Ceylon Graphite (CYL) - Reboot Keen to Show Scale and Consistency

Ceylon Graphite is a public company listed on the TSX Venture Exchange (CYL:TSX-V), involved in the exploration and production of graphite in historic resource jurisdictions in Sri Lanka. We recently spoke with Don Baxter, recently appointed CEO at Ceylon Graphite. He wants to accelerate the business objectives at Ceylon Graphite and shared his vision with us. 

Company Overview

Ceylon Graphite is involved in the exploration and production of graphite in historic resource jurisdictions in Sri Lanka. Graphite is an essential mineral in electric vehicle (EV) production, battery storage applications, and mobile communication devices. The global demand for graphite is expected to continue to grow.

The company holds a 121km² land package containing historic vein graphite deposits. High-margin vein deposits currently make up less than 1% of the world’s graphite production. The company’s acreage contains the majority of known historic graphite resources in Sri Lanka.

Management Team

In addition to Baxter, the management team at Ceylon Graphite consists of Rodney Stevens, Vice President Corporate Development; Abbey Abdiye, CFO; Dr. Siva Bohm, Chief Scientific Executive; and Sasha Jacob, Strategic Advisor. The Board of Directors is made up of Dr. Mallika Bohm, Technical Director; and Jody Lenihan, Kevin Aylward, and Brett James, directors.

Meet Don Baxter

Baxter, trained as a mining engineer, has been working with several graphite companies, such as Alabama Graphite, Focus Graphite and Noranda Graphite, for many years. He is one of the premier graphite experts outside of China, having built one of only two producing graphite mines in North America. He has also been responsible for rapidly advancing the development of value-added graphite products, namely coated spherical purified graphite for the lithium-ion battery sector. 

Earlier in his career trajectory, when he was president of another company, he was approached by a Japanese concern to start focusing on spherical graphite purification and production. That is when he came to the realization that the wave of the future, indeed already in the present, is battery-ready spherical graphite rather than the traditional low-margin flake graphite. 

Baxter moved on in January 2020 to join the board at Ceylon Graphite as an independent director. He became CEO at Ceylon Graphite when his predecessor, Bharat Parashar, decided to retire. Baxter is absolutely convinced that the world needs quite a large amount of coated spherical graphite and that need has picked up steam as the COVID-19 pandemic has possibly begun to wane. 

Baxter’s vision and current job are to transform Ceylon Graphite into a premier spherical graphite producer in short order to fulfill the burgeoning demand. He knows that he needs to ramp up production in order to get the attention of tier-1 buyers in the cell phone and EV space. He maintains that he doesn’t need tremendously large amounts of CAPEX to build mines and start processing.

Ceylon’s Graphite Sites

Graphite has been exported from Sri Lanka since the 1800s. Prior to World War II, Sri Lanka produced almost all of the world’s graphite. After that, other sources came on and Sri Lankan production tailed off. It is the only country in the world to produce the purest form of graphite, vein graphite, also known as lump graphite, in commercial quantities. Currently, the island produces less than 10,000 t of graphite per year. 

Ceylon Graphite currently has its first mine in production and ongoing plans to develop many more mines on their acreage. The existing mining is done very traditionally and by the book. Baxter is looking into some equipment upgrades that will selectively mine and streamline the graphite extraction process itself. 

Baxter is making wholesale changes in the mining personnel at Ceylon Graphite. He brought in a new mine manager who brings experience from working at the government mine, Kahatagaha. A highly talented graphite geologist is coming on board as well and he will be very important as they certify their resource base. Baxter himself is going to bring his own Sri Lankan mining background in order to direct and work out the long-term planning and execution for additional mines. 

What he envisions is that they’ll have a large number of working mines operating, complete with a ten-year plan, to support their continued resource expansion and production.

Optimum Mining Plan

Baxter has a number of three-dimensional geologic models for the many graphite occurrences on the company’s acreage. What’s needed now is a systematic and detailed work plan for all the sites. Essentially, it’s a matter of scheduling the work and planning out the tonnage that will be extracted with the upgraded equipment they will be using. That will allow for rapid evaluation of the resource. The grade of the ore on Ceylon Graphite’s landholding is amazingly high. Detailed infill spacing will not be needed to make an accurate resource estimate.

Exploration, Mining Operations, or a Bit of Both?

In some respects, both exploration and mine development are occurring simultaneously at Ceylon Graphite. Indeed, they have one mine producing now. But very quickly, with a limited amount of additional work, Baxter expects to have 10 functional mines running.

The second mine is ready to go and is within 2-months of permitting. Baxter needs to raise $150M or possibly more to build this second mine and plant. 

Graphite economics are based on the price of large, medium, fine graphite flake. The vein graphite on the company acreage is even better than flake; it commands $2,000 per t. His mine is profitable with that price.

Graphite mines in Sri Lanka are small. When Baxter joined Ceylon Graphite he told the board that buyers are not going to get excited about 5,000 t per year. Ceylon Graphite needs to get to 30,000 to 50,000 t per year before that excitement happens. The resource at Ceylon Graphite has to be developed and grown. Baxter is confident that this growth will take place. 

Sri Lanka is the only real source for vein graphite. Once processed, it has a higher capacity for battery applications than flake graphite. Baxter believes that the world needs lots of flake graphite but also that vein graphite on its own is even better. 

Spherical Graphite

Spherical graphite is the key component of the anodes lithium batteries. Charged energy is stored within the anode by lithium ions trapped between the layers of graphene-based spherical graphite. Graphene is derived from naturally occurring graphite. 

Spherical graphite is the product that most graphite companies are hoping to produce economically to fulfill an expected boom in battery demand from portable devices and electric vehicles. The global production of spherical graphite is currently dominated by China. The global demand for spherical graphite is going to exceed 3Mt. 

Baxter has a great team in place to guide his company’s transformation into a major spherical graphite provider. He has been working with Cambridge-based Drs. Siva and Mallika Bohm to perfect graphite-processing methods. As a result, Ceylon Graphite has acquired an exclusive global license from Cambridge Advanced Materials & Innovation for a method of producing high-quality, few-layer graphene from the vein graphite produced by the company. No new learning curve is needed to produce this type of graphene. 

Additionally, Baxter has been evaluating the best technologies for preparing spheroidal graphite from natural graphite. Being able to do that at a large scale is particularly important, not only for Ceylon Graphite but for many other companies as well.  Baxter intends to obtain multiple units of the best machines for scaling up the spheroidizing process. By combining the best processing machines with their exclusive grapheme license, the company hopes to ramp up scale rapidly. 

Benefits of Current Company Size

Baxter is quite aware that Ceylon Graphite must scale up its operations. Indeed, Baxter believes that the global demand is so great that many companies in the graphite arena need to step up. He believes that starting small and building out systematically is the right approach.

Ceylon Graphite is poised for growth but is small right now. From the mining perspective, the first thing that needs to be done is to validate their reserves, which is coming along very quickly. 

Their current small size also enables the company to get a good handle on important environmental, social, and governance (ESG) concerns. Buyers definitely want to know that good ESG is in place at their graphite suppliers. Ceylon Graphite doesn’t have mine-tailings or a dump for waste rock. They also don’t have to utilize primary processing. Instead, they go straight to a secondary process because they have such high-grade graphite.

Financial Status

Ceylon Graphite currently has about $ 2 M in the bank. Last October, they were able to raise some $4 M. They are looking to initiate another cash raise in the fall of this year. Considering their burn rate, Baxter believes that the company is in good shape at present.

In Summary

Ceylon Graphite has a new CEO and technical team in place. They are moving forward from an entrepreneurially oriented past to a more process- and market-driven company. There is a great need for graphite in several key modern applications, particularly EV battery technology, and Ceylon is looking to become a world-class supplier of this critical resource.

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To find out more, go to the Ceylon Graphite Website