Hi
@downsyde ;
MRL Corporation is so oversold you will be fine!
The long term horizon is not as far away as some would imagine; many still haven;t adjust to this new market of bubbles and inefficiency.
Things move further and faster then ever before and I see the last two years as just the first few moments of a Rocket launch!
A Rocket expends half its fuel getting off the Ground!
I think all the time-frames are wrong. They are being aggressive and that means Capital. Like the Chinese memo I shared awhile ago about Graphene the world is racing and pouring all their capital into not being left behind and SL Vein Graphite is the best and the hundreds of historical mines on MRL Corporations 5 projects barely go down 25 meters!
Capital - Labor - Production; this is what it is all about !
In my opinion MRL Corporation is one for the Text Books...
Structure is vital as always in assessing things right now and also management. Money follows Management and never has this been more true then with MR Grigor entering the world of Graphene. He is spot on with this one i think because the numbers we got out in the conversion and time it took was exciting even for a nerd like me!
Few things fire me up more then the sound of the TARDIS ! But the Figures they got from SL Vein was remarkable and I am still excited; in part because Australia is leading the way here and has integrity and will do right by Sri Lanka as well. Australia has allot of Soft Power that MRL Corporation can tap into in my opinion.
I have still allot more research to share; my favorite one so far is the evidence that the market is doing the grunt work.... For Example:
http://www.*.com.au/companies/news/...-project-with-production-potential-57010.html
This is another great example Downsyde in case you did not see it:
Review of MRF
http://www.newingonstocks.com/review-of-mrf/
Wednesday 12 August
MRL Corporation Ltd is looking to produce graphite and graphene from its Sri Lankan deposits. I bought some shares (ticker MRF, price 7.2¢, undiluted mkt cap $14.2m) on Monday at 5.6¢ and thought it would be useful to outline the fundamentals.
There are 196.6 million shares outstanding, comprising 191.7 million shares listed on ASX and 5.0 million shares escrowed until 24 December 2015. There are also 49.4 million thinly traded ASX-listed options (ticker MRFOA) exerciseable at 20¢ by 17 October 2016 (they last sold at 1.1¢ a week ago, with the current quote spread being 0.6¢-1.1¢). Finally there are some unlisted options, being 54 million exerciseable at 10¢ by 21 May 2017 and 12 million exerciseable at 9.2¢ by 31 October 2017.
MRL had a cash position of $1.05m at 30 June 2015 after spending $0.5m on operating and investing activities in the quarter. The company had raised $1m of equity capital in May by placing 25m shares at 4¢ to
“sophisticated” investors.
The MRL board of directors has been relatively constant since its ASX listing in January 2013. The major personnel are mining professional Craig McGuckin (CEO) being the managing director and Peter Yound (CFO) being the other executive director (albeit that Yound stepped down for a period due to bankruptcy proceedings).
There is one substantial shareholder, being Peter Peterson, head of Corporate division for Perth stockbroker CPS Capital. He owns 10.9 million shares or 5.3%. Other significant shareholders are Craig McGuckin and family with 7.1 million shares and Peter Yound and family with 6.9 million shares. Both executives also own a swag of options.
MRL Corporation bought into Sri Lanka in 2013 after it had to give up on coal in Mongolia because the government there had turned against foreign investment (the name MRL is derived from Mongolian Resources Ltd). MRL has since acquired additional tenements in Sri Lanka and currently its many licences cover some 12,000 hectares on my reckoning.
The Sri Lankan deposits were mined some decades ago when the country supplied a significant proportion of the world’s markets for graphite, but operations were interrupted due to the civil war which ran for 26 years until 2009. Sri Lanka currently produces about 5,000 tpa.
The graphite is highly crystalline and is contained within narrow (20-30cm) steeply-dipping, exceptionally high grade (92-99% Cg) veins. This type of deposit is thought unique to Sri Lanka. The veins have to be accessed from underground using overhead retreat stoping and, to allow for a working width, a certain amount of waste rock must be removed to expose the graphite. The graphite can then be stripped off the stope wall and hauled to surface, whilst the waste rock can be left in the stope to support the walls. A number of veins would have to be mined to supply a central process plant in order to get sufficient scale of operation.
No resource estimates can be made with any confidence without a huge amount of drilling, and MRL considers that could not be justified on cost grounds. It drills for structure (and currently, to obtain samples for metallurgical testing), not grade. So there are no estimates of mineral resources, let alone ore reserves.
The cost of mine development prior to production will be low because of the presence of old shafts and workings, which can be rehabilitated. The work is well advanced and extraction of graphite is scheduled by the end of this calendar year.
Mining cost and underground operating risk will be relatively high, but processing cost and capital cost will be low because of the high grade of the ore. Indeed, the ore could be sold in its raw state, if desired; Sri Lankan graphite in this form fetched US$1,750 in 2013/14. MRL expects to incur cash costs of US$290/t for extraction of bulk samples, and full cost including amortisation of capital is put at US$600/t.
Processing the graphite would deliver higher prices than selling it raw. In January it was demonstrated that acid leaching can upgrade 93% purity raw graphite to 99.95% purity, which is battery grade and could fetch over US$5,000/t. Further processing could produce spherical graphite which sells at a much higher price again.
MRL has stated that it expects to make commercial sales of graphite this year from its underground mining operations (and presumably the material will also be used for larger scale metallurgical testing and provision of samples to potential customers). The company has not yet provided any information on intended mining rate, nor capital cost, nor the overall production and sales strategy.
In the absence of such information from MRL, a 19 page report on MRL published in November 2014 by CPS Capital (written by Peter Peterson?) is included on the company’s website and provides some guidance. A table apparently sourced from MRL contains some interesting information. For a basic small-scale operation selling 5,000t run of mine raw graphite of less than 95% purity from a number of mining operations, the assumptions included a capital cost of under US$5m, an operating cost of US$600-650/t and a product price of US$1,700-2,000/t, implying annual EBITDA of at least US$5.5m. Not bad for a company with a market cap of under $20m.
Another scenario outlined was production of 11,000 tpa run of mine graphite, upgraded to 10,000 tpa of 99.99% purity, thence upgraded to 5,000 tpa spherical graphite on an assumed yield of 50%.
Capital cost was put at US$31m, operating cost at US$1,200/t and product price at US$9,000/t, implying annual EBITDA of US$39m before royalties. The after-tax NPV was put at US$158m using a discount rate of 10%.
These scenarios have been superseded somewhat by subsequent MRL announcements on the potential to produce graphene, which is the holy grail for graphite producers because it could sell for in excess of US$50,000/t once a market is established.
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.
The one niggling factor in the back of my mind is that Sri Lanka is far more risky than Sweden. Although economic policies are broadly supportive of business and economic growth, as evidenced in GDP statistics of recent years, ethnic tensions remain a threat, the political system is fragmented with generally weak coalition governments, large fiscal deficits are occurring, public debt is high and corruption is endemic.
Expert Euler Hermes puts Sri Lanka on a C3 (sensitive) rating, the C being for medium term country risk on a scale from AA to D, and the 3 (sensitive) rating being for short term risk on a scale from 1 (low) to 4 (high).
For perspective, PNG and Mozambique both have the same rating as Sri Lanka, while it would come as no surprise that Australia and Sweden are both rated AA1 (low). It helps that the legal system is based on the British common law system and that English is taught and spoken as a second language.
Political risk aside, I know which share I would prefer to own.
TLG looks great but MRF looks phenomenal.
I still need to do a bit more work on MRL and on graphite and graphene markets and their potential, not having had time to do so at this point. Among questions I would want answered are:
What other operators are in Sri Lanka and what are their prospects?
Does MRL have the best deposits in Sri Lanka?
Could other producers outside of TLG and MRL produce commercial quantities of graphene as cheaply? Perhaps they haven’t yet tried to do so?
How quickly can the graphene market develop and what prices are likely to be available for the products?
So there are likely to be updates made to this review over time.
Finally, looking at the chart, it can be seen that yesterday the shares jumped from the previous close of 5.7¢ to as high as 9.1¢ before settling at 7.2¢, a rise of 1.5¢. That was in reaction to the announcement on graphene yields. The shares have now established support on the uptrend line I have drawn, while resistance is apparent in the
12-14¢ range. 
Dare I state that a breakout above that level would suggest a target of about $1 per share?
http://www.newingonstocks.com/review-of-mrf/
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I believe this Bears scrutiny because it is emblematic of the market taking the Data and forming Logical Conclusions and Deductions. I formed a similar conclusion to this Review years ago...
Value Investing is about finding those Cases where the Market has missed completely the Value... from the Science of SL Vein to the Drastically Low Capex and Opex to the Macro Drivers (There is strong links between growth of a nation and the growth of small caps into mid-caps to 75%+ Chance of the Vein producing.
Many Investors who are Sentiment Driven don't really understand that the 200 dma is as good as random from a maths point of view... (That being said I have come to appreciate the skill of TA since coming to HC - They have really impressed me) What is not random is the Value and right now at this early stage when the risks are high (until production when they drop significantly) instead of chasing Markets or Waves it is far better mathematically to start paddling ahead of the Wave; particularly going against the other Surfers.
In general Long-termers/Value Investors don't talk shop because they compound and stay as quiet as a church-mouse. Hence Value investing is not really well known but I think the Balance Sheet Crowd is going to make a come-back.
MRL Corporation is definitely a wonderful case for everyone to get into - To learn about Peer Group Analysis and LOM and Capital Structure and Costs of Mining...
One thing that stands out in my mind is how many failures I have studied that would have succeeded if their OPEX and CAPEX were not so high or their DEBT...
They did everything right but were just too fat to convert Assets into Profit....
Obviously I could be 100% Wrong!
Still it comes back for me the simple things like Labor or Capital or Production!
Kind Regards
