First Phosphate (FRSPF): Building a G7-Backed North American LFP Battery Supply Chain

In this episode of WTR Small Cap Spotlight, First Phosphate CEO John Passalacqua joins WTR's Tim Gerdeman and Dmitry Silversteyn to discuss the company's recent C$17.7 million financing, G7-backed investment and offtake agreements, and strategy to build a fully integrated North American lithium iron phosphate (LFP) battery materials supply chain. The conversation covers project financing, commercial partnerships, upcoming development milestones, and what could drive the company's next phase of growth.

Transcript

SPEAKER_00 0:01

Welcome to the WTR Small Cap Spotlight Podcast. I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research. In today's podcast episode, I'm joined by John Pasilakowa, CEO of First Phosphate OTC Ticker Symbol FRSPF, and Canadian Stock Exchange Ticker Symbol, PHOS. First Phosphate is developing a high purity phosphate resource in Canada to provide a secure and scalable supply of phosphate and cathode active materials to the growing non-Chinese LFP battery industry. Also joining is my WTR equity research colleague, Dimitri Silverstein. Gentlemen, good morning and thanks for joining me today. Good morning, Tim.

SPEAKER_01 0:45

Morning, Tim. Thank you.

SPEAKER_00 0:47

John, First Phosphate recently completed an oversubscribed private placement raising approximately 17.7 million Canadian dollars and bringing total capital raise since 2022 to approximately 80 million Canadian. How does this financing change the company's balance sheet strength? And what key milestone should investors expect this cash runway to fund over the next 12 to 18 months?

SPEAKER_02 1:11

Yeah, thank you, Tim. So as of our last uh financial statements, the balance in the Treasury was just over 30 million. So with this last uh uh tranche of financing, it brings us closer to the $33 to $35 million range, and we still have access to the $16.7 million contribution from the federal government of Canada for the feasibility study. So we're looking at available cash of about almost uh $50 million to get us down the line to complete our feasibility study permitting and to get us to final investment decisions. So the company's in a really, really strong financial position here. We have uh over two to almost three years of uh capital runway, and that's at a fairly accelerated pace as well, a very accelerated pace.

SPEAKER_00 1:52

Great. That uh balance sheet strength is a luxury that a lot of uh firms don't enjoy. So that's uh that's wonderful news. I'm gonna turn it over to Dimitri.

SPEAKER_01 2:01

Hi, John, and welcome back. And as Tim said, uh you know, having a strong balance sheet at this stage of the game is a luxury that uh not every small cap uh developer can enjoy. So congratulations on the recent raise. Um at the recent G7 summit, first phosphate announced uh financing interest from several international institutions uh alongside definitive off-take agreements. From your perspective, what does this level of international support say about the strategic importance of your project?

SPEAKER_02 2:29

Yeah, so I think you know, we were talking about the strong balance sheet. So the strong balance sheet and the international support goes hand in hand, one reinforces the other. The international support basically is showing that the LFP battery and phosphate specifically is a real area of focus for the Western Allied nations. If you remember when uh the USA had some uh issues uh uh earlier in October of last year uh with China, they were over three things. They were over rare earths, they were over microchips, but the third was the LFP battery supply chain. So the G7 nations have taken it seriously. They realize that the LFP battery supply chain and phosphate, which is 60% of the cathode of the LFP battery, is a is a very uh important uh area of uh supply chains to focus on. And they're counting on first phosphate with this high purity igneous phosphate deposit in really allied territory in Canada to be one of the major solutions to this uh situation. So first phosphate is now basically uh endorsed uh at the G7 level, endorsed by uh a number of the nation states Denmark, Canada, Italy, European Union, and Belgium, in order to bring forth, bring forth this supply chain for uh Europe and North America for the LFP battery and the phosphate behind it.

SPEAKER_01 3:45

Understood. So how have these relationships uh that you've announced at the G7 changed the con or may change the conversation you're having with potential lenders or customers or even government partners here in the US?

SPEAKER_02 3:58

It makes a really big difference, actually, um Dimitri, because it's sort of like a business card. It's very easy to entertain discussions. It's no longer a question of uh who am I and what are we doing and why this and is it important? The importance is recognized right away, and the also the significance of the company and the backing of the company and the stature of the company is recognized right away. So the discussions are much easier, they're much more fluid, and there isn't uh a whole lot of uh convincing anymore. The the the entire Western world is convinced at this point.

SPEAKER_01 4:29

That's great to hear. So moving on, how or you know, you have definitive golf-tech agreements that we mentioned, covering both the phosphate concentrate from the mine and the phosphoric acid from the uh planned uh processing facility. How do these commercial agreements strengthen the development plan and the long-term vision of building an integrated North American LFP battery material supply chain?

SPEAKER_02 4:53

Yeah, so basically, you know, it's really important in dealing in such a supply chain that it be across different nations. And so the fact that we are dealing across different uh national boundaries, uh, that shows the importance of it. It uh it leads to offtake, it leads to investment, and it leads to supporting all the other smaller players in that whole battery supply chain. So first phosphate is really important from the level of the access to the critical mineral, really the phosphate, which is 60% of the cathode of the LFP battery. So to start a supply chain, you need to start on all sectors of it. But being right at the top of the supply chain, right, with the critical minerals to do it, that's mostly that's very important because if you don't have anything to put in, you can't really create anything. So that's where we are. And we also are very cognizant of all the steps that get down to making the cathode active material and making the energy storage systems, the actual cells, the actual batteries.

SPEAKER_01 5:48

So that leads me into my kind of a follow-up question. Where do you see the greatest opportunity to expand your customer relationships or maybe move further up the value chain?

SPEAKER_02 5:59

So we are really focused right now on the mine, as I was saying. That's the most important thing is getting the phosphate, getting the critical raw material to market. So that's our focus, getting the open pit mine going as soon as possible in Beijing La Marche. We're planning for 2029. That's an extremely aggressive timeline. We think that the quicker that these uh projects get to market, the more invaluable they will be. And then from there, obviously transforming into phosphoric acid. We have plans to move into phosphoric acid at the port of Sagday. We were supported at the G7 level by three entities of the Italian government and Mare Group, a very large engineering firm quoted on the Milan Stock Exchange. And also we were supported uh on the mining side by the Export Import Bank of Denmark. So that really covers off the mine, the secondary transformation. And then the third step is obviously getting into the LFP cathode active material, where we have a technology to do that, and we're also looking for partnership on that end. That's kind of where I think the company would stop, and then it would be passed on to those who make the LFP battery cells. They take those cells, they put them into packs, and then they make the end products that go into uh anything from uh energy storage to uh an EV battery to a drone battery to a battery for uh any anything else that uh will take LFP batteries, which is which is quite diverse, a data center or uh any other type of small electronic appliance.

SPEAKER_01 7:22

Understood. Sounds like you have a pretty busy couple of years in front of you. So looking ahead over the next year, what are the two or three milestones that you believe investors should watch uh most closely as indicators that first phosphate is executing successful in its strategy?

SPEAKER_02 7:38

So the first one is obviously our feasibility study. Now that we're well financed, well capitalized, we've got uh teams internal and external heads down working on that. We're hoping to bring in the feasibility study by end of 2026, early 2027 at the latest. In the meantime, also uh more agreements with government, access to more to more capital from government, those are important milestones. And then after that, in 2027, it would be about getting our permitting organized, getting our final investment decision and the capital stack together to actually go out and build the mine in 2028 for uh basically being in production in 2029.

SPEAKER_01 8:18

Great. So that like I said, there's a lot of stuff going on with your company and a lot of moving pieces here. Which of those milestones that you just mentioned do you believe has the greatest potential to change how the market values the company?

SPEAKER_02 8:30

I think they all work together and they're all a series of steps and it's all on the way to getting to a mine. The the most important one right now is obviously the feasibility study, showing that the project is feasible, that it that it can be built out. We just finished our uh uh definition drilling of the project, showed great continuity, showed an impressive increase in from inferred to indicated resource. So we're very comfortable on all of that. Now it's just a matter of putting it all onto paper and making it work.

SPEAKER_01 8:59

Understood. Well, thank you very much for joining us today.

SPEAKER_02 9:02

Thank you so much. Great to be here.

unknown 9:04

Thank you.

SPEAKER_00 9:04

Thanks, Dimitri, and thank you, John, for uh giving us a quick update. It's always nice to catch up on first phosphate, and don't hesitate to come back on as you have more milestones and best wishes for the second half of the year. Thank you. Thank you for listening, and don't forget to subscribe as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules. We will see you next time for another edition of the WTR Small Cap Spotlight Podcast. Finally, a special thanks to the producer and editor of the podcast, Krista Fitzpatrick.