the best return on the Company’s investment and minimise capital expenditure.

The scoping study reviewed three production scenarios: 31,000tpa, 42,000tpa and 52,000tpa. The 52,000tpa case predictably returned the best economics of the three alternatives due to scale economies and as such is the assumed production case. A larger throughput option will be reviewed as part of the next stage of economic assessment.

Scope
for
material
cost
reduction Mining costs of US$5.00/t have been assumed for both ore and waste at an ore to waste strip ratio of 1:1.23. There is significant scope to improve mining costs through optimising the strip ratio, re-­‐calculating the cost of free digging material for the top 20m of the resource, reviewing an owners’ fleet, and adjusting the cut-­‐off grade.

2

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**Capital

cost
estimate**

Capital costs have been estimated for a 500,000tpa mill feed rate. The Scoping study was completed to an accuracy of +/-­‐35% for capital and operating costs.

Item	Cost USD
Process Plant	$28,575,981
Site Infrastructure	$11,478,255
Offsite infrastructure	$104,171
Equipment and spares	$706,126
EPCM(first three line items)	$6,023,761
Contingency (four line items)	$6,129,680
Owners Costs	$4,302,642
Total	$57,320,616
Table 2. Capital Cost estimate summary.

**Operating

cost
estimate**

Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario
31000 t/y		42,000 t/y		52,000 t/y
LOM US$/y	US$/t conc.	LOM US$/y	US$/t conc.	LOM US$/y	US$/t conc.
3,861,464 6,854,931 4,961,505 3,047,001	123 219 158 97	4,963,630 7,056,100 4,961,505 4,088,370	118 168 118 97	6,574,200 7,217,384 4,961,505 5,049,204	127 139 96 97
18,724,900	598	21,069,605	501	23,802,293	458

Table
3.
Operating
Cost
estimate
summary.

Operating costs for life of mine are calculated to be US$458/t of concentrate.

3

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**JORC

Mineral
Resource**

The Scoping study utilised Black Rock Mining’s Mineral Resource Statement as announced on 29 February 2016.

The global resource is 131.1mt @
7.9%
TGC including 37.6Mt @
10.2%
TGC or 16.6Mt @
11.1%
TGC,
making the Mahenge Project resource the largest and highest grade in Tanzania or the fourth largest globally. 40% of the resource tonnes are in the Indicated Resources Category.

Prospect	Category	Tonnes (millions)	TGC (%)	Contained TGC (million tonnes)
Ulanzi	Indicated 35.0 8.3 2.9 Inferred 45.5 8.7 4.0
	Sub-total 80.5 8.5 6.9
Epanko	Indicated 17.6 6.4 1.1 Inferred 20.8 5.9 1.2
	Sub-total 38.4 6.1 2.3
Cascade	Indicated - - - Inferred 12.3 9.5 1.2
	Sub-total 12.3 9.5 1.2
COMBINE D	INDICATE D 52.5 7.7 4.0 INFERRED 78.6 8.1 6.4
	TOTAL 131.1 7.9 10.4

Tables
4a,
4b.
JORC
resource
summary
table
and
global
resource
table
by
cut-­‐off
grade.

Mahenge
Global
Resource
by
cut-­‐off
grade Indicated
and
Inferred

Mahenge Global Resource by cut-offgrade	Mahenge Global Resource by cut-offgrade	Mahenge Global Resource by cut-offgrade	Mahenge Global Resource by cut-offgrade	Mahenge Global Resource by cut-offgrade
Indicated and Inferred
	Cut-offTGC%	Mt		TGC%
	0	131.1		7.9
	1	131.1		7.9
	2	131.1		7.9
	3	131		7.9
	4	130.2		7.9
	5	124.1		8.1
	6	107.6		8.5
	7	88.3		8.9
	8	64.3		9.5
	9	37.6		10.2
	10	16.6		11.1
	11	6.6		12
	12	2.7		13
	13	0.9		14
	14	0.3		15
	15	0.1		15.9

4

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The Scoping study utilised 12.5Mt of the highest grade near-­‐surface tonnage of the 131Mt resource, described in more detail on page 6.

A final drilling programme commencing early April is planned to:

• Increase the proportion of Indicated Resources at Ulanzi by increasing drill density

• Test a high grade mineralised portion of the Ulanzi resource identified from the last drill programme

• Drill test the 1km long Cascades structure to deliver an Indicated Resource

• Provide additional metallurgical test holes

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Graph
1.
Mahenge
Global
Resource
Grade-­‐Tonnes
curve

Image
1.
3D
view
of
Ulanzi
and
Cascades
Mineral
Resources,
looking
northwards

5

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Mining

The Production Target referred to in this study is 12.5Mt of mineralisation at 10.5% TGC, utilising both Indicated and Inferred Resources, with inferred resources being scheduled from Year 2 of mining commencement. A mining schedule was developed using Whittle pit shells to optimise three mine pits and subsequent mining schedule. Mining is assumed to be through a contract miner for the Scoping Study.

500ktpa	500ktpa	500ktpa
Description	Unit	Total
Tonnesmined/processed Grade Wastemined Stripratio	tonnes TGC% tonnes tonne/tonne	12,500,000 10.50 15,375,000 1.23
Productproduced	TGCtonnes	1,220,625

Table
5.
Proposed
Life
of
Mine
production
summary
for
500ktpa
over
a
25
year
mine
life

Cautionary
Statement: The
production
target
used
in
the
scoping
Study
is
based
on
25%
Indicated
Mineral
Resources and
75%
Inferred
Mineral
Resources.
There
is
a
low
level
of
geological
confidence
associated
with
Inferred
Mineral Resources
and
there
is
no
certainty
that
further
exploration
work
will
result
in
the
determination
of
Indicated
Mineral Resources
or
that
the
production
target
or
preliminary
economic
assessment
will
be
realised.

Image
2.
Proposed
pit
shells
for
Ulanzi
and
Cascade s

6

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**Metallurgy

and
process
design**

A metallurgical test work program was developed based on four main composite samples generated from a recent drilling program. The composites were created from selected interval samples of ½ cut drill core from Epanko North fresh, and oxide, Ulanzi fresh and oxide deposits. In addition a surface high-­‐grade oxide bulk sample was received from the Ulanzi deposit to be used for the generation of bulk concentrates for marketing samples.

The preliminary flotation tests were planned with the intent to maintain the graphite flakes as coarse as possible, while achieving high recovery to concentrate. The test work is being undertaken by Bureau Veritas Minerals Laboratory (Perth) and is currently on going.

Test work was flowsheet comprising rougher flotation and three stages of cleaner flotation. The preliminary results shown in Table 6 indicate high grade >94% TGC can be produced with a high component of high-­‐grade coarse flake graphite.

Screen Size	Epanko	Fresh test T24	Epanko Fresh test T30	Epanko Fresh test T30	Epanko Oxide test T29	Epanko Oxide test T29	Ulanzi	Fresh test T28
	Mass	TGC (%)	Mass	TGC (%)	Mass	TGC (%)	Mass	TGC (%)
	%	Assay	%	Assay	%	Assay	%	Assay
+300 µm	16.5	98.2	14.1	98.9	16.0	97.3	7.0	98.0
+180 µm	37.8	98.3	35.0	98.5	33.5	96.4	34.0	98.2
+150 µm	9.4	97.3	9.0	97.8	8.7	95.4	10.1	97.8
+106 µm	13.8	97.6	13.3	97.7	13.7	95.5	15.6	98.1
+75 µm	8.7	96.5	8.9	96.4	9.5	94.8	10.8	96.6
+38 µm	7.7	89.2	8.6	85.3	9.4	92.6	11.7	86.1
-38 µm	6.2	76.7	11.1	80.8	9.3	88.0	10.7	74.6
	100.0	95.9	100.0	95.1	100.0	95.0	100.0	94.0

Table
6.
Metallurgical
test
work
results
for
Ulanzi
and
Epanko
north

In addition test work on the bulk surface sample produced similar high-­‐grade coarse flake graphite concentrates as shown in the following Table.

Screen Size	Mass	TGC(%)
	%	Assay
+500 µm	1.8	98.5
+300 µm	26.0	97.3
+180 µm	39.7	94.4
+150 µm	9.4	93.5
+106 µm	10.5	95.0
+75 µm	6.1	95.8
+25 µm	4.7	96.5
-25µm	1.7	87.6
	100.0	95.3

Table 7 .
Bulk
concentrate
results
from
Ulanzi
oxide.
First
phase
test
work

The process flow sheet has been developed based on the initial test work program. The processing plant is designed to recover graphite concentrate by froth flotation. Ore from the mine will be primary and secondary stage-­‐crushed, followed by grinding, flotation, filtering, sizing and drying and transportation to port for shipping.

7

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**Processing

Plant**

The processing plant incorporates the following unit process operations:

• ROM ore will be stage crushed in primary and secondary crushers

• Ore will be wet ground by primary rod mill for concentration by flotation

• Graphite concentrate will be recovered by flotation roughing, cleaning and scavenging stages with re-­‐grind targeting coarse graphite recovery

• Graphite concentrate will be dried, screen in to various sizes and bagged for transport

• Flotation tailings will be thickened to enhance water recovery and discharged in a constructed tailings storage facility

The process flow sheet is shown in Figure 1 .

Figure 1 .
Process
flowsheet.

8

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Infrastructure

Key infrastructure components for the project include:

• Power generation -­‐ On site diesel generators with grid power assumed to be available in year two of operation. An allowance for deferred capital to connect to the grid power has been included in the financial model

• Site accommodation -­‐ Modular prefabricated accommodation will be provided for non-­‐local employees

• Water – Water supply for the project will comprise a combination of borefield, pit dewatering, tailings return water and site run off.

• Tailings storage facility -­‐ A tailings storage facility (TSF) is included in the design with an initial capacity for 2 years with water recovered from the TSF via a tailings return decant system. The TSF will be progressively lifted from year 2

• Transport -­‐ The Mahenge project is approximately 65km by road from the nearest train line (the TAZARA Line) that runs to Dar es Salaam. For this study it is assumed that product will be trucked to Ifakara rail siding and railed to the Port of Dar es Salaam

**Summary

table
for
31,000,
42,000
&
52,000
scenarios**

Item	Unit	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario
		31,000 t/y	42,000 t/y	52,000 t/y
Mine Life Mill Feed rate Feed grade Av. concentrate production Basket price Development capital Sustaining and deferred capital Operating cost NPV IRR Discountedpayback	Years tpa %TGC tpa US$/t conc. US$M US$/t conc. US$/t conc. US$M % Years	25 300,000 10.6 31,335 1,236 47.2 8.8 598 115.6 35% 4	25 400,000 10.6 42,044 1,236 52.0 10.4 501 204.0 50% 3	25 500,000 10.5 51,925 1,236 57.3 12.2 458 285.7 62% 2

Tables 8 , 9 .
Summary
production
tables
and
cash
costs.

Item	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario	Graphite Production Scenario
	31,000 t/y		42,000 t/y		52,000 t/y
	LOM US$/y	US$/t conc.	LOM US$/y	US$/t conc.	LOM US$/y	US$/t conc.
Mining Processing and Power General and Administration Product logistics FOB	3,861,464 6,854,931 4,961,505 3,047,001	123 219 158 97	4,963,630 7,056,100 4,961,505 4,088,370	118 168 118 97	6,574,200 7,217,384 4,961,505 5,049,204	127 139 96 97
Total	18,724,900	598	21,069,605	501	23,802,293	458

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**Product

pricing**

A basket price of US$1,23 6 /t has been calculated using 2016 pricing in China by size category, adjusted for purity. Benchmark Minerals Intelligence has provided price data for the study. The flake distribution is based on a conservative flake distribution profile from metallurgical test work to date.

Graphite size andgrade	Price USD	Distribution %	US$/t FOB
+500μm -500μm+300um -300μm+180um -180μm+150um -150μm+75um -75μm	2,200 2,000 1,450 1,150 750 400	1 20 30 15 20 14	22 400 435 172.5 150 56
Basketprice		100	$1,236

Table 10 .
Graphite
pricing
assumptions
for
Basket
Price.

**Graphite

Market
Outlook**

The Company considers that it has coarse flake graphite with a significant purity advantage over conventional flake sold out of China and plans to fully test a series of concentrates for its suitability to manufacture spherical graphite. Mahenge flake concentrate is also being tested for its suitability into mainstream graphite applications.

The natural flake Graphite market is assumed to be between 500,000-­‐700,000 tpa of a 1.5Mtpa natural graphite market. The natural flake graphite market supplies industries such as refractories, steel making (recarburising), battery manufacture (anode material), lubrication and insulation. The Synthetic graphite market is much larger and provides graphite for smelter electrodes, carbon fibre and the battery market. Synthetic graphite is more expensive to produce than natural flake graphite but higher purity and there is substitution between natural flake and synthetic flake producers into the battery market.

The
Battery
Market The lithium ion battery (LiB) manufacturing business continues to grow strongly since LiBs were commercialised in the early 1990’s. LIB’s are used in all portable consumer electronics such as smart phones, tablets and laptop computers. The drive for smaller, thinner and longer lasting portable devices is driving a massive R&D programme into increasing the energy density, efficiency and longevity of LIBs. At the same time, the rapidly developing Electric Vehicle (EV) and Hybrid Electric Vehicle (HEV) market is demanding lighter batteries with increased energy density characteristics AND the ability to recharge quickly and have a >10 year life.

The Portable electronics, EV and HEV producers are both driving LiB demand and funding massive research and development initiatives. As a result, pricing of LIBs has fallen dramatically from thousands of dollars per kWh a decade ago to US$200/kwh in 2014/15, to claims by General Motors that LiB production costs are now around the US$150/kwh level and are continuing to fall. Numerous LiB battery factories are operational with a number of “mega” factories under construction in the US and Asia to the tune of >80Gwh of new annual production coming on stream over the next three years. This relentless new production will see battery prices continue to fall as manufacturing methods are scaled up. Tesla is quoted as wanting to see battery prices fall by a third for its EV programme economics – and it is happening.

Current LiB pricing is decreasing to the point where it can be economically utilised into the renewable energy power storage sector. The Holy Grail of renewable energy is to be able to store (or smooth out) intermittent power from solar, wind and tidal sources so this energy can be used when required by end-­‐users. Various mechanical and chemical storage systems have been unsuccessful. As the cost of LiBs fall, and their lifespan increases through technology improvements, a number of companies are beginning to offer home and industrial scale power storage solutions. Apart from home power storage units offered by Telsa and Mercedes Benz, Chinese and Japanese Companies advertised LiB battery storage units at the Tokyo Rechargeable Battery Conference in February 2016.

As the price of LiB decreases towards US$100/kwh, demand will continue to increase for battery storage solutions. Australia has 1.42M solar installations and in the USA solar installations are at an all time high. Solar City in the US wants to offer battery storage as an integrated package with new solar installations within 4 years. Urban electricity self-­‐sufficiency is becoming a reality due to LiB technology and pricing. As such, we consider that LiBs for electrical storage will eclipse the EV and HEV market over the next 4-­‐5 years.

10

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**Summary

and
Next
Steps**

The positive Scoping Study results are highly encouraging and validate the potential of the Mahenge Graphite project to become a long mine life, low cost operation.

• The Board has approved moving to a PFS to more accurately cost a circa 50,000tpa mine development. This is expected to take 4-­‐5 months to completion

• The metallurgical evaluation programme is continuing with the objectives of optimising flake size and purity of the Ulanzi and Epanko north lodes. Results will be regularly reported from this ongoing programme

• The final drilling programme planned for April is designed to increase the proportion in Indicated Resources, define additional high-­‐grade portions of the Ulanzi structure and to deliver an Indicated resource from Cascades, which has delivered the highest-­‐grade zones to date at Mahenge. The overall resource is expected to increase as a result of this programme with results expected during May/June

• A mining study will incorporate the new drill data to prepare an optimised pit shell and mining schedule

• Additional core and bulk samples will be taken from Ulanzi and Cascades for metallurgical test work

• The 500kg bulk sample is at its final cleaning stage and is expected to provide 80kg of flake graphite to be used for spherical graphite testing and marketing samples

• The graphite marketing programme is underway for the rest of the Calendar year with the objective of delivering offtake agreements to match proposed annual production

The Company is well funded to complete the above programmes and to commence BFS studies.

For
further
information
please
contact: Mr.
Steven
Tambanis Mr.
Gabriel
Chiappini Managing
Director Director Office:
+61
8
9320
7550 +61
8
9320
7550 Email: st@blackrockmining.com.au Email:
gabriel@blackrockmining.com.au

**About

Black
Rock
Mining**

Black
Rock
Mining
Limited
is
an
Australian
based
company
listed
on
the
Australian
Securities
Exchange.
The
Company
has
graphite tenure
in
the
Mahenge
region,
Tanzania,
a
Country
which
hosts
world-­‐class
graphite
mineralisation.
The
Company
announced
its Mahenge
JORC
compliant
resource
on
29
February
2016,
which
is
the
largest
and
highest
grade
resource
in
Tanzania
and
the
4[th] largest globally.

The
company
is
building
a
skill
and
knowledge
base
to
become
a
developer
and
diversified
holder
of
graphite
resources.

Shareholder
value
will
be
added
by:

• identifying
  and
  securing
  graphite
  projects
  with
  economic
  potential

• focussing
  on
  tenure
  with
  scale
  potential
  that
  can
  be
  commercialised
  by
  converting
  into
  a
  JORC
  compliant
  resource;
  and

• developing
  the
  resource
  into
  a
  producing
  mine

Our
current
focus
is
on
completing
technical
and
financial
studies
to
take
the
Mahenge
Project
into
production.

11

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**Competent

Person’s
Statements**

The information in this report that relates to Exploration Results and the JORC Mineral Resource (announced on 29 February 2016) is based on and fairly represents information and supporting documentation prepared by Mr Steven Tambanis (Managing Director of Black Rock Mining Limited). Mr Tambanis is a member of the Australian Institute of Mining and Metallurgy and has sufficient experience of relevance to the styles of mineralisation and types of deposits under consideration, and to the activities undertaken to qualify as Competent Persons as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Tambanis consents to the inclusion in this report of the matters based on his information in the form and context in which they appear.

The information in this report that relates to the Scoping Study and results is based on information compiled by Mr David Pass, a Competent Person who is a member of Australian Institute of Mining and Metallurgy. Mr Pass is a full time employee of BatteryLimits Pty Ltd, a specialist engineering and metallurgical consultancy and an independent consultant to Black Rock Mining Limited. Mr Pass has sufficient experience that is relevant to the style of mineralogy and type of deposit under consideration and the typical beneficiation thereof. Mr Pass consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to the Scoping Study and results is based on information compiled by Mr Phillip Hearse, a Competent Person who is a Fellow of Australian Institute of Mining and Metallurgy. Mr Hearse is a full time employee of BatteryLimits Pty Ltd, a specialist engineering and metallurgical consultancy and an independent consultant to Black Rock Mining Limited. Mr Hearse has sufficient experience that is relevant to the style of mineralogy and type of deposit under consideration and the typical beneficiation thereof. Mr Hearse consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to the mine schedule and optimisation is based on information compiled by Mr Roselt Croeser, a Competent Person who is a Member of the Australian Institute of Mining and Metallurgy. Mr Croeser is a mining engineer and an independent consultant to Black Rock Mining Limited. Mr Croeser has sufficient experience that is relevant to the style of mineralogy and type of deposit under consideration and the mining thereof. Mr Croeser consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

12