FRANKFURT : FKC
OTTAWA, ONTARIO--(Marketwired - June 25, 2014) -
Focus Graphite Inc. (TSX VENTURE:FMS)(OTCQX:FCSMF)(FRANKFURT:FKC)
("Focus" or the "Company") is pleased to report the results of its
Feasibility Study ("FS") for the Lac Knife Project performed by Met-Chem
Canada Inc.
The study was based on a 25-year mine life that produced a
Pre-tax Net Present Value ("NPV") of $383 million calculated at a
discounted cash flow ("DCF") rate of 8% Pre-tax, the financial model has
an Internal Rate of Return ("IRR") of 30.1% and a capital payback
period of 3.0 years.
The after tax financial model has an NPV of $224 million
calculated at a DCF rate of 8%, and with an IRR of 24.1% and a capital
payback of 3.2 years. A National Instrument 43-101 technical FS report
will be filed on SEDAR within 45 days of this news release.
"Lac Knife is a remarkable property by any Canadian or
international standard," Gary Economo, Focus' Chief Executive Officer
said. "As we have already demonstrated, Lac Knife provides us, and our
shareholders, with a significant advantage. And that is: The ability to
meet our customers' needs for quality products at competitive prices."
Don Baxter, Focus's President and COO said: "We are very
pleased to have reached this significant milestone in the development of
the Lac Knife Project. With the Feasibility Study in hand, an offtake
with an end-user signed as well as battery tested spherical graphite,
Focus has positioned itself as a leader in the graphite space, with no
other company having reached this level of development."
Results from the FS indicate that the Lac Knife Project is
viable economically with a Base Case scenario that includes a
concentrator production line rate of 44,300 tonnes of concentrate
annually at an average mill feed rate of 323,670 tonnes per year of
Mineral Reserves over a 25-year mine life. A concentrator availability
of 93% was used for the study. The additional Measured, Indicated, and
Inferred Resources will continue to be evaluated to develop the mid and
long term growth profile for the Company.
Highlights:
- Reduced operating costs from $458 per tonne of
concentrate to $441 per tonne within close range of the Updated PEA
study released November 7th, 2013.
- Mining costs are 126.95 $/t of concentrate ($17.85
per tonne of ore) with the major component associated contract mining
costs. Contract mining versus lower cost owner mining can be revisited
with further evaluation of mine equipment leasing and associated owner's
costs.
- Processing costs for the concentrator are, on
average over the life of mine $239.37 per tonne of concentrate produced,
based on yearly average processing costs of $33.66 per tonne of ore
processed. The low cost hydroelectric power supplied by Hydro Quebec
contributes to overall low production costs.
- Detailed engineering is planned to start in 2014
and further analysis of each of these cost components will continue
during the detailed engineering stage.
- Life of Mine Plan resulted in an overall average strip ratio of 1.8 to 1 for 25 years.
- Average prices used in the financial model do not
include value added products that can be produced using the typically
lower valued finer natural flake graphite. These finer graphite
concentrates can be further processed into value added products for the
Lithium Ion battery market because of their high carbon content of 98%
carbon and realize a higher margin for a reasonable capital investment
and operating cost over and above those outlined in this release. Based
on these results it has become an important objective to outline the
scope of this secondary transformation project for electrifying
transportation and for use by other lithium battery end users.
Today, the prices for the Lac Knife graphite concentrates
average US$1,713 per tonne based on the size distribution and high
carbon grade. Also included in the table above are the results using
forecasted prices for 2016 where the average price for the same
concentrates is estimated to increase to US$2,256 per tonne. These
prices are estimated by Industrial Minerals Data of the UK, who are
recognized in this field as an independent source of accurate, detailed
information for the natural flake graphite market.
Met-Chem's financial model does not include potential
value-added, purified, spheronized, and coated battery-grade graphite in
its financial and operational calculations.
The exchange rate used is $0.91 US Dollars per Canadian
Dollar. Table 1 provides the Net Present Values calculated at various
discounted cash flow rates for the Base Case production scenario of
44,300 tonnes of graphite concentrate produced annually. The financial
analysis in the FS study used the 24 month price of US$1,713 per tonne
that is a weighted average for the various graphite concentrates that
are classified by flake size and also valued by their carbon content.
The annual milling capacity is 323,670 tonnes per year to
produce 44,300 tonnes of concentrate annually at a cost of $441 per
tonne of concentrate. The concentrate will grade 97.8% Graphitic Carbon
("Cg") on average for a 25-year open pit mine life based on current open
pit reserves. All graphite concentrate produced with flakes larger than
200 mesh contain more than 98% Cg.
The FS is based on the Pilot Plant test work run by SGS
Mineral Services in Lakefield, Ontario, during the spring of 2013 and
announced in a news release on August 21
st,
2013. The concentrator process flow sheet is based on standard flotation
circuits followed by a series of polishing mills that upgrade the
carbon content by cleaning impurities present in the ore that are
generally found on the graphitic carbon flake surfaces of the Lac Knife
mineralization. Pilot Plant recovery was 91%, full scale, consistent
operations should improve on the mill process recovery. Flake size
distribution is expected to increase in favour of larger flake as the
full scale plant will start with a SAG mill which is better suited to
mitigate flake damage as opposed to crushing and grinding methods used
in the pilot plant.
Lac Knife is unique in that all natural flake graphitic
concentrates produced with flake size above 200 mesh (75 microns) size
are more than 98% Cg. This allows Focus to divert finer sized products
that would typically be difficult to sell due their flake size to higher
value added products such as spherical graphite for batteries due to
the high carbon content of 98% carbon (See "Lithium Battery Coin Cell
Test Results" below).
Proven and Probable Mineral Reserves:
The open pit design includes 429 kt of Proven Reserves and
7,428 kt of Probable Reserves for a total of 7,857 kt of Proven and
Probable Mineral Reserves grading 15.13% Cg. The Mineral Reserves which
account for mining dilution and ore loss are reported at a cut-off grade
of 3.1% Cg. In order to access these reserves, 2,746 kt of overburden,
10,926 kt of waste rock and 231 kt of Inferred Mineral Resources must be
mined. This total waste quantity of 13,903 kt results in a stripping
ratio of 1.8 to 1. Table 2 presents the Lac Knife open pit mineral
reserves that were estimated for the FS. The remaining Measured and
Indicated Resources within the Lac Knife deposit will help to develop
the mid and long-term growth profile for the company (See Table 5 for
MRE).
A pit optimization analysis was carried out using the MS-Economic Planner module of MineSight
®
which ran the Lerchs-Grossmann algorithm to determine the economic
limits of the deposit. The analysis showed that the open pit design for
the Feasibility Study should be based on a 25-year mine life that
includes approximately 82% of the Measured and Indicated Mineral
Resources.
The open pit design incorporates 10 m high benches and
follows the pit slope recommendations from the 2014 geotechnical
investigation. The pit is 700 m long and 400 m wide at surface and has a
maximum pit depth of 100 m.
Mining will be carried out by a mining contractor who will
use conventional open pit mining methods that include drilling and
blasting followed by a hydraulic excavator loading a fleet of 46-tonne
haul trucks. The mine will be operated seasonally (7 months of the year)
and a front-end wheel loader will be used to feed the processing plant
from an ore stockpile during the winter months.
The study was conducted with engineering and estimation
methods appropriate to target an estimate accuracy of 15% that is
standard and realistic for capital and operating cost estimates in a
Feasibility Study. Based on an extensive risk review exercise the
contingency is 11.5%. The Capital Expenditures in Table 3 outline what
is needed to construct the mine, processing plant, power line and all
associated infrastructure that is estimated at a total of $165.55
million.
The company is currently in discussion with vendors to define
financing packages for equipment. This will result in a reduced up
front capital and add to the basket of financing options currently being
investigated. Another financing option currently under due diligence is
Supply Chain Financing ("SCF") based on an offtake agreement signed in
December 2013 for a minimum of 50% of Lac Knife's production. SCF is a
non-dilutive alternative to equity financing and is not as encumbering
as traditional debt, or royalty financing. Future off-take agreements
will contain a financial component as well.
This project-financing alternative could include equity and
low interest debt as well as a signing bonus to execute an offtake
agreement. These options have the potential to enhance future project
economic metrics, and the company continues to discuss with several
interested parties on various options.
The operating costs per tonne of concentrate produced are
$441 (See Table 4 below). This is an improvement over the updated
Preliminary Economic Assessment (PEA) that showed $458 per tonne of
concentrate produced. One key variable to low production costs is Lac
Knife's project location giving relatively easy access to low cost
hydroelectric power from Hydro Quebec at the intersection of the access
road and Provincial Highway 389.
Permitting is well underway with the ESIA to be submitted by
the end of the summer and the Mine Closure Plan is planned for
submission mid-summer. Focus continues to communicate, meet, and listen
to local communities and will be increasing these efforts now that the
feasibility is completed and the impacts are known.
The National Instrument 43-101 ("NI 43-101") MRE was performed by Pierre Desautels of AGP Inc. and was announced January 28
th.
It increased the Measured and Indicated Resources by 92% for the Lac
Knife Deposit. The MRE is based on both the 2012 and 2013 additional
exploration and definition drilling programs for a total of 92 holes,
and 9,103 meters that successfully achieved the designed goal to upgrade
the quality of existing Indicated and Inferred Resources to the
Measured and Indicated Resource categories. This is in addition to 105
previous drill holes that totaled 9,217 meters.
Measured and Indicated Resources are estimated at 9.6 million
tonnes grading 14.77% at a 3% Cg cut-off grade. Additionally there are
3.1 million tonnes of Inferred Resources at 13.25 % Cg using a 3%
cut-off in this updated resource estimate presented in Table 5.
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
(See Table 2 above for Reserves).
Lithium Battery Coin Cell Test Results
On May 27
th, Focus Graphite announced it
"Succeeded in Producing Extremely High-Performing Coated Spherical
Graphite for Lithium Ion Batteries". The results from coin cell
performance testing performed on Lac Knife Spherical Graphite ("SPG")
produced outstanding performance metric results. The benchmark products
have a typical irreversible capacity loss ("ICL") of 6-10% ICL. Lac
Knife SPG showed two ICL test results measuring 1.01% and 1.44%, truly
remarkable results. Essentially these battery performance tests
illustrated that the Irreversible Capacity Loss ("ICL") was reduced by
75% compared to the benchmark products available in the market today.
These tests confirm Focus' capability to tailor lithium ion
battery anode grade SPG and value added products to meet the most
stringent customer specifications
Lac Knife anode SPG is unique in having such a low ICL
performance metric, this could be attributed to the unique properties of
the Lac Knife high carbon content concentrate that grades 98% C, even
in the finer flake size concentrate products down to 200 mesh (75
microns) that are usually the most difficult products to sell. This
holds the potential to allow Focus market access to significantly higher
margin value added products with a finer grade lower cost product
creating a unique opportunity.
"Commercially and competitively, these results open the door
for Focus to confidently accelerate our plans to market and sell our
battery grade, high margin products to potential partners and
customers," said Mr. Baxter.
Qualified Persons
The technical information within this news release was
approved by Project Leader Mary- Jean Buchanan Eng., and Jeffrey Cassoff
Eng., Lead Mining Engineer, and Ewald Pengel P. Eng., Senior
Metallurgist, who was responsible for concentrator design, all from
Met-Chem Canada Inc., and all individuals that are Qualified Persons
under NI 43-101 guidelines and all independent of the issuer. Pierre
Desautels P.Geo. of AGP Inc. completed the NI 43-101 Mineral Resource
Estimate report and is also independent of the issuer.
The technical information in this news release was prepared
by Mr. Don Baxter, P. Eng., Focus President & Chief Operating
Officer, a Qualified Person as defined by NI 43-101 guidelines, who has
reviewed and approved the technical content of this news release.
About Focus Graphite
Focus Graphite Inc. is an emerging mining development company
with an objective to produce value added products initially for the
lithium ion battery market from the Lac Knife graphite deposit located
south west of Fermont, Québec. The Lac Knife project hosts a NI 43-101
compliant Measured and Indicated Mineral Resource Estimate* of 9.6
million tonnes grading 14.77% graphitic carbon (Cg) as natural flake
graphite with an additional Inferred Mineral Resource Estimate* of 3.1
million tonnes grading 13.25% Cg. Focus' goal is to assume an industry
leadership position by becoming a low-cost producer of technology-grade
graphite. The feasibility study results released on June 25
th,
2014 for the Lac Knife Project indicated that the project is
economically viable and has the potential to become a low cost graphite
producer based on 7.86 million tonnes of Proven and Probable Reserves
grading 15.13 Cg. On May 27, 2014 the Company announced the Potential
for High Value Added Sales in the Li-Ion Battery Sector following
battery coin cell tests performed on Lac Knife Spherical Graphite
("SPG"). Testing measured the performance metrics and confirmed Focus'
capability to tailor lithium ion battery anode grade graphite and value
added products to meet the most stringent customer specifications. This
is a result of being a technology-oriented enterprise having a vision of
building long-term, sustainable shareholder value. Focus also invests
in the development of graphene applications and patents through Grafoid
Inc.
*
Mineral resources are not mineral reserves and do not have demonstrated economic viability
About Met-Chem Canada, Inc.
Met-Chem is an internationally renowned consulting
engineering firm established in 1969 to provide all phases of geology,
mining, mineral processing and engineering services throughout the
world. From its headquarters in Montreal, Met-Chem offers the mining
industry professional expertise that covers scoping, pre-feasibility and
feasibility studies, basic and detailed engineering, procurement and
construction management, training, start-up, commissioning and
operations assistance.
About Industrial Minerals-DATA
Industrial Minerals ("IM") Data-Graphite is a dedicated
pricing and analysis service for the natural graphite market. Tracking
over 40 different grades from around the world, IM Data's pricing
database supplies up-to-date information which allows for tracking both
current and historical trends as far back as 1988. Their analysts, based
in London and Shanghai, collect information directly from the industry,
providing exclusive insight and market intelligence. With up-to-date
pricing data, market analysis and commentary, IM Data Graphite is the
only independent source of accurate, detailed and independent
information for the natural graphite market.
Forward Looking Statement
This news release contains "forward-looking information"
within the meaning of Canadian securities legislation. All information
contained herein that is not clearly historical in nature may constitute
forward-looking information. Generally, such forward-looking
information can be identified by the use of forward-looking terminology
such as "plans", "expects" or "does not expect", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or variations of
such words and phrases or state that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be
achieved". Forward-looking information is subject to known and unknown
risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of the Company
to be materially different from those expressed or implied by such
forward-looking information, including but not limited to: (i) volatile
stock price; (ii) the general global markets and economic conditions;
(iii) the possibility of write-downs and impairments; (iv) the risk
associated with exploration, development and operation of mineral
deposits; (v) the risk associated with establishing title to mineral
properties and assets; (vi) the risks associated with entering into
joint ventures; (vii) fluctuations in commodity prices; (viii) the risks
associated with uninsurable risks arising during the course of
exploration, development and production; (ix) competition faced by the
resulting issuer in securing experienced personnel and financing; (x)
access to adequate infrastructure to support mining, processing,
development and exploration activities; (xi) the risks associated with
changes in the mining regulatory regime governing the resulting issuer;
(xii) the risks associated with the various environmental regulations
the resulting issuer is subject to; (xiii) risks related to regulatory
and permitting delays; (xiv) risks related to potential conflicts of
interest; (xv) the reliance on key personnel; (xvi) liquidity risks;
(xvii) the risk of potential dilution through the issue of common
shares; (xviii) the Company does not anticipate declaring dividends in
the near term; (xix) the risk of litigation; and (xx) risk management.
Forward-looking information is based on assumptions management
believes to be reasonable at the time such statements are made,
including but not limited to, continued exploration activities, no
material adverse change in metal prices, exploration and development
plans proceeding in accordance with plans and such plans achieving their
stated expected outcomes, receipt of required regulatory approvals, and
such other assumptions and factors as set out herein. Although the
Company has attempted to identify important factors that could cause
actual results to differ materially from those contained in the
forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can be no
assurance that such forward-looking information will prove to be
accurate, as actual results and future events could differ materially
from those anticipated in such forward-looking information. Such
forward-looking information has been provided for the purpose of
assisting investors in understanding the Company's business, operations
and exploration plans and may not be appropriate for other purposes.
Accordingly, readers should not place undue reliance on forward-looking
information. Forward-looking information is made as of the date of this
news release, and the Company does not undertake to update such
forward-looking information except in accordance with applicable
securities laws.
Focus Graphite Inc.
Mr. Don Baxter, P.Eng