Ceylon Graphite Corp (CYL.V) specializes in lump vein graphite. CYL.V hold one of the largest area (121 sq km) of high purity graphite in Sri Lanka. We initiated coverage on January 10, 2018. Since then, the following updates were provided to the market.
Feb. 6 - Update - New Veins and Tunnel: Upgraded and refurbished shaft for K1 site has now reached a depth of over 130 ft and will continue to the current bottom of the shaft. De-watering of the main shaft has been completed. There are two tunnels on each side of the shaft. Drill holes KRS 01 (Dip 50.5 deg) and KRS04 (Dip 60 deg) both intersected a graphite vein in the bedrock and have also hit a tunnel or cave at a depth of over 300ft. Numerous vein identified in bedrock so more exploration will be conducted before mining.
Also completed prep geological work, on K2 grid in for exploration and drilling, refurbishment of the existing shafts on the grid. K2 work will start on Feb. 9, 2018. Also commence mining on Palliyadda site on the basis of the drilling results of hole number PLB0004 and PLB0008, both indicated graphite veins of more than 40 cms. These grids, one in Katuwana and the other in Malsiripura have visible graphite veins.
Feb. 15 - Options granted at 0.30 cents. Kevin Aylward, 0.05M , Abbey Abdiye, 0.2M, and Bharat Parashar 1M.
Mar. 20 -Discover New Graphite Veins: announced significant advancements of its mining operations at its K1 and K2 sites.
K1 - Discovered three new large graphite veins in the 25 to 30 cm range at the 180 ft. level tunnels. Permit Application is in process and currently working on demarcating to be able to determine the minimum size of the mineral resource block. K2- drilling reached a depth of 110 meters.
Preliminary results indicate several marginal graphite veins. Also working with Dorfner ANZAPLAN on testing the spheroidization, purification and expandability properties of the graphite found in its mine.
Mar. 28 - Shortlisted at the Mines and Money Asia Conference - in two categories: 1. Executive of the Year, 2. Exploration Company of the Year.
Apr. 12 - Large New Graphite Veins Discovered - Two new large graphite veins at a depth of over 200 ft at K1 site. Each vein is around 18 inches (46 cm) across and is situated in ceiling of a drive on the North side of the tunnel. Samples were taken from the veins and sent to the Geological Survey and Mining Bureau of the Government of Sri Lanka for carbon testing. Laboratory tests indicate a Cg level of 89.2%. These samples will also be sent to laboratories for micronization to 20 microns and then spheroidization tests.
The next steps include: 1) the purchase of an underground drilling machine (in discussions with suppliers), 2) drilling along the veins to ascertain the quantum of resource available; and 3) completing the mining license application process.
Apr. 16 - Announces $2.0M Non-Brokered Financing. Terms: convertible debentures and two common share purchase warrants at a conversion price of CDN$0.25 per share. Jacob Securities Holdings Inc., a company controlled by Sasha Jacob, has agreed to subscribe to up to $1,0M.
Net proceeds will be used for the current exploration program and for working capital purposes.
Additionally, received assay results samples taken from its K1 mine. These results indicate carbon content of 94.66 % (w/w). The laboratory testing was done by Geological Survey and Mines Bureau of the Government of Sri Lanka. Bharat Parashar, CYL's CEO also reported: "We are currently at a depth of over 200 feet and expect the quality of the graphite mineralization to continue to improve as we go lower.”
Last six months have been positive for CYL.V. The company has reported numerous discoveries of visible graphite veins as it continues to advance explorations on K1 and K2 sites. CYL.V also received recognition from its peers in Asia being named - The Exploration Mining Company of the Year.
However, CYL.V has not had much improvement in valuation over the last six months. In fact, the stock is trending down of late. It seems that despite its unconventional status (not seeking a NI 43-101), the company is still in the process of doing a comprehensive resources estimate.
This has postponed their initial commercial production date from Q1 2018 to now Q3 2018 and most likely beyond.
In addition, the awaiting detailed sample results from K1 site (specifically on micronization and spheroidization) affects near-term valuation.
While CYL.V's CEO mentioned on Capital Idea Research (December 2017) already having interest from potential client, no formal off-take agreement has been signed to date. This is understandable, knowing the grade and quantities are crucial details for an off-take partner. Both are yet to be determined.
Surely CYL.V continues to remain attractive at these level, but a continuing moving timeline to production is impacting its value proposition.
It is up to the company to provide a rationale for it, and update them accordingly. This hopefully should fix the lagging valuation.
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