QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2014

May 26, 2014

ASIA PACIFIC I EUROPE I NORTH AMERICA

ASX ANNOUNCEMENT

ASX: VXL ASX: VXLO

27 May 2014

EXERCISE OF OPTIONS

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

Valence
advises
that
it
has
issued
listed
shares
upon
the
exercise
of
options,
and
provides
the
following information
in
relation
to
the
issue
as
required
under
the
listing
rules:

Number of securities	25,000
Class and terms	Fully paid ordinaryshares
Issueprice	25 centsper share
Purpose of the issue	Exercise of options byshareholders
Will the entity seek shareholder approval	No. The shares are issued under listing rule 7.2, exception 4 and shareholder approval is not required
Class of securityholder	Not applicable

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

For
further
information,
please
contact:

Jaroslaw
(Jarek)
Kopias CFO
&
Company
Secretary Valence
Industries info@valenceindustries.com +61
8
8418
8564

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2

**About

Valence
Industries**

Valence
Industries
(ASX:VXL)
is
the
owner
and
operator
of
the
only
graphite
manufacturing
facilities
in Australia
located
at
Uley
in
South
Australia
near
the
regional
centre
of
Port
Lincoln.
The
Company
is
bringing existing
infrastructure
into
production
with
a
focus
on
global
markets
across
multiple
graphite
product
ranges. Graphite
production
will
commence
in
early
2014,
with
plans
for
expanded
production
by
the
end
of
2014.

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
Licences
and
two
associated
Retention
Licences,
along
with
an extensive
Exploration
Licence,
for
the
conduct
of
its
operations.
In
addition
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**

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.
This
program
includes
development
of
a significant
VXL
High
Purity
Graphite
Facility
program
and
a
range
of
future
Graphene
applications.

==> picture [323 x 243] intentionally omitted <==

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Whyalla$
N%
Valence$Industries$
Uley$Graphite$Project$
PORT%LINCOLN%
Adelaide%
PROJECT%LOCATION%
----- End of picture text -----

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Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

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

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

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

Name of entity

Valence Industries Limited

ABN

41 008 101 979

We (the entity) give ASX the following information.

Part 1 - All issues

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

1 +Class of +securities issued or to Ordinary shares be issued 2 Number of[+] securities issued or 25,000 shares to be issued (if known) or maximum number which may be issued 3 Principal terms of the Fully paid ordinary shares. +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

• See chapter 19 for defined terms.

Appendix 3B Page 1

04/03/2013

Appendix 3B New issue announcement

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

• See chapter 19 for defined terms.

Appendix 3B Page 2

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Appendix 3B New issue announcement

6d Number of[+] securities issued with security holder approval under rule 7.1A 6e Number of[+] securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of[+] securities issued under an exception in rule 7.2 6g If[+] securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If[+] securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B. 8 Number and +class of all +securities quoted on ASX ( including the +securities in section 2 if applicable)

7.1 – 25,061,302 7.1A – Not applicable
27 May 2014
Number	+Class
134,258,708 53,680,786	Ordinary shares (Shares) Listed Options exercisable at 25 cents on or before 31 July2016(Options).

• See chapter 19 for defined terms.

Appendix 3B Page 3

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Appendix 3B New issue announcement

9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	Number	+Class
	32,816,642 16,250,000 3,500,000 3,000,000 2,062,500	Ordinary shares escrowed to 6 January 2016. Listed Options exercisable at 25 cents on or before 31 July 2016 escrowed to 6 January 2016. Unlisted Options exercisable at 25 cents on or before 31 July 2016 escrowed to 6 January 2016 - vested. Unlisted Options exercisable at 25 cents on or before 31 July 2016 escrowed to 6 January 2016 – unvested and subject to performance criteria. Unlisted performance rights escrowed to 6 January 2016 and subject to performance criteria.
	Same as for all other securities

• See chapter 19 for defined terms.

Appendix 3B Page 4

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Appendix 3B New issue announcement

Part 2 - Pro rata issue

11	Is security holder approval
	required?
12	Is the issue renounceable or non-
	renounceable?
13	Ratio in which the+securities
	will be offered
14	+Class of+securities to which the
	offer relates
15	+Record date to determine
	entitlements
16	Will holdings on different
	registers (or subregisters) be
	aggregated for calculating
	entitlements?
17	Policy for deciding entitlements
	in relation to fractions
18	Names of countries in which the
	entity has security holders who
	will not be sent new offer
	documents
	Note: Security holders must be told how their
	entitlements are to be dealt with.
	Cross reference: rule 7.7.
19	Closing date for receipt of
	acceptances or renunciations
20	Names of any underwriters
21	Amount of any underwriting fee
	or commission
22	Names of any brokers to the
	issue
23	Fee or commission payable to the
	broker to the issue

• See chapter 19 for defined terms.

Appendix 3B Page 5

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Appendix 3B New issue announcement

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

• See chapter 19 for defined terms.

Appendix 3B Page 6

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Appendix 3B New issue announcement

Part 3 - Quotation of securities

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

• 34 Type of[+] securities ( tick one )

• (a) +Securities described in Part 1

• (b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 - 1,000

• 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

Appendix 3B Page 7

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Appendix 3B New issue announcement

Entities that have ticked box 34(b)

38 Number of[+] securities for which +quotation is sought 39 +Class of +securities for which quotation is sought 40 Do the[+] securities rank equally in all respects from the[+] issue date with an existing[+] class of quoted +securities? If the additional[+] securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another[+] security, clearly identify that other[+] security)

Number +Class 42 Number and +class of all +securities quoted on ASX ( including the[+] securities in clause 38)

• See chapter 19 for defined terms.

Appendix 3B Page 8

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Appendix 3B New issue announcement

Quotation agreement

1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted +quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

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

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

==> picture [96 x 63] intentionally omitted <==

Sign here: ............................................................ Date: 27 May 2014 Company secretary

Print name: Jaroslaw (Jarek) Kopias

== == == == ==

• See chapter 19 for defined terms.

Appendix 3B Page 9

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Appendix 3B New issue announcement

Appendix 3B – Annexure 1

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

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

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

• Insert number of fully paid[+] ordinary 115,547,375 (on admission to ASX prior to securities on issue 12 months before the placement under prospectus) + issue date or date of agreement to issue Add the following: • Number of fully paid[+] ordinary securities 33,673,677 (rights issue for admission to issued in that 12 month period under an ASX) – 24 December 2013 exception in rule 7.2 687,500 (issue upon exercise of

• • Number of fully paid[+] ordinary securities performance rights on issue prior to issued in that 12 month period with admission to ASX) – 20 January 2014 shareholder approval 17,024,453 (rights issue shortfall) – 4

• • Number of partly paid[+] ordinary February 2014 securities that became fully paid in that 12 month period 142,345 (exercise of listed options) – between 16 April 2014 and 27 May 2014

• Note: • Include only ordinary securities here – other classes of equity securities cannot be added

• Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• It may be useful to set out issues of securities on different dates as separate line items

Subtract the number of fully paid[+] ordinary securities cancelled during that 12 month period “A” 167,075,350

• See chapter 19 for defined terms.

Appendix 3B Page 10

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Appendix 3B New issue announcement

Step 2: Calculate 15% of “A”

“B” 0.15 [Note: this value cannot be changed] Multiply “A” by 0.15 25,061,302

Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used

• Insert number of[+] equity securities issued Nil or agreed to be issued in that 12 month period not counting those issued: • Under an exception in rule 7.2 • Under rule 7.1A • With security holder approval under rule 7.1 or rule 7.4

• Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities

• • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• • It may be useful to set out issues of securities on different dates as separate line items

• “C”

Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1 “A” x 0.15 Note: number must be same as shown in Step 2 Subtract “C” Nil Note: number must be same as shown in Step 3 Total [“A” x 0.15] – “C” 25,061,302 [Note: this is the remaining placement capacity under rule 7.1]

• See chapter 19 for defined terms.

Appendix 3B Page 11

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Appendix 3B New issue announcement

Part 2

Rule 7.1A – Additional placement capacity for eligible entities

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A” Not applicable Note: number must be same as shown in Step 1 of Part 1

Step 2: Calculate 10% of “A”

“D”

0.10

Note: this value cannot be changed Multiply “A” by 0.10

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of[+] equity securities issued or agreed to be issued in that 12 month period under rule 7.1A

Notes:

• This applies to equity securities – not just ordinary securities

• Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

• Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

• It may be useful to set out issues of securities on different dates as separate line items

“E”

• See chapter 19 for defined terms.

Appendix 3B Page 12

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Appendix 3B New issue announcement

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

• See chapter 19 for defined terms.

Appendix 3B Page 13

04/03/2013