Focus Graphite to file Lac Knife NI 43-101 report
FOCUS GRAPHITE FILES LAC KNIFE GRAPHITE PROJECT FEASIBILITY STUDY TECHNICAL REPORT
Focus Graphite Inc., the sole owner of the Lac Knife high-purity graphite deposit in Quebec, will file the feasibility report prepared in accordance with National Instrument 43-101 and with form 43-101F1 under the company’s SEDAR profile on Friday, Aug. 8, 2014, and on Focus’s website.
The Feasibility Study was prepared by Met-Chem Canada Inc. with contributions from AGP Mining Consultants, Journeaux Associates and Golder Associates.
Don Baxter, Focus’ President and Chief Operating Officer said: “With the Feasibility Study now completed, we continue to de-risk the project by focusing on key, near to mid-term milestones, including: detailed engineering, project financing, and the permitting process.
“In particular,” he added, “the Feasibility Study opens the door to another level of available financing.
“We are evaluating options to secure project financing that will enable us to advance the Lac Knife mine and plant construction.”
Mr. Baxter said discussions with potential offtake partners are ongoing and will complement the existing 10-year offtake signed in December, 2013.
The highlights of the Feasibility Study, as reported June 25, 2014:
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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 $1,713 $2,256 US$
Concentrate:
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Internal Rate of Return (IRR) 30.1 41.8 %
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Net Present Value @ 6% Discounted 510 809 $ million
Cash Flow
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Net Present Value @ 8% Discounted 383 624 $ million
Cash Flow
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Net Present Value @ 10% Discounted 291 488 $ million
Cash Flow
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Payback Period 3.0 2.1 Years
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Lac Knife Feasibility Results Base Case 2016 Forecast Units
(After-Tax)
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Internal Rate of Return (IRR) 24.1 32.8 %
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Net Present Value @ 6% Discounted 304 476 $ million
Cash Flow
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Net Present Value @ 8% Discounted 224 364 $ million
Cash Flow
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Net Present Value @ 10% Discounted 165 280 $ million
Cash Flow
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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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Of note is that average prices used in the financial model do not include value added products produced using the typically lower valued finer natural flake graphite.
Background:
The Feasibility Study was conducted with engineering and estimation methods appropriate to target an accuracy of 15% that is standard and realistic for capital and operating cost estimates for this level of study, that is required prior to detailed engineering, and well beyond the +/- 30% accuracy of a Preliminary Economic Assessment (PEA). Based on an extensive risk review exercise the contingency is 11.5%. Capital Expenditures in Table 2 itemize cost requirements for mine construction, processing plant, power line and all associated infrastructure estimated at $165.55 million.
--------------------------------------------------------------------- Table 2 --------------------------------------------------------------------- Lac Knife Capital Expenditure - Cost Centers CDN$ millions --------------------------------------------------------------------- Mine equipment, infrastructure, and pre-stripping 4.21 --------------------------------------------------------------------- Infrastructure 11.62 --------------------------------------------------------------------- Primary Crushing 7.02 --------------------------------------------------------------------- Concentrator 62.24 --------------------------------------------------------------------- Environmental and Tailings Management 8.22 --------------------------------------------------------------------- Additional Infrastructure 15.4 --------------------------------------------------------------------- Indirect Costs 39.77 --------------------------------------------------------------------- Contingency (11.5%) 17.07 --------------------------------------------------------------------- Sub Total 165.55 ---------------------------------------------------------------------
The company is continuing discussions with vendors to define financing packages for equipment. The company’s aim is to reduce up front capital and add to the basket of financing options currently being investigated. Discussions and due diligence continue regarding Supply Chain Financing (“SCF”) based on the offtake agreement signed in December, 2013 for a minimum of 50% of Lac Knife’s production over the life of a 10-year agreement. SCF is a non-dilutive alternative to equity financing and is less encumbering than traditional debt, or royalty financing.
Future off-take agreements will contain a financial component. This project-financing alternative could include equity and low interest debt as well as a signing bonus to execute an offtake agreement. The various options discussed above have the potential to enhance future project economic evaluation metrics, and the company continues these discussions with several interested parties.
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, of Met-Chem Canada Inc. all Qualified Persons under NI 43-101 guidelines and independent of the issuer. Pierre Desautels, P.Geo., of AGP Inc. completed the NI- 43-101 Mineral Resource Estimate and is 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.
(i) Mineral resources are not mineral reserves and do not have demonstrated economic viability
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