OTTAWA, ONTARIO–(June 4, 2012) – Focus Graphite Inc. (TSX VENTURE:FMS)(OTCQX:FCSMF)(FRANKFURT:FKC) (“Focus†or the “Corporation“) is pleased to announce that it has signed a Letter of Intent (the “Agreementâ€) with Lara Exploration Ltd. (“Laraâ€) for Lara’s wholly-owned Canindé graphite project located in Ceará State, northeastern Brazil.
The Canindé project comprises 11 registered exploration licenses and an additional six exploration licenses pending approval by the Brazilian Department of Mines (“DNPMâ€). The project covers a total surface area of 15,615 hectares and hosts 22 surface graphite occurrences discovered by Lara in mid-2011.
The occurrences define a 16 km long, north-northwest trending graphitic corridor in high-grade metamorphic rocks within the Project area. Individual graphite occurrences range in width from less than 1 m to maximum of 10 m and host from 1-2%, disseminated graphite in paragneiss and schist (mostly flakes) to over 50% graphite in narrow lenses in gneiss, schist, pegmatitic migmatites and in brecciated horizons in gneiss. Graphitic carbon contents for surface grab samples from 15 of the occurrences range from less than 1% to a high of 42.04 %. The project is accessible by road.
Gary Economo, President & CEO of Focus Graphite said the move into Brazil, the world’s third leading producer of graphite, is intended to expand the Corporation’s operations and holdings internationally.
“Consolidation in the graphite mining sector is one of the pillars of our global business strategy,†Mr. Economo said. “Caninde’s potential opens the door for us to develop a new graphite district in Brazil.
“While our primary focus and priority continues to be Lac Knife’s development, the Caninde project has the potential to add overall value from a second high quality graphite source,†he said.
Mr. Economo added that the vast majority of Focus Graphite’s financial and human capital will continue to be devoted to the construction of its Lac Knife, Quebec mine and facilities.
A map of the Canindé project together with photographs of selected graphite occurrences are available on the Corporation’s website at www.focusgraphite.com.
The Agreement
Under the terms of the Agreement, Lara has granted Focus two separate options to acquire a total 60% undivided interest in the Canindé project in consideration of a staged exploration expenditure commitment over 5 years and by issuing 500,000 common shares to Lara on or before the third anniversary of the Agreement and by reimbursing Lara for claims acquisition costs. Focus will act as the Operator of the Canindé project exploration program throughout the duration of the Agreement.
Focus can exercise the First Option and earn a 51% interest in the Project by (i) issuing 500,000 common shares to Lara (100,000 shares upon signing of the agreement and 400,000 shares by the third anniversary thereof) and (ii) carrying out, as operator, exploration on the Property (including 2,000m of drilling and an electromagnetic survey of the entire Property) totaling $2.5 million by the third anniversary of the Agreement based on the following schedule: $500,000 each in years 1 and 2; and $1.5 million in year 3.
Focus can exercise the Second Option and earn an additional 9% interest in the Project (total: 60%) by carrying out, as operator, exploration on the Property (including a further 5,000 m of drilling) and completing a favorable Preliminary Economic Assessment in accordance with National Instrument 43-101, an expenditure totaling at least $4.5 million by the fifth anniversary of the Agreement.
If Focus elects not to exercise the Second Option, or elects but fails to exercise the Second Option, Lara and Focus will enter into the Joint Venture with Focus holding a 51% interest and Lara holding a 49% interest in the Project. If Focus exercises the Second Option, Lara and Focus will enter into the Joint Venture with Focus holding 60% interest and Lara holding 40%. Upon the execution of the Joint Venture both Parties will proportionately fund the exploration program and the party holding majority interest will be deemed the operator of the Joint Venture. If a Party’s interest is reduced to less than 10%, its interest in the Joint Venture shall be converted into a 2% production royalty.
The Canindé project is subject to a 1% royalty payable to a third party on gross revenue from sales to a maximum of R$ 750,000 (approximately $369,000) as well as a one-time payment of R$ 200,000 (approximately $99,000) payable to said third party upon the delivery of an Economic Graphite Reserve estimate (non NI 43-101 compliant) as defined and approved by the DNPM.
The Agreement is subject to certain conditions precedent and covenants that must be satisfied in connection with the transaction. The parties intend to execute, on or before August 31, 2012, a Definitive Option agreement (to which will be attached a Joint Venture agreement to be entered into upon exercise of the First Option or, if applicable, the Second Option) and other documents necessary to complete the transactions contemplated hereby.
The Agreement is also subject to Board and regulatory approval by the TSX Venture Exchange (the “TSX-Vâ€).
Mr. Tony Brisson, P. Geo., a Qualified Person as defined by NI 43-101 is responsible for the technical information contained in this release.
About Focus Graphite
Focus Graphite Inc. is an emerging mid-tier junior mining company, a technology solution supplier and a business innovator. It is the owner of the highest-grade (16%) technology graphite resources in the world. The company’s goal is to assume a dominant industry leadership position by becoming the lowest-cost producer of technology-grade graphite. As a technology-orientated enterprise with a view to building long-term, sustainable shareholder value, Focus Graphite is invested in the development of graphene applications and patents through Grafoid Inc.
Forward Looking Statements – Disclaimer
This news release may contain forward looking statements, being statements which are not historical facts, and discussions of future plans and objectives. There can be no assurance that such statements will prove accurate. Such statements are necessarily based upon a number of estimates and assumptions that are subject to numerous risks and uncertainties that could cause actual results and future events to differ materially from those anticipated or projected. Important factors that could cause actual results to differ materially from the Company’s expectations are in our documents filed from time to time with the TSX Venture Exchange and provincial securities regulators, most of which are available at www.sedar.com Focus Graphite disclaims any intention or obligation to revise or update such statements.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.