QUANTUM GRAPHITE LIMITED - Capital/Financing Update 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

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ASX ANNOUNCEMENT

ASX: VXL & VXLO

Monday, 15 September 2014

DRILLING & PHASE II FEASIBILITY STUDY

Phase
II
feasibility
study
program
envisages
expansion
of
capacity
by
50,000
tpa
with flexibility
to
increase
the
Phase
II
plant
to
100,000
tpa.
On
1
September
2014
Valence
Industries
announced
unique
high-‐grade
in-‐fill
drilling
results with
29.8%
graphitic
Carbon
over
16m
including
10m
@
38%
graphitic
Carbon,
and
further assay
results
are
pending.
Given
the
significance
of
the
high-‐grade
in-‐fill
drilling
results,
the
feasibility
study
is
now being
reviewed
to
optimise
the
Phase
II
development.

**Phase

II
Feasibility
Study**

The
purpose
of
the
feasibility
study
is
to
define
the
program
for
mining
the
proposed
new
open
pit (Uley
Pit
2),
evaluate
the
construction
of
a
new
Phase
II
graphite
processing
facility
and
assess
the opportunities
to
market
the
Company’s
increased
production
into
to
the
growing
global
markets
for graphite.

Valence
Industries
has
been
able
to
refine
estimates
and
is
able
to
announce
some
key
preliminary conclusions,
which
will
be
verified
as
the
feasibility
study
process
continues:

Phase	II Capital Cost		A$34M-A$35M	A$34M-A$35M	This anticipated capex is consistent with the 2013	This anticipated capex is consistent with the 2013	This anticipated capex is consistent with the 2013	This anticipated capex is consistent with the 2013
(Capex)					Scoping Study but includes the base
					infrastructure to allow a for a proposed		increase
					in future processing capacity (see below). The
					capex requirements remain relatively modest.
Phase	II Operating Cost		A$450-A$500		The anticipated opex is lower than the A$650 per
(Opex)		(per tonne of graphite			tonne of graphite production as estimated in			the
			concentrate)		2013 Scoping Study. This opex level is
					considered to be globally competitive.
Average Sales Price				USD$1,400	This average sales price remains consistent with
		(per tonne of graphite			the anticipated average sales price expressed in
			concentrate)		2013 Scoping Study. This confirmation is also
					supported	by the current MOUs and ongoing
					negotiations with customers by Valence
					Industries.

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Phase II Plant Capacity	Phase IIA – 50,000	Phase IIA – 50,000	This capacity is consistent with the 50,000	This capacity is consistent with the 50,000	tpa
	(tonnes of	graphite	capacity planned in the 2013 Scoping Study		but
	concentrate per year)		provides a new flexibility to increase output
	+		capacity by a further 50,000 tpa taking total
	Phase IIB – 50,000		Phase I and Phase	II potential capacity to 114,000
	(tonnes of	graphite	tonnes of graphite concentrate each year.
	concentrate per year)
Uley Pit 2	Open pit free-dig operations.		Consistent with 2013 Scoping Study the in-fill
			drilling campaign has verified the ability to
			implement free dig open pit operations for the
			proposed Uley Pit	2 to feed the Phase I Plant and
			the Phase II Plant.

On
the
basis
of
the
key
initial
conclusions
from
the
feasibility
study,
Valence
Industries
is
satisfied that
Phase
II
expansion
of
operations
at
the
Uley
Graphite
facilities
will
provide
strong
growth outcomes.

Valence
Industries
has
now
identified
significantly
higher
grades
of
graphitic
mineralisation
with further
assay
results
pending.
In
addition,
visual
inspection
of
the
new mineralised
pegmatite
zone indicates
the
potential
existence
of
a
unique
flake
graphite
mineralisation
of
considerable
grade (assays
pending).

With
this
in
mind
Valence
Industries
intends
to
review
the
feasibility
study
in order
to
optimise
the
benefits
to
be
gained
from
the
higher-‐grade
mineralisation
identified,
and
the further
assays
to
be
received
from
the
drilling
program.

In
particular
the
extension
of
the
feasibility
study
program
will
consider:

Mineral
Resource The
full
nature
and
extent
of
the
Mineral
Resource
that
can
be
expressed from
completing
the
analysis
of
the
in-‐fill
drilling
results
and
updating
the established
JORC
(2012)
Mineral
Resource.
In
particular,
to
incorporate
the new
results
from
the
previously
known
area
of
graphitic
mineralisation
and the
new mineralised
pegmatite
zone .
Mining
Program The
opportunities
presented
to
further
optimise
the
proposed
layout
and mining
optimisation
for
Uley
Pit
2
and
correspondingly
deliver
relevant adjustments
to
capital
and
operating
costs.
This
may
include
re-‐assessment of
optimal
mining
methods
to
recover
both
flake
graphite
material
in
the mineralised
pegmatite
zone alongside
the
extraction
of
the
known
flake-‐ graphite
mineralisation.
Process
Program The
processing
changes
to
take
advantage
of
the
high-‐grades
in
the
area
of previously
known
graphitic
mineralisation
and
to
factor
in
manufacturing from
the
new mineralised
pegmatite
zone .

This
is
anticipated
to
be reflected
in
minor
adjustments
to
the
Phase
II
Plant
design
to
optimise
the value
can
be
realised
from
both
areas
of
high-‐grade
graphitic
mineralisation.

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Market
Program Assessment
of
the
flake
sizing
and
product
characteristics
of
the
new
grades of
material
and
the
potential
applications
and
associated
market opportunities.
Valence
Industries
recently
completed
metallurgical
test drilling
to
provide
samples
to
assess
the
metallurgical
characteristics.

The metallurgical
testing
results
will
inform
the
potential
for
further
market opportunities
from
the
new
high-‐grade
areas.

Economics Review
and
reassessment
of
the
opex,
capex
and
resultant
economics
for the
Phase
II
expansion
program
in
light
of
the
advantages
to
be
achieved from
both
the
new
high-‐grade
material
from
the
previously
known
areas
of graphitic
mineralisation
and
from
the
new mineralised
pegmatite
zone .

The
revision
of
the
feasibility
study
program
is
underway
and
is
not
anticipated
to
involve fundamental
reengineering
or
redesign.
The
updated
feasibility
study
program
will
be
completed over
the
coming
months.

Valence
Industries
proposes
to
implement
as
soon
as
possible
those stages
of
Phase
II
that
can
commence
early.
This
may
include
preparation
of
Uley
Pit
2,
baseline civil
work,
preparatory
infrastructure,
longer
lead
time
orders,
detailed
design
and
engineering
and early
contractor
involvement
(ECI).

The
feasibility
study
program
will
be
pursued
in
parallel
with
the
re-‐commissioning
of
the
Phase
I Plant
to
process
the
existing
run-‐of-‐mine
stockpiles.

That
Phase
I
program
is
tracking
well
to commence
production
subject
to
receipt
of
the
revised
regulatory
works
approval
(PEPR)
from
the South
Australian
government.

Valence
Industries
will
continue
to
receive
assay
results
over
the
coming
weeks
and
will
interpret and
express
those
results
in
the
context
of
the
established
JORC
(2012)
Mineral
Resource.

For
further
information,
please
contact:

Christopher
S.
Darby CEO
&
Managing
Director [email protected] +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_

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_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._

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**V A L E N C E

I N D U S T R I E S**

**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

A
New
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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QUANTUM GRAPHITE LIMITED Capital/Financing Update 2014

65646_rns_2014-09-14_e08456ce-320a-4a2e-81d1-9f217c034b17.pdf

ASX ANNOUNCEMENT

ASX: VXL & VXLO

DRILLING & PHASE II FEASIBILITY STUDY

**Phase

_**Competent

**V A L E N C E

**About

**Manufacturing

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

AI assistant

QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

65646_rns_2014-09-14_e08456ce-320a-4a2e-81d1-9f217c034b17.pdf

ASX ANNOUNCEMENT

ASX: VXL & VXLO

DRILLING & PHASE II FEASIBILITY STUDY

**Phase

_**Competent

**V A L E N C E

**About

**Manufacturing

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

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QUANTUM GRAPHITE LIMITED Capital/Financing Update 2014