I wanted to consolidate some important data points and really look closely at the Price of Vein and MRL Corporation along with it...
1/ The U.S.A. is a 100% importer of Graphite, and has recently joined China and the European Union in classifying Graphite as a critical strategic material. This has far reaching consequences in my opinion.
2/ A further 344km2 are currently under application for licence. Assets are value.
3/ Very little upgrading and processing is required to make a high-quality saleable product with Vein Graphite.
4/ Vein graphite is the rarest, most valuable form of natural Graphite. A true safe haven commodity. The Vein Graphite difference from flake is its crystal structure, the end-users use it in specific applications, it is the most competitive with China.
5/ Large tons of graphite don't actually impress as much as you might think. Finding buyers for all those tons is a massive hurdle.
6/ Smaller projects that hit revenue targets are intrinsically valuable. MRL has set sound, achievable targets and that extrapolates into revenue targets.
7/ Supply shortages are to be expected by 2020. A predicted shortage of 100k to 130k tons per year as demand by the BRIC nations expands.
8/ End-users purify lower-grade graphite in-house to save costs and to pay mines less.
9/ End-users are starting large volume buying again after the 2012 dip.
10/ Graphiters are quicker to market all round beating out base and precious metals.
11/ It is easier for small companies to adapt and change to meet their end-users product specifications, allowing them to set the higher price. Larger companies often have invested in one set of specifications and find the costs of changing exorbitant.
12/ Vein Graphite is special, many graphiters face large metallurgical processing costs the Vein does not have. Low cost plays a part whether or not to invest long or short. If the costs are high that has to weigh upon decisions because delays snag up confidence.
13/ MRL can keep capital costs low, this is very important to see in the budget and the management. Paying in shares to keep the management strong is one of the best ways to keep down capital costs. Another is mining in an emerging nation with tax and currency advantages.
14/ Vein graphite is a niche market supplied only by Sri Lanka. Graphiters are at the mercy of the End-users because they have specific requirements from their input material to their finished product and any change to the production line costs. End-users favor smaller tons of Graphite that meet their needs and will favor MRL for that alone.
15/ MRL is not beholden to anyone but the shareholders, they have excellent kingmakers MR Grigor and can make JV's and deals with End-users early on in the exploration, mining and shipping steps that they must take.
16/ Whenever low-cost production can be sold at the premium without delays revenue follows.
IRR - Internal Rate of Return.... Small consistent tons allows for one single customers. Multiple customers multiple headaches.
No wonder many are watching and waiting and wondering about MRL Corporation !
No WONDER:
In May MRL announced testwork results on drillcore material which demonstrated that graphene can be extracted in a readily scaleable single-step process using electrochemical exfoliation . The only other graphite company yet to have demonstrated this important advantage is Talga (TLG), using a wet physio-chemical technique on its Swedish ore.
On 3 August MRL announced provisional agreement to pursue graphene commercialisation outcomes with Imagine Intelligent Materials Pty Ltd of Australia. MRL said that the agreement will provide access to a network of advanced manufacturing enterprises and scientific expertise, to investigate the full spectrum of the graphene value chain.
Yesterday MRL announced that further preliminary testwork has suggested the yield of graphene from its graphite could approximate 50%. They went on to state that further testing could increase the yield to more than 90%.
I had thought that because of its graphene potential Talga Resources Ltd (ticker TLG, price 35¢, mkt cap $49m) would be the best performer of all of the ASX-listed graphite companies, but MRL now looks far superior. Here is a quick comparison:
In September 2014 Talga released the results of a scoping study based on an opencut mine at a 4:1 strip ratio producing 250,000 tpa ore grading some 24% total graphitic carbon (TGC). The process plant would upgrade this to 40,000 tpa of graphite concentrate grading 80-85% purity (which could be sold for $480/t) and 7,000 tpa of graphene grading 99.9% purity. However, it was thought that only a limited tonnage of the graphene could actually be sold as graphene because of the limited market for the material at this pioneering stage of the industry, and Talga assumed, for the sake of the exercise, that 1,000 tpa would be sold as graphene with the remainder sold as high quality graphite priced at US$1,600/t. That would result in annual project revenues of some US$84m. Capital cost was put at around $30m. Operating costs were put at $84/t of feed (i.e. $21m annually) and that included processing costs.
MRL could achieve revenue of US$75m from mining say 5,000 tpa (continuing with the example provided by CPS Capital) and producing 1,000 tpa graphene priced at US$55,000/t and 4,000 tpa of high quality battery grade graphite priced at US$5,000/t, at a capital cost probably well under $10m, at much lower operating costs (a cost of US$600/t for the raw graphite would amount to $3m annually, to which must be added the cost of processing) and probably earlier to boot.
Sri Lanka is one of the fastest growing economies with a GDP of 8% between 2010 and 2012
The Sri Lankan government is promoting foreign private sector investment
There is excellent infrastructure and experienced mining labour available
The country is English speaking with a high literacy rate of >92%
Sri Lanka is run by a democratic government, and is a member of the Commonwealth
There is excellent exploration and mining tenure available
Subject to Board of Investment approval to mine high grade vein graphite for export, MRL may receive:
A tax free holiday period
Duty free imports of capital equipment
Streamlined repatriation of profits
Why Sri Lanka?
1/ Sri Lanka is the only region in the world that produces vein (lump) graphite with a carbon content of more than 90%C in commercial quantities.
2/ The 25-year civil war ended in May 2009.
3/ The Sri Lankan government is keen on promoting foreign private sector investment, with graphite being the country's one of most important mineral products.
4/ Sri Lanka is underlain by Proterozoic high grade metamorphic rocks with Phanerozoic sediments being restricted to the coastal region.
5/ Sri Lanka currently produces a very small amount of graphite about 4,000 metric tons (MT) yearly, according to the US Geological Survey (USGS).
6/ But Sri Lanka's graphite is a unique product. The country produces lump and chippy dust graphite and is the worlds only source of these particular materials.
7/ Lump and chippy dust graphite are the highest-value graphite products found globally, the USGS notes. In 2012, prices for Sri Lankan lump and chip graphite averaged $1,990 per MT, significantly higher than prices reported for other products, such as flake or amorphous graphite.
8/ The significant potential application of modern geophysical techniques. Electrical surveys are a simple and effective way to check large amounts of ground for graphitic targets. By looking at the under-explored ground around Sri Lanka's major mines, incoming explorers have a high probability of making significant finds.
