RE:RE:No revenues showing in Financial Statements@BeursBladValue : thanks for your comments, nice to see some conversation on this seemingly dead board lol. Some observations :
1- IMO your 1-2 quarters estimate to reach 4800tpa throughput is too optimistic, going by the extremely frustrating slow ramp up of prodocution (or lack of) during the last 3 years since they acquired thei 40% equity in Sakura mine, and also going by the latest guidance of the company (they expect early 2018 to reach 4800tpa throughput).
Now of course that is "run of mine" guidance not processed graphite, but IMO there isnt much graphite to be processed beyond the stockpiled 500t plus their "run of mine" monthly throughput. Remember they are only mining 1-2 tons of graphite per day, 6 days a week, which is barely 30tons per month, or 360tons per year. They need to increase at least 10 times their daily production to reach their desired throughput. Easier said than done. IMO Deep and Narrow Vein Mining is a nightmare for miners. Not only you need continuously to explore to find and map new veins, but also you need to build the necessary infrastructure deep down to access the veins. There is a reason why the biggest mine in sri lanka is doing barely 3500tpa-4000tpa.
Quote :
"However, at this point in time, JORC-code-proven reserves are 7.000t while exploration continues with the goal to reach 20.000t of proven reserves by mid 2018. The vast amount of inferred resources, known through the in-depth understanding of the Sri Lankan Graphite deposits commercial ore on the property, well exceed a few hundred thousand ore tons.
It is planned to produce 150t/month of run-of-mine Graphite through 2017 with production ramping up to 400t/month in early 2018."
End of Quote
To achieve their targeted throughput, Elcora is even considering (and rightly so) to experiment with some new technology. IMO Elcora mistake was to under-capitalize the Sakura mine, probably due to management under-estimating the difficulties of underground narrow vein mining. With the appointment of a german professional (with experience running narrow vein mines in asia), hopefully Elcora management are taking the issue more seriously now and they will accelerate the infrastructure construction and exploration/planning efforts.
Quote :
"Elcora’s near-term objective is to increase the daily production of the mine
by improving mechanization levels and try-out a new technology in Graphite narrow vein mining."
End of Quote
2- You said : "As far as I know there's no issue at the processing plant. I'm guessing they are still milling the 500 tons of stockpiled graphite".
We know they didnt sell any graphite during Q1 2017 (no revenue showing on the financial statements). I think there are only two options here : either A/ they had an issue producing to customer specifications and ramping up production with the processing plant (the wording of the financial statement supports partially thiss theory, they said staring from Q2 they are now using 32 full time employees and running the processing plant in a flow continuously, before that, they were running the processing plant in a "Batch mode" with only 6 full time employees (see december 2016 fianncial statement MD&A), or B/ they did produce the graphite to customer specifications but theur had an issue selling it and send it to thyssenkrupp (transportation ? port logistics ?...who knows). I would go with option "A".
3- you are assuming "1500$ per tonne". I am not sure about the price per tonne. During Q4 2016 they sold some 16.871$ worth of graphite. probably that is for the first (and only until now ?) shipment made to thyssenkrupp. But how many tonnes ? At 20 tonnes (one full container) that is barely 843$ per tonne. I doubt they bothered sending anything less than a container (20 tonnes). Unless they sent only half a container worth of graphite (10 tonnes) and then the average price they obtained would be 1687$ per tonne. I would go with the first hypothesis (20 tonnes, 843$ per tonne).
I would say 843$ per tonne for a first shipment is not that bad, they are producing 97.5% up to 99% purity graphite with different sizes. Had it been mostly 99% / super large flakes (32mesh), they could obtain up to 1800$ per tonne. IMO that is their goal.
Furthermore, we have also now what seems to be some "newly discovered ?" issue, which complicates the achievemnt of 99% purity, it is no more 92% out of the ground as previously claimed/supposed by the company but rather 65%-75% carbon due to silica intersection. they are now obliged to do selective mining to achieve the 99% purity.
Quote :
The natural graphite grade in the Ragedara veins ranges from 92-99% C. But Silica and Pyrite veins
intersecting and interacting during mineralization with the Graphite veins result in an overall run-off-mine Graphite grade of 65-75% C. To achieve highest possible Graphite grades in the processing plant, selective mining and run-off-mine storage has been started in Q2 2017."
End of Quote
4- Note the absence in the q1 2017 MD&A financial statement of any mention of processing plant expansion (doubling the capacity from 2500tpa to 4800tpa). IMO they are waiting some solid results with the current processing plant configuration, before committing to the expansion.
Overall I am very diappointed and frustrated by the extremely slow ramp up of production and more importantly the lack of any graphite sales during Q1 2017, at the same time I have a feeling they are finally starting to take things more seriously at Sakura (new mine manager effect ? they changed the previous manager for a reason), it is about time after almost 3 years of acquiring the mine ! Lets hope they succeed !
BeursBladValue wrote: Patience is a virtue, they are fairly close to booking the first meaningful revenues. Elcora still needs one or two quarters to revamp the production at the Ragedara mine (Sakura) in my opinion.
In the January press release, Elcora stated:
Since its inception four years ago, Elcora has focused on the processing side of the business as opposed to simply extracting materials from a mine. In the graphite industry, it is very important to control the source in order to ensure quality and proper volume.
With the appointment of Mr. Leiders there's again focus on the production at the mine:
Elcora recently hired an experienced Mining Director from Germany, with the objectives of increasing output and productivity over the next few years. While Ragedara’s historical peak production was 18,000 metric tons per year, work is being performed in order to bring production back to 4,800 metric tons per year.
Since then, they have also done some exploration work to achieve that. So they will probably reach or come close to the 4,800 tons per year target within 1-2 quarters in my opinion:
Aim of the exploration programs for the next 2 years (since Q1 2017) is to find the unmined portions of the historically mined veins below the old workings of the mine. This had already resulted in finding 5 veins with widths of 66, 40, 20, 20 and 15 cm and 7.000t ore tons contained.
As far as I know there's no issue at the processing plant. I'm guessing they are still milling the 500 tons of stockpiled graphite:
A team of 32 fulltime employees are working in a 3 shift roster 6 days a week at the mill. The mill operates as a continuous flow plant in a closed-circuit mode. The current processing capacity is 2500 tonnes per year; with final product purity ranging from >97.5%C for some products to >99%C for the high-tech graphite applications.
We know that ThyssenKrupp will be offtaking their graphite production. So if they reach around 4,800 tons per year in 1-2 quarters, we should see graphite revenues in the neighbourhood of CAD 1,800,000 per quarter (4,800 tpy / 4 quarters x CAD 1,500 per ton).