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Fundamental Research sees "long-term upside" in Focus Graphite
Wednesday, June 13, 2012 by Joyanta
Acharjee
Fundamental Research has initiated coverage on Focus Graphite
(CVE:FMS)(OTCQX:FCSMF) with a "Buy" rating and sees the stock
fairly valued at $1.21.
Focus Graphite is focused on development of the 100 percent-owned
Lac Knife graphite project in Quebec.
The deposit has several significant upsides including very high
grades, a good quantity of large flake and is located in a region
with well-established infrastructure. At 15.7% Cgr (carbon as
graphite), Lac Knife is the highest known graphite deposit grade in
the world.
"We are extremely encouraged by this estimate which, we believe is
the highest grade graphite deposit in the world," Fundamental
Research analyst Siddharth Rajeev said in a note.
Metallurgical testing shows the deposit contains 46.1 percent large
flake and 39 percent medium flake with a global recovery rate of
85.9 percent. Large flake graphite is the most valuable form of
graphite.
Flake graphite has been experiencing increasing demand for the
primary reason that only flake graphite can be used for high-growth
applications such as Li-ion lithium batteries, fuel cells, and
nuclear reactors.
Flake graphite, and especially large flake graphite, is the most
desirable and therefore, the most expensive, Fundamental Research
said.
In December 2011, Focus Graphite released the first NI 43-101
compliant resource estimate for the property.
Using a cut-off grade of 5% Cgr, the estimate gives 4.9 million
tonnes at a grade of 15.67% Cgr in the Measured and Indicated
category, and 3 million tonnes grading 15.58% Cgr in the Inferred
category.
The large amount of historical work on the property has allowed
Focus to expedite project development, and production is due to
start in 2014 and has a capacity to produce up to 25,000 tonnes per
year, with a 40 year mine life.
"We are encouraged by the production scenario put forward by
management and anticipate release of the PEA in June. We consider
the prospect for a 2014 start date to offer significant medium to
long term upside," Fundamental's Rajeev said.
Focus Graphite recently signed a license agreement with
Hydro-Quebec to develop a graphite purification facility and a
graphite anode production facility for lithium-ion batteries.
As at the end of March 2012, the company had cash and short-term
investments of $26 million.
"The company’s strong cash position, we believe, will easily take
them through the next 12 months," the Fundamental Research analyst
said.
http://www.proactiveinvestors.com.au/companies/news/30008/fu…