Strategies for More Effective Critical Materials Use 3

Strategies for More Effective Critical Materials Use 3 December 2010 Trans-Atlantic Workshop on Rare Earth Elements and Other Critical Materials for a Clean Energy Future Peter C. Dent VP Business Development Electron Energy Corporation 924 Links Avenue, Landisville, PA 17538 www. electronenergy. com

Real World Views “The purpose of a business is to serve a customer” Peter F. Drucker • “Effective” – “Do the Right Thing” • Provide customer value – Fulfill a need – Better Performance – Lower Cost – Realistic expectations • Solutions MUST make sense commercially • Sustainable manufacturing & supply chains • Environmentally responsible 3/15/2018 2

• EEC’s Beginnings Marlin Walmer - innovator and pioneer in magnet materials Founded Electron Energy Corporation in 1970 • First non-captured commercial Samarium Cobalt (Sm. Co) producer in the world • Last US Rare Earth magnet producer (Samarium Cobalt or Neodymium Iron Boron - Nd. Fe. B) Marlin Walmer 1/11/29 – 12/12/99

About EEC Landisville, PA – 40, 000 sq ft single site 118 employees Small Business One Modern Manufacturing Site Samarium Cobalt magnet producer ISO 9001: 2000 Certified Compliance with DOD Domestic Preferences of Specialty Metals (DFARS 225. 252 -7003, 7008, 7009) • Defense Directorate of Trade Controls Registered • •

Real World View of Magnet Materials Production WW Total Market Size $7 B 2010, $15 B by 2020 Japan, US, European producers close plants, move production Nd. Fe. B magnets 72% CHINA Alnico ½ Sm. Co 63% Rare Earth Oxide Ore production 97% Rare Earth pure Metals nearly 100% 3/15/2018 5/18/2010 IVEC 2010 Hard ferrites 66+ % 5

Typical Manufacturing Process for Sintered Rare Earth Magnets – Labor is predominant cost Crush into ~ 200 - 500 m Raw Materials Sm, Co, Fe, Cu, Zr (Sm. Co) Nd, Pr, Dy, Fe, Co, B (Nd. Fe. B) Magnetizing & Testing Induction Melting or coreduction Crushing Ball milling or Jet milling To m scales Machining Grinding, lapping, honing, Or wire EDM Sintering, Solution and Heat treatment Pressing

-Increase use of periodic table of elements -Semiconductors 24 plus new elements used in 2000 and beyond -11. 3 Tons/year person nonfuel minerals in USA, - ? T/yr developing world -New inventions Criticality Matrix (US National Academies, 2008) -Changing demographics This matrix was devised by the U. S. National Academies and published in 2008 in Minerals, Critical Minerals, and the U. S. Economy (2008). The matrix preceded by a detailed explanation of the conclusions from which it was created is 3/15/2018 (free) on the Internet at http: //books. nap. edu/openbook. php? record_id=12034&page=165#p 200140369960165001 7

Magnet Sales Worldwide • • • Data courtesy of Webmagnetics. com Market is growing due to automotive & more uses, miniaturization People pay lots more for better magnet performance ($5. 4/kg Ferrite, $90/kg Nd) Smaller magnets make smaller less costly systems Lower systems costs will increase market “More electric” means more magnets

Material Usage • • 5/18/2010 Light Rare Earths (LRE’s) IVEC 2010 Heavy Rare Earths (HRE’s) Perspective 30 years ago? Mother nature’s gifts Unique properties Benefits vs. cost of replacement 9

Global Metal Production 2008 - Record Year Item Raw Steel Pig Iron 2008 Mine Prod. (Metric Tonnes) 1, 360, 000 958, 000 Item 2008 Mine Prod. (Metric Tonnes) Uranium (2007) 41, 279 Lithium 27, 400 Aluminum Silver 20, 900 Copper 15, 700, 000 Cadmium 20, 800 Manganese 14, 000 Bismuth 5, 800 Zinc 11, 300, 000 Boron 4, 100 Lead 3, 800, 000 Gold 2, 330 Nickel 1, 610, 000 Selenium 1, 590 Magnesium 808, 000 Zirconium 1, 360 Strontium Materials 512, 000 Tantalum 815 Molybdenum 212, 000 Yttrium (2001) 600 Antimony 165, 000 Indium 568 Rare Earths (mixed, oxides) 124, 000 Palladium 206 Cobalt 71, 800 Platinum 60, 000 Rhenium 45 Niobium (Columbium) 60, 000 Rhodium 30 Tungsten 54, 000 Hafnium 25 -Recycling effectiveness of large vs. small, mid size expectations 200 Vanadium 3/15/2018 39, 700, 000 -A steel world -Large users volume, mature recycle -Rare metals have high price and big incentives Courtesy: Jack Lifton 10

Rare Earth Mineral Production • China REE worldwide reserves – 2 years ago over 50% – today substantially less – Reason, more discoveries • 100 plus potential sites for REE’s discussed for development worldwide • 5 -6 new non-Chinese mining operations will likely be developed • Lots of investment is flowing to major REE producers – well funded – Downstream supply chain needs – Non-Chinese customers, OEM’s 3/15/2018 11

Forecast Global Demand for Individual Rare Earths in 2014 (± 15%) (Im)balance of Supply-Demand Rare Earth Oxide Demand Supply/Production REO Tonnes % REO Tonnes Lanthanum 51, 050 28. 40% 54, 750 Cerium 65, 750 36. 50% 81, 750 Praseodymium 7, 900 4. 40% 10, 000 Neodymium 34, 900 19. 40% 33, 000 Samarium 1, 390 0. 80% 4, 000 Europium 840 0. 50% 850 Gadolinium 2, 300 1. 30% 3, 000 Terbium 590 0. 30% 350 Dysprosium 2, 040 1. 10% 1, 750 Erbium 940 0. 50% 1, 000 Yttrium 12, 100 6. 70% 11, 750 Ho-Tm-Yb-Lu 200 0. 10% 1, 300 3/15/2018 Total 180, 000 100% IVEC 2010 203, 500 % 26. 90% 40. 20% 4. 90% 16. 30% 2. 00% 0. 40% 1. 50% 0. 20% 0. 90% 0. 50% 5. 70% 0. 50% 100. 00% - Air Products O 2, N 2 -steel -Reduce use of higher demand -Increase use of lower demand (Ce, Sm) – unsold material = cost, wildcard -Thorium? Source: Dudley J Kingsnorth IMOCA 2009 12

Rare Earth Supply-Demand Source: Industrial Minerals Company of Australia 3/15/2018 13

Rare Earth Prices -Fe, Co, Tb, Ce, Au, Re price comparisons -REE price disparities ($3/kg -$500/kg pre July 8, 2010, $10 -12/kg avg. ) 3/15/2018 14

Core Issues • What will be impact of new RE applications (wind power, Li vs. Ni. MH batteries, lighting, MCE refrigeration, To Be Invented) ? • 1000’s of REE applications, how many can be helped? • Who will make it to market profitably & sustainably grow over time? • What will China do? –Wildcard factor, SEO’s • Can private sector fix problems alone? 3/15/2018 15

REE Supply Core Strategies -Market Driven • • Stockpile raw materials – price/availability disruptions Mitigate/Replace REE usage (short-medium term) – Incremental Process improvements (Kaizen – Japan Nd. Fe. B) – Better magnet technology (same flux with less material) => mitigate • • • Hi electrical resistivity Nd. Fe. B, Sm. Co (DOE) Nanocomposites (Nd. Fe. B, Sm. Co) add 30% Fe New magnet systems (non REE) – Leapfrog, disruptive technologies Develop / Adopt Recycling with ROI Develop applications for Ce, Sm, Pr and others in over supply – grow business Secure long term reliable, sustainable supply Develop & recruit people to innovate Engage with US government to affect appropriate REE policies Move from Studies => Resource Allocation & Action Multi faceted, balanced, realistic public policy approaches & expectations Be EFFECTIVE 3/15/2018 16

Questions Electron Energy Corporation 924 Links Avenue Landisville, PA 17538 (717) 898 -2294 Peter C. Dent (717) 459 -1001 direct (610) 349 -5525 cell pcd@electronenergy. com www. usmagnetmaterials. com 3/15/2018 17