23-05-2017: Response to ASX Query Letter

23 May 2017

Ms Dawn James

Adviser, Listing Compliance Australian Securities Exchange 20 Bridge Street

Sydney NSW 2000

Email: [e-mail] Dear Ms James

Thank you for your letter of 19 May 2017, the contents of which are noted.

May I first state the experienced board of First Graphite Limited ("FGR") are aware of all the Listing Rule requirements, particularly LR 3.1, and the obligations they impose.

1. Once the Information was verified, as set out in Item 4 below, Yes.

2. N/A

3. Monday 15 May 2017. Please refer to Item 4 for the full chronology of events.

4. As you have stated the date stamp on two of the photographs included in the release shows they were taken on Friday, 12 May 2017. This photograph was taken underground at Shaft H on the Friday afternoon. This photograph was not available to the management or board of FGR until Monday 15 May 2017.

   As you have stated the photographs showed "graphite ore being extracted". In the Company's March quarterly release on 30 April 2017 the Company had disclosed "Small quantities of the vein have been extracted and stored on surface." However, the nature of the veins in Sri Lanka is that they will boudinage. Accordingly, to ensure the materiality of the Information, it was prudent for the board to verify that the photographs were not of a vein which pinched out and did not continue. The necessary verification activities were undertaken and the board was sufficiently satisfied as to the nature of the vein by Wednesday 17 May 2017, being the date the announcement was made.

5. FGR is in compliance with all Listing Rules, and in particular LR 31.

6. This response has been authorised and approved by the Company's board of directors. Regards

   Peter R. Youd Executive Director, Chief Financial Officer & Company Secretary

   2

   19 May 2017

   Mr Peter Youd Company Secretary First Graphite Limited

   Suite 3, 9 Hampden Road

   NEDLANDS WA 6009

   By email: Dear Mr Youd

   First Graphite Limited ("

   ASX Limited ("ASX") refers to the following.

7. FGR's announcement entitled "Operations Update" lodged on the ASX Market Announcements Platform and released at 10:12 am AEST on 17 May 2017 (the "Announcement"), disclosing the delivery of the first vein graphite product to the surface from the mines being developed in Sri Lanka.

8. The photographs in page 2 and page 3 of the Announcement labelled "Shaft H vein graphite ore being extracted" and "Graphite vein in Shaft H level drive being mined" which are both date stamped 12 May 2017.

9. Listing Rule 3.1, which requires a listed entity to give ASX immediately any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities.

10. The definition of "aware" in Chapter 19 of the Listing Rules, which states that:

    "an entity becomes aware of information if, and as soon as, an officer of the entity (or, in the case of a trust, an officer of the responsible entity) has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer of that entity"

    and section 4.4 in Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 - 3.1B "When does an entity become aware of information".

11. Listing Rule 3.1A, which sets out exceptions from the requirement to make immediate disclosure, provided that each of the following are satisfied.

    "3.1A Listing rule 3.1 does not apply to particular information while each of the following is satisfied in relation to the information:

12. A.1 One or more of the following applies:

    • It would be a breach of a law to disclose the information;

13. ASX Compliance Pty Limited ABN 26 087 780 489

    20 Bridge Street

    Sydney NSW 2000

    www.asx.com.au Customer service 13 12 79

    • The information concerns an incomplete proposal or negotiation;

    • The information comprises matters of supposition or is insufficiently definite to warrant disclosure;

    • The information is generated for the internal management purposes of the entity; or

    • The information is a trade secret; and

    3.1A.2 The information is confidential and ASX has not formed the view that the information has ceased to be confidential; and

    3.1A.3 A reasonable person would not expect the information to be disclosed."

14. ASX's policy position on the concept of "confidentiality", which is detailed in section 5.8 of Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 - 3.1B. In particular, the Guidance Note states that:

    "Whether information has the quality of being confidential is a question of fact, not one of the intention or desire of the listed entity. Accordingly, even though an entity may consider information to be confidential and its disclosure to be a breach of confidence, if it is in fact disclosed by those who know it, then it ceases to be confidential information for the purposes of this rule."

    Having regard to the above, ASX asks FGR to respond separately to each of the following questions and requests for information:

15. Does FGR consider the information in the Announcement ("Information") to be information that a reasonable person would expect to have a material effect on the price or value of its securities?

16. If the answer to question 1 is "no", please advise the basis for that view.

17. If the answer to question 1 is "yes", when did FGR first become aware of the Information?

18. If the answer to question 1 is "yes" and FGR first became aware of the Information before 17 May 2017, did FGR make any announcement prior to the relevant date which disclosed the Information? If so, please provide details. If not, please explain why the Information was not released to the market at an earlier time, commenting specifically on when you believe FGR was obliged to release the Information under Listing Rules 3.1 and 3.1A and what steps FGR took to ensure that the Information was released promptly and without delay.

19. Please confirm that FGR is in compliance with the Listing Rules and, in particular, Listing Rule 3.1.

20. Please confirm that FGR's responses to the questions above have been authorised and approved in accordance with its published continuous disclosure policy or otherwise by its board or an officer of FGR with delegated authority from the board to respond to ASX on disclosure matters.

21. When and where to send your response

    This request is made under, and in accordance with, Listing Rule 18.7. Your response is required as soon as reasonably possible and, in any event, by not later than 3.00 p.m. WST on 23 May 2017. If we do not have your response by then, ASX will have no choice but to consider suspending trading in FGR's securities under Listing Rule 17.3.

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