Cat Financial Looking at Funding Package for Focus Graphite’s Lac Knife

Focus Graphite (TSXV:FMS,OTCQX:FCSMF) started 2015 on a good note, announcing Tuesday that Caterpillar Financial Services has expressed an interest in providing a financing solution for the company’s Quebec-based Lac Knife flake graphite project. 

No formal commitment has yet been made, but according to Don Baxter, president and COO of Focus, Cat’s interest “represents an important milestone” in the development of the financing structure for Lac Knife. Indeed, as he explained to Graphite Investing News, a package from Cat could represent 12 percent of the total financing requirements for the project.

Furthermore, it could allow Focus to save some money. “Our feasibility study was based on contract mining,” said Baxter, “and this will take us on the path of owner mining — there’s more control over the operations, and it’ll lower our operating costs even further.”

The feasibility study for Lac Knife, released in August 2014, pegs capital expenditure at $165.55 million, including a $17.07-million contingency. It also outlines an after-tax, base-case scenario that includes an internal rate of return of 24.1 percent, a net present value of $224 million at an 8-percent discount and a payback period of 3.2 years.

In terms of what a financing package from Cat might look like, few details are available as yet. That said, Baxter was able to say that mine equipment as well as project financing options are being discussed. Meanwhile, Focus is also in financing discussions with other investors and institutional funds in the public and private sectors.

It’s certainly clear that financing will be key for Focus in 2015, but the company has other plans as well. Baxter noted, “we’re just getting organized to get detailed engineering underway, which will allow us hopefully to get site works underway in June.” He concluded, “it’s going to be a busy year.”

At close of day Tuesday, shares of Focus were selling for $0.48 each after rising a modest 4.35 percent.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: Focus Graphite is a client of the Investing News Network. This article is not paid-for content.