Lac Knife

Lac Knife is situated in the Grenville Geological Province of northeastern Québec, about 27 kilometres south of Fermont, a full-service town which serves as a base for ArcelorMittal’s Mont-Wright iron ore operations. The property consists of a total of 57 mining claims covering 29,863 hectares.

The area is a historic and active mining region, hosting excellent infrastructure including electric grid power and nearby access to road, rail, and port facilities. Other nearby towns include Wabush and Labrador City, both of which serve other iron ore mines in the area.

The Lac Knife graphite property was discovered in 1959 by D.L. Murphy during geological survey work by the Québec Ministry of Energy and Resources. Between 1986 and 1990, Mazarin Inc. conducted exploration work that expanded the Murphy showing, and completed pre-feasibility and feasibility studies between 1989 and 1990.

In August 1990, Cambior signed a joint venture for an equal partnership with Mazarin for the Lac Knife Project. In 2001, interest in Lac Knife increased as the graphite market was emerging for hydrogen fuel cells and other uses. Graftech Inc. conducted a study that demonstrated the exceptional quality of the graphite at Lac Knife.

In 2002, Graftech and Mazarin planned a joint venture with the goal of starting production in 2004. However, the graphite market declined and the project was halted. IAMGOLD Corp. subsequently purchased Cambior, which included the Lac Knife asset.

In October 2010, IAMGOLD sold 100% of the Lac Knife property to Focus Metals Inc. (now Focus Graphite Inc.).

A positive feasibility study, prepared by Met-Chem Canada Inc.  (now DRA Americas Inc.), released on August 8, 2014, indicated that Lac Knife has the potential to become one of the lowest-cost, highest-margin producers of graphite concentrates in the world.

The current surge in lithium-ion battery demand has created considerable interest in securing new domestic primary supply chains for critical materials such as graphite, which is used in the manufacture of anodes for lithium-ion batteries and in a variety of other high-tech industries. In April 2023, Focus released its update of the 2014 Lac Knife feasibility study and NI 43-101 Technical Report to address current market drivers and to move the project towards production to meet this demand.

Graphite mineralization is set in migmatized biotite-bearing quartz-feldspar gneiss belonging to the Nault Formation of the lower Proterozoic Gagnon Group. According to the Québec Ministry of Natural Resources, where this gneissic unit is sheared, brecciated and silicified, coarse graphite flakes and associated sulphide minerals make up 5% to 10% of the rock, with up to 20% or more in the more brecciated zones. Fuchsite and other iron-rich micas accompany the graphite and sulphide mineralization in the more silicified horizons.

Updated Mineral Resources Estimate (MRE)

An updated resource calculation released in March 2023 as part of the Lac Knife project Feasibility Study update prepared by DRA Global Ltd. show indicated mineral resources of 12.0 million tonnes grading 15.34% graphitic carbon (Cg) at a 4.0% Cg cut-off grade, for an estimated content of 1.7 million tonnes  in-situ natural flake graphite.  Additionally, there are 0.6 million tonnes of Inferred mineral resources at 16.90 % Cg, for an estimated content of 0.1 million tonnes of in-situ natural flake graphite. A cut-off grade of  4.0% was used to determine the MRE, as presented in the updated resource estimate table below:

Mineral Resource Estimate
Classification	Tonnage (Mt)	Cg (%)	Concentrate (Mt)
Measured 1,2,3	–	–	–
Indicated 1,2,3	12.0	15.34	1.7
Total Measured and Indicated	12.0	15.34	1.7
Inferred 1,2,3,4	0.6	16.90	0.1

Notes:

1. Mineral Resources are inclusive of Mineral Reserves.
2. The Mineral Resources were estimated following the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.
3. Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. See ‘Lac Knife Open Pit Mineral Reserves’ table above for reserves.
4. The Inferred Mineral Resource in this estimate has a lower level of confidence that that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.
5. Resources are constrained by a Pseudoflow-optimised pit shell using HxGn MinePlan software. Pit shell is define using 45-degree slope, $CAD 1,475/t concentrate sales price, $CAD 5.91/t ore mining costs, $CAD 34.42/t processing costs, $CAD 10.53/t G&A and $CAD 265.00/t for concentrate transportation costs, 90.7% process recovery, 97.8% concentrate grade and an assumed 50,000 tpy concentrate production.
6. The Effective Date is March 6, 2023.
7. Numbers may not add due to rounding.

Under the 2023 Feasibility Study Update, total Measured + Indicated mineral resources are estimated at 12.0 million tonnes grading 15.34% Cg at a cut-off grade of 4.0% Cg, equivalent to 1.7 million tonnes of graphite concentrate contained in situ, compared to 9.58 million tonnes grading 14.70% Cg at a cut-off grade of 3.0% Cg, equivalent to 1.4 million tonnes of graphite concentrate contained as reported in the 2014 Feasibility Study. The FSU estimate represents an increase of 300,000 tonnes in contained graphite concentrate relative to the 2014 FS estimate.¹

¹ Note: The results of the 2014 feasibility study are historical results and are not considered compliant with NI 43-101 reporting standards.   

Updated Mineral Reserve Estimate

The new open pit design for the Lac Knife project includes 9,310 kt of Probable reserves grading 14.97% Cg.  The mineral reserves which account for mining dilution and ore loss are reported at a cut-off grade of 5.1% Cg.  To access these reserves, 4,719 kt of overburden and 19,073 kt of waste rock must be mined. This total waste quantity of 23,775 kt results in a stripping ratio of 2.6 to 1.

The following table presents the Lac Knife open pit mineral reserves that were estimated for the 2023 feasibility study update.  The remaining measured and indicated resources within the Lac Knife deposit will help to develop the mid and long-term growth profile for the company.

*Lac Knife Open-Pit Mineral Reserves Estimate
Category	Tonnage (kt)	Cg Grade (%)
Proven	–	–
Probable	9,310	14.97
Proven and probable	9,310	14.97

*The measured and indicated mineral resources are inclusive of those mineral resources modified to produce the mineral reserve.  The reference point for the mineral reserve estimate is the mill feed.

Notes:

1. Estimate of Mineral Reserves has been estimated by the Reserves QP.
2. The Mineral Reserves are reported in accordance with the CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council.
3. The effective date of the estimate is March 6, 2023.
4. Mineral Reserves are included in Mineral Resources.
5. Pit shell was developed using a 45-degree pit slope, concentrate sales price of $1,375$/t concentrate, mining costs of $5.91 /t ore, $5.40 $/t waste, and 3.71$/t overburden, processing costs of 34.42 $/t processed, G&A cost of $10.53 $/t processed and transportation costs of 265 $/t concentrate, 90.7% process recovery and 97.8% concentrate grade and an assumed 50,000 tpa concentrate production.
6. The Mineral Reserves are inclusive of mining dilution and ore loss.
7. The open pit Mineral Reserves are estimated using a cut-off grade of 5.1 % Cg.
8. The strip ratio for the open pit is 2.6 to 1.
9. The Mineral Reserves are stated as dry tonnes processed at the crusher.
10. All figures are in metric ton.
11. Totals may not add due to rounding.

Under the 2023 Feasibility study Update (“FSU”), total Mineral Reserves are estimated at 9.31 million tonnes grading 14.97% Cg at a cut-off grade of 5.1% Cg, equivalent to 1.39 million tonnes of graphite concentrate contained in situ, compared to 7.86 million tonnes grading 15.13% Cg at a cut-off grade of 3.1% Cg, equivalent to 1.19 million tonnes of contained graphite concentrate, reported in the 2014 FS. This represents an increase of 200,000 tonnes in contained graphite concentrates relative to the 2014 FS estimate¹.

The pit optimization analysis was completed using the MSOPit module of HxGN MinePlan®. The optimizer uses the Pseudoflow algorithm to determine the economic pit limits based on input of mining and processing costs, and revenue per block. In compliance with NI 43-101 guidelines regarding the Standards of Disclosure for Mineral Projects, only blocks classified in the Measured and Indicated categories drive the pit optimization. Inferred resource blocks are treated as waste, bearing no economic value.

The pit that has been designed for the Lac Knife deposit will be approximately 1,130 m long by 400 m wide at surface and will reach  a maximum pit depth of 150 m. At its maximum extent, the total surface area of the pit will be  roughly 319,000 m². The open pit design incorporates 10 m high benches and follows the pit slope recommendations from the 2014 geotechnical investigation.

In March 2023, Focus Graphite announced an update to its 2014 feasibility study that positioned Lac Knife as potentially one the lowest-cost, highest margin future North American producers of high-purity graphite concentrate for use in high-performance Li-Ion batteries.

Under the 2023 Feasibility Study Update (FSU), the Lac Knife project will be developed based on a conventional open-pit, shovel-and-truck and drill-and-blast mining operation accompanied by a processing plant designed to produce 50,000 t/y of graphite, containing 47,781 t/y of high-grade salable concentrate. The mining production schedule is based on one shift of 10 hours, 7 days a week, while the processing plant will be operated on 24 hours a day, 365 days a year basis. The mine life is scheduled to be 27 years with total ore mined of 9,31 million tonnes grading 14.97% Cg.

The Lac Knife Project is designed as a stand-alone business operation to produce a line of high purity flake graphite concentrates destined mainly for the North American and European battery anode materials industry and for other specialty applications using natural flake graphite from Québec. The updated Project feasibility study positions Focus to become a leading supplier of these graphite concentrates to EV battery manufacturers.

Lac Knife is unique in that all natural flake graphitic concentrates produced with flake size above 200 mesh (75 microns) size grade more than 98% Cg. This allows Focus to divert finer sized products that would typically be difficult to sell due to their flake size to higher value-added products such as spherical graphite for batteries, due to the high carbon content of 98% carbon.

Although the Lac Knife mine will be a conventional open-pit mining operation using diesel-driven equipment, Focus is determined to utilize all electric mobile equipment as soon as it becomes economically available in order to make the Project a carbon-free operation, powered by low-cost hydroelectricity readily available in the area from Hydro-Québec. In an effort to improve environmental mine safety, Focus is planning a dry tailings system instead of the originally planned tailings pond and reclaim system, along with new mitigation measures designed to minimize the risks of acid mine drainage in the tailings pile.

The Lac Knife open pit mine’s maximum footprint increases by 59.5% to 319,000 m² (0.32 km²) relative to the 2014 design¹, while the maximum depth of the pit from surface is extended by 50 m to 150 m relative to the 2014 design (max. depth: 100 m). At its maximum extension, the Lac Knife open pit’s footprint of will be 75 times smaller than that of the nearby Mont Wright iron ore mine operated by ArcelorMittal (surface area: 24 km²).

¹ Note: The results of the 2014 feasibility study are historical results and are not considered compliant with NI 43-101 reporting standards.  

The Initial CAPEX for the project, outlined in the table below, is estimated at $235.6 million, a 42.8% rise relative to the 2014 FS¹, while Life of Mine (LoM) sustaining capital totals $50.3 million, up $28.1 million from the 2014 FS¹. Factors that account for the significant  rise in initial CAPEX and sustaining capital include: Costs related to (a) the upgraded design of the Lac Knife waste rock and tailings storage facility (TSF) and the addition of a water treatment plant; (b) the purchase of a fleet of mobile mining equipment by the Company as the 2014 FS¹ called for a contractor to operate the mine; (c) costs of technological improvements to the Lac Knife concentrator; (d) inflation; and (e) the decrease in the value of the Canadian dollar relative to the US dollar.

Lac Knife Capital Expenditure (CDN$ millions)
Cost Centres	Initial Cost	Sustaining Cost	LoM
Mine Development	$8.07	$13.71	$21.78
Mine Equipment and Facilities	$19.66	$6.11	$25.77
Crushing and Concentrator	$99.24	$0.50	$99.74
Tailings Management	$22.73	$30.21	$52.94
Infrastructure	$32.50	$0.00	$32.50
Indirect Costs	$29.30	$0.00	$29.30
Contingency	$25.00	$0.00	$25.00
Total Capital Expenditure	$236.5	$50.53	$287.03

 

The LoM OPEX, outlined in the table below, rises by $99.46 to $540.48 per tonne of concentrate relative to the 2014 FS. The rise in OPEX is mainly related to the new TSF and water treatment plant, the significant expansion of the Lac Knife open-pit mine and increased concentrate trucking costs.

Lac Knife Operational Expenditures (27-year average)
Cost Centres	CDN$ per Tonne of Concentrate
Mining	$129.76
Processing Costs	$310.56
Tailings Costs	$4.38
General Administration Mine Site	$95.78
Total Operating Costs	$540.48

 

The annual ore milling capacity is 365,320 tonnes per year to produce 47,781 tonnes of concentrate annually at a cost of $540.48 per tonne.  The concentrate will grade 97.8% Graphitic Carbon (Cg) on average for a 27-year open pit mine life based on current open pit reserves.  All graphite concentrate produced with flakes larger than 150 mesh (89 microns) contain more than 99.4% Cg.

The Feasibility Study Update, based on a 27-year mine life, produced a Pre-tax Net Present Value (NPV) of $500.9 million calculated at a discounted cash flow (DCF) rate of 8% Pre-tax, the financial model has an Internal Rate of Return (IRR) of 28.70% and a capital payback period of 2.8 years.  The after-tax financial model has an NPV of $285.7 million calculated at a DCF rate of 8%, and with an IRR of 22.4% and a capital payback of 3.3 years. These numbers are comparable to with those of the historical 2014 Feasibility Study, despite a series of fundamental modifications to the design of the project.

Results from the 2023 Feasibility Study Update indicate that the Lac Knife Project is viable economically with a base case scenario that includes a concentrator production line rate of 47,781 tonnes of concentrate annually at an average mill feed rate of 365,320 tonnes per year of mineral reserves over a 27-year mine life.  A concentrator availability of 93% was used for the study.  The additional measured, indicated, and inferred resources will continue to be evaluated to develop the mid and long-term growth profile.

Click Here to view the complete technical report for the 2023 feasibility study update

Focus first filed an Environmental and Social Impact Assessment (ESIA) for Lac Knife with Québec’s Ministry of the Environment and Climate Change (“MELCC”) in December 2014.

In 2017, Focus received a second series of questions from the MELCC.  To address these questions, the following surveys and investigations have been completed or are near completion:

• Survey of groundwater flow and groundwater quality, including the installation of 21 piezometers in previous or purposely drilled wells;
• Geochemical characterizations of:
  • Surface water quality from 14 lakes plus the Rivière aux Pékans (four out of six sampling phases completed),
  • Lacustrine (lake bottom) sediments from 28 sites (14 lakes),
  • Soils and overburden material, including 727 samples (143 sites) analyzed to set the local natural thresholds for metals and contaminants, including mechanized excavation of 44 trenches;
• Kinetic lixiviation (humidity cells) testing on four pilot plant tailings samples;
• Wetland characterization, plus an inventory of special-status and invasive plant species; and
• Inventory of Chiroptera (bat) fauna.

Now that Focus has completed its 2023 feasibility study update, it will complete an updated ESIA before the end of 2023 that will address all of the questions received from the MELCC.

It will also complete the Mine Closure Plan, which is planned for submission in the fall of 2023.

Focus continues to communicate, meet, and listen to local communities and will be stepping up these efforts now that the feasibility study is completed, and the scale and impacts of the Project are better understood.