Auto giants revving up to meet electric vehicle (EV) demand are looking at making key changes in the battery supply chain. They are now eying lithium iron phosphate, or LFP batteries, which have low risk of catching fire and cost less as they use iron and phosphate, instead of scarce cobalt and nickel that go into traditional lithium-ion batteries.
Clearly, First Phosphate Corp., which is focused on extracting and refining advanced phosphate material for the LFP battery industry, is right on trend. The company with Saguenay, Quebec-based assets has newly listed on the Canadian Securities Exchange (CSE) and traded at C$0.46 on Wednesday aftrenoon with the ticker symbol PHOS.
In a telling sign, First Phosphate expanded its private placement to $3.4 million from $2 million to accommodate increased investor interest.
“There are over 300 companies in the lithium space. But in the phosphate sector, there aren’t too many public companies. There are just 20 or 25 and none of them are focused exclusively on the LFP battery industry like us,” First Phosphate founder and CEO John Passalacqua told Proactive.
“We will own a niche, which is why we’re attracting investor interest, and have surpassed our initial fundraising objective. We will be the only pure-play, publicly traded company to be focused on producing clean, high-grade, and ethically sourced phosphate for LFP cathode active material. There’s no dearth of investors looking for unique and smart ways to play the battery space. We certainly fill that gap.” Passalacqua, who has technology and capital markets experience, has a sixth sense for spotting opportunity.
“In 2012, a company called First Potash received a cease trade. We recently took control of the board and brought the company back. We were looking for assets and had studied over 100 businesses when we found these phosphate assets. We created a new business model. We renamed it First Phosphate. The rest is history,” said Passalacqua.
“I saw a big opportunity. I’ve been disappointed at times with management teams in investments I’ve made, so I felt it was important to keep this one close to our founding group, and I decided to become CEO and to dedicate my efforts to making this a reality in the Saguenay-Lac-St-Jean region.”
Prized flagship asset and land claims
First Phosphate owns the Lac à l’Orignal flagship property, supporting land and 1,500 square kilometers of additional blue-sky land claims in the Saguenay-Lac-St-Jean region of Quebec.
“When we bought the property, we realized there were other indications of phosphate in the area. The last thing we wanted was to get crowded out by players staking claims, or buying properties around us,” said Passalacqua.
The firm built strong bonds with the prospectors in the area and did its own magnetic reconnaissance surveying.
“We’ve basically locked up every single phosphate showing of any importance that has been found over the last 30 years in the area between the Saguenay Deep Sea Port and 300 km driving distance north of there, after which point logistics become challenging,” added Passalacqua.
In October last year, First Phosphate completed a 43-101 report at its Lac à l’Orignal property, showing a resource in the ground of 49 million tons between indicated and inferred grading at 5.2% p205, which is phosphate, and grading at 4.23% titanium oxide and 23% iron oxide.
The main Lac à l’Orignal stike zone is 1,500 meters (m) long, 250m wide and 100m thick.
“We have 14 blue-sky areas, and we started surface sampling on all of them and they all yielded positive phosphate results. Bégin-Lamarche surface samples have returned phosphate results of up to 16% P2O5 and titanium oxide of up to 12% and 46% iron oxide — some of the highest historical samplings ever in the Saguenay-Lac Saint-Jean area,” noted Passalacqua, while cautioning that drilling was needed for confirmation.
The company’s titanium and iron secondary recoveries are potentially as valuable as the phosphate. “The iron is plentiful and it’s something that, in specialized formula, does enter the LFP manufacturing process,” said Passalacqua.
A winning business model
A high 95% of the world’s phosphate is found in heavy metal laden sedimentary rock, while 4% is found in igneous carbonatite rock. Only 1% of phosphate is found in its rarest and cleanest form in igneous anorthosite host rock.
“First Phosphate claims are sitting within 1% of the world’s purest igneous anorthosite rock found mostly in Quebec, which means that over 85% of the phosphate concentrate produced at the mine site could be transformed into premium battery-grade phosphoric acid,” pointed out Passalacqua.
“Consequently, it allows us to have a simple business model focused on the super high-end demand space occupied by the LFP battery sector and not the commoditized fertilizer markets.”
Fertilizer producers work with phosphate found in sedimentary rock deposits that are not so clean, so they can’t economically produce a large percentage of purified phosphoric acid (PPA) from their feedstock. Most of their production is fertilizer grade merchant grade acid (MGA) and not PPA.
“We have an advantage in that respect. We can be an LFP battery focused company due to the purity of our igneous anorthosite rock phosphate,” said Passalacqua.
Vertical integration strategy
First Phosphate has a vertical integration strategy on the table to go from mine to LFP powder, like what the Mosaic Company and Nutrien do for fertilizers with strong supply chain control.
“It’s important to have control over your own resources. Otherwise, you you’re dependent on others and it may introduce business risk. We want to be fully vertically integrated from phosphate mine all the way to LFP cathode active material and to be able to support EV makers,” said Passalacqua.
“A kilo of cathode active material sells for US$25 per kilo, whereas fertilizer sells for around US$1 a kilo. Obviously, there are different input costs, but the margins are higher and vertical integration allows you to lower costs.”
First Phosphate’s strategy rests on extracting the ore from the ground, and moving the concentrate to the Port of Saguenay, where there will be a plant to refine the phosphate to PPA.
“Once that happens, there would be another plant to create the LFP cathode active material,” explains Passalacqua. The firm is looking for a partner for PPA production and LFP production technology.
“We can tap into many companies with technology to create the LFP cathode active material,” said Passalacqua. “We could have three different production runs up on different partner technologies to minimize our risk. But for PPA, we need the right single partner and that’s harder to find.”
The company is in a busy spell, focused on wrapping up the following tasks this year which will act as catalysts:
Completing a listing on the CSE
Launching a PEA for Lac Orignal, which gets the company closer to a mine
Kicking off drilling at Bégin-Lamarche and reporting results
Working on producing PPA from concentrate
Completing mineralogy to validate the firm’s ability to concentrate the phosphate found in the deposit
Receiving the University of Queen’s study to determine the suitability of the firm’s phosphate for the LFP battery industry
Looking for partnerships in advanced refinement to PPA
Locking in offtake partners for a portion of phosphate concentrate, phosphoric acid, and for LFP cathode active material
Building a pilot plant for concentrates
The bullish case
Ford Motor has begun building a $3.5 billion battery plant in Michigan that will produce LFP batteries for its EVs. Volkswagen and Rivian have also telegraphed plans to use LFP in North American cars. Over the years, CEO Elon Musk has said that Tesla plans to shift more EVs to LFP batteries to overcome nickel and cobalt supply concerns.
“Auto giants all over the world, including Tesla, have started to move a lot of their production to LFP batteries,” said Passalacqua.
“I see a bright future for the Saguenay-Lac-St-Jean region of Quebec as the LFP Battery Valley. We plan to see it through as a major hub for the development of the LFP battery industry in North America.”
The global LFP battery market will rocket to $50 billion by 2028, from $10 billion in 2021, according to Fortune Business Insights.