Ceylon Graphite - Highest-Grade Graphite in the World

0:11 Hi, everyone. Thank you for joining Salon Graphite's Live Investment Summit today hosted by 6, highest grade graphite in the world. I'm pleased to introduce our speakers today, Parat Parasha, Chairman and Chief Executive Officer, and Sasha Jacob, Founder and Strategic Advisor. The team is going to walk you through a company presentation, and after that, we will be taking questions. As a reminder, you can always submit your questions in the right-hand side on the Q&A panel.

0:41 Now, without further ado, I'm going to pass it over to Bharath to kick things off. Thank you, Jane, and good morning to all. I'm Bharat Parashar. And this morning, we're going to talk to you a little bit about Ceylon Graphite, who the company is, what we do, and how we position ourselves in the world's graphite market. And of course, we'll also talk a little bit about the graphite market and the battery market. Having said that, I'll start off with saying we were established in 2017 when we did a reverse takeover of an existing shell company on the TSXV, and we have since been in business.

1:29 Our call sign, our symbol on the TSXV CYL. We are now also listed on the OTC, and we were recently upgraded to QB status a few days ago. Let me start off by going through our disclosure and disclaimer statement here, which is pretty standard to what most companies talk about. Please have a look at it at a good time. We have some forward looking statements and geological projections here, which I'd appreciate if you could have a look at later on on the slide pack. Moving on, what is our goal and ambition?

2:10 Our mission is to be the preeminent global supplier of the highest quality graphite products in the world, practicing environmental excellence, which is key, and good governance. So you'll see on the screen right now a piece of graphite. That is exactly what you see coming out of our minds. That's a piece from our K1 mine. And it is those of you who have had the opportunity to see us at the trade shows might have seen similar pieces. It is a piece of graphite of very high quality. As you know, graphite is key these days in the energy storage business and in the battery business. And one of our great proponents, I should call him, Mr. Elon Musk, has said that batteries should really be called nickel graphite batteries rather than lithium-ion, because in a battery, primarily the cathode is nickel and the anode side is graphite with a bit of silicon oxide.

3:17 And lithium is purely like salt on the salad. So you know, we're really a nickel graphite battery, not a lithium ion battery these days. But having said that, I'll move on. We have a strong management team here. And before we get into the management team, I'd like to pass you over to my colleague and the founder of our company, Mr. Sacha Jacob, to talk a little bit about history and why we are in Sri Lanka and how we found this great opportunity. Sacha.

3:51 Great, thank you Bharat. Hi everyone. Yeah, just provide a bit of background, first of myself and then on the company and how we got to Sri Lanka. Myself, I'm a long-term investment banker, was the first investment banker in Canada in the renewable energy and clean tech space, focusing exclusively on that area beginning about 20 years ago. We've managed about 8 billion of transactions in that sector over the years. The company itself, our history in the country started actually on the hydro side with a company that I co-founded in 2005, which was developing hydro projects throughout the country of Sri Lanka. It became what was then the largest hydro company in the country.

4:41 That team also began moving on and developing hydro projects in Uganda, utilising the talent of the team that we built up in Sri Lanka. My previous firm was covering the rare earths and strategic metals space quite accurately from the research side and the investment banking side. We had heard about this anomaly of really high-grade Graphite that was in Sri Lanka. We'd been researching a little bit and found the history of it. In one of our many visits to the country, we visited the geologic survey to research the opportunity for graphite more. And this was back in 2011. And I guess the first clue that we were in the right spot was when you walk into the lobby of the geological bureau in Colombo, Sri Lanka, you see a huge chunk of pure graphite, almost the size of a table in the lobby.

5:36 We knew then that we were probably in the right area. We began researching all the historic sites, really handwritten maps, having a team go to the local villages, understanding where the shafts and the adits were, where graphite waste dumps were, and researching it from there, doing some VLF work. And then we had AMC Consulting go to the country and go through the 120 different grids that we have, each grid being one square kilometer. And from there, we prioritize the sites based on how prolific the graphite veins were there historically, and then began refurbishing each of those sites as we'll talk about in greater detail. Bharat, I'll hand it over to you.

6:24 Thank you, Sasha. That was a great description of our past. What I will add just to Sasha's comments, our hypothesis when we started this business was simply graphite mining in Sri Lanka in the past was done in the overburden in the mud. And when they reached the rock, they would stop and go to a new site. Graphite in Sri Lanka is visible. The veins are visible on the surface. So miners would just follow it down to the rock.

6:56 So our hypothesis was if we can obtain grids from the GSMB where previous graphite work had been done, we should have a fairly good chance of being able to find graphite in the rock. So most of our 121 grids have had previous production, And this hypothesis, as you will see when we talk about our 2 sites later on, has been made correct as we have gone in there and actually found the graphite. Just to stay on track here, I've been, I'm a little older than Sasha. I've been in the business for 40 years now. Like Sasha, my experience has been investment banking.

7:44 I used to be the co-head of Citigroup Investment Banking Business in Asia. I've been in private equity for about 20 years now and used to be with the Emerging Markets Partnership, EMP Global. I used to run American Express Bank in India and have been around in the Asian region for the last 42 years. So we've got pretty good experience in Asia dealing with people and excellent relationships. Another key management people who I'd like to spend a minute on Our business in Sri Lanka is run by Mr. Soza. He's a serial entrepreneur and a successful businessman there. He takes care of the day-to-day management of the company.

8:32 The operating side is run by Janaka Ratnaike. Janaka is a mining engineer qualified in Australia and has worked for the GSMB. His last assignment was head of one of the longest mines in Sri Lanka called Kahataga, which has been in operation for 150 years. 1873 or something it started. And our top local geologist is Dr. Ranjit Premasiri, qualified out of the UK with a PhD from there. He was president of the Sri Lankan Geological Society and is a professor of geology at one of the local universities right now.

9:18 Mr. Abdi is our CFO. Having said that, just thought I'd spend a minute on what is graphite. Graphite is an electrode of carbon. It's 6 carbon It's 6 carbon molecules in a hexagonal shape. It's biocompatible. It is used in a variety of products, as you can see here. It used to be in the pencil, but it's now come all the way up to smart materials.

9:51 But obviously, the largest usage of the product currently is still in steel and lubricants and refractories. But going forward in the future, it is definitely expected to be in batteries and energy storage.

10:19 Sasha, you might want to talk a little bit about the actual graphite, the past, the present and the future here for a little bit. Absolutely. So as Bharat was mentioning, of course, the past was mostly in the mobile electronics market. The present, of course, you're reading every day in the papers and the news about the huge demand of electric vehicles. But just as big and moving into the future is the energy storage side. And benchmark mineral intelligence has projected a compound annual growth just in the storage side of about 41% between today and 2030. This is mostly for balancing renewable energy, wind and solar production, as well as you're seeing things like the Tesla Powerwall and other home storage devices. So a huge area that shouldn't be ignored is the massive demand coming from the energy storage side itself outside of electric vehicles.

11:15 So, you know, the big word these days are these mega or giga factories, actually. They are no more mega factories. And how much raw material do they consume? A 30 gigawatt battery factory, as you see there, will consume around 30,000 to 35,000 tons of graphite. And this is going to be primarily in the anode. So in a battery, if you look at a battery on a very simplistic basis, one side is your anode and the other is your cathode. As I had spoken earlier, and you have Brian in the middle, but the basic part of your anode is graphite. So, and our view is that unless there's some radical change in technology, no matter what happens, The graphite part of the battery is going to stay at where it is.

12:08 Graphite demand. Sasha mentioned this. If you look at graphite demand in today's market, it's about 700,000 to 800,000 tons per annum, of which about 200,000

12:21 tons is accounted for by batteries and the EV market in particular. But benchmark minerals, who are the key people who forecast this stuff, have said that this will go to about 3 million tons per annum by 2030 in a 4 million ton market. And you can see, as I talked about earlier, there are several uses of the product. And one of the big uses, there are 2 big uses that people don't really talk about that much. One is the steel industry, which is having a big rebound. And the other is the military, who uses a lot of graphite, simply because graphite is the best conductor of heat. And they put it as a lubricant in the big gun barrels of the mega big guns they use so that the gun barrel doesn't explode. But these are the large

13:15 graphite markets in today's world. Talking about graphite production, this graph very clearly puts out that there's going to be a graphite deficit from operations in about 2, 3 years, say about 2022. And this will just continue to grow over the next couple of years. And as Sasha said, battery, the demand from the battery sector is expected to be about 30% year on average, out to 2030, you're gonna have a huge gap. Who's gonna fulfill this gap?

13:51 2 people are going to do it. One is new production and obviously synthetic graphite. And you're going to see more and more new mines coming on stream to do this. Ceylon graphite is obviously very well positioned for all this. I think as we have said time and time again in most of our

14:19 press releases and other public disburses, we are one of the quickest and cheapest mines to come, facilities to come to market. We are averaging around $2.5 million a mine, and we hope to keep that going. We do about, when fully operational, ramped up completely, Each mine site is anticipated to do about 5000 tons per annum.

14:53 And as we'll show you later on in the presentation, we expect over the next few years, Out of 121 sites, all things being equal to be able to develop at a minimum 10 mines. We currently have 1 site which has declared commercial production. That's our K1 site. Our graphite from there, I would say, is the highest grade graphite in the world. The reason we say that is because in situ, that is in the earth, this is a carbon content of 90% plus, which is very high compared to anybody else. Most of the markets, most of the graphite in the world is flake. And flake graphite is of a much lower carbon consistency than vein graphite. We are purely vein graphite.

15:45 The demand for natural graphite we've talked about. We are also very well positioned from geographical position to be able to serve both Eastern and Western markets. We look at graphite as the new oil. It's going to replace as decarbonization takes place, and you're going to need to store energy.

16:13 And transportation sectors are going to need us a lot more than they have in the past. A little bit of our production highlights. Just again, repeating, we started in 2017. We've had our products verified by 2 well-known laboratories, Dorfner Anserplan in Germany and American Energy in Chicago. Both have certified that our graphite is expandable up to 99.99% and sterilizable into battery-grade material. The quality of our graphite is exceptionally high. In December of last year, K1, which is our primary and flagship mine site, announced commercial production.

17:01 And we are hoping that we'll be able to do the same with our M1 site towards May, June of

17:08 this year. What is left there is to obtain the final mining license from the government. It's called an IMLA, Industrial Mining License Category A. And we are going to be starting the process to apply for that very shortly. Please keep in mind over the last year, like most other mines, due to the COVID-19, we have all had a bit of stop and start work. But particularly in Sri Lanka, which is a small country, the rules have been a little tight on that. Oh, yes. The other thing I didn't mention to you is that unlike most of the mines around the world, which are open pit mines in Sri Lanka, we are only allowed underground mining.

17:55 And so the COVID impact is a little more

18:00 than that. We have some other sites that we've looked at, which are very promising, and we hope to start developing on them in a little while. The next big phase of actually positioning of our company will be when we go towards processing. We have no intention of being a pure graphite supplier. Plus, the government of Sri Lanka will want us to do some value-add to the graphite. We are in the process of coming up with exactly the right strategy on how we will upgrade our graphite and then how we will sell it to be a part of the main

18:46 energy storage industry around the world. We have the largest land package currently, other than the government in Sri Lanka, that is dedicated to graphite. We have 121 grids that have been granted to us by the GSMB, the Geological Society and Mines Bureau, who are our regulators, as Sasha mentioned. You can see off this map, we are mainly in mid to the lower half of Sri Lanka. And if you look at the geological structures, and those of you who are geologists,

19:29 the country is basically on the same geographical grids underground. And we are if you actually measure these we are off the 2 larger mines that have been in operation in Sri Lanka for the last 150 years, Kahadaga and Bogla. And the key thing to those mines, which I think is very relevant to any discussion, is typically the mine, your mine life is 50 years at the max. These mines have been in operation for over 150 years and are down at over 2000 feet. Our mine, K1, is currently at 150 feet. And our M1,

20:14 the work that has gone on, we're at 90 feet, as I'll show you in a little while. So we have a long way to go. And the winds that we have are going to just keep going further and further into the earth. So this is our K1 site, in which I've got a 3D demonstration there. We have a shaft going down to about 150 feet. And from that, we've got various other windows and tunnels that have come about. We have also drilled some holes there. And it is our estimation that we've got about 53,000 tons of graphite

20:55 in the ground there. We are in the process of restarting production. And hopefully in another few days, we'll be able to say that we've got there. It takes a bit of time to get rid of all the cobwebs and problems caused by the COVID. But we now have full health approval to restart the work. We now, This is to give you some idea of what our mine looks like. The shaft area you can see on the far left and on the far right are the veins. These are the veins underground. You can see some of our shaft and one of our first

21:38 catifolds of production of graphite that came up. We produce vein graphite, very different from flake. Vein graphite is like the veins in your arm. It comes up from the bottom of the earth through the rock in pieces. So we don't go out there and crush a lot of rock. We just mine the actual veins. Yes, the vein does bulb and pinch. But when the pinching starts, then we start looking at the sides where there is some flake in the sides. But we focus on the pure graphite in the middle. As you can see from the pictures on the far right,

22:19 we have some exceptionally large veins at the K1 mine. This is the M1 mine. And again, here we are estimating that we've got a fair amount of graphite. Pictures here show the size of the vein. On the far right, you can see the thickness. I'm a big guy. That's me out there in the green t-shirt. My wingspan is over 6.5 feet. And it just shows you how wide the vein here is, and it's right in the rock

22:55 at the M1 site. Moving on, There's some comparable data here of the companies who we compete against and what they're doing and how we sort of position against them. And I'll let Sasha talk about this for a few minutes. Sure. This chart was put together by a highly regarded analyst, Chris Ecclestone, quite highly regarded in the battery metal space and probably one of the foremost experts in the graphite space. But as a comparison of the public companies and you'll see the relevant columns, the CapEx estimates for the mining development of each company, the grades that they're achieving, the cost per tonne. And of course, you'll see in the status that Salon Graphite is one of only 2 public companies that's currently actually producing graphite.

23:53 So just to take you very quickly onto a bit of valuation and some numbers here, But this slide basically sets out, these are all our numbers. And obviously, this is only based on the sale of natural graphite. Obviously, valuations will all change once this company starts upgrading

24:16 its product. But we produce graphite right now at an exceptionally cheap price. And Sri Lankan graphite sells in the market at a vast premium to anything else. And the reason is simple. It sells at about $2,000 to $2,300 a ton simply because it has got the highest grade. And at 90%, 95% carbon content compared to 10% to 30% of other flake graphite, It makes a tremendous difference. Plus, our costs of mining are anywhere in the range of 200 to $250 a ton, depending on how deep you go into the mine.

25:05 I think that we've got some very good incentives from the Sri Lankan government, and we have excellent relationship with the GSMB. So we think that we will be able to go out in the market. And if you look at actually the first part of our cash flows, I forget the numbers for a second. Just look at my production schedule. What we are saying is that in a year's time, we'll be able to produce about 1,000 tons of graphite and then slowly move that up as we go forward. We think we'll be at full production at K1, which is about 500 tons a month in about 3 years. And we think that in 3 years, given the fact that we are now, we just had a very successful financing that was done in the market.

26:00 We think that with the cash flow that we also generate ourselves, we'll be able to really go after all these mines and get them into production without having to go to the market for any excessive amount of debt. There's always a little debt that one has here and there, but we are not going to, we are not basing any of our projections on large project finance, whereas most of our competitors, and God help them, will need large project financing. That's the difference we have. We are a small, we are a multiple, we are a producer through a multiple amount of small mines. We don't have 1 mega mine like Sera.

26:49 We have small mines and we have high quality graphite and we're going to have an exceptionally robust production platform. And if you now look at the numbers, you'll see that given the fact that we sell at around 2000, $2,300 a ton, we have gross profit margins that are huge and that we will have very positive EBITDA as we go forward over the next 10 years. 10 years. I don't know what our stock price is doing this morning, but as of yesterday, it closed at 26 cents. We have a market cap of about 32 million dollars. We have about 120 million shares outstanding with some warrants and a few options that are out there. As I said, we have no real debt. We have some convertible debentures, but it is our hope that these will get converted over the next couple of months as our business continues to grow.

27:52 One of the things that I'd really like to put out here is that we manage this business as a team. We have Sasha, myself, and Anuka, who are always talking to each other. We have cameras that are live inside our minds. So most of the time we know exactly what is going on. We are out there almost every month. These days, that's obviously not possible, but we are all ready to get back there. And most importantly, we have run this business as tight as possible. Nobody here is looking to make money by simply getting large salaries and having aerial surveys and stuff like that. We do everything the old-fashioned way.

28:41 K1 mine right now, for example, 150 feet, There are 14 ladders going all the way down. And we have been down, I have been down all 14 ladders. Believe me, I never thought it was so difficult to climb up a 10, 12-foot ladder when you're coming up from 150 feet underground. But it is a very exciting business. We think that we are very well positioned and are growing very well and hope and obviously pray that COVID goes away as fast as it can so we can get back to normal. I'd be delighted to take any questions that you might have. And thank you for listening. Well, thank you very much for the presentation, Pat and Sasha. We did have a few questions coming in, so let's hop right to it.

29:34 Our first question is from Thiago all the way from Portugal. He's an existing investor, first of all, wanted to congratulate you both on a fantastic project. He'd like to know whether there's any news about licenses for the M1 site and what is your expectation about upgrading the graphite to spheroidized graphite? Yes, thank you, Thiago. So we have what they, in Sri Lanka you have multiple licenses. You basically start off with an exploration license, which allows you to do exploring on a site that has been given to you by the GSMB, who is a local regulator. We follow that up with different kinds of mining licenses. But the best license and only license to get is an IMLA license, which is an industrial mining license category A.

30:30 We were given the fourth such license in Sri Lanka's history last year. We are now in process of applying for an IMLA for the M1 site. Every site has to get its own license. It is a tedious process. It is long, yes, but it is thorough. And eventually the government will, you know, makes you go to 12 different departments starting from archaeology on one side, all the way to urban development on the other, to make sure that everything is correct. Based on that, we will get an environmental protection license and an IMLA license. God willing, we will have the IMA license for our M1 site by about April, May. I mean, I cannot be any more specific than that because these things move around a bit from time to time and can get speeded up or delayed depending on how much other stuff these departments are doing. I hope that answers your question.

31:42 Perfect. Thank you very much. Our next question is from Alistair. Can you talk a little bit about how your graphite compares to flake graphite? What can't your graphite go in that flake graphite can? So basically there are 3 kinds of graphite, Alistair. There's flake, there's vein and then there's amorphous. And basically the primary graphite around the world these days is flake. Vein graphite is limited to a few parts in the world. Obviously, the biggest one is Sri Lanka and a little bit on the east coast of India, but the veins are not as thick and as high grade as Sri Lanka. So I don't know whether you know, but pre-Second World War, Sri Lanka was the largest producer of graphite in the world. It accounted for over 50% of the world's graphite.

32:38 And obviously, as the demand for graphite fell after the war, plus the prices went nowhere. This didn't really progress. But Sri Lankan vein graphite is in all categories the same as flake graphite after it has been separated from the stone and then concentrated. So if you look at a typical mine in say Africa or China, what they'll do is they'll take a big stone crushing machine in a graphite mine. They'll start bulldozing the stone. They'll create big piles of stone, which they'll then put through a separator in which you separate the stone from the flakes of graphite.

33:24 You might remember the old Western movies. There were specks of gold on a piece of stone. Similarly, there are specks of graphite on the stone. They're separated. And that is typically in the 10 to 30% carbon content. Purity of graphite is measured in terms of carbon content. And you get about 30, I'd say most graphite in the world is anywhere from 10% to about 40%. And it is then put into a concentrator and concentrated and sold. When you're talking about natural, raw graphite. So our graphite is at 90-95% carbon content. This is about 40%. It is all that upgraded for use, depending on where you want to use it. Obviously, when you use it for the steel industry and other lesser technical utilizations, then you don't need to upgrade it too much.

34:21 But most graphite is upgraded at least to 95% and then it is sold in the market. And if you look at the battery industry, what we call it, you need at least 4 nines or maybe 3 nines. So 99.99% plus. So once you get to that level, all graphite is the same. But what happens is the cost of A mining, most graphite in the world, 400 to 500 tons, pure extraction cost, plus XXX, separation, concentration, etc. Takes it up to over 1000 bucks and then you upgrade it, which has a further cost, and then you sell it as upgraded material.

35:07 For us, we're already at 95%. Some of our graphite doesn't have to be upgraded. It just has to be milled and micronized into smaller particles and then sold on. But yes, once we are all upgraded at 99.99%, there's no difference between flake or vein. Perfect. Thank you very much. The next question is from David. How do you compare to other graphite companies in the public market? I let Sasha answer that, but I'll just say this to you for a very quick point before I pass it over to Sasha. We have got done a lot of, we've got into production for let's say 6 and A06 and 750,000 Canadian dollars and we have 1.75 mines in position. So we are maybe the cheapest miner in the world. And we've done this in 3 years, I think, so we're the quickest to market, and we are 1 of 2 mines in production.

36:15 So We are very well positioned in that score. Sasha might want to talk about the other mines. Sure. I've just pulled up the comp chart prepared by Hull Garden and Company. This is available, by the way, in the corporate presentation, which is available on the website, which is salongraphite.com. But as Brad was pointing out, the key comparisons here, significant difference in the capital requirements to put in a production, which you'll see in the column. And then, of course, the grade difference and the cost per ton of production difference. Another key difference is, as Bharat had mentioned earlier in the presentation, this company is mining 100% underground. So there's no open pit, there's no massive environmental disturbance.

37:11 I think you'll see all of these other companies are all above ground, open pit, not underground. Because of our high grade, another key difference is that there's no primary processing at site and that's what's really reflected in the capex difference. Most other mines that have these grades that you can see, most of which are below 10%, have to crush and mill and float right at site to remove the graphite pieces, specks from the larger host rock material that they're producing. In the case of Ceylon graphite, that's not what's occurring. It's really moving directly. The main graphite, which separates very easily from the host rock and is coming out at 90% plus carbon.

37:57 Those are the key differences. Again, this chart prepared by Hall-Garden is available in the corporate presentation, which is on the website. Great, thank you very much. Our next question is from Andrew. How many tons of graphite are estimated to be in a total 121 mine sites? I wish I knew. All I can say is that it is... So the way we go about looking at this is, we have done 2 sites where we have some idea of what we think the graphite is. But most of the sites, when we start off, we go and do physical inspections.

38:46 And given what I had said earlier that most of our sites have had previous production, you can see old pits or adits that were in existence. And we look at the dump material out there. But it's very different. And you know, The more dump that is, we have the dump examined. We have it tested to see what kind of material that is. But it's very difficult for me to give you a number, Mr. Andrew. What I can say though is that, and maybe I should talk at this stage a little bit about how we do stuff. What we do is we start a drilling process on each site. We don't do 50-60 drills because we, I believe, And I will put that out there and I should say, maybe I forced my poor team to believe too, that if we strike on the drills and we strike big veins, which we did at K1, we then saw the shaft And we went down to the bottom of the shaft, we cleaned the shaft, and we saw the large veins at the bottom of the shaft.

39:53 We then looked for directional comparison, and we started work. We did not go through the full 50, 60 veins that were needed, I mean, sorry, drills that were needed. And we had our local geologists come up with an estimate, which is what is required by the GSMB for them to be able to even license us. So they come and do their own inspection of all our records. They look at where we've done the drilling. They go down the mine and look at the veins and they come up with their own estimates. It is generally estimated that once we get a positive site, we'll at least do 5000t of graphite per annum. Now, our M1 site, for example, we managed to get... There was a lot of drilling done there by an Australian company called Bora Bora.

40:50 On that site, there were 50 drills done and it's over 5 square miles, 6 square miles, the 5 grids that we have there. We are only looking at the bottom grid right now for this mine. And some guys are saying to us that this sector, The historical view of this was that it was bigger than Kahataga. And Kahataga, as you know, is maybe the biggest graphite mine in the world, open at depth at 2000 feet. But I'll give you a small anecdote here. When we started off with this mine and Sasha and I went to the M1 site, we saw a surface vane of 18 inches and about 6 inches wide and we were ecstatic.

41:47 So I just told my manager, you know, just get I want to take a picture of this. So can you wash it? So he started washing the vein And we just washed and washed and washed. And we found a 10 foot vein on the surface. Nowhere in the world has anyone ever found a 10 foot vein of graphite on the surface. And it was just amazing. We thought it would be maybe, you know, it looked nice in a photograph of some of the dirt was removed. But a 10-foot across wave is outstanding. And if you look down at the pictures which are on the screen right now, you will see that my wingspan, the vane is thicker than that. And this is just 1 vane that we have right now. And we haven't even hit the mother load. So we are going down in a shaft right now, which if you look at the first 2 pictures, which are eventually going to become ventilation shafts.

42:51 We're going to go into the reservoir with an attic at the bottom of the hill, but we can only start that work once we get our IMLA license. So we are very optimistic about what we think we're going to find out there. I hope I answered your question. Thank you very much, Harad. That's very exciting indeed. Our next question is from Harry. You mentioned that K1 is one of only 2 graphite mines currently in production. Can you confirm whether this is just in Sri Lanka or is that worldwide? I think when we, Sasha, maybe you want to answer that. But what when Sasha mentioned that we are talking about, there's a lot of production going on in the world. If you look at this, these are the new mines that are coming on stream.

43:48 Graphite in the world is being produced in China in large amounts and in certain parts of Africa and in India and in other parts of the world. But of the new mines that are coming on board, we are 1 of 2 new mines that are just come on board. New graphite to the market. Yes, the key distinction is public companies, is what we've mentioned. So as you see from the chart, Sara is another public company that's producing, and then ourselves, all the others, and the public markets are pre-production. All right, Thank you very much for confirming.

44:34 So obviously, we're focusing on Sri Lanka. Can you talk a little bit about the political situation in Sri Lanka? I know that there was a civil war a couple of years ago. So what's the situation like now? Well, I think Sasha mentioned that we have invested in Sri Lanka during the civil war with our mini hydro business. But the situation in Sri Lanka right now is absolutely normal. It's as good or bad as any other country. There have been 3 elections that I can think of that were completely open and fair. The first one was when Mr. Mahinda Rajapaksa became president and he lost in the next election and Mr.

45:20 Srinath came in and in the third election, which was last year, Mr. Gautam Bhaiya, Raja Paksa has come into power as the president and there's a prime minister. We have traveled length and breadth of the country. I never traveled with any. I mean, I just travel in a pickup or on a Jeep. It's just like going anywhere else for me. Yes, there was a bit of chaos last year with the Easter Sunday bombings, but those were more religious. And I think they had nothing to do with the old civil war issues. The country is back to normal. It has a good law and order situation right now. And I think it's got a good, the basic law there is pretty good. There are excellent rules for us in the mining business.

46:11 And funnily enough, the government follows those rules. The GSMB sets out rules and if you meet them, you move on. If you don't meet them, they say, go back and fix it. Great. It's good to hear that Sri Lanka is a safe jurisdiction to be working in. It seems that earlier we may have missed the second part of Tiago's question. So just circling back, Tiago would like to know what is the estimated time to upgrade to spherical graphite for batteries? Oh dear. That's 1 million dollar question, Tiago. I think the way we are planning to go forward is we hope that sometime in 2020, In 2021, we will have a firm idea of what we are going to do on the next stage.

47:10 Obviously, our next stage is upgrade. Upgrade the graphite to at least a triple 9. Whether we go 4 9s depends on what we are going to do next. So we are hoping that by the end of this year, the big issue is, as Sasha mentioned, we want to be environmentally conscious. And very key, if you have any idea of graphite, you'll know that majority of the graphite upgrading historically has been done through acid leaching with hydrofluoric acid. Now, Hydrofluoric acid tends to permeate the soil and the water system and it becomes poisonous for the people who live around. We are trying to go into other technology and there's some of it around the world right now, which is thermal with fluoride bands or nitrogen bands.

48:04 Those technologies will allow us to take away impurities from the high-grade graphite and make it completely pure and at a cost that is reasonable. So we are deciding on which technology to use, number 1. Number 2, what our plan is as of right now, and it's a plan, and I admit it's only a plan, that we would like to start off with a smaller capacity upgrader in as much that we will start off with about 5000 tons per annum. And then these things are modular, so you can expand as you go forward. But For us to become reasonable players in a global market, we need to have at least 10,000 to 15,000 tons of production on stream and be able to sell to the next level players. So who do you sell to?

49:01 You sell primarily to battery users. Battery users are of 2 kinds. You have the old batteries and the new lithium ion batteries, or you sell to people who use for crucibles or for refractories or for the steel business. But the key is we are going to upgrade our graphite to 99% and then do we sell to the user or do we create a new joint venture with somebody to take more value adds. For example, do we become an anode manufacturer or do we just become a standardizer? We do standardization of the graphite. So that part of the decision-making, we have not got to. Right now, we know we are upgrading definitely to 99.9, at least 3 nines. And the question is, do we go to 4 nines? And Sasha and me are talking on a regular basis to technology providers.

50:03 Some of it is beyond my mental capacity, but I'm trying to learn as fast as I can as to all these technical issues about heat and how it impacts silicon. We're getting there. We're getting there. Thank you very much. Next question is from Jody. If Salon Graphite installs an in-country value-add refinery to purify to, say, 99.5, can you estimate what would be the cost per tonne and what would be the resultant increase in sales price per tonne? That's an excellent question. Now, if we expand only to 99.5%, there is a small part of the market that does expanded graphite.

50:54 Expanded graphite sells for exceptionally high prices in today's market, and they could go into the tens of thousands of dollars per tonne. Natural graphite sells in today's market for Sri Lanka natural graphite, as I had mentioned, $2000 to $2300 a tonne. If I upgrade my graphite and Sweronize it, it'll sell...just upgrade it to say $4.9, I'll be able to sell it for about $5,000 a tonne. But if I expand it to, you're looking at something in the plus $10,000 range. We're not even looking at that right now. We're only looking at basic upgrading to 3 nines and hopefully be able to sell it around $5,000 a ton.

51:40 But please keep in mind, Mr. Jodi, that Demand and supply will drive the market and the market prices. Number 1. Number 2, as the energy vehicle business goes up, it will, and there is a shortfall of graphite, it will, Prices will go up. Number 2, number 3, synthetic graphite is primarily made from petroleum products. And you know, once this COVID crisis gets over and oil price goes up to even $60, $70 a barrel, which it was for a long time, last couple of years, the price of synthetic graphite spirals.

52:27 And then there's a huge gap between natural graphite and synthetic graphite. And more and more producers want natural graphite because it's cheaper. Yes, there is a difference in as much as natural graphite at times could have the quality of the graphite, I'm sorry, of the carbon could differentiate depending on where in the mine it comes from. And you do have to do a little more upgrading. But still you're looking at huge profit potential in terms of, you know, we're already high enough at 68% gross margin. I think it will go up even higher when we get into the final parts of graphite upgrading.

53:17 I'm sorry I haven't been able to give you a more specific answer, but we're a little bit away from that. And I don't think it would be right for me to just speculate. All right. Thank you very much. So Beyond just the supply and demand of graphite, the market price for graphite, what is going to drive the Salon Graphite stock price? Would it be tons per year of production or the number of mines in operation or a combination of everything? I think you said everything that needed to be said there, Jane. I mean, the issue is the market, I think, will look for us to produce. Our mantra at present is 3 words, production, production, production.

54:05 Once we sustain the production over any given period of time, and by that I mean K1 producing, M1 producing, I think the market will then look to us to upgrade to a certain level. And once we upgrade, they will then look to us to get into a more specialized portion of our business, which is we've got to make a decision. Are we going with the energy storage business in a big way or are we going with other parts of the business? And one of the things I must, I don't know whether I mentioned this in my presentation or Sasha mentioned it is, but there is much more graphite available on the in the eastern hemisphere versus the west.

54:54 If you take the east coast of Africa all the way to China, the United States of America has recently designated graphite as a critical mineral because there is no new graphite available there. And I think even from its existing sources, There is not much available. So there is going to be a whole new market as America moves towards both electric vehicles and energy storage. And I say this in typically most of my presentations. I think in my lifetime, we will see a situation, and I'm pretty much going down the road here, in my lifetime, every house will have a shoebox that's going to be a battery, like the Tesla wall, only the Tesla wall is a whole wall. I'm saying you're going to have a shoebox that's going to be able to do 15 or 20 days of energy storage for you. And a lot of these big utilities will go out of business and only be there for backup systems. So that's my 2 cent prediction.

56:11 Great. Thank you very much. So since production is so integral to driving value, Do you foresee any challenges with getting to with production or how are you going to overcome those challenges? Yeah, you know, from a production perspective, my biggest challenge on a day-to-day basis is water. And the reason for that is that Sri Lanka, in the middle of the tropics, it rains every day in the afternoon or rains the whole day sometimes. And given that it's hard rock there, the rock splinters over time, you have water coming in from all sorts of leaks and crevices and coming down into the shaft, going into the tunnels or forming pools.

56:57 We've got to have a lot of water recovery programs that take place there. And it's a full-time job. Believe me, we've got pumps at all different levels. And we are, you know, one of the things we're going to start very shortly is building an adit. If you remember the 3D diagram of the K1 site, we have a shaft that is right on the edge of the hillside. So as we go down the hill, we are going to maybe halfway down closer to the road, which is about, I'd say as a straight drop, about 150-160 feet from the top of the shaft. We are going to have an adit which will help us in the water removal process.

57:45 And it will feed directly into a local stream, which will also help the local villages around with water in the dry season. That's my single biggest issue in production. The other ones obviously are getting with our new minds will be to get to veins as good as we have at K1 and M1 so far. The H1 site we have, which you can also see on our website, we found a 3.5ft vein on the surface, but we don't know how far down that goes yet. So we're restarting that site. I don't want to say anything until we get to the bottom of the hill there.

58:36 Perfect. Thank you very much. Unfortunately, I do think that's all the time we have for questions. We are coming to the end of the hour now. First of all, I want to thank you very much, Sasha and Bharat, for taking us through the presentation and answering all of our questions. I know that we were not able to get to everyone's questions, so please stick around, everyone, if you thought of a question as well afterwards. We do have a quick survey after this. Please leave your details so that the Salon Graphite team can follow up with you directly. You can also go to their website at www.salongraphite.com. As Sasha mentioned, the presentation is there and more details are there as well for you to explore. Now, Paran, I'd like to hand back to you for the final word. I just want to thank everyone for participating.

59:28 I want to thank also my colleagues who get into the mine every day and work hard. I want to assure everybody that we are trying to do all our mining and work around our mines in Sri Lanka in the most environmentally friendly way possible. I'm a big believer in the environment and we are not in any way doing anything that we shouldn't be doing. I hope and ask all of you who are listening and all our other investors to pray for us on a daily basis that we find more and more graphite and that we can bring this up in a safe way and then sell it into the market to meet the needs of the global community.

1:00:20 Thank you. Sasha. Thank you everyone for taking the time to listen to the presentation and please do submit any additional questions and the company will communicate directly and answer all of those questions that we weren't able to get to. Thank you again. All right, until next time, everybody, bye now. Bye. Thank you. Thank you. Thank you. Thank you. Thank you.