Leading Edge Materials (TSX-V: LEM) CEO Blair Way on the Woxna Graphite Project, the EU Battery Alliance, & Nora Karr Rare Earth Project

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, how are you this afternoon?

Blair Way: I'm doing great, Gerardo. It's always good to catch up.

Gerardo Del Real: So listen, I want to start off, the stock and the share price has seen some recent price volatility, and it's trending back upwards. I know that you had a press release a little over a week ago that really went over the fundamentals of the business. The flagship, of course, is the Woxna Graphite Project. And I want to just step back, and for readers and listeners that are new to this story, I would love for you to provide an overview of the Woxna facility. Because I think that a lot of people forget that Woxna is a fully constructed mine with processing, and waste management, and infrastructure in place. Can you go over that aspect of it? And then I want to talk with you about what you're doing to advance the flagship, which is the Woxna part of the business there.

Blair Way: Absolutely. Our flagship, the Woxna Graphite Mine, is, as you say, a fully built, permitted, operational, it's in operational ready status at present. It's a proper processing facility, has all the infrastructure, waste management, the support of the local community and government. We recently had our permit extended, our operating license extended to 2041. So, we have everything in place, and what we're now doing is taking that traditional graphite production, which is a floated graphite product, and we're looking to the value adding process, which is spheronising, thermal purification in order to produce a battery-grade material. And that's a value adding that creates a product that's much more valuable, more profitable, and also is targeting a future market, rather than the traditional markets for traditional graphite.

So, we have been going through the process since refurbishing the plant and getting it operating back in 2014. We've used the material that we produced at our plant, which is in the order of hundreds of tonnes, and we're putting them through various regimes of value adding, and we've been through a number of regimes of testing for purification and shaping. We're really zeroing in now, and that was part of our press release, to give investors an update on the business and the fundamentals still remain the same. There is an enormous market looming ahead of us in Europe for demand for our sort of value added graphite products. And we're working towards being able to demonstrate that properly to these customers or future customers in Europe, which involves the installation of a demonstration plant at Woxna such that we can take the floated concentrate and turn it into this value added material.

And we've touched on that a little bit, but we'll have more news flow to demonstrate the steps that we're going through to ultimately target this sort of demonstration capability, which then leads us to be able to produce hundreds of kilos of material so customers can incorporate them into their production lines for cell manufacturing.

Again, as you mentioned we've had a few ups and downs, shall we say, on our share price. Some of them a little bit frightening, but the fundamentals remain unchanged. Sometimes the market, especially this time of year, it's summertime, we have to take the knocks as they come. However, we're seeing things returning and I think that's a function of investors understanding the fundamentals are strong and we'll continue to drive our flagship, the Woxna graphite mine, to provide a graphite material for our future lithium ion batteries cell manufacturers in Europe.

Gerardo Del Real: Excellent. Blair, you mentioned the potential for off takes in customers, you called it talking with customers and being able to provide in the future graphite for customers. Now, for people that are not familiar with the EU Battery Alliance, can you explain the electrification of Europe? Because that is a very, very real megatrend, which is initially what caught my attention when I started speculating and recommending Leading Edge Materials. But can you explain to everybody what the electrification of Europe is, how aggressive Europe is actually being in rolling this out, and how the EU Battery Alliance plays a part in that?

Blair Way: For sure. Europe is definitely pushing for the electrification of transportation and also stationary energy storage. But certainly the electrification of transportation is a big thing. It's managing pollution and in the various large cities that are in Europe and many of them are now heading down the path of eliminating the internal combustion engine within certain city limits and the like. That is combined with the EU Battery Alliance, which is a consortium – or even a powerhouse you might say – of big industry and smaller industry in Europe combined with the very significant government organizations to drive the businesses such that they can become leaders in the electrification of transportation. And that means taking it right through the supply chain from finding it in the ground, extracting it from the ground, turning it into value added material, turning it into cells and anodes and cathodes, and then producing batteries. Those batteries go into the vehicles that are being electrified. When you talk about electrification of vehicles, all the big auto manufacturers in Europe are talking within the next few years to have 5, 10, even 15 specifically electrified vehicles. Not hybrids, but electric vehicles.

So, the change is looming ahead of us. We're now starting to see some big deals between European auto manufacturers and Asian cell manufacturing. And some of them are looking at installing facilities in Europe. These are the sort of things that open the doors for us such that we can have customers that will be looking for a locally sourced material, which will become more and more important. And that is part of the EU Battery Alliance to not only demonstrate or get Europe on top of the manufacturing of cells and electrification of transportation, but also in a sustainable way. No one like an electric car that's been put together with unsustainable materials or unsustainable power charging those batteries.

So, there's a huge movement to tie that all together and we believe we're in an exceptionally good position because of the location that we're in, because of the operation that we have, and the fact that we are obviously operating under EU regulations. We're using green energy from Sweden to undertake the processing. So, we believe we're well positioned to be able to provide materials for this growing market that we see in Europe. Now EU Battery Alliance is forecasting the industry, and this is the whole industry, as a $250 billion dollar industry by 2025. That's an enormous number. I mean, I'm still not sure we completely how they calculated it. But it's an enormous figure, and even if they're half right, they're still pretty incredible numbers, and we believe we can be a part of that as part of that supply chain.

Gerardo Del Real: Now, how many other juniors in the space are as advanced or more advanced than Leading Edge when it comes to being able to demonstrate quality and consistency in the product that you're delivering? And then my follow up question, Blair, is going to be, what are the next steps to scale that out?

Blair Way: It certainly is a good question, Gerardo. And what we see are number of junior graphite companies, and those graphite companies are at various stages of exploration and development. And of course we're beyond that, we have our production facility, we have our licenses in place, we're just looking at the value adding process, it is a technical R&D type work that we're doing. We believe we're quite well advanced on that, we have produced test batteries with our materials, but what that means is we have a production facility and very few, if any other public graphite companies have such a beast. And that's a huge differentiator for us as far as the market is concerned, but also as far as the customers are concerned. The customers are looking for graphite supply all around the world, but certainly in Europe they're looking for European supply.

There are a couple other companies with exploration property that may or may not have future higher value potential in the future. But we certainly are one of only two EU graphite production facilities, and the other one is private and operates in a slightly different model than how we're targeting the electrification or lithium ion battery market. So, certainly we are very unique in that regard and we think that is a big differentiator at this stage.

Gerardo Del Real: Now, I understand that internally there is a lot of strategic research underway, and you're looking at the possibility for the installation of a battery graphite demo plant at Woxna. Can you explain that to me?

Blair Way: Certainly. Our news flow has been about the batteries that are produced and the tests that we've been able to do, leading into materials that will satisfy the demands of a lithium ion battery manufacturer. But, the next steps for these potential customers is we need to provide them with hundreds of kilos to integrate into their production to confirm / qualify our materials. They're not going to just start buying from us. For us with our existing plant we already have a few hundred tonnes in the shed. We need to basically take that next step by selecting the right spheronising equipment and the right purification equipment, we can then demonstrate a commercial scale operation.

It won't be full scale, but it will be a scale that's relative to a commercial operation such that we can also produce hundreds of kilo samples, which then can be provided to our customers as representative of something we can produce at our site rather than in a lab, which is typically hundreds of grams or maybe even kilograms. We need to be able to produce these larger samples in order to make it to the next step. And you and I have spoken a number of times about this qualification process and the many steps we have to go through while producing these hundred kilo samples and integrating them to the lithium ion cell production is a big part of that.

Gerardo Del Real: Now, within the EU Battery Alliance, how many other potential suppliers of natural graphite are involved?

Blair Way: At present we are the only natural graphite producer, and certainly we believe we have a very strong position in order to articulate how to provide that material. And initially when we join the EU Battery Alliance there was not much awareness of the fact that there was these materials in Europe. There was that assumption that they would have to be sought elsewhere and then that would be a matter of trying to integrate more sustainable mining methodology or what have you. So, we were able to actually demonstrate that there is the materials in Europe, and graphite is the key one for us, but we have a number others in our portfolio that are at exploration stage, but also can demonstrate the potential for supply of those future materials.

Gerardo Del Real: Excellent. Now, Blair, I have to ask you before you go. Rare earths are in the news again, and I know that Woxna is the flagship and deservedly so gets the bulk of the attention right now. But we all remember the last rare earth crisis, which frankly was set off by a very insignificant event. What that did to share prices, and what that did just globally, the new Trump tariff list is targeting high-tech materials that the US needs and definitely will affect the perception of buyers around the world, not just in the US, as to how to secure and source these materials. Can you talk a bit about Norra Karr and the asset which is truly a world-class asset? But can you talk a bit about that and just some thoughts?

Blair Way: Absolutely. I mean, the stuff that's been in the news the last week or the last few days is just incredible. And if you compare it, as you mentioned, to what created the last excitement about rare earths, this is significant, this is major powerhouse countries fighting or arguing amongst themselves on how to manage the economics of materials and the flow to and fro between countries. So, for us with Norra Karr, it's a large rare earth deposit in southern Sweden that has really high potential for being a very resource efficient, with close to zero waste, but it's also significant that it's in Europe. So, it has the opportunity to bypass some of these challenges, the majority of rare earth elements come from China where there are certainly environmental issues in that regard as well.

So Norra Karr has the opportunity for customers to be able to source materials from elsewhere other than China would be a good option. Certainly we've had challenges in the past because the rare earth bubble faded away, China continued to supply rare earths as required for export, but this latest Trump conflict I guess, if you want to call it that, could change that. So, it may not be just the US they turn the taps off, it could be elsewhere. So, that's going to impact people's understanding of how to prepare and plan for the future for this. And we believe Norra Karr, again, is very well positioned to be part of the future of solving these sort of challenges.

And the challenges have always existed, any time you have this limited source of materials, your security of supply is always an issue. And it was an issue five, seven years ago, and it continues to be an issue. But this will bring it to the forefront and we believe Norra Karr to be an asset that will have what we consider to be quite valuable in that regard to, again, some of these industrial European companies, which are wholly reliant on China. This creates for Norra Karr an alternative, and we believe this excitement may push that to the front of the rare earth or to the top of their to-do list rather than sitting way down at the bottom like it has been the last few years.

Gerardo Del Real: Now, the last time that we saw rare earths in the news this way I know some very important and influential, deep-pocketed people got involved with specifically this Norra Karr asset. Are you beginning to get phone calls, again, because I know for a while the asset obviously wasn't getting attention from anybody. But is that phone starting to ring again, Blair?

Blair Way: We're certainly seeing signs of interest and we've been confident that we would see this sort of sentiment return. I'm not a big fan of these crazy bursting bubbles. Bubbles take off and typically bubbles explode. But, what I'm hoping we'll see is a much more practical or rational approach to solving these problems. As I said, the security supply issue has always been an issue, it just hasn't been at the top of the pile of interest. And certainly what we're seeing is that, people are starting to think about it again, and we are very receptive to that. Obviously, we've been protecting Norra Karr, we've always felt it was a world-class asset, and we continue to feel that, and that was one of the reasons we acquired it a few years ago. It is a fantastic asset and it will be very valuable or well-considered in the future. It's just this latest machination is certainly indicating that we might see the future sooner than we thought.

Gerardo Del Real: Well, I know in this space things always take a lot longer than we would like them to. But I want to remind everybody, Leading Edge Materials has a market cap, and correct me if I'm mistaken, Blair, but I think you're somewhere in the $45 million dollar range, Canadian. And that's a lot of upside considering that you have a fully built and permitted facility with Woxna on the graphite side. And frankly, billion dollar assets on the rare earth side, not to mention some exciting exploration projects that involved other critical metals. Is there anything else, Blair, that you'd like to add?

Blair Way: No, I think you're right. Our market cap is quite modest and there's lots of potential upside. Things have to obviously swing the right way. What we're seeing with the rare earths, what we're seeing with graphite, the EU Battery Alliance, and the changes into electrification of transportation in Europe we believe are all significant and very much a positive for our business and for our business model. As we said from the very beginning, the fundamentals are what we believe to be very strong for our company, and we will continue to pursue these channels to fruition and keep our investors informed as we progress through it. Always happy to have more discussions, Gerardo, and keep you up to date on how things are going.

Gerardo Del Real: Well, this one was overdue, so thank you very much, Blair. I really appreciate it.

Blair Way: Thanks, Gerardo. Always great to catch up.

Gerardo Del Real: Chat again soon.

Blair Way: Sounds good.