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Leading Edge Materials (TSX-V: LEM) CEO Blair Way on Encouraging High Purity Battery Graphite Qualification Test Results, Additional Catalysts

May 26, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF), Mr. Blair Way. Blair, thank you for joining me.

Blair Way: Hi, Gerardo. How are you today?

Gerardo Del Real: I'm doing well. I'm glad to have you on, it's been a busy couple of weeks. Let me take things in order, I know that you closed your financing a couple of weeks back so if we could start there, a pretty strategic group, a long-term group that's a committed shareholder base. Could you talk a bit about that first?

Blair Way: Absolutely. As we mentioned it was a strategic placement, these are a very small group. In fact basically a couple of very interested investors from Sweden that are strong supporters of our story and wanted to be a part of it. As you can imagine these are people that we've been in discussions with and have been participating with the company for some time. They certainly were very interested in being more in the company and we felt that was a strong strategic move. So it was the right thing to do and certainly we're seeing indications of that down the path and how that's going to help us in the future.

Gerardo Del Real: I thought the timing was very, very interesting actually to bring in a strategic group of European investors. Just because of all the media attention that European gigafactories, for a lack of a better title, are now getting. There seems to be plans for a new European gigafactory popping up every week. Can we talk a bit about that?

Blair Way: For sure. It's one of these things that we would love to be able to talk more about in press releases and things, but as you can well imagine many of these facilities are being planned by big companies or companies that certainly initially expect a certain amount of confidentiality when you're working with them. There are a number of them, there's the Northvolt plant in Sweden which is a favorite. Obviously the Daimler, there's been a lot of news for Daimler-Mercedes and they've kicked off a half a billion dollar plant. But there's Nissan, Renault, BMZ, Jaguar, Land Rover, the Volkswagen Group, even Tesla's planning one. Let alone Samsung and LG in more Eastern European countries are also planning. There's a lot going on in Europe and we look forward in the future to being able to talk in more details specifically about plants but at present we're certainly I'll say trapped or caught in normal business relations of confidentiality and we're hopeful that in the future we'll have something more significant to discuss.

Gerardo Del Real: Understood, and I think reading between the lines a little bit it sounds like there's a lot to talk about. Obviously you can't talk about it right now but the fact that there is a lot of meat on the bone is a good thing. Let's get to something that you can talk about, you had a press release on the 18th of May and I'll just read the headline here. "Leading Edge materials provides update on high-purity battery graphite qualification from the Woxna Project in Sweden." And obviously Woxna is the flagship. Can you take me over the details? Because it's a pretty important release. A lot of technical points to cover, but if you could share the details that would be fantastic.

Blair Way: As you know we've spoken at length over the past few months, almost past four, six months about the very steps we have to go to to qualify our materials for battery cell manufacturers. Whether they're in the US or Canada or Australia or Europe or wherever, the processes are very similar. The expectation is that we as a producer actually demonstrate that our materials are suitable. They're not going to just take a sample that we give them and go down that path, so we've been quite a ways down that path. In the early days I talked about doing coin cells and testing them through the various rigorous tests that they have to go through to demonstrate. The discussions that we've talked about is how initially you can do these tests with a hundred grams of graphite. Well, producing 18650 cells you need to be able to get at least a number of kilos of high-purity material together in order to produce the slurry to produce the anodes so you can then produce the 18650 battery cells.

We've now produced ten. We do have some surplus material, we'll be producing a few more 18650 cells for additional testing but also some testing with individual cell companies. What this means is these ten cells have been put through the first phase of a rigorous test program for these larger cells. These are the cells, same format as cells that are used in the Tesla and the Panasonic batteries that are used in the Tesla electric vehicles. We put these through a High Precision Coulometry test which is essentially a way of measuring the ion’s movement from anode to cathode during charge and discharge. That defines the performance of that material. We made these batteries with 100% graphite, 100% Woxna graphite. Normally in say a Panasonic the battery cells are made of a blend of synthetic and natural flakes.

We've made our batteries from 100% natural flake graphite and we've seen performance that we are very pleased with and we are sharing this information with the appropriate players in the space and so far the reaction has been strong. The real takeaway from this, this is a big batch of batteries compared to what you normally read about in some graphite companies. We've used kilograms of material and as I've mentioned before the next round of tests will be producing a lot more of these 18650 batteries. We have a number of batteries now that these 18650 cells that we can work with. But yes, there still will be more test rounds that will be required and that'll be a larger amount of material to demonstrate consistency and ability to replicate these good results as we move down the path.

Gerardo Del Real: Excellent. For those that aren't familiar this is the importance of having the facility and the stockpile. Could you provide a bit of context there, Blair, as to the stockpile that you have to make it through this qualification process?

Blair Way: Yes. In order to qualify a large amount of batteries you have to have a large amount of material. In order to have a large amount of material you have to be able to get it from your mine or from your deposit. Most of the graphite companies out there only have drill core. They maybe have done a small bulk mining but even then at 10% try to get a decent volume of material that then you put through a pilot plant which costs a fortune. Then you create a flotation concentrate, then that has to go through a purification pilot plant which then will also cost another fortune. Then you may end up with only a few hundred grams or at best a kilogram of this material which wouldn't be enough to make these 18650 cells. We on the other hand have a fully commissioned plant at site.

We can run it as we need to. We could only have around 101 tonne bags of our graphite concentrate at various levels of purity at this stage but it's primarily flotation concentrate. We can basically send it through a spheronizing process and a purification process at a number of different facilities at our choosing to then enable us to produce it in upwards of 500 kilos of high purity graphite if indeed that's what we need. Certainly towards the end of the qualification process that's the sort of quantity that people are going to be asking for is 500 kilos to 1,000 kilos, close to a tonne of high purity material. For us to produce that we will have effectively mined, what is it, 10,000 tonnes of ore. Which is quite a big bulk sample as you can see. It does give us an advantage in this process working with the cell manufacturers to be able to truly demonstrate the ability of our company to produce the materials that they need.

Gerardo Del Real: Excellent. Now I've always stated that Leading Edge has positioned itself as a future supplier of critical metals for Europe. Far from one-trick pony, obviously Woxna is the flagship as I mentioned but you also have a lithium property that recently saw some very encouraging drill intercepts. Can I get an update on that property there, the Bergby Project?

Blair Way: Yes. Our Bergby Project, which we've certainly turned around fairly quickly from a staking leading to a short drill program and we're partly through the results, the assay results for that drill program. The first round of results were very, very good and good enough for us that we actually decided we'd probably stake a bit more ground around our property, around the Bergby property.

We staked the Rotmyran property which is 20 kilometers north of Bergby. We still have results due, another two rounds of assay results due for our Bergby drill program and we're very optimistic of the results of that. We will be press releasing that very soon. So Bergby is progressing, exceeding our expectations certainly at this early stage and we hope it will continue to do so. We will be taking a closer look at our new staked ground, the Rotmyran Lithium Project, and we'll advise progress on that as we go down that path.

Gerardo Del Real: Excellent. Now I imagine that behind the scenes when you meet with these battery manufacturers and they inquire about the graphite and they see the quality of graphite that's coming out of Woxna they're inquiring probably about lithium and cobalt and other critical metals. Would that be accurate, Blair?

Blair Way: For sure. You know what's interesting is there's so much rhetoric around, in the nether, in the internet space about how much material goes in and a lithium-ion battery is made up of more of graphite and lithium and the value of this and that. At the end of the day these are businesses that are looking for raw materials and the raw materials are critical to their business. What that means for us is, initially they talked to us about graphite. We have a production facility with the ability to produce a material that satisfies that particular part of the supply chain. But with the results coming from Bergby and some of these other commodities that we're chasing, cobalt, lithium primarily, they see that we may well be a future supplier of that. That is something that both is interesting to them but also has the potential to mean we could be more than just a supplier of graphite.

It's further down the track, these are greenfield projects which are ... We're talking drill core at this stage. We've got no permits but comparing us to many of the other companies that are out there, there are many other lithium companies that are also just drill core and they're not placed in Europe. Being in Europe is a big advantage for us.

Gerardo Del Real: Excellent. Lastly I want to talk about something that's not so much a greenfields project, your rare earth asset, the Norra Karr asset. Can we talk about that a bit? Because rare earths have been in the news here once again recently.

Blair Way: Yes, certainly. Rare earths is a wild card for us, at present as everyone knows rare earths used to be pretty hot. There's been a bit of a waning of interest but it does appear that we may be seeing additional interest and certainly we're seeing some news out of the US that is indicating there is a bit more support and interest in finding alternative sources for rare earths because they're basically coming 100% from China at present and that's a source of supply concerns. Yeah, it certainly is something that we are following and when the time is right we will certainly pursue that.

Gerardo Del Real: Excellent. Well it's a good option to have, again it's looking ahead a bit and a lot of things have to fall into place to be able to go that route. But it's a great asset to have and it's a great option to have. Blair, I want to thank you very much for joining me today. As those assays come in from the Bergby Project I hope to have you back and hopefully we can discuss those in further detail.

Blair Way: Thanks, Gerardo. It was a pleasure to catch up.

Gerardo Del Real: Thank you.

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