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Ceylon Graphite Mine to Lithium Ion Battery Anode

Donald Baxter


Ceylon Graphite Corp.


Don Baxter

+1 (604) 765-8657

Interview conducted by:

Lynn Fosse, Senior Editor

CEOCFO Magazine

Published – January 31, 2022

CEOCFO: Mr. Baxter, what is graphite and why should people be interested in it?

Mr. Baxter: Graphite is pure carbon, the only two pure forms of carbon in the world are graphite and diamond. It is on the periodic table as C. It has been around forever. It is used in most things that you know, but may not recognize that it is there, such as walk around electronics, like cell phones and flat screen TVs. Graphite has the properties of being electrically conductive and heat conductive. The major industrial use of it from a heat standpoint is refractory steel making industries and all the things that go around dealing with molten steel and what not.

The interest in graphite and the reason we have an interest in graphite and the main market driver for graphite now is batteries. The anode in the lithium-ion battery is graphite. It initially was synthetic graphite, but the natural graphite is becoming the anode material of choice and the demand for processed natural graphite for an anode is going exponential. Our focus is on natural graphite and ultimately anode graphite for lithium-ion batteries.

CEOCFO: Would you tell us specifically about Ceylon Graphite, and why Sri Lanka?

Mr. Baxter: Ceylon Graphite is listed in the TSX Venture, and the OTC and it was initially a graphite mining company but I took over as CEO in June, my background is mining and processing graphite for batteries. Our strategy is to become a mine-to-battery company, so we want to go from our mines in Sri Lanka directly to end-use suppliers for making anodes and/or the OEMs making the batteries directly. The reason for Sri Lanka is that although there are two forms for natural graphite in the world that can be used for batteries, flake graphite which is in abundance in Africa, North America and China. Also  there is vein graphite which is unique to Sri Lanka and what makes it unique is that it is 95% carbon in the ground, which means it is almost solid graphite, there is not many geologic impurities as opposed to a flake graphite that could be 2% in the ground and up to 10% and then you have an expensive primary processing step in order to make it into the next phase that can go into batteries. When I came in, the company in Sri Lanka was already there so I am there by default but ultimately the graphite is quite unique and at one point Sri Lanka was quite famous for its graphite. We are looking to bring that back and bring Sri Lanka back into the forefront of the graphite industry.

CEOCFO: What happened?

Mr. Baxter: What happened was up until about the World War II, Ceylon at the time, now called Sri Lanka, produced a lot of the world’s graphite and had about 3000 small-scale mines operating, chasing these veins. I think they found cheaper sources out of different places and moved away after the war. Flake graphite was probably more abundant. There is still a small market now on the industrial side of things but ultimately what is going to bring it back to more than two or three mines, we are looking at probably twenty mines and least and maybe forty mines of our own to feed the huge demand that is coming. We are looking to restore to a certain extent, the many mines producing in Sri Lanka, probably not 3000 mines but you never no, it is going to be a big market.

CEOCFO: What is involved in mining graphite?

Mr. Mr. Baxter: In the case of Ceylon Graphite in Sri Lanka, we have small-scale underground mines. In our case we have a lot of properties that are past-producing mines. Right now, we have two mines that are basically on the verge of production. They have been in production in the past and we are just doing some rehabilitation work. We are sinking a mine shaft deeper to start hoisting graphite out of two mines in late spring/early summer. Small-scale underground mining from an ESG perspective is quite advantageous.

Environmentally, it is very sound because not only do we not have the primary processing that is required for other flake graphite mines, but it is all underground and it is not the large-scale use of the land on surface and because we do not have processing, we do not have tailings and waste rocks that other mines will have. It is a small-scale environmentally friendly process and that goes a long way when dealing with the OEMs who are looking at not just your product you can make and sell them for their batteries, but what your ESG (Environmental, Social and Governance) picture is and your CO2 mission footprint as well. Right now, our methods are fairly old-style manual, but we are looking to mechanize small scale veins to increase production. It is a typical small-scale underground mine.

CEOCFO: How did you choose the two mines you are working on now and how do you assess your best prospects?

Mr. Baxter: Because of all the past-producing mines in Sri Lanka, a couple of the founders of Ceylon Graphite basically went into the archives Bureau of Mines in the back-office files and found the mining grids that contained all past-producing mines. That was the target and the thing with the geology there is regional, so if you are on the grid and around the past-producing mines, the graphite veins run on for kilometers and to depth, so there is no chance they have been mined out. Our K1 mine right now that we are just deepening the shaft, last produced graphite in the 1940s as far as I can tell, so we are already underground working and it is easy to go not too far from the apple tree to pick the apples.

CEOCFO: Are you funded for your next steps - perhaps getting new mines up and running?

Mr. Baxter: We will be raising some money soon; we are just looking to small offering in the very near term. The beauty compared to other mining operations and being small-scale, a mine could be $150 million but, in our case, because we do not have the primary processing and we are small-scale, with each of our mines there is $2 million. There is a lot of rehabilitation of existing sites so we do not need a lot of capital that others will typically require. Yes, we are funded, and we have some pretty significant financial backing to continue what we are doing.

CEOCFO: The investment community understands for the most part?

Mr. Baxter: They are getting to understand. I am finding that more and more when people are talking about batteries and vehicles the talk almost always used to be about lithium, cobalt and nickel, but suddenly there has been a realization that the anode of the battery is graphite, so companies have announced factories and are looking to make all these batteries for Tesla, GM or Ford or whatever North American companies and most every European companies that are making electric vehicles now or moving towards electric vehicles do not have the inputs, so graphite is suddenly becoming an overnight realization that we need graphite and we do not have the ability to process it into battery material. Right now, China does 100% of the world’s natural graphite processing for batteries.

The COVID situation worldwide has really brought the light onto the supply chain and to realize that for example the capacity of the United States to process graphite for batteries is zero, China 100%, so there is a lot of rush to that. I have been at this for quite some time focused on processing for batteries. I first started working on thermal purification which is a more environmentally friendly process than the Chinese use which is acid. I have been at this since 2012 so I recognized this early on. We are focused on that aspect of it and that is where the tremendous demand is coming from.

CEOCFO: Would the process be done on-site or near the mine?

Mr. Baxter: Sri Lanka will require a certain amount of value-add processing within Sri Lanka, however what we are looking at is a combination of that and processing facilities. For example, we also have a subsidiary company in the UK where right now we have focused a lot of our technical work on batteries, and we are working with two universities there. With Brexit the UK is looking to fast-track their own development of processing capabilities within the UK. That is or immediate focus for Ceylon and for the size of us that is where we need to be.

In every area such as North America, Europe and UK, we will be looking at having processing capabilities within their own borders. That is one of the lessons of Covid regarding critical supply chains. Even in conversations with Sri Lanka they are looking to do more within their own borders as well and maybe even develop a full battery industry. I think it is kind of fluid now and everybody is starting to realize that they want a piece of this, and Ceylon is positioned well to participate. We can make as much graphite as is going to be demanded of us.

We have enough ground, enough mine sites and grids in order to cover. Initially we are looking at 50 thousand tons but that could be 100 thousand tons or 400 thousand tons. It is up in the air what the demand is going to be. It is going to be quite an exciting couple of years.

CEOCFO: I am assuming Sri Lanka will stay friendly to the mining industry?

Mr. Baxter: Oh absolutely, I think the thing with Sri Lanka right now is they do need foreign investment. They do have some issues with foreign currency reserves now as we speak. In my meetings with government officials, they are very encouraging with what we are doing, very encouraging of looking to help streamline permitting aspects of things. It is very bureaucratic, they have taken the old English or British bureaucracy and piled on.

The chairman of the Mines Bureau talked about more and more mines, and I said we can do that but we need your help to streamline the permitting process so that we can do more mines quicker. They are quite open for that, and Sri Lanka is a beautiful country, it is a high tourist area but with Sri Lanka they are also looking to have some substantial industry. They do have a history of graphite mining, so they are looking to hopefully restore that and take advantage of this push.

CEOCFO: What challenges are you on the lookout for or that you can be proactive about?

Mr. Baxter: There are always issues that come into play. There can be some geopolitical issues. Right now, business travel with the COVID situation is an issue. I have been looking at going back to Sri Lanka in the near-term and I am wondering if I must quarantine this time like the last time, it was only 24 hours but all the PCR tests getting on a plane is not like it used to be, pre covid. There is always the worry of getting the story out, we are a public company so a lot of our measure of success has to do with share price and looking at getting the word out and I think we are starting to make that happen, it is just a question of getting that interest in the stock and that makes everything else easier as far as raising money.

We do have some good financial backing and interest in what we are doing so that takes a bit of the pressure off. I think it is also a question of growing the company and getting the legs under that we need. In our case we have a good core technical team. Being an engineer myself, that is my main worry is producing and doing what we say we will do which I am confident we can.

CEOCFO: Is there anything potential investors might miss when they look at Ceylon Graphite that they really should recognize?

Mr. Baxter: I think just the fact that they looked at Ceylon before or that they have interest in batteries now, graphite has been overlooked. Since I have taken over, I have made it very clear that we are a mine-to-battery company, so it is not necessarily about being a resource mining company, it is more of a technical processing company. If you are looking at Ceylon for the first time, then recognizing that graphite is a critical supply input material and the ability to process it for batteries is key.

There are a lot of players out there that may talk the talk, but we walk the walk. We know what we are doing and have some pretty good battery results and we will continue to grow that. Look at our technical staff, what we can do, our team is strong. We may be a small company now, but the potential is tremendous. We are quite undervalued now so I think that someone coming into the stock now will be pleasantly surprised in my opinion for the potential of the share price.

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“Talking about batteries and vehicles the talk almost always used to be about lithium, cobalt and nickel, but suddenly there has been a realization that the anode of the battery is graphite.”
Donald Baxter