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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource companies in which he's invested in. 

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Alabama Graphite Corp., Exclusive CEO Interview, What Makes This Company Unique?

Date: Tuesday, January 12, 2016 12:39 PM EST

I’ve witnessed China’s CSPG production methods firsthand on multiple occasions. Chinese CSPG production is compartmentalized and very inefficient. The processing methods are harsh and not environmentally responsible. Even if the Chinese improve their process from an environmental standpoint, which presumably they will do, it will take time and translate into higher costs. AGC intends to produce ultra-high-purity, specialty graphite products, without the use of dangerous and environmentally harmful hydrofluoric acid (as is commonly used in Chinese graphite production) or costly high-temperature, thermal upgrading and purification.

There’s diverging opinion on nearly every key metric (grade, purity, flake size, shape, impurities, etc.). How can investors possibly pick the good projects from the bad? 

Baxter: That’s a great question. As you say, those metrics are critical for projects proposing to produce only primary graphite concentrates. However, we believe that focusing on primary graphite concentrates may not be a prudent strategy as currently there’s oversupply of graphite concentrate globally. The traditional evaluation parameters/metrics of flake size, head grade, or how many tonnes of run-of-mine graphite concentrate can be produced, are not relevant in today’s market outside of China. 

We believe the only metrics/parameters relevant to assessing a battery technology graphite company are: can the company produce a high-grade primary concentrate  – which can be transformed into a consistent, high-performance, final graphite product that meets or exceeds the requirements of battery manufacturers, and is it able to do so at low cost? Although a PEA is preliminary in nature, AGC’s PEA indicates that we hold the potential to satisfy those parameters – and possibly at the lowest known cost of CSPG production.

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If we had based the Coosa project on traditional, primary processed, run-of-mine concentrate production, our PEA economics would not be nearly as strong. The secondary-processed, specialty graphite products are the core of our business strategy. We believe AGC is in the right management hands with the requisite skill set to make our CSPG-based strategy work. All indications at this point are that CSPG will be in high demand, and our process can be utilized to make other high-value graphite products beyond CSPG. Additional products such as purified micronized flake graphite, “PMG,” high-purity flake, and expandable graphite.

Logistically speaking, the Company’s Coosa project is situated in one of the most advantageous locations of any graphite project in North America. The Coosa project is located on private land (with only Alabama state-level permitting required, as opposed to U.S. federal permitting and EPA approvals) in an established mining friendly jurisdiction, with excellent infrastructure, year-round temperate climate, and significant support from stakeholders and local & state governments.

The project has excellent access to the American market; however, perhaps one of AGC’s most important competitive advantages is that the Company holds the potential to offer U.S. clients a, ‘Made-in-USA’ solution. This would afford the end user with the associated U.S. sourcing benefits, as it pertains to the U.S. Federal Trade Commission’s Made in USA labeling act and U.S. materials sourcing claims. The fact that the CSPG that AGC is endeavoring to produce would be sourced from the United States, as opposed to merely being processed in the U.S, could offer formidable competitive advantages that non-U.S.-sourced graphite could not address.

What are the prime misconceptions about Alabama Graphite? 

Baxter: Misconceptions plaguing Alabama Graphite are the same as those overhanging the sector. For us there’s the fallacy that low-to medium-sized flake is a disadvantage or that low head grade is a serious problem. These misconceptions stem from the mistaken belief that we’re pursuing the same market as numerous other graphite development companies. While peers talk about large and jumbo flake sizes, we believe our flake is ideal for producing CSPG, in particular for the 10- to 25-micron-sized CSPG material demanded by battery makers around the world. In fact, our flake size distribution has allowed us to deliver secondary processing yields of ~75% at bench scale, compared to China’s ~30% CSPG yields.

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