QUANTUM GRAPHITE LIMITED — Regulatory Filings 2014

Dec 16, 2014

ASX ANNOUNCEMENT ASX: VXL & VXLO

17 December 2014

Maiden High Grade Graphite Ore Reserve

• Maiden Ore Reserve of 261,000 tonnes of graphite at Uley Pit 2
• Ore Reserve Average Grade of 12.9% graphitic Carbon
• Mine Plan in place as Feasibility Study nears completion

Valence Industries Limited has released its maiden JORC 2012 Graphite Ore Reserve and an initial "Life of Mine" (LOM) for its wholly owned Uley GraphiteTM operations in South Australia.

Valence Industries Managing Director and CEO, Christopher Darby, said "this maiden graphite ore reserve is a significant milestone for Valence Industries. It underpins our plans for production and commercial sales of graphite. Valence Industries is unique in Australia, we have an Ore Reserve and a graphite plant in place with high grades of flake graphite to process. We forecast an initial life of mine of 6 years for Uley Pit 2, with the initial mine production plan processing over 2 Million tonnes of ore."

"The Valence Industries team is keen to demonstrate the wealth of potential at Uley. We have a corporate goal of value adding to our graphite through advanced manufacturing processes and this remains firmly in our sights."

"The drilling campaign now underway on the Uley Pit 2 Extension is expected to add to our mine life with drill results due in early 2015. Based on our JORC exploration target of 9Mt to 12Mt at 9% to 12% graphite grade around Uley Pit 2, we are confident there is no shortage of graphite to support our production expansion plans" said Mr Darby.

Graphite production at the Uley GraphiteTM facilities will commence on receipt of final regulatory approvals. Valence Industries understands that no substantive issues remain and approval will come shortly.

With this announcement, Valence Industries now holds the key supporting elements for the feasibility study planned for release late this month:

• A graphite ore reserve with supporting technical analysis;
• A mine plan with the relevant supporting expert assessment in place; and
• The market and capital assessment informing the ore reserve and mine plan and supporting the positive economics of the project.

Uley GraphiteTM Maiden Ore Reserve

Valence Industries' maiden Ore Reserve is based on the ordinary kriged Mineral Resource estimate (ASX announcement dated 17 November 2014) prepared by Coffey Mining.

The Mineral Resource and Ore Reserve estimates includes the infill drilling completed by Valence Industries over the current area of Uley Pit 2 but does not include the results (pending) of the

current drilling program across the Uley Pit 2 Extension (Figure 1) which was designed to define the nature and extent of mineralisation across a portion of the announced Uley GraphiteTM Exploration Target (ASX announcement dated 17 th November 2014).

The Ore Reserve estimate was undertaken utilising the Measured and Indicated Mineral Resources only**.

ULEYPIT 2 –MAIDEN ORE RESERVETonnes are expressed in dry metric tonnes
Classification	Tonnage	Average Grade(%gC)	Contained Tonnes
Proved	319,000	17.9	57,101
Probable	1,716,000	11.9	204,204
TotalOre Reserve	2,035,000	12.9	261,305

**Ore Reserve and Mine Plan do not yet take full account of the existing JORC 2012 Inferred Mineral Resource.

Ore Reserves are based on a cut-off grade of 3.6%, which is slightl higher than the 3.5% applied to the current JORC 2012 Mineral Resource.

A minimum mining cutback mining width of 25m was adopted.

Overall pit wall slope angle used was 40 degrees.

Graphite price assumptions for the ore reserves are US$1,400 per tonne, with a foreign exchange rate of USD/AUD 0.85.

Other Modifying Factors applied to the Ore Reserve estimate are included in JORC Table 1 (below).

Mine Plan & Optimal Pit Shell

The JORC 2012 Ore Reserve for Uley Pit 2 has been applied to establish a mine plan and to identify an optimal pit shell for Uley Pit 2. These two elements and the detailed expert reports that underpin them are essential for the feasibility study and represent another step forward in that program.

In Figure 1 (below) the design for the progressive mining development of Uley Pit 2 is illustrated.

Uley Pit 2 begins with the "starter pit" shown in yellow. Mining from this area is currently scheduled to commence following the processing of the existing ROM stockpiles at site. This is anticipated to occur in mid-2015.

Uley Pit 2 will then move into an expanded pit design shown in blue. This second stage is the first cutback of the "starter pit".

It is anticipated that a third stage involving a second cutback will be established for the area currently being drilled to the south of Uley Pit 2.

The marked exploration target locations are in addition to the exploration target area immediately to the south of Uley Pit 2 and shown as "Uley 2 – Pit Extension" where the current drilling program is underway. These areas form the JORC 2012 Exploration Targets as previously announced by Valence Industries.

Those Exploration Targets of between 6m and 12m tonnes at between 9% to 12% graphite grades surround the immediate vicinity of Uley Pit 2 and are located on the land owned by the company (ASX announcement dated 17th November 2014).

The Exploration Targets are in addition to the current JORC 2012 Mineral Resource held by Valence Industries and summarised in Table 2 (below).

TABLE 2: ULEY PIT 2 –JORC 2012 MINERAL RESOURCE*
Classification	Tonnage	Average Grade(%gC)	Contained Tonnes
Measured	340,000	17.92	60,000
Indicated	1,850,000	11.84	220,000
Inferred	850,000	8.89	80,000
Totals	3,040,000	11.69	360,000

*November 2014 estimate, reported using a 3.5% graphitic Carbon cut-off grade. Mineral Resource estimate reported in accordance with JORC 2012 guidelines and rounded to two significant figures (refer to announcement dated 17 November 2014, and JORC Tables 1-3 for further information).

**Note that the current Ore Reserve and the Mine Plan do not yet take full account of the existing JORC 2012 Inferred Mineral Resource in defining the LOM.

For further information, please contact:

Christopher S. Darby CEO & Managing Director info@valenceindustries.com +61 8 8418 8564

Competent Persons Statement

The aspects of this announcement that relate to the Uley Exploration Target, Geology and Database is based on information provided by Ms. Karen Lloyd (Director – Jorvik Resources and retained as GM – Technical Delivery, Valence Industries). Ms Lloyd is a Member of the Australian Institute of Mining and Metallurgy. Ms Lloyd has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and 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 and Ore Reserves". Ms Lloyd consents to the inclusion in this release of the matters based on their information in the form and context as it appears.

Competent Persons Statement

The aspects of this announcement that relate to Mineral Resources is based on information compiled under the supervision of Mr Ingvar Kirchner, who is a Fellow of the Australasian Institute of Mining and Metallurgy, a Member of the Australian Institute of Geoscientists, and a full-time employee of Coffey Mining. The Uley resource modelling and documentation was completed by Ms Ellen Maidens. Ms Maidens is a Member of the Australian Institute of Geologists and is a full-time employee of Coffey Mining Both Mr Kirchner and Ms Maidens have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and 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 and Ore Reserves". Mr Kirchner and Ms Maidens consent to the inclusion in this release of the matters based on their information in the form and context as it appears.

Competent Persons Statement

The aspects of this announcement that relate to metallurgical aspects of the Mineral Resource and Ore Reserve have been prepared by Mr Chris Campbell-Hicks. Mr Campbell-Hicks is a full-time employee of Coffey and is a Fellow and Chartered Professional of the Australasian Institute of Mining and Metallurgy and is a Member of the Mineral Industry Consultants Association.

Competent Persons Statement

The aspects of this announcement that relate to the Ore Reserve is based on information provided by Mr Harry Warries. Mr Warries is a Fellow of the Australasian Institute of Mining and Metallurgy and an employee of Coffey. Mr Warries has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and 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 and Ore Reserves". Mr Warries consents to the inclusion in this release of the matters based on their information in the form and context as it appears.

Forward Looking Statements

All statements other than statements of historical fact included in this announcement including, without limitation, statements regarding future plans and objectives of Valence Industries Limited (Valence Industries) are forward-looking statements. When used in this announcement, forward-looking statements can be identified by words such as 'may', 'could', 'believes', 'estimates', 'targets', 'expects' or 'intends' and other similar words that involve risks and uncertainties. These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this announcement, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the company, its directors and management of Valence Industries, that could cause Valence Industries' actual results to differ materially

from the results expressed or anticipated in these statements.

Valence Industries cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this announcement will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. Valence Industries does not undertake to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this announcement, except where required by applicable law.

November 2014 OK EstimateReported using a 3.5% Graphitic Carbon cutoff for reporting purposesGraphitic Carbon Grade tonnage distributions subdivided by JORC Code 2012 Resource Categoriesusing ROUNDED figures
MeasuredIndicated				Inferred			Total (Measured + Indicated+ Inferred)
Tonnes(Mt)	GraphiticC(%)	ContainedGraphite(Mt)	Tonnes(Mt)	GraphiticC(%)	ContainedGraphite(Mt)	Tonnes(Mt)	GraphiticC(%)	ContainedGraphite(Mt)	Tonnes(Mt)	GraphiticC(%)	ContainedGraphite(Mt)
0.34	17.92	0.06	1.85	11.84	0.22	0.85	8.89	0.08	3.04	11.69	0.36
		The Uley Project is located on the Eyre Peninsula, 15km west-southwest of Port Lincoln in the state of South Australia.Graphite mineralisation is hosted by folded and thrust graphitic schists and gneisses.The deposit is covered by 25m x 25m spaced diamond drillholes. 30 of these are vertical and the remaining 41 drillholesare angled at -60° to 090°Validated data from 70 diamond drillholes has been used in the resource estimate.
		Drillhole data was used to create wireframes of the mineralised zones utilising a 3.5% Graphitic C lower cut-off.Low grade interpretations have been omitted as advice is that recovery of graphite is problematic from this material.Drillhole logging data was used to create a surface of the base of oxidation and top of fresh rock. These have been used toinform the block model though was not used in tabulating the resource.
	techniques.	Graphitic C assays and non-carbonate assays were used in the estimation. For the purpose of the estimation, Coffey haveassumed the Non-carbonate C is comprised primarily of graphite. Study of core photos, drill logs and petrography reportsdo not suggest the presence of any non-elemental carbon within the non-carbonate C. Comparison of non-carbonate Cand graphitic C assays show the difference between the two techniques is less than the analytical error of the assayPrevious reports note that assays are of +75µm screened material for samples from the 18 drillholes drilled in 1993.Records of weights for the sieved fractions have not been recovered and hence tonnages relying on data from these holes
	results.	have not been corrected. Assays from all other samples were taken from complete samples.QAQC for the earlier drilling consists of umpire duplicates of early samples. No blanks or standards have been used in thesampling protocols. No potential samples were highlighted by the umpire assays and they are considered to be acceptablefor use in the Resource estimation. QAQC for the 2014 programme consists of the insertion of certified standards at a rateof 1 in 25 and the assaying of bulk reject duplicates at a rate of ~1 in 100. No problems were highlighted by the QAQC
		The severely selectively sampled holes from the 2011 drilling programme have been relogged so that there are lithologicalrecords for the entire holes. The visibly mineralised core that was not previously sampled has been sampled. The averagegrade of these samples is 8.04% Graphitic C.
		Both the resampling of the 2011 drillholes and the sampling of the 2014 drillholes have been selective, with only visiblygraphitic material sampled. In all, 52% of drilled core has been sampled. The selective sampling remains potentiallyproblematic in several areas.
		Drill core was sampled on geological units ranging between 0.3m and 4m in length with the majority of sample lengthsbeing 1m. These have been composited to 1m intervals for the Resource estimate.
		Statistical analyses were completed on the raw sample data and the 1m composite data. A top cut of 50% Graphitic C wasapplied to the composites in the mineralised zones in the footwall (FW) and hangingwall (HW) domains, and a top cut of30% Graphitic C was applied to the composites in the flat lying/near surface domain.
		Directional variograms were generated for composite data from both the FW and HW domains and variogram modelscreated. As the flat lying domain contained insufficient samples to conduct variography, parameters from the FW domainwere applied to the flat lying domain with adjusted orientation.
		Grade estimates were generated for parent blocks of size 12.5m (X) x 12.5m (Y) x 4m (Z) with sub-blocks of size 1.25m x1.25m x 1m. The method used to obtain grade estimates was Ordinary Kriging (OK).
		In situ dry bulk densities were assigned on the basis of 371 measurements made from 22 drillholes from the 2014programme. It should be noted that the quantity of bulk density data has improved substantially, and revised and

• essentially lower bulk densities applied to graphite mineralisation are the result of the Valence data. This change is likely to be related to a higher level of weathering of the host rock than was previously understood.
• Resource classification was developed from the confidence levels of key criteria including drilling methods, geological understanding and interpretation, sampling, data density and location, grade estimation and quality of the estimates. The resource classification and estimate does not specifically address the definition or quantity of material types or product quality as all contacts are relatively gradational and metallurgical testwork is on-going.
• A graphitic carbon cutoff of 3.5% was adopted based on a graphite product price of $1,500/t, a processing cost of $28.50/t, a coarse fraction of 70% and an overall recovery of 90%. The values of 70% coarse fraction (>75μm) and 90% recovery have come from review of two testwork programmes carried out on Uley ore samples in April and May 2007 and another programme carried out in August 2014.

Figure 2 – Drillhole Location

9600 N		MX223	MX22
9550 N		MA28	Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contr
				AD604 N0602 N0600MUSIC AD323 N0601 N0321 N0500		M0324
9500 N				MOROS MOROS MOROL MORT2 MORTO MOROR MOROR		CollectionME21
				M0507 M0317 M0506 M0319 M0505 M0320 M0504		M/503
9450 N	MX22			ME24 ME619 ME17 ME15 ME13 ME11 ME609 ME50		2010.M625.
					M0305 M0508 M0304 M0312 M0306 M0313 M0307 M0511	10311	M0310	MORIE	10309
9400 N		MAS20 MAS18 MAS16		M614 M630 M632 M638 M636	M0634
	MONT MONT		HD635ABECO	M631	M629 - H0626 - H0627
9350 N.
9850 E	9900 E	9950E		10000 E 10050 E	10100 E	10150 E 10200 E		10250 E	10300 E

Figure 3 – Drillhole and Geology Cross Sections 9375N

(Coffey, 2014)

(Coffey, 2014)

8

Figure 4 – Drillhole and Geology Cross Sections 9400N

(Coffey, 2014)

9

Figure 5 – Drillhole and Geology Cross Sections 9425N

Figure 6 – Drillhole and Geology Cross Sections 9450N

(Coffey, 2014)

w w w . v a l e n c e i n d u s t r i e s . c o m

Figure 7 – Drillhole and Geology Cross Section 9475N

Figure 8 – Drillhole and Geology Cross Section 9500N

Figure 9 – Drillhole and Geology Cross Section 9525N

Figure 10 – Drillhole and Geology Cross Section 9550N

(Coffey, 2014)

Figure 11 – Drillhole and Geology Cross Section 9600N

Table 2 – Collar Coordinates for Drillholes used in the Resource

Hole ID	Easting	Northing	RL	Total Depth(m)
MD222	10004	9593.5	499	41
MD223	9950	9600	498.3	43
MD304	9999.78	9425.11	497.27	97
MD305	9950.19	9425.33	498.85	61.4
MD306	10049.23	9425.52	495.75	93.5
MD307	10102.64	9427.54	493.69	97
MD308	10275.21	9425.16	485.57	95.5
MD309	10324.96	9425.92	482.2	66.5
MD310	10224.77	9424.59	488.98	51.5
MD311	10175.68	9426.86	491.38	55.5
MD312	10024.4	9425.34	496.55	89.5
MD313	10073.15	9426.23	495.15	87.5
MD317	9999.94	9474.38	497.88	111.2
MD319	10050.38	9476.2	496.55	105
MD320	10099.72	9473.07	496.57	102.5
MD321	10100.21	9522.52	498.05	108
MD323	10048.42	9524.7	498.67	96.5
MD324	10149.25	9525.33	495.58	104.5
MD500	10122.2	9523.09	497.16	105.5
MD501	10068.51	9523.52	498.76	108.5
MD502	10016.92	9525.72	498.72	96.3
MD503	10153.51	9474.03	494.2	85.6
MD504	10125.76	9475.87	496.35	100
MD505	10073.84	9479.46	497.52	102.5
MD506	10019.49	9474.15	497.41	94.4
MD507	9968.76	9473.82	498.23	105.5
MD508	9974.31	9427.34	498.4	99.5
MD509	9978.63	9372.79	498.92	104
MD510	10024.97	9374.4	498.35	80.4
MD511	10133.84	9423.01	492.34	81.4
MD600	9999.94	9525.16	498.26	110.2
MD601	10000.19	9499.99	498.08	101.2
MD602	9975.31	9525.02	497.93	149.3
MD603	9975.37	9499.95	498.07	140.2
MD604	9949.89	9524.99	497.53	140.3
MD605	9950.04	9500.08	497.58	144.3
MD606	10099.88	9500.05	497.82	80.6
MD607	10124.88	9449.92	494.52	68.2
MD608	10075.13	9500.1	498.39	114.7
MD609	10099.89	9450.11	494.9	80.2
MD610	10050.57	9499.98	498.09	114.7
MD611	10074.92	9450.22	495.34	97.9
MD612	10025.07	9499.95	498.05	101.2
MD613	10050.23	9450.16	495.86	119.2
MD614	10000.51	9401.75	498.13	101.2

Hole ID	Easting	Northing	RL	Total Depth(m)
MD615	10025.41	9449.97	496.95	121.8
MD616	9975.76	9399.98	498.62	120.7
MD617	10000.31	9450.07	497.83	110.2
MD618	9950.63	9400.02	499.19	119.2
MD619	9975.78	9449.89	498.28	110.2
MD620	9926.2	9400	498.96	117.7
MD621	10150.29	9500.04	495.13	50.2
MD622	9926.07	9449.86	498.15	128.2
MD624	9950.37	9450.04	498.51	119.2
MD625	10151.01	9449.98	493.89	40.2
MD626	10100.26	9372.25	492.87	56.2
MD627	10125.56	9373.27	490.88	53
MD628	9976.25	9550.04	498.16	119.2
MD629	10075.46	9374.99	494.85	56.8
MD630	10025.81	9402.83	496.96	78.5
MD631	10050.69	9374.97	496.86	80.2
MD632	10051.97	9402.79	495.98	95.2
MD633	10026.43	9375.12	498.15	79.6
MD634	10076.49	9394.31	495.19	84.6
MD635	10000.1	9374.96	499.36	78.8
MD636	10125.94	9399.98	491.74	42.6
MD637	9975.59	9375.02	499.03	80.2
MD638	10101.37	9405.95	492.09	77.7
MD639	9950.27	9374.98	499.28	99.7
MD640	9928.4	9374.97	499.15	100.4

The following extract from the JORC Code 2012 Table 1 is provided for compliance with the Code requirements for the reporting of Mineral Resources:

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

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Samplingtechniques	Nature and quality of sampling (eg cut channels,random chips, or specific specialised industrystandard measurement tools appropriate to theminerals under investigation, such as down holegamma sondes, or handheld XRF instruments, etc).These examples should not be taken as limiting thebroad meaning of sampling.Include reference to measures taken to ensuresample representivity and the appropriatecalibration of any measurement tools or systemsused.Aspects of the determination of mineralisation thatare Material to the Public Report.In cases where 'industry standard' work has beendone this would be relatively simple (eg 'reversecirculation drilling was used to obtain 1m samplesfrom which 3kg was pulverised to produce a 30gcharge for fire assay'). In other cases moreexplanation may be required, such as where thereis coarse gold that has inherent sampling problems.Unusual commodities or mineralisation types (egsubmarine nodules) may warrant disclosure ofdetailed information.	All holes used in the Resource Estimate were HQdiamond drillholes sampling moderately dippingstratabound graphite mineralised zones.30 vertical drillholes were used in the estimatetogether with 40 drillholes drilled at -60° towards090.Half cores samples were obtained on geologicalintervals, typically 1m in length but ranging from0.3m to 4m.High grade graphite mineralisation is reasonablyvisible during geological logging and sampling.Visibly mineralised intervals were crushed andpulverised to at least 85% passing 75μm, thensent for analysis by LECO method.The sample preparation and assaying techniquesare industry standard and appropriate for this typeof mineralisation.Some core material remains selectively sampled.	KL
Drillingtechniques	Drill type (eg core, reverse circulation, open-holehammer, rotary air blast, auger, Bangka, sonic, etc)and details (eg core diameter, triple or standardtube, depth of diamond tails, face-sampling bit orother type, whether core is oriented and if so, bywhat method, etc).	All holes used in the Resource Estimate weredrilled from surface.30 drillholes were drilled using HQ standard tubeand were not orientated.42 angled drillholes were drilled using HQ tripletube. Downhole surveys were obtained using aRanger SS118 downhole camera.The angleddrillholes were orientated using the Reflex ACT IIRD core orientation tool.	KL
Drill samplerecovery	Method of recording and assessing core and chipsample recoveries and results assessed.Measures taken to maximise sample recovery andensure representative nature of the samples.Whether a relationship exists between samplerecovery and grade and whether sample bias mayhave occurred due to preferential loss/gain offine/coarse material.	Core recovery was captured by logging "CoreLoss" in areas of no/low recovery.Industry standard procedures/techniques wereemployedtoensuremaximumdownholerecovery. Overall core recovery for all resourcedrillholes is 85%.There has been no identified relationship betweensample recovery and grade.	KL

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Logging	Whether core and chip samples have beengeologically and geotechnically logged to a level ofdetail to support appropriate Mineral Resourceestimation, mining studies and metallurgicalstudies.Whether logging is qualitative or quantitative innature. Core (or costean, channel, etc)photography.The total length and percentage of the relevantintersections logged.	Geological and geotechnical logging of thedrillholes is of an appropriate standard to supporta Mineral Resource estimation, mining studiesand metallurgical studies.Geological core logging is qualitative.Core photography is available.The total length of the samples intervals for allholes used in the estimate was 3,420m (52% oftotal core was sampled)	KL
Sub-samplingtechniquesand samplepreparation	If core, whether cut or sawn and whether quarter,half or all core taken.If non-core, whether riffled, tube sampled, rotarysplit, etc and whether sampled wet or dry.For all sample types, the nature, quality andappropriateness of the sample preparationtechnique.Quality control procedures adopted for all subsampling stages to maximise representivity ofsamples.Measures taken to ensure that the sampling isrepresentative of the in situ material collected,including for instance results for fieldduplicate/second-half sampling.Whether sample sizes are appropriate to the grainsize of the material being sampled.	Half core samples were taken. In competent corethese were cut by core saw.In incompetentmaterial the sample was collected by manualhalving of the material. Half core sampling is anappropriate, industry standard technique.Bulk reject duplicate samples were taken in the42anglesdrillholestoensuresamplerepresentivity. These duplicates were inserted ata typical frequency of 1 in 100 samples (1% rateof insertion). Certified reference standards wereinserted at a typical rate of 1 in 20 samples (5%rate of insertion) for quality assurance checks ofanalysesreportedbythemineraltestinglaboratory ALS Global.There is no record of field duplicate samples orstandards having been submitted in the 30verticaldrillholestotestsamplingrepresentatively.Samples from the 18 vertical 1993 drillholes werecrushed and sieved on site prior to dispatchingthe coarse +75μm to ALS-Chemex for assaying.There is no available data on weights of sievedfractions.If the fine fraction was a significantproportion of the sample, assays from the coarsefractions should be higher than correspondingwhole rock assays.A study of grades fromthe1993 drilling with the whole rock assays fromthe other programmes shows no difference ingrade tenor. Visual comparison of grades in the1993 drillholes with neighbouring holes from theother programme likewiseshows no notabledifference in grade tenor. As such, despite thedescription of assaying of coarse fractions only,the assays from the 1993 drilling are treated thesame as whole rock assays with no tonnagecorrection required.Discrepancies in C values in the 1993 samples,with non-carbonate C occasionally being greaterthan the Total C value, are assumed to reflect alackofcompletehomogenisationinthecrushing/sieving process carried out on site.Sample preparation on the 12 2011 verticaldrillholes and the 40 sampled angled 2014drillholes was undertaken by ALS Adelaide.Samples were crushed and split to >70% passing-6mm and pulverised to >85% passing 75μm priorto assaying by ALS Brisbane.Sample sizes are deemed appropriate for thematerial being sampled.	KL

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Quality ofassay dataandlaboratorytests	The nature, quality and appropriateness of theassaying and laboratory procedures used andwhether the technique is considered partial or total.For geophysical tools, spectrometers, handheldXRF instruments, etc, the parameters used indetermining the analysis including instrument makeand model, reading times, calibrations factorsapplied and their derivation, etc.Nature of quality control procedures adopted (egstandards, blanks, duplicates, external laboratorychecks) and whether acceptable levels of accuracy(ie lack of bias) and precision have beenestablished.	Techniques used are:C-IR18 (Graphitic carbon by LECO analyser)C-CAL15 (Inorganic carbon by difference)C-IR17 (Organic carbon by LECO analyser)C-CON01(CarbonconcentratebyLECOanalyser)C-IR07 Total Carbon by LECO analyser)C-IR18 was used for the 2014 samples, and CIR17 was used for previous samples.As therocks are assumed to contain no organic material(supported by petrographic study), the differencebetween these two techniques is less than theanalytical error of the techniques and henceconsidered negligible.Bulk reject duplicate samples were taken in the42anglesdrillholestoensuresamplerepresentivity. These duplicates were inserted ata typical frequency of 1 in 100 samples (1% rateof insertion). Certified reference standards wereinserted at a typical rate of 1 in 20 samples (5%rate of insertion) for accuracy checks of analysesreported by the mineral testing laboratory ALSGlobal.There is no record of field duplicate samples orstandards having been submitted in the 30verticaldrillholestotestsamplingrepresentatively.Internal laboratory QAQC for all sampling hasbeen reviewed with no problems highlighted withrespect to sampling bias or precision.	KL
Verification ofsampling andassaying	The verification of significant intersections by eitherindependent or alternative company personnel.The use of twinned holes.Documentation of primary data, data entryprocedures, data verification, data storage (physicaland electronic) protocols.Discuss any adjustment to assay data.	There are no twinned drillholes. Areas of overlapbetween angled and vertical drillholes showintercepts of similar tenor and thicknessAssays in the database have been checkedagainst laboratory certificates and original logswhich contained assay data. No inconsistencieswere identified.Non-sampled intervals were assumed to be"unmineralised" and given a Graphitic C value of0.01%, equivalent to half the detection limit of CIR18.	KL
Location ofdata points	Accuracy and quality of surveys used to locatedrillholes (collar and down-hole surveys), trenches,mine workings and other locations used in MineralResource estimation.Specification of the grid system used.Quality and adequacy of topographic control.	Drill location co-ordinates are reported in UleyMine Grid (transformed to truncated AMG) Thereported truncation was:Easting = -554,216.866MNorthing = -6,139,092.867MADH = RL +404.252MDrillhole collars have been re-surveyed in the fieldand these transformations validated. All drillholeswere re-surveyed during 2014 by PA Dansie &Associates Pty Ltd.A whole of site survey was undertaken during2014 by Maptek Pty Ltd.	KL

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Data spacinganddistribution	Data spacing for reporting of Exploration Results.Whether the data spacing and distribution issufficient to establish the degree of geological andgrade continuity appropriate for the MineralResource and Ore Reserve estimation procedure(s)and classifications applied.Whether sample compositing has been applied.	No exploration results are reported or included inthis Mineral Resource estimate.Diamond drilling on an infill spacing of up to 25mX 25m was used to estimate geological and gradecontinuity at a level deemed appropriate for theclassification and reporting of a Mineral Resourceestimate.1m sample composites applied during theestimation process.	KL
Orientation ofdata inrelation togeologicalstructure	Whether the orientation of sampling achievesunbiased sampling of possible structures and theextent to which this is known, considering thedeposit type.If the relationship between the drilling orientationand the orientation of key mineralised structures isconsidered to have introduced a sampling bias, thisshould be assessed and reported if material.	Drilling orientation is considered appropriateconsidering the deposit type and orientation ofmoderatelyWNWdippingmineralisation.Sampling bias relating to the orientation ofsampling is considered minimal.	KL
Samplesecurity	The measures taken to ensure sample security.	All reasonable measures are being taken toensure sample security along the value chain.These measures include the recording of sampledispatch and receipt reports, secure storage ofsamples, and a locked and gated core shedThe assay method used is destructive.Arepresentative sample library is maintained onsite.	KL
Audits orreviews	The results of any audits or reviews of samplingtechniques and data.	Noformalthirdpartyauditshavebeenundertaken.Laboratoryproceduresandmanualsarecomprehensively documented on-site and boththe AMDEL and ALS laboratories are consideredto be reputable laboratory for carbon analysis. Asthe assaying techniques used are broadlydestructive techniques, with a limited ash residue,they not suited for replicate analysis.The quality control protocols implemented at Uleyare considered to represent good industrypractice and allow some assessment of analyticalprecision and accuracy.The assay data isconsidered to display acceptable precision.Internal laboratory QAQC data (standards, blanksand duplicates) have been reviewed and nosignificant problems were identified regarding thequality of the assaying.	KL

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

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Mineraltenementand landtenure status	Type, reference name/number, location andownership including agreements or material issueswith third parties such as joint ventures,partnerships, overriding royalties, native titleinterests, historical sites, wilderness or nationalpark and environmental settings.The security of the tenure held at the time ofreporting along with any known impediments toobtaining a licence to operate in the area.	The Uley Graphite Project consists of fivecontiguous tenements on the Eyre Peninsula ofSouth Australia, of which two are retention leasestwo are mining leases and one is an explorationlicence. Tenement identification numbers are:ML5561, ML5562, EL4778, RL66 and RL67.Mining development is subject to the development,submission and approval of a Program forEnvironmental Protection and Rehabilitation(PEPR) and an Environmental Licence which ismandated under South Australian State legislation.The site has been on care and maintenance sincehistorical production ended in 1993. It is notexpected that environmental constraints will beconsidered a material constraint to the prospects ofeventual economic extraction.Valence Industries has a 100% interest in thesetenements and no joint venture or other materialagreements are in place. Valence does have a1.5% royalty in place with its former parent.Tenement ownership is secure with expirationdates varying from 2016 (EL4778) to March 2017(ML5561 and ML5562). There are no knownimpediments to obtaining a license to operate inthe area.	KL
Explorationdone byother parties	Acknowledgment and appraisal of exploration byother parties.	A number of parties have undertaken explorationon the leases and the data set held by ValenceIndustries Ltd includes all available information.	KL
Geology	Deposit type, geological setting and style ofmineralisation.	Graphite is developed as a constituent mineral incoarse prograde metamorphic assemblages aswell as in the fabric and foliation of micaceaousschists. These are interpreted to be the folded,thrust and metamorphosed equivalents of the CookGap Schist. Folding of stratigraphy on variouslocal scales is obvious.	KL
DrillholeInformation	A summary of all information material to theunderstanding of the exploration results including atabulation of the following information for allMaterial drillholes:easting and northing of the drillhole collarelevation or RL (Reduced Level – elevationabove 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 thebasis that the information is not Material and thisexclusion does not detract from the understandingof the report, the Competent Person should clearlyexplain why this is the case.	A summary of the drillholes used in the ResourceEstimate is provided in Table 2 of this report.	EM/KL

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Dataaggregationmethods	In reporting Exploration Results, weightingaveraging techniques, maximum and/or minimumgrade truncations (eg cutting of high grades) andcut-off grades are usually Material and should bestated.Where aggregate intercepts incorporate shortlengths of high grade results and longer lengths oflow grade results, the procedure used for suchaggregation should be stated and some typicalexamples of such aggregations should be shown indetail.The assumptions used for any reporting of metalequivalent values should be clearly stated.	This table accompanies a Resource Estimation,and is not reporting Exploration results.No metal equivalents are used.	KL
Relationshipbetweenmineralisation widths andinterceptlengths	These relationships are particularly important in thereporting of Exploration Results.If the geometry of the mineralisation with respect tothe drillhole angle is known, its nature should bereported.If it is not known and only the down hole lengthsare reported, there should be a clear statement tothis effect (eg 'down hole length, true width notknown').	As this table accompanies a Resource Estimation,and is not reporting Exploration results, this sectionis not applicable.The relationships are captured and defined on ahole-by-hole basis in the resource model andorientations of holes to mineralised zone areappropriately accounted for in the estimate.	KL
Diagrams	Appropriate maps and sections (with scales) andtabulations of intercepts should be included for anysignificant discovery being reported These shouldinclude, but not be limited to a plan view of drillholecollar locations and appropriate sectional views.	Collar Plan of Resource Drillholes is presented inFigure 2 of this report.Typical cross sections are presented in 3 to 11 ofthis report.	EM/KL
Balancedreporting	Where comprehensive reporting of all ExplorationResults is not practicable, representative reportingof both low and high grades and/or widths shouldbe practiced to avoid misleading reporting ofExploration Results.	Valence Industries carry out balanced reporting ofexploration results.Selective sampling of only visibly graphitic materialhas been carried out on the 2011 and 2014 drillcore.	EM/KL
Othersubstantiveexplorationdata	Other exploration data, if meaningful and material,should be reported including (but not limited to):geological observations; geophysical surveyresults; geochemical survey results; bulk samples –size and method of treatment; metallurgical testresults; bulk density, groundwater, geotechnicaland rock characteristics; potential deleterious orcontaminating substances.	All material available exploration information wasconsidered. This comprised a drilling database,previous estimates and reports and academicliterature, petrological reports, metallurgical testwork reports, density determinations, and site visitphotography/communication. Historical productionrecords from the original Uley Mine providedassumptions relating to future potential economicextraction.	KL
Further work	The nature and scale of planned further work (egtests for lateral extensions or depth extensions orlarge-scale step-out drilling).Diagrams clearly highlighting the areas of possibleextensions, including the main geologicalinterpretations and future drilling areas, providedthis information is not commercially sensitive.	Exploration work to quantify the extent andcontinuity of mineralisation within the Valence heldtenure is ongoing. This work includes planneddiamond and reverse circulation drilling, furthergeophysical surveys and geological mapping. Thisexploration effort is deemed commerciallysensitive.	KL

Section 3 Estimation and Reporting of Mineral Resources (Criteria listed in section 1, and where relevant in section 2, also apply to this section).

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Databaseintegrity	Measures taken to ensure that datahas not been corrupted by, forexample, transcription or keyingerrors, between its initial collectionand its use for Mineral Resourceestimation purposes.Data validation procedures used.	Data has been provided as an Access database.A total of 18 1993 era diamond holes drilled by Graphite Mines ofAustralia, 12 SER diamond drillholes drilled in 2011, and 40Valence angled diamond holes in the Uley area have been usedin the resource modelling study. The database used for resourceestimation consists solely of diamond drilling and has beenreviewed and re-validated for obvious errors by Coffey prior tocommencing the resource estimation study. The assay data hasbeen cross checked against assay certificates provided by ALSChemex.The following checks were completed prior to uploading the drillingdata into a Vulcan database:Check and correct overlapping intervals.Ensure downhole surveys existed at a 0m depth.Ensure consistency of depths between different datatables, for example survey, collar and assays.Check gaps in the assay data which were replaced by -999.Hole MD623 had not been assayed at time of data handover andso has not been included in the resource database.Hole MD617M is a metallurgical hole and has not been assayedso has not been included in the resource database.No records were apparently kept for the sieved fraction weightsfrom the 1993 drilling to determine factors for tonnage and assaygrade fractions. As discussed in the subsampling section ofSection 1 of this table, statistical comparison of these sampleswith the other samples shows there is no difference between the1993 assays and the whole rock assays. As such the1993samples are treated as whole rock assays for the MineralResource estimate.	EM/
Site visits	Comment on any site visitsundertaken by the CompetentPerson and the outcome of thosevisits.If no site visits have beenundertaken indicate why this is thecase.	Ms Karen Lloyd (Jorvik Resources Pty Ltd), Competent Personfor geology and exploration data has been engaged by ValenceIndustries in the capacity of General Manager – TechnicalDelivery and undertakes regular site visits to Uley.	KL
Geologicalinterpretation	Confidence in (or conversely, theuncertainty of) the geologicalinterpretation of the mineral deposit.Nature of the data used and of anyassumptions made.The effect, if any, of alternativeinterpretations on Mineral Resourceestimation.The use of geology in guiding andcontrolling Mineral Resourceestimation.The factors affecting continuity bothof grade and geology.	The current geological interpretation is based on review ofprevious estimates and reports and has been augmented by thegeological and structural information provided by the 2014angled infill diamond drillholes.Information from site visits and geological reports suggests thegraphite lenses occurs within an anticlinorium i.e. a fold withparasitic folds on its limbs, as occurred in the Uley mine to thenorth. The current model is of a recumbent antiform plungingvery shallowly to the ENE, with HW lodes dipping shallowly tothe WNW and FW lodes dipping moderately (~33°) to theWNW.	EM

Criteria	JORC Code Explanation	Commentary
Dimensions	The extent and variability of the	The dimensions of the block model are:	PersonEM
	Mineral Resource expressed aslength (along strike or otherwise),plan width, and depth below surfaceto the upper and lower limits of theMineral Resource.	NorthingEasting (X)(Y)	RL (Z)
		Minimum98009200Coordinates	340
		Maximum104009700Coordinates	540
		Block size (m)12.512.5	4
		Sub Block size (m)1.251.25	1
		Rotation00	0
Estimation andmodellingtechniques	The nature and appropriateness ofthe estimation technique(s) appliedand key assumptions, includingtreatment of extreme grade values,domaining, interpolation parametersand maximum distance ofextrapolation from data points. If acomputer assisted estimationmethod was chosen include adescription of computer softwareand parameters used.The availability of check estimates,previous estimates and/or mineproduction records and whether theMineral Resource estimate takesappropriate account of such data.The assumptions made regardingrecovery of by-products.Estimation of deleterious elementsor other non-grade variables ofeconomic significance (eg sulphurfor acid mine drainagecharacterisation).In the case of block modelinterpolation, the block size inrelation to the average samplespacing and the search employed.Any assumptions behind modellingof selective mining units.Any assumptions about correlationbetween variables.Description of how the geologicalinterpretation was used to controlthe resource estimates.Discussion of basis for using or notusing grade cutting or capping.The process of validation, thechecking process used, thecomparison of model data todrillhole data, and use ofreconciliation data if available.	Graphitic C (%) was estimated using Ordinary Kriging (OK)utilising the cut 1m composites in Vulcan mining software.Grade estimation was constrained to blocks inside themineralisation wireframes with hard boundaries applied. Theexception to this was zone 2. This zone contains both a HWand a FW limb. The blocks were flagged as being HW (202) orFW (201) but were informed using all composites from zone 2(both 201 and 202) to allow the estimation of the hinge area tobe well informed. Any non-sampled intervals were assigned avalue of 0.01% Graphitic C.No other elements were estimated, be they deleterious or not.No assumptions were made concerning mining selectivitybeyond small to medium scale open pit mining.Material types and quality were not defined in the model giventhe data available for interpretation and estimation.assumed that metallurgical testing based on bulk samples arebroadly representative of products likely to be obtained frommining of this mineralisation.The deposit was domained into the following domains:Footwall domain – in the footwall of the fold, dipping atapproximately 33°Hanging wall domain – in the hanging wall of the fold,dipping at approximately 15°Flat lying domain – shallow overprinting mineralisationExtreme grade values were top cut. A top cut of 50% GraphiticC was used within the FW and HW domains and a top cut of30% Graphitic C was used within the Flat lying domain. Thevalues used were determined based on statistical analysis of thecomposites within each domain.The parent block size is approximately ½ of the nominal 25m x25m drill spacing with sub-blocking chosen to allow for adequatevolume resolution.The search parameters are suitable given the parent block size,data spacing, and the orientation of the modelled mineralisation.The Resource estimate was compared with the previousestimates. The understanding of the orientation and continuityof the mineralised zones within the current resource, beingbased on 25m x 25m spaced drillholes, more than half of whichare angled and contain valid structural data, is of much higherconfidence than in the previous model.The current model omits a low grade domain incorporated in theprevious model.The estimate was validated by visual and statistical comparisonof the block estimate grades with the informing 1m compositegrades.	EMIt is

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Moisture	Whether the tonnages are estimatedon a dry basis or with naturalmoisture, and the method ofdetermination of the moisturecontent.	Tonnes are estimated based on a dry insitu bulk density.	EM
Cut-offparameters	The basis of the adopted cut-offgrade(s) or quality parametersapplied.	A graphitic carbon cutoff of 3.5% was adopted based on agraphite product price of $1,500/t, a processing cost of $28.50/t,a coarse fraction of 70% and an overall recovery of 90%. Thevalues of 70% coarse fraction (>75μm) and 90% recovery havecome from review of two testwork programmes carried out onUley ore samples in April and May 2007 and anotherprogramme carried out in August 2014.	CCH/KL
Mining factors orassumptions	Assumptions made regardingpossible mining methods, minimummining dimensions and internal (or,if applicable, external) miningdilution. It is always necessary aspart of the process of determiningreasonable prospects for eventualeconomic extraction to considerpotential mining methods, but theassumptions made regarding miningmethods and parameters whenestimating Mineral Resources maynot always be rigorous. Where thisis the case, this should be reportedwith an explanation of the basis ofthe mining assumptions made.	The Uley project has been historically mined by open cut miningmethods and it was assumed that this would still be the case forany future mining operation.No assumptions have been made about mining selectivity forspecific material types or quality.No dilution or other factors have been applied to the resourceestimate.Conceptually, consideration of the resource estimate andsubsequent mining scenarios remain at a high level only. It isassumed that there is some basis for determining reasonableprospects for eventual economic extraction considering historicmining of the nearby Uley graphite deposit in a very similargeological setting and location.
Metallurgicalfactors orassumptions	The basis for assumptions orpredictions regarding metallurgicalamenability. It is always necessaryas part of the process of determiningreasonable prospects for eventualeconomic extraction to considerpotential metallurgical methods, butthe assumptions regardingmetallurgical treatment processesand parameters made whenreporting Mineral Resources maynot always be rigorous. Where thisis the case, this should be reportedwith an explanation of the basis ofthe metallurgical assumptions made.	Three testwork reports, ALS Testwork Report P0550, P0565and P0582 were reviewed and clearly indicate that a totalgraphitic carbon grade of >90% and at >85% recovery can beachieved on the samples of Uley graphite tested with 3 stagesof cleaning in conformance with the existing plant design. Thetestwork further indicates that if two additional stages ofcleaning and an additional regrind mill were added to the circuita >98% graphite grade product is possible.During further PFS and/or DFS programs additional variabilitytestwork will be required.	CCH
Environmentalfactors orassumptions	Assumptions made regardingpossible waste and process residuedisposal options. It is alwaysnecessary as part of the process ofdetermining reasonable prospectsfor eventual economic extraction toconsider the potential environmentalimpacts of the mining andprocessing operation. While at thisstage the determination of potentialenvironmental impacts, particularlyfor a greenfields project, may notalways be well advanced, the statusof early consideration of thesepotential environmental impactsshould be reported. Where these	Mining development is subject to the development, submissionand approval of a Program for Environmental Protection andRehabilitation (PEPR) and an Environmental Licence which ismandated under South Australian State legislation. The site hasbeen on care and maintenance since historical productionended in 1993. It is not expected that environmental constraintswill be considered a material constraint to the prospects ofeventual economic extraction.	KL

Criteria	JORC Code Explanation	Commentary			CompetentPerson
	aspects have not been consideredthis should be reported with anexplanation of the environmentalassumptions made.
Bulk density	Whether assumed or determined. If	Density was assigned to the block model as follows:			EM
	assumed, the basis for theassumptions. If determined, themethod used, whether wet or dry,the frequency of the measurements,the nature, size andrepresentativeness of the samples.The bulk density for bulk materialmust have been measured by	Oxidation state	Average BulkDensity formineralisedmaterial(t/m3)	Average BulkDensity for wastematerial(t/m3)
		Oxidised	1.79	1.91
	methods that adequately account for	Transitional	1.91	2.01
	void spaces (vugs, porosity, etc),moisture and differences between	Fresh	2.08	2.25
	rock and alteration zones within thedeposit.Discuss assumptions for bulkdensity estimates used in theevaluation process of the differentmaterials.	2001).year's model.essentiallylower	bulkdensitiesrock than was previously understood.rock samples for the Mineral Resource estimate.	A total of 371 bulk density measurements were collected fromthe 2014 drillcore. The Archimedes method was used on uncutcore from 22 representative holes with each distinct lithologyand weathering zone in each hole tested. The bulk densityresults were flagged against the ore zones and oxidation state inVulcan and averages for mineralised and waste determined foroxide, transitional and fresh weathered (defined by BOCO andTOFR surfaces). Four samples were removed prior to runningaverages due to being extreme values. Three samples were<1.2 and one was >4. The values were evaluated against corephotos and against "typical" bulk density values as listed insection 9.2 of the Field Geologist's Manual (Fourth Edition,These bulk density values are lower than those used in lastIt should be noted that the quantity of bulkdensity data has improved substantially, and revised andappliedtographitemineralisation are the result of the Valence data. This change islikely to be related to a higher level of weathering of the hostNo corrections have been applied for the sieved fraction weightsfrom the 18 1993 drillholes to determine factors for tonnage andassay grade fractions. As discussed in the sampling sections,these results are statistically no different to the whole rockassays and as such, these samples are being treated as whole

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Classification	The basis for the classification of theMineral Resources into varyingconfidence categories.Whether appropriate account hasbeen taken of all relevant factors (ierelative confidence in tonnage/gradeestimations, reliability of input data,confidence in continuity of geologyand metal values, quality, quantityand distribution of the data).Whether the result appropriatelyreflects the Competent Person'sview of the deposit.	Resource classification is based on quantity/quality of sampledata as follows:The infilling to 25m x 25m drilling centres has increasedsample density to the point where confidence in thegeological and grade continuity, and the quality of theestimation, are such that the majority of the estimatedblocks are classified as Indicated.Mineralised zones based on 1 drillhole only remainunclassified.Small portions of the mineralisation in the centre of the fold(zones 1, 2 and 3) have been classified as Measured dueto the continuity of grade thickness and tenor, and thequality of the estimation. These areas are limited due inpart to uncertainty introduced by selective sampling of thedrillholes.The classification scheme as applied is considered toadequatelyreflectthesampledensityandgeologicalinterpretation.The resource classification and estimate does not specificallyaddress the definition or quantity of material types or productquality as all contacts are relatively gradational and metallurgicaltestwork is on-going.	EM/IK
Audits orreviews	The results of any audits or reviewsof Mineral Resource estimates.	Ms Karen Lloyd of Jorvik Resources Pty Ltd (engaged asGeneral Manager – Technical delivery for Valence Industriesformally reviewed the data used for the Mineral Resourceestimate. No third party reviews have been undertaken on theMineral Resources estimation process, though formal peerreview through the Coffey system has been undertaken prior toreporting.	KL
Discussion ofrelativeaccuracy/confidence	Where appropriate a statement ofthe relative accuracy and confidencelevel in the Mineral Resourceestimate using an approach orprocedure deemed appropriate bythe Competent Person. Forexample, the application ofstatistical or geostatisticalprocedures to quantify the relativeaccuracy of the resource withinstated confidence limits, or, if suchan approach is not deemedappropriate, a qualitative discussionof the factors that could affect therelative accuracy and confidence ofthe estimate.The statement should specifywhether it relates to global or localestimates, and, if local, state therelevant tonnages, which should berelevant to technical and economicevaluation. Documentation shouldinclude assumptions made and theprocedures used.These statements of relativeaccuracy and confidence of theestimate should be compared withproduction data, where available.	The grade estimate is based on the assumption that open cutmining methods will be applied and high confidence gradecontrol, for example RC grade control drilling, or ditch-witchbench top sampling will be available for ore/waste demarcation.As such the Resource estimate should be considered to be aglobal estimate.The resource classification and estimate does not specificallyaddress the definition or quantity of material types or productquality as all contacts are relatively gradational and metallurgicaltestwork is on-going. Bulk metallurgical tests are assumed to berepresentative of the mineralised material within the Uley 2deposit.	EM

Section 4 Estimation and Reporting of Ore Reserves (Criteria listed in section 1, and where relevant in section 2 and section 3, also apply to this section).

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Mineral Resourceestimate forconversion toOre Reserves	Description of the Mineral Resourceestimate used as a basis for theconversion to an Ore Reserve.Clear statement as to whether theMineral Resources are reportedadditional to, or inclusive of, the OreReserves.	The Uley 2 Mineral Resource as described in Section 3 formedthe basis for the conversion to Ore Reserves.The Mineral Resources are inclusive of the Ore Reserves.	HW
Site visits	Comment on any site visitsundertaken by the CompetentPerson and the outcome of thosevisits.If no site visits have beenundertaken indicate why this is thecase.	The Competent Person for the Ore Reserves, Mr Harry Warries,has not visited the site.No site visit was deemed necessary as other Coffey personnelhave been to site.	HW
Study status	The type and level of studyundertaken to enable MineralResources to be converted to OreReserves.The Code requires that a study to atleast Pre-Feasibility Study level hasbeen undertaken to convert MineralResources to Ore Reserves. Suchstudies will have been carried outand will have determined a mineplan that is technically achievableand economically viable, and thatmaterial Modifying Factors havebeen considered.	A feasibility study is being completed by Valence Industries Ltd.The feasibility was undertaken by a team of industryprofessionals as listed below.Market research and commodity priceLone Star TechMinerals LLCMining operating and capital costValenceMine planningCoffeyMetallurgical and processingALS Global,D.E.N.M Ltd,BluechipEngineering,Haver AustraliaProcessing operating and capital costsBluechipEngineering,ValenceGeneral site operating costsValenceGeneral site infrastructureValenceGeotechnical investigationBarrett, Fullerand Partners,ValenceHydro(geo)logical investigationAustralian WaterEnvironments(AWE), ValenceTailings storage facilityBTM Solutions,GolderMining dilution and recoveryCoffeySocial and EnvironmentalValenceLegal tenureValenceGovernmentValence	HW
Cut-offparameters	The basis of the cut-off grade(s) orquality parameters applied.	A 3.6% graphitic carbon cutoff, based on the economicparameters as described in subsequent sections. In addition,the contact between graphitic mineralisation and waste is sharp,which is shown by the fact that the grade tonnage profilebetween 2% and 4% graphitic carbon is very flat.	HW
Mining factors orassumptions	The method and assumptions usedas reported in the Pre-Feasibility orFeasibility Study to convert theMineral Resource to an Ore Reserve(i.e. either by application ofappropriate factors by optimisation	The basis of design for the Project is predicated on ramping upproduction, as dictated by the predicted sales demand, fromapproximately 27ktpa of 94% carbon concentrate in Year 1 to64ktpa by Year 5, which equates to 200ktpa to 550ktpa ofcrusher feed. The average waste to ore strip ratio isapproximately 5.9 : 1, indicating a maximum total material	HW

Criteria	JORC Code Explanation	Commentary	CompetentPerson
Metallurgicalfactors orassumptions	or by preliminary or detailed design).The choice, nature andappropriateness of the selectedmining method(s) and other miningparameters including associateddesign issues such as pre-strip,access, etc.The assumptions made regardinggeotechnical parameters (eg pitslopes, stope sizes, etc), gradecontrol and pre-production drilling.The major assumptions made andMineral Resource model used for pitand stope optimisation (ifappropriate).The mining dilution factors used.The mining recovery factors used.Any minimum mining widths used.The manner in which InferredMineral Resources are utilised inmining studies and the sensitivity ofthe outcome to their inclusion.The infrastructure requirements ofthe selected mining methods.The metallurgical process proposedand the appropriateness of thatprocess to the style ofmineralisation.Whether the metallurgical process iswell-tested technology or novel innature.The nature, amount andrepresentativeness of metallurgicaltest work undertaken, the nature ofthe metallurgical domaining appliedand the corresponding metallurgicalrecovery factors applied.Any assumptions or allowancesmade for deleterious elements.The existence of any bulk sample orpilot scale test work and the degreeto which such samples areconsidered representative of theorebody as a whole.For minerals that are defined by aspecification, has the Ore Reserveestimation been based on theappropriate mineralogy to meet thespecifications?	movement of up to 5Mtpa will be required.The material to be mined is classified as soft and it wasassumed that no drill and blast would be required. Mining willbe undertaken by conventional open pit methods of load andhaul, utilising small mining equipment comprising 100t dieselhydraulic excavators and 60t off-highway dump trucks.Detailed pit design work was completed based on pitoptimisations using Whittle Four-X optimisation software. OnlyMeasured and Indicated Resources were used in the pitoptimisation.Pit slope parameters were based on the slope parameters andconditions of an existing historic and abandoned pit, as well asa total of 42 diamond drillholes from both the geotechnical andresource drilling programmes were drilled and were logged forgeological, rock quality and structural data. Overall pit wallslopes of 400 were adopted.Grade control will consist of sampling of ditch-witch spoilsacross the pit floor.With strong visual control no mining dilution was adopted,although a mining recovery of 95% was assumed.A minimum cutback mining width of 25m was adopted.The mine plan was based on Measured and IndicatedResources.The primary infrastructure required for the development of theProject are listed below:oSite and local area road construction and upgradesoGeneraladministrationandservicesinfrastructureupgrade.oGeneral mining facilities upgrade.oProcess plant refurbishmentRe-use and re-cycling of existing water supply with rechargeThe proposed metallurgical process is conventional primarycrushing and milling, followed by floatation and drying, sizing andbagging of concentrate products to meet specific customerrequirements. The proposed metallurgical process is well testedand uses established, proven technologies.Three testwork reports, ALS Testwork Report P0550, P0565 andP0582 were reviewed and clearly indicate that a total graphiticcarbon grade of >90% and at >85% recovery can be achievedon the samples of Uley graphite tested with 3 stages of cleaningin conformance with the existing plant design. The testworkfurther indicates that if two additional stages of cleaning and anadditional regrind mill were added to the circuit a >98% graphitegrade product is possible.During further PFS and/or DFS programs additional variabilitytestwork will be required.	CCH
Environmental	The status of studies of potentialenvironmental impacts of the mining	Valence will require approval under the Mining Act (1971) whichincludes the approval of a comprehensive Program for	HW

Criteria	JORC Code Explanation	Commentary	CompetentPerson
	and processing operation. Details ofwaste rock characterisation and theconsideration of potential sites,status of design options consideredand, where applicable, the status ofapprovals for process residuestorage and waste dumps should bereported.	Environment Protection and Rehabilitation (PEPR) and anenvironmental licence.Most baseline environmental surveys have been completed. Thepreliminary impact assessment did not categorise any potentialProject impacts as 'High'. Detailed impact assessments are ongoing in areas including air quality, groundwater, surface water,flora, fauna, noise, social, visual, and heritage.It is expected that all predicted impacts may be adequatelymitigated and/or managed and that an updated ML and PEPRwill be subsequently approved by the State Government.
Infrastructure	The existence of appropriateinfrastructure: availability of land forplant development, power, water,transportation (particularly for bulkcommodities), labour,accommodation; or the ease withwhich the infrastructure can beprovided, or accessed.	The existing process plant has been refurbished and theProject's supporting infrastructure has been developed throughstudies by engineering service providers as listed under theStudy Status criterion. Works have included 'modelling' of plantavailability, plant throughput, tailings storage facility and waterconsumption with subsequent production of sufficient drawingsto enable development of detail estimates including forecasts ofconsumable consumptions such as grinding media, fuel,reagents and power. First principle estimates have derivedlabour levels for project construction and on-going operation.	HW
Costs	The derivation of, or assumptionsmade, regarding projected capitalcosts in the study.The methodology used to estimateoperating costs.Allowances made for the content ofdeleterious elements.The derivation of assumptions madeof metal or commodity price(s), forthe principal minerals and coproducts.The source of exchange rates usedin the study.Derivation of transportation charges.The basis for forecasting or sourceof treatment and refining charges,penalties for failure to meetspecification, etc.The allowances made for royaltiespayable, both Government andprivate.	Thecapitalcostandoperatingcostsestimatesarecommensurate with a pre-feasibility level study and wereestimated by the Study contributors as listed under the StudyStatus criterion discussed above. The capital cost estimate hasbeen developed through the collation of a number of firstprinciple estimates completed by the various Study contributorson completion of sufficient design works to provide bills ofmaterials to the estimators, quotations from equipment providersand contracting companies and estimates carried out directly bythe owner's team. The operational cost estimate was developedon a 'first principle basis', derived from base data provided byValence and the Study contributors such as:oForecast operational manning levelsoProposed organisation chartsoReagent usage forecast by system modellingoFuel utilisation estimatesoCalculated power consumptionoOperational readiness costsoEstimated mining costsThe estimated LOM capital costs for the Project are $48.5Mrepresented by $35 million in Phase 2 plant capital andadditional capital expenditure over the life of the Ore Reserve.The mining costs were estimated at $2.33/t mined.The estimated process operating costs, including drying andbagging, for the Project are $439/dmt of concentrate.Royalties have been estimated based on the assumption thatValence will be able to negotiate a New Project Status.	HW
Revenue factors	The derivation of, or assumptionsmade regarding revenue factorsincluding head grade, metal orcommodity price(s) exchange rates,transportation and treatmentcharges, penalties, net smelterreturns, etc.The derivation of assumptions madeof metal or commodity price(s), forthe principal metals, minerals andco-products.	The derivation of, or assumptions made regarding revenuefactors including head grade, commodity price, exchange rates,transportation and treatment charges have all been derived fromLone Star Tech Minerals LLC and Roskill in a confidentialindependent market report dated July 2014. An average LOMconcentrate price of $1,647/dmt was used for the Study.Valence has signed four Memoranda of Understanding (MOU's)for flake graphite sales, providing committed contracts fordelivery subject to final product and grade qualifications. Pricinglevels are consistent with those anticipated during feasibility levelstudies.	HW

Criteria	JORC Code Explanation	Commentary	CompetentPerson
		A long term USD:AUD foreign exchange rate of 0.85 wasadopted for the Study.
Marketassessment	The demand, supply and stocksituation for the particularcommodity, consumption trends andfactors likely to affect supply anddemand into the future.A customer and competitor analysisalong with the identification of likelymarket windows for the product.Price and volume forecasts and thebasis for these forecasts.For industrial minerals the customerspecification, testing andacceptance requirements prior to asupply contract.	Independent marketing consultant Lone Star Tech Minerals LLChas completed a detailed analysis on behalf of Valence coveringthe forward supply and demand outlook and longer term pricingforecasts.A bulk sample of graphitic carbon concentrate was tested formaterial and processing suitability by the Bluechip Engineeringwho determined it suitable as a feed source for applications thatutilise graphite products.	HW
Economic	The inputs to the economic analysisto produce the net present value(NPV) in the study, the source andconfidence of these economic inputsincluding estimated inflation,discount rate, etc.NPV ranges and sensitivity tovariations in the significantassumptions and inputs.	The financial evaluation undertaken as part of the Studyindicated a positive net present value (NPV) at a 10% discountrate.Sensitivity analysis indicated that a negative 20% change inproduct price, foreign exchange rate, operating cost or capitalcost still resulted in a positive NPV.	HW
Social	The status of agreements with keystakeholders and matters leading tosocial licence to operate.	A social impacts and benefits study has been completed andresults discussed with stakeholders.	HW
Other	To the extent relevant, the impact ofthe following on the project and/oron the estimation and classificationof the Ore Reserves:Any identified material naturallyoccurring risks.The status of material legalagreements and marketingarrangements.The status of governmentalagreements and approvals critical tothe viability of the project, such asmineral tenement status, andgovernment and statutory approvals.There must be reasonable groundsto expect that all necessaryGovernment approvals will bereceived within the timeframesanticipated in the Pre-Feasibility orFeasibility study. Highlight anddiscuss the materiality of anyunresolved matter that is dependenton a third party on which extractionof the reserve is contingent.	No significant (high) naturally occurring risks were identifiedduring a whole of project risk assessment.Valence has entered into formal marketing arrangement for thesale of graphitic carbon concentrate.All Valence tenure is in good standing with all legal obligationsmet.Regular meetings with state and federal Governmentagencies occur for the purposes of discussing requiredapprovals and facilitating meetings with other stakeholders.A Mining Lease and Program for Environmental Protection andRehabilitation (PEPR) must be approved before the reserve canbe extracted and are dependent on the approval of the Ministerfor Mineral Resources.Valence has no reason to believe that the necessaryGovernment approvals will be received within the timeframesanticipated in the Study.	HW
Classification	The basis for the classification of theOre Reserves into varyingconfidence categories.Whether the result appropriatelyreflects the Competent Person'sview of the deposit.	Proved and Probable Ore Reserves were declared based on theMeasured and Indicated Mineral Resources contained within thepit design. The financial analysis showed that the economics ofthe Project were positive and the risk analysis did not identifyany insurmountable risks.All Measured Resources that were contained within the pit	HW

Criteria	JORC Code Explanation	Commentary	CompetentPerson
	The proportion of Probable OreReserves that have been derivedfrom Measured Mineral Resources(if any).	design were converted to Proved Ore Reserves.
Audits or reviews	The results of any audits or reviewsof Ore Reserve estimates.	No external audits or reviews of the Ore Reserve estimates havebeen undertaken.	HW
Discussion ofrelative accuracy/confidence	Where appropriate a statement ofthe relative accuracy and confidencelevel in the Ore Reserve estimateusing an approach or proceduredeemed appropriate by theCompetent Person. For example,the application of statistical orgeostatistical procedures to quantifythe relative accuracy of the reservewithin stated confidence limits, or, ifsuch an approach is not deemedappropriate, a qualitative discussionof the factors which could affect therelative accuracy and confidence ofthe estimate.The statement should specifywhether it relates to global or localestimates, and, if local, state therelevant tonnages, which should berelevant to technical and economicevaluation. Documentation shouldinclude assumptions made and theprocedures used.Accuracy and confidencediscussions should extend tospecific discussions of any appliedModifying Factors that may have amaterial impact on Ore Reserveviability, or for which there areremaining areas of uncertainty at thecurrent study stage.It is recognised that this may not bepossible or appropriate in allcircumstances. These statements ofrelative accuracy and confidence ofthe estimate should be comparedwith production data, whereavailable.	The relative accuracy and confidence of the Ore Reserveestimate is inherent in the Ore Reserve Classification.No mine production data is available at this stage forreconciliation and/or comparative purposes.Factors that may affect the global tonnages and the associatedgrades include:oMining dilutionoMining recoveryProcess plant performance	HW