Vein graphite is the most valuable and purist occurring natural graphite in the world.
It occurs in narrow vein systems that are very amenable to modern low cost underground mining techniques, but this very rare form of graphite is only found on a commercial scale in Sri Lanka.
MRF is the most advanced ASX listed vein graphite exploration and development company in Sri Lanka with five 100% owned project areas ranging from early stage exploration to near term production assets on granted Mining Leases with crucial land access agreements already in place.
Sri Lanka, in civil war for 26 years which concluded in early 2009, has never seen modern mining techniques adopted to explore and mine for graphite. The country produced more graphite in 1916 than it did in 2013. Subsequently the market for Vein graphite is small, due largely to supply side restrictions and a tightly controlled market. MRF has the potential first mover advantage and the opportunity to open up new markets for the much valued high purity graphite.
We believe the Sri Lankan vein will beneficiate to high value products like battery grade spherical graphite at a significantly lower cost than existing competitors. Vein is higher grade than traditional flake, cheaper to purify and consists of a higher crystalline structure than synthetic so is more electrically, thermally conductive and likely amenable to spheriodisation. This combination of properties means that once commercially available, MRF’s beneficiated graphite will be in high demand and in theory could command prices as high as USD $10,000/tonne.
The company’s initial strategy is simple; identify commercially viable vein deposits, develop and incrementally place into production. A low CAPEX/OPEX production template will be applied to individual deposits which incrementally build output while the early cash flow funds the ongoing re-development of an already identified 40 plus historical sites. With refurbishment of some shafts already under way and the recent acquisition of Aluketiya on granted Mining Leases, MRF plans to be producing by as early as Q2 15.
Unlike other listed graphite companies MRF’s strategy is targeted clearly at the highest growth segments of the graphite market, high purity graphite will enjoy increasing demand from emanating Future Use electronic and clean energy applications. The blue sky could come from the in country vertical integration of MRF’s ROM (Run Of Mine) product to high purity, high value products like spherical graphite or nuclear graphite.
And unlike other ASX listed graphite companies, who will only produce a small quantity of graphite suitable for the Future Use markets, potentially almost all of MRF’s product will be suitable for this high value sector of the graphite market.
The company has established an adit at Pandeniya and recently commenced a bulk sampling program focused on metallurgical testwork, research and marketing. The first samples have arrived at Wuhan University of Technology in China and the Nagram Metallurgical Group in Perth with results due by years end.
The company is due to commence off take conversations with an understandably excited demand side who, until now, have been unable to secure constant supply of this valued material. This is evident by the strong investor support the company is already experiencing from Chinese and Singaporean investor groups. Demand for Future Use electronic and clean energy applications is set to grow, would be buyers of Sri Lankan high purity vein graphite have been restricted by issues of scale and secure supply. With the introduction of modern mining MRF could be the answer to ensure cost effective scale to the supply side of Sri Lanka’s rare but valued vein graphite.
Sri Lankan graphite deposition model is best described from the ‘bottom up’: tension fractures formed in the metamorphic sediments, caused by the folding of the sediments, creating ‘conduits’ for the hydrothermal deposition of high quality vein graphite.
Historically, mining of these veins has found the veins generally increase in thickness and grade quality with increasing depth. Graphite veins generally dip steeply at –70° to near vertical, enabling ‘narrow vein’ extraction mining techniques similar to those used on narrow vein, high-grade gold deposits. The method commonly used is an overhead retreat stopping technique where the high-grade vein graphite is mined and hauled to surface without contamination.
The graphite selvages, in contact with the surrounding waste, is hauled to surface and stockpiled for upgrading. The balance of the waste is used to fill the floor of the stope. Due to the nature of the vein graphite, it is anticipated vein widths of ~25cm, using narrow vein mining techniques can be economically extracted from underground operations.
About Graphite
Natural graphite occurs in three forms: amorphous graphite, flake graphite and the most rare and highest quality form being crystalline vein graphite. Sri Lanka is famed for being the only commercial producer of crystalline vein graphite (lump or Ceylon graphite), the highest quality of naturally occurring material in the world.
The quality of vein graphite produced in the country has a purity level in excess of 90% TGC (Carbon as graphite) which means little upgrading and processing is required to make a high quality saleable product.
Amorphous (micro crystalline) graphite is the least pure form of naturally occurring graphite and commercial deposits usually have a carbon content of 70-85%, and are found as lenses or lumps with flat fracture cleavages. It is normally formed by metamorphism of previously existing anthracite coal seams.
Flake (crystalline) graphite is the more common form of graphite and typically has carbon content in the range of 80-99%, an d is usually formed in metamorphic rock in concentrations of 5%-12% of the ore body. Mining and processing of these deposits is similar to open pit gold or copper mines, requiring ‘large scale’ mining and processing to extract the graphite.
Large-scale mining and processing plants typically equates to high capital expenditures and relatively high operating costs.
Vein (crystalline) graphite is the purest form of graphite with TGC grades typically >90%, with some grade as high as 99.5% TGC. Mining vein graphite may be considered analogous to high-grade gold vein mining, requiring considerably less capital expenditure when compared to large-scale open pit mining. That is, development, mining equipment and processing plants will be of a significantly smaller scale. Operating unit costs will also be lower than those for typical large-scale open pit mining.
I think the market is asking the right questions. I also think the market is still in general ignorant of the massive forces coming down on them and as we can see from MR Grigor's announcements this year many major players must be considering the jump over because of the impact of Graphene on their Commodities.
These announcements in my opinion have to be taken with absolute seriousness...
Kind Regards
MRF Price at posting:
6.6¢ Sentiment: Buy Disclosure: Held
