TORONTO (miningweekly.com) – Emerging mid-tier junior mining development company Focus Graphite late on Thursday announced an industry leading offtake agreement for the future production from its Lac Knife graphite resource, located 27 km south west of Fermont, Quebec.
The strategic accord for up to 40 000 t/y of graphite concentrate and value added products was struck on Thursday 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 in 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,” Focus Graphite president and COO Don Baxter said in a statement.
The agreement called for the supply of a mix of high-purity flake sizes, from extra large flake +48 mesh to medium/large +80/100 to +200 mesh fine flakes.
“This agreement holds the potential for Lac Knife’s future development,” Baxter added, noting that the off-take agreement underscored the company’s long-held commercial objective of competing in the Chinese market.
CHINESE MARKET PULL
Last month, at Industrial Minerals Events’ Graphite & Graphene Conference, in New York, Focus Graphite CEO Gary Economo in his presentation predicted China's recent clamp down on flake graphite producers on environmental grounds, and urged graphite industry leaders to find a competitive advantage, owing to China being on the road to becoming a net importer of technology graphite.
One of China’s primary flake graphite producing regions had been ordered to halt production on environmental grounds, which would take about 10% of the world’s flake graphite supply off the market, the equivalent of 60 000 t/y, UK-based market research firm Industrial Minerals Data said this week.
Given that China produces almost 75% of the world’s graphite and that ‘flake' is the most sought-after form of natural graphite for value-added, high-technology carbon products, this was a significant development.
The last time a supply shortage close to this magnitude happened in China, was in 2009, which was seen as the catalyst for flake graphite prices reaching over $2 500/t in a year.
Industrial Minerals Data manager Simon Moores said in a report published on Monday that up to 55 miners and processors of graphite in the town of Pingdu, located in the east-coast province of Shandong, had been ordered by the local government to stop production after failing to improve wastewater, dust and gas emissions.
He said it had been called the strictest environmental action in local history. The halt also wiped about 20% of the country’s domestic output off the market.
Focus Graphite’s ten-year agreement called for the supply of large, medium and fine flake graphite concentrate and value-added graphite products from Focus Graphite’s proposed Lac Knife mining and processing facility, in the Côte-Nord region of north-eastern Quebec.
The specific terms of the agreement, including pricing and renewal rights, remained confidential for competitive reasons.
Despite the agreement, Focus warned that it was still busy with a feasibility study for the project, noting that there was no certainty that the objectives would be met.
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) as 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.
Focus Graphite’s TSX-V-listed stock jumped 39.62% to C$0.105 apiece on Friday morning.