While it did not disclose the cost of the deal, which it arranged with government-owned producer Kahatagaha Graphite Lanka, First Graphite said the deal would accelerate its graphene production capacity and help it reduce costs.

In an announcement, First Graphite said it had found the development of its Aluketiya and the historic Pandeniya mine in Sri Lanka “more challenging than anticipated, mostly due to ground conditions in the initial excavation of the shafts”.

“However, these issues are being overcome and directors are confident that saleable production from its own mines will soon be available,” it said.

First Graphite signed another two-year graphite supply deal with a Sri Lankan company in early December, agreeing purchase up to 1000 tonnes per annum.

The company said the deals would ensure a good supply of premium grade vein graphite through the commissioning and ramp up phase of its graphene initiative, saying this would be its primary source of growth going forward.

First Graphite is developing a commercial cell graphene production unit, having tested a 250 litre cell in September last year, which it hopes could one day enable graphene to be produced on site, rather than at a central processing facility.

The company will also work with Kahatagaha to help it pursue value adding downstream opportunities under the deal.

Shares in First Graphite were up 12.2% or A1.2c in morning trade to 11c, capitalising the group at $33.8 million.

The company had $1.7 million at bank at the end of the September quarter, after raising $2.4 million through a placement in May that year.