Company Spotlights / Market Commentary

First Phosphate: A North American Energy Opportunity

  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

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Edge is publishing this content on behalf of the Company and is compensated for investor relations services

Batteries are a fundamental piece of our electrically powered world.

Through them, we can drive electric vehicles, power spacecraft, and store renewable energy, among many other applications.

As a result, strong demand is pushing this industry forward to new heights with the global battery market expected to reach USD 423.90 billion in market value by 2030, growing at a CAGR of 16.68% over the period.

Lithium Iron Phosphate (LFP) Battery Market Size | Precedence Research
Lithium Iron Phosphate (LFP) Battery Market Size | Precedence Research

However, what you may not know is that the battery market is currently undergoing a rapid transformation, and not everyone is ready for it.

With the world divided into two distinct factions, and North America spearheading a sustainable energy revolution, only a select few players will have the means to compete.

Interestingly, one Canadian small-cap company may be better positioned than anyone to become the leading supplier of LFP battery material for all of North America.

First Phosphate (Canada: PHOS) (USA: FRSPF), an exploration and development company, is fully dedicated to extracting and purifying phosphate for the production of cathode active material for the LFP battery industry.

In this article, we will outline how the Company’s recent preliminary economic assessment (PEA) marks the beginning of a long and prosperous journey toward LFP battery production.

Why First Phosphate’s Phosphate is Different

Methods of Producing Phosphoric Acid | First Phosphate
Methods of Producing Phosphoric Acid | First Phosphate

There is a reason why nearly 90% of the world’s phosphate is used in mineral fertilizers rather than industrial applications.

Earth’s main source of phosphate, sedimentary phosphate (95% of the global supply), generally contains deleterious (toxic) heavy metals and lower purity levels (25%-34% purity) than igneous rock alternatives (38%-41% purity).

Consequently, most sedimentary phosphate mines are used specifically for the production of fertilizer-grade phosphoric acid and not to produce large amounts of purified phosphoric acid (PPA) for LFP battery application.

Moreover, sedimentary mines create radioactive gypsum slag piles which are quite devastating to the environment and thus are not a sustainable long-term solution.

Though challenging, an even more pressing issue is the US government’s declaration that 40% of electric vehicle (EV) battery components must be sourced from North America by 2023, and 80% by 2026, via the Inflation Reduction Act.

Under the current circumstances, North American EV and LFP battery manufacturers are highly incentivized to seek out new suppliers quickly given that 90% of LFP batteries are made in China today.

Project Phosphate Demand and US Phosphate Rock Production | Journal of Environmental Radioactivity and US Geological Survey

If so, where are these manufacturers going to find domestic, high-quality PPA for LFP batteries, that won’t harm the environment?

The answer lies in the rare and non-toxic igneous anorthosite rock, nestled away in the Saguenay-Lac-St-Jean Region of Quebec.

This geological wonder represents a mere 1% of the global phosphate supply, yet it boasts unparalleled quality and purity.

In earlier test-work conducted by First Phosphate, the Company achieved a high-purity phosphate concentrate of 40.2% with a 91.4% recovery rate at its Lac à l’Orignal flagship project.

With this in mind, First Phosphate moved forward with the property’s development by conducting a preliminary economic assessment to demonstrate its economic potential and future prospects.

To say the least, the Lac à l’Orignal project will have plenty to offer once permitting is complete and production begins.

First Phosphate’s $795 Million NPV Project

Following the success of the metallurgical test-work conducted at the Lac à l’Orignal flagship property, First Phosphate set out to determine what the project was worth through its preliminary economic assessment.

According to the PEA, the Company concluded that the Project would generate a pre-tax net present value of CAD 795 Million at a 5% discount rate, which would imply an internal rate of return of 21.7%, even after a pre-production investment of $550 million.

What’s more, Lac à l’Orignal is expected to generate an after-tax cash flow of $567 Million in its first five years, resulting in a 4.9-year payback period from the start of production.

Lac à l'Orignal PEA | First Phosphate
Lac à l’Orignal PEA | First Phosphate

To do so, the Project will produce an average of 425,000 tonnes of beneficiated phosphate concentrate at over 40% P2O5 content, 280,000 tonnes of magnetite, and 97,000 tonnes of ilmenite, annually, over a 14.2-year mine life.

Nearly all of the phosphate concentrate produced by First Phosphate annually is secured through its memorandum of understanding (MOU) with Prayon Technologies, the Belgian-based global leader in purified phosphoric acid production and technology.

This partnership with Prayon ensures that the Company generates consistent and predictable cash flows throughout the lifetime of its operations.

What’s more, with roughly 1,500 square kilometers of royalty-free land claims in the Saguenay-Lac-St-Jean Region and multiple high-quality properties in the area, as well as their close proximity to electrical power lines, service roads, Quebec Hydro, and the deep sea Port of Saguenay, there is significant untapped value for the Company.

In all, the combination of the Lac à l’Orignal Project and its additional phosphate projects proves that there is a major opportunity, especially given First Phosphate’s current market capitalization of CAD 18.2 million.

Now, the Company is one step closer to producing LFP cathode active materials for all of North America and fueling our future energy ambitions.

The Bottom Line

The world is on the brink of a major energy shift that will reshape how businesses and countries alike store their power.

As we transition into this new era, few companies are better equipped to serve the growing demand for sustainable LFP battery production than First Phosphate.

With the multi-million dollar production potential of the Lac à l’Orignal Project and additional untapped value from its wide array of properties in the Saguenay-Lac-St-Jean Region, the Company is ready to capitalize on the growing trend taking shape in North America.

If you are interested in learning more about this fascinating business, check out First Phosphate’s (Canada: PHOS) (USA: FRSPF) website and investor presentation below.

FIRST PHOSPHATE (CA: PHOS.CN) (USA: FRSPF)

Disclosure/Disclaimer:

We are not brokers, investment, or financial advisers; you should not rely on the information herein as investment advice. If you are seeking personalized investment advice, please contact a qualified and registered broker, investment adviser, or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Edge Investments and its owners currently hold shares in First Phosphate and have been compensated for content creation, amounting to thirty thousand dollars. Edge Investments and its owners reserve the right to buy and sell shares in First Phosphate without further notice, which may impact the share price. Please do your research before investing, including reading the companies’ public filings, press releases, and risk disclosures. The company provided information in this profile, extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your research.

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  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

    View all posts

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