Peninsula Mines Ltd. has signed a binding supply letter agreement with DNI Metals Inc, that includes a commitment by DNI to supply up to 24,000 tonnes per year of flake graphite to 100% owned Peninsula subsidiary Korea Graphite Co. Ltd, subject to Korea Graphite finalising offtake agreements with Korean end users. In addition, as contemplated in the Cooperative Memorandum of Understanding signed on the 15th August 2017D2, Peninsula/Korea Graphite and DNI will continue to discuss potential development cooperation in order to fast-track DNI's Madagascar flake-graphite projects.

The Binding Supply Agreement includes the following terms: Under the terms of the Supply Agreement DNI will supply to Korea Graphite minimum flake graphite production ("Graphite Production") as follows: a) 500 tonnes of Graphite Production a month (6,000 tonnes a year) from 1 September 2018 (the Due Date) for a period of four months; b) 1,000 tonnes of Graphite Production per month (12,000 tonnes a year) from 1 January 2019 for a period of six months; c) 2,000 tonnes of Graphite Production per month (24,000 tonnes a year) from 1 July 2019 for a minimum period of 24 months. The obligations of the parties in relation to the Binding Supply Agreement are subject to Korea Graphite entering into, by the Due Date, one or more binding offtake agreements in Korea for the on-sale of Graphite Production to End-Users on the best prices reasonably achievable by Korea Graphite and otherwise on usual commercial terms acceptable to Korea Graphite and DNI acting reasonably ("Offtake Agreements"), and, the Graphite Production supplied under the Supply Agreement must comply with the specifications as the End-Users may specify in their Offtake Agreements, including as stipulated in the offtake Memorandum of Understanding ("Offtake MOU") signed by Korea Graphite with Korean expandable graphite producer, Graphene Korea Co. Ltd. ("Graphene Korea")D1.

The purchase prices payable by KGL for the Graphite Production under the terms of the Supply Agreement will be the same as the DNI approved purchase prices payable by the End Users under the Offtake Agreements less 10% of such amounts (which amount is to be retained by KGL by way of a marketing fee). The marketing fee will be split 50:50 with DNI for flake graphite sourced from outside DNI's projects (excluding Peninsula's Korean projects). Korea Graphite and DNI will aim to enter into a more detailed agreement for the supply of flake graphite produced from Projects held by DNI in Madagascar before the Due Date.

The company is also progressing its key graphite projects in Korea, in particular at Chugwang and Eunha where a high proportion of super-jumbo (>500 micron) and jumbo (>300 micron) graphite flakes were identified in petrography on surface rock samplesD3. Channel sampling and bulk-sampling for metallurgical testing has commenced on both properties, and detailed electromagnetics ("EM")designed to map the graphitic units and generate drilling targets is planned to commence shortly.