First Graphene Ltd. — Interim / Quarterly Report 2020

Apr 29, 2020

ASX Announcement

30 April 2020

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March Quarterly Activities Review

Progress Continues Despite COVID-19 Issues

HIGHLIGHTS

• PureGRAPH[®] manufacturing at Henderson continued safely throughout COVID-19 restrictions.

• Steel Blue executed a two-year PureGRAPH[® ] supply agreement for use in work safety boots.

• Continued positive results from mining industry field trials secures additional customers after the quarter-end.

• Nine-month inspection of bucket liner extends expected life even further.

• Development of advanced graphene materials for next generation supercapacitor.

• Continuing interface with potential customers for supply of PureGRAPH[®] for use in composite products (glass fibre and carbon fibre).

• Further strong advances in VFD development with the objective of manufacturing graphene oxide.

• Launch of advertising campaign directed at mining companies.

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Overview

First Graphene Limited (ASX:FGR) has continued to make progress in its objective of commercialising the PureGRAPH[®] range of graphene products during the March quarter, though not without some interruptions caused by the coronavirus induced lockdown.

COVID-19:

Australian operations have continued to operate mostly uninterrupted through the COVID-19 operations. The workforce has responded positively throughout and followed government social distancing advice at all times. Manufacture of PureGRAPH[®] product and support of customers has continued effectively.

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On the 18 March, the Company advised shareholders that the University of Manchester had closed all its non-essential research laboratories, including the GEIC, from 5:00pm, Tuesday 17th March. Our staff ensured all experiments were shut down safely, chemicals and raw materials were safely stored, and all confidential papers locked away.

Experimental work in the UK is on hold and our staff have provided scientific support to colleagues in Australia and customers globally, while consolidating our foundations in regulatory approval, manufacturing strategy, intellectual property and new market development. The UK team is well prepared to pick up operations and has identified the steps for immediate return to work once restrictions are lifted.

First Graphene’s key priorities on COVID-19 continue to be for the Company to play its role in limiting the spread of the virus, protecting the health and safety of its employees, delivering value for its customers and stakeholders. We are pleased to report that we have no COVID-19 related illnesses within our workforce.

We are also ensuring the Company is implementing appropriate strategies and actions to place First Graphene in the strongest possible financial position in this ever-changing environment.

In addition to its focus on the health and wellbeing of the workforce the Company implemented strategies to ensure it is in the strongest possible financial position. These strategies continue to be focused on liquidity management and include deferment of nonessential capital and cost reductions while maintaining the continuity of its production and research operations.

Entitlement Issue to Strengthen Balance Sheet

Since the close of the March quarter, the Company has announced that it is undertaking a 1 for 10 Entitlement issue to all shareholders, at a subscription price of 13¢. There will be a 1 for 1 free attaching option for each share taken up, being the same options series currently trading on the ASX (FGROC).

The Company has previously raised equity capital via placements to sophisticated investors who qualify under the s708 Corporations Law exceptions. However, while the Company still has a solid cash position, the directors have elected in this instance, to undertake an entitlement issue despite the share price having been adversely affected by the coronavirus concerns. Directors see this as the best way to make shares available at modest prices to all shareholders equally. Meanwhile, ensuring that the Company is well-funded for the continued and exciting growth curve that has only just begun. A growing business needs higher levels of working capital.

Steel Blue Supply Agreement

It was announced on 21 January, that Steel Blue had signed a two-year supply agreement whereby it would exclusively source PureGRAPH[®] for the sole in a new line of work safety boots. Steel Blue will also be looking to include PureGRAPH[®] into the Met-Guard and other areas of the boot in the future.

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This Supply Agreement followed on from First Graphene being able to successfully incorporate PureGRAPH[®] into a thermoplastic polyurethane (“TPU”). While existing TPU’s already possess high abrasion resistance and tensile strength, the incorporation of PureGRAPH[®] has improved mechanical properties whilst providing additional benefits in thermal heat transfer, chemical resistance and reduced permeability.

Continued positive results from mining industry field trials

As advised on 3 February, the newGen-provided Armour-GRAPH™ bucket liner supplied to a major iron ore producer containing PureGRAPH[®] 20 continued being trialled. The bucket liner showed no signs of advanced wear or scalloping as would normally be experienced with the liners currently used in industry after 24 weeks of use. The client has continued the trial, with a further inspection to be undertaken in another 12 weeks from that date.

The same client also installed a second ArmourGRAPH™ bucket liner at the same Pilbara mine site.

With this liner performing well we are now seeing ArmourGRAPH™ liners being installed for trials with other newGen iron ore producing clients.

The buckets were inspected in late April and the PureGRAPH[®] enhanced bucket liners remained in good operational condition. The client intends to push toward their targeted wear life of twelve months. The next inspection will be in July, at which point the liners will be replaced and returned for post operational inspection. This further demonstrates the dramatically increased wear resistance the PureGRAPH[®] range of products can provide to sacrificial wear applications.

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newGEN’s ArmourGRAPH™ bucket after twenty-four weeks in service shows no signs of advanced wear or scalloping

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Further orders have been received by newGen and ten more bucket liners are being provided to a third Pilbara iron-ore producer.

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Five of the additional ten bucket liners being provided by newGen

The range of PureGRAPH[®] enhanced wear liner products continues to expand, with items such as pipe-spools and conveyor items.

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PureGRAPH[®] enhanced conveyor pulley

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Developing Advanced Graphene Materials for Next Generation Supercapacitors

In September 2019, the Company announced the signing of a worldwide, exclusive licence agreement with the University of Manchester for the manufacture of hybridgraphene materials by electrochemical processing. Two high value product groups can be synthesised using this approach.

• Firstly, metal oxide decorated materials with high capacitance for super capacitor and electrocatalyst applications; and

• Secondly, pristine graphene products with tightly controlled oxygen levels for applications in electrical and thermal conductivity.

The manufacturing process employed builds on the Company’s existing electrochemical processing expertise which is scaled to 100 tonne per year capacity at FGR’s manufacturing site at Henderson, WA.

The licence agreement was quickly followed in October 2019 by the initiation of a UK government funded EPSRC (Engineering and Physical Sciences Council) project to transfer the technology from the University laboratories to First Graphene laboratories.

Since October, the Company has successfully transferred the technology to its laboratories in Manchester, UK and has also completed two successful pilot trials at its manufacturing facility in Henderson, WA. Specifically, the Company was able to demonstrate the following:

• Synthesis of metal oxide decorated hybrid graphenes at litre scale in FGR laboratories;

• Synthesis of pristine (zero-oxygen) graphene materials at litre scale in FGR

• laboratories;

• Manufacture of metal oxide decorated hybrid graphenes at multi-kilogram scale;

• and

• Manufacture of pristine (zero-oxygen) graphene materials at multi-kilogram scale.

The structure of the new materials has been confirmed by Raman analysis and Scanning Electron Microscopy (SEM). A typical image of metal oxide decorated graphene is shown in Fig. 1 which shows the nanostructured metal oxides on the surface of an exfoliated graphene platelet.

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Figure 1 : Metal Oxide decorated graphene surface – crystalline metal oxide nanostructures grown directly onto the graphene platelet. Considered to be an ideal structure for capacitance and catalysis.

The FGR team is testing the performance of these materials in energy storage and catalysis applications. Initial testing has shown the prototype supercapacitor devices (coin cell) can be manufactured with these materials. Additional testing is presently delayed due to restricted access to test facilities as a consequence of COVID-19 actions.

In parallel to the experimental programme, the Company has actively sought endusers for novel supercapacitor products. The need for supercapacitors with higher performance from those currently available have been validated by end-users in the aerospace, marine, electric vehicle and utility storage sectors. The Company is also seeking government funding to develop a new supply chain for game changing supercapacitor devices and have received letters of support from several key industry players.

Continued Growth in Customer Engagement

Despite the circumstances resulting from COVID-19, the Company continued to receive well-qualified enquiries in Australia during March. A number of these were from the mining services sector, which continues to be an area of focus for the Company, where PureGRAPH[®] has proven its ability to improve mechanical performance in a range of polyurethane based products.

The shutdown in Europe has slowed down customer evaluation trials across the region. However, we can report that a major European based multinational placed a 4[th] order for kilogram development quantities of PureGRAPH® products for inclusion in an early phase commercialisation programme.

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Strong Advances in VFD Development

Background Summary on Graphene Oxide

Graphene oxide (GO) is the chemically modified derivative of graphene, whereby the basal planes and edges have been functionalised with oxygen containing functional groups such as hydroxyl, epoxy and carboxyl groups. These oxygen functionalities make GO hydrophilic and therefore dispersible, forming homogenous colloidal suspensions in water and most organic solvents. This makes it ideal for use in a range of applications.

To date, the most widely used process for the synthesis of graphene oxide is the Hummer’s method. This typically requires strong acids and oxidants, such as potassium chlorate (KClO3), nitric acid (HNO3), concentrated sulphuric acid (H2SO4) and potassium permanganate (KMnO4). Much work has been done by other parties to improve the synthesis methods while maintaining high surface oxidation, but these continue to rely on the use of strong acids and oxidants.

Through its subsidiary 2D Fluidics Pty Ltd, FGR has made considerable progress in developing a more benign processing route for oxidised graphene. The objective is to provide controlled levels of surface oxygen functionality to give better compatibility in aqueous and organic systems. This will not incur the higher oxygen (and other defect) levels which result from Hummer’s method and its subsequent reduction steps. It will also provide the ability to “tune or optimise” the surface oxidation level to suit respective applications.

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Figure 2: Synthesis of graphene oxide via the chemical synthesis route vs the Vortex Fluidics Device (VFD) route

FGR’s method synthesises GO directly from bulk graphite using aqueous H2O2 as the green oxidant. Different energy sources have been used for the conversion of H2O2 molecules into more active peroxidic species, such as a combination of a pulsed Nd:YAG laser and/or other light sources. The irradiation promotes the dissociation of H2O2 into hydroxyl radicals which then leads to surface oxidation.

The technology has been successfully transferred to the FGR laboratories at the Graphene Engineering and Innovation Centre (GEIC) in Manchester where it has undergone further development and optimisation to identify, understand and resolve future upscaling issues.

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Figure 3: SEM (above left) and Raman analysis of oxidised sheets (above right). The Raman analysis shows the changes in the peak positions and increases in peak intensity ratios, confirming the synthesis of oxidised surfaces

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Figure 4: AFM height images of the oxidised graphene sheets

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XPS analysis showed the use of a pre-treatment step in combination with the near infrared laser gave oxidised graphene sheets with an average surface oxidation of ~30-35%: this will enhance compatibility with aqueous systems.

Further trials have already demonstrated the two-step process is reproducible and versatile, with the ability to process different starting materials of graphite. The multidisciplinary team has identified the control of the feed rate and energy input will allow us to control the surface oxidation, providing a consistent material that can be tailored as required for a range of applications.

Figure 5 shows that increase in surface oxygen content for two starting materials: graphite ore (top) and PureGRAPH[®] graphene (bottom). As we go through the twostage process, in both cases the surface oxygen functionality increases. The endproduct has a range of functional groups, including C-O, C=O and COOH.

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Figure 5: XPS analysis. XPS analysis shows the increase in oxidation after pre-treatment and Vortex Fluidics Device (VFD) processing. The top chart shows graphite as the starting material, the bottom chart shows PureGRAPH graphene as the starting material.

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Launch of Advertising Campaign Directed at Mining Companies

With the success being achieved in mining wear products, the Company is launching an advertising campaign directed at Australia’s mining companies. The campaign will be run on social media platforms and in mining publications.

A copy of the proposed advertisement is attached to this Quarterly Activities Review.

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About First Graphene Ltd (ASX: FGR)

First Graphene Ltd. is the leading supplier of high-performing graphene products. The company has a robust manufacturing platform based upon captive supply of high-purity raw materials and an established 100 tonne/year graphene production capacity. Commercial applications are now being progressed in composites, elastomers, fire retardancy, construction and energy storage.

First Graphene Ltd. is publicly listed in Australia (ASX:FGR) and has a primary manufacturing base in Henderson, near Perth, WA. The company is incorporated in the UK as First Graphene (UK) Ltd. and is a Tier 1 partner at the Graphene Engineering and Innovation Centre (GEIC), Manchester, UK.

PureGRAPH[®] Range of Products

PureGRAPH[®] graphene powders are available in tonnage volumes with lateral platelet sizes of 20μm, 10μm and 5μm. The products are high performing additives, characterised by their high quality and ease of use.

With authority of the board, this announcement has been authorised for release, by Peter R. Youd

Director, Chief Financial Officer and Company Secretary

For further information, please contact

Craig McGuckin Managing Director First Graphene Limited + 61 1300 660 448

Warwick Grigor Non-Executive Chairman First Graphene Limited +61 417 863187

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