QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

Nov 10, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

ASX ANNOUNCEMENT ASX: VXL & VXLO

Tuesday, 11 November 2014

EXERCISE OF OPTIONS

Valence Industries Limited (ASX: VXL & VXLO) ("Valence" or "the Company") advises that shareholders have exercised listed options (ASX: VXLO) issued by the Company. All listed options have an exercise price of 25 cents per share and expiry of 31 July 2016.

Shareholders have most recently exercised 2,535 listed options (ASX: VXLO) issued by the Company. Valence Industries has issued the following listed shares upon the exercise of the VXLO securities on the following terms:

Number of securities	2,535
Class and terms	Fully paid ordinary shares
Issue price	25 cents per share
Purpose of the issue	Exercise of options by shareholders
Will the entity seekshareholder approval?	No. The shares are issued under listing rule 7.2, exception 4 andshareholder approval is not required
Class of security holder	Not applicable

An Appendix 3B seeking quotation of the shares is attached to this announcement.

For further information, please contact: Jaroslaw (Jarek) Kopias CFO & Company Secretary Valence Industries info@valenceindustries.com +61 8 8418 8564

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX's property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Valence Industries Limited

ABN

41 008 101 979

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

• 1 +Class of +securities issued or to be issued
• 2 Number of +securities issued or to be issued (if known) or maximum number which may be issued
• 3 Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

+ See chapter 19 for defined terms.

4 Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities? If the additional +securities do not rank equally, please state: the date from which they do the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets) 6a Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i No 6b The date the security holder resolution under rule 7.1A was passed 6c Number of +securities issued without security holder approval

under rule 7.1

+ See chapter 19 for defined terms.

• 6d Number of +securities issued with security holder approval under rule 7.1A
• 6e Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)
• 6f Number of +securities issued under an exception in rule 7.2
• 6g If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation.
• 6h If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements
• 6i Calculate the entity's remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements
• 7 +Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

8 Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

Number	+Class
153,865,337	Ordinary shares
52,199,188	ListedOptionsexercisableat25cents on or before 31July 2016.

7.1 – 8,288,026 7.1A – Not applicable

11 November 2014

+ See chapter 19 for defined terms.

Appendix 3B New issue announcement

		Number	+Class
9	+classNumberandofall+securities not quoted on ASX+securities(includingtheinsection 2 if applicable)	32,816,642	Ordinarysharesescrowedto6January 2016.
		16,250,000	RestrictedOptionsexercisableat25cents on or before 31July2016escrowedto 6 January 2016.
		3,500,000	UnlistedOptionsexercisableat25cents on or before 31July2016escrowedto 6 January 2016 -vested.
		1,550,000	UnlistedOptionsexercisableat25cents on or before 31July2016escrowedto 6 January 2016 –unvested and subjecttoperformancecriteria.
		687,500	Unlistedperformancerightsescrowedto6January2016andsubjecttoperformance criteria.

10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Same as for all other securities

+ See chapter 19 for defined terms.

Part 2 - Pro rata issue

11	Issecurityholderapprovalrequired?
12	Is the issue renounceable or nonrenounceable?
13	Ratio in which the +securitieswill be offered
14	+Class of +securities to which theoffer relates
15	+Recorddatetodetermineentitlements
16	Willholdingsondifferentregisters(orsubregisters)beaggregatedforcalculatingentitlements?
17	Policy for deciding entitlementsin relation to fractions
18	Names of countries in which theentity has security holders whowillnotbesentnewofferdocumentsNote: Security holders must be told how their
	entitlements are to be dealt with.Cross reference: rule 7.7.
19	Closingdateforreceiptofacceptances or renunciations
20	Names of any underwriters
21	Amount of any underwriting feeor commission
22	Names of any brokers to theissue
23	Fee or commission payable to thebroker to the issue

+ See chapter 19 for defined terms.

Appendix 3B New issue announcement

24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders 25 If the issue is contingent on security holders' approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do security holders sell their entitlements in full through a broker? 31 How do security holders sell part of their entitlements through a broker and accept for the balance? 32 How do security holders dispose of their entitlements (except by sale through a broker)? 33 +Issue date

+ See chapter 19 for defined terms.

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

34 Type of +securities (tick one) (a) +Securities described in Part 1 (b) All other +securities Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid,

Entities that have ticked box 34(a)

securities

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35	If the +securities are +equity securities, the names of the 20 largest holders of theadditional +securities, and the number and percentage of additional +securitiesheld by those holders
36	If the +securities are +equity securities, a distribution schedule of the additional+securities setting out the number of holders in the categories1 - 1,0001,001 - 5,0005,001 - 10,00010,001 - 100,000100,001 and over
37	A copy of any trust deed for the additional +securities

employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible

+ See chapter 19 for defined terms.

Entities that have ticked box 34(b)

38	Number of +securities for which+quotation is sought	2,535
39	+Class of +securities for whichquotation is sought	Ordinary fully paid shares (VXL)
40	Do the +securities rank equally inall respects from the +issuedatewith an existing +class of quoted+securities?	Yes
	If the additional +securities do notrank equally, please state:the date from which they dotheextenttowhichtheyparticipateforthenextdividend, (in the case of atrust, distribution) or interestpaymentthe extent to which they donot rank equally, other than inrelation to the next dividend,distributionorinterestpayment
41	Reason for request for quotation	Exercise of quoted options (VXLO)
	now
	Example: In the case of restricted securities, endof restriction period
	(if issued upon conversion ofanother +security, clearly identifythat other +security)
42	+classNumberandofall	Number	+Class

42 Number and +class of all +securities quoted on ASX (including the +securities in clause 38) 153,865,337 52,199,188

Ordinary shares Listed Options exercisable at 25 cents on or before 31 July 2016.

+ See chapter 19 for defined terms.

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX's absolute discretion. ASX may quote the +securities on any conditions it decides.
• 2 We warrant the following to ASX.
  • The issue of the +securities to be quoted complies with the law and is not for an illegal purpose.
  • There is no reason why those +securities should not be granted +quotation.
  • An offer of the + securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any +securities to be quoted and that no-one has any right to return any +securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.
• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the +securities be quoted.
• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.
• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here: ............................................................Date: 11 November 2014 Company secretary

Print name: Jaroslaw (Jarek) Kopias

== == == == ==

+ See chapter 19 for defined terms.

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 –Issues exceeding 15% of capitalStep 1: Calculate "A", the base figure from which the placementcapacity is calculated
Add the following:
Number of fully paid +ordinary securities•issued in that 12 month period under anexception in rule 7.2	33,673,677 (rights issue for admission toASX) – 24 December 2013
Number of fully paid +ordinary securities•issued in that 12 month period withshareholder approval	687,500 (issue upon exercise ofperformance rights on issue prior toadmission to ASX) – 20 January 2014
Number of partly paid +ordinary•securities that became fully paid in that12 month period	17,024,453 (rights issue shortfall) – 4February 20141,623,943 (exercise of listed options) –
Note:	between 16 April 2014 and 11 November2014
•Include only ordinary securities here –other classes of equity securities cannotbe added•Include here (if applicable) the securitiesthe subject of the Appendix 3B to whichthis form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items	982,187 (SPP issue) – 6 November 2014.
Subtract the number of fully paid +ordinarysecurities cancelled during that 12 monthperiod
"A"	169,539,135

+ See chapter 19 for defined terms.

Step 2: Calculate 15% of "A"
"B"	0.15
	[Note: this value cannot be changed]
Multiply "A" by 0.15	25,430,870
Step 3: Calculate "C", the amount of placement capacity under rule7.1 that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod not counting those issued:	17,142,844 ordinary shares issued on 25September 2014
•Under an exception in rule 7.2
•Under rule 7.1A
•With security holder approval under rule7.1 or rule 7.4
Note:•This applies to equity securities, unlessspecifically excluded – not just ordinarysecurities•Include here (if applicable) the securitiesthe subject of the Appendix 3B to whichthis form is annexed•It may be useful to set out issues ofsecurities on different dates as separateline items
"C"	17,142,844
Step 4: Subtract "C" from ["A" x "B"] to calculate remainingplacement capacity under rule 7.1
"A" x 0.15	25,430,870
Note: number must be same as shown inStep 2
Subtract "C"	17,142,844
Note: number must be same as shown inStep 3
Total ["A" x 0.15] – "C"	8,288,026
	[Note: this is the remaining placementcapacity under rule 7.1]

+ See chapter 19 for defined terms.

Part 2

Rule 7.1A –Additional placement capacity for eligible entities
Step 1: Calculate "A", the base figure from which the placementcapacity is calculated
"A"	Not applicable
Note: number must be same as shown inStep 1 of Part 1
Step 2: Calculate 10% of "A"
"D"	0.10
	Note: this value cannot be changed
Multiply "A" by 0.10
Step 3: Calculate "E", the amount of placement capacity under rule7.1A that has already been used
Insert number of +equity securities issuedor agreed to be issued in that 12 monthperiod under rule 7.1A
Notes:•This applies to equity securities – notjust ordinary securities•Include here – if applicable – thesecurities the subject of the Appendix3B to which this form is annexed•Do not include equity securities issuedunder rule 7.1 (they must be dealt within Part 1), or for which specific securityholder approval has been obtained•It may be useful to set out issues ofsecurities on different dates as separateline items
"E"

+ See chapter 19 for defined terms.

Step 4: Subtract "E" from ["A" x "D"] to calculate remainingplacement capacity under rule 7.1A
"A" x 0.10
Note: number must be same as shown inStep 2
Subtract "E"
Note: number must be same as shown inStep 3
Total ["A" x 0.10] – "E"
	Note: this is the remaining placementcapacity under rule 7.1A

+ See chapter 19 for defined terms.