MRL Corporation (ASX:MRF) is on the fast-track to production and cash flow, delivering bulk samples from its Aluketiya and Pandeniya high-grade graphite projects in Sri Lanka to Wuhan University of Technology in China.
Should metallurgical tests be positive, the company could be in position to start ramping up commercial production of spherical graphite for use in batteries later next year.
Aluketiya produced high-grade graphite for several decades until the operation was stopped in the 1960s while Pandeniya contains numerous historical adits, shafts and remnant graphite dumps.
Sri Lanka is the only region in the world which produces commercial quantities of vein graphite with greater than 90% total graphitic carbon (NYSEMKT:TGC).
Metallurgical tests to determine the suitability of converting MRL's high-grade vein graphite to premium-priced spherical graphite used in batteries will take about six weeks.
If these confirm that MRL's graphite is suitable, the company intends to issue samples to major battery manufacturers with the objective of securing offtake agreements.
Its strategy to fast-track the start of production and cash flow is underpinned by several factors including Aluketiya being already covered by a mining licence while an application for a mining licence at Pandeniya is underway.
In parallel with the test work, MRL is now refurbishing some of the shafts at Pandeniya to prepare them for production.
Wuhan University of Technology possesses 27 research centres, including two State Key Laboratories, a State Engineering Laboratory and provincial or ministerial level laboratories in the areas of new materials, new energy, transportation and logistics, mechatronics and automobile, information technology as well as resources and environmental technology.
Spherical Graphite Demand
Demand for high purity flake and synthetic graphite for use in lithium-ion battery (LIB) anodes is projected to rise.
This is fuelled in part by U.S. electric car manufacturer Tesla's plans to build a $5 billion battery factory that could increase natural graphite demand by up to 37% by 2020.
Tesla has stated its intention is to reduce the cost of battery production by a minimum of 30% with natural graphite set to play a part in the reduction of raw material costs.
Synthetic graphite for batteries currently sells for around $20,000 per tonne while spherical coated graphite made from natural flake, with its superior properties, sells for around $6,000 to $10,000 per tonne.
TechMetals Research estimates 102,900 tonne per annum of battery grade graphite will be required to supply the Tesla facility.
Using current processing methods and yields, Tesla's demand alone is greater than current existing global supply calculated at 80,000 tonnes to 85,000 tonnes per year. If achieved, battery demand for natural graphite will increase by 112%.
IM Data estimates large flake grades (+80 mesh and larger) suitable for battery consumption made up just over 20% of total flake graphite output in 2013 and with competition for these grades from other traditional markets (like the refractories sector), new projects like MRF's will be required to meet the battery market demand.
Aluketiya is located in Meegahatenna within the Walallawita District, which is considered to be one of the richest graphite-bearing areas in the country.
The project has the potential for graphite veins extending over large distances.
Extensive veins of high-grade graphite are visible from surface but the area has not been subjected to any modern exploration techniques.
Pandeniya is located within the broader Warakapola area, which has a long history of high-grade commercial graphite production.
Artisanal miners had produced large volume of vein graphite during the 1890's to 1950's.
However, these historical workings were relatively shallow due to limited ventilation and dewatering capabilities.
While no systematic modern exploration for vein graphite has been undertaken, mineralisation is expected to remain open below the surface of historical shafts.
Successful testing could allow MRL Corporation to fast-track its Aluketiya and Pandeniya projects to commercial production of high grade spherical graphite later next year.
This will capitalise on the expected growth in graphite demand due to the increased use of high grade graphite in lithium-ion rechargeable batteries.
Highlighting investor interest, MRL has recently raised $1.1 million through a placement of 16.4 million shares at $0.07 to sophisticated investors in Asia.
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