General Discussians, page-4

I emailed DC this interview and asked him a few questions.

His initial response as follows, with permission to share:

Hi Ten,

I think FMG is an interesting example, and iron oreshare some similarities to graphite.

One key similarity is that Chinese demand is largerthan its supply.

In the short-run, we see volatility like we areseeing now, with low graphite prices, as the Chinese subsidise their ownproduction, whether through higher cost flake graphite or synthetic.

In 2023, however, the Chinese were net importers ofonly minimal volume, and the price was much higher. Does this reflectmore of the “true” market balance? I think definitely, yes.

Another similarity to iron ore is that thecompanies that made out best from the run-up in iron ore prices were those whocould keep costs down and avoid over-leveraging, which increases exposure toprice swings. In graphite, whether flake, PSG or synthetic graphite, thisis the major issue we are all grappling with.

Most of the forecasts suggest graphite prices willbe back to previous levels by the time we could get into production. Isthink this is likely, hence we are moving ahead with investing our own capitalto get the operation ready.

At the same time, we are mindful that Chinese cankeep prices down, so we need to ensure we don’t expose ourselves to too muchrisk while the market remains volatile.

Besides the Chinese uncertainty, we have anadditional wildcard – public policy to encourage non-Chinese supply. This worksin our favour and may provide the means for us to balance the risks on Chineseprice volatility.

I am mindful that the uncertainty spooks investors,and this leads to some of large swings in share price, as we’ve seen over thelast couple of days. Of course, we’ve seen this move the other way in thepast, and I am certaintly doing everything I can to get us back there.

I hope these explanations help.

If you have any more questions, please let me know.

Kind regards,

David