QUANTUM GRAPHITE LIMITED — Share Issue/Capital Change 2015

Sep 3, 2015

ASIA PACIFIC I EUROPE I NORTH AMERICA

ASX ANNOUNCEMENT ASX: VXL & VXLO

4 September 2015

ISSUE OF SHARES

Valence Industries Limited (ASX:VXL) advises that it has reached agreement with Rio Tinto Exploration Pty Ltd with respect to concluding legacy royalties. Under the agreement Rio Tinto Exploration Pty Ltd will become a shareholder in the Company with 2,062,500 shares and receives a cash payment of \$100,000 concluding all legacy royalties. As part of the agreement, the Company will also receive an introduction to the relevant people for supply of graphite to the Rio Tinto group. An Appendix 3B seeking quotation of the shares is attached to this announcement.

For further information, please contact: Jaroslaw (Jarek) Kopias CFO & Company Secretary Valence Industries info@valenceindustries.com +61 8 8215 6400

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX's property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Valence Industries Limited

ABN

41 008 101 979

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 ⁺Class of +securities issued or to be issued

Ordinary shares - VXL

• 2 Number of +securities issued or to be issued (if known) or maximum number which may be issued
• 3 Principal terms of the ⁺securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if ⁺convertible securities, the conversion price and dates for conversion)

2,062,500

Fully paid ordinary shares

⁺ See chapter 19 for defined terms.

4	Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities? If the additional +securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment	Yes
5	Issue price or consideration	\$0.20 per share
6	Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets)	Satisfaction of legacy royalties.
6a	Is the entity an +eligible entity	No
	that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i
6b	The date the security holder resolution under rule 7.1A was passed
6c	Number of +securities issued without security holder approval under rule 7.1

⁺ See chapter 19 for defined terms.

• 6d Number of +securities issued with security holder approval under rule 7.1A
• 6e Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)
• 6f Number of +securities issued under an exception in rule 7.2
• 6g If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the ⁺issue date and both values. Include the source of the VWAP calculation.
• 6h If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements
• 6i Calculate the entity's remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements
• 7 ⁺Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

8 Number and ⁺class of all ⁺securities quoted on ASX (including the ⁺securities in section 2 if applicable)

Number	+Class
166,199,572	Ordinary shares
57,152,418	Listed Options exercisable at 25 cents on or before 31 July 2016.

7.1 – 15,736,405 7.1A – Not applicable

4 September 2015

• See chapter 19 for defined terms.

		Number	+Class
9	+class Number and of all +securities not quoted on ASX +securities (including the in section 2 if applicable)	32,816,642	Ordinary shares escrowed to 6 January 2016.
		16,250,000	Restricted Options exercisable at 25 cents on or before 31 July 2016 escrowed to 6 January 2016.
		3,500,000	Unlisted Options exercisable at 25 cents on or before 31 July 2016 escrowed to 6 January 2016 - vested.
		4,000,000	Unlisted Options exercisable at \$1.10 on or before 31 July 2017 subject to various vesting criteria.
		1,500,000	Unlisted Options exercisable at \$1.10 on or before 31 July 2017 - vested.

10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Same as for all other securities

⁺ See chapter 19 for defined terms.

Part 2 - Pro rata issue

11	Is security holder approval required?
12	Is the issue renounceable or non renounceable?
13	Ratio in which the +securities will be offered
14	+Class of +securities to which the offer relates
15	+Record date to determine entitlements
16	Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?
17	Policy for deciding entitlements in relation to fractions
18	Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7.
19	Closing date for receipt of acceptances or renunciations
20	Names of any underwriters
21	Amount of any underwriting fee or commission
22	Names of any brokers to the issue
23	Fee or commission payable to the broker to the issue

⁺ See chapter 19 for defined terms.

Appendix 3B New issue announcement

24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders 25 If the issue is contingent on security holders' approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do security holders sell their entitlements in full through a broker? 31 How do security holders sell part of their entitlements through a broker and accept for the balance? 32 How do security holders dispose of their entitlements (except by sale through a broker)? 33 ⁺Issue date

⁺ See chapter 19 for defined terms.

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

34 Type of ⁺securities (tick one) (a) ⁺Securities described in Part 1 (b) All other ⁺securities Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid,

Entities that have ticked box 34(a)

securities

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35	If the +securities are +equity securities, the names of the 20 largest holders of the additional +securities, and the number and percentage of additional +securities held by those holders
36	If the +securities are +equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over
37	A copy of any trust deed for the additional +securities

employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible

⁺ See chapter 19 for defined terms.

Entities that have ticked box 34(b)

• 38 Number of ⁺securities for which ⁺quotation is sought
• 39 ⁺Class of ⁺securities for which quotation is sought
• 40 Do the ⁺securities rank equally in all respects from the ⁺issue date with an existing ⁺class of quoted ⁺securities?

If the additional ⁺securities do not rank equally, please state:

• the date from which they do
• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment
• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment
• 41 Reason for request for quotation now

Example: In the case of restricted securities, end of restriction period

(if issued upon conversion of another ⁺security, clearly identify that other ⁺security)

42 Number and ⁺class of all ⁺securities quoted on ASX (including the ⁺securities in clause 38)

Number	+Class

⁺ See chapter 19 for defined terms.

Quotation agreement

• 1 ⁺Quotation of our additional ⁺securities is in ASX's absolute discretion. ASX may quote the ⁺securities on any conditions it decides.
• 2 We warrant the following to ASX.
• The issue of the +securities to be quoted complies with the law and is not for an illegal purpose.
• There is no reason why those +securities should not be granted ⁺quotation.
• An offer of the ⁺ securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any +securities to be quoted and that no-one has any right to return any +securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.
• If we are a trust, we warrant that no person has the right to return the ⁺securities to be quoted under section 1019B of the Corporations Act at the time that we request that the +securities be quoted.
• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.
• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before ⁺quotation of the ⁺securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here: ............................................................Date: 4 September 2015 Company secretary

Print name: Jaroslaw (Jarek) Kopias

== == == == ==

⁺ See chapter 19 for defined terms.

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital
Step 1: Calculate "A", the base figure from which the placement capacity is calculated
Insert number of fully paid +ordinary securities on issue 12 months before the +issue date or date of agreement to issue	168,415,350
Add the following:
Number of fully paid +ordinary securities • issued in that 12 month period under an exception in rule 7.2	263,398 (exercise of listed options) – between 26 September 2014 and 28 July 2015
Number of fully paid +ordinary securities • issued in that 12 month period with shareholder approval Number of partly paid +ordinary • securities that became fully paid in that 12 month period	982,187 (SPP issue) – 6 November 2014. 17,142,844 (placement) – 25 September 2014 approved by shareholders 18 November 2014. 3,032,270 (rights issue) – 2 July 2015
Note: • Include only ordinary securities here – other classes of equity securities cannot be added • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items Subtract the number of fully paid +ordinary
securities cancelled during that 12 month period
"A"	189,836,049

⁺ See chapter 19 for defined terms.

Step 2: Calculate 15% of "A"
"B"	0.15
	[Note: this value cannot be changed]
Multiply "A" by 0.15	28,475,407
Step 3: Calculate "C", the amount of placement capacity under rule 7.1 that has already been used
Insert number of +equity securities issued or agreed to be issued in that 12 month period not counting those issued: • Under an exception in rule 7.2	Share placement (May 2015) 7,117,665 and free attaching options 3,558,837 Share placement (September 2015) 2,062,500 shares
• Under rule 7.1A
• With security holder approval under rule 7.1 or rule 7.4
Note: • This applies to equity securities, unless specifically excluded – not just ordinary securities • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items
"C"	12,739,002
Step 4: Subtract "C" from ["A" x "B"] to calculate remaining placement capacity under rule 7.1
"A" x 0.15	28,475,407
Note: number must be same as shown in Step 2
Subtract "C"	12,739,002
Note: number must be same as shown in Step 3
Total ["A" x 0.15] – "C"	15,736,405
	[Note: this is the remaining placement capacity under rule 7.1]

⁺ See chapter 19 for defined terms.

Part 2

Step 1: Calculate "A", the base figure from which the placement Not applicable
0.10
Note: this value cannot be changed
Step 3: Calculate "E", the amount of placement capacity under rule 7.1A that has already been used

⁺ See chapter 19 for defined terms.

Step 4: Subtract "E" from ["A" x "D"] to calculate remaining placement capacity under rule 7.1A
"A" x 0.10
Note: number must be same as shown in Step 2
Subtract "E"
Note: number must be same as shown in Step 3
Total ["A" x 0.10] – "E"
	Note: this is the remaining placement capacity under rule 7.1A

+ See chapter 19 for defined terms.