QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2018

Dec 9, 2018

Offer Information Statement

Offer Information Statement for a non-renounceable rights issue offer to Eligible Shareholders of one (1) New Share for every ten (10) Existing Shares held on the Record Date at an issue price of \$0.003 per New Share (Rights Issue Offer) and an offer to Eligible Shareholders who accept their Entitlements under the Rights Issue Offer to acquire New Shares not taken up by other Eligible Shareholders under the Rights Issue Offer (Top-Up Offer). This Offer Information Statement also provides for the possible placement of New Shares to Eligible Shareholders who participate in the Top-Up Offer and do not receive their full allocation of New Shares under the Top-Up Offer (Placement).

Non-Renounceable Rights Issue offer of 1 New Share for every 10 Existing Shares at an Offer Price of \$0.003 per Share to raise approximately \$2,250,000

Minimum application amount is \$500.This offer is not underwritten.

Shareholders may apply for additional New shares over and above their rights entitlement from the shortfall via the Top-Up Offer.

In the event the Top-Up Offer is fully subscribed, the Directors may place up to an additional \$1,000,000 in New Shares to Eligible Shareholders participating in the Top-Up Offer but who do not receive their full allocation on the basis that any Shortfall under the Top-Up Offer was fully subscribed.

IMPORTANT NOTICE

This is an important document and requires your immediate attention. It should be read in its entirety and in conjunction with the Company's Annual Financial Report for the financial year ending 30 June 2018, a copy of which has been included in Appendix 1.

Please note that an Offer Information Statement is not a prospectus and has a lower level of disclosure requirements than a prospectus. Investors should read the Offer Information Statement in its entirety (including the key risks summarised in Section 5 of this Offer Information Statement).

You should obtain professional investment advice from you stockbroker, accountant or other professional adviser before accepting the Offer to apply for the New Shares.

The New Shares offered under this Offer Information Statement should be considered speculative. The general advice provided in this Offer Information Statement has been prepared without taking into account the specific personal circumstances of Shareholders.

Important Information

General

This Offer Information Statement (OIS) is dated 10 December 2018 and was lodged with ASIC on that date. Neither ASIC nor ASX take any responsibility for the contents of this OIS or the merits of the investment to which the OIS relates.

This OIS contains an Offer to Eligible Shareholders to apply for New Shares in the Company. It does not contain all information which would be found in a prospectus or which may be required in order to make an informed investment decision regarding, or about the rights attaching to, the New Shares offered by this OIS.

The expiry date for this OIS is the date which is 13 months after the date of this OIS. No Applications for New Shares will be accepted nor will New Shares be issued on the basis of this OIS after the expiry date of this OIS.

This is not a prospectus

This OIS is issued pursuant to section 709(4) of the Corporations Act. It is not a prospectus and the content requirements for an OIS (set out in section 715 of the Corporations Act) are less onerous than that required for a prospectus. Nevertheless, this OIS contains important information and should be read in its entirety before making a decision to apply for New Shares.

Investors should obtain professional investment advice

Eligible Shareholders should obtain professional investment advice before accepting the Offer. The information provided in this OIS and the accompanying Entitlement and Acceptance Form is not a financial product and has been prepared without taking into account any Shareholder's investment objectives, financial circumstances or particular needs. The information contained in this OIS and the accompany Entitlement and Acceptance Form should not be considered to be comprehensive or to comprise all the information which a Shareholder may require in order to determine whether or not to subscribe for New Shares.

Disclaimer of representations

No person is authorised to give any information or to make any representation in connection with the Offer described in this OIS. Any information or representation which is not contained in this OIS or disclosed by the Company pursuant to its continuous disclosure obligations may not be relied upon as having been authorised by the Company in connection with the issue of this OIS.

Overseas shareholders

This OIS has been prepared having regard to the Australian disclosure requirements. It does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer.

The Offer is not being extended and New Shares will not be issued to Shareholders with a registered address which is outside Australia and New Zealand. It is not practicable for the Company to comply with the securities laws of overseas jurisdictions (other than those mentioned above) having regard to the number of overseas Shareholders, the number and value of New Shares these Shareholders would be offered and the cost of complying with regulatory requirements in each relevant jurisdiction.

United States Shareholders

This Offer does not constitute an offer in the United States of America, nor does it constitute an offer to a person who is a US Person or someone who is acting on behalf of a US Person.

No Shares have been, nor will be, registered under the US Securities Act, nor may be offered or sold in the United States of America, or to, or for the account or benefit of, US Persons except under an available exemption from registration under the US Securities Act. Shares may only be resold or transferred if registered under the US Securities Act or pursuant to an exemption from registration under the US Securities Act and in

compliance with state securities laws. The Company is under no obligation and has no intention to register the Shares in the United States of America.

New Zealand Shareholders

The Offer is being made in New Zealand pursuant to the Securities Act (Overseas Companies) Exemption Notice 2013.

Shareholders resident in Australia or New Zealand holding Existing Shares on behalf of persons who are resident overseas are responsible for ensuring that taking up an Entitlement under the Offer does not breach regulations in the relevant overseas jurisdiction. Return of a duly completed Entitlement and Acceptance Form will be taken by the Company to constitute a representation that there has been no breach of any such regulations.

Availability

Eligible Shareholders can obtain a copy of this OIS during the Offer period on the Company's website at www.quantumgraphite.com/investors or by contacting the Company. If you access an electronic copy of this OIS, you should ensure that you download and read the entire OIS. In particular, Eligible Shareholders should refer to Section 5 for details of the risk factors that could affect the performance of the Company.

The Offer does not take into account the investment objectives, personal circumstances (including financial and taxation issues) and particular needs of Eligible Shareholders. Eligible Shareholders should consider the prospects of the Company in the light of their individual objectives, circumstances and needs.

The electronic copy of this OIS available from the Company's website does not include a personalised Entitlement and Acceptance Form. Eligible Shareholders will only be able to accept the Offer by completing the personalised Entitlement and Acceptance Form which accompanies this OIS (refer to Section 4 for further information).

Defined terms

Throughout this OIS, for ease of reading, various words and phrases have been defined rather than used in full on each occasion and are set out in Section 7 of this OIS.

Forward-looking statements and risks

This OIS contains forward-looking statements that, despite being based on the Company's current expectations about future events, are subject to known and unknown risks, uncertainties and assumptions, many of which are outside the control of the Company and its Directors. These known and unknown risks, uncertainties and assumptions, could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied by forward-looking statements in this OIS. These risks, uncertainties and assumptions include, but are not limited to, the risks outlined in the Offer Overview and Section 5 of this OIS. Forward-looking statements do not constitute, and should not be regarded as, a representation that the relevant results will actually be achieved or that the underlying assumptions are valid. The opinions, estimates, forecasts and projections are subject to uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the Company.

Privacy Act

If you complete an Entitlement and Acceptance Form, you will be providing personal information to the Company (directly or to the Share Registry). The Company collects, holds and uses that information to assess your Application, service your needs as a Shareholder, facilitate distribution payments and corporate communications to you as a Shareholder and carry out administration.

The information may also be used from time to time and disclosed to persons inspecting the register, bidders for your securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office, authorised securities brokers, print service providers, mail houses and the Share Registry.

You can access, correct and update the personal information that we hold about you. Please contact the Company or the Share Registry if you wish to do so at the relevant contact numbers set out in this OIS.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act 1988 (Cth) (as amended), the Corporations Act and certain rules such as the ASX Settlement Operating Rules. You should note that if you do not provide the information required on the Entitlement and Acceptance Form, the Company may not be able to accept or process your Application.

Corporate Directory

Directors Sal Catalano Bruno Ruggiero Steven Chadwick Robert Osmetti David Trimboli	Share Registry Link Market Services Limited Tower 4, 727 Collins Street, Melbourne, Victoria, 3008 T +61 3 9847 9125 www.linkmarketservices.com.au
Company Secretary Sal Catalano	ASX Code QGL ABN 44 008 101 979
Registered office Level 5, 349 Collins Street, Melbourne, Victoria, 3000 Tel: +61 3 8614 8414	Website www.quantumgraphite.com
Legal Advisers PricewaterhouseCoopers 2 Riverside Quay Southbank VIC 3006 www.pwc.com	Auditor Grant Thornton Level 3 170 Frome Street Adelaide, South Australia, 5000 www.grantthornton.com.au

Offer Overview

Key investment aspects
Offer Price	\$0.003 per New Share
Offer Ratio	1 New Share for every existing 10 Shares held by Eligible Shareholders on the Record Date
Total amount to be raised under the Rights Issue Offer and Top-Up Offer	\$2,250,000
Number of New Shares to be issued under the Rights Issue Offer and Top-Up Offer	748,678,844
Possible Additional Amount that may be raised under the Placement	\$1,000,000
Potential additional New Shares that may be issued under the Placement	333,333,334

Note: The amounts listed above are approximations. The final amounts raised and New Shares issued remain subject to rounding of Entitlements and acceptances of any Shortfall.

Timetable for the Offer

Announcement of Offer and Lodgement of OIS – Announcement of	Monday, 10 December 2018
Offer and Appendix 3B lodged with ASX and OIS lodged with ASIC and
ASX
Notice to Shareholders - notice of Rights Issue Offer sent to	Tuesday, 11 December 2018
Shareholders containing information required by Appendix 3B
Ex date – the date on which Shares commence trading without the	Thursday, 13 December 2018
entitlement to participate in the Offer
Record Date – the date for determining Entitlements of Shareholders	Friday, 14 December 2018
to participate in the Rights Issue Offer
OIS sent to Shareholders – despatch of OIS and Entitlement and	Wednesday, 19 December 2018
Application Forms to Shareholders
Offers open for acceptance
Notice sent to Shareholders having Unmarketable Parcels	Wednesday, 19 December 2018
Last day to extend Closing Date	Friday, 1 February 2019
Closing Date – The last day for receipt of Entitlement and Application	Friday, 8 February 2019
Forms
Shortfall notification date – notification of Shortfall (if any) under the	Tuesday, 12 February 2019
Rights Issue Offer
Issue date – Allotment of New Shares under the Rights Issue Offer,	Thursday 15 February 2019
Top-Up Offer and Placement and despatch of holding statements for
New Shares
Quotation and expected commencement of normal trading in New Shares on ASX	Monday 18 February 2019

These dates are indicative only and subject to change. The Company reserves the right to amend this indicative timetable. In particular, the Company reserves the right, subject to the Corporations Act and ASX Listing Rules. This may include extending the Closing Date, accepting late Applications, or to withdraw the Entitlement Offer. Any extension of the Closing Date will have a consequential effect on the date for the issue of New Shares. No cooling-off rights apply to Applications submitted under the Offer.

1. Details of the Offer

1.1 The Offer

The Offer is being made by the Company. Further details of the Company and its business are set out in Section 3.

The Company is making a Rights Issue Offer to Eligible Shareholders as a pro-rata, non-renounceable entitlement offer of 1 New Share for every 10 Existing Shares held by Eligible Shareholders registered at the Record Date at an issue price of \$0.003 per Share. Fractional entitlements will be rounded up to the nearest whole number.

Based on the capital structure of the Company as set out in Section 2.1 of this OIS, a maximum of 748,678,844 Shares will be issued pursuant to this Offer to raise up to \$2,250,000. Further information, including a description of the use of funds and the key risks relating to the Offer, is set out further below in this OIS.

The Directors have determined that the minimum subscription amount will be \$500.

Shareholders will be entitled to subscribe for additional New Shares over and above their entitlement.

All of the New Shares offered under this OIS will rank equally with the Shares on issue at the date of this OIS.

The Directors may at any time decide to withdraw this OIS and the Offer of New Shares made under this OIS in which case the Company will return all Application Monies (without interest) within 28 days of giving such notice of withdrawal.

1.2 No rights trading

This Offer is personal to you and the rights to New Shares under the Rights Issue Offer are non-renounceable.

This means that Entitlements to participate in the Rights Issue Offer are not transferable and there will be no trading of rights on the ASX and you may not dispose of your rights to subscribe for New Shares under the Rights Issue Offer to any other party. If you do not take up your Entitlement to New Shares under the Rights Issue Offer in full or in part by the Closing Date, the Rights Issue Offer to you will lapse and you will not receive any value in respect of those Entitlements that you do not take up. The New Shares the subject of that Entitlement may be taken up by other Eligible Shareholders under the Top-Up Offer or by the placement of the Shortfall.

1.3 Dilution

It is important to note the action which you must take in order to participate in the Offer. Eligible Shareholders who do not take up all of their Entitlements may have their interest in the Company diluted by up to 10% (as compared to their holdings and number of Shares on issue as at the date of this OIS).

1.4 Record Date and Applications

The Entitlement of Eligible Shareholders to participate in the Rights Issue Offer will be determined on the Record Date.

The Record Date for the purpose of the Offer is 7.00pm (Melbourne Time) on 14 December 2018. The Offer set out in this OIS is only being made to Eligible Shareholders. Eligible Shareholders' Entitlements to New Shares will be shown in the accompanying Entitlement and Acceptance Form. Not all Shareholders will be eligible to participate in the offer of New Shares.

Your Entitlement is shown on the Entitlement and Acceptance Form accompanying this OIS.

Details of how to apply under the Offer are set out in Section 4 of this OIS.

1.5 Shareholders holding Unmarketable Parcels

Any Shareholder holding less than 167,000 Shares will be notified by the Company that it intends to sell their Shares in accordance with the Corporations Act and/or the ASX Listing Rules in the manner determined by the Directors in their absolute discretion, unless that:

• Shareholder increases their holding to a number of Shares in excess of 167,000 Shares (including by way of their participation in the Rights Issue Offer, the Top-Up Offer and/or the Placement); or
• otherwise notifies the Company that it wishes to retain its existing holding of Shares.

1.6 Underwriting, Shortfall and Placement

The Offer will not be underwritten. In the event there is a Shortfall, the Directors reserve the right to place the Shortfall in their sole discretion. The Shortfall will be used to satisfy, at the Directors' sole discretion, any Applications made in the Top-Up Offer (see Section 1.10). The issue price of any placement of the Shortfall will not be less than \$0.003 per Share.

To the extent Applications made in the Top-Up Offer exceed the Shortfall (Placement Applications), the Directors reserve the right to issue New Shares to applicants under the Placement Applications, up to an amount of \$1,000,000 at an issue price of \$0.003 per Share (see Section 1.11).

1.7 Issue and allotment of Shares

New Shares issued pursuant to the Offer will be issued in accordance with the ASX Listing Rules and the Timetable.

Pending the issue of the New Shares or payment of refunds pursuant to this OIS, all Application Monies will be held by the Share Registry in trust for the Applicants in a separate bank account as required by the Corporations Act. The Company, however, will be entitled to retain all interest that accrues on the bank account and each Applicant waives the right to claim interest by completing and returning the Entitlement and Acceptance Form.

The issue of New Shares offered by this OIS and despatch of holding statements is expected to occur on the dates specified in the Timetable.

It is the responsibility of Applicants to determine their allocation prior to trading in the New Shares. Applicants who sell New Shares before they receive their holding statements will do so at their own risk.

Shares will not be issued on the basis of this OIS later than thirteen (13) months after the date of this OIS.

1.8 Use of Funds

Completion of the Rights Issue Offer and Top-Up Offer will result in an increase in cash in hand of up to \$2,250,000. If the Placement is fully subscribed, completion of the Placement will result in an increase in cash in hand of up to \$1,000,000. These amounts are the amounts received prior to the payment of costs associated with the Offer.

The primary purpose of the Offer is to raise capital. The Directors currently intend to apply the proceeds raised under the Offer to firstly pay the costs of the Offer and secondly for general working capital to further the aims and objectives of the Company.

1.9 Amounts payable under the Offer

Other than the issue price of \$0.003 per New Share, there are no other fees or charges payable for Eligible Shareholders to receive New Shares.

1.10 Top-Up Offer

ASX Listing Rule 7.11.4 and the Corporations Act (as modified by ASIC Instrument 2016/84) permit the Company to make an additional offer of the New Shares that may be comprised in any Shortfall. Accordingly, Eligible Shareholders are also able to participate in a further discretionary offer of New Shares, being the New Shares that have been initially offered to Eligible Shareholders under the Rights Issue Offer. It is a condition of the Top-Up Offer that the New Shares being offered may only be issued to a successful applicant where an Offer of the New Shares has first been made to, but not accepted by, another Eligible Shareholder under the Offer.

New Shares that might otherwise have been offered to Excluded Shareholders will be included in the Top-Up Offer. In addition:

• the Top-Up Offer is only made to persons to whom an Offer was made under the Rights Issue (i.e. to Eligible Shareholders);
• there is no guarantee that any Application in the Top-Up Offer will be successful (however, any Application under the Top-Up Offer which is not fully allocated will become a Placement Application and the applicant may receive New Shares under the Placement (see Section 1.11)); and
• the Directors reserve the right to issue the Shortfall by way of the Top-Up Offer and reserve the right to satisfy Applications in the Top-Up Offer and to allocate New Shares under the Top-Up Offer at their sole discretion;
• the Top-Up Offer has the same Closing Date as the Rights Issue Offer;
• the issue price of New Shares under the Top-Up Offer is the same price as the New Shares that are offered under the Rights Issue Offer; and
• no Shortfall will be issued to any Shareholder which would result in a person acquiring a Relevant Interest in the Company which results in someone's voting power in the Company increasing above 19.9% or increasing at all from a starting point that is above 20% and below 90%.

Without limiting the Directors' discretion, in issuing the Shortfall, Directors may give preference to Eligible Shareholders whose base Entitlement is less than a Marketable Parcel and whom have taken up their full Entitlement under the Rights Issue Offer.

Persons who are unsuccessful in the Top-Up Offer or whose Application is only partly accepted will have their excess Application Monies returned by cheque within five days of the Closing Date, without interest. Please note it is not practical to refund amounts of less than \$2.00 and any refunds owing for this amount will be retained by the Company.

1.11 Placement

Eligible Shareholders who participate in the Top-Up Offer are able to participate in a further discretionary offer of New Shares via the Placement. To the extent Applications made in the Top-Up Offer exceed the Shortfall (Placement Applications), the Directors may issue New Shares to applicants under the Placement Applications, up to an amount of \$1,000,000 at an issue price of \$0.003 per Share.

In addition:

• the Placement is only made to persons who participated in the Top-Up Offer and did not receive their full allocation of New Shares under the Top-Up Offer;
• there is no guarantee that any Placement Application in the Placement will be successful; and

• the Directors reserve the right to issue the New Shares by way of the Placement and reserve the right to satisfy Placement Applications and to allocate New Shares under the Placement at their sole discretion;

• the Placement has the same Closing Date as the Rights Issue Offer and Top-Up Offer;

• the issue price of New Shares under the Placement is the same price as the New Shares that are offered under the Rights Issue Offer and Top-Up Offer; and
• no New Shares will be issued to any Shareholder under the Placement which would result in a person acquiring a Relevant Interest in the Company which results in someone's voting power in the Company increasing above 19.9% or increasing at all from a starting point that is above 20% and below 90%.

Without limiting the Directors' discretion, in issuing the New Shares under the Placement, Directors may give preference to Eligible Shareholders whose base Entitlement is less than a Marketable Parcel and whom have taken up their full Entitlement under the Rights Issue Offer and have participated in the Top-Up Offer (but did not receive their full allocation under the Top-Up Offer).

Persons who are unsuccessful in the Placement or whose Placement Application is only partly accepted will have their excess Application Monies returned by cheque within five days of the Closing Date, without interest. Please note it is not practical to refund amounts of less than \$2.00 and any refunds owing for this amount will be retained by the Company.

1.12 Quotation on ASX

The Company shall make application to the ASX for the quotation of the New Shares. The commencement of quotation of the New Shares is subject to confirmation from ASX.

2. Effect of the Offer

2.1 Capital structure

The effect of the Offer on the capital structure of the Company, assuming the Rights Issue Offer, the Top-Up Offer and the Placement are fully subscribed, is set out below.

2.1.1 Current Structure

The capital structure of the Company as at the date of this OIS is as follows:

Security	Number
Fully Paid Shares	7,486,788,432 Ordinary Shares
Partly Paid Shares	None
Total Shares on issue	7,486,788,432 Ordinary Shares
Total Options on issue	1,000,000,000 Options to acquire ordinary shares, exercise price \$0.00, expiry date 20 July 2023

2.1.2 Capital structure on completion of the Offer

The following table shows the capital structure of the Company on completion of the Offer (assuming the Rights Issue Offer, the Top-Up Offer and the Placement are fully subscribed):

Security	Number
Existing Shares on issue as at the Record Date	7,486,788,432
Partly Paid Shares	None
New Shares to be issued under the Rights Issue Offer and Top-Up Offer	748,678,844
Total Shares on issue following completion of the Rights Issue Offer and Top-Up Offer	8,235,467,276
New Shares to be issued under the Placement	333,333,334
Total Shares on issue following completion of the Rights Issue Offer, Top-Up Offer and Placement	8,568,800,610
Total Options on issue	1,000,000,000 Options to acquire ordinary shares, exercise price \$0.00, expiry date 20 July 2023

2.2 Effect of the Offer on control and voting power in the Company

The Company's substantial Shareholders and their Entitlements prior to the Rights Issue Offer are set out in Section 2.3 below.

If all Eligible Shareholders take up their full Entitlements under the Rights Issue Offer, the issue of New Shares under the Offer will have no effect on the control of the Company and all Shareholders will hold the same percentage interest in the Company, subject only to changes resulting from Excluded Shareholders being unable to participate in the Offer.

Eligible Shareholders who do not subscribe for their full Entitlement of New Shares under the Offer and ineligible shareholders unable to participate in the Offer will be diluted relative to those Shareholders who subscribe for all of their Entitlement or participate in the Top-Up Offer and/or the Placement.

2.3 Substantial Shareholders

The following entities have advised the Company of substantial shareholdings in the Company as at the date of this OIS:

• Chimaera Capital Limited 19.5%
• Seefield Investments Pty Ltd 6.26%
• Ziziphus Pty Ltd 6.07%

2.4 Directors' Interests and Participation

Each Director's relevant interest in the securities of the Company at the date of this OIS and their Entitlement is set out in the table below.

Name	Ordinary Shares		Options
Sal Catalano		1,439,086,321	1,000,000,000
Steve Chadwick		101,000,000
Robert Osmetti		331,553,268
Bruno Ruggiero		419,039,273
David Trimboli		468,738,944

2.5 Market Price of Shares

The Company is a "disclosing entity" for the purposes of the Corporations Act and its Shares are enhanced disclosure securities quoted on ASX.

3. Details of the Company and its business

3.1 Company Overview

The Company owns the Uley Graphite mine on the Eyre Peninsula in South Australia.

The Company is currently undertaking a definitive feasibility study for the expansion of the Uley Graphite mine. See further information below.

3.2 Tenement information

The Company's mineral tenements are wholly owned. Their locations are set out in Figure1 below and comprise:

• Mining Leases 5561 and 5562 totalling 66 ha (inner small rectangle bordered in blue in Figure1) with an additional 412.5 ha in Retention Leases 66 and 67 (larger rectangle bordered in blue in Figure1);
• a large scale, highly prospective Exploration Licence 6224 of approximately 75km² (area bordered in red in Figure1) that includes a number of primary and secondary electromagnetic targets (indicated in Figure1 as the areas shaded pink and bright yellow).

Figure 1

3.3 Mineral Resources and Reserve Estimates and Exploration Overview

The Company has previously (May 2015) released details of its mineral resources and reserves as set out below:

ULEY PIT 2 – JORC 2012 MINERAL RESOURCE
Classification Tonnage (Mt) Average Grade (%gC) Contained Tonnes (Mt)
Measured	0.36 17.51 0.06
Indicated 2.75 11.39 0.31
Inferred 1.44 10.61 0.15
Totals 4.54 11.63		0.52
ULEY PIT 2 – ORE RESERVE
Classification	Tonnage (Mt)	Average Grade (%gC)	Contained Tonnes (Mt)
Proved	340,000	17.6 59,840
Probable	2,577,000	11.4	293,778

(Mt) = dry metric tonnes, (%gC) = grade expressed in percentage of graphitic carbon

The plan view of the Uley Pit 2 is illustrated in Figure 2 below which includes the location of drill holes (denoted as white crosses). The drill holes located within the white bordered rectangle have been reported since the publication of the Company's reserves and resources in 2015.

Mineralisation is open at depth and continues in a south westerly direction. Assays reported on 30 November 2018 included graphitic carbon grades of more than 50%.

Figure 2

Close up of the results of the transient electromagnetic survey (TEM) of Uley Pit 2 and surrounds in Figure 3 below. The Company's exploration model and long-term development strategy is based on its interpretation of the TEM geophysical signature.

Figure 3

3.4 Definitive Feasibility Study and Future Plans

The Company has retained Lycopodium Limited to undertake a definitive feasibility study (DFS) for the increase of the Uley production capacity, estimated within the range of 42,000 to 50,000 tonnes of high purity natural flake graphite concentrate. The technical scope of the DFS will include an analysis of geology, metallurgy, mining and processing.

The Company expects that the increase in production will involve a revision of the Company's published Mineral Resources and Reserves, an expansion of the mine plan and the construction of a new process plant that will deliver the production tonnages referred to above and concentrate quality with a purity ranging from 92% to 96% total graphite content (TGC).

The Company has a dual market strategy to develop and grow its business:

• Bias in supply arrangements to established traders and processors, principally in Asia. This does not preclude direct sales to end users, given long standing product history with key global refractory manufacturers; and
• Continue the development of alternative markets not necessarily dependent on advanced processing of high purity graphite. This strategy is focussed on collaboration with technology partners principally relating to the use of the Company's graphite for the manufacture of thermal energy solutions in the renewables sector.

3.5 Likely Regulatory Impacts of Future Plans

The Company's mining and processing activities in respect of Mining Leases 5561 and 5562 have been subject to an approved Program for Environmental Protection and Rehabilitation (PEPR) issued by the Department of Energy and Mining on 23 December 2014 under the South Australian Mining Act 1971.

The Company expects that the planned increase in production will require it to seek changes to the PEPR. Until the results of the DFS are delivered, the Company is unable to make any further comments regarding the nature and/or scope of any such changes.

3.6 Competent Persons Statement

The Company confirms that it is not aware of any new information or data that materially affects the information included in this OIS and that all material assumptions and technical parameters relating to Mineral Resources is based on, and fairly represent, the Mineral Resources and information and supporting documentation extracted from the reports prepared by a competent person in compliance with the JORC Code (2012 edition) and released to the ASX on 17 December 2014, 5 May 2015, 15 May 2015 (all under the company's previous code, VXL) and the further announcements dated 31 October 2018 and 30 November 2018 respectively.

4. Required Actions by Shareholders

4.1 Entitlement and Acceptance Form

A personalised Entitlement and Acceptance Form is enclosed with this OIS. The Entitlement and Acceptance Form shows the number of New Shares to which the Eligible Shareholder is entitled under the Rights Issue Offer. Fractional Entitlements have been rounded up to the nearest whole number.

4.2 Your choices as an Eligible Shareholder

The number of New Shares to which you are entitled (your Entitlement) is shown on the accompanying personalised Entitlement and Acceptance Form. You may:

• a) take up all of your Entitlement to New Shares;
• b) take up all of your Entitlement to New Shares and apply for additional New Shares under the Top-Up Offer and the Placement (if applicable);
• c) take up some of your Entitlement to New Shares; or
• d) not take up any of your Entitlement to New Shares and allow your Entitlement to lapse.

4.3 How to Accept the Offer

Your acceptance of the Offer must be made on the Entitlement and Acceptance Form accompanying this OIS. You may participate in the Offer as follows:

a) If you wish to accept your Entitlement in full (and apply for additional New Shares under the Top-Up Offer and the Placement, if relevant):

• complete the Entitlement and Acceptance Form, filling in the details in the spaces provided (including in relation to your participation in the Top-Up Offer and Placement, if applicable); and
• attach your cheque or arrange payment by BPAY® for the amount indicated on the Entitlement and Acceptance Form.

b) If you only wish to accept part of your Entitlement:

• fill in the number of New Shares you wish to accept in the space provided on the Entitlement and Acceptance Form; and
• attach your cheque or arrange payment by BPAY® for the appropriate Application Monies (at \$0.003 per New Share).

If you only accept part of your Entitlement, the remaining offer for New Shares will lapse and become part of the Shortfall.

c) If you do not wish to accept all or part of your Entitlement, you are not obliged to do anything.

If you do nothing, your Entitlement will lapse and become part of the Shortfall. The number of Existing Shares you hold as at the Record Date and the rights attached to those Existing Shares will not be affected if you choose not to accept any of your Entitlement, however, you will be diluted.

Your completed Entitlement and Acceptance Form and payment must reach the Registry no later than 5:00pm (Melbourne Time) on the Closing Date.

The Offer is non-renounceable. Accordingly, a holder of Shares may not sell or transfer all or part of their Entitlement.

4.4 Implications of acceptance

Returning a completed Entitlement and Acceptance Form or paying any Application Monies will be taken to constitute a representation by you that:

• a) you have received a copy of this OIS and the accompanying Entitlement and Acceptance Form, and read them both in their entirety; and
• b) you acknowledge that once the Entitlement and Acceptance Form is returned, or payment of any Application Monies is made, the Application may not be varied or withdrawn, except as required by law.

4.5 Payment by cheque/bank draft

All cheques must be drawn on an Australian bank or bank draft made payable in Australian currency to Quantum Graphite Limited and crossed Not Negotiable.

Your completed Entitlement and Acceptance Form and cheque must reach the Share Registry at the address set out on the Entitlement and Acceptance Form by no later than 5:00pm (Melbourne Time) on the Closing Date.

4.6 Payment by BPAY®

For payment by BPAY®, please follow the instructions on the Entitlement and Acceptance Form. You can only make a payment via BPAY® if you are the holder of an account with an Australian financial institution that supports BPAY® transactions. Please note that should you choose to pay by BPAY®:

• a) you do not need to submit the Entitlement and Acceptance Form but are taken to have made the declarations on that Entitlement and Acceptance Form; and
• b) if you do not pay for your Entitlement in full, you are deemed to have taken up your Entitlement in respect of such whole number of Shares which is covered in full by your Application Monies.

Payment arrangements for the Top-Up Offer and Placement (as applicable) are as specified on the Entitlement and Acceptance Form.

It is your responsibility to ensure that your BPAY® payment is received by the Share Registry by no later than 5:00pm (Melbourne Time) on the Closing Date. You should be aware that your financial institution may implement earlier cut-off times with regards to electronic payment and you should therefore take this into consideration when making payment.

4.7 Enquiries

For further information, please telephone Link Market Services Limited on 1300 847 879 (within Australia) or +61 1300 847 879 (from outside Australia) between 8:30am and 5:30pm (AEDT) Monday to Friday.

5. Risk Factors

In accepting their Entitlements under the Rights Issue Offer, the Top-Up Offer and the Placement (as applicable), Shareholders will be subscribing for New Shares in the Company. As with any share investment, there are risks associated with an investment in the Company. The numerous risk factors are both of a specific and a general nature. Some risks can be mitigated using safeguards and appropriate systems and controls, but some are outside the control of the Company and its Directors and cannot be mitigated.

This Section identifies the major areas of risk identified by the Directors associated with an investment in the Company, but should not be taken as an exhaustive list of the risk factors to which the Company and its Shareholders are exposed now or may be in the future. You should read the entire OIS and consult your professional advisers before deciding whether to apply for the New Shares offered pursuant to this OIS.

5.1 Specific Risks

5.1.1 Speculative nature of mineral exploration

A significant risk for the Company is that any proposed exploration programmes will not result in exploration success. Mineral exploration by its nature is a high-risk endeavour and consequently there can be no assurance that exploration of the project areas described in this OIS, or any other projects that may be acquired in the future, will result in discovery of an economic mineral deposit.

Should a discovery be made, there is no guarantee that it will be commercially viable. While the Directors will make every effort to reduce these risks through their experience in the exploration and mining industry, the fact remains that a commercially viable mineral discovery is very much the exception rather than the rule and success can never be guaranteed.

5.1.2 Risks associated with exploration and mining

The future viability and profitability of the Company as an exploration and mining company will be dependent on a number of factors including, but not limited to, the following:

• commodity prices and exchange rates and, in particular, the price of natural flake graphite;
• risks inherent in exploration and mining including, among other things, successful exploration and identification of ore reserves, satisfactory performance of mining operations (including risks relating to continuity of ore deposit, fluctuations in grades and values of the product being mined, and unforeseen operational and technical problems) and competent management;
• risks associated with negative exploration results, including statutory or voluntary relinquishment (in whole or in part) of tenements or not exercising an option to acquire equity, even though a viable mineral deposit may be present, but undiscovered;
• poor weather conditions over a prolonged period which might adversely affect mining and exploration activities and the timing of earning revenues;
• risks associated with the financial failure or default by a participant in any of the joint ventures or other contractual relationships to which the Company is, or may become, a party.

5.1.3 Native Title, Aboriginal Lands and Land Access

There may be risks arising because of native title and/or Aboriginal land rights which may affect the Company's ability to gain access to prospective exploration areas to obtain production titles; compensatory obligations may be necessary in settling native title claims lodged over any of the tenements held or acquired by the Company in the future; the level of impact of these matters will depend, in part, on the location and status of the tenements acquired by the Company.

Further, Commonwealth and State legislation obliges the Company to protect sites of significance to Aboriginal custom and tradition. Some sites of significance may be identified within the tenements. It is therefore possible that one or more sites of significance will exist in an area which the Company considers to be prospective. The Company's policy is to carry out clearance surveys prior to conducting exploration which would cause a disturbance to the land surface.

5.1.4 Environmental Risks

The minerals and mining industries have become subject to increasing environmental responsibility and liability. The potential for liability is an ever-present risk. The use and disposal of chemicals in the mining industry is under constant legislative scrutiny and regulation. There are environmental management issues with which the Company may be required to comply from time to time.

Exploration work will be carried out in a way that causes minimum impact on the environment. Consistent with this, it may be necessary in some cases to undertake baseline environmental studies prior to certain exploration or mining activities, so that the environmental impact can be monitored, and as far as possible, minimised. While the Company is not aware of any endangered species of fauna and flora within any of its project areas, no baseline environmental studies have been undertaken to date, and discovery of such could prevent further work in certain areas.

5.1.5 Grant, renewal and valuation of tenements

The future viability and profitability of the Company as an exploration and mining company will be dependent on exploration and mining tenements. There are risks associated with obtaining grant of any exploration or mining tenements which are applications or renewal of tenements upon expiry of their current term.

Further, no valuation has been completed of the exploration projects or the Shares of the Company. The Company makes no representation in this OIS as to the value of the exploration assets. It is recommended that Shareholders and their advisors make their own assessment as to the value of the exploration projects and the tenements.

5.1.6 Reliance on plant and equipment

The Company's ongoing operations is dependent on certain plant and equipment and the mine structure.

There are risks associated with maintaining exploration and mining properties and, the costs of maintaining such properties requires the Company to have access to sufficient development capital.

Further, unforeseen major failures, breakdowns or repairs required to key items of exploration and mining plant and equipment or mine structure may result in significant delays, notwithstanding regular programmes of repair, maintenance and upkeep, which can have an adverse impact on the Company's viability and profitability.

5.1.7 Retaining key personnel

The Company's ongoing success depends to a significant extent on its key personnel. These individuals have extensive knowledge of the exploration and mining industry and the Company's business. The loss of key personnel and an inability to recruit suitable replacement personnel may adversely affect the Company's future financial performance.

Further, the future viability and profitability of the Company as an exploration and mining company is dependent on its workforce. As a result, the Company is exposed to the risks that exploration and mining may be adversely affected or hampered by industrial disputes.

5.1.8 Liability and insurance risk

The Company's insurance arrangements may not be adequate to protect the Company against liability for losses relating to public liability, property damage, product liability, business interruption and other risks that may arise in the course of its operations. Should the Company be unable to maintain adequate insurance to cover these risks or experience claims for losses in excess of the level of its insurance coverage, the Company's financial performance could be materially affected.

5.1.9 Litigation and dispute risk

From time to time, the Company may be involved in litigation in relation to issues such as contractual, personal injury, employee and other claims, which may arise in the ordinary course of business.

Litigation may adversely impact upon the operational and financial performance of the Company, and may also negatively impact on the Company's share price. In addition, should the Company decide to pursue claims against a third party, including any party with whom the Company has entered into agreements, this process may incur significant management and financial resources, and a positive outcome for the Company cannot be guaranteed.

Further, even if the Company was successful in obtaining a judgment against a third party, the Company may be unable to recover any monies from that party. For example, the relevant third party may have inadequate financial resources to cover any damages judgment, which is awarded in favour of the Company.

5.1.10 Financing requirements

The Company's Directors expect that the Company will have sufficient capital resources to enable it to achieve its immediate business objectives. However, if circumstances arise that require further financing, there can be no assurance that further financing will be obtained on reasonable or acceptable terms.

5.1.11 Government legislation

Australian and international government legislation is subject to review and change from time to time. Any such change is likely to be beyond the control of the Company and could affect both industry and the Company's profitability. Revenues and operating costs of the Company may be affected by change in international, federal, state, or local government laws, regulations or policies, or in taxation legislation.

5.2 General Risks

In addition to the specific risks outlined above, there is a range of general risks associated with the Company's operations. Factors such as inflation, interest rates taxation law, accounting standards, natural disasters, social upheaval, war and terrorism may have an impact on prices, operating costs and market conditions generally.

The Company's operations and future profitability can be affected by these factors, which are beyond the control of the Company.

5.2.1 Economic uncertainty may affect the value of Shares

The price of the Shares on the ASX may rise or fall due to numerous factors including:

• general economic conditions including but not limited to inflation and interest rates and exchange rate movements;
• changes to government policy and legislation; and
• sentiment in the market for local and global listed stocks.

5.2.2 Trading in Shares might not be liquid

There may be relatively few potential buyers or sellers of the Shares on the ASX at any time. This may increase the volatility of the market price of the Shares. It may also affect the prevailing market price at which Shareholders are able to sell their Shares. This may result in Shareholders receiving a market price for their Shares that is a discount or premium to the price paid initially.

5.2.3 Taxation changes may occur

Any change to the existing rate of company income taxation may adversely impact on the financial performance of the Company and in turn impact Shareholder returns. Any other changes to Australian taxation law and practice that impact QGL, graphite and mining industry generally, could also have an adverse effect on Shareholder returns.

5.2.4 Catastrophic events could occur

Acts of terrorism, an outbreak of international hostilities, earthquakes, labour strikes and other natural disasters may cause an adverse change in investor sentiment with respect to the Company specifically, or the stock market more generally. This could have a negative impact on the value of an investment in the Company's Shares.

5.3 Speculative Nature of Investment

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of the New Shares offered under the Rights Issue Offer, Top-Up Offer or the Placement. Therefore, the New Shares to be issued pursuant to the Offer carry no guarantee with respect to the payment of dividends, returns of capital or the market value of those New Shares. Shareholders should consider that investment in the Company is speculative and should consult their professional advisors before deciding whether to apply for New Shares in the Company. Shareholders should consult their stockbroker, solicitor, accountant or other financial adviser if they are in any doubt as to the value of the Rights Issue Offer, Top-Up Offer and/or the Placement and in particular in relation to taxation implications.

6. Additional information

6.1 Rights attaching to Shares

The New Shares offered pursuant to this OIS will rank equally in all respects with Existing Shares upon issue. Full details of the rights attaching to the Shares are set out in its Constitution, a copy of which can be inspected at the Company's registered office and is available on the Company's website at www.quantumgraphite.com under the 'Corporate Governance' tab.

The following is a summary of the principal rights that attach to the Shares under the Constitution:

Voting	Every holder of Shares present in person or by proxy, attorney or representative at a meeting of Shareholders has one vote on a vote taken by a show of hands. On a poll, every holder of Shares who is present in person or by proxy, attorney or representative has one vote for every Share held by him or her, registered in such Shareholder's name on the Company's share register.
	However, if a member is present at any meeting of the Company and any one or more proxy, attorney or representative for such a Shareholder is also present, or if more than one proxy, attorney or representative for a Shareholder is present at any meeting then no such proxy, attorney or representative is entitled to vote on a show of hands and on a poll, the vote of each one is of no effect unless such person is appointed to represent a specified proportion of the Shareholder's voting rights, not exceeding in the aggregate 100%.
	A poll may be demanded by the chairman of the meeting, by not less than five Shareholders entitled to vote at the meeting present in person or by proxy, attorney or representative, or by any one or more Shareholders who are together entitled to not less than 5% of the total voting rights of the Shares of all those Shareholders having the right to vote on the resolution.
Dividends	Subject to the Corporations Act and the ASX Listing Rules, the Directors may pay a dividend in respect of Shares as, in their judgment, the financial position of the Company justifies.
Transfer of Shares	Subject to the Constitution, a member may transfer all or any of the member's Shares by: • a Proper ASTC Transfer; or
	• an instrument in writing in any usual form or in any other form that the Directors approve.
	The Company may ask ASX Settlement to apply a holding lock to prevent a Proper ASTC Transfer or may decline to register an instrument of transfer in certain circumstances including: (a) in the circumstances permitted or required under the Listing Rules or the ASX Settlement Operating Rules, as applicable; (b) where the transfer is not in registrable form; (c) where the Company has a lien over any of the Shares transferred; (d) where the registration of the transfer may breach a law of Australian or would be in breach of any order of any Court; (e) where the transfer is paper-based and registration of the transfer will create a new holding, at the time the transfer is lodged, is less than a Marketable Parcel.
	Subject to the powers vested in the Directors to decline transfers as set out in the Constitution, where the Company receives a complying instrument of transfer it must register the transferee named in the instrument as the holder of the Shares to which it relates.

Meetings and Notice	Each Shareholder is entitled to receive notice of and to attend general meetings of the Company and to receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution of the Company, the Corporations Act or the Listing Rules. Shareholders may requisition meetings in accordance with section 249D of the Corporations Act.
Liquidation rights	If the Company is wound up, the liquidator may, with the sanction of a special resolution, divide among the Shareholders the whole or any part of the property of the Company, and may determine how the division is to be carried out as between the Shareholders or different classes of Shareholders.
Shareholder liability	As the Shares under the OIS are fully paid shares, they are not subject to any calls for money by the Directors and will therefore not become liable for forfeiture.
Changes to the Constitution	The Constitution can only be amended by a special resolution passed by at least three quarters of Shareholders present and voting at the general meeting. At least 28 days written notice, specifying the intention to propose the resolution as a special resolution must be given.
Unmarketable Parcels	The Constitution contains provisions permitting it to sell Unmarketable Parcels of shares on terms consistent with the Listing Rules. Notice must be given to the holder of the intended sale and the holder must be given at least six weeks to notify the Company that it wishes to retain its Shares.
Future increases in capital	Subject to the Constitution, the directors have the right to issue shares or grant options over unissued shares to any person or to settle the manner in which fractions of share, however arising, are to be dealt with, and they may do so at such times as they think fit and on the conditions they think fit subject to the Listing Rules and the ASX Settlement Operating Rules and to any special rights conferred on the holders of any shares or any class of shares.
Variation of rights	The rights attached to any class of shares may, unless their terms of issue state otherwise, be varied:
	i. with the written consent of the holders of 75% of the shares of the class; or ii. by a special resolution passed at a separate meeting of the holders of shares of the class.
Listing Rules	The Company is admitted to the Official List, and as such despite anything in the Constitution, if the Listing Rules prohibit an act being done, the act must not be done.
	Nothing in the Constitution prevents an act being done that the Listing Rules require to be done. If the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be).
	If the Listing Rules require the Constitution to contain a provision or not to contain a provision the Constitution is deemed to contain that provision or not to contain that provision (as the case may be). If a provision of the Constitution is or becomes inconsistent with the Listing Rules, the Constitution is deemed not to contain that provision to the extent of the inconsistency.

6.2 Consents

Chapter 6D of the Corporations Act imposes a liability regime on the Company (as offeror of the New Shares), the Directors and persons named in the OIS with their consent as having made a statement in the OIS involved in a contravention in relation to the OIS with regard to misleading and deceptive statements made in the OIS. Although the Company bears primary responsibility for the OIS, the other parties involved in the preparation of the OIS can also be responsible for certain statements made in it.

Each of the parties referred to in this Section:

• a) does not make, or purport to make, any statement in this OIS other than those referred to in this Section; and
• b) in light of the above, to the maximum extent permitted by law, expressly disclaim and take no responsibility for any part of this OIS other than a reference to its name and a statement included in this OIS with the consent of the party named in this Section 6.

6.2.1 Auditor's consent

Grant Thornton has given its written consent to being named as auditor to the Company in this OIS and for the inclusion of the audited financial information of the Company in Appendix 1, in the form and context in which the information and the report are included. Grant Thornton has not withdrawn its consent prior to the lodgement of this OIS with ASIC.

6.2.2 Legal adviser consent

PricewaterhouseCoopers has given its written consent to being named as the legal adviser to the Company in this OIS, in the form and context in which the information is included. PricewaterhouseCoopers has not withdrawn its consent prior to the lodgement of this OIS with ASIC.

6.2.3 Share Registry consent

Link Market Services Limited has given its written consent to being named as the Share Registry in this OIS, in the form and context in which the information is included. Link Market Services has not withdrawn its consent prior to the lodgement of this OIS with ASIC.

6.2.4 Directors' responsibility statement and consent

This OIS is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with section 720 of the Corporations Act, each Director has consented in writing to the lodgement of this OIS with ASIC and has not withdrawn that consent.

6.3 Taxation implications

Shareholders should be aware that there may be taxation implications in relation to Entitlements under the Rights Issue. These taxation implications will vary between different Shareholders.

Shareholders should consult their professional tax adviser. Shareholders should seek, and rely on, their own taxation advice regarding an investment in the Company. Neither the Company, nor any of its Directors, officers, employees, agents or advisers, accept any liability or responsibility with respect to the taxation consequences connected with the Rights Issue Offer, the Top-Up Offer or the Placement.

6.4 CHESS

The Company participates in the security transfer system known as CHESS. CHESS is operated by ASTC, a wholly-owned subsidiary of ASX, in accordance with the ASX Listing Rules and the ASTC Settlement Rules.

Under CHESS, Eligible Shareholders will not receive a share certificate but will receive a statement of holding of New Shares. If you are broker sponsored, and you take up all or part of your Entitlement, ASTC will send you a

CHESS statement. The CHESS statement will set out the number of New Shares issued to you under this OIS, and provide details of your holder identification number and the participant identification number of the sponsor. If you are registered on the issuer-sponsored sub-register, and you take up all or part of your Entitlement, your statement will be despatched by the Share Registry, and will contain the number of New Shares issued to you under this OIS and a security holder reference number.

6.5 Governing law

The information in this OIS, the Offer and the contracts formed on acceptance of the Offer are governed by the law applicable in Victoria, Australia. Any person who applies for Shares submits to the non-exclusive jurisdiction of the courts of Victoria.

7. Defined terms

\$ means an Australian dollar.

Applicant means an Eligible Shareholder who applies for New Shares under this OIS.

Application means an application for a specified number of New Shares by an Applicant under this OIS made by completing and returning an Entitlement and Acceptance Form by the Closing Date.

Application Monies means funds accompanying a completed Application.

ASIC means the Australian Securities & Investments Commission.

ASX means ASX Limited ACN 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

ASX Settlement means ASX Settlement Pty Ltd ACN 008 504 532.

ASX Settlement Operating Rules means the settlement operating rules of ASX Settlement.

ASTC means ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532.

ASTC Settlement Rules means the operating rules of ASTC.

Board means the board of directors of the Company.

Closing Date means 5:00pm (Melbourne Time) on Friday, 8 February 2019.

Company or Quantum Graphite Limited or QGL means Quantum Graphite Limited ABN 41 008 101 979.

Constitution means the constitution of the Company as amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the directors of the Company as at the date of this OIS.

Eligible Shareholder means all Shareholders who are registered on the Shareholder register as at 7.00pm (Melbourne Time) on the Record Date, other than Excluded Shareholders.

Entitlement means the number of New Shares each Eligible Shareholder is offered under the Rights Issue Offer as designated on their personalised Entitlement and Acceptance Form.

Entitlement and Acceptance Form means the form by that name which is included in or accompanies this OIS.

Excluded Shareholders means each Shareholder as at 7.00 pm (AEST) on the Record Date with a registered address outside Australia or New Zealand.

Existing Shares means Shares on issue as at the Record Date.

Listing Rules means the Listing Rules of ASX.

Marketable Parcels has the meaning given to that term in the ASX Listing Rules, and Unmarketable Parcels means parcels of Shares which are not Marketable Parcels.

Melbourne Time means the time in Melbourne, Victoria.

New Share means a Share offered under this OIS.

Offer means the Rights Issue Offer, the Top-Up Offer and the Placement outlined in this OIS.

Offer Information Statement or OIS means this Offer Information Statement dated Monday, 10 December 2018.

Offer Price means \$0.003 per New Share.

Official List means the official list of the ASX.

Option means an option to acquire a Share.

Placement means the offer of up to \$1,000,000 of New Shares to Shareholders via a placement to Eligible Shareholders who participate in the Top-Up Offer but do not receive their full allocation on the basis that the Top-Up Offer is fully subscribed.

Placement Applications has the meaning given in Section 1.6.

Proper ASTC Transfer has the meaning given to that term in the Corporations Regulations 2001(Cth).

Record Date means Friday, 14 December 2018.

Relevant Interest has the meaning given to that term in the Corporations Act.

Rights Issue Offer means an offer to Eligible Shareholders of one (1) New Share for every ten (10) Existing Shares held on the Record Date at an issue price of \$0.003 per New Share under this OIS.

Section means a section of this OIS.

Share means an ordinary fully paid share in the capital of the Company.

Shareholder means a holder of one or more Shares as recorded on the Share register for the Company maintained by the Share Registry.

Share Registry means Link Market Services Limited ACN 083 241 537.

Shortfall means any New Shares in respect of which a valid Application is not received by the Company from Eligible Shareholders.

Timetable means the indicative timetable in respect of the Offer set out on page 7 of this OIS.

Top-Up Offer means an offer under this OIS to Eligible Shareholders who accept their Entitlements under the Rights Issue Offer to acquire New Shares not taken up by other Eligible Shareholders under the Rights Issue Offer.

US Person has the meaning given to that term by regulations made under the US Securities Act 1933 (as amended).

US Securities Act means the US Securities Act 1933 (as amended).

Dated: 10 December 2018 Mr Sal Catalano Company Secretary

Quantum Graphite Limited ABN 41 008 101 979

2018

ANNUAL FINANCIAL REPORT

for the year ended 30 June 2018

Competent Persons Statement

Quantum Graphite Ltd confirms that it is not aware of any new information or data that materially affects the information included in this announcement and that all material assumptions and technical parameters underpinning the estimates in this announcement continue to apply and have not materially changed since the announcements previously released as "Valence Doubles Existing ROM Stockpiles" (6/8/14), "Uley Graphite Grade Increases to 11.7%" (17/11/14), "Maiden High Grade Graphite Ore Reserve" (17/12/2014, "VXL Feasibility Study Expansion and Adv Manufacturing" (2/1/15), "High Grade Mineralisation Extended at Uley Graphite" (12/3/15), "50% Increase in Uley Graphite Resource" (5/5/15) and "Major Increase to Graphite Ore Reserve and Mine Life" (14/5/15), "Production Update" (21/9/15).

Contents

CORPORATE DIRECTORY 1
DIRECTORS' REPORT 2
AUDITOR'S INDEPENDENCE DECLARATION 15
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 18
CONSOLIDATED STATEMENT OF CASH FLOWS 19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20
DIRECTORS' DECLARATION 44
INDEPENDENT AUDIT REPORT 45

This Annual Financial Report covers Quantum Graphite Ltd (Quantum, QGL or the Company) as a Group consisting of Quantum Graphite Ltd and its subsidiaries, collectively referred to as the "Group". The financial report is presented in the Australian currency.

Quantum is a company limited by shares, incorporated and domiciled in Australia. Its offices are:

Principal Place of Business

Quantum Graphite Ltd 349 Collins Street Melbourne VIC 3000

Registered Office Quantum Graphite Ltd 349 Collins Street Melbourne VIC 3000

Website www.quantumgraphite.com

Corporate Directory

Directors:	Auditors:
Bruno Ruggiero	Grant Thornton Audit Pty Ltd
Non-Executive Chairman	Level 3
Steven Chadwick	170 Frome Street
Executive Director	Adelaide SA 5000
Sal Catalano
Executive Director	Solicitors:
Robert Osmetti	Dentons Australia Pt Ltd
Non-Executive Director	Level 21
David Trimboli	567 Collins Street
Non-Executive Director	Melbourne VIC 3000
Company Secretary:	Home Stock Exchange:
Sal Catalano	Australian Securities Exchange
	20 Bridge Street
Principal Business Office:	SYDNEY NSW 2000
349 Collins Street
Melbourne VIC 3000	ASX Codes:
Telephone: + 61 3 8614 8400	QGL – fully paid ordinary shares
	Share Registry:

Link Market Services Ltd Tower 4, 727 Collins Street

Docklands VIC 3008

DIRECTOR'S REPORT

The Directors of Quantum Graphite Ltd present their report on the Company and its subsidiaries, for the year ended 30 June 2018.

DIRECTORS

The following persons were directors of Quantum Graphite Ltd during the financial year and up to the date of this report, unless otherwise stated:

• Bruno Ruggiero Chairman and Independent Non-Executive Director (resigned 16 March 2018 and reappointed 22 June 2018)
• Steven Chadwick– Executive Director (resigned 16 March 2018 and reappointed 22 June 2018)
• Sal Catalano Executive Director (resigned 16 March 2018 and reappointed 22 June 2018)
• Robert Mencel Former Independent Non-Executive Director (appointed 15 March 2018 and resigned 6 July 2018)
• Robert Osmetti Independent Non-Executive Director (appointed 15 March 2018)
• David Trimboli Independent Non-Executive Director (appointed 15 March 2018)

At the 2016 Annual General Meeting (2016 AGM) held on 18 December 2017 the Company received a second strike against the resolution on the Remuneration Report. The Company is required to hold a meeting at which all Directors (other than the Managing Director) who were in office at the date of the approval of the applicable Director's Report must stand for re-election.

The meeting was not held within 90 days of the 2016 AGM and the directors Mr Chadwick, Mr Ruggiero and Mr Catalano stepped down as directors on 16 March 2018. Mr Mencel, Mr Osmetti and Mr Trimboli were appointed as directors on 15 March 2018 with the approval of the Deed Administrators to form an interim board for the purposes of completing the outstanding matters under the interlocking Deeds of Company Arrangement (Interlocking DOCAs), including the holding of the 2017 Annual General Meeting (2017 AGM).

The 2017 AGM was held on 22 June 2018 and Mr Chadwick, Mr Ruggiero and Mr Catalano were reappointed as directors and subsequently on 6 July 2018 Mr Mencel resigned as a director of the company.

Bruno Ruggiero BE (Mech), Grad Dip MinSc (Ext. Met), GradCertEng Tech (Struct) Chairman and Independent Non-Executive Director (Resigned 16 March 2018 and reappointed 22 June 2018)

EXPERIENCE AND EXPERTISE

Bruno has multiple degrees in engineering and over 30 years' experience in the minerals industry, both nationally and internationally from scoping to operations, and is a founding partner of the publicly listed Lycopodium Ltd.

Currently Technical Director with Lycopodium Minerals, Bruno sets the technical direction and standards for new project initiatives that the Lycopodium Minerals undertakes.

SPECIAL RESPONSIBILITIES

Member of audit committee.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES

Executive Director of Lycopodium Limited (ASX: LYL from 25 October 2001)

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS Nil.

INTEREST IN SHARES

Direct interest of 36,000,000 shares and indirect interest in 675,070,094 shares (256,030,821 shares as an Executive Director of Lycopodium Ltd and 419,039,273 shares via an interest in Ziziphus Pty Ltd).

INTEREST IN OPTIONS Nil.

DIRECTORS' REPORT (CONTINUED)

Steven Chadwick BASc (Metallurgy) Executive Director (Resigned 16 March 2018 and reappointed 22 June 2018)

EXPERIENCE AND EXPERTISE

Mr Chadwick is a Metallurgical Graduate of the WA School of Mines with 40 years' experience in the mining industry, incorporating technical, operating and management roles, as well as a strong metallurgical background.

Mr Chadwick is now a metallurgical consultant specialising in project management and feasibility studies for a range of local and international clients. He was a founding director of BC Iron and a former managing director of Coventry Resources, PacMin Mining and Northern Gold. He was a director and consulted to major Canadian miner Teck Resources Australian subsidiary company for 10 years.

SPECIAL RESPONSIBILITIES

Member of audit committee.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES

Non-Executive Director of Lycopodium Limited (ASX: LYL from 13 January 2016).

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS Nil.

INTEREST IN SHARES

Direct interest of 36,000,000 shares and indirect interest in 321,030,821 shares (256,030,821 shares as a Non-Executive Director of Lycopodium Ltd and 65,000,000 shares via an interest in Spectrum Metallurgical Consultants Pty Ltd).

INTEREST IN OPTIONS

Nil.

Sal Catalano B.Juris., LLB, FITA

Executive Director and Company Secretary (Resigned as a director on 16 March 2018 and reappointed 22 June 2018)

EXPERIENCE AND EXPERTISE

Mr Catalano has extensive experience across business, the law and investment banking. He brings strong leadership skills and international business experience to the Board. He was a former Principal of Paloma Partners' securities financing group, Head of Donaldson Lufkin & Jenrette's (Pershing Division) Asian securities business and a Director of Credit Suisse's Alternative Capital Group. He is a Principal of the Chimaera Financial Group.

SPECIAL RESPONSIBILITIES

Chairman of audit committee.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES Nil.

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS

Chairman and Chief Executive Officer of DIGGA Australian Mining Fund (ASX: DGA) (30 January 2012 - 27 March 2015).

INTEREST IN SHARES

Direct interest of 36,000,000 shares and indirect interest in 1,385,086,321 shares via an indirect interest in Chimaera Capital Ltd.

INTEREST IN OPTIONS

Indirect interest in 1,000,000,000 options.

DIRECTORS' REPORT (CONTINUED)

Robert Mencel, BEng Mining, MBA GDM

Former Independent Non-Executive Director (Appointed 15 March 2018 and resigned 6 July 2018)

EXPERIENCE AND EXPERTISE

Mr Mencel held various positions with the Company before being appointed the Company's Managing Director from 1 December 2015 to June 2016. He has extensive experience in the resources sector, with over 20 years developing a wide range of engineering, mining and mineral processing operations, translating strategic management objectives into operable practices. He has proven leadership abilities in developing cohesive teams to achieve stated outcomes within specific time frames. He holds a Bachelor Degree in Engineering (Mining), as well as post graduate qualifications from Deakin University of an MBA (Technology Management) and a Graduate Diploma in Management.

He was previously Managing Director of Ironclad Mining Limited and prior to that his roles have included General Manager at Mount Gibson, Deputy Project Manager at Tenix and senior operational management roles with Normandy Mining Limited and WMC Limited.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES

Nil.

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS

Managing Director Ironclad Mining Limited (ASX: IFE, from 1 January 2013 to 20 November 2014).

INTEREST IN SHARES

Direct interest in 19,990,160 shares.

INTEREST IN OPTIONS / PERFORMANCE RIGHTS Nil.

Robert (Bob) Osmetti BE (Civ), MIE Aust, CPEng Independent Non-Executive Director (Appointed 18 March 2018)

EXPERIENCE AND EXPERTISE

Mr Osmetti is a Civil Engineer with over 39 years' experience in the project management and construction management of projects in an EPCM role and has worked for major construction contractors in the mining sector.

He brings direct experience in all aspects of project implementation, estimating, scheduling and construction management as well as the management of a number of feasibility studies for major resource projects in Australia and overseas.

Mr Osmetti is one of the founding partners of Lycopodium and has held diverse positions within the group. Bob is currently the Managing Director of Mondium Pty Ltd, a fully incorporated JV between Monadelphous and Lycopodium, established to provide fully integrated engineering, procurement and construct services to the minerals sector.

SPECIAL RESPONSIBILITIES

Nil.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES

Executive Director of Lycopodium Limited (ASX: LYL from August 1992)

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS Nil.

INTEREST IN SHARES

Direct interest in 18,000,000 shares and indirect interest in 587,584,089 shares (256,030,821 shares as an Executive Director of Lycopodium Ltd and 331,553,268 shares via an interest in Selso Pty Ltd (Osmetti Family Account)).

INTEREST IN OPTIONS

Nil.

DIRECTORS' REPORT (CONTINUED)

David Trimboli BCom

Independent Non-Executive Director (Appointed 18 March 2018)

EXPERIENCE AND EXPERTISE

Mr Trimboli is an experienced global investor with significant experience in commodities financing and trading. He was formerly a long serving senior coal trader at the world's largest commodities trading group, Glencore International AG, and was a key member of the Glencore team when the group successfully completed its IPO in London and Hong Kong. Mr Trimboli has undertaken significant investments activities and holds diverse interests in commodities, industrial minerals, real estate and technology in Australia and internationally.

Mr Trimboli is the founder of Seefeld Investments, with offices in London, Zug and Perth and has been an integral part of the rapid growth of Seefeld's business. He brings a wealth of experience in cultivating partnerships and key commercial relationships.

OTHER CURRENT DIRECTORSHIPS OF LISTED COMPANIES Nil.

OTHER DIRECTORSHIPS HELD IN LISTED COMPANIES IN THE LAST THREE YEARS Nil.

INTEREST IN SHARES

Direct interest in 18,000,000 shares.

INTEREST IN OPTIONS Nil.

PRINCIPAL ACTIVITIES

The Company's principal activities are the exploration, mining, processing and manufacture of graphite and associated products.

OPERATING AND FINANCIAL REVIEW

During the current financial year, the Company pursued the finalisation of the Interlocking DOCA and its recapitalisation.

The expiry date for a total of 1,500,000 unlisted options with an exercise price of \$1.10 was 31 July 2017. These options were not exercised and lapsed.

On 29 September 2017 the Company issued pursuant to ASX Listing Rule 7.1 29,852,400 shares to the parties below in consideration for services provided in connection with:

• Compliance with the Uley Mine's Approved Program for Environment Protection and Rehabilitation;
• Ongoing maintenance at the Uley Mine site;
• Government relations including in respect of the Company's participation in the Quantum Energy Partnership battery tender submitted to the South Australian Government; and
• Geological and drill data management.

The shares were issued at a deemed price of \$0.0252 as follows:

• 24,877,000 Shares (ranking equally with all existing Shares) issued to Tony Harbrow (or his nominee);
• 2,985,240 Shares (ranking equally with all existing Shares) issued to Thornton Group (Australia) Pty Ltd (or its nominee);
• 1,990,160 Shares (ranking equally with all existing Shares) issued to Robert Mencel.

DIRECTORS' REPORT (CONTINUED)

A concurrent creditor meeting for QGL and Quantum Graphite Operations Pty Ltd (QGO) was held on 5 October 2017 which approved a variation to the Interlocking DOCAs for each company which was executed on 20 October 2017, and varied on 22 December 2017 to reflect the following:

• Removal of the requirement to establish a creditors' trust.
• Milestones for completing prescribed tasks deferred
• Removing the election for the secured creditor to accept convertible notes rather than ordinary equity.
• Inclusion of provisions restricting any single investor holding more than 20% in ordinary equity of the total issued capital of the Group upon implementation of the Interlocking DOCAs. Any entitlement to an interest greater than 20% shall be satisfied by the issue of options.
• The disclosure to the Administrators of all recipients of shares obtained through the conversion of secured and unsecured debt to ordinary equity.
• Streamlining the process for the issuance of shares and options.
• The Deed Administrators to ensure that the 'Implementation Board' remains in place for the duration and implementation of the Interlocking DOCA's and to exercise such powers under sections 437A and 442A of the Act as is necessary to ensure expeditious implementation of the Interlocking DOCA's.
• Security interest of Chimaera Capital Limited to be satisfied once shareholder approval is obtained and shares and options have been issued.

The 2016 Annual General Meeting of the Company was held on 18 December 2017 and approved the following:

• The election of Mr Chadwick, Mr Ruggiero and Mr Catalano as directors of the Company;
• Approval to issue shares to unsecured creditors in relation to the conversion of their debt into equity in accordance with the terms of the Interlocking DOCAs up to a maximum of 500,000,000 shares.
• Approval of the issue of shares up to a maximum of 7,000,000,000 shares and 800,000,000 unlisted options to the Secured Creditor Beneficiaries in accordance with the Interlocking DOCAs: The entitlements of individual Secured Creditor Beneficiaries shall be determined by the Trustee and the Deed Administrators pursuant to the terms of the Trust and the Interlocking DOCAs.
• Approval of the issue to Directors each quarter in advance commencing on 1 January 2018 of shares equivalent in value to one quarter of the Directors Entitlement. The deemed issue price of the Shares is the higher of \$0.001 (0.1 cent) or the monthly VWAP for the month immediately preceding the month of issue of the Shares. The table below illustrates the minimum issue price of \$0.001 (0.1 cent) which represents the maximum dilution.

Director	Foregone quarterly remuneration	Minimum Issue Price	Maximum no. of shares per quarter	Maximum no. of shares for the year
Steven Chadwick	\$18,000	\$0.001	18,000,000	72,000,000
Sal Catalano	\$18,000	\$0.001	18,000,000	72,000,000
Bruno Ruggiero	\$18,000	\$0.001	18,000,000	72,000,000

At the AGM the Company received 37.6% votes against the resolution to adopt the 2016 Remuneration Report being a "Second Strike" despite the appointment of a new board (and management team) following the approval of the Interlocking DOCAs in November 2016.

Consequently, the Company was required to hold a meeting at which all Directors (other than the Managing Director) who were in office at the date of the approval of the applicable Director's Report must stand for re-election.

DIRECTORS' REPORT (CONTINUED)

The meeting was not held within 90 days of the 2016 AGM and the existing Directors Mr Chadwick, Mr Ruggiero and Mr Catalano stepped down as directors on 16 March 2018. Mr Mencel, Mr Osmetti and Mr Trimboli on 15 March 2018 were appointed as directors with the approval of the Deed Administrators to form an interim board for the purposes of completing the outstanding matters under the Interlocking DOCAs, including the holding of the 2017 AGM.

The 2017 AGM was held on 22 June 2018 and Mr Chadwick, Mr Ruggiero and Mr Catalano were reappointed as directors and subsequently on 6 July 2018 Mr Mencel resigned as a director of the company.

Resolutions passed at the 2017 AGM included a refreshing of the shareholder approvals passed at the 2016 AGM in respect of shares and options to be issued to the Secured Creditor Beneficiaries

Pursuant to the 2017 AGM shareholder approvals (and ASX Listing Rule 7.1), the Company issued 775,038,393 shares on 16 March 2018 as follows:

• 54,000,000 at \$0.001 per share with a value of \$54,000 to the directors (Mr Chadwick, Mr Catalano and Mr Ruggiero) in lieu of director fees
• 428,538,393 at \$0.016 per share with a value of \$6,856,614 were issued to unsecured creditors in respect of the full extinguishment of the debts due to them in accordance with the Interlocking DOCAs; and
• 292,500,000 at \$0.0252 per share with a value of \$737,100 to Secured Creditors Beneficiaries in accordance with the Interlocking DOCAs.

The net loss for the Group for the year was \$7,390,538 (2017: \$2,666,773) after providing for income tax.

Strategy & Outlook

As set out in the Interlocking DOCA's approved by Creditors on 27 October 2016, the funds advanced to the Company under the secured facility (and subsequent recapitalisation upon full implementation of the Interlocking DOCAs) enabled it to execute its plan to build the framework for the increase of the Uley production capacity to a level that is commercially sustainable. This plan includes the following key elements:

• The preparation of a revised mine plan together with the completion of any necessary metallurgical test work and drilling;
• The review and possible extension of the Company's existing resources and reserves; and
• The completion of a revised definitive feasibility study (DFS) to be undertaken by Lycopodium Minerals.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes in the state of affairs of the Company that occurred during the reporting period that has not otherwise been disclosed in this report or the financial statements.

DIVIDENDS

There were no dividends paid or declared during the reporting period or to the date of this report.

EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD

Full Implementation of the Interlocking DOCAs

On 14 August 2018 the Company announced that the Interlocking DOCAs had been fully implemented with all conditions satisfied including the recapitalisation of the Company and the issue of all securities. Accordingly:

• a. the Deed Administrators, Mr Laurence Fitzgerald and Mr Michael Humphris, resigned and notified ASIC that the Interlocking DOCAs had been fully effectuated; and
• b. the Company exited external administration.

In connection with the implementation of the Interlocking DOCAs (including the issue of shares pursuant to shareholder approvals obtained at the 2017 AGM) the Company prepared a proforma balance sheet (the Pro Forma Balance Sheet) based on the balance sheet as at 31 December 2017 to reflect the impact of the changes on its financial position following the recapitalisation of the Company.

The Proforma Balance Sheet was the subject of review by the Company's Auditors, Grant Thornton, resulting in them issuing an Independent Limited Assurance Report on the Historical Pro Forma Financial Information (Grant Thornton Report) dated 5 September 2018.

DIRECTORS' REPORT (CONTINUED)

As required by the ASX for the purposes of reinstatement of quotation of the Company's securities, the Company announced its new capital structure on 5 September 2018 together with its opening cash balance and a statement of estimated quarterly cash flows (Cash Flow Statements) for the period September 2018 to December 2019. Details of the new capital structure, the Grant Thornton Report and the Cash Flow Statements were lodged with the ASX on 5 September 2018.

Issue of Shares and Options relating to Implementation of the Interlocking DOCAs

Following shareholder approvals obtained at the 2017 AGM, the Company issued the following securities pursuant to ASX Listing Rule 7.1

• a. On 21 July 2018,6,197,638,425 shares at \$0.0252 per share to the Secured Creditor Beneficiaries;
• b. On 21 July 2018,1,000,000,000 options to acquire ordinary shares, exercise price \$0.00, expiry date 20 July 2023;
• c. On 28 August 2018, 177,243,000 shares at \$0.0252 per share to the Secured Creditor Beneficiaries in accordance with the Interlocking DOCAs; and
• d. On 28 August 2018, 108,000,000 shares at \$0.001 per share to the directors in lieu of their quarterly director fees as follows:

		Quarterly Director
	Shares	Fees
Directors		(\$)
S Chadwick	18,000,000	18,000
B Ruggiero	18,000,000	18,000
S Catalano	18,000,000	18,000
R Mencel	18,000,000	18,000
R Osmetti	18,000,000	18,000
D Trimboli	18,000,000	18,000
Total	108,000,000	108,000

Commencement of works relating to Definitive Feasibility Study

On 3 August 2018 the Company announced that work had commenced on the definitive feasibility study (DFS). Lycopodium Minerals' fee was capped at \$450,000 and payment has been satisfied in full by the issue of shares in the Company.

Renewal of Mining Titles

On 9 May 2017, the Company announced the renewal of Mining Leases ML5561 and ML5562 to 16 March 2024 and renewal of Retention Leases RL66 and RL67 to 16 March 2024.

On 14 August 2018, the Company announced that the Exploration Licence known as EL4778 was terminated and the area represented by the former EL4778 became the subject of the grant of a new Exploration Licence EL6224 to the Company.

Other Matters

Since the end of the financial year Mr Robert Mencel resigned (effective 6 July 2018) as a director.

No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years.

LIKELY DEVELOPMENTS

The likely developments for the Company include the works described below:

• The preparation of a revised mine plan including the completion of metallurgical test work and drilling works that may be required;
• The extension of the Company's existing resources and reserves; and
• The completion of the definitive feasibility study to be undertaken by Lycopodium Minerals.

DIRECTORS' REPORT (CONTINUED)

DIRECTORS' MEETINGS

The number of Directors' meetings held during the reporting period and the number of meetings attended by each Director is as follows:

	Board Meetings			Audit Committee Meetings
Directors	Attended	Entitled to attend	Attended	Entitled to attend
S Chadwick1	3	3	-	-
B Ruggiero1	3	3	-	-
S Catalano1	3	3	-	-
R Mencel2	-	-	1	1
R Osemtti2	-	-	1	1
D Trimboli2	-	-	1	1

1 Resigned 16 March 2018 and reappointed 22 June 2018

2 Appointed 15 March 2018

At this time, there are no separate Board committees, other than the audit committee as disclosed above, as all matters usually delegated to such committees are handled by the Board as a whole.

UNISSUED SHARES UNDER OPTION

There are no unissued ordinary Shares of Quantum under option as at the date of this report.

REMUNERATION REPORT (AUDITED)

The Directors of Quantum Graphite Ltd present the Remuneration Report in accordance with the Corporations Act 2001 and the Corporations Regulations 2001.

The Remuneration Report is set out under the following main headings:

• A. Principles used to determine the nature and amount of remuneration
• B. Details of remuneration
• C. Service agreements
• D. Share-based remuneration

A. Principles used to determine the nature and amount of remuneration

The Company's remuneration policy has been designed to align objectives of key management personnel with objectives of shareholders and the business, by providing a fixed remuneration component and offering specific long-term incentives through the issue of options and / or performance rights. The Board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel and Directors to run and manage the Company. The key management personnel of the Company are the Board of Directors and Executive Officers.

The Board's policy for determining the nature and amount of remuneration for its members and key management personnel of the Company is as follows:

• o The remuneration policy, setting the terms and conditions for the executive Directors and key management personnel, is developed by the Board. All key management personnel are remunerated on a consultancy or salary basis based on services provided by each person. The Board annually reviews the packages of key management personnel by reference to the Group's performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.
• o The Board may exercise discretion in relation to approving incentives, bonuses, options and performance rights. The policy is designed to attract the highest calibre of key management personnel and reward them for performance that results in long-term growth in shareholder wealth.
• o Key management personnel were also entitled to participate in the Company's Performance Rights and Option Plan as approved by shareholders at the 2013 AGM.
• o The Board policy is to remunerate non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive Directors are not linked to the performance of the Company, except in relation to KPI options. Additionally, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and are able to participate in the Performance Rights and Option Plan.

During the reporting year, performance reviews of senior executives were not conducted.

Performance based remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and other key management personnel. This has been facilitated through the issue of options and/or performance rights to key management personnel to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing shareholder wealth.

REMUNERATION REPORT (AUDITED) (CONTINUED)

Voting at the Company's 2015, 2016 and 2017 Annual General Meeting's

The Company received 34% votes against the resolution to adopt the 2015 Remuneration Report being a "First Strike" at the Company's AGM held on 25 November 2015.

The Company received a 37.6% vote against the resolution to adopt the 2016 Remuneration Report being a "Second Strike" at the Company's 2016 AGM held on 18 December 2017, even though a new board and management team was appointed following the unanimous approval by Creditors of the Interlocking DOCAs on 19 October 2016. Further there was no remuneration paid to the new board and management nor was any of board member or management team personnel entitled to remuneration. There were no questions or issues raised by shareholders regarding remuneration at that meeting.

A meeting of shareholders was not held within 90 days of the 2016 AGM. The Directors - Mr Chadwick, Mr Ruggiero and Mr Catalano, resigned on 16 March 2018. Mr Mencel, Mr Osmetti and Mr Trimboli were appointed as directors on 15 March 2018 with the approval of the Deed Administrators to form an interim board for the purposes of completing the outstanding matters under the Interlocking DOCAs, including the holding of the 2017 AGM.

The 2017 AGM was held on 22 June 2018 and Mr Chadwick, Mr Ruggiero and Mr Catalano were reappointed as directors and in addition the company received a vote in favour of the resolution to adopt the 2017 Remuneration Report.

The Company did not engage remuneration consultants during the reporting period.

B. Details of remuneration

Details of the nature and amount of each element of the remuneration of the Company's key management personnel ("KMP") are shown below:

2018	Short term benefits	Post employment benefits	Share-based payments	Share based payments		% of remunerati
	Salary and fees	Super annuation	Options and Performance Rights	Shares issued	Total	on that is equity	Salary and Fees Owing4
	\$	\$	\$	\$	\$	based	\$
Non-Executive Directors
S Chadwick1	1,761	-	-	18,000	19,761	100%	1,761
B Ruggiero1	1,761	-	-	18,000	19,761	100%	1,761
S Catalano1	1,762	-	-	18,000	19,761	100%	1,761
R Mencel2,3	18,000	-	-	-	18,000	0%	18,000
D Trimboli2	18,000	-	-	-	18,000	0%	18,000
R Osmetti2	18,000	-	-	-	18,000	0%	18,000
Total	59,283	-	-	54,000	113,283	100%	59,283

Director and other Key Management Personnel Remuneration

(1) Mr Chadwick, Mr Ruggiero and Mr Catalano resigned on 16 March 2018 and was reappointed on 22 June 2018.

(2) Mr Mencel, Mr Trimboli and Mr Osmetti were appointed on 15 March 2018.

(3) Mr Mencel resigned on 6 July 2018.

(4) The outstanding directors' salaries and fees were settled by the issue of shares in the year ending 30 June 2019.

REMUNERATION REPORT (AUDITED) (CONTINUED)

2017	Short term benefits Salary and	Post employment benefits Super	Share-based payments Options and	Total	% of remunerati on	Salary, fees and
	fees	annuation	Performance Rights		that is equity	superannua tion owing
	\$	\$	\$	\$	based	at year end9
Non-Executive Directors
S Chadwick5	-	-	-	-	0%	-
B Ruggiero5	-	-	-	-	0%	-
S Catalano5	-	-	-	-	0%	-
G Spurling6	-	-	-	-	0%	56,250
G Lamont6	-	-	-	-	0%	33,333
I Pattison6	-	-	-	-	0%	33,333
Executive Directors
R Mencel6	-	-	-	-	0%	100,631
Other Key Management Personnel
J Kopias6,7	-	-	-	-	0%	17,506
C Whiteley8	-	-	-	-	0%	102,792
Total	-	-	-	-	0%	343,845

(5) Mr Chadwick, Mr Ruggiero and Mr Catalano were appointed on 18 November 2016.

(6) Mr Spurling, Mr Lamont, Mr Pattison, Mr Mencel and Mr Kopias resigned on 18 November 2016.

(7) Fees paid to Kopias Consulting for CFO, Company secretarial and accounting services – an entity associated with Mr Kopias.

(8) Mr Whitely resigned July 2016.

(9) Salary, fees and superannuation owing at year end to Mr Spurling, Mr Lamont, Mr Pattison, Mr Mencel, Mr Kopias and Mr Whitely are creditors subject to the Interlocking DOCAs.

C. Details of remuneration (continued)

Transactions with KMP

Transactions with key management personnel are made on normal commercial terms and conditions and at market rates. Outstanding balances are unsecured and are repayable in cash.

Sal Catalano

Chimaera Capital Limited ("CCL") (an entity related to Sal Catalano) provided corporate and accounting services to the Company including provision of the registered and main business office. There was \$148,800 paid to CCL during the year (2017: \$Nil) and there were no amounts payable as at 30 June 2018 (2017: \$Nil) in relation to these services.

D. Share-based remuneration

Unlisted options

All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements.

There were no options over ordinary shares in the Company that were granted as remuneration to each KMP during the year ending 30 June 2018.

Performance Rights

There were no performance rights over ordinary shares in the Company granted as compensation during the reporting period.

REMUNERATION REPORT (AUDITED) (CONTINUED)

Share holdings of key management personnel

The number of ordinary shares of Quantum Graphite Limited held, directly, indirectly or beneficially, by each KMP, including their personally-related entities as at the reporting date:

2018

KMP	Held at 30 June 2017	Issued in lieu of Director fees	Appointment or Resignation	Issued pursuant to Interlocking DOCAs	Held directly or indirectly at 30 June 2018
S Chadwick1	-	18,000,000	-	142,500,000	160,500,000
B Ruggiero1	-	18,000,000	-	77,500,000	95,500,000
S Catalano1	-	18,000,000	-	150,000,000	168,000,000
R Mencel2, 3	-	-	1,990,160	-	1,990,160
D Trimboli2	-	-	-	-	-
R Osemtti2	-	-	-	77,500,000	77,500,000
Total	-	54,000,000	1,990,160	447,500,000	503,490,160

(1) Mr Chadwick, Mr Ruggiero and Mr Catalano resigned 16 March 2018 and were reappointed on 22 June 2018.

(2) Mr Mencel, Mr Trimboli and Mr Osmetti were appointed on 15 March 2018.

(3) Mr Mencel resigned on 6 July 2018.

Option holdings of key management personnel

There are 1,000,000,0000 options over ordinary shares in Quantum Graphite Limited issued post 30 June 2018 held by Chimaera Capital Limited in which Mr Catalano has an indirect shareholding during the financial year and at the reporting date.

END OF AUDITED REMUNERATION REPORT

DIRECTORS' REPORT (CONTINUED)

ENVIRONMENTAL LEGISLATION

The Directors believe that the Company has, in all material respects, complied with all particular and significant environmental regulations relevant to its operations.

The Company's operations are subject to various environmental regulations under the Commonwealth and State Laws of Australia. Approvals, licences, hearings and other regulatory requirements are performed, as required, by the Company's management for each permit or lease in which the Company has an interest.

INDEMNITIES GIVEN, AND INSURANCE PREMIUMS PAID TO AUDITORS AND OFFICERS

During the year, the Company did not pay a premium to insure officers of the Group.

The Group has not otherwise, during or since the end of the reporting period, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a liability incurred as such by an officer or auditor.

NON-AUDIT SERVICES

During the year Grant Thornton did not perform services in addition to its statutory duties.

Details of the amounts paid to the auditors of the Company and its related practices for audit and non-audit services provided during the reporting period are set out in note 19 to the Financial Statements.

A copy of the Auditor's Independence Declaration as required under s307C of the Corporations Act 2001 is included on page 15 of this Financial Report and forms part of this Directors' Report.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

CORPORATE GOVERNANCE

The Board has adopted the ASX Corporate Governance Council's "Corporate Governance Principles and Recommendations - 3rd Edition" (ASX Recommendations). The Board continually monitors and reviews its existing and required policies, charters and procedures with a view to ensuring its compliance with the ASX Recommendations to the extent deemed appropriate for the size of the Company and its development status.

A summary of the Company's ongoing corporate governance practices is set out annually in the Company's Corporate Governance Statement and can be found on the Company's website at www.quantumgraphite.com/responsibilities.

Signed in accordance with a resolution of the Directors.

Bruno Ruggiero Sal Catalano 25 September 2018

Chairman Director and Company Secretary

Grant Thornton Audit Pty Ltd Grant Thornton House Level 3 170 Frome Street Adelaide, SA 5000

T +61 8 8372 6666 F +61 8 8372 6677

Auditor's Independence Declaration

To the Directors of Quantum Graphite Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Quantum Graphite Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the audit.

Grant Thornton Audit Pty Ltd Chartered Accountants

J L Humphrey Partner – Audit & Assurance Adelaide, 25 September 2018

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

'Grant Thornton' refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another's acts or omissions. In the Australian context only, the use of the term 'Grant Thornton' may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation.

www.grantthornton.com.au

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2018

	Notes	2018 \$	2017 \$
Other income		-	33
Corporate expenses	2	(1,271,251)	(859,157)
Commercialisation expenses	2	(160,695)	(306,278)
Pre-commissioning expenses	2	(587,695)	(152,364)
Total operating loss		(2,019,641)	(1,317,766)
Interest revenue		36	22,706
Interest expense		(1,974,268)	(1,642,402)
Debt raising costs		(2,575,000)	(552,951)
Net financing expense		(4,549,232)	(2,172,647)
Deemed disposal of Valence Industries Services Pty Ltd (In Liquidation)		(821,665)	-
Loss before tax		(7,390,538)	(3,490,413)
Income tax benefit / (expense)	3	-	823,640
Loss for the year attributable to owners of the parent entity		(7,390,538)	(2,666,773)
Other comprehensive income		-	-
Total comprehensive loss for the year attributable to owners of the parent entity		(7,390,538)	(2,666,773)
Loss per share from continuing operations Basic and diluted loss – cents per share	4	(1.66)	(1.34)

Consolidated Statement of Financial Position

As at 30 June 2018

	Notes	2018 \$	2017 \$
ASSETS
Cash and cash equivalents	5	32,896	13,877
Receivable from the Department of State Development	6	1,073,863	1,073,863
Trade and other receivables	7	162,568	55,684
Inventory		6,280	6,280
Intangible assets		7,189	7,189
Development expenditure	8	6,753,775	6,753,775
Exploration and evaluation expenditure	9	1,415,705	1,415,705
Property, plant and equipment	10	7,901,639	7,982,325
TOTAL ASSETS		17,353,915	17,308,698
LIABILITIES
Trade and other payables	11	511,647	5,914,389
Employee provisions	12	-	59,242
Borrowings	13	15,598,493	11,100,748
Rehabilitation provision	14	558,369	558,369
TOTAL LIABILITIES		16,668,509	17,632,748
NET ASSETS / (LIABILITIES)		685,406	(324,050)
EQUITY
Issued capital	15	37,555,718	29,155,724
Reserves	16	-	40,762
Accumulated losses		(36,870,312)	(29,520,536)
TOTAL EQUITY/(DEFICIT)		685,406	(324,050)

Consolidated Statement of Changes in Equity For the year ended 30 June 2018

2018	Share capital	Option / Rights reserve \$	Accumulated losses	Total equity/(deficit)
	\$		\$	\$
Balance at beginning of year	29,155,724	40,762	(29,520,536)	(324,050)
Shares issued in lieu of director fees	54,000	-	-	54,000
Partial conversion of secured debt for equity pursuant to the Interlocking DOCA	752,281	-	-	752,281
Full conversion of unsecured creditors for equity pursuant to the Interlocking DOCA	7,593,713	-	-	7,593,713
Lapse of listed/unlisted options and performance rights	-	(40,762)	40,762	-
Transactions with owners	8,399,994	(40,762)	40,762	8,399,994
Comprehensive income:
Total loss for the year	-	-	(7,390,538)	(7,390,538)
Total other comprehensive income for the year	-	-	-	-
Balance 30 June 2018	37,555,718	-	(36,870,312)	685,406
2017	Share capital	Option / Rights reserve \$	Accumulated losses	Total equity/(deficit)
	\$		\$	\$
Balance at beginning of year	29,155,724	734,965	(27,547,966)	2,342,723
Lapse of listed/unlisted options and performance rights	-	(694,203)	694,203	-
Transactions with owners	-	(694,203)	694,203	-
Comprehensive income:
Total loss for the year	-	-	(2,666,773)	(2,666,773)
Total other comprehensive income for the year	-	-	-	-
Balance 30 June 2017	29,155,724	40,762	(29,520,536)	(324,050)

Consolidated Statement of Cash Flows

For the year ended 30 June 2018

	Notes	2018 \$	2017 \$
Operating activities
Receipts from customers		-	33
Payments to suppliers and employees		(31,018)	(1,169,940)
Interest received		37	22,707
Interest payment		-	(23,504)
R&D Tax concession received		-	823,640
Net cash used in operating activities	17	(30,981)	(347,064)
Investing activities
Net cash used in investing activities		-	-
Financing activities
Drawdown of Loan		50,000	314,147
Net cash from financing activities		50,000	314,147
Net change in cash and cash equivalents		19,019	(32,917)
Cash and cash equivalents - beginning of year		13,877	46,794
Cash and cash equivalents - end of year	5 (a)	32,896	13,877

Notes to the consolidated financial statements For the year ended 30 June 2018

1. Basis of preparation

a) Realisation basis of preparation

Based on current forecasts and existing financing arrangements, there is significant uncertainty as to the Company's ability to meet its ongoing operating and financing commitments over the foreseeable future. Consequently, the financial statements have not been prepared on a "going concern" basis but rather have been prepared on an "alternate" basis representing a planned orderly realisation of assets and settlement of liabilities.

As at 30 June 2018 the Company had accumulated losses of \$36.87 million, and net assets of \$0.685 million. In addition, the Company had operating cash outflows of \$30,981 for the year with cash and cash equivalents of \$32,896 at 30 June 2018.

From 13 November 2015 the Company had been suspended from trading on the Australian Securities Exchange ("ASX") and at a meeting of creditors of the Company held on 27 October 2016, it was resolved that the Company, and its subsidiary Quantum Graphite Operations Pty Ltd, enter into Interlocking Deeds of Company Arrangements ("Interlocking DOCAs").

Realisation basis of accounting

The "realisation basis" of accounting adopted by the Company in the preparation of its financial statements continues to apply the requirements of Australian Accounting Standards taking into account that the Company is not expected to continue as a going concern in its present form in the foreseeable future.

As the non-current assets do not meet the requirements for held for sale or discontinued operations under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, they continue to be recognised as assets at cost, less impairment losses. However, the adoption of the alternative basis of accounting representing a planned orderly realisation of assets and settlement of liabilities has resulted in a change in the method of assessing the recoverable value of certain intangible and non-monetary assets which have required impairments in accordance with AASB 136 Impairment of Assets. The carrying value of assets at 30 June 2018 reflects the directors' assessment of recoverable value (or amortised cost if lower than recoverable value).

No additional provisions or liabilities have been recognised as a result of adopting the alternate basis of accounting as the Directors have not incurred any additional legal or contractual obligations.

The valuation of assets and liabilities included in these financial statements have been shown to reflect the subsequent event transactions that are known.

b) Statement of compliance

This consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards ("AASB's") and other authoritative pronouncements of the Australian Accounting Standards Board. Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board ("IASB"). Quantum Graphite Ltd is a listed company, registered and domiciled in Australia. Quantum Graphite Ltd is a for profit entity for the purpose of preparing the financial statements.

The consolidated financial statements for the reporting period ended 30 June 2018 were approved and authorised by the Board of Directors on 25 September 2018.

Notes to the consolidated financial statements (Continued)

2. Significant accounting policies

The significant policies which have been adopted in the preparation of this financial report are summarised below.

a) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Quantum Graphite Ltd as at 30 June 2018 and the results of all subsidiaries for the year then ended.

Subsidiaries

The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 30 June 2018. Subsidiaries are all entities (including structured entities) over which the Group has

• i) the power to direct the relevant activities;
• ii) exposure to significant variable returns; and
• iii) the ability to utilise power to affect the Group's own returns.

Subsidiaries are fully consolidated from the date on which control is fully transferred to the Group. They are deconsolidated from the date that control ceases. All subsidiaries have a reporting date of 30 June.

A list of controlled entities is contained in Note 18 to the Financial Statements.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted, where necessary, to ensure consistency with the accounting policies adopted by the Group.

b) Segment reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the Board of Directors.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the Board.

The Group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in the nature of the minerals targeted.

Operating segments that meet the quantitative criteria, as prescribed by AASB 8 Operating Segments, are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements.

The Directors have considered the requirements of AASB 8 Operating Segments and the internal reports that are reviewed by the Board in allocating resources have concluded that at this time there are no separately identifiable segments.

c) Revenue

Revenue arises from the sale of goods and the rendering of services. It is measured by reference to the fair value of consideration received or receivable, excluding sales taxes, rebates, and trade discounts. The Group often enters sales transactions involving a range of the Group's products. The Group applies the revenue recognition criteria set out below.

Sale of products

Sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership, generally when the customer has taken undisputed delivery of the goods. Revenue from the sale of goods with no significant service obligation is recognised on delivery.

All income is stated net of goods and services tax.

Interest and dividend income

Interest income and expenses are reported on an accrual basis using the effective interest method. Dividends, other than those from investments in associates, are recognised at the time the right to receive payment is established.

d) Finance income and expense

Finance income comprises interest income on funds invested, gains on disposal of financial assets and changes in fair value of financial assets held at fair value through profit or loss.

Interest income is recognised as it accrues in the profit or loss, using the effective interest rate method.

e) Plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the items. Repairs and maintenance are charged to the profit or loss during the reporting period in which they were incurred.

Plant and equipment under construction is accumulated until it is installed and ready for use at which time the costs are transferred to plant and equipment and depreciated.

Depreciation is calculated using the diminishing value method to allocate asset costs over their estimated useful lives, as follows:

Plant and equipment 3-20 years

The assets residual values and useful lives are reviewed and adjusted at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss. When revalued assets are sold, it is the Group's policy to transfer any amounts included in other revenues in respect of those assets to retained earnings.

f) Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that right of tenure is current, and those costs are expected to be recouped through the successful development of the area (or, alternatively by its sale) or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and operations in relation to the area are continuing.

Accumulated costs, in relation to an abandoned area, are written off in full against profit in the period in which the decision to abandon the area is made.

g) Development expenditure

Development expenditure represents the accumulation of all acquired exploration, evaluation and development expenditure incurred by or on behalf of the entity in relation to areas of interest being prepared for mining or in which economic processing of a mineral reserve has commenced. Amortisation of costs is provided on the unit of production method, with separate calculations being made for each mineral resource. The unit of production basis results in an amortisation charge proportional to the depletion of the economically recoverable mineral reserves. The net carrying value is reviewed regularly and, to the extent to which this value exceeds its recoverable amount that excess is fully provided against in the financial year in which this is determined.

Notes to the consolidated financial statements (Continued)

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

The Group records the present value of the estimated cost of legal and constructive obligations (such as those under the consolidated entity's Environmental Policy) to restore operating locations in the period in which the obligation is incurred. Site restoration costs include the dismantling and removal of plant and equipment, waste removal and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs and current legal requirements and technology.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

h) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the provisions to the instrument. For financial assets, this is equivalent to date that the Group commits itself to either the purchase or sale of the asset.

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified as 'fair value through profit and loss', in which case the costs are expensed to the profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at either fair value or amortised cost using the effective interest method or cost. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, quoted prices in an active market are used to determine fair value.

The Group does not designate any interest in subsidiaries as being subject to the requirements of accounting standards specifically applicable to financial instruments:

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets except for those not expected to mature within twelve (12) months after the end of the reporting period.

(ii) Financial liabilities Non-derivative financial liabilities are subsequently measured at cost.

Impairment

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired.

i) Impairment of assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income.

Where it is not probable to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

j) Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivables.

Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method, less provision for impairment. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.

k) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the reporting period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. They are recognised initially at their fair value and subsequently amortised cost using the effective interest rate method.

Trade and other payables are stated at amortised cost.

l) Income Tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with investments in subsidiaries or associates and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity's which intend to settle simultaneously.

To the extent that research and development costs are eligible under the "Research and development tax incentive" programme, a 43% refundable tax offset is available for companies with annual turnover of less than \$20 million. The Group recognises refundable tax offsets received in the financial year as an income tax benefit, in profit or loss, resulting from the monetisation of available tax losses that otherwise would have been carried forward.

m) Leases

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is then recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance leasing liability, irrespective of whether some of these lease payments are payable up-front at the date of inception of the lease. Leases of land and buildings are classified separately and are split into a land and a building element, in accordance with the relative fair values of the leasehold interests at the date the asset is recognised initially.

n) Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

o) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group, excluding costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-tax effect and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

p) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

q) Share-based payments

The Company operates equity-settled based remuneration plans for its directors. None of the Company plans features any options for a cash settlement.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employee' services are determined indirectly by reference to the fair value of the equity instruments granted. The fair value is appraised at the grant dates and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets s and performance conditions.

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share option reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest.

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimated are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. Non-adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs are allocated to share capital.

r) Employee benefits

The Group provides post-employment benefits through various defined contribution plans.

A defined contribution plan is a superannuation plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The Group contributes to several plans and insurances for individual employees that are considered defined contribution plans. Contributions to the plans are recognised as an expense in the period that relevant employee services are received.

Employee benefits, including annual leave entitlement, are included in 'employee provisions', measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.

s) Goods and services tax ("GST")

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows.

t) Parent entity

The financial information of the parent entity, Quantum Graphite Limited (formerly Valence Industries Limited), disclosed in the notes to the financial report has been prepared on the same basis as the consolidated financial statements, other than investments in controlled entities which are carried at cost less impairment.

u) Critical accounting estimates and judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends of economic data, obtained both externally and within the Group.

i) Key estimates

Impairment

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

Rehabilitation provision

Estimates and assumptions of the appropriate discount rate at which to discount the liability, the timing of cash flows, the application of relevant environmental legislation and the future expected costs of decommissioning are all used in determining the carrying value of the decommissioning provision. The carrying amount of the provision is set out in Note 14.

ii) Key judgements

Development expenditure and plant and equipment

The future recoverability of fixed assets and capitalised development expenditure has been assessed by the directors and is dependent on a number of factors, including commodity prices, the level of reserves and resources, foreign currency rates and future technological changes that could impact the costs of mining and processing and future legal changes.

Significant judgements and assumptions are required in making estimates of recoverable amounts. This is particularly so in the assessment of long-life assets.

After assessing the recoverable amount of the Uley Graphite project against its carrying value, no impairment charges were recognised for the current financial year.

Notes to the consolidated financial statements (Continued)

Exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits and net assets will be reduced in the period in which this determination is made.

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made.

iii) Share-based payment transactions

The Group measures the cost of equity-settled transactions with management and other parties by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by the Board of Directors with reference to quoted market prices or using the Black-Scholes valuation method or the Monte Carlo valuation method as appropriate taking into account the terms and conditions upon which the equity instruments were granted. The assumptions in relation to the valuation of the equity instruments are detailed in Note 22. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

v) Adoption of the new and revised accounting standards

The revisions and amendments to AASB's issued by the Australian Accounting Standards Board and IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the annual period beginning 1 July 2017, Management has reviewed the requirements of the standards and has concluded that there was no effect on the classification or presentation of balances.

w) Recently issued accounting standards to be applied in future accounting periods

The accounting standards that have not been early adopted for the year ended 30 June 2018 but will be applicable to the Group in future reporting periods are detailed below. Apart from these standards, we have considered other accounting standards that will be applicable in future reporting periods, however they have been considered insignificant to the Group.

(1) AASB 9 Financial Instruments (December 2014)

AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities and includes a forward-looking 'expected loss' impairment model and a substantially-changes approach to hedge accounting.

These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are:

• x Financial assets that are debt instruments will be classified based on: (i) the objective of the entity's business model for managing the financial assets; and (ii) the characteristics of the contractual cash flows.
• x Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.
• x Introduces a 'fair value through other comprehensive income' measurement category for particular simple debt instruments.
• x Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

Notes to the consolidated financial statements (Continued)

• x Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows:
• the change attributable to changes in credit risk are presented in Other Comprehensive Income ("OCI"); and
• the remaining change is presented in profit or loss.

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

Otherwise, the following requirements have generally been carried forward unchanged from AASB 139 into AASB 9:

• classification and measurement of financial liabilities; and
• derecognition requirements for financial assets and liabilities.

AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting that enable entities to better reflect their risk management activities in the financial statements.

Furthermore, AASB 9 introduces a new impairment model based on expected credit losses. This model makes use of more forward-looking information and applies to all financial instruments that are subject to impairment accounting.

When this standard is first adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial statements.

(2) AASB 16 Leases

AASB 16:

• x replaces AASB 117 Leases and come lease-related interpretations:
• x requires all leases to be accounted for 'on-balance sheet' by lessees, other than short-term and low value asset leases;
• x provides new guidance on the application of the definition of lease and on sale and lease back accounting;
• x largely retains the existing lessor accounting requirements in AASB 17; and
• x requires new and different disclosures about leases.

When this Standard is first adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial statements.

(3) AASB 2016-5 Amendments to Australian Accounting Standards- Classification and Measurement of Share-based Payment Transactions

The Standard amends AASB 2 Share-based Payment to address:

• x The accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled sharebased payments;
• x The classification of share-based payment transactions with a net settlement feature for withholding tax obligations; and
• x The accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

When these amendments are first adopted for the year ending 30 June 2020, there will be no material impact on the financial statements.

Other standards not yet issued and not expected to impact on the Group:

• AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014)

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

2. EXPENSES

2018	Corporate \$	Commercialisation \$	Pre-Commissioning \$	Total \$
Employee benefits expense	113,283	-	-	113,283
Depreciation	55,211	2,769	22,706	80,686
Other	1,102,757	157,926	564,989	1,825,672
Total	1,271,251	160,695	587,695	2,019,641
2017	Corporate \$	Commercialisation \$	Pre-Commissioning \$	Total \$
Employee benefits expense	148,883	-	-	148,883
Depreciation		6,488	29,102	115,097
	79,507
Other	630,767	299,790	123,262	1,053,819

Commercialisation expenses include sales and marketing and other expenses directed towards the development of value-added products and associated markets. Pre-commissioning expenses include costs of establishing operational readiness at Uley and pre-production testing of the plant.

3. INCOME TAX EXPENSE

	2018 \$	2017 \$
(a) The components of income tax expense comprise:
Current income tax (expense) / benefit	-	823,640
(b) The prima facie tax loss from ordinary activities before income tax is reconciled to the income tax as follows:
Net loss	(7,390,538)	(3,490,413)
Prima facie tax benefit on loss from ordinary activities before income tax at 27.5% (2017: 27.5%)	(2,032,398)	(959,864)
Tax effect of temporary differences not brought to account as they do not meet the recognition criteria	(2,981)	(2,981)
Deferred tax asset not realised as recognition criteria not met	2,035,379	962,845
Subtotal	-	-
Research and Development Tax Concession	-	823,640
Income tax (expense) / benefit	-	823,640

3. INCOME TAX EXPENSE (CONTINUED)

	2018 \$	2017 \$
(c) Deferred tax assets have not been recognised in respect of the following:
Tax losses	38,342,549	30,962,310
Deferred tax asset has not been recognised	10,544,201	8,514,635

Future utilisation of the tax losses will be subject to the satisfaction of continuity of ownership or continuity of business test. The assessment regarding the utilisation has not yet been completed and tax losses are not recognised as deferred tax assets.

4. EARNINGS PER SHARE

The weighted average number of shares for the purpose of diluted earnings per share can be reconciled to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:

	2018 #	2017 #
Weighted average number of shares used in basic earnings per share	446,505,604	199,016,214
Loss per share - basic and diluted (cents)	(1.66)	(1.34)

In accordance with AASB 133 'Earnings per Share' there cannot be any dilutive securities as the Company made a loss for the year.

5. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include the following:

	2018 \$	2017 \$
Cash at hand and in bank.
Cash at bank	32,896	13,877
Cash and cash equivalents	32,896	13,877

Reconciliation of cash at the end of the year.

The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows:

Cash and cash equivalents	32,896	13,877

6. RECEIVABLE FROM THE DEPARTMENT OF STATE DEVELOPMENT ("DSD")

Opening balance	2018 \$ 1,073,863	2017 \$ -
Drawn down/transfer of funds held on Term Deposit	-	1,080,000
DSD expenses incurred	-	(6,137)
Closing balance	1,073,863	1,073,863

The funds held in a term deposit as security for the rehabilitation bond were transferred to the DSD during the year ending 30 June 2017. During the year ending 30 June 2017 the DSD incurred expenses in relation to remedial works at the site and drew down funds from the rehabilitation bond to meet these expenses.

7. TRADE AND OTHER RECEIVABLES	2018 \$	2017 \$
Trade and other receivables include the following:
Other receivables	162,568	55,684
Total receivables	162,568	55,684

No receivables are considered past due and / or impaired.

8. DEVELOPMENT EXPENDITURE

	2018 \$	2017 \$
Opening balance	6,753,775	6,753,775
Additions during the year:	-	-
Closing balance	6,753,775	6,753,775

All development expenditure relates to the Company's Uley Graphite operation.

9. EXPLORATION AND EVALUATION EXPENDITURE

	2018 \$	2017 \$
Opening balance	1,415,705	1,415,705
Expenditure on exploration during the year	-	-
Closing balance	1,415,705	1,415,705

10. PLANT AND EQUIPMENT

2018	Plant & Equipment \$	Plant under construction \$	Motor vehicles \$	Office equipment \$	Total \$
Gross carrying amount
Opening balance	824,611	7,744,565	39,566	20,520	8,629,262
Additions/(Disposals)	-	-	-	-	-
Balance 30 June 2018	824,611	7,744,565	39,566	20,520	8,629,262
Depreciation and impairment
Opening balance	(430,523)	(162,438)	(39,566)	(14,410)	(646,937)
Depreciation	(79,247)	-	-	(1,439)	(80,686)
Balance 30 June 2018	(509,770)	(162,438)	(39,566)	(15,849)	(727,623)
Carrying amount 30 June 2018	314,841	7,582,127	-	4,671	7,901,639

2017	Plant & Equipment \$	Plant under construction \$	Motor vehicles \$	Office equipment \$	Total \$
Gross carrying amount
Opening balance	824,611	7,744,565	39,566	20,520	8,629,262
Additions/(Disposals)	-	-	-	-	-
Balance 30 June 2017	824,611	7,744,565	39,566	20,520	8,629,262
Depreciation and impairment
Opening balance	(317,941)	(162,438)	(39,566)	(12,082)	(532,027)
Depreciation	(112,582)	-	-	(2,328)	(114,910)
Balance 30 June 2017	(430,523)	(162,438)	(39,566)	(14,410)	(646,937)
Carrying amount 30 June 2017	394,088	7,582,127	-	6,110	7,982,325

11. TRADE AND OTHER PAYABLES

Trade and other payables, which are all current, recognised in the statement of financial position can be analysed as follows:
	2018	2017
	\$	\$
Trade and other payables (1)	-	5,854,569
Accrued expenses	511,647	59,820
Total trade and other payables	511,647	5,914,389

(1) The trade and other payables balance at 30 June 2017 were subject to the Interlocking DOCAs and the liquidation of VIS and accordingly the trade and other payables balance were converted to equity on 16 March 2018. Further any amount owing to VIS was deconsolidated because of VIS being placed in liquidation.

12. EMPLOYEE PROVISIONS

All provisions are considered current. The carrying amounts may be analysed as follows:

	2018 \$	2017 \$
Opening balance	-	58,619
Additions / (Reductions) provisions – employee entitlements	-	623
Closing balance (1)	-	59,242

(1) The employee provisions balance at 30 June 2017 was attributable to VIS and was deconsolidated at the point control was lost.

13. BORROWINGS

The Group's borrowings represent working capital funding and funding of annual insurance premiums.

	2018 \$	2017 \$
Secured loan – Chimera Capital Limited	15,598,493	11,088,554
Insurance premium funding	-	12,194
Total borrowings	15,598,493	11,100,748

Assets pledged as security

The financing loan is secured by rights to the Mining Tenements owned. The Insurance Premium funding loan is secured by the refund proceeds of cancelled policies.

14. REHABILITATION PROVISION

	2018 \$	2017 \$
Decommissioning provision	558,369	558,369
	558,369	558,369

The provision represents the present value of estimated future decommissioning costs of the Uley mine site which at the reporting date was restricted to removal of the Phase I processing plant and associated infrastructure and rehabilitation of a portion of the Uley Pit 2 and water treatment areas. The estimated provision brought to account is reflective of the stage of development of the Uley project.

15. ISSUED CAPITAL

	Number of shares	2018 \$
(a) Issued and paid up capital
Fully paid ordinary shares	1,003,907,007	37,555,718
	1,003,907,007	37,555,718
(b) Movements in fully paid shares
Opening balance	199,016,214	27,155,714
Issue of shares on 21 September 2017 – in lieu of operating costs	29,852,400	752,280
Issue of shares on 16 March 2018 – full conversion of unsecured creditors per the Interlocking DOCAs	428,538,393	6,856,614
Issue of shares on 16 March 2018 – partial conversion of secured creditors per the Interlocking DOCAs	292,500,000	737,100
Issue of shares on 16 March 2018 – in lieu of director fees	54,000,000	54,000
Balance as at 30 June 2018	1,003,907,007	37,555,718

(a) Issued and paid up capital	Number of shares	2017 \$
Fully paid ordinary shares	199,016,214	29,155,724
	199,016,214	29,155,724

(b) Movements in fully paid shares

Opening balance	199,016,214	29,155,724
Balance as at 30 June 2017	199,016,214	29,155,724

15. ISSUED CAPITAL (CONTINUED)

The share capital of Quantum Graphite Limited consists only of fully paid ordinary shares. All shares are eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of the Company.

None of the parent's shares are held by any company in the Group.

The shares do not have a par value and the Company does not have a limited amount of authorised capital.

In the event of winding up the Group, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

16. RESERVES

Balance of share-based payments reserve

	2018 \$	2017 \$
Opening balance	40,762	734,965
Lapse of options	(40,762)	(694,203)
Closing balance	-	40,762

Share based payments are in line with the Quantum Graphite Ltd (formerly Valence Industries Limited) remuneration policy, details which are outlined in the director's report. Listed below are summaries of options and performance rights granted:

Share Option Reserve 2018	Number of options	2018 \$	Weighted average exercise price
Opening balance	1,500,000	40,762	\$1.10
Cancelled / lapsed	(1,500,000)	(40,762)	\$1.10
Balance at 30 June 2018	-	-	-

Share Option Reserve 2017	Number of options	2017 \$	Weighted average exercise price
Opening balance	21,250,000	734,965	\$0.31
Cancelled / lapsed	(19,750,000)	(694,203)	\$0.25
Balance at 30 June 2017	1,500,000	40,762	\$1.10

Nature and purpose of reserves

The share-based payments reserve is used to recognise the fair value of all equity issued pursuant to share based payments.

17. RECONCILIATION OF CASHFLOWS FROM OPERATING ACTIVITIES

Operating activities

	2018 \$	2017 \$
Loss after tax	(7,390,538)	(2,666,773)
Debt raising costs	2,575,000	557,723
Interest expense	2,029,639	1,623,943
Depreciation expense	80,686	115,097
Shares issued for work completed	806,281	-
Deemed loss of deconsolidation of Valence Industries Services Pty Ltd (In Liquidation)	821,665	-
Additional provided claims subject to the Interlocking DOCAs	67,320	-
Decrease/(increase) in receivables	-	53,225
Increase/(decrease) in payables	371,567	(30,279)
Increase/(decrease) in borrowings	607,399	-
Net cash used in operating activities	(30,981)	(347,064)

18. INVESTMENTS IN CONTROLLED ENTITIES

(a) Controlled Entities

The Company has the following subsidiaries:

			Percentage held
Name of Subsidiary	Country of Registration	Class of Shares	2018	2017
Quantum Graphite Operations Pty Ltd (Subject to Deed of Company Arrangement)	Australia	Ordinary	100%	100%
Valence Industries Services Pty Ltd (In Liquidation) (1)	Australia	Ordinary	100%	100%
Valence Industries Commercialisation Pty Ltd	Australia	Ordinary	100%	100%
Valence Industries USA Ltd	USA	Ordinary	100%	100%

(1) On 19 October 2016 VIS was placed into liquidation. On 1 July 2017 the Group ceased to control VIS and as such it was deconsolidated from the group with effect as and from this date and a loss of \$821,665 recognised in the statement of Profit and Loss.

19. AUDITOR REMUNERATION

	2018 \$	2017 \$
Audit services
Auditors of Quantum Graphite Ltd – Grant Thornton
- Audit and review of Financial Reports	28,840	28,840
Audit services remuneration	28,840	28,840
Other services
Auditors of Quantum Graphite Ltd – Grant Thornton
- Taxation compliance	-	-
Total other services remuneration	-	-
Total remuneration received by Grant Thornton	28,840	28,840

20. COMMITMENTS AND CONTINGENCIES

Exploration commitments

In order to maintain rights of tenure to exploration permits, the Group has certain obligations to perform minimum exploration work and expend minimum amounts of money.

It will be necessary for the Group to incur a minimum expenditure requirement of \$140,000 per annum in order to retain present interests in exploration licences.

Lease commitments

The Company has entered into two, four-year operating leases in relation to office equipment. Minimum lease payments recognised as an expense during the period amount to \$nil. Remaining amounts due are:

	2017 \$	2016 \$
Within one year	-	15,629
After one year but not more than five years	-	-
Longer than five years	-	-
	-	15,629

The prior year commitments related to office and rental property operating leases which are now on a month to month basis.

The Group's operating lease agreements do not contain any contingent rent clauses.

Contingent liabilities

The Group has no contingent assets or liabilities.

21. RELATED PARTY TRANSACTIONS

The Group's related party transactions include its subsidiaries and key management personnel.

(a) Transactions with subsidiaries

Loans between entities in the wholly owned Group are not interest bearing, unsecured and are payable upon reasonable notice having regard to the financial stability of the Company.

(b) Transactions with key management personnel

Key Management Personnel remuneration includes the following which are disclosed in detail in the remuneration report:

	2018 \$	2017 \$
Short-term benefits	113,283	133,827
Post-employment benefits	-	-
Total remuneration	113,283	133,827
The following transactions occurred with KMP:	2018 \$	2017 \$
Payment for professional services to entities associated with related parties	-	7,329
Payables for professional services at reporting date	-	118,347

Chimaera Capital Limited ("CCL") (an entity related to Sal Catalano) provided corporate and accounting services to the Company including provision of the registered and the main business office. There were \$148,800 in expenses paid to CCL during the year (2017: \$Nil) there were no amounts payable as at 30 June 2018 (2017: \$Nil) in relation to these services.

22. EMPLOYEE REMUNERATION

(a) Employee benefits expense

Expenses recognised for employee benefits are analysed below:	2018 \$	2017 \$
Salaries / contract payments for Directors and employees	113,283	148,883
Employee entitlement provisions	-	623
	113.283	149.506

22. EMPLOYEE REMUNERATION (CONTINUED)

(b) Post-employment benefits expense

Expenses recognised for post-employment employee benefits are	2018	2017
analysed below:	\$	\$
Superannuation payments for Directors and employees	-	9,842

(c) Share based employee remuneration

As at 30 June 2018 the Group maintained a performance rights and option plan for employee and director remuneration. There were nil unlisted options granted to Directors as remuneration during the financial year.

In the prior period, the value of options with a market condition granted in the year is the fair value calculated at grant date using a Black-Scholes option-pricing model. The value of each option with a non-market condition such as the achievement of strategic objectives is based on the underlying share price at the grant date. The total value attached to these options takes into account the Company's best estimate at the grant date of the number of rights that will vest.

Share options and weighted average exercise prices are as follows:

2018

2018	Number of options	Weighted average exercise price (\$)
Opening balance - remuneration options	1,500,000	1.10
Exercised / Forfeited / expired	(1,500,000)	1.10
Outstanding as at 30 June 2018	-	-

2017	Number of options	Weighted average exercise price (\$)
Opening balance - remuneration options	5,000,000	0.51
Exercised / Forfeited / expired	(3,500,000)	0.25
Outstanding as at 30 June 2017	1,500,000	1.10

Fair value of options granted

The fair value at grant date of the Director options has been determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

23. FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT

The Group's financial instruments consist mainly of deposits with banks and accounts receivable and payable.

The total for each category of financial instruments are as follows:

	Note	2018 \$	2017 \$
Financial assets
Cash and cash equivalents	5	32,896	13,877
Receivable from the Department of Energy and Mining	6	1,073,863	1,073,863
Trade and other receivables	7	162,568	55,684
		1,269,327	1,143,424
Financial liabilities
Trade and other payables	11	511,647	5,914,389
Borrowings	13	15,598,493	11,100,748
		16,110,140	17,015,137

Financial risk management policy

Risk management is carried out by the Managing Director and CEO under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as interest rate and credit risk.

a) Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities.

The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate working capital is maintained for the coming months. Upcoming capital needs and the timing of equity and debt raisings are assessed by the board.

Financial liabilities are expected to be settled within 12 months pursuant to the Interlocking DOCAs.

b) Interest rate risk

The Group's exposure to interest rate risk is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates. Cash is the only asset affected by interest rate risk as cash is the Group's only financial asset exposed to fluctuating interest rates.

23. FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT (CONTINUED)

The Group is exposed to interest rate risk on cash balances and term deposits held in interest bearing accounts. The Board constantly monitors its interest rate exposure and attempts to maximise interest income by using a mixture of fixed and variable interest rates, whilst ensuring sufficient funds are available for the Group's operating activities. The Group's net exposure to interest rate risk at 30 June 2018 approximates the value of cash and cash equivalents.

c) Sensitivity analysis

Interest rate

The Group has performed a sensitivity analysis relating to its exposure to interest rate risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

2018		Effect on:
	Sensitivity*	Profit \$	Equity \$
Interest rate	+ 1.50%	+183,000	+183,000
	- 1.50%	-183,000	-183,000
2017		Effect on:
	Sensitivity*	Profit \$	Equity \$
Interest rate	+ 1.50%	+144,700	+144,700
	- 1.50%	-144,700	-144,700

*The method used to arrive at the possible change of 150 basis points was based on the analysis of the absolute nominal change of the Reserve Bank of Australia (RBA) monthly issued cash rate. Historical rates indicate that for the past five financial years, interest rate movements ranged between 0 to 150 basis points. It is considered that 150 basis points a 'reasonably possible' estimate as it accommodates for the maximum variations inherent in the interest rate movement over the past five years.

The fair values of all financial assets and liabilities of the Group approximate their carrying values.

d) Net fair values of financial assets and financial liabilities

AASB 13 Fair Value Measurement: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

• quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
• inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and
• inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The carrying amounts of all financial assets and liabilities approximate their net fair values and are disclosed as level 3 fair values.

24. PARENT ENTITY INFORMATION

Information relating to Quantum Graphite Limited (the parent entity).

	2018 \$	2017 \$
Statement of financial position
Total assets	28,746,455	23,930,660
Total liabilities	16,110,141	11,830,213
Issued capital	37,555,718	29,155,724
Accumulated losses	(24,919,404)	(17,098,039)
Share based payment reserve	-	40,762
Statement of profit of loss and other comprehensive
income Loss for the period	6,740,933	3,275,752

The parent entity has not entered into a deed of cross guarantee nor are there any contingent liabilities at the end of the reporting period.

25. OPERATING SEGMENTS

The Directors have considered the requirements of AASB 8 – Operating Segments and the internal reports that are reviewed by the chief operating decision maker (the Board) in allocating resources have concluded that at this time there are no separately identifiable segments.

26. EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD

Full Implementation of the Interlocking DOCAs

On 14 August 2018 the Company announced that the Interlocking DOCAs had been fully implemented with all conditions satisfied including the recapitalisation of the Company and the issue of all securities. Accordingly:

• a. the Deed Administrators, Mr Laurence Fitzgerald and Mr Michael Humphris, resigned and notified ASIC that the Interlocking DOCAs had been fully effectuated; and
• b. the Company exited external administration.

The Company's recapitalisation enables it to execute its plan to build the framework for the increase of the Uley production capacity to a level that is commercially sustainable. This plan includes the following key elements:

• The preparation of a revised mine plan together with the completion of any necessary metallurgical test work and drilling;
• The review and possible extension of the Company's existing resources and reserves; and
• The completion of a revised definitive feasibility study (DFS) to be undertaken by Lycopodium Minerals (see below).

Pro Forma Balance Sheet, Cash Flow Statements and New Capital Structure

In connection with the implementation of the Interlocking DOCAs the Company prepared a proforma balance sheet (Pro Forma Balance Sheet) based on the balance sheet as at 31 December 2017 to reflect the impact of the changes on its financial position following the recapitalisation of the Company.

The Proforma Balance Sheet was the subject of review by the Company's Auditors, Grant Thornton, resulting in them issuing an Independent Limited Assurance Report on the Historical Pro Forma Financial Information (Grant Thornton Report) dated 5 September 2018.

As required by the ASX for the purposes of reinstatement of quotation of the Company's securities, the Company announced its new capital structure on 5 September 2018 together with its opening cash balance and a statement of estimated quarterly cash flows (Cash Flow Statements) for the period September 2018 to December 2019. Details of the new capital structure, the Grant Thornton Report and the Cash Flow Statements were lodged with the ASX on 5 September 2018.

26. EVENTS ARISING SINCE THE END OF THE REPORTING PERIOD (CONTINUED)

Issue of Shares and Options relating to Implementation of the Interlocking DOCAs

Following shareholder approvals obtained at the 2017 AGM, the Company issued the following securities pursuant to ASX Listing Rule 7.1

• a. On 21 July 2018,6,197,638,425 shares at \$0.0252 per share to the Secured Creditor Beneficiaries;
• b. On 21 July 2018,1,000,000,000 options to acquire ordinary shares, exercise price \$0.00, expiry date 20 July 2023;
• c. On 28 August 2018, 177,243,000 shares at \$0.0252 per share to the Secured Creditor Beneficiaries in accordance with the Interlocking DOCAs; and
• d. On 28 August 2018, 108,000,000 shares at \$0.001 per share to the directors in lieu of their quarterly director fees as follows:

		Quarterly Director
	Shares	Fees
Directors		(\$)
S Chadwick	18,000,000	18,000
B Ruggiero	18,000,000	18,000
S Catalano	18,000,000	18,000
R Mencel	18,000,000	18,000
R Osmetti	18,000,000	18,000
D Trimboli	18,000,000	18,000
Total	108,000,000	108,000

Commencement of works relating to DFS

On 3 August 2018 the Company announced that work had commenced on the DFS. Lycopodium Minerals' fee was capped at \$450,000 and payment has been satisfied in full by the issue of shares in the Company.

Renewal of Mining Titles

On 9 May 2017, the Company announced the renewal of Mining Leases ML5561 and ML5562 to 16 March 2024 and renewal of Retention Leases RL66 and RL67 to 16 March 2024.

On 14 August 2018, the Company announced that the Exploration Licence known as EL4778 was terminated and the area represented by the former EL4778 became the subject of the grant of a new Exploration Licence EL6224 to the Company.

Other Matters

Since the end of the financial year Mr Robert Mencel resigned (effective 6 July 2018) as a director.

No other matters or circumstances have arisen since the end of the financial period which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial years.

Directors' Declaration

In the opinion of the Directors of Quantum Graphite Limited:

• a) the consolidated financial statements and notes of Quantum Graphite Limited are in accordance with the Corporations Act 2001, including:
• i. giving a true and fair view of its financial position as at 30 June 2018 and of its performance for the financial year ended on that date; and
• ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
• b) due to the uncertainty outlined in note 1, the directors are unable to conclude whether Quantum Graphite will be a going concern or whether it will be able to pay its debts as and when they fall due for the next 12 months.

As a consequence of the company being in Administration for a significant portion of the reporting period, the Directors have not been given the declarations required by section 295A of the Corporations Act 2001 from the chief executive officer and the chief financial officer for the year ended 30 June 2018.

The consolidated financial statements comply with International Financial Reporting Standards.

Signed in accordance with a resolution of the Directors:

Bruno Ruggiero Sal Catalano Director Director

Melbourne 25 September 2018

Grant Thornton Audit Pty Ltd Grant Thornton House Level 3 170 Frome Street Adelaide, SA 5000

T +61 8 8372 6666 F +61 8 8372 6677

Independent Auditor's Report

To the Members of Quantum Graphite Limited

Report on the audit of the financial report

Opinion

We have audited the financial report of Quantum Graphite Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors' declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

• a giving a true and fair view of the Group's financial position as at 30 June 2018 and of its performance for the year ended on that date; and
• b complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

'Grant Thornton' refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another's acts or omissions. In the Australian context only, the use of the term 'Grant Thornton' may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

www.grantthornton.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Emphasis of Matter: Realisation Basis of Accounting

We draw attention to Note 1(a) in the financial statements, which indicates at reporting date that there was significant uncertainty about the Group's ability to meet its ongoing operating and financing commitments over the foreseeable future. Consequently the financial statements have not been prepared on a going concern basis but have been prepared on a realisation basis representing a planned orderly realisation of assets and settlement of debts. At reporting date the Group was in administration and its ability to continue as a going concern was contingent on successfully raising additional capital in connection with the full implementation of the Interlocking Deeds of Company Arrangement. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

There are no other key audit matters in addition to the matter described in the Emphasis of Matter: Realisation Basis of Accounting section.

Information other than the financial report and auditor's report thereon

The Directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2018, but does not include the financial report and our auditor's report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the financial report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors\_responsibilities/ar1.pdf. This description forms part of our auditor's report.

Report on the remuneration report

Opinion on the remuneration report

We have audited the Remuneration Report included in pages 10 to 13 of the Directors' report for the year ended 30 June 2018.

In our opinion, the Remuneration Report of Quantum Graphite Limited, for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001.

Responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Grant Thornton Audit Pty Ltd Chartered Accountants

J L Humphrey

Partner – Audit & Assurance

Adelaide, 25 September 2018

ASX Additional Information

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 18 September 2018.

The Company is listed on the Australian Securities Exchange.

Substantial shareholders

The substantial shareholders whom have notified the Company in accordance with Section 671B of the Corporations Act at the date of this report are:

• x Chimaera Capital Ltd 19.5%
• x Seefeld Investments Pty Ltd 6.26%
• x Ziziphus Pty Ltd 6.07%

Voting rights

Ordinary shares On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Distribution of equity by security holders

Holding	Ordinary Shares (Quoted)
1 – 1,000	173
1,001 – 5,000	1,268
5,001 – 10,000	761
10,001 – 100,000	1,574
100,001 and over	461
Number of Holders	4,237

Unmarketable parcels

There were 1,169 holders of less than a marketable parcel of ordinary shares (\$500 amounts to 4,348 shares at 11.5 cents per share).

Business objectives

The Company has used its cash and assets readily convertible to cash in a way consistent with its business objectives.

On-market buy-back

There is no current on-market buy-back.

Twenty largest holders of All Ordinary Shares on issue

		No. of Shares Held	% Held
1	Chimaera Capital Ltd (Custodian)	1,776,339,123	23.73%
2	Ziziphus Pty Ltd	419,039,273	5.60%
3	Selso Pty Ltd (Osmetti Family A/c)	331,553,268	4.43%
4	Insync Investments Pty Ltd (Weekley Super Fund No 1 A/c)	325,470,262	4.35%
5	Lycopodium Limited	256,030,821	3.42%
6	Michael James Maddox	198,367,579	2.65%
7	ACN 112 940 057 Pty Ltd (Canci Investments A/c)	194,364,157	2.60%
8	Golder Associates Pty Ltd	169,084,069	2.26%
9	G & N Lord Superannuation Pty Ltd (GNR Superannuation Fund A/c)	164,770,131	2.20%
10	Asymmetric Credit Partners Pty Ltd	161,970,131	2.16%
10	Russell Howard Pty Ltd (Russell Howard S/F A/c)	161,970,131	2.16%
11	Fuddy Pty Ltd (Pattison Super Fund A/c)	155,605,664	2.08%
12	Chimaera Capital Ltd	150,000,000	2.00%
13	Peter Faulkner Investments Pty Ltd (Faulkner Tuke S/fund A/c)	143,654,232	1.92%
14	Next Australia Pty Ltd (Next Superannuation Fund)	143,600,943	1.92%
15	Valence Industries Services Pty Ltd (In Liquidation)	115,388,438	1.54%
16	Getco Pty Ltd	99,183,789	1.32%
17	Mr Ian David Pattison + Ms Katherine Margaret Forrest (Sylvan S/f A/c)	96,680,306	1.29%
18	Mr David John Hebberman + Ms Josephine Nora Hall (David Hebberman Fam S/f
	A/c)	93,312,422	1.25%
19	Hatch Eggs Pty Ltd (The Hatch Super Fund A/c)	81,697,218	1.09%
20	Tuke Investments Pty Ltd (The David Tuke S/fund A/c)	80,266,745	1.07%
		5,318,348,702	71.04%
	Total Ordinary Shares on issue	7,486,788,432	100.00%