Ann: SER Shares Trading Ex-Entitlement , page-19

http://www.theaureport.com/pub/na/13107

Tap Profits in the Growing Graphite Market: Simon Moores
TICKERS: AXE, FMS, NK, NGC; NGPHF, SER, ZC
Source: Brian Sylvester of The Critical Metals Report (4/17/12)

TCMR:]You also mentioned Mega Graphite.

SM: Mega Graphite bought an Australian company called Strategic Energy Resources Ltd. (SER:ASX) and that gave it a fast track route into the graphite industry. Its Uley Mine is actually a big stockpile of processed and unprocessed material because, similar to Ontario Graphite, back in the early 1990s the mine was closed. It wasn't economical enough to compete with cheaper products from China.

Mega Graphite has upgraded the plant with modern equipment and is reprocessing the stockpiled material to make the various grades of graphite. It has the potential to produce about 20,000 tons good-quality graphite from that stockpile over the next three years. But it will need to start mining to replenish these stocks.

TCMR: Is there a significant mining industry in Australia? Will Mega Graphite and Strategic Energy face some competition?

SM: At the moment Australia has no graphite mining industry. Zimtu Capital Corp. (ZC:TSX.V) is buying up a lot of deposits there and has an impressive portfolio of assets around the world. Archer Exploration Ltd. (AXE:ASX) is another company that has a project as part of a larger portfolio of mineral assets. But Mega Graphite is far more focused on producing graphite so the company shouldn't encounter much production competition in the near term.

TCMR: What's the infrastructure like at Uley?

SM: It's fine. Australia is mining friendly. It is used to this kind of industry.

TCMR: It's not going to face any mining royalties there? Australia has implemented one on iron ore and coal.

SM: Australia will try to target its big businesses like iron ore and coal. Graphite is never going to be a comparatively big business there. If Australia heavily taxes the smaller mining companies, then it won't have much of a mining industry left. It needs to encourage these. Mining is the sole reason Australia didn't slip into recession.

TCMR: What advice would you give to investors who are interested in the graphite story?

SM: The resource is everything. The larger the flake and the higher the purity of carbon the more critical it will be to high-tech applications. Also look at what the company's plans are for selling this material and if it is targeting specific markets—co-operation with Japan and South Korea will be key here. Traders from these countries are usually the most savvy of long-term investors.

The most interesting graphite plays are those that are focused on technology end uses. Producing high-tech-compatible materials for emerging markets, like spherical graphite for batteries, will add the serious value.