Looking to dip my toes in, page-2

Intel, it's a hard thing to come to terms with all the ins and outs of the graphite market, because it's opaque, and too be honest, even a number of people who call themselves a CEO of a graphite company don't truly understand the current graphite market (evidenced by the sheer disparity between those who say they are talking to buyers, and those who actually are signing them up). While they have their own biases, as a general rule I would recommend reading articles/interviews with people like Simon Moores (Industrial Minerals), Stephen Riddle (Asbury Carbon), Stormcrow (particularly given their conservative nature in assessing worst case scenarios).

You are most definitely right that the risk/reward trade-off has intensified, and dramatically so. You cannot buy a graphite company with committed sales and moving towards production (as opposed to drilling) for a market cap as low as ours. The recent market and graphite sell-offs has presented a very compelling opportunity.

To answer:

1. I don't know the full ins and outs of the TK/Arafura deal, but it was for rare earths, not graphite. From what I could glean, Arafura was struggling to get finance, and I don't know if the size of the potential deal with TK was enough to provide enough comfort to potential funders. In that sense, TK/Arafura may almost be seen as akin to our EGT, which was a great off-take to achieve (the first on the ASX of all the graphite companies), but the EGT deal wasn't a sufficient size by itself to achieve funding for a 40 ktpa production mine. Between our two off-takes however (assuming TK converts to binding), we'll have 30 ktpa of sales locked in, which is well above the threshold that funders would require.

2. TK is highly likely to need both agreements. The Flinders deal is for between 2-5 ktpa, so it's fairly minor. They want another supplier for the bulk of their requirements, bearing in mind that TK are one of the worlds largest steel producers, so even without their other business arms, they would chew through a fair bit of raw resources. I would suggest that they would have gotten all from KNL agreements if they could, but KNL wouldn't have been able to offer them exclusivity of supply in Germany, because they already offered it to the EGT (which should give a massive hint to the alert, that both TK and the EGT are likley to be German, or at least have a significant presence in Germany).

3. Read our updated scoping study announcement on 18/8. Bottom of page 5 has the Stormcrow pricing for flake distribution. Note we are one of the very few companies that use it, because it's very conservative, and based on a worst case scenario for pricing. That obviously doesn't fit in with other companies trying to inflate their numbers (think LMB with $2K per tonne min off-take for their whole basket, or SYR saying they will get $1K per tonne for their basket of graphite for the recarburiser market). Note that Stormcrow are completely independent of KNL. I've read their full report, which isn't huge, and would recommend it to anyone considering a material investment in the graphite space.

4. Royalty rates are 3% for graphite. Company tax rate is 30%. I don't believe anyone has had any significant trouble, if they follow the right process. Probably the biggest concern is not so much the sovereign risk, as Tanz is pretty open and accepting of business, but instead is just the time or the African way of doing things when they are ready to do them. Anyone who has been to Africa will know what I mean. Our environmental permits are all on schedule, and mining licence should be issued next year. As per some previous posts, the President of Tanz recently spend a significant chunk of his day with KNL management, discussing both Epanko and Merelani.

5. I only know what's in the public domain, but highlight that both KNL management and external consultants have taken the infrastructure position into account in their scoping study, and are doing so with greater rigour as part of the BFS.

6. The single best person I can point to here is John Park. Not only has he built and managed a mine before, but he was specifically and intimately involved with the Merelani graphite mine in Tanzania. You really can't get much more relevant than that. Both John and Grant (Pierce) are well versed with Tanz, and Andrew as CEO is very careful, cautious, and methodical. They've been able to achieve the first binding graphite off-take on the ASX (including the first deal with a non-Chinese company), well ahead of graphite becoming the flavour of the month. They are finalising their second agreement, again with a European focus, highlighting a clear company strategy to focus on existing current buyers of graphite, and particularly those who are actively looking to diversify supply away from China.

I would recommend the Pattersons report on ASX listed graphite industry of 20/7/14, if you can find it. While it has some flaws, and KNL in particular have already moved on significantly since then (from a fundamental viewpoint), it is probably the most comprehensive report on comparing graphite companies. For the record, their top 3 picks that they recommended were SYR, VXL, and KNL, with daylight between the rest of the herd. Another significant mining broker has recently issued a note this month highlighting a number of projects likely to develop within the next 12-24 months. I can't repaste it, but they identified a number of various resource projects across the spectrum, of which only two graphite companies made the list. KNL was one of them.

With regards to catalysts to move the sp, there are a number coming up.

1. TK off-take becoming binding
2. Merelani JV being ratified by STAMICO (note already signed/accepted by Richland, who are STAMICO's JV partner). We don't need Merelani, and can make an extremely profitable realistic graphite miner at the Epanko deposit, but Merelani adds some serious icing to our cake.
3. BFS.
4. Financing secured, likely with some support from TK.

5. Mining licence.
6. Once financing secured, and the mining licence approved, I'd expect to see our EGT being made public, once they are confident the mine will proceed. I don't know who it is, apart from the high likelihood that they are German or have a big German presence, but as an existing graphite user, they will be well known in our space.

1 & 2 are likely before the BFS comes out, so there are some significant catalysts there. I can't pick the bottom, but I know that at these levels, it's got to be very close. If you look at the buy/sell spread, the sellers might have stopped playing games as of this morning, and the buy side is being stacked, so that also leads me to think it's going to start a climb upwards. Regardless of picking the exact bottom, you are likely to be very rewarded as we move into production in 2016.