Sri Lanka vein graphite struggling for business

Published: Monday, 12 November 2012

Investment needed for Ragedara vein graphite mine to continue operations

Sri Lanka’s third largest vein graphite producer is considering its future after only a two-month trial period. Slow graphite demand is hampering operations at the Ragedara Mine in the centre of the country.

The Ragedara mine is now on hold after only resuming operations in July 2012 following a 25-year absence. It sold just 10 tonnes of high quality, vein graphite, 95% C in hand mined lumps (+1 mesh) since reopening.

The mines resurrection was backed by the joint support of Sakura Private Ltd and the government, but is now facing a lack of funding to continue with the underground mining of vein graphite – a unique, naturally occurring high quality form of graphite only commercially mined in Sri Lanka.

A market source told IM Data that the initial output from the Ragedara mine was just a trial order placed by a German company for testing purposes. The Ragedara mine owners are operating through a preliminary license, valid only for nine months, which limits them to produce merely 20 tonnes a year, until they receive a valid industrial license.

Ragedara has a production capacity of 800-1,000 tpa but is lacking the investment required for the purchase of essential machinery and equipment used for drilling and extraction purposes at the underground operation.

Another industry source explained Sri Lanka’s vein graphite suppliers are not experiencing new business at present due to the economic slowdown in the US, UK and Japanese markets. The other major producers, including Bogala Graphite Lanka Ltd, 90% owned by German-based Grafit Kropfmühl, and Kahatagaha Graphite Lanka Ltd (KGLL), another fully government-owned entity, are fulfilling the orders from earlier in 2012.   

Vein graphite is a major export product and source of income for the Sri Lankan economy. Other minerals mined in the country include: quartz, feldspar and silica sand.

Timing of return key to lack of business

The move to suspend operations is somewhat surprising after only two months of operations. Ragedara has returned to production on a downward trend of graphite demand as the industry feels the impact from sluggish Chinese demand and fearful European economies.

Owing to the steel industry, refractory production has slowed in H2 2012 and graphite is suffering as a result. According to our database vein graphite prices for 99% C, -200 mesh, ranges between $2,750- $2,850/tonne, with the prices due for renewal post-November 2012.

High quality flake product (94-97% C, +80 mesh) has fallen from the highs of $2,500-$3,000/tonne in 2011 and early 2012, to $1,800-$2,200/tonne in H2 2012.

Vein graphite is priced separately to flake with contracts agreed on an annual basis. However it is not sheltered from the overall trends in the industry.

Should Ragedara wrap up business then it would strengthen the position of Bogala Graphite which produces 1,600tpa and KGLL which has an output of 1,200tpa. These companies sell graphite to European traders and processors to be resold to the refractories industry. 

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