The Natural Graphite Report 2012Data, analysis and forecast for the next five years

New, original data from Industrial Minerals

Unique country supply reviews including: China, Brazil, India, North Korea, and Canada

Major demand drivers – Li-ion batteries, refractories, & emerging markets

How will prices react? Historical analysis and forecast

Demand destruction risks

Critique of the graphene revolution

NEWSTRATEGIC STUDY FOR 2012

Underground mining at Skaland Graphite in Norway. Reiner Schaufler.

Now China has turned. Its focus is on serving its own domestic needs as well as a push to manufacturer higher value goods. China’s desire to build a value-chain means it no longer wants to be the source of raw materials, but the source of processed and finished products.

The situation holds the potential to be a graphite game-changer.

A generation of underinvestment in mines around the world is now being felt. But much exploration is underway – particularly in Canada and Brazil – and new mines are coming . But how long will this new supply take to come to fruition? Will the quality and volumes be sufficient? Is there room for more players? Are there already too many?

Prices up 140%This supply/demand situation has been simmering for the last five years. Since 2010, the price of high quality flake grades of natural graphite have increased by 140% as a result of Chinese policy and struggling production elsewhere.

The price pattern is recurring: that of a stabilisation followed by an increase. One thing seems certain –graphite is not losing its value.

Industrial Minerals is the world’s leading source of natural graphite pricing data.

The talk in and outside of the industry is on what the future will hold for natural graphite. The rate of exploration in the second half of 2011 has levels not seen in a generation and Canada is leading the way on new projects.

The unknowns that are electric vehicles and large scale energy storage together with China at a rapid stage of economic development, leaves the future for the key raw material uncertain.

Simon Moores, Industrial Minerals smoores@indmin.com

Natural graphite is entering a new era of demand. Faced by a perfect storm of factors the world’s graphite supply is in uncertain times.

Graphite’s diversity has secured a strong suite of traditional end use markets over the last 100 years. Refractories, metallurgy, lubricants, and carbon products such as car brake pads and pencils have carved out a substantial business for many producers around the world.

But it is the emergence of the Li-ion battery era that has the potential to turn the industry on its head. Portable electronic devices – mobile phones, iPads, power tools – and large scale energy storage all favour Li-ion technology. It is electric vehicles that hold the potential demand clout that could revolutionise the graphite space.

The potential for graphite does not stop there. The wild card is the new super-material graphene. Derived from a single layer of graphite, graphene is over 100 times stronger than steel and more conductive than copper

while being incredibly light. The applications of graphene are endless, but it is yet to be commercialised. Very soon, the industry may not have enough natural graphite to go around.

The Natural Graphite Report 2012 reviews every major graphite producing company around the world, building from the bottom up data and analysis of the industry. It also contains a focus on the commercialisation of graphene, its production and demand potential.

ChinaThe world is at the mercy of Chinese supply which accounted for 79% of the world’s natural graphite in 2011.

China’s graphite production power was on display when huge volumes of new supply came onto the world market rendering smaller mines in Canada, Mexico, Europe, and Australia uneconomic. But this was 20 years ago.

Graphite’s new era of demand

Global Flake Graphite Production in 2012

* +80 mesh, 94-97% C Source: Industrial Minerals

Source: Industrial Minerals

Flake Graphite Price Trend *

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

US

Dol

lar V

alue

/ton

ne

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

PRICE FORECAST OUT TO 2020 FOR HIGH QUALITY FLAKE, FLAKE GRAPHITE, & AMORPHOUS

5

2

7

3

149

10

11 8

6

Source: Industrial Minerals

1 China

2 Brazil

3 India

4 North Korea

5 Canada

6 Norway

7 Zimbabwe

8 Ukraine

9 Uzbekistan

10 Russia

11 Czech Republic

2012 graphite market share by country

Brazil 8%

India 4%

North Korea 3%

Canada 2% Other 3%

China 80%

= High price = Low price

The Natural Graphite Report 2012:Analysis and forecast of supply and demand for the next five years

The Natural Graphite Report 2012:The report

COUNTRY SUPPLY ANALYSIS Active explorers

Untapped deposits

Producing mines

Includes: China, Brazil, India, North Korea, Canada, Mexico, Austria & Norway

FIVE YEAR SUPPLY PROJECTIONS By country

By region

Globally

ORIGINAL, NEW DATA FOR 2012 Production, prices, demand

First-hand data from Industrial Minerals

Direct from the industry

Unrivalled, independent insight into natural graphitePRICE FORECAST OUT TO 2020 High quality flake graphite

Flake graphite

Amorphous grades

RISKS Major threats to demand

Critical insight before you invest

FIVE-YEAR DEMAND FORECAST Sector by sector analysis

Batteries: Li-ion impact from electric vehicles, portable energy, large scale storage

Refractories

Car brake pads, lubricants, metallurgy markets

Emerging uses: nuclear reactors, graphene

GRAPHENE Critique of commercialisation

Prices and applications

Potential demand impact

Natural Graphite Report 2012 Supply & Exploration North Korea

207

Supply Projection

Source: Industrial Minerals Research

0 2010 2011 2012 2013 2014 2015 2016

75,000

tonn

es p

er a

nnum

Conservative Base Bullish

60,000

45,000

30,000

15,000

Year Conservative Base Bullish

2010 40,000 40,000 40,000

2011 30,000 30,000 30,000

2012 30,000 40,000 40,000

2013 30,000 40,000 45,000

2014 30,000 45,000 60,000

2015 30,000 45,000 70,000

2016 30,000 45,000 ??????

No bullish figure for 2016

Natural Graphite Report 2012 Supply & Exploration North Korea

207

Supply Projection

Source: Industrial Minerals Research

0 2010 2011 2012 2013 2014 2015 2016

75,000

tonn

es p

er a

nnum

Conservative Base Bullish

60,000

45,000

30,000

15,000

Year Conservative Base Bullish

2010 40,000 40,000 40,000

2011 30,000 30,000 30,000

2012 30,000 40,000 40,000

2013 30,000 40,000 45,000

2014 30,000 45,000 60,000

2015 30,000 45,000 70,000

2016 30,000 45,000 ??????

No bullish figure for 2016

8

Natural Flake Graphite Derivatives

Spherodized graphite, the anode for Li Ion batteries

Excavation Mechanical separation Flotation

Purification Spherodization Milling

Surface treatment

70% loss

19’800 kg5%

1980 kg50%

1050 kg95%

33 kg95%

28.5 kg99.95%

30 kgCoated Graphite

For 1 EV Car

990 kg95%

Natural Graphite Spherodized

Estimated world production coated (1000 t)

Source SG

Worldwide 19’000 tJapan 8080*China 7870Korea 1800others 1250

*Core graphite from China

CharacteristicsHigh purity

High crystallinity

Spherical particle shape

Main application – Li Ion batteries

2.2- 2.25 g/ccm

>1.1 g/ccm

<1.0 sm/g

Real density

Tap density

BET

Texture

95 %

80 nm

100 nm

Graphitization

Lc

La

Crystallinity

<0.1 %Ash

Moisture

Purity

Natural Graphite Report 2012 Supply & Exploration North Korea

207

North Korea

Source: Industrial Minerals Research

Myeongji Co 100%

Domestic production Global share Global share (Excl China)

North Korea: 2.40% (30,000 tonnes) Rest of the world: 97.6% (1.222m tonnes)

North Korea: 11.9% (30,000 tonnes) Rest of the world: 88.1% (222,000 tonnes)

Graphite production rank 4 Number of active miners 1 Number of active explorers 0 Output in 2011 30,000 tonnes Estimated output in 2012 30,000 tonnes

Myeongji Co

Production area

CHINA Province by province analysis

Risk analysis

Review of government plans for graphite

Five year outlook: flake & amorphous

SPECIALIST GRAPHITE Expanded graphite

Spherical graphite

Richard Russell Publisher, Industrial MineralsMSc (Marketing with French), BA (French)Richard has worked in publishing for the last 18 years and has covered many industries including law and tax, financial services, advertising and marketing and industrial minerals. He brings a wealth of commercial and management experience to complement the strength and depth of the specialist industry knowledge of the Industrial Minerals team.

Richard won a global award for best product innovation at LexisNexis and has vast experience in sales and marketing, business development, product

management and development and information technology. He was Managing Director of a fast-growing Anti-Money Laundering compliance business for several years and has experience in M&A in his more recent roles. He joined Industrial Minerals at the end of 2011 to help develop both the breadth and depth of specialist services Industrial Minerals brings to the market.

Email: rrussell@indmin.com

Simon MooresGraphite Market Specialist, Industrial Minerals BSc (Geology & Geography)Simon has been reporting on, researching and analysing the non-metallic minerals sector since 2006 when he joined Industrial Minerals. He has specialist knowledge in critical and strategic minerals including graphite, lithium and rare earths.

Graphite, along with lithium, has been a major focus owing to its new energy uses in batteries. Simon was Consulting Editor on Metal Bulletin Research’s Global

Lithium Market Outlook in 2009 and 2011. He has chaired conferences and given keynote presentations around the world. He has also been interviewed by international press including London’s The Times regarding Chinese control on world graphite production.

Simon has visited numerous mines and junior projects around the world including Qingdao Haida Graphite in China, Rockwood Lithium (formerly Chemetall) in Silver Peak, Nevada, and American Vanadium also in Nevada.

Email: smoores@indmin.com

1. Overview / Executive Summary

2. Critical Material Rating: is graphite a critical material?

3. Flake Vs Amorphous

4. Graphite Basics

What is graphite?

How is it mined and produced?

Basic processing routes – examples from around the world

5. Supply + Exploration by country

Structure: Supply patterns, Performance in 2011; 5 year supply forecast; Supply Conclusions and production ranking

Producers

Austria

Australia

Brazil

Canada

Czech Republic

China

India

Mexico

North Korea

Norway

Russia

Sri Lanka

Turkey

Ukraine

Uzbekistan

Zimbabwe

Untapped Resource Opportunities

Africa

South Africa

South America

Europe

5b Processors & Distributors (by company)

Non-mining natural graphite majors including:

USA: Asbury Carbon, Superior Graphite

Germany: GK Graphite, LUH, Technografit

China: Refmin

6. Market Uses & Demand

Structure: End Market Review, Demand Direction, Present Demand in tonnes, Forecast by Sector in tonnes

Each section includes:

+ Anatomy of Graphite’s use: where and how it is used in the market

+ Example grades from around the world – industry standard grades

6.1 Overview

6.2 Refractories

Steel, Cement, Ceramics, Glass and Petrochemicals

6. 3 Batteries

Electric vehicles, portable energy, large scale storage

6.4 Metallurgy

Carbon additives

6.5 Lubricants

6.6 Parts and components

car brake pads, carbon brushes, pencils

6.7 Other uses and opportunities

agriculture, polymers, and more

7. Specialist Graphite

7.1 Expandable graphite

7.2 Spherical graphite

8. Prices

Prices overview – trends, factors affecting price movements, China

Spot price quotes over the last year

High quality graphite flake forecast

Flake graphite forecast

Amorphous forecast

9. Risks to demand destruction

10. Graphene

What is graphene?

How is it made?

Market opportunities

R&D and production

Price guide

11. Relationship with synthetic graphite

Total graphite market share

Basics of synthetic

Do they compete?

12. Data Pages

The most critical data, graphs and charts from the report.

Table of contents

Mike O’ DriscollGlobal Head of Research, Industrial MineralsMSc (Mining Geology), BSc (Geology & Geography)Mike has been writing about and analysing the non-metallic minerals industry for 25 years. He was Editor from 1995-2012 and now heads up Industrial Minerals research and mineral intelligence division. During his career, Mike has visited a wide range of mineral and end-user operations worldwide, and has regularly organised, chaired and presented papers at industry conferences. He was Associate Editor and contributing author to the 7th edition of Industrial Minerals & Rocks, published

by the Society for Mining, Metallurgy and Exploration (SME) in 2006.

In 2011, Mike was awarded the prestigious Hal Williams Hardinge Award by the SME. The SME recognised his “leadership in the exchange of information with the Chinese minerals sector”.

For more information click: http://www.smenet.org/awards/viewAward.cfm?category=4&typeId=28

Email: modriscoll@indmin.com