Project

Resource Estimates

The PEA, originally released in February 2017 and revised in July 2017, provided refined Project resource estimates as summarized in Table 3 and based on the results of the Company’s three exploration programs.

Table 3: Project Graphite Resource Estimates

The Company conducted three exploration programs between 2012 and 2014 totaling almost 7,600m of drilling and published NI 43-101 compliant resource reports effective January 2013, February 2014 and March 2015. These reports are available at: https://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00025247. An estimated, additional 8,000m of drilling is required to bring the resources to a measured category required for the feasibility study.

An electromagnetic survey, conducted in 2012, identified the approximately 18km graphite mineralization zone on the Kigluaik Mountain front as highlighted in red in Figure 3. The 4.8km long area identified as the area of inferred resources is also shown.

2012 Exploration Program

In 2012, the Company conducted an airborne geophysical survey of the Property. It identified an electro-magnetic (“EM”) conductor, coincident with graphite occurrences, that is more than 18 kilometres in strike length. A second EM conductor in the south or “Araujo zone” was also identified but remains untested by drilling.

An exploration and diamond core drilling program was conducted on the Property in 2012. It consisted of drilling, prospecting, geological mapping, and sampling along the conductors delineated by the airborne survey and previously defined as graphite-bearing schist. The information from the program was summarized in the Company’s maiden National Instrument (“NI”) 43-101 compliant resource report filed in January 2013. It calculated an inferred resource of 107.2 million tonnes at 5.78% graphite using a 3.0% Cg cut-off.

The program included 18 drillholes totaling 4,249 m. Seventeen were in the central portion of the Property near Graphite Creek. These drillholes are spaced about 200 m apart with infill drilling initiated on the western portion of the drill zone at 50m spacing. Except for one drillhole (12GCH005; -87° dip), all drillholes were drilled at -49° to -51° dip to test the true thickness of mineralization. The graphite bearing rocks dip at approximately 60°.

The drill core was sampled approximately every metre resulting in 4,106 samples. Of these, 208 yielded >10% Cg and 1,249, >3% Cg. All drillholes encountered graphite mineralization. Drillhole 12GCH005 encountered 173 m of 5.39% Cg with sub-intersections of 10.03% Cg over 55 m and 12.01% Cg over 42 m. Drillhole 12GCH006 encountered 147 m of 4.0% Cg with sub-intersections of 6.56% Cg over 58 m and 10.14% Cg over 32 m. The results confirmed that graphite mineralization exposed at surface extends to vertical depths of over 225 m.

The 18th drillhole, 12GCH008, was located 2.2 km west of the main drill zone and represents a step-out hole to test graphite mineralization along the EM conductor. It encountered 77 m of 3.0% Cg including 6.02% Cg over 52 m and 7.07% Cg over 31 m. This supports the potential for continuous high-grade mineralization along the geophysical conductor.

The mineral resource estimate was derived using analytical data from 17 of the 18 drill holes and 3,913 samples were assayed for Cg using the LECO analytical method (composite to 2 m). The drill holes were spaced up to 320 metres apart initially with some infill drilling at 50 metre spacing. Interpretation and modeling of five three-dimensional wireframe envelopes were completed to outline the mineralized graphitic horizons. A block model of 5 m (E-W) by 2 m (N-S) by 5 m (vertical) was interpolated using the inverse square of the distance method and a maximum of 6 composites, to estimate each block within the mineralized envelope(s). The specific gravity was fixed to 2.7 kg/m3 and is based on core measurements. The base case cut-off grade of 3% Cg is based on a conservative approach with 80% recovery for a 95% Graphite concentrate and an average selling price of $1,200/tonne.

The 2013 Technical Report was prepared by SGS Canada Inc. and APEX Geoscience Ltd. following the guidelines of the Canadian Securities Administration’s NI 43-101 and Form 43-101F1. The report titled “Technical Report, Maiden Inferred Resource Estimate of the Graphite Creek Property, Alaska USA”, is filed on SEDAR and can be viewed on www.sedar.com.

2013 Exploration Program

The 2013 program consisted of drilling conductors along strike using data gathered from the 2012 EM survey. Ten diamond drillholes were completed totaling 1,023 meters and typically spaced about 250 meters apart. The results, announced in January 2014, increased the existing inferred resource by 74% to 186.9 million tonnes of 5.5% Cg at a 3% Cg cut off.

2014 Exploration Program

The 2014 program was designed to infill between existing drill holes and increase the confidence in the continuity and distribution of the graphite mineralization. Twenty-two diamond drill holes amounting to 2,313.9 meters were drilled. An additional two were completed in separate areas of the deposit to provide core samples for metallurgical test work on the two principle near-surface zones of mineralization. A metallurgical program was initiated in November 2014 to evaluate the processing parameters of representative samples of the two upper zones of mineralization seen in the drilling. One of the study’s goals was to optimize the process flow sheet for the Project’s processing facility. The metallurgical program is ongoing.
In March 2015, the Company provided an updated mineral resource estimate of 17.95 million tonnes indicated, grading 6.3% Cg, and 154.36 million tonnes inferred, with 5.7% Cg, using a 3% Cg cut-off grade. The drilling results moved a portion of the previously released resource estimate from inferred to indicated resource status. (See Technical Report, 2015 Indicated and Inferred Mineral Resource Estimate at the Graphite Creek Property, Alaska, United States effective March 17,2015).