Focus Metals 2nd Annual General Meeting | Speech
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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.
AI
