27 January 2016

WORLD CLASS TEST RESULTS SUPPORT EXPANDABLE GRAPHITE MARKET PUSH

Expandability results underpin strong interest from graphite end users for Chilalo product

Highlights

• Testwork conducted by major Chinese end user confirms expansion rates exceeding 1,000 times - (ie. 1 gram of Chilalo graphite produces over 1 litre in volume of expandable graphite)

• Chilalo graphite has highest expandability of all graphite they have tested, both domestic and international

• Confirms suitability for the high-margin, fast-growing expandable graphite market

• Confirms Chilalo's coarse flake graphite is suitable for production of high-value products such as graphite foil and graphite paper whilst Chilalo's fine and medium flake graphite confirmed as ideally suited to the high volume flame retardant building materials market

• Demand for expandable graphite set to rapidly accelerate following introduction of Chinese legislation mandating the use of flame-retardant building materials in construction of new buildings and renovations to existing buildings

• Discussions with major Chinese consumer of expandable graphite at an advanced stage

  
  

  IMX Resources Limited's (ASX: IXR) ('IMX' or the 'Company') strategy to pursue the lucrative expandable graphite market has been validated after end user testing confirmed the outstanding suitability of the flagship Chilalo Graphite Project in Tanzania to supply this high growth sector.

  
  

  Feedback from IMX's targeted end user, with whom the Company is in advanced discussions, confirmed exceptional expansion rates exceeding 1,000 times, indicating that Chilalo graphite is ideally suited to a range of high-value and in-demand products.

  
  

  In particular, Chilalo coarse flake graphite in excess of 180 microns has been identified as suitable for the production of high value expandable graphite products such as graphite foil, graphite paper, knitted tape (high temperature and fire resistance), narrow flexible graphite strip, and other graphite based products requiring high rates of expansion. Chilalo fine and medium flake graphite (

  
  

  IMX Managing Director Phil Hoskins said the results opened up enormous new market opportunities for Chilalo graphite and reduced IMX's reliance on the market to supply graphite into lithium-ion batteries.

  
  

  
  

  "Coarse flake graphite is theoretically suitable to many different end uses including refractories and spherical graphite, but in the absence of costly chemical or thermal purification, maximum revenue is achieved selling it into the expandable graphite market. However, not all graphite expands and some graphite expands at a higher rate and it is therefore pleasing that our targeted end user has confirmed Chilalo's world-class expansion rates and validated the Company's strategy of targeting this high growth market.

  
  

  "Chilalo's finer flake product is still expected to be suitable for the manufacture of spherical graphite for lithium-ion batteries, ensuring the project maintains exposure to this rapidly growing market segment. However, spherical graphite is exclusively produced using fine and medium flake graphite (

  
  

  Videos demonstrating the expandability of Chilalo graphite will today be placed on the IMX website (www.imxresources.com.au).

  
  

  Feedback from end users is that expansion ratios from Tanzanian graphite are generally known to exceed those from Chinese domestic graphite. These latest test results by the Company's targeted end user, a major Chinese consumer, have placed Chilalo product number one for expandability compared to both Chinese domestic and international graphite they have tested. In recent years, demand in China for larger flake graphite has increased and the domestic supply of the required quantity and quality of such graphite is insufficient to meet this demand. IMX is ideally placed to take advantage of this opportunity to supply quality coarse flake graphite into China.

  
  

  Over the past 12 months, IMX has undertaken a program of product marketing activities in China which has included close engagement with various end users, manufacturers, industry bodies and potential offtake partners. These test results underpin the interest from end users with whom the Company is in advanced discussions.

  
  

  Expandable Graphite

  Expandable graphite is a compound of graphite that expands or exfoliates when heated. This material is manufactured by treating flake graphite with various reagents (such as acid) that migrate between the layers in the graphite. When the graphite is heated it rapidly expands to several hundred times its original size (the expansion ratio). The expansion ratio is the volume of expandable graphite produced per gram of

  graphite product at a specified temperature. In general, coarser flake graphite typically has higher

  expansion ratios than smaller flakes.

  
  

  Producing expandable graphite is a relatively inexpensive process and there are no issues with product recoverability with 1 tonne of flake graphite producing between 1.1-1.2 tonnes of expandable graphite with the additional mass coming from reagents and water. This is a positive compared to production of spherical graphite where the yield of spherical graphite from flake graphite is approximately 40%.

  
  

  China dominates the expandable graphite market producing 95% of the world's expandable graphite, with the balance produced in the US and Germany (source: Benchmark Mineral Intelligence 2015). Given China's diminished reserves of coarse flake graphite, there is a substantial shortage of coarse flake graphite capable

  
  

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  of producing the quantity of expandable graphite required to meet China's demand, representing a substantial opportunity for IMX. The Company's recent visit to a Chinese factory that is currently producing expandable graphite illustrated this shortage of quality graphite - the graphite feedstock was +100 mesh with an expansion rate of ~200 times (far inferior to Chilalo graphite).

  
  

  Figure 1: Expandable Graphite

  Natural flake graphite possesses certain properties including heat resistance, corrosion resistance and self- lubrication. Expandable graphite also possesses other properties including softness, compression resilience, adsorption and radiation resistance.

  
  

  Expandable graphite is not transported great distances as a finished product because its properties change if it is compressed and it is not cost-effective to do so as it is a low weight but high volume product. As a result, IMX will not produce expandable graphite in Tanzania, but will export directly to the end user for manufacturing.

  
  

  Expandable graphite market

  
  

  Expandable graphite is one of the fastest growing markets for graphite and has multiple uses, including:

  
  

• The production of high-value graphite foils as shown below in Figure 2 (market price of ~US$ 50,000/t) which are used as heat shields in electronic devices such as mobile phones, laptops and TV screens. Examples of the use of graphite foil in electronic devices is shown in Figure 3.

  Figure 2: Graphite foil produced from expandable graphite

  
  

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  Figure 3: Electronic devices using graphite foil as a heat shield

  
  

• The production of graphite paper used in the manufacture of heat shield gaskets and other products such as fire and thermal seals for machinery and electronic parts.

• With its unique fire and heat resistant characteristics, expandable graphite is being increasingly used in the manufacture of flame retardant and thermally efficient building materials, such as insulation for example, with a rapidly growing market for these products. This is discussed further below.

  A video demonstrating the flame retardant characteristics of expandable graphite has been placed on the IMX website (www.imxresources.com.au).

  
  

• The radiation resistant properties of expandable graphite also have military applications.

Discussions with Chinese end users over the last six months have revealed that the market size has been entirely restricted by supply and that coarse flake graphite with the expansion characteristics of Chilalo graphite can be readily absorbed by current demand.

End users capable of producing these expandable graphite products are moving to continuous 24 hour plant operations and are still unable to keep up with demand. The current supply / demand imbalance has resulted in long wait times for expandable graphite products with significant up-front payments required to secure orders.

Flame Retardant Building Materials

The addition of expandable graphite to ordinary insulation foam or cement provides the material with flame retardant properties. It also provides thermal efficiency improving the material's ability to assist in heat retention.

The Company understands that China has recently mandated the use of flame retardant building materials for all future new construction or building renovations. Note that flame retardant building materials are only required in certain aspects of the construction. These regulatory changes are expected to significantly increase the demand for expandable graphite and result in a large volume market.

Whilst IMX hasn't sighted the new Chinese building regulations, they are understood to be made up of four categories of building materials with varying levels of expandable graphite required in each. Category 1

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