Global electrification is a phenomenon that ranks amongst the most powerful in recent commercial history. It was not that many years ago that the sight of an electric vehicle driving down the street would turn heads, yet today EVs are on track to become as ubiquitous as the mobile phones that also were once a mere thing of futurist fantasies.
Consumer demand for electric vehicles is undeniably here to stay, but in the background, supply chain constraints are causing logistical and cost ramifications that must be addressed if manufacturers and governments are to realize their ambitious EV adoption targets.
For those interested in how the EV industry is set to develop in coming years, LFP is an acronym worth knowing. It stands for Lithium Iron Phosphate and represents a battery technology that is taking EVs by storm thanks to advantages in cost and safety.
John Passalacqua, Chief Executive Officer of First Phosphate Corp. (CSE:PHOS) (First Phosphate Corp. (CSE:PHOS)), sat down with Proactive in November to offer his take on the growing importance of LFP batteries and the role his company is playing in the formation of a second battery region in the Canadian province of Quebec.
Proactive: Last month, General Motors announced it would be switching to LFP batteries for its popular Chevrolet Volt, in place of the lithium-ion batteries it had been using most recently. Tesla and Ford are among automakers already employing LFP batteries in some of their EVs. Give us your view on LFP batteries and the outlook for further adoption.
Passalacqua: Perhaps the best way to answer that is to share some numbers with you on how the industry is evolving. It was predicted that around 50% of battery chemistry would be LFP by 2030. However, in the first two quarters of 2023, 66% of battery output in China was LFP already. They are also adding a bit of manganese to the mix to get longer range, so they have an LFMP (Lithium Manganese Iron Phosphate) starting up as well. It could be that well over 70% of batteries in China are LFP or LFMP. It’s moving quickly.
Why do you think LFP utilization has taken off like that?
For a number of reasons. Electrification is now mandated in a lot of countries, and quotas have to be reached within certain timeframes. It is becoming real and we are talking about mass adoption.
When EVs were still kind of theoretical, they were expensive, often over $100,000 per vehicle, so manufacturers had to put in the best of the best.
Now that it’s about getting prices down and also consumer safety, LFP has come on strong for two reasons. The LFP battery is 50% to 60% cheaper than the NMC (Nickel Manganese Cobalt) battery in terms of the cathode active material that goes inside of it. Also, LFP batteries are non-toxic and they don’t catch fire like NMCs can. In addition, they don’t degrade as you charge and re-charge every night.
So, the LFP battery is becoming a really powerful platform for mass adoption in that it has a safety profile, the non-degradation through charge and re-charge, and it is positioned to encourage broad use because of the cost level.
We’ll get to specific progress at your phosphate properties in a moment, but let’s start with the 32,000 foot view. There are some unique aspects to your properties in terms of location and geological setting.
Probably the most important factor is that we are sitting in what is called igneous and anorthosite rock. This is a volcanic rock that holds the phosphate and because of the way the lava cooled back in the day, all of the different elements fell to their specific densities. That means the phosphate is found in a relatively pure state, so there is no cadmium, uranium, thorium, arsenic or mercury in it, and the sulfides are very low.
Because this rock is so pure, ranking amongst 1% of the world’s phosphate reserves, we are able to purify it to a phosphate concentrate of 41%, where the maximum purity would be 42% inside its host mineral called apatite. We are getting an apatite about 97% pure and are recovering 91.4% of it.
When you take this phosphate rock concentrate and process it further with sulfuric acid, about 90% will turn into purified phosphoric acid. Generally, when you are using sedimentary type phosphates, which are good for making fertilizers, only perhaps 10% to 30% can be converted to purified phosphoric acid and then you have to find a market for the rest of it in fertilizer. But we don’t have to do that. We can focus on getting this ultra-high purity phosphoric acid specifically for battery and technology clients. The rock type and rarity give us an serious advantage.
What you’ve just outlined are some of the reasons you have partnerships and backing from large and important organizations in both the private and government sectors. Tell us more about these.
We have a number of really important partners at the table. Prayon, out of Belgium, is Europe’s largest producer of purified phosphoric acid. They are going to be our partner in terms of looking for an offtake for our phosphate rock. They are also looking to provide us with the technology to make phosphoric acid.
Prayon practically invented phosphoric acid in the 1950s, so there is no technology risk. There are only four companies we know of outside of China that have access to this technology for making purified phosphoric acid.
Also at the table is the Port of Saguenay, a deep seaport located near our properties. That gives us access to the world, and the government is now focusing on Saguenay becoming the second
battery region of Quebec and has put $105 million into retrofitting the port for hydro, gas and water.
Our third big relationship is with NorFalco, which is a Glencore company. They are the largest producers of sulfuric acid in North America, and that’s not an easy substance to find. Working with the leading company handling this in North America is very important.
Another important relationship is with American Battery Factory, which does gigafactories for LFP batteries. Their first gigafactory is going to be in Tucson, Arizona, and they plan to have many facilities across North America and the world.
American Battery Factory needs 40,000 tons of cathode active material by 2028 and they are looking to have all of that made in North America. They have come to us to be their partner that will provide local supply of input materials and actual LFP cathode active material.
Our fifth big relationship is with EXIM Bank, the Export-Import Bank of the United States, an entity that is a branch of the United States government. They are very excited by First Phosphate and what we are doing and they are willing to step up and finance our initiatives in the mine, purified phosphoric acid facility and LFP cathode active materials facility. They have given us a starter line of US$170 million, which can go up as we show progress.
Let’s look at work to date. When did you acquire the projects and what has your team achieved with them so far?
We went on a mission to basically stake all the land between the Port of Saguenay and about 250 kilometers north of the port that had phosphate showings. We are talking about lands that prospectors had with phosphate showings on them, lands that the Quebec government had with phosphate showings, and one project, Lac à l’Orignal, which actually had some drilling done on it.
We acquired all the properties in the area, and that was around May to June of 2023, and since then we have been moving them forward.
To accomplish all of that in such a short period of time is quite something for a company of any size, and particularly for a relative start-up such as First Phosphate. What does the next year look like?
It all stems from the accomplishments in 2023. In addition to staking the claims and other things I just mentioned, we raised about C$9 million dollars. We’ve built a board of advisors in the business, geology, mining, phosphate and LFP battery sectors, and feel the team is complete now.
We started a partnership with the University of Queens, which looked at Lac à l’Orignal to determine whether it had the characteristics of an appropriate deposit for production of LFP batteries. That came back positive because we have very low deleterious elements in the deposit.
Also important is that we are in North America, not in the Middle East where a lot of phosphate deposits are found.
We started our drilling at Bégin-Lamarche and found three long and consistent veins of phosphate, which we need to progress next year, and we believe could be the leading phosphate deposit for the company.
At Lac à l’Orignal, we did our 43-101 estimate and PEA (Preliminary Economic Assessment). It showed 49 million tons of phosphate-bearing rock in the ground, with a net present value of about C$800 million and an IRR (Internal Rate of Return) of 22%, so we are very happy with that.
We were able to deliver a 900 kilogram sample to Prayon through our new pilot plant. They used that to create a merchant-grade phosphoric acid and they are finalizing the creation of a purified phosphoric acid with it. That is important because next year we’ll be able to get samples out to potential clients.
Also important is that we gained major project status from the Saguenay-Lac-Saint-John region of Quebec, which is something only a few projects have in the area.
As for 2024, the two main things are some more drilling at Bégin-Lamarche and we also need to consider the best area for a first mine. We have three good properties: Lac à l’Orignal has its PEA, Bégin-Lamarche is showing some exceptional results and is very close to the port and infrastructure, and we have another property at Larouche which is just 40 kilometers from the port.
We have to decide on a potential mine site, start feasibility studies, and take the purified phosphoric acid Prayon prepares for us and send it to potential clients for possible offtakes and partnerships. We also need to start planning for a purified phosphoric acid plant at the Port of Saguenay.
It has only been about nine months since First Phosphate debuted on the stock market. Share your experience as a publicly listed company with us and also what you hear from shareholders and the investment community.
It certainly has been interesting to be a CEO. I was an investor for a long time and it is quite something to understand how involved it is and how rewarding it is to be a CEO of a company and have the responsibility and ability to execute.
For the most part, we have very happy shareholders. Our stock is trading a bit above where we did the last capital raise before going public. We did another raise after going public and are down slightly from that level, but the market has come down quite a bit for junior mining companies. We are fortunate to have supportive shareholders and we’ve been able to advance our projects.
I’m very proud of our team, which consists of our management, board of directors, board of advisors, our partners and suppliers, the industry as a whole, multiple governments, and our shareholders. We are moving things forward as quickly as we can and given everything that we have achieved so far and the near-term plans, 2024 should be a pivotal year for First Phosphate.