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.
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.
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.
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.
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.
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.
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
"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.
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.
company’s strong cash position, we believe, will easily take them
through the next 12 months," the Fundamental Research analyst said.