Focus Graphite (TSXV:FMS, OTCQX:FCSMF) has announced two offtake agreements with private graphene company Grafoid. Focus’ stock price rallied 17.5 percent to $0.235 per share on Monday as the market reacted to the news.
The first offtake entails Grafoid’s rights to receive at its discretion a maximum of 1,000 tonnes of high purity large-flake graphite concentrate (98.3 percent total carbon) each year for 10 years. The graphite would be acquired from Focus’ Lac Knife mine in Quebec. For the second offtake contract, Grafoid is entitled to up to 25,000 tonnes of graphite concentrate (98.3 percent total carbon) each year for 10 years from the same Quebec mine.
Focus Graphite projects that the Lac Knife large-flake graphite concentrate production will be 14,606 tonnes per year. Grafoid’s first offtake will be up to 6.8% of this large-flake production and 56.4% of Lac Knife’s other production flake types which totals 44,300 tonnes per year.
Grafoid has stated that the high purity graphite will be used for next generation graphene technologies such as:
- graphene-based automotive batteries
- graphene batteries for consumer electronics
- graphene energy storage applications
Additionally, the second offtake graphite will be used for graphite polymers used in the automotive and aerospace market.
Focus has made it clear that both companies are motivated to go beyond basic battery-grade graphite. They are eager to find other applications for their graphite which takes advantage of the direction of the market. Gary Economo, CEO and newly appointed interim president and COO of Focus (and CEO and co-founder of Grafoid) believes battery grade graphite and its applications are old technology. It seems that Economo sees potential for growth in an untapped market of future graphene technologies in the power storage sector.
Economo has determined that getting the Lac Knife facility online and into production is a major priority. Funding is required in order to achieve this goal. Like any other public company, raising cash could come from basic bank debt or share issues or share divestment (potentially to Grafoid, which Focus currently has interests in). The offtake agreement such as the two created with Grafoid are also a source of financing. Economo has hinted there are talks with multiple battery companies for offtake agreements for battery-grade graphite.
Focus Graphite has reiterated its goal to ensure long-term shareholder value, and the company seems to be back on track by aligning its strategy to this goal.
An agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer’s future production. An offtake agreement is normally negotiated prior to the construction of a facility such as a mine in order to secure a market for the future output of the facility.