QUANTUM GRAPHITE LIMITED - Capital/Financing Update 2019

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MARKET RELEASE For Immediate Release 15 July 2019

SUBSTANTIAL INCREASE IN ULEY 2 JORC 2012 MINERAL RESOURCES DFS UPDATE

Quantum Graphite Limited ( QGL ) is pleased to announce the upgrade to the Uley 2 Mineral Resources estimate (MRE). This upgrade (July 2019 MRE), reported in accordance with the JORC Code (2012), represents a substantial increase to the MRE completed in May 2015[1] . The Technical Report summarising the work undertaken in respect of the resource estimation is attached to this release.

July 2019 MRE Highlights

117% increase in Measured Resources
39% increase in Total Resources to 6.31 million tonnes at an average grade of 11.1% total graphitic carbon (TGC)
79% or 5.0 million tonnes of Total Resources are classified in the Measured and Indicated categories

Mineral Resources – Classification and Tonnes

The July 2019 MRE comprises 6.3Mt @ 11.1 % TGC, for 697kt of TGC at a 3.5% TGC cut-off. This includes 5.0Mt @ 11.2% Measured and Indicated material for 560kt of TGC (79% of the total Resource). The respective classification and Resource tonnes are set out in the table below:

CLASSIFICATION	TONNES (Mt)	TGC (%)	DENSITY (t/M3)	TGC (kt)
Measured	0.8	15.6	2.1	125
Indicated	4.2	10.4	2.1	435
Inferred	1.3	10.5	2.2	137
TOTAL	6.3	11.1	2.1	697

1 Refer QGL ASX release dated 05/05/2015, “50% Increase in Uley Graphite Resource”

Quantum Graphite Limited ACN 008 101 979 349 Collins Street, Melbourne, Victoria, 3000, Australia GPO Box 214, Melbourne, Victoria, 3001, Australia

The July 2019 MRE confirms the continuity of mineralisation to the south and underpins the increase in Uley 2 Mineral Resources. Importantly the mineralisation remains open along strike to the south and east and at depth, well within the company’s Mining and Retention leases.

As indicated in previous releases, the stronger geophysical response continues to be a significant factor of higher-grade mineralised areas. Future drilling programs are designed to target the extensive geophysical anomalies along the plunging anticline to confirm the presence of conductive graphite layers.

The company has not revised the Exploration Target previously announced[1] however the July 2019 MRE confirms the continued exploration to the south west and east. The oblique view of Uley 2 set out below displays the main mineralisation envelopes and drilling and clearly illustrates the areas of future exploration.

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Definitive Feasibility Study – Update and Key Milestones

With the completion of the metallurgical test work and the 2019 MRE, the company is progressing the preparation of the revised mine plan for Uley 2. The company expects to release details of the mine plan within the next three weeks once optimisation studies, currently underway, are completed. This release will also set out the remaining DFS milestones.

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1 Refer QGL ASX release dated 05/05/2015, “50% Increase in Uley Graphite Resource”

Competent Person Statement – Mineral Resource estimate

The information in this report that relates to the Uley 2 Mineral Resource estimate is based on information compiled by Ms Vanessa O’Toole who is a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM) and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity to which she is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Ms O’Toole is an external consultant to QGL and a full-time employee of Wicklow Resources Pty Ltd and consents to the inclusion in the report of the matters based on this information in the form and context in which it appears. For further details see section 8.3.1 of the Technical Report.

Competent Person Statement – Industrial Minerals statement (Clause 49 JORC Code (2012))

In accordance with Clause 49 of the JORC Code (2012), the likely product specifications and possible product marketability and overall potential for economic extraction are considered by the competent person to support the Mineral Resource estimate at Uley 2. For further details see section 8.2 of the Technical Report.

JORC Code (2012) Table 1 Compliance

Appendix A of the Technical Report includes the relevant extracts (i.e., sections 1, 2 and 3) from Table 1 of the JORC Code (2012).

For further information contact: Company Secretary Quantum Graphite Limited e: [email protected]

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July 2019 Mineral Resource Estimate

Uley 2 Deposit Uley Graphite Mine, Port Lincoln South Australia

Quantum Graphite Ltd ( QGL ) commissioned Wicklow Resources Pty Ltd ( Wicklow ) to prepare an update to the Mineral Resource estimate ( MRE ) for the Uley 2 Deposit ( Uley 2 ) which forms part of the Uley Graphite Project utilising exploration drilling previously not available at the time of the preparation of the May 2015 MRE completed by Coffey. This report ( Technical Report ) is a technical summary of the resource estimation work undertaken by Wicklow between September 2018 and July 2019.

Vanessa O’Toole Principal Consultant, Wicklow Resources

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Wicklow Resources Pty Ltd, 6 Benbullen Road Kalamunda Western Australia 6076 ABN 76 632 133 816

Summary of Data Procedures

I Drilling Data

No drilling data has been excluded for estimation purposes.

Logging and sampling methods for the drilling follow industry recognised procedures and are considered to be of an acceptable standard. Quality assurance and quality control (QAQC) results also support the use of the data to inform the MRE. QAQC samples inserted at 5% representivity demonstrate the accuracy and precision of the graphitic carbon to be satisfactory.

II Assay data - Laboratory sampling, sample preparation and analysis

The samples were prepared at ALS Global (Adelaide) including crushing and splitting to >70% passing -6mm and pulverised to >85% passing 75μm prior to assaying by ALS Global in Brisbane. The prepared samples underwent analytical procedures C-IR18, C-CAL15, CIR17 and C-IR07 by LECO analyser to determine graphitic carbon, inorganic carbon and total carbon.

III Assay Data - Quality control

QAQC programs included collection and insertion of certified reference material (CRM) samples at a rate of roughly 1 in 20 samples (5% rate of insertion). A total of four CRMs provided by Geostats Pty Ltd covering a grade range from 0.13 % total graphitic carbon (TGC) to 16.29 % TGC have been used. Duplicates were sampled at a typical frequency of 1 in 100 samples (1% rate of insertion). There is no record of field duplicate samples or standards having been submitted in the 30 vertical drill holes drilled prior to 2014. The results show acceptable analytical accuracy has been achieved and no analytical bias identified.

IV Data verification

While exercising all reasonable due diligence in checking and confirming the data validity, Wicklow has relied largely on the data supplied by QGL to estimate and classify the Uley 2 Mineral Resource. As such, Wicklow accepts responsibility for the resource modelling and classification while QGL has assumed responsibility for the accuracy and quality of the underlying drill data. Data was imported in to Surpac software by Wicklow and checked for errors, there were no issues identified relating to data quality.

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1 Introduction

This report sets out the procedures undertaken to complete an independent estimate of the Mineral Resources of Uley 2 situated within the Uley Graphite Project.

The Uley Graphite Project is located on the Eyre Peninsula, 15km west-southwest of Port Lincoln in the state of South Australia (see Figure 1-1). Mining has not commenced at Uley 2. The nearby Uley 1 deposit has been mined previously however is not included within the Uley 2 MRE.

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Figure 1-1 Location of Uley 2 Deposit and the QGL mining titles described below:

Tenement	Interest
ML5561	100%
ML5562	100%
RL66	100%
RL67	100%
EL6224	100%
The Uley 2 pit	is situated within
Mining Leases 5561 and 5562.

1.1 Approach

The process adopted by Wicklow for the purpose of this MRE is summarised below:

(a) The competent person visited the site on two occasions in 2018. This process included inspection of the exposed graphitic mineralisation on surface and in the Uley 1 pit walls. No further drilling has been undertaken at Uley 2 since February 2018. Drill core was inspected and compared to geological logs. Drill hole collar coordinates for several holes were checked using a hand-held GPS.

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(b) The underlying raw data, including drill hole logs, quality control reports and assay reports were reviewed and are considered suitable for use in estimating the Mineral Resources. An adjusted Access database was created and any data not relevant to ‘ore’ definition was eliminated. (c) QGL supplied previous mineralisation wireframes and block models generated in Vulcan in connection with the May 2015 MRE completed by Coffey. Wireframes were based on a 3.5% total graphitic carbon (TGC) content. On analysis of the TGC sample data these wireframes were adjusted by Wicklow to a 2% TGC cut-off to reflect a more likely natural cut-off between ‘ore’ and background waste at the Uley 2 deposit. Mineralisation wireframes and weathering surfaces were also extended to the south to include drilling not included in the May 2015 MRE.

(d) On analysis of the sample data including TGC and carbon in the form of carbonate (i.e., CO3) distinct zones of varying TGC and CO3 distributions were identified. ‘Geodomains’ were created delineating the varying distributions. These were related to weathering profile and CO3 content.

(e) As part of metallurgical test work drill core was sampled by the competent person in December 2018 to ensure the distribution of sampling across the newly defined ‘geodomains; One metre composites were extracted for each of these domains and statistically analysed.

(f) An ordinary kriging (OK) interpolation was used to estimate TGC and CO3 within the block model using three estimation passes.

(g) External bulk density test work was generated to reflect the varying ‘geodomains’. Results from the analysis of this data was used to attribute bulk density within the block model.

(h) Classification of the mineralisation as Measured, Indicated and Inferred Resource is based on confidence in the geological and mineralisation continuity and type, drill hole spacing and bulk density test work and governed by the general relationship between exploration results, Mineral Resources and Ore Reserves as set out in JORC Code 2012 (see Figure 1-2).

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Figure 1-1 General relationship between exploration results, Mineral Resources and Ore Reserves and applicable to the estimation of this Mineral Resource as required under the JORC Code 2012 - “framework for classifying tonnage and grade estimates to reflect difference levels of geological confidence and different degrees of technical and economic evaluation” . (Source: JORC Code 2012)

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2 July 2019 Mineral Resource statement

The MRE for the Uley 2 Deposit has been updated and reported in accordance with the JORC Code (2012) to incorporate drilling previously unavailable for the MRE completed in May 2015[2] . The additional drilling totals 30 diamond core (DD) drill holes for 2,620 m of drilled metres[3] .

The July 2019 MRE comprises 6.3 Mt @ 11.1 % TGC, for 697 kt of total contained graphite at a 3.5% TGC cut-off (Table 2-1). This includes 5.0 Mt @ 11.2% Measured and Indicated material for 560 kt of TGC (79% of the total Resource).

Table 2-1 TGC Mineral Resource estimate for Uley 2 as at July 2019 (3.5% TGC cut-off, any differences due to rounding)

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Tonnes TGC Density TGC Tonnes
Classification
Mt % t/m [3] kt
Measured 0.8 15.6 2.1 125
Indicated 4.2 10.4 2.1 435
Inferred 1.3 10.5 2.2 137
TOTAL 6.3 11.1 2.1 697
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The Uley 2 drilling, tenement boundaries and mineralisation wireframes are presented in Figure 2-1 and Figure 2-2.

Figure 2-1 Uley tenement boundaries and resource drilling extensions

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2 Refer to the QGL ASX release dated 05/05/2015, “50% Increase in Uley Graphite Resource”

3 Refer to the QGL ASX release dated 30/11/2018, “Uley 2 Extension Drill Results”

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Figure 2-2 Oblique view looking NW displaying main mineralisation envelopes and drilling

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3 Geology and mineralisation

3.1 Regional geology

The regional graphite mineralisation appears as conformable metamorphic segregations in Palaeoproterozoic schist and gneiss within the Gawler Craton. Mineralisation is hosted within the Hutchison Group metasediments that overlay the granitoid gneiss of the Sleaford Complex. The Hutchison Group is overlain by marine shelf sediments of the Wallaroo Group.

The project area is overlain by calc-arenites of the Tertiary age Bridgewater Formation. The calcarenites are underlain by the Pliocene age Uley Formation or the Eocene age Wanilla Formation. Local laterally extensive ferricrete is developed over the Wanilla sediments.

The Hutchinson Group is split into a lower and upper, separated by the Cook Gap Schist. Mineralisation at Uley is confined to the Cook Gap schist and concentrated within tightly folded thrust structures.

3.1.1 Stratigraphy

The Warrow Quartzite forms the basal unit of the Hutchison Group, unconformably overlaying the Sleaford Complex. The upper portion of this unit varies from massive to flaggy quartzite with interbedded pelitic schists. The basal portion is dominantly massive, coarse grained, feldspathic quartzite derived from shallow marine or fluvial clastic sediments

The Middleback Subgroup is a mix of pelitic and chemical sediments and amphibolites of a mafic igneous origin. There are four units within this subgroup:

The Katunga Dolomite is a basal unit of the Middleback Subgroup and overlies the Warrow Quartzite. It is a layered dolomitic marble with serpentine and diopside characterising high grade metamorphism, whilst tremolite, actinolite and talc characterise low grade metamorphism.
The Lower Middleback Jaspilite contains a variety of banded iron formations, dominantly magnetite quartzite, carbonate, schist and chert, grading to jaspilite in some occurrences.
The Cook Gap Schist overlies the Lower Middleback Jaspilite and consists of garnet-mica schists and gneisses. Strong deformation is displayed in the development of strained quartz veins and mylonite. Broad compositional layering exists as a result of sedimentary variation, while smaller scape layering of mica-rich and quart-rich bands is the result of metamorphism.
The Upper Middleback Jaspilite overlies the Cook Gap Schist and is the uppermost unit of the Middleback Subgroup. It is very similar to the Lower Middleback Jaspilite.

The Upper Hutchison Group overlies the Middleback Subgroup and represents the top of the Hutchison Group. The unconformable and laterally extensive Bridgewater Formation is a

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calcarenite of Pleistocene age. The aeolianites form a veneer over much of the southern Eyre Peninsula.

3.2 Local geology and mineralisation

Uley is a disseminated crystalline flake graphite deposit hosted within metasediments of the Hutchison Group, specifically confined within the Cook Gap Schist. Crystallisation of 0.1mm to 2 mm graphite flakes occurred during high-grade metamorphism of carbonaceous sediments. Strong deformation is displayed in the development of strained quartz veins and mylonite within the tightly folded graphitic gneiss and schist units.

The distribution of graphite at Uley was determined by airborne and ground electrical surveys, demonstrating elongate graphitic anomalies. The conductive graphite layers show broad northnorth-easterly plunging anticline, consistent with known regional structures (see Figure 3-1).

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1 Refer QGL ASX release dated 05/05/2015, “50% Increase in Uley Graphite Resource”
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Figure 3-1 Uley project surface geology and contours of SIROTEM survey data. Future drilling programs are designed to target the extensive geophysical anomalies along the plunging anticline to confirm the presence of conductive graphite layers.

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4 Drilling data

4.1 Summary

The Mineral Resource estimate is based on drilling derived from a nominal 25m spacing along and across strike with the drill sections orientated E-W and extended to a maximum of approximately 90m depth below surface. Drilling was orientated at -60 degrees towards the E (bearing 090). Prior to 2014 all drill holes were drilled vertically.

A total of 63 ore definition DD holes have been completed at Uley 2 as at July 2019. Drill collar locations are illustrated in Figure 4-1.

Figure 4-1 Drill hole collars at Uley 2 with mineralisation outlines at approximately 25m depth

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Drill location co-ordinates are reported in Uley Mine Grid (transformed to truncated AMG). Drillhole collars have been re-surveyed in the field and these transformations validated.

Downhole surveys were obtained approximately every 30m and at depth of hole using a Ranger SS118 downhole camera. The angled drill holes were orientated using the Reflex ACT II RD core orientation tool.

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4.2 Drill hole collar location

Drill location co-ordinates are reported in Uley Mine Grid (transformed to truncated AMG). The reported truncation was:

Easting = -554,216.866M

Northing = -6,139,092.867M

AHD = RL +404.252M

Drillhole collars have been re-surveyed in the field and these transformations validated. All drillholes were re-surveyed during 2014 by PA Dansie & Associates Pty Ltd and a whole of site survey was undertaken during 2014 by Maptek Pty Ltd.

4.3 Down hole surveys

Drillholes drilled prior to 2014 were vertical and no downhole surveying was carried out, although most drillholes are relatively shallow with assumed minor cumulative deviation.

The MD600 and 700 series drillholes, drilled in 2014, were drilled at angle -60° towards azimuth 090°. Downhole surveying was carried out using a Ranger SS118 camera tool.

4.4 Geological logging

All intervals were geotechnically logged by qualified geologists over time. All logging included lithological features, mineral assemblages, mineralisation percentage estimates and geotechnical information suitable for the development of geology models and pit slope design criteria.

4.5 Sampling

4.5.1 GMA Sampling

GMA sampled the core as 1m lengths, typically as ½ sawn drillcore. Where geology remained constant, lengths where increased to 1.5m, 2m or 3m intervals. Where geology varied at lengths less than 1m, intervals down to 0.3m were sampled. The most common sample length is 1m.

4.5.2 2011 Sampling

Whole core was selected on geological intervals of obviously highly graphitic material that were dispatched to ALS-Chemex in Perth. Sample lengths range from 0.2m to 4.0m, with an average length of 1m sampled. Fifty per cent by weight of crushed -6mm sample was retained as a reference sample.

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4.5.3 2014 and 2015 Sampling

Half core was sampled on a standard 1m interval unless lithological or visual grade estimates required longer or shorter sample lengths. Minimum and maximum lengths of 0.3m and 1.2m respectively were permitted. Core was cut 1-2cm to the left of the orientation line to preserve orientation information for future reference.

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5 Resource definition and analysis

5.1 Preparation of wireframes

The drilling relevant to the July 2019 MRE at Uley 2 extends over a distance of 375m (from 9,225m grid N to 9,600m grid N) and includes a 125m vertical interval from approximately 375m to 500m. The graphitic mineralisation is interpreted to extend along the full strike distance. Depth of interpreted mineralisation varies as structural events resulted in the plunge to the north-east of the tight isoclinal folds that host mineralisation.

The deposit was previously constrained by Mineral Resource outlines based on mineralisation envelopes prepared using a 3.5% TGC cut-off. After statistical analysis, the cut-off was adjusted to 2% TGC as this likely represents the break between ‘ore’ and waste. The adjusted mineralisation interpretation applied a minimum 2 m downhole intercept with a maximum of 2m internal waste.

Geometallurgical domains were created to allow for the modelling of C as CO3 cohesively and guide the 2018 metallurgical test work program. The geometallurgical domains (geodomains) are delineated based on lithology, mineralogy, weathering and C as CO3 content. A “carbonate” shell was created to define elevated C as CO3 based on a 1% C as CO3 cut-off. Five geodomains are modelled, as summarised and presented in Table 5-1 and Figure 5-1.

Table 5-1 Summary of geometallurgical domains

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Geodomain Geodomain
Rock type Rock code Description
number code
Mineralised Garnet
1 Fresh GA, GN Unweathered mineralisation
Gneiss
Mineralised Garnet
2 Saprock GA, GN Moderately weathered mineralisation
Gneiss
Mineralised Garnet
3 Saprolite GA, GN Highly weathered mineralisation
Gneiss
Elevated C as CO3 (>1%)
4 Carbonate Carbonate ore CO
mineralisation
5 Clay Clay CL Clay mineralisation
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Figure 5-1 Section 9,450mN displaying geometallurgical domains and C as CO3 carbonate

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The surface topography used in the MRE is derived from the surveyed drillhole collars and extrapolated beyond the resource area. Surface topography at Uley 2 is relatively flat and relief is reasonably gentle. The derived topographic model is considered to be of sufficient quality and accuracy for use in the MRE.

5.2 Compositing and statistics

The sample data was coded within the mineralisation wireframes along with the oxidation surfaces and carbonate shell to flag geodomains. Compositing was completed within the geological domains based on a 1 m downhole compositing interval. Variable length compositing was used to ensure that no residuals were created. An assessment of the Coefficient of Variation (CoV – ratio of the standard deviation to the mean) showed a high CoV for C as CO3 for some fresh domains and appropriate top-cuts were applied. The CoV was low for TGC within each mineralisation domain and therefore a top-cut was not required.

5.3 Geostatistical analysis

Variograms were generated to assess the spatial continuity of TGC and C as CO3 and derive inputs to the kriging algorithm used to interpolate grades. Snowden Supervisor software was used to generate and model the variograms within each geodomain and mineralisation object. The major direction (direction of maximum continuity) was oriented along strike with the intermediate (semi-major) direction oriented horizontally and the minor direction oriented orthogonal to the dip plane. In domains with limited input data variogram parameters were adopted from other similar types (geodomains), with the major direction of continuity adjusted

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in line with the interpreted orientation. All variograms were modelled using the following general approach:

All variograms were standardised to a sill of one.
Variograms were modelled using spherical variograms with a nugget effect and two structures.
The variograms were evaluated using normal scores variograms and the nugget and sill values back transformed to traditional variograms using the discrete Gaussian polynomials technique.
Table 5-2 and Figure 5-2 present example variogram models for the main isoclinal fold structure (object 2).

Table 5-2 Example variogram parameters – main folded mineralisation object 2

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Major Structure 1 Structure 2
Object Geodomain Co
Direction C1 X1 Y2 Z3 C2 X2 Y2 X2
clay 00-->020 0.10 0.56 60 20 5 0.34 105 75 15
saprolite 00-->-020 0.10 0.56 60 20 5 0.34 105 75 15
2 saprock 00-->020 0.10 0.56 70 35 3 0.34 105 75 15
carbonate 00-->020 0.23 0.36 70 35 3 0.41 85 40 7
Fresh 00-->-020 0.28 0.56 60 20 5 0.34 105 75 15
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Figure 5-2 Example variogram model – TGC within main object 2

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6 Mineral Resource estimation

6.1 Block model

A Surpac block model (201907_uley_mod.mdl) was created to encompass the full extent of the deposit. A block size of 12.5m NS by 12.5m EW by 4m vertical was used with sub-blocks of 3.125m by 3.125m by 1m. The parent block size was selected on the basis of 50% of the average drill hole spacing across the deposit and the results of kriging neighbourhood analysis (KNA). The model cell dimensions in other directions were selected to provide sufficient resolution to the block model in the across-strike and down-dip direction. Details of the model are listed in Table 6-1.

Table 6-1 Uley 2 block model parameters

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Model Name 201907_uley_mod
(Grid) Y X Z
Minimum
9,200 9,800 280
Coordinates
Extent 9,650 10,200 540
Block Size (Sub-
12.5 (3.125) 12.5 (3.125) 4 (1)
blocks)
Rotation none
Attributes: Attributes:
RTYPE 1=mineralised 2=waste
DOMAIN Mineralisation shell number
OXCODE 10=fresh, 20=trans, 30=oxidised
GDOMAIN 100=fresh, 200=saprock, 300=saprolite, 400=clay, 500=carbonate (>1% shell)
TGC Estimated total graphitic carbon %
C_CO3 Estimated C as CO3 %
DENSITY Calculated for mineralisation, average values for waste
min_dis Minimum distance for interpolation
ave_sam Average distance for interpolation
num_sam Number of samples for interpolation
pass Pass number for interpolation
kvar Kriging variance for interpolation (4 attributes for each lg/hg domain)
RESCLASS 1=measured, 2=indicated, 3=inferred
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6.2 Grade interpolation

6.2.1 Estimation parameters

For all mineralised objects in the Uley 2 deposit, the wireframe interpretations were used as hard boundaries in the interpolation. That is, only grades inside each object or geodomain were used to interpolate the blocks inside. The ordinary kriging (OK) algorithm was selected for grade interpolation.

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Orientated ‘ellipsoid’ search ellipses were used to select data for interpolation. The ellipse was oriented to the average strike, dip and plunge of the mineralised zones, and varied accordingly for each object. The same major direction (orientation of mineralisation) was used for TGC and C as CO3 in order to maintain the ratios of the constituents. The search ellipse axis lengths were derived from the variogram modelling.

The maximum first-pass search radius was set at 37.5m and increased for each pass as required to ensure all blocks were estimated in the final kriging pass. The major to semi-major, and the major to minor ratios were determined from the variogram ranges. Based on KNA results a maximum number of 16 samples was used for estimation. Search parameters are presented in Table 6-2.

Table 6-2 Search parameters applied to all geodomains and objects at Uley 2

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TGC C as CO3
Parameter
Pass 1 Pass 2 Pass 3 Pass 1 Pass 2 Pass 3
Search Type Ellipsoid Ellipsoid Ellipsoid Ellipsoid Ellipsoid Ellipsoid
Bearing
Variable – based on individual object Variable – based on individual object
Dip
directions directions
Plunge
Major-Semi Major Ratio 2 2 2 2 2 2
Major-Minor Ratio 3 3 3 3 3 3
Search Radius 37.5m 75m 150m 37.5m 75m 150m
Minimum Samples 8 8 2 8 8 2
Maximum Samples 16 16 16 16 16 16
Block Discretisation 4X by 4Y by 2Z 4X by 4Y by 2Z
Percentage Blocks Filled 48% 43% 9% 48% 43% 9%
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6.3 Density and material type

Bulk density test work was implemented by QGL in February 2019. Analysis of 58 samples from varying geodomains was completed externally to Australian Standards by ALS Adelaide and designed to support on-site bulk density measurements completed as part of previous campaigns. Statistical analysis of the bulk density data determined a likely correlation between TGC or C as CO3 content and bulk density, dependant on geodomain. For the saprock, saprolite and fresh mineralisation, bulk density appears related to the TGC content (Figure 6-1). Within the carbonate geodomain, the bulk density appears related to the C as CO3 content (

Figure 6-2 ). Bulk density was assigned to the model using calculations generated from the analysis. The previous MRE assigned an average value for the bulk density ranging between 1.8 and 2.1 t/m[3] dependant on the weathering profile. The average value for the calculated bulk density in the

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updated MRE is 2.1t/m[3] . The lower values assigned in May 2015 are likely resultant of poor bulk density sampling methodology under-valuing the real bulk density values.

Figure 6-1 Bulk density vs TGC – saprock

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Figure 6-2 Bulk density vs C as CO3 - carbonate

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7 Model validation

A three-step process was used to validate the Uley 2 MRE. Firstly, a qualitative assessment was completed by slicing sections through the block model in positions coincident with drilling. A quantitative assessment of the estimate was completed by comparing the average grades of the composite file input against the block model output for each TGC object and geodomain.

As a further check that the interpolation of the block model correctly honoured the drilling data, a trend analysis was completed by comparing the interpolated blocks to the sample composite data. The trend analysis was completed for elevation in 4m bench heights, and 25m strike panels. Validation plots for the fresh and carbonate geodomains are presented in Figure 7-1 to Figure 7-4.

Figure 7-1 Validation trend plot – TGC in the fresh geodomain

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Figure 7-2 Validation trend plot – C as CO3 in the fresh geodomain

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Figure 7-3 Validation trend plot – TGC in the carbonate geodomain

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Figure 7-4 Validation trend plot – C as CO3 in the carbonate geodomain

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The conclusions from the model validation work are as follows:

Visual comparison of the model grades and the corresponding drillhole grades shows a good correlation and trends observed in the drilling are honoured in the block estimates.
A comparison of the global drillhole mean grades with the mean grade of the block model estimated grade for each geodomain demonstrates an absolute difference in mean grade typically below 4% for TGC and 8% for C as CO3, which is a good outcome.
With the exception of extrapolated regions with minimal informing data, the grade trend plots show a reasonable correlation between the trends in the block model grades compared with the drillhole grades.

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8 Mineral Resource classification and reporting

8.1 Classification

The July 2019 Uley 2 MRE was classified and reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2012).

The Mineral Resource classification criteria were developed based on an assessment of the following items:

Nature and quality of the drilling and sampling including QAQC review.
Drilling density.
Confidence in the understanding of the underlying geological and grade continuity and the structural characteristics.
Confidence in the estimate of the mineralised volume.
Bulk density data.
Model validation results.
The criteria listed in Table 1 Section 1 and Section 3 of the JORC Code.

The resource classification scheme (Measured, Indicated and Inferred) adopted for the Uley 2 MRE was based on the following:

The majority of mineralisation was classified as Indicated Resource where the drilling density was 25mE x 25mN. A portion of the Resource where vertical drilling has reduced the drill density and supported the thickness and grade was classified as Measured Resource.
Where mineralisation wireframes were extrapolated to more than half of the drill density (approximately 12.5m), the Resource was classified as Inferred Resource. There is no extrapolation outside of an appropriate range for Inferred classification. Material outside of the mineralisation envelopes was not classified.
Smaller mineralisation objects derived from minimal informing samples (less than 2 drill holes) were classified as Inferred.
Bulk density data test work completed in 2018 increased confidence in volume to tonnage conversions.

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Optimisation studies completed in May 2015 on the previous Uley 2 MRE (Coffey) support the use of a 3.5% cut-off grade for Resource reporting.[4] Figure 8-1 demonstrates the 2015 optimised pit shell in section with the block model TGC grades.

Figure 8-1 Section 9,450mN showing the 2015 optimised pit shell

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8.2 Metallurgical considerations

The JORC Code Clause 49 requires that industrial minerals must be reported “ in terms of the mineral or minerals on which the project is to be based and must include the specification of those minerals” . Clause 49 also states that it “ may be necessary prior to the reporting of a Mineral Resource or Ore Reserve to take particular account of key characteristics or qualities such as likely product specifications, proximity to markets and general product marketability .”

Petrographic studies by Pontifex Pty Ltd demonstrated a range of graphite flake sizes within a gneissic quartz-feldspar matrix. Minor amounts of mafic gangue minerals such as biotite, amphiboles and pyroxenes are also present. Biotite is shown to be intergrown with the graphite in some samples. Graphite liberation test work completed during 2014 and 2015 by QGL delivered promising results. The subsequent 2019 metallurgical campaign was designed to ensure the necessary sample representivity across all geodomains. The 2019 program exceeded the previous test work and was achieved utilising limited crushing and grinding to 0.6 mm followed by conventional froth flotation concentration with multiple stages of polishing. The resultant flake size distribution is presented in Table 8-1.

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4 Refer to the QGL ASX release dated 14/05/2015, “Major increase to graphite ore reserve and mine life”

Table 8-1 Uley 2 – flake size distribution and purity

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Size fraction Size fraction Approx. weight Graphitic C LOI
µm (Mesh) Distribution % Purity % %
+300 +50 10.5 97.8 0.26
-300+150 -50+100 35.4 97.2 0.34
-150+75 -100+200 27.1 96.6 0.36
-75 -200 27.0 90.7 0.73
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8.3 Mineral Resource statement

The July 2019 MRE comprises 6.3 Mt @ 11.1% TGC, for 697 kt of total contained graphite at a 3.5% TGC cut-off (Table 8-2). This includes 5.0 Mt @ 11.2% Measured and Indicated material for 560 kt of TGC (79% of the total Resource).

Table 8-2 Mineral Resource TGC estimate for Uley 2 as at July 2019 (3.5% TGC cut-off)

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Tonnes TGC Density TGC Tonnes
Classification Oxidation
Mt % t/m [3] kt
Oxide 0.0 7.5 1.9 1,160
Transitional 0.6 16.8 2.1 107,960
Measured
Fresh 0.1 11.4 2.2 16,280
Subtotal 0.8 15.6 2.1 125,400
Oxide 0.4 8.6 2.0 29,600
Transitional 3.1 10.5 2.1 320,300
Indicated
Fresh 0.8 10.7 2.2 85,000
Subtotal 4.2 10.4 2.1 434,900
Oxide 0.0 6.4 2.0 2,120
Transitional 0.5 10.8 2.1 53,470
Inferred
Fresh 0.8 10.4 2.2 81,340
Subtotal 1.3 10.5 2.2 136,930
TOTAL 6.3 11.1 2.1 697,260
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Figure 8-2 displays the grade-tonnage curve including all Measured and Indicated Resource for a range of TGC cut-offs. The sensitivity of the Mineral Resource tonnages to the reporting cut-off grade is minimal at cut-offs between 3.0% and 4.0% TGC, i.e., there is little impact on the total reported tonnes when comparing these cut-off grades.

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Figure 8-2 Uley 2 grade-tonnage curve for Measured and Indicated Resources

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8.3.1 Competent Person’s Statement – Mineral Resources

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8.4 Comparison to previous MRE

Comparisons between the May 2015 MRE completed by Coffey and the June 2019 MRE relevant to this report are presented in Table 8-3. C as CO3 was not reported as part of any previous MREs. The Measured Resources increased by 0.44 Mt with an 11% drop in TGC grade. Total Resources increased by 39% tonnages with a 4% drop in TGC % for an overall increase in TGC tonnages of 32%.

Table 8-3 Comparisons between the 2015 and 2019 Uley 2 MREs, 3.5% TGC cut-off

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May 2015 July 2019 Difference %
Classification Tonnes TGC TGC Tonnes TGC TGC Tonnes TGC TGC
Mt % Mt Mt % Mt Mt % Mt
Measured 0.36 17.5 0.06 0.80 15.6 0.13 122% -11% 117%
Indicated 2.75 11.4 0.31 4.20 10.4 0.43 53% -9% 39%
Inferred 1.44 10.6 0.15 1.31 10.5 0.14 -9% -1% -7%
TOTAL 4.54 11.6 0.53 6.31 11.1 0.70 39% -4% 32%
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*Positive values indicate an increase in value from 2015 to 2019

Variations to grade and tonnages are the result of the following adjustments to resource definition and estimation procedures:

Wireframes were adjusted to extend through the south-west of Uley 2 to include drilling unavailable for the May 2015 MRE. This increased the overall reported tonnages.
Based on statistical analysis of the raw drill hole data, wireframes were adjusted to allow for a 2% TGC cut-off. The previous MRE utilised wireframes created using a 3.5% cut-off. This contributed to an overall increase in tonnages and a 4% reduction in TGC% grade.
The addition of bulk density test work allowed for the increase in Measured Resources in zones where close-spaced drilling confirmed the continuity and thickness of TGC and C as CO3 grade. The use of regression formulas based on grade and bulk density relationships to calculate the bulk density increases the confidence in reported tonnages within these zones.
Metallurgical test work targeting individual geodomains and mass composites has increased confidence in the definition of the Uley 2 Resource and subsequent conversion of Inferred to Indicated and Measured Resources.

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Appendix A

The following extract from the JORC Code 2012 Table 1 is provided for compliance with the Code requirements for the reporting of Ore Reserves.

Section 1 Sampling Techniques and Data (Criteria in this section apply to all succeeding sections)

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Competent
Criteria JORC Code Explanation Commentary
Person
Sampling  Nature and quality of sampling (eg cut channels, random chips, or  All holes used in the Resource Estimate were HQ diamond drillholes, KL
techniques specific specialised industry standard measurement tools sampling moderately dipping strata bound graphite mineralised zones.
appropriate to the minerals under investigation, such as down hole  30 vertical drillholes were used for ore definition together with 114
gamma sondes, or handheld XRF instruments, etc). These drillholes drilled at -60° towards 090.
examples should not be taken as limiting the broad meaning of  Half cores samples were obtained on geological intervals, typically 1m
sampling. in length but ranging from 0.3m to 4m.
 Include reference to measures taken to ensure sample  High grade graphite mineralisation is reasonably visible during
representivity and the appropriate calibration of any measurement geological logging and sampling.
tools or systems used.  Visibly mineralised intervals were crushed and pulverised to at least
 Aspects of the determination of mineralisation that are Material to 85% passing 75μm, then sent to ALS Brisbane for analysis by LECO
the Public Report. method.
 In cases where ‘industry standard’ work has been done this would  The sample preparation and assaying techniques are industry standard
be relatively simple (eg ‘reverse circulation drilling was used to and appropriate for this type of mineralisation.
obtain 1m samples from which 3kg was pulverised to produce a  Some core material remains selectively sampled.
30g charge for fire assay’). In other cases more explanation may
be required, such as where there is coarse gold that has inherent
sampling problems. Unusual commodities or mineralisation types
(eg submarine nodules) may warrant disclosure of detailed
information.
Drilling  Drill type (eg core, reverse circulation, open-hole hammer, rotary  All holes used in the Resource Estimate were drilled from surface. KL
techniques air blast, auger, Bangka, sonic, etc) and details (eg core diameter,  30 vertical drillholes were drilled using HQ standard tube and were not
triple or standard tube, depth of diamond tails, face-sampling bit or orientated.
other type, whether core is oriented and if so, by what method,  114 angled drillholes were drilled using HQ triple tube. Downhole
etc). surveys were obtained using a Ranger SS118 downhole camera. The
angled drillholes were orientated using the Reflex ACT II RD core
orientation tool.
Drill sample  Method of recording and assessing core and chip sample  Core recovery was captured by logging “Core Loss” in areas of no or KL
recovery recoveries and results assessed. low recovery.
 Measures taken to maximise sample recovery and ensure  Industry standard procedures/techniques were employed to ensure
representative nature of the samples. maximum downhole recovery. Overall core recovery for all resource
 Whether a relationship exists between sample recovery and grade drillholes is 87%.
and whether sample bias may have occurred due to preferential  There has been no identified relationship between sample recovery and
loss/gain of fine/coarse material. grade.
Logging  Whether core and chip samples have been geologically and  Geological and geotechnical logging of the drillholes is of an appropriate KL
geotechnically logged to a level of detail to support appropriate standard to support a Mineral Resource estimation, mining studies and
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Competent
Criteria JORC Code Explanation Commentary
Person
Mineral Resource estimation, mining studies and metallurgical metallurgical studies.
studies.  Geological core logging is qualitative.
 Whether logging is qualitative or quantitative in nature. Core (or  Core photography is available.
costean, channel, etc) photography.  The total cumulative length of the sample intervals for all holes used for
 The total length and percentage of the relevant intersections resource definition was 11,270 m (90% of total core length was
logged. sampled).
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Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person
Mineral Resource estimation, mining studies and metallurgical studies.  Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography.  The total length and percentage of the relevant intersections logged. metallurgical studies.  Geological core logging is qualitative.  Core photography is available.  The total cumulative length of the sample intervals for all holes used for resource definition was 11,270 m (90% of total core length was sampled).

Sub-sampling techniques and sample preparation	 If core, whether cut or sawn and whether quarter, half or all core taken.  If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry.  For all sample types, the nature, quality and appropriateness of the sample preparation technique.  Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.  Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.  Whether sample sizes are appropriate to the grain size of the material being sampled.	 Half core samples were taken. In competent core, these were cut by diamond saw. In incompetent material, the sample was collected by manual halving of the material. Half core sampling is an appropriate, industry standard technique.  Bulk reject duplicate samples were taken in the current angled drillholes to ensure sample representivity. These duplicates were typically inserted at a frequency of 1 in 100 samples (1% rate of insertion). Certified reference standards were inserted at a typical rate of 1 in 20 samples (5% rate of insertion) for quality assurance checks of analyses reported by the mineral testing laboratory ALS Global.  There is no record of field duplicate samples or standards having been submitted in the 30 vertical drillholes to test sampling representativity.  Samples from the 18 vertical CRAE drillholes were crushed and sieved on site prior to dispatching the coarse +75μm to ALS-Chemex for assaying. There is no available data on the weights of the sieved fractions. If the fine fraction made up a significant proportion of the total sample, assays from the coarse fractions should be higher than corresponding whole rock assays. A comparison of grades from the CRAE drilling with the whole rock assays from other drilling programmes shows no difference in grade tenor. Visual comparison of grades in the CRAE drillholes with neighbouring holes from the other programme likewise shows no notable difference in grade tenor. As such, despite the description of assaying of coarse fractions only, the assays from the CRAE drilling are treated in the same manner as whole rock assays with no tonnage correction required.  Some discrepancies were noted in the C values in the CRAE samples, with non-carbonate C occasionally being greater than the Total C value. These are assumed to reflect a lack of complete homogenization in the crushing/sieving process carried out on site.  Sample preparation on the 12 vertical drillholes (2011 campaign) and the 92 angled drillholes (2014 and 2015 campaigns) was undertaken by ALS Adelaide. Samples were crushed and split to >70% passing -6mm and pulverized to >85% passing 75μm prior to assaying by ALS Brisbane.  Sample sizes (half core samples) are deemed appropriate for the material that is beingsampled.	KL

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Competent
Criteria JORC Code Explanation Commentary
Person
Quality of assay  The nature, quality and appropriateness of the assaying and Techniques used are: KL
data and laboratory procedures used and whether the technique is  C-IR18 (Graphitic carbon by LECO analyser).
laboratory tests considered partial or total.  C-CAL15 (Inorganic carbon by difference).
 For geophysical tools, spectrometers, handheld XRF instruments,  C-IR17 (Organic carbon by LECO analyser).
etc, the parameters used in determining the analysis including 
C-CON01 (Carbon concentrate by LECO analyser).
instrument make and model, reading times, calibrations factors  C-IR07 Total Carbon by LECO analyser).
 Nature of quality control procedures adopted (eg standards, applied and their derivation, etc.  C-IR18 was used for the 2014 and 2015 samples, and C-IR17 was used
for previous samples. As the rocks are assumed to contain no organic
blanks, duplicates, external laboratory checks) and whether
material (supported by petrographic study), the difference between
acceptable levels of accuracy (ie lack of bias) and precision have
these two techniques is less than the analytical error of the techniques
been established.
and hence considered negligible.
 Bulk reject duplicate samples were taken in the 2014 angled drillholes
at a typical frequency of 1 in 100 samples (1% rate of insertion).
Certified reference standards were inserted at a typical rate of 1 in 20
samples (5% rate of insertion).
 There is no record of field duplicate samples or standards having been
submitted in the 30 vertical drillholes.
 Internal laboratory QAQC for all sampling has been reviewed with no
problems highlighted with respect to sampling bias or precision.
Verification of  The verification of significant intersections by either independent or  Metallurgical drillholes were designed to allow for twin drilling analysis. KL
sampling and alternative company personnel. Analysis demonstrated acceptable comparative intercepts for tenor and
assaying  The use of twinned holes. thickness of mineralization.
 Documentation of primary data, data entry procedures, data  Assays in the database have been checked against laboratory
verification, data storage (physical and electronic) protocols. certificates and original logs which contained assay data. No
 Discuss any adjustment to assay data. inconsistencies were identified.
 Non-sampled intervals were assumed to be “unmineralised” and given a
Graphitic C value of 0.01%, equivalent to half the detection limit of C-
IR18.
 No adjustments to any assay data were done.
Location of data  Accuracy and quality of surveys used to locate drillholes (collar  Drill location co-ordinates are reported in Uley Mine Grid (transformed KL
points and down-hole surveys), trenches, mine workings and other to truncated AMG). The reported truncation was:
locations used in Mineral Resource estimation. Easting = -554,216.866m
 Specification of the grid system used. Northing = -6,139,092.867m
 Quality and adequacy of topographic control. ADH = RL + 404.252m
 Drillhole collars have been re-surveyed in the field and these grid
transformations validated. All drillholes were re-surveyed during 2014
by PA Dansie & Associates Pty Ltd.
 A complete site survey was undertaken during 2014 by Maptek Pty Ltd.
Data spacing  Data spacing for reporting of Exploration Results.  No exploration results are reported or included in this Mineral Resource KL
and distribution  Whether the data spacing and distribution is sufficient to establish estimate.
the degree of geological and grade continuity appropriate for the  Diamond drilling on an infill spacing of up to 25m X 25m was used to
Mineral Resource and Ore Reserve estimation procedure(s) and estimate geological and grade continuity at a level deemed appropriate
classifications applied. for the classification and reporting of a Mineral Resource estimate
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Criteria	JORC Code Explanation	Commentary	Competent Person
	 Whether sample compositing has been applied.	(updated estimate).  1m sample composites were used during the resource estimation process.
Orientation of data in relation to geological structure	 Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.  If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.	 Drilling orientation is considered appropriate considering the deposit type and orientation of moderately WNW dipping mineralisation. Sampling bias related to the orientation of sampling is considered minimal.	KL
Sample security	 The measures taken to ensure sample security.	 All reasonable measures were being taken to ensure sample security along the value chain. These measures included the recording of sample dispatch and receipt reports, secure storage of samples, and a locked and gated core shed.  The assay method used is destructive. A representative sample library is maintained on site for reference.	KL
Audits or reviews	 The results of any audits or reviews of sampling techniques and data.	 No formal third-party audits have been undertaken to date.  Laboratory procedures and manuals are comprehensively documented on-site and both the AMDEL and ALS laboratories are considered to be reputable laboratories for carbon analysis. As the assaying techniques used are broadly destructive techniques, with a limited ash residue, they are not suited for replicate analysis.  The quality control protocols implemented at Uley 2 are considered to represent good industry practice and allow assessment of analytical precision and accuracy to a degree. The assay data is considered to display an acceptable level of precision and accuracy.  Internal laboratory QAQC data (standards, blanks and duplicates) have been reviewed and no significant problems were identified regarding the qualityof the chemical assaying.	KL

Section 2 Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section)

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Competent
Criteria JORC Code Explanation Commentary
Person
Mineral  Type, reference name/number, location and ownership  The Uley Graphite Project consists of five contiguous tenements on the KL
tenement and including agreements or material issues with third parties such Eyre Peninsula of South Australia, of which two are retention leases, two
land tenure as joint ventures, partnerships, overriding royalties, native title are mining leases and one is an exploration licence. Tenement
status interests, historical sites, wilderness or national park and identification numbers are: RL66, RL67, ML5561, ML5562 and EL4778.
environmental settings.  Mining development is subject to the approved Program for
 The security of the tenure held at the time of reporting along Environmental Protection and Rehabilitation (PEPR) and an
with any known impediments to obtaining a licence to operate Environmental Licence which is mandated under South Australian State
in the area. legislation.
 QGL has a 100% interest in these tenements and no royalty, joint
venture or other material agreements are in place other than a royalty of
1.5% with its former parent company, SER.
 Tenement ownership is secure with expiration dates varying from 2016
(EL4778) to March 2017 (ML5561 and ML5562). There are no known
impediments to obtaining a license to operate in the area.
Exploration  Acknowledgment and appraisal of exploration by other parties.  Historically a number of parties have undertaken exploration on the KL
done by other leases. The data set held by QGL, and used in the resource update,
parties includes all available information.
Geology  Deposit type, geological setting and style of mineralisation.  Graphite is developed as a constituent mineral in coarse prograde KL
metamorphic assemblages as well as in the fabric and foliation of
micaceous schists. These are interpreted to be the folded, thrusted and
metamorphosed equivalents of the Cook Gap Schist. Folding of
stratigraphy on various local scales is obvious from the core logging.
Drillhole  A summary of all information material to the understanding of  A summary of all drillholes used in the Resource Estimate is provided in VO/KL
Information the exploration results including a tabulation of the following Section 4 of this report.
information for all Material drillholes:
 easting and northing of the drillhole collar
 elevation or RL (Reduced Level – elevation above sea
level in metres) of the drillhole collar
 dip and azimuth of the hole
 down hole length and interception depth
 hole length
 If the exclusion of this information is justified on the basis that
the information is not Material and this exclusion does not
detract from the understanding of the report, the Competent
Person should clearly explain why this is the case.
Data  In reporting Exploration Results, weighting averaging  This Table accompanies a Resource Estimation, and is not reporting KL
aggregation techniques, maximum and/or minimum grade truncations (eg Exploration results.
methods cutting of high grades) and cut-off grades are usually Material  No metal equivalents are used.
and should be stated.
 Where aggregate intercepts incorporate short lengths of high
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Competent
Criteria JORC Code Explanation Commentary
Person
grade results and longer lengths of low grade results, the
procedure used for such aggregation should be stated and
some typical examples of such aggregations should be shown
in detail.
 The assumptions used for any reporting of metal equivalent
values should be clearly stated.
Relationship  These relationships are particularly important in the reporting  As this table accompanies a Resource Estimation, and is not reporting KL
between of Exploration Results. Exploration results, this section is not applicable.
mineralisation  If the geometry of the mineralisation with respect to the  The relationships are captured and defined on a hole-by-hole basis in the
widths and drillhole angle is known, its nature should be reported. resource model and orientations of holes to mineralised zone are
intercept  If it is not known and only the down hole lengths are reported, appropriately accounted for in the estimate.
lengths there should be a clear statement to this effect (eg ‘down hole
length, true width not known’).
Diagrams  Appropriate maps and sections (with scales) and tabulations of  Refer to Section 4 and Figure 5-1 . VO/KL
intercepts should be included for any significant discovery
being reported These should include, but not be limited to a
plan view of drillhole collar locations and appropriate sectional
views.
Balanced  Where comprehensive reporting of all Exploration Results is  QGL carry out balanced reporting of exploration results. VO/KL
reporting not practicable, representative reporting of both low and high  Selective sampling of visible graphitic material only has been carried out
grades and/or widths should be practiced to avoid misleading on the 2011 and current drill core.
reporting of Exploration Results.
Other  Other exploration data, if meaningful and material, should be  All available and material exploration information has been considered. KL
substantive reported including (but not limited to): geological observations; This comprised a drilling database, previous estimates and reports,
exploration data geophysical survey results; geochemical survey results; bulk academic literature, petrological reports, metallurgical test work reports,
samples – size and method of treatment; metallurgical test dry rock density determinations, and site visit
results; bulk density, groundwater, geotechnical and rock photography/communication. Historical production records from the
characteristics; potential deleterious or contaminating original Uley Mine provided assumptions related to future potential
substances. economic extraction.
Further work  The nature and scale of planned further work (eg tests for  Exploration work to quantify the extent and continuity of mineralisation KL
lateral extensions or depth extensions or large-scale step-out within the QGL-held tenure is ongoing. This work includes planned
drilling). additional diamond and reverse circulation drilling, further geophysical
 Diagrams clearly highlighting the areas of possible extensions, surveys and geological mapping. Details of this exploration effort are
including the main geological interpretations and future drilling deemed commercially sensitive.
areas, provided this information is not commercially sensitive.
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Section 3 Estimation and Reporting of Mineral Resources (Criteria listed in the preceding sections where relevant, also apply to this section)

Criteria	JORC Code Explanation	Commentary	Competent Person
Database integrity	 Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.  Data validation procedures used.	 Data has been provided by QGL in the form of an Access database.  A total of 18 1993 era diamond drill holes drilled by Graphite Mines of Australia, 12 SER diamond drillholes drilled in 2011, and 112 Valence angled diamond drillholes in the Uley area have been used in the resource modelling update. The database used for resource estimation consists solely of diamond drilling and has been reviewed and re-validated for obvious errors by Wicklow prior to commencing the resource estimation study. The assay data has been cross-checked against assay certificates provided by ALS Chemex.  The following checks were completed prior to uploading the drilling data into a Surpac database:  Check and correct overlapping intervals.  Ensure downhole surveys existed at a 0m depth.  Ensure consistency of depths between different data tables, for example survey, collar and assays.  Check gaps in the assay data were replaced by -1 as a code for missing data. Non-sampled intervals were assigned a value of 0.01% Graphitic C.	VO
Site visits	 Comment on any site visits undertaken by the Competent Person and the outcome of those visits.  If no site visits have been undertaken indicate why this is the case.	 Site visits were completed by the competent person in September and December 2018.	VO
Geological interpretation	 Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.  Nature of the data used and of any assumptions made.  The effect, if any, of alternative interpretations on Mineral Resource estimation.  The use of geology in guiding and controlling Mineral Resource estimation.  The factors affecting continuity both of grade and geology.	 The current geological interpretation is based on a review of previous estimates and reports and has been augmented by the geological and structural information provided by the additional drillholes not available for the May 2015 MRE.  Information from site visits and geological reports suggests the graphite lenses occurs within an anticlinorium i.e. a fold with parasitic folds on its limbs, as occurred in the now depleted Uley mine to the north. The current model is of a recumbent antiform plunging very shallowly to the ENE, with HW lodes dipping shallowly to the WNW and FW lodes dipping moderately (~33°) to the WNW.  The deposit was previously constrained by Mineral Resource outlines based on mineralisation envelopes prepared using a 3.5 % TGC cut-off. On review the cut-off was adjusted to 2% TGC as the distribution in grade demonstrates a distinct variance at 2%. This likely represents the break between “ore” and waste. The adjusted mineralisation interpretation applied a minimum 2m down hole intercept with a maximum of 2 m internal waste.  Geometallurgical domains were created to allow for the modelling of C as CO3cohesively and guide the 2018 metallurgical test work program. The	VO

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Competent
Criteria JORC Code Explanation Commentary
Person
geometallurgical domains (geodomains) are delineated based on lithology,
mineralogy, weathering and C as CO3 content. A “carbonate” shell was
created to define elevated C as CO3 based on a 1% C as CO3 cut-off.
Dimensions  The extent and variability of the Mineral Resource expressed  The drilling relevant to the Mineral Resource estimate at Uley 2 extends VO
as length (along strike or otherwise), plan width, and depth over a distance of 375 m (from 9,225 m grid N to 9,600 m grid N) and
below surface to the upper and lower limits of the Mineral includes a 125 m vertical interval from approximately 375 m to 500 m.
Resource. The graphitic mineralisation is interpreted to extend along the full strike
distance. Depth of interpreted mineralisation varies as structural events
resulted in the plunge to the north-east of the tight isoclinal folds that host
mineralisation. Mineralisation becomes shallower and closer to the
surface towards the south-west of Uley 2.
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Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person	Criteria JORC Code Explanation Commentary Competent Person
geometallurgical domains (geodomains) are delineated based on lithology, mineralogy, weathering and C as CO3 content. A “carbonate” shell was created to define elevated C as CO3 based on a 1% C as CO3 cut-off.
Dimensions  The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.  The drilling relevant to the Mineral Resource estimate at Uley 2 extends over a distance of 375 m (from 9,225 m grid N to 9,600 m grid N) and includes a 125 m vertical interval from approximately 375 m to 500 m. The graphitic mineralisation is interpreted to extend along the full strike distance. Depth of interpreted mineralisation varies as structural events resulted in the plunge to the north-east of the tight isoclinal folds that host mineralisation. Mineralisation becomes shallower and closer to the surface towards the south-west of Uley2. VO
Estimation and modelling techniques	 The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.  The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.  The assumptions made regarding recovery of by-products.  Estimation of deleterious elements or other non-grade variables of economic significance (e.g. sulphur for acid mine drainage characterisation).  In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.  Any assumptions behind modelling of selective mining units.  Any assumptions about correlation between variables.  Description of how the geological interpretation was used to control the resource estimates.  Discussion of basis for using or not using grade cutting or capping.  The process of validation, the checking process used, the comparison of model data to drillhole data, and use of reconciliation data if available.	 Based on the dominant sample length, 1 m composites for TGC and C as CO3were extracted within the coded mineralisation by geodomains. Variable length compositing was used to ensure that no residuals were created.  An assessment of the Coefficient of Variation (CV – ratio of the standard deviation to the mean) parameter resulted in the decision to top-cut C as CO3during grade estimation for some fresh domains. The CV was low for TGC within each mineralisation domain and therefore a top-cut was not required.  TGC (%) and C as CO3(%) were estimated into the block model using Ordinary Kriging (OK) utilising the cut 1m composites in Surpac mining software. Grade estimation was constrained to blocks inside individual mineralisation wireframes and geodomains with hard boundaries applied. Results below the detection limit were assigned a value of 0.01 % for both graphitic C and C as CO3.  Variograms were generated to assess the spatial continuity of TGC and C as CO3and as inputs to the kriging algorithm used to interpolate grades. Snowden Supervisor software was used to generate and model the variograms within each geodomain. The major direction (direction of maximum continuity) was oriented along strike with the intermediate (semi-major) direction oriented horizontally and the minor direction oriented orthogonal to the dip plane.  A Surpac block model was used for the estimate with a block size of 12.5 m NS by 12.5 m EW by 4m vertical with sub-cells of 6.275 m by 6.275 m by 1 m. The chosen parent block size is based on the nominal drill hole spacing along with consideration of the geometry of the mineralisation and the results of the grade continuity analysis.  OK grade interpolation used an oriented ‘ellipsoid’ search to select data for interpolation. Estimation parameters were developed specifically for TGC and C as CO3within each mineralised geodomain. Where cohesive variograms could not be achieved due to limited data, parameters were borrowed from other like domains. Search directions were adjusted to allow for variations in orientation as a result of folding.  Athree-step qualitative and quantitative processwas applied tovalidate	VO

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Competent
Criteria JORC Code Explanation Commentary
Person
the grade estimate. This included visual comparison of block grades and
the input drill hole composites and global comparisons of these grades.
The grade trends shown by the composite data are honoured by the block
model within each domain. Trend plots comparing the model and
composite grades along and across strike and with depth were generated.
The plots displayed good correlation between the sample grades and the
block model grades in each direction.
 No other elements, deleterious or not, were estimated to date. No
assumptions were made concerning mining selectivity beyond small to
medium scale open pit mining.
Moisture  Whether the tonnages are estimated on a dry basis or with  Tonnes are estimated based on an average dry insitu bulk density values. VO
natural moisture, and the method of determination of the
moisture content.
Cut-off  The basis of the adopted cut-off grade(s) or quality  Optimisation studies completed in May 2015 on the previous Uley 2 MRE VO/KL
parameters parameters applied. (Coffey) support the use of a 3.5% cut-off grade for Resource reporting.
Mining factors or  Assumptions made regarding possible mining methods,  The Uley graphite deposit has been historically mined by open cut mining
assumptions minimum mining dimensions and internal (or, if applicable, methods and it is assumed that this will still be the case for any future
external) mining dilution. It is always necessary as part of the mining operation in the area.
process of determining reasonable prospects for eventual  No assumptions have been made about mining selectivity for specific
economic extraction to consider potential mining methods, but material types or quality.
the assumptions made regarding mining methods and  No external mining dilution or other factors have been applied to the
parameters when estimating Mineral Resources may not resource estimate.
always be rigorous. Where this is the case, this should be
reported with an explanation of the basis of the mining
assumptions made.
Metallurgical  The basis for assumptions or predictions regarding  Petrographic studies by Pontifex Pty Ltd demonstrated a range of graphite MG
factors or metallurgical amenability. It is always necessary as part of the flake sizes within a gneissic quartz-feldspar matrix. Minor amounts of
assumptions process of determining reasonable prospects for eventual mafic gangue minerals such as biotite, amphiboles and pyroxenes are
economic extraction to consider potential metallurgical also present. Biotite is shown to be intergrown with the graphite in some
methods, but the assumptions regarding metallurgical samples. Graphite liberation test work completed during 2014 and 2015 by
treatment processes and parameters made when reporting QGL delivered promising results. The subsequent 2019 metallurgical
Mineral Resources may not always be rigorous. Where this is campaign was designed to ensure the necessary sample representivity
the case, this should be reported with an explanation of the across all geodomains. The 2019 program exceeded the previous test
basis of the metallurgical assumptions made. work and was achieved utilising limited crushing and grinding to 0.6 mm
followed by conventional froth flotation concentration with multiple stages
of polishing. The resultant flake size distribution is.
Environmental  Assumptions made regarding possible waste and process  Mining development is subject to the approved Program for KL
factors or residue disposal options. It is always necessary as part of the Environmental Protection and Rehabilitation (PEPR).
assumptions process of determining reasonable prospects for eventual
economic extraction to consider the potential environmental
impacts of the mining and processing operation. While at this
stage the determination of potential environmental impacts,
particularly for a greenfields project, may not always be well
advanced, the status of early consideration of these potential
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Criteria	JORC Code Explanation	Commentary	Competent Person
	environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.
Bulk density	 Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.  The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit.  Discuss assumptions for bulk density estimates used in the evaluationprocess of the different materials.	 Bulk density test work was implemented by QGL in February 2019. The analysis was completed externally to Australian Standards by ALS Adelaide and designed to support on-site bulk density measurements completed as part of previous campaigns. Statistical analysis of the bulk density data determined a likely correlation between TGC or C as CO3 content and bulk density, dependent on geodomain. Bulk density was assigned to the model using calculations determined from the analysis.	VO
Classification	 The basis for the classification of the Mineral Resources into varying confidence categories.  Whether appropriate account has been taken of all relevant factors (ie relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).  Whether the result appropriately reflects the Competent Person’s view of the deposit.	 The Mineral Resource classification criteria were developed based on an assessment of the following items: • Nature and quality of the drilling and sampling including QAQC review. • Drilling density. • Confidence in the understanding of the underlying geological and grade continuity and the structural characteristics. • Confidence in the estimate of the mineralised volume. • Bulk density data. • Model validation results. • The criteria listed in Table 1 Section 1 and Section 3 of the JORC Code.  The resource classification scheme (Measured, Indicated and Inferred) adopted for the Uley 2 MRE was based on the following: • The majority of mineralisation was classified as Indicated Resource where the drilling density was 25 mE x 25 mN. A portion of the Resource where vertical drilling has reduced the drill density and supported the thickness and grade was classified as Measured Resource. • Where mineralisation wireframes were extrapolated to more than half of the drill density (approximately 12.5 m), the Resource was classified as Inferred Resource. There is no extrapolation outside of an appropriate range for Inferred classification. Material outside of the mineralisation envelopes was not classified. • Smaller mineralisation objects derived from minimal informing samples (less than 2 drill holes)were classified as Inferred.	EM

Criteria	JORC Code Explanation	Commentary	Competent Person
		• Bulk density data test work completed in 2018 increased confidence in volume to tonnage conversions..  The classification scheme as applied is considered to adequately reflect the sample density and geological interpretation based on all available drillhole data.
Audits or reviews	 The results of any audits or reviews of Mineral Resource estimates.	 No third party reviews have been undertaken on the Mineral Resource estimation process to date, though formal peer review as part of mine planning processes have been completed.	VO
Discussion of relative accuracy/ confidence	 Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.  The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.  These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.	 The grade estimate is based on the assumption that open cut mining methods will be applied and that a form of high confidence grade control sampling, for example based on RC grade control drilling or ditch-witch bench top sampling, will be available for final ore/waste demarcation. As such the resource estimate should be considered to represent a global resource estimate.	EM

VO = Ms Vanessa O’Toole, an employee of Wicklow Resources Pty Ltd. KL = Ms Karen Lloyd, an employee of Jorvik Resources Pty Ltd. MG = Mr Mark Giddy, an employee of Lycopodium Minerals Pty Ltd. EM = Ms Ellen Maidens, formerly an employee of Coffey.

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QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2019

65646_rns_2019-07-14_4d0b8038-59c4-46f3-a5d5-1e0a45c79a36.pdf

MARKET RELEASE For Immediate Release 15 July 2019

SUBSTANTIAL INCREASE IN ULEY 2 JORC 2012 MINERAL RESOURCES DFS UPDATE

Mineral Resources – Classification and Tonnes

Definitive Feasibility Study – Update and Key Milestones

Competent Person Statement – Mineral Resource estimate

Competent Person Statement – Industrial Minerals statement (Clause 49 JORC Code (2012))

JORC Code (2012) Table 1 Compliance

July 2019 Mineral Resource Estimate

Uley 2 Deposit Uley Graphite Mine, Port Lincoln South Australia

Vanessa O’Toole Principal Consultant, Wicklow Resources

Summary of Data Procedures

I Drilling Data

No drilling data has been excluded for estimation purposes.

II Assay data - Laboratory sampling, sample preparation and analysis

III Assay Data - Quality control

IV Data verification

1 Introduction

1.1 Approach

2 July 2019 Mineral Resource statement

3 Geology and mineralisation

3.1 Regional geology

3.1.1 Stratigraphy

3.2 Local geology and mineralisation

4 Drilling data

4.1 Summary

4.2 Drill hole collar location

4.3 Down hole surveys

4.4 Geological logging

4.5 Sampling

4.5.1 GMA Sampling

4.5.2 2011 Sampling

4.5.3 2014 and 2015 Sampling

5 Resource definition and analysis

5.1 Preparation of wireframes

5.2 Compositing and statistics

5.3 Geostatistical analysis

6 Mineral Resource estimation

6.1 Block model

6.2 Grade interpolation

6.2.1 Estimation parameters

6.3 Density and material type

7 Model validation

8 Mineral Resource classification and reporting

8.1 Classification

8.2 Metallurgical considerations

8.3 Mineral Resource statement

8.3.1 Competent Person’s Statement – Mineral Resources

8.4 Comparison to previous MRE

Appendix A

Section 1 Sampling Techniques and Data (Criteria in this section apply to all succeeding sections)

Section 2 Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section)

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