MRF - My thoughts

I have held MRFOA for a while now, and I like the potential of MRL Corporation. I am considering investing more into MRF. I thought id post some of my findings and concerns to share with other holders, or potential holders, to help share the facts and collectively learn more about the company. If anything I've posted is incorrect please let me know so I can correct it. Anything in italics is a quote, taken directly from the MRL Corporation website, or an announcement. If there are any relevant questions that none of us can answer with certainty, I'll make a list and contact the company, and report back with the answers given to me.

Market capitalisation = $11.8m @0.06

Shares on issue = 196.72m

MRF was re-instated to the official list of the ASX on 24 December 2013 following the completion of a capital raising. MRF have 5 tenements in central and south western Sri Lanka, and holds licences to exercise the exclusive right to explore for graphite within 6,300 hectares of land. Historically, the shallow underground workings were mined in the early 1900s using basic techniques. Operation ceased due to lack of ventilation and pump availability, which resulted in ground water. Extensive remnant vein graphite is visible on the surface at all license locations.

Two quotes from past announcements that I found interesting:
MRL’s strategy to fast-tack the start of production and cash flow is underpinned by several key factors, including the fact the Aluketiya project is already covered by a mining licence and an application for a mining licence at Pandeniya is underway. There is also an established track record of high-quality graphite production at these projects and the existence of production shafts at Pandeniya. - From the announcement: MRL begins key testwork on its high-quality graphite (22-10-2014)
and
MRL Corporation (ASX: MRF) is pleased to announce that it is set to begin production at its Aluketiya graphite project in Sri Lanka in the September Quarter after assays returned Total Graphitic Carbon (TGC) grades of up to 99.3%. MRL also advises that rehabilitation and construction work on two historic shafts at Aluketiya is set to start in March and take about two months to complete. - From the announcement: Outstanding assays for Aluketiya (28-01-2015)

The Positives of MRL Corporation
- High potential - Sri Lankan vein graphite is the best quality in the world and with the projected demand increase in the coming years I believe MRF have very strong prospects due to the unique quality of the graphite they have.

- One step graphene - This is what really sets MRF apart and gives it such an amazing blue sky prospect. Graphene has the potential to change the world and cause the next industrial revolution. Getting in on the ground level of graphene could prove to be a very wise decision for any investor.

- Peer analysis - Talga has an MC of $52.58m @0.38. Almost five times MRF. While MRF does not deserve a valuation in that range, at this time, they could easily get there in a short period of time if things go the right way. I believe Talga is the only true peer at this stage.

- Directors skin in the game - While not huge holdings, the directors do hold parcels of shares. Some of these options may have been given to them, but I know they have also bought from market. This always gives me confidence that their interests align with the shareholders.

The Negatives of MRL Corporation
- Lack of communication - This is the big one. The lack of communication from MRF is a worry for me. I'd like to see an investor presentation, or something similar. This is a crucial time for MRF and, a clean and concise presentation for prospective investors to look at, and understand where the company is at, and where it is going, in just a couple of minutes would make a big difference.
There has been a lack of reporting on results. Id like to know where MRF are up to in regards to the "rehabilitation and construction work on two historic shafts at Aluketiya is set to start in March and take about two months to complete."
Some questions id have are:
1) What is the capex? Warwick Grigor has estimated about $10m for MRF to get to production but I'd like to see an estimation and breakdown from MRF.
2) What is the opex?
3) What is the LOM? (I know this is not a straightforward answer with vein mining but an accurate estimate would be nice.)
4) How much production would MRF be looking at to start, and at full production? I know this would largely depend on the offtake agreements.
5) What other infrastructure will needed to be upgraded? Roads, power, water, etc.
As I stated in my opening of this post, I'll call the company with these and any other relevant questions anyone has, and report as a reply to this post.

- Further dilution - With $589,310 at the end of March, and with $406,018 estimated expenditure in April - June quarter. It is not unbelievable to think that MRF will have burned through the $1 million recently raised by the end of the year. Another cap raising will be needed unless funding has be alternatively secured.

- No offtakes - MRF currently have no offtake partners. The company would definitely have to secure offtakes and funding to further the projects. I hope this can happen in the near term, and push into production by years end, or early 2016.

My Conclusion
MRL Corporation has huge potential, and if the stars align for MRF it will be a truly amazing success story for all holders, especially at this price. For me it is a matter of weighing up whether MRF is likely to reach full potential. The risk V's reward ratio here looks promising.

As always DYOR and check the facts. I'm not an expert on SL mining and would welcome the thoughts and constructive discussion of people with more knowledge in this area. Thank you to all the HC MRF commentators for your research and sharing of thoughts.

I have added some information on the projects and directors (and their holdings) below from the company website. #Note that at least some of the information about the projects may be out of date.

The five Projects
Warakapola Project Area
The Warakapola project area is comprised of 2,500 hectares of granted exploration concessions together with a further 167 square kilometers being under application. MRL has commenced exploration activities in the Pandeniya priority area which covers approximately 65 hectares. Within this area there are in excess of 20 historical adits and shafts and waste dumps.
In the March quarter of 2014 MRL will: ​

• Re-enter the main Wallagala adit for underground geological mapping
• Make use of the BM8 geophysical tool to assist in mapping near surface graphite
• Conduct a 20+ line kilometre electromagnetic (EM) survey
• Identify potential drill target areas with a view to commencing drilling in April 2014

Aluketiya Project Area ​

• Located in one of the richest graphite-bearing regions in Sri Lanka
• Long history of graphite production
• Agreement gives MRL the right to explore, develop and mine
• Aluketiya already covered by an Industrial Mining License
• Rehabilitation of shafts to commence late 2014
• Drilling program to start late 2014 – six diamond core holes already drilled
• Logging of available core to be completed by end of November 14.

Pujapitiya Project Area
In the March quarter of 2014 MRL will make use of the BM8 geophysical tool to assist in mapping near surface graphite.
Mining commenced at the Kahatagaha/Kolongaha (K/K) Mining Operations in 1872 and by the end of the 1990s had produced in excess of 300,000 tonnes of carbon as graphite. The operation is managed by Kahatagaha Graphite Lanka Limited (KGLL) and exports 100% of the products produced to major clients in the U.S.A., United Kingdom, Japan, Australia, India and Pakistan.
The Pujapitiya grids also have prolific remnant graphite at surface and numerous abandoned underground shafts and audits. MRL has commenced planning for site geological mapping and underground exploration. During the preliminary site visits several thin graphite veins are visible in the roadway and hillside cuttings. Minor veining is also visible in adit entrance.

Hikkaduwa Project Area
The southern license consists of 10 square kilometers of exploration grids. These grids were selected due to the high occurrence of historical workings and extensive residual graphite at their surface.
Many access roads within the license area are littered with residual vein graphite. This, in combination with historical concrete winch plinths in the area, provides MRL with confidence for the future of the project area for exploration and mining.
Exploration activities in this project area will include: ​

• Detailed geological mapping, concentrating initially on areas surrounding historical workings
• Possible clearing selected abandoned underground workings to provide access for mapping access of underground graphite vein sets
• Geophysical mapping of selected areas

Palinda Nuwara Project Area
The central license area consists of 10 square kilometers of exploration grids. These grids were selected due to the high occurrence of historical workings and extensive residual graphite at their surface.
MRL believes this project area has the potential to host sizable vein graphite, due to the shallow, large adits and shafts that exist.
Exploration activities in this project area will include: ​

• Detailed geological mapping, concentrating initially on areas surrounding historical workings
• Clearing selected abandoned underground workings to provide access for mapping access of underground graphite vein sets
• Geophysical mapping of selected areas
• Diamond core drilling, to establish the continuity of vein sets along strike and at depth

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MLR Corporation Directors (and their holdings)
Peter Hepburn-Brown (Non Executive Chairman) ​

• Nakuru Pty Ltd 201,600 Fully paid ordinary shares
• 1,000,000 Unlisted options exercisable at $0.10 on or before 21 May 2017.
• Mr Peter Gordon Hepburn-Brown 1,000,000 Unlisted options exercisable at $0.092 on or before 31 October 2017.

Craig McGuckin (Managing Director) ​

• CLEMM Pty Ltd Indirect interest in 5,000,000 unlisted options exercisable at 20cps expiring 17 October 2016 Jointly held Craig Robert and Lee Ann McGuckin
• 6,635,786 fully paid ordinary shares,
• 400,000 listed options exercisable at 20cps expiring 17 October 2016
• 620,109 unlisted options exercisable at 20cps expiring 17 October 2016
• 5,000,000 Unlisted options exercisable at $0.10 on or before 21 May 2017.
• 5,000,000 Unlisted options exercisable at $0.092 on or before 31 October 2017. Jointly held Craig Robert and Lee Ann McGuckin
• 450,000 fully paid ordinary shares, 250,000 listed options exercisable at 20cps expiring 17 October 2016

Peter Youd (Executive Director, CFO) ​

• Hallidaf Management Limited Indirect interest in 6,094,794 fully paid ordinary shares.
• Indirect interest in 5,000,000 unlisted options exercisable at 20cps expiring 17 October 2016.
• Indirect interest in 600,000 listed options exercisable at 20cps expiring 17 October 2016.
• Indirect interest in 5,550,000 unlisted options exercisable at 10cps expiring 21 May 2017.
• Kingston Vale Pty Ltd Indirect interest in 144,000 fully paid ordinary shares.
• 3,000,000 Unlisted options exercisable at $0.092 on or before 31 October 2017.
• Terri Frances Youd 420,109 fully paid ordinary shares.
• 420,109 unlisted options exercisable at 20cps expiring 17 October 2016.
• Sarah Frances Youd 100,000 fully paid ordinary shares.
• 100,000 unlisted options exercisable at 20cps expiring 17 October 2016.
• James Lyall Youd 100,000 fully paid ordinary shares.
• 100,000 unlisted options exercisable at 20cps expiring 17 October 2016.
  

Denis Geldard (Non Executive Director) ​

• 3,516,800 Fully paid ordinary shares
• 1,250,000 Unlisted options exercisable at $0.10 on or before 21 May 2017.
• 250,000 listed options exercisable at 20cps expiring 17 October 2016
• 1,000,000 Unlisted options exercisable at $0.092 on or before 31 October 2017.

Chris Banasik (Non Executive Director) (Geologist) ​

• Indirect interest in 500,000 fully paid ordinary shares.