EDITOR: | May 1st, 2014

Elcora Resources Corp. executes definitive agreement with Sakura Graphite (PVT) Ltd.

| May 01, 2014 | No Comments

ElcoraMay 1, 2014 (Source: CNW) — Not for distribution to US wire services or for dissemination in the United States of America

Elcora Resources Corp. (TSXV: ERA) (“Elcora”)


Elcora has entered into a definitive share purchase agreement dated March 25, 2014 (the “Agreement”) with Sakura Graphite (PVT) Ltd of Sri Lanka (“Sakura”). Upon completion of this transaction Elcora will own 40% of the issued and outstanding shares of Sakura (the “Transaction”).  Sakura operates the Sakura Graphite Mine located on Sakura’s plots totalling 70 acres in Sri Lanka (the “Mine”).  In addition, Elcora will earn 20% of the net income from the Mine as the Mine operator, and an additional 30% of the net income from the Mine for managing the processing of the graphite, for the life of the Mine.  Historically, the Mine operated between 1974 and 1985 and produced as much as 18,000 tons per year of high purity graphite. The graphite from the Mine is of natural crystalline vein type. Sakura has invested in and developed the Mine over the last 3 years and is now nearing readiness to begin commercial production, with much of the mining equipment having been upgraded over the last two years. Upgrading of the remaining equipment will continue as Sakura progresses the project towards becoming a fully integrated graphite producer. Pursuant to the terms of the Transaction, Elcora will provide the remaining capital expenditure required to put the Mine back into commercial production.  The Transaction is not a non-arms length transaction.  No Finders Fee is payable for the Transaction.

Pursuant to the Transaction, Elcora will issue a total 6,827,442 common shares of Elcora at a price of $0.19 per share (the “Shares”) to shareholders of Sakura on the Closing Date. Elcora will also issue 6,827,442 warrants to the shareholders of Sakura to purchase common shares of Elcora (the “Warrants”).  Each Warrant entitles the holder of such Warrant to purchase one common share of Elcora at a price of $0.19 for a period of 5 years. Sakura shall be entitled to appoint one director to Elcora’s board, but is not appointing a director to Elcora’s board at the closing of this Transaction.

KWA Holdings (Private) Ltd. (“KWA”) will own the remaining 60% of the outstanding shares of Sakura.  J.D.K. Wickramaratne, a Sri Lankan citizen, will be the sole officer, director and shareholder of KWA.  Upon closing, Dr. Ian Flint will become the VP of Mining for Elcora.

KWA and Elcora have entered into a shareholders agreement for Sakura (the “Shareholders Agreement”).  Pursuant to the terms of the Shareholders Agreement, on closing Troy Grant, the President and CEO of Elcora will become the President and CEO of Sakura and Theo van der Linde, the CFO of Elcora will become the CFO of Sakura.  Troy Grant will also become a director of Sakura. J.D.K. Wickramaratne will serve as Chairman of Sakura. The Shareholders Agreement grants to the CEO of Sakura control of daily management and conduct of all the company’s business, including completion of other transactions or corporate actions, choosing and communicating with Sakura’s auditors, Sakura’s internal policy for any related party transactions, Sakura’s internal policy and controls to ensure that any material information concerning Sakura is disclosed in a news release by Elcora, the internal control system for the financial reporting of Sakura and payment of all mine management and processing and refining fees by Sakura.

The Transaction is subject to approval by the TSX Venture Exchange (the “Exchange”), all other regulatory approvals and the approval of the shareholders of Elcora, if required.

Technical Report

Sakura Graphite Mine and Property Description and Location

A report on the Sakura Ragedara Property was prepared by Marc Filion, P.Eng. on behalf of Elcora to comply with the Geological reporting and disclosure requirements set out under National Instrument 43-101 (the “Geological Report”).   The Report has been reviewed by the TSX Venture Exchange and accepted for filing.  The Report will be filed on SEDAR and can be viewed at www.sedar.com

The Report documents the exploration and operational history and recent work on the Ragedara graphite property.  Extensive prior workings exist on the nine – one kilometer square grid blocks including historic mines from approximately the 1920’s and 1980’s and the currently operating Sakura Graphite Mine.

The Ragedara Graphite deposit is located at the north west end of a so called “high purity natural graphite bearing mountain range” (the villagers call “Miniran Kanda”) which stretches in a north-south direction for about 8 km bordering the Kurunegala and Mathale District boundary.

Since the 18th century, during the period of the Industrial Revolution in Europe and Western Countries (around 1865) and the period of World Wars I & II, world demand for high purity crystalline graphite was mainly satisfied by the exports from Sri Lanka (then Ceylon under colonial rule by British Government).

According to the history of graphite mining in Sri Lanka, more or less 100 graphite pits have been operated in the above mentioned mountain range from which graphite has been extracted at shallow depths for commercial exploitation. This is evidenced by more than 10 abandoned mine openings located over the 30 acres of mine land at Ragedara, such as Vihara Pathala, Maillagaha Pathala, Hurigahawala, Hunduwala, Bangalawala, Nugagaha Pathala, Mahawala and No 2 Pathala.  During the period 1900 – 1920 and 1930 – 1950 production by the above named graphite pits contributed a considerable portion of all graphite exports from the island.

The owners of Ragedara & Kolongaha mines (H. L. De Mel & Company) and Kahatagaha mines managed to continue their operations until the 1950s. Due to a rapid drop in levels of graphite exports since 1950, more and more pits were abandoned.  Between 1976 and 1985 more than 14 veins were exposed at Ragadara. Of these, 8 were economically mineable, having vein widths of 25 – 40 cm, with some close to 2m wide.  Reported production figures during that period of activity vary from 15 000 to 18 000 tonnes per year.  Production was halted due to limited sales and increased costs resulting from a ground slippage, although minor operations continued until 1990.  The property was subsequently acquired by Sakura in 2011.

Mineralized Occurrences

The graphite mineralization in the Ragedara mine area is of the natural crystalline vein type and comprises graphite veins, black-blue and lead gray in color. Veins are tabular or lenticular in shape and have widths of a few centimeters to a few tens of centimeters. The largest one observed at Ragedara was close to 2m wide; the largest one found in Sri Lanka being 6m wide. The massive crystalline graphite shows uniformity throughout the veins and is composed of massive to millimeter size closely packed black graphite flakes.  The very clearly marked host rock contact shows evidence of a chill zone demonstrated by the presence of 1 to 20 mm long acicular graphite. The general strike trend of veins is N85°W with an angle of dip of 75° to the south. The thickest parts of the veins coincide with intersections of fracture planes in the rock that generally have moderate to steep dip angles.

The lateral extension of the veins along the strike is variable and the workable part can extend from a few meters to about 50m. Along the longitudinal axis of the veins, the graphite shows evidence of a pinch and swell behavior thus affecting the width of the veins. The down dip extension cannot be estimated, but could be more than several hundred meters as commonly happens in other similar graphite mines in Sri Lanka. Kahatagaha Mine which is situated about 8 km south of the present location has graphite veins extending more than 675m deep which are still being worked commercially.

Recent Exploration

In 2011 the Dept. of Geology at the University of Peradeniya executed a geophysical investigation on one 300m long line over the longitudinal axis of the property. Subsurface conditions of the target area were also investigated using two dimensional electrical Resistivity and Induced Electrical Polarization imaging. In January 2012 a second resistivity geophysical investigation over five N-S resistivity profiles were carried out, each having a length between 350 to 400m.

Although the depth of penetration of the resistivity profiles is only about 40 to 60m, the shape of potential mineralized zones on the profile images clearly indicate that they extend to great depths. This is probably due to the increasing thickness of individual graphite veins or increasing frequency of occurrence of veins towards depth.

Metallurgical testing

Metallurgical test (SGS) results indicate the possibility of separating the massive crystalline graphite into small grains and flakes in a number of fine size categories. A dry mechanical process of 15 to 45 min with the use of ceramic grinders followed by sieving shows that more than 63% of the graphite is greater than 32 mesh with a grade of 97.5% C(t), 20% of the graphite between 32 and 80 mesh with a grade of 97.6% C(t), and the smaller residual material with a grade of 97.2% C(t).

Current Mining

Name of the Mine: Ragedara Graphite Mine
Number of the Mining License IML/A/HO/5930
Number of the Exploration License EL/183
Concession Classes: Unrestricted Exploration License 4 km2 (400 ha)
Industrial Mining License Category A: Renewable yearly
Surface Two plots totaling 70 acres on a long term government lease (with option to buy after 35 years) + one of 19 acres which is private property

 The land rights and titles to the mine are owned by Sakura, a company that is wholly owned by KWA Ceylon Holdings Ltd and Fayolle Ceylon Ltd. prior to the closing of this Transaction.

The mining license has been granted under the condition of a five (5%) royalty paid to the Sri Lankan government on graphite sales prior to refining and a two (2%) royalty payable to the Sri Lankan government on the sale of building stone materials from the FOB value on the exploitation plus a levy on export of ca 10 USD/t. The industrial mining license allows for an unlimited production per month. The project was approved by Parliament of Sri Lanka on April 24, 2012. The license will automatically renew every year if Sakura conforms to the conditions of operating the mine. Sakura has also been granted the right to exploit the granite that will be extracted from the mine when blasting for building stone materials. Sakura has signed a contract to sell the stone for road works and is currently building a shredding plant on an adjacent piece of land.

On April 23, 2012, Sakura was granted an environmental mining certificate by the Provincial Environmental Authority (North Western Province).

Current graphite extraction totals approximately 20 tonnes per month at a cost of $136 per tonne of graphite ranging in grade between 94% and 99% which is currently being stockpiled.  No mineral processing is currently performed on the product.

Financial Information

Sakura Graphite (PVT) Limited
All figures presented in USD

Year ended 10 month Period Ended January 31,
(Audited) (Unaudited)
2013 2012 2014 2013
$ $ $ $
Total Assets 1,351,126 679,754 1,249,832 1,107,485
Total Liabilities 1,568,307 679,789 221,340 1,283,377
Total Shareholders’ Equity (217,181) (35) 1,028,491 (175,887)
(Loss) Profit  for the year /10 month period (217,185) 1,612 (261,123) (179,082)
Retained loss for the year / 10 month period (217,227) (42) (478,350) (179,125)
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)

Private Placement

Elcora also intends to complete its previously announced non-brokered private placement offering at $0.16 per common shares with a full warrant attached entitling the holder to acquire one common share of Elcora for $0.30 for 18 months (the “Offering”) for a minimum offering of $1,100,000 and a maximum offering of $1,500,000.

The Offering is subject to certain conditions, including but not limited to the receipt of all required regulatory approvals and consents, including the approval of the Exchange.  The securities issued pursuant to the Offering will be subject to a hold period expiring four months and one day after the closing of the Offering in accordance with applicable securities laws and, if required, the policies of the Exchange.

This press release was prepared under the supervision of Marc Filion, P.Eng., who is a Qualified Person.  Marc Filion, P.Eng. is the author of the Geological Report.  Marc Filion, P.Eng. has read this press release and confirmed that it fairly and accurately represents the information in the Geological Report.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and approval and all other required regulatory approvals.

It is expected that Elcora’s stock will resume trading at the open on Monday, May 5, 2014.


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.  No stock Exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.  This News Release includes certain “forward-looking statements”.  All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding potential mineralization and reserves, exploration results, and future plans and objectives of Elcora, are forward-looking statements that involve various risks and uncertainties.  There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.  Important factors that could cause actual results to differ materially from Elcora’s expectations are exploration risks detailed herein and from time to time in the filings made by Elcora with securities regulators.

Investors are cautioned that, except as disclosed in the filing statement prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon.

Raj Shah


Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>

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