The market for graphite is about to explode and Focus Graphite is perfectly positioned to lead the charge with their high quality Lac Knife deposit.
Canada-based Focus Graphite Inc. (TSX VENTURE:FMS), is poised for to take the lead in the next big thing – the graphite market – with its superlative Lac Knife deposit. The 100 per cent Focus Graphite-owned deposit contains an NI 43-101 compliant 8.1m/t graphite grading approximately 16 per cent — an exceptional level of quality. While that quality is in itself impressive, even more crucially, the Quebec deposit is also primarily composed of large flakes (the distribution is 46.1 per cent large flakes [+48 to +100 mesh], 39 per cent medium flake [+150 to -200 mesh] with the rest in small and fine flakes).
A recently released Preliminary Economic Assessment (PEA) assigns values to the Lac Knife project. They are significant, conservative, and show revenue projections of $3.7 billion; a Net Present Value of $246 million and an IRR of 32 per cent; cash flows of nearly $1 billion, and; nearly 40 per cent of its 50,000 tpa production assigned to high technology materials processing.
“We’re very, very pleased with this PEA because it basically confirms what we’ve known all along,” says Economo. “This is potentially a very profitable and economic deposit.”
‘Profitable’ seems to be putting it mildly — bottom line for investors is the massive potential of the graphite market. “There are many different applications for graphite, and the market continues to expand every day,” says Economo. Graphite is used in a wide range of industrial and consumer applications from aviation and automotive applications, to construction, refractory uses, green energy wind turbines and solar panel applications, sporting goods, battery anodes and gaskets.
Over the last fifteen years researchers discovered the astonishing thermal capabilities of graphite: the material is able to absorb and disperse heat efficiently making it also an ideal material for high technology applications. For example graphite is used in consumer technology such as smartphones and tablet computers, replacing fans to cut down on the size of these ever-slimmer electronic devices.
With more than 70 per cent of the supply, China has an inarguable dominance over the graphite market, however, with reports of the largest producer in China calling for a halt on the export of graphite, the international market is set to open up. While China dominates the industrial supply, it remains a net importer of 99.9 to 99.99 per cent purified technology graphite – high value materials which Focus intends to market globally.
Lac Knife’s 16 per cent grade provides a cost advantage that flows through its planned mine-to-purification-to-market structure. Focus acquired the purification and anode manufacturing technology licenses from Hydro-Quebec, a world leader in renewable energy development.
Key to the price level of the outgoing product is the purity of the deposit. Indeed, the differential in pricing is quite marked – while a tonne of material composed of 94 to 97 per cent small flakes comes in at $1800, the same quantity of large flake material is priced at $2,000 to $2,500. Technology grade 99.99 per cent materials command prices of $20,000 to $40,000 or more. Naturally, costs per tonne are calculated on the basis of the final value of the material, so a sufficiently high grade equates to a low extraction level per tonne.
“The grade is 16 per cent, which will make us one of, if not the lowest cost producer in the world,” says CEO Gary Economo.
Perhaps even more intriguing is the fact that the high grade of the Lac Knife graphite will also enable Focus Graphite to capitalize on its forty per cent stake in joint venture partner Grafoid Inc., the company which has developed a process that turns high quality graphite flake into the material graphene, a substance with manifold applications including an infinite variety of high tech applications ranging from nano-scale medical devices to large scale energy storage to next generation consumer electronics.
The changes likely to be wrought by the graphite derivative graphene will increase performance of any device in which it is utilized, increasing thermal dispersion by two and a half to three times and extending battery life, an eventuality that would double the range of an battery-powered electric vehicle.
These developments render the Lac Knife deposit all the more significant as graphene requires high quality graphite ore for its manufacture and due to the morphology and structure of the flake many deposits cannot be used for high tech applications.
“The question is not how much graphite there is in this world, but what type of graphite is available,” says Economo.
“There are only a few deposits world-wide that could be used in high tech applications.”
“It is our aspiration to become the world’s largest producer of graphite flake and the world’s supplier of the highest quality graphite.”
Adding to the attractive economic nature of the operation is the fact that Lac Knife sits in a “mining-friendly jurisdiction,” Economo says, “in the middle of a whole slew of iron ore mining camps,” and thus in an area already rich in infrastructure. The property already has road access and two nearby rail systems lead to deep water ports on the St. Lawrence River.
“All the infrastructure required to move the material is already present.”
Progress on the Lac Knife continues apace with the property now undergoing environmental and permitting processes while project development proceeds simultaneously.
“The key catalyst and key factors are off-take agreements with some of our customers and financing the mine and processing facilities,” says Economo.
“Everything is dependent on each other. At first we had to have a PEA in order to be able to get some off-take agreements from our customers and we need the off-take agreements to get our financing. Our next phase is to focus our efforts on our off-take agreements with our customers.”
From there, attention will turn to the deposit itself.
“It is time for the Lac Knife deposit to shine. The numbers speak for themselves. It’s a wonderful project. With grades of 16 per cent it makes us a very strong and a leading competitor in the worldwide graphite industry.”