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Focus Graphite (TSXV:FMS,OTCQX:FCSMF,FWB:FKC) has entered into two offtake agreements with Grafoid, a leader in graphene application development. The company stated that the agreements safeguard the security of future revenue for Focus Graphite’s Lac Knife project as well as supply for the commercialization of Grafoid’s Mesograf™ product applications.
As quoted in the press release:
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”) 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.
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).
Focus provided additional information regarding the energy and polymer offtake agreements. Energy offtake:
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 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.
Polymer offtake:
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 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.
Completion of the offtake agreement transactions between Focus Graphite Inc. and Grafoid Inc. are subject to a number of conditions, including, but not limited to, the signing of definitive agreements within 60-days from the date of the announcement; approvals by the Board of Directors of both companies; and TSX-V acceptance.
Focus Graphite CEO, Gary Economo, said:
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.
Click here to read the Focus Graphite (TSXV:FMS,OTCQX:FCSMF,FWB:FKC) press release
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