Focus Graphite sets sale quota with Chinese buyer

Mar 6, 2014

A MINIMUM PURCHASE OF 200,000 TONNES OVER 10 YEARS: FOCUS GRAPHITE UPDATES ITS HISTORIC OFFTAKE AGREEMENT WITH A CHINESE INDUSTRIAL CONGLOMERATE

Further to its Dec. 19, 2013 announcement, the terms of Focus Graphite Inc.’s historic off-take agreement with a Chinese industrial conglomerate will bind the parties to a minimum purchase of 20,000 tonnes per year of future production from the Lac Knife graphite property approximately 27 kilometres southwest of Fermont, Que.

Focus president and chief operating officer, Don Baxter, said other specific terms of the agreement, including pricing and renewal rights remain confidential for competitive reasons.

“We are pleased to update our initial off-take announcement on Dec. 19, 2013, which stipulated a supply ceiling of 40,000 tonnes per year of large, medium and fine flake graphite, and value-added graphite also holds a minimum purchase floor of 20,000 tonnes per year over the life of the agreement,” Mr. Baxter said.

“This update is, in part, prompted by questions posed to us by other potential strategic off-take buyers concerned with the availability or possible lack thereof of future long-term supplies of Lac Knife concentrates,” Mr. Baxter added.

As reported in its Nov. 7, 2013, updated preliminary economic assessment, the company intends to produce 44,300 tonnes of high-purity graphite annually.

“Based on our ongoing discussions, Focus recognizes the importance of leaving the door open to accommodate future demand, particularly from our friends in the United States and Europe,” Mr. Baxter said.

“More,” he added, “Tesla Motors’ announcement of its intention to build a huge battery manufacturing facility in the U.S. opens the door for our industry to compete for the right to supply purified and shaped battery grade materials to an industry innovator.”

Tesla Motors announced it intends to invest $5-billion to construct a massive battery manufacturing facility somewhere in the southwestern U.S.

On Feb. 26, 2014, the New York Times reported the automaker expects to reduce the per-kilowatt cost of its battery packs by more than 30 per cent by the end of the first year of volume production for its third-generation electric vehicle. At full production, the factory, known as the Gigafactory, would produce about 500,000 lithium-ion batteries annually by 2020, more than suppliers worldwide produced last year.

Tesla’s aim, Mr. Baxter said, is to reduce input costs for both its world-leading electric vehicles and for energy storage units for its SolarCity solar power subsidiary.

SolarCity uses Tesla battery packs for its residential and business customers to lessen their dependence on electrical power from the grid.

Mr. Baxter said Tesla’s move, as one of the highest profile-driving forces in the world, opens the door for graphite developers to make their case not only to Tesla, but all clean technology end-users to compare the cost-to-power advantages that come from of natural flake graphite.

“As a graphite developer moving toward production, Focus Graphite’s long-held business strategy, in principle, mirrors that of Tesla chairman Elon Musk’s — and that is: building a vertically integrated value chain to secure a competitive advantage,” Mr Baxter said.

More than half of Focus’ Lac Knife’s deposit is 98-per-cent purity, low-cost, fine flake (minus-100 mesh) graphite, which can be affordably purified and shaped to meet future battery material demand for the anodes used in lithium-ion batteries.

Mr. Baxter stated, “Focus stands alone in the graphite industry by publicly declaring its intention to carve out new technology markets from a graphite product once considered to be low value, and therefore, largely ignored and sometimes neglected fine flake graphite.”

Both the U.S. and China have set mandatory production targets for electric and hybrid electric vehicles at one million vehicles each by 2015 to 2016.

It is estimated that batteries for two million electric vehicles will create a demand for an additional supply of 160,000 tonnes per year of high-value purified graphite. Global production of flake is currently estimated at 500,000 tons per year.

http://www.focusgraphite.com/news/press-releases