Canadian firm signs deal for 113 Sri Lankan lump graphite mining claims
Friday, 11 October 2013 03:42
Torch River Resources Ltd. (Torch) has announced that it has entered into an arms length non-binding purchase and transfer agreement with Han Tal Graphite Ltd. (Han), a Sri Lankan based holding company, to acquire 113 mining grids with 56 historical mines and exclusive exploration licenses to explore and develop its wholly-owned 113km2 lump graphite claims mining claims in south-west Sri Lanka, many of which were originally artisanal mining operations in the 1920s and 1930s.
In many cases Han believes the veins associated with these operations may remain open 10-15m below the surface of the pits offering potential for near term production.
The Han claims have been described by the Sri Lankan Geological Survey and Mining Bureau (GSMB) as comprising some of the best graphite areas in the country. Sri Lanka is known to be underlain up to 90% by proterozoic high grade metamorphic rocks with proterozoic sediments, particularly along the coastal regions. The proposed Han claims are geologically part of the Highland Complex (HC) of Sri Lanka and consists entirely of granulite grade proterozoic metamorphic rocks.
Rocks in and around the project on a regional scale are charnocktic gneiss, hornblende biotite gneiss, garnet sillimanite graphite gneiss, grantic gneiss and minor calc gneiss. The proposed project areas are mainly concentrated within 1-4km wide charnocktic gneiss and hornblende biotite gneiss rock bands, and in some cases several kilometers long with NW-SE trending rock bands.
The claims are also located approximately 45km from the Port of Colombo, the largest and busiest port in Sri Lanka. Paved roads provide easy access to and from the claims and the port. Han has also established in-country relationships with suppliers, mining personnel and the local Government authorities.
Torch estimates that the mines could be reactivated within 12-24 months of commencing the necessary start-up work, which would include the completion of a resource estimate and receipt of a positive economic feasibility study to support the viability of the mines.
Over the past year Torch River has rapidly moved toward the development of lump/vein graphite deposits in both Sri Lanka and Quebec. The company believes that the agreement with Han Tal is a step forward in its efforts to leverage the cost and production advantages afforded in mining and marketing lump graphite.
Of the three widely-established graphite types – flake, amorphous, and lump – only lump graphite with its high purity carbon content offers the opportunity to achieve finished product that historically has a low cost of mining per ton, and in turn compete favourably with any other low cost developers in the world. The fact that high quality lump prices in excess of $2,000 can also be realised and that it can be used in all of the same applications as flake opens up the potential for a wide range of global market segments for lump graphite.
Torch CEO Paul Ogilvie commented on the new claims: “We are extremely pleased to acquire such a vast amount of grids in these prime graphite regions. Our entire graphite team and our Board of Directors believe this is an ideal fit for the company and that the Han project will further enhance and differentiate Torch River towards our goal to be one of the leading emerging lump graphite producers in the world today. Our goals in this regard are clear: build a great company by leveraging the clear economic advantages associated with lump graphite; create outstanding value for our shareholders; consistently exceed our customers’ expectation with new and innovative graphite products; and create fulfilling opportunities for our employees and the communities in which we work. We take all of these responsibilities seriously and are confident that our new relationship with Han Tal Graphite is a positive step towards achieving all of those goals.”
Torch and Han plan to move quickly work towards a definitive Mining Claims Purchase and Transfer Agreement. As consideration for the transaction the company will at closing make a cash payment of $300,000 CDN and will issue 5,000,000 (with an aggregate deemed value of $500,000) shares to Han. A further tranche of $750,000 CDN and 7,500,000 shares will be issued under commencement of full production, the terms of which will be defined in the definitive agreement. There has been no finder’s fee paid.
Torch will prepare a 43-101 in the coming months and further technical information will be disclosed once the report is completed. Both companies have commenced their respective due diligence processes including site visits, operational assessments, and geophysical test work on representative samples from each of the new claims.
Extensive historic mining in Sri Lanka has dated back to 1675. In 1899 graphite accounted for Rs.2.2 million (or about 22% of Sri Lanka’s total foreign exchange earnings). The highest historical production of 33,411 metric tons in a single year was in 1962. Sri Lanka’s current annual production circa is 9,000-10,000 tons from two underground mines, one of which is Kahatagaha Graphite (a State mining company) and Bogala Graphite PLC, a private company wholly-owned by Graphit Kropfmuhl AG Group (a German based group).
Kahatagaha Graphite announced record revenues in 2012 of R556m (US$4.2m) and gross profit of R183m (US$1.4m). Sri Lanka is the only country that produces commercial quantities of high grade vein graphite with carbon content greater than 90%Cg (premium product). 2012 vein graphite prices averaged US$1900/t-US$3500/t.
Government initiatives to monetise dormant assets have seen a series of overseas investment in neighbouring licences. As a result Sri Lanka has seen strong international and domestic demand for its graphite products. Sri Lanka itself has experienced an average GDP growth rate of over 6% from 2003 until 2012, reaching a peak in 2010 of 8.6% in December of 2010. This has resulted in a robust local economy that has brought increased stability to the business and political sectors. In this regard the Sri Lankan Government has taken steps to promote foreign private sector investment by easing the project approval process and improving it infrastructure across the country.
Natural graphite is a global commodity with applications across a broad section of industrial and consumer products. The worldwide market is generally reported to be approximately 1.2 million tons per year and has been largely dominated by exports from China for much of the past 20 years. That situation has been changing, however, as internal consumption patterns and export restrictions in China have increased. As a result, the need for new, reliable, and cost-effective supplies of graphite has become a topic of concern for many graphite users.
In Canada as many as 10 companies are seeking to quantify and build flake, amorphous or lump graphite operations. This includes Torch River’s efforts to develop three lump properties in south western Quebec. Lump graphite opens up the opportunity to create low-cost operations which in turn have the potential to keep Torch in the race to supply the growing global graphite markets.
Increased domestic demand in places such as China, as well as demand due to new applications such as batteries in hybrid electric vehicles has led to projections that an additional 200,000-300,000 tons of graphite per year may be required over the next five years.
Lump or vein graphite is considered to be one of the rarest, commercially valuable, and highest quality types of natural graphite. It occurs in veins along intrusive contacts in solid lumps and is currently only actively mined in Sri Lanka. As a result of the carbon content typically found within lump/vein graphite, production costs are normally be lower than flake or amorphous graphite recovery.
Lump graphite processing techniques can include everything from hand sorting of large concentrated samples to standard crushing, grinding, froth flotation and milling. Lump/vein graphite is suitable for many of the same applications as flake graphite giving it a distinct competitive edge in terms market prices and product applications.