In this Open Briefing®, Chairman Jitto Arulampalam discusses:

- ASX listing and activities

- 99.97% Nuclear Grade Graphite sample tested

- Geophys survey identifies vein graphite targets

- Graphite market and company outlook

Record of interview:

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Lanka Graphite (ASX: LGR) formerly known as Viculus Limited (ASX: VCL) successfully raised $3.848 million dollars via a placement of 19,240,000 shares at $0.20 to complete an off-market takeover bid for Euro Petroleum Limited (Euro). As a result, post listing on the ASX, Lanka Graphite (Lanka) now holds several granted exploration licences which cover existing Sri Lankan Graphite mines that have historically produced very high grade lump-style graphite. Describe the new corporate structure and what are the company’s main assets and strategy?

Executive Chairman Jitto Arulampalam

The company has 70 million shares on issue post listing with a market capitalisation over $7M. The main company assets are our Sri Lankan graphite tenements covering an area of 242km² of highly prospective ground over many historically operated mines, adits and shafts. These are granted Exploration Licences EL236 and EL267 (Matugama Mine), EL237 (Attanagalla Mine), EL266 (Alutgama Mine), EL268 (Morawaka and Rakwana Mine) as well as applications pending grant upon Exploration Licences COM EL011 (Matara Mine), EL953 (Hanguranketa Mine). We are pleased to have announced recently, the granting of EL952 now EL/307 (Ratnapura Mine) and EL954 now EL/308(Matugama Mine), both located within the Sabaragamuwa Province of Sri Lanka and comprise a total of 37 square kilometre grid units.
These exploration licences cover areas that were historically mined in the late 1800’s and early 1900’s and from where lump graphite was previously mined. Visible graphite can still be observed in the existing adits and shallow pits. Depth of historical mining operations was only down to around 100 metres so we think we can find significant graphite mineralisation beneath the old workings.
The strategy of Lanka Graphite will be to progress all aspects of the exploitation of these exploration licences as well as to explore all avenues related to building Sri Lanka’s newest graphite company.

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Lanka has appointed an in-country General Manager Technical Services, Mr Supun Wimalanath, who is overseeing the current Geophysical Survey. Can you give some background to Mr Wimalanath and his role with the company?

Executive Chairman Jitto Arulampalam

We are very pleased to be able to secure the services of Supun Wimalanath as our GM Technical Services and he will be overseeing a range of activities across the company operations in Sri Lanka. Supun was previously the Senior Technical Officer (Geology) with the Sri Lanka Geological Survey and Mines Bureau (GSMB).
Supun’s work with the GSMB since 2008, included geological exploration (graphite and mineral sands), environmental impact assessments, site planning and project co-ordination. Supun also has extensive experience in advising foreign companies on how to best plan graphite exploration and mining activities in Sri Lanka. Supun’s experience working within the Sri Lankan government mining body, ensures Lanka Graphite can be most expertly advised to ensure our relationship with the Sri Lankan government and its mines depart is optimal, effective and collaborative on all required levels.

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Assay testing by ALS Metallurgy in Perth on samples taken from Lanka’s EL 266/267/268 returned grades of up to 99.97% TC (total carbon) which is very close to pure graphite and can command prices of between US$5000 - U$20,000 per tonne. Can you comment on this sampling and what it means for Lanka’s prospective projects.

Executive Chairman Jitto Arulampalam

These sample results are very exciting for Lanka as it gives a good indication of the kind of results we can expect from the future of our project. This bodes very well as we are positioning ourselves as a potential producer of very high grade, low volume, high margin product and the battery graphite market is a key target. Battery grade graphite must be pure as deleterious content can induce sparking and inefficiencies. The high prices paid for such product means we could have a very high margin production profile. The grade lends itself also to a simple upgrade to Nuclear grade graphite, a key component in reactor construction. The grades show we will be able to target niche graphite and graphene markets with our very high grade product and this is key to our business development strategy. We continue to discuss a range of graphite and graphene opportunities with a number of parties.

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Results have been announced from the ongoing Geophysical Survey across Lanka’s exploration licences which include old graphite mine locations. What has the survey identified and what does it mean for the exploration program?

Executive Chairman Jitto Arulampalam

The geophysical survey undertaken across selected targets within our exploration licences was designed to identify structural targets that we could further explore with more intense EM survey gridding. With the use of Very Low Frequency Electromagnetics (VLF), we were able to find the conductive zones below and between old shafts and adits historically mined for vein graphite. The survey also identified new structures and lithology that indicates extension of the known graphite mineralisation. There were more than 50 pits identified during the mapping of the EL266 (Alutgama Mine), EL 267 (Matugama Mine), and EL 268 (Morawaka and Rakwana Mine), so the area has had extensive mining already at near-surface graphite mineralisation. With this exploration campaign we can define the extent of the mineralisation and begin to define its parameters.
So we are very pleased with the results and from these we can now design a more closely spaced survey that will help us identify core drilling targets. We aim to commence drilling on these in the fourth quarter of 2016 following an extensive mapping of all our tenements.

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The total amount raised for the transaction via placement of 19.24M shares at $0.20 was $3.848M. Where are these funds being employed and what are the immediate activities that shareholders can expect to see? How amenable to exploration and mining is the Sri Lankan government?

Executive Chairman Jitto Arulampalam

The funds have been employed paying the vendors in Sri Lanka for our graphite tenements, exploration activities and working capital for the next two years. We expect to commence drilling at potential graphite sites recommended by our independent geologist within the next four months. Exploration activities have included; mapping and trenching, geophysical surveys. Planning is underway for dewatering old adits and shafts to allow mapping and sampling, core drilling to test mineralisation and resource modelling and delineation commencement.
The Sri Lankan government is very encouraging of mining in Sri Lanka and with mining of graphite dating back to the 1600’s, there is a long history of mining in the country. Sri Lanka’s government is keen to encourage good economic development and employment and sees graphite mining as a key element for growth.

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What is the geological setting of the graphite deposits and what can you tell us about the generally known depth and historical operations? How far from infrastructure such as roads, electricity and ports are the old mines and new tenements?

Location map of Lanka Graphite Exploration Licences

Executive Chairman Jitto Arulampalam

All our tenements cover large areas where graphite mining has previously been conducted. Within these areas there are several abandoned mining sites that were operational as early as the middle of the 19th Century. None of these mines have been operational since Britain granted independence to Sri Lanka in 1948.
All of our tenements are accessible by roads and have ample supply of readily available water and electricity. These tenements are also within 100km of three commercial ports including the Colombo Port the largest in Sri Lanka. As stated earlier, mining depths were generally as deep as 100m and the surface area is mostly jungle forestation and flat. Potentially, a possible simple mining model won’t require large amounts of chemicals and crushing and will need only minimal processing due to the ‘lump style’ of the graphite that exists in the region.
We expect to conduct a simple washing process before essentially direct-shipping the graphite product. Our intention is for a small scale, high margin operation which will require relatively small operational cost as well as small capital cost.

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Sri Lankan graphite traditionally mined and supplied to Asian customers is unique in its high grade lump-style nature. What is different about Sri Lankan graphite and the type of product that Lanka is targeting for production?

Executive Chairman Jitto Arulampalam

Sri Lanka is the only country in the world producing the highest purity vein/lump graphite (95-99% purity). Lanka Graphite intends to build our core capability post listing to be able to produce high value graphite products such as graphite fluoride, graphite Nano powder and ultimately graphene. Currently much of the high purity graphite required for batteries and high-tech applications such as graphene, is synthetically produced and this product can command prices in excess of US$15,000/t. High grade natural occurring graphite can command prices between US$3000/t and US$5000/t.

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There are some larger graphite players planning to produce some large global volumes in the coming years, such as Syrah Resources. Will Syrah’s graphite target the same markets and will Lanka have to compete with the Tanzanian graphite producers?

Executive Chairman Jitto Arulampalam

We don’t see that large scale graphite mining companies are competing with Lanka Graphite as the product we aim to deliver is very different. Our target markets, geographically and technically are different and our end-user is different.
There are many graphite players planning to produce large global volumes supplying into an entirely different market segment (industrial graphite). Lanka Graphite will be leveraging its unique high purity graphite (95-99% purity) to produce products aimed at the end user market such as lithium ion batteries, fuel cells in electric cars, and graphene for use in a broad area of nanotechnology.

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What will be the target markets for Lanka Graphite product in terms of both corporate customers and locations? Does Sri Lanka’s geographical location give you any significant advantage?

Executive Chairman Jitto Arulampalam

Lanka Graphite would be targeting high-value end users (i.e Li-ion battery and fuel cell used by electric vehicle manufacturers) from the Asian region. We have made progress in discussions with leading graphene research entities and we recognise that as a major plank in our future success. Sri Lanka produced graphite is very very high quality and possibly the only source of type of high-quality graphite that is suitable for use in the production of graphene. So we are very excited about where we sit in that industry and how we can develop our business to take best advantage of the present and future growth for graphene production.
Sri Lanka is strategically located next to the fast growing Indian sub-continent with close proximity to Southeast Asia and the Middle East and is well situated at the crossroads of major shipping routes connecting South Asia, Far East and the Pacific with Europe and the Americas. These are where many of the high-tech international companies are domiciled and we intend to initiate discussions with many potential clients as soon as we can.
We have completed Phase 1 of our exploration on granted Exploration Licences, including; dewatering, sampling, mapping, geophysical survey and core drilling to test mineralisation below old workings. Phase 2 will shortly follow and then a drilling programme will be designed for commencement in the fourth quarter this year. Concurrently to this activity on site, we have also begun to seek exclusive off-take agreements with local operational mines and progress engagement with end users to lock in future supply from our operations.
We are very pleased to now be listed, trading on the ASX and commencing exploration and early stage operations that will lead to a new high grade graphite mining company in Sri Lanka that can grow as we deliver premium graphite to a growing global market.

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Thank you Jitto.

For more information about Lanka Graphite Limited, visit www.lankagraphite.com or call Executive Chairman Jitto Arulampalam on +61 3 9221 6394

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