richard karn

For those shareholders new to the register ,- and to reinforce existing holders ,-of the potential of this world class Graphite Deposit at Uley .

Graphite is increasing in price . Read "Industrial minerals" reports . The SER Uley deposit contains huge reserves of very high grade material .
A JV deal with a North American group is being negotiated .

The RICHARD KARN report :


Hello,

This is the fourth in a series of reports we are releasing on listed Australian companies that produce specialty metals that China controls.

We believe the rare earth element incident as it is referred to in the press constitutes a watershed event in that it has put Chinese trade practices in the spot lightand no one likes what they see.

As we have discussed in past releases, over the last decade China has made it a routine policy to incrementally reduce the supply of these metals and metal oxides they have come to control while simultaneously increasing export tariffs, which are sometimes accompanied by a value-added tax (VAT), to affect persistent price increases the rest of the world pays for these materials, thereby gradually providing Chinese companies with an unassailable competitive advantage.

Over this period, China has experienced truly extraordinary economic growth that is bettering the lives of a people that had endured unimaginable hardship under the policies of Chairman Mao, which we applaud.

In effect, however, a significant portion of Chinas economic success is the result of using control of these materials to incrementally constrict OECD manufacturing like a giant economic python intent on gradually squeezing the life out of its prey.

Over the last decade, and as can be seen on the table below, virtually any metal that China controls has seen price increases far in excess of those contained in headline commodity price indices like the CRB; compared with the prices the OECD pays for the specialty metals China controls, golds roughly 400% gain or oils 180% gain seem paltry.


Rare earth elements (REEs) are a clear cut example of this price manipulation, as are manganese, antimony and tungsten, each of which have been the subject of past Emerging Trends Reports, but what the western press euphemistically calls unhealthy competitive behavior, can also be seen with graphite, the subject of this Speculative Brief.

Today China produces 70% of the worlds graphite supply.

More than twenty years of taking market share and then incrementally constricting supply to the West has resulted in a situation today that finds Chinese companies paying less than half as much for their graphite as US and EU companies.

Although the graphite price has only doubled over the last decade, there is mounting evidence graphite is set to follow the well-established price manipulation policies outlined above. We expect this assertion to be confirmed in the near term by the Chinese government announcing reductions in the amount of graphite available for exportas they have over the last few years with rare earth oxides, tungsten, antimony and a number of other metals and metal oxides.



This will place a premium on non-Sino sources of graphite.



At the same time, graphite is a key constituent in a range of new, especially green, applications such as large lithium ion batteries for electric vehicles, carbon fibre, Pebble Bed Modular Reactors, large scale fuel cells, or grapheneto name but a few of the new uses, at least three of which stand to nearly double graphite demand.



In Speculative Brief #4, we recommend the company that is putting the largest deposit ( SER ) of high grade flake graphite in Australia back into production.



How Big? Just one of this companys six deposits has a JORC compliant resource of 4 million tons grading 8.1% graphitic carbon, and the exploration potential is so wide open that estimates range from 25 to 150 million tonsa long life, world class deposit by any measure.



Since we released Speculative Brief #4 to our Sponsors in early December, the company has announced it has reached a tentative agreement for more than $30 million in funding to put their historic mine back into production with expanded processing capacity.



This is great news, not least because these are North American funds, not Chinese.



The stock ran up nearly 50% on the announcement and has since fallen back to being up less than 10%.



We submit those selling into this rally do not grasp the goings-on in the graphite market and the stock remains a long term buy: had this funding been in place prior to our reports release, we would have made this an Investment Report rather than a Speculative Briefthat is how important graphite will be going forward and how important this source stands to become.



Projects like this are literally in the sweet spot and will be highly sought after because they can be put back into production faster, most cheaply, and entail far less risk than new project development. Companies like this universally lack access to the capital markets as well as mainstream coverage because their market cap is too small to allow institutional involvement and their specialty metal is traded off-exchange, rendering it essentially unhedgeable, so most generally fly well below most investors radarall the makings of a fabulous speculation.

Full report available www.emergingtrendsreport.com

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