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

In this episode of the WTR Small Cap Spotlight, First Phosphate CEO John Passalacqua joins WTR's Tim Gerdeman and Dmitry Silversteyn to discuss the company's strengthened financial position following an oversubscribed $17.7 million private placement, $21.5 million in non-repayable government grants from Natural Resources Canada, and letters of interest from international export credit agencies representing up to C$275 million in potential project financing. The conversation covers the company's definitive offtake agreements securing a minimum of 200,000 tons per year of phosphate concentrate and 60,000 tons per year of battery-grade phosphoric acid, G7 Critical Minerals recognition, Quebec fast-track permitting status, and the path toward a targeted 2029 production start. Passalacqua also explains why phosphate — not lithium or graphite — is emerging as the real bottleneck for North American LFP battery production.

Transcript

SPEAKER_02 0:00

Welcome to the WTR Small Camp Small Light Podcast. I'm your host, Tim Gerdman, Vice Chairman, Co-Founder, and Chief Marketing Officer of Water Tower Research. In today's podcast episode, I'm joined by John Panasalamakama, CEO of First Phosphate OTC ticker symbol F R S P F and Canadian Stack Exchange ticker symbol PHOS. First Philosophy 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. Morning, Tim. Thank you. Gentlemen, over the past several months, First Phosphate has significantly strengthened its financial position. In June and July, the company completed an oversubscribed two tranche private placement that raised approximately 17.7 million Canadian dollars, bringing total capital raise since 2022 to roughly 80 million Canadian. Earlier this year, the company also secured up to 16.7 million Canadian in non-repayable funding from Natural Resources Canada's, or Narcan, uh Global Partnership Initiative, and just this week announced an additional $4.84 million in non-repayable infrastructure funding through the Narcan First and Last Mile Fund, also known as FLMF. How has this combination of equity capital and government support changed First Phosphate's financial position? And what key milestones do you expect these funds to carry the project through over the next two to three years?

SPEAKER_01 1:44

Yes, so um with the uh latest capital raise, the company has over $30 million in treasury, as per our last financials. And if you look at these two uh non-repayable, uh non-uh dilutive um grants that have been made uh by the government of Canada, that totals $21.5 million. So the company has access to capital of over $50 million in order to uh basically get itself down the road to at least two and a half to three years from now. It gets us uh past the feasibility study that we're hoping to release at the end of this uh year, if not early next year. And it gets us uh through permitting and it gets us right to final investment decision as well.

SPEAKER_00 2:27

Understood. It certainly sounds like the company is in much stronger financial position than it was a year ago, let's say. Of course, corporate uh capital is only one piece of the puzzle for a project of this scale. Let's talk about how you're putting together the long-term financing needed to actually build the mine and the downstream facilities. At the June 2026 G7 summit, First Phosphate announced letters of interest from several international financial institutions, or financing institutions, I should say, including a guarantee of up to uh 275 million Canadian uh from the Export and Investment Fund of Denmark, as well as several uh Italian agencies for planned phosphoric acid facility. How do these organizations fit into your overall project finance strategy? And what are the major milestones investors should watch as these letters of interest progress towards definitive project financing?

SPEAKER_01 3:18

Yes, so we we are we're very fortunate on the um side of the of IFO, which is the export credit agency of Denmark, that that uh letter of interest uh gets at least 40 percent of the capital of actually building the mine concentrator together. So that's the first step. That's what the feasibility study uh will basically unveil at the end of this fiscal year. And uh basically that allows us to uh to build the first part of the capital stack when we come to the final investment decision. So that it's very helpful in the fact that you know at least uh a good chunk of the capital for the final investment decision is already in place, plus we already have the overfift access to the over $50 million at this time to be able to actually get to that final investment decision.

SPEAKER_00 4:06

Interesting. So one of the things uh lenders typically like to see, talking about final investment decision, is the evidence that there will be customers waiting on the other end. Uh that brings us to another area where first phosphate has made meaningful progress over the past year, building commercial relationships. You've now signed a definitive off-take agreement uh covering a minimum of 200,000 tons per year of phosphate concentrate from your mine and about 60,000 tons per year of battery-grade phosphoric acid from the planned uh refining facility. The company has also received uh $2 million US advanced payment from one of its from one of your uh phosphate concentrate customers. So that's great validation as far as I can tell. Uh, what do these commercial commitments tell you about customer demand for a secure North American source of battery grade phosphate? And how are they influencing decisions with lenders, strategic partners, and potential downstream customers?

SPEAKER_01 5:03

Yeah, so the off-take agreements are uh definitive, they're bankable and they're prepaid. That's very important. It means that they have uh meat on the bone. And um it's uh very helpful with the lenders because it's it serves as basically uh a fundamental uh demand for the final product. That is very important. And it also just goes to show how important this uh high purity igneous phosphate is, especially from a secure source uh as we have in North America.

SPEAKER_00 5:34

It's interesting because I came back last week from an LFB battery uh conference in in Detroit, and I would say probably half the speakers brought up phosphate as a bottleneck uh for LFB battery production, particularly in North America. And this is something that is becoming front and center. You know, people think of lithium, people think of graphite, but phosphate, in opinions of some of the people at the at this conference, is the real bottleneck. So getting your project off the ground would seem to be a big step in the right direction in terms of uh making America and North America uh a national security and reduce the reliance on Chinese products. So I think this project is very important. It's interesting to see uh financing and commercial validation advancing together. Uh another theme that's uh become increasingly visible over the past year is the breadth of government support for project uh as it's evolving, both within Canada and internationally. As I mentioned, beyond direct funding, the project has now received recognition under the G7 Critical Minerals Resilience and Production Alliance and received a phylon fast track status from Quebec's Ministry of Natural Resources and Forests. Uh you will also benefit from approximately $55 million Canadian federal funding for the expansion of the port uh at the port of Seganaw? Is it Seganaw? Uh Seganine Seganin Marine Infrastructure. Together with the loans and the grants that we talked about, these initiatives appear to be reducing both execution and permitting risk. So, how meaningful is this coordinate support from federal, provincial, and international governments as you advance permitting infrastructure development and ultimately construction of the project?

SPEAKER_01 7:18

Yeah, it's very interesting. We see, in fact, multi-level jurisdictional support for the project. I mean, it starts really at the local level with the municipalities who are supportive, our local uh indigenous group as well, and then it moves at the uh to the Quebec level with that fast track status that uh is meant to basically there's three projects that have been asked into this uh fast track status. We are one of the three, and basically it creates a central point within Quebec government where all the files can can basically flow through and it can help to uh basically bring together the ministries in order to fast track the project. So that's really important. And then at the Canadian federal government level, we had the funding earlier the year that was to uh uh get together the the engineering studies for the concentrator at the mine, and now we have the first and last mile fund, which basically is for the uh electrical line and the roads uh to and from the property. And we already know that we're we have very good logistics. We're sitting at about a couple kilometers from main highway, and we're right next to the electric electrical um line. It's just now about running those uh those two pieces of infrastructure to the actual mine. So that's at the national level. We've had uh uh interest from uh the the U.S. government through Exim Bank as well, and all the interest uh at the G7 summit, it's been identified as a key strategic project for the G7, uh, and that includes the governments of uh Denmark, uh, Belgium, Italy, and the European Union. And so we see this you know multi-tiered uh uh level of support, right from the grassroots all the way up to the the international level. So that's really important, that really de-risked the project that uh assures uh uh capital readiness um at all the levels. And it's not only just any capital, it's capital at the nation-state level. It's capital that's non-predatory, it's it's it's non-biased, it really wants to see these projects uh move forward. And it's so it comes with uh it's it's it's a lender that wants to see your success and that gives you the best terms possible. That's really important to uh to understand as well.

SPEAKER_00 9:22

Absolutely. Couldn't agree more. Uh when you step back, John, all of these developments, stronger financing, customer commitments, government support, and permitting progress are really different pieces of the same story, systematically reducing project risk. So I'd like to finish by asking a broader uh question and ask you to look where the project stands today and where it's headed next. Compared to a year ago, First Phosphate has substantially strengthened its balance sheet, secured multiple government grants we just discussed, uh attracted interest from international export agencies, signed definitive uh commercial off-take agreements. Uh as you look towards late 26 and 2027, where does the project stand today? What are the most important milestones investors should watch for next, including the completion of the feasibility study? Obviously, you talked about that and permitting. Uh and how does how do these milestones continue to de-risk the path towards your targeted 2029 production?

SPEAKER_01 10:22

Yeah, so um uh as we mentioned before, the next big step is really the feasibility study, which should be out by the end of uh this calendar year, early uh next calendar year. And uh then from there we've got to um move into permitting and then final investment decision. And we're hoping uh to be to have an open pit mine in production by 2029. Now that's an extremely aggressive timeline. We are we're working towards it. Uh the this uh support from government just kind of meets us halfway, which is great. We've done our our part, we've raised the capital. Government's coming in from the other side, helping with permitting, uh, helping with uh you know key infrastructure and uh help helping with uh contribution to be able to get us to move as quickly as possible. So uh we we're and we have the bankable uh definitive off takes in place as well. So we're working very hard towards that milestone because uh we feel that the quicker that these uh projects can be brought to life, the more that they will be worth.

SPEAKER_00 11:19

Absolutely. Thank you, John. That was a very interesting discussion, and I'm glad to see First Phosphate continue to matriculate the ball down the down the field and getting closer to production. I'll turn the call over back to Tim.

SPEAKER_02 11:32

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.