• Developing high-grade mines in famous graphite location

• Eyeing first production at K1 project

• Strong management

​​​What Ceylon Graphite does:

Ceylon Graphite Corp (CVE:CYL), established in 2017, is developing graphite mines in historic resource areas of Sri Lanka.

The company holds a total land package of 121 square kilometres, which contains historic vein graphite deposits - as opposed to flake type graphite deposits.

These unique and comparatively higher margin vein (lump) deposits currently make up less than 1% of world graphite production and Ceylon's package represents the majority of known historic graphite resources in Sri Lanka.

Serious mining and exportation of graphite in Sri Lanka, formerly known as Ceylon - largely for use as lead in pencils - began in about 1824, but the unusual deposits of the country have been used locally since the middle of the 1600s.

Sri Lanka is the only country to export commercial quantities of vein graphite and so it recognizes the mineral’s value in creating significant foreign investment, yet few areas are fully of the purity of Sri Lanka vein graphite. It is extremely high grade at over 90% carbon.

K1 is Ceylon Graphite’s first exploration and flagship project in Karasnagla. The group also has the M1 development site; the H1 site (over 50 acres) in Hakbewa. It has the P1 development site in the Pasyala district as well.

How is it doing:

Ceylon Graphite is moving towards commercial production early in 2020 at the K1 asset and in November the company was granted an environmental protection license for the property. Initially, this will be small scale - at around 20 tonnes a month, rising to 200 tonnes through next year, then up to 3/400 tonnes a month.

The firm has bought land next to K1 so it can construct an adit, a horizontal passage leading into a mine for access or drainage.

The environmental approval came three months after the country’s mining regulator, the Geological Survey and Mines Bureau (GSMB), granted the industrial mining license  category A (IMLA) for K1 - one of just four such licences granted for mining in Sri Lanka. It gives exclusive rights to mine, process and trade in graphite found within the project area.

The same month, the firm was awarded a IMLB license (category B) license for its M1 graphite project, where the application for an IMLA license is already in train.

Under the IMLB, single borehole blasting is permitted plus the use of certain machinery and equipment in the mining process. It means the group may also excavate or produce a small amount of graphite at the site per month.

In August this year, the M1 site was boosted as the company revealed that new assays had shown a carbon content of 99.2%, which Ceylon said is “vastly superior” in terms of purity to other natural graphite sources.

In September, Ceylon announced plans to raise up to C$1.25 million via a private placing to advance the business, issuing units at C$0.08 a throw.

Inflection points:

• More development activity at K1 and other sites
• Commercial production start at K1

What the analyst says:

Proactive Research analyst Christopher Ecclestone updated on the development of Ceylon Graphite's mines in October this year, noting that the graphite price was holding up pretty well, which augurs well for the firm.

"Basically, Ceylon Graphite are operating in a very low-cost environment and they're super-efficient, with low capex," Ecclestone said in a note.

He also highlighted the firm's "very interesting" strategy on exploration.

"Building the mine is the exploration, which sort of makes sense if you have fine, vertical structures. Just drilling around them proves nothing. So what they do essentially is they build the shaft, prove up the deposit, and by the time they've actually proved up the deposit, they've got a mine ready to go," the analyst noted.