Ann: Syrah Sales and Marketing Update, page-23

G...there are also other factors that are not being considered, the one main factor is not fully understanding the battery market and the dynamics to qualifying any new raw material qualification and taking the cynical approach that just because a company is new a high volume producer puts them into the fast track of pushing out suppliers that have proven products over many years. This also applies to many other industry and applications.

One important thing to note is that any pricing published comes from mainly Chinese suppliers and possibly Asbury, all retrieved by either Roskill, BM, or IM. I know for a fact, and from recent discussions on this very subject with various customers in several industries, that no one from any of the three market reporting entities had contacted them for pricing information and even if they did, they would not discuss. Pricing is a key competitive advantage of a customer purchasing graphite products as this is a major raw material cost factor. Any pricing provided to any supplier or negotiated is sequestered by an NDA or CDA. So, anyone claiming to have direct knowledge of pricing from a customer then disseminating or publishing it, is false.

It is also fool hearted to believe that any company can produce 60% more capacity than the market will bear, which is now in equilibrium. The end result is discounting of prices as significant levels for standard mesh grade products. The more advanced processed / added value a graphite product is and tighter spec, the less elastic the pricing. There are NO TAKE or PAY contracts in standard mesh / purity flake graphite as it is readily available from many suppliers. The more unique the graphite product / performance (cannot be easilyy replicated), the fewer than can potential supply, then a TAKE or PAY can be secured.

Of the hundreds of companies I have discussed, negotiated, and secured pricing from low grade graphite product to some of the most expensive graphite grades ever produced, it all lies in the performance of a graphite product in a specific customer application, reliability of the supplier, consistency of the product from the supplier, meeting customer specs, and finally working from a 3rd / 2nd tier supplier to a primary supplier on a customer's BOM. When all else is equal, the more readily available, multiple suppliers exist of a graphite product, price will always be the first item on the negotiation agenda. The Chinese are masters at this.

Understanding and following added value / advanced product sales tactics where price is the LAST thing to be discussed is a tribute to a solid sales force driving high margin products with either short or long term agreements.

Many of the graphite startups have management teams that come from bulk mineral mining, processing and sales where packaging is none existent with ship bulk sales of unprocessed ore are made and not a processed technical mineral such as natural flake graphite. This is why there are NO OFF TAKES IN GRAPHITE!!

All finished flake graphite concentrate has to be qualified and to my knowledge, no one customer in the world today has the facilities to process graphite contained ore...if this was the case, the customer would absorb 100% of the risk of plant construction & maintenance, processing, environmental requirements, packaging, ISO requirements, TSF, laboratories, etc.

Finally, I concur with your investor view assessment and it is difficult to believe that Syrah will have enough working capital to fund the BAM plant while evaluations begin on the commercial production of any anode grade graphite (from 3 to 4 years) and the elephant is the room screeching out is that BAM material WILL NOT work in every battery chemistry, format, or application. One product they will never replace is the MAG material produced by SGL used by Hitachi! The performance has been outstanding for more than two decades and many new suppliers have introduced new graphite products that has fallen well short in performance, capacity, and recycling (charge / discharge) metrics.

Also, with the recent report that Tesla is burning through US$ 1Billion per quarter and missing production and delivery targets again as well as actually discussing another capital raise of up to US$ 2.5Billion to survive is troubling. Tesla has not turned a profit since going public and there is no indication that trend will change over the next 18 months, and that is assuming they can maintain solvency until then.