Torch River Resources is working towards the terms of a proposed agreement to merge with Plumbago Refining Corporation (PRC). The goal of the proposed merger is to create a combined company that will be in a better position to advance the development of 20 of their 49 former high-grade lump graphite mines in southern Sri Lanka.

Torch and PRC have commenced their respective due diligence processes and are proceeding with discussions of the terms by which a merger of the two companies can be achieved. Site visits were planned during August and the companies are encouraged that an agreement may be negotiated.

Both companies believe the proposed merger could be viewed as a positive development in the worldwide effort to create new supplies of natural graphite. The marketplace has been largely dominated by exports from China for much of the past 20 years; however, that situation has been changing as internal consumption patterns in China have increased. As a result, the need for new, reliable, and cost-effective supplies of graphite has become a topic of concern for many graphite users.

In Canada as many as 10 companies are seeking to quantify and build graphite operations. While these are welcome developments in the Canadian junior mining space, the reality is that the local sector may become saturated with projects. In addition, projects that consist of low-grade deposits may encounter high processing costs and in turn large capital expenditures in order to achieve enough scale to reduce operating costs. Both high capital expenses and operating expenses increase the risk of those projects.

Conversely, low-cost operations such as the one that may be possible as a result of the merger of Torch and PRC, have the potential to position the merged company well ahead in the race to supply global graphite markets.

Over the past two years PRC has acquired full ownership of a Sri Lankan subsidiary, Sarcon Development, which has been pursuing a development program to re-activate 20 former producing mines in Sri Lanka. Sarcon has licensed 49 sites which are all are permitted and have received technical backing from Sri Lanka’s Geological Survey and Mines Bureau.

Torch and PRC estimate that the mines could be re-activated within 3 to 5 months of commencing the necessary start-up work which would include the completion of a resource estimate and receipt of a positive economic feasibility study to support the viability of the mines.

In addition, Sarcon has obtained exclusive exploration rights for a 116.1sqkm grid in west and southwest Sri Lanka. These are believed to include the majority of known graphite mines on public land in Sri Lanka. The graphite formerly produced from the mines and which is expected to be produced should the mines be re-activated, is of the 'vein/lump' variety which is typically characterized by grades of 90% C and +80 mesh quality or higher.

These qualities, when produced from other mines, have resulted in some of the lowest capital expenses and operating expenses in the graphite sector. Many of the former producing mines that PRC is seeking to re-activate are next to some of Sri Lanka’s most productive graphite properties.

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