QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

Jul 14, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

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ASX ANNOUNCEMENT

ASX: VXL & VXLO

15 July 2014

GRAPHITE PROCESSING PLANT UPDATE

• Phase
  I
  Processing
  Plant
  recommissioning
  nears
  completion

• Installation
  of
  plant
  and
  equipment
  is
  progressing

• Production
  from
  existing
  fines
  stockpile
  to
  commence
  in
  Q3
  2014

• Expansion
  of
  production
  from
  ROM
  stockpiles
  to
  follow
  installation
  of
  new
  crushing
  circuit

• Sales
  arrangements
  with
  key
  customers
  are
  advancing
  rapidly

• BFS
  for
  Phase
  II
  Plant
  and
  Open
  Pit
  is
  expected
  to
  be
  finalised
  in
  August

**Process

Plant
recommissioning
nears
completion**

Valence
Industries
Limited
(ASX:
VXL
&
VXLO)
(the
Company)
continues
the
re-­‐commissioning
and upgrading
of
the
Company’s
existing
graphite
manufacturing
facilities
at
Uley
near
Port
Lincoln
in South
Australia.

The
refurbishment
and
upgrade
of
existing
plant
on
the
land
owned
by
Valence
Industries
is
nearing completion.
The
primary
(external)
processing
plant
is
used
to
screen,
wash
and
grind
the
raw
run of
mine
material
and
produce
a
feed
product
for
second
stage
processing.
The
secondary
(internal) plant
processes
material
from
the
primary
processing
plant
to
manufacture
and
package
Valence’s graphite
products.

In
combination
with
the
advances
in
the
engineering
and
construction
for
Phase
I
Valence
has
made significant
advances
in
the
program
of
recruitment
to
match
the
ramp
up
of
operations.
The program
to
build
and
maintain
a
strong
local
and
regional
workforce
has
met
with
a
very
positive response.
The
company
now
has
its
senior
site
leadership
team
in
place
for
the
Uley
Graphite operations
and
continues
to
recruit
for
operational
personnel
to
match
production
readiness.
It
is anticipated
that
this
recruitment
program
will
also
form
a
significant
part
of
the
Phase
II
expansion for
the
company
with
increasing
numbers
of
personnel
for
both
mining
and
operations
through 2014
and
2015.

**Phase

I
–
Secondary
Processing
Plant**

Valence
will
recommence
production
using
the
secondary
(internal)
processing
circuit
to
process the
Fines
Stockpile
(800
tonnes
@
50%
average
grade
for
400
tonnes
of
contained
graphite)
into
a range
of
graphite
products.

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The
key
components
of
the
secondary
processing
circuit
have
been
upgraded
and
tested,
including:

• Primary
  Screening
  Units

• Flotation
  &
  Collection
  Tanks

• Main
  Slurry
  Tank

• Travelators

• Screening

• Dust
  Collection

• New
  Fluid
  Bed
  Gas-­‐Fired
  Dryer

The
only
major
outstanding
element
of
the
secondary
circuit
is
the
new
Bagging
System,
which
has been
assessed
off-­‐site
and
will
arrive
at
site
for
installation
shortly,
and
installation
and
upgrades
of final
agitation,
plumbing
and
fluid
transfer
systems
to
fully
integrate
the
key
components.

The
Company
holds
Mining
Leases,
Retention
Leases
and
an
extensive
Exploration
Licence.
With the
close
proximity
of
the
Phase
II
mining
and
process
expansion
to
the
Phase
I
processing operations,
the
Company
has
been
working
closely
with
regional
and
State
regulators
to
obtain regulatory
approvals
that
incorporate
both
Phase
I
and
the
Phase
II
expansion.
The
approvals process
is
at
an
advanced
stage.
The
Company
expects
to
obtain
final
regulatory
approvals incorporating
the
upgraded
plant
and
expanded
mining
operations
in
the
third
quarter
of
2014, after
which
fines
production
will
immediately
commence.
Screening,
bagging
and
delivery
to further
customer
targets
from
historical
production
and
using
Valence’s
specialist
offsite
testing facilities
is
continuing.

**Phase

I
–
Primary
Processing
Plant**

The
primary
processing
circuit
is
being
upgraded
with
key
elements
including
for
the
pre-­‐screening of
run
of
mine
ore,
washing
and
crushing
prior
to
transfer
slurry
to
the
secondary
processing
circuit.

The
Company
is
in
the
process
of
replacing
the
existing
rod
mill
with
a
new
ball
mill,
which
has
been commissioned
specifically
for
the
Uley
Graphite
operations.
Delivery
and
installation
of
the
new ball
mill
is
scheduled
for
August
2014.

The
other
components
of
the
primary
processing
circuit
(screens,
separators
and
conveyors)
are under
construction,
together
with
the
minor
related
structural
engineering
works,
in
line
with
the recommissioning
timetable.

The
completion
of
the
primary
processing
circuit
will
occur
while
the
secondary
plant
is
processing the
fines
stockpile.
Processing
will
then
ramp
up
progressively
as
treatment
commences
on
the main
stockpile
(74,000
tonnes
@
10%
average
Graphitic
Carbon
grade)
and
continues
to
sustain that
Phase
I
plant
for
more
than
9
months
of
operations,
after
which
the
new
run
of
mine
ore
is expected
to
be
available
for
processing.

Customer
demand
for
the
company’s
graphite
products
continues
to
exceed
expectations,
and
the company
expects
to
conclude
direct
supply
agreements
in
line
with
commencement
of
scaled-­‐up production.

**Phase

II
–
Expansion
–
Bankable
Feasibility
Study**

The
Bankable
Feasibility
Study
(BFS)
for
the
proposed
Phase
II
Plant
and
Open
Pit
expansion
at
Uley is
progressing
well.
The
design
for
the
Phase
II
expansion
includes
new
graphite
manufacturing

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facilities
to
significantly
increase
annual
graphite
production
capacity
by
up
to
another
60,000 tonnes
of
graphite
per
annum.
Valence
is
planning
for
the
BFS
to
be
finalised
in
August.

A
diamond-­‐drilling
program
has
commenced
across
the
proposed
Uley
Pit
2
area.
The
drilling program
is
designed
to
increase
the
geological
confidence
level
on
the
existing
Mineral
Resource estimate
(refer
to
Valence’s
Prospectus
dated
November
2013)
in
preparation
for
an
Ore
Reserve estimate,
pit
optimisation
and
design
and
for
production
feed-­‐material
handling
programs.
It
is anticipated
that
the
Company
will
make
further
announcements
relating
to
the
current
drilling program
over
coming
weeks.

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 Mineral Resources 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.

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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.

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
third
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.

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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