First Phosphate Focused On Soaring LFP Battery Demand

Peter Epstein

As demand for lithium iron phosphate batteries is rising, Peter Epstein of Epstein Research takes a look at new player First Phosphate.

Many readers are becoming more aware that lithium iron phosphate [LFP] batteries are rising in popularity among electric vehicle makers including Ford, Volkswagen, BMW, Mercedes-Benz, and Stellantis N.V. This comes after industry leader Tesla chose the LFP configuration as its go-to battery for standard-range vehicles around the world. 

There are tradeoffs in using LFP chemistries, however rapidly growing market penetration clearly shows that OEMs are comfortable with the pros and cons. LFP batteries last longer (more recharge cycles) and are safer (fewer fires!), but have a lower driving range than more powerful lithium-ion batteries using nickel and cobalt.

What initially attracted users to LFP is its lower cost, but since these batteries have become so popular, tens of billions of dollars are being invested into improving the battery density while maintaining the cost advantage. As range profiles expand, reaching a tipping point of say 300 km/charge, range anxiety will start to disappear.

The monthly price of phosphate rock (from Morocco) traded as high as US$320/ton in the fourth quarter of last year but has declined modestly to US$300/ton, up quite a lot from about US$71/ton in April 2020 when COVID hit North America. This strong increase is noteworthy in the context of countries around the world adding phosphate to their lists of critical materials. 

As impressive as the increase in phosphate rock prices is, it should be noted that the price hit US$450/ton in the 4th quarter of 2008 and remained at that level for six months. Adjusted for inflation, that’s like a price of US$640/ton in today’s dollars. 

First Phosphate is not like peer phosphate or fertilizer companies who are [or hope to be] just phosphate or potash miners. Instead, they plan to vertically integrate in a substantial way, with the help of highly-skilled, cutting-edge technology partners. 

Regarding critical minerals, materials, and metals, few are more critical to the human condition than phosphate. Shortages can lead to food riots and starvation in low-income regions of the world. There’s no substitute for phosphate in the production and consumption of food and fertilizers. Globally a handful of companies end up controlling 90%+ of mined phosphate rock. 

These players have dominated the fertilizer sector for decades. They take sedimentary-hosted phosphate from mines and concentrate it into industrial-grade phosphoric acid. However, a by-product of this process is hazardous waste containing unwanted radioactive materials and heavy metals. 

This waste, amounting to well over a billion tons across the globe, has to be safely stored indefinitely.

First Phosphate

A new junior miner in the fertilizer/phosphate market is First Phosphate (PHOS:CSE), listed on the Canadian Stock Exchange [CSE] on February 22nd under the ticker: PHOS. It has a different type of phosphate, nearly 50 million tons of an igneous [hard rock] deposit with an attractive 5.2% phosphorus pentoxide [P2O5] grade. 

Just 5% of phosphate deposits are held in igneous rocks, and just 1% in the type of geology First Phosphate has. This is very important because igneous rock has much lower concentrations of deleterious elements, enabling a large portion of it to be upgradable [purified] to the very highest grade of phosphoric acid. 

First Phosphate is unique in other key ways as well. Instead of selling its phosphate rock at an early stage of the multistage process of refining run-of-mine ore to premium purified phosphoric acid [PPA], the company hopes to work with specialty chemical companies to advance mined material to much higher-value end products. 

That way First Phosphate can retain a significant share in the profits of premium LFP battery-related materials. Management does not plan to make the cathodes that go into the batteries but wants to produce world-class PPA to sell to companies that mix it with iron sulfate and lithium hydroxide to make a crucial component of the battery cathode.

For example, Israel’s ICL Group, a leading specialty minerals company, plans to build a US$400 million “LFP cathode active material (CAM) manufacturing plant” in St. Louis, Missouri.

With an enterprise value market cap + debt – cash of under US$20M, and only a few (if any) pure-play phosphate juniors with projects in Tier-1 jurisdictions like Quebec and focused entirely on LFP batteries to choose from, this is a company that could see a ton of interest from investors looking for new battery metal bets.

PPA from First Phosphate in Quebec, Canada would be readily accessible when commercial production begins in three to five years.

Even closer than St. Louis, Ford is building a US$3.5 billion LFP facility in Michigan that would be reachable from Quebec within a day by rail.

First Phosphate is not like peer phosphate or fertilizer companies who are [or hope to be] just phosphate or potash miners. Instead, they plan to vertically integrate in a substantial way, with the help of highly-skilled, cutting-edge technology partners. 

The company is working with very capable parties including; Queens University, SGS Canada, P&E Mining Consultants, the Port of Saguenay, Laurentia Exploration, Groupe Conseil Nutshimit-Nippour, TFI International, and Agrinova. Management has assembled a six-person advisory board of experts in areas including; geology, earth science, PPA production technologies, corporate operations, and financial planning. 

Canada and the United States [Dept. of Energy + Dept. of Defense] are providing low-cost government loans and free money grants to kickstart the building of new EV and lithium-ion battery plants in Quebec/Ontario and across the U.S. 

Management, led by CEO John Passalacqua will be applying for a variety of these funding programs on its own and in conjunction with partners. With the vast majority of the globe’s LFP battery production taking place in China, new sources of phosphate products from Canada will enjoy high demand for clear logistical & geopolitical reasons.

In addition to concerns about China, readers should note that over 80% of phosphate supply has traditionally come from Russia, North Africa, and the Middle East, regions that could over time find more in common with China/Russia/Saudi Arabia than the U.S. and Canada. 

Near-Term Catalysts

This year is poised to be a busy and productive one.

A Preliminary Econ. Assessment [PEA] should start fairly soon and be completed by year-end, along with a metallurgical study and the evaluation of prospective PPA production partners.

One or more phosphate rock off-take agreements could be in hand in the second half of 2023 and PPA pilot plant testing is also scheduled. See a more detailed list of near-term catalysts below. 

Recently First Phosphate has been announcing successes in ongoing exploration activities around the main deposit. For example, multiple surface grab samples of up to 19% P2O5 were found. Metallurgical testing indicates an anticipated apatite grade of at least 38% P2O5 at > 90% recovery.

A new discovery was made on Target 3 wherein the results of 38 grab samples produced multiple assays > 10% P2O5 (double the resource grade). In another area up to 20.5% P2O5 grab samples were reported, some of the highest-grade phosphate samples ever in the Saguenay-Lac-St-Jean region of Quebec.

Management notes that (subject to a lot more work) titanium oxide and iron oxide concentrates could be viable co-products of the P2O5. For additional exploration details and more info on the blue-sky potential, please review the latest [February] corporate presentation

Readers are encouraged to check out First Phosphate’s website and most recent press releases. With an enterprise value market cap + debt – cash of under $20M, and only a few (if any) pure-play phosphate juniors with projects in Tier-1 jurisdictions like Quebec and focused entirely on LFP batteries to choose from, this is a company that could see a ton of interest from investors looking for new battery metal bets.

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