The Graphene, Graphite and Carbon Nanotube Research Board

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Caterpillar Financial Services Might Help Finance Focus Graphite's Lac Knife Project

Ben Kramer-Miller
Disclosure: The author is long FCSMF. (More...)
Gold & precious metals, macro, research analyst, deep value
Jan. 7, 2015 3:26 AM ET | About: Focus Graphite, Inc. (FCSMF)

http://seekingalpha.com/article/2802795-update-caterpillar-financial-services-might-help-finance-focus-graphites-lac-knife-project


Summary

Focus Graphite just announced that Caterpillar Financial Services is looking at potentially financing 12% of its Lac Knife Project.
This is a bullish development although I've been confident that the company would be able to get financing.
Given the advanced stage of Lac Knife, its strong economics, and its prime location I continue to believe that this is the best development-stage graphite company; financing remains a risk.

Focus Graphite (OTCQX:FCSMF) just announced that Caterpillar Financial Services is considering lending the company money in order to construct its flagship Lac Knife Project. While there is nothing official Cat Financial has issued a "letter of interest" that indicates that it would be open to lending the company 12% of the total initial capex that it needs, which based on current estimates would be ~$19 million.

12% may not seem like a lot, but investors will recall that in my detailed summary of my discussion with COO/President Don Baxter that the company has several different financing options, including:

Monetizing part of its stake in Grafoid - its partner in the graphene business.
Monetize its offtake agreement.
Get financing through Quebec, which provides capital for mining projects in the province.
Create a streaming agreement. The structure of such an agreement still needs to be worked out but many mining companies are looking for financing through this channel.

It can also, of course, issue more stock although as you can imagine management wants to avoid this.

The potential deal with Cat Financial, be it small and not yet official, is a huge step forward that demonstrates that the Lac Knife Project is being taken seriously by financiers with deep pockets. Investors should be encouraged by this.