OTTAWA, ONTARIO--(Marketwire - Oct. 29, 2012) -
Focus Graphite Inc. ("Focus" or the "Company") (TSX
VENTURE:
FMS)(OTCQX:
FCSMF)(FRANKFURT:FKC) announces positive results of
the Preliminary Economic Assessment ("PEA") on its Lac Knife Graphite
Project ("Lac Knife" or the "Project"). The PEA was prepared by Roscoe
Postle Associates Inc. ("RPA"), in collaboration with Soutex Inc.
("Soutex" - responsible for metallurgy and mineral processing) and
demonstrates that the Project has robust economics and excellent
potential to become a profitable producer of graphite. Highlights of the
PEA are summarized below:
Operational Highlights:
- Proposed Life of Mine production of 6.0 million tonnes
(Mt) of mill feed at a grade of 15.66% graphitic carbon (Cgr), based on
the initial Mineral Resource estimate disclosed on January 19, 2012
- Mine Life of 20 years, open pit operation at 300,000 tonnes per year
- Processing through a sequence of crushing,
grinding, flotation, magnetic separation, thickening and drying,
producing a primary concentrate of graphite of various grades and flake
sizes
- Tailings directed through sulfide flotation circuit
in order to minimize the volume of acid-generating residues and to
enable proper management of both acid-generating tailings and waste rock
within a unique disposal site
- Average graphite recovery of 91.3% at Lac Knife process plant
- Life of Mine production of 928,000 tonnes of
concentrate at 92% Cgr on average at Lac Knife, or approximately 46,600
tonnes of concentrate per annum (tpa)
- Thermal purification upgrade of approximately 40%
of the primary concentrate to 99.99% Cgr by an existing producer with
inherent purification losses of 15%
- Life of Mine Project production of 868,000 tonnes
of concentrate at 93.5% Cgr on average, including 338,000 tonnes of high
purity 99.95% Cgr product
Financial Highlights:
- Exchange rate US$1.00 = C$1.00
- PEA economics for the Project calculated based on
graphite market prices of $10,000, $1,300, and $800 per tonne of battery
grade (>99.95% Cgr, +100 mesh), medium grade (>90% Cgr, -100+200
mesh) and fine grade (>80% Cgr, -200 mesh) respectively, on a FOB
mine basis
- $246 million pre-tax Net Present Value (NPV) (at a 10% discount rate)
- 32% pre-tax Internal Rate of Return (IRR)
- $926 million pre-tax undiscounted cash flow
- $3.7 billion total net revenue
- Pre-tax payback period of 2.8 years
- $154 million initial capital cost, inclusive of $33
million and $24 million in working capital and contingency (25%),
respectively
- $68 per tonne average unit operating cost at Lac Knife
- $435 per tonne average unit operating cost, assuming thermal purification on a contract basis
Note: This PEA is considered by RPA to meet the
requirements of a Preliminary Economic Assessment as defined in National
Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI
43-101"). The economic analysis contained in the technical report is
based, in part, on Inferred Resources (as defined in NI 43-101), and is
preliminary in nature. Inferred Resources are considered too
geologically speculative to have mining and economic considerations
applied to them and to be categorized as Mineral Reserves (as defined in
NI 43-101). Mineral resources that are not mineral reserves do not have
demonstrated economic viability. There is no certainty that the
reserves development, production, and economic forecasts on which the
PEA is based will be realized.
Gary Economo, President and CEO of Focus Graphite, stated,
"This is a great day for the Canadian graphite industry, our
shareholders and the
province of Québec. Lac Knife is a world-class
resource and the publication of our Preliminary Economic Assessment
confirms Focus has the potential to become one of the highest-grade
lowest-cost producers of graphite in the world. We enter a new phase
now, where we can expedite our financing, advance customer off-take
agreements, and construction of our purification and anode facilities."
PEA SUMMARY
Project Location
The Project is located in the Côte-Nord administrative region
of Québec. Fermont is the closest community and is located 27 km
north-north east of the Project. Road distance from Montreal to Lac
Knife is approximately 1,300 km and by all-season highway 389, it is 500
km from Baie-Comeau to Fermont. The municipalities of Wabush and
Labrador City, in Newfoundland and Labrador are located 30 km from
Fermont, and Wabush is home to a commercial airport with regular flights
to Sept-Iles, Québec, and Montréal.
Geology and Mineral Resources
The Project hosts graphite enriched metasediments. Graphite
occurs as lenses and bands. Currently, graphite rich rocks have been
identified from drilling undertaken in 1989 and more recently in
2010-2011 with 12 drill holes aimed at twining the older holes with the
objective of confirming the 1989 grade and lithology information. The
mineralized zone extends approximately 650 m in length and 120 m in
thickness. Mineralization reaches the surface under a layer of
overburden. Mineralization is intersected at depths reaching 110 m.
There is potential for the delineation of additional Mineral Resources
at greater depth and along strike to the south.
On January 19, 2012, Focus released an initial NI 43-101
compliant Mineral Resource estimate in a Technical Report. RPA reviewed
and accepted the current Mineral Resources and has declared them
adequate to support the current PEA with one modification to the
Mineral
Resource classification. RPA elected not to classify any Mineral
Resources as Measured and, as a consequence, converted the January 2012
Measured Mineral Resources to the Indicated category. The Mineral
Resources are presented in the table below.
MINERAL RESOURCE ESTIMATE
Mining
Mining will be carried out using conventional truck and
loader open pit mining methods. Life of Mine strip ratio averages
1.12:1. An owner-operated mining fleet is proposed over the life of the
operation. Pre-stripping of overburden is required prior to commencement
of mining operations.
Highlights of the production schedule are as follows:
- A short ramp-up to full production with 270,000 tonnes produced in Year 1
- Production of 300,000 tpa, or 822 tpd
- Waste mining averaging 335,000 tpa
Production quantities total 6.0 Mt, at a grade of 15.66% Cgr.
This includes mining extraction and dilution (at zero grade) factors
applied to the potentially mineable graphite-bearing material.
Processing and Recovery
The selected process consists of crushing followed by a
grinding and flotation separation circuit. The resulting concentrate is
then thickened, dried and stored. The tailings generated by the
concentration process passes through flotation cells to separate
acid-generating tailings from clean non-acid tailings.
The PEA forecasted concentrate production is approximately
46,600 tpa with a tailings production expected at approximately 253,400
tpa. This is based on a concentrate average grade of 92% Cgr and a
recovery of 91.3% derived from testwork results conducted by SGS Canada
Inc. (SGS). Although laboratory and locked cycle tests were performed
with a slightly higher potentially mineable ore grade than estimated, no
significant impact is expected on the anticipated recovery.
Tailings, Waste Rock and Water Management
One of the challenges for the Project is the management of
acid-generating materials. The graphite-bearing mineralization, the
waste rock and the tailings showed acid-generating potential. Therefore,
the mine water and the ore storage run-off water will likely be acidic.
The global program to manage this issue will comprise the following:
- Subaqueous co-disposition of acidic tailings and waste
rock into a unique storage site: the tailings and waste rock storage
facility (TSF).
- Sulfide flotation to reduce the proportion of acidic tailings to 30% of the total volume.
- Tailings managed in two separate streams.
- Use of the 70% non-acidic alkaline tailings as
inert material for encapsulation of acid-generating tailings and waste
rock within the TSF.
- Water treatment plant and polishing pond for pH neutralisation, metals precipitation, and sedimentation.
- Water management to direct all industrial sourced
waters through the water treatment plant and/or the polishing pond as
required.
Thermal Purification
The Project considers the thermal purification of
approximately 40% of the concentrate produced at the Lac Knife process
plant. This portion of the primary concentrate production meets the
specifications (+100 mesh, >95% Cgr) for purification to 99.99% Cgr.
Graphite concentrate of this purity is used in battery production and
other applications at high prices. It has been assumed that the thermal
purification would be done under contract by an existing producer, with
related losses of approximately 15%.
Revenue
Focus has initiated contacts with several major graphite
consuming groups in North America, Europe and Asia. Marketing efforts
have been targeted to high value end users requiring superior quality
product in terms of product purity and flake size. Potential customers
have provided Focus with product quality requirements and projected
annual demand. RPA has reviewed these expressions of interest and is
satisfied that there are sufficient indications of demand to support the
projected PEA production forecast.
To date, Focus has identified the
following major product opportunities:
- Ultra high purity thermo processed battery grade product based on large flake, high purity concentrate
- Medium to fine flake graphite concentrate, -100+200 mesh, +90% graphitic carbon concentrate
- Fine flake concentrate, -200 mesh, +80% graphitic carbon concentrate
Production quantities for each major grade category are based
on the lock-cycle concentrate production test results and test recovery
results from proprietary thermal purification processing of the high
grade primary concentrate. Projected overall product volumes and product
qualities are detailed in the following table.
Current published prices for the Project's major graphite product opportunities are detailed as follows.
Freight and insurance costs are projected to be approximately
$63/t for product sold to customers in the United States, $200/t for
deliveries to Europe and $428/t for deliveries to Asia. RPA has reviewed
various price scenarios and has assumed the following price in the
economic analysis:
- Battery Grade $10,000/t FOB mine - $9,572/t CIF equivalent
- Medium Grade $1,300/t FOB mine - $1,237/t CIF equivalent
- Fine Grade $800/t FOB mine - $600/t CIF equivalent
The
price set used in the PEA averages
$4,196 per tonne of
graphite concentrates FOB mine prior any deductions for marketing,
freight and insurance; or 16,900 tpa at $9,572/t (purification losses
considered) and 26,700 tpa at $867/t on average, CIF considered.
RPA considers these graphite prices to be appropriate for a
PEA-level study. It is noted that the processing for the Battery Grade
product, which accounts for some 86% of LOM revenue, is based on an
expression of interest by a producer and is by no means a certainty,
however, RPA considers the assumption to be reasonable for a PEA.
Total net revenue is $3.7 billion, averaging $185 million per year. On a unit basis, net revenue is $615 per tonne milled.
Capital Costs
The estimated initial capital cost has been developed to
include all mining, processing, infrastructure, tailings and indirect
capital costs. The capital cost estimate includes a contingency of $24
million (25% of direct and indirect capital costs) and is summarized in
the table below.
INITIAL CAPITAL COST ESTIMATE
Sustaining capital, totalling $25 million consists of mine,
process, and infrastructure equipment replacement, tailings and waste
rock storage facility expansion, progressive environmental
rehabilitation, and mine closure costs.
Operating Cost
The Life of Mine operating costs have been estimated for
mining, stockpile re-handling, processing, tailings and water treatment,
and general and administration. The operating costs are summarized in
the following table.
OPERATING COST ESTIMATE
In addition, the unit cost for thermal purification under
contract was derived from a budget quote by an existing producer and
considered the approximate 15% losses during the purification process.
This cost equates to $367 per tonne milled, therefore bringing the
overall operating cost to $435 per tonne milled.
Preliminary Economic Assessment
Financial evaluation of the Project was carried out using a
cash flow model, on a pre-tax basis. Estimates are based on constant
2012 dollar basis, with no provision for escalation. Results are
provided in the following table.
PEA FINANCIAL RESULTS
NPV Sensitivity Analysis
Key economic risks were examined by running cash flow sensitivities on:
- head grade;
- recovery;
- graphite market price;
- operating cost per tonne milled; and
- capital cost
The pre-tax NPV (at 10%) sensitivity analysis has been
calculated for -20% to +20% variations on the above items, with the
exception of recovery which has been calculated for -20% to +5%. There
is minimal to no effect on NPV when the head grade and recovery factors
are adjusted above 0% because of the Project market ceiling on graphite
concentrate sales. The NPV sensitivity is shown in the following graph.
NPV (10%) Sensitivity Chart is available at the following link : http://media3.marketwire.com/docs/NPV_Sensivity_Chart.pdf
The technical and economic information relating to the PEA
contained in this press release has been reviewed and approved by Marc
Lavigne, M.Sc., ing., Senior Mining Engineer for RPA, Robert de
l'Étoile, M.Sc.A., ing., Principal Geological Engineer for RPA, and
Pierre Roy, M.Sc., P.Eng., ing., Senior Metallurgist Specialist for
Soutex, all independent qualified persons under NI 43-101. The technical
report will be filed on SEDAR on or before October 31, 2012.
Other News - Bi-Weekly Default Status Report
As previously reported, the Company is presently in default
because of its failure to file the PEA and supporting technical report
(the "Technical Report") under NI 43-101 and will continue to be in
default until such time as it files the required report on the Project.
In compliance with the alternative information guidelines set out in
National Policy 12-203 - Cease Trade Orders for Continuous Disclosure Defaults
("NP 12-203") for issuers who have failed to comply with a specified
continuous disclosure requirement within the times prescribed by
applicable securities laws, Focus issued today a default status report
by way of present press release confirming the Company's objective to
file the PEA and Technical Report at the latest on October 31, 2012.
Until Focus completes the filing of the PEA and Technical
Report, and until the Management Cease Trade Order ("MCTO") is
subsequently lifted by the Ontario Securities Commission (the "OSC"),
Focus will comply with the alternative information guidelines set out in
NP 12-203. The guidelines, among other things, require the Company to
issue bi-weekly default status reports by way of a news release so long
as the PEA and Technical Report have not been filed.
The Company reports that since its original announcement on
September 10, 2012 in respect of the notice of default received from the
OSC and its subsequent announcement on September 25, 2012 relating to
the issuance of the MCTO (collectively, the "Notice"), with the
exception of the Company's announcement today of the PEA results, there
has not been any other material changes to the information provided in
the Notice nor any failure by the Company in fulfilling its stated
intentions with respect to satisfying the alternative information
guidelines required pursuant to NP 12-203. In addition, there has not
been any other specified default by the Company under NP 12-203, nor are
any anticipated and there is no other material information concerning
the affairs of the Company that has not been generally disclosed.
This press release has been reviewed and approved by
Marc-André Bernier, M.Sc., P.Geo. (Ontario and Québec), Technical
Advisor and a Director of Focus, and a Qualified Person under NI 43-101.
About Focus Graphite
Focus Graphite Inc. is an emerging mid-tier junior mining
development company, a technology solutions supplier and a business
innovator. It is the
owner of the NI 43-101 compliant Lac Knife graphite
deposit grading 16% carbon as graphite.
The company's goal is to assume
an industry leadership position by becoming a low-cost producer of
technology-grade graphite. As a technology-oriented enterprise with a
view to building long-term, sustainable shareholder value, Focus
Graphite is investing in the development of graphene applications and
patents through Grafoid Inc.
(See: Why Graphene won scientists the Nobel Prize! )
Forward Looking Statements - Disclaimer
This news release may contain forward looking statements,
being statements which are not historical facts, and discussions of
future plans and objectives. There can be no assurance that such
statements will prove accurate. Such statements are necessarily based
upon a number of estimates and assumptions that are subject to numerous
risks and uncertainties that could cause actual results and future
events to differ materially from those anticipated or projected.
Important factors that could cause actual results to differ materially
from the Company's expectations are in our documents filed from time to
time with the TSX Venture Exchange and provincial securities regulators,
most of which are available at
www.sedar.com Focus Graphite disclaims any intention or obligation to revise or update such statements.
Neither TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the policies of
the TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Mr. Gary Economo
613-691-1091, ext. 101
