QUANTUM GRAPHITE LIMITED — Investor Presentation 2014

Oct 14, 2014

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Valence Industries Australia’s Only Graphite Producer Asia Pacific I Europe I North America

October 2014

Christopher S. Darby CEO & MD

Manufacturing our Carbon Future[TM]

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Valence (noun). the combining power of an element, especially as measured by the number of hydrogen atoms it can displace or combine with: carbon always has a valence of 4.

© Valence Industries Limited ASX : VXL 1 ASX : VXLO

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Disclaimer

This presentation includes certain statements that may be deemed forward-looking statements. All statements in these presentation materials (other than statements of historical facts) which address future production, reserve potential, exploration activities & events or developments that the Company expects, are forward-looking statements. Such forward-looking statements include, without limitation: (i) estimates of future graphite prices, supply, demand &/or production; (ii) estimates of future cash costs; (iii) estimates of future capital expenditures; (iv) estimates regarding timing of future development, construction, production or closure activities; (v) statements regarding future exploration results; (vi) statements regarding cost structure, project economics, or competitive position, &; (vii) statements comparing the Company’s properties to other mines, projects or metals. Although the Company believes that such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance & actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation & exploration successes, continued availability of capital & financing, & general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance, that the Company expressly disclaims any responsibility for revising or expanding the forward-looking statements to reflect actual results or developments, & that actual results or developments may differ materially from those projected, in the forward- looking statements. No representation or warranty is given by the Company as to the accuracy or completeness of the information contained in this presentation. Neither the Company nor its officers or employees accept responsibility or liability (to the maximum extent permitted by law) for any loss of damage suffered or incurred by any other person or entity however caused & relating in any way to these presentation materials including, without limitation, the information contained in the presentation material & its accuracy, completeness, currency or reliability. This presentation does not constitute a recommendation regarding the securities of the Company, & should not be construed as legal or financial advice. It has been prepared for information purposes only & contains general summary information & does not take into account the circumstances of any individual investor. Prospective investors in the Company are encouraged to obtain separate & independent advice with regard to any investment in the Company. By accepting the presentation materials, the recipient agrees to keep permanently confidential the information contained herein. The information in this presentation which relates to Indicated & Inferred Mineral Resources compiled in accordance with the JORC Code 2012 is based on information supplied by Ms. Karen Lloyd, Mr. Ingvar Kirchner & Ms. Ellen Maidens as detailed in the Company’s Replacement Prospectus released as an ASX announcement on 18 November 2013. The Company confirms that it is not aware of any new information included in this presentation. Valence confirms that all material assumptions underpinning the estimates in this report continue to apply & have not materially changed. The Company confirms that the form & content in which the Competent Person’s findings are presented have not been materially modified. The information in this announcement that relates to the Mineral Resources pertaining to the Company’s in-fill drilling campaign results is based on information compiled by Ms Karen Lloyd, who has been engaged as General Manager – Technical Delivery by Valence Industries. Ms Lloyd is a Member of the Australian Institute of Mining & Metallurgy. Ms Lloyd has sufficient experience that is relevant to the style of mineralisation & type of deposit under consideration & to the activities being undertaken to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources & Ore Reserves”. Ms Lloyd consents to the inclusion in this release of the matters based on their information in the form & context as it appears. This presentation also references information, that has not been updated since, previously announced on 6 August 2014 & 9 October 2014.

Photographs, maps, charts, diagrams & schematic drawings appearing in this presentation are owned by & have been prepared by or commissioned by the Company, unless otherwise stated. Maps & diagrams used in the presentation are illustrative only & may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs & tables is based on information available at the date of this presentation. By accepting this presentation the Recipient agrees to be bound by the foregoing statements.

© Valence Industries Limited

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Valence Industries 2014

80,000 tonnes of MOUs Aug 2014

Listed on ASX 6 Jan 2014

First Sale of Graphite Apr 2014

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Cor orate Overview p

ASX Code: VXL & VXLO	ASX Code: VXL & VXLO
Ordinary Shares on issue	185.7m
Options on issue	68.5m
Market cap (@70 cents)	$130m
Cash (End Q3 2014)	~$14.5m
Debt	Nil

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Corporate Overview

Major Shareholders	Major Shareholders
Strategic Energy Resources Ltd (Restricted)	11.74%
HSBC Custody Nominees (Australia) Ltd	4.80%
Avatar Energy Pty Ltd	4.14%
EERC Australasia Pty Ltd	3.57%
Chimaera Capital Ltd	2.48%
Top 20 shareholders hold 45.60%

Directors & Senior Management

Graham Spurling AM, Chairman Christopher S. Darby, CEO & MD Glenister Lamont, Non-exec Director Ian Schache, Non-exec Director Jarek Kopias, CFO & Co. Sec. Karen Lloyd, GM Technical Delivery David J. Salari (P.Eng), Chief Dev. Officer

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Vertically Integrated Manufacturing

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Pit & Process
Optimisation &
QA QC Systems
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Multiple Specialist
Graphite Products
Packaged & Delivered to
Global Customers
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Uley Graphite Phases

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Recommission 14000/t
Primary Process Circuit
2ndry Process Circuit
30+ Personnel
Start Manufacturing
9+ Month Stockpiles
First Customer Sales
Regulatory Approvals
Recruitment
Phase I
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Complete Phase II BFS
New Plant Capex
~$34-$35M
Expand Capacity by
~50000 tpa ++
New Open Pit Mining
Operate Existing
Facilities ~14000 tpa
90+ Personnel
Increase Sales
Phase II
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2014 - 2015

2014 - 2016

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2014

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Phase I – Existing Plant

• 14,000 tonnes of graphite per year (smaller scale facility than Phase II)

• Proven historical production capability (working model for Phase II expansion)

• Established site workshop & support infrastructure

• Close to Port & Light Industry (15 minutes)

• Undergone Complete Refurbishment in 2014

• Site Operations Crews Recruited (No FIFO)

• ROM Stockpiles First for Production (lower grades than Uley Pit 2)

• Plant Ready as Planned & Now Waiting on Final SA Governmental Approvals

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Phase II Feasibility Program

		Anticipated capex is consistent with 2013 Scoping Study
Capital Cost (Capex)	$34M-$35M	but with significant proposed increase in potential processing capacity. The capex requirements remain relatively modest & will be met from a balance of debt,
		vendor financing & other capital assessed by reference to
		risk,production build up& workingcapital criteria.
Operating Cost (Opex)	$450-$500 (per tonne of graphite concentrate)	Anticipated opex is lower than the level estimated in the 2013 Scoping Study of AUD$650 per tonne of graphite concentrate. This opex level is considered to be globally
		competitive.
Average Sales Price	USD$1,400 (per tonne of graphite concentrate)	Consistent with anticipated average sales price expressed in 2013 Scoping Study. Confirmed prices by reference to current customer engagement by Valence Industries.
	Phase IIA – 50,000
	(tonnes of graphite concentrate per	This is consistent with the 50,000 tpa capacity planned in
Phase II Plant Capacity	year) + Phase IIB – 50,000	the 2013 Scoping Study but provides a new flexibility to increase output capacity by a further 50,000 tpa taking total Phase I & Phase II capacity to a potential 114,000 tonnes
	(tonnes of graphite concentrate per	of graphite concentrate each year.
	year)
		Consistent with 2013 Scoping Study the in-fill drilling
Uley Pit 2	Open pit free-dig operations.	campaign has verified ability to implement free dig open pit operations for proposed Uley Pit 2 to feed Phase I Plant &
		Phase II Plant.
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Valence Industries Geology & Resource

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JORC 2012 Mineral Resource

	Valence	Industries
	Uley Graphite Main Road
	Uley Pit 2	(JORC 2012)
	Lower
Resource	Cutoff		Average
Class- ification	Grade (% Graphitic	Tonnage (Mt)	Grade* (% Graphitic Carbon)
	Carbon)
Indicated	3.5	1.9	10.7%
Inferred	3.5	4.5	5.5%
Total		6.4	7.1%
**see JORC Statement on Page 2

ROM Stockpiles 174,000t @ 6.23% Graphitic Carbon

1	25,903 2.5
2	18,161 2.6
		174,000
3	24,748 2.4
4	1,406 2.1
Independent Survey (Maptek		2014)
ISO	9001 Assay (ALS Adelaide,	2014)
	**see JORC Statement on Page 2

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2014 Drilling campaign

• In fill drilling campaign completed

• Geo-model & Drill Data indicate old Uley Pit 1 did not intersect high grade zones (GREEN) (despite sitting on regional geophysical high)

• Uley Pit 2 (PINK) Targets fold limb extension of Uley Pit 1

• Uley Pit 2 is across higher grade zones & has simpler geology (discrete & continuous lodes)

• Grades now confirmed as Globally Unique

• Discovery of new mineralised graphitic zone with Arterial Flake[TM] graphite

• Revised JORC 2012 statement upgrading existing Mineral Resource to an Ore Reserve within weeks

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2014 Drill Campaign

• Revised model indicates significant multiple lodes

• Assays show very high grade flake graphite in previously known area 47%gC ++

• Discovery of New Graphite Zone \ (mineralised pegmatite)

• New zone exceptionally high grade graphite

• Significant Intersections & with substantive graphite between Very High Grades

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VXL Arterial Flake[TM]

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60%+
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Super
Jumbo
Flake
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Arterial
Flake [TM]
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• Globally Unique Flake Graphite Grades

• • Exceptionally Large Graphite Flake Sizes +5 Mesh (4mm+)

• Game Changing & Beyond Any Other Flake Graphite Material

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Valence Industries VXL Graphite Market

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VXL Graphite Products

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Graphite Facts

HIGH PURITY FLAKE • Graphite is relatively common, but high GRAPHITE IS IN purity, large flake graphite is rare VERY LIMITED • China, the world’s major graphite SUPPLY producer is closing polluting operations

• China, the world’s major graphite producer is closing polluting operations

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• Valence manufactures high purity flake graphite products for multiple applications

• Selling to traditional & new technologies

NEW TECHNOLOGIES ARE DRIVING DEMAND FOR HIGH PURITY FLAKE GRAPHITE

• New technologies require high purity graphite

• Valence’s Uley graphite is very low in impurities

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VXL Product Ranges

• Broad range of graphite products

• Globally diversified by region

• Product review initiated using historical production stored at site

• Valence seen as a politically stable source of supply for customers

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+895
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-295
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• Premium Product + High Demand

• Consistent High Purity + High Quantity

• Premium Product + High Demand

• Consistent High Purity + High Quantity

• High Quality + Sustained Demand

• Consistent High Purity + Consistent Quantity

• High Quality + Sustained Demand

• Consistent High Purity + Consistent Quantity

• High Quality + Increasing Demand

• New Applications + New Markets

• Consistent High Purity + Consistent Quantities

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Illustrative of selected VXL +50 Mesh 95% Graphite Products

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Commercialisation & Sales

• Phase I & Phase II first target traditional markets as baseline (refractories, crucibles, foundry applications & lubricants)

• Phase III targets specialist & high purity markets (batteries, fuel cells etc)

• Customer engagement & product review process takes a long time (Uley Graphite products have been in qualification process for 2+ years)

• Long term strategy - value add & build on direct relationships with customers

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• Batteries

• Fuel Cells

• Solar

• Semiconductors

• Conductive Plastic & Paint

  - **Flame Retardants**

• Lubricants

• Forging

• Ongoing strategy - diversify customer base across end markets & geographic regions

• Crucibles

• Hot Metal

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MOUs Exceed 80,000 t

MOU’s signed with separate customers & agents representing 29,000+ tonnes of annual graphite production over 2+ years

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Diverse
Products
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Diverse
Regions
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Critical Material

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Strategic & Critical for industrial nations including USA & European Commission

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Valence Industries Summary

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Existing Facility &
Unique Resource
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Only Australian
Production & Sales
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Rapid Growth
Program
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• Existing Graphite Resource, Mine & 14,000 tpa Processing infrastructure

• Established JORC 2012 Mineral Resource & Soon JORC 2012 Ore Reserve

• Proven past production of high quality Flake Graphite

• Initial sales of large flake >95% purity graphite commenced in April

• Processing of stockpiles 9 to 12 months from 2014 through 2015

• Strong MoUs & expressions of interest from major global customers supporting avg price of US$1400 per tonne

• New Phase II plant for planned production in 2015 – Adding 50,000+ tonnes per year

• Phase III High Purity & High Value Program

• Phase IV Graphene & New Advanced Manufacturing Program

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Contact

Christopher S. Darby CEO & Managing Director Valence Industries Limited i n f o @ v a l e n c e i n d u s t r i e s . c o m I + 6 1 8 8 4 1 8 8 5 6 4

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