Ann: DFS confirms Chilalo as high margin graphite project, page-2

Annual throughput of 500 ktpa to produce approximately 50,000 tpa over an 18-year mine life

ڇ Chinese toll-treatment of Chilalo flake graphite concentrate into expandable graphite for qualification and direct sale to fire-retardant customers identified by Graphex; and

ڇ Installation of fine milling equipment to produce micronised graphite for qualification and sale to customers identified by Graphex.

Graphex has signed a term sheet with China’s largest expandable graphite manufacturer, Yichang Xincheng Graphite Co Ltd to act as the Company’s processing agent, effectively toll-treating Chilalo graphite concentrate into the desired expandable graphite specifications for a processing fee.

The operating costs of the Company’s expandable graphite production are US$512 per tonne of expandable graphite excluding the internal transfer price of purchasing the graphite feedstock from the mine.

Graphex has identified a large number of micronised graphite customers and the detailed technical specifications of five standard products required by those customers. Whilst contract sizes can be relatively small, the substantial uplift in value has the potential to significantly increase margins. Graphex has conducted micronisation equipment product trials with a milling equipment supplier that provides a fully automated, programmable processing system that can achieve up to a ~1.5% improvement in finished product purity. The preferred milling system achieves a yield of ~ 95% on average from the original feedstock with the ability to produce five industry-standard micronised grades to meet market specifications.

The additional capital cost for micronised graphite equipment, buildings and services is US$2.0M

The operating costs for the Company’s micronised graphite production are US$383 per tonne of micronised graphite excluding the internal transfer price of purchasing the graphite feedstock from the mine. This includes labour, power, parts, overheads and packaging of the micronised graphite, product logistics within Tanzania and sales and marketing agent fees. Micronised graphite pricing in the DFS is FOB Port and therefore, sea freight from Tanzania to Europe or USA is not included.