Canada is well known for many things including its overly-polite citizens, abundant natural resources, and love for everything hockey.
But what many people overlook is that it sits on a treasure trove of opportunities.
One of its most promising opportunities is in the Lithium Iron Phosphate (LFP) battery market.
As demand for highly efficient electric vehicles accelerates, so too does the need for the batteries that power them—the electric automotive industry is expected to reach $434.4 billion by 2028, growing 17.5% annually in the period.
But there is a catch.
Currently, the supply of high-grade purified phosphoric acid (PPA) used in these LFP batteries is shrinking, and fast.
If we don’t shift our focus toward a supply closer to home, there are very few ESG-compatible alternatives out there, meaning that we can all but kiss our dreams of an immediately electrified future goodbye.
Fortunately, one company, First Phosphate (Canada: PHOS)(Frankfurt: KD0.F) is well underway to becoming the leading supplier and developer of high-grade purified phosphoric acid (PPA) and LFP cathode active material to the North American LFP battery market.
Recently, we wrote an article discussing First Phosphate’s business model, assets, and management team.
In this article, we intend to expand on it by shedding light on some of the company’s major developments, as well as distilling a few of the more complex topics that exist in the industry.
If you are an investor seeking to capitalize on one of the most positive long-term trends in Canada and North America, then you will want to see what First Phosphate has in store.
First Phosphate’s Unique and High-Grade Phosphate Deposits
First Phosphate owns over 1,500 square kilometers of royalty-free land claims in the Saguenay-Lac-St-Jean Region of Quebec, Canada.
However, what is most fascinating about the region is that it sits on top of the rarest form of rock phosphate in the world (1% of the global supply) which is perfectly suited for the manufacturing of large quantities of purified phosphoric acid for LFP batteries
Unlike most rock phosphate which is made up of sedimentary deposits, igneous anorthosite deposits, found in Saguenay-Lac-St-Jean, possess phosphate rock which, when beneficiated, can reach concentration levels of 38% to 41%, the highest purities possible—sedimentary deposits reach purity levels of 25% to 34%.
This enables First Phosphate to convert over 85% of its phosphate feedstock into LFP-grade purified phosphoric acid (PPA), compared to sedimentary phosphate feedstocks, which have relatively inefficient and uneconomic conversion capabilities—for this reason, the majority of phosphoric acid supplies emanating from sedimentary rock are converted into Merchant Grade Acid used in fertilizers and animal feedstock, as opposed to LFP battery grade material.
Moreover, igneous anorthosite rock is devoid of harmful trace elements typically found in sedimentary deposits, which tend to produce radioactive residual waste found in gypsum slag piles—instead, First Phosphate can recycle its gypsum into the agriculture, cement, and construction industries, thus creating a circular economy.
This means that not only is First Phosphate’s igneous phosphate a more feasible supply of pure phosphoric acid for the LFP battery industry, but it is also the only source that meets the stringent ESG regulations set in the North American and European markets.
How is Phosphate Rock Beneficiated?
By now you have heard us mention that phosphate rock is beneficiated, after it is mined, to reach higher purity levels.
But what exactly does that mean?
Well, in an overly simplified explanation, the beneficiation of phosphate rock is the process of separating the phosphate mineral from waste rock and other unwanted materials, in order to create a concentrate containing the highest percentage of phosphate.
This concentrate can then be refined to produce the LFP-grade phosphoric acid used in LFP cathode active material that then goes into LFP batteries.
To beneficiate phosphate rock, one must first crush the phosphate rock into smaller granularity and separate the magnetic elements such as titanium and iron from the non-magnetic apatite (the host mineral in which phosphate is found) using magnetic flotation processes.
Then, a mixture of solvent-less materials is used to help separate the phosphate from the remaining residuals, whereby the desired mineral will float to the top, while the waste rock sinks to the bottom.
After that, the phosphate is dried to produce the beneficiated rock phosphate.
In regards to First Phosphate, this beneficiation process will be completed in-house as part of their vertically integrated production plan—information on the current bench-scale process being developed together with SGS Quebec can be found at…
|First Phosphate Engages with SGS
All-in-all, this will prove quite advantageous as it begins to make the company a one-stop shop for customers of LFP cathode active material in the North American LFP battery market.
Now that we have gotten all the rock talk out of the way, let’s explore what First Phosphate has been up to.
In mid-February, First Phosphate commenced a 4,000-metre drilling program at its Bégin-Lamarche Phosphate Property to test the continuity of high-grade phosphate-bearing nelsonites, originally found on the surface.
Then, the company announced earlier this month that they received the initial drill results.
Based on studies conducted by First Phosphate and its partner, Laurentia Exploration, geologists discovered four high-grade phosphate layers, returning purity levels of 7.8% to 10.6%—when beneficiated, this may reach levels of 38% to 41%.
On top of that, Layer 2 demonstrated particularly promising results, revealing a strong apatite presence, covering a length of 500 meters, and a thickness of up to 83 meters—Length is measured along the full length of the hole.
Interestingly, this magnetic trend continues for another kilometer to the South East, meaning that there may be more high-grade phosphate deposits in the area.
As a bonus, the Bégin-Lamarche property is strategically located near existing regional infrastructure and the deep sea port of Saguenay (75 km driving distance).
When phosphate extraction begins in the future, and once all of First Phosphate’s fully vertically-integrated processes are in place, this will allow First Phosphate to produce cathode active materials for the North American market with good cost synergies.
To summarize the results of the program, First Phosphate President and former Environment Minister, Peter Kent, remarked, “These initial drill results confirm our earlier high-grade surface findings and are some of the highest-grade drill results ever established in the Saguenay-Lac-St-Jean region of Quebec.”
Lac a L’Orignal
In addition to its findings at Bégin-Lamarche, First Phosphate recently announced a final research report conducted by the Queen’s University Pufahl Research Group, which concluded that the company’s flagship property, Lac à l’Orignal, is a unique and highly probable ESG-compliant source of North American phosphate for the LFP battery industry.
To support this claim, Co-Director, Dr. Peir Pufahl attests that “collectively, the attributes indicate that First Phosphate’s Lac à l’Orignal deposit is a source of North American phosphorus for the LFP battery industry [and] that it has a high probability of being ESG-compliant.”
When reviewing the report titled, “Characterization of First Phosphate’s Lac à l’Orignal Phosphate Deposit, Lac-Saint-Jean Anorthosite (LSJA) Complex, Quebec, Canada: Implications for Supplying Lithium Ferro (Iron) Phosphate (LFP) Batteries”, a few of its most important conclusions were that:
1. The P2O5 (phosphate) concentration, using in situ analytical methods, reached 41.7% purity levels, plus or minus 0.26%.
2. The Lac à l’Orignal deposit is a promising viable source of P (phosphorous) for the LFP battery market given that its P2O5 and CaO (quick lime) concentrations and CaO/P2O5 ratios are better than required for phosphoric acid production.
3. Other elements, including Si, Fe, Al, Mg, As, Cd, U, and Th of the apatite concentrate are below deleterious threshold concentrations. The low abundance of these deleterious trace elements and sulfide gangue minerals suggests that the environmental risks of acid mine drainage would be minimal—this makes the Lac à l’Orignal deposit an attractive and highly probable ESG-compliant source of North American P for the LFP battery industry.
To build on this momentum, First Phosphate began a preliminary economic assessment (PEA) with P&E Mining Consultants Inc., to create a mine plan, mine production schedule, and capital and operating cost estimates, which will be incorporated into a financial model for the project.
The project design also ties into the existing infrastructure in the region, including the low-to-no-carbon-emissions Quebec Hydro grid, and existing municipal and heavy-haul road networks.
This will provide First Phosphate, and its Lac à l’Orignal property, direct access to the deep sea port of Saguenay, thus opening its phosphate contrate to the international market, while also reducing costs.
The completion of the PEA is scheduled for the third quarter of 2023—a potential beneficiated rock phosphate offtake agreement is already in place between First Phosphate and its MOU partner, Prayon, of Belgium.
When discussing the recent events at Lac à l’Orignal, President Peter Kent said, “This partnership has provided First Phosphate with a competitive edge by laying the foundation for developing proprietary and advanced methods of phosphate production for the LFP battery industry. Ultimately, we want to leverage our high-purity phosphate Mineral Resource to help Quebec and Canada become a leader in the electric vehicle industry, and advance on our national climate change goals.”
First Phosphate Signs MOU w/ Global Leader in Purified Phosphoric Acid Production and Technology
As part of its vertically integrated production plan, the company is planning to develop a manufacturing pipeline that extracts, beneficiates, refines, and produces LFP cathode active for the LFP battery industry.
One of the key steps in this process is the advanced refinement of high-grade phosphate concentrates into LFP-grade purified phosphoric acid (PPA).
However, the process of refining phosphate concentrate into an advanced LFP battery-grade material is timely, expensive, and requires known technology.
In fact, there are only four companies in the western world that conduct this advanced refinement process at a meaningful scale.
Fortunately, First Phosphate signed a memorandum of understanding (MOU) with Prayon, Europe’s largest producer of PPA, and global leader in PPA production and technology.
In doing so, First Phosphate will accelerate its integration plan for the North American LFP battery market as the two parties collaborate toward assessing potential partnerships.
The four partnerships being discussed are:
1. Phosphate Concentrate Production and Offtake
Both parties are committed to considering a potential off-take agreement, whereby First Phosphate would supply Prayon with phosphate concentrate from its eventual mining operations.
First Phosphate’s phosphate feedstock would be transformed into merchant-grade phosphoric acid (MGA) and subsequently into purified phosphoric acid (PPA) at the Prayon plant located in Engis, Belgium.
2. LFP Grade Phosphoric Acid Toll Processing
Both parties have agreed to study the potential of a long-term purified phosphoric acid toll processing agreement.
3. License for LFP Grade Phosphoric Acid Production Facility
First Phosphate is also contemplating the development of its own LFP battery-grade phosphoric acid production facility.
To achieve this, both parties have agreed to discuss the terms and conditions of a license for Prayon to lend its technological expertise in the manufacturing of merchant grade and LFP grade phosphoric acid, which enables First Phosphate to establish its own phosphoric acid facilities in Quebec, Canada.
4. Development of LFP Cathode Active Material Manufacturing Plant
In addition to the development of phosphoric acid facilities in Quebec, Canada, Prayon has expressed interest in studying the feasibility of an LFP Cathode Active Material production facility in the area as well.
Prayon has familiarity with the production of LFP Cathode Active Material and would be lending its expertise to First Phosphate on the matter.
When addressing the MOU, President Peter Kent explained, “The LFP battery already represents a leading globally accepted battery chemistry but still has limited domestic manufacturing supply in Europe and North America. Today’s announcement sows the seeds to onshore that production capacity in North America.”
Looking Towards the Future
As you can see, First Phosphate (Canada: PHOS)(Frankfurt: KD0.F) is well underway to becoming a leading supplier of LFP cathode active material to the North American LFP battery market.
With multiple high-quality phosphate properties and invaluable partnerships, the company is positioning itself to be one of the key players in this rapidly expanding market.
In the coming months, as First Phosphate continues to execute its development plan, you can expect the company to seek new partnerships, advance its properties, and evaluate LFP cathode active material production technologies.
Ultimately, First Phosphate is dedicated to extracting and purifying phosphate for the production of LFP cathode-active material.
To do so will require patience, resiliency, and determination.
With a world-class Board, Management, and Advisory team, including CEO John Passalacqua, this company will likely achieve its objectives and more.
If you would like to learn more about First Phosphate (Canada: PHOS)(Frankfurt: KD0.F) and its team, check out its website and investor presentation below.
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