Ann: Appendix 4E & Annual Report 30 June 2016-HZR.AX, page-2

HAZER GRAPHITE PURITY

In August 2016, the Company announced results from initial tests undertaken to demonstrate the purity and characteristics of Hazer’s graphite against that of industry grade graphite, including commercial battery grade graphite. This characterisation and testing process is an important step before embarking on a graphite development program, as it provides the Company with critical benchmark data needed to further optimise the reaction conditions that will improve the yield and quality of the graphite. Hazer produced graphite at 99% tgc (total graphite content), through initial methane decomposition and a single stage chemical purification. Importantly, the chemical purification was undertaken without the use of hydrofluoric acid (HF). Prior to chemical purification, the graphite product harvested directly from the Hazer reactor under non-optimised conditions has tgc purity of 86%. The general characteristics of Hazer graphite produced under non-optimised conditions show excellent comparison to highend commercial forms of graphite, including primary synthetic graphite and synthetic spherical graphite SG, used for upper end lithium-ion batteries, and little resemblance to lower value amorphous carbon AC (Carbon Black). The Company is extremely pleased with these initial results using large-scale laboratory reactors and believe they will provide a strong platform for further growth, through both optimisation of the core reaction conditions and further application testing of Hazer’s graphite for batteries and other key graphite markets. It is promising that even under non-optimized conditions the characteristics of the graphite produced by the Hazer Process correlates well with commercially available premium graphite. These initial results show that Hazer’s graphite is highly crystalline with few defects, key requirements for high-end graphite markets such as battery applications.

SCALE-UP DEVELOPMENT UNDERWAY
The Company has now set in place a development and testing roadmap that focuses on the lithium-ion battery vertical for its graphite product, as well as potential applications in other graphite markets. With additional characterisation testing currently underway, as well as further optimisation of reactor conditions, Hazer hopes to enhance the yield and quality of the graphite produced. We look forward to updating the market with new results produced under optimised conditions and plan to send this graphite for independent testing at a globally recognised testing facility. Hazer also plans to develop and test small-scale lithium-ion batteries within its laboratory using synthetic graphite produced from the Hazer Process. Work also continues towards the design and construction of a pilot plant that will be capable of producing hundreds of kilograms of combined hydrogen and graphite products per day, to be undertaken in 2017. In March 2016, Hazer signed an agreement with chemical engineering group Kemplant, who are assisting