Focus Signs Two Graphite Offtake Agreements with Grafoid

Focus Graphite‘s (TSXV:FMS,OTCQX:FCSMF) share price rose 17.5 percent, to $0.235, during Monday morning trading after the company announced that it’s entered into two offtake agreements with privately owned Grafoid, a graphene research, development and investment company in which Focus holds an interest.

The first offtake will allow Grafoid to acquire, at its discretion, up to 1,000 tonnes of high-purity, large-flake graphite concentrate (98.3 percent total carbon) per year for 10 years from Focus’ Lac Knife project in Quebec. Under the second, Grafoid will be able to acquire, again at its discretion, as much as 25,000 tonnes of graphite concentrate (97.8 percent total carbon) per year for 10 years from Lac Knife.

Lac Knife’s projected annual production of high-purity, large-flake graphite concentrate is 14,606 tonnes, and the first offtake will account for as much as 6.8 percent of that amount. Looking at all flake sizes, Lac Knife is expected to produce 44,300 tonnes annually; the second offtake will cover up to 56.4 percent of that amount.

In terms of what all that graphite will be used for, Monday’s press release states that Grafoid will use the high-purity, large-flake graphite concentrate covered by the first offtake “for a range of next-generation graphene-based automotive batteries, batteries for consumer electronics, and energy storage applications.” Meanwhile, the graphite concentrate covered by the second offtake will be used to “supply Grafoid’s needs for a range of graphite-based polymer applications for the autmotive and aerospace industry.”

Not just battery grade

Speaking to the Investing News Network, Gary Economo, CEO and newly appointed interim president and COO of Focus, explained that the fact that the graphite will be used in those ways — and not just be directed at the battery industry — is the key takeaway from Monday’s release. “There’s new markets that Grafoid is developing for the use of graphite. And Focus, in partnership with Grafoid … intend[s] to take advantage of the future growth of these new, high-value markets that are being created,” he said.

Elaborating, Economo, who’s also CEO, director and a founding partner at Grafoid, said that Focus is keen to do more than just sell battery-grade graphite because ”the industry for spheritized, battery-grade graphite is not that big. We can’t produce 40,000 tonnes of it and sell it. It’s not going to happen. So we have to find other applications.”

That might seem like an odd statement considering all gigafactory-related hype about potential demand for battery-grade graphite. However, Economo said he isn’t optimistic about selling a large amount of the material because it “started to be used as an anode material for lithium batteries many years ago,” meaning that it’s an old technology. As a result, he believes that eventually “new or better battery technologies will have to be created that can provide higher energy densities and lower costs.” Unfortunately, “graphite alone is not going to do that — the anode is going to be more than just graphite.”

He cautioned, “companies that are mining graphite have to look to those future technological developments if they’re going to be successful.”

Next step: funding

In terms of what’s next for Focus, Economo said that the company’s goal right now is to get Lac Knife into production. To do so, it will of course have to raise some money, and according to Economo, doing so will involve various steps. For instance, Focus may sell some of its shares in Grafoid to raise short-term cash prior to putting a big financing package together; the company will also look at debt financing.

Further offtake agreements may also be a component of funding, and luckily Focus already has more of them in the works. Though Economo couldn’t go into too much detail, he did state, “we are working with a number of battery companies for battery-grade offtakes that we hope we’ll be able to secure in the near future.”

All in all, it sounds like interesting times are ahead for both Focus and Grafoid. In closing, Economo emphasized that while Focus may have gotten a little off track in the last year and a half due to issues with previous management, moving forward, the company will aim to rebuild shareholder value. “It’s a good mine-to-market model between the two companies working together,” he said, also noting that the plan is to “build this mine, get into production as soon as possible and get the shareholder value up.”

As mentioned, news of the offtake initially sent Focus’ share price up an impressive 17.5 percent. Later in the day it declined slightly to $0.22; however, that’s still 10 percent above Friday’s close of $0.20.

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

Editorial Disclosure: Focus Graphite and Grafoid are clients of the Investing News Network. This article is not paid-for content.