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First Phosphate (PHOS): From Bell Ringing to Building a North American LFP Supply Chain · WTR Small-Cap Spotlight

• 0:00
  SPEAKER_00: Welcome to the WTR Smallcap Spotlight Podcast.
• 0:04
  SPEAKER_00: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:11
  SPEAKER_00: In today's podcast episode, I'm joined by John Pasilaca, Chief Executive Officer of First Phosphate OTCQX Ticker Symbol FRSPF, Canadian Securities Exchange ticker symbol PHOS, and most recently, you can find its ADRs on NASDAQ under ticker symbol PHOS.
• 0:29
  SPEAKER_00: First Phosphate is developing a high-purity phosphate resource in Quebec to establish a secure, vertically integrated North American supply chain for lithium iron phosphate, or LFP battery materials, serving growing end markets including energy storage, data centers, robotics, mobility, and national security.
• 0:48
  SPEAKER_00: Also joining is my WTR equity research colleague, Dimitri Silverstein.
• 0:52
  SPEAKER_00: Gentlemen, thanks for joining me this morning.
• 0:55
  SPEAKER_00: Great to be here, Tim.
• 0:57
  SPEAKER_01: Thanks for having us, Tim.
• 0:59
  SPEAKER_00: John, to kick things off, ringing NASDAQ's opening bell a few days ago struck me as a really important milestone for First Phosphate, not just recognition of how far the company has come since its founding, but also the beginning of a new phase as a NASDAQ listed company.
• 1:13
  SPEAKER_00: What did the NASDAQ listing and bell ringing ceremony mean for First Phosphate, as well as for you personally?
• 1:20
  SPEAKER_00: And what benefits are you expecting from the NASDAQ listing going forward?
• 1:24
  SPEAKER_02: Yeah, good question.
• 1:25
  SPEAKER_02: So for the company, we were expecting to have uh proper exposure to institutional investors in the U.S.
• 1:30
  SPEAKER_02: and uh globally.
• 1:31
  SPEAKER_02: A lot of the work that we'd done in the U.S.
• 1:33
  SPEAKER_02: uh earlier, many of the investors said that they wanted to see us on a on a larger board.
• 1:37
  SPEAKER_02: So now there's uh no excuse uh not to own first phosphate.
• 1:41
  SPEAKER_02: Uh for me personally, it was uh just a just a really uh life-altering experience.
• 1:46
  SPEAKER_02: Uh I didn't expect it at all.
• 1:47
  SPEAKER_02: I went down to NASDAQ All Business out there to, you know, obviously um uh show the company to the world, but it it changed me.
• 1:53
  SPEAKER_02: When I received that crystal from from Andy Hall at uh at NASDAQ, I just kind of stopped for a second and I realized, you know what?
• 1:59
  SPEAKER_02: Oh, we've done a lot here, and I've done a lot in life, and it's a real recognition.
• 2:03
  SPEAKER_02: I remember since I was a very young boy and even trading uh the Nasdaq in the early days when it went from a thousand up to three thousand in 1999 and back down to a thousand, nobody knew if it would come back.
• 2:12
  SPEAKER_02: And you know, it's always been very special to me, technology and NASDAQ and the integration of the two.
• 2:17
  SPEAKER_02: And I love the f the way the the the way NASDAQ has opened up their uh sort of uh kimono and and their their sort of outlook where they love companies like us that are technology but backwards integrated into a mine.
• 2:29
  SPEAKER_02: So it's sort of like the uh the mine but with it with a with a purpose to get to the technology.
• 2:33
  SPEAKER_02: So it was a very special moment for me.
• 2:35
  SPEAKER_02: Um it's a culmination of a lot of things in my life.
• 2:37
  SPEAKER_02: But again, it's not a it's not a point of arrival, it's a point of departure, and uh we're back on the horse here and we're we're working hard every day.
• 2:44
  SPEAKER_02: And then uh for the company was especially, especially, and for me personally, it was especially meaningful because within uh about 10 days of ringing that that NASDAQ opening bell, all of the volume that we had across all of our uh of our uh ticker symbols on all the exchanges, whether it be Nasdaq, whether it be in Frankfurt, whether it be on the OTCQX, whether it be in Canada on the on the on the Canadian Securities Exchange, we had, I would say, like a 10x spike in volume.
• 3:10
  SPEAKER_02: And we've traded more shares since ringing that opening bell than we traded in the whole entire genesis of the company.
• 3:15
  SPEAKER_02: We are now trading sometimes between 15 to 20 million dollars worth of stock per day.
• 3:19
  SPEAKER_02: So just a you know, it's like when you go to somebody's home and you knock on the door and you politely say, Hey, can I come in?
• 3:24
  SPEAKER_02: What do you can I can I show you what I got?
• 3:26
  SPEAKER_02: And just such a warm welcome from America and from the Nasdaq and from global investors that I just wanted to take this moment to thank, thank, thank everybody for that.
• 3:35
  SPEAKER_02: Really special for us.
• 3:37
  SPEAKER_00: That's actually remarkable to hear, and I'm glad you had a good experience, and I agree it's a really, really memorable experience.
• 3:42
  SPEAKER_00: You'll likely never forget the rest of your life.
• 3:43
  SPEAKER_00: So with that, I'll turn it over to Dimitri.
• 3:46
  SPEAKER_01: Thank you, Tim.
• 3:47
  SPEAKER_01: So, John, of course, uh getting to NASDAQ doesn't happen overnight.
• 3:50
  SPEAKER_01: You mentioned a lot of work that the company has put in, particularly for Canadian development stage companies.
• 3:55
  SPEAKER_01: So let's talk about what was actually involved in getting there.
• 3:59
  SPEAKER_01: First phosphates level two American depository receipts began trading on NASDAQ global markets uh under PHOS uh ticker on July, I'm sorry, on August 10th, uh, which followed your level one ADR program, um, which you had listed on OTC uh QX Exchange earlier this year.
• 4:17
  SPEAKER_01: So can you walk us through the sort of the up listing process?
• 4:20
  SPEAKER_01: What additional requirements first phosphate get to satisfy, and how you chose or why you chose the ADR structure rather than directly listing the Canadian company shares on the asset?
• 4:32
  SPEAKER_02: Yeah, so that's a great, very important and very deep question.
• 4:36
  SPEAKER_02: Uh so we did it, we did it in a excuse me, we did it in a very unique fashion.
• 4:41
  SPEAKER_02: It was the first time that it was ever done.
• 4:43
  SPEAKER_02: It was only until recently that um Canadian uh companies could issue ADRs.
• 4:48
  SPEAKER_02: There was a first one that was issued um a few months before us uh along with a capital raise to list onto NASDAQ.
• 4:54
  SPEAKER_02: We were the first that were self-sponsored.
• 4:56
  SPEAKER_02: So when I was down uh doing my research um on how to enter the U.S.
• 5:01
  SPEAKER_02: markets, what I what I uh basically recognize as two points of failure for Canadian companies was they go to NASDAQ or they go to um NYSE way too early and they go undercapitalized and uh they have to consolidate the shares uh before um going onto these these exchanges.
• 5:18
  SPEAKER_02: Once there is they're consolidated, they have to season.
• 5:21
  SPEAKER_02: I call it uh an open season, and that's when the shorts get a hold of them.
• 5:24
  SPEAKER_02: Uh and then after that they have to do a capital raise or not well capitalized, a good warrant for good measure on top of it, and you have lost a lot of shareholder value.
• 5:32
  SPEAKER_02: So one of the things that was really important for us was to um make this a creative or synergistic or a net positive to shareholders, if you will.
• 5:40
  SPEAKER_02: So we wanted to avoid those two elements.
• 5:42
  SPEAKER_02: So what we did is we we established an ADR uh was 10 to 1 on the common, so meaning 10 common shares for every ADR.
• 5:49
  SPEAKER_02: So if you see the common share right now trading at about a dollar ninety or so uh US on the F on the uh OTC QX as FRSPF, it should logically be 10 times 190, about$19.
• 6:03
  SPEAKER_02: And that's kind of where it is, give or take a little bit of arbitrage spread sometimes because it is thinner um on the on the Nasdaq.
• 6:09
  SPEAKER_02: So by doing the ADR 10 to 1, uh we we got a away from the consolidation issue.
• 6:14
  SPEAKER_02: And then what we did is we raised a lot of capital ahead of time.
• 6:17
  SPEAKER_02: I wanted to go down to the U.S.
• 6:18
  SPEAKER_02: markets prepared, not with my hands out asking for money, but to really bring and showcase something, this unique opportunity to to get to Igneous phosphy, the first time ever asset class, and to go to the U.S.
• 6:28
  SPEAKER_02: markets, you know, showing respect.
• 6:30
  SPEAKER_02: And so we raised all the capital up front.
• 6:33
  SPEAKER_02: Uh so we met the listing requirements without having to uh raise contemporaneously.
• 6:38
  SPEAKER_02: We avoided that dilution, we avoided the the the dilution um of consolidating shares, and we came with a really unique proposal and uh it's been and that's why I think it's been so well accepted.
• 6:49
  SPEAKER_02: I had no idea that this would be so well accepted.
• 6:52
  SPEAKER_02: But I think it was really all that thinking behind the scenes that that got us to where we needed to get.
• 6:56
  SPEAKER_02: And I think we also got a little bit of a of a disruptor advantage, a little bit of a disruptor premium, a little bit of a first-to-market premium as well.
• 7:03
  SPEAKER_02: And I think we also did a great job bringing that opening bell and giving a real clear message to U.S.
• 7:08
  SPEAKER_02: and global investors who we are, why we're here.
• 7:10
  SPEAKER_02: Um I was given two minutes to speak.
• 7:12
  SPEAKER_02: I only took 50 seconds to speak, and I just spoke really clearly about uh, you know, igneous phosphate LFP battery, bringing it back here, onshoring it in North America, why it's important.
• 7:22
  SPEAKER_02: But then what was really cool is um my president got up and he spoke uh in his uh native language, Ilnu.
• 7:27
  SPEAKER_02: It's an indigenous language in Canada for about 15 seconds.
• 7:30
  SPEAKER_02: That was so well received back at home, that was amazing.
• 7:33
  SPEAKER_02: And then our VP of operations got up and spoke in French Canadian, and uh that was really well received.
• 7:38
  SPEAKER_02: So it really it was just such a magical moment on so many angles, uh, you know, uh cultural, um, business, uh, personal satisfaction, the company attaining it, and just the warm, warm welcome received from from from uh from from the U.S.
• 7:51
  SPEAKER_02: investors.
• 7:52
  SPEAKER_02: And like you said, I think well structured, well thought out.
• 7:56
  SPEAKER_01: Certainly sounds like that, John.
• 7:58
  SPEAKER_01: So uh the structure also means that investors now have several different ways to get exposure to first phosphate, as you mentioned.
• 8:05
  SPEAKER_01: You're now trading on basically three exchanges.
• 8:07
  SPEAKER_01: The distinctions may not be obvious to everyone, particularly U.S.
• 8:10
  SPEAKER_01: investors accounting at the company for the first time.
• 8:13
  SPEAKER_01: So as a US investor can now buy NASDAQ, as I said, directly through the PHOS AGR uh or on the OTC uh QX with international market access.
• 8:26
  SPEAKER_01: They can also buy directly from the Canadian Stock Exchange.
• 8:28
  SPEAKER_01: So can you explain the particular differences among uh or the practical differences among these three alternatives?
• 8:34
  SPEAKER_01: And which type of investors do you think each intends to serve?
• 8:37
  SPEAKER_01: And how do you expect trading liquidity?
• 8:39
  SPEAKER_01: You refer to the fact that your liquidity across your asset classes is picked up or your your your exchange uh trading is picked up.
• 8:46
  SPEAKER_01: But uh, what are you looking for uh to develop, you know, sort of longer term?
• 8:52
  SPEAKER_02: So yeah, we when we had when we went out on onto onto the NASDAQ ADR, and again, it was first listed on the OTCQX, the ADR, and then it up listed.
• 9:00
  SPEAKER_02: Uh we were kind of concerned, maybe we got too many ticker symbols, maybe it's going to be confusing the people.
• 9:05
  SPEAKER_02: But it it's it's really interesting.
• 9:07
  SPEAKER_02: It actually has all worked very synergistically.
• 9:09
  SPEAKER_02: And I think we're right now we would want to keep it as much as we can because you see, um, there's a common share and then there's the ADR.
• 9:16
  SPEAKER_02: So the common share and the ADR is a function of the common share.
• 9:19
  SPEAKER_02: And the common share trades on three markets and in three currencies.
• 9:22
  SPEAKER_02: So you can buy the common share uh in uh in Germany or on TradeGate in Euros, you can buy it in Canada on the Canadian Securities Exchange in Canadian dollars, you can buy it on the OTC Q uh QX uh in US dollars, and all of those exchanges are doing some serious volume, sometimes you know 500 uh thousand shares a day and sometimes up to four million shares per day in Canada.
• 9:45
  SPEAKER_02: And all of those can be then be converted into the ADR.
• 9:48
  SPEAKER_02: So you take ten common shares wherever you bought them, you go to uh B and Y and you convert them into um into one ADR.
• 9:55
  SPEAKER_02: And you can also convert back out from the ADR to the common.
• 9:58
  SPEAKER_02: Another nice thing we did is we're we're as a company, we're taking care of those fees to go back and forth for now to encourage uh the the the the movement.
• 10:07
  SPEAKER_02: And I think that's been a you know really well uh perceived by the market, even though it's just a trivial little amount.
• 10:13
  SPEAKER_02: People just just like that kind of bonus.
• 10:14
  SPEAKER_02: I just think it shows how open we are to to having this whole sort of circuit um you know fun fungible.
• 10:21
  SPEAKER_02: And so the the the common shares are are are trading really well in all those exchanges.
• 10:26
  SPEAKER_02: You can get to them from from these three currencies, and then for those institutions that really need a NASDAQ symbol, well you've you've got the NASDAQ ADR, which is an American security, a full-fledged uh American security, and that works really well as well.
• 10:40
  SPEAKER_02: Uh there's a little liquidity starting up on that.
• 10:42
  SPEAKER_02: We're trading about a almost, you know, sometimes 70,000 to 100,000 shares per day.
• 10:46
  SPEAKER_02: And if you look at that, that's you multiply that by 10, it's really like trading 700,000 to a million shares per day.
• 10:52
  SPEAKER_00: Dimitri, I'm gonna add Lib a question really quickly because I'm very curious, John.
• 10:56
  SPEAKER_00: I think it's amazing how much your volume has gone up, which is great.
• 10:59
  SPEAKER_00: Um, there's always this debate on Wall Street about what benefits you get by moving over to NASDAQ.
• 11:03
  SPEAKER_00: I'm curious, with that increase in volume, have you noticed incoming or inbound calls from major institutions that may not have spoken to you before, that now you're on their radar screen as a result of being listed on Nasdaq?
• 11:16
  SPEAKER_02: Oh yeah, I mean it's it's changed everything.
• 11:18
  SPEAKER_02: Uh analysts reaching out and wanting to be the first to cover the story.
• 11:21
  SPEAKER_02: Uh uh individual investors large wanting to you know to be the ones to participate in in you know some financing down the road, large financing, large and uh large institutions looking at the capital stack and looking at the way it's so unique and just wanting to be involved in it, investment banks calling uh good capital coming at us, bad capital as well.
• 11:42
  SPEAKER_02: You've got to fill filter all that out, but really good capital, really good um um uh companies and potential shareholders coming at us, and many realizing that we've got two and a half to three years of capital on the books and even you know moving at an accelerated development rate, we still got that capital on the books, realizing that the only way to get the shares is in the market.
• 12:01
  SPEAKER_02: And this is why you're seeing uh, you know, this big swell of volume in the market, uh buying on market.
• 12:07
  SPEAKER_02: That's great color.
• 12:08
  SPEAKER_00: Thank you.
• 12:08
  SPEAKER_00: Back to Dimitri.
• 12:10
  SPEAKER_01: Sure, sure.
• 12:10
  SPEAKER_01: Um thank you, Tim.
• 12:12
  SPEAKER_01: So improving liquidity is clearly one objective.
• 12:14
  SPEAKER_01: Yeah, and Tim mentioned, you know, the other potential, bigger opportunity, which is expanding the universe of investors who could consider owning first phosphate uh in the first place.
• 12:24
  SPEAKER_01: But uh let me uh you know talk about there may be another benefit that is harder to quantify than trading volume or the number of potential shareholders, and that's credibility associated with being listed in the major U.S.
• 12:35
  SPEAKER_01: exchange.
• 12:35
  SPEAKER_01: You referred to it earlier.
• 12:37
  SPEAKER_01: First phosphate is increasingly dealing with governments, export credit agencies, strategic customers, engineering partners, and other large institutions as it advances the Vijay Lamarche project.
• 12:48
  SPEAKER_01: Beyond the capital markets, does being listed on NASDAQ change how first phosphate is perceived by these counterparties?
• 12:54
  SPEAKER_01: And can that additional visibility and credibility help the company move from development towards financing and construction?
• 13:02
  SPEAKER_02: Yeah, that's a very, very good question.
• 13:04
  SPEAKER_02: So um, you know, there's only about 200 companies, from my understanding, uh per annum that are uh listed or uplisted onto Nasdaq.
• 13:11
  SPEAKER_02: So that puts you into a much smaller club, it puts you in a much more credible club.
• 13:15
  SPEAKER_02: So I think, yes, I think in terms of of a seal of approval, a stamp, uh that is very important for us to to to have the the the the NASDAQ listing.
• 13:24
  SPEAKER_02: It's sort of like uh kind of cuts through a lot of the due diligence for people and sort of gets them to to to a level right away.
• 13:30
  SPEAKER_02: It's sort of like you're you're in a club that counts and you're there by by merit.
• 13:35
  SPEAKER_02: And also, yes, with the with the customers, with the off-takers, with all the institutions.
• 13:40
  SPEAKER_02: Uh you have to remember as well we have large sovereigns at the table to finance the uh the construction of of the mine, the the the the the the debt piece, which will be uh non-dilutive, and that's gonna come at very significantly lower um interest rate terms, obviously, because of the sovereigns.
• 13:56
  SPEAKER_02: We get uh government of Canada, government of Quebec, uh Denmark, uh Belgium, EU, and Italy at the table.
• 14:03
  SPEAKER_02: And so for them to see that you're on Nasdaq, it it it helps them to understand that the the the equity portion that will need to be raised at some point, albeit small with respect to the to the debt component, uh, is going to be very easy to do.
• 14:17
  SPEAKER_01: Okay.
• 14:17
  SPEAKER_01: Well, that brings us naturally to financing.
• 14:20
  SPEAKER_01: Thanks for that nice segue.
• 14:21
  SPEAKER_01: Uh Nasdaq uplisting itself does not involve uh an equity offering, as you mentioned, but it does potentially give first phosphate another capital markets tool as its funding requirements grow.
• 14:31
  SPEAKER_01: So as the company moves towards uh feasibility, uh a final investment decision, and ultimately construction, how does the NASDAQ listing give you greater uh flexibility to raise equity?
• 14:42
  SPEAKER_01: Uh you said it's a smaller component, but it's still a component, or attract strategic capital in the US, potentially from you know deeper institutional investor base?
• 14:52
  SPEAKER_01: And uh maybe as a follow-up and and maybe as a final question, um as you look beyond the bell ringing, what would have to happen over the next, let's say, year to two years for you to look back and say that the NASDAQ listing delivered which you hoped it would.
• 15:08
  SPEAKER_02: Okay, so big question.
• 15:10
  SPEAKER_02: So um let me start with the last one.
• 15:12
  SPEAKER_02: I I think the Nasdaq listing has already delivered uh so much, so much.
• 15:17
  SPEAKER_02: And I think we've worked synergistically with the NASDAQ listing, just like the DNA of the company of our management and um and NASDAQ is so close and so tightly knit.
• 15:26
  SPEAKER_02: Like I said, NASDAQ's been central to my to my being since I was a young boy, just starting off as an entrepreneur in in the ear in the early 90s.
• 15:33
  SPEAKER_02: Um you know, there's there's no question that that NASDAQ is our future.
• 15:38
  SPEAKER_02: We just love what NASDAQ represents and uh we want to be good and we want to become a you know a really you know a good poster child for for what success can mean and uplist a NASDAQ and where we we can go.
• 15:49
  SPEAKER_02: And that's what they want from us too.
• 15:50
  SPEAKER_02: You know, these institutions, NASDAQ, NISE, the larger exchanges, they want success.
• 15:55
  SPEAKER_02: They don't want failures.
• 15:56
  SPEAKER_02: So we have to work with them and everybody and investors and we have to execute and and we have to we have to we have to create shareholder value, we have to create value uh for our society, for our for our civilization.
• 16:07
  SPEAKER_02: On your question about financing, I I think I already uh uh answered that.
• 16:10
  SPEAKER_02: I think you know the the equity component on this is gonna be so small at some point that we need to raise so many institutions are at the table.
• 16:17
  SPEAKER_02: I think it's gonna be kind of a fight as to who we choose to bring in, uh which you know really puts the tables on the side of the company.
• 16:24
  SPEAKER_02: We've worked really, really hard, Dimitri, to to to raise the capital that we've raised to date.
• 16:28
  SPEAKER_02: 80 million.
• 16:29
  SPEAKER_02: We've raised it without uh without uh any investment banks.
• 16:32
  SPEAKER_02: We've kept the cap table really clean.
• 16:35
  SPEAKER_02: And so now we're at a point where we could we deserve to have you know the bigger capital at the table and almost competing um to get into, to have a to have uh access to what will be you know a fantastic project uh for Quebec and and for North America and for the um the independence of the LFP battery supply chain for the entire Western world.
• 16:54
  SPEAKER_02: As you know, we're we're we're backed by the G7 countries.
• 16:57
  SPEAKER_02: This is a a Western prerogative at this point, it's no longer a local uh a local mine.
• 17:03
  SPEAKER_01: Absolutely, John.
• 17:04
  SPEAKER_01: I couldn't agree with you more.
• 17:05
  SPEAKER_01: You know, setting up this middle processing um piece in in North America or at least outside of China, I think is critical to getting this this industry back to where it belongs.
• 17:18
  SPEAKER_01: So thank you for that.
• 17:19
  SPEAKER_01: Uh Tim, I will turn the questions back over to you.
• 17:22
  SPEAKER_00: Thanks, Dimitri and John.
• 17:23
  SPEAKER_00: Congratulations again on all the milestones.
• 17:25
  SPEAKER_00: You've had quite a few and keep it coming.
• 17:27
  SPEAKER_00: I have to say, I always try to insert a little humor, particularly in these early morning podcasts.
• 17:31
  SPEAKER_00: So as I always practice saying your last name before the the podcast begins, it dawned on me today that your last name would be a very um useful tool as sobriety checkpoints for police officers, requiring requiring drivers to say your name ten times quickly without slurring.
• 17:46
  SPEAKER_00: But uh that's that's a weak attempt at humor on an early morning podcast.
• 17:50
  SPEAKER_00: Thanks, guys, and have a great day.
• 17:52
  SPEAKER_00: 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.
• 18:08
  SPEAKER_00: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 18:14
  SPEAKER_00: Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.