Historical (2014)
A positive feasibility study, prepared by Met-Chem Canada Inc. (now DRA Americas Inc.), released on August 8, 2014, indicates that Lac Knife has the potential to become one of the lowest-cost, highest-margin producers of graphite in the world at $441 per tonne of graphite concentrate.
Mining was assumed to be carried out by a mining contractor who will use conventional open pit mining methods that include drilling and blasting followed by a hydraulic excavator loading a fleet of 46-tonne haul trucks. The mine will be operated seasonally (7 months of the year) and a front-end wheel loader will be used to feed the processing plant from an ore stockpile during the winter months.
The study was conducted with engineering and estimation methods appropriate to target an estimate accuracy of 15% that is standard and realistic for capital and operating cost estimates in a feasibility study. Based on an extensive risk review exercise the contingency is 11.5%. The estimated capital expenditures in the table below outline the cost to construct the mine, processing plant, power line and all associated infrastructure, resulting in an estimate of $165.55 million.
Capital Expenditures
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Lac Knife Capital Expenditure — Cost Centres
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CDN$ millions
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Mine Equipment, infrastructure and pre-stripping
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$4.21
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Infrastructure
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$11.62
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Primary Crushing
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$7.02
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Concentrator
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$62.24
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Environmental and Tailings Management
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$8.22
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Power and Communication at Mine Site
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$15.4
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Indirect Costs
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$39.77
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Contingency (11.5%)
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$17.07
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Sub Total
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$165.55
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The operating costs per tonne of concentrate produced are $441 (see Operational Expenditures table below). This is an improvement over the updated Preliminary Economic Assessment (PEA) that showed $458 per tonne of concentrate produced. One key variable to low production costs is Lac Knife’s project location giving relatively easy access to hydroelectric power from Hydro-Québec at the intersection of the access road and Provincial Highway 389.
Operational Expenditures
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Lac Knife Operating Expenditures (25-year average) Cost Centers
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$/tonne of Concentrate
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Mining
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$126.95
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Processing Costs (Concentrator)
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$239.37
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General Administration Mine Site
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$74.70
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Total Operating Costs
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$441.02
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The annual milling capacity is 323,670 tonnes per year to produce 44,300 tonnes of concentrate annually at a cost of $441 per tonne of concentrate. The concentrate will grade 97.8% Graphitic Carbon (Cg) on average for a 25-year open pit mine life based on current open pit reserves. All graphite concentrate produced with flakes larger than 200 mesh contain more than 98% Cg.
The feasibility study was based on a 25-year mine life that produced a Pre-tax Net Present Value (NPV) of $383 million calculated at a discounted cash flow (DCF) rate of 8% Pre-tax, the financial model has an Internal Rate of Return (IRR) of 30.1% and a capital payback period of 3.0 years. The after-tax financial model has an NPV of $224 million calculated at a DCF rate of 8%, and with an IRR of 24.1% and a capital payback of 3.2 years.
Results from the feasibility study indicate that the Lac Knife Project is viable economically with a base case scenario that includes a concentrator production line rate of 44,300 tonnes of concentrate annually at an average mill feed rate of 323,670 tonnes per year of mineral reserves over a 25-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.
Average prices used in the financial model do not include value added products that can be produced using the typically lower valued finer natural flake graphite. These finer graphite concentrates can be further processed into value added products for the lithium-ion battery market due to their high carbon content.
Current (2021)
Since the 2014 feasibility study, Focus has completed or undertaken several studies, the findings of which will serve as a basis for optimizing the potential of the Lac Knife project considering the evolution of the graphite market, notably with respect to the demand for raw materials related to lithium-ion batteries and electrification of transportation.
In early 2021, engineering firm DRA Americas Inc. was engaged to update the 2014 feasibility study for the Lac Knife project and prepare a new technical report in accordance with the Canadian Securities Administrators’ National Instrument (NI) 43-101 – Standards of Disclosure for Mineral Projects.
The key changes to the feasibility study under consideration are:
- Incorporation of additional equipment for tailings filtration for the dry stack tailings facility.
- Evaluate the impact of additional bore hole data.
- Incorporation of a new tailings management system concept for the project.
- Update CAPEX and OPEX based on the latest 2021 equipment pricings and quotes.
- Update economic model to take into consideration new graphite sales price as well as updated CAPEX and OPEX.
The updated feasibility study is expected to be completed in 2022.