QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

Oct 8, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

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ASX ANNOUNCEMENT

ASX: VXL & VXLO

Thursday, 9[th] October 2014

60%+ GRADE ARTERIAL FLAKE[TM] GRAPHITE

• Valence
  Industries
  has
  discovered
  a
  new
  globally
  unique
  flake
  graphite
  deposit
  zone
  with intercepts
  exceeding
  60%
  graphitic
  carbon.

• Significant
  intersections
  in
  the
  new
  zone
  include
  flake
  graphite
  grades
  of
  61.5%
  graphitic carbon
  over
  2.6
  metres.

• Super
  jumbo
  flake
  graphite
  sizes
  in
  the
  new
  zone
  exceed
  4
  millimetres
  (+5
  mesh).

• Results
  from
  in-­‐fill
  drilling
  in
  the
  area
  of
  known
  mineralisation
  also
  demonstrate
  significant intersections
  at
  very
  high
  grades,
  including
  21.7%
  gC
  over
  16m
  (MD619).

• The
  full
  impact
  of
  the
  discovery
  has
  yet
  to
  be
  established
  but
  has
  the
  potential
  to significantly
  enhance
  the
  economics
  of
  the
  Uley
  operation
  for
  Valence
  Industries.

**Discovery

of
High
Grade _Arterial
Flake_ [TM] Graphite**

Valence
Industries
has
discovered
new
and
significant
high-­‐grade
very
large
flake
graphite mineralisation.

This
area
is
a
completely
new
area
of mineralised
pegmatite untouched
by historical
drilling
and
entirely
in
addition
to
the
already
known
mineralisation
that
forms
the existing
JORC
(2012)
Mineral
Resource.

This
new
area
of
graphitic mineralised
pegmatite has
been
encountered
from
near
surface
at
25 metres
dipping
down
to
120
metres
and
extending
across
a
strike
distance
of
~75
metres.

It
is
anticipated
that
this
new
area
is
structurally
controlled mineralised
pegmatite and
remobilised gneiss
that
has
an
apparent
continuity
which
presents
as
an
area
best
described
as
an
“artery”
of TM flake
graphite.
We
have
named
the
unique
graphite
from
this
new
zone Arterial
Flake .

TM The
features
of
Valence
Industries’
new Arterial
Flake graphite
include:

New
Discovery A
unique
and
exciting
new
geological
discovery. Very
High
Grade Very
high
grades
exceeding
60%+
gC.

Flake
graphite
grades
like
this
over such
significant
intercepts
have
not
been
previously
reported. Easily
Accessed Found
from
near
surface
in
soft
dig
material
and
so
is
easily
accessed. Super-­‐Jumbo
Flake Has
super-­‐jumbo
flake
sizes
that
from
independent
petrology
exceed
4mm (+5
mesh).
This
has
also
never
been
reported
previously. Globally
Unique A
globally
unique
combination
of
high-­‐grade,
super-­‐jumbo
flake,
bulk intersections
and
easily
mined
material.

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2

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Arterial
Flake[TM] from
Hole
MD622 MD622
Grades
from
15%
gC
to
29.6%
gC

**Potential

&
Current
Petrology**

Valence
Industries
has
commissioned
independent
petrological
testing
and
assessment
of
the material
from
across
the
area
of
the
in-­‐fill
drilling
campaign
and
particularly
with
respect
to
the newly
discovered mineralised
pegmatite zone.

To
date
the
petrology
program
has
confirmed
that
the
assessed
material
includes
super
jumbo
flake sizes
that
exceed
4
millimetres
(+5
mesh).
The
petrology
assessment
is
the
first
step
in
determining TM the
flake
size
distribution
of
the
new Arterial
Flake .

Further
flake
size
distribution
analysis
will occur
as
Valence
Industries
identifies
market
applications.

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Uley
Graphite
–
Example
of
Oriented/Schistose
Coarse
Graphite (2014)

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Valence
Industries’
is
conducting
further
assessment
of
the
potential
associated
with
its Arterial Flake TM
graphite
in
the mineralised
pegmatite zone
and
the
types
of
new
flake
graphite
products and
industries
that
the
Company
will
be
capable
of
manufacturing
and
supplying.

The
results
of that
assessment
will
help
to
inform
the
outcomes
of
the
current
Phase
II
feasibility
study
process
as well
as
the
program
for
optimising
production
from
the
existing
Phase
I
graphite
processing
and manufacturing
facilities.

“ The
discovery
of
Arterial
Flake
graphite
is
potentially
game
changing. This
discovery
sets
Uley
Graphite
even
further
ahead
on
the
Australian and
the
global
graphite
stage. ”
said
Christopher
Darby,
MD
&
CEO, Valence
Industries.

TM Significant
intersections
of Arterial
Flake in
the
graphitic mineralised
pegmatite include:

• 24%
  graphitic
  carbon
  (gC)
  over
  6m
  (from
  48.0m)
  including 61.5%
  gC
  over
  2.6m (MD615)

• 32.9%
  gC
  over
  3.8m
  from
  (46.1m)
  including 60%
  gC
  over
  1m (MD617)

• 60.7%
  gC
  over
  2m
  (from
  80.0m)(MD624)

• 43%
  gC
  over
  2.7m
  (from
  (52.7m)
  including
  56.6%
  gC
  over
  2m
  (MD639)

All
significant
intersections
across
the mineralised
pegmatite are
expressed
in
Table
1.

**Relationship

between
New
Pegmatite
Zone
&
Established
Mineralisation**

The
new
zone
of
graphitic mineralised
pegmatite is
a
new
discovery.

Historical
drilling
and
the existing
JORC
(2012)
Mineral
Resource
did
not
find
this
area
and
did
not
take
this
area
of mineralisation
into
account.

The
exact
relationship
between
this
new
zone
of mineralised pegmatite and
the
areas
previously
known
to
the
Company
is
starting
to
be
understood
but
is subject
to
ongoing
assessment.

The
new
area
of
graphitic mineralised
pegmatite ,
and
the
extreme
flake
size
which
has
crystallised, is
thought
to
be
from
the
late
stage
dewatering
of
the
Cook
gap
schist
(host
rock),
remobilisation
of the
fluids
through
fissures,
and
subsequent
deformation
events
which
are
likely
to
have
controlled the
mineralisation
structurally.

In
summary,
the
mineralised
graphitic
pegmatite
post-­‐dates
(overprints)
the
established
Uley mineralisation.
The
new
zone
is
located
within
and
below
the
existing
mineralisation
and
this
will be
understood
in
greater
detail
in
coming
weeks.
Importantly
the
combination
of
the
new
and
the previously
established
forms
of
mineralisation
are
anticipated
to
add
substantially
to
the
quality and
quantity
of
the
resource
held
by
the
Company.

This
is
a
new
discovery
and
Valence
Industries
is
continuing
to
analyse
and
interpret
the
data
to develop
a
full
picture
of
these
structures.

Valence
Industries
will
continue
to
undertake metallurgical
test
work
and
detailed
geological
modelling
over
the
coming
weeks
to
develop
its TM knowledge
of
the
Company’s
new Arterial
Flake as
well
as
the
areas
of
previously
know mineralisation.
Valence
Industries
will
then
update
the
existing
JORC
(2012)
Mineral
Resource
and intends
to
release
a
maiden
Ore
Reserve
for
inclusion
in
its
Phase
II
feasibility
study
program. Metallurgical
test
work
will
also
be
incorporated
in
the
feasibility
study
for
release
towards
the
end of
2014.

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4

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**Significant

New
High
Grade
Intersections
in
Established
Mineralisation**

All
data
has
now
been
received
from
the
in-­‐fill
drilling
campaign
across
the
area
of
the
proposed new
Uley
Pit
2,
which
contains
the
Company’s
established
JORC
(2012)
Mineral
Resource.
The
drill results
include
significant
additional
high-­‐grade
intersections.

These
new
graphite
intersections
within
the
previously
known
areas
of
mineralisation
are significant
in
their
own
right.

The
additional
assay
results
from
the
known
area
of
mineralisation
are
highly
positive.
The
in-­‐fill drilling
results
include
the
following
significant
intersections:

• 19.6%
  gC
  over
  11.3m
  (from
  26.4m
  depth)
  and
  16.3%
  gC
  over
  15m
  (from
  86.8m)
  including
  22.6% gC
  over
  4m
  (MD608)

• 20.48%
  gC
  over
  5.1m
  (from
  70.7m)
  including
  47.2%
  over
  1.7m
  (MD
  612)

• 19.4%
  gC
  over
  9.4m
  (from
  43.2m)
  (MD613)

• 21.7%
  gC
  over
  16m
  (from
  80.8m)
  including
  36.9%
  over
  2m
  (MD619)

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Uley
Pit
2
–
Diagram
of
Previously
Known
Areas
of
Graphitic
Mineralisation Showing
Some
Significant
In-­‐Fill
Drilling
Assay
Results

These
outcomes
within
the
previously
known
areas
of
mineralisation
would
on
their
own differentiate
the
Uley
Graphite
deposit
as
a
leading
high-­‐grade
deposit
globally.

These
are
high grades
of
graphite
over
significant
intervals
and
hosted
in
material
that
is
easily
excavated
and transported
for
processing.

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_“Nowhere
else
in
the
world
is
there
a
flake
graphite
combination
of
high
grade, easily
mined,
easily
processed,
moderate
climate,
close
proximity
to
established port,
close
proximity
to
skilled
personnel
and
contractors
and
a
stable
first world
economic
and
political
base.

When
this
is
added
to
the
only
existing graphite
manufacturing
plant
in
Australia
it
really
sets
Valence
Industries apart.”_ said
Christopher
Darby,
MD
&
CEO,
Valence
Industries.

All
significant
intersections
from
the
2014
diamond
in-­‐fill
drilling
campaign
are
presented
in
Table
1.

**A

Good
Challenge
to
Have
–
High
Grades
&
Quality
Assurance**

Analysing
the
very
high
grades
of
flake
graphite
encountered
in
the
area
of
previously
known mineralisation
and
the
even
higher
grades
encountered
in
the
new mineralised
pegmatite posed
a significant
challenge
for
the
independent
laboratory.
In
the
normal
course
the
laboratory
uses
a
set of
certified
reference
graphite
samples
that
represent
the
range
of
graphite
grades
found
around the
world
but
these
did
not
have
grades
high
enough
to
reference
the
samples
provided
by
Valence Industries.

The
lack
of
reference
samples
meant
that
to
achieve
the
standards
required
for
ISO9001
certified samples,
the
independent
laboratory
had
to
conduct
multiple
cross-­‐checks
and
create
new reference
samples
to
verify
the
exceptionally
high-­‐grade
flake
graphite
results.
This
program
of
QA &
QC
assurance
has
been
the
main
reason
for
the
delay
in
obtaining
final
results
from
the
in-­‐fill drilling
campaign.

For
further
information,
please
contact:

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

_The
information
in
this
announcement
that
relates
to
the
in
situ
Mineral
Resources
is
based
on,
and
fairly represents,
the
Mineral
Resources
and
information
and
supporting
documentation
extracted
from
the
report, which
was
prepared
by
a
competent
person
in
accordance
with
the
JORC
Code
(2012
edition)
and
released
to
ASX by
the
Company
on
18
November
2013.

The
Company
confirms
that
it
is
not
aware
of
any
new
information
or data
that
materially
affects
the
information
included
in
the
original
market
announcement.
All
material assumptions
and
technical
parameters
underpinning
the
Mineral
Resource
estimates
in
that
previous
release continue
to
apply
and
have
not
materially
changed._

_**Competent

Persons
Statement
–
In-­‐Fill
Drilling
Campaign**_

_The
information
in
this
announcement
that
relates
to
the
Mineral
Resources
pertaining
to
the
Company’s
in-­‐fill drilling
campaign
results
is
based
on
information
compiled
by
Ms
Karen
Lloyd,
who
has
been
engaged
as
General Manager
–
Technical
Delivery
by
Valence
Industries.
Ms
Lloyd
is
a
Member
of
the
Australian
Institute
of
Mining and
Metallurgy.

Ms
Lloyd
has
sufficient
experience
that
is
relevant
to
the
style
of
mineralisation
and
type
of deposit
under
consideration
and
to
the
activities
being
undertaken
to
qualify
as
Competent
Persons
as
defined
in the
2012
Edition
of
the
“Australasian
Code
for
Reporting
of
Exploration
Results,
Mineral
Resources
and
Ore Reserves”.
Ms
Lloyd
consents
to
the
inclusion
in
this
release
of
the
matters
based
on
their
information
in
the
form and
context
as
it
appears._

**See
also
Appendix
1
–
JORC
Code
2012

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7

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Table
1
–
Valence
Industries
–
In-­‐fill
Drilling
Campaign
2014
–
Uley
Graphite Assay
Results
Showing
Significant
Intersections
of
Graphitic
Mineralisation**

Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**
	Hole_ID	From (m)	To (m)	Width (m)	Graphitic Carbon (gC%)	Comments
	MD600	6.7	13	6.3	10.7	Results received
	MD600	83.5	99.5	16	29.3	Results received
	including	83.5	93.8	10.3	38.1	Results received
	MD601	71.4	75.9	4.5	34.4	Results received
	including	71.4	73.9	2.5	46.0	Results received
	MD601	79.8	84.1	4.3	32.2	Results received
	MD602	65	71.3	6.3	25.8	Results received
	MD602	75.1	77.7	2.6	24.1	Results received
	MD602	92.5	97.5	5	38.5	Results received
	MD602	106.3	107.8	1.5	19.3	Results received
	MD602	115.8	136.8	21	13.6	Results received
	MD603	61.4	67.4	6	25.6	Results received
	MD603	81.7	87.7	6	38.7	Results received
	MD603	95.4	97.4	2	18.4	Results received
	MD603	104.3	109.3	5	13.0	Results received
	MD603	110.6	121.8	11.2	12.1	Results received
	MD604	21.7	25.7	4	19.5	Results received
	MD604	68.7	79	10.3	32.0	Results received
	MD604	97.1	98.6	1.5	47.1	Results received
	MD604	112.8	119.3	6.5	14.6	Results received
	including	112.8	116.1	3.3	19.3	Results received
	MD605	62	73	11	30.8	Results received

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9

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Table
1
–
Valence
Industries
–
In-­‐fill
Drilling
Campaign
2014
–
Uley
Graphite Assay
Results
Showing
Significant
Intersections
of
Graphitic
Mineralisation**

Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**
	Hole_ID	From (m)	To (m)	Width (m)	Graphitic Carbon (gC%)	Comments
	MD605	86.9	90.8	3.9	36.7	Results received
	MD605	108	113.3	5.3	20.6	Results received
	including	108	110	2	31.3	Results received
	MD606	48.9	53.9	5	15.6	Results received
	MD606	73.5	77.5	4	21.1	Results received
	MD607	46.5	56.2	9.7	18.5	Results received
	including	47.5	50.2	2.7	27.5	Results received
	MD608	26.4	37.7	11.3	19.6	Results received
	MD608	86.8	101.8	15	16.3	Results received
	including	95.8	99.8	4	22.6	Results received
	MD609	36.8	38.8	2	17.2	Results received
	MD609	45.8	53.1	7.3	16.6	Results received
	MD610	4.5	5.8	1.3	15.4	Results received
	MD610	33.5	35	1.5	23.9	Results received
	including	34	35	1	39.8	Results received
	MD610	41.4	48.1	6.7	36.2	Results received
	including	41.9	43.9	2	51.6	Results received
	and	44.9	47.1	2.2	43.8	Results received
	MD610	63.5	65.3	1.8	20.4	Results received
	MD612	36.7	38.4	1.7	17.2	Results received
	MD612	57.5	67.2	9.7	30.8	Results received
	including	62.5	65.5	3	42.9	Results received
	MD612	70.7	75.8	5.1	20.4	Results received
	including	74.1	75.8	1.7	47.2	Results received
	MD613	18.5	19.1	0.6	17.4	Results received
	MD613	26.4	28.7	2.3	21.1	Results received
	including	26.4	27.7	1.3	29.5	Results received
	MD613	43.2	52.6	9.4	19.4	Results received
	MD614	43.8	48.7	4.9	29.7	Results received
	including	45.8	47.8	2	34.9	Results received
	MD615	31.9	34.2	2.3	27.6	Results received
	MD615	38.3	46	7.7	19.3	Results received
	including	41	44	3	34.8	Results received
	MD615	48	54	6	24.0	Results received
	including	51.4	54	2.6	61.5	Results received
	MD615	84.9	86.9	2	16.5	Results received
	MD616	35.6	43	7.4	21.6	Results received
	MD616	72.4	74.4	2	15.3	Results received
	MD617	11.7	14.2	2.5	18.5	Results received
	MD617	31.3	33.7	2.4	15.8	Results received
	MD617	46.1	49.9	3.8	32.9	Results received
	including	48.1	49.1	1	60.0	Results received
	MD617	57	66.5	9.5	30.3	Results received
	including	58	64.5	6.5	39.5	Results received
	MD617	71.5	79.5	8	18.3	Results received
	MD618	40	52.3	12.3	30.5	Results received
	including	42	45	3	41.2	Results received
	and	49	51.6	2.6	40.4	Results received
	MD618	81.2	92	10.8	19.3	Results received
	including	86.1	86.9	0.8	45.9	Results received
	MD619	51.7	56.7	5	32.1	Results received
	MD619	68.9	70.3	1.4	41.6	Results received

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Table
1
–
Valence
Industries
–
In-­‐fill
Drilling
Campaign
2014
–
Uley
Graphite Assay
Results
Showing
Significant
Intersections
of
Graphitic
Mineralisation**

Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**	Table 1 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Assay Results Showing Significant Intersections of Graphitic Mineralisation**
	Hole_ID	From (m)	To (m)	Width (m)	Graphitic Carbon (gC%)	Comments
	MD619	80.8	96.8	16	21.7	Results received
	including	81.8	83.8	2	36.9	Results received
	and	84.8	86.8	2	38.0	Results received
	MD620	26.1	30	3.9	17.3	Results received
	MD620	50.6	54.7	4.1	23.6	Results received
	MD620	103.4	110.3	6.9	18.4	Results received
	MD622	9.9	12.9	3	15.0	Results received
	MD622	63	66	3	17.4	Results received
	MD622	102.5	106.5	4	29.6	Results received
	MD622	118.9	122.8	3.9	17.2	Results received
	MD624	51	61	10	28.3	Results received
	including	52	56	4	37.0	Results received
	MD624	80	82	2	60.7	Results received
	MD624	94	105	11	18.7	Results received
	MD626	24.2	26.2	2	15.3	Results received
	MD628	104.7	106.8	2.1	31.5	Results received
	MD630	35	38	3	30.6	Results received
	MD632	11.1	14.6	3.5	17.7	Results received
	MD632	41.2	43.7	2.5	16.3	Results received
	MD632	77.5	81.5	4	15.7	Results received
	MD633	17.5	19.1	1.6	19.7	Results received
	MD635	40.7	45.7	5	16.6	Results received
	including	42	43	1	51.2	Results received
	MD637	31.9	37	5.1	17.5	Results received
	MD637	59	67.5	8.5	15.9	Results received
	MD637	68.8	71.5	2.7	19.5	Results received
	MD638	38.7	42.7	4	16.1	Results received
	MD639	30.3	35.2	4.9	21.3	Results received
	MD639	46.2	51.2	5	16.0	Results received
	MD639	52.2	54.9	2.7	43.0	Results received
	including	52.7	54.7	2	56.6	Results received
	MD639	77.5	80	2.5	18.8	Results received
	MD640	31	37	6	20.0	Results received
	including	32	34	2	35.0	Results received
	MD640	40.6	46.2	5.6	39.9	Results received
	MD640	53.9	56.9	3	17.2	Results received
	MD640	82.5	84.5	2	17.0	Results received
	MD640	93.5	95.5	2	18.7	Results received

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Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite Significant Drill-Hole Specifications**
	Significant Drill-Hole Specifications**
HOLE_ID	EASTING	NORTHING	DEPTH	DIP	AZIMUTH
MD600	10000	9525	100	-60	90
MD601	10000	9500	110	-60	90
MD602	9975	9525	130	-60	90
MD603	9975	9500	160	-60	90
MD604	9950	9525	150	-60	90
MD605	9950	9500	150	-60	90
MD606	10100	9500	80	-60	90
MD607	10125	9450	60	-60	90
MD608	10075	9500	100	-60	90
MD609	10100	9450	80	-60	90
MD610	10050	9500	100	-60	90
MD611	10075	9450	100	-60	90
MD612	10025	9500	100	-60	90
MD613	10050	9450	120	-60	90
MD614	10000	9400	100	-60	90
MD615	10025	9450	140	-60	90
MD616	9975	9400	120	-60	90
MD617	10000	9450	100	-60	90
MD617.2	9900	9375	120	-60	90
MD618	9950	9400	110	-60	90
MD619	9975	9450	120	-60	90
MD620	9925	9400	120	-60	90
MD621	10150	9500	50	-60	90
MD622	9925	9450	130	-60	90
MD623	10125	9500	60	-60	90
MD624	9950	9450	120	-60	90
MD625	10150	9450	40	-60	90
MD626	10100	9375	60	-60	90
MD627	10125	9375	40	-60	90
MD628	10000	9550	130	-60	90
MD629	10075	9375	60	-60	90
MD630	10025	9400	80	-60	90
MD631	10050	9375	80	-60	90
MD632	10050	9400	120	-60	90
MD633	10025	9375	70	-60	90
MD634	10075	9400	90	-60	90
MD635	10000	9375	80	-60	90
MD636	10125	9400	40	-60	90
MD637	9975	9375	80	-60	90
MD638	10100	9400	80	-60	90
MD639	9950	9375	100	-60	90
MD640	9925	9375	100	-60	90

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**VALENCE

INDUSTRIES**

**About

Valence
Industries
&
Graphite
Manufacturing**

Valence
Industries
(ASX:VXL
&
VXLO)
is
the
owner
and
operator
of
the
only
graphite
mining
and manufacturing
facilities
in
Australia
located
at
Uley
in
South
Australia
near
the
major
regional centre
of
Port
Lincoln.
In
April
2014
and
just
four
months
after
listing
on
the
ASX,
Valence Industries
achieved
the
first
sales
of
graphite
by
an
Australian
company
in
more
than
20
years
and recently
signed
MoUs
for
the
supply
of
80,000
tonnes
of
graphite
over
a
period
of
2+
years.

The
Company
is
bringing
its
existing
plant
and
substantial
infrastructure
into
production
in
Phase
I with
a
focus
on
global
markets
across
multiple
graphite
product
ranges.
Graphite
production
will commence
in
the
second
half
of
2014,
with
plans
for
expanded
mining
and
graphite manufacturing
in
Phase
II
increasing
through
2015.

Located
only
23
kilometres
from
Port
Lincoln,
the
regional
centre
for
the
Lower
Eyre
Peninsula
in South
Australia,
Valence
Industries’
Uley
Graphite
project
is
recognised
as
a
significant
area
of graphite
mineralisation,
and
one
of
the
largest
coarse
flake
graphite
deposits
in
the
world.
The deposit
contains
disseminated,
high-­‐grade
flake
graphite
and
the
mineralisation
is
near
surface, with
the
final
manufactured
graphite
products
recognised
and
purchased
by
many
customers
for its
high
quality.

The
company
holds
two
existing
Mining
Leases
and
two
associated
Retention
Leases,
along
with an
extensive
Exploration
Licence,
for
the
conduct
of
its
operations.
The
company
anticipates regulatory
works
approval
verification
during
the
September
Quarter
of
2014.

Valence
Industries
is
in
the
fortunate
position
of
owning
the
land
on
which
its
current
and proposed
expanded
operations
are
conducted
along
with
the
extensive
existing
infrastructure.

**Manufacturing

Our
Carbon
Future
&
Advanced
Graphene
Program**

The
Company
operates
as
an
industrial
manufacturer
of
high-­‐grade
flake
graphite
products
for distribution
and
sale
to
global
markets.
Valence
Industries
owns
established
processing
facilities and
infrastructure
to
manufacture
a
wide
range
of
graphite
product
lines
for
multiple
applications and
multiple
industries.

The
Company
produces
and
sells
its
graphite
products
from
its
Uley
Graphite
facilities
in
regional South
Australia
for
delivery
to
diversified
markets
for
graphite
in
the
Asia
Pacific,
Europe
and North
America.
As
a
vertically
integrated
manufacturer
of
specialist
graphite
product
ranges Valence
Industries’
branded
products
are
designed
to
meet
current
and
future
customer
demand.

The
Company
is
also
pursuing
research
into
advanced
fields
and
applications
for
graphite.
That program
includes
the
relationship
with
the
University
of
Adelaide
for
the
establishment
of
a dedicated
Graphene
Research
Centre
in
Adelaide.
Graphene
is
one
of
the
most
significant
steps forward
in
the
world
of
advanced
materials
with
the
potential
for
transformative
and
disruptive technologies
and
the
leading
research
in
this
area
from
the
University
of
Adelaide
on
natural
flake graphite
has
originated
from
work
on
the
Company’s
Uley
Graphite.
The
Graphene
Research Centre
program
will
see
the
development
and
commercialisation
of
processes
and
products
for the
application
of
graphene.

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VALENCE INDUSTRIES ULEY GRAPHITE MINING & MANUFACTURING SITE SOUTH AUSTRALIA, AUSTRALIA

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APPENDIX 1 – JORC CODE, 2012 EDITION

JORC
Code,
2012
Edition

**Section

1
Sampling
Techniques
and
Data**

Section 1 Sampling Techniques and Data	Section 1 Sampling Techniques and Data
(Criteria in this section apply to all succeeding sections.)
Criteria	JORC Code explanation	Commentary
Sampling techniques	• Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc.). These examples should not be taken as limiting the broad meaning of sampling. • Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used. • Aspects of the determination of mineralisation that are Material to the Public Report. • In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.	Triple tube Diamond (HQ3) drilling was employed to generate core for logging and sampling. Mineralised samples were submitted for assay on typically one metre intervals. Duplicate and standard samples were inserted typically every 20th sample. Diamond core was cut in half using a diamond impregnated blade on a core saw and half-core samples were sent to ALS Global for assay.
Drilling techniques	• Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc.) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face- sampling bit or other type, whether core is oriented and if so, by what method, etc.).	Drilling was planned on a nominal 25m X 25m collar pattern, for a total of 3,953 diamond drilling metres. Drill holes were drilled at -60 degree dip on a 090 azimuth. Diamond drilling was undertaken using triple tube HQ3 (61mm diameter) core from collar to End of Hole.
Drill sample recovery	• Method of recording and assessing core and chip sample recoveries and results assessed. • Measures taken to maximise sample recovery and ensure representative nature of the samples. • Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain offine/coarse material.	Core recovery was recorded at the drill site and during core logging and measured for every core run. Sample recovery is deemed to be adequate for resource estimation purposes.
Logging	• Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. • Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc.) photography. • The total length and percentage of the relevant intersections logged.	100% of the drill holes were geologically and geotechnically logged by qualified geologists, recording relevant data to a set database structure. All logging included lithological features, mineral assemblages, mineralisation percentage estimates and geotechnical information suitable for the development of geology models and pit slope design criteria.

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Criteria	JORC Code explanation	Commentary
Sub-sampling techniques and sample preparation	• If core, whether cut or sawn and whether quarter, half or all core taken. • If non-core, whether riffled, tube sampled, rotary split, etc. and whether sampled wet or dry. • For all sample types, the nature, quality and appropriateness of the sample preparation technique. • Quality control procedures adopted for all sub- sampling stages to maximise representivity of samples. • Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling. • Whether sample sizes are appropriate to the grain size of the material being sampled.	Sample preparation is consistent with industry best practice. Field QC procedures involved the use of certified reference material assay standards, blanks and duplicates for Company QC measures, and laboratory standards, replicate sampling and barren washes for laboratory QC measures. The insertion rate of each of these QAQC measures averaged 1:20. Half-diamond core samples averaged 1m in length, and are deemed appropriate for the material and analysis method.
Quality of assay data and laboratory tests	• The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total. • For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc. • Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established.	The samples were prepared at ALS Global (Adelaide), including crushing entire sample >70% -6mm, splitting and retention of 50% sample weight, and pulverising. The prepared samples were sent to ALS global (Brisbane) for analytical procedures C-IR18, C- CAL15, CIR17 and C-IR07 by LECO analyser to determine graphitic carbon, inorganic carbon by difference, organic carbon and total carbon. The detection limits and precision for graphitic carbon analysis are considered to be adequate for the purpose of future resource estimations. The laboratory procedures are considered to be appropriate for reporting purposes. Company QAQC samples inserted at 5% representivity demonstrate the accuracy and precision of the graphitic carbon to be satisfactory.
Verification of sampling and assaying	• The verification of significant intersections by either independent or alternative company personnel. • The use of twinned holes. • Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols. • Discuss any adjustment to assay data.	Significant mineralisation intersections were verified by two company personnel. No adjustments to the assay data have been made. All data was collected, sampled and assayed according to Company procedures and validated using a Microsoft Access relational database.
Location of data points	• Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation. • Specification of the grid system used. • Quality and adequacy of topographic control.	Topographical control is sufficient for this exploration drilling. Collar locations were set out using an independent surveyor. All down-hole surveying was undertaken using a Reflex multi-shot survey tool at nominal 25m intervals down hole.
Data spacing and distribution	• Data spacing for reporting of Exploration Results. • Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied. • Whether sample compositing has been applied.	Drill collar spacing is generally 25m X 25m or 25m X 50m where existing drill holes provide sufficient geological confidence.

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Criteria	JORC Code explanation	Commentary
Orientation of data in relation to geological structure	• Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type. • If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.	The orientation of the drilling is not expected to introduce sampling bias. Drilling has generally intersected mineralisation perpendicular to strike continuity.
Sample security	• The measures taken to ensure sample security.	Samples were packaged and stored in secure storage from collection through the chain of custody to submission. Laboratory best practice methods were employed bythe laboratoryupon receipt.
Audits or reviews	• The results of any audits or reviews of sampling techniques and data.	Company QAQC checks were undertaken during the drilling, logging and sampling program. No external audit of the data has been undertaken. No significant issues in drilling, sampling or analytic technique have been identified.

Section
2
Reporting
of
Exploration
Results

(Criteria
listed
in
the
preceding
section
also
apply
to
this
section.)

Criteria	JORC Code explanation	Commentary
Mineral tenement and land tenure status	• Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings. • The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.	The Company owns 100% interest in the EL4778 tenement. The tenement is in good standing and there are no known significant impediments to exploration or mining in the area.
Exploration done by other parties	• Acknowledgment and appraisal of exploration by other parties.	No other parties were involved in this exploration program.
Geology	• Deposit type, geological setting and style of mineralisation.	The Uley graphite deposit is a high-grade coarse-flake mineralised envelope within the broader “Mikkira" graphite resource. Uley graphite mineralisation is hosted by the Cook Gap Schist, a partially migmatised medium grained biotite+/-garnet+/-muscovite+/- sillimanite-quartzofeldspathic schist/gneiss with leucocraticpegmatite sweats.
Drill hole Information	• A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes: o easting and northing of the drill hole collar o elevation or RL (Reduced Level – elevation above sea level in metres) of the drill hole collar o dip and azimuth of the hole o down hole length and interception depth o hole length. • If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.	Refer to collar table within the text of this document.

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Criteria	JORC Code explanation	Commentary
Data aggregation methods	• In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually Material and should be stated. • Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail. • The assumptions used for any reporting of metal equivalent values should be clearly stated.	No top cuts have been applied to the results reported in this announcement. A nominal 10% graphitic carbon lower cut-off has been applied in the determination of significant intercepts. High grade intercepts within broader low grade intervals have been separated as "including" results. No metal equivalent values are used in this report.
Relationship between mineralisation widths and intercept lengths	• These relationships are particularly important in the reporting of Exploration Results. • If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported. • If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. ‘down hole length, true width not known’).	Drill holes intersected mineralisation at near perpendicular to the strike orientation of the host lithologies. All drill holes were orientated at -60 degrees on a bearing of 090.
Diagrams	• Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.	See figures in release
Balanced reporting	• Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.	Representative reporting of significant intercepts has been effected within this report.
Other substantive exploration data	• Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.	The Company has previously reported a Mineral Resource in accordance with JORC (2012) guidelines at the Uley 2 deposit. Refer to the listing prospectus dated 15 November 2013.
Further work	• The nature and scale of planned further work (e.g. tests for lateral extensions or depth extensions or large-scale step-out drilling). • Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.	Further work programs are planned including metallurgical test work to ensure optimisation of the Uley processing facilities.

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