Ann: March Quarterly Activities and Cashflow Report, page-33

Paul's perception of the world rings true. The reality is that no one company is going to dominate across all graphite markets - there is just too much available, at likely production costs which will make for some very competitive bidding.

This situation will have two significant results. First, within the next two years, things are going to get very uncomfortable for the small-scale, high cost operators. They will have to seek out specific niche markets, because the buyers are not going to pay flight-of-fancy prices just to keep them in business.

Second, we are likely to see major producers zeroing in on application areas which are either high-volume, or involve high value-add. A straw in the wind here has been the announcement by SYR of their studies for possible spheroidal graphite plants in Mozambique and the USA. What has been largely overlooked about those possible plants is just how big they are, and how they would impact the world markets. Both studies are looking at plants of 25K t/y capacity. That means that each of them would be larger than any current spheroidal graphite plant in the world. Syrah has already stated that they are not interested in competing against low-grade petroleum coke for the bottom-end recarburiser market, but, instead, are working on quality cast iron, and electric arc steelmaking. Given that, and their spheroidal graphite interests, we have to conclude that they are firmly focused on the high-end, extensively-modified (and, hopefully, higher-profit) end of the market, for each of their products.

Which is exactly what shareholders love to hear!

Cheers,

Prime1