CYL Ceylon Graphite Corp

Ceylon Graphite Corp. (“Ceylon Graphite” or the “Company”) (TSX-V: CYL) (OTC: CYLYF) (FSE: CCY) today announced that it has entered into an amended and restated agreement dated February 4, 2023 (the “Restated Agreement”) with a private vendor (the “Vendor”) based in Sri Lanka to amend and restate the terms of a purchase agreement dated September 12, 2012 , as amended (the “Initial Agreement”), whereby the Company’s wholly owned subsidiary incorporated in Curacao, Plumbago Refining Corp BV (“Plumbago”), acquired Sarcon Development Pvt Ltd. (“Sarcon”). Sarcon holds 116 high-grade graphite grids in the country of Sri Lanka, which grids represent the Company’s primary focus for exploration and development.

The Initial Agreement required an outstanding cash payment of US$1,000,000 to be paid to the Vendor to satisfy Plumbago’s payment obligations to the Vendor for the acquisition of Sarcon. Under the Restated Agreement, the Company has agreed to issue to the Vendor an aggregate total amount of common shares (the “Common Shares”) of the Company equal to an aggregate sum of US$1,625,000 upon meeting the following milestones:

      1)   Within 10 business days of the approval of the TSX Venture Exchange (the “TSXV”) for the amended terms of the transaction contemplated by the Restated Agreement, an amount of Common Shares equal to US$250,000 (the “First Issuance”), valued using the greater of, (A) the five day volume weighted average price of ‎‎the Common Shares on the TSXV for the five day consecutive trading ‎‎day period ending on the trading day immediately preceding the date of issuance ‎‎of such Common Shares, provided that the five day volume weighted average price does not differ by more than five percent of the volume weighted average price of the Common Shares for the six months preceding the date of issue, and if there is a variance greater than 5% the lower of the two averages will be used, and (B) the “Discounted Market Price” (as such term is defined in the policies of the TSXV) of the Common Shares on the day prior to the issuance of the Common Shares, with such price to be not lower than C$0.05 per Common Share (the “Valuation Formula”).      2)   Within fourteen 14 business days of receipt of proceeds from the earlier of (a) the sale of 100 cumulative metric tonnes of graphite received by Sarcon, or (b) the six-month anniversary of the First Issuance, an amount of Common Shares being equal to US$250,000 (the “Second Issuance”) and valued using the Valuation Formula.      3)   Within 5 days of each three month period after the Second Issuance over a period of twelve months totalling four issuances, an amount of Common Shares being equal to US$1,000,000 (US$250,000 per issuance) and valued using the Valuation Formula.      4)   Within 5 days of the fifteen month anniversary of the Second Issuance, an amount of Common Shares being equal to US$125,000 (the “Final Issuance”, and collectively with all other share issuances payable to the Vendor, the “Share Issuances”) and valued using the Valuation Formula, subject to a reduction in the amount of Common Shares payable pursuant to the Final Issuance equal to the aggregate amount of funds paid or caused to be paid by Plumbago pursuant to the Monthly Payments (as defined below). Additionally, Plumbago shall pay or cause to be paid a cash payment of US$250,000 on the date of the First Issuance and Sarcon shall pay to the Vendor a monthly amount of US$5,000 (the “Monthly Payments”) for consulting services in connection with its production of graphite to the date of the Final Issuance.

In connection with entering into the Restated Agreement, Plumbago and Sarcon will enter into a new escrow agreement with the Vendor and an escrow agent for the escrow and delivery of 500,000 shares of Sarcon (the “Sarcon Shares”), representing 50% of the shares of Sarcon held by Plumbago, to Plumbago on completion of the Share Issuances and cash payments payable to the Vendor. If the Share Issuances and cash payments are not satisfied in accordance with the terms of the Restated Agreement, the Sarcon Shares shall be returned to the Vendor.

The Company believes that the transactions contemplated by the Restated Agreement will free up capital for development on its Sri Lankan properties and ensure an orderly delivery of the Sarcon Shares to Plumbago upon the Company meeting its payment obligations under the Restated Agreement. The Company is also pleased to have the expertise of the Vendor as an outside consultant to Sarcon as the Company works towards advancing its Sri Lankan property package.

“This is an exciting development which allows the Company to preserve cash intended for production, while securing long-term support and cooperation to advance our goals,” added CEO and Director Sasha Jacob. “We are confident we finally have everything in hand to reach commercial production quickly, including:

• An end to local Covid restrictions which have caused significant delays over the last three years
• Additional equipment has been acquired to advance and accelerate our production, including two new 5-tonne winches to triple our earlier planned capacity
• All permits for K1 production and paperwork to secure a new commercial license for M1 are complete
• A return of the original development team to work together to achieve production and expansion
• New contracted operations experts to guide and oversee production
• Ongoing discussions with EV manufacturers and other parties for off-take agreements”

The Vendor is not a “Non-Arm’s Length Party” (as such term is defined in the policies of the TSXV) to the Company, no “Control Person” (as such term is defined in the policies of the TSXV) will be created in connection with the Share Issuances and there are no finder’s fees payable in connection with the transactions contemplated by the Restated Agreement.

The Common Shares issued to the Vendor in connection with the Share Issuances shall be subject to a statutory hold period of four months and one day.

Completion of the transactions contemplated by the Restated Agreement are subject to the approval of the TSXV.

About Ceylon Graphite Corp. Ceylon Graphite is a public company listed on the TSX Venture Exchange, that is in the business of mining for graphite, and developing and commercializing innovative graphene and graphite applications and products. Graphite mined in Sri Lanka is known to be some of the purest in the world and has been confirmed to be suitable to be easily upgradable for a range of applications including the high-growth electric vehicle and battery storage markets as well as construction, healthcare and paints and coatings sectors. The Government of Sri Lanka has granted the Company’s wholly owned subsidiary Sarcon Development (Pvt) Ltd. an IML Category A license for its K1 mine and exploration rights in a land package of over 120km². These exploration grids (each one square kilometer in area) cover areas of historic graphite production from the early twentieth century and represent a majority of the known graphite occurrences in Sri Lanka.

Further information regarding the Company is available at www.ceylongraphite.com

Abbey Abdiye, CFOinfo@ceylongraphite.comCorporate Communications+1(202)352-6022

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release

FORWARD LOOKING STATEMENTS:

This news release contains forward-looking information as such term is defined in applicable securities laws, which relate to future events or future performance and reflect management's current expectations and assumptions. The forward-looking information includes, but is not limited to, payments made to the Vendor, completion and timing of the transactions contemplated by the Restated Agreement, required approvals in connection with completion of the transactions contemplated by the Restated Agreement, delivery and timing of the Sarcon Shares to Plumbago, statements about expectations of management related to the strategic direction and operations of Ceylon Graphite and its subsidiaries, outcomes of discussions with EV manufacturers and other parties for off-take agreements, government and third-party approvals, global market conditions, Ceylon Graphite’s grids, Ceylon Graphite’s plans to undertake additional drilling and to develop a mine plan and timing of commencement of mining operations. Such forward-looking statements reflect management's current beliefs and are based on assumptions made by and information currently available to Ceylon Graphite, including the assumption that, the transactions contemplated by the Restated Agreement will be approved and completed on the terms and conditions as anticipated by the Company, that the Sarcon Shares will be released to Plumbago in accordance with the terms of the escrow agreement to be entered into by Plumbago, Sarcon and the Vendor, that there will be no material adverse change in graphite prices, all necessary consents, licenses, permits and approvals will be obtained, including various local Government licenses. Investors are cautioned that these forward-looking statements are neither promises nor guarantees and are subject to risks and uncertainties that may cause future results to differ materially from those expected. Risk factors that could cause actual results to differ materially from the results expressed or implied by the forward-looking information include, among other things, risks related to litigation and contractual disputes, inaccurate results from the drilling exercises, a failure to obtain or delays in obtaining the required regulatory licenses, permits, approvals and consents, an inability to access financing as needed, a general economic downturn, risks related to global pandemics, a volatile stock price, labour strikes, political unrest, changes in the mining regulatory regime governing Ceylon Graphite, a failure to comply with environmental regulations and a weakening of market and industry reliance on high quality graphite. Ceylon Graphite cautions the reader that the above list of risk factors is not exhaustive.