Presentation on flake graphite industry at GMP Securities day in London, June 2014 Focuses on the future of the industry in tradition markets like steel refractories and new demand such as Tesla Motors' Gigafactory

1. Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)
Flake Graphite Basics – Supply, Demand Prices
GMP Securities Workshop, London, 10 June 2014

2. Natural Graphite Snapshot – Supply
• Global Production 2011: 1.01m
• Global Production 2012: 850,00 tonnes
• Global Production 2013: 700,000 tonnes
• Flake Graphite Production 2013: 375,000 tonnes
Supply
53%
46%
1%
% Global Output
Flake Amorphous Vein
#1 Producer:
• Heilongjiang Aoyu Energy, China
• 70‐80,000 tpa capacity
#1 Producer (non‐Chinese):
• Nacional de Grafite, Brazil
• 72,000 tpa capacity
Note: There are no pure play graphite
companies that are public
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

3. • Purest form in nature
• Large single crystals
• Purity: 95 – 98% C
• Occurs in large lumps
• <1% of world output
• Sri Lanka – world’s only mine
Natural Graphite Snapshot – Supply
Vein Graphite
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

4. Natural Graphite Snapshot – Supply
Flake Graphite
• High quality, quite common
• Occurs as small flakes, specs
• Purity: 85‐95% C
•49% of world graphite output
Top flake producers
1. China
2. Brazil
3. India
4. Canada
5. Norway
6. Madasgacar
7. Zimbabwe
8. Ukraine
9. Czech Republic
10. Russia
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

5. Natural Graphite Snapshot – Supply
Amorphous Graphite
• Low quality
• Associated with coal mines (meta‐coal)
• Purity: 70‐85% C
• Biggest producers: China, Mexico
• Around half of world graphite output
Amorphous producers
1. China
2. Mexico
3. Austria
4. Turkey
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

6. Natural Graphite Snapshot – Demand
Demand for flake graphite
52%
23%
22%
3%
Flake graphite demand in 2013 (tonnes)
Refractories, Foundries, Crucibles Batteries Industrials Other
2 Markets that dominate discussion:
• Refractories (volume market) vs Batteries (growth market)
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

7. Natural Graphite Snapshot – Prices
$2,200‐2,500
$1,300‐1,500
$900‐1,200

8. Natural Graphite Snapshot – Prices
• Prices are set in private contracts between buyer and seller
• Traded in tonnes as a concentrated powder
• Shipped in bags in containers, CIF & FOB
• Price volatility for the last 5 years since 2009 global recession
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

9. Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

10. Flake Graphite – Supply
0%
10%
20%
30%
40%
50%
60%
China Brazil India Canada Other
% of Global Production (375,000 tpa in 2013)
Production
Other: Norway, Madagascar, Russia, Ukraine, Zimbabwe
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

11. Flake Graphite – New Supply
• Exploration boom in 2010
• Led by Canada (TSX‐V listed)
• A later surge by Australia companies (ASX listed)
• Hotspots of activity
• Canada – Quebec
• Canada – Ontario
• Madagascar
• Mozambique
• Australia
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

12. 2010: 7 Exploration Projects / Companies (Canada only)
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

13. 2012: 80 Exploration Projects (Canada only)
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

14. Flake Graphite – New Supply
Key factors in evaluating a flake graphite project:
1. Grade
• Not necessarily King, but key to economics
• Anything above 6% is better than most mines today
• Anything above 10% is better than majority of mines in
China
2. Flake Distribution / Footprint
• Higher proportions of medium and large flake = critical
• Fines (<150 mesh) notoriously difficult to sell
3. Volume
• A small market
• Average mine size today is 20‐30,000 tpa
• Not always about volume, large volume mines will need
big buyers
4. Offtakes / Partnerships / Industry Contacts
• Close contact with key buyers can make or break a mine
• Those companies that develop personal relationships =
stronger
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

15. Flake Graphite – Demand
Impurities
• Particles attached to the
outside of the flake
• Taken from the surrounding
rock
• Removed by flotation
In between stacks (intercalated)
Removed by chemical or thermal
purification
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)
Mechanical
Impurities include:
• Ash
• Sulphur
• Iron

16. Barriers to new mining projects (BP)
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

17. Flake Graphite – Demand
Refractories
• #1 market for flake graphite
• 38% of demand
• No substitutes
• Steel only
Graphite grades used:
• Large & Medium Flake
• ~ 94% C
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

18. Flake Graphite – Demand
Batteries
• #2 market for flake graphite
• 23% of demand
• Substitutes: Synthetic graphite
• Cost issues
• Strongest growth
Graphite grades used:
• Spherical graphite
• 5‐15 micron
• 99.95% C
• Derived from flake graphite
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

19. Flake Graphite – Demand shocks
Tesla Motors Gigafactory
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

20. Trends – China consolidation
December 2013: Shandong, China ordered to halt flake graphite production
April 2014: Heilongjiang, China announces plans to clean up graphite industry
May 2014: 40% of Shandong’s graphite producers remain offline
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

21. Trends ‐ China consolidation
Shandong = 10% global output, 20% China output
Heilongjiang = 29% global output, 45% China output
Supply at risk:
Total minimum cuts in China: 40,000 tpa (18%)
Total maximum cuts in China: 90,000 tpa (41%)
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

22. Trends – Demand shocks
Tesla Motors’ Plan
• World’s battery production
in one plant
• To drive cost of lithium‐ion
batteries down by 30%
• To drive cost of EVs down
• To spark mass uptake of EVs
Tesla Motors Gigafactory
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

23. Trends – Demand shocks
Tesla Motors Gigafactory – critical mineral demand
Gigafactory at capacity (2020)
• Flake graphite demand
• 80‐126,000 tonnes/year
• 33‐50,000 tonnes/year
spherical graphite
• 6 new mines
• Lithium demand
• 20‐30,000 tonnes/year
• Cobalt demand
• 5‐7,000 tonnes/year
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

24. Trends – Graphene
• Graphene = the first isolated one‐dimensional material
• One layer of graphite
• Graphene is a technology play, not a graphite one
• Will not consume major volumes of flake graphite
• Value in extensive research to commercialise & find markets
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

25. New mines will be needed regardless of growth
Supply Demand
> Shutdowns in China > Batteries emerging
> Old, small mines elsewhere > Global recovery in industrial
markets expected
> Brazil internally focused /
not expanding (yet)
> Major Projects / New
Demand: Tesla Motors
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)

26. Supply / demand deficit
Simon Moores, smoores@indmin.com (Twitter: @sdmoores)/ Andy Miller amiller@indmin.com (Twitter: amiller_indmin)
5%
‐5%
‐15%
‐20%
‐25%
‐20%
‐15%
‐10%
‐5%
0%
5%
10%
2013 2014 2015 2016
> Assuming no new supply