Latest / WTR Small-Cap Spotlight / First Phosphate (FRSPF): Why Agnico Eagle's Move Into Phosphate Could Re-Rate the Entire LFP Supply Chain

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First Phosphate (FRSPF): Why Agnico Eagle's Move Into Phosphate Could Re-Rate the Entire LFP Supply Chain · WTR Small-Cap Spotlight

• 0:00
  SPEAKER_01: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_01: In today's podcast episode, I'm being joined by John Pasilaca, CEO of First Phosphate OTC Ticker Symbol, F R S P F, and Canadian Stock Exchange Ticker Symbol, PHOS.
• 0:23
  SPEAKER_01: First Phosphate is developing a high-purity phosphate resource in Canada to provide a secure and scalable supply of phosphate and cathode active materials to the growing non-Chinese LFP battery industry.
• 0:37
  SPEAKER_01: Also joining is my WTR equity research colleague, Dimitri Silverstein.
• 0:41
  SPEAKER_01: Good morning, gentlemen, and thanks for joining me.
• 0:44
  SPEAKER_01: Hi, Tim.
• 0:45
  SPEAKER_01: Good to be here.
• 0:48
  SPEAKER_01: John, good to have you back on the podcast.
• 0:51
  SPEAKER_01: And I do have to kick things off by asking the following: with all the recent news regarding the impact of the conflict in the Middle East on various chemicals and related materials either manufactured and or shipped from or through the region, including fertilizers and phosphate more specifically, one thing that caught my eye was the recent announcement by one of the largest gold miners in the world regarding their intended acquisition of a phosphate resource in Canada.
• 1:17
  SPEAKER_01: It seems that Avenir's proposed acquisition of Fox River has drawn renewed attention to Canadian phosphate assets.
• 1:24
  SPEAKER_01: From your perspective, what does that transaction signal about growing strategic interest in phosphate within North America's electrification and supply chain buildup?
• 1:34
  SPEAKER_00: Yeah, thanks, Tim.
• 1:35
  SPEAKER_00: Thanks for that.
• 1:35
  SPEAKER_00: So in North America, there are three igneous uh phosphate projects.
• 1:39
  SPEAKER_00: Um one is a carbonatite, which is the one that was acquired, and then the two are igneous and orthocytes, which you know are uh likely the cleaner ones uh for electrification.
• 1:48
  SPEAKER_00: Now, Avenir Minerals that made the acquisition of Fox River Resources as a subsidiary of Agneco Eagle.
• 1:54
  SPEAKER_00: It was started uh last year, about October, uh, to invest in critical minerals to diversify out uh the miner a little bit.
• 2:00
  SPEAKER_00: And since then they've made a few acquisitions of five, ten percent in in various minerals, but this was a really big departure.
• 2:06
  SPEAKER_00: They they bought the entire company, they bought Fox River Resources for about 95 million uh Canadian dollars, and uh now they own uh you know an igneous carbonatite uh type asset in Ontario.
• 2:17
  SPEAKER_00: Um it's uh geared primarily towards uh fertilizer, but in their press release they discussed that they'd like to you know uh try it out for LFP batteries.
• 2:25
  SPEAKER_00: Um and so that's gonna be uh you know interesting.
• 2:27
  SPEAKER_00: It's a little bit of a question mark.
• 2:29
  SPEAKER_00: The uh the carbonatites are are very clean, but they can include you know lots of metals and um and uh rare earths in there.
• 2:35
  SPEAKER_00: So um we'll see how far they get in terms of purification up to LFP.
• 2:38
  SPEAKER_00: But nonetheless, uh we we welcome uh Agneco Eagle into the igneous phosphate space.
• 2:43
  SPEAKER_00: We think it's a great uh validator for the space um and it's very interesting.
• 2:47
  SPEAKER_00: You know, they're they're moving from gold, which is usually small, tight veins and you know, high value add per ton, if you will, um, to something that's you know the the exact opposite, right?
• 2:56
  SPEAKER_00: It's like a bulky material, the the phosphate, the igneous phosphate, um and it's in fertilizer.
• 3:00
  SPEAKER_00: It's you know it's an industrial mineral, it's completely different than than a precious metal.
• 3:04
  SPEAKER_00: So let's see what they're up to.
• 3:05
  SPEAKER_00: Uh we know Agne Eagle to be you know a very smart operator, uh very astute in what they do, and uh we'll be looking here over the next few weeks uh and months to see what what comes of it.
• 3:14
  SPEAKER_00: Nonetheless, there remain now just two igneous um uh anorthocyte properties in Quebec.
• 3:19
  SPEAKER_00: Um, you know, obviously first phosphate is the one that's uh uniquely geared towards LFP batteries, it's got the largest market cap and it's got you know the the real downstream, right?
• 3:27
  SPEAKER_00: We've been able to you know make these LFP batteries, right?
• 3:30
  SPEAKER_00: We've been able to translate our phosphate into high purity phosphoric acid.
• 3:34
  SPEAKER_00: There's no problem, there's no question about it.
• 3:35
  SPEAKER_00: It's an igneous anorthocyte that's extremely clean.
• 3:38
  SPEAKER_00: And we've been able to you know develop the supply chain solution uh for North America in terms of uh landing a mine-to-market uh model here.
• 3:46
  SPEAKER_01: That's great background ground color that I appreciate you uh sharing with us.
• 3:50
  SPEAKER_01: And uh Dimitri, I'll turn it over to you to ask a few questions.
• 3:53
  SPEAKER_02: Sure.
• 3:54
  SPEAKER_02: Uh thanks, thanks, Tim.
• 3:56
  SPEAKER_02: John, uh Fox River and your resource are both Canadian phosphate projects, as you mentioned.
• 4:01
  SPEAKER_02: Um they appear to target somewhat different end markets and and follow development strategies that are somewhat different.
• 4:08
  SPEAKER_02: How would you describe the key differences between the two assets from a geology, uh, infrastructure, and then more importantly, the downstream positioning standpoint?
• 4:17
  SPEAKER_00: Yeah, good question.
• 4:18
  SPEAKER_00: So um Fox River, um, the Martison properties in in Ontario, uh, the province of Ontario.
• 4:23
  SPEAKER_00: We're in the province of Quebec.
• 4:24
  SPEAKER_00: Like I said, we are an igneous anorthocyte.
• 4:27
  SPEAKER_00: Uh, we've done all our metallurgy and separation and all our downstream, and you know, we've been able to create batteries um that were fully tested and function just like uh any other regular LFP battery, you know, bought out of Asia, meaning that all the processes and and uh all the minerals that went into it are are fully validated.
• 4:43
  SPEAKER_00: So we've been able to sort out our our mineralogy and our metallurgy and strictly for LFP battery.
• 4:48
  SPEAKER_00: We're not interested in fertilizer.
• 4:49
  SPEAKER_00: Um the Martisin project, obviously, I can't speak f for the company itself, but from what I understand from some of their documentation, there was an early uh PFS in about 2008 that was just uh for the mine for making fertilizer grade uh phosphate, and then I I think about 2022-23 they came out with a downstream PEA that included the downstream uh components of it, but it was all it was all geared towards uh fertilizer, right?
• 5:13
  SPEAKER_00: Um and then I think around 25 or so they they did a little bit of testing, uh moving some of that um uh processed phosphate into LFP battery, uh grade uh phosphate that is uh um purified phosphoric acid.
• 5:26
  SPEAKER_00: I think they had some some good initial results on uh portion of of their uh of their production.
• 5:31
  SPEAKER_00: So um there is certainly also an LFP angle there, but it's mostly you know a fertilizer project, at least as far as it was conceived by the PEA.
• 5:38
  SPEAKER_00: Um now we at first phosphate, um, you know, we appreciate a a fertilizer model together with an LFP model, but it's not at all what we do.
• 5:45
  SPEAKER_00: Um we're singularly focused on uh high purity igneous phosphate, igneous and orthocyte, the 1% purest in the world, but specifically for the LFP battery.
• 5:53
  SPEAKER_00: We think it's just too much to be focused on you know serving two masters.
• 5:57
  SPEAKER_00: We think it's two very different industries, fertilizer and LFP.
• 5:59
  SPEAKER_00: And we'd rather be focused 100% where the value at is um and where the big uh growth is going to be and where the technology industry needs us, right?
• 6:06
  SPEAKER_00: It's uh it's very very different uh customer sets as well.
• 6:10
  SPEAKER_00: Um so we're focused there where we we think the value is and we're in the rock that we think is the best position to um to be able to have not any surprises.
• 6:18
  SPEAKER_00: Uh we've worked it all out and can get us uh to you know high purity phosphate for LFP battery.
• 6:22
  SPEAKER_00: And that's the Ari Ignes and Northeside property, Beijon La Marche in Sagney-Lac-Saint-Jean, Quebec.
• 6:28
  SPEAKER_02: Understood.
• 6:29
  SPEAKER_02: To dive a little bit deeper into what you said, uh, one of the themes investors are focusing on or should be focusing on is the distinction between what you mentioned, the fertilizer-oriented phosphate projects and the battery-grade phosphate supply chain, which is what you guys are pursuing.
• 6:44
  SPEAKER_02: Uh, from you know, investors' point of view, how important is that distinction when comparing first phosphate strategy to a project like Fox River, which you know is mainly for fertilizers.
• 6:55
  SPEAKER_02: There's a portion of it that can be converted to high purity BPA.
• 6:59
  SPEAKER_02: Uh, but I don't think it's it's nearly as as uh well-positioned as yours.
• 7:04
  SPEAKER_02: I'd be interested in your thoughts.
• 7:06
  SPEAKER_00: Yeah, like I said, um, you know, Dimitri, I think all businesses have to have um the their their their the reason to be.
• 7:12
  SPEAKER_00: They have to have their focus.
• 7:14
  SPEAKER_00: I believe in being extremely focused as a business.
• 7:16
  SPEAKER_00: I think that's the only way we attain success.
• 7:19
  SPEAKER_00: I think it's already very difficult to be focused just on the LFP battery industry.
• 7:23
  SPEAKER_00: For me to be able to have to focus on fertilizer as well, I think that would be just way too much.
• 7:26
  SPEAKER_00: I don't think you can serve uh both masters.
• 7:29
  SPEAKER_00: But um I think it's also very important um the fact that, you know, first phosphate, um, when we started the company in 2022, um since then we've been completely focused on the LFP battery with with no interest in fertilizer.
• 7:41
  SPEAKER_00: So that means that all of our resources have gone into the downstream and uh you know building a f a full downstream supply chain.
• 7:47
  SPEAKER_00: So uh you know, I don't think you can be focused on building the two of them, uh fertilizer and LFP, but um for us it's just LFP and and all of our resources are here.
• 7:55
  SPEAKER_00: We've been able to build up a tremendous IP, and I think it's the focus that does that.
• 7:59
  SPEAKER_00: So, you know, some investors might think of good diversification and being fertilizer and LFP at the same time, but I really don't think you can be.
• 8:06
  SPEAKER_00: I think it's got to be one or the other.
• 8:07
  SPEAKER_00: But I don't take away from anybody else, you know, building on different uh rev uh business models.
• 8:12
  SPEAKER_00: We've seen all things all kinds of things work in industry and not work, but I think focus is what works, and that's why we're focused on LFP battery.
• 8:19
  SPEAKER_02: That makes a lot of sense, John.
• 8:20
  SPEAKER_02: Thank you.
• 8:20
  SPEAKER_02: Uh the Fox River transaction suggests you know strategic buyers are are you know or maybe increasingly looking at phosphate as a critical material tied to both food security, obviously, and electrification, which I think is an important point that people miss sometimes.
• 8:35
  SPEAKER_02: Um, do you think the market is beginning to better appreciate the importance of battery-grade uh purified for phosphoric acid within the LFP ecosystem?
• 8:44
  SPEAKER_00: Yeah, I mean, look, it's a tremendous validator.
• 8:46
  SPEAKER_00: That's why I said we, you know, we welcome fullheartedly um, you know, Agneco Eagle uh moving into this business.
• 8:51
  SPEAKER_00: Um, you know, if if they're into gold, and gold is you know the top of the uh of the precious metal sort of uh uh stack, I mean, them coming into uh igneous phosphate.
• 9:00
  SPEAKER_00: Maybe they see igneous phosphate as the new gold of electrification.
• 9:03
  SPEAKER_00: Certainly, you know, 80% of the batteries uh now produced on planet Earth are LFP batteries.
• 9:08
  SPEAKER_00: They're all coming out of China.
• 9:09
  SPEAKER_00: China holds it as one of their key export markets.
• 9:11
  SPEAKER_00: Um you know, during um the trade tensions in October of last year, uh China had threatened three things.
• 9:17
  SPEAKER_00: One was rare earths, two was uh microchip technology.
• 9:20
  SPEAKER_00: Number three was LFP technology.
• 9:22
  SPEAKER_00: To this date, um certain grades of LFP powder and technology cannot be exported um outside of China.
• 9:27
  SPEAKER_00: Now we have that full supply chain um ready to to be implemented here in North America uh from mine to market.
• 9:34
  SPEAKER_00: So it's a really important key strategic concern um and it's a in a you know it's a it's a question of of na national security.
• 9:43
  SPEAKER_00: So, you know, I could see a miner like uh Agneco Eagle, you know, looking to uh new uh streams, and I could see them looking to uh igneous phosphate as being you know one of the more important ones for electrification.
• 9:54
  SPEAKER_00: So I think this is a tremendous validator.
• 9:57
  SPEAKER_00: Um, you know, we know from from Agnacoeagle that they're very well thought-out company.
• 10:01
  SPEAKER_00: They they they move slowly when they make decisions, they make them for a reason.
• 10:05
  SPEAKER_00: So as you know, um sort of um off-piste as this might seem for Agni Coeagle, there's got to be a big plan behind there.
• 10:12
  SPEAKER_00: Um and let's let's see what they let's see, let's see what they have uh planned.
• 10:16
  SPEAKER_00: I'm really interested to see it.
• 10:19
  SPEAKER_02: So am I.
• 10:19
  SPEAKER_02: Thanks.
• 10:20
  SPEAKER_02: Thanks for that.
• 10:21
  SPEAKER_02: So let's uh talk about your resource specifically, the Pigon Lamarche uh resource.
• 10:26
  SPEAKER_02: It benefits from uh proximity to the hydroelectric power, road access, and the port.
• 10:31
  SPEAKER_02: Um in your view, how meaningful are the infrastructure advantages when evaluating long-term project economics and development risks uh in this sector?
• 10:40
  SPEAKER_00: Yeah, look, they're everything, right?
• 10:42
  SPEAKER_00: And this is where I think sometimes we we you know um the the gold mining uh mentality in uh North America um can be detrimental.
• 10:50
  SPEAKER_00: Um, you know, everyone looks when they're looking at gold, they look at, you know, where's the biggest resource, right?
• 10:54
  SPEAKER_00: But when you're looking at something like phosphate, it's not necessarily the the biggest and the best resource.
• 10:58
  SPEAKER_00: I'm not saying that Beijing La Marche is a fantastic resource, but what is more important about the Beijing La Marche than far beyond its great purity and and its great continuity is the fact that it's located b beside infrastructure.
• 11:10
  SPEAKER_00: When you're moving uh phosphate at, you know, three, four hundred dollars US a ton versus gold that you know could be f forty five hundred tons uh uh you know an ounce, right?
• 11:19
  SPEAKER_00: Forty five hundred dollars an ounce, it's it's a b it's a big departure in terms of you know value for the mass that needs to be um uh delivered or or uh moved.
• 11:27
  SPEAKER_00: So it's really important that you need to be uh beside critical infrastructure.
• 11:31
  SPEAKER_00: It's almost like uh having a gravel quarry.
• 11:33
  SPEAKER_00: You can't have a gravel quarry, you know, three, four hundred kilometers from port.
• 11:36
  SPEAKER_00: So you know, we're sitting at seventy kilometers from the deep sea port of Sagenay.
• 11:40
  SPEAKER_00: Um this phosphate you generally moves um by vessel across the world.
• 11:44
  SPEAKER_00: So it's really important to be in tight um uh at the port.
• 11:48
  SPEAKER_00: The other thing is, you know, we've got an open pit mine, we're very close to to roadway, like a kilometer from from major um you know, provincial, like state highways.
• 11:56
  SPEAKER_00: Um we're very close to the electricity grid, we're very close to uh workforce, we don't have any new major infrastructure to build, like all that keeps your capex low, and we have a good um project that is like you know, like a medium-sized mine, it's it's human, it's bite-sized, the capex is not is not exorbitant.
• 12:13
  SPEAKER_00: Uh, you know, we we get into production mine and concentrator and everything with under 500 million uh USD.
• 12:20
  SPEAKER_00: So, you know, all that's very, very important.
• 12:22
  SPEAKER_00: Um it makes for for a project that's bite-sized and that banks and governments and off takers and you know the company itself um can can put into production fairly quickly.
• 12:31
  SPEAKER_00: And we're looking at you know a 2029 uh production date, which is extremely aggressive, but we feel that the quicker that these um uh deposits are these critical mineral deposits are put into production, the more that they'll they'll be worth.
• 12:44
  SPEAKER_02: Understood.
• 12:45
  SPEAKER_02: Understood.
• 12:45
  SPEAKER_02: So continuing in that lane, uh you recently you know recently published your infill drilling results, which demonstrated a broad continuous mineralization uh across multiple zones of your project, even though you call it a mid-sized project, it does seem to be pretty impressive looking at the drill results.
• 13:01
  SPEAKER_02: Uh as you advance the ongoing uh 30,000 meter uh drill campaign, what milestone should investors be washing out for in the next uh, let's say six to twelve months?
• 13:11
  SPEAKER_00: Yeah, so um Dimitri, we do we were supposed to do a 30,000 meter drill program, we've gone up to 40,000 meters.
• 13:18
  SPEAKER_00: Um we're now in the process of sort of uh uh calculating all those results.
• 13:22
  SPEAKER_00: So the the main um purpose of the drill campaign was to move resources from inferred and indicated up to indicated and measured, which is you know the basis for a feasibility study, and to prove out the continuity.
• 13:33
  SPEAKER_00: So the continuity you know we feel is there.
• 13:36
  SPEAKER_00: We've already um announced that in our last press release.
• 13:38
  SPEAKER_00: Now the next step for us is uh the mineral resource estimate in the coming weeks, which will tell us exactly what what we have in terms of you know uh inferred and uh sorry, indicated and measured resources, and uh then you know put us in a position where our board can make a decision to move into feasibility study.
• 13:54
  SPEAKER_00: Um our feasibility study, if all goes well, we we've targeted for uh December of this year, the end of December.
• 14:00
  SPEAKER_00: We've got all the internal and external consultants ready to go.
• 14:03
  SPEAKER_00: Um, and then we're looking at permitting in 2027 as well as you know building out the capital stock uh by end of 2027, uh build out in 2028, and having an operating mine um in 2029 to meet you know definitive bankable and prepaid offtake uh that we already have in place.
• 14:19
  SPEAKER_02: Understood.
• 14:19
  SPEAKER_02: And and so far it seems that you are hitting your goals and milestones in the time in the manner that you've indicated.
• 14:25
  SPEAKER_02: So that's that should be good for investors as they look forward.
• 14:28
  SPEAKER_02: Um last question for me uh do you believe that Fox River transactions could ultimately halt narrow devaluation gap between first phosphate and other North American strategic mineral developers, particularly as as first phosphate continues to advance its LFD-focused uh supply chain strategy?
• 14:45
  SPEAKER_02: In other words, you know, people still think of phosphate as, you know, when I say phosphate, you you think fertilizer type of thing.
• 14:52
  SPEAKER_02: But clearly it is not.
• 14:54
  SPEAKER_02: And with all the news coming out here and the advances that you're making in your own projects, um, do you see this eventually moving phosphate into the category of critical minerals and therefore moving the first phosphate stock uh valuation-wise closer uh to what other critical metals uh companies may be enjoying?
• 15:13
  SPEAKER_00: Yeah, very good question.
• 15:14
  SPEAKER_00: I think I think it's clear uh worldwide that you know uh lithium-iron phosphate batteries are now um 80% of all the batteries in the world.
• 15:21
  SPEAKER_00: What people seem uh to be coming to grips with is the fact that inside the cathode of the LFP battery, 4% is lithium, but over 60, 60% is phosphate.
• 15:32
  SPEAKER_00: Um so whether they believe that phosphate is a critical mineral or not, it truly is.
• 15:36
  SPEAKER_00: Um just recently in the Parliament of Canada they put uh phosphate on the you know the list of uh A minerals for electrification, and they specifically said in the Parliament, look, this is no longer about um agriculture.
• 15:48
  SPEAKER_00: There's a company in Sag de Lac-Saint-Jean-Quebec, i.e.
• 15:51
  SPEAKER_00: yours truly first phosphate, without mentioning our name, that is, you know, a hundred percent dedicated towards phosphate for the LFP battery industry.
• 15:58
  SPEAKER_00: And I believe that we're the only company out there that's a hundred percent dedicated to the LFP battery.
• 16:03
  SPEAKER_00: All others are talking fertilizer and perhaps, you know, shifting part of their production LFP.
• 16:08
  SPEAKER_00: I don't know if how how deeply they truly understand, you know, how focused you really need to be on this industry.
• 16:13
  SPEAKER_00: But you know, we're the only ones out there in phosphate for electrification.
• 16:16
  SPEAKER_00: Yeah, I I think we are re-rating.
• 16:18
  SPEAKER_00: Um I d uh uh you know, in in the last uh twenty, thirty days since the uh um the memo came out on the acquisition of uh Fox River by Agni Coeagle, our market cap has traded up over a hundred million dollars, which is the whole cost of the acquisition of Fox River.
• 16:34
  SPEAKER_00: So I, you know, that's why we we really thank um you know Agnica Eagle for what they did coming into the space and validating the space.
• 16:40
  SPEAKER_00: But there's a tremendous run to be had here.
• 16:42
  SPEAKER_00: And you know, I think it it really illuminates the strategy that uh first phosphate has really enunciated since the beginning, which is no fertilizer.
• 16:51
  SPEAKER_00: We are here for the LFP battery, we're in the highest purity igneous rock.
• 16:54
  SPEAKER_00: Uh we've been able to get downstream and actually make batteries with our stock.
• 16:58
  SPEAKER_00: Like that really validates the whole stock, our mineralogy, our metallurgy.
• 17:02
  SPEAKER_00: And I think you're right.
• 17:03
  SPEAKER_00: I think the uh you know the the the re-rating on the entire sector, uh partly due to you know what's going on in the Strait of Hormuz, but you know, more so because of you know the electrification angle.
• 17:13
  SPEAKER_00: And it takes a long time, you've got to understand, for our industry analysts to keep catch on to this.
• 17:17
  SPEAKER_00: I don't know why in the West.
• 17:18
  SPEAKER_00: We've been talking nickel manganese cobalt battery, and I think we'll be talking nickel manganese cobalt battery when it will be only five percent of batteries out there.
• 17:26
  SPEAKER_00: We you know it seems like we latch onto these trends and we just never update.
• 17:29
  SPEAKER_00: It's it's really strange, but um, I think the smarter crowd is catching on to this.
• 17:33
  SPEAKER_00: And there you go, first phosphate.
• 17:35
  SPEAKER_00: Uh, you know, where are you gonna get the P and L FP?
• 17:38
  SPEAKER_00: Here we are.
• 17:40
  SPEAKER_02: Got it, got it.
• 17:41
  SPEAKER_02: Thank you, John.
• 17:42
  SPEAKER_02: Uh Tim, I'm gonna turn the call over back to you.
• 17:44
  SPEAKER_01: Thanks, Dimitri and uh John.
• 17:46
  SPEAKER_01: Thanks for uh joining us again.
• 17:47
  SPEAKER_01: Always good to catch up on first phosphate.
• 17:49
  SPEAKER_01: And I think investors will appreciate you differentiating a moment ago the difference between focusing on ag versus focusing on the battery materials, which are so critical going forward.
• 17:58
  SPEAKER_01: So thanks again for your time.
• 18:01
  SPEAKER_01: Thank you so much, gentlemen.
• 18:02
  SPEAKER_01: Have a great day.
• 18:04
  SPEAKER_01: Thank you for listening, and don't forget to subscribe, as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 18:20
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 18:25
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.