If Merelani was off the cards I may be thinking something...

If Merelani was off the cards I may be thinking something similar.  With Epanko alone realising gains in the share price may take longer..but lets look at VXL and their margins at Uley to gage an idea of the potential for Merelani.

VXL are going to spend roughly 34 million to more than triple the capacity of the Uley graphite mine to 50,000 TPA from the current capacity of 14,000 TPA.

Capacity currently at Merelani is 15,000 TPA.  I would like to see a capital spend of 15-20 million to bring capacity up to around 35000 TPA for Merlani.  That will be phase two.  They can refurbish obviously first at a lower price and just get producing at the name plate production of 15,000 TPA.

Uley have determined a basket price for the product at 1400 a tonne.  They believe that net they will grab 6 million.

"Revenues of $11.5m are estimated to be achieved based on an estimated average price of US$1,400/t, based on the various mesh sizes within the Uley orebody. This provides circa $6m net to VXL."

http://www.valenceindustries.com/pdf/2014-02-02-060400VXL-20140109.pdf

They are probably estimating all in costs at Uley to be at roughly $650 a tonne.  No doubt we will have lower all in costs associated with Merelani mine production per tonne.  The mine was shutdown when graphite prices were 500-600 a tonne?  Lets just say all in costs are $600 a tonne.  I expect them to be lower.  Our basket price at roughly $1600?

We hopefully should clear based off 15,000 TPA roughly 24 million revenue.  Say circa 12 million net to KNL.  If we ramp up production and double capacity..closer to 24 million net.  These are all extremely rough estimates but when you assess the profitability of the Uley operation they make sense.  I also think im being way too conservative.

It will be interesting to see how profits etc are worked out.  Royalties to paid to Stamico and Richland based off per tonne produced?  Division of profits?