Marki, the Chinese have an option to take all the 40 000 ton...and plan total production (I guess base on resource estimate) is 44 000 ton.
February 27, 2014 — Don Baxter, President and COO of Focus Graphite (TSXV: FMS | OTCQX: FCSMF), a graphite play in one of North America’s most prolific graphite zones in Lac Knife, Quebec, spoke to Tracy Weslosky, Publisher & Editor-in-Chief from InvestorIntel about a very important off-take agreement that Focus has recently made. This announcement, which includes a 10-year strategic agreement for up to 40,000 tons per year (400,000 ton total) of graphite concentrate with a Chinese-based industrial consortium located in the port city of Dalian, Lianing Province, China; one of the China’s most important centers for trade and industry, and home to many high-tech companies – and its significance are discussed.
This means, China is slated to consume up to 90% of Lac Knife’s expected annual production of 44,200 tons in accordance to the 2013 Preliminary Economic Assessment. Baxter said that the very fact that there is an offtake agreement is important, “…because there’s never been an off-take agreement in the graphite industry, period; so the fact that Focus is the first to do it is extremely significant and the fact is with a Chinese conglomerate further underpins what we’ve been saying about the graphite market and its problem with supply”. In fact, as Tracy notes, China has been undergoing a transformation from graphite exporter to graphite importer. “China is not only the world’s largest exporter of graphite it has have now become the third largest importer. So they have begun to consume more of their own raw materials and are looking to discourage the export of materials. They want to export finished goods, consuming more of their own products internally and they don’t want to supply the world’s raw materials anymore…they will take up to 40,000 tons a year; whereas, we’re slated to produce 44,000 tons a year.”
That means that China will be buying up to 90% of production, Baxter says there is an advantage to that: “it has made our other potential clients extremely nervous; they want to make sure there is enough of our material for them as well.” Should any investor be concerned about whether or not Focus will be able to ‘step up to the plate’ and meet this kind of demand, they can find reassurance in the fact that Focus recently announced recently an upgrade to their PEA: “with the new metallurgy, we are able to reduce operating cost tremendously. I was able to remove a significant third party cost to upgrade the graphite and to drop our operating costs to 458 dollars per ton of concentrate produced and that is extremely significant…because it is within the range of Chinese production costs so we can compete in our backyard with the Chinese.”
In effect, the improved metallurgical results from the Lac Knife Pilot Plant suggest that Focus Graphite has the potential to become one of the lowest-cost producers of graphite in the world, competitive — and appealing enough – even to Chinese end users.