China Carbon Graphite Group to Integrate Natural Graphite Mines

Natural graphite comes in several forms: Flake, amorphous and lump. Natural flake and synthetic graphite are currently used in renewable energy solutions such as lithium-ion batteries as well as in fuel cells, and in nuclear power stations. Very fine grades of natural flake graphite can also be transformed into synthetic diamonds.

To better protect the environment and to curb pollutants generated during the production of certain natural resources, in 2010, the Chinese government decided to implement a number of new restrictions on natural resource industry sectors, including certain export restrictions. As a result of these restrictions, numerous mines were limited in their operations, and the market prices of rare earth elements and certain natural resources that originate in these mines, such as graphite, were driven up.

Graphite is widely used in many different industries. It is used as a refractory material in the steel industry, and as a conductive material, a lubricating material and a metallurgical material in various other industries including aerospace, automotive, semiconductor, nuclear power, battery manufacturing, and generally as a high-tech composite material. For this reason, China has included graphite in its protective measures taken to assure domestic supply, much in the same way it has treated rare earth elements.

As a result, Graphite saw price appreciation in 2010 along with rising Chinese demand for all types of industrial minerals, including the increasingly popular rare earth elements. We believe this upward trend will continue in 2011.

In light of China’s increasingly restrictive posture on rare earth and other important resources, as well as world dependency on China for graphite supply (it has been reported that China exports over 70% of world’s graphite every year), graphite is on course to become a very important strategic resource. As one of the few listed companies in the graphite industry,the Company has the state-of-art technology in quality control and environment protection, and expects to enjoy sustained and rapid growth in the near future, since the new restrictions are expected to eliminate those less efficient competitors in this industry.

Since the beginning of 2011, aside from expanding production capacity, China Carbon is seeking to initiate an acquisition, with the objective of becoming a vertically integrated leader in the Chinese graphite industry. China Carbon is located in Inner Mongolia, a region with very rich mineral resources.