Focus Graphite Inc. Announces Strategic Offtake Agreements With Grafoid Inc.
Agreements Safeguard Security of Future Revenue for Focus Graphite's Lac Knife Project and Supply for the Commercialization of Grafoid's Mesograf™ Product Applications
OTTAWA, ONTARIO--(Marketwired - June 22, 2015) - Focus Graphite Inc., (TSX VENTURE:FMS)(OTCQX:FCSMF)(FRANKFURT:FKC) ("Focus" or the "Company") an advanced stage graphite mining development company and sole owner of the high-grade Lac Knife, Québec natural flake graphite deposit, is pleased to announce it has entered into two offtake agreements with
Grafoid Inc., a global leader in graphene application development.
The first offtake agreement (the "Energy Offtake") commits Grafoid to acquire, at its discretion, up to an annual maximum of 1,000 tonnes of high-purity (98.3% total carbon "Ct")(1) large flake (+80 mesh) graphite concentrate annually from the Lac Knife Project for 10 years, representing up to 6.8% of the projected annual production of 14,606 tonnes of high-purity large flake concentrate.
(1) 98.3% Ct purity is the average of 6 pilot plant runs. The pilot plant program was completed in 2013 by SGS Canada Inc., located in Lakefield, Ontario. See news release dated August 21, 2013.
The second offtake agreement (the "Polymer Offtake") commits Grafoid to acquire, at its discretion, up to 25,000 tonnes of 97.8% Ct (average concentrate grade for all flake sizes) graphite concentrate annually from the Lac Knife Project for 10 years, representing up to 56.4% of the projected total annual production of 44,300 tonnes (all flake sizes).
Mr. Gary Economo, Chief Executive Officer of Focus Graphite, announced that the two companies have set forth initial terms for two offtake agreements. "The strong relationship and strategic alignment between the two companies is reflected in these agreements. Focus Graphite benefits from a substantial ongoing future revenue stream while Grafoid is assured a secure supply to meet customer needs," said Mr. Economo.
Grafoid is a Canadian graphene research and development company that invests in the development of industrial-scale graphene applications and technologies, in partnership with major global corporations and academic institutions. Grafoid's graphene products are developed under the trade name of Mesograf™.
Focus is the largest single shareholder in Grafoid Inc. holding 7,800,000 Grafoid common shares valued at US$39 million.(2)
(2) Grafoid Inc. is a private company that has raised nearly US$20 million and completed acquisitions at US$5 a share, as referenced in a company release on the acquisition of ALCERECO and in investment analyst coverage by NY-based JGL Partners LLC.
Energy Offtake Agreement
Once the Lac Knife Project comes into production, the "Energy Offtake" is intended to supply Grafoid's needs for a range of next-generation graphene-based automotive batteries, batteries for consumer electronics, and energy storage applications. Customer requirements would come from Grafoid, its subsidiaries, acquisitions and/or joint venture partnerships.
Under the initial terms of the Energy Offtake agreement, Grafoid would pay Focus Graphite C$1 million over a 12-month period, with the first payment being on or before September 30, 2015, for the right of first refusal to purchase up to the annual maximum of 1,000 tonnes and would also give Grafoid the first right of refusal to extend and expand the offtake agreement for an additional 10-year period. The pricing for an additional 10-year period will be set at market price less 10%.
Pricing for the offtake is derived from the
Technical Report on The Lac Knife Graphite Feasibility Study(3) for high-purity large flake (98.3% Ct) graphite concentrate which is US$1,910/tonne, minus 10%. Accordingly, Focus estimates that the Company could record approximately US$17.2 million in revenue under the first 10-year term of the agreement, if fully exercised.
(3) Prices from table 19.3, page 215, NI 43-101 Technical Report On The Lac Knife Graphite Feasibility Study, August 8, 2014, prepared in accordance with NI 43-101 by Met-Chem Canada Inc. Prices in the technical report were from an independent market study carried out by UK-based Industrial Minerals Data, on world supply and demand for flake graphite concentrate that provided a price forecast for the period 2014-2017.
Polymer Offtake Agreement
Once the Lac Knife Project comes into production, the Polymer Offtake is intended to supply Grafoid's needs for a range of graphite-based polymer applications for the automotive and aerospace industry. Customer requirements would come from original equipment manufacturers (OEMs) and Tier 1 or Tier 2 suppliers. This area of commercial application development holds considerable promise for Grafoid as OEMs are looking for lighter and stronger composite materials to replace expensive carbon fiber and that ultimately reduce cost, increase fuel savings and build longer life into those components used in transportation industries.
The patented graphite-polymer process was developed by Grafoid's wholly owned subsidiary, Graflow Inc., in partnership with Rutgers University's AMIPP Advanced Polymer Center.
Under the initial terms of the Polymer Offtake agreement, Grafoid would pay Focus Graphite C$1 million over a 12-month period, with the first payment being on or before September 30, 2015, for the right of first refusal to purchase up to the annual maximum of 25,000 tonnes of the projected total annual production of all flake size graphite concentrate. Grafoid would also have the first right of refusal to extend the offtake agreement for an additional 10-year period. The pricing for an additional 10-year period will be set at market price less 10%.
Pricing for the offtake is derived from the
Technical Report on The Lac Knife Graphite Feasibility Study(4) for blended average market pricing which is US$1,713/tonne, minus 10%. Accordingly, Focus estimates that the Company could record approximately US$385.4 million in revenue under the first 10-year term of the agreement, if fully exercised.