Discussing valuation, page-31

Cartex. 1. Your experience is relevant in understanding how Syrah's supply might be absorbed by the current market. But industrial applications and consumer devices are not reflective of future demand driven by EV adoption. Assuming those markets remain steady or have small incremental growth the marginal growth in graphite demand will come from EV growth over the next few years. Do you think that the Gigafactories announced by automakers (not just Tesla) won't be built as planned?

2. China has forced adoption or prohibited adoption of products for extended periods of time across many industries. They have been successful at it. One of the benefits of a centrally managed economy. While the Chinese are not the technology leader in EV they are keen to win this race. Broad adoption (global) will be driven far more by economic forces. Tesla has said that they are close to getting the battery cell cost below $100 KWH. They believe in 2 years (2020) they will have the battery pack cost below $100 KWH. If the Chinese force demand/adoption for the next 5 years the battery cost (and car cost) will become economical for them as well as the US and Europe. If they stop in 2019 things will get tricky. But they won't be stopping in a meaningful way anytime soon.

3. Agree on CURRENT demand and the fact others overstate industry volumes. However, the question is not current applications of graphite (industrial and consumer electronics products) but how much will demand for graphite increase from EV battery grow over the next 3 years? Are you saying there won't be a sharp increase in demand?

4. My pricing comments were related to the sustained increase in price in iron ore. It is relevant to graphite and provides a road map for how graphite pricing should evolve over the next 5 years. Iron and graphite are both commodity materials. Iron ore and frankly any commodity that has gone through periods with sharp increases to both supply and demand are relevant to graphite demand, pricing and profitability. There will be a sustainable surge in demand, price response by the commodity and a long period of very high profitability. For all the reasons you have stated re: qualification, etc the surge in graphite should be more powerful and durable than generic bulk commodities.

5. SPG. I am only partially familiar with the process. My understanding was that sales could occur within 18 months of first tons. Can you outline the process and timeline so I can better why it will take a full 3 years. 

6. You would agree that the price of the battery has fallen 15% or more every year for the past 10 years, yes? You would also agree that Tesla's current packaging/process leaves significant scope for improvement/cost reduction. Do you think Musk was lying when they stated on their investor call that they are at $100 KWH for the battery cell? And my assertion regarding the drop in cost with technologies was based on circuit boards, chips, etc where the sophistication of the product rivals/surpasses EV technology. Costs have dropped for decades while performance has increased. I expect the same for EV. 

7. Again, the bulk/commodity comparison was to highlight the influence of supply and demand. Particularly for periods when new supply was arriving into the commodity just as demand was beginning to inflect.