Interview First Phosphate: "We are breaking new ground in processes and ESG"

There are different deposits. There is sedimentary rock that has accumulated over the millenia, and phosphate deposits in magma or igneous rocks. Igneous rock, in turn, can be composed of carbonatites or anorthosites. The latter is the cleanest and highest quality source of phosphate available. Carbonatites are often clean as well or can often contain other rare earth elements. First Phosphate plans on mining phosphate from anorthosites. Its phosphate deposits from igneous rock have the advantage of not containing radioactive elements, which ensures that the process following phosphate extraction is very simple and does not result in contamination. Large tailings piles, such as those created in phosphate production from sedimentary rock, will not exist in our process. Consequently, we will be able to high-quality and sustainable phosphate mining practice and thus have all the ESG prerequisites to win the automotive industry as a customer.

Mostly in Russia, which in the wake of recent developments, is no longer a stable supply source, and partly also in Africa where accessibility can become a challenge. There are also deposits in Brazil, but many of them contain rare earth elements and are not exported because Brazil has high fertilizer requirements and demand is higher than the supply in the country. One of the few very promising sources of igneous phosphate is located in Canada in the district of Saguenay-Lac-St-Jean, Québec. From a geological point of view, our claims are convincing with many surface samples having revealed good phosphate showings. Some of our property claims have already been brought to a resource stage after successful drilling results and 43-101 study. In addition, there are further advantages.

Our project's unique selling points did not pay off in the market in the past - most phosphates were mined for the fertilizer industry and animal feed. But then came the triumph of electric cars and the growing importance of the lithium iron phosphate battery. This battery technology has now become established and relies heavily on phosphate, but the market for these batteries is still heavily dominated by China. However, the Inflation Reduction Act requirements stipulate that North America should produce these critical raw materials. In addition, car manufacturers and, ultimately, the buyers of environmentally friendly e-cars, require phosphate that has been produced under the best possible conditions of environmental social governance. This unique selling point distinguishes our project. In addition, producing high-grade phosphate for batteries from igneous rock has other additional advantages such that most feedstock can be upgraded to purified phosphoric acid. This allows us to focus directly on the LFP battery and the technology client and not the fertilizer space. First Phosphate, therefore, stands for a completely new product: environmentally friendly phosphate for electric cars.

In addition, at project level, our claims are optimally positioned. This is true, as mentioned, for geological as well as logistical reasons: Our main properties are located at a maximum of 145 km from a deep-sea port of Saguenay and are close to the city of Saguenay, where there is also an airport. Other advantages are very good road access and clean and economical energy from hydropower. All these ingredients ensure that we will be able to extract phosphate for the LFP battery but that we are also able to do this is fully environmentally sensitive fashion.

We are working on a Preliminary Economic Assessment (PEA) for our flagship project Lac à L'Orignal, and aim to complete this before year-end. Currently, there is a mineral resource estimate of 49 million tonnes of phosphate bearing ore. There is further potential on our other claims, all of which are royalty-free. At Bégin-Lamarche, we have taken rock samples that show grades between 10 and 15%. These are outstanding values for the region. Drilling activities have started at Bégin-Lamarche. Both grades and economic and well as local stakeholder support are very promising.

The existing resource estimate is already very informative and shows the potential of the Lac à L'Orignal project well. The PEA will focus on the economics and provide questions about the cost of building a mine and other key data for the potential operation of the project, such as profitability and costs. The PEA will independently confirm and summarize many details.. We feel that we have all the ingredients to become a success story. We are cautiously optimistic that the PEA will confirm this.

Two companies in the region can be used for comparison. One is Mine Araud, a project much further north-east of our properties for which a feasibility study is already available, and which has not yet been developed. Also to the immediate north of our project (double the distance from port) is Arianne Phosphate. It also has its feasibility study competed. The project is significantly larger than ours with a plan to produce about 3 million tons per year of phosphate rock concentrate. In our case, at Lac-à-l’Orignal, production is likely to be around 500,000 t per year. We are focused on phosphate production for LFP battery material only. This allows us to work with small and more compact mine size with lower capex and closer to infrastructure. We wish to focus capex on value-added activities like the production of purified phosphoric acid to feed an LFP cathode active material plant at the Port of Saguenay. Our approach involves a vertically-integrated one within the LFP battery value chain and is very unique. We view phosphate strictly as technological material.

We want to cover the entire value chain between mining and LFP cathode active material. In addition to mining phosphorus, this includes crushing the raw ore and separating the individual components until we have phosphate rock (apatite), titanium oxide and iron oxide. In the next step, we want to produce purified phosphoric acid and process gypsum by-product in a fully circular and sustainable way. The final step concerns the production of the cathode material. Here we expect to cooperate with lithium producers to produce a basic LFP cathode active material that manufacturers of lithium iron phosphate batteries across North America can use directly in the creation of battery cells and battery packs. Existing partners and suppliers include SGS Québec and Queen's University, which are helping us in evaluating the early processing stages. Another partner is Prayon, who will provide the technology to produce high-purity phosphoric acid. Prayon has a lot of experience with igneous rock, and they could take a part of our production as offtake, which gives us security, especially during the planning phase.

We want to start pilot production of beneficiated phosphate rock in the coming months. This will initially involve separating the individual elements from one another, enriching phosphate rock accordingly and, in the next step, producing the first test batches of purified phosphoric acid and of iron sulphate. Together with our partners, we will take the lead in producing the basic materials needed by the LFP cathode active material industry.

Especially in this day and age, we should all be aware that risks can never be completely ruled out. All major car manufacturers have committed to lithium iron phosphate batteries and are investing in this area. The advantages of this technology in terms of cost, performance, longevity and safety are well defined. Since industrial companies do not change processes overnight, nor in a few years, we are sure that LFP batteries will be around for a time to come. In addition, there are few alternatives to what First Phosphate is creating in North America. This is all the more true when considering ESG criteria, which need to apply to the battery and EV industry. Various market researchers also believe that LFP technology will play an increasingly important role in the coming years in all forms of energy storage. The change that is taking place is in our favour.

The traditional agricultural market for phosphate is growing for demographic reasons, while supply is declining in many regions. Many traditional phosphate deposits have existed for decades and are gradually running out. For this reason, too, we see ourselves as very well positioned in the market as a new source to come online. But what also has to be said is that we are bringing a product to market that is so pure that it should be part of a more complex value chain than, for example, fertilizer production. We are fully focused on LFP battery. But even in established markets, the situation can change. For instance, if ESG criteria play a greater role in fertilizer production, then igneous phosphate rock becomes a more prized commodity.

We went public in a challenging environment. Nevertheless, our stock has performed well and we thank investors for their support. Existing shareholders see potential in us and, at the same time, new investors recognize the potential and the special niche in which we operate. Nevertheless, we are moving forward operationally and implementing our goals. If we succeed in doing this, we assume that First Phosphate will be supported by investors. Execution is the true measure eof success of any company in the end and this is where we want to lay our focus. Currently, our operational activities are about six months ahead of schedule.

Growth companies need to raise capital when they have the opportunity. In our case, the principle also applies that we can accelerate our activities with greater financial resources. At present, we are financially well-equipped. However, we never rule out investment from shareholders who fit in with our company, share our long-term goals and possibly even compliment us strategically. All our stakeholders - from partner companies to employees to shareholders - know each other well and we pull together. We intend to maintain this philosophy to remain a tight-knit shareholder family.

In order to fully achieve our goals and ultimately produce lithium iron phosphate cathode active material, we need to work with many partners. We choose our partners carefully and wish to work with the best in the world that share our values.

More than 90% of the global market for lithium iron phosphate batteries is produced in China. This share could decline as the technology becomes more widely used in electric cars around the world. When comparing the approval procedures in China with those in countries such as Canada or Germany, it generally takes longer to build a corresponding factory in industrialized countries outside of China. But for reasons of regional diversification alone, the share of Western manufacturing companies will grow. I also do not see China as being technologically unassailable. Producing on ESG level and being able to be a secure supply source within North America is extremely important. The framework conditions for innovative companies like ours, which will make modern battery technology ESG-compliant from the open pit onwards and make further value creation sustainable, are extremely favourable. The fact that China dominates the market for lithium iron phosphate batteries today is an opportunity for us to bring greater breadth to the world’s source of lithium iron phosphate cathode active material.