MRL Corporation (ASX:MRF) expects to start first drilling a highly anticipated program at its Pandeniya graphite project in Sri Lanka on and around 11 June 2014.
MRL holds 6,300 hectares of Exploration Licenses that could potentially produce 5,000tpa of vein graphite and has applied for further exploration areas surrounding its granted licenses.
This follows the arrival of the drill rig from the Geological Survey and Mining Bureau on site at the Pandeniya location.
The first hole, DH-1, is expected to be drilled to a depth of between 50 metres to 125 metres.
Drill holes DH2 and DH3 will be up to 300 metres deep and test the continuity of vein graphite mineralisation below the historical shafts and adits.
These will test the vein graphite potential in three locations across the Warakapola Pandeniya / Bopitiya area.
MRL has also appointed Peter Youd as an executive director of the company.
Youd also acts as its chief financial officer and company secretary.
More than 200 historical adits and shafts are located on MRL’s granted licences, which cover 6,300 hectares.
The large quantity of remnant graphite dumps indicate MRL’s licences produced a reasonably large volume of vein graphite from numerous artisanal pits during the 1890’s to 1950’s.
Artisanal miners had limited ventilation and dewatering capabilities, therefore historical workings are relatively shallow, where systematic modern exploration for vein graphite has ever been undertaken.
No systematic modern exploration for vein graphite has been undertaken on MRL licences.
The graphite vein mineralisation is expected to remain open below the surface of historical shafts.
MRL expects exploration and development to be low cost along with opex and capex.
It has completed initial adit underground safety training as well as ventilation, electrical and land access.
Work is underway on the Pandeniya Priority 1 shaft.
Sri Lankan graphite
Sri Lanka is renowned the world over for being the only producer of crystalline vein or lump graphite, which is the highest quality of naturally occurring material.
The quality of vein graphite produced in Sri Lanka has a purity level in excess of 90% Carbon as Graphite.
This is significant as it requires very little upgrading and processing to produce a high quality saleable product, leading to low operating costs and high profit margins.
MRL has successfully produced concentrate grading 95.4% total graphitic carbon from the first round of testing with a single stage flotation.
MRL Corporation’s graphite tenements have historically produced large volumes of vein graphite from numerous artisanal pits.
The start of modern drilling will test the vein graphite potential in three locations, giving the company a firm understanding of the potential of its assets.
MRF’s projects could potentially produce 5,000tpa of vein graphite, generating revenues of up to US$10 million per year, depending on current progress.
Capital costs could be on the low side of potentially less than US$5 million and operating costs of US$600-650/tonne, which compares well with other potential graphite producers, which have CAPEX of between $30 million to $133 million.
There are significant price catalysts ahead including:
- Diamond drilling results from Pandeniya / Bopitiya.
- Potential for high grade vein graphite.
- Refurbishment of existing artisanal workings for exploration.
- Detailed mapping of graphite vein structure & geophysical results.
- Near term production potential from historical workings
- Potential for additional licences.
Shares in MRL Corporation have been rising steadily in the past month, with shares rising to the current $0.09 from its close of $0.055 on 12 May.
Notably, this has met Proactive Investors' initial price target of $0.09 to $0.10 that we placed on the stock when its shares were trading at $0.03. The current program has the potential to push this price target higher.
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