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Focus Metals 2nd Annual General Meeting | Speech
(Download the PDF).
By: Gary Economo
President and CEO, Focus Metals Inc.
May 3, 2012
Ladies and gentlemen, good morning and welcome to our second Annual
General Meeting.
My name is Gary Economo and I’m President and CEO of Focus Metals.
I’m pleased to announce that our shareholders have voted and have
consented to our request to change our corporate identity to Focus
Graphite Inc.
A year ago, at our first AGM, I described Focus Metals as an
exciting young company with an ambition to create a bonanza for our
shareholders.
Focus Graphite remains an exciting young company and we’re about to
realize those ambitions we still hold for creating that shareholder
bonanza. Here’s why:
Our management approach to success is based upon our “business
unusual” philosophy, that is, breaking with the conventions of
traditional mining management.
Digging up graphite and selling your product into the market is
good if that’s all you aspire to.
We saw opportunities to add immense value to our future production
by implementing a strategy to beat the market and our
competitors.
That strategy is built upon Lac Knife’s 16%, industry-leading
grade.
We knew, and we had the confidence to pioneer a new wave of
thinking in our industry by incorporating technology innovation
into our business vision.
I can state today, without any reservation that our
technology-driven focus has been met with success on a number of
fronts.
The Year in Review
During the last year, we saw our share price ebb and flow as the
market apprised itself of, and began considering both the short and
long-term potential of buying into a largely ignored, but ancient
commodity.
Again, I can say without reservation or sense of false modesty that
Focus paved the way for the interest shown today by commodity
investors. Shock and Awe provided the world with the buzzwords that
created a focus on Focus.
The graphite mining sector has changed dramatically during the last
12 months.
Today, there are a number of new entrants looking to carve out a
niche for themselves in the graphite space.
While projected future demand for graphite bodes well for our
industry over the longer term, we anticipate some rationalization
over the next two-to-five years as new supply sources come onto the
market.
China remains the X-Factor, and the pace of demand over the short
term will be led by technology end users as new applications for
graphite are developed.
Focus Graphite intends to lead the mining sector by assuming a
dominant position in the supply of technology graphite to meet
sectoral needs based on price, quality and availability.
Lac Knife’s 16% grade and the quality of our “super concentrate”
graphite deposit support our ambitions to become the lowest-cost
producer of technology graphite in the world.
At the end of the day, only two things matter: the highest graphite
grade in the world, and; a management with a vision to build
shareholder value from a technology-based enterprise.
Creating a bonanza for our shareholders requires diligence, effort,
creativity, and time.
Business innovation, an ability to maximize business opportunities
and adding value from a technology source remain the pillars of our
management objectives.
Moving into pre-production during the last 12 also brought
administrative changes. Chief among them was the appointment of Mr.
Tony Brisson as Vice President, Exploration.
Tony’s 2012 Lac Knife plans for Lac Knife drilling program are
finalized and drilling should commence in a matter of days or weeks
depending on the weather.
We also passed a number of financial and operational milestones as
we moved into pre-production development – one of which was
significant – the closing of a $20 million bought deal private
placement led by Cormark Securities and included Byron Capital and
Desjardins Securities.
Among other notable achievements since our last AGM was the hiring
of Roscoe Postle Associates – one of the world’s premier mine
designers – to begin planning for Lac Knife’s mine construction and
supporting requirements.
Last summer, the U.S. financial regulator FINRA approved our
request for listing on the premium OTCQX exchange and Standard and
Poors launched their coverage of Focus Metals.
Last autumn, we announced our purchase of some 200 Quebec mining
claims and we added an additional 65 Quebec claims and properties
in January this year.
A Turning Point
Last December, we published our 43-101 compliant resource estimate
for our Lac Knife, Quebec deposit. It elevated our status and
validated our claim as the holders of the best graphite property in
the world.
It opened the door for us to cement our relationships with
potential customers and it strengthened our position in discussions
leading towards offtakes, or long-term sales/purchase
agreements.
It also prompted our financial backers to re-invest in Focus.
On March 14, about five weeks ago, a syndicate led by Cormark that
included Byron Capital closed a $10 million bought deal
flow-through private placement. Those funds, by regulation, are
earmarked for drilling at Lac Knife, at Kwyjibo and for any
exploration purposes related to our claims.
That new funding has left us in the enviable position of being very
well funded and enabled us to engage in a broader campaign than we
had planned for last year.
The preparation of our Preliminary Economic Assessment is underway
and that report should be ready for publication in the very near
future.
Our recent, preliminary metallurgical report prepared for us by SGS
indicated good results and we expect a final recovery report to be
published once testing is completed and the results analyzed.
What that initial report confirmed was Lac Knife’s graphite is
perfectly suited for green technology and lithium battery
applications. And that’s precisely where we’re headed.
As a longer-term investment, we believe Focus stakeholders have
come to accept our milestone-by-milestone development. As an
emerging company, our “business unusual” continues to break the
mold of a traditional mining development company.
Looking Ahead – The Market and Focus Graphite
The year ahead will be interesting to shareholders both
domestically and internationally.
As I mentioned earlier, China remains the X-Factor in global
markets. Pressure is mounting on the central government from major
graphite producers there to grant the same protectionist status
given to rare earth producers.
Consolidation of the graphite industry in China has begun, starting
with amorphous graphite – a market we don’t compete in – but any
moves to restrict flake graphite exports, which account for about
half of China’s production will place upward pressure on
international prices.
China itself is a world-leading consumer of flake graphite and
currently leads the world in electric vehicle development and
production including cars, trucks, buses and motorcycles.
Lithium battery and fuel cell development and production go
hand-in-hand with China’s green programs. The potential for a rise
in prices bodes well for emerging producers - Focus Graphite
included - over the short term.
Over the next two to five years however, even with increased
margins, the market remains sensitive to China’s ability to
undercut markets by introducing more product into markets.
With the ability to produce at the lowest cost, highest quality
graphite in the world, Focus Graphite is virtually immune from
potential market oversupplies. Conversely, shareholders could
anticipate a benefit from the highest possible profit margins.
In the meantime, the greatest value will accrue to our shareholders
by continuing to execute our Lac Knife development strategy. We
remain uniquely positioned to lead the graphite sector because of
our world-class deposit and because we’re positioned to take
advantage of market changes which will inevitably occur.
Kwyjibo: 2012 Summer Exploration and Drilling
Our focus remains on a two-phase exploration and summer drilling
program with our partner SOQUEM beginning in mid-June and ending
mid-September.
A 4,000 meter core drilling program at the Josette site is planned
to further define the shape and size of our rare earth resource
that will be followed by the release of a 43-101 compliant resource
calculation once the drilling results are compiled.
Given the signs of a return to relative stability in rare earth
markets, a positive showing from a second technology resource would
complement our graphite developments.
Graphene Developments
Earlier this year, Dr. Gordon Chiu, Focus Metals Chief Scientist
pronounced our Lac Knife graphite deposit as a “super concentrate”
supply source for graphene development. That is, any graphite
source with a grading higher than 15%.
Dr. Chiu told a gathering of researchers and scientists in early
April he had mated Lac Knife’s graphite with a proprietary process
for transforming our graphite ore to an affordable, high quality,
high energy graphene.
We expect further news from Dr. Chiu during the course of the next
year.
Conclusion
Let me conclude by saying we have every confidence in our abilities
to execute a technology-biased business strategy we introduced two
years ago.
We shall deliver the two most important elements of that strategy,
and they are:
1. to develop Lac Knife to production and to employ those
technologies that add value to Lac Knife’s graphite, and;
2. to build shareholder value into each phase of Lac Knife’s
development through innovation and through the introduction of
those technologies which maximize profits and growth.
Thank you for your attendance here today.