With FGR only metres away from producing its own SL vein...

With FGR only metres away from producing its own SL vein graphite and becoming a “Producer” let’s have a look at what moving from Explorer to Producer really means.

There are only two major mines in Sri Lanka producing vein graphite at the moment - Kahatagaha and Bogala mines. Previously Kahatagaha and Kolongaha mines were working as two mines and operated since 1872. Presently these two mines are amalgamated and work as a single mine under Kahatagaha Graphite Lanka Ltd (KGLL).

Kahatagaha Mines are located in North Western Province of Sri Lanka at Maduragoda, Dodangaslanda in the Kurunegala District, approximately 90 km. from the capital city of Colombo, and managed by KGLL. It is a fully government owned public limited liability Company, purviewed by the Ministry of Industry and Commerce and the shareholder being Secretary to the General Treasury.

1. KGLL
- Producing 80 tonnes monthly, and is planning to increase production to 125 tonnes monthly in 2013

- Currently mining at a depth of 350m (1,100 feet)
- Minimum 90% purity with majority by weight being lump type at 95% carbon, +10mm

KGLL is one of the high-value mines accounting for Sri Lanka’s current output of lump and chip graphite. The mine has been in production since 1872 and reportedly produces a product with total graphitic carbon content greater than 90%.

2. Bogala Graphite Ltd
- a 90%-owned subsidiary of Germany’s Graphit Kropfmühl AG (a part of the AMG advanced materials grouping)
- Producing 250 tonnes monthly from one single vein mine
- Being mined from both ends at 2,299 feet from underground
- Was producing 6,000 tonnes of value-added graphite annually prior to the global recession and restarted operation at its Ragedara vein mine in July 2012.

The German company entered the Sri Lankan sector in 2000, buying control of the Bogala graphite mine, a historic operation dating back to 1847. 25-year civil war ended in May 2009 (8 years ago) and has been stable ever since. Sri Lanka has been mining graphite for 200 years Carbon content of more than 90%C in commercial quantities.
The German company was producing throughout the civil war anyways. But, with the recent fatality at Bogala and pause on production, only KGLL is producing at the moment.

Note: Both KGLL and Bogala’s shafts are over 650 metres deep. FGR shafts are 40 metres.

Here’s a bit more about KGLL
https://www.facebook.com/pg/kahatagahagraphite/about/?ref=page_internal

KGLL Mine is 2000 feet (610 meters) deep which makes it is the deepest mine in Sri Lanka and accessed by 2 shafts. The one at Kahatagaha is 1132 feet (345 meters) and Kolongaha goes up to 330 feet (101 meters).

The below shaft bottom access is by a series of winches up to 2000 feet (610 meters). Main winch is operated to send underground workers up to 1132 feet level to reach up to 2000 feet level.

Why is KGLL important? FGR just signed an exclusive 2 year sales agreement with KGLL.
http://www.firstgraphite.com.au/attachments/article/144/20170112-Sales Agreement.pdf

- Binding agreement to purchase 100% of Kahatagaha premium grade vein graphite for a two year period.

- Strategic supply will underpin the Company’s low-cost graphene production strategies and allow for accelerated graphene production capacity

- Certainty of KGLL material will augment the Company’s own mine activities going forward and enable an acceleration of presence in the vein graphite market

- Confirmation of strong relationship with Sri Lankan authorities that give FGR a strong competitive edge

Note: Bogata has only 1 shaft and has been producing for 150+ years. KGLL only has 2 shafts, yes just 2 shafts and has been producing from those 2 shafts for over 100+ years!

FGR has been granted the first (and only) new underground graphite mining licence in SL in 25 years!!!

FGR is also getting 3 shafts up on its own!!!

And in one of those shafts it has also discovered an unprecedented and historic vein of 1.72m at 99.8%!!!

IMO this is FGR monopolising the premium SL vein graphite market for at least the next 2 years. No other foreign company is even close to producing their own, or have a mining licence to do so, and many have already failed so far in the process. FGR has secured the supply of this unique and strategic resource for the graphene revolution.

Look at this KGLL training presentation


What I find interesting is on slide 4. It shows how multiple veins are clustered together allowing for multi vein ore recovery. I’m assuming FGR is working with KGLL to leverage this knowledge and KGLL are leveraging FGR’s graphene innovation to develop this scarce and untapped commodity jointly moving forward.

At the moment Sri Lanka is a developing country with low labour costs, and this is another competitive advantage to the rest of the world and this in turn adds to FGR’s low Operational costs.

FGR do not, and have not needed to finance a mine. FGR have developed its shafts already and are only a few metres from bringing out its own strategically scarce resource.

FGR will not be in any debt, or carrying debt moving forward (because of any mining capital expenditure or works) and hopefully producing in the coming weeks!!!

IMO, bring on the Monopoly and Competitive Advantage.