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."
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Table 1
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Lac Knife Feasibility Results
(Pre-Tax) Base Case 2016 Forecast Units
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Average Price / Tonne of
Concentrate: $1,713 $2,256 US$
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Internal Rate of Return (IRR) 30.1 41.8 %
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Net Present Value @ 6% Discounted
Cash Flow 510 809 $ million
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Net Present Value @ 8% Discounted
Cash Flow 383 624 $ million
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Net Present Value @ 10%
Discounted Cash Flow 291 488 $ million
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Payback Period 3.0 2.1 Years
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Lac Knife Feasibility Results
(After-Tax) Base Case 2016 Forecast Units
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Internal Rate of Return (IRR) 24.1 32.8 %
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Net Present Value @ 6% Discounted
Cash Flow 304 476 $ million
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Net Present Value @ 8% Discounted
Cash Flow 224 364 $ million
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Net Present Value @ 10%
Discounted Cash Flow 165 280 $ million
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Payback Period 3.2 2.4 Years
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All monetary values are in Canadian Dollars ("CDN") except where specified
otherwise
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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 21st, 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).
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Table 2
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Lac Knife Open Pit Mineral Reserves
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Category Tonnage (kt) Cg Grade (%)
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Proven 429 23.61
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Probable 7,428 14.64
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Proven and Probable 7,857 15.13
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A pit optimization analysis was carried out using the MS-Economic Planner module
of MineSight(R) 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 $165.55 million.
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Table 3
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Lac Knife Capital Expenditure - Cost Centers CDN$ millions
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Mine equipment, infrastructure, and pre-stripping 4.21
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Infrastructure 11.62
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Primary Crushing 7.02
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Concentrator 62.24
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Environmental and Tailings Management 8.22
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Additional Infrastructure 15.4
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Indirect Costs 39.77
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Contingency (11.5%) 17.07
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Sub Total 165.55
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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.
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Table 4
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Lac Knife Operating Expenditures (25 year average)
Cost Centers $/Tonne of Concentrate
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Mining 126.95
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Processing Costs (Concentrator) 239.37
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General Administration Mine Site 74.70
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Total Operating Costs 441.02
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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 28th. 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.
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Table 5
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Lac Knife Mineral Resource Estimate In situ
Categories Tonnage (t) Cg (%) Graphite(t)
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Measured 432,000 23.66 102,000
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Indicated 9,144,000 14.35 1,312,000
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Measured + Indicated 9,576,000 14.77 1,414,000
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Inferred 3,102,000 13.25 411,000
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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 27th, 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, Quebec. The
Lac Knife project hosts a NI 43-101 compliant Measured and Indicated Mineral
Resource Estimate(i) of 9.6 million tonnes grading 14.77% graphitic carbon (Cg)
as natural flake graphite with an additional Inferred Mineral Resource
Estimate(i) 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 25th, 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.
(i) 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Focus Graphite Inc.
Mr. Don Baxter, P.Eng
President and Chief Operating Officer
705-789-9706
dbaxter@focusgraphite.com
www.focusgraphite.com
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