THE BOURSE WHISPERER: MRL Corporation (ASX: MRF) has signed a Heads of Agreement to acquire the rights to the high-grade Aluketiya graphite mine in Sri Lanka.
Aluketiya is located in Meegahatenna in the Walallawita District, approximately 85 kilometres from Colombo.
The company said the acquisition expands its portfolio of high-grade vein graphite licences in Sri Lanka, where it is aiming to develop multiple small-scale production hubs.
Under the agreement, MRL will acquire the lease covering Aluketiya, which it explained will give it the right to explore, develop and mine the graphite.
MRL will pay a lease fee of US$3500 a month during the exploration phase.
Upon the start of production, MRL will pay a 10 per cent, sales-based, royalty.
The transaction is subject to MRL completing due diligence and execution of a formal lease agreement.
Aluketiya is a historic operation, which MRL said had produced high-grade graphite for several decades until the operation was stopped in the 1960s.
The company claims there to be extensive veins of high-grade graphite visible from surface, however the area has not been subjected to any modern exploration techniques.
MRL aims to establish the extent of this high-grade graphite mineralisation as part of a drilling program due to start in late 2014.
However, the company also explained that it does not intend to drill Aluketiya to the point of being able to calculate a JORC-compliant resource estimate.
Instead the company intends to begin production as soon as possible.
MRL’s confidence stems from Aluketiya’s historical records, which it claims indicate the graphite to be of such high-grade the material produced is expected to be direct-shipping quality.
“We are aiming to develop a high-grade, low-cost mining operation in the shortest timeframe possible,” MRL Corporation managing director Craig McGuckin said in the company’s announcement to the Australian Securities Exchange.
“Based on what we know, the cost of getting into production will be extremely low and therefore there will be no need to spend the time and money establishing a JORC-compliant resource.
“The fact that Aluketiya is already covered by a Mining Licence is immensely valuable because not only will it enable us to start production quickly, it will also underpin our applications for other approvals such as transport and export licences.”
MRL indicated it is continuing to drill at the company’s Pandeniya – Priority 1 Area within the Warakopola Area in central Sri Lanka, where high-grade graphite intersections have been encountered.