GREENWING RESOURCES LTD — Capital/Financing Update 2016

Aug 18, 2016

Supplementary Prospectus

Bass Metals Limited

ACN 109 933 995

ASX Code: BSM

1 IMPORTANT INFORMATION

This is a supplementary prospectus (Supplementary Prospectus) intended to be read with the prospectus dated 12 July 2016 (Prospectus) issued by Bass Metals Limited (ACN 109 933 995) (Company).

This Supplementary Prospectus dated 19 August 2016 was lodged with the Australian Securities and Investments Commission (ASIC) on that date. ASIC and its officers take no responsibility for the contents of this Supplementary Prospectus.

Other than as set out below, all details in relation to the Prospectus remain unchanged. Terms and abbreviations defined in the Prospectus have the same meaning in this Supplementary Prospectus. If there is a conflict between the Prospectus and this Supplementary Prospectus, this Supplementary Prospectus will prevail.

For the avoidance of doubt, references to 'section' in this Supplementary Prospectus mean references to that section of the Prospectus, unless otherwise stated.

This Supplementary Prospectus will be issued with the Prospectus as an electronic prospectus and may be accessed at www.asx.com.au.

This is an important document and should be read in its entirety. Please consult your legal, financial or other professional adviser if you do not fully understand the contents.

2 REASONS FOR THE SUPPLEMENTARY PROSPECTUS

2.1 Purpose of this document

Following discussions with ASIC, the Company has agreed to provide additional clarifying disclosures in this Supplementary Prospectus in relation to the Company's existing assets, tenure of the Graphmada Graphite Mine, the Company's business model and an extract of the audited accounts of Stratmin pertaining to Graphmada Mauritius and its subsidiaries. These disclosures should be read in light of the general disclosures, including risk factors contained in the Prospectus.

2.2 No investor action required

As the content of this Supplementary Prospectus is not considered to be materially adverse to investors:

• (a) Applications for New Shares under the Retail Entitlement Offer and/or Shortfall Offer must be made using the Entitlement and Acceptance Form attached to or accompanying the Prospectus (see the Entitlement and Acceptance Form and section 7 of the Prospectus for detailed instructions on how to complete the Entitlement and Acceptance Form and return by the Closing Date); and
• (b) Applicants who have already subscribed for New Shares under the Prospectus to the date of this Supplementary Prospectus do not need to take any action.

3 ADDITIONAL DISCLOSURES

3.1 Company's existing assets

In addition to the 6.25% interest the Company currently holds in the issued capital of Graphmada Mauritius which owns the Graphmada Graphite Mine, the Company's assets comprise the following mining tenements located in Tasmania which are considered prospective for zinc, lead and silver:

Tenement	Interest
EL48/2003 Mt Block	100%
CML103M/1987 Hellyer Mine Lease	100%*
Que River Project
CML68M/1984 Que River Mine Lease (QRML)	100%
ML 10W/1980 Access Easement to QRML	100%

*The Hellyer Mine Lease CML103M/1987 is owned by HMO a 100% subsidiary of Ivy Resources Limited. The Company has a 100% interest in all of the existing base metal resources and base metal exploration rights through a sublease agreement.

The Company's interest in RL11/1997 Mt Charter was relinquished in the quarter ended 30 June 2016. The Company was unsuccessful in its bid to secure this tenure under a competitive tender process in March/April 2016.

The Company's Que River assets and other Tasmanian assets listed above are on care and maintenance due to current market conditions. The assets have total annual costs of approximately \$400,000, including a commitment of \$180,000 for Mt Block relating to the annual renewal and 2017 exploration activity plan. Such expenses are included in the Company's proposed use of funds as detailed in section 5 of the Prospectus as a portion of the amount allocated as "general working capital".

The Company recently renewed its annual license for EL 48/2003 (Mt Block) and paid approximately \$15,000 in consulting and renewal costs to secure this license for a further term. As part of the renewal of EL 48/2003, the Company has submitted to the Department of State Growth, Tasmania that it proposes to undertake the following additional work during 2016/2017:

• (a) a diamond hole drill program proposed to test the Amoeba Zone west of the Que River mineralisation; and
• (b) further testing of the soil geochemical anomaly associated with the silicasericite alternation of the Que River- Hellyer volcanics.

The Company's entire Tasmanian tenement package has demonstrated high value VHMS mineralisation and remains prospective for this style of mineralisation.

There are several untested anomalies on EL 48/2003 and the Company is committed to fully investigating this potential. The projected cost to manage this program is estimated to be at least \$180,000.

For the 2016/2017 year, the Company intends to actively manage the care and maintenance of its Hellyer Mine Lease (CML 103M/1987) and the Que River Mine Lease (CML 68M/1984) and undertake ongoing random geological surveys and assessments as required to expand the Company's knowledge of these extensive licenses. The Company has and will continue to engage three part time consultants to manage these projects and processes.

Ongoing work schedule for the next 12 months may include and not be limited to:

• (a) ongoing water testing and quality management;
• (b) regular and monthly environmental management of the site with monthly reports produced to Senior Management;
• (c) general field work and management of the Company's existing inventory of data;
• (d) management of historical core and drill samples and liaison with the relevant government authorities to ensure continuity and security of this data.
• (e) ongoing assessment and regular management of expressions of interest that may, from time to time, be received to assist the Company in the further economic development of this site;

The Company will continue to meet expenditure commitments in relation to its Tasmanian assets and is looking at various ways to maximise shareholder value, including through further exploration if market conditions allow. Whilst the Company will consider any offers on their merits, it has no present intention of disposing of its Tasmanian assets.

3.2 Tenure of the Graphmada Graphite Mine

Graphmada Mauritius (which is being acquired by the Company) owns all of the issued shares in Graphmada SARL, an entity incorporated in Madagascar (together, the Graphmada Group). Graphmada SARL is the registered holder of three mining permits, permit numbers PE 25600 (Loharano), 26670 (Mahefedok) and 24730 (Antsirabe) (Permits). PE 25600 and PE 26670 authorise Graphmada SARL's current primary mining operations and expire in 2047 and 2048 respectively.

In addition, in December 2015, Graphmada Group initiated a process with the Ministry of Mines in Madagascar to extend the Loharano permit area. The process is pending. The Company believes the process will be granted as all preconditions have been met, however the Ministry has suspended granting any approvals until the new mining code is implemented in early 2017. As a result, there is no guarantee the process will be granted in a timely fashion or at all, and investors are urged to read section 6(g) of the Prospectus in full. Graphmada Mauritius' current mining operations will not be affected if the process is not granted, and the Company's prospects and immediate intentions to increase production are not dependent on any additional area being secured for mining.

	Graphmada Group's permitting details and tenure
Permit Number	No. Squares	Square sizes	Granted Date	Expiry Date	WGS84 UTM39s Easting	WGS84 UTM39s Northing
PE 26670	32	625m	21/01/08	20/01/48	286,965.92E	7,905,786.82N
Mahefedok		x 625m			289,464.72E	7,905,850.73N
					289,592.65E	7,900,853.24N
					287,093.88E	7,900,789.19N
PE 25600	16	625m	27/09/07	26/09/47	289,400.86E	7,908,349.51N
Loharano		x 625m			291,899.60E	7,908,413.33N
					291,963.45E	7,905,914.62N
					289,464.72E	7,905,850.73N
PE 24730	16	625m	18/01/07	17/01/47	286,902.04E	7,908,285.67N
Antsirabe1		x 625m			289,400.86E	7,908,349.51N
					289,464.72E	7,905,850.73N
					286,965.92E	7,905,786.82N

Graphmada Group's permitting details and tenure are set out in the table below and the map shown further below:

Figure 1: Graphmada Group's permitting details.

¹ PE 24730 is not material to Graphmada Group's primary mining operations.

Figure 2: Graphmada Group's Loharano and Mahefadok permits

Furthermore, and consistent with its aspiration of increasing production from Graphmada Group's ground, the Company intends to apply for additional tenure in the future.

The Company has obtained a legal opinion from John W Ffooks & Co on the legal status of the Permits. The legal opinion is included in full at Schedule 1 of this Prospectus.

3.3 Business model

Following completion of the acquisition of the remaining 93.75% of the issued capital of Graphmada Mauritius, the Company will own the Graphmada Graphite Mine in Madagascar. The mine has been highly developed by Stratmin and others, and has been significantly de-risked with a historic sunk cost of more than \$16 million to date.

Details of Graphmada Mauritius' operations, mineral resources and exploration at Loharano and Mahefadok projects were released to ASX on 2 September 2015 in an announcement titled, "Strategic investment in producing graphite asset" (Announcement) ². The Announcement has been lodged with ASIC under section 712 of the Corporations Act. A copy of the Announcement may be obtained from the Company free of charge to anyone who asks for it during the application period of the Prospectus.

Further information on the Loharano project is included at Schedule 2 in an independent technical report on the Loharano Graphite Mine project by Creo Design Pty Ltd (2012) (Independent Technical Report). The Independent Technical Report was prepared under the JORC Code 2004. The estimates in the Independent Technical Report have not been updated to JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

The information in the Independent Technical Report that relates to Mineral Resources and exploration results is based on information compiled by Johan Hattingh a Competent Person who is a member of a 'Recognised Professional Organisation' (RPO) included in a list promulgated by ASX from time to time. Mr Hattingh has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and consents to the inclusion of the information in the Independent Technical Report in the form and context in which it appears.

The graphite at Graphmada is hosted in both weathered regolith and underlying graphitic gneiss, with the grade of graphitic carbon increasing with depth. All mining to date has been very shallow and low cost, with the mining horizon from 1.5m below surface to a depth of 6-8m, depending on the topography, which is undulating.

² http://www.asx.com.au/asxpdf/20150902/pdf/4311myw8v0ddyz.pdf

However, the graphite bearing regolith is known to go to depths of >30 metres, to the underlying hard rock mineralisation.

Recent mining is from the Loharano deposit, with the Mahefedok deposit undergoing trial mining. The mineral resource at Loharano previously reported in the Announcement is set out below. This mineral resource represents the top 5 metres of the deposit. Following completion, the Company will undertake exploration and expansion studies in relation to the deposit as outlined in the use of funds table in section 3.4 below and 5.4 of the Prospectus. There is no guarantee that further exploration will generate the same or similar results. Please also refer to section 6.2(f) of the Prospectus regarding such risks.

Mineral Resource Category – Loharano Operation (Cut-off Grade – 2%)
Contained Classification Tonnage ('000) Grade (%) Graphite (tonnes)
Total Indicated	421	5.15	21,630
Total Inferred	5,273	4.04	213,029
Total Resources*	5,694	4.12	234,659

* Rounding in effect

*These estimates were prepared and first disclosed by Stratmin under the AIM Listing Rules and the JORC Code 2004. The estimates have not been updated to JORC Code 2012 on the basis that the information has not materially changed since it was last reported.

To date, due to an underperforming processing plant and with limited capital to improve the plant, production has been restrained to a small fraction of the stated mineral resource. The Company's due diligence showed that less than 120,000 tonnes or less than ~2% of the mineral resource at Loharano has been mined by Stratmin. On this basis, the information in relation to the resource estimates has not materially changed.

Figure 3: Cumulative tonnes mined (Loharano)

If the Company successfully completes the acquisition, it proposes upgrades aimed at achieving the stated nameplate process capacity for the processing plant of 6,000 tonnes per annum (tpa).

The Company plans to invest money into upgrading the processing plant simultaneously with ongoing drilling to further delineate its resource. There is a risk that the Company may not be able to upgrade its large inferred resource. There is also a risk that the Company may not be able to identify sufficient graphite to meet any increased or sustained levels of production and that therefore any money spent by the Company may not be economically recoverable.

With a 140 strong workforce, which utilises modern facilities and infrastructure, an onsite doctor, pharmacy, housing, offices, communications and a state-of-the-art analytical laboratory in place, the Company is positioned to develop and execute its plans to improve and expand its production through timely capital investment.

Graphmada sold close to ~1,500 product tonnes in 2015, with a high proportion being large flake graphite with >94% purity.

Figure 4: Graphmada historical saleable product

Production year to date (2016) has seen an increasing production volume of saleable graphite, albeit at lower purity. Immediately following completion, the Company intends to invest capital to reach not only greater sustainable production volumes but at purity consistently greater than 94% Graphitic Carbon (GC), which attracts premium pricing.

In addition to a number of site visits from the Company's Chief Executive Officer, the Company engaged a number of independent consultants who have also visited the Graphmada Graphite Mine and were extensively involved in the due diligence process undertaken by the Company on Graphmada Mauritius and the Graphmada Graphite Mine. This process identified both opportunities to increase production and also potential risks to the Company.

The Company believes that, as a result of its due diligence, both production capacity and quality can be increased and improved in the short to medium term, and the Company is currently putting in strategies to achieve this. These strategies include:

• (a) appointing an experienced Australian management team and consulting experts to manage operations effectively and efficiently. This includes Peter Adamini of Independent Metallurgical Operations, an experienced metallurgist; and
• (b) increased efficiencies achieved through plant upgrades (for which the Company has allocated \$2 million from funds raised under the Offer),with the aim of increasing production to produce consistent product quality of >94% GC including, but not limited to, the following:

• (i) improving ore feed preparation to reduce loss (~10%);

• (ii) refurbishing the scrubber to improve liberation prior to flotation;

• (iii) replacing secondary mills with better liberation size control;
• (iv) improving the flow design of the flotation circuit and install level control systems and higher quality air injection capability;
• (v) replacing slurry pumps;
• (vi) replacing of dewatering centrifuges for more efficient drying;
• (vii) sourcing an alternative drying system to replace the installed double drum rotary dryer;
• (viii) replacing the screening system to improve capacity;
• (i) installing a blending system to improve the consistency and quality of the bagged product; and
• (ii) replacing diesel generators and improve power supply infrastructure.

The cost of these improvements are detailed in section 3.4 below and 5.4 of the Prospectus.

Furthermore, the Company has identified significant savings in administration and other operational costs such as executive salaries and legal costs which have been incurred by the Graphmada Group.

The potential risks identified include most significantly that the process plant foundations and wall structures of the Graphmada Graphite Mine were poorly installed, and in the past have been unstable and have had a history of failure. Modifications have been implemented to ensure ongoing operations, however there remains a risk that any future failure may have a significant adverse impact on the Graphmada Mauritius project including injury and lost production. To mitigate this risk, the Company plans to reconfigure part of the plant layout when upgrading equipment, thus relieving plant foundations and wall structures of weight bearing forces.

The information in this report that relates to Mineral Resources is based on information compiled by Tim McManus, a Competent Person who is a member of the Australasian Institute of Mining and Metallurgy and a full-time employee of the Company.

Tim McManus has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

Tim McManus consents to the inclusion of the information in this report in the form and context in which it appears.

3.4 Use of funds

As stated in section 5.4 of the Prospectus, funds raised under the Offer will primarily be used for exploration and expansion studies, to improve production capacity, and where required, replacing operating plant and equipment at the Graphmada Graphite Mine, and for general working capital.

A further breakdown of certain aspects of the "use of funds" table provided in section 5.4 of the Prospectus is provided in the table below.

DETAILED USE OF FUNDS	A\$ Million
Exploration and Expansion Studies	\$0.7m
Drilling	\$0.5m
JORC compliant assessment and reporting	\$0.2m\$
Processing Plant Optimisation (6000tpa)	\$0.7m
Raw material preparation and feed	\$0.1m
Primary and secondary wet milling	\$0.3m
Flotation Cells	\$0.1m
Dryer	\$0.1m
Blending and screening	\$0.1m
Mining and Ancillary Infrastructure	\$0.8m
Mining equipment	\$0.4m
Engineering, fabrication and construction	\$0.3m
Power and electrical	\$0.1m
Total Optimisation & Expansion Contingency (20%)	\$0.5m
Total use of funds	\$2.7m

Any further funds raised by the Joint Lead Managers through the conditional top-up placement (up to \$1.5 million) (referred to in section 2 of the Prospectus) will increase the working capital.

The Company proposes to fund ongoing Graphmada operations and its Tasmanian assets holding costs through existing cash reserves and receivables of \$2.2 million as at 30 June 2016. In addition cash receipts from sales of graphite product will also supplement its funding.

However, it is recognised that current revenue generated from graphite sales alone is not able to sustain the Graphmada Group'soperations as they currently stand. Therefore the capital raised from the Offer will be used to improve and expand operations in order to reduce the cost per tonne of graphite produced and grow revenue by producing a higher quality product (+94% Graphitic Carbon) that will attract better pricing. The Company's due diligence shows that through moderate capital investment sustainable margins can be achieved.

In addition, significant savings are available to the Company through a reduction in overhead costs. The costs to sustain Stratmin, as an AIM listed company are considerably higher than the costs for maintaining the Company's ASX listing. Combined with a reduction in board fees and management salaries, and other administration costs both at corporate level and on site, the Company is confident that a sustainable cost structure can be implemented. For example, in 2015, the Graphmada Group recorded revenue of £445,000 and expenses of £1,762,000. Included in these expenses were administration costs (not related to production) of £1,085,000. However, the Company recognises that there still remains a risk that some of these cost reductions may not be realised.

Further, to reduce the risk to the Company through the handover period and post completion, Stratmin has, under the SPA, made certain warranties, including that the Graphmada Group will have sufficient net working capital to meet budgeted operating expenses for a period of 30 days commencing on completion. Stratmin has agreed to indemnify the Company for any breach of those warranties. Those warranties were negotiated in light of the extensive due diligence undertaken by the Company on the Graphmada Group.

As a result and in effect, Graphmada Mauritius will upon completion under the SPA have limited liabilities that the Company has consented to. The only ongoing liability will be a decommissioning obligation of £236,000, which will be offset by the value of plant and equipment. All other liabilities not consented to will be met by Stratmin, and set off against the \$1.5 million cash component of the consideration to be paid by the Company to Stratmin at completion. The intercompany liabilities of the Graphmada Group will be assigned to Bass on completion of the SPA.

Under the SPA, the maximum amount that Stratmin may be required to pay for all breaches of the SPA, including warranties, is limited to the consideration, except where the breach of warranty is due to, or the result of fraud dishonesty, or willful or grossly negligent conduct. As at the date of this Supplementary Prospectus, the Company is not aware of any material breaches of the SPA by either party.

3.5 Audited accounts

Stratmin's only asset is 93.75% of the issued capital of Graphmada Mauritius which in turn owns all of the issued capital in Graphmada SARL (which owns the Graphmada Graphite Mine). Stratmin has treated Graphmada Mauritius and its subsidiary Graphmada SARL as a disposal group and are accounted as discontinued operations.

Included at Schedule 3 is an extract of the audited accounts for Stratmin for the year to 31 December 2015 (Stratmin Audited Accounts).

The Stratmin Audited Accounts have been lodged with ASIC under section 712 of the Corporations Act and may be obtained from the Company free of charge to anyone who asks for it during the application period of the Prospectus.

Included at Schedule 4 is the statement of financial position as at 31 December for Stratmin Group (comprising Stratmin, Graphmada Mauritius and Graphmada SARL), Graphmada Group (comprising Graphmada Mauritius and Graphmada SARL) and Graphmada Mauritius, during which time Stratmin did not own any other assets.

Included at Schedule 6 is the Graphmada Group Statement of Comprehensive Income.

Included at Schedule 6 is the Graphmada Mauritius Statement of Comprehensive Income.

The Stratmin Audited Accounts are based on the information provided in Schedules 4, 5 and 6. The information in Schedules 4, 5 and 6 was included in the audit of Stratmin with minor adjustments made in the consolidated accounts to comply with UK IFRS. Included at Schedule 7 is a letter from Stratmin's auditor confirming that as at 31 December 2015, the only substantial asset held by Stratmin was the Graphmada Graphite Mine which was held by subsidiaries of Stratmin at this reporting date.

3.6 Stratmin shareholder approval

On 29 July 2016 Stratmin announced that its shareholders had approved the sale of Graphmada Group. As a result the Acquisition is not subject any conditions which may at Stratmin's election be defeated.

4 ADDITIONAL INFORMATION

4.1 Interests of promoters and named persons

Except as disclosed in the Prospectus or this Supplementary Prospectus, no expert, promoter or any other person named in this Supplementary Prospectus as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of the Supplementary Prospectus, nor any firm in which any of those persons is or was a partner nor any company in which any of those persons is or was associated with, has now, or has had, in the 2 year period ending on the date of this Supplementary Prospectus, any interest in:

• (a) the formation or promotion of the Company; or
• (b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or
• (c) the Offer.

Creo Design provided an Independent Technical Report of the Loharano Graphite Mine to Stratmin. Creo Design has not received any fees for services to the Company in the 2 years prior to the date of this Supplementary Prospectus.

John W. Ffooks & Co, a member of Bowman Gilfillan Africa Group, has acted as Madagascan legal counsel and provided due diligence reports including a solicitor's report on tenements. The Company has paid or will pay approximately USD\$4,000 to John W. Ffooks & Co for these services up to the date of the Supplementary Prospectus. Further amounts may be paid to John W. Ffooks & Co for other work in accordance with its normal time based charges.

Tim McManus is the Company's Chief Executive Officer and is a full time employee of the Company. Mr McManus receives an annual salary of \$274,000 inclusive of superannuation for services provided in this role. Mr McManus also has an interest in 500,000 Shares.

Welbeck Associates Chartered Accountants and Statutory Auditor has acted as auditor for Stratmin. Welbeck Associates has not received any fees for services to the Company in the 2 years prior to the date of this Supplementary Prospectus.

4.2 Consents

Each person referred to in this section:

• (a) has given and has not, before the date of lodgement of this Supplementary Prospectus with ASIC withdrawn their written consent:
• (i) to be named in the Supplementary Prospectus in the form and context which it is named; and
• (ii) where applicable, to the inclusion in this Supplementary Prospectus of the statement(s) and/or reports (if any) by that person in the form and context in which it appears in this Supplementary Prospectus;
• (b) has not caused or authorised the issue of this Supplementary Prospectus;
• (c) has not made any statement in this Supplementary Prospectus or any statement on which a statement in this Supplementary Prospectus is based, other than specified below; and
• (d) to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this Supplementary Prospectus, other than the references to their name and the statement(s) and/or report(s) (if any) specified below and included in this Supplementary Prospectus with the consent of that person.

Name	Role
John W. Ffooks & Co	Legal opinion on Permits
Tim McManus	Competent Person

Creo Design Pty Ltd	Independent Technical Report
Stratmin Global Resources Plc	Vendor
Welbeck Associates Chartered Accountant and Statutory Auditor	Auditor

5 DIRECTORS STATEMENT

This Supplementary Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors. Each Director has consented to the lodgment of this Supplementary Prospectus with ASIC and has not withdrawn that consent.

Dated: 19 August 2016

………………………………………… Signed for and on behalf of Bass Metals Ltd by David Round

SCHEDULE 1 LEGAL OPINION ON MINING PERMITS

To: David Round Bass Metals Ltd 31 Ventnor Avenue, West Perth WA 6005 Australia Email: david@bassmetals.com.au

CONFIDENTIAL

10 August 2016

Dear Sirs,

Graph-Mada Sarl (the "Company") – Madagascar Mining Permits

We issue this legal opinion (the "Opinion") at your request. The primary purpose of this Opinion is to address the legal status of certain graphite mineral mining interests located in the Atsinanana region of Madagascar granted to or owned by the Company.

The Mining Permits

• 1. In preparing this Opinion we have reviewed copies of the following documents:
• 1.1. Certificate from the Bureau du Cadastre Minier de Madagascar (the "BCMM", the Malagasy Mining Registry)) dated 24 April 2012 certifying the transformation of the 1 square of 2.5 km x 2.5 km covered by Exploitation Permit No. 26670 issued in the name of the Company into 32 new squares of 625m in respect of the Toamasina province (the "26670 Permit"). The 26670 Permits is granted in connection with the exploitation of graphite and is valid for a period of 40 years from the date of signature and is renewable in units of 20 years thereafter. This certificate is valid for 3 months from the date of signature. There is no renewal required for this certificate. The newly issued 26670 Permit with the newly delineated mining squares has been delivered by the BCMM following signature of the Managing Director of the Company in 29 June 2015.
• 1.2. Exploitation Permit No. 24730 dated 18 January 2007 issued in the name of the Company in respect of the Toamasina province for sixteen (16) mining squares of 625 m x 625m (the "24730 Permit"). The 24730 Permit is granted in connection with the exploitation of graphite and is valid for a period of 40 years from the date of signature and may be renewable in units of 20 years thereafter. The certificate certifying the transformation from squares of 2.5km x 2.5km into 16 new squares of 625m x 625m has been approved by the BCMM and the Company is able to obtain such certificate from the BCMM. The newly issued 24730 Permit with the transformation of mining squares for 625m had been delivered by the BCMM following the signature of the Managing Director of the Company in 26 October 2007.

• 1.3. Exploitation Permit No. 25600 dated 27 September 2007 issued in the name of the Company in respect of the Toamasina province for sixteen (16) mining squares of 625 m x 625m (the "25600 Permit"). The 25600 Permit is granted in connection with the exploitation of graphite and is valid for a period of 40 years from the date of signature and may be renewable in units of 20 years thereafter. The certificate certifying the transformation from squares of 2.5km x 2.5km into 16 new squares of 625m x 625m has been approved by the BCMM in 26 October 2007 and the Company is able to obtain such certificate from the BCMM. The newly issued 25600 Permit had been delivered by the BCMM following the signature of the Managing Director of the Company in 27 March 2014.

• 1.4. The 26670 Permit, the 25600 Permit and the 24730 Permit have been issued by the BCMM, and signed by the Minister in charge of Mines (referred to hereinafter as the "Mining Permits"). A summary table of the Mining Permits is attached at Appendix 1 hereto.

• 1. We have further reviewed the following documents:
• 2.1. Environmental Permit no.50/07-MINENVEF/ONE/DG/PE dated 14 November 2007 relating to the exploitation of graphite in Mahela, Atsinanana region in connection with the Exploitation Permit (PE) no.26670-I, granted in the name of Graph-Mada Sarl.
• 2.2. Document from the BCMM showing the payment of the mining fees 2015 (Frais d'Administration minière).
• 2.3. Notification table and a letter of formal notice dated 29 July 2016 regarding the unpaid mining fees 2016.
• 2.4. Debit note of the Company's bank evidencing the payment of the mining fees 2016 amounting 27,022,848 MGA.

Broadly, the process of issuing a mining permit to a party consists of the following steps:

• 1. An application for a mining permit at the BCMM should include the following documents and should be made in triplicate (the original and two copies):
• Application form from the BCMM duly completed and signed by the applicant;
• Certified copy of the Statuts of the company;
• Certificate copy of extract from the Company Registry;
• Updated fiscal card or CIF (Carte d'Immatriculation Fiscale)
• Certified copy of the company professional card specifying the mining activity (Carte Professionelle);
• Legalised plan type of a mining permit R from the BCMM;
• The AERP or Autorisations Exclusives de Réservation de Périmètre granted to the company;
• Localisation map (Carte de Localisation) from the BCMM;
• Spotting map (Carte de Repérage) from the BCMM;
• Deed giving power of attorney to the representative;
• Criminal record no. 3 of the representative less than three months old;
• Certified copy of the National Identity Card of the representative; and
• Certificate of residence of the representative less than three months old.
• 1. Issuance of a provisional receipt by the BCMM following deposit of the application and payment of the instruction fee. The applicant must provide the BCMM with all the documents set out above within 5 days of the date of deposit of the application.

Within 5 working days of the deposit of a completed application the BCMM issues the receipt of the admissibility in respect of the application (Récépissé de recevabilité de la demande).

The applicant pays 75% of the mining fee amount within 20 working days from the date of deposit of the application.

Our Opinion

• 1. In issuing this opinion:

• 3.1. We have made all appropriate searches of the relevant registries including the BCMM and the Company Registry in Antananarivo and inspected all relevant documents but not examined any corporate records of any governmental authorisations or orders, certificates of public officials or of representatives of the parties or any other documents not stated above, and our opinion is qualified in that regard;

• 3.2. Insofar as we examined originals, we assume that the signatures are genuine and in respect of copies of such originals we assume that such copies are true and accurate copies (unless manifestly not the case);

• 3.3. Where compliance with the BCMM or statutory requirements necessary to maintain the Mining Permits in good standing is not disclosed on the face of the documents referred to above, unless the non-compliance has come to our attention as a result of our investigations, we express no opinion on that compliance or permit. We have made reasonable and diligent enquiries to ensure that matters that should have come to our attention have done so; and
• 3.4. After due enquiry, we are not aware of any material adverse change has taken place since the execution of the documents listed in this opinion, which would affect, undermine or otherwise alter their validity.
• 1. In issuing this opinion, we have made particular reference to the Malagasy law set out in Appendix 2:
• 4.1. Law no. 99-022 of 19 August 1999, incorporating the Mining Code, as amended by law 025/2005 of 13 July 2005; and
• 4.2. Decree no. 2000-170, as amended, which sets out the technical details for the implementation of the Mining Code.
• 1. Based on our review of the documents examined and subject to the statements set out herein, we confirm that at the date of this opinion:
• 5.1. The Mining Permits are correctly registered at the BCMM in the name of the Company and that the Company is able to exploit them freely without reference to any other party;
• 5.2. That the Company's title to the permits will not be affected by any change to its parent company's shareholders; and
• 5.3. The Company and its representatives had all relevant powers to enter into all documentation in relation to the acquisition of the Mining Permits provided and that all documents are correctly executed and filed.
• 5.4. That there is no outstanding payments of fees or any further payments to be made to the authorities in respect of the permits, save for the annual fees pertaining to each of the Mining Permits.
• 5.5. We have not reviewed any other document in connection with the mining fees paid for these permits than the debit note of the Company's bank evidencing the payment of the mining fees for 2016. The amount of fees to be paid by the holder depends on the number of square and the number of the year. The Exploitation Permit No. 24730 is in its thirteenth (13) years and the Exploitation Permit No. 26670 is in its twelfth (12) years.
• 5.6. There are no conditions or restrictions attached to the Mining Permits that may impact on the exploration, mining or transfer of such permits other than:
• those set out in the Mining Code (including environmental provisions see Appendix 2 of this Opinion);
• in respect of the payment of annual permit fees to the BCMM; and
• in respect of the obligation to file an annual report of work completed.
• 5.7. That, so far as can be ascertained, there have been no challenges made and no challenges are currently underway or threatened to the Company's title to the Mining Permits.

Yours faithfully,

John W. Ffooks & Co

Appendix 1

Summary Table of Mining Permits

Permit Holder	Permit Number	No. Squares	Type	Granted date	Expiry date
The Company	24730	16	PE	18/01/2007	17/01/2047
The Company	25600	16	PE	27/09/2007	26/09/2047
The Company	26670	32	PE	21/01/2008	20/01/2048

An annual mining fee is levied by the BCMM and is a function of the type of the mining, they are covered and the length of validity of the mining permits.

Appendix 2 An Overview of the Legal System in Madagascar

Background

The legal system in Madagascar is based upon the French civil law system. This is a codified legal system based on the Napoleonic model. As in all civil law systems, statute law (which is contained in a series of codes) has the greatest importance. In contrast with common law systems, the doctrine of precedent (jurisprudence) has little weight.

Most of the current codes were implemented more than forty years ago. Many of these have not been updated for some time. However, the government of Madagascar is in the process of updating laws in key areas – for example, the new Companies Code enacted in 2004, the Labour Code enacted in 2004 and the Competition Code.

The mining sector was brought up to date with the Mining Code in 1999, and the Large Mining Investment Law in 2002 (the main features are described below). The Mining Code has been updated with Law no. 2005- 021 dated 17 October 2005 and its Decree no. 2006-910 dated 19 December 2006. The Large Mining Investment law ("LGIM") was put in effect with Decree no 2003-784 dated 8 January 2003.

Legal Process

The following procedure is adopted for enactment of new laws:

• After consulting with various interested parties the government drafts a proposition.
• The proposal is presented to Parliament for approval.
• Following approval by the Lower House, it is approved by the Senate.
• After Senate approval, it is passed to the Constitutional Court, which opines on its constitutionality.
• Following validation by the Constitutional Court, the law is returned to the President for signature.
• Once signed, the law must be published in the official journal along with a decree bringing the law into force.

In the event that the new law is uncontroversial and meets no opposition, it routinely takes about six months between proposition and coming into force. In the event that further clarification is necessary under the law, or is required as a matter of practicality, laws are backed up by interpretive decrees. These are issued directly by the minister responsible for the law and may be issued without the need for approval by Parliament.

Dispute Resolution

Trials of commercial cases are held at first instance before a single judge who may sit with two assessors but without jury. Parties are represented by an avocat, the equivalent of a barrister or trial attorney. In the trial, much more reliance is placed on written submissions than in common law jurisdictions, and much less legal argument takes place in court.

Parties have the right of appeal to the Court of Appeal, where up to three judges will hear the case, again largely on written submission. Cases usually take a few months to reach the Court of Appeal. Following the Court of Appeal, parties can appeal to the Cour de Cassation on points of law and procedure only. This will be heard by up to five judges. Beyond the Cour de Cassation lies the Supreme Court, again comprising five judges, for a final finding in law. The Constitutional Court exists solely to decide questions relating to the constitution.

As an alternative to the court system, arbitration is recognised in Madagascar and foreign arbitral awards are enforceable. Madagascar has its own arbitration centre.

Corporate law

The system of company and corporate law in Madagascar is now similar to that found in any other Frenchspeaking country. Since the new company law was implemented in 2004, the procedure for setting up and operating companies has become much simpler.

There are two sorts of company of interest to the foreign investor: the société à responsabilité limité or SARL (similar to an English limited company) and the société anonyme or SA (similar to an unlisted English plc).

An SARL is administered by the gérant, or statutory directory. The gérant is appointed by the shareholders in the statutes or by extraordinary general meeting of the Company. The gérant has full powers to run the company and it is very difficult to limit his apparent authority when dealing with third parties. Should he exceed the authority he has under his appointment, no recourse is available against the third party to unwind any unauthorised transaction or claim compensation. Action may be taken by the shareholders against the gérant but this may not be effective.

An SA with more than three shareholders is managed by a directeur général and administered by three to twelve administrateurs (administrators, similar to the board of directors, which has a President (chairman of the board)). The Directeur Général is responsible for management issues while the administrators are responsible for the internal running of the company (board meetings, approving accounts, etc). If an SA has fewer than four shareholders, the structure is collapsed into one position, the administrateur général, who has full and unfettered power to run the company.

There is no obligation to have local shareholders and an SA or an SARL can be owned 100% by foreign people or companies. However, someone involved in the management or administration of a Malagasy company must be either a national or a resident foreigner. In the case of an SARL this means that the gérant must be resident in Madagascar or a Malagasy national. For an SA, one of the administrators or the Directeur Général or his deputy must be resident in Madagascar or a Malagasy national.

A company's internal operation is much the same in Madagascar as elsewhere. A company is run for the benefit of its shareholders, it makes its decisions through its directors and these are all recorded as minutes in the company's records.

Under Malagasy company law, companies are free to contract as they wish. No permissions or permits are required after a company's incorporation to allow it to carry on business.

A system exists in Madagascar for a company to charge or pledge its assets by way of security for a loan. While this is not identical with systems in common law jurisdictions, it still has effect as long as procedure is respected. Rights under permits or contracts can be pledged or assigned as well as rights to physical goods.

Malagasy companies can open foreign currency accounts in Madagascar and can receive and send foreign currency. Payments within Madagascar must be made in Ariary and transfers within Madagascar of foreign exchange are not allowed. Foreign exchange is freely available and the Ariary is freely convertible.

Real estate law

The holder of a mining permit must inform the concerned landowners of its right to occupy certain portions of land required for its mining project, whether or not covered by the mining permit.

In this instance, the permit holder is required to make enquiries in order to identify the landowner where the

land is subject to the mining permit.

There is a system of land registration in Madagascar. Land that is registered is recorded in the books at the provincial land registry. The topographic service holds an official plan drawn up by a surveyor, showing the boundaries of the land. Applying to register previously unregistered land requires an application to the local land registry and payment of the appropriate fees.

The registration system allows charges and other interests including mortgages to be registered. In this way, anyone making an enquiry on a piece of land at the registry can see at once if the land is registered and if there are outstanding claims against it.

Since 2003, foreign investors have had the right to own land rather than hold a 99 years lease. There are certain restrictions concerning the size of land and the investment that can be made, as well as the category of activity to be carried out, although these are quite broad. In addition, the Minister of Agriculture (who is ex officio responsible for land issues) may give permission to vary from the limits set out in the law.

Once the relevant landowner is identified, the latest and the permit holder must convene their respective rights and obligations under a lease agreement.

If no lease agreement has been agreed between the parties, the landowner has the right to ask for the ejection of the holder of permits subject to payment of compensation to the latest or the holder of the mining permit can continue the mining work if the perimeter is declared a public utility matter, allowing the Ministry in charge of Mines to engage process for compulsory purchase.

The holder of a mining permit must also come to an arrangement with the concerned traditional occupants, or the native titleholders, or the usufructaries (beneficial occupants) of lands of its right to occupy the relevant perimeter.

Native title

The Mining Code provides that the holder of the mining permit has a presumptive right to access the land over which the permit is granted, subject to compensation of owners/occupiers to be set by the court if not agreed. It would be usual for formal documented owners of land to be compensated before the work began, and for informal "customary" user to be compensated as the works progressed.

Mining law

The point of departure for mining investments in Madagascar is the Code Minier or the Mining Code, which has been in force since 1999. This should be read in conjunction with Decree N°2000-170, which sets out the technical details for the implementation of the Mining Code and Law no. 2005-025 of 17 October 2005 which amends the Mining Code. Its enforcing decree is Decree no. 2006-910 dated 19 December 2006.

The Mining Code covers all aspects of mining. The most important aspect to consider at the present time is permitting. For all permits, only one permit exists per square. The Minister of Mines must sign each individual permit, although this is not required for Autorisation Exclusive de Réservation de Périmètre ("AERP") (permit reservations).

Under the Mining Code, Madagascar is divided into squares; the former size of squares corresponds after adoption of the new mining code to 16 new squares of 625 m on a side. (Article 232 new mining code and article 85 of its mining decree). Squares issued prior to this date (2.5km on a side) are automatically converted into 16 "new" squares.

These are administered by the Bureau de Cadastre Minier de Madagascar ("BCMM"), the Madagascar Mining Registry. It operates on a first-come, first-served basis. The system operates in a reliable, stable fashion and the risk of expropriation is low.

There are three basic types: AERPs, Permis de Recherche ("PR") or Exploration Permit and Permis d'Exploitation ("PE") or Exploitation Permit. Applications for any type of permit can be made either a Malagasy citizen or by a Malagasy registered company (SA or SARL). There is no restriction on the shareholding in the company that holds a permit, nor on transfers of shares within that company.

An AERP is a temporary permit area reservation. It can be applied for over any free area. It gives an exclusive right over the area for three months and it is not renewable from issue (Article 22 Mining Code). At the holder's option it can be surrendered or transformed into a PR.

New permits are each 625m issued in respect of parcels and an Exploration Permit is valid for a period of five years, renewable twice for a further three (a total of eleven years) (Article 33 of Mining Code). During the life of the Exploration Permit, only activity germane to the exploration, evaluation and analysis of the square can be carried out (Article 34 of the Mining Code).

Commercial exports are specifically prohibited.

In order to exploit a square commercially, the permit must be transformed into an Exploitation Permit. This is done essentially by completing an environmental impact assessment and paying the fee prescribed from time to time (Article 104 decree enforcing the Mining Code). The exploitation permit is granted for forty years, renewable in increments of twenty years (Article 37 of the Mining Code).

Both Exploration and Exploitation permits are real property rights that can be bought, sold, mortgaged or otherwise charged or disposed of (Article 59 of the Mining Code).

Under the Mining Code, the holder of a permit has a right to occupy the surface of the square concerned, subject to payment of a reasonable rent. There is a procedure set out in the Mining Code in the event that the owner of the surface rights cannot reach an agreement with the permit holder (Article 124 of the Mining Code). Similarly, the holder of the permit has rights to construct and operate equipment necessary for the exploitation of the square in question. Again, this is subject to the payment of a reasonable rent to be imposed if not agreed.

The Mining Code further requires exploration permit holders to undertake an environmental impact assessment before transforming their permit into an Exploitation Permit (Article 162 Decree of the Mining Code). The terms of this are specified in an inter-ministerial decree known as the "MECIE" decree.

If minerals are found within the permit area that is not listed on the permit, these must either be left in the ground or the scope of the permit changed. This would also include fossils.

A royalty is payable based on the value of the product extracted. The Mining Code states that this is 2% of the value of the first sale (Article 117). However, for large exports of ore (rather than refined product) it can be difficult to define when the first sale takes place. The Mining Department of the Ministry of Energy and Mines has defined this point as being the first export sale and procedures are in place to avoid tax evasion by transfer pricing.

Any project exploring or mining for uranium must form a joint venture company with Office des Mines Nationales et des Industries Stratégique ("OMNIS"), the Malagasy state entity responsible for "strategic minerals" (which includes Uranium). The promoter must enter into a shareholders agreement, which typically gives OMNIS a 20% free carry to US\$1m, followed by pari-passu contributions or dilution to a minimum of 10%.

The non-payment of mining fees within the legal period is subject to a fine of 5% paid within 45 days from the reception of the formal notice letter from the BCMM. Failure to do so, the Company may be subject to an withdrawal of its mining permit.

Moratorium period

According to the BCMM's administrative notice dated 26 November 2010, the issue and transformation of mining permits have been suspended.

According to the BCMM's administrative notice dated 6 February 2012, the transformation of mining permits has been reopened but the issue of new permits remains suspended.

Therefore, all orders issuing by the Ministry of Mines relating to the transformation of the Company mining squares are valid. As a consequence of this, all the PEs delivered by the BCMM in respect of the aforementioned orders are also valid.

Permitting generally

The first step for a company undertaking a mining project in Madagascar is to obtain an Exploration permit. The Exploration Permit allows the company to carry out research activities. To advance a mining project to the commercial phase, an Exploitation Permit is required. One of

the main requirements for converting the Exploration Permit is to complete an Environmental Assessment ("EA"). Included in the EA will be an Environmental Management Plan ("EMP").

The Large Mining Investment Act ("LGIM") is a government program that provides the mine developer with significant incentives. The LGIM application is described below. Included in the LGIM application is an investment plan as well as the EMP.

It should be noted that there are no official texts in Madagascar dealing with the terms and conditions for mineral extraction, processing or export.

The principal documents associated with a mining project are the Mining Permit, the EMP and the plan d'investissement (project investment plan issued for the certification under the LGIM).

The LGIM issues guarantees that the terms of any permit (exploration, exploitation or environmental) will not be changed after the grant thereof. As well as these three major documents there are a large number of permits issued subsequently by the various ministries responsible. The majority of the permits will be issued by the Ministry of Energy and Mines and the Ministry of Environment, with other permits being issued by the Ministry of Territory and Development, the Ministry of Transportation, the Ministry of Civil, Ministry of Telecommunications, The Ministry of Water and Forests, the Ministry of Agriculture, the Ministry of Culture and the Ministry of Defence.

The LGIM

On 8 October 2002, the Malagasy government enacted Law no. 2001-031, establishing a Loi pour les Grands Investissements dans le Secteur Minier Malagasy. This law is commonly referred to as the Large Mining Investment Code, or LGIM, and was drafted with the assistance of the World Bank. The main features of the LGIM are described in Section 26. The implementing regulations, Decree no. 2003-784, were signed 8 July 2003. An amendment was published under Decree No 2005 – 476 dated 13 July.

This law provides for certain investment incentives for qualifying projects and is a key ingredient in making large project attractive investors. Certification of a project under the LGIM requires completion of environmental studies, issuance of mining or exploration permits, and certification by the Malagasy government of the investment plan, which must exceed approx.. US\$25m.

Certification can technically be achieved based on exploration permits and an EA for the exploration

activities, provided sufficient detail is available regarding the financing and project development activities. Certification ties the project sponsors to certain timetables regarding development, however, such that early certification is not necessarily beneficial.

Key benefits of the LGIM include:

• Reduction of the royalty fee to 1%;
• Duty free import of all project equipment and material;
• Reduced general tax regime;
• Stability guarantees concerning legislation;
• Rights and guarantees to foreign currency including offshore accounts; and
• Guarantees concerning foreign workers.

LGIM Application Process

An outline of the certification process is presented below together with the key features of the application process:

• Application can be made, and certification granted, on the basis of exploration permits;
• The key parameter governing certification is the investment amount, which must be greater than the threshold amount, currently estimated at 50 billion Ariary, (approximately US \$25M);
• Certification of the project ties the project sponsors into a timeline, with commencement of initial works required within one year of certification and the beginning of commercial operations within 5 years;
• Application requires a provisional financing plan and a feasibility study;
• The application outline is fixed by the Ministry of Mines and Energy; and
• The application process has set timeframes for governmental review and approval.

The application process review expected timeframe is outlined in the table below:

Review of the application and recommendation to Minister:	30 calendar days
Minister confirms recommendation and informs the Council:	10 working days
Adoption of the decree of certification:	60 calendar days
Sponsor commits to implement the Investment Plan:	15 calendar days
Publishing the decree in the Journal Official:	as soon as possible after sponsor commits

The entire process after submission of a complete application may take up to 4 months from the date of application. Drafting of the application itself take approximately two months after all information is available (principally the feasibility study and financing plan), but the preparation of the application could well proceed in parallel with the completion of these other activities.

Key Components of the Application

The required components of the application include:

• 1. An application letter indicating:
• The identity of the Holder and the Entity of Transformation;
• The references of the Project Mining Permits;
• The identity of the investors; and
• Information about the intention of creating an Entity of Transformation.
• 1. The feasibility study of the project;
• 1. The investment plan as per standard form, including:

• The calculation of the investment amount

• The lists of the generic categories and indicative quantities of the materials, goods, and

• Equipment necessary for the building, equipment, and maintenance of the project and any public utility infrastructure

• Audited financial statements of the investors proving they have the required equity for the financing plan;

• A current letter from an experienced international bank indicating that the project is financeable if Eligibility Certification is obtained;

• A certified copy of the valid Environmental Authorization related to the Mining Permits;

• A document specifying the steps taken to obtain the Environmental Authorization for the subsequent stages of the Project;

• A commitment to reserve the production for export and the application for exemption from VAT of imports in the list above; and

If required by the Holder, a proposal for a different international.

Environmental law

The main environmental laws in connection with the mining activity are:

• Decree No. 99-954 of 15 December 1999 amended by Decree No. 2004-167 of 3 February 2004 relating to the compatibility of investments with the environment (MECIE);
• Law No. 90-033 of 21 December 1990 relating to the Environmental Charter, changed and supplemented by laws No. 97-012 of 6 June 1997 and No. 2004-015 of 19 August 2004;
• Law No. 96-025 of 30 September 1996 relating to the local management of renewable natural resources;
• Interministerial Order No. 4355/97 of 13 May 1997 including definitions and demarcations of the sensitive zones;
• Law No. 99-022 of 19 August 1999 including the mining code, changed by Law 2005-021 of 17 October 2005;
• Decree No. 2000-170 of 15 March 2000 fixing the conditions of application of Law No. 99- 022 of 19 August 1999 including the mining code;
• Decree No. 73-079 of March 1973 relating to the conditions of use of explosives and detonating substances;
• Interministerial Order No. 12032/2000 of 6 November 2000 relating to the regulation of mining areas in relation to environmental protection;
• Decree No. 2005-013 of 11 January 2005 organising the application of the law;
• Order No. 18177/04 of 27 September 2004 including a definition and demarcation of sensitive forested zones;
• Interministerial Order No. 19560/2004 related to suspension of mining and forested licence conferment in zones reserved as 'conservation sites';
• Law No. 2001-005 of 11 February 2003 including the Protected Areas Management Code and its subsequent texts:
• Order No. 6830/2001 dated 28 June 2001 relating to the methods and the procedures for public participation in environmental assessments;
• General guidelines for carrying out an environmental impact study;
• Guidelines for conducting an environmental impact study on a mining project;
• Law 2005-021 of 17 October 2005 amending Law No. 99-022 of 19 August 1999;
• Decree No. 2006-910 of 19 December 2006 fixing the conditions of application of Law 2005- 021 of 17 October 2005;
• Interministerial Order No. 18633/2008/MEFT/MEM clarifying the status of certain permits suspended by Interministerial Order No. 17914 of 18 October 2006; and

• Draft Law No. 028/2008 of 29 October 2008, including overhaul of the Protected Areas Management Code.

The principal safety laws are:

• Deliberation No. 58-60/AR of 8 May 1958 laying down safety rules in mines and quarries (OJ No. 3879 of 21 June 1958, paragraph 1465); and
• Order No. 895/60 of 20 May 1960 determining particular hygiene and security applicable measures in mines, mining research sites and their dependency.

Environmental review and permitting process for a mining project

As a first step, any person or entity who wishes to conduct mineral prospecting is obliged to make a prior declaration to the BCMM (Mining Code 20, article 2005). This declaration of prospecting is valid for one year from the date of approval by the BCMM (article 66 of the implementing decree of the Mining Code 2005).

After this, the adoption of the Malagasy Environment Charter and the promulgation of the MECIE decree imply an obligation for any public or private investment project likely to undermine the environment to be examined either via an environmental impact assessment (EIA), or through a Environmental Commitment Programme (known by its initials in French, PREE), according to the technical nature, size of the project and the assessment of the agencies in question.

The project practicability study (screening) determines the type of study to be performed (EIA or PREE). In the case of a mining area, the following are subject to an EIA:

• any developments, facilities, structures and works and jobs that might affect the sensitive zones (as required by Order No. 4355/97 of 13 May 1997 giving the definition and demarcation of sensitive zones);
• any developments, transport, works and jobs that exceed thresholds fixed in the MECIE Decree (see also MECIE Decree, annex I); and
• any jobs not subject initially to an EIA, but subject to an EIA if there is a modification increasing environmental damage.

The environmental permit, issued by the National Office for the Environment at the end of a favourable EIA, on the basis of the Technical Evaluation Committee's technical opinion, is a precondition to starting any work located in the sensitive zones.

Obtaining an environmental permit

The environmental permit is acquired in the 60 days after a favourable EIA is filed, or 60 days as from the receipt of the complete files from the promoter if there is public participation by way of documents, on-site consultation or a public inquiry. This delay is 120 days in the case of public participation through a public hearing. This period will be extended by 10 days, if necessary, for answers to requests for supplementary information addressed by the Technical Evaluation Committee.

The environmental permit is valid until an environmental auditor's certificate is obtained when the project is closed (MECIE article 30), or if need be, up to the modification of the project scope, which will be specified by regulations (MECIE article 14).

In the case of a mining area, the following are subject to a PREE:

• any operations outside the sensitive zones;
• any projects with no or little impact on the environment; and
• any project not exceeding thresholds fixed by the MECIE Decree (see MECIE Decree, annex II).

An environmental approval, issued following the approval of the PREE by the concerned sectorial ministry, on the basis of its environmental department's technical opinion, is a mandatory precondition to begin any

work not within sensitive zones.

The validity of the environmental approval relies on the applicant obtaining a mining licence (which is valid for five years, renewable twice for three years each time).

An environmental undertaking relating to a research project consists of:

• an environmental undertaking for research with minimal impact: for operations restricted to activities whose environmental impact is considered minimal;
• environmental undertaking for research with standard impact for the operations that are not eligible for an environmental undertaking for research with minimal impact; or
• environmental undertaking for research on an artisanal mining permit: a licence of research and mining development reserved for farmers as defined in the Mining Code.

Obtaining an environmental authorisation

Environmental undertaking for research with minimal impact

An environmental approval is acquired within 40 working days as from the date of receipt of the file, as follows:

• the receipt of the environmental undertaking for research with minimal impact report and requesting the opinion of the Ministry of Mines' environmental department: 30 working days from the date of receipt of the report; and
• approval of the Ministry of Mines: 10 working days as from the date of receiving an opinion from the environmental departments.

This period will be extended, if necessary, for answers to requests for supplementary information from the environmental department.

Environmental undertaking for research with standard impact

If the request is for a simple environmental undertaking for research with standard impact or concerns a research project in a sensitive zone, and if the operations of the holder expressly exclude operations in the sensitive zones that are inside the research perimeter, environmental approval is acquired 45 working days as from the date of receipt of the file:

• the receipt of the standard impact report and requesting the opinion of the Ministry of Mines' environmental departments: 35 working days from the date of receipt of the document; and
• approval of the Ministry of Mines: 10 working days as from the date of receiving an opinion from the environmental departments.

This period will be extended, if necessary, for answers to requests for supplementary information from the environmental department. However, if the object of the standard impact report is a research project in a sensitive zone or at the stage of development or at practicability, the environmental approval is acquired in 50 working days as from the date of receipt of the file:

• the receipt of the report at the environmental department and submission of the file by the environmental department to an ad hoc evaluation committee: 10 working days as from the date of receipt of the file;
• the transmission of the committee's opinions to the Ministry of Mines: 30 working days as from the date of the environmental department sending the report; and
• approval of the Ministry of Mines: 10 working days as from the receipt of the of evaluation committee's opinion.

This period will be extended, if necessary, for answers to requests of for supplementary information addressed by the committee.

Appendix 3 Our experience

As a law firm duly incorporated under the laws of Madagascar, we are entitled to provide legal opinions and consultant services on Malagasy tenure. The CV of one of our Partners, Richard Glass, is attached in Appendix 4 hereto.

We have listed below some of our experience:

Madagascar – due diligence reports for ASX Listed companies

Aziana – From Greenfield Exploration to ASX Listing

We have been standing counsel to Aziana Ltd since their arrival in Madagascar over six years ago. We assisted them with their acquisition strategy for exploration ground, set up their Madagascar and offshore corporate structures and advised on all aspects of their implementation in Madagascar. We have most recently acted on their successful ASX listing, issuing title opinions and taking a lead role assisted by Australian counsel to oversee the legal aspects of the transaction to the satisfaction of the Exchange authorities.

We acted for this non-listed group of companies financed out of Hong Kong. In addition to negotiating joint ventures with partners for their various licences, we ensure that all their corporate paperwork on their various companies and licences are always up to date and ready for inspection by potential partners.

Ambatovy Project - Mining Investment

We have advised the Ambatovy Project in Madagascar since its inception in 2003. We advise on the real estate and permitting aspects of its US\$4.5bn investment in Madagascar. The client reached financial close for US\$2.2bn of project financing in 2008 and we continue to advise the project directly. Issues include an extensive land acquisition programme, preparation for and conduct of a compulsory purchase (eminent domain) programme, advising on the law on large mining investments (LGIM), ensuring local law conformity with the international financing agreements, negotiating with key strategic partners, analysing risk and developing risk mitigation strategies and reviewing and revising agreements with consultants.

Asia-Thai Mining – PAM Madagascar Takeover

Advising a major Thai group in its acquisition of the Madagascar assets of a Canadian listed company. The team reviewed a large volume of documentation at very short notice to produce a detailed report for the Acquirer's board. This included not only mining assets, but a review of all corporate and commercial contracts, environmental obligations and personnel.

Major Mining Investment – Hong Kong

We are advising a Hong Kong-based private equity group on its investment in a US\$100m exploration project in Madagascar. We have reviewed the shareholders agreement as well as producing a very detailed opinion on the permits and the method by which they were acquired.

TSX-V – Joint Venture

Advising a Canadian listed gold mining company on its acquisition of mining assets in Madagascar. This included a due diligence review of the assets and corporate structure as well as advice on the joint venture structure, earn-in requirements and shareholder agreements to be put in place.

Coal of Africa – ASX Listing

We were instructed by Australian counsel to the listed vehicle to carry out a thorough corporate due diligence on the Madagascar assets prior to inclusion in the listing. We reviewed the permit holdings, the

corporate structure and advised generally on the legal environment in Madagascar to give comfort both to the Exchange authorities and the Board of the listed vehicle. We continue to advise the company following its successful listing and capital raising.

Coal Mining in Madagascar

We acted for a major ASX-listed coal producer in its acquisition of a coal project in Madagascar. We completed detailed due diligence and an opinion on the viability of the target company's permits. We also advised on tax and corporate structuring issues.

LP Hill PLC – Tranomaro Mineral Development Corporation Ltd. Acquisition and AIM re-admission

We advised LP Hill Plc on its acquisition of Tranomaro Mineral Development Corporation Ltd, a company with uranium assets in the south of Madagascar. The Firm worked closely with the NOMAD and London Counsel and completed extensive due diligence, drafted all the mining permit transfer documentation, created the new (local) project vehicle, arranged share transfers between the parties and co- ordinated the closing of the transaction from the Malagasy perspective. We drafted and negotiated the key joint venture agreement with OMNIS, the party representing the Malagasy government and issued the corporate opinions required by AIM ahead of re-admission.

UMC Mining PLC – AIM Reverse Takeover Advising an AIM listed company on its reverse takeover of a Malagasy mining company.

Our advice included review and verification of the company structure, reviewing and issuing an opinion on the licences and licence transfers, commenting on the share purchase agreement from a Malagasy law perspective as well as advising on the deal in a Madagascar context.

Indian Pacific Resources – Due Diligence

We acted for Indian Pacific Resources on their recent acquisition of permits in Madagascar. Our opinion was reviewed at exchange and board level.

Jubilee Platinum PLC

We have advised Jubilee Platinum PLC on its activities in Madagascar since 2004. Advice has included joint ventures with various partners, a detailed review of all documentation relating to the company and producing a summary for the client together with recommendations. A shareholders agreement was drafted to regulate the relationships of the shareholders and to set out their respective obligations.

Sunridge Gold Corp

We act for Sunridge Gold Corp, a TSX-V listed junior. In addition to their joint ventures, we take care of all their corporate and administrative papers and provide annual opinions to their auditors.

Energold – E-Golbal Drilling

We act for this TSX listed mining-services provider in Madagascar and Guinea. We have created subsidiaries for the parent company and continue to provide corporate and tax structuring advice.

Private Corporation – Gold exploration and production

We are acting for Cyprus-based investors in the due diligence and acquisition of a stake in a Madagascarbased gold project. We are producing detailed due diligence and reviewing all corporate documentation on the target. We are advising the client on the most tax-efficient structures going forward.

ASX - Pre-listing Due Diligence

Advising an Australian company on its pre-listing due diligence and preparation. We assisted them in ordering their assets correctly to simplify and speed up their listing process, as well as working in tandem with the listing authorities to highlight information gaps and rectify these in the shortest possible timeframe.

Burkina Faso and Mali - TSX Listing of Mining Assets

We issued the listing opinion for a Canadian company with assets in Burkina Faso and Mali on its listing on

the Toronto Stock Exchange. We conducted extensive due diligence into the corporate and mineral assets of the project companies, and prepared a detailed report for inclusion in the listing prospectus.

Ivory Coast – Detailed Due Diligence

We were instructed by a Canadian finance house to undertake a detailed due diligence of target assets in the Ivory Coast. Working with our colleagues in Abidjan, we gave detailed advice on a 24-hour basis during the intense pre-closing financing phase. We then conducted the due diligence on the targets in country for which we seconded one of our team members from Madagascar to bring experience and direction to the process.

Mali - Bidder's statement to exchange – ASX

Acting for a Singapore-listed company intending to acquire an ASX listed company, we verified statements in the bidder's statement relating to the bidder's assets in Mali. We conducted searches at the mining registry; reviewed the mining permits; commented on the grant and renewal process; and advised on risk factors both in the mining sector and in the jurisdiction generally.

Togo - AIM listed junior – Togo acquisition and re-admission

Advising a London-based AIM-listed junior on its acquisition of a Togolese mining company and its permits and assets. We carried out the due diligence on all Togolese aspects of the transaction and issued an opinion to the Nomad which was included in the prospectus.

Togo - Preliminary due diligence for AIM listing

Acting for an AIM listed company we performed initial due diligence on mining assets in Togo. We advised on specific aspects of the mining code concerning transfer and renewal, made searches at the companies' registry in Loméand prepared comments on the local law aspects of the documentation.

Appendix 4 Richard Glass - CV

Richard Glass Partner John W Ffooks & Co

Antananarivo, Madagascar Tel: +261 33 216 7225 Email: richard@jwflegal.com

Summary

Richard was made a partner in 2013 and has a broad corporate practice encompassing oil & gas, mining and telecommunications. He is an English-law qualified corporate solicitor and specialises in advising inward investors to Sub-Saharan Francophone Africa. Prior to joining John W. Ffooks & Co in May 2010, Richard trained with a City law firm before moving to Jersey in 2007 to work in the corporate finance department of Carey Olsen. Richard manages a team of 19 locally qualified attorneys across 14 jurisdictions in Francophone Africa and specializes in advising on the local law aspects of international mergers and acquisitions, stock-market listings and drafting security documentation (both on the lender and borrower side). Richard holds dual English/French nationality, is fluent in written and spoken French and has significant deal-experience within the Francophone region of Sub-Saharan Africa.

SCHEDULE 2 INDEPENDENT TECHNICAL REPORT

Client: Graph-Mada SARL & StratMin Global Resources Plc

INDEPENDENT TECHNICAL REPORT ON THE LOHARANO GRAPHITE MINE PROJECT, MADAGASCAR

Creo Design (Pty) Ltd

September 2012-09-25

Prepared by: Dr. J. Hattingh

This report has been prepared by Creo Design (Pty) Ltd with all the reasonable skill, care and diligence, within the terms of the contract with the client. The report is confidential to the client and Creo Design accepts no responsibility of whatever nature to third party to whom this report may be known.

No part of this document may be reproduced without prior written approval of Creo Design (Pty) Ltd

2

INDEPENDENT TECHNICAL REPORT ON THE LOHARANO GRAPHITE MINE PROJECT, MADAGASCAR

DOCUMENT CONTROL SHEET

AUTHOR:	Dr. Johan Hattingh	Date: 25 September 2012
	PhD (Geology), Pr. Sci Nat

CHECKED BY:	Carel van der Merwe	Date: 21 September 2012
	B.Sc. Hons., Pr. Sci Nat

APPROVED BY:	Dr. Johan Hattingh	Date: 25 September 2012
	PhD (Geology), Pr. Sci Nat

PREPARED FOR GRAPH-MADA SARL & STRATMIN GLOBAL RESOURCES PLC

COPY	COPY NO	RECEIVED BY	DATE
Client Copy
File Copy

COPY NO: 1

Please sign and fax / email back to Creo Design on +27 21 880 0226 / admin@creo.co.za TO ACKNOWLEDGE RECEIPT

1.	SUMMARY7
2.	INTRODUCTION AND TERMS OF REFERENCE9
2.1	Competent Person 10
2.2	Site Visits 10
3.	RELIANCE ON OTHER EXPERTS 10
3.1	Mineral Tenure 10
3.2	Permitting 10
3.3	General 10
4.	PROPERTY DESCRIPTION AND LOCATION 11
4.1	Location 11
4.2	Property Title and Land Tenure 11
4.3	Government Policy and Outlook Regarding the Mining Industry 15
4.3.1	Background 15
4.3.2	Mining 16
4.3.3	Royalty payments 18
4.4	Madagascar Environmental Policy 18
4.5	Graph-Mada Environmental Policy 19
5.	ACCESSIBILITY, PHYSIOGRAPHY, CLIMATE, INFRASTRUCTURE, & SECURITY 20
5.1	Access 20
5.2	Physiography 22
5.3	Climate 22
5.4	Local Resources and Infrastructure 22
5.4.1	Water 23
5.4.2	Power 23
5.4.3	Telecommunications 23
5.4.4	Mining Equipment and Processing Plant 23
5.4.5	Roads 23
5.4.6	Waste and Sewage 23
5.4.7	Fuel 23
5.5	Security 24
6.	EXPLORATION HISTORY 24
6.1	Property‐Scale Exploration History 24
7.	GEOLOGICAL SETTING 25
7.1	Geomorphology 25
7.2	Regional Geology 25
7.2.1	Eastern Madagascar Geology 29
7.3 7.3.1	Property Geology 29 Brickaville Group 29
7.3.2	Manampontsy Group 30
7.4	Graphite Mineralization 34
8.	EXPLORATION 35
8.1	Pitting and Auger Drilling 35
8.2	Geological Mapping 36
8.3	Trenching Programme 36
8.4	Prospecting and sampling 36
9.	GRAPH-MADA – 2012 TRENCHING PROGRAM 37
9.1	Trenching and auger equipment 37
9.2	Sampling and Sample Handling Procedures 38

9.3	Logging 39
9.4	Sample Recovery 39
9.5	Sample Photography 39
9.6	Sample Position Surveying 39
9.7	Results 40
10.	SAMPLING METHOD AND APPROACH 40
10.1	Laboratory Analysis 40
10.2	Standard Sampling 40
10.2.1	Trench Sampling 40
10.2.2	Auger Drill Sampling 41
11.	SAMPLE PREPARATION, ANALYSIS AND SECURITY 41
12.	DATA VERIFICATION 43
12.1	Collar Surveys 43
12.2	Channel Sample Logs 43
12.3	Assays 43
12.4	Density 43
12.5	Assay QA/QC 43
12.5.1	Standard Reference Material 43
12.5.2	Duplicates 44
12.5.3	Blanks 44
12.6	LECO CS 844 QA/QC Procedures 44
12.7 13.	Metallurgical Sample Selection, Collection and Shipping 45 ADJACENT PROPERTIES 45
14.	MINERAL PROCESSING AND METALLURGICAL TESTING	45
14.1	Historical Work 45
15.	MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES 46
15.1	Geological Interpretation 46
15.2	Exploratory Data Analysis 47
15.2.1	Assays 47
15.2.2	Trench Data Evaluation 47
15.2.3	Grade profile 48
15.2.4	Capping 49
15.3	Mineral Resource and Mineral Reserve Estimates 50
15.3.1	Introduction 50
15.2	Audit Procedures 50
15.3	Mineral Resource and Reserve Estimation Methodology 50
15.3.1	Quality and Quantity of Data 51
15.3.2	Quality Assurance/Quality Control 51
15.3.3	Definition of Auger and Channel sample Intersections 52
15.3.4	Block Tonnage Grade Estimation 52
15.3.5	Mineral Resource Blocks 52
15.3.6	Classification 53
15.3.7	Mineral Reserve Estimation 53
15.4	Graph-Mada's Mineral Resource and Mineral Reserve Statement 54
15.4.1	Resource and Reserve Statement 54
15.5	Creo Comments 55
16.	CONCLUSIONS AND RECOMMENDATIONS	55
17.	CERTIFICATE OF QUALIFIED PERSON	57
18.	REFERENCES	58

Figures

• Figure 4-1: Location map
• Figure 4-2: Location map of the licence areas.
• Figure 5‐1: Road Access to the Loharano property from the Toamasina
• Figure 7-1 Landscape at Loharano comprising hilly terrain and deeply incised valleys.
• Figure 7-2: Madagascar Geology
• Figure 7-3: Brickaville amphibole-biotite gneiss
• Figure 7-4: Sampling point in a trench cut into the lateralized graphite bearing Manampontsy deposits.
• Figure 7-5: Exploration pit showing the humic topsoil grading into laterite clay with an inset showing cream coloured quartz/kaolin rich graphite bearing laterite from the bottom of the pit.
• Figure 7-6: Trench and pit distribution in the explored portion of the licence area.
• Figure 7-7: A trench section showing the occurrence of graphite in the laterite as seen in the ferruginous upper part of the secession.
• Figure 8-1: Ferruginous laterite scree.
• Figure 8-2: View to the west of Trench 3, in the background, and Trench 5 in the foreground, parallel to each other and across the presumed strike of the graphite-bearing laterite clays.
• Figure 9-1: Excavation of Trench T3
• Figure 9.2: Auger drilling
• Figure 9-3: Marked sampling point at Trench T5
• Figure 15 -1: Idealized cross-section of the laterite clays in the graphite deposit at Loharano
• Figure 15-2: Grade-frequency % distribution
• Figure 15-3: Vertical grade variogram based on weighted averages showing increase in grade at depth
• Figure 15-4: Plan view of 3D model of the indicated resource at Loharano

Tables

• Table 4-1: Property Status
• Table 13.1: Shows the Carbon and Sulphur values for Standards used in the Laboratory
• Table 15-1: Graph-Mada CREO Mineral Resource and Mineral Reserve Statement for the Loharano project (at 20 September 2012).

Appendices

• APPENDIX 1:
• APPENDIX 2:
• APPENDIX 3:

1. SUMMARY

The Loharano Graphite Project is held by Graph-Mada SARL, a company established in Madagascar for the purpose of the mining and beneficiation of natural crystalline flake graphite, in an area located in eastern Madagascar some 15 km west of the coast and 20 km south west of the town Brickaville. This area is particularly well known for its high-quality flaky graphite. The graphite is extremely pure (up to 99% carbon) and occurs in the form of disseminated graphite flakes within the Proterozoic gneissic host rock of probably sedimentary origin.

The Loharano graphite deposits occur within the central-eastern part of the Precambrian belt in eastern Madagascar. Geologically, Madagascar can be divided into the Precambrian basement complex in the eastern part of the country, and the sedimentary cover formations in the west. Central Madagascar is traversed by a 100- km wide, north-south-trending shear zone of possible Pan-African age transecting the Proterozoic and Archean basement. This high-grade zone consists mainly of granulites and amphibolite facies rocks, migmatites, conformable granite sheets, and granite plutons. The north-west-trending Ranotsara Shear Zone separates southern Madagascar, where paragneisses predominate, from centralnorthern Madagascar, which consists mainly of granitic orthogneisses.

The Loharano license area is underlain by the Precambrian metamorphic rocks of the "Graphite System". The Graphite System is locally subdivided into the gneiss and schist dominated Ambatolampy Group to the west and the migmatite dominated Manampontsy Group to the east underlying the license area. The Manampontsy Group is particularly well known for its high-quality flaky graphite. The graphite is extremely pure (up to 99% carbon) and occurs in the form of fracture and foliation fillings within the gneissic and migmatitic host rocks that have been lateralized to clay.

Here the graphite-bearing composite silicate metamorphic rock, pervasively heterogeneous on a meso- to megascopic scale typically consists of darker and lighter parts. The darker parts usually exhibit features of metamorphic rocks readily associated with graphite layers, whereas the lighter parts are depleted of ferrous and manganese oxides. The dominant structural trend is an approximate northnortheast – south-southwest orientation and graphite mineralization follow the same trend.

Graphite flakes and layers occur throughout the lateralized sections of the host rocks, but are often separated by thin layers of barren clay. The graphite content and size of the flakes tend to increase as the clays become more quartz-rich in depth.

The thickness of the lateralized host rocks reaches a minimum of 10 metres in the historical quarries where the present excavations were shown to be open-ended terminating at depth in graphite-bearing clay.

The lack of outcrops in the Loharano license area prevents an insight into the primary graphite mineralization in the graphite-bearing metamorphic rock. The graphite mineralization observed is of a highly altered nature in laterite clays derived from the original host rocks.

An extensive trenching and pitting program was conducted in the permit area. This revealed a typical humic topsoil averaging 15 centimetres, underlain by a succession of reddish brown, yellow and cream-coloured laterite clays showing rhythmic banding probably caused by chemical precipitation. The clays become progressively more sandy or quartz-rich, often with small kaolinized feldspar fragments, in depth and grade into cream or greyish white clayey saprolite, reflecting the underlying gneiss. The graphite mineralization occurs as sporadically disseminated flakes throughout the various clays, occasionally forming thin discontinuous layers, but in general, in increasing amounts in depth.

A total of 588 samples have been analysed for total carbon and organic carbon content. To check on the possible presence of carbonate carbon, 6 samples of graphitic laterite clay, varying in colour and composition, were selected for assaying. The average carbonate carbon content was found to be low at 0.20%C. The graphitic carbon content gave an weighted average value of 3,31% C. The lowest value obtained was 0.01% C, the highest value 17.6% C. Lower grades are found predominantly in the top 1m just below surface. The average grade increases to 5.15%C by stripping the overburden represented by the top 1m just below surface.

The assay results were entered into a data base from where the data was imported into 3D modelling software where the data gets displayed spatially and ultimately block values could be calculated. From this it was calculated that an Indicated Resource of 421 000t at 5.15% graphitic carbon and an Inferred Resource of 5 273 000 at 4,04 % graphitic carbon has been established at the north block at the Loharano licence area during the latest exploration campaign.

Creo believes that the trenching, pitting and auger drilling done near the surface is currently sufficient for delineating a sizeable open pit with sizeable proportion of material in the Indicated category. Trenching data and the 3D modelling undertaken indicates that mineralisation may extend in an easterly and southerly direction and substantial scope exists to extend the resource in depth. Infill and extensional diamond core drilling will improve the geological as well as the resource confidence in the areas currently identified as targets.

2. INTRODUCTION AND TERMS OF REFERENCE

Graph-Mada SARL (Graph-Mada) is engaged in the exploration for and mining of, a graphite deposit and development of a processing plant into a state of the art beneficiation facility in Madagascar, some 100 km south-west of Toamasina and 15 km inland from the east coast of central Madagascar. The company maintains offices and staff in Antananarivo, Madagascar and Cape Town, South Africa. Graph-Mada and StratMin Global Resources Plc (StratMin) engaged Creo Design (Pry) Ltd (Creo) in May 2012 to prepare an Independent Technical Report in conformity with standards and in compliance with the JORC Code issued by the Australasian Institute for Mining and Metallurgy ("AusIMM"), under whose technical jurisdiction the mineral resources fall. The guidelines as set out in the JORC Code are considered by Graph-Mada to be a concise recognition of the best practice reporting methods for this type of mineral development and accord with the principles of open and transparent disclosure that are embodied in internationally accepted Codes for Corporate Governance.

Graph-Mada has two graphite licence areas but only one has been developed to some extent in terms of detailed mineral resource establishment and infrastructure. This report describes the developments on one of the two licence areas with the licence number 26670 and called the Loharano Project. Here the licence consists of two blocks where exploration work was focused totally on the northern block. On the other licence area called the Antsirabe Project located some 60 km to the north-west of the Loharano Project work is still limited to basic reconnaissance exploration.

This report describes the Loharano Project and results of a first phase mineral resource estimation based on pits, auger holes and trenches excavated as part of an extensive exploration campaign. The report was prepared at the request of Mr. Marius Pienaar, President and COO of Graph-Mada under instruction of the board of directors of Graph-Mada and Stratmin. A follow-up resource estimation based on diamond core drilling data will be done at a later stage when core drilling equipment can be sourced.

The currency used in this report is expressed in US dollars and, unless specified, all measurements in this report use the metric system. Coordinates used within this report are Universal Transverse Mercator (UTM), and are reported in UTM zone 38S, WGS 84 datum.

The sections on Mining Operations, Process Mineral Recoveries, Markets, Contracts, Environmental Considerations, Other Relevant Data and Information, Taxes, Capital and Operating Cost Estimates, Economic Analysis, Payback, and Mine Life, are not applicable to this report. All Illustrations are embedded within the body of the report.

2.1 Competent Person

Johan Hattingh employed by Creo as a geologist with more than 20 years of experience is the author responsible for the preparation of this report. He is a Competent Person (CP), as defined by the JORC Code issued by the AusIMM.

2.2 Site Visits

Johan Hattingh visited the Loharano graphite property in his capacity as CP on behalf of Creo, to conduct an independent review during June 6 to 11, 2012 as part of his preparation and data acquisition for this report.

Also during June and early July 2012, a second senior geologist from Creo, Carel van der Merwe spent 18 days on site verifying the mapping and studying the pits and trench profiles prepared by Graph-Mada. During this time a comprehensive trenching and channel sampling program was supervised by Carel van der Merwe.

3. RELIANCE ON OTHER EXPERTS

Johan Hattingh as author of this Technical Report states that he is a competent person for the areas as identified in the appropriate "Certificate of Competent Person" attached to this report.

Johan Hattingh and co-workers from Creo has followed standard professional procedures in preparing the content of this report. Data used in this report has been verified where possible, and this report is based on information believed to be accurate at the time of its completion. The author has relied on information derived from the following reports pertaining to mineral rights permitting issues.

3.1 Mineral Tenure

Creo's CP has reviewed the mineral tenure related to the Loharano graphite properties and has independently verified the legal status and ownership of the Loharano Project area including underlying property agreements.

3.2 Permitting

Regarding the status of the current permits, Creo's CP has independently verified the information, opinions and data supplied by Graph-Mada representatives and by independent experts retained by Graph-Mada as far as possible.

3.3 General

The information mentioned in the above sections was sourced from scans and photocopies of official documents, which has been supplied by Graph-Mada. The author is not responsible for the accuracy of any mineral tenure or related data, and do not make any claim or state any opinion as to the validity of the property disposition described herein.

For the preparation of this report, the author has relied on maps, documents, and electronic files generated by the Graph-Mada management and exploration teams, contributing consultants, and service providers working under their supervision. To the extent possible under the mandate of a JORC review, the data has been verified with regard to the material facts relating to the prospectiveness of the property reviewed in this report.

4. PROPERTY DESCRIPTION AND LOCATION

4.1 Location

The Loharano property, the subject of this report, is 7.794 km² in size and is located in east‐central Madagascar, 90 km south-west of the port city of Toamasina (Tamatav), in the Toamasina Province (Figure 4‐1). The village of Brickaville is situated some 20km north of the Loharano project block.

The project is centred on UTM coordinates 288,370 E 7,908,060 N (UTM WGS 84). Madagascar designates individual claims by a central LaBorde UTM location point, comprising a square with an area of 6.25 km², the block area extending 1.25 km in all directions from this central point.

4.2 Property Title and Land Tenure

The claims that form part of the Loharano graphite property are held under mining and exploration permits. The above-mentioned permits have been issued by the Bureau du Cadastre Minier de Madagascar (the "BCMM", the Malagasy Mining Registry) and signed by the Ministry in charge of mining in Madagascar.

Certificates from the BCMM dated 24 April 2012, certifying the transformation of the size of the 16 mining squares of 2.5 km x 2.5 km covered by Exploitation Permit No. 26670, in the name of the Company, into 32 mining squares of 625 m x 625 m each, under the auspices of the Toamasina province. This permit represents the Loharano licence where the findings on the northern 16 of the 32 mining squares (Figure 4-2) is the subject of this report.

The licenses were issued for the exploitation of graphite and are valid for a period of 40 years from the date of signature and may be renewable in periods of 20 years thereafter. This certificate is valid for 3 months from the date of signature.

Figure 4-1: Location map

An Exploitation Permit No. 24730 dated 5 March 2007 was issued to the Company under the auspices of the Toamasina province for sixteen (16) mining squares of 2.5 km x 2.5 km. The license was issued for the exploitation of graphite and is valid for a period of 40 years from the date of signature and may be renewable in units of 20 years thereafter.

The details and location of the properties are shown in Table 4‐1 and Figure 4‐2.

Loharano Property Status
Permit Squares #		LaBorde Projection		WGS 84, Zone 38 South		Date Expiry
		X	Y	UTMX	UTMY	Granted	Date
26670	32	668961.76	797236.99	288369.81	7908060.09	21/01/2008	20/01/2048
Antsirabe Property Status
24730	16	683767.35	863878.14	301492.18	7975041.94	05/03/2007	04/03/2047

Table 4-1: Property Status

Land ownership is vested in the Government of Madagascar and is regarded as communal land under control of local communities using it mainly for subsistence farming activities and small scale brick and cobble stone quarrying operations along the western perimeter of the licence areas.

The claims were acquired by Graph-Mada under the rules of the Code Minier 1999 with some limited amendments that have been instituted to the Code by Decret 2005‐021, which the Bureau du Cadastre Minier de Madagascar (BCMM), the administration body for mining permits, has published in a brochure dated 2006, available in their office in Antananarivo. The amendments relate to the reduction of the permit duration (from 10 years to 5) and permittable square size (from 2.5 km x 2.5 km to 625 m x 625 m), and changes to the fees applied. Upon the issuing of the new decree, pre‐existing squares were converted to new but smaller squares, and pre‐existing properties are now governed by the tenets of Decret 2005‐021.

The updated Decret requires the payment of annual administration fees for permits of 15,000 Ariary (MGA). The conversion rate (as at 1 July 2012) is approximately 2,150 Ariary to one US dollar. Annual fees are equivalent to approximately US\$9 for research permits and US\$28 for exploitation permits in years one and two. Annual fees increase by multiplying by a factor equivalent to the number of years (plus 1) that the permit has been held by the company. Payments of the administration fees are due on March 31 of each year, along with the submission of an activity report.

Figure 4-2: Location map of the licence areas.

Permit ownership is readily transferable. Upon establishment of a resource, Research Permits are readily transferable into Exploitation Permits through an application process.

The properties have not been surveyed by a registered land surveyor; however, since all claim boundaries conform to the predetermined rectilinear LaBorde Projection grid, these can be readily located on the ground by use of Global Positioning System instruments.

Most current GPS units and software packages do not offer LaBorde among their available options, and therefore defined shifts have to be employed to display LaBorde data in the WGS 84 system. For convenience, all Graph-Mada positional data is collected in WGS 84, and if necessary converted back to LaBorde.

4.3 Government Policy and Outlook Regarding the Mining Industry

4.3.1 Background

Madagascar was formerly an independent kingdom but became a French colony in 1896 where after it regained independence in 1960. During 1992-93, free presidential and National Assembly elections were held ending 17 years of singleparty rule. In 1997, in the second presidential race, Didier Ratsiraka, the leader during the 1970s and 1980s, was returned to the presidency.

Marc Ravalomanana achieved a second term following a landslide victory in the generally free and fair presidential elections of 2006. In early 2009, protests over increasing restrictions on opposition press and activities resulted in Ravalomanana stepping down and the presidency was conferred to the mayor of Antananarivo, Andry Rajoelina. Numerous attempts have been made by regional and international organizations to resolve the subsequent political gridlock by forming a powersharing government.

In November 2009 a power‐sharing coalition government agreed to govern the country until the next election. Based on information provided by the Company, the Loharano project has in no means been affected by the political situation in Madagascar during this past three years, nor are there any indications that it will be adversely affected going forward. As of late 2011, Andry Rajoelina has appointed a new cabinet. The 2012 presidential election was contested between the followers of Didier Ratsiraka and Marc Ravalomanana, nearly causing secession of half of the country. In April 2012, the High Constitutional Court announced Ravalomanana the winner.

The Madagascar legal system is based on the civil law system based on the old French civil code and customary law in matters of marriage, family, and obligation.

After discarding socialist economic policies in the mid-1990s, Madagascar followed a World Bank- and IMF-led policy of privatization and liberalization. This strategy placed the country on a slow and steady growth path from an extremely depressed level. Agriculture, including fishing and forestry, is a mainstay of the economy, accounting for more than 25% of GDP and employing 80% of the population.

Exports of apparel boomed in recent years primarily due to duty-free access to the US, however, Madagascar's failure to comply with the requirements of the African Growth and Opportunity Act (AGOA) led to the termination of the country's dutyfree access in January 2010 and a sharp fall in textile production. Deforestation and erosion, aggravated by the use of firewood as the primary source of fuel, are prevailing concerns. The current political crisis, which began in early 2009, has dealt additional blows to the economy. Tourism dropped more than 50% in 2009 compared with the previous year, and many investors were wary of entering the uncertain investment environment. GDP grew by less than 1% per year in 2010- 2011.

The Malagasy Government embarked on an economic revival plan as early as the turn of the century. The Ministry of Energy and Mines had already initiated reform through the PRSM program (Projet de Reforme du Secteur Minier) with the introduction of the new Mining Code in 1999 and the establishment of the Mining Titles (Cadastral) Registry (Bureau du Cadastre Minier de Madagascar, or BCMM) in 2000. These initiatives are successfully attracting new investors to Madagascar, including both junior and senior mining companies, to explore and develop the country's mineral endowment within a stable, transparent legal and regulatory framework.

4.3.2 Mining

Most of Madagascar's mining and mineral processing operations are privately owned, including the gemstone, graphite, and salt mines and the cement plants. Artisanal miners are responsible for the production of most of the gemstones and gold in Madagascar. The State-owned Kraomita Malagasy SA (KRAOMA) was the country's only chromite producer. Shortly after the military coup of March 2009 the interim Government suspended the issuance of mining permits and discussed the possibility of revising some mining contracts.

The manufacturing sector accounted for an estimated 13.2% of the gross domestic product, and the mining and construction materials sector, 0.7 %. Employment in the mining industry was estimated to be between 300,000 and 500,000 workers (Ministry of the Economy, Commerce, and Industry, 2008, p. 114).

After 2009, the production of most gemstones increased sharply. Ilmenite, rutile, and zircon production started in 2009. Quartz production has decreased by 91% in 2009; mica, by 71%; and chromite, by an estimated 17%. The country's petroleum refinery was shut down in 2005.

During 2003, in furtherance of its economic policy, the Ministry of Mines introduced the 5‐year PGRM program (Projet de Gouvernances des Ressources Minérales) to improve and enforce the legal and statutory framework, particularly with respect to mining; and to promote investment in the minerals sector through a dedicated ASPM (Agence de Promotion du Secteur Minier); and to improve the geoscientific knowledge of Madagascar; and to address environmental, health and safety issues, and to contribute to poverty reduction.

To achieve this, the Code Minier or the Mining Code was set as the departure point for mining in Madagascar although it has been in force since 1999. The Mining Code was expanded and reinforced by the Decree N°2000-170, which sets out the technical details for the implementation of the Mining Code and Law no. 2005-025 of 17 October 2005 which amends the Mining Code. Its enforcing decree is Decree no. 2006-910 dated 19 December 2006. The Mining Code covers all aspects of mining. The most important aspect to consider at the present time is permitting. For all permits, only one permit exists per square. The Minister of Mines must sign each individual permit, although this is not required for Autorisation Exclusive de Réservation de Périmètre ("AERP") (permit reservations).

In accordance with the Mining Code, Madagascar is divided into squares; the former size of squares corresponds after adoption of the new mining code to 16 new squares of 625 m on a side. (Article 232 new mining code and article 85 of its mining decree). Squares issued prior to this date (2.5km on a side) are automatically converted into 16 "new" squares. These are administered by the Bureau de Cadastre Minier de Madagascar ("BCMM"), the Madagascar Mining Registry.

It operates on a first-come, first-served basis. The system operates in a reliable, stable fashion and the risk of expropriation is low. There are three basic types: AERPs, Permis de Recherche ("PR") or Exploration Permit and Permis d'Exploitation ("PE") or Exploitation Permit. Applications for any type of permit can be made either by a Malagasy citizen or by a Malagasy registered company (SA or SARL). There is no restriction on the shareholding in the company that holds a permit, or on transfers of shares within that company. In the late 1990s, Madagascar had four graphite mining companies that produced more than 16,000 ton high grade graphite per year.

In recent years, national graphite production declined to about 5,000 tons per year because of increasing costs of petroleum products used for drying graphite during final stages of product beneficiation. Processing costs also increased because of declining grades at local graphite deposits as higher-grade materials were depleted. Etablissements Gallois S.A. was the only remaining company that regularly produced and exported graphite with an annual production of approximately 10,000 tons.

The Antsirakambo, Marovintsy and Ambalafotaka graphite mines owned by Etablissements Gallois are located on the east cost of Madagascar, in the Toamasina and Vatomandry regions. The blending facilities, as well as the transit department, are centred in the city of Toamasina, Madagascar's main port. From here graphite is packed in 20-ton containers for export.

4.3.3 Royalty payments

No royalty payment system is in place at this stage in Madagascar. There has been much debate over this legislation and, as a consequence, the enactment of the Royalty Bill has been postponed to after the April 2012 elections. This proposed piece of legislation incorporates the government's intention to impose revenue royalties on mineral projects. To date no further development in this regard was made public.

There are a number of problems with this proposal as it needs to be linked to existing tax legislation which clearly identifies "mining" and "industrial" tax rates, and the intention is not to facilitate double taxation.

4.4 Madagascar Environmental Policy

In order to conduct any form of mineral prospecting or mining, companies have to make a declaration to the BCMM (Mining Code 20, article 2005). This declaration of prospecting or mining is valid for one year from the date of approval by the BCMM (article 66 of the implementing decree of the Mining Code 2005). After this, the adoption of the Malagasy Environment Charter and the promulgation of the MECIE decree imply an obligation for any public or private investment project likely to impact the environment to be examined either via an environmental impact assessment (EIA), or through a Environmental Commitment Programme (known by its acronym in French, PREE), depending on the technical nature, size of the project and the assessment of the agencies involved. The project feasibility study determines the type of study to be performed (EIA or PREE). In the case of a mining project, the following are subject to an EIA:

any developments, facilities, structures and works and activities that might affect the sensitive zones (as required by Order No. 4355/97 of 13 May 1997 giving the definition and demarcation of sensitive zones);

any developments, transport, works and activities that exceed thresholds described in the MECIE Decree (see also MECIE Decree, annex I).

Madagascar is regarded as one of the most unique places in the World, with over 80% of flora and fauna being endemic to the island. Most of Madagascar's inhabitants work in the agricultural sector however; many of the ecosystems on the island have been adversely altered through unsustainable subsistence agricultural practices. In order to serve both economic development and the establishment of sustainable environmental policies and institutions, the Malagasy government created the Malagasy Office of the Environment in the late 1980s, and signed the National Environmental Action Plan (NEAP), the most ambitious and comprehensive environmental program in Africa.

The NEAP was launched operationally in 1991 with the following objectives:

• manage the national heritage of biodiversity in protected areas, in conjunction with sustainable development of surrounding areas
• improve human living conditions through protection and better management of natural resources, emphasizing watershed protection, reforestation, agroforestry, and improved water supply and sanitation
• promote environmental education, training, and communication
• improve policy and management
• Establish mechanisms for research, managing data, and monitoring the environment.

4.5 Graph-Mada Environmental Policy

Due to the fact that no formalized 'best practices' framework is in place for mining companies in Madagascar, Graph-Mada engaged Malagasy environmental consultants from AGETIPA (Agence d'Exécution des Travaux d'Intérêt Public d'Antananarivo) to ensure compliance with the NEAP and its principles. Furthermore, Graph-Mada has adopted an internationally accepted best practice guideline to help it continuously improve its social, environmental, and health and safety performance, and to comprehensively integrate these three aspects into all of their exploration and mine development work.

Graph-Mada has implemented the following concepts and principles for responsible mining related activities:

• to have proper management systems in place that will ensure sound practices with sustainable development as departure point
• to employ a local Country Manager based in the capital who is responsible for liaising with government officials and ensuring the Company complies with all environmental and mining policy
• to consult with local land users before conducting any mining related activities

• to conduct mining activities in accordance with internationally accepted 'best practices' guidelines
• to be sensitive to local customs and beliefs when conducting mining activities through continuous consultation with the community
• to ensure a safe and healthy work place, and protecting all employees, contractors and sub‐contractors and affected communities from risks and hazards
• to allow for working conditions and compensation that comply with national laws and that are consistent with international standards, and compatible with local social and economic circumstances
• to manage the environment by reclaiming unused excavations, roads and other disturbances where possible and to re-vegetate reclaimed areas
• to avoid water, soil and air pollution

5. ACCESSIBILITY, PHYSIOGRAPHY, CLIMATE, INFRASTRUCTURE, AND SECURITY

5.1 Access

From the major port city Toamasina access to the mine is gained via the main paved road leading from Toamasina to the capital, Antananarivo. This road is followed from Toamasina in a southerly direction. At about 110km by road the road leads through Brickaville (nearest town to the mine) and a further 17.4 km south of Brickaville the turn-off to the mine is to the left where it is marked with a large sign.

From the turn-off a secondary all-season road leads to the mine in an southerly and later in an easterly direction over a distance of 2.3 km. The gravel road section is used by heavy transports even during portions of the rainy season, but may become impassable at the height of the rainy season. Figure 5-1 shows the road access to the Loharano Property from the city of Toamasina.

The closest railroad access is from Brickaville northwards to the harbour city of Toamasina, which is the nearest export harbour.

The capital, Antananarivo, is currently serviced by South African Airways with services to Johannesburg, Air France out of Paris, and Air Mauritius to Mauritius; Air Madagascar also provides services to Paris, Johannesburg, Mauritius, Nairobi, and Réunion. Air Madagascar also has infrequent flights to Bangkok and Milan; domestically, Air Madagascar has regularly scheduled jet and propjet flights throughout the country, including daily flights between Antananarivo and Toamasina.

Figure 5‐1: Road Access to the Loharano property from Toamasina

5.2 Physiography

The Loharano project area is situated within the moderate relief granitic hills, forming the centre of the Madagascar metamorphic sub-province at the eastern margin of the Madagascar plateau.

The property is covered by dense subtropical vegetation with intermittent areas of grassland vegetation, especially in areas dominated by laterite, where it occurs mainly in the central portion of the mining area where red clayey soils dominates. Here grass cover is widespread and trees are widely spaced. Outcrop is totally absent due to the high degree of weathering of the substrate with bedrock totally decomposed well below 5m below surface and probably even below 15m below surface.

In areas of lower relief, alluvial cover is generally thicker and covered by dense semi-rainforest vegetation. Drainage systems here form part of the head water streams of eastward draining coastal river systems. All streams are perennial and even in the dry season soils are water logged below 5 m depth. Elevations range between 20 and 50 m amsl for most of the concession area.

5.3 Climate

The Loharano project falls within the subtropical Eastern climate zone of Madagascar, with elevated temperatures year round peaking in the hot summer months at an average of over 30°C. The climate is dominated by south-eastern trade winds originating in the Indian Ocean anticyclone, a centre of high atmospheric pressure that seasonally changes its position over the ocean.

Madagascar has two seasons, a hot, rainy season from December to March/April, and a cooler dry season from April/May to November. Rainfall in this part of Madagascar is generally high and very variable. Average annual rainfall varies from 1500mm to 1800mm. The average is 1600 mm, mostly from summer thunderstorms. The average annual evaporation rate is measured at 2,524mm. The high rainfall and high evaporation rates result in extremely humid conditions. Temperatures can be extreme and have varied between a minimum of 5°C in winter to a maximum of 42°C in summer. Average temperatures in the area, however, are in the range between a winter minimum of 13°C to a summer maximum of 33°C.

5.4 Local Resources and Infrastructure

The current infrastructure on the site comprises housing units for staff, site offices, workshops and stores facilities. A state of the art graphite beneficiation plant was designed and is being constructed on site at the moment.

The civil construction work has been completed and all of the processing equipment for the plant has been installed. Electrical reticulation and plumbing has been installed and tested. Commissioning is currently under way with the first successful wet commissioning runs completed.

5.4.1 Water

The main water source for process water is a tributary of the Iaroka River that runs all year round. Here a 150 mm water pump delivers process water to the plant situated on a terrace some 20m above and 160m from the river via two 200 m3 holding reservoirs. Potable water is extracted from a 20m deep water well near the mine village.

5.4.2 Power

Power is provided to the site by a 300kW generator that will be sufficient to power the plant and to provide electricity to the mine village. Back-up generators are kept on site.

5.4.3 Telecommunications

Telephone communication is available via cellular phones with good reception over the entire licence area. Internet access is available via a mobile network modem. The speed of the internet connection is very slow.

5.4.4 Mining Equipment and Processing Plant

All Mining equipment is owned by Graph-Mada SARL. Earth moving equipment includes an excavator, two articulated dump trucks and a front end loader. The graphite beneficiation plant is equipped with a series of slurry pumps, a screening plant, flotation cells, a thickener system and a dewatering filter press.

5.4.5 Roads

All roads in and around the mine are gravel and well maintained. Water bowsers will be utilized to spray the roads to limit dust entrainment into the atmosphere during the dry months.

5.4.6 Waste and Sewage

Septic tanks and French drains provide sewage disposal. Solid waste disposal will take place in small landfill sites in the mined-out areas. Oil, grease and related pollutants are removed by a contractor from site for disposal at appropriate waste sites. Any other hazardous waste is transported to a registered hazardous waste site.

5.4.7 Fuel

Fuel is delivered to site by petroleum suppliers. Mainly diesel fuel is used and is stored in a 23 000 litre storage tank on site.

5.5 Security

Site security is maintained by a team of guards under direct supervision of the mine management. Security of personnel is a company policy directed by management. Since the area is predominantly rural, few police or other security patrols are common in the area. There is always a remote possibility that local criminal activity might spill over to the mine site affecting operations. To mitigate this, the company has a good access control system in place.

6. EXPLORATION HISTORY

BRGM of France was the first official exploration team in the area to conduct a regional geological mapping campaign and first mineral deposit survey. The Loharano area was regionally mapped by BRGM in the 1950's as part of a geological research/mapping project under the auspices of the French Government. A regional geological map, which straddles the Precambrian geology of the area was compiled to a scale of 1:200,000 by BRGM in the late 1950's and was published in 1962.

In 1985, BRGM produced a country scale compilation of all exploration and mineral inventory data in their files in a three‐volume set. Relatively little exploration and development work was completed in Madagascar after the BRGM work and therefore, the volumes are key to retracing historical and comprehensive work. Following independence in 1960, archival research did not reveal evidence of mineral exploration in modern times within the Loharano region.

A series of excellent 1/100,000 scale geological maps (1952‐53) are available for the region surrounding the property. The property area is covered by 1/100,000 scale topographic map Ampasimanolotra (Brickaville) Feuille U-47 (1965)

The region around the Loharano property has primarily been explored for base metal type occurrences although colonial geologic services were alert to all kinds of mineral potential in the region. Just to the northwest of the Loharano Property, three stone quarries are currently or have recently been exploiting gneissic granite to produce brick size blocks for export to the main centres.

6.1 Property‐Scale Exploration History

The graphite deposits at Loharano were exploited on a small scale during French colonial times, reportedly until 1947 when production was suspended due to a rebellion.

The workings consist of two small quarries near the central part of the license area and it has been estimated that approximately 70 000 tonnes of graphite ore has been excavated.

Since the establishment of the company in 2006 Graph-Mada SRL has excavated a bulk sample, between the two small historical quarries, of 532 tonnes of ore yielding 18 tonnes of graphite. Appendix 1 provides details of the analysis of the bulk sample. A sizing test by Asbury Graphite Mills Inc. of the recovered graphite showed that 97% of the particles exceeded +80 mesh in size. (For details, see Appendix 2.) The tests confirmed the possiblity of producing high grade natural flaky graphite from the deposit.

High resolution satellite imagery of the Loharano area was acquired and analysed by means of spectral analysis to assist in indentifying graphite target areas.

In addition, 34 pits have been dug and sampled, 70 auger holes drilled and sampled and at present 955 metres of 5m deep trenching have been completed and sampled. The trenches were channel sampled at 10 metre intervals and 588 samples of 1 metre or less have been submitted for analyses.

7. GEOLOGICAL SETTING

7.1 Geomorphology

The Loharano license area is located some 15km inland from the east coast of Madagascar on the western flank of a broad, open river valley incised by a tributary of the Laroka River into the coastal platform. The eastern part of the concession is occupied by the wide river floodplain and the western part of the concession is occupied by remnants of the severely dissected coastal platform where smaller rivers incised deep into the coastal platform to create a rolling hill terrain (Figure 7- 1). Rivers drain the concession predominantly in an easterly and northerly direction. Most of the concession area is located below 50m above mean sea level.

7.2 Regional Geology

Madagascar can be described as formed by two geological entities, the Precambrian crystalline basement, and the much younger overlying Phanerozoic non‐metamorphosed sedimentary formations.

The central and eastern two‐thirds of the island are mainly composed of Archean to Neoproterozoic‐aged crystalline basement rocks, made up of metamorphic schist and gneiss intruded by granite and basic igneous rocks. The basement is ringed by a series of five sedimentary basins ranging in age from Permian to Quaternary. To the east, it is also bordered by a narrow band of Cretaceous basalt and rhyolite. The basement is also cut by large volcanic massifs of Jurassic basalt and rhyolite, the eruption of which is related to the breakup of the former Gondwana super‐continent.

Figure 7-1 Landscape at Loharano comprising hilly terrain and deeply incised valleys.

The basement geology of Madagascar is a complex mélange of intercontinental tectonic blocks made up of ancient poly‐deformed high‐grade metamorphic rocks and later igneous intrusions. The basement of north‐central Madagascar is composed of two north‐south trending Archean domains. In the northernmost part of the island, the Archean belts are overthrust by the east‐west trending belt primarily composed of younger Neoproterozoic rocks metamorphosed to granulite facies (high‐grade) during the Cambrian.

The tectonic and metallogenic framework of the basement has been subdivided (Besairie et al., 1964) into four blocks: the northern Bemarivo Block (volcanics and meta sediments), the north-eastern Antongil Block (granite,tonalite, gneiss and migmatite), the central Antananarivo Block (migmatitic paragneiss and granitoid orthogneiss), and the southern Bekily Block (mafic and felsic intrusions). Figure 7‐2 shows the regional geology of Madagascar.

Figure 7-2: Madagascar Geology

From north to south, the blocks are described below:

• The Bemarivo Block (Neoproterozoic-Mesoproterozoic) is considered a volcanic nappe sequence in the northern part of the country. This fold and thrust complex is composed of meta‐sediments and calc‐alkaline volcanic, granite and gneiss that have collectively been thrust across north‐central Madagascar during the Mesoproterozoic.
• The Antongil Block (Middle to Late Archean) exposed along the northeast coast is a tectonic fragment derived from the breakup of the western Dharwar craton of southern India. It comprises a complex of foliated and unfoliated granite, tonalite orthogneiss (Palaeoarchaean protolith age 3,190 Ma), and variable migmatite gneisses with 100s metre‐scale lenses of kyanite‐grade metasedimentary rocks and sparse bodies of low‐grade, ultramafic-intermediate rocks (greenstones). The un-deformed granites yield ages in the range 2,540 to 2,510 Ma. Sahantaha shelf sediments of Neoproterozoic age with a Dharwar craton provenance were deposited on the NW passive margin of the Antongil basement.
• The Antananarivo Block (NeoArchaean to PalaeoProterozoic) of central Madagascar, within which the Loharano project lies, consists of variably migmatitic paragneiss and granitoid orthogneiss with 2.75 to 2.5 Ga protoliths, intruded by voluminous magmatic rocks, formed within an active continental margin setting. The block was later affected by strain along the NNW-SSE Betsimisaraka Suture (BS) zone, tens of kilometres wide, high strain belt, comprising amphibolite-granulite facies metasediments associated with km-scale lensoid masses of mafic- ultramafic rocks. It marks the line of closure of the Palaeo-Mozambique Ocean, separating Central Madagascar from the Antongil Block to the east as a result of westward subduction during the Neoproterozoic. The metasedimentary protoliths were sourced from the Dharwar craton and have depositional ages of 800 to 550 Ma. Eastward thrusting onto the shelf‐craton took place between 630 and 515 Ma (Cambrian age).
• The Bekily Block is situated in the southern part of the country and is thought to be of Proterozoic age. The block is dominated by high‐grade metamorphism (Figure 7‐2) and is bound by several prominent shear zones. Numerous syntectonic mafic and felsic intrusions occur in the region. The rocks contain frequent graphitic sequences. Two prominent N‐S trending late‐Neoproterozoic ductile shear zones, (the Ampanihy and Vorokafotra shears), bisect the region, with a third set of en‐echelon shears forming part of the NW‐striking, early Palaeozoic aged Ranotsara shear zone, which defines the northern edge of the Block. The Loharano Property is situated within the NNE striking Ampanihy shear zone.

The younger Phanerozoic sedimentary cover is largely restricted to the western side of the island where it covers much of the Ianapera property. The oldest Phanerozoic rocks are Permian‐Triassic in age and are found in continental rift basins. Later, the Morondava Basin of Triassic to Miocene age formed along the continental margin, and deposited a coal‐bearing transgressive‐regressive sequence of arenaceous sediments. These later sediments correlate with the continental Karoo sequence of southern Africa, which was widespread in the former Gondwana Supercontinent.

7.2.1 Eastern Madagascar Geology

The Loharano deposits occur within the central-eastern part of the Precambrian belt in eastern Madagascar (Antananarivo Block). The Precambrian is subdivided into Archean, medium to high-grade metamorphic rocks such as gneisses, migmatites, mica schists and amphibolites, and Proterozoic metasediments. The Precambrian of Madagascar is divided into two sectors by the north-west-trending sinistral Ranotsara Shear Zone. Central Madagascar is traversed by a 100- km wide, northsouth-trending shear zone of possible Pan-African age transsecting the Proterozoic and Archean basement.

This high-grade zone consists mainly of granulites and amphibolite facies rocks, migmatites, conformable granite sheets, and granite plutons. The north-westtrending Ranotsara Shear Zone separates southern Madagascar (Bekily Block), where paragneisses predominate, from central-northern Madagascar (Antongil Block), which consists mainly of granitic orthogneisses.

7.3 Property Geology

The Loharano project is underlain by supracrustal and plutonic rocks of Late Neoproterozoic age that are metamorphosed at upper amphibolite facies and deformed with upright NNE‐trending structures. The supracrustal rocks consist of migmatitic (± biotite, garnet) quartzofeldspathic gneiss, quartzite, and amphibolite gneiss.

7.3.1 Brickaville Group

Precambrian highly metamorphosed migmatites and gneiss belonging to the Brickaville Group occupies the higher terrain due to its resistance to weathering and erosion. The gneiss is essentially a white-weathering, fairly coarse-grained quartzfeldspar rock with amphibole grains occurring in clusters and streaks, the latter defining the well developed foliation of the rock. Narrow biotite-amphibole layers are common in these gneissic rocks (Figure 7-3). Here the quartz-rich highly metamorphosed amphibole gneiss and migmatites form prominent hills to the west of the Loharano Project area with the contact immediately west of the western boundary of the licence area.

Figure 7-3: Brickaville amphibole-biotite gneiss

7.3.2 Manampontsy Group

The Loharano license area is underlain by the Precambrian metamorphic rocks of the "Graphite System". The Graphite System is locally subdivided into the gneiss and schist dominated Ambatolampy Group to the west and the migmatite dominated Manampontsy Group to the east underlying the license area. The Manampontsy Group is particularly well known for its high-quality flaky graphite. The graphite is extremely pure (up to 99% carbon) and occurs in the form of disseminated and layered graphite within the gneissic and migmatitic host rocks that decompose to clay.

Rocks of the Manampontsy Group is prone to chemical weathering rendering the near surface part of the assemblage totally decomposed to well beyond 15m below surface. Here the rock is essentially lateralized into a graphite-bearing composite silicate metamorphic rock being pervasively heterogeneous on a meso - to megascopic scale where it typically consists of darker and lighter parts or zones (figure 7-4). No fresh outcrop was encountered any where near the Loharano Project area.

Figure 7-4: Sampling point in a trench cut into the lateralized graphite bearing Manampontsy deposits.

The darker parts usually exhibit features of metamorphic rocks readily associated with graphite layers, whereas the lighter parts are of an igneous nature. The dominant structural trend is an approximate north-northeast – south-southwest orientation and graphite mineralization follow the same trend.

Trenching and pitting in the permit area revealed a typical humic topsoil averaging 15 centimetres, underlain by a sequence of reddish brown, yellow and creamcoloured laterite clays showing rhythmic banding probably caused by chemical precipitation. The clays become progressively more sandy or quartz-rich, often with small kaolinized feldspar fragments, in depth and grade into cream or greyish white clayey saprolite, reflecting the underlying gneiss (Figure 7-5). The foliation strike follows the regional north-south trend and the dip is 500 to the west.

Figure 7-5: Exploration pit showing the humic topsoil grading into laterite clay with an inset showing cream coloured quartz/kaolin rich graphite bearing laterite from the bottom of the pit.

Towards the northern part of the exploration area and between the historical workings and the mine village in Trench 2, these clays seem to dip under the typical red laterite soil abundantly exposed elsewhere in the road cuttings (Figure 7-6).

Between the plant and the mine village in Trench 5, a watercourse divides typical cream-coloured sandy graphitic clay from typical red laterite with no graphite, indicating a possibly variation in the primary rock or a faulted contact (Figure 8-2). The logs of the trench sampling programme are presented in Appendix 2.

Figure 7-6: Trench and pit distribution in the explored portion of the licence area.

7.4 Graphite Mineralization

Graphite flakes and layers occur throughout the lateralized sections of the host rocks (Figure 7-7), but are often separated by thin layers (< 20 centimetres) of barren clay. The graphite content and size of the flakes tend to increase as the clays become more sandy and quartz-rich in depth. (Appendix 3)

The thickness of the lateritized host rocks reaches a minimum of 10 metres in the historical quarries, but due to the high level of the water table in the license area, it could not be determined elsewhere by trenching or augering. The average height above sea level is 20 metres and many of the trenches and auger holes, still in graphitic host rocks, became waterlogged in depth. Virtually all of the trenches waterlogged or dry - ended at depth in graphite-bearing clay (in situ decomposed gneiss).

The general trend of the graphite mineralization is NNE-SSW and there seems to a dip of 300 to the northwest which coincides with the strike and dip of the gneissic rocks in the area. The deposits remain open-ended, laterally and in depth and additional exploration would be required to arrive at reliable tonnage figures at depth.

Figure 7-7: A trench section showing the occurrence of graphite in the laterite as seen in the ferruginous upper part of the secession.

8. EXPLORATION

Systematic prospecting to determine the extent and grade of the graphite deposits was initiated at the end of the first quarter of 2012.

Exploration of the poorly exposed graphite deposits is limited by a number of factors, caused by the climate and topography. The area underlain by the Loharana license is devoid of any fresh and unweathered outcrops of metamorphic rocks. The humic topsoil is underlain by laterite clay and where eroded, by resistant ferruginous laterite (Figure 8-1).

The limits of the underlying graphite-bearing clays can best be determined by pitting and trenching. The very shallow water table would render any form of percussion drilling impractical and also prevents sampling in the deeper waterlogged trenches.

Figure 8-1: Ferruginous laterite scree.

8.1 Pitting and Auger Drilling

In an initial effort, during May 2012, to delineate the graphite deposits, 66 pits were dug and 23 auger holes were drilled. Thirty-four samples were recovered from the pits and 70 samples from the auger holes. Sampling was done in 1-metre sections. The pitting and auger drilling indicated a N300 E strike direction for the graphite deposits with a dip varying from 350 to 500 W.

8.2 Geological Mapping

Lack of outcrops prevented surface geological mapping. However, the historical workings have been mapped and on completion of the trenches a subsurface geological map can be compiled.

8.3 Trenching Programme

To further delineate the extent of the graphite deposits, it was decided to dig trenches perpendicular across the trend indicated by the pitting and auger drilling (Figure 7-6; 8-2).

Trenching started on 15 June 2012 and was completed by the end of August 2012. It was estimated that a total of 1360 metres of trenching should define the lateral extent of the deposits.

Figure 8-2: View to the west of Trench 3, in the background, and Trench 5 in the foreground, parallel to each other and across the presumed strike of the graphitebearing laterite clays.

8.4 Prospecting and sampling

Due to the unavailablity of a diamond drill rig, it was decided that trenching and systematic sampling of the trenches provide the best alternative to delineate the best known graphite mineralization. The obvious place to start in the license area was in the immediate vicinity of the historical workings. The trenching program of this area will be followed by diamond drilling at a later stage as a 2nd exploration phase.

Apart from reconnaissance surveys graphite mineralization in the rest of the license area has not yet been prospected. The reconnaissance work has shown that additional graphite mineralization occurs inter alia in the north-eastern portion of the license area and will be subjected to a prospecting and sampling program once the current program is completed.

9. GRAPH-MADA – 2012 TRENCHING PROGRAM

9.1 Trenching and auger equipment

Trenching was carried out by means of a Hitachi EX300 32-tonne excavator capable of digging trenches to a depth of 5 metres from surface. The excavator has a 1.6m3 bucket, can lift 11.2 tonnes and is capable of moving 330 tonnes per hour (Figure 9-1). The trench width is 900mm that allows the sampling team to get into the trench with a ladder to survey and sample the trench.

Figure 9-1: Excavation of Trench T3

Auger drilling was carried out by means of a manual auger fitted with a sampling bit and bucket and capable of drilling to a total depth of 5 metres in 1-metre lengths, yielding samples of approximately 1 kg each (Figure 9-2).

Figure 9.2: Auger drilling

9.2 Sampling and Sample Handling Procedures

The trenches were sampled at 10-metre intervals along their length and perpendicular to the layering of the graphitic laterite clays. Samples were taken with a groove-cutting spade in 1-metre sections from the bottom of the trenches to the surface.

The sample closest to surface including topsoil in most instances was less than 1 metre depending on whether the actual depth of the trench sampling point was less or more than 5 metres. Care was taken to clean the equipment after each sample was taken to prevent contamination.

The auger holes and pits were also sampled in 1-metre sections. The samples, averaging approximately one kilogram in weight, were collected in plastic bags, sealed with cable ties and tagged with plastic key holder tags. Each individual set of trench samples was packed in a plastic crate and sealed for shipment to the laboratory. A record sheet for each sample batch was created and managed by the site geologist to ensure a complete chain of custody record.

9.3 Logging

The trenches were logged on scaled graph paper using the framework of the sampling and noting the nature of the laterite clays and the presence or absence of graphite in each sample (Appendix 3).

9.4 Sample Recovery

The trenches and auger holes on the crests and upslope sections of the hilly terrain of the license area provided sampling opportunities where samples could be recovered fully down to 5 metres plus, but the downslope sections and watercourses between the hills quickly became waterlogged at depths of 3 - 4 metres. As a consequence a number of the sampling points did not succeed in sampling the excavated graphite-bearing laterite fully in these areas.

9.5 Sample Photography

No sample photography was undertaken due to the constraints posed by the narrow trenches and instability of the trench walls.

9.6 Sample Position Surveying

Sample position surveying was carried out with a handheld GARMIN GPSmap 62S and all sampling points were marked with numbered wooden stakes for future surveying (Figure 9-3).

Figure 9-3: Marked sampling point at Trench T5

9.7 Results

A total of 588 samples from the pitting, trenching and augering program have been submitted for sample preparation and analyses.

10. SAMPLING METHOD AND APPROACH

10.1 Laboratory Analysis

Due to difficulties in getting carbon (and sulphur) into solution, these elements are not readily measured by ICP Spectroscopy and an alternative technique is needed. A LECO CS combustion analyzer was used by Set Point Laboratories for the measurement of carbon in the ore and organic materials. The sample is combusted in a stream of purified oxygen which produces CO2 from the carbon. The carbon is then quantified by infrared detection. Standards covering a range from 0.407% to 12% carbon content and being considered representative of the average value of the samples are run with each batch of samples.

10.2 Standard Sampling

Graph-Mada employs standard geochemical and channel‐sampling procedures and does not process its own samples. Samples are not taken across significant geological boundaries, alteration types and alteration intensities, but are segregated into two separate samples at these points. A minimum sample length of 0.1 m and a maximum sample length of 1.00 m are used.

10.2.1 Trench Sampling

Continuous one‐metre groove (channel) samples approximately 12 cm wide were taken along the walls of the trenches. The following procedural steps were taken during the sampling process:

• Plastic sample bags are sequentially numbered with a unique series of plastic tags.
• The trench walls are sampled from the bottom upwards to ensure that there is no contamination from rubble or fines.
• Two technicians use hammers and spades to gently dislodge the weathered rock along the channel profile.
• A third technician follows behind to collect the sample material, first verifying that the sample tag corresponds with the sample.
• The sample bag is sealed with a cable tie with the sample tag inserted in the cable tie.
• All samples are brought back to the camp in plastic crates for storage in a secure facility until shipment.
• Sound chain of custody with a well documented paper trail was in place during the sampling program.

10.2.2 Auger Drill Sampling

• Sample intervals are set at 1.00 m and shortened based on eventual depth of the hole.
• Sample intervals are recorded in the drill log and in sample books. QA/QC sample numbers are flagged at this point for later insertion.
• Plastic sample bags are numbered sequentially with the appropriate sample number.
• The geologist who logged the hole verifies the sample tag with the sample book.
• The sample bag is sealed with a cable tie, placed in another bag (i.e. double bagged) with a duplicate sample number, and a sample tag is inserted between the sample bags to mitigate the destruction of the sample tag.
• All the samples are stored in a secure facility until shipment.
• Sound chain of custody with a well documented paper trail was in place during the sampling program.

11. SAMPLE PREPARATION, ANALYSIS AND SECURITY

The sample preparation was done at the Laboratoire de Mines, Ministère de l'Energie et de Mines, Antananarivo, Madagascar, under the personal supervision of the Director, Dr. Georges Rasamimanana.

The samples were dried, pulverized and split to approximately 150g and the sealed pulps shipped to Set Point Laboratories, Johannesburg, South Africa, an ISO 17025 accredited laboratory.

Set Point Laboratories used a LECO CS 844 Series analyzer utilizing the combustion infrared technique to determine the total carbon as well as the organic carbon content by heating the pulps for 2 hours at 5000 C. This heating process is preceded by an acid leach stage in the analysis process. The percentage graphite in the samples was arrived at by subtracting the organic carbon from the total carbon content (see Flow Diagram below).

Six random samples were subjected to carbonate testing to determine if any of the carbon in the samples can be attributed to the possible presence of carbonate in the host rock. No significant carbon with a carbonate origin could be detected during the analysis.

All analytical results were e-mailed directly by both and to the Graph-Mada Project Manager, as well as the consultants of Creo responsible for managing the data. The results were also posted on a secure website and downloaded by Graph-Mada personnel using a secure username and password.

At all times during sample collection, storage, and shipment to the laboratory facility, the samples are in the control of Graph-Mada and the supervision of Creo. A well managed chain of custody with a complete paper trail was in place during the sampling program.

12. DATA VERIFICATION

12.1 Collar Surveys

The UTM coordinates of the pits, auger holes and the sampling points in the trenches have all been surveyed with a GARMIN GPSmap 62S and the trench sampling points marked with wooden stakes. Future verification by a qualified land surveyor is planned.

12.2 Channel Sample Logs

Detail logs of the channel sampling program were recorded. The channel sampling points in the trenches are marked and the trenches will be left open to verify the logs after processing of the assay results has been completed.

12.3 Assays

The assays carried out by Set Point Laboratories were verified by a second laboratory, U.I.S. Analytical Services in Pretoria, South Africa. Here one in every eight samples was re-analysed to verify the analysis done by Set Point Laboratories. The results compared very well with no substantial variation.

12.4 Density

Due to the compact and solid nature of the graphite-bearing host formation, the hydrostatic weighing method was used to determine the relative density. Random samples representing typical ferruginous graphite-bearing laterite clay and samples of graphite-bearing kaolinized feldspathic clay were first weighed in air and then in water. Relative densities were calculated using the formula:

Relative Density =	Weight (air)
	Weight (air) – Weight (water)

The samples had an average relative density of 1.73 g/cm3 .

12.5 Assay QA/QC

Set Point Laboratories' standard procedure is to run a standard, a duplicate and a blank after every 30 samples for large batches. For smaller batches (<100 samples) a standard and duplicate are run after 15 samples and at the end.

12.5.1 Standard Reference Material

Set Point uses the following standard reference materials for carbon determination obtained through LECO from the U.S. National Institute of Standards and Technology:

NIST SRM 12h – 0.407%C BCS 352 – 6.116%C

NIST 915b – 12%C

12.5.2 Duplicates

Duplicates are run after every 30 samples.

12.5.3 Blanks

Blanks are run after every 30 samples.

12.6 LECO CS 844 QA/QC Procedures

Quality Control/Quality assurance on large samples batches are applied by running 1 laboratory duplicate, 1 standard and a blank for every 30 samples analyzed on the LECO CS 844 analyzer. The Leco CS844 analyzer is used to accurately determine carbon and sulphur content in rock and soil samples and other inorganic materials by means of a high-efficiency combustion furnace. The solid state combustion furnace is capable of very rapid and complete combustion of carbon in any form.

In the instance, where a sample batch consisted of less than 30 samples, 1 laboratory duplicate, 1 standard and 2 blanks are analyzed for every 15 samples analyzed.

Various calibration materials (see table 13.1 below) are used as standards for the quality control purposes. The calibration certificates are shown in Appendix 3.

Table 13.1: Shows the Carbon and Sulphur values for Standards used in the Laboratory

Calibration Standard	Element	Percentage
		(%)
BCS 352	C	6.116
NIST 915	C	12.0
NIST 886	S	1.466
NIST SRM 2766	C	6.10
Reagent Grade Calcium Carbonate	C	12.0
Reagent Grade Barium Sulphate	S	13.74
NIST SRM 915b, Calcium Carbonate	C	12.0
NIST SRM 886, Refractory Gold Ore	S	1.466
NIST SRM 12h	C	0.407

Results for all the QA/QC samples were reported in the final report with the assay values, and indicated as such.

12.7 Metallurgical Sample Selection, Collection and Shipping

Composite samples taken during the trenching programme and made up of channel samples with clear graphite mineralization were selected by Carel van der Merwe of Creo Design (Pty) Ltd. The on‐site collection, bagging and shipping preparation work was supervised by Carel van der Merwe as part of his site visit in July to August 2012. A proper chain of custody was implemented and managed by Creo personnel for the duration of the sampling program.

13. ADJACENT PROPERTIES

Reconnaissance exploration work has shown that there are clear evidence of graphite mineralization to the south and northeast of the licence area presently being explored, but no mining or detailed exploration has taken place here. Graphite mineralisation in the northern block of the Loharano concession extends south into the southern block. The gneissic granite outcrops to the northwest of the area investigated are manually exploited on a small scale by stone masons.

14. MINERAL PROCESSING AND METALLURGICAL TESTING

Shortly after the licences were obtained in 2008 it was established that significant graphite deposits existed within the Loharano property. This prompted reconnaissance petrographic studies and preliminary metallurgical tests were completed on a selection of shallow trial pit samples that covered the central part of graphite mineralisation at the northern block at Loharano. A summary of this historical work is described below. Subsequent hydrometallurgical scoping work has tested a variety of floatation options for several composite samples of varying grades of primary mineralization. The results of the more recent scoping test work are still to be released.

14.1 Historical Work

Metallurgical testwork on samples from the Loharano licence area commenced in 2008, with samples taken from excavations made during mining activities that date back to Colonial times. These samples were subjected to chemical and sizing analysis (Appendix I & II). A pilot plant built on site was used to process 532 tonnes of run-of-mine ore yielding 18 tonnes of graphite. Appendix 1 provides details of the analysis of the bulk sample. A sizing test by Asbury Graphite Mills Inc. of the recovered graphite showed that 97% of the particles exceeded +80 mesh in size (Appendix 2.). The tests confirmed the possibility of producing high grade natural flaky graphite (>94%) from the deposit.

15. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

15.1 Geological Interpretation

The lack of outcrops in the Graph-Mada license area prevents an insight into the primary graphite mineralization in the graphite-bearing metamorphic rock. The graphite mineralization observed is of a highly altered nature in laterite clays derived from the original host rocks.

The alternating laterite clay horizons can visually be individualized on colour caused by iron content (Figure 15-1), amount of weathered feldspar and possibly alteration of the dark minerals, but contacts are often gradational and the profile seems to change with the topography. The clay is less ferruginous and more sandy (quartz and kaolinized feldspar fragments) in depth or at the crests of the hills suggesting that ground water percolating through the near surface part of the deposit tends to transport iron and other mobile elements to the surface.

The graphite mineralization occurs as sporadically disseminated flakes throughout the various clays, occasionally forming thin discontinuous layers, but in general, in increasing amounts in depth.

Figure 15 -1: Idealized cross-section of the laterite clays in the graphite deposit at Loharano

The primary control of the mineralization is the graphitic horizon or horizons in the underlying metamorphic rocks and as seen from occurrences in outcrops elsewhere, probably gneiss. The regional trend of the metamorphic rocks is N100 E with dips varying from 200 to 500 W.

The indicated trend of the graphite mineralization is N300 E with dips similar to those of the regional trend. The extent of the graphite mineralization to the northeast and southwest has not yet been established.

To date, all of the excavations bottomed in graphite-bearing clay. The minimum thickness is consequently 5 metres, but the southernmost historical workings in the highly eroded area immediately north of the Iaroka River tributary, has a graphitebearing floor 10 metres below the surface. The mineralization model is that of a highly altered and partially reworked deposit striking N30⁰ E and dipping 35⁰ WNW.

15.2 Exploratory Data Analysis

Exploratory data analysis is the application of various statistical tools to characterize the statistical behaviour or grade distributions of the data set. In this case, the objective is to understand the population distribution of the grade elements in the various units using such tools as histograms, descriptive statistics, and probability plots.

15.2.1 Assays

A total of 588 samples have been analysed by Set Point Laboratories for total carbon and organic carbon content. To check on the possible presence of carbonate carbon, 6 samples of graphitic laterite clay, varying in colour and composition, were selected for assaying. The carbonate carbon content varied from <0.01 to 0.38% C and averaged at 0.20%C. The graphitic carbon content for each sample has been calculated in the manner described in paragraph 11. All 588 samples contained graphitic carbon, confirming the visual observation that graphite occurs throughout the various layers of laterite clay.

The arithmetic average value of the assayed samples is 3,13% C and the weighted average is 3,31% C. The lowest value obtained was 0.01% C, the highest value 17.6% C and the range is therefore 17.59% (Figure 15-2). The standard deviation is 2.59% C.

15.2.2 Trench Data Evaluation

The assay results of the samples obtained from the trenches, confirmed the general visual observation that the graphite mineralization increases with depth where the laterite clay becomes more sandy or quartz-rich (Figure 15-3).

Figure 15-2: Grade-frequency % distribution

The colour of these more siliceous/aluminous and less ferruginous clays is cream to light grey with occasional red spots. The size of the graphite flakes also seem to increase with depth.

In the odd instances in the trenches where the clays contain less graphite in depth, this transition from reddish brown to cream-coloured is absent and could indicate localised alteration or faulting in the primary rocks.

The trenches have not been individually subjected to statistical analysis due to the variable graphite content. Areas of an acceptable grade are rather going to be defined by contouring of the analysis values.

15.2.3 Grade profile

The overall increase in graphite grade at depth as confirmed by the vertical grade variogram analysis (Figure 15-3) based on weighted average figures provides the opportunity for selective mining. As evident from the vertical variogram grade analysis the weighted averages of samples taken from the top 1 m of the deposit range from just above 1 % graphite to 3% graphite weighted average of 2.05% C. Below 1 m below surface the graphite content increases drastically from 3% to a weighted average of just below 6% graphite. Overburden stripping where the top 1m gets removed up to the hard limonitic clay layer just below the yellow clay layer (Figure 15-1) will result in the average grade to increase from 3.13% graphite to 5.15% graphite.

15.2.4 Capping

A combination of decile analysis and a review of probability plots were used to determine the potential risk of grade distortion from higher‐grade assays. A decile is any of the nine values that divide the sorted data into ten equal parts so that each part represents one tenth of the sample or population. In a mining project, high‐grade outliers can contribute excessively to the total carbon content of the deposit. The decile analysis indicated that grade capping was not warranted for any of the zones. This is not uncommon in these types of deposits where the grade tends to be uniformly distributed with very few outliers.

15.3 Mineral Resource and Mineral Reserve Estimates

15.3.1 Introduction

This section describes the methods used to derive and classify the latest Mineral Resource and Reserve estimates for the Loharano project. CREO was responsible for the calculation of Graph-Mada's Mineral Resource and Reserve figures.

15.2 Audit Procedures

Creo has independently verified the underlying sampling and assay data. Creo considers that given the extensive sampling program, geological investigations, independent check assaying and, in certain instances, independent audits, the estimates reflect an appropriate level of confidence.

The Mineral Resources and Reserves estimates use the terms and definitions as set out by JORC. Further, the Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce Mineral Reserves.

15.3 Mineral Resource and Reserve Estimation Methodology

The same method of estimating the mineral resources and reserves is used at each of the areas that comprise the graphite resource in the Loharano concession. The estimation of resource and reserve blocks is not typical of a mining operation where the value of resource blocks are estimated and classified well ahead of the mining blocks presently being developed and mined.

Figure 15-4: Plan view of 3D model of the indicated resource at Loharano

Because of the highly erratic nature of both the graphite mineralisation zones and of the grade within them, most of the data for evaluating resource blocks is derived from development adjacent to the mining blocks and from the position of the present mining.

The continuity of grade values within the mineralised horizons is based primarily on experience that has been gained from mining the graphite deposit in the past and experience that has been gained from the study of soil profile development and of its advanced state of alteration of the primary rock. Mineral Resource and Reserve blocks have been defined based on this information. The graphite deposit geometry has been modelled using the GEMCOM Surpac® 3D modelling software. This software allows the three-dimensional structure of the mineralised volume to be viewed graphically. This is used as a tool for visualising grade continuity and is an aid for mine planning.

15.3.1 Quality and Quantity of Data

Within the exploration trenches that were cut perpendicular to the graphite body, channel sampling was performed at 10m intervals. The orientation and spacing of the trenches are relatively consistent but the channel sample positions between the various trenches are although at set 10m intervals, not that uniform between trenches. Therefore the spacing of channel samples and auger samples was not on a definite grid, however, the layout of sample points was totally unbiased and not influenced by any geological features. The assay results were entered into a data base from where the data was imported into the Surpac® 3D modelling software where the data gets displayed spatially and ultimately block values could be calculated.

15.3.2 Quality Assurance/Quality Control

Samples were prepared at the Laboratoire de Mines, Ministère de l'Energie et de Mines, Antananarivo, Madagascar, under the personal supervision of the Director, Dr. Georges Rasamimanana.

The samples were dried, pulverized and split to approximately 150g and the sealed pulps shipped to Set Point Laboratories, Johannesburg, South Africa, an ISO 17025 accredited laboratory. Setpoint is accredited with SANAS and conducts its own quality checks to retain this rating. Graph-Mada performed random checks on the performance of the laboratory in the form of blank or duplicate samples.

Although being an accredited laboratory, where the standards are supposedly kept to a high standard, the use of simple sample checks (duplicates, blanks and standards) are used as a standard procedure by Graph-Mada. An umpire laboratory was used to confirm the accuracy of the Set Point analysis by re-analysing one in eight samples at a second independent laboratory.

15.3.3 Definition of Auger and Channel sample Intersections

Graphite intersections are defined as all channel samples in the trenches and auger sample intersecting the graphite deposit, irrespective of the sample grade. For both auger drillhole and channel sampling, a minimum sampling width of 100cm is used to conform to the equipment scale used during mechanical mining. Where the graphite deposit width is less than 1 metre, the samples are excluded.

15.3.4 Block Tonnage Grade Estimation

The mine is split into sub-areas defined by graphite mineralisation type. Within these areas, ore resource blocks are defined adjacent to development ends and could be adjacent to previous mining. The 3D visualisation of the orebody within GEMCOM Surpac® helps defining the blocks in relation to the orebody geometry. Blocks are generally 20m on strike and 5m in the dip direction.

Where blocks are defined adjacent to a development end only, the grade and true width of the graphite deposit in the block are estimated by calculating the arithmetic mean or "stretch average" of the samples along the development end. If the sample spacing is at the standard 3m, then the block value is derived by calculating the average value of the samples.

If the sample interval is variable then the block is assigned the length-weighted arithmetic mean of the strip averages. If the resource block is surrounded by other sampling, either by previous trench sampling or exploration boreholes, the block is assigned values based on the mean of the surrounding sampling, weighted by the inverse of the distance from the sampling to the centre of the block. In each case, one mean value is determined for each channel sampling section first and the means are then averaged.

The number and spacing of auger drillholes and channels intersecting the graphite deposit is dictated by the position of the exploration development with respect to the orientation of the graphite deposit being explored. Because of this, there is no set augerhole spacing and the number of augerholes available to estimate block values varies from place to place. This parameter cannot therefore be used as a Resource classification criterion.

15.3.5 Mineral Resource Blocks

In selecting Resource blocks to be included in a mineral resource statement, a cutoff grade of 2% graphitic carbon is applied. This is an economic cut-off based on cash-flow analysis. However, some resource blocks that are below the cut-off grade are included within the 15-Year Forecast plan, where the blocks are required to be mined to extract the economic pay portion of the total resource, either for geological or geotechnical considerations.

For Graph-Mada to include a resource block in the reserves, it must satisfy one of the following:

• Immediately available blocks
• Resource blocks that are adjacent to current mining areas, have all mining infrastructure in place and are fully equipped with services; or
• Blocks not immediately available
• Resource blocks which can be made available within one month.

A block tonnage is calculated for each Resource block using the estimated true thickness, the block area and by using an average specific gravity (SG) for each of the mine areas (sections). A density value of 1.73t/m3 is used. Development and waste rock is also assigned a density of 1.73t/m3 . The SG values have generally been accepted as being correct. The values were checked for accuracy in mid-2012. Detailed variation of true block densities around these accepted standards has been found to be very consistent.

15.3.6 Classification

The resource blocks are classified into Indicated and Inferred Resources based on the following criteria:

• Indicated Mineral Resources: Indicated blocks are blocks bounded by sampling on one side, or where the down dip continuation of a block has been demonstrated by augerhole or channel sample intersections. In most cases, Indicated Resource blocks are mainly near surface where more data sets are available and are normally the blocks with the highest density of channel and auger samples.
• Inferred Mineral Resources: Blocks where geological interpretation suggests that continued mineralisation is likely even where no drilling information is available. These blocks occur adjacent to Indicated Mineral Resource blocks and in most instances below the Indicated Mineral Resource blocks where the deepest deposit is open ended in depth. Channel sample data is not available for these blocks but auger sample data is available.

15.3.7 Mineral Reserve Estimation Mineral Reserves are derived from Mineral Resources by

• the application of appropriate in–situ cut-offs (which vary from orebody to orebody and from one part of the deposit to the next part of the deposit);
• the addition of dilution and development mining tonnes;
• the exclusion of those blocks within boundary, safety restrictions and also those not mineable from the current infrastructure or using the currently employed mining methods;
• the application of block factors, mine call factors and plant recovery factors such that the resulting estimates reflect yield grades.

15.4 Graph-Mada's Mineral Resource and Mineral Reserve Statement

15.4.1 Resource and Reserve Statement

No audited Mineral Resource and Mineral Reserve statement for Graph-Mada's Loharano concession was previously issued.

A combined Mineral Resource and Mineral Reserve statement for Graph-Mada as at 20 September 2012 is presented in Table 1-1. The statement in Table 1-1 presents the total estimated resources and reserves at Loharano. All resources have been estimated using a cut-off grade of 2%/t.

This statement is valid until 31 March 2013 and includes adjustments to take account of mining depletion for the six months to April 2013. The stated Mineral Resources are inclusive of those Mineral Resources upgraded to Mineral Reserves following the application of technical and economic factors.

The conversion factor for Indicated Resources into reserves for the mine is lower than would normally be expected. This is particularly true for the southern part of the orebody, where the conversion rates are around 40%, since many of the resource blocks are scattered in old mining areas that would require re-surfacing of the terrain to make it accessible. The feasibility of re-shaping and preparing these areas must still be investigated before these blocks can be included in the reserves.

Table 15-1: Graph-Mada – CREO Mineral Resource and Mineral Reserve Statement for the Loharano project (at 20 September 2012).

Mineral Reserve Category				Mineral Resource Category
			Contained				Contained
Classification	Tonnage	Grade	Graphite	Classification	Tonnage	Grade	Graphite
	(kt)	(%)	(ton)		(kt)	(%)	(ton)
					421
Total	0			Total	421	5.15
Probable				Indicated			21,630
				Total Inferred	5,273	4.04	213,029
Total	0			Total	5,694
Reserves				Resources

15.5 Creo Comments

Creo considers that the quantity and quality of the trenching, drilling, sampling, sample preparation and handling is sufficient to delineate the Mineral Resources to the level of confidence implied by the classification used in the audited Mineral Resource and Mineral Reserve statement given above.

The cautionary approach in the declaration of mineral resources and mineral reserves is a consequence of the inability to predict even over short distances the extent and grade of the deposit due to the complex geological and structural controls of the mineralisation and the correct interpretations thereof of these structural features. The approach used by Creo to derive their Mineral Resource estimates is generally considered to be appropriate to the orebody being evaluated and in line with generally accepted norms and standards.

The estimation method of Resource and Reserve blocks from sample data is not based only on actual grade continuity and on geostatistically proven methods and parameters, but also on historically accepted methods using arithmetic averaging and inverse distance weighting to estimate block values. The classification of mineral resources is based on the availability and position of data in relation to the block being classified. The spatial extent of measured resources is limited by a distance that is historically accepted and not based on the measured accuracy of the estimation. When comparing successive resource estimates, it is noted that the Indicated Resources remain relatively constant, while the Inferred Resources are slowly depleted. It must be accepted that despite the complexity of the mineralised horizons and the estimation techniques applied, the estimation methodology should determine estimates of the block grades which are on average equal to the true mean estimates.

Creo considers there is good potential for the delineation of further Mineral Resources and Mineral Reserves following ongoing exploration and development. The Graph-Mada economic model includes an annual revolving drilling budget to investigate the extensions to known graphite deposits outside of the currently defined Mineral Resource base.

16. CONCLUSIONS AND RECOMMENDATIONS

Based on the information presented, Creo considers the data collection procedures applied during the sampling phase appropriate and the sample database suitable for the purpose of resource estimation.

Creo believes that the trenching, pitting and auger drilling done in the near surface horizon is currently sufficient for delineating a sizeable open pit with an appreciable proportion of material in the Indicated category.

Trenching data and the 3D modelling undertaken indicates that mineralisation may extend in an easterly and southerly direction and substantial scope exists to extend the resource in depth. Infill and extensional diamond core drilling will improve the geological as well as the resource confidence in the areas currently identified as targets.

Creo recommends the following:

• Future core drilling campaigns should focus on the following areas:
• The drill program should be delineated with a drill spacing of 100 m to define additional inferred resources, with the main goal of the program to establish the true strike length and width of the deposit and delineate additional tonnes that can be included in a preliminary economic assessment.
• The resource model of the Loharano deposit is currently supported by trench data for the area between the mine village and the Graphmada plant. Creo consider these areas as high priority targets for diamond drilling that should be conducted in Phase I of the exploration program especially to the south and to a depth of 30m below the mine floor elevation.
• Phase II of the exploration program should be an infill program with a drill spacing of 50 m to upgrade the inferred resources, with the main goal of the program to establish an updated indicated resource.
• Graph-mada should also focus on extending the resources at the southern Loharano block with additional trenching followed by a limited exploratory drill program. To the south, additional drilling may extend the mineralization to the south since the trenches appear to indicate continuation of mineralization.

Following the site visit, audit of the project database, and review of the QA/QC program, Creo recommends the following:

• The samples should be submitted to a secondary laboratory not previously used by Graph-mada.
• It is also recommended that Graph-mada modify the insertion of blank samples into the sample stream, it is preferred that samples be inserted following samples that return high‐grade graphite.

Pulps from earlier assays should be inserted in the sample stream with a new tag number in order to incorporate a blind pulp duplicate procedure into the QA/QC protocol.

Johan Hattingh

I, Johan Hattingh of Stellenbosch, South Africa, do hereby certify that as the author of this Independent Technical Report on the Loharano Graphite Mine Project, Madagascar," dated September 25 2012, I hereby make the following statements:

• I am a Principal Resource Geologist with Creo Design (Pty) Ltd. with a business address at 9 Quantum Street, Unit 20, Techno Park, Stellenbosch, South Africa.
• I am a graduate of Stellenbosch University (B.Sc., 1985; B.Sc. Hons., 1988) and University of Port Elizabeth (M.Sc., 1992; Ph.D. Geology, 1996).
• I am a member in good standing of the Geological Society of South Africa and I am registered with The South African Council for Natural Scientific Professionals (Registration #400112/93).
• I have practiced my profession in the mining industry continuously since graduation.
• I did visit the property during June/July 2012
• I have read the definition of "qualified person" set out in JORC and certify that, by reason of my education, affiliation with a professional association (as defined in JORC), and past relevant work experience, I fulfil the requirements to be a "qualified person" for the purpose of JORC.
• My relevant experience with respect to resource modelling includes 23 years experience in the mining sector covering exploration geology, mine geology, grade control, and resource modelling. I was involved in numerous projects around the world in both base metals and precious stone and metals deposits.
• I am responsible for the entire content of this technical report titled "Independent Technical Report on the Loharano Graphite Mine Project, Madagascar," dated September 25, 2012".
• I have no prior involvement with the property that is the subject of the Technical Report.
• As of the date of this Certificate, to my knowledge, information, and belief, this technical report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

Signed and dated this 25 th day of September 2012.

J. Hattingh Ph.D. Geology, Pr. Sci Nat

18. REFERENCES

Besairie, H. (1964). Madagascar, Carte Géologique 1/1,000,000. In three sheets, Antananarivo.

Besairie, H. (1964). Madagascar, Carte Géologique 1/1,00,000. In one sheet, Ampasimanolotra (Brickaville).

BRGM (1985). Plan Directeur d'Actions Pour la Mise en Valeur des Ressources du Sol et du Sous‐Sol de Madagascar, Direction des Mines et de la Géologie, Contrat d'etude No 01/84/MIEM‐DME/FED, Three volumes: Premier Phase‐Premier partie 573 pp; ‐ Deuxieme partie 418 pp; Deuxieme Phase 146 pp.

APPENDIX 1:

Product Supplier: Address Information:	Sea Breeze Group Unit GG02, Rostra,
The Forum
Northbank Lane
Century City
7441
Cape Town
South Africa
Product Manufacturer: GRAPH MADA SARL
Product Grade No.:	Concentrate
CC:	Gerry Hand
Distribution:
Information Requested:

Sample No.	Lab No.1	Lab No.2
LOI (%)	90.97 / 91.51	90.28 / 91.22
Ash (%)	9.03 / 8.49	9.72 / 8.78
Moisture (%)	0.11	0.10
Volatile (%)	1.86	1.76
Sulfur (%)	< 0.005 / 0.007	< 0.005 / 0.009

Mesh	mm	Lab No.1 (%)	Lab No.2 (%)
6	3.35	0.00	0.00
8	2.38	Trace	Trace
10	2.00	Trace	Trace
14	1.41	0.10	0.10
16	1.19	0.30	0.30
20	0.850	3.30	3.20
30	0.600	14.20	14.20
40	0.425	27.10	27.50
50	0.300	24.80	25.00
60	0.250	10.90	10.90
70	0.212	7.10	7.00
80	0.180	4.00	4.00
100	0.150	3.00	2.90
200	0.075	3.50	3.40
270	0.053	0.70	0.70
325	0.045	0.30	0.30
PAN	n/a	0.70	0.50
$+50$ mesh	0.300	69.8	70.40
$+80$ mesh	0.180	91.8	92.2

Asbury Graphite Mills Inc. Founded 1895

405 Old Main Street • P.O. Box ¹⁴⁴ Asbury, NJ 08802 A Division of Tel: 908-537-2155 Fax: 908- 537-6989 Internet: www.asbury.com

To: Graph-Mada Sarl Lot IVM 104 NK - 67 HA SUD Antananarivo 101 Madagascar

Asbury Graphite Mills, Inc. sizing test results showed the following results from the graphite ore sample provided.

Particle Size:

+10 mesh 0.86 % +20 mesh 12.22 % +30 mesh 26.32 % +40 mesh 32.48 % +50 mesh 17.03 % +60 mesh 4.61 % +70 mesh 2.31 % +80 mesh 1.22 % +100 mesh 0.74 % -100 mesh 2.21 %

If anyone has any questions or needs additional information please contact me at any time.

Best regards, Stephen Riddle Asbury Graphite Mills, Inc. 405 Old Main Street Asbury, New Jersey 08802-0144 Phone 908-537-2155 E-mail sariddle@asbury.com

APPENDIX 3:

Trench T2
Sample ID	Width (m)	Lithological Description	% Carbon % Graphite
T2_01A	1	Dark grey humic soil (0.15m) and yellow to reddish brown clay
T2_01B	1	Yellow to reddish brown clay-no discernible graphite
T2_01C	$\mathbf{1}$	Reddish brown clay-no discernible graphite
Waterlogged below 3 m
T2_02A	1	Grey humic soil and dark brown clay-no discernible graphite
T2_02B	1	Yellow to brown clay-no discernible graphite
T2_02C	$\mathbf 1$	Yellow to brown clay-no discernible graphite
Waterlogged below 3m
T2_03A	1.3	Grey to dark brown humic soil and clay with graphite
T2_03B	$\mathbf 1$	Red to yellow brown, slightly sandy, clay with graphite
T2_03C	1	Cream to light brown sandy clay with graphite
Waterlogged	below 3.30m
T2_04A	0.7	Dark grey to brown humic soil and clay-no discernible graphite
T2-04B	1	Yellow to reddish brown clay-no discernible graphite
T2_04C	$\mathbf 1$	Reddish brown clay with graphite
T2_04D	1	Reddish brown sandy clay with graphite
T2_04E	$\mathbf 1$	Reddish brown sandy clay with graphite
T2_05A	1.6	Dark grey humic soil and clay with graphite
T2_05B	$\mathbf 1$	Reddish brown sandy clay with graphite
T2_05C	$\mathbf 1$	Yellow to reddish brown sandy clay with graphite
T2-05D	$\mathbf 1$	Reddish brown sandy clay with graphite
T2_06A	0.7	Dark grey humic soil and clay with graphite
T2_06B	$\mathbf 1$	Reddish brown clay with graphite
T2_06C	$\mathbf 1$	Reddish to cream sandy clay with graphite
T2-06D	$\mathbf 1$	Reddish to cream sandy clay with graphite
T2_06E	$\mathbf 1$	Reddish to cream sandy clay with graphite
T2_07A	0.8	Dark grey humic soil
T2_07B	$\mathbf{1}$	Yellowish cream sandy clay with graphite
T2_07C	$\mathbf{1}$	Cream to light grey sandy clay with graphite
T2_07D	1	Light grey sandy clay with graphite
T2_08A	0.95	Dark grey humic soil and clay-no discernible graphite
T2_08B	1	Light grey sandy clay with graphite
T2_08C	1	Grey with red patches sandy clay with graphite
T2_08D	$\mathbf{1}$	Dark grey with red patches sandy clay with graphite
T2_08E	$\mathbf{1}$	Reddish brown sandy clay with graphite
T2_09A	1	Dark grey humic soil and clay-no discernible graphite
T2_09B	1	Reddish brown sandy clay with graphite
T2_09C	$\mathbf{1}$	Grey with red patches sandy clay with graphite
T2_09D	$\mathbf{1}$	Red and cream sandy clay with graphite
T2_09E	$\mathbf 1$	Red and cream sandy clay with graphite

Sample ID	Width (m)	Lithological Description	% Carbon % Graphite
T3_01A	0.9	Dark grey humic soil and brown clay-no discernible graphite
T3_01B	1	Yellowish brown clay with graphite
T3_01C	1	Yellowish brown sandy clay with graphite
T3_01D	1	Reddish brown to cream clay-no discernible graphite
T3_01E	1	Reddish cream clay with fragments of altered feldspar- n.d. gr
T3_02A	0.6	Dark grey humic soil and brown clay with graphite
T3_02B	1	Reddish brown sandy clay with graphite
T3_02C	1	Reddish cream clay sandy clay with minor graphite
T3_02D	1	Reddish cream clay sandy clay with minor graphite
T3_02E	1	Reddish cream clay sandy clay with minor graphite
T3_03A	0.2	Dark grey humic soil
T3_03B	1	Reddish cream sandy clay-no discernible graphite
T3_03C	1	Reddish brown clay with graphite
T3_03D	1	Yellow to reddish brown sandy clay with graphite
T3_03E	1	Reddish brown sandy clay with graphite
T3_04A	1	Dark grey humic soil and brown clay-minor graphite
T3_04B	1	Yellow brown sandy clay with graphite
T3 04C	1	Reddish to yellow brown sandy clay with graphite
T3_04D	1	Reddish brown sandy clay with graphite
Waterlogged	below 4.00 m
T3_05A	1	Brown sandy clay with graphite
T3_05B	1	Yellow brown with red spots sandy clay-no discernible graphite
T3_05C	1	Yellow brown with red spots sandy clay-no discernible graphite
Waterlogged	below 3m
T3_06A	0.8	Dark grey humic soil, minor brown clay-no discernible graphite
T3_06B	1	Reddish brown sandy clay with graphite
T3_06C	1	Reddish brown sandy clay with graphite
Waterlogged	below 2.80m 0.4
T3_07A T3_07B	1	Medium grey humic soil with small graphite flakes Dark grey humic soil with small graphite flakees
T3_07C	1	Light reddish grey sandy clay with graphite
T3_07D	1	Dark grey and brown clay with graphite
Waterlogged	below 3.40m
T3_08A	0.4	Dark grey humic soil - no discernible graphite
T3_08B	1	Dark grey humic soil and brown clay with graphite
T3_08C	1	Yellow to reddish brown sandy clay with graphite
T3_08D	1	Reddish brown sandy clay with graphite
T3_08E	1	Reddish brown sandy clay with graphite
T3_09A	1	Dark grey humic soil-no discernible graphite
T3_09B	1	Light brown soil-no discernible graphite
T3_09C	1	Brownish to reddish grey sandy clay with graphite
T3_09D	1	Cream to grey sandy clay with graphite
T3_09E	1	Reddish brown sandy clay with graphite
T3_10A	0.7	Dark grey humic soil with Fe-laterite fragments
T3_10B	1	Brownish grey sandy clay with graphite
T3_10C	1 1	Brownish grey sandy clay with graphite
T3_10D T3_10E	1	Reddish grey sandy clay with graphite Reddish brown sandy clay with graphite
T3_11A	0.9	Dark grey humic soil - no discernible graphite
T3_11B	1	Dark grey clayey soil with graphite
T3_11C	1	Light grey yellowish sandy clay with graphite
T3_11D	1	Reddish brown sandy clay with graphite
T3 11E	1	Reddish grey sandy clay with graphite

Trench T4
Sample ID	Width (m)	Lithological Description	% Carbon % Graphite
T4_01A	1	Dark grey to brown humic soil and clay with graphite
T4_01B	1	Brownish grey sandy clay with graphite
T4_01C	1	Light reddish brown sandy clay with graphite
T4_01D	$\mathbf{1}$	Cream to brown sandy clay with graphite
T4_02A	$\mathbf{1}$	Dark grey humic soil with graphite flakes
T4 02B	$1\,$	Grey to reddish brown sandy clay with graphite
T4_02C	$\mathbf 1$	Reddish brown sandy clay with graphite
T4_02D	$\mathbf 1$	Reddish brown sandy clay with graphite
T4_03A	0.7	Dark grey humic soil - no discernible graphite
		Reddish brown sandy clay with graphite
T4_03B	1
T4_03C	$\mathbf{1}$	Reddish to yellowish brown sandy clay with graphite
T4_03D	1	Reddish brown to cream sandy clay with graphite
T4_03E	$\mathbf 1$	Reddish brown sandy clay with graphite
T4_04A	0.2	Dark grey humic soil-no discernible graphite
T4_04B	1	Dark grey humic soil with small graphite flakes
T4_04C	1	Reddish brown to cream sandy clay with graphite
T4_04D	$1\,$	Reddish brown sandy clay with graphite
T4_04E	$1\,$	Reddish brown sandy clay with graphite
T4_05A	0.8	Dark grey humic soil-no discernible graphite
T4_05B	1	Yellowish brown sandy clay with graphite
T4_05C	1	Yellow to reddish brown sandy clay with graphite
T4_05D	$\mathbf{1}$	Reddish brown sandy clay with graphite
T4_05E	$1\,$	Reddish brown sandy clay with graphite
T4_06A	0.98	Dark grey humic soil-no discernible graphite
T4_06B	$1\,$	Yellow brown sandy clay with graphite
T4-06C	$\mathbf 1$	Reddish brown sandy clay with graphite
T4_06D	$\mathbf{1}$	Reddish brown sandy clay with graphite
T4_06E	1	Reddish brown sandy clay with graphite
T4_07A	1	Dark grey to light brown humic soil-no discernible graphite
T4_07B	1	Yellow brown sandy clay with graphite
T4_07C	1	Yellow brown sandy clay with graphite
T4_07D	1	Reddish brown sandy clay with graphite
T4_07E	1	Reddish brown sandy clay with graphite
Trench T5
Sample ID	Width (m)	Lithological Description	% Carbon % Graphite
T5_01A	1	Black humic soil and brown clay-no discernible graphite
T5_01B	1	Yellow brown clay with graphite
T5_01C	1	Yellow ro reddish brown sandy clay with graphite
T5_01D	1	Mottled reddish brown and cream sandy clay with graphite
T5_01E	$\,1\,$	Yellow to reddish brown sandy clay with graphite
T5_02A	0.5	Dark grey humic soil and brown clay with small graphite flakes
T5_02B	1	Light yellow brown clayey soil with small graphite flakes
T5_02C	$1\,$	Yellow to reddish brown sandy clay with graphite
T5_02D	1	Reddish brown to cream sandy clay with graphite
T5_02E	1	Reddish to cream /light brown sandy clay with graphite
T5_02F	1	Reddish brown sandy clay with graphite
T5_03A	1	Dark grey humic soil-no discernible graphite
T5_03B	1	Yellowish brown sandy clay with graphite
T5_03C	1	Yellow to reddish cream sandy clay with graphite
T5_03D	$\,1\,$	Yellow to reddish brown sandy clay with graphite
Waterlogged	below 4m
T5_04A	0.4	Dark grey humic soil-no discernible graphite
T5_04B	1	Dark grey clay-no discernible graphite
T5_04C	1	Yellow ro reddish sandy clay with graphite
T5_04D	1	Red, yellow and cream clay with minor graphite
T5_04E	1	Red, yellow and cream clay with minor graphite
Waterlogged	below 4.40m

	Total	Organic
Element	carbon	C
Units	%	%
TO1LH001	5.16	0.33
TO1LH002	6.68	0.13
TO2LH003	2.19	0.18
TO2LH004	3.97	0.33
TO3LH005	2.56	0.18
TO3LH006	3.26	0.11
TO3LH007	2.71	0.10
TO4LH008	4.91	0.04
TO4LH009	8.58	0.34
TO4LH010	7.02	0.06
TO5LH011	7.48	0.08
TO6LH012	3.70	0.16
TO6LH013	5.28	0.12
TO6LH014	3.04	0.02
TO6LH015	2.63	0.01
TO6LH016	3.07	0.02
TO9LH017	5.19	0.04
TO9LH018	6.71	0.13
TO9LH019	8.14	0.46
TO9LH020	9.89	0.50
T10LH021	1.66	0.12
T10LH022	1.56	${}_{< 0.01}$
T10LH023	2.96	0.09
T10LH024	4.84	0.22
T10LH025	6.81	${}< 0.01$
T11LH026	8.73	0.18
T11LH027	6.14	0.07
T11LH028	1.20	0.10
T12LH029	3.67	0.09

	Total	Organic
Element	carbon	C
Units	℅	%
T12LH030	10.5	0.20
T12LH031	5.35	0.01
T12LH032	3.71	0.08
T12LH033	0.88	0.15
T13LH034	4.73	${}_{0.01}$
TL13LH035	6.04	0.13
T13LH036	5.74	0.08
T13LH037	3.97	0.15
T13LH038	2.84	0.06
T14LH39	5.25	0.20
T15LH40	0.24	0.159
T15LH41	1.43	0.05
T15LH42	3.54	0.04
T15LH43	3.92	0.06
T16LH044	1.33	0.06
T16LH045	8.36	0.14
T17LH046	2.04	0.08
T17LH047	1.58	0.09
T17LH048	1.96	0.09
T17LH049	1.09	0.04
T18LH050	5.45	0.19
T18LH051	7.06	0.20
T18LH052	4.48	0.10
T18LH053	3.81	0.07
T18LH054	3.63	${}_{<0.01}$
T19LH055	5.01	0.13
T19LH056	3.56	${}_{< 0.01}$
T20LH057	5.55	0.06
T20LH058 T20LH059	1.41 0.88	0.02 0.10
T20LH060	1.44	< 0.01
T201H061	1.40	0.04
T21LH062	1.53	0.10
T21LH063	2.09	0.05
T21LH064	5.12	${}_{< 0.01}$
T21LH065	4.78	< 0.01
T22LH066	1.95	0.03
T22LH067	1.94	0.07
T22LH068	2.08	0.05
T22LH069	1.74	0.02
T22LH070	1.98	0.04

	Total	Organic
Element	carbon	C
Units	%	℅
PO4LH01	1.80	0.05
PO19LH02	1.32	${}< 0.01$
PO21LH03	5.01	0.08
PO22/1LH04	1.84	0.05
PO22/2LH05	3.21	${}_{0.01}$
PO24LH06	8.51	0.18
PO25LH07	8.09	0.03
PO26/1LH08	6.88	${}_{0.01}$
PO26/2LH09	4.99	0.01
PO28LH010	0.83	0.02
PO30/1LH011	5.72	0.20
PO30/2LH012	8.71	0.14
PO30/3LH013	6.55	0.03
PO31LH014	1.61	< 0.01
PO32LH015	1.18	0.06
PO35LH016	1.08	0.11
PO36LH017	3.36	0.12
PO39LH018	1.48	0.05
PO40LH019	6.89	0.12
PO41LH020	4.39	0.12
PO42LH021	1.99	0.26
PO43LH022	1.91	0.18
PO44LH023	8.91	0.18
PO56LH024	1.30	${}_{0.01}$
PO58LH025	1.55	0.06
PO60LH026	1.89	0.09
PO61LH027	3.16	0.03
PO62LH028 PO63LH029	6.92 8.29	0.03 0.06
PO65LH030	3.61	0.29
PO66LH031
	2.42	0.11
(T 05 LH 011) / (T 21 LH	4.99	0.03

SCHEDULE 3 EXTRACT OF AUDITED FINANCIAL STATEMENTS OF STRATMIN FOR THE PERIOD ENDED 31 DECEMBER 2015 (NOTE 12, PAGE 29)

NOTES TO THE GROUP FINANCIAL STATEMENTS (CONTINUED) YEAR TO 31 DECEMBER 2015

12 DISCONTINUED OPERATIONS

In December 2015 Bass Metals Limited acquired 6.25% of Graphmada Mauritius, the holding company for the Group's graphite operations in Madagascar, and in May 2016 it was announced that Bass Metals Limited would proceed with an offer to acquire the remaining 93.75% of Graphmada Mauritius that it did not already own. Completion of the acquisition is expected to take place following the Company's Annual General Meeting in July 2016. Consequently Graphmada Mauritius and its subsidiaries have been treated as a disposal group and accounted for as discontinued operations.

The results of the discontinued operations, which have been included in the consolidated income statement, were asfollows:

	2015	2014
	£'000	£'000
Revenue	445	92
Expenses	(1,762)	(1,241)
Loss before tax	(1,317)	(1,149)
Attributable tax expense	-	(4)
Net loss attributable to discontinued operations	(1,317)	(1,153)

The major classes of assets and liabilities comprising the disposal group and classified as held for sale are as follows:

	2015 £'000
Goodwill	4,699
Property, plant and equipment	1,288
Inventories	384
Trade and other receivables	170
Cash and bank balances	2
Total assets classified as held for sale	6,543
Trade and other payables	259
Decommissioning obligation	236
Total liabilities associated with assets classified as held for sale	495

Net assets of disposal group 6,048 During the year discontinued operations used net cash of £404,000 (2014: £901,000) in operating activities, paid £42,000 (2014: £413,000) in respect of investing activities, and paid £nil (2014: £nil) in respect of financing activities.

SCHEDULE 4 STRATMIN GROUP, GRAPHMADA GROUP AND GRAPHMADA MAURITIUS

STATEMENT OF FINANCIAL POSTION AS AT 31 DECEMBER 2015 (AUDITED)¹

	Stratmin GROUP		Graphmada Group		Graphmada Mauritius
	2015	2014	2015	2014	2015	2014
	£'000	£'000	£'000	£'000	£'000	£'000
Non-Current assets
Goodwill	-	5,012	-	-	-	-
Property, plant and	2	1,230			-	-
equipment Investment in	-	-	1,185 -	1,228 -	-	-
subsidiaries
Available for sale	1	6	-	-	-	-
investments
Loans to group	-	-	-	-	-	-
undertakings
	3	6,248	1,185	1,228	-	-
Current assets
Assets of the disposal group classified as
held for sale	6,543	-	-	-	-	-
Inventories	-	242	287	168	-	-
Trade and other	124	357	268	375	2	-
receivables
Trade and other			82		-	-
receivable
Intercompany
Cash and cash	156	91	2	7	-	1
equivalents
Current liabilities	6,823	690	639	550	2	1
Liabilities of the
disposal group
classified as held for
sale	495	-	-	-	-	-
Trade and other	355	382	257	105	14	-
payables Intercompany			4,652	3,181	234	-
liabilities
Short term borrowings	87	226	-	-	-	-
	1,198	608	4,909	3,286	248	-
Non-Current liabilities
Decommissioning	-	132	236	132	-	-
obligation
Net assets/(liabilities)	5,628	6,198	(3,321)2	(1,640)	(246)	1
Equity
Share capital Share premium	6,046 31,818	4,505 31,771	3 -	3 -	1 -	1 -
account
Merger reserve	23,460	23,460	-	-	-	-
Reverse acquisition	(48,478)	(48,478)	-	-	-	-
reserve
Investment reserve	(33)	(32)	-	-	-	-
Other reserves	134	293	-	-	-	-
Retained earnings	(7,506)	(5,321)	(3,324)	(1,643)	(247)	-
Equity attributable to owners of the Company	5,441	6,198	-	-	-	-
Non-controlling	187	-	-	-	-	-
interests
	5,628	6,198	(3,321)	(1,640)	(246)	1
Notes

¹ The Consolidated Stratmin Group Financial Report includes the Financial Position for Graphmada Group. Graphmada Mauritius is included in Graphmada Group.

² The intercompany liabilities are to be assigned to Bass on completion of the SPA. Refer to section 3.4 for further details.

SCHEDULE 5 GRAPHMADA GROUP STATEMENT OF COMPREHENSIVE INCOME

31 December 2015

	2015	2014
	£'000	£'000
Continuing operations
Revenue	392	87
Cost of sales	(456)	(115)
Gross (loss)/profit	(64)	(28)
Administrative expenses	(1,085)	(709)
Other operating expenses	(314)	(79)
Operating loss	(1,463)	(816)
Finance costs	-	-
Loss from continuing operations	(1,463)*	(816)
Loss before tax	(1,463)	(816)
Tax	-	(4)
Loss for the year	(1,463)	(820)
Other comprehensive income: Items that may be subsequently reclassified to profit and loss:
Market value adjustment to investments	- -	- -
Other comprehensive income/(expense) for the period	6	-
Total comprehensive loss for the year attributable to equity holders of the parent	(1,457)	(820)

The loss reported in the Total comprehensive loss for the year attributable to equity holders of the parent (£ 1,457,000) expressed within the Graphmada Group's Statement of Comprehensive Income (Schedule 5) and the Net loss attributable to discontinued operations reported within the Extract of the Notes to Stratmin Global Resources Plc ("Stratmin") Financial Report for the year ended 31 December 2015 (£1,317,000 - Schedule 3) indicated a difference of £140,000.

This difference in these reported losses was adjusted at the time of the audit completion and was required in order for Stratmin to comply with International Financial Reporting Standards ("IFRS") and is reconciled as follows:

Total Comprehensive loss as reported by Graphmada group at Schedule 5 (as referred above)	(£1,457,000)
Add – Additional Income (from Graphite sales) not previously recognized by Graphmada Group	£53,000
Less – Additional expense relating to the loss on plant cost not previously recognized by the Graphmada Group	(£17,000)
Add - Capitalisation of decommissioning of plant costs that had previously been recognized as an expense by the Graphmada Group	£104,000
Net loss attributable to discontinued operations as per Schedule 3	£1,317,000

SCHEDULE 6 GRAPHMADA MAURITIUS STATEMENT OF COMPREHENSIVE INCOME

31 December 2015

	2015 £'000	2014 £'000
Continuing operations
Revenue	-	-
Cost of sales	-	-
Gross (loss)/profit	-	-
Administrative expenses	(247)	-
Other operating expenses	-	-
Operating loss	(247)	-
Finance costs	-	-
Loss from continuing operations	(247)	-
Loss before tax	(247)	-
Tax	-	-
Loss for the year	(247)	-
Other comprehensive income:
Items that may be subsequently reclassified to profit and loss:
Market value adjustment to investments	- -	- -
Other comprehensive income/(expense) for the period	-	-
Total comprehensive loss for the year attributable to equity holders of the parent	(247)	-

SCHEDULE 7 AUDITOR'S LETTER