Focus Graphite Announces Lac Knife Financials
Focus Graphite, the Canadian company with the world’s highest grade deposit of graphite in its grasp, and a major investor in the development of graphene by exfoliation, has recently announced the results of a preliminary economic assessment of its Lac Knife Graphite project. The assessment suggests an exciting time of growth can be anticipated in relation to this world class business and it therefore remains my opinion that graphene investors would be hard pressed to find a more attractive proposition.
OTTAWA, Ontario – (October 29th, 2012) – Focus Graphite Inc. (“Focus” or the “Company”)
(TSX-V:FMS; OTCQX:FCSMF; FSE: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:
• 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
• 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
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.”
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
Category Tonnage(tonnes) Grade(% Cgr)
Indicated 4,938,000 15.76
Inferred 3,000,000 15.58
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated at a cut-off grade of 5% Cgr.
3. Numbers may not add due to rounding.
4. Cgr – graphitic carbon
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
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
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
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
• Water management to direct all industrial sourced waters through the water treatment
plant and/or the polishing pond as required.
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%.
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
• Medium to fine flake graphite concentrate, -100+200 mesh, +90% graphitic carbon
• 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.
PROJECTED PRODUCT MIX
Grade Tonnes (maximum annual) (1) Product Characteristics
Battery Grade 16,900 (2) >99.95% Cgr, +100 mesh
Medium Grade 11,200 >90% Cgr, -100+200 mesh
Fine Grade 15,500 >80% Cgr, -200 mesh
Notes: (1) totals are rounded
(2) inclusive of conversion recovery factor from 19,900 t of primary concentrate
Current published prices for the Project’s major graphite product opportunities are detailed as
|Synthetic, 99.95%C,Swiss||Swiss border||US$/kg||20 – 7|
|Crystalline, 90%C, -100 mesh FCL,||CIF European port||US$/t||1,400 – 1,100|
|Amorphous powder, 80%-85%C, Chinese FCL,||CIF European port||US$/t||800 – 600|
Source: Industrial Minerals, September 2012
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
• 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.
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 $24 million (25% of direct and indirect capital costs) and is summarized in the
INITIAL CAPITAL COST ESTIMATE
Capital Cost Item Cost ($ million)
Surface Infrastructure 18.7
Mining (incl. pre-stripping overburden/waste) 11.2
Tailings / Waste Rock & Water Treatment 3.1
Warehouse Inventory 0.9
Contingency (25%) 24.2
Working Capital (3-month opex) 32.6
Total Initial Capital Cost 153.5
Sustaining capital, totalling $25 million consists of mine, process, and infrastructure equipment
replacement, tailings and waste rock storage facility expansion, progressive environmental
rehabilitation, and mine closure costs.
The Life of Mine operating costs have been estimated for mining, stockpile re-handling,
processing, tailings and water treatment, and general and administration. The operating costs
are summarized in the following table.
OPERATING COST ESTIMATE
Operating Costs Item Cost ($/t milled)
Mining / Re-handling 15
Processing / Tailings and Water Treatment 41
General and Administration 12
Total Operating Costs 68
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 $435 per tonne milled.
Preliminary Economic Assessment
Financial evaluation of the Project was carried out using a cash flow model, on a pre-tax
basis. Estimates are based on constant 2012 dollar basis, with no provision for escalation.
Results are provided in the following table.
PEA FINANCIAL RESULTS
Value ($ million)
Gross Revenue 3,894
Marketing and CIF 225
Net Revenue 3,669
Total Operating Cost 2,597
Operating Cash Flow 1,072
Initial Capital Cost 154
Working Capital Recovery (33)
Sustaining Capital 21
Mine Closure 4
Pre-Tax Cash Flow 926
Net Present Value
8% discount rate 316
10% discount rate 246
12% discount rate 192
Pre-Tax IRR 32.1%
Payback Period 2.8 years
NPV Sensitivity Analysis
Key economic risks were examined by running cash flow sensitivities on:
• head grade;
• 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 a graph available on the focus graphite website
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
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
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.
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
President and Chief Executive Officer
613-691-1091, ext. 101