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OMI Holdings Limited ACN 091 192 871 Level 4, 450 Victoria Road Gladesville NSW 2111

4 September 2012

UPDATE ON PROPOSED ACQUISITION OF KOREAN GRAPHITE PROJECTS AND INDEPENDENT GEOLOGIST’S REPORT

Further to its announcement of 6 June 2012, OMI Holdings Limited (ASX: OMI or the Company) is pleased to advise that Mr Leslie Davis of Veronica Webster Pty Limited has completed an Independent Geologist’s Report in respect of the Korean Graphite projects it proposes to acquire. The Independent Geologist’s Report will be included in a prospectus that the Company intends to release over the coming days.

OMI is pleased to announce that the Independent Geologist’s Report defines a maiden inferred graphite resource in accordance with the JORC Code. Further information regarding the inferred graphite resource is detailed in the enclosed Independent Geologist’s Report.

Yours faithfully,

Gary Stewart Company Secretary

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1 VERONICA WEBSTER PTY. LIMITED

(Incorporated in Queensland; ACN 010 299 224) Brisbane Office Consultants to the Mining Industry 7 O’Quinn Street Les W Davis - Minerals Exploration Consultant Nudgee Beach QLD. 4014 Telephone & Fax: 07 3267 3355 L Davis 0411 484 295 V Davis 0407 596 301 Email [email protected]

POSTAL ADDRESS: P O Box 619, Hamilton QLD 4007

4 September 2012

Directors OMI Holdings Limited, C/- Level 10, 8-10 Loftus Street, Sydney, NSW 2000

Dear Directors

RE: INDEPENDENT GEOLOGIST’S REPORT ON THE MINERAL PROPERTIES OF OPIRUS MINERALS PTY LTD IN THE REPUBLIC OF KOREA.

1.0 INTRODUCTION

OMI Holdings Limited (ASX code “OMI”) requested Veronica Webster Pty. Limited ("VWPL") to provide an Independent Geologist’s Report (“IGR”) on the mineral properties of Opirus Minerals Pty Ltd (“Opirus”) in the Republic of Korea (“South Korea”). These consist of several graphite projects located in South Korea, acquired by Opirus, with either granted or applied for exploration tenements. Opirus is operating in South Korea through a wholly owned local subsidiary Won Kwang Mines Inc (“Won Kwang”).

For convenience, these are sometimes referred to as the OMI tenements or the OMI projects.

Mr. L W Davis, who is a duly authorised representative and director of VWPL, has supervised the preparation of the Report. Mr Davis has had over 40 years experience in the minerals industry, is a registered Chartered Professional (Geology) and is affiliated with The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He specialises in mineral resource/reserve estimations, advanced project assessment and exploration management.

For personal use only use personal For The exploration projects of OMI are all easily accessible, refer to Figure 1. There are three prospects: Geumam, Samcheok and Taewha deposits.

Mr Davis visited all the main project areas in June 2012.

Figure 1. OMI project areas in South Korea

From May to June 2012, Mr Davis was supplied exploration information by Opirus, which warrants that the supplied information is accurate and complete. On 19th June 2012, Les Davis had a meeting with Chris Sennitt of Senlac Geological Services Pty Ltd (“Senlac”) who has generated all the Opirus graphite initiatives. Mr Sennitt has been operating in South Korea since 1994 and has extensive geological knowledge of the country with exploration on uranium, tungsten-molybdenum, base metals, rare earths and gold-silver as well as graphite. During 2012, Senlac reviewed and appraised numerous graphite deposits in South Korea and visited 14 graphite prospects.

For personal use only use personal For Geological data and exploration results were obtained from the Korean Resources Corporation and the Korean Mining Promotion Corporation (“KMPC”) as it was previously known. The KMPC sampled trenches, adits and drives but did not drill L Davis of VWPL is satisfied after studying the reporting and on the basis of previous

3 exploration results that Inferred Resources may be estimated in accordance with the JORC (2004) Code on each of the deposits: Geumam, Samcheok and Taewha deposits. Mr Davis has also prepared Inferred Resources and information for exploration targets for each of the three graphite deposits.

The information in this report that relates to Exploration Results, Mineral Resources, Ore Reserves and Exploration Targets is based on information compiled by Leslie William Davis who is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists. Leslie William Davis is a Director of Veronica Webster Pty Limited. Leslie William Davis has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Leslie William Davis consents to the inclusion in the report of the matters based on his information in the form and context which it appears.

All references to mineral resources are consistent with the most recent Australasian Code (and Guidelines to the Code) for Reporting of Exploration Results, Mineral Resources and Ore Reserves and Exploration Targets: Reports prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Minerals Council of Australia -JORC.

Mr Davis has at his own discretion relied on the observations and interpretations of previous explorers, exploration consultants and Senlac. Independent checking at other organisations which may have been previously involved in exploration and mining activities in the area of the OMI tenements was not carried out.

The views and conclusions expressed in this Report are solely those of VWPL and L W Davis.

An appraisal of all the above mentioned information forms the basis of this Report.

VWPL affirms that L Davis is both a Fellow of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists, with a minimum of five years experience in the estimation, assessment and evaluation of mineral resources and ore reserves that is relevant to the styles of mineralisation and the types of deposits under consideration. All references to previous geological sources of information fairly represent the contents of the previous geological reports. Reports and publications attributed to organisations and persons are referenced only to support the technical (scientific) aspects within the Independent Geologist’s Report and are not used for promotional reasons. Consent for the use of any public domain information has not been sought.

In accordance with Corporations Regulation 7.6.01 (1) (u), the independent report is not financial product advice but is intended to provide investors with expert opinion on matters relevant to an investment in OMI. L Davis and VWPL are not operating under an Australian financial services licence and the advice in the independent report is an

For personal use only use personal For opinion on matters other than financial products and does not include advice on a financial product. Neither VWPL nor L Davis has any direct or indirect interest in OMI or Opirus, any of their related bodies corporate, their assets or the outcome of the proposed capital raising. VWPL will receive standard consulting fees for the preparation of this report.

4 2.0 SUMMARY

Pursuant to an option to acquire the issued capital of Opirus, OMI has the opportunity to secure three historic graphite deposits in South Korea at a time when this commodity is gaining traction in both new and diverse commercial uses and also traditional uses. In consequence graphite prices are strong. However, there is no graphite world spot price or equivalent. Sales involve an individual agreement between producer and purchaser based on quality, type and volume. So, the economics of graphite are basically determined by the consumer and the end application. There is rarely a usage that cannot be satisfied by several different types of graphite. OMI’s ultimate plan is to principally produce graphite products to satisfy the significant local demand in South Korea; including the major steel producers and electronic industries.

South Korea was historically the largest producer of graphite in the world during the 1960s to early 1990s with a graphite production of about 77 000 tonnes per annum

Three graphite prospects, Geumam, Samcheok and Taewha deposits have been acquired. There is evidence of mining at all three deposits but no individual production records.

Mr Davis of VWPL has estimated the following inferred resources based on previous exploration results:

• Geumam deposit; Inferred Resource of 200 000 tonnes grading 10% graphitic carbon under the JORC (2004) Code. This amounts to 20 000 tonnes of contained graphite. • Samcheok deposit; Inferred Resource of 200 000 tonnes grading 5% graphitic carbon under the JORC (2004) Code. This amounts to 10 000 tonnes of contained graphite. • Taewha deposit; Inferred Resources of 170 000 tonnes grading 7% graphitic carbon under the JORC (2004) Code. This amounts to 12 000 tonnes of contained graphite.

OMI has determined notionally that prior to economic scoping studies, within these wide zones, it would hope to achieve an aspirational exploration target for each of the deposits and the details are provided in the relevant Sections below. All these exploration targets will be different because of the Inferred Resources existing on each deposit.

The potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource.

At Geumam and Samcheok deposits there is evidence of wide zones (several tens of metres) of stratigraphy containing beds of graphite.

At the Taewha deposit the zones are smaller but still large enough to achieve OMI’s

For personal use only use personal For exploration target.

Drilling is required to determine average grades but extensive previous investigations by South Korean governmental organisations and limited recent sampling by OMI

5 (Senlac) suggests that carbon grades of 5% to 10% Cg might be achievable in some zones, over several tens of metres.

Drill testing to verify widths and grades methodically is required at Geumam, Samcheok and Taewha deposits using petrology followed by laboratory sizing and other metallurgical work to determine graphite quality.

OMI has prepared a phased program to be carried out over 18 months when funds become available with a budget of around A$3 million (based on minimum subscription), for testing of the quality and extent of graphite mineralisation within the three projects. About $2.1 million will be spent on direct exploration; this allows a nominal $0.7 million per project. This sum includes about $150 000 for 1000 m of drilling per project. Should the maximum subscription of $5 million be raised, then extra funds of about $0.8 million for direct exploration will be applied at those projects showing the most promise.

After the Phase 1, it is anticipated that one of the projects will be considered superior to the others, based on likely tonnes, mean grade, possible quality of graphite products and the ease and cost of establishing an operation. On this project, evaluation drilling will commence to upgrade its resource in accordance with the JORC Code, produce further samples for grade and metallurgical testing and begin plans for mining and treatment. It cannot be said that the project is economically viable at this stage. The funding for most of the Phase 2 will have to be raised.

VWPL considers that the exploration program is well planned and that there are sufficient funds to achieve the objectives. Early discussions with consumers about quantities and product types of graphite required are considered a vital component of the planning and exploration process.

The three graphite deposits are situated in hilly terrain where there is very little residential or agricultural establishment to compete for the land use. Future open pit mining might be possible.

Today, the only current mining in South Korea is limestone and aggregate quarrying.

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3.0 TENURE -KOREAN MINING ACT AND MINING RIGHTS

The three projects of OMI are secured by tenements called Mining Rights or applications for Mining Rights.

The Mining Act of South Korea is straightforward and the only tenement is a Mining Right (which consists of both exploration rights and production rights), if a Mining Right holder decides to progress to mining, then an application for Mine Development Permit is lodged. This permit process requires submission of a mine plan with financial, environmental and social impact studies.

A Mining Right usually covers a one minute by one minute square block (approximately 277 ha, or 2.8 km2 in area). A Mining Right is normally granted for 20 years. No royalty is payable. Mining Rights are transferable.

The term “minerals” in the Mining Act lists graphite.

Full details regarding tenure are provided in the Tenement Report of the Prospectus. For personal use only use personal For

4.0 HISTORY OF EXPLORATION AND MINING OF GRAPHITE IN SOUTH KOREA

South Korea was historically the largest producer of graphite in the world during the 1960s to early 1990s, followed by Austria. South Korea’s graphite production was about 77,000 tonnes per annum according to the graphite commodity section in the United States Geological Survey Minerals Yearbooks and US Bureau of Mines figures, during the 1970s to early 1990s. It was mainly exported to Japan for use in the steel industry as castings in foundries and carbon content raising in hardened steel production. The graphite production ceased when China, which produces about 70% of world graphite maintained reduced prices over a prolonged period, to the point where other producers could not compete.

Today, the only mining in South Korea is limestone and aggregate quarrying. Because of this the Fraser Institute Annual Survey of Mining Companies, 2011-2012 does not report on South Korea.

4.1 Historical Mining Practice

Typical mining practice adopted in South Korea during the period between the 1950s and the 1990s was to mine underground, in order to exploit high grade ores and minimize dilution. Primitive mining methods were usually employed with hand-held equipment. No bulk mining methods were ever employed in South Korea.

Only minimal flotation processing was undertaken at graphite deposits. Most of the graphite commodity shipped was hand sorted and exported as direct shipping ore.

Geological information on the graphite deposits is very limited and no geological papers were published. Most geological data was obtained from the Korean Resources Corporation (“KORES”) library digital database and mainly consists of individual reports on each prospect by the Korean Mining Promotion Corporation (“KMPC”), the precursor organization to KORES. It is evident from these records that no drilling for graphite mineralisation was undertaken. The KMPC examined and sampled trenches, adits and drives.

KMPC operated mainly in the 1970s to 1980s. The reports of the KMPC are not detailed and the complete mapping details are not verifiable on the ground because of vegetative growth and cultural changes of the past 30 years. Where ground information can be observed, the KMPC data appears reliable and VWPL has relied on the KMPC reporting and believes that it is entitled to rely on the reporting, because the mine operator was making a serious attempt to mine the graphite deposits at that time.

At the OMI graphite deposits, the KMPC examined graphite mineralisation from in mine openings with detailed sampling.

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5.0 GEOLOGY OF SOUTH KOREA

The geology and stratigraphy of South Korea is well documented and is briefly summarised below using the main sources of Reedman and Um (1981) and Lee (1988).

5 1 Pre Cambrian Cratonic Basement

The Korean peninsula is divided into three Achaean-aged blocks within the North China-Korea Platform (the Nangrim-Pyeongnam Block, Gyeongyi Massif and the Ryeongnam Massif) separated by north-east trending Phanerozoic mobile belts (Imjingang and Ogchon Belts), see Figure 2. The Gyeonggi, Yongnam and Ryeongnam Massifs consist of highly metamorphosed gneiss and schists of probable sedimentary origin mainly, but some of the gneiss appears more likely to be metamorphism of an original igneous basement with porphyroblastic gneiss, augen gneiss, migmatite, minor schist and amphibolite.

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Figure 2. Simplified Geology of the Korean peninsula – main structural elements and the location of known graphite deposits (blue dots) and OMI projects (larger blue dots).

5.2 Phanerozoic

During the mid-late Cambrian, rifting formed a subsiding major trough zone (the Ogchon and Taebaeksan Basins) between the Gyeonggi and Ryeongnam Massifs, into which marine sediments of the late Proterozoic-mid Ordovician age were deposited. A volcano-sedimentary sequence was deposited in the Ogchon Basin and shallow marine platform facies in the Taebaeksan Basin and these are thought to be lateral For personal use only use personal For equivalents, Cluzel and others (1990).

In the late Silurian-Devonian periods, the Ogchon Orogeny severely faulted and deformed the Ogchon fold belt.

Carboniferous-Permian, Triassic, Jurassic, Cretaceous and Tertiary sediments overly the basement in places. During the Permian important coal measures and carboniferous sediments were deposited and under high-pressure metamorphic conditions some have been to be converted to graphitic rocks.

Plutons and large batholiths of the mid Jurassic-early Cretaceous Daebo Granite Series were emplaced into the margins of the Ogchon Basin, particularly along the north-east striking fault corridors. Cretaceous age intrusive rocks have been emplaced as stocks, plugs and dykes into the Ogchon Basin. These igneous intrusions are interpreted to be responsible for the metamorphism of carboniferous rocks and

formation of graphite. For personal use only use personal For

6.0 GENERAL GEOLOGY OF GRAPHITE

Graphite, also known as plumbago or black lead, is one of the naturally occurring crystalline forms of elemental carbon (“C”), (atomic number 6). Its chief characteristics are its black colour, greasy or unctuous feel, metallic lustre, common flaky habit due to its perfect basal cleavage, extreme softness (hardness 1 to 2),

Most graphites are not pure and often contain other associated minerals, up to 20%, between the graphite layers, referred to as “ash”. Common associated “ash” minerals include, silicates, oxides, sulphides, apatite (P205), sometimes also water, bitumens and gases (up to 2%). The specific gravity ranges from 2.09 to 2.23 depending on impurities.

Natural graphite varies considerably in crystallinity. Graphite crystals have a marked perfect basal cleavage and in a hexagonal system in platy form which crystallises in six-sided (hexagonal) flakes. It breaks into minute, flexible flakes that easily slide over one another. This feature is the cause of graphite’s distinctive greasy feel and it is this greasy characteristic that makes graphite a good lubricant.

Natural graphite is subdivided into three common types:

• amorphous graphite (microscopic flakes inextricably mixed with other minerals, and usually formed by the metamorphism of coal or carbonaceous shales). • crystalline, (an interlocking mass of crystals usually occurring in veins) and • flake graphite (disseminated flakes, commonly in metamorphic rocks),

The production of synthetic graphite is a fourth source of the mineral.

6.1 Amorphous graphite

Amorphous graphite lacks the brilliant lustre of coarser crystalline varieties and is generally dull black or grey black, the colour depending on the impurities present. The trade term is “lump” when massive and “dust” when powdered.

The source material for amorphous graphite is generally thought to be anthracite coal. Amorphous graphite occurs in the ground similar to anthracite coal and bituminous coal and it is very similar all around the world in form and carbon contents. Amorphous graphites are mined or have been mined extensively in Mexico, Korea, China, Italy and Austria. Currently the largest percentage comes from China.

The general usage for amorphous graphite is in the refractory, carbon brush, carbon seal, electrode, paint and foundry industries.

6.2 Crystalline graphite

In the trade the terms “'crystalline”' is reserved for varieties, which occur in crystals

For personal use only use personal For large enough to be visible to the naked eye; flake, lump or vein. “High crystalline” and vein graphite (Sri Lanka is the only producer) is of high purity, as high as 99% carbon. As the name suggests the graphite is coarse and occurs in fissure veins and cavities. The graphite is conjectured to form from crude petroleum oil.

6.3 Flake graphite

Flake graphite consists of flat plate-like particles that occur in a disseminated form through layers of regional and thermally metamorphosed silica rich sedimentary rocks such as quartz-mica schists, felspathic- micaceous-quartzites, gneisses, and limestones. Such deposits are widespread throughout the globe. The major raw material for nature to produce flake graphite from is thought to be methane gas as well as fine droplets of crude oil.

The majority of flake graphite is of metamorphic origin and usually found as veins, lenses, pockets, thin laminae and disseminated in the host rock. Naturally occurring organic carbon can be graphitized at temperatures between 300 to 1200oC, during regional low-grade metamorphism or as the result of contact between an igneous intrusion and a carbonaceous rock. Some graphite appears to be magmatic; stocks of syenite (Russia), pegmatites (Canada) are examples. A mixture of high-grade of finely crystalline graphite occurs with magmatic minerals. In places these igneous rocks are fringed by coarse limestone, containing graphite and the graphite is believed to be genetically associated with the reduction of the carbon oxide produced when limestones are engulfed by magma.

Generally, volumetrically significant flake graphite occurs anywhere from 2% up to as high as 30% concentration, but commonly concentration will be somewhere around 5% to 15%. As a general rule the flakes do not occur much larger than 20 mesh (~0.8 mm) particles. The size of flake is discussed further in Section 11, which deals with graphite processing and market.

6.4 Synthetic Graphite

Synthetic graphite is a substitute for natural graphite and petroleum coke is usually the base for manufacture. However, essentially any amorphous graphite or non-graphitic carbon material can be graphitised by heat treatment to development of graphite crystals. In this process, material gets softer and machinable, impurities are vaporised and a host of physical properties are changed towards, but not completely to those of natural graphite types. More information is supplied in Section 11.

6.5 Composition of graphite

The composition of graphite types has major impact on usage and price. Some typical analyses are shown in the following Tables.

TYPICAL CHEMICAL ANALYSIS FOR TYPES OF GRAPHITE Amorphous Crystalline Crystalline Crystalline Primary Secondary Calcined Flake Flake Vein Artificial Artificial Petroleum High grade Low grade synthetic synthetic Coke CARBON % 84.00 95.60 87.80 98.00 99.90 99.60 99.70 SULPHUR % 0.11 0.18 0.11 0.74 0.00 0.03 2.10 ASH % 15.89 4.22 12.09 1.26 0.10 0.37 ? TOTAL % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 For personal use only use personal For Table 1. Composition of various graphite types (after Kenan 1984).

TYPICAL CHEMICAL ANALYSIS FOR ASH

13 TYPICAL CHEMICAL ANALYSIS FOR ASH Amorphous Crystalline Crystalline Crystalline Primary Secondary Calcined Flake Flake Vein Artificial Artificial Petroleum High grade Low grade synthetic synthetic Coke SiO2 % - SILICA 53.82 47.65 50.88 47.26 23.88 43.53 22.21 Al2O3 %- 23.35 27.15 27.30 14.17 1.88 2.32 13.33 ALUMINIUM Fe2O3 %-IRON 9.63 15.23 14.96 26.53 12.10 26.19 17.77 TiO2 - TITANIUM 1.00 0.98 1.03 1.06 2.39 12.06 4.43 P2O5 %- 0.00 0.35 0.42 0.12 2.17 0.00 - PHOSPHOROUS CaO %- 5.10 1.98 1.32 6.33 23.31 15.56 8.89 CALCIUM MgO %- 2.80 3.36 1.95 1.67 0.65 0.34 4.44 MAGNESIUM NaO %- 0.67 0.85 0.50 0.53 33.32 0.00 - SODIUM K2O %- 2.90 1.89 1.52 1.36 0.00 0.00 - POTASSIUM SO3 %- 0.93 0.54 0.16 0.97 0.00 0.00 - SULPHITE TOTAL % 100.2 99.98 100.04 100.00 99.70 100.00 ASH Table 2. Composition of ash in various graphite types (after Kenan 1984).

Graphite has properties of both a metal and a non-metal; it is flexible but not elastic, has a high thermal and electrical conductivity and is highly refractory and chemically inert. Graphite has the highest natural strength and stiffness of any material. It maintains its strength and stability to temperatures in excess of 3,600°C and is very resistant to chemical attack. At the same time it is one of the lightest of all reinforcing agents and has high natural lubricity.

For more information refer to the Section 11 on graphite processing and market.

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7.0 GRAPHITE DEPOSITS OF SOUTH KOREA

Amorphous and flake graphite is found both in North and South Korea, being formed both during regional metamorphism and by thermal metamorphism associated with Jurassic and Cretaceous intrusions.

Much of the graphite in South Korea is found within biotite schist and gneiss of the Precambrian gneiss complexes, see Figure 2, and the source of the graphitic carbon is probably, oil and gas, bitumens and other associated carbon bearing material.

Within South Korea, some graphite deposits are found within the Permian-Jurassic Coalfields of Nampo and Poun.

Field evidence at Opirus’ Geumam, Samcheok and Taewha graphite prospects shows flake graphite is present. There is evidence of mining at all three deposits but no individual production records. Intense sulphidization/thermal sulphate oxidation with limonite, hematite and jarosite staining is observed associated with graphite beds at Samcheok.

Geological reports written by the KMPC have been independently translated for the purpose of the IGR, to verify the interpretations of Opirus geological staff. The

translator also translated the annotations on maps and plans. For personal use only use personal For

8.0 THE GEUMAM GRAPHITE PROJECT.

At the Geumam Graphite Deposit, there are three Mining Rights covering 204 ha. Opirus’ subsidiary Won Kwang has purchased blocks (Dangjin 65-2, 55-3 and 65-1, registration numbers: 078355, 080014 and 080077.

The Geumam graphite deposit is located 67 km southwest of Seoul and 4 km north of the township of Dangjin, in Dangjin County of Chungcheongnam-Do Province. The Dangjin area is a relatively populated rural community in a coastal setting, with several villages present. The local economy is agriculture, aquaculture and fishing.

The terrain of the area is characterised by low eroded hills with elevations of less than 100 m above sea level, situated south-east of coastal tidal mudflats. Vegetation on the low hills typically consists of dwarf pines, bamboo and thick scrub, with significant paddy rice cropping in the valley flats.

There are two houses and a pig farm in the immediate vicinity of the graphite deposit and the surface rights are likely to be mostly held by individual private landowners. Three-phase power of the national electrical grid passes directly through the deposit at Area B.

The Geumam area, mapped by the KMPC (1980a, 1980b & 1980c) consists of Precambrian crystalline basement, composed mainly of biotite gneiss, gneiss and quartzite of the Gyeonggi Gneiss Complex, and granite gneiss of the Sobaegsan Gneiss Complex. The basement has subsequently been intruded by quartz porphyry of the Cretaceous age Bulgugsa Series. The regional 1 km line-spaced airborne geophysical survey magnetic map (Korea Institute of Geoscience and Mineral Resources, 2008) shows a positive magnetic feature to the west of the Geumam deposit. This is possibly caused by a concealed intrusive body in the basement.

Widespread regional metamorphism occurred during the Late Permian-Triassic. The biotite gneiss shows the metamorphic fabric of the biotite gneiss to strike predominantly north-east and dip moderately at 25o to-40o to the south-east. Foliations within biotite gneiss of the Gyeonggi Gneiss Complex are regarded as conformable with original primary sedimentary bedding.

8.1 Deposit Geology – graphite beds – Previous Investigations

There is evidence of mining and production at the Geumam deposit but there are no individual production records.

The KMPC (1980a, 1980b & 1980c) mapped three stratabound graphite beds, comprising two western (lower) beds (labelled Areas C and D, Figure 3) and an eastern (upper) bed (labelled Areas A and B, Figure 3). The main hosts are mica schist and

For personal use only use personal For hornblende schist and each contain quartz, biotite, chlorite after biotite, muscovite, feldspar and graphite particles. Quartzite and crystallised limestone interbeds occur in the schist. Quartz-calcite veinlets are observed cutting across some of the graphite beds.

Individual beds (“regions, surveyed on the outcrops”) of rich graphite occur with widths ranging from 10 cm to 20 m within thicker zones of graphite bearing schist. In some places, the strike and dips show severe folding and deformation, but generally the strike is north-easterly with dips 40o to 50o east.

The KMPC used several trenches to evaluate and sample the graphite beds. A small adit was also driven on outcrop at Area D.

Figure 3. Geumam Mining Rights, geology and graphite lode locations, roads, watercourses and farmed areas. After KMPC and Senlac mapping.

The eastern bed is 25 to 70 m thick (horizontal widths derived from mapping and trenching) and can be traced over a strike length of 350 m (KMPC, 1980a). The graphite beds are hosted within muscovite-chlorite schist. The eastern bed is exposed in two main outcrops: A and B.

At Area A, (also Ga Area), the graphite bed varies in width from 30 to 60 m (horizontal For personal use only use personal For widths), exposed in outcrop over a strike length of 120 m. According to the KMPC this was the main production area of the mine. Mention is made of agraphite commodity dressing plant but no details are provided. Trenching and shallow open pitting showed the depth of weathering to range from 7.0 m to 10.0 m. Sampling recorded an average

17 grade of 11.93% FC, (the KMPC use the expression Fixed Carbon – FC, which equals Cg). It was stated that the graphite beds pass under alluvium to the south-west.

At Area B, (also Na Area), 70 m east of Area A, the graphite bed ranges in width from 25 to 70 m, exposed in outcrop over a strike length of 100 m. Trenching showed the average depth of weathering was 7.0 m. Sampling recorded an average grade of 5.55% FC or Cg.

The KMPC (1980c) carried out a limited self potential (“SP”) geophysical survey over the south-eastern part of the deposit at Area B. SP is a passive electrical method which measures voltage variations in natural physical responses associated with conductors such as sulphide and graphite. The anomalous response in the SP survey closely corresponds to Area B of the eastern (upper) graphite bed and a strike length of at least 600 m is interpreted, refer Figure 3. The survey demonstrates the effectiveness of electrical methods to map conductive graphite mineralization and suggests that induced polarisation-resistivity (“IP”), which is a far more powerful electrical method than SP should be a very effective tool.

To the west and north two beds are mapped by the KMPC (1980a) exposed in two outcrops: C and D.

At Area C (also Da Area), the graphite bed is 25 m wide (horizontal width), exposed in outcrop over a strike length of 130 m. Trenching showed that the average depth of weathering was 5.8 m. Sampling recorded an average grade of 8.37% FC or Cg. A concrete paved track cutting has exposed the graphite bed, which is well folded and deformed with brecciation and metamorphogenic crystalline quartz veining. A narrow graphite bed of 2 m width is mapped about 200 m further to the west. Area C passes under alluvial cover both to the north and the south.

Area C has been confirmed by L Davis, see Figure 4. Graphite has a SG of 2.1 to 2.3 depending on impurities and the host rocks are about SG 2.7. Therefore, graphitic carbon or Cg can be visually estimated approximately because volume % is similar to weight %, however this must be confirmed by assaying samples.

Senlac on behalf of Opirus collected five samples at the Geumam deposit, including four continuous rock-chip channel samples from the good road-cut exposure of Area C, see Figure 4. Four contiguous 10 m samples (co-ordinates 290710 E, 4089889 N; 290720 E, 4089883 N; 290729 E, 4089878 N; 290736 E, 4089874 N), that is a 40 m horizontal sample section, ranging from 7.10% Cg to 13.00% Cg, average 9.93% Cg. This sampling confirms the results from the KMPC, see above. Within the ash or gangue which amounts to about 87%, there is ~3% iron, ~1.8% potash and ~38% silica.

At Area D, (also Ra Area) the graphite bed is 50 m wide (horizontal width), exposed in outcrop over a strike length of 80 m. The KMPC discuss this zone as a northerly extension of Area A. Trenching showed the depth of weathering average 4.9 m. Sampling recorded an average grade of 10.7% FC or Cg.

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Figure 4. Geumam, Western area C – high-grade graphite in contact with schist. Note very contorted bedding with a general dip to the east (RHS). This is the location where the 40 m grading 9.93% Cg was recorded by Opirus.

OMI requested AMDEL Laboratory of Adelaide to carry out SEM-EDS (scanning electron microscopy-energy dispersive spectroscopy) elemental analysis on small, selected high-grade samples of graphite from the Geumam deposit (co-ordinates 290544 E, 4089460 N), to identify flake graphite grains and any deleterious inclusions present within the graphite samples. Seven “spot” images were investigated for elements.

SEM/EDS elemental analysis is a semi-quantitative technique and chemical composition data should be treated as indicative only. Minor ash component in the graphite contains fluorine and chlorine. Gangue minerals are primarily quartz and potash feldspar with some other silicates, clays and iron oxide.

The Geumam sample showed abundant flake graphite in the 100 micron size range,

see Figure 5. For personal use only use personal For

Figure 5. High resolution photomicrograph of a polished section for a sample from Geuman graphite deposit, Area C, showing flake graphite crystals, from Amdel Report, 01 August 2012.

8.2 Historical sampling, resource estimates and exploration targets.

8.2.1 Resource Estimate

The reports of the KMPC are not detailed and there are no lists of samples and assays and other information to support estimates. Complete mapping details are not verifiable on the ground because of vegetative growth and cultural changes of the past 30 years. Where ground information can be observed, the KMPC data appears reliable and VWPL has relied on the KMPC reporting and believes that it is entitled to rely on the reporting, because the mine operator was making a serious attempt to mine the graphite deposits at that time.

VWPL considers that sufficient continuity of mineralisation has been established to classify an Inferred Resource of 200 000 tonnes grading 10% graphitic carbon under the JORC (2004) Code. This amounts to 20 000 tonnes of contained graphite.

8.2.2 Exploration targets

OMI has determined notionally that prior to economic scoping studies, within these wide zones, it would hope to achieve an exploration target in the range of 300 000 For personal use only use personal For tonnes to 600 000 tonnes grading from between 5% and 10% graphitic carbon. OMI intends to explore and establish this minimum exploration target at the Geumam deposit. The potential quantity and grade is conceptual in nature and there has been

20 insufficient exploration to define a mineral resource. It is uncertain if further exploration will result in the determination of a mineral resource.

VWPL has calculated that the target might be available above 40 m vertical depth in some graphitic zones.

The zones of graphite at the Geumam deposit are close enough together to form a single mining operation.

8.3 Conclusions – Recommendations and Future work

The location of the Geumam deposit is in a lightly populated area in a range of low hills so is considered a suitable location for a mining development. Discussions with landowners will be vital to gain access for exploration and mining.

The wide beds of graphite mineralization may be conducive to open pit mining methods.

The Geumam graphite deposit can be easily tested by trenching and shallow drilling but trenching may not always be feasible for environmental reasons.

OMI have prepared a phased program to be carried out over 18 months when funds become available and budget of around A$2.1 million (based on minimum subscription) for testing the three projects which are controlled. The initial part of the program is essentially similar for each project and includes surveying, geological mapping in detail aided by trenching and construction of accessible tracks and traverses for drilling. Sampling of the trenches and preliminary estimates of area and projected volumes of graphitic zones will be used to rank Geumam Project with the other two and priority will be given to the mineralisation which produces the better results. A nominal drill program of 1200 m is allocated to the Geumam Project.

It is anticipated that the Geumam deposit will be drill tested with nominal 100 m holes intersecting the graphite beds at 50 m below surface with shallow holes down to 25 m, perhaps 50 m where applicable. Sampling will provide the width and grade of graphitic zones and basic metallurgical characteristics.

Should it be evident from phase 1 that OMI has a good chance of establishing a graphite mining operation at the Geumam Project, based on the grade and type of mineral present, then Phase 2 will be proposed. The details of Phase 2, which is

evaluation drilling cannot be planned at this time. For personal use only use personal For

21 9.0 THE SAMCHEOK GRAPHITE PROJECT

Opirus’ subsidiary, Won Kwang Mines has lodged applications for two Mining Rights (009 and 010) application numbers 2012-663 and 2012-664 over the Samcheok graphite deposit which is situated about 215 km east of Seoul on the eastern seaboard of Korea, about 13 km south-east of the coastal town of Samcheok, in Donghae County of Gangwon-Do Province.

A number of small coastal villages are in the area but not in the same area as the Mining Rights. The local economy is mainly fishing and agriculture.

The deposit lies in coastal, undulating low hilly terrain, vegetated by dwarf pines and thick scrub.

The Samcheok area consists of Precambrian crystalline basement, composed mainly of a north-north-west striking sequence of schist and gneiss of the Gyeonggi Gneiss Complex and granite gneiss of the Sobaegsan Gneiss Complex. Foliation in the schist strikes approximately north-north-west and dips at 60o to 75o to the east. Widespread regional metamorphism occurred during the Late Permian-Triassic. The foliation within gneiss is regarded as conformable with original sedimentary bedding.

The basement rocks have been intruded by small localised minor diorite and aplitic dykes of the Cretaceous age Bulgugsa Series. The airborne magnetic anomaly map indicates there is an intense magnetic anomaly located immediately to the west of the graphite deposit. The significance of this anomaly is unknown at this stage, but it could indicate the presence of a concealed intrusive body at depth.

9.1 Deposit Geology – Graphite beds – Previous Investigations

There is evidence of mining and production at the Samcheok deposit but there are no individual production records.

The graphite horizon at Samcheok is hosted by biotite schist of the Yongnam Gneiss

Complex, near the schist’s basal contact with gneiss, see Figure 6. For personal use only use personal For

Figure 6. Samcheok Mining Rights, geology and graphite lode locations (in black), roads and watercourses. After KMPC and Senlac mapping.

The KMPC (1979 and 1984) report a single wide (60 m to 80 m) zone (horizontal widths) of graphitic schist which is at least 300 m long, possibly up to 700 m long. Senlac has traced limonite-hematite stained outcrops in road cuts and open pit exposures over a strike length of at least 700 m. The KMPC recorded grades of between 4% C and 5% Cg. A very limited SP geophysical survey was conducted by the KMPC (1976), which indicates the graphite bed can be readily mapped with electrical methods.

The open pit does not show mining over a width of more than 10 m and only one band of high-grade graphite is seen, refer Figure 7. Vegetation and scree obscure any outcrop which might confirm more extensive graphite.

For personal use only use personal For

Figure 7. Samcheok open pit – high grade graphite. Disseminated graphite in the schists may constitute the principal exploration target, see Figure 8.

Figure 8. View of the limonite stained, sulphidized graphite-bearing beds exposed in the abandoned open cut graphite mine at Samcheok. Disseminated graphite constitutes the principle target.

A 2 m wide coarse-grained quartz-muscovite pegmatite dyke appears to be associated with the high-grade flake graphite-bearing zone exposed in the open pit and can be traced in outcrops to the north. Podiform “pinch and swell” glassy quartz veinlets are For personal use only use personal For commonly developed within the foliation of the gneiss.

24 At Samcheok, close to the abandoned open cut, there are derelict mine buildings, remains of a treatment plant, stockpiles and mine dumps overgrown by dense secondary regrowth vegetation.

Concrete structures of the treatment plant, considered to be in part flotation cells suggest that a low-grade mining product was being concentrated at the time of operation. L Davis thought that disseminated graphite was observable in the schists but petrology is required to assess the quantity and nature of the graphite grains. Drilling is vital to prove the extent and confirm the wide graphite zone.

Senlac collected three samples at the Samcheok deposit including a continuous 5.0 m long (horizontal width) rock-chip channel sample (co-ordinates 521559 E, 4133837 N) from the open pit exposure at the Samcheok deposit and this averaged 5.75% Cg. This sampling confirms the grade estimates of the KMPC, see above. The ash or gangue amounts to about 93%, within which there is ~2.6% iron, ~1.9% potash and ~28% silica.

Two grab samples (521570 E, 4133837 N; coarse flake graphite in sericite-muscovite gneiss and 521662 E, 4134066 N, coarse grained sericite-muscovite gneiss with minor graphite) assayed 3.55% Cg and 0.45% Cg respectively.

SEM/EDS analysis by Amdel on a specimen of selected flake graphite from the Samcheok open pit showed a common flake size of ~250 microns. There were no deleterious ash component elements. Gangue minerals are quartz and plagioclase.

9.2 Historical sampling, resource estimates and exploration targets.

9.2.1 Resource Estimate

The reports of the KMPC are not detailed and there are no lists of samples and assays and other information to support the estimate. Complete mapping details are not verifiable on the ground because of vegetative growth and cultural changes of the past 30 years. Where ground information can be observed, the KMPC data appears reliable and VWPL has relied on the KMPC reporting and believes that it is entitled to rely on the reporting, because the mine operator was making a serious attempt to mine the graphite deposit at that time.

The KMPC examined and sampled wide zones of graphite in the open pit and trenches.

VWPL considers that sufficient continuity of mineralisation has been established to estimate an Inferred Resource of 200 000 tonnes grading 5% graphitic carbon under the JORC (2004) Code. This amounts to 10 000 tonnes of contained graphite.

9.2.2 Exploration target

For personal use only use personal For OMI has determined notionally that prior to economic scoping studies, within these wide zones, it would hope to achieve an exploration in the range of 400 000 tonnes to 800 000 tonnes grading from between 5% and 10% graphitic carbon. OMI intends to explore and establish this minimum exploration target at the Samcheok deposit. The

25 potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a mineral resource. VWPL has calculated that the target might be available above 40 m vertical depth in some graphitic zones. VWPL has calculated that the target might be available above 20 m vertical depth in the graphitic zone if it is proved to have the maximum estimated width suggested by the KMPC.

9.3 Conclusions – Recommendations and Future work

The location of the Samcheok deposit is in a sparsely populated range of low hills and is considered a suitable location for a mining development. The outcropping wide bed of graphite mineralization is possibly conducive to open pit mining methods. The Samcheok graphite deposit can be easily tested by trenching and shallow drilling but trenching may not always be feasible for environmental reasons.

OMI has prepared a phased program to be carried out over 18 months when funds become available and budget of around A$2.1 million– ( based on minimum subscription) - for testing the three projects which are controlled. The initial part of the program is essentially similar for each project and includes surveying, geological mapping in detail aided by trenching and construction of accessible tracks and traverses for drilling. Sampling of the trenches and preliminary estimates of area and projected volumes of graphitic zones will be used to rank Samcheok Project with the other two and priority will be given to the mineralisation which produces the better results. A nominal drill program of 500 m is allocated to the Samcheok Project.

It is anticipated that the Samcheok deposit, which is a simple steeply dipping horizon with potential 60 m width will be drill tested with nominal 100 m holes intersecting the graphite bed at 50 m below surface. Shallow holes down to 25 m, perhaps 50 m will be used where applicable. Sampling will provide the width and grade of graphitic zones and basic metallurgical characteristics.

Should it be evident from phase 1 that OMI has a good chance of establishing a graphite mining operation at the Samcheok Project, based on the grade and type of mineral present, then Phase 2 will be proposed. The details of Phase 2, which is evaluation drilling cannot be planned at this time.

For personal use only use personal For

10.0 THE TAEWHA GRAPHITE PROJECT.

Opirus’ subsidiary, Won Kwang purchased this area of one Mining Right (Hongcheon 91-2) registration number 079948 on 22 June 2012.

The Taewha graphite deposit is situated 79 km east-northeast of Seoul and 10 km south-east of the city of Chuncheon, in Hongcheon County of Gangwon-Do Province. The town of Hongchon is situated 15 km to the south.

A partially concrete paved track traverses the ridge to the south of Taewha from Bukbang village and provides access to the site. The deposit lies in rugged, mountainous terrain that is well forrested with conifers and is accessible only by 4WD vehicle, using logging tracks. Elevations in the area range from 300 m up to 900 m. The land use at the deposit is logging activities.

The Taewha area consists of Precambrian crystalline basement, composed mainly of biotite gneiss and hornblende gneiss of the Gyeonggi Gneiss Complex. The basement rocks have been intruded by Triassic amphibolite sills and dykes. To the south-east of the Mining Right a diorite body is mapped, see Figure 9.

Widespread regional metamorphism occurred during the Late Permian-Triassic.

For personal use only use personal For

Figure 9. Taewha Mining Right, geology and graphite lode locations (in black). After KMPC and Senlac mapping.

10.1 Deposit Geology – Graphite beds – Previous Investigations

There is evidence of mining and production at the Taewha deposit but there are no individual production records.

The KMPC mapped two graphite beds 1979 and 1984) exposed in a narrow creek gully as striking east and forming an antiform structure, with the limbs dipping moderately at about 25-45o to the north and south, Figure 9. Seven trenches by the KMPC confirmed the continuity of the graphite beds.

The KMPC drove four adits at Taewha: the Taewha Adit, Main Adit, Sangil Adit and Haeil Adit.

The Taewha Adit was driven for 160 m in a north-east direction following the northern

For personal use only use personal For limb of the Upper Graphite Bed, with crosscuts to the east and south-east designed to intersect the overturned southern limb (Lower Graphite Bed).

28 The Upper Graphite Bed (Northern limb) can be traced over an outcrop strike length of 250 m and on average is 4.9 m thick (true width), with an average grade of 6.8% FC or Cg (KMPC, 1984). Visually, this Upper bed appears to be slightly coarser grained in size than the Lower bed. The exact size of the flake will need to be determined by laboratory testing.

The Lower Graphite Bed (Southern limb) has a strike length of 300 m and thickness of 5.8 m (true width), with an average grade of 6.9% FC or Cg. Visually, this Lower bed appears to be softer and more clay altered than the Upper bed. The Lower graphite bed was worked by a small open pit. Senlac interpreted two flat lying to shallow dipping graphite layers that are separated by about 30 m of gneiss; possibly fault repetition of the same layer.

• Figure 10. View of the Upper Graphite Bed (North Body exposed by a trench excavation at Taewha

The relatively narrow widths of lode (4.9 m to 5.8 m) reported by the KMPC are indicative of true-width measurements on high-grade graphite band in underground exposures – adits and drives. The adits have collapsed and the workings are inaccessible; trenches are overgrown and infilled.

Senlac collected only two grab samples (co-ordinates 398433 E, 4187199 N and 398500 E, 4187117 N) of selected coarse flake at the Taewha deposit which assayed 3.6% Cg and 8.6% Cg respectively. Each contain about 90% ash, within which there is ~3% iron, ~3% potash and ~30% silica.

SEM/EDS analysis by Amdel on specimens of selected flake graphite from the Taewha

For personal use only use personal For deposit showed range of flake sizes from ~100 to ~500 microns. There was no deleterious ash component. Gangue minerals are mainly quartz and potash feldspar

10.2 Historical sampling, resource estimates and exploration targets.

10.2.1 Resource Estimate

The KMPC examined and sampled mine openings, trenches, adits and drives.

VWPL considers that sufficient continuity of mineralisation has been established to estimate Inferred Resources of 170 000 tonnes grading 7% graphitic carbon under the JORC (2004) Code. This amounts to 12 000 tonnes of contained graphite.

10.2.2 Exploration target

OMI has determined notionally that prior to economic scoping studies, it would hope to achieve an exploration target in the range of 380 000 tonnes to 760 000 tonnes grading from between 5% and 10% graphitic carbon. OMI intends to explore and endeavour to establish this minimum exploration target at the Taewha deposit. The potential quantity and grade is conceptual in nature and there has been insufficient exploration to define a mineral resource. It is uncertain if further exploration will result in the determination of a mineral resource.

VWPL has calculated that the target might be available above 50 m vertical depth in combined graphitic zones.

10.3 Conclusions – Recommendations and Future work

The location of the Taewha deposit is in a sparsely populated mountainous region and is a therefore may be an attractive location for a mining development. The near surface, flat-lying nature of graphite mineralization is possibly conducive to open pit mining.

The Taewha graphite deposit can be easily tested by trenching and shallow drilling and trenching may be more feasible than at many other situations closer to communities.

For personal use only use personal For projected volumes of graphitic zones will be used to rank Taewha Project with the other two and priority will be given to the mineralisation which produces the better results. A nominal drill program of 500 m is allocated to the Taewha Project.

30 Should it be evident from phase 1 that OMI has a good chance of establishing a graphite mining operation at the Taewha Project, based on the grade and type of mineral present, then Phase 2 will be proposed. The details of Phase 2, which is evaluation drilling cannot be planned in at this time.

For personal use only use personal For

11.0 GRAPHITE MARKET – USES – PRODUCTION - CONSUMPTION –– PRICES – RESERVES

The purpose of the IGR is to appraise the OMI opportunities to explore and exploit the graphite deposits controlled in South Korea. The IGR would not be complete without examining briefly and making observations on the graphite market but it is not intended to appraise, comment or advise on the market.

11.1 General

The economics of graphite are basically determined by the consumer and the end application. There is rarely a usage that cannot be satisfied by several different types of graphite. In general the consumer will choose a graphite type which does the best job at the most economical price and products are usually tailored to meet the needs of individual customers and their own particular applications. Graphite is purchased directly by the customer from the producer and there is no secondary buyers market such as a metals exchange or warehouse stockpile.

It is for these reasons that explorers, developers, and mine producers must work closely with industry end-users in the next decade (Fletcher, 2012).

11.2 Uses

Graphite has an abundance of markets and uses. It is key to existing technologies that have been around for 100 years as well as new technologies, like lithium-ion batteries. Nevertheless it is not a niche industry in the same manner that rare earths and lithium are niche industries. Currently, ~1.2 million tonnes per annum of graphite are produced globally. This is bigger by volume than molybdenum, vanadium, cobalt, tungsten, rare earths and lithium combined.

Throughout graphite's industrial history, new technologies keep em erging while demand from traditional industries hasn't dropped off. This has built graphite into the 1.2 million tonnes industry it is today.

Traditional demand for graphite is largely tied to the steel industry where it is used as a liner for ladles and crucibles, as a component in bricks which line furnaces (“refractories”), and as an agent to increase the carbon content of steel (~60% world production). Innovations in steel grades, growing acceptance and extensive variations of properties of steel are largely widening a broad spectrum of applications in this sector.

In the automotive industry, graphite is used in brake linings, gaskets and clutch materials (7% world production). Graphite also has a myriad of other uses in batteries and lubricants (~5% world production), fire retardants, and reinforcements in plastics and all other uses (~28% world production).

For personal use only use personal For Graphite also has many important new “green energy” applications, such as lithium-ion batteries, fuel cells, nuclear and solar power. These applications are projected to create demand growth in graphite over the next decade (Fletcher, 2012).

32 From an industrial standpoint there are basically four types of graphite which are: amorphous, high crystalline, flake, and synthetic graphite.

11.2.1 Amorphous graphite

Amorphous graphite is used for lower value graphite products and is the lowest priced graphite. Grades of amorphous graphite are categorized based on particle size and purity and can be customized to fit any requirement. Commercial grades of amorphous graphite are typically available from 75 to 85% Cg purity, and in particle sizes from 100 mm lumps to three micron (0.003 mm) size powder.

Although the lowest value of all graphite products, amorphous graphite is cheaper to produce. It accounts for the majority (~60%) of world production and consumption and is appropriate especially for the high-volume traditional refractories.

11.2.2 Crystalline graphite

High crystalline graphite, also known as vein graphite, due to the nature of its geological occurrence in fissure veins, fractures and other cavities is only produced in Sri Lanka at any scale. Vein graphite is also one of the most carbon rich forms of natural graphite and occurs in nature with a purity as high as 98% to 99% Cg, with the major impurities being iron oxide.

The major consumers of the high crystalline vein graphite are carbon brush industries, seal and gasket industries, refractories and friction products.

11.2.3 Flake graphite

Flake graphite is usually separated from its host rock by conventional froth flotation. In order to float the graphite, it has to be crushed down to something under 16 mesh (~1.1 mm) to begin with. As a general rule the flakes do not occur much larger than 20 mesh (~0.8 mm) particles. The crushing process and flotation is a very simple in concept but very complicated to operate. The minus 16 mesh (~1.1 mm) is passed through the flotation cells after adding appropriate floating agents. Residuals are progressively re-crushed until all the graphite is released and re-floated until the maximum graphite has been obtained from the original feed.

There are two general sizes which are currently manufactured: basically minus 80 mesh (~0.2 mm) plus 100 mesh (~0.15 mm) and minus 100 mesh (~0.15 mm) graphite; but sizes can range from minus 20 mesh (~0.8 mm) down. The carbon content of these flake graphite products ranges anywhere from 80 Cg to approximately 96 Cg. Higher carbon contents can be obtained with flake graphite, but it must be treated with a chemical-thermal process and when this is done, one can obtain carbon contents as high as 99.5 Cg and many times as high as 99.9 Cg.

For personal use only use personal For Flake graphite is used in refractory applications, mainly in secondary steel making, crucibles for melting chemical reagents, ceramics, graphite foil, lubricants, releasing agents, coatings, batteries, catalysts in chemical fertilizer industry, additive material for plastics and rubber products, carbon brushes, fuel cells, synthetic diamonds and more.

33 11.2.3.1 New uses for flake graphite and graphene

Flake graphite is the principle source for the production of graphene. Graphene is an allotrope of carbon. Its structure is one-atom-thick planar sheets of carbon atoms that are densely packed in a honeycomb crystal lattice. The crystalline or flake form of graphite consists of many graphene sheets stacked together.

Graphene is the thinnest and strongest material known to science and conducts electricity better than any other substance (Renick, 2011). Graphene is strong, chemically stable, an excellent conductor of electricity and has an extremely high surface area.

The potential applications of graphene are expected to be widespread in emerging electronic and modern inventions, including: computer touch screen technology, pollution sensors, biomedical sensors, super small transistors, super dense computer data storage, energy storage, solar cells, electronic circuitry, transparent conducting electrodes, rechargeable batteries (lithium and nickel-iron) and electrochemical capacitors (ultracapacitors).

11.2.4 Synthetic graphite

Synthetic graphite has to be mentioned because it forms around 5% of the graphite market. There are several different types with varying properties. Essentially any amorphous carbon material can be graphitised.

Primary artificial graphite is calcined petroleum coke which has been heat treated in a specialised furnace to temperatures of 2800oC plus. It is more costly to produce than secondary artificial graphite. The primary artificial graphite is manufactured in a particle form and contains no additives such as iron oxide.

Secondary artificial graphite is a man-made material in which the basic raw materials are calcined petroleum coke and coal tar pitch. It is given the terminology secondary artificial graphite because the original graphite was usually manufactured for some other purpose and it is generally a bi-product of some operation. The manufacture of the secondary artificial graphite consists of a crushing, sizing, blending, extrusion, baking and graphitizing process with the addition of minor additives such as extrusion oils, waxes, iron oxide, titanium oxide and considerable natural amorphous graphite.

The primary application for secondary artificial graphite is in the hot metal industry as carbon raiser. The other applications generally fall into foundry washes, composites and other chemical applications.

Pyrolytic carbon is generally produced by heating a hydrocarbon nearly to its decomposition temperature and permitting the graphite to crystallise (pyrolysis). It is used in for missile nose cones, rocket motors, pebble bed nuclear reactors and orthopaedic implants, to mention a few exotic uses but there are many more.

For personal use only use personal For Synthetic graphite tends to be of higher purity, a lower density, higher porosity and higher electrical resistance than natural graphite. However, synthetic graphite is more porous than natural graphite and this increased porosity makes it unsuitable for refractory applications.

Synthetic graphites are used in aerospace applications, sometimes [batteries], [is this inconsistent with the statement below regarding synthetic graphite not being suitable for batteries carbon brushes, electrodes for electric arc furnaces for metallurgical processing, moderator rods in nuclear power plants, manufacture of chlorine and caustic soda. The cost is prohibitive for many graphite applications and consumers often prefer flake graphite's properties. Batteries, for example, require a good porosity and surface area so the lithium ions can flow through the anode and generate the charge. Man-made graphite does not provide that.

11.4 Global graphite production and reserves

Mine production Mine production Reserves where 2010. ‘000 2011. ‘000 known. ‘000 Brazil 76 76 360

Canada 25 25 China 600 600 55,000 India 140 140 11,000 Korea, North 30 30 Madagascar 5 5 940

Mexico 7 7 3,100

Norway 2 2 Romania 20 20 Sri Lanka 8 8 Ukraine 6 6 Other countries 6 6 6,400

World total 925 925 77,000 (rounded) Table 3. USGS Graphite mine production Reserves for 2010 2011 (these reserves of the USGS have no relationship or comparison to reserves in accordance with the JORC (2004) Code.

Worldwide demand for graphite slowly began to increase during the last half of 2009 and continued increasing steadily throughout 2010 and into 2011. This increase resulted from the improvement of global economic conditions and its impact on industries that use graphite. Principal import sources of natural graphite into the USA were, in descending order of tonnage, China, Mexico, Canada, Brazil, and Madagascar, which combined accounted for 99% of the tonnage and 92% of the value of total imports. Mexico provided all the amorphous graphite, and Sri Lanka provided all the lump and chippy dust variety. China, Canada, and Brazil were, in descending order of tonnage, the major suppliers of crystalline flake and flake dust graphite. For personal use only use personal For Of the estimated1.2 million tonnes of graphite produced annually, approximately 40% is of the flake type. China is the world leader in graphite production with ~73% of total output. India is the second largest producer with 12% of market share, followed by

35 Brazil on 7%, North Korea (3%), Canada (1%), Ukraine (1%), Sri Lanka (1%) and Madagascar (1%). China’s production and export growth is levelling off, quality is falling, export taxes are being levied, a licensing system has been instituted and China is importing graphite from North Korea.

11.5 Price

Flake graphite is currently demanding much higher prices than fine-grained or amorphous graphite, see Table 4 (although produced in 2012, the Table might be out- of-date because the prices are changing rapidly).

Flake graphite can command many times the price of amorphous graphite and this has been the case since the 1980s. Also the volumes produced, of flake graphite versus amorphous graphite has remained unchanged at around 40:60. It is widely held that flake graphite prices are increasing, but the extremely high prices must be for correspondingly small volumes.

The Table 4 shows prices of processed graphite product after crushing, flotation and screening, etc. In any single deposit, several products might be derived after beneficiation. The cost of flake graphite will vary on two bases, first on the size of the flake and second the carbon content. The higher carbon contents such as 96% plus Cg to 99% Cg have to be treated chemically and thermally, therefore demanding a much higher price.

The Cg% values in the Table are concentrate grades, which have nothing to do with the estimated % carbon contents of in situ graphite mineralisation recorded at the deposits.

The concentrate grades rising most rapidly in price include all three 94-97% Cg crystalline flake graphite categories, which are used as a high-quality refractory material, in friction materials (brake/clutch linings), lubricants and in the manufacture of graphite foil and long-life batteries.

Natural graphite concentrates 99% to 99.9% Cg, +50 mesh $4,500 $6,000 94% to 97% Cg, +80 mesh $2,500 $3,000 90% Cg, +80 mesh $2,000 $2,500 94% to 97% Cg, +100-80 mesh $2,200 $2,500 90% Cg, +100-80 mesh $1,500 $2,000 85% to 87% Cg, +100-80 mesh $1,500 $1,900 94% to 97% Cg, -100 mesh $2,000 $2,400 90% Cg, -100 mesh $1,400 $1,800

For personal use only use personal For Amorphous powder 80% to 85 Cg $600 $800

Synthetic 99.95% C2 $7,000 $20,000

36 Table 4. Industrial Minerals Graphite Prices per tonne after MEGA Graphite Incorporated, 2012. (note 50 mesh = ~ 0.3 mm; 80 mesh = ~ 0.2 mm and 100 mesh

= ~ 0.15 mm). For personal use only use personal For

12.0 CONCLUSIONS

12.1 OMI Holdings Limited strategy

OMI considers that any new graphite mining and processing operation in South Korea would have several key advantages over many competitors. However, the prospects of the mining tenements are yet to be clarified.

Firstly there are available for testing several accessible graphite deposits, some of which have been mined in the past.

South Korea is the third largest Asian economy a G20 country and is a stable democracy. There are major steel and automobile industries. South Korea has a good relationship with Australian companies and Posco, the large steel company is BHP’s largest single customer with current sales of US$6.9 billion and 4% of total sales (Ord Minnett, ORDS Quarterly, June quarter 2012).

Domestic graphite consumption is more than 20,000 tonnes per annum. Infrastructure is excellent with efficient container ports, linked to an excellent modern road and rail transportation network. South Korea is high volume trading partner with China, Japan, United States, Hong Kong, Canada and Australia.

South Korean companies, such as Samsung, LG Chemicals and Hyundai are deeply involved with technological developments in electronics, batteries and automobiles; the principle sectors that are driving new demand for types graphite.

Corporate Tax is levied at 25% of profit.

These and other matters are dealt with in the Prospectus.

12.2 OMI Graphite deposits

All the graphite deposits are situated in hilly terrain where there is very little residential or agricultural establishment to compete for land use.

Although open pitting has not been carried out for minerals in South Korea, there are quarries for limestone and road metal. There is a good case for placing graphite along with these as a similar non-toxic product.

OMI has prepared a phased program to be carried out over 18 months when funds become available together with a budget of around A$2.1 million (based on minimum

For personal use only use personal For subscription), for testing the three projects which are controlled. A minimum of $1 million is planned to be spent on direct exploration; this allows a nominal $0.7 million per project. This sum includes about $150 000 for 1000 m of drilling per project. Should the maximum subscription of $5 million be raised, then extra funds of about $0.8 million for direct exploration will be applied at those projects showing the most promise.

The initial part of the program (Phase 1) is essentially similar for each project and includes surveying, geological mapping in detail aided by trenching and construction of accessible tracks and traverses for drilling. A good geological and structural map of each deposit is vitally needed to plan the drill sites.

Sampling of the trenches and drill holes should provide preliminary estimates of area and projected volumes of graphitic zones, which will be used to rank the projects and priority will be given to the mineralisation which produces the better results.

On this project, evaluation drilling will commence to attempt an upgrade from an Inferred Resource to an Indicated Resource in accordance with the JORC (2004) Code, but there is no guarantee that this can be achieved, produce further samples for grade and metallurgical testing and begin plans for mining and treatment. The additional funding for most of the Phase 2 will have to be raised or funded by future off- take and/or joint venture partners.

the planning and exploration process. For personal use only use personal For

13.0 GLOSSARY OF TECHNICAL TERMS

Terms not included in the glossary are used in accordance with their definition in the Concise Oxford Dictionary.

adit horizontal passage from the surface into a mine aeromagnetic survey a survey made from the air for the purpose of recording magnetic characteristics of rocks. Archean the earlier part of Precambrian time, older than 2500 million years. Augen in foliate metamorphic rocks such as schists and gneisses, large lenticular mineral grains or mineral aggregates having the shape of an eye in cross section, in contrast to the shapes of other minerals in the rock. basement the igneous and metamorphic crust of the earth, underlying sedimentary deposits. biotite a generally dark coloured iron, magnesium, and potassium rich mica. Cambrian a time period, approximately 545 million to 505 million years ago. carbonate a rock, generally a sedimentary rock, comprised largely of minerals containing calcium carbonate; CO3. Carboniferous a time period, approximately 360 million to 290 million years ago. Cg graphitic carbon or fixed carbon distinguished from other sources of carbon (Cg). chlorite a green platey iron-magnesium rich silicate mineral. Cretaceous a time period approximately 140 to 70 million years ago. cross-section a (vertical) section drawn at right angles to the long axis of a geological feature. Devonian a time period, approximately 408 million to 360 million years ago. diamond drilling rotary drilling using diamond-impregnated bits, to produce a solid continuous core sample of rock. dip the angle at which any planar feature is inclined from the horizontal. disseminated descriptive of mineral grains which are scattered throughout the host rock. dyke a tabular igneous intrusion which cuts across the bedding or other planar structures in the country fissure a surface or fracture in rock along which there is distinct separation. foliation a planar arrangement of textural or structural features in any type of rock. gneiss foliated rock formed by regional metamorphism. hornblende a common iron-magnesium silicate mineral host rock the rock containing a mineral or an ore body. hydrothermal pertaining to heated water, particularly of magmatic origin associated with the formation of mineral deposits or the alteration of rocks. Indicated Resource is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity butare spaced closely enough for continuity to be assumed. Inferred Resource is that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geoscientific evidence, drill holes, underground openings, or other sampling procedures where the lack of data is such that continuity cannot be predicted with confidence and where geoscientific data may not be known with a reasonable level of reliability. intercept, intersection the length of e.g. mineralisation traversed by a drill hole. intrusion the process of formation of an rock mass emplaced within surrounding rock IP (Induced Polarisation) a geophysical exploration method which measures changes in magnetic and electrical fields induced in the earth by the application of an electrical current to the ground. Jurassic a time period, approximately 200 million to 145 million years ago. limestone a sedimentary rock consisting chiefly of calcium carbonate mainly as calcite. lineament a linear feature of regional extent that is believed to reflect the Earth's crustal structure.

lode a tabular or vein like deposit of valuable mineral between well defined walls of country rock. For personal use only use personal For magnetic ‘low’ an area of low magnetic expression relative to the surrounding area. magnetic survey systematic collection of readings of the Earth's magnetic field at a series of different locations, in order to define the distribution of values which may be indicative of different rock types, formations, etc.

40 mesh (as in determining grain size) The aperture size of screens used in the laboratory and metallurgical industries.Mesozoic an era of geologic time, from the end of the Palaeozoic to the beginning of the Cainozoic, or from about 250 to about 65 million years ago. meta a prefix denoting a metamorphosed rock. metamorphic descriptive of a rock which has changed its structure and properties due to the effects of heat and/or increased pressure over time. metamorphogenic caused by or formed during metamorphism. Migmatite a composite rock, strongly deformed (foliation and irregular streaking), composed of igneous or igneous-appearing and/or metamorphic materials, which are generally distinguishable megascopically Ordovician a time period, approximately 500 million to 445 million years ago. Permian a time period, approximately 290 million to 250 million years ago. Permo-Carboniferous an interval of geologic time covering the Permian and Carboniferous periods. petrography study of rock texture on a macro and microscopic scale. petrology study of formation of rock. phyllite a metamorphic rock similar to but coarser grained than slate and with a silky sheen on cleavage surfaces. Porphyroblastic the texture of a recrystallized metamorphic rock having clusters of coarse minerals in a finer-grained matrix Proterozoic a time period, older than 570 million years old. resistivity a method of geophysical exploration which measures the electrical resistance of rocks in the ground. rock-chip sampling obtaining a sample, generally for assay, by breaking chips off a rock face schist a metamorphic rock with platy to foliated texture. sediments solid material both mineral and organic that is in suspension, is being transported or has been moved from its site or origin by air, water or ice, and has come to rest on the Earth's surface either above or below sea-level. Self-potential (“SP”) a passive (measures natural physical responses) electrical geophysical method SEM/EDS scanning electron microscopy-energy dispersive spectroscopy. Silurian a time period, approximately 433 million to 408 million years ago. Siluro-Devonian an interval of geologic time covering the Silurian and Devonian periods. skarn a thermally metamorphosed impure limestone. stope the space from which ore is being or has been excavated underground above or below a level. stratabound a deposit confined to a single stratigraphic unit, it may or may not be conformable. stratigraphy composition, sequence and correlation of stratified rocks in the Earth's crust. strike horizontal direction or trend of a geologic structure. strike length the long dimension of a geological feature such as a bed, vein or fault where it intersects a horizontal plane, especially the ground surface stringer a narrow vein or irregular filament of mineral traversing rock mass of different composition. sulphide a general term to cover minerals containing sulphur and commonly associated with mineralisation. Tertiary first period of the Cenozoic era covering the time span from 2 to 65 million years ago. Triassic a time period, approximately 250 million to 210 million years ago. vein a thin sheet-like infill of a fissure or crack, commonly bearing quartz. working an opening or excavation in mining or quarrying.

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14 SOURCES OF INFORMATION

Those of the greatest relevance are emboldened.

14.1 Formal references, papers and articles.

Amdel Mineral Laboratories 01/08/2012 - Report N5324qs12: SEM/EDS Anaylsis For 6 Samples. Amdel Mineral Laboratories 03/08/2012 - Final Analysis Report, Job Number: 2AD4571 for 17 rock samples.

Cluzel, D, Cadet, J P, 1990. Geodynamics of the Ogcheon Belt (South Korea), Tectonophysics, 183, 41- 56. ______, Jolivet, L. & Cadet, J P, 1991. Early-middle Palaeozoic intraplate orogeny in the Ogcheon Belt (South Korea), Tectonics, 10 (6), 1130-1151. ______, Lee, B J & Cadet, J P, 1991. Indosinian dextral ductile fault system and synkinematic plutonism in the southwest of the Ogcheon Belt (South Korea), Tectonophysics, 194, 131-151. Fletcher, R., 2012. Graphite Applications Expanding, The Critical Metals Report (24 January, 2012). Fraser Institute Annual Sur vey of Mining Com panies, 2011-2012 Global Industry Analysts, 2010. Carbon & Graphite: A Global Strategic Business Report, Global Industry Analysts Inc. Kenan, W. M., 1984. Economics of Graphite. Presentation October 1984, Society of Mining Engineers of AIME. Lee, D.S., 1987. Geology of Korea, Geol. Soc. Korea, Kyohak-Sa, 514pp. Lee, S.M., 1973. Applications of metamorphic facies and facies series to the tectonics of Korea, Jour Geol. Soc. Korea, 9, 11-23. Moores, S., 2012. Graphite Market, Industrial Minerals (14 February 2012). Reedman, A J & Um, S H, 1975. The Geology of Korea, Korea Inst Energy & Res, Seoul, 139 pp. Renick, O., 2011. IBM Work With World’s Thinnest Material Seen Creating Faster PCs, The Times. Roskill, 2009. The Economics of Natural Graphite, 7th edition, Roskill Information Services Ltd. USGS, 2010. Minerals Yearbook, Graphite. United States Geological Survey, 33.1-33.10. U.S. Geological Survey, Mineral Commodity Summaries, January 2012 Zeefer Consulting, 2011. China Graphite & Talcum Mining Industry Analysis, Zeefer Consulting.

14.2 Korean Government reports

Reports were translated by Topclasstranslation Inc. of 210, Yeoksamro 83 Gil 18, Gangnam- Gu, Seoul.

KIGAMM, 1996. Explanatory Note of the Daejeon Sheet, 1:250,000 scale, Korea Institute of Geoscience and Mineral Resources, KR-95(S)-1. KIGAMM, 2001. Geochemical Atlas of Korea (1:700,000), Series 1-7, Korea Institute of Geoscience and Mineral Resources. KIGAMM, 2008. Magnetic Anomaly Map Atlas of Korea (1:50,000), Korea Institute of Geoscience and Mineral Resources. Kim, S.E. & Hwang, D.H., 1983. Metallogenesis in Korea – Explanatory Text for the Metallogenic Map of Korea, Kor. Inst. Energy Resources, 16-23.

For personal use only use personal For KMPC, 1976. Geological investigation of the Samcheok graphite deposit, Korea Mining Promotion Corporation, Annual Report, 518-519. KMPC, 1977. Geological investigation of the Samcheok graphite deposit, Korea Mining Promotion Corporation, Annual Report, 538-539.

42 KMPC, 1979. Geological investigation of the Taewha graphite deposit, Korea Mining Promotion Corporation, Annual Report, 562-563. KMPC, 1980. Geological investigation of the Geumam graphite deposit, Korea Mining Promotion Corporation, Annual Report, 480-481. KMPC, 1980. Geological investigation of the Geumam graphite deposit, Korea Mining Promotion Corporation, Annual Report, 518-519. KMPC, 1980. Geological investigation of the Geumam graphite deposit, Korea Mining Promotion Corporation, Annual Report, 1170-1187. KMPC, 1984. Geological investigation of the Taewha graphite deposit, Korea Mining Promotion Corporation, Annual Report, 1178-1193.

14.2 Websites referenced 2012

www.prweb.com/releases/carbon/graphite/prweb4545674.htm www.carbonandgraphite.org www. dailymail.co.uk/sciencetech/article - 2018440 June 2012 www.focusmetals.com www.megagraphite.com www.strategyr.com/Carbon_and_Graphite_Market_Report.asp www.techmetalsresearch.com www.webmineral.com U.S. Geological Survey, Mineral Commodity Summaries, January 2011

minerals.usgs.gov/minerals/pubs .../graphite/mcs-2011-graph.pdf For personal use only use personal For

15.0 DECLARATION

15.1 Qualifications and Experience

This report has been prepared for Veronica Webster Pty Limited through its duly authorised and qualified representative, Mr. Leslie William Davis, Minerals Exploration Consultant and Director of the company. Veronica Webster Pty Limited has operated in Australia serving the mining industry since 1980.

Mr. Davis has had more than 40 years experience in the Australian minerals industry, particularly exploration for precious metals and base metals, mining geology, ore resource/reserve estimation and property evaluation. He held senior positions with Electrolytic Zinc Co of Australasia Limited, Freeport Minerals Corporation of Australia, Tenneco Oil & Minerals and Amad NL before joining Veronica Webster Pty Limited in 1985.

His principle qualification is Bachelor of Science (Special Geology) Leics., UK. His professional affiliations are as follows:-

Ruby Fellow - The Australasian Institute of Mining & Metallurgy.

Chartered Professional Geology (CP).

Fellow - Australian Institute of Geoscientists.

Member - Geological Society of Australia.

15.2 Independence

Veronica Webster Pty Limited and L W Davis have no conflict of interest in preparing this Independent Report. The Independent Report has been commissioned by OMI with payment to be made for services rendered solely on a standard time-fee basis. The companies and consultants preparing this Independent Report have no association with OMI or OMI nor have they any financial interest in or entitlement to OMI or associates of OMI.

15.3 Limitations

The views expressed in this Independent Report are solely those of Veronica Webster Pty Limited, and L W Davis. When conclusions and interpretations credited specifically to other parties are discussed within the Report, then these are not necessarily the views of Veronica Webster Pty Limited or L W Davis.

15.4 Consents For personal use only use personal For Veronica Webster Pty Limited hereby consents to the inclusion of the Independent Report in a Prospectus prepared by OMI for the purpose of raising exploration capital.

44 Veronica Webster Pty Limited hereby consents to the inclusion of the Independent Report, in both electronic and paper form, in the form and context in which it appears and advise that we have not, at the date of the Independent Report, withdrawn such consent. Veronica Webster Pty Limited was only commissioned to prepare, and has only authorised issue of this Independent Report on OMI's exploration tenements specified in the Independent Report. It has not been involved in the preparation of, or authorised issue of, any other part of the Prospectus in which this Independent Report is included.

For and on behalf of VERONICA WEBSTER PTY LIMITED

L W DAVIS BSc (Special Geology), Leics. UK, FAusIMM (CP), FAIG.

For personal use only use personal For