Insights On The Graphite Industry With Focus On A Ceylon Graphite Corp.

Graphite Industry

Graphite is a form of crystalline carbon. It has a number of applications across various industries such as Refractory, Lubricants, Batteries, Foundry and many others. Graphite is obtained through mining and has witnessed a huge growth in consumption due to significant technological advancements made in the batteries and paints businesses where graphite has an important role to play. In 2018, the global graphite market was reportedly valued at US $17.62 billion and research reported by various news sources have pegged the global Graphite market to grow at a cumulative annual growth rate (CAGR) of 6.3 per cent from 2019 to 2025.

With the development in the Lithium-ion battery industry, which uses Graphite as an important building component because of its extremely high thermal and electrical conductivity, growth in the consumption of graphite is quite evident. With the expected growth in the graphite market, various players in the industry are focusing on their facility upgradation and expansion such as the Japanese company Showa, which is a major supplier of Graphite Electrodes, has made a significant investment to upgrade its European sites to comply with the standards set internationally.

Graphite Industry in the United Kingdom

In terms of exploration and production, the biggest deposit of Graphite in the United Kingdom is located in the Seathwaite region near the valley of borrowdale. This deposit is unique in nature as it is only one of the world’s two deposits hosted by volcanic rocks, the other being in Spain. As per the research conducted by the British Geological Survey, the graphite in this location was identified to be found in between mineralised faults fissures belonging to a volcanic group which is more than 450 years old. The European Union Industries’ graphite consumption is mostly sourced through imports, a significant portion of which comes from China and hence the growth opportunities in exploration, if the existence of graphite in the region is tested to be successful, are very high.

In the context of Industrial applications and marketing of Graphite, UK  Carbon and Graphite is one of the biggest company in the United Kingdom that is involved in the manufacturing, testing and global distribution of various graphit products which are used in the Aerospace, Aluminum, Foundry, Fused Mineral, etc industries across the globe. Their products include Graphite Electrodes, Additives, Gouging Rods and other speciality graphite products. Another major player in the UK Graphite Industries is the South Yorkshire based OLMEC Advanced Materials.

The growth in the industry can also be understood using an example of an up and coming Candian resource company Ceylon Graphite Corp., which is engaged in the exploration and development of graphite.

 

Ceylon Graphite Corp.

Ceylon Graphite Corp. (TSX-V: CYL), previously known as NWest Energy Corp., is a Vancouver, Canada based mineral exploration and production company that mainly focuses on its exploration operations of Graphite. The company is publicly listed on the TSX Venture Exchange, but its operations are focused in developing the graphite mines in the island of Sri Lanka where graphite resource exploration has proven to be successful historically. The company owns a land package of approximately 121 square Km that has been proven to have lumps or graphite veins which are considered to be the highest quality of graphite deposits. These deposits are unique in nature and contain higher-margin lumps, and it is estimated that the production from these sites makes up for less than 1 per cent of world’s entire graphite production. These areas have had a history of production since the 1920s. This grade of vein graphite is generally north of 90 per cent Cg, with a purity of 95 per cent – 99 per cent carbon without refining. Vein Graphite is higher conductor of thermal and electrical energy, which enhances its purpose for utilisation across various industrial application, making it an extremely important resource.

The company operates through two fully-owned subsidiaries; Sarcon Development  (Pvt) Limited and JADS Enterprises (Pvt) Limited. The company has four work-sites namely, K1 Development, which is a project under Sarcon Development and was Ceylon’s first project where a significant portion of the exploration work has been finished, and the company has now applied for a license for mining purposes. This site is located in the region of Karasnagala. The M1 Development, which has its operations under JADS Enterprises, is located in the Malsiripura region. After conducting various drilling tests and surveys and also the observation of the visible surface lumps, it is believed that this site will be successful in terms of mining. The company is working in order to apply for and obtain a mining license for this site. Two other new sites are the H1 development, in the region of Hakbewa and the P1 development located in Pasyala and the exploration operations being started on the respective sites.

CYL Financial Performance (Interim results for the quarter ended 30th June 2019)

On 28th August 2019, the company announced its interim financial statements for the quarter ended 30th June 2019. The company reported that they made a capital expenditure of CAD 54,386 during the quarter ended 30th June 2019, a decline of 20.92 per cent quarter on quarter from CAD 68,775 during the quarter ended 31st March 2019. The company reported a Cost of Goods Sold (COGS) of CAD 17,600 in Quarter ended 30th June 2019, an increase of 61.46 per cent year on year as compared to COGS of CAD 10,900 in the quarter ended 30th June 2018. The company has not reported any revenue as yet but reported a gross loss reduction of 26.34 per cent from the previous quarter. Losses before Interest Taxes, Depreciation and Amortization (LBITDA) was reported to be at CAD 308,800 for the quarter ended 30th June 2019, a year on year reduction of 16.47 per cent, from the LBITDA reported for the quarter ended 30th June 2018 at CAD 369,700. The company reported a Loss before Tax (LBT) or Pre-tax loss of CAD 403,300 in the reporting period, a decline of around 0.2 per cent year on year as compared to Pre Tax loss of CAD 402,100 for the quarter ended 30th June 2018. The company reported Basic Earnings per Share (BEPS) diluted at CAD 0.01 per share. The company reported a cash position of CAD 441,600 and total Assets worth CAD 3.84 million as on 30th June 2019. The company also reported a combined debt of approximately CAD 1.41 million as on 30th June 2019.

CYL Share Price Performance

On 8th October 2019, at market close, Ceylon Graphite Corp’s stock’s current market price at Toronto Stock Exchange was at CAD 0.09 per share. At current market price, the company’s shares were trading 12.5 per cent or CAD 0.01 per share above the 52-week low price of CAD 0.08 per share, which the stock hit on August 07, 2019. This was also reportedly 55.00 per cent or CAD 0.11 per share below the 52-week high price of CAD 0.20, which the stock reached on October 16, 2018. While writing, 54,766,181 shares of the company were outstanding. At the current trading price, the company has shed 10.00 per cent in the week, 18.18 per cent in this month and 41.94 per cent year to date (YTD) in value. The company’s market capitalisation (M-Cap) was currently reported at CAD 4.928 million.