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The 2011 Annual report has now been posted.
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World Class Graphite Project – (SER 100%) Uley, South Australia

Located only 23 kilometres from Port Lincoln, the regional centre for the Lower Eyre Peninsula in South Australia, Uley is recognised as a substantive and significant area of graphite mineralisation. The graphite deposit is one of the largest coarse flake graphite deposits in the world, containing disseminated, high-grade flake graphite.

The mineralisation is near surface and the graphite produced from the former operation was accepted by traders for its high quality.

Main Road Deposit JORC Upgrade

The work, undertaken by Coffey Mining, was commissioned to support the development of the Uley Graphite Project and Main Road ore body.

Analysis of approximately 1200 metres of infill drilling at the Uley Main Road deposit in late January has delivered an important resource upgrade for the project as well as highlighted the resource’s high grade graphitic carbon.

Pricing & Market Update

The price for graphite continues to increase as demand is strong and supply, particularly from China, remains constrained due to winter closures and ongoing limits to exports.  June pricing is listed in the table below.

» All prices in USD/t, CIF European port

The combination of these factors and the promise of new battery technologies are seeing projects with much lesser grades being reactivated.  There is a project in North America which is being reactivated with an average carbon content of approximately 2.4%. 

Uley’s Main Road project with 8.7% average grade is well positioned to be a key future development and graphite supplier.

Mega Graphite deal

A non-binding term sheet was agreed during the quarter with Canadian company Mega Graphite Inc. (Mega) for the Uley Graphite Project.  Subsequent to the end of the quarter, a detailed agreement was signed and SER received CAN $800,000 to aid the implementation of the deal.

Highlights of the Agreement

• Implementation Deed signed with MEGA Graphite Inc for the acquisition of a demerged subsidiary of SER which owns all rights to the Uley graphite project.
• The Demerger Scheme and Transfer Scheme are subject to the approval of the    SER shareholders and Participants.
• 80% of the shares in a demerged subsidiary containing the Uley graphite project will be distributed to shareholders and 20% retained by SER.
• Shares in the demerged subsidiary will be acquired under a Transfer Scheme, in exchange for shares in MEGA Graphite, if MEGA Graphite obtains listing on the TSX; or a listed entity with which MEGA Graphite merges (Transfer Scheme Scrip).

The amount of the Transfer Scheme Scrip will be equal to the greater of:

• 33% of the issued capital of MEGA Graphite; or
• a higher percentage of the issued capital in MEGA Graphite if required to reflect the value of Uley, which value must be a minimum of CDN$70m.
• A CDN$800,000 cash payment has been received by SER from MEGA Graphite, and a further CDN$200,000 payment is due upon the Transfer Scheme becoming Effective.
• SER to retain a direct holding in MEGA Graphite (or a listed merger entity) allowing shareholders exposure to graphite value adding business.
• The minimum project value of CDN$70m has an indicative value of approximately 20 cents per SER share on a fully diluted basis.
• SER Shareholders can retain their shares in SER which will also have an interest in MEGA Graphite (or a listed merger entity), and SER retains a 1.5% royalty on all product sales revenue from the Uley graphite project.

Mega has existing graphite properties and customers and is focussed on delivering new technology applications for emerging markets.

SER shareholders are poised to leverage on value added opportunities in the graphite business.

Ontario-based Mega owns several world class graphite properties in North America. It is currently working on off-take agreements for large flake graphite and graphite products for emerging graphite markets to customers around the world.  It also owns a rare earth project and places a strong focus on research and development for new technology applications.  

Monash University ARC Agreement

The formal documentation has been completed and agreed by all parties, namely,  SER, Monash University and Rice University,  but at this stage is not signed.  As previously announced, SER has formed a strategic alliance with Monash University to develop a technological base for the utilization of graphite in high-tech applications, such as the energy sector. The energy sector is a growing market for the use of graphite and SER is focussed on becoming a participant. The Company is also aware of the vast advances nanotechnology is making to utilize graphite based materials for electronic, energy, and environmental applications.  We believe creating an intellectual knowledge-base is an important element of our business plan that will maximise the potential of our Uley graphite project.

With limited resources for undertaking research and development, SER is partnering Monash University to explore opportunities in a cost effective manner. This collaboration will enable us to develop a long term relationship and thereby create additional opportunities in developing the Uley graphite deposit. While SER will make small cash and in-kind contribution to the research over three years, Monash is expected to receive over $200,000 from the Australian Research Council. Past production at Uley produced +50, +80 and +100 mesh product.  Graphite measured at minus 150 microns, referred to as ‘fines’ were discarded. SER and the team from Monash University are attempting to utilize these ‘fines’ to create value added products. Our research project will be specifically aimed at reclamation of ‘fines‘ and the generation of intellectual property for converting these fines into high-value products for super-capacitor and battery applications.

Our research partners have had a scholarly paper published recently in an ACS journal, which was selected for press release by ACS.  See link below.

Link to BBC News: http://www.bbc.co.uk/news/business-13895077