TORONTO (miningweekly.com) – Emerging graphite producer Focus Graphite will position itself to start production at the latest by 2016, in time to take advantage of a potential significant price up-tick as demand for this form of carbon rises, and supply struggles to keep up.

Speaking to Mining Weekly Online on the sidelines of the 2014 Vancouver Resource Investment Conference, president and COO Don Baxter said that the company was on a fast-tracked trajectory to exploiting its high-grade Lac Knife graphite resource, located 27 km south-west of Fermont, Quebec.

The price of graphite has tripled between 2005 and 2012. Baxter said the main reasons for this were the fact that the excess global supply got used up, while the Chinese supply (which is the main supply of this form of carbon globally) did not rise and the market had became concerned about supply security.

“The battery guys who really need it became scared. Despite the price really heating up in recent times, the price has cooled to some degree last year. I think people are realising now that as the economy is starting to show signs of life, the demand is going to come back and no new mines had been built since the last cycle. There was a lot of interest in graphite, but no new mines were built,” he said.

Even analysts’ baseline projections were expecting a lot of upside to the graphite price.

Baxter said that a current price of about $1 886/t of graphite could be significantly more by the time the company started producing.

OFFTAKE ACCORD

Focus last month announced an industry leading offtake agreement for the future production from its Lac Knife graphite resource. The strategic accord for up to 40 000 t/y of graphite concentrate and value added products was struck with an industrial conglomerate comprising heavy industry, manufacturing and technology companies located in Dalian City, Liaoning province, China.

“Not only is this offtake agreement the first of its kind in the graphite industry, it is significant for the fact that it encompasses the wide spectrum of Lac Knife’s offerings in pioneering the sale of small flake to extra large flake and value added technology products,” Baxter said.

He noted that it was significant that a Chinese company looking outside of Chinese borders for graphite.

“I think the other potential offtakers, such as the battery guys, Japanese and the South Koreans manufacturers have suddenly become quite nervous. I’d say we’ve done our part to speed them along a bit. I think they’re concerned that China is looking to broaden its grip on the graphite market, even outside of its borders,” Baxter said.

He underlined that the agreement could help to simplify finding appropriate financing for the $126-million project. He said the company’s financing efforts could overlap the feasibility study, owing to the company’s ultimate long-term goal being to be in production by mid-2016.

“The numbers are good now, so there’s a lot of upside to our potential. The thing with graphite is that people who are looking to secure a supply of graphite, are often able to finance projects, albeit through debt, equity or a combination of both, would be tied into offtake agreements, and those agreements often open up the door to other types of less dilutive types of finance,” he said.

The Lac Knife project has a low operating cost of about $450/t of concentrate produced.

The concentrate grade is also critical, Baxter pointed out. “For the new metallurgical work that we’ve completed, the overall average grade of concentrate is 96.6%, but everything that falls under the +200 mesh is 98% carbon, which is unheard of.

“We have some unique properties to our products. It goes to show that even though we produce from a higher-grade deposit, we do have a smaller flake distribution and it tends to show that as the grade gets higher, the flake size distribution gets smaller.

“However, in our case it looks like that works to our advantage, because the nature of the flake appears as if it will be able to micronise and spheronise extremely well, which would sell in the $800/t range; but add a little investment to it, and we could very well be able to sell it in the $8 000/t range. That’s phenomenal,” he enthused.

This means that the company would be able to sell the fines by-products, as well as its main high-grade large flake graphite at premium pricing.

“I’ve done it before. We will produce high-quality spherical graphite for batteries and micronised purified graphite for pyrometallurgical applications,” he said.

Despite having a foot in the door in the emerging graphene industry, through a 16% interest in a joint venture with graphene producer Grafoid, Baxter explained that for a junior miner such as Focus, graphene would at this stage not be a big-tonnage end destination for its graphite.

“We have to sell 46 000 t/y of graphite, and the graphene industry is not going to take that much. The traditional markets will take the bulk of our output, but it could change in the future, as new applications are being developed and discovered,” he said.

FAST TRAJECTORY

A mine engineer by trade, Baxter explained that since joining the team in September last year, he has brought to the table his background in graphite metallurgy and process design.

“The company is now moving into the feasibility stage as from November. We’re transitioning from an exploration company to a development company,” he said.

Baxter pointed out that Focus had completed an infill-drilling programme over the past summer, which would enable it to update its resource in the near future. Those results would also be pulled into the feasibility study, which would result in a proven and probable reserve by the end of this summer.

Concurrently with the feasibility study, the company was also focused on preparing the permitting applications for the project and a closure plan was also currently being developed. These were planned for submission to the various authorities by mid-summer, which would further de-risk the project, Baxter noted.

The Lac Knife project hosts a Canadian National Instrument 43-101-compliant indicated mineral resource estimate of 4.9-million tons grading 15.8% graphitic carbon (Cgr) of crystalline graphite, with an additional inferred resource estimate of three-million tons grading 15.6% Cgr of crystalline graphite.

Focus said its goal is to assume an industry leadership position by becoming a low-cost producer of technology-grade graphite. On October 29, 2012, the company released the results of a preliminary economic assessment of the Lac Knife project, which had indicated that the project has a “very good” potential to become a graphite producer.