Mr. Ugo Landry-Tolszczuk reports

SRG: POSITIVE PRELIMINARY ECONOMIC ASSESSMENT AND RESOURCE ADDITIONS AT LOLA PRE-TAX IRR OF 35% OVER A 16-YEAR MINE LIFE

SRG Graphite Inc. has released results of a preliminary economic assessment study (PEA) for the development of its Lola graphite project in the Republic of Guinea, West Africa. The PEA was prepared by Montreal-based Met-Chem, a division of DRA Americas Inc. All dollar figures are in U.S. dollars.

Highlights of the Lola graphite PEA:

• Production of 50,200 tons of graphite concentrate per year over a 16-year mine life;
• Capital costs of $105-million including contingency of $15-million;
• Operational costs of $372/tonne of concentrate and $130/t of transport;
• Pretax NPV8 (net present value at an 8-per-cent discount) of $204-million (posttax NPV8 of $121-million) at an average sales price of $1,328/t;
• Finished grade of over 94 per cent and up to 98 per cent over all size fractions;
• Strip ratio of 0.39.

"These results highlight the value of the Lola graphite asset for the company," said Ugo Landry-Tolszczuk, president and chief operating officer of SRG. "That said, the team will continue to work on improving the design and economics of the project. During our trade-off assessment work, we have found several key points of improvement to incorporate in the feasibility study. Early works which will contribute to the next stage in the development of the project is under way and we are dedicated to meeting our objectives for the year."

The PEA follows the mineral resource estimate published on June 18, 2018. A technical report detailing the PEA, and completed in accordance with National Instrument 43-101 guidelines, will be filed and available on SEDAR within 45 days from June 18, 2018, the release date of the mineral resource update published by the company. Effective date of the estimate is June 14, 2018.

Commercial sales, revenues and project economic sensitivities

The Lola mine will produce an average of 50,200 tonnes of saleable graphite annually. At an average sale price of $1,328 per tonne, this represents $66.6-million annual revenue. Given the volatility of graphite prices in recent years and the bilateral nature of sales contracts a sensitivity analysis of the project economics is presented in the associated table.

                 PROJECT ECONOMICS SENSITIVITY ANALYSIS (PRETAX)     
                                                             
Average sale price ($/t)               $1,195  $1,261 $1,328 (1)   $1,394     $1,460
Average annual revenue (million) (2)     60.0    63.3       66.6     70.0       73.3
Pretax returns
Average annual cash flow (million)      231.2    34.5       37.9     41.2       44.5
NPV (million) at 8% discount              151     177        204      231        257
IRR (%)                                  28.5   31.7%      34.8%    37.9%      41.0%
Payback (years)                           3.1     2.8        2.6      2.4        2.3
Posttax returns
Average annual cash flow (million)      222.7    25.0       27.3     29.5       31.8
NPV (million) at 8% discount               84     102        121      139        157
IRR (%)                                 20.3%   22.7%      24.9%    27.2%      29.4%
Payback (years)                           4.2     3.9        3.5      3.3        3.0

(1) Base case.                                        
(2) Does not include year 16 as it is not a full year.

Mineral resources update

The PEA was prepared using data from the mineral resource estimate published on June 18, 2018, and including the latest drill campaign. To maximize the life of mine of the project, the PEA uses the resource at a cut-off grade of 1.64 per cent graphitic carbon (Cg), which includes measured resources of 2.1 million tonnes (Mt) grading 4.31 per cent Cg, indicated resources of 17.0 million tonnes grading 4.39 per cent Cg and inferred resources of 2.1 million tonnes grading 4.79 per cent Cg. The resource has been pit constrained at $1,300/t.

The mineral resources update was estimated as at June 14, 2018, in accordance with the definitions adopted by the Canadian Institute of Mining Metallurgy and Petroleum and incorporated into National Instrument 43-101 -- Standards of Disclosure for Mineral Projects (NI 43-101). A mineral resource estimate update for the Lola graphite project was carried out by Dr. Marc-Antoine Audet, PGeo, lead geologist and SRG's qualified person.

Mining

The Lola deposit is characterized by its saprolite surface mineralization, which continues at depth into the fresh rock bed. For the PEA, mining operations were exclusively focused on the weathered zone, ensuring operation efficiency and competitive cost of operations. The first 30 metres of the deposit represent the weathered material. Constraining mining to the weathered portion of the deposit ensures minimal utilization of blasting, and results in a strip ratio of only 0.39.

The average grade fed to the processing plant over the 16-year mine life is 4.43 per cent Cg, and the total material mined per year is 1.8 million tonnes (mineralized material and waste). Mining costs were established at $2.13/t, considering preliminary pit design and access roads.

                          MINING HIGHLIGHTS                                      
                                                               
Mining costs ($/t material mined)                                 $2.13
Average graphite grade (% Cg)                                     4.43%
Stripping ratio (waste/mineralized)                                0.39
Average graphite-bearing material mined per year (t/y)        1,294,763
Average waste mined per year (t/y)                              510 178
Mine of life (years)                                           16 years

Process

The processing plant and waste dump are located on a plateau, west of the main pit, where the land is already conveniently flat and barren of trees. It is currently less than one kilometre from the visual mineralisation. This proximity will ensure short cycle times and contribute to the control of production costs.

Efforts were made to keep a simple flowsheet with limited polishing and flotation stages. Concentrate grade higher than 94 per cent Cg is expected, with a recovery of 79 per cent. Reagents used for processing are diesel as a collector and methyl isobutyl carbinol (MIBC) as a frother, both commonly available and routinely used reagents in the graphite sector. The processing costs are $9.24/t of processed material resulting in $248/t of graphite concentrate produced.

                      PROCESS HIGHLIGHTS                         
                                                   
Processing costs ($/t plant feed)                           9.24
Processing costs ($/t concentrate)                           248
Average concentrate grade (% Cg)                greater than 94%
Graphite plant recovery                                      79%
Average material fed to the plant (t/year)             1,294,763

Process description

Mineralized material handling, crushing, scrubbing, grinding and desliming circuits were designed considering the saprolitic properties of the deposit. The relatively low competency of the material allows the design to use two mineral sizers at the front end instead of a jaw crusher or cone crusher. These processing units are known for their low operational cost and reliability compared with conventional jaw and cone crushers.

The crushed material is fed into a scrubber which promotes flake preservation and consumes less energy compared with conventional milling methods. The scrubber discharge is screened, where the coarse fraction is fed to a closed-circuit ball mill, before being recombined with the screen fines. The combined slurry is then fed through a desliming stage, where ultrafines, including slime, clay and organic material are removed. This leads to an upgraded and cleaner material feeding the flotation circuit, resulting in an overall simpler flowsheet.

After desliming, the material is fed to the rougher flotation bank producing a rougher concentrate. A first polishing stage further liberate the graphite flakes. The polished rougher concentrate goes through a first cleaning stage and is then fed into a splitting screen, dividing the fine from the coarse graphite, in order to apply the relevant specific polishing energy to each stream. After their respective polishing and cleaning stages, the two streams are recombined, thickened, filtered and dried. The dried concentrate is then screened into four different size fractions before being bagged, and finally stored and shipped to clients.

Quality control and assurance

Silvia Del Carpio, PEng, MBA Met-Chem/DRA, independent qualified person as defined by National Instrument 43-101, for the purposes of the PEA has reviewed the technical content of this press release. Raphael Beaudoin, PEng, director of operations and a qualified person for SRG, has read and approved this press release.

About SRG Graphite Inc.

SRG is a Canada-based company focused on developing the Lola graphite deposit located in the Republic of Guinea, West Africa. SRG is committed to operating in a socially, environmentally and ethically responsible manner.

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