Focus Graphite Announces Updated Economic Results of Its 2012 Preliminary Economic Assessment
November 07 2013 - 3:30PM
Marketwired Canada
Focus Graphite Inc. ("Focus" or the "Company") (TSX
VENTURE:FMS)(OTCQX:FCSMF)(FRANKFURT:FKC) is pleased to announce the results of
an updated positive Preliminary Economic Assessment ("PEA") for its Lac Knife
Graphite Project ("Lac Knife" or "the Project"). The Lac Knife property is
located about 27 kilometers south west of Fermont, Quebec. This update is based
on improved metallurgical results of the recent Pilot Plant test campaign using
an optimized flotation and polishing circuit conducted at SGS Lakefield and
announced on August 21st, 2013.
The increase in concentrate grades and associated economic results were updated
in the project cash flow summary and were validated by RPA Inc. in consultation
with Soutex Inc. of Quebec City. Inputs updated in the financial model included:
final concentrate average grade increase from 92% Ct to 96.6% Ct within the new
flake size distribution categories, a reduction in operating cost by $367 per
tonne milled, due to the elimination of the need to purify the concentrate by a
third party and the associated $27,600,000 in working capital requirements.
Pricing is based on "run-of mine" prices, without the value added price used in
the original PEA financial model. The original report was filed on October 29th,
2012.
The Lac Knife project has a pre-tax internal rate of return ("IRR") of 36.4%
(28.6% after tax) and a pre-tax net present value of $ 316.9 million ($185.3
million after tax) in the base case using a weighted average price of US$1866
per tonne of run-of-mine concentrates. The cost of production is $458 per tonne
of concentrate.
Highlights are summarized below:
Pre Tax Value After Tax Value
($ millions) ($ millions)
----------------------------------------------------------------------------
Net Present Value
8% discount rate 316.9 185.3
10% discount rate 250.1 143.3
12% discount rate 198.4 110.6
Capital Expenditure including a 25%
contingency of $24m 125.95 125.95
Operating cost per tonne milled $67.61 $67.61
Operating cost per tonne ofconcentrate
produced $458.20 $458.20
Pre-Tax IRR 36.4% 28.6%
Pre Tax Payback Period 2.4 years 2.8 years
Exchange rate US$1.00 = C$1.00 US$1.00 = C$1.00
Strip Ratio 1.12 1.12
Don Baxter, P.Eng, President and Chief Operating Officer, stated: "The recent
Pilot Plant results are key to the potential economic viability of Lac Knife.
The results show that all flake concentrate above 200 mesh can be produced at
98% Ct thereby eliminating the need to use third party purification proposed in
our original PEA study. Within the graphite community, most operations produce
lower-grade fines that are difficult to sell. Lac Knife holds the potential to
open new markets to Focus for small flake technology-grade graphite products.
"The updated PEA indicates that Lac Knife shows positive economic potential
based on current run of mine prices for markets that are here today," Mr. Baxter
said.
Focus CEO Gary Economo said: "With the recent excellent metallurgical results
from the Lac Knife Pilot Plant and, with the key variables updated in this
announcement, our project has the potential to become one of the lowest-cost
producers of graphite in the world. The feasibility study we have just initiated
moves us closer to financing, securing off-take agreements, permitting and
construction."
In tandem to the feasibility level design for the Lac Knife development, Focus
continues its development of value-added products destined for technology
markets. These products will include spherical graphite used for Li-ion
batteries as well as expanded and micronized and purified graphite for use in
powder metallurgy and composite materials. These products for technology-grade
graphite applications can sell for prices averaging $10,000 per tonne. Focus'
work in this area is ongoing and is showing promising results. Value-added
products, their costs and their sale prices, were not included in the PEA update
average pricing.
Operational Highlights:
-- Open pit mine life is 20 years, at 300,000 tonnes per year.
-- 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(i) disclosed on January 19, 2012
-- Processing includes crushing, grinding, flotation, magnetic separation,
thickening and drying of run of mine to produce 44,300 tonnes of
concentrate per annum (tpa), a reduction of 2,300 tonnes of concentrate
is essentially due to the higher concentrate grade.
-- Sustaining capital average is $996,300 per year
-- Life of mine project production of 880,877 tonnes of concentrate at
96.6% Ct
Sensitivity Analysis Update:
------------------------------------------------------------------------
Pre-Tax Sensitivity to Graphite Price
Product specifications $US/t conc NPV @10% NPV @8% IRR
-10% Downside scenario 1,679 $192,115 $247,502 30.9%
Updated Base Case 1,866 $250,112 $316,857 36.4%
+10% Upside scenario 2,053 $308,109 $386,213 41.7%
------------------------------------------------------------------------
After-Tax Sensitivity to Graphite Price
Product specifications $US/t conc NPV @10% NPV @8% IRR
-10% Downside scenario 1,679 $109,087 $144,646 24.5%
Updated Base Case 1,866 $143,266 $185,305 28.6%
+10% Upside scenario 2,053 $176,939 $225,431 32.4%
------------------------------------------------------------------------
A copy of the PEA report and the October 29th, 2012 PEA announcement are
available on Focus Graphite's website www.focusgraphite.com.
The updated PEA pre-tax cash flow model is based on a constant 2012 dollar
basis, with no provision for escalation. The prices used in the model do not
include any potential of value added products the Company is currently
developing.
(i) Note: This PEA is considered by RPA to meet the requirements of a
Preliminary Economic Assessment as defined in Canadian NI 43-101 regulations.
The economic analysis contained in the technical report is based, in part, on
Inferred Resources, 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. There
is no certainty that the reserves development, production, and economic
forecasts on which the PEA is based will be realized.
This news release has been reviewed by Don Baxter, P.Eng, President and COO of
the Company and a Qualified Person under National Instrument (NI) 43-101
guidelines.
About RPA:
RPA Inc. is a group of technical professionals who have provided advice to the
mining industry for nearly 30 years. During this time, RPA has grown into a
highly respected organization regarded as the specialty firm of choice for
resource and reserve work. RPA provides services to the mining industry at all
stages of project development from exploration and resource evaluation through
scoping, prefeasibility and feasibility studies, financing, permitting,
construction, operation, closure, and rehabilitation. Our portfolio of customers
includes clients in banking (both debt and equity) institutional investors,
government, major mining companies, exploration and development firms, law
firms, individual investors, and private equity ventures.
About SGS Metallurgical Services (Lakefield)
SGS Canada Inc. ("SGS") is recognized as a world leader in the development of
concentrator flowsheet design and pilot plant testing programs. SGS'
Metallurgical Services division was founded over half a century ago. Its
metallurgists, hydro-metallurgists and chemical engineers are experienced in all
the major physical and chemical separation processes utilized in the recovery of
metals and minerals contained in resource properties around the world.
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, Pierre Roy, M.Sc., P.Eng., ing., Senior
Metallurgist Specialist for Soutex, all independent qualified persons under NI
43-101.
The information pertaining to the metallurgical test program completed by SGS
that is presented in this news release has been reviewed and approved by Mr.
Oliver Peters, M.Sc., P.Eng, MBA, SGS Canada Inc. Consulting Metallurgist. Mr.
Peters has extensive experience in the development of metallurgical processes
and has managed the majority of the graphite testing programs conducted at SGS
in recent years.
About Focus Graphite
Focus Graphite Inc. is an emerging mid-tier junior mining development company, a
technology solutions supplier and a business innovator. Focus is the owner of
the Lac Knife graphite deposit located in the Cote-Nord region of northeastern
Quebec. The Lac Knife project hosts a NI 43-101 compliant Indicated Mineral
Resource Estimate(i) of 4.9 million tons grading 15.8% graphitic carbon (Cgr) as
crystalline graphite with an additional Inferred Mineral Resource Estimate(i) of
3.0 million tons grading 15.6% Cgr of crystalline graphite. Focus' goal is to
assume an industry leadership position by becoming a low-cost producer of
technology-grade graphite. On October 29th, 2012 the Company released the
results of a Preliminary Economic Assessment ("PEA") of the Lac Knife Project
which indicated that the project has a very good potential to become a graphite
producer. As a technology-oriented enterprise with a view to building long-term,
sustainable shareholder value, Focus also invests in the development of graphene
applications and patents through Grafoid Inc.
Forward Looking Statements - Disclaimer
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 or 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 operations 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 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 upon 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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