QUANTUM GRAPHITE LIMITED — Investor Presentation 2015

May 10, 2015

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Manufacturing Our Carbon Future

TM

PRODUCTION EXPANSION & ADVANCED MANUFACTURING STRATEGY

Investor Presentation

11 May 2015

W W W . V A L E N C E I N D U S T R I E S . C O M ASX : VXL & VXLO

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Disclaimer
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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 forwardlooking 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.

Valence Industries confirms that it is not aware of any new information or data that materially affects the information included in this announcement and that all material assumptions and technical parameters underpinning the estimates in this announcement continue to apply and have not materially changed. The announcements previously released and referenced in the announcement are: “Valence Doubles Existing ROM Stockpiles” (6/8/14), “Discovery of High Grade Arterial Flake Graphite” (9/10/14), “Uley Graphite Grade Increases to 11.7%” (17/11/2014), “Maiden High Grade Graphite Ore Reserve” (17/12/14) and “VXL Feasibility Study Expansion and Adv Manufacturing” (2/1/2015) , “50% Increase in Uley Graphite Resource” (5/5/2015). The Company cautions that the Exploration Target of 9 Mt to 12 Mt at 9% to 12% gC referenced in this presentation is conceptual in nature. The Exploration Target estimation is an expression of the potential for geological extensions to the Uley Pit 2 prospect based on prior work by third parties and interpretation of that data by Valence Industries. There has been insufficient exploration to estimate a Mineral Resource on the extension and it is uncertain if further exploration will result in the determination of a Mineral Resource on the extension. The Company notes that the work in relation to the Exploration Target has relied upon historic data from open file and archived reports and the information relied upon cannot be duplicated or otherwise verified by the Company. The estimate made here is an Exploration Target under JORC 2012 Clause 17.

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 - Strategy Update
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• Graphite production and exports have commenced from the existing plant

• Production to increase to 14,000 tpa capacity by Q3 CY 2015

• Funding now in place for expansion strategy

• Debt facility for US$75m and new equity up to A$11.4m

• Expansion program includes

• New high grade open pit mine

• Increasing graphite processing capacity to 64,000 tonnes p.a.

• New Materials Handling facility

• New Advanced Manufacturing plant

• Revised strategy applies additional capex to increase production of higher margin product – Advanced Manufacturing product to increase from 5% to 40% of total production

• 50% increase in graphite resource announced based on 35% of current drill program

• Resource & Ore Reserves upgrades to be announced progressively to Sept 2015

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Current Production
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• Production and exports have commenced from the existing graphite plant

• Commissioning is ongoing, with production scheduled to reach full 14,000 tpa capacity in Q3 CY 2015

• Process improvements scheduled for completion by mid June 2015 include

• expanded tailings facilities to service both current and proposed plants, and

• scalable process water return systems

• Production quality from the existing plant is exceeding expectations

• High proportion of large and jumbo flake graphite (+80 mesh and above)

• Lower proportion of smaller flake sizes and fines

• Customer demand continues to be strong

• Multi-year customer sales contracts and MoUs signed for up to 37,000 tpa

• Additional sales contracts are under negotiation

• Australian Graphene Research Centre program commercialisation is in progress

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Funding Secured for Expansion Program
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• Binding Heads of Agreement signed for US$75 million (A$94 million) in debt funding for capital costs and working capital for the Company’s full expansion program

• The debt facility is structured in two parts to match capital investment program

• Interim debt facility of $US20m (AU$25m) drawdown before August 2015

• Full debt facility of $US75m (AU$94m) which will also repay the Interim debt facility

• Interim debt facility is higher cost, but it allows deferral of the Full facility until additional production conditions can be met, thereby lowering the overall average debt cost

• Equity raising to supplement the debt facilities, to fund interim capital requirements and for working capital, comprising

• A placement to institutional and sophisticated investors to raise A$2.1m at $0.29 per share

• 1 for 6 renounceable Rights Issue at $0.29 per share to raise up to A$9.4m

• Placement and Rights Issue investors will receive 1 for 2 attaching options in the same class as the ASX listed VXLO options

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Production Expansion Program
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The funding facilities support the Company’s expansion program:

• Further Resource Upgrade (to Sept 2015)

Finalisation of the 2015 drilling and metallurgy program underway with corresponding resource upgrades for Uley Pit 2

• New High Grade Open Pit (mining to commence Q4 CY 2015)

New mining from Uley Pit 2 with associated tailings and water reclamation facilities

• Expand Graphite Production Capacity (2016)

Expand capacity in two stages, to 39,000 tpa initially, then to 64,000 tpa

• Materials Handling Facility (2016)

Development of a sophisticated Materials Handling and blending facility in Adelaide to meet demand for higher specification traditional graphite products

• Advanced Manufacturing Plant (2016)

Substantial increase in capacity for the planned Advanced Manufacturing plant for reprocessing, refining and resizing graphite into higher-margin specialised and highly purified graphite products

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Ongoing Resource Upgrade
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• 50% increase in graphite resource announced 5 May 2015

• Upgrade based on only 35% of current drilling program

• Very high graphite grade maintained at 11.63% graphitic carbon

• Transition of current resource upgrade to an Ore Reserve due in May 2015

• Mineral Resource & Ore Reserves from remaining 65% of drilling program due to be announced progressively to Sept 2015

• The immediate (JORC 2012) exploration target is 9 Mt to 12 Mt at 9% to 12% gC

Uley Pit	2 in-situ JORC	2012 Mineral	Resource*
Resource Classification	Tonnage (Mt)	Graphitic Carbon (%)	Contained Graphite (‘000 tonnes)
Measured	0.36	17.51	60
Indicated	2.75	11.39	310
Inferred	1.44	10.61	150
Total	4.54	11.63	520

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Uley Pit 2: 25m+ @ 25%+gC
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New Open Pit – Uley Pit 2
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• Mining of new open pit, Uley Pit 2 to commence in Q4 CY 2015

• Very high grade Ore Reserve at average 12.9% gC

• Free dig quarry operations with very short haulage 180m to stockpiles

• Uley Pit 2 contains JORC 2012 Ore Reserve of 2 Mt

• Uley Pit 2 JORC 2012 Exploration Target 9 Mt to 12 Mt at 9%-12% gC

• Southern Extension planned for 2017-2018 onwards

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Port Lincoln 23km
Graphite Ore Reserve 2,000,000+ tonnes
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New Open Pit – Uley Pit 2

(Looking South – April 2015)

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Production Expanding to 64,000 tpa
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• New production capacity to increase to 39,000 tpa commencing in 2016

• Traditional flake graphite production with multiple high-quality flake size & purity grades

• Automated systems will provide increased flexibility regarding processing options

• Further increase in capacity to to 64,000tpa scheduled for 2017–2018

• Capital cost of A$50M for the expansion program as set out in the December 2014 Feasibility Study remains valid

• Additional capital from current facilities to be applied to increasing capacity of proposed higher margin Advanced Manufacturing plant

Bagging of Current Production

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Materials Handling Facility
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• Construction of sophisticated Materials Handling facilities to commence in Adelaide in 2016

• Blending, sizing, packaging, warehousing and logistics of flake graphite products for export

• Designed to package graphite concentrate from:

• the Uley Graphite[TM] processing facilities, and

• the Advanced Manufacturing Facility (on completion)

• Value adding to standard graphite products through specialist blending, sizing and customised packaging

• Close proximity to port facilities to allow just-in-time deliveries

• Agile response to customer specifications for flake graphite products

• Ability to produce and manage up to 200 specialised graphite products

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Advanced Manufacturing Plant
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• Construction of Advanced Manufacturing plant to commence in 2016 in Adelaide

• The plant will reprocess and refine flake graphite concentrate from the Uley Graphite[TM] plant to higher quality and purity, including by micronisation

• Product will be produced to customer specification, up to 99.95% purity at specified flake sizing

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• Delivers significant value adding, increasing average product price from US$1,335/t to US$3,819/t*

• Feasibility Study was based on 5% of graphite concentrate from Uley going through the Advanced Manufacturing plant

• Revised strategy increases proportion of Advanced Manufacturing from 5% to 40% of total production, leading to a substantial increase in expected revenues

*Feasibility Study Dec 2014

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Feasibility Study Impact
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Baseline production split (5% Advanced Manufacturing) from Feasibility Study (Dec 2014)

Table 1: FEASIBILITY STUDY BASELINE PRODUCTION SPLIT 95/5	Table 1: FEASIBILITY STUDY BASELINE PRODUCTION SPLIT 95/5
	39,000 tonnes per annum
Advanced Manufacturing Processing	5% ~2,000 tpa US$3,819 p/t
Standard Processing	95% ~37,000 tpa US$1,335 p/t
Average Sales Price1	~39,000 tpa AU$1,824 p/t
Average Margin per Tonne	~39,000 tpa AU$1,047 p/t
Total Margin p.a.2	AU$40.8M

1 USD : AUD 1:0.80

2 39,000 tpa x AU$1,123 = AU$43.8M & AU$1,123 x 64,000 tpa = AU$71.8M

Revised strategy increases to 40% Advanced Manufactured in product mix delivering an 85% increase in average margin[2]

Table 3: REVISED PRODUCTION STRATEGY CURRENT PRODUCTION SPLIT 60/40	Table 3: REVISED PRODUCTION STRATEGY CURRENT PRODUCTION SPLIT 60/40
	39,000 tonnesper annum
Advanced Manufacturing Processing	40% 15,600 tpa US$3,819 p/t
Standard Processing	60% 23,400 tpa US$1,335 p/t
Average Sales Price1	100% ~39,000 tpa AU$2,911 p/t
Average Margin per Tonne2	100% ~39,000 tpa AU$1,941 p/t

• 1 USD : AUD 1:0.80

• 2 Margin per tonne derived from Feasibility Study to be verified in detailed engineering and design program

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Rights Issue
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• A 1 for 6 renounceable entitlement offer of up to 32.3 million shares at $0.29 per share to raise approximately $9.4 million (Rights Issue)

• Investors receive 1 free option for every 2 shares subscribed under the Rights Issue in the same class as ASX listed VXLO options, exercisable at $0.25 on or before 31 July 2016.

• The Rights Issue is not underwritten but Valence Industries may accept underwriting commitments and subscriptions for shortfall shares under the Rights Issue at its discretion

• Net proceeds from the Rights Issue and Placement will be applied towards completing the 2015 drilling program, new tailings facilities, completion of existing plant commissioning, design for production expansion, and for working capital

• The capital structure assuming full subscription to the Rights Issue is:

Description	Shares	Options *	Gross Amount Raised
ExistingSecurities	186,681,979	71,949,188	-
Placement	7,117,665	3,558,833	$2,064,123
Rights Issue (1 for 6)	32,299,941	16,149,971	$9,366,983
* The Company also has 5,550,000 Unlisted Total	VXLAM options on issue. 226,099,585	91,657,992	$11,431,106

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Timetable for Rights Issue
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EVENT	DATE
Announcement of Rights Issue & lodgment of prospectus	Thursday 7 May 2015
Ex date, Rights trading commences	Thursday 14 May 2015
Record date for determining Shareholder entitlements	7:00pm (AEST) Monday 18 May 2015
Prospectus dispatched to Shareholders	Thursday 21 May 2015
Last day of Rights trading	Thursday 4 June 2015
Closing Date – The last day for receipt of acceptance	5:00pm (AEST) Friday 12 June
forms	2015
Allotment of New Shares and New Options	Friday 19 June 2015
Expected commencement of trading in New Shares and Options	Monday 22 June 2015

• The timetable is subject to amendment in accordance with the ASX Listing Rules

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Debt Facility – Summary terms
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Interest Rate: Based on market rates at the time of closing each facility. Initial facility not expected to exceed 20% p.a. (short term facility) Full facility not expected to exceed 12.5% p.a. (repays Initial facility) Early repayment: In amounts of at least US$5m. Early repayment provisions apply Fees: Lead arranger fee 3.5%, 1% facility administration fee, 1.5% advisory fee. Key Conditions Due diligence, execution of formal documentation, obtaining shareholder Precedent: and regulatory approvals, consents or waivers, no deterioration in market conditions or the financial position of the Company, commissioning of existing plant and securing customer sales sufficient to repay each facility. Market Flex: Applies

Nature of Facility: Senior loans to Valence Industries, principal amortising notes

Security: First ranking charges over all assets and normal security arrangements consistent with financing of this nature

Warrants: Issued to Syndicate members equal to 15% of the amounts drawn, calculated based on the 32.2 cent strike price, exercisable within 48 months from drawdown

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Investment Highlights
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• Graphite production and exports have commenced from existing plant

• Production rate to increase to 14,000 tpa by Q3 CY 2015

• Multi-year customer sales contracts and MoUs signed for up to 37,000 tpa

• Funding now in place for full expansion strategy including

• New high grade open pit mine

• Increasing graphite processing capacity to 64,000 tonnes p.a.

• New Materials Handling facility

• New Advanced Manufacturing plant

• Revised strategy to increase production of higher margin product

• Advanced Manufactured product to increase from 5% to 40% of total production

• Increases product revenue from US$1,335/t to US$3,819/t

• Further Resource & Ore Reserve upgrades to be announced progressively to Sept 2015

• Australian Graphene Research Centre program commercialisation plans in progress

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Contact
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Christopher S. Darby CEO & Managing Director Valence Industries Limited

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Appendix & Supplementary Information

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Corporate
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Capital Structure

Capital Structure
(ASX: VXL & VXLO)
Ordinary shares	186.7m
Quoted Options(@ 25c 31.7.16)	71.9m
Options(@ $1.10 exp. 31.7.17)	5.5m
Market Cap(@30c)	$56m
Cash(@ 31/3/15)	$3.0m
12 month sh. price range	87c – 28c

Board

Graham Spurling AM Chairman Christopher S. Darby Managing Director & CEO Glenister Lamont Non-executive Director Ian Schache Non-executive Director Ian Pattison Non-executive Director Jarek Kopias CFO & Company Secretary

Senior Executives

Major Shareholders

Major Shareholders
Strategic Energy Resources Ltd	11.67%
HSBC Custody Nominees (Aust) Ltd	4.99%
Avatar Energy Pty Ltd	4.05%
EERC Australasia Pty Ltd	3.55%
Top 20 shareholders own 42.4%

Christopher S. Darby Managing Director & CEO Jarek Kopias CFO & Company Secretary Christopher S. Whiteley Chief Marketing Officer Chris Hall Acting Chief Operating Officer Greg Sando Chief Information Officer

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Ore Reserve & Mineral Resource
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• Mineral Resource (JORC 2012) upgrade released May 2015

JORC 2012 MINERAL RESOURCE

ORE RESERVE – ULEY PIT 2 (JORC 2012) Classification Tonnage Average Grade %C Proved 319,000 17.9 Probable 1,716,000 11.9 Ore Reserve Total 2,034,000 12.9 • JORC 2012 Ore Reserve upgrade expected to follow within weeks • A further Mineral Resource and Ore Reserve update is expected by September 2015 after further drilling	Classification Tonnage Average Grade %C
	Measured 360,000 17.51
	Indicated 2,750,000 11.39
	Inferred (Uley Pit 2) 1,144,000 10.61
	Total 4,540,000 11.63
	Indicated (Stockpiles) 174,000 6.23
	JORC 2012 EXPLORATION TARGET
	Immediate Exploration Target 9 Mt to 12 Mt 9%gC to 12%gC

• JORC 2012 Ore Reserve upgrade expected to follow within weeks

• A further Mineral Resource and Ore Reserve update is expected by September 2015 after further drilling

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Operating locations
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PORT ADELAIDE
FACILITIES
PORT LINCOLN
FACILITIES
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Land, tenements & resources
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JORC 2012
Exploration Target
9Mt-12Mt @ 9%gC-
12%gC
(ALL PINK AREAS)
__
Extension drilling
underway
on
9900m @
25M grid
&
Results due
Q2 CY 2015
__
Major expansion
75km [2] EL
South & West of
Uley Pit 2.
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Contact
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Christopher S. Darby CEO & Managing Director Valence Industries Limited

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