Welcome to Alexium’s fifth newsletter.

In the last quarter, we have refined our focus on our unique, environmentally friendly flame retardant (FR) treatment and we are repositioning ourselves as a specialty chemistry company for environmental and technical solutions.

Our new direction has been driven by the significant growth potential of the flame retardant market. Firstly, stricter fire standards in the emerging world has seen demand for flame retardants from countries such as China and India rapidly increasing. Secondly, as details continue to emerge on the dangers of brominated chemicals, there is increasing pressure from Europe, United States and Australia for safer, bromide-free flame retardant alternatives. Consumer groups and government authorities are steadily building a strong case to enforce more stringent flame retardant regulations.

Given this market environment, the timing for introducing a new, bromine/halogen-free, FR solution is ideal and we are very excited about the potential

applications.

We are very pleased to announce we have now finalised the strategic alliance with Duro Textiles to license our novel flame retardant (FR) treatment under an exclusive agreement for commercial and military customers in North America.

We will also be focusing on entering new product areas beyond the textile industry, such as carpet, furnishings, polyurethane foam padding, insulation, plastics, and aerospace interiors.

To support the commercial roll-out of our FR treatment to industrial partners, we are pleased to welcome David Lambert as a process chemist and production transition manager. David brings a wealth of experience to our technical team and will help to accelerate the development and transitioning of our technologies into the market.

In recent weeks, we have also achieved a $1.1 million capital raising to help us expand our business in the specialty chemicals market, and have been awarded a $200,000 contract with the US Airforce Research Laboratory to demonstrate Cleanshell® CB treatments for chemical and biological protection applications.

And in latest news, the Australian patent office has granted a patent for the “Method for Attachment of Silicon-containing Compounds to a Surface and for Synthesis of Hypervalent Silicon-compounds” (Australia Patent No. 2006290509).

This patent award follows equivalent patent grants in other global territories, further bolstering Alexium’s intellectual property portfolio.

Gavin RezosChairman

Alexium – The SmArT SurfAce compAny

about alexiumAlexium international Group (“Alexium”) is an international company listed on the Australian and frankfurt Securities exchanges and the oTcQx international (ASx:AJx/Ax:AJx/oTcQx:Axxiy). Based in perth, Western Australia and Greer, South carolina, Alexium holds exclusive global commercial rights to reactive Surface Treatment (“rST”), an award winning technology developed in uS government labs. Alexium was established to exploit commercial opportunities for the rST technology globally supported by a strategic commercial and technological relationship with the uS Department of Defence (“DoD”).

chAirmAn’S messaGe

Issue #05 OCTOBeR 2012

neWSleTTer

in ThiS issue:

• Chairman’s Message

• Alexium Awarded US Air Force Contract

• Flame Retardant Market

• RST Capability for Temperature-Sensitive Fibers

• Strategic Alliance with Duro Textiles

• Alexium Delivers Safer Flame Retardant Technology

• Executive Management Highlight

• Calls for New Flammability Standards

• Alexium Conducts Successful Capital Raising

• David Lambert Appointed as Process Chemist

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Alexium was recently awarded a $200,000 contract with the US Air Force Research Laboratory to demonstrate Cleanshell® CB treatments for chemical and biological protection applications. This contract follows two other purchase orders by the US Army over the last year and will further validate RST technology for defense applications.

An estimated 200,000 chemical and biological protection suits are purchased annually by the US military for programs such as JPACE, JC3 and JSLIST. Over 4.5 million JSLIST suits “alone” have been sold globally since 1997, representing product sales for JSLIST suits in excess of $800 million.

Alexium’s Cleanshell® CB repellency treatment is targeted specifically to the treatment of the outershell fabric of CB protection ensembles. Alexium’s Cleanshell® CB treatment has been optimized to provide excellent water and oil repellency, but has also shown dramatically increased repellency of Chemical Warfare Agent simulants.

This contract was awarded to further demonstrate Cleanshell® CB on a range of different fabric types and to develop additional performance capabilities over the ensuing months. The work will include testing against a range of “live” chemicals, such as Soman and Mustard nerve agents, on a number of Cleanshell® CB treated fabrics. New reactive particles produced by the Air Force Research Laboratory as part of Alexium’s Cooperative Research and Development Agreement (CRADA) with the US Air Force, will also be incorporated in the fabrics for testing, including against airborne chemical warfare agents.

Alexium is eager to transition the technology to the next stage for defense applications. Whilst the defense sector pathway can include extensive material testing, product testing, certifications and field trials, we see this project as an important catalyst to more rapidly qualify and field our protective treatments – which will position the company for larger procurement opportunities.

Alexium AWArDeD us aiR FoRCe CoNtRaCt rST cApABiliTy for temPeRatuRe-seNsitiVe FibeRs

Alexium has successfully demonstrated its Reactive Surface Technology (RST) treatments for functionalizing temperature-sensitive fibers such as high-performance polyolefins to add new properties such as antimicrobial, adhesion promotion, and flame retardance.

European consumption of polyolefin textiles alone was nearly 2.5 million tons in 2006, with continued annual market growth. The largest end-use markets were technical textiles (950,000 tons) and carpets (635,000 tons). The polyolefin textile market in Europe alone is estimated to be at least $2.5 billion.

High-performance polyolefin fibers have garnered great industry interest due to their high resistance to chemicals, low moisture absorption, excellent abrasion resistance, and high impact strength. These fibers are gaining market share in a number of industries, including high end industrial, medical, and consumer product applications such as sporting goods, ballistic protection, and climbing ropes.

Until now, functionalizing the inert surface of polyolefin materials has been a key technical barrier for many potential applications. For example, poor adhesion between the fiber and resin in composite structures is a common failure mode and cause for premature mechanical failures. To functionalize these fibers, economically viable treatments often damage the properties of the fiber itself due to thermal or chemical degradation.

Alexium has successfully demonstrated its RST process for durable, functional treatments to polyolefin fibers. RST employs “cold” microwave technology to coat fibers via a “shrink wrap” effect of the coating around the fiber. Alexium is initiating several commercial demonstration pilots to apply antimicrobials, adhesion promoters, and flame retardants to polyolefin fibers.

Polyolefin fibers, while advantageous in many high-end technical applications, melt and decompose at such low temperatures that coating options and market applications are limited. Given the abundance of polyolefin applications and the gap in providing functional treatment options, we are carefully selecting targets and working with several market leaders to apply coatings that have the potential to expand polyolefin fabric usage into new applications and add significant value to existing applications.

Alexium’s RST process is ideally suited for treating high-performance polyolefins because these fibers are transparent to microwave processing and are not directly heated. Through this process, the Alexium RST chemistries are directly cured on the fiber surface while the fiber effectively remains cold.

The conventional heat curing methods are not a solution for many temperature sensitive fabrics. We anticipate that our RST process will offer a whole new range of applications for these technical fabrics.

The market for flame retardant chemicals is being driven by globally tightening fire safety regulations. Flame retardants are substances that can be chemically inserted into the polymer molecule or be physically blended in polymers after polymerization to suppress, reduce, delay or modify the propagation of a flame through a plastic material. The application for flame retardant chemicals ranges from automotives, electrical and electronics components to construction, and wires and cables industry. They are also used in plastic covers of television sets, carpets, paints, upholstery, and domestic kitchen appliances.

Building and construction industry is the largest end-use application for flame retardant chemicals. Increasing fire safety regulations and fire safety standards for residential, commercial as well as

infrastructural construction are expected to fuel consumption growth of flame retardant chemicals in the building and construction industry. The rapidly growing construction industry in China and India is also expected to boost the market. Wire and cable is the second largest application for flame retardant chemicals.

The global flame retardant chemicals market in terms of revenues was estimated to be worth $4.8 billion in 2011 and is expected to reach $7.1 billion in 2017, growing at a CAGR of 6.9% from 2012 to 2017. Asia-Pacific dominates the global flame retardant chemicals market, accounting for 47.7% of the overall market in 2011. The growth in the Asia-Pacific market is expected to be fuelled by countries like China and India.

flAme reTArDAnT maRKet

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Alexium has reaffirmed its strategic focus on providing unique, environmentally friendly flame retardant (FR) chemistries. As the public and government agencies across the world are increasing pressure to phase out traditional bromine-based flame retardants due to environmental and health concerns, Alexium is introducing a safe and effective bromine-free FR alternative for several industrial applications.

The most widely used commercial chemical flame retardants contain organo-bromine compounds and while they inhibit the ignition of combustible household items such as furniture padding, plastics, electronics and clothes, they are coming under increasing public criticism and scrutiny of consumer protection agencies.

These chemicals have become widespread environmental pollutants, and have been detected in water, soil, air, animals and human tissues. Several studies link brominated flame retardants to cancer, neurological disorders and reduced fertility.

Exposure occurs through the diet and the indoor environment. Infants and toddlers are at most risk, due to exposure via breast milk and through house dust.

In a recent article in the Sunday Herald investigating toxins in breast milk, Dr Peter Tait of the Public Health Association of Australia (PHAA) was quoted as saying flame retardants in carpet and household electronics were of great concern and that the Government should assess the risk to children.

Some European countries have already banned some or all of these hazardous brominated flame retardants, and in the United States legislative efforts are underway to phase out the use of these dangerous chemicals (see Calls for new flammability standards article).

Consumers and industry are looking for a better, cleaner alternative. Since our novel FR chemistry does not contain bromine or any other halogens, we feel very confident we will find commercial traction, especially for customers that want to play it safe.

Alexium DeliVerS SAfer flAme reTArDAnT TechnoloGy to meet Global DemaND

Alexium has finalised a deal with Duro Textiles to license Alexium’s novel flame retardant (FR) treatment under an exclusive commercial agreement for commercial and military customers in North America. The agreement will result in an immediate financial boost to Alexium while preserving the company’s ability to license the technology to partners in all other territories.

Duro Textiles is one of the United States’ largest dyers, printers, finishers and distributors of textile products. By leveraging technological advances, production experiences and superior quality, Duro is a leader and foremost solution provider for military fabric needs in the US. Duro’s military products range from light to heavy weight fabrics that are used in everything from ultra light-weight-breathable ponchos, tents, sleep systems, physical training uniforms, to the extreme durability of ballistic nylon tactical outerwear. Duro is also a major fabric supplier to the performance apparel, industrial, tactical, home, and hospitality markets. Duro Industries and sister companies Galey & Lord, and Best Textiles are part of Patriarch Partners, LLC, a private equity firm managing $7 billion in assets in more than 70 companies.

Patriarch Partners Textile Platform Managing Director Edward W. Ricci II said they are elated to be entering into this strategic alliance with Alexium to bring a revolutionary technology for nylon to various markets.

“We feel that this technology is truly game-changing and we are eager to further develop and commercialize this exciting technology for both military and commercial applications.”

The eco-friendly flame retardant treatment is based on a new flame retardant mechanism that Alexium has discovered and developed for nylon fabrics.

This innovative technology for synthetic fabrics is based on a unique charring mechanism that extinguishes the flame while preventing any melting or dripping. The properties offer a broad range of applications and we value Duro’s partnership in future development and full commercialization.

Under this agreement, both parties will be working together on commercial and technical roll-out, establishing manufacturing capacity, and supplying customers over the coming ten months with a view to a rapid roll out.

While the specific terms of the license are confidential, the agreement includes an upfront license fee, development cost sharing, machine sales, milestone payments, and royalties based on product sales, and minimum quantities.

Together, Duro and Alexium are targeting a North American current market opportunity in excess of 4 million linear yards of nylon. Duro will also have limited rights to export military fabrics to Europe and the Middle East.

After completing a technical ramp-up and market introduction period, this agreement is expected to establish asolid revenue stream for Alexium and will assist the company in expanding into other technology platform areas.

Specific to these topical FR nylon treatments, Alexium has initiated discussions to establish similar commercial relationships in other global territories.

We are also looking to apply our technology to carpets, synthetic fabric blends, and as polymer additives in materials for non-textile applications.

STrATeGic AlliAnce WitH DuRo textiles execuTiVe mAnAGemenT HiGHliGHt

Mr. Stefan Susta currently serves on the board of Alexium International Group Limited (ASX:AJX/AX:AJX/OTCQX:AXXIY) as Executive Director and on the management team as Chief Operating Officer, with day-to-day responsibility for the operational and commercial activities in the United States.

Based out of the US operating headquarters in Greer, South Carolina, Mr. Susta is leading Alexium’s commercial activities, including business development, licensing, collaborating with commercial and military partners, and day-to-day operations management.

Prior to joining Alexium full time in 2010, Mr. Susta was the president of Tandem Ventures & Consulting, Inc., where he provided direct consulting support to a number of corporate, government and not-for-profit clients, focusing on technology commercialization and business development.

Over nearly three years, his work here focused on business development to capture state/federal government funding, attracting early stage capital, assisting in IP and contract negotiations, developing commercialization and marketing plans, technology transfer, capturing SBIR/STTR funding, and developing successful business strategies to launch new products and technologies.

Prior to Tandem, Mr. Susta was director of commercialization and technology transfer at EMTEC and a technology transition manager for SAIC.

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Alexium announced in June it was expanding its technical team to respond to increased commercial interest and to accelerate the roll-out of Alexium treatments to industrial partners.

DISCLAIMER

This document is not for distribution in the US and alone or with collateral documents does not constitute an offer or an invitation to participate in the issue of securities of Alexium. Any statements, opinions, projections, forecasts or other material contained in this document do not constitute any commitments, representations or warranties by Alexium or its associated entities, directors, agents and employees.

Except as required by law and only to the extent so required, directors, agents and employees of Alexium shall in no way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatsoever nature arising in any way out of, or in connection with, the information contained in this document. Further, should any of the information contained herein change, Alexium does not have any obligation to inform recipients of this document. This document includes certain statements, opinions, projections, forecasts and other material, which reflect various assumptions. The assumptions may or may not prove to be correct. In particular, there is a risk that the timing, scale and delivery of some of the outcomes referred to in this document will not eventuate.

The use of the name or mark of any specific manufacturer, commercial product, commodity, or service in this publication does not imply endorsement by the United States Air Force (“USAF”).

All figures in US dollars unless otherwise stated. Information provided as at 28 November 2011.

A four-part series published in May in the Chicago Tribune, which exposed a deceptive, decades-long campaign by the tobacco and chemical industries to promote flame retardants, has promoted a spate of US government inquiries.

The “Playing with Fire” series revealed that in addition to their toxicity, existing flame retardants are ineffective at fire prevention, and that some manufacturers of flame retardants manipulated scientific studies to conceal that information.

In late June, California Governor Edmund G. (Jerry) Brown Jr. called for a revamp of the state’s 1970s-era flammability standards for upholstered furniture, citing studies that link flame retardants in sofas to cancer and reduced fertility. The overhaul could reduce or eliminate use of existing flame retardant chemicals in furniture nationwide because many manufacturers design their products to comply with California’s statute.

“We must find better ways to meet fire safety standards by reducing and eliminating—wherever possible—dangerous chemicals,” Brown said in a statement.

On July 18, the U.S. Environmental Protection Agency also announced it will conduct a broad investigation of flame retardants.

James Jones, the EPA’s top chemical safety official said the EPA will use its limited authority under the existing law to target several flame retardants, including one chemical mixture that the agency promoted as safe nearly a decade ago and is now widely sold under the brand name Firemaster 550.

The EPA also will adopt a new strategy by the end of the year focusing on a larger group of flame retardants that pose the greatest potential concerns.

“The American public has the right to expect that the chemicals manufactured, imported and used in this country are safe,” Jones said. “The time to fix this badly outdated law is now.” said Mr Jones.

in The neWS: Calls FoR NeW Flammability staNDaRDs

DAViD lAmBerT AppoinTeD AS PRoCess CHemist aND PRoDuCtioN tRaNsitioN maNaGeR

Alexium conDucTS suCCessFul CaPital RaisiNG

in early September, Alexium placed a total of 11 million convertible notes with a face value of 10 cents per note to raise AuD $1.1 m (before costs) to Sophisticated and professional investors. Baker young Stockbrokers limited acted as lead manager to the placement.

The placement has been undertaken to allow Alexium to expand its business in the specialty chemicals markets following on from the recent breakthroughs in flame retardant (fr) nylon and polyolefins as well as the chem/bio capabilities of Alexium’s reactive Surface Treatment (rST) technology.

Alexium will use the funds from this placement to progress its development work in the specialty chemical solutions area, focusing on fr treatments and fr additives. incorporated either as topical finish or additive in the polymer, these flame retardant treatments can add significant value, enable new product applications and address a growing need for environmentally acceptable, more effective fr solutions.

email: info@alexiuminternational.com.auWebsite: www.alexiuminternational.com

operating Headquarters: alexium inc.8 Distribution courtGreer South carolina 29650 uSAPhone: +1 864-416-1060Fax: +1 864-551-4555

alexium international Group limitedSuite 7, 85 Forrest StreetCottesloe WA 6011 AustraliaPhone: +61 (8) 6162 1358Fax: +61 (8) 6314 1623

Alexium has appointed Mr. David Lambert as a key technical member of its development team and is also in the process of hiring additional laboratory support.

Mr. Lambert is a seasoned and highly versatile chemist with nearly 30 years of experience in the supervision, design, development, manufacturing, product stewardship, application, and testing of products. Mr. Lambert served the US military over 20 years and is a retired Lieutenant Colonel with vast supervisory experience in Chemical Corps, Military Police and Air Defense.

David Lambert has extensive formulations experience with both water-borne and solvent-borne formularies including elastomers, auxiliaries, dyes, coatings, and formulated products for a

variety of applications. David Lambert will also add in-plant trial experience, customer support, and process development experience.

David Lambert brings years of experience in analytical and instrumentation methods, development and validation, as well as statistical data processing and is well seasoned in plant scale-up, trouble shooting process improvement and production operations.

We think David will be a great addition to our outstanding technical team and accelerate the development and transitioning of our technologies to our industrial partners.

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