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SMG Indium secures $7.5 million funding

SMG intends to issue 2 million shares of common stock at $3.75 per share and expects to use 85% of the gross proceeds to purchase and stockpile the metal indium and 15% for general corporate purposes

SMG Indium Resources (SMG) has entered into a definitive purchase agreement to sell $7.5 million of its common stock in a private placement offering to entities affiliated with Raging Capital Management LLC.

"We are pleased that our largest shareholder, Raging Capital Management LLC, continues to believe in our corporate vision and has decided to increase its investment in our Company. We have agreed to issue common stock at a 10% premium to the closing bid price and essentially at parity to our Net Market Value ("NMV") which was last reported on our website on December 31, 2011 at $3.76 per share. With the proceeds, we will continue to expand our strategic stockpile of indium," said Alan C. Benjamin, chief executive officer of SMG Indium Resources.

"We believe the supply/demand fundamentals of the indium market are very compelling, and we are excited to be shareholders in what we believe is the world's largest strategic stockpile of the metal. Further, the Company has successfully acquired an additional 25 metric tons of indium since the initial public offering," said William C. Martin, Chairman and Chief Investment Officer of Raging Capital Management, LLC.

Indium is strongly linked to the burgeoning digital economy. Indium in the form of indium tin oxide ("ITO") creates the optically transparent electrodes that drive LCD displays on TVs, computer monitors, laptops, tablets, smartphones and touchscreens. The demand for LCD glass has continued to grow even during the recession. Additionally, the unique chemical properties of indium compounds make them essential to fabricating products in some of the most exciting emerging technologies, including LEDs, high speed semiconductors in the form of InGaAs and InP as well as the next generation of thin-film solar panels known as CIGS.

Primary production of indium is constrained by both physical occurrence (it is produced entirely as a by-product of industrial metal smelting) and by geographic occurrence (over 50% of the world's primary production and in excess of 70% of reserves are located in China). Primary production has been stagnant for the past five years and has not been rising to meet growing demand.

Last year, the Department of Energy released its first Critical Materials Strategy report. The report found that four clean energy technologies used materials at risk of supply disruptions in the next five years. In that report, the supply of five rare earth elements and indium were assessed as being most critical in the short term.

The Company believes the indium market is in a structural supply deficit. However, economic uncertainty, generated by the fiscal crisis in Europe, has led display manufacturers to draw down inventories, even as end-user sales of TVs, tablets and cell phones have continued to grow.

This has resulted in lower than expected demand for LCD driven raw materials and as a result the current price of indium has fallen to $570 per kilogram. Although the price of indium can always drop further amidst uncertainty, the Company believes this price level represents an excellent opportunity to further increase its stockpile.

An investment in SMGI represents an investment in a Company whose value is tied to a commodity linked to growth in the technology sector, as well as an investment in a hard asset, indium bullion. We believe SMG Indium Resources Ltd. maintains the largest strategic stockpile of indium outside of the People's Republic of China.
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