uley graphite43 10111july2012final

Uley Main Road Graphite Deposit Eyre Peninsula, South Australia NI43-101 Report

Prepared by Coffey Mining Pty Ltd on behalf of:

MEGA Graphite Inc

Effective Date: 11 July 2012

Qualified Person: Trevor Bradley – MAIG

MINEWPER01006AA

MINEWPER01006AA

Coffey Mining Pty Ltd ABN 52 065 481 209 1162 Hay Street, West Perth WA 6005 Australia PO Box 1671, West Perth WA 6872 Australia T (+61) (8) 9324 8800 F (+61) (8) 9324 8877 coffey.com

11 July 2012

MEGA Graphite Inc Level 1, Suite A 192 Waymouth Street ADELAIDE SA 5000 Attention: Mr Christopher Darby

Dear Chris

RE: Uley Main Road Graphite Deposit – NI43-101

Please find attached our report in support of the proposed submission of the Uley Project Main Road Graphite Resource under NI43-101 reporting guidelines.

If you have any queries relating to this report, please do not hesitate to contact Trevor Bradley or Karen Lloyd in our West Perth office on 9324 8800.

For and on behalf of Coffey Mining Pty Ltd

This is a scanned signature held on file by Coffey Mining. The person and signatory consents to its use only for the purpose of this document.

Karen Lloyd Principal Consultant Audits

Coffey Mining Pty Ltd

DOCUMENT INFORMATION

Uley Main Road Graphite Deposit – MINEWPER01006AA NI43-101 Report – 11 July 2012

Author(s): Karen Lloyd Principal Consultant/Primary Author MAusIMM

Trevor Bradley Manager – Audits (Supervising Principal)

MAIG

Date: 11 July 2012

Project Number: MINEWPER01006AA

Version / Status: Final

Path & File Name: F:\MINE\Projects\MEGA Graphite Inc\MINEWPER01006AA_Uley Graphite Project\Report\CMWPr_1006AA_UleyGraphite_43-101_11July2012_TB Final.docx

Print Date: Thursday, 12 July 2012

Copies: MEGA Graphite Inc (1 Electronic)

Coffey Mining – Perth (1)

Document Change Control

Version Description (section(s) amended) Author(s) Date

Draft ALL TB / KL 07/06/2012

Final ALL TB / KL 12/07/2012

Document Review and Sign Off



Principal Consultant/Primary Author Karen Lloyd

Supervising Principal Consultant Trevor Bradley



Table of Contents

1 Summary .......................................................................................................................................1

2 Introduction ..................................................................................................................................3

3 Reliance on Other Experts ..........................................................................................................4

4 Property Description and Location ............................................................................................5

5 Accessibility, Climate, Local Resources, Infrastructure and Physiography .........................7

6 History ...........................................................................................................................................8

7 Geological Setting and Mineralisation .......................................................................................9 7.1 Regional Setting ................................................................................................................9

7.1.1 Stratigraphy ............................................................................................................. 9 7.1.2 Project Geology ..................................................................................................... 12 7.1.3 Structural Geology ................................................................................................. 12

7.2 Mineralisation and Alteration .......................................................................................... 13

8 Deposit Types ............................................................................................................................ 14

9 Exploration ................................................................................................................................. 15

10 Drilling ........................................................................................................................................ 16 10.1 CRAE Drilling .................................................................................................................. 16 10.2 2011 Drilling .................................................................................................................... 18 10.3 Surveying ........................................................................................................................ 18 10.4 Geological Logging ......................................................................................................... 18 10.5 Sampling ......................................................................................................................... 19

10.5.1 CRAE Sampling .................................................................................................... 19 10.6 2011 Sampling ................................................................................................................ 19 10.7 Bulk Density Measurement ............................................................................................ 19 10.8 Drillhole Data .................................................................................................................. 19

10.8.1 CRAE Sample Preparation .................................................................................... 19 10.8.2 2011 Sample Preparation ...................................................................................... 20 10.8.3 Prior Analysis ........................................................................................................ 20

11 Sample Preparation, Analyses and Security .......................................................................... 21 11.1 CRAE Analytical Quality Control Procedures and Data ................................................. 21

11.1.1 Certified Reference Material (Standards) and Blanks ........................................... 22 11.1.2 Umpire Laboratory Check Assaying ...................................................................... 22 11.1.3 Summary ............................................................................................................... 22

11.2 CRAE Database Validation ............................................................................................ 26 11.3 2011 Drilling Results....................................................................................................... 26

12 Data Verification ........................................................................................................................ 28 12.1 Database Coding and Compositing ................................................................................ 28 12.2 Summary Statistics ......................................................................................................... 28



12.3 Density ............................................................................................................................ 28 12.4 Block Model Construction ............................................................................................... 28 12.5 Estimation Approach ...................................................................................................... 30 12.6 Modifying Factors ........................................................................................................... 30 12.7 Resource Classification Criteria ..................................................................................... 30 12.8 Mineral Resource Reporting ........................................................................................... 33

13 Mineral Processing and Metallurgical Testing ....................................................................... 34 13.1 1980 - 1987 Testwork ..................................................................................................... 34 13.2 LECO Analyser ............................................................................................................... 34 13.3 Minimum Additional Testwork Requirements ................................................................. 34

13.3.1 Head Assays ......................................................................................................... 34 13.3.2 Mineralogy ............................................................................................................. 35 13.3.3 Batch Flotation Testing .......................................................................................... 35

14 Mineral Resource Estimates .................................................................................................... 36 14.1 Geological Interpretation and Modelling ......................................................................... 36 14.2 Mineralisation Interpretation ........................................................................................... 36 14.3 Weathering Interpretation ............................................................................................... 36

15 Adjacent Properties .................................................................................................................. 37

16 Other Relevant Data and Information ...................................................................................... 38 16.1 Geological Model ............................................................................................................ 38 16.2 Grade .............................................................................................................................. 38 16.3 Resource Tonnages ....................................................................................................... 38

17 Interpretation and Conclusions ............................................................................................... 40

18 Recommendations .................................................................................................................... 41

19 References ................................................................................................................................. 42

Date and Signature Page .................................................................................................................... 43



List of Tables Table 1_1 – June 2012 Resource 2

Table 4_1 – Tenement Schedule Summary 5

Table 10.1_1 – Estimate Summary Drilling and Sampling Statistics for 16

Table 10.2_1 – 2011 Drillhole Locations 18

Table 10.7_1 – Bulk Density Statistics 19

Table 11.3_1 – 2011 Assay Results 27

Table 12.2_1 – Summary 2m Composite Statistics –Graphitic Carbon (%) 29

Table 12.4_1 – Block Model Parameters 30

Table 12.7_1 – Confidence Levels of Key Categorisation Criteria 31

Table 12.7_2 – Sampling Techniques and Data 31

Table 12.7_3 – Estimation and Reporting of Minerals Resources – Fundamental Data 32

Table 12.7_4 – Estimation and Reporting of Minerals Resources – Modifying Factors 32

Table 16.3_1 – Classified Resource at 3.8% Graphitic Carbon Cutoff 39

Table 18_1 – Exploration Potential – 41

List of Figures Figure 4_1 – Uley Graphite Project - Tenure 6

Figure 5_1 – Uley Graphite Project - Accessibility 7

Figure 7.1.1_1 – Stratigraphic Column 11

Figure 7.1.3_1 – Graphitic Schist – Uley Main Road Deposit 12

Figure 8_1 – Graphitic Schist Model – Uley Main Road Deposit 14

Figure 9_1 – Regional Mineralisation Targets 15

Figure 10.1_1 – Drillcore Storage and Sample Archive 17

Figure 10.1_2 – Outcrop at the 17

Figure 11.1.2_1 – Summary Statistics – Amdel versus Comlabs 24

Figure 11.1.2_2 – Umpire Assaying 25

Figure 17_1 –Other Adjacent Anomalies 40



List of Appendices Appendix A – Lab Assay Protocols

Appendix B – Extracts from Warries and Barnes October 1996 Report

Appendix C – 2012: Resource


Uley Main Road Graphite Deposit – MINEWPER01006AA Page: 1 NI43-101 Report – 11 July 2012

1 SUMMARY

Coffey Mining Pty. Ltd. (Coffey Mining) has been retained by MEGA Graphite Inc (MEGA) via a letter of engagement dated 6 March 2012 to undertake reporting of the Uley Main Road graphite deposit under Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (2011).

Coffey Mining has validated the existing drillhole data and database, re-constructed data from local mine grid to Australian Mine Grid (AMG) survey and developed a new density model for the resource, based on billet sampling with results produced to certified Australian Standards 1289.2.1.1 and 1289.3.5.1.

This report documents the graphite resource, which has been estimated using Ordinary Kriging (OK) techniques and cross checked against an estimate calculated by using Inverse Distance Cubed (ID3) methods. Both estimates utilised the re-validated drillhole and assay data as well as an additional (50 sample) assay set from a diamond core drilling programme undertaken in 2011.

The Uley Project is located on the Eyre Peninsula, 15km west-southwest of Port Lincoln in the state of South Australia. A site visit was undertaken in May 2012. The Uley project consists of five contiguous tenements, of which two are retention licences, two are mining leases and one is an exploration licence.

Uley has been mined intermittently from the 1920s with the most recent period of production coming to an end in early 1993. The mining and processing site has been on extended care and maintenance since that time. The 20 tonne per hour (tph) processing plant is substantially intact and operable, subject to refurbishment. A 33KV power supply to the plant site is in place and energised.

Coffey Mining validated substantial parts of the Conzinc Rio Tinto Exploration (CRAE) database, containing sample, assay and drillhole data. Independent contractors have re-established collar and survey control and Coffey Mining has developed a density model using recent density data measured to applicable standards by Coffey Information (an associated company to Coffey Mining) has been developed. Based upon this work the insitu dry bulk density (DBD) of the wallrock material used is 2.6g/cm³. The DBD of graphite is 2.17g/cm³. The density model using 2.17g/cm³ and the estimated percentage of graphite was applied to the resource block model.



Coffey verify that all the relevant core, as documented in the archive provided by MEGA, is intact; that the original and residual sampling was re- verified; that all collar positions have been updated from local mine grid to the Australian Height Datum AMG grid correctly and that a topographic survey has been completed. In addition to the classified Mineral Resource several less well explored prospects were identified and reported on. These are located on the exploration tenement and provide an additional total exploration potential, which is estimated to fall within a range of 25-150Mt with grade ranging from 5 to 20% graphitic carbon.

This report has been prepared in accordance with and complies with Canadian National Instrument 43-101 for the ‘Standards of Disclosure for Mineral Projects’ of June 2011 (the Instrument) and the resource and reserve classifications adopted by the Canadian Institute of Mining (CIM) Council in November 2004. The report is also consistent with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ of December 2004 (JORC Code) as prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy (AusIMM), Australian Institute of Geoscientists (AIG) and Mineral Industry Consultants Association (MICA).

The Uley Graphite Mineral Resource Upgrade Report, of June 2011, was prepared by Coffey Mining and the Resource declared in accordance with the guidelines of the JORC Code 2004.

Ms Karen Lloyd compiled this report under the direct supervision of Mr Trevor Bradley (MAIG), an employee of Coffey Mining and a Member of the Australian Institute of Geoscientists whom has sufficient experience relevant to the activity undertaken to qualify as a Qualified Person as defined in NI43-101 and whom takes responsibility for this report on behalf of Coffey Mining Pty Ltd.

The Mineral Resource Statement as at 10 June 2011 is tabulated below (Table 1_1).

Table 1_1 Uley Main Road Graphite Deposit - June 2011 Resource Update

Classified Resource at 3.8% Graphitic Carbon Cutoff OK Estimate using a Parent Block of 10mY by 4mE and 4mRL

Classification Lower Cutoff Grade (Graphitic Carbon %)

Tonnage (Mt)

Average Grade (Graphitic carbon %)

Indicated 3.8 4.3 9.4 Inferred 3.8 2.3 7.5 Total 6.6 8.7

Notes: There is drilling coverage for the whole rock grades on a 25m by 50m grid over the target areas. These host rocks, folded and thrust graphitic schists, were intersected by 30 drillholes. Of these all 30 are diamond drillholes.

Statistical analyses on samples and 2m composites were completed. Grade estimates were calculated for 4m (east-west) by 10m (north-south) by 4m (vertical) blocks. The method used

to obtain grade estimates was Ordinary Kridging. An ID3 check estimate was performed. Average in situ dry bulk densities were applied. Density measurements are obtained from direct measurment to

Austraslian standard. Mineral 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. The requirements for infill drilling, together with uncertainties in geological interpretation and mineralisation envelopes in the more structurally complex zones have resulted parts of the resource being classified as an Inferred Mineral Resource.

Model does not include mining dilution nor metallurgical receovery. Metallurical recovery of flake graphite estimated at 60% of graphite grade.



2 INTRODUCTION

Coffey Mining Limited (Coffey Mining) has been commissioned by MEGA Graphite Inc (MEGA) to report on the Uley Graphite Project, located in the state of South Australia under Canadian National Instrument 43-101 Standards of disclosure for Mineral Projects (2011).

This report complies with the requirements of NI-43101 for the purpose of listing on the Toronto Stock Exchange (TSX) and has been prepared in accordance with the NI-43101. A site visit was undertaken on 22 May 2012.

The competent person in respect of this report is Mr Trevor Bradley (MAIG), an employee of Coffey Mining and a Member of the Australian Institute of Geoscientists whom has sufficient experience relevant to the activity undertaken to qualify as a Qualified Person as defined in NI43-101 (2011) and whom takes responsibility for this report on behalf of Coffey Mining Pty Ltd. Ms Karen Lloyd is the primary author and compiled the report under the direct supervision of Mr Bradley.

A historical Mineral Resource estimate was previously undertaken by Coffey Mining in January 2010. Previous Mineral Resource estimates have not been reported under NI-43101 as historical ownership of the project was limited to Australian Securities Exchange listed companies and privately owned entities. Coffey Mining and its parent, Coffey International, has been providing consulting services for over 50 years. Coffey International Limited (Coffey) is an Australian-based international consulting firm specialising in the areas of mining and geotechnical engineering, hydrogeology, hydrology, tailings disposal, environmental science and social and physical infrastructure.

Neither Coffey, nor the Experts responsible for compiling this report, have or have had previously any material interest in MEGA Graphite Inc or the mineral properties in which MEGA Graphite Inc has, or is earning, or acquiring, an interest. Coffey Minings relationship with the Uley Graphite Project is solely one of professional association between client and independent consultant. This report is prepared in return for professional fees based upon an agreed commercial schedule of rates and the payment of these fees is in no way contingent on the results of this report.



3 RELIANCE ON OTHER EXPERTS

The principal sources of information used to compile this report comprise technical reports and technical data variously compiled and supplied by MEGA Graphite Inc, and its consultants and discussions with its corporate management. A listing of the principal sources of information is included in Section 19 of this report. As part of this assessment a Principal Consultant and employee of Coffey Mining Ms Karen Lloyd has visited the project site in May 2012. Ms Lloyd is a Member of the Australian Institute of Mining and Metallurgy (AusIMM) and has applied for fellowship status. Mr Trevor Bradley is reliant on Ms Lloyd for the purpose of the site visit and has liaised with Ms Lloyd throughout the generation, reporting and validation of the 2012 Mineral Resource model and this document.

The data supplied as related to resource estimates and exploration includes:

Primarily, digital files, in MapInfo format of geology, geophysics and tenements.

A Vulcan/Maptek Map-file with drilling and assay completed by the tenement holders prior to MEGA, who were Conzinc Rio Tinto Exploration (CRAE).

A series of resource completion reports (Collins 2007; Read and Associates, 1987; Finch 1984; and Howard, 1982) that summarises the resource estimate methodology, the project geology, the project database to that time, drilling methods, QA/QC procedures, sampling methodologies, structural analysis, target generation and a tabulated and classified resource. The latter of these reports is a comprehensive and diligent summary of all work on the Project to that date and represents the major report at hand on the Uley Project.

Data previously held in archive by Coffey Mining of project work completed by RSG Global (subsequently merged with Coffey Mining in 2007).

Assays received from ALS-Chemex, Perth for samples submitted in the 2011 drilling programme.

Coffey Mining declares that it has relied upon the information it has been provided by MEGA Graphite Inc and has taken all reasonable care to ensure that the information contained in this report is, to the best of its knowledge, in accordance with the facts. Furthermore Coffey Mining assumes that the information contains no omission likely to affect its import. Coffey Mining has not undertaken any independent enquiries or audits of MEGA Graphite Inc to verify that all material documentation has been provided and gives no representation that its assumption is correct. MEGA Graphite Inc has agreed to indemnify Coffey Mining from any liability arising from Coffey Mining’s reliance on data provided or not provided to it.



4 PROPERTY DESCRIPTION AND LOCATION

The Uley Graphite Project consists of five contiguous tenements (Table 4_1 and Figure 4_1), of which two are retention leases two are mining leases and one is an exploration licence. Development would be subject to the development, submission and approval of a Mining and Rehabilitation Plan (MARP) which is mandated under South Australian State legislation. MEGA has a 100% interest in these tenements and no royalty agreements are in place.

Table 4_1

Uley Main Road Graphite Deposit - Resource Update Tenement Schedule Summary

Type Lease/Title Number Area Expiry

Mining Lease ML 5561 44ha 16 March 2017 ML 5562 22ha 16 March 2017

Retention Lease RL 66 225ha 10 October 2016 RL 67 187.5ha 10 October 2016

Exploration Lease EL 3414 75km² 12 October 2014

Freehold Title Allotment 1/Plan 28872 Hundred of Uley 117ha N/A



Figure 4_1 Uley Graphite Project – Tenure

(Source: MEGA)



5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The project site is situated approximately 23km west and southwest from the City of Port Lincoln (population 14,000), the regional centre for the Lower Eyre Peninsula (Figure 5_1). Port Lincoln offers a nearby workforce and substantial infrastructure. Port Lincoln has a modern deep water port and is serviced by air from Adelaide the capital city of the state of South Australia. A two lane highway connects Port Lincoln to other regional towns on the peninsula and through to Adelaide, a total road distance of just over 600 kilometres.

With rolling topography and coastal cliffs, the areas average maximum temperatures range from 25 - 29°C in summer to a slightly cooler 15-18°C in winter. Rainfall is about 500mm or 20 inches which mainly falls during the winter months.

Figure 5_1

Uley Graphite Project – Accessibility

North

10km



6 HISTORY

The project was mined by open pit methods intermittently from the 1920s and the latest episode of production ceased in early 1993. The mining and processing site has been on extended care and maintenance since that time. The 20 tonne per hour (tph) processing plant is substantially intact and presumed operable, subject to refurbishment. A 33KV power supply to the plant site is in place and energised. A tailings storage facility (TSF) is present, as are the mine-offices and accommodation blocks. The depleted pit is flooded and the records of production from the old pit were abandoned in 1993 when the mine was closed.



7 GEOLOGICAL SETTING AND MINERALISATION

7.1 Regional Setting

The graphite deposits around Port Lincoln are located within the Gawler Craton geological province. The Hutchison Group metasediments within which the deposits are hosted overlies the granitoid gneisses of the Sleaford Complex and is itself overlain elsewhere by marine shelf sediments of the Wallaroo Group.

Regionally the project area is overlain by calc-arenites of the Tertiary age Bridgewater Formation, which locally, are immediately underlain by either the Pliocene age Uley Formation (well sorted, rounded orange-brown-clayey sand and quartzose sand) or the Eocene age Wanilla Formation (humic fluvial sands). Local laterally extensive ferricrete is developed over the Wanilla sediments.

The Uley and Wanilla formations overlie the Archean age, Hutchinson Group which is split into a lower and upper Hutchinson Group and separated by the Cook Gap Schist. The graphite deposits which are the subject of this report are hosted within the Cook Gap schist. To the north east of the Uley tenements lies the Kalinjala mylonite, which represents a vertical tectonic terrane boundary and fault zone. To the north of the tenements lies an eastward verging thrust zone within the Donnington (1850 Ma) suite of charnockites, granite gneiss and gabbro-norites geographically proximal to Boston and Louth bays.

The Uley Graphite Project tenements lie within the Lincoln SI53-11 1:250,000 Geology sheet (Schwarz, 2003). Drilling on the tenements has intersected the Katunga dolomite and the Warrow quartzite at the base of the Hutchinson Group.

The Uley Main Road deposit and the now depleted Uley pit are both interpreted to be developed within a thrust zone of similar age to the one to the North within the Donnington suite. The geological basement is comprised of undifferentiated ortho- and para-gneiss of the Archean age Sleaford Complex.

7.1.1 Stratigraphy

The basement to the Hutchison Group is the Sleaford Gneiss and similar age gneisses in the Port Lincoln area, though little of this sequence has been recognised in the Middleback Ranges. Areas between the Hutchison Group exposures are most probably Dutton or Donnington Suite granites and gneisses, although exposure in these areas is poor. Figure 7.1.1_1 summarises the stratigraphy in the region.

Parker & Lemon (1982) defined the stratigraphy of the Hutchison Group for the entire Eyre Peninsula. Facies variations were invoked to account for the significant iron formations of the Middleback Ranges around Whyalla. The Hutchison Group stratigraphy in the Middleback Range comprises from base: the Warrow Quartzite, Katunga Dolomite, Lower Middleback Jaspilite, Cook Gap Schist, and the Upper Middleback Jaspilite.



The Lower Middleback Jaspilite was further subdivided into 4 members: the Duke, Duchess, Knight and Long Gulley members (Lemon, 1979). These members were originally limited to the South Middleback Ranges only, however RSG Global (now Coffey Mining) geophysical interpretations suggest that the lower 3 members can be identified throughout the entire Eyre Peninsula.



Source Parker & Lemon (1982) Figure 7.1.1_1 Stratigraphic Column



7.1.2 Project Geology

The Uley project target horizon within the Hutchison Group is the Cook Gap Schist, The Warrow Quartzite and Katunga Dolomite have been intersected and are horizons below the target. Thrusting, faulting and folding with subsequent metamorphism have resulted in graphite mineralisation being developed in thickened local synclinal rootless folds.

Faulting and thrusting has further disrupted the graphite mineralisation resulting in brecciated and sheared textures. Three broad sub-horizontal broad graphitic horizons are recognised, two above and one below an interpreted flat lying fault, interpreted to be a thrust. This interpretation of the Uley Main Road deposit is in broad agreement with mapping and interpretations made during excavation of the now depleted Uley pit, some 600m to the north

7.1.3 Structural Geology

The Uley prospect is hosted within a suite of graphitic schists (Figure 7.1.3_1) and biotite-garnet gneisses. This has been historically interpreted as a basal sub-horizontal thrust, with folded and thrust schists and gneiss in the hanging wall of the thrust. Locally the stratigraphy has been metasomatised during high grade metamorphism and siliceous pegmatite veins invade the schists and gneiss. The timing of these events is unknown

Figure 7.1.3_1

Graphitic Schist – Uley Main Road Deposit



7.2 Mineralisation and Alteration

Metasomatised pegmatites that are quartz rich, are developed during high grade prograde metamorphism and are encountered throughout the stratigraphy. Carbonate alteration occurs both as pervasive wall-rock alteration and as carbonate veins/veinlets. Pervasive carbonate alteration haloes have been observed in the rocks within and surrounding the Uley mineralisation on a scale of up to hundreds of metres. Carbonate alteration has been observed in nearly all types of rocks.



8 DEPOSIT TYPES

Graphite is developed as a constituent mineral in coarse prograde metamorphic assemblages as well as in the fabric and foliation of micaceaous schists. These are interpreted to be the folded, thrust and metamorphosed equivalents of the Cook Gap Schist. Folding on various local scales is obvious (Figure 8_1).

Figure 8_1

Graphitic Schist Model – Uley Main Road Deposit View to N across N9500 Local Grid

Light blue: un-mineralised < 3% Graphitic carbon, Blue/mauve 3-5%, Yellow 5-6%, Orange 6-10%, Red 10-20%; Purple > 20%



9 EXPLORATION

Coffey Mining has reviewed the existing regional exploration data. The primary exploration targeting tool is a Sirotem geophysical survey completed by Solo Geophysics using a 50m x 50m loop size and MKIII instrument. These EM anomalies (Figure 9_1) have subsequently been followed up with diamond drilling and significant intersections are reported below (Table 10_1). Exploration is targeting graphitic schists within a sequence of garnet-biotite and cordierite gneisses and metasediments. These targets have an obvious and distinct EM signature which has not been affected by weathering.

Figure 9_1

Regional Mineralisation Targets

(Source: SER)



10 DRILLING

The original RSG Global and Coffey Mining resource estimates were based on a subset of a global database consisting of 2,560m of diamond drilling dating from 1982 to 1983 completed by Conzinc Rio Australia Exploration (CRAE). The drilling database has been reformatted into a Vulcan ISIS database and Excel spreadsheet for use in Vulcan and comprises 71 drillholes for 5,212.7m of drilling. Of these 18 drillholes, for 1,153.6m of diamond drilling (HQ size) were actually used for the Uley Main Road resource estimate, with 987.4m of core sampled. The remainder represent scattered drilling on other geophysical anomalies on the surrounding exploration tenement.

Coffey Mining has independently verified the drilling data through access to the HQ/HQ3 core stored in secured core-sheds on the Retention Leases. Eight of the CRAE drillhole collars used for the resource estimate were also preserved in the field and visited.

10.1 CRAE Drilling

All remaining CRAE drill core (Figure 10.1_1), post sampling are kept on-site in two secure sheds. All assay (Table 10.1_1), sampling results, procedures, manuals and remnant materials are kept on-site, either in a laboratory annex to the site-office, or a metallurgical laboratory next to the plant site. There are a number of scattered test pits (Figure 10.1_2).

Table 10.1_1

Uley Main Road Graphite Deposit - December 2009 Resource Update Estimate Summary Drilling and Sampling Statistics

Method Number of Holes

Average Length (m)

Total Drilled Metres

Number of Assays

Diamond 18 96 1,153.6 1,028



Figure 10.1_1 Drillcore Storage and Sample Archive

Figure 10.1_2 Outcrop at the “Eastern Anomaly” to the East of Uley Main Road Deposit



10.2 2011 Drilling

Diamond drilling (Table 10.2_1) on infill spacing of 25 x 50m has been completed to complement the existing resource and assay database. The core is HQ (63.5mm) and all drilling is vertical.

Table 10.2_1

Uley Main Road Graphite Deposit 2011 Drillhole Locations

Drillhole Easting (m) Northing (m) Dip Final Depth (m) ULEY 500 564,347 6,148,618 -90 105.5 ULEY 501 564,297 6,148,618 -90 108.5 ULEY 502 564,247 6,148,618 -90 96.3 ULEY 503 564,372 6,148,568 -90 85.6 ULEY 504 564,347 6,148,568 -90 100 ULEY 505 564,272 6,148,568 -90 102.5 ULEY 506 564,247 6,148,568 -90 94.6 ULEY 507 564,197 6,148,568 -90 103.5 ULEY 508 564,197 6,148,518 -90 99.5 ULEY 509 564,197 6,148,468 -90 104 ULEY 510 564,247 6,148,468 -90 80.4 ULEY 511 564,347 6,148,518 -90 81.4

10.3 Surveying

All plan collars and data was based on the Uley Mine Grid. In Howard (1982) a reference is provided to the local to AMG grid conversion factors. As was common in 1982, local mine grid was used and then truncated to deal with the 8 bit processors in calculators and computers at that time. The reported truncation was E -56,000m and N -6,140,000 metres. This has been applied to reformat the composite “Mapfiles” used in the estimation and the block model these data inform. Drillhole collars have been re-surveyed in the field and these transforms validated. Topography has been re-surveyed by a qualified local land surveyor and applied to the block models as a DTM. Drillhole data had heights specified to AHD (Australian Height Datum). All holes used in the resource database were recorded as vertical.

10.4 Geological Logging

The geological logging was completed and recorded by qualified CRAE geologists with logging details, assay sheets and drillhole core recoveries provided in Appendix 1. The drillhole logs were directly entered into Excel spreadsheets on-site. The drillhole database is currently stored in a Vulcan - ISIS format. The project database stores the geological logging data, assay analyses and collars which is considered sufficient for the current study.



10.5 Sampling

10.5.1 CRAE Sampling

CRAE sampled the core as 1m lengths, typically as ½ sawn drillcore. Where geology remained constant, lengths where increased to a maximum of 1.5m, 2m or 3m intervals. Where geology varied at lengths less than 1m, intervals down to 0.3m were sampled. The most common sample length is 1m. For the resource estimate, 2m composites were used.

10.6 2011 Sampling

Whole core was selected on geological intervals that were dispatched to ALS-Chemex in Perth. Fifty percent by weight of crushed -6mm sample was retained as a reference sample.

10.7 Bulk Density Measurement

Selected core samples have undergone density determination by the Coffey Mining affiliate Coffey Information. Selected billets of core have been tested and certified to Australian Standards 1289.2.1.1 for core and AS1289.3.5.1 for looser material. Twenty four direct measurements were taken. Two different methods were used, both are direct measurement of selected billets and soil particle measurement was only used where material was no longer coherent core. The average of these is 2.6g/cm³. Table 10.7_1 summarises the results of the density measurements.

Table 10.7_1

Uley Main Road Graphite Deposit Bulk Density Statistics

Mean 2.6 Median 2.7 Kurtosis 2.2 Mode 2.6 Geomean 2.6 Number 24 Maximum 3.5 Minimum 1.7 Skew -0.47152

10.8 Drillhole Data

10.8.1 CRAE Sample Preparation

The CRAE core samples were crushed and sieved on site and the +75µm fraction subjected to LECO analysis for graphite. This method in essence follows the “Proximate” analysis methodologies used in oil, gas, coal and carbon based mineral systems, where % volatiles, % ash and % fixed carbon are determined.



10.8.2 2011 Sample Preparation

The core samples were crushed and sieved by ALS-Chemex and the +75µm fraction subjected to LECO analysis for graphite using techniques C-IR07, C-IR17, C-IR-06 and carbonate % by calculation.

10.8.3 Prior Analysis

The determination of graphitic carbon in a specimen containing graphite cannot be determined by loss on ignition and moisture analysis alone, as a significant fraction of the non-graphitic mineral component may be present as volatile carbonates, bicarbonates, sulphides and nitrates. Organic compounds are expected to be present in samples, when mined. The total concentration of organic and inorganic decomposition gases is determined as the Volatile Matter by heating a weighed specimen in a covered crucible, at > 950°C for a specified time in an insert atmosphere.

All CRAE samples were analysed on-site or at Amdel in 1980-1987, with analysis involving the following steps:

Determination of moisture content;

Loss on Ignition and residual ash content

Content of non-combustible volatiles, fixed carbon after combustion and volatilisation;

Sizing analysis;

Acid leach of minerals fractions;

LECO carbon analysis by Infrared spectrometry;

Wet-sieving analysis.

Samples (20g) are sieved at +150µm, 106µm and 75µm, after crushing and froth flotation, acid leach and LECO analysis is performed on all size fractions.

The LECO CR 412 Analyser is a non-dispersive, infrared, digitally controlled device and is designed to measure the carbon content in a wide variety of organic and inorganic materials, including soil, cement and limestone. Analysis begins by weighing out a sample into a combustion boat (crucible). On analysis, the sample is typically combusted at >1350°C, within a pure oxygen environment. All sample materials contained in the combustion boat go through an oxidative reduction process which causes carbon bearing compounds to break down freeing the carbon, which oxides to form CO2. From the combustion chamber, the gases flow through two Anhydrone (MgCl4) tubes to remove moisture, through a flow controller (3.5l/min) then through to an infrared (IR) detection cell. The IR cell measures the concentration of carbon dioxide gas present. The instrument, its theory of operation, and characteristics are presented in Appendix 1. The LECO CR 412 Analyser has an inherent manufacturer specified accuracy of +/- 1% carbon present.



The method as developed and applied by Amdel (now part of the Bureau Veritas group) is reported in Howard, 1982. Samples are acid digested at 90°C and then filtered on fibreglass. Dried samples are then heated in an oven to 500°C before being heated in a “LECO” combustion chamber at 1500°C and the CO2 is determined by infrared spectrometry. Subsequent stoichiometric calculation results in percentage carbon as graphite or carbon in carbonate. These were the two variables estimated in the original resource estimate.

11 SAMPLE PREPARATION, ANALYSES AND SECURITY

The current round of sampling was subjected to:

Acid leach of mineral fractions;

LECO carbon analysis by Infrared spectrometry.

11.1 CRAE Analytical Quality Control Procedures and Data

As part of a previous study, Coffey Mining had completed a statistical review on the quality control data provided by MEGA. The objective of these analyses was to determine accuracy of the assaying and also to assess the relative precision and accuracy levels between various sets of assay pairs. It should be noted that no additional assay quality control data has been provided to Coffey Mining for any assaying completed since Howard (1982) reported these. The quality control data investigated by Coffey Mining for this assignment was only the umpire and duplicate assays undertaken by Howard (1980).

The statistical measures used in these assessments are summarised as follows:

Thompson and Howarth Plot, showing the mean relative percentage error of grouped assay pairs across the entire grade range, used to visualise precision levels by comparing against given control lines.

Rank % HARD Plot, which ranks all assay pairs in terms of precision levels measured as half of the absolute relative difference from the mean of the assay pairs (% HARD), used to visualise relative precision levels and to determine the percentage of the assay pairs population occurring at a certain precision level.

Mean vs % HARD Plot, used as another way of illustrating relative precision levels by showing the range of % HARD over the grade range.

Mean vs %HRD Plot is similar to the above, but the sign is retained, thus allowing negative or positive differences to be computed. This plot gives an overall impression of precision and also shows whether or not there is significant bias between the assay pairs by illustrating the mean percent half relative difference between the assay pairs (mean % HRD).



Correlation Plot is a simple plot of the value of assay 1 against assay 2. This plot allows an overall visualisation of precision and bias over selected grade ranges. Correlation coefficients are also used.

Quantile-Quantile (Q-Q) Plot is a means where the marginal distributions of two datasets can be compared. Similar distributions should be noted if the data is unbiased.

Standard Control Plot shows the assay results of a particular reference standard over time. The results can be compared to the expected value, and the ±10% precision lines are also plotted, providing a good indication of both precision and accuracy over time.

11.1.1 Certified Reference Material (Standards) and Blanks

Coffey Mining can find no records of standard certified reference materials and blanks being used. Laboratory procedures and manuals are however comprehensively documented on-site. The sampling methodology used is similar to that used in coal and the determination of organic content in sediments and these are broadly destructive techniques, with a limited ash residue not suited for replicate analysis.

11.1.2 Umpire Laboratory Check Assaying

Howard (1982) took seventeen samples from the remnant HQ core for the purposes of umpire and duplicate analysis. The Amdel laboratory is the original sample venue. Due to the nature of the HQ sampling, only limited material was reportedly available for this umpire analysis. Results of umpire and duplicate analysis as reported in Howard (1982) are presented in Figures 11.1.2_1 and 11.1.2_2.

At a 15% precision level, >80% of the data are within precision limits. Given the flakey and thus nuggetty effect the graphite flakes and grains would have on sampling, these results are considered acceptable. The LECO instrument has stated manufacturers accuracy of 1% carbon under ideal operating conditions.

The Amdel versus check laboratory (Comlabs) comparison displays overall acceptable precision (82% within a 15% Rank HARD limit) although the mean of the Comlabs analysis (15.3% C) is 2.1% higher than the Amdel assay (13%).

11.1.3 Summary

Although limited, the CRAE quality control protocols implemented at Uley are considered to represent good industry practice at the time and allow some assessment of analytical precision and accuracy. The assay data is considered to display acceptable precision. Further investigation is recommended into the sample preparation to ensure improved precision is achieved in future assay results.



Additional duplicate assaying should be completed at a rate of 1:20 samples submitted. This additional quality control data allowed further investigation of the sample preparation and enabled the determination of the errors associated with the crushing and splitting of the crushed sub-sample relative to the pulverisation.

Coffey Mining notes that the umpire repeats are ~20% higher in grade, however the graphs indicate this is due to nuggetty mineralisation at grades > 20% graphite carbon.

No standards data was available for review at the time of this report, however the AMDEL laboratory was considered to be a reputable laboratory at the time for carbon analysis.



Figure 11.1.2_1 Summary Statistics – Amdel versus Comlabs

AMDEL COMLABS Units ResultNo. Pairs: 17 17 Pearson CC: 1.0Minimum: 0.2 0.5 carbon % Spearman CC: 1.0Maximum: 41.8 53.5 carbon % Mean HARD: 11.6Mean: 13.0 15.8 carbon % Median HARD: 4.7Median 10.8 10.8 carbon %Std. Deviation: 11.2 14.7 carbon % Mean HRD: -11.5Coefficient of Variation: 0.9 0.9 Median HRD -4.7

0

20

40

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HA

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Mean vs. HARD Plot(All Data)

Mean HARD: 11.6 Median HARD: 4.7Precision: 15%

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Rank HARD Plot(All Data)

Precision: 15%

82.4% of data are withinPrecision limits

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HRD Histogram(All Data)

Mean HRD: -11.5 Median HRD: -4.7Precision: +/-15.0%

-60

-40

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Mean vs. HRD Plot(All Data)

Mean HRD: -11.5 Median HRD: -4.7Precision: +/-15%

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T & H Precision Plot (Assay Pairs)(All Data)

10% 20% 30% 50%

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Grouped Mean of Pair (carbon %)

T & H Precision Plot (Grouped Pairs)(All Data)

10% 20% 30% 50%

-20

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Correlation Plot(All Data)

P.CC= 1.0 S.CC= 1.0 Ref. Liney = 1.3x -0.8

-20

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QQ Plot(All Data)

Ref. Line y = 1.3x -0.9

Summary(All Data)

Printed: 17-Dec-2009 16:59:22 Data Refreshed: 17-Dec-2009 16:54:24 Page 1



Figure 11.1.2_2 Umpire Assaying

AMDEL ANALABS Units ResultNo. Pairs: 17 17 Pearson CC: 1.0Minimum: 0.2 0.3 carbon % Spearman CC: 1.0Maximum: 41.8 50.9 carbon % Mean HARD: 8.1Mean: 13.0 14.7 carbon % Median HARD: 5.6Median 10.8 12.5 carbon %Std. Deviation: 11.2 13.7 carbon % Mean HRD: -4.8Coefficient of Variation: 0.9 0.9 Median HRD -2.0

0

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Mean vs. HARD Plot(All Data)

Mean HARD: 8.1 Median HARD: 5.6Precision: 15%

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0 10 20 30 40 50 60 70 80 90 100H

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Rank HARD Plot(All Data)

Precision: 15%

82.4% of data are withinPrecision limits

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HRD Histogram(All Data)

Mean HRD: -4.8 Median HRD: -2.0Precision: +/-15.0%

-40

-20

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%)


Mean vs. HRD Plot(All Data)

Mean HRD: -4.8 Median HRD: -2.0Precision: +/-15%

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T & H Precision Plot (Assay Pairs)(All Data)

10% 20% 30% 50%

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T & H Precision Plot (Grouped Pairs)(All Data)

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Correlation Plot(All Data)

P.CC= 1.0 S.CC= 1.0 Ref. Liney = 1.2x -0.8

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QQ Plot(All Data)

Ref. Line y = 1.2x -1.1

Summary(All Data)

Printed: 17-Dec-2009 16:57:29 Data Refreshed: 17-Dec-2009 16:54:24 Page 1



11.2 CRAE Database Validation

A total of 18 CRAE era and 12 diamond drillholes drilled in 2011 in the Uley area had been used in the resource modelling study. The database used for resource estimation consists solely of diamond drilling and has been reviewed and re-validated for obvious errors by Coffey Mining prior to commencing the resource estimation study. Checks to assay certificates have been provided by ALS Chemex.

The following checks were completed prior to uploading the drilling data into a Vulcan database:

Check and correct overlapping intervals.

Ensure downhole surveys existed at a 0m depth.

Ensure consistency of depths between different data tables, for example survey, collar and assays.

Check gaps in the assay data which were replaced by -999.

Data was composited to 2m lengths.

11.3 2011 Drilling Results

The 2011 drilling results are tabulated below in Table 11.3_1.



Table 11.3_1 Uley Main Road Graphite Deposit

Assay Results

Sampling Assay

Drillhole Sample From (m)

To (m)

Length (m)

Total Carbon (%)

Method C-IR06

Graphite (%) Weak Digest

Method C-IR07

Graphite (%) Strong Digest

Method C-IR17

Carbon as Carbonate (%)

Method CAL-15

ULEY 500 1 15.5 17.5 2.0 17.35 17.05 17.20 0.15 ULEY 501 1 22.0 24.3 2.3 13.05 7.69 8.08 4.97 ULEY 501 2 56.3 58.01 1.7 37.50 39.60 35.80 1.70 ULEY 501 3 59.1 60.8 1.7 17.40 17.65 17.30 0.10 ULEY 501 4 60.8 62.5 1.7 27.60 27.10 26.50 1.10 ULEY 502 1 60.6 62.0 1.4 34.50 34.80 32.10 2.40 ULEY 502 2 62.0 63.3 1.3 33.50 35.50 31.60 1.90 ULEY 502 3 63.3 64.3 1.0 18.70 17.40 18.50 0.20 ULEY 502 4 82.0 84.0 2.0 37.10 37.40 34.70 2.40 ULEY 502 5 85.0 87.5 2.5 46.10 42.20 39.30 6.80 ULEY 503 1 41.8 44.3 2.5 24.20 24.60 22.70 1.50 ULEY 503 2 53.4 54.7 1.3 32.20 31.90 29.50 2.70 ULEY 504 1 7.3 9.3 2.0 4.61 3.54 3.84 0.77 ULEY 504 2 28.3 29.3 1.0 12.45 8.74 10.20 2.25 ULEY 504 3 30.3 32.01 1.7 12.80 10.80 11.00 1.80 ULEY 504 4 39.3 41.1 1.8 8.10 7.78 7.51 0.59 ULEY 504 5 41.1 42.1 1.0 12.90 12.60 12.20 0.70 ULEY 505 1 11.2 13.1 1.9 28.30 23.90 23.50 4.80 ULEY 505 2 46.4 48.5 2.1 38.80 41.00 37.20 1.60 ULEY 506 1 12.9 15.3 2.4 22.50 19.00 19.25 3.25 ULEY 506 2 56.1 57.3 1.2 29.20 30.20 28.50 0.70 ULEY 506 3 57.3 60.3 3.0 >50.00 50.40 49.20 4.20 ULEY 506 4 80.7 82.01 1.3 28.30 28.30 26.70 1.60 ULEY 506 5 82.01 83.01 1.0 28.90 27.50 28.00 0.90 ULEY 506 6 83.5 87.01 3.5 28.70 27.40 28.00 0.70 ULEY 507 1 47.0 48.5 1.5 23.80 24.60 22.90 0.90 ULEY 507 2 48.5 52.01 3.5 30.00 31.10 28.20 1.80 ULEY 507 3 50.0 51.5 1.5 38.00 40.50 37.00 1.00 ULEY 507 4 51.5 53.9 2.4 36.20 36.10 35.00 1.20 ULEY 508 1 26.3 28.3 2.0 6.71 5.31 5.80 0.91 ULEY 508 3 34.9 36.1 1.2 28.90 27.20 27.50 1.40 ULEY 508 2 34.4 34.9 0.5 14.90 14.60 12.50 2.40 ULEY 508 4 38.4 42.3 3.9 18.10 19.75 17.30 0.80 ULEY 508 5 42.5 45.6 3.1 28.40 27.10 26.10 2.30 ULEY 508 6 54.5 58 3.5 19.90 20.60 18.80 1.10 ULEY 509 1 34.5 36.5 2.0 19.80 21.30 18.80 1.00 ULEY 509 2 36.5 39.5 3.0 32.80 34.30 31.30 1.50 ULEY 509 3 44.5 47.5 3.0 >50.00 52.00 48.90 1.80 ULEY 509 4 54.4 55.7 1.3 48.60 51.10 47.50 1.10 ULEY 509 5 66.5 68.5 2.0 29.60 28.30 28.20 1.40 ULEY 509 6 68.8 70.1 1.3 23.40 25.30 21.60 1.80 ULEY 509 7 70.1 72.7 2.6 25.70 29.50 25.70 <0.02 ULEY 510 1 9.1 10.2 1.1 21.80 21.50 21.20 0.60 ULEY 510 3 22.4 24.4 2.0 16.70 12.05 12.25 4.45 ULEY 510 2 30.5 33.6 3.1 18.60 18.95 15.00 3.60 ULEY 510 4 35.3 38.3 3.0 23.00 19.55 17.75 5.25 ULEY 511 1 6.4 9.4 3.0 8.71 6.34 7.28 1.43 ULEY 511 2 13.0 14.3 1.3 11.85 7.01 7.55 4.30 ULEY 511 3 36.0 38.4 2.4 18.70 17.40 18.50 0.20 ULEY 511 4 38.4 42.4 4.0 14.80 14.90 14.60 0.20



12 Data Verification

12.1 Database Coding and Compositing

The resource drillhole database was composited to a 2m downhole composite interval, which was then coded against the recording the interpreted mineralisation model. The 2m composites were used for all statistical, geostatistical and grade estimation studies. The decision to use 2m composites was based on the targeted mining approach which is to be by conventional open pit methods, using small to medium sized mining fleet.

12.2 Summary Statistics

Summary 2 metre composite statistics are presented in Table 12.2_1.

The data distribution is positively skewed which is typical of many such deposits. The coefficient of variation (CV), which is calculated by dividing the standard deviation by the mean grade, of 1.11 is moderately high indicating that high grade composites are not materially influencing the mean.

12.3 Density

An average bulk density of 2.20 t/m³ has been applied to all modelled mineralised zones as a default value. Where relevant a scripted and calculated density value which considers the modelled graphite grade is substituted which is based on an average of 35 density measurements conducted on-site.

12.4 Block Model Construction

A three-dimensional block model was constructed for the Uley Rain Road graphite deposit, covering the interpreted mineralisation zone and including suitable additional waste material to allow later pit optimisation studies. The selected block size was based on the geometry of the domain interpretation and the data configuration (25m to 50m drill section spacing). A parent block size of 4mE x 10mN x 4mRL was selected with no sub-blocking. Block coding of the mineralisation domains, oxidation and lithology was completed on the basis of the block centroid, wherein a centroid falling within any wireframe was coded with the wireframe solid attribute. A visual review of the wireframe solids and the block model indicates robust flagging of the block model. Sufficient variables were included in the block model construction to enable grade estimation and reporting. Details are reported in Appendix B, as originally reported in Warries and Barnes, 1996.

The block model construction parameters are displayed in Table 12.4_1.

The mineralisation domains, lithology and modelled weathering were coded to the block model. The mean bulk density of 2.2g/cm³ was applied to the block model via block model script for tonnage reporting. A bulk density was also calculated based on Graphite Carbon % and surrounding bedrock reporting at 2.6g/cm³.



Table 12.2_1

Uley Main Road Graphite Deposit

Summary 2m Composite Statistics –Graphitic Carbon (%)

2011 2m Composites

1996 2m Composites

MIDZ %GRA MIDZ %GRA Number 720 720 Number 538 538 Minimum 389.85 0 Minimum 389.675 0 Maximum 497.02 49.2 Maximum 498.02 50.955 Mean 451.45 8.275 Mean 449.288 7.121 Median 454.57 4.6 Median 451 4.23 Std Dev 26.967 9.185 Std Dev 28.707 7.826 Variance 727.214 84.369 Variance 824.093 61.241 Std Error 0.037 0.013 Std Error 0.053 0.015 Coeff Var 0.06 1.11 Coeff Var 0.064 1.099 Log Num 720 712 Log Num 538 536 Geom Mean 450.634 4.455 Geom Mean 448.364 3.921 Log Min 5.966 -2.303 Log Min 5.965 -2.303 Log Max 6.209 3.896 Log Max 6.211 3.931 Log Mean 6.111 1.494 Log Mean 6.106 1.366 Log S Dev 0.06 1.253 Log S Dev 0.064 1.217 Log Var 0.004 1.569 Log Var 0.004 1.482 Sichel Stats Mean 450.634 9.745 Sichel Stats Mean 448.364 8.206

V 0.004 1.567 V 0.004 1.479 Gamma 1 2.188 Gamma 1 2.093

Percentiles 10 412.65 0.775 Percentiles 10 409 0.797 20 424.57 1.5 20 421 1.376 30 436.08 2.475 30 6-Mar-01 7:37:55 40 446.27 3.6 40 441 3.319 50 454.57 4.6 50 451 4.23 60 461.94 6.5 60 461 5.513 70 469.8 9.6 70 469 8.439 80 478 13.3 80 479 11.243 90 485.88 20.325 90 487 17.114 95 490.08 28 95 491 23.894 97.5 492.65 35 97.5 493 28.432 99 494.658 40.765 99 495 35.979



Table 12.4_1 Uley Main Road Graphite Deposit – June 2010 Resource Update

Block Model Parameters

East North Elevation Origin 9800 9200 -100 Extent (m) 600 500 500 Parent Block size (m) 4 10 4 Sub-Block Size (m) - - - Number of Blocks (parent) 15,050,175 15,050,175 15,050,175

12.5 Estimation Approach

Coffey Mining was mandated to re-estimate the block model, rather than re-validate and update work that has been completed by RSG Global in 1997 (Appendices B & C).

Coffey Mining had based its grade interpolation on both Ordinary Kriging (OK) and Inverse Distance Cubed (ID3), the more common statistical methods for estimating block grades. In these interpolation techniques, contributing composite samples are identified using a search volume applied from the centre of each block. Weights are determined so as to minimise the error variance considering both the spatial location of the selected composites and the modelled variogram. Variography describes the correlation between composite samples as a function of distance. The weighted composite sample grades are then combined to generate a block estimate and variance.

Variables modelled by ID3 techniques as a cross check is restricted to % Graphite Carbon only.

For the mineralised zones, grade was interpolated based on 2m composite samples using structural and grade-domain (mineralisation zones) control for both composite and block selections applying hard boundaries between the zones. Grade estimates were interpolated into parent cells only.

12.6 Modifying Factors

No modifying factors have been applied to the global resource estimate, as the mining methodology, equipment inventory and project timeline are yet to be finalised.

12.7 Resource Classification Criteria

The resource estimate for the Uley Main Road deposit has been categorised in accordance with the guidelines set out in the ‘National Instrument 43-101 Standards of Disclosure for Mineral Projects.

Indicated and Inferred Mineral Resources are classified for the Uley gold deposit, based on a block size of 4mE x 10mN x 4mRL. The classification is based on the confidence levels of the key criteria as presented in Tables 12.7_1 to Tables 12.7_4.



Table 12.7_1 Uley Main Road Graphite Deposit

Confidence Levels of Key Categorisation Criteria

Quality Comment Risk / Impact Comment 1 Not resource 10 Extreme (Not resource)

2-4 Inferred 7-9 High 5-7 Indicated 4-6 Moderate

8-10 Measured 1-3 Low

Table 12.7_2


Classification Scorecard - Sampling Techniques and Data

Quality Score

Risk Score Item Comment

5 4 Drilling Techniques Drill type (eg. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka etc.) and details (eg. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, etc.). Measures taken to maximise sample recovery and ensure representative nature of the samples. Diamond drilling, vertical.

6 4 Logging Core and chip samples have been logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies. Logging is qualitative in nature. Core photography completed, sighted & verified.

6 4 Drill Sample Recovery Sample recoveries have been recorded and results re-assessed & recorded.

5 3 Other Sampling Techniques Nature and quality of sampling (e.g. cut channels, random chips etc.) and measures taken to ensure sample representivity. Continuous over mineralised horizons.

7 3 Sub-Sampling Core, sawn half and ½ core taken. Sample sizes are appropriate to the grainsize of the material being sampled.

5 6 Quality of Assay Data and Laboratory Tests

Assaying and laboratory procedures used partial ½ core. Control procedures - duplicates, acceptable levels of accuracy (i.e. lack of bias) and precision have been partly established.

8 3 Verification of Sampling and Assaying The independently verification of significant intersections by Coffey Mining. No use of twinned holes.

8 4 Location of Data Points Accuracy and quality of surveys used to locate drill holes (collar and downhole surveys), Quality and adequacy of topographic control. Re-surveyed in 2009.

6 7 Data Density and Distribution Data density is 50m x 50m x 2m. Sample compositing has been applied to produce 2m composite database. 7 7 Audits and Review No audits or reviews of sampling techniques and data, but sample and core verification undertaken by Coffey Mining.

Average Score 6

Average Score 5



Table 12.7_3


Classification Scorecard - Estimation and Reporting of Minerals Resources – Fundamental Data

Quality Score


8 4 Database Integrity Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes. Data validation procedures used.

7 3 Geological Interpretation Nature of the data used and of any assumptions made. The effect, if any, of alternative interpretations on Mineral Resource estimation. The use of geology in guiding and controlling Mineral Resource estimation. The factors affecting continuity both of grade and geology. Interpreted in terms of existing understanding of structural geology.

5 7 Estimation and Modelling Techniques

The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters, maximum distance of extrapolation from data points. The assumptions made regarding recovery of by-products. In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed. Any assumptions behind modelling of selective mining units (eg. non-linear Kriging). The process of validation, the checking process used, the comparison of model data to drillhole data, and use of reconciliation data if available. Check estimate completed. Mine production records not applicable.

Average Score 7

Average Score 5

Table 12.7_4


Classification Scorecard - Estimation and Reporting of Minerals Resources – Modifying Factors

Quality Score


7 3 Cutoff Grade Parameters The basis of the cutoff grade(s) or quality parameters applied, including the basis, if appropriate, of equivalent metal formulae. Pit-optimisation study based on client input revenue and cost.

- - Mining Factors or Assumptions

Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. Where no assumptions have been made, this should be reported. 10mx10mx2m regularised block model.

- - Metallurgical Factors or Assumptions

The basis for assumptions or predictions regarding metallurgical amenability. It may not always be possible to make assumptions regarding metallurgical treatment processes and parameters when reporting Mineral Resources. Where no assumptions have been made, this should be reported. None made.

5 3 Tonnage Factors (in-situ bulk densities)

Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, the frequency of the measurements, the nature, size and representativeness of the samples. Direct measurement to Australian Standard.

5 5 Classification

The basis for the classification of the Mineral Resources into varying confidence categories. Whether appropriate account has been taken of all relevant factors. i.e. relative confidence in tonnage/ grade computations, confidence in continuity of geology and metal values, quality, quantity and distribution of the data. Whether the result appropriately reflects the Competent Person(s)’ view of the deposit. Drill density. 50 x 50m inferred 50 x 25m Indicated

Audits or Reviews The results of any audits or reviews of Mineral Resource estimates None.

Average Score 6

Average Score 4



Using the discussed classification criteria a block model script was developed to code to the model a resource categorisation. The resource categorisation is based on drillhole spacing.

Indicated: minimum of 25mx50m spacing.

12.8 Mineral Resource Reporting

A selective mining (4mE x 10mN x 4mRL) block size has been reported using a range of lower cutoff grades and subdivided by resource classification. A maximum lower cutoff grade of 3.8% TC is recommended.

The grade estimate is based on the assumption that open cut mining methods will be applied and high confidence grade control, for example RC grade control drilling, or ditch-witch bench top sampling will be available for ore/waste demarcation. It is recommended that mining modifiers be reviewed for any mine planning activities undertaken and that additional dilution and ore loss be added to the model, as well as mineral recovery.

In addition to the OK estimate used here, Coffey Mining has undertaken a check estimate using an Inverse Distance Cubed (ID3) methodology, with no bottom sample cut and 40% top cut, using the same composite sample and assay metadata used in the OK estimate. The top cut is based on an analytical technique upper tolerance limit. A search ellipse of 20m x 40m x 7.5m (X, Y and Z) was used with a minimum of one informing samples and a maximum of 30 informing samples and a default search distance of 50m. This is chosen to constrain the estimate to local samples and prevent the samples from one structural domain in effect being used in another – these being localised antiformal limbs.

Coffey Mining has elected to report mineralisation drilled at 50m x 25m spacing as “Indicated”.



13 MINERAL PROCESSING AND METALLURGICAL TESTING

The nature and extent of the testing on the Uley Main Road Graphite Ores is minimal however the analytical procedures used for this limited scope of work are acceptable.

13.1 1980 - 1987 Testwork

Initially all CRAE sampled were analysed on-site or at Amdel in 1980-1987, with analysis involving the following steps:

Determination of moisture content;

Loss on Ignition and residual ash content

Content of non-combustible volatiles, fixed carbon after combustion and volatilisation;

Sizing analysis;

Acid leach of minerals fractions;

LECO carbon analysis by Infrared spectrometry;

Wet-sieving analysis.

Samples (20g) are sieved at +150µm, 106µm and 75µm, after crushing and froth flotation, acid leach and LECO analysis is performed on all size fractions. Results for the above test have not been received. No froth flotation recoveries or other data has been provided.

13.2 LECO Analyser

As described in Section 10.8.3 prior analysis, the method as developed and applied by Amdel (now part of the Bureau Veritas group) is reported in Howard, 1982. Samples are acid digested at 90°C and then filtered on fibreglass. Dried samples are then heated in an oven to 500°C before being heated in a “LECO” combustion chamber at 1500°C and the CO2 is determined by infrared spectrometry. Subsequent stoichiometric calculation results in percentage carbon as graphite or carbon in carbonate. These were the two variables estimated in the original resource estimate.

13.3 Minimum Additional Testwork Requirements

For testing of a graphite ore body the following additional testwork would be considered as minimum and mandatory prior to commencement of production to ensure any unquantified mineral values are recognised and allocated to the production schedule:

13.3.1 Head Assays

C speciation suite (C(tot), C(g), C(org), CO2 ), ICP scan, Au, Ag, Pt, Pd



13.3.2 Mineralogy

Semi-quantitative XRD analysis

Optical microscopy – semi-quantative modal abundance, liberation and aspects of ratio of graphite.

Electron microscopy examination – semi-quantitative analysis for silicates

Semi-quantitative bulk sample analysis by powder X-ray Diffraction (XRD) should be performed. All crystalline minerals identified by XRD analysis should be reported and grouped into major (>30%), moderate (10-30%), minor (2-10%) and trace (<2%) amounts. Mineral abundances should also be reported in weight %, generated by relative intensity ratio (RIR) method. XRD should be reconciled with ICP and carbon assays.

13.3.3 Batch Flotation Testing

Flotation test work should aim at obtaining a saleable concentrate grade at maximum recovery. Rougher kinetic tests are used to examine the effect of primary grind size, pH, and reagent scheme. These are followed by cleaner tests, which will typically look at the effect of regrind size and cleaner configuration. When a successful flowsheet is developed, metallurgical performance should be confirmed through locked cycle testing. Further consideration and assessment of processing factors is warranted, though it is understood from personal communication and anecdotal information that historical recoveries of around 85-90% were obtained during the last processing phase in the 1980's to 1990’s.



14 MINERAL RESOURCE ESTIMATES

14.1 Geological Interpretation and Modelling

Coffey Mining undertook a lithological interpretation based on the drillhole data using the Vulcan technical software package. Two deposit wide changes in rock type are material: a barren pegmatite lithology; and a fault zone, where fault fills can be mineralised. The former is excluded from the resource declaration. Mineralised wireframe envelopes were applied as the basis of constraint for the resource model. These enveloped were based on the available geochemical data, geological logging, and the supplied geological model, a legacy of Strategic Energy Resources, the previous tenement holders.

14.2 Mineralisation Interpretation

The mineralisation wireframe constraints used are based on sectional interpretations generated on 25m sections using a nominal 5% graphitic carbon (GC) lower cutoff grade. The cutoff grade was selected as it represented a natural ‘geological’ cutoff that captures the anomalous intercepts. It was also selected as suitable when open cut methods are being targeted and recoverable resource estimation is to be considered. The changes from strongly mineralised to background mineralised zones is obvious in the sample composite database as changes from >5% GC, to values around < 1-3% GC.

High grade (>5% GC) intercepts are present along the entire strike length of the zone. These have been included in the broad interpretation. Significant short scale variation may be common, often resulting in substantial variations between drillholes on section, especially in the development of pegmatite, fold limbs and discrete veins of graphite. Prior optimisation work by Coffey Mining in August 2009 has resulted in a 3.8% cutoff being applied.

14.3 Weathering Interpretation

The drillhole database contains logged weathering codes comprised of codes reflecting the degree of weathering which varies from highly to slightly weathered and includes unweathered codes. This data was used to construct a weathering profile (base of weathering and fresh zones) and coded in the block model. On some sections the intermixing of the weathering types is complicated and the interpreted profile has been simplified for the purposes of modelling. In general, the weathering surface broadly parallels the topographical profile to a 70m depth below surface. Both the weathering (which is more applicable to mining) and oxidation (which is more applicable to metallurgical recovery) will be critical components of geometallurgical models required for higher feasibility level studies.

Weathering has occurred to 70m depths below the un-mineralised Tertiary age calcretised aeolianates. Graphite is stable at standard temperature and pressure (STP) and apparent even in strongly altered and weathered outcrop



15 ADJACENT PROPERTIES

There are several known graphite occurrences in the area surrounding the Uley property. Lincoln Minerals has declared a 880,000 tonne @ 11.47%C Inferred Resource (in accordance with JORC guidelines (2004) and not reported under NI-43101) at its’ Kookaburra Gully prospect, and several other companies have announced active exploration in the region and several historical working are under review by numerous parties.



16 OTHER RELEVANT DATA AND INFORMATION

The level of technical risk is defined as the likelihood of variation of resource tonnage and/or graphite grade from the stated values. While an assessment of the data quality has been completed as part of this report, it is difficult to measure this level of risk as it is a reflection of the degree of confidence in the database, the geology, and the grade interpolation process. A number of pertinent issues that have been discussed are highlighted in this section.

16.1 Geological Model

The mineralisation constraints have been based on a combination of geology and graphite grades. The model has been constructed to capture the anomalous graphite mineralisation and is considered acceptable for open cut mining methods. A physical constraint has been interpreted for the higher grade (>3.8% carbon) zones as these intercepts are distributed and controlled by the limbs of antiformal structures throughout the interpreted mineralisation zone. A 40% top cut constraint has been applied as well as a high yield sample limit at distance of 13m. This is to confine sampling to local structural domains.

16.2 Grade

Grades quoted in this report should be understood to be global estimates of the mineralisation at Uley Main Road.

Local estimates for detailed planning will require grade control methodologies to be developed. The mineralisation is visually obvious which a positive in this context. An on-site laboratory however would require substantive refurbishment and capital investment to achieve to current Australian Standards which would be required from a quality control perspective. Coffey Mining estimates 60% of the graphite may be recovered as coarse graphite (flake, > 75um) from prior work involving the mineralogical characteristics presented in the RSG Global/Coffey Mining archive. Percentages of fine flake, by rock type are also reported in Keeling, 2000.

16.3 Resource Tonnages

The resource (Table 16.3_1) is constrained at depth by structure and stratigraphy but appears open along strike to the north and south and an extension into the Uley 3 anomaly is supported by geophysical interpretation. This resource may be upgraded in terms of size by further step-out drilling and in terms of classification by in-fill drilling at Uley Main Road. Of the Mineral Resource declared here 65% of the tonnage is “Indicated”. The inferred tonnages occur to the north of the area of 25 x 50m infill and the now depleted original Uley pit, as well as to the east of the drilled out area, where there is scattered drilling on 50 x 50m basis.

A check estimate using an ID3 methodology produced a Total resource, of 6.6Mt at 7.9% Graphitic carbon (Appendix C) at the same cutoff grade, 3.8% graphitic carbon.



Table 16.3_1 Uley Main Road Graphite Deposit -

Classified Resource at 3.8% Graphitic Carbon Cutoff OK Estimate using a Parent Block of 10mY by 4mE and 4mRL

Classification Lower Cutoff Grade (Graphitic Carbon %)

Tonnage (Mt)

Average Grade (Graphitic carbon %)

Indicated 3.8 4.3 9.4 Inferred 3.8 2.3 7.5 Total 6.6 8.7



17 INTERPRETATION AND CONCLUSIONS

The 3D modelling undertaken and drilling data indicates mineralisation may extend in to the “Eastern Anomaly” otherwise known as Uley 3 (Figure 17_1).

Figure 17_1

Other Adjacent Anomalies

Based on the documentation provided, Coffey Mining considers that the data collection procedures applied are appropriate. The drillhole database is considered to be appropriate for the purposes of resource estimation.

Further scope exists to improve the geological and resource estimation confidence in the areas currently defined as exploration targets. This would be achieved by additional infill and extensional drilling along the geophysical anomaly.



18 RECOMMENDATIONS

Coffey Mining recommends undertaking continued exploration work across the Uley tenements and suggests that exploration drilling to -100m depth below collar would target the Uley4-6 deposits.

Coffey Mining recommends that such drilling be undertaken with diamond drillcore at HQ and HQ3 core sizes and sampling and procedures should be standarised and substantially similar to the work already completed. Coffey Mining does not recommend reverse circulation, reverse air blast or similar technques that produce a fragmented sample.

Based upon the available drillhole data, total exploration potential for the above projects, as reported by Coffey Mining in 2009, ranges from 25-150Mt with grade ranges from 6 to 9% (Table 18_1). (Coffey Mining, 2009, 2010).

Table 18_1

Uley Main Road Graphite Deposit - December 2009 Resource Update

Strategic Energy Resources Exploration Potential – Reported August, 2009

Prospect Name Surface Area (km²) Discovery Hole Intersections Target

Ranking Fisheries 1.5 83MKRC11 68.0-99.2m, 31m @ 7.1 C 5 Salt Lake 2.5 83MKRC08 16-42m, 26m @ 7.5% C 2 Kacey 3.00 83KRD011 44.2-51.9m, 7.7m @ 9.2% C 3

Homestead 0.25 83MKRC10 18-60m, 42m@ 7.0% C 30-60m, 30m @ 8.6% C 1

Remnant Uley 2.0 82MKD14 40-46m,6m @ 6.1 % C 4



19 REFERENCES

Anon, 1993. Appendix 2, Drill Logs. Uley graphite project, 31 December, 1993.

Coffey Mining, 2009. Memorandum to Strategic Energy resources, Project MINEWPER00737AA, Memorandum , 2pp.

Coffey Mining, 2010. December 2009 Resource Upgrade, Project MINEWPER00737AA, report, 50pp.

Howard, J.P., 1982. E.L. 812 MIKKIRA – Uley Prospect. An Estimate of Graphite Resources.

Keeling, J., 2000. Uley graphite a world class resource. Mesa Journal, v18, 6-11.

Parker, A.J., and Lemon N.M., 1982. Reconstruction of the Early Proterozoic stratigraphy of the Gawler Craton, South Australia. Journal of the Geological Society of Australia, v.29, p.221-238.

Rowe, J., 1993. Ore Reserve/Mineral Resource, 31 December, 1993.

Swartz, M.P., 2003. Lincoln Map Sheet. South Australia Geological Survey, Geological Atlas 1:250,000 Series, Sheet SI 53-11.

Vassallo, J.J. and Wilson, C.J.L., 2001. Structural repetition of the Hutchison Group metasediments, Eyre Peninsula, South Australia. Australian Journal of Earth Sciences, v.48, p.331-345.

Warries H. and Barnes, J., 1996. Database compilation, resource estimation, pit optimisation and mine scheduling. RSG Global Report.

Yeates G., 1990. Middleback Range iron ore deposits. In: Geology of the Mineral Deposits of Australia and Papua New Guinea (Ed. F.E. Hughes), The Australasian Institute of Mining and Metallurgy, Melbourne. p.1045-1048.



DATE AND SIGNATURE PAGE

The “qualified person” (within the meaning of NI 43-101) for the purposes of this report is Trevor Bradley. The effective date of this report is 11 July 2012.


Trevor Bradley MAIG Manager - Audits Coffey Mining Pty Ltd. Signed on the 11 July 2012

Appendix A CRAE Lab Assay Protocols


Appendix A – Lab Assay Protocols Page: 1

Appendix B Extracts from Warries and Barnes October 1996 Report

Appendix B – Extracts from Warries and Barnes October 1996 Report Page: 1

TABLE 7.2

ULEY GRAPHITE PROJECT

STATISTICAL DATA SUMMARY 1996

GRAPHITIC CARBON UG_ASS.DAT : ORIGINAL SAMPLE DATABASE

Cutoff Grade

(%) No of

Samples Min Max Mean Std Dev Coeff of Variation

Geom Mean

Ln Std Dev

Sichel’sMean

Minimum 869 0.00 57.9 8.28 9.9011 1.20 3.97 1.3721 10.17 1.0 719 1.00 57.9 9.91 10.1550 1.03 6.11 1.0054 10.11 3.0 527 3.00 57.9 12.84 10.4095 0.81 9.60 0.7596 12.80 4.0 447 4.00 57.9 14.52 10.4461 0.72 11.54 0.6751 14.46 5.0 389 5.00 57.9 16.03 10.3855 0.65 13.33 0.6032 15.96 6.0 349 6.00 57.9 17.24 10.2897 0.60 14.77 0.5497 17.14 8.0 287 8.00 57.9 19.47 10.0434 0.52 17.39 0.4644 19.28 10.0 253 10.00 57.9 20.88 9.8692 0.47 19.03 0.4188 20.74 12.0 220 12.00 57.9 22.42 9.6924 0.43 20.76 0.3783 22.21 15.0 171 15.00 57.9 25.01 9.5127 0.38 23.56 0.3332 24.97 20.0 103 20.00 57.9 30.08 9.1687 0.31 28.93 0.2713 30.08 25.0 65 25.00 57.9 34.39 9.0377 0.26 33.35 0.2424 34.35 30.0 37 30.00 57.9 39.94 8.3671 0.21 39.13 0.2035 39.91 40.0 17 41.20 57.9 47.56 5.6428 0.12 47.27 0.1144 47.74 50.0 4 53.00 57.9 56.35 2.2840 0.04 56.31 0.0413 56.31

TABLE 7.4

BENCH COMPOSITING PARAMETERS 1996

TOP BENCH : 500.0mRL FIRST MID BENCH : 499.0mRL

BENCH HEIGHT : 2.0m BENCH COMPOSITE RANGE : 120m

MINIMUM BENCH : 380.0mRL WIREFRAME : MINTOTt3.00t

SOURCE DATABASE : ULY/DH1 COMPOSITE MAP FILE : BCH2

VARIABLE : TOTCBN, GRACBN, CO3CBN


TABLE 8.1

VARIOGRAM MODEL SUMMARY 1996

2M BENCH COMPOSITES CARBONATE CARBON

MAJOR AXIS SEMI MAJOR AXIS MINOR AXIS DIRECTION N000E N090E -90º NUGGET 0.10 0.10 0.10 SILL1 0.56 0.56 0.68 SILL2 0.45 0.45 TOTAL SILL 1.11 1.11 0.78 RANGE1 8 8 4 RANGE 2 45 45 RELATIVE NUGGET EFFECT 9% 9% 13%

TABLE 8.2

VARIOGRAM MODEL SUMMARY

2M BENCH COMPOSITES GRAPHITIC CARBON


TABLE 8.3

VARIOGRAM MODEL SUMMARY

TOTAL CARBON



TABLE 9.1

BLOCK MODEL EXTENTS 1996

DIRECTION ORIGIN LENGTH END BLOCK SIZE NO OF BLOCKS

NORTH 9200 500 9700 10 50 EAST 9800 500 10300 10 50 RL 380 120 500 2 60

TABLE 9.2

BLOCK MODEL VARIABLES 1996

VARIABLE TYPE COMMENT ORE_ZONE_CODE byte 100 for blocks within mintot3 wireframe. DENSITY float TOTCBN_OK_UC float Estimated total carbon grade. TOTCBN_OK_NO_DIST float Average distance to samples - total carbon est. TOTCBN_OK_NO_SMPS float No of samples used in estimate - total carbon est. TOTCBN_OK_ESTFLG byte Estimation flag - total carbon. GRACBN_OK_UC float Graphitic carbon estimated grade. GRACBN_OK_AV_DIST float Graphitic carbon - average distance to samples. GRACBN_OK_NO_SMPS float Graphitic carbon - no of samples used in estimate. GRACBN_OK_ESTFLG byte Graphitic carbon - estimation flag. CO3CBN_OK_UC float Carbonate carbon estimated grade. CO3CBN_OK_AV_DIST float Carbonate carbon - average distance to samples. CO3CBN_OK_NO_SMPS float Carbonate carbon - no of samples used in estimate. CO3CBN_OK_ESTFLG byte Carbonate carbon - estimation flag. ROCK_CODE float 50 if rock, 1000 if air. RESCLASS byte Resource classification variable. TOTCBN_CALC float Calculated total carbon. TOTCBN_OK_ESTVAR float Total carbon estimation variance. GRACBN_OK_ESTVAR float Graphitic carbon estimation variance. CO3CBN_OK_ESTVAR float Carbonate carbon estimation variance. BTONNES float Block tonnage (volume * density). COARSE_GRAPHITE_DT float Total Coarse Graphite in dry tonnes.


TABLE 10.1

ORDINARY KRIGING GRADE ESTIMATION PARAMETERS 1996

CARBONATE CARBON

VARIABLES Grade : CO3CBN_OK_UC Estimation Variance : CO3CBN_OK_ESTVAR No of Samples : CO3CBN_OK_NO_SMPS Average Distance to Samples : CO3CBN_OK_AV_DIST DISCRETISATION

X : 4 Y : 4 Z : 4 SEARCH TYPE : ELLIPSOID : OCTANT SERACH Minimum No of Samples : 2 Maximum No of Samples : 40 SEARCH RANGES Major : 45 Semi Major : 45 Minor : 8 ELLIPSOID ROTATION ROT_ALPHA : 0.0 ROT_ZETA : 0.0 ROT_BETA : 0.0 VARIOGRAM PARAMETERS Major Axis Semi Major Axis Minor Axis Nugget 0.1 0.1 0.1 Sill 1 0.56 0.56 0.68 Range 1 8.0 8.0 8.0 Sill 2 0.45 0.45 Range 2 45.0 45.0 SOURCE DATA Map File : BCH2 Variable : CO3CBN CONDITION ORE_ZONE_CODE EQ 100


TABLE 10.2


GRAPHITIC CARBON

VARIABLES Grade : GRACBN_OK_UC Estimation Variance : GRACBN_OK_ESTVAR No of Samples : GRACBN_OK_NO_SMPS Average Distance to Samples : GRACBN_OK_AV_DIST DISCRETISATION

X : 4 Y : 4 Z : 4 SEARCH TYPE : ELLIPSOID : OCTANT SERACH Minimum No of Samples : 2 Maximum No of Samples : 40 SEARCH RANGES Major : 50 Semi Major : 45 Minor : 7 ELLIPSOID ROTATION ROT_ALPHA : 0.0 ROT_ZETA : 0.0 ROT_BETA : 0.0 VARIOGRAM PARAMETERS Major Axis Semi Major Axis Minor Axis Nugget 3.0 3.0 3.0 Sill 1 43.0 41.0 56.0 Range 1 7.0 7.0 7.0 Sill 2 18.0 31.0 Range 2 45.0 40.0 SOURCE DATA Map File : BCH2 Variable : GRACBN CONDITION ORE_ZONE_CODE EQ 100


TABLE 10.3


TOTAL CARBON

VARIABLES Grade : TOTCBN_OK_UC Estimation Variance : TOTCBN_OK_ESTVAR No of Samples : TOTCBN_OK_NO_SMPS Average Distance to Samples : TOTCBN_OK_AV_DIST DISCRETISATION

X : 4 Y : 4 Z : 4 SEARCH TYPE : ELLIPSOID : OCTANT SERACH Minimum No of Samples : 2 Maximum No of Samples : 40 SEARCH RANGES Major : 35 Semi Major : 35 Minor : 7 ELLIPSOID ROTATION ROT_ALPHA : 0.0 ROT_ZETA : 0.0 ROT_BETA : 0.0 VARIOGRAM PARAMETERS Major Axis Semi Major Axis Minor Axis Nugget 4.0 4.0 4.0 Sill 1 44.0 44.0 59.0 Range 1 7.0 7.0 7.0 Sill 2 18.0 18.0 Range 2 35.0 35.0 SOURCE DATA Map File : BCH2 Variable : TOTCBN CONDITION ORE_ZONE_CODE EQ 100


TABLE 11.1

ULEY GRAPHITE PROJECT

STATISTICAL DATA SUMMARY 1996

TOT_OK - TOTAL CARBON - ORDINARY KRIGING ESTIMATE ULEYOK1.BMF : 3% TOTAL CARBON WIREFRAME MODEL

Cutoff Grade

(%) No of

Samples Min Max Mean Std Dev

Coeff of Variation

Geom Mean

Ln Std Dev

Sichel’s Mean

Minimum 8374 0.00 37.16 8.53 5.1116 0.60 7.57 0.5429 8.77 1.0 8154 1.03 37.16 8.76 4.9820 0.57 7.57 0.5416 8.77 3.0 7876 3.00 37.16 8.98 4.9157 0.55 7.91 0.4961 8.94 4.0 7200 4.00 37.16 9.49 4.8367 0.51 8.52 0.4499 9.43 5.0 6351 5.00 37.16 10.16 4.7671 0.47 9.29 0.4080 10.03 6.0 5489 6.00 37.16 10.90 4.7195 0.43 10.10 0.3753 10.80 8.0 3656 8.00 37.16 12.89 4.6275 0.36 12.22 0.3150 12.83 10.0 2488 10.00 37.16 14.77 4.4987 0.31 14.20 0.2702 14.77 12.0 1647 12.00 37.16 16.72 4.3747 0.26 16.23 0.2369 16.72 15.0 839 15.02 37.16 19.87 4.0770 0.21 19.48 0.1945 19.87 20.0 324 20.00 37.16 24.34 2.7610 0.11 24.19 0.1097 24.44 25.0 140 25.03 37.16 26.76 2.1030 0.08 26.69 0.0718 26.69 30.0 16 30.42 37.16 31.90 2.2158 0.07 31.83 0.0657 31.83 40.0 0 0.00 0 0.00 0.0000 0.00 0.00 0.0000 0.00 50.0 0 0.00 0 0.00 0.0000 0.00 0.00 0.0000 0.00

Appendix C 2012: Resource

Appendix C: Resource Update Page: 1

ORDINARY KRIGING GRADE ESTIMATION PARAMETERS

GRAPHITIC CARBON

VARIABLES Grade : Graphite_Ok Graphite_ID3 Estimation Variance : Spare No of Samples : Num_samples : DISCRETISATION

X : 4 Y : 4 Z : 4 SEARCH TYPE : ELLIPSOID Minimum No of Samples : 2 Maximum No of Samples : 40 SEARCH RANGES Major : 50 Semi Major : 45 Minor : 7 ELLIPSOID ROTATION ROT_ALPHA : 360 ROT_ZETA : 0.0 ROT_BETA : 60 VARIOGRAM PARAMETERS Major Axis Semi Major Axis Minor Axis Nugget 25 25 27 Total Sill 75 75 75 Range 1 43 43 43 SOURCE DATA Map File : uly2mjune Variable : ROCK High Yield limits Major:30 Semi Major :20 Minor:12.5

Appendix C: Resource Update Page: 2

Abbreviations and Glossary

A full listing of abbreviations used in this report is provided below.

Uley Main Road Graphite Deposit – Resource Update List of Abbreviations

Description Description Archean Geological period > 2500 Ma l/hr/m² Litres per hour per square metre AUD Australian dollars M million µ microns m metres 2D two dimensional Ma Million years 3D three dimensional ml millilitre AAS atomic absorption spectrometer mm millimetres Au gold MMI mobile metal ion bcm bank cubic metres Moz million ounces C carbon Mtpa million tonnes per annum cm centimetre N (Y) northing DDH diamond drillhole NPV net present value DTM digital terrain model NQ size of diamond drill rod/bit/core E (X) Easting ºC degrees centigrade Eocene Geological period 33.9-55.8Ma OK Ordinary Kriging G Gram P80 -75µ 80% passing 75 microns g/m³ grams per cubic metre Pliocene Geological period 1.8-5.3Ma Grade Control Controlling material dispatch during mining ppb Parts per billion Graphitic carbon % calculated contained carbon as graphite ppm Parts per million HARD half the absolute relative difference psi pounds per square inch HQ size of diamond drill rod/bit/core QC quality control hr hours Q-Q quantile-quantile HRD half relative difference RAB rotary air blast ID Inverse Distance weighting RC reverse circulation ID² Inverse Distance Squared RL (Z) reduced level IPS integrated pressure stripping ROM run of mine IRR internal rate of return SD standard deviation ISO International Standards Organisation SMU Selective mining unit kg kilogram t tonnes kg/t kilogram per tonne t/m³ tonnes per cubic metre km kilometres Tertiary Geological period < 65Ma km² square kilometres Tph Tonnes per hour

Coffey Mining Pty Ltd ABN 52 065 481 209 Project Number 1162 Hay Street, West Perth WA 6005 Australia PO Box 1671, West Perth WA 6872 Australia T (+61) (8) 9324 8800 F (+61) (8) 9324 8877 coffey.com

CERTIFICATE OF AUTHOR Trevor Bradley Coffey Mining Pty Limited 1162 Hay Street WEST PERTH, WA, 6005 Australia I, Trevor Bradley, B (App) Sc. (Hons); LL.M (Dist), M.A.I.G., do hereby certify that:

1. I am the Manager Audits of Coffey Mining Pty Ltd, 1162 Hay Street, West Perth, WA, 6005, Australia.

2. I am a graduate of the University of Technology, Sydney and hold a Bachelor of Applied Science

degree with Honours in Geology (1986).

3. I am a member of the Australian Institute of Geoscientists (MAIG), No 2846.

4. I have worked continuously in my profession for a total of 26 years since 1986.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 43-101”) and certify; that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfil the requirements to be a “qualified person” for the purposes of NI 43-101.

6. I am responsible for all Sections of this Technical Report titled “Uley Main Road Graphite Deposit, Eyre Peninsula, South Australia” with the effective date of 11, July 2012 and signed the 11th July 2012. I have not personally visited the site. Other Coffey Mining professionals have made a number of site visits to the project over the last four years.

7. I have not had prior involvement with the property that is the subject of this Technical Report.

8. As at the date of this certificate, to the best of my knowledge, information and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

9. I am independent of Mega Graphite Inc, its associates and affiliates, pursuant to Section 1.5 of National Instrument 43-101.

10. I have read National Instrument 43-101 and Form 43-101F1 and the Technical Report has been prepared in compliance with that instrument and form.

11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public

Dated this 11th Day of July, 2012 at Perth, Western Australia.

Trevor Bradley B(App) Sc. (Hons), LL.M (Dist), MAIG Manager Audits – Coffey Mining

uley graphite43 10111july2012final

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