QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

Dec 1, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

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ASX ANNOUNCEMENT

ASX: VXL & VXLO

2 December 2014

Graphite Production Status Update

• Regulatory,approval,for,commercial,production,at,final,stage,and,expected,shortly

• Approval,received,for,screening,and,grading,of,174,000,tonne,ROM,stockpiles

• Plant,preBcommissioning,and,construction,testing,successful

• Graphite,flake,size,and,purity,exceeds,expectations

Valence,Industries,Limited,is,pleased,to,provide,an,update,on,its,wholly,owned,Uley,Graphite[TM] mining,and,processing,facilities,in,South,Australia.,,,

Processing!Approval!Status!

As,has,been,advised,to,the,market,,the,Company,is,in,the,process,of,finalising,regulatory,approvals, for,full,scale,mining,and,processing,at,its,Uley,Graphite[TM,] ,facilities.,

The,Company,has,an,Approved,Development,Plan,( ADP ),for,its,operations.,,Valence,Industries,has, been,in,close,consultation,with,the,South,Australian,Department,of,State,Development,( DSD ),in, relation,to,the,final,stage,of,approval,,the,transition,to,a,Program,for,Environment,Protection,and, Rehabilitation,( PEPR ).,,,

Final,amendments,to,the,PEPR,program,are,being,agreed,with,the,DSD,and,are,being,documented., Valence,Industries,understands,there,are,no,substantive,items,outstanding,for,the,PEPR,and,has, received,indications,from,DSD,that,formal,approval,can,be,expected,in,December,2014.,

Screening!&!Grading!Approval!

In,preparation,for,the,full,PEPR,approval,,Valence,Industries,advises,that,it,has,received,approval, from,DSD,to,commence,the,screening,and,grading,of,the,Company’s,runBofBmine,( ROM ),stockpiles, under,the,existing,ADP,permit.,

This, significant, step, in, the, formal, approval, process, will, accelerate, Valence, Industries’, ability, to, process,commercial,quantities,of,graphite,,once,the,full,PEPR,approval,is,obtained.,This,approval, allows,the,Company,to,crush,,screen,and,grade,the,existing,174,000,tonnes,of,ROM,stockpiles.,,,

The, stockpiles, have, an, average, grade, of, 6.23%, gC, (graphitic, carbon), for, an, estimated, 10,800, tonnes, of, contained, graphite[1] ., , The, screening, and, grading, process, will, prepare, the, stockpiled, material,for,final,processing,through,the,Phase,I,plant,once,full,approvals,are,obtained.,,,

1 ,Inferred,JORC,2012,Mineral,Resource

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2

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Graphite!Processing!Plant!Status!!

Valence, Industries, confirms, the, successful, preBcommissioning, testing, of, the, Phase, I, processing, plant,over,the,last,month.,,The,quality,of,graphite,produced,from,test,processing,has,exceeded, initial,expectations,both,in,terms,of,flake,size,and,purities,of,graphitic,carbon.,,,

Initial,volumes,from,the,fines,stockpiles,has,been,passed,through,the,refurbished,and,upgraded, internal,circuit,as,part,of,the,construction,testing,and,preBcommissioning,of,the,plant.,,The,test, processing, has, taken, material, through, to, sizeBscreening, and, bagging, using, the, new, bagging, equipment.,,All,stages,of,the,processing,circuit,–,including,flotation,,thickening,and,drying,B,are, operational,and,working,as,intended.,

The,trials,have,produced,flake,graphite,at,higher,purity,levels,and,in,larger,flake,sizes,than,was, expected,from,the,fines,stockpile,material.,A,significant,percentage,of,the,graphite,has,fallen,into, the, larger, flakeBsize, ranges, including, +35, mesh, (Jumbo, Flake),, +50, mesh, (Large, Flake), and, +80, mesh,(Medium,Flake).,,This,program,has,also,verified,that,the,Uley,Graphite[TM,] ,resource,consists, entirely,of,flake,with,no,amorphous,graphite.,

The,first,stage,of,production,will,be,to,treat,and,package,for,shipping,the,existing,preprocessed, fines, stockpile., , The, next, stage, of, production, will, be, to, fully, process, existing, ROM, stockpiles, in, accordance, with, the, Company’s, production, plan., In, 2015, Valence, Industries, will, look, at, introducing, higherBgrade, fresh, ore, from, the, new, Uley, Pit, 2, in, order, to, maximise, economic, productivity,of,the,Phase,I,processing.,

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Size,Screening,Unit,(2014),

Bagging,Units,(2014),

For$further$information,$please$contact:$$

Christopher,S.,Darby, CEO,&,Managing,Director, info@valenceindustries.com, +61,8,8418,8564,,

Valence$Industries$confirms$that$it$is$not$aware$of$any$new$information$or$data$that$materially$affects$the$information$ included$in$this$announcement$and$that$all$material$assumptions$and$technical$parameters$underpinning$the$estimates$in$ this$announcement$continue$to$apply$and$have$not$materially$changed$since$the$announcement$previously$released$as$ “Valence$Doubles$Existing$ROM$Stockpiles”$(6/8/14).

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