Gary Economo, President and CEO of Focus Graphite, spoke with Metals News about the recent developments at the Lac Knife high-grade graphite deposit at the New Orleans Investment Conference. He said, “I started with this company about three years ago. My background is in high tech, with a particular focus on the graphite sector.”
Mr. Economo's background in high-tech has been an asset for Focus Graphite. Mr. Economo said, “Graphite is thermally conductive. A heat spreader and a heat transfer material. That is basically my background.” Economo's understanding of the high-tech industry is one reason he became involved with Focus Graphite. He said, “That’s the reason I got involved in this business. This particular deposit offers a unique type of flake that is perfectly suited for high-tech applications. Knowing the end uses is what drove me to get involved in this company.”
Focus Graphite's Lac Knife deposit has been in existence for quite some time. Mr. Economo said, “The deposit was discovered about 20 years ago. The deposit sat on the back burner.” Focus Graphite's goal is to move the deposit into production.
Mr. Economo said, “We went public on the Toronto exchange as FMS. We have been trading at good volumes – between 200,000 to 300,000 shares per day on average.” Even with that volume, the slip in the market has affected Focus Graphite as well. Gary said, “As we all know, the last twelve months has been very taxing on our stock.” How does Mr. Economo project that the price level will change? He said, “There are three different catalysts that will support our share price and that will help us achieve the price levels we believe we deserve. The first is our PEA published in October, 2012. That is the first catalyst that will allow us to achieve our goals.”
The PEA projected a 46,600 ton per year production over a 20-year mine life, with some 40% of that production assigned for purification to meet demand from technology graphite end users.
“The second catalyst is the off-take agreements. Unlike gold, graphite is a very unique mineral and each potential customer has unique production technical specifications and requirements,” he said. “The third catalyst is to raise the funding we require to build the mine and the purification facilities. We are in a good position to move from a resource exploration company to a true development company in 2013.”
To develop the Lac Knife deposit will require a significant investment. Of the investment required, Economo said, “Historical numbers are $75 to $100 million dollars to develop a mine that would produce about 20,000 tons per year. Our PEA doubles that rate. We are seeing a different mix and a higher volume of what we need to be producing so we’ve adjusted our Cap X to reflect that. We expect it to be in $150 million dollar range which includes a 25% contingency. Payback will be slightly more than 2.5 years.”
One way that Focus Graphite will achieve the funding they need is through their off-take agreements. Mr. Economo said, “We are very confident that we can get the off-takes that we need. We have to provide information that the material is sellable.” Based on the opinions of their independent consultants, Focus Graphite believes that is the case. Mr. Economo said, “We are very confident that we can sign a few up in a short period of time. Our bankers have been in discussions with institutional funds and they have given soft commitments based on the PEA and the off-take agreements.”
Why should investors take a close look at Focus Graphite? Mr. Economo said, “I think the most important reason is grade. Grade is king. Always has and always will be in the mining industry. Most of the other graphite deposits are running between 2% to 6% grade. We are at 16%. We have eight million tons at 16% of proven 43-101 resource. For high tech, you need 95% purity. We have to purify 6 tons of ore in order to get one ton of graphite. Our competitors will have to crush and float 50 tons.” Key to their strategy is competing with China. Economo said, “The most important thing is that we can compete with China. We plan to be a lot lower cost than they are. We have to be able to produce at a lower price than they do. Not only does China supply 75% of the world's graphite, but they use 75% of the world's graphite for lithium batteries. As electric motorcycles, bikes, vans, cars, buses are developed; they will all need lithium technology and all lithium technologies require purified graphite. They will need a high grade of graphite to do that.” Focus Graphite has an additional edge with their understanding of the needs of the end users. Gary said, “We know the market. We know the customers. We know the business better than any other company in the business. We come from the graphite end user business. We believe it will be easier for us to attack that market and to capture those customers. The project has the infrastructure there. Quebec is one of the best mining jurisdictions. We are just down the street from some of the largest iron ore mines. We have train service to move the product. All the infrastructure is there.”
Technology is also a focus of their processing. Mr. Economo said, “Coming from a technology background, one thing we have learned is that technology will always win. We have spent a lot of time to develop purification technologies in partnership with Hydro-Quebec that will help us to reduce our costs and enable us to compete in the global market.”
Clearly, Focus Graphite controls a significant, unusual deposit in mining-friendly Quebec. Mr. Economo said, “Our deposit holds 45% of the flake as large flake. The other 35.5% is medium flake. The rest is small flake. Even our small flake size is valuable. Our recent Locked Cycle Tests confirmed our small flake – at more than 96% purity – was economically viable and suitable for battery-grade materials. The lithium battery industry uses small flake graphite. With our processing and purification materials we can upgrade those materials for use in high technology applications.”
“As a company pursuing a technology agenda through a vertically-integrated, mine-to-market-to technology business model, Focus owns 40% of Grafoid Inc., a graphene production and industrial application company. This is where the future of graphite is heading. And we’re changing the game as we speak,” Mr. Economo said.
http://www.focusgraphite.com/
Gary Economo, CEO
Email: geconomo@focusgraphite.com
Tel: 613-691-1091 ext. 101