QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

Aug 31, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

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ASX ANNOUNCEMENT

ASX: VXL & VXLO

Monday, 1 September 2014

IN-FILL DRILLING CAMPAIGN ASSAY UPDATE

• First
  assay
  results
  confirm
  understanding
  of
  Valence
  Industries’
  existing
  6.4Mt
  Indicated
  & Inferred
  JORC
  2012
  Mineral
  Resource.

• Assay
  results
  confirm
  existence
  of
  additional
  high-­‐grade
  flake
  graphite
  mineralisation,
  with hole
  MD600
  returning
  29.8%
  graphitic
  Carbon
  over
  16m
  including
  10m
  @
  38%
  graphitic Carbon,
  within
  the
  existing
  resource
  envelope.

• New
  graphite
  mineralisation
  discovered
  outside
  boundaries
  of
  previously
  established
  JORC 2012
  Mineral
  Resource.

**In-­‐Fill

Drilling
Campaign**

Valence
Industries
Limited
(Valence
Industries)
(ASX:VXL&VXLO)
is
pleased
to
announce
initial positive
results
from
the
in-­‐fill
drilling
campaign
completed
at
the
company’s
flagship
Uley
Graphite operations.

The
purpose
of
that
in-­‐fill
drilling
campaign
was
to:

• Further
  define
  the
  established
  Mineral
  Resource
  to
  the
  confidence
  level
  required
  for
  the
  Phase II
  Feasibility
  Study.

• Convert
  the
  established
  Mineral
  Resource
  to
  an
  Ore
  Reserve
  estimate
  to
  permit
  mining optimisation
  and
  further
  pit
  design
  for
  the
  proposed
  new
  Uley
  Pit

• Obtain
  further
  geotechnical
  data
  to
  further
  develop
  the
  pit
  design
  for
  the
  proposed
  new
  Uley Pit

• Collect
  additional
  representative
  samples
  across
  the
  Mineral
  Resource
  to
  permit
  further metallurgical
  test
  work
  to
  inform
  refinement
  to
  the
  Phase
  II
  plant
  design.

The
assay
results
from
the
in-­‐fill
drilling
campaign
across
the
area
of
the
established
JORC
(2012) Mineral
Resource
over
the
last
two
months
will
be
received
over
the
coming
weeks
and
the
first assays
have
returned
positive
results.

The
in-­‐fill
drilling
campaign
was
completed
in
challenging
conditions
including
70%
of
the
annual rainfall
received
at
site
by
mid-­‐year
which
led
to
some
delays
in
completing
the
drilling
program.
In addition
results
from
the
assay
laboratories
have
been
delayed
due
to
work-­‐loads
and
the additional
QA/QC
Valence
Industries
is
undertaking.

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2

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**Positive

Data
from
Initial
In-­‐fill
Drill
Results**

The
initial
assay
results
from
the
in-­‐fill
drilling
campaign
are
considered
to
be
encouraging.

Key conclusions
from
the
initial
results
include:

• Grade: The
  existence
  of
  additional
  high-­‐grade
  flake
  graphite
  mineralisation
  with
  initial
  assay grades
  ranging
  from
  10.7%
  up
  to
  47.1%
  graphitic
  Carbon.
  This
  includes
  29.8%
  graphitic Carbon
  over
  16m
  which
  incorporates
  10m
  @
  38%
  graphitic
  Carbon
  in
  drill
  hole
  MD600.

• Host: Confirmation
  that
  the
  unit
  hosting
  the
  previously
  identified
  forms
  of
  graphite mineralisation
  is
  deeply
  weathered
  and
  amenable
  to
  the
  company’s
  planned
  free-­‐dig open
  pit
  style
  mining
  operation.

Depth: Confirmation
of
the
presence
of
the
previously
known
graphite
deposits
at
or
near
the surface
and
now
to
121
metres
downhole.

The
conclusions
reached
in
relation
to
the
host
material
and
the
presence
of
graphite mineralisation
from
near
surface
to
depth
underpins
Valence
Industries’
understanding
of
the existing
Mineral
Resource
used
in
the
current
Phase
II
Feasibility
Study.

**Visual

Inspection
&
Appearance
of
New
Mineralised
Zone**

Visual
inspection
of
the
drill
core
from
the
further
36
drill-­‐holes
from
which
Valence
Industries
has not
yet
received
test
results
appears
to
indicate
the
presence
of
previously
unknown
graphite mineralisation.

This
appears
to
be
an
area
of
previously
un-­‐tested
flake
graphite
mineralisation
which
is
outside
the existing
resource
envelope
and
not
encountered
in
previous
drilling.

It
also
appears
that
it
may have
been
masked
from
previous
geophysical
analysis.

In
particular
visual
inspection
appears
to
indicate:

• the
  potential
  existence
  of
  a
  unique
  flake
  graphite
  mineralisation
  of
  considerable
  grade
  (assays pending);
  and

• a
  potentially
  significant
  shift
  in
  Valence
  Industries’
  knowledge
  of
  this
  critical
  feed
  for
  its graphite
  processing
  and
  manufacturing
  programs.

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3

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Figure 1
– Apparent New Graphitic Mineralisation MD622 Drill Core (assays pending)
– Uley Graphite

The
observations
made
in
relation
to
this
new
material
(as
shown
in
Figure
1)
will
be
reviewed,
and assays
will
undergo
QA/QC
checks
before
being
reported
as
the
Company
completes
the
test
work program
from
the
in-­‐fill
drilling
campaign.

**Preliminary

Geological
Remodelling**

Geological
remodelling
of
the
relationship
between
the
previously
known
area
of
mineralisation and
the
newly
identified
mineralised
zone
is
in
its
early
stages.
Nonetheless,
that
early
remodelling indicates
that
the
new
zone
forms
a
continuous
horizon
hosted
in
an
intrusive
pegmatite.

This
early
remodelling
is
presented
in
the
representational
cross-­‐section
Figure
2
( below )
(not
to scale)
and
illustrates
the
relationship
between
the
newly
discovered
graphitic
mineralised pegmatite
(grey)
and
the
lithologies
hosting
the
previously
known
graphitic
mineralisation
as included
in
the
Company’s
JORC
(2012)
Mineral
Resource
(black).

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4

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_**Figure 2

– Valence Industries
– Indicative Geological Schematic Uley Graphite
– Uley Pit 2**_

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----- Start of picture text -----

Cook
Gap
Schist
(Waste)
Burrawing
Amphibolite
(Waste)
Graphitic
Mineralisation
(JORC
resource)
New
Graphitic
Mineralisation
(previously
undrilled)
----- End of picture text -----

The
drilling
campaign
performed
over
this
body
in
2011
identified
those
areas
of
graphitic mineralisation
shown
in
black
but
did
not
discover
the
area
now
shown
in
grey.

It
is
the
area
in grey
which
represents
the
area
of
apparent
new
graphitic
mineralisation.

**Ongoing

Data
&
Results**

As
Valence
Industries
completes
the
in-­‐fill
drilling
campaign
further
data
and
assay
results
will
be reported.
It
is
anticipated
that
the
additional
data
will:

• Add
  further
  to
  the
  Company’s
  understanding
  of
  the
  existing
  JORC
  (2012)
  Mineral
  Resource
  as initially
  proposed
  and
  anticipated
  when
  the
  in-­‐fill
  drilling
  program
  was
  initiated;
  and

• Expand
  on
  the
  Company’s
  knowledge
  and
  understanding
  of
  the
  new
  graphite
  mineralisation including
  the
  grades,
  the
  extent
  and
  continuity
  of
  mineralisation,
  and
  the
  technical
  marketing and
  investment
  opportunities
  arising
  from
  the
  discovery.

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5

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• Require
  consideration
  as
  to
  whether
  the
  new
  mineralisation
  may
  also
  affect
  geotechnical aspects
  of
  the
  pit
  design
  and
  processing
  and
  manufacturing
  plant
  operating
  parameters.

As
results
of
the
in-­‐fill
drilling
campaign
are
received
and,
in
particular,
as
results
on
the
area
of “New
Mineralisation”
are
considered
and
interpreted
Valence
Industries
also
reasonably anticipates
that
grade
and
tonnage
of
a
revised
Mineral
Resource
estimate
will
change.

The
current
results
received
by
Valence
Industries
are
contained
in
Table
1
(below)
and
in
Table
2 (below)
a
summary
of
the
drill-­‐holes
has
been
provided.

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
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	TBA	TBA	TBA	TBA	Results Pending
MD608	TBA	TBA	TBA	TBA	Results Pending
MD609	TBA	TBA	TBA	TBA	Results Pending
MD610	TBA	TBA	TBA	TBA	Results Pending
MD611	TBA	TBA	TBA	TBA	Results Pending
MD612	TBA	TBA	TBA	TBA	Results Pending
MD614	TBA	TBA	TBA	TBA	Results Pending
MD615	TBA	TBA	TBA	TBA	Results Pending
MD616	TBA	TBA	TBA	TBA	Results Pending
MD617	TBA	TBA	TBA	TBA	Results Pending
MD618	TBA	TBA	TBA	TBA	Results Pending
MD619	TBA	TBA	TBA	TBA	Results Pending

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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**
Hole_ID	From (m)	To (m)	Width (m)	Graphitic Carbon (gC%)	Comments
MD620	TBA	TBA	TBA	TBA	Results Pending
MD621	TBA	TBA	TBA	TBA	Results Pending
MD622	TBA	TBA	TBA	TBA	Results Pending
MD623	TBA	TBA	TBA	TBA	Results Pending
MD624	TBA	TBA	TBA	TBA	Results Pending
MD625	TBA	TBA	TBA	TBA	Results Pending
MD626	TBA	TBA	TBA	TBA	Results Pending
MD627	TBA	TBA	TBA	TBA	Results Pending
MD628	TBA	TBA	TBA	TBA	Results Pending
MD629	TBA	TBA	TBA	TBA	Results Pending
MD630	TBA	TBA	TBA	TBA	Results Pending
MD631	TBA	TBA	TBA	TBA	Results Pending
MD632	TBA	TBA	TBA	TBA	Results Pending
MD633	TBA	TBA	TBA	TBA	Results Pending
MD634	TBA	TBA	TBA	TBA	Results Pending
MD635	TBA	TBA	TBA	TBA	Results Pending
MD636	TBA	TBA	TBA	TBA	Results Pending
MD637	TBA	TBA	TBA	TBA	Results Pending
MD638	TBA	TBA	TBA	TBA	Results Pending
MD639	TBA	TBA	TBA	TBA	Results Pending
MD640	TBA	TBA	TBA	TBA	Results Pending

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**	Table 2 – Valence Industries – In-fill Drilling Campaign 2014 – Uley Graphite 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

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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
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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The
preliminary
results
of
the
in-­‐fill
drilling
campaign
are
being
assessed
and
considered
in
the context
of
the
conclusions
reached
in
the
Phase
II
Feasibility
Study.

The
Company
will
make
an announcement
in
relation
to
the
Phase
II
Feasibility
Study
either
late
this
week
or
early
next
week as
further
assay
results
from
the
in-­‐fill
drilling
campaign
are
received,
in
particular
assays
from
the new
area
of
mineralisation,
and
considered
in
the
context
of
that
study.

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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9

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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
September
Quarter
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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APPENDIX 1

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 location 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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