QUANTUM GRAPHITE LIMITED — Investor Presentation 2015

Jan 26, 2015

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

ASX : VXL & VXLO

January-February 2015

Manufacturing Our Carbon Future[TM]

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

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Corporate Overview

	Capital & Shares Ordinary Shares 186.7m Options 68.4m Market cap (@45 cents) $84m Cash (End Q3 2014) ~$14.5m Debt Nil	Major Shareholders Strategic Energy Resources Ltd (Restricted) 11.67% HSBC Custody Nominees (Australia) Ltd 5.08% Avatar Energy P/L 4.11% EERC Australasia P/L (restricted) 3.55% BNP Paribas Nominees P/L 2.15% Top 20 shareholders hold 43.90%

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Corporate Overview

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Valence Industries
Directors & Officers
Graham Spurling AM
Chairman
Christopher Darby
MD & CEO
Glenister Lamont
Non-Exec. Director
Ian Schache
Non-Exec. Director
Ian Pattison
Non-Exec. Director
ASX chart of daily prices over 1 year for VXL compared to Mining & Metals Index
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Operating Graphite Manufacturer

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25000tpa
REFINING &
ORE RESERVE &
MICRONISING
MINE
Completed
Uley Pit 2 = 2Mt @
11.7%gC
High Purity &
LOM 5+ Years
TENEMENTS &
ENVIRONMENTAL
APPROVALS
Holds Mining,
Retention &
Exploration Licences
& Environmental
GRAPHITE PLANT Approvals
Commissioning
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Exceptional Location

23km from Major Regional Centre Road, Rail, Port, Electricity, Water & Light Industrial Infrastructure

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Freehold Land for Phase I & Phase II Operations & All Mining Rights 100% Owned by Valence Industries

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Data sourced from Feasibility Study, 31 December 2014 5**

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Valence Industries Now

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Established Current Sales Facilities & Contracts & Production Programs

Existing Traditional Graphite Plant Existing Plant capacity of 14000tpa

Sales Commenced in Mid-2014 & Further Sales & Exports on Track Long Term Commitments with 80000 of MoUs 2015 to 2019

Pre-processed fines stockpile processing on-track & started December 2014

Multiple sales contracts signed or in final negotiation for full plant capacity

ROM Stockpile pre-processing on-track & commenced December 2014 Full ROM Stockpile production on track & set to commence early 2015

Exports to Established Customers Commence in Early 2015 As Scheduled

Average Prices Per Tonne: Traditional A$1669t & Consistent with Forecast

Ore Reserves & Extensive Tenements

Only Operating Australian Graphite Mine

Largest Australian Graphite Ore Reserve 5+ Years LOM

Significant Resource Growth Potential

High Grade Material with Unique Flake Quality

Additional Mineral Resource & Ore Reserve Targeted for Q2 2015

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Current Production

Screen & Resize Existing Stockpiles

New ROM Stockpiles for Grading

Primary Grinding & Slurry Circuit

Secondary Process Building & Workshops

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Current Production

Flotation Cells Producing Graphite

Bagging of Production in Phase I Plant

Filled Processed Graphite Tank

Bagging of Production in Phase I Plant

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Transformation & Growth

Original Growth Plan Traditional Graphite Production

Feasibility Study Growth Plan Traditional & Advanced Graphite Production

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Phase I
Existing Plant Refurbished
2014
& Recommissioned
Phase II
Expanded Traditional
2015-2016
Production Capacity
Phase III
Future Program 2019-2020
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Phase II (Stage 1)
Operate Existing Plant & Mine Expand Existing Plant x25000tpa
2014 - Ongoing 2015-2016
Phase III (Stage 1)
Advanced Product Handling High Purity & Micronised
2015-2016 2015-2016
Phase II (Stage 2) & Phase III (Stage 2)
Expand Existing Plant x25000tpa Expand High Purity & Micronised
2017-2018 2017-2018
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Expansion: Operational Strategy

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**Data sourced from Feasibility Study, 31 December 2014

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Foundations for Advanced Manufacturing

The first western company to manufacture high quality Traditional Flake Graphite & Advanced Specialist Graphite products

High Grades & Arterial Flake[TM] = High Quality Flake Graphite Unique & globally significant area of graphite mineralisation

Combination of

high grades (11.7%gC) & easy liberation & absence of natural contaminants delivers large % of Jumbo Flake and Super-Jumbo Flake (4mm+ Flake Sizes)

Advanced Product Handling = Value Added Opportunity High Quality Traditional flake graphite concentrate from Uley Graphite[TM] deliver unique precursor material for value-added processing

Advanced Manufacturing principles allow Manufacture of specialist high-value product lines for Traditional Markets

Unique Arterial Flake[TM] (up to 60%gC) processing opportunities that decrease physical intervention & increase flake size retention

PHASE I & PHASE II AS PLANNED

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Further refining & reprocessing produce high-purity & micronised for High-Margin Production

NEW PHASE III FAST TRACKED

Data sourced from Feasibility Study, 31 December 2014 11**

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Expansion Program (2015-2016)

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Existing
Traditional
Graphite Plant
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Expand Traditional
Graphite Plant &
New Uley Pit 2
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Advanced
Product
Handling
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2014 2015-2016 2015-2016 2015-2016 In Production Feasibility Feasibility Feasibility Commissionin Study Study Study g Completed Completed Completed Existing Add Specialist Purify & 14000tpa 25000tpa Blending & Micronise Capacity Capacity Refining Uley Graphite Uley Graphite Port Adelaide Port Adelaide Site Site Site Site

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Expansion Program	Expansion Program	(2016-2017)
Expanded Traditional Graphite Plant	Expanded Advanced Manufacturing Plant
		Pit & Process
		Optimisation &
2016-2017	2016-2017	QA QC Systems
Feasibility Study	Verification Study to be	Value Added Automated
Completed	Conducted	Manufacturing
Add 25000tpa Capacity	Increase Capacity to Purify & Micronise	Multiple Specialist Graphite Products Packaged & Delivered to Global Customers
Uley Graphite	Port Adelaide
Site	Site

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Focus on Margin

	As Modelled in Feasibility Study	Avg COP (per tonne)	Avg Sales Price (per tonne)***	Avg Margin (per tonne)***
	Traditional Base Flake Graphite Production	$750-$950 (FOB Adelaide)*	$1670	$720-$920
	Advanced Flake Graphite Production		$4770	$3820-$4020
	Strategy: A Strong Value-Added Manufacturing Blend to Deliver Increased & Sustained Margins

• Ex Works Globally Competitive @ A$400-A$500 per tonne Data sourced from Feasibility Study, 31 December 2014 14 *rounded numbers

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Capital Allocation & Funding

Capital spread across 4 years & applied to match corresponding sales plan Modest capital draw in context of revenue & EBIT target over period Phased capital allocation gives flexibility as capacity increases Term sheets & negotiations with range of funders established Assessment of Risk & Cost of Capital Sources Underway Funding sources: capital reserves, revenue, debt & equity all available Plant Capital Expanded Traditional Plant & New Uley Pit 2 2015-2016 $36.7M Expanded Traditional Plant 2017-2018 Advanced Product Handling 2015-2016 $13.2M Advanced Manufacturing Plant 2015-2016 Data sourced from Feasibility Study, 31 December 2014 & Working Capital Not Included

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Revenue & Dividend Forecast

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Year 4 Revenue ~$97M Year 4 EBIT ~$53M Year 4 Dividend 25% of EBIT distribution

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Note: Conservative estimate at <5% of volume contributed by advanced processing. Margin & revenue increases for each tonne of advanced processing. www.valenceindustries.co m

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**Data sourced from Feasibility Study, 31 December 2014

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Mining Tenements & Regulatory Approvals

VALENCE INDUSTRIES MINING TENEMENTS	VALENCE INDUSTRIES MINING TENEMENTS	VALENCE INDUSTRIES MINING TENEMENTS
Number	Status	Area
ML5561	Current	44 ha
ML5562	Current	22 ha
RL 66	Current	225 ha
RL 67	Current	187.5 ha
EL 4778	Current	75km2
(**Renewal and extension of tenements is anticipated to be granted in the normal course)

PROGRAM FOR ENVIRONMENTAL PROTECTION & REHABILITATION (PEPR) 23 December 2014 Environmental Approval Granted Authorises Phase I Operations & Phase II Expansion Program at Uley Graphite[TM] facilities Authorises Uley Pit 2 Mining Program From Surface to 16m & Then Simple Process to go below 16m

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Arterial Flake [TM]
Core sample from new
pegmatite zone
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**Data sourced from Feasibility Study, 31 December 2014

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No Shortage of High Quality Raw Material

	ORE RESERVE – ULEY PIT 2 (JORC 2012) Classification Tonnage Average Grade %C Proved 319,000 17.9 Probable 1,716,000 11.9 Total 2,035,000 12.9 Uley Pit 2 – Fresh Graphitic Drill Core	MINERAL RESOURCE & EXPLORATION TARGETS (JORC 2012) Classification Tonnage Average Grade %C Measured 340,000 17.92 Indicated 1,850,000 11.84 Indicated (Stockpiles) 174,000 6.23 Inferred (Uley Pit 2) 850,000 8.89 Total 3,214,000 11.54 Exploration Target 9,000,000 to 12,000,000 9 to 12

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Ore Reserve Growth Potential

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Exploration Targets (JORC 2012)

All Located ML5561 & ML 5562 & RL66 & RL 67 Immediate Vicinity of Uley Pit 2

Current Drilling Program On Track on Uley Pit 2 Extension with Strong Visual Intersections & Results Due from Late March 2015 Onwards

Exploration Licence

Location 75km[2]

South and West of Uley Pit 2 Significant Potential with Historical Prospect Areas

**AREAS IN PINK = JORC 2012 EXPLORATION TARGET AREAS

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**Data sourced from Feasibility Study, 31 December 2014

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Ore Reserve Growth Potential

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**Data sourced from Feasibility Study, 31 December 2014

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Expansion Economics

Description	Outcome		Element	Assumption / Input
			Model Start Date	Dec 2014
NPV 10 (after tax)	$65m
			Modelling period	Monthly
IRR	46%
			Key Financial Output	Free Cash Flow to Equity
Total Ore Mined	2,035 kt		Real/Nominal Basis	Real
			Exchange Rate USD/AUD	0.80
Average Head Grade	12.9%
			Discount rate	10% (after tax)
Life of Mine	5 Years
			Tax Modelling	After tax
Total Graphite Concentrate Sold	235kt
			Graphite Resource Mined	2,035kt (Uley pit 2)
NOTE: This analysis is based on current formal Ore Reserve only as the key determinant of NPV. Every 1Mt of Ore Reserve adds A$32M to NPV.			Note: After Tax Free Cash to Equity representative of cash flows likely to be received over CURRENT life of the expanded operations as determined by current formal Ore Reserve only

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**Data sourced from Feasibility Study, 31 December 2014

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VXL Graphite Products

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**Data sourced from Feasibility Study, 31 December 2014

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Market Engagement & Sales Strategy

MOU’s signed with multiple customers & agents representing 80,000+ tonnes of annual graphite production over 2-3 years As Production Qualifications from Operating Plant are Completed Convert to Sales Agreements

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**Data sourced from Feasibility Study, 31 December 2014

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Global Graphite Leader

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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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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. 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).

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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