Categories: Energy
Topics: General Energy

Leading Edge Materials (TSX-V: LEM) CEO Blair Way Discusses the Reinstatement of Norra Karr Exploration License

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me this evening is president and CEO of Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF), Mr. Blair Way. Blair, how are you this evening?

Blair Way: Good Gerardo. How are you doing this evening?

Gerardo Del Real: I'm doing very well, thank you. I understand it's not evening where you're at, so I appreciate the time you're taking to join me, today.

Blair Way: It's not a problem. Time zones are our friends or our enemies.

Gerardo Del Real: Yes, sir. You had some good news this morning. The headline reads, Leading Edge Materials Norra Kärr Exploration License Reinstated, and this is news that pertains to a very strategic rare earth asset that you have that I think in the future is going to be an important project. We all know that the Flagship is the Woxna Graphite Project, of course, but Norra Kärr is something in the future that I think will be valuable. This is pretty good news. Could you share the details of the news release?

Blair Way: Absolutely. I mean, back in August, September when we branded the company and merged Norra Kärr and we had to announce, we were advised of this challenge to our exploration license, then we press released it and we mentioned, or indicated how we were entitled to an appeal and we didn't expect any, we were on the right side of the law, so we expected it to go our way, and of course these things take time. This press release from this morning just indicates that it did go the way we expected and the court ruled in our favor and it's exactly what we anticipated because we've done the right amount of work, we've done the right thing on this property and we definitely have the right to maintain it and continue to work the property for the future.

As you mentioned it is an asset that we believe has great potential for the future and it's very important that we maintain these permits and regulatory compliance in place. Of course, these things can always be appealed, and that is also noted in the press release, as well. This will be third time lucky, we really don't expect it to change any different and it will be ruled in our favor as per the norm, as a law will dictate, the mining law in Sweden.

Gerardo Del Real: Excellent. I mentioned, this is a very strategic asset. An asset that I think is going to be an important one in the long-term, but obviously, right now, the main catalyst and the focus is the flagship Woxna Graphite Project there in Sweden. I know that the stock in the past couple of days has seen some volatility, a couple of days to the downside and then up strongly today on good volume. I think over 22%, if I'm not mistaken.

I think a lot of that was in parts due to President Trump declaring doom for all of Sweden and the second part I think there was a misguided article that appeared on one of the financial blogs that pretty much compared in the words of a wise person in the industry, it was potatoes to peanuts, or something along those lines. If you could touch a little bit on each of those, how are things there at Woxna in Sweden? Is the plant and the infrastructure, is that doomed, or is everything okay out there?

Blair Way: Yeah. As people may well be familiar with the various power of a tweet these days, it took us off guard, we just couldn't believe that something that has been an ongoing scenario or situation in Sweden is that there has been some big immigration challenges and the country has been working through it and unfortunately a single tweet from President Trump has the ability to scare, or frighten, a number of people thinking that something new has happened, and there's a change. Of course, on the ground in Sweden, it's business as usual. There's no change. No indication of any sort of problems beyond what are the norm, and in fact it's probably improving from what it has been a couple of years ago, so again, I think many of these stories that people respond to, and I think President Trump was responding to a Fox News story.

A lot of the information they were using was very sensational and just utilizing whatever information made the story rather than the other way around and have the information and facts make the story. There's that misinformation and then that combined with a story, as you mentioned one of the financial blogs that is quite well read, quite a well-regarded publisher. There's some elements of the story that may have been true, but of course the headline is "sell all graphite." It's like really not the right story angle.

In fact, he was talking more about the refractory material and not the high value material, which is the battery-grade material for lithium ion batteries. Battery graphite is a different beast. It is like potatoes to peanuts. The peanuts are the factory material and that is cheap as chips and you can get it from China, and it's really not that complicated. The battery material is almost like your most complicated french fry. Coming from a potato chip, you got to shape it the right way, cook it the right way and put the right seasoning on it.

That's really what our business is about. It's preparing our graphite, so that it suits the needs of the lithium ion battery market. This gentlemen was pulling up prices from, in some cases, two and three, and four years ago from other people’s articles, and other people’s PEA's, and the like, and drawing a conclusion, maybe he already had that conclusion, and was just trying to find the right facts to support the conclusion, but interesting enough he was wrong on one company and of course that was the company that he supported and said was doing it right.

There seemed to be maybe some ulterior motives in the way that the story was presented, but again, it had a negative impact on us that really shouldn't have happened. Maybe the combination of doom and gloom in Sweden and this gentleman suggesting that graphite we got to get rid of it all because it's scary, maybe those two elements created the volatility and with a little bit of sanity and a few people having a couple nights sleep, many of us thought on it, slept on it. The fundamentals from four days ago is the same as the fundamentals today.

We have a production facility that is permitted up in Sweden, and we have the ability to produce some material from that plant to then process it into high purity spherical graphite. We're working with the end users and the story is the same, nothing has changed from five days ago or even four, or five weeks ago, or even five months ago. We're working down that path and it's a long and hard path to qualify our materials for the various end users that are out there, and the future end users, and working with the future end user there are the challenges there that they're also developing their own specification and working with us, so that ideally is the best outcome that we work with a future battery cell manufacturer that wants to secure supply of our materials, because of its sustainability of supply, its security of supply, and the fact that in Europe, it's a European supply, as well.

Gerardo Del Real: Excellent. Just to be clear, Leading Edge Materials is the only company with the stockpile and a producing facility that can actually complete and make it through this qualification process. Am I correct in that statement?

Blair Way: That's correct and that's something that's often missed, any time you're read it, if you're greenfield graphite company, you have a few drill cores, maybe you even have a thousand meters of drill cores, or two thousand meters of drill cores, that wouldn't even equate to half a tonne of ore, let alone tonnes of concentrate and we have hundreds of tonnes of concentrate in our shed that we can utilize for the processing of sterilizing, purification, and qualification with the various end users and the qualification process involves, initially just hundreds of grams and anyone can get that from a drill core, but the next round of testings are tens and hundreds of kilograms and that's where we are significantly differentiated because we already have hundreds of kilograms in our shed. We can utilize that as we see fit for this qualification process for the various end users. There really isn't anyone else in the public space that has access to this volume of material necessary for the actual qualification process.

Gerardo Del Real: Excellent. When you talk about end users, and potential offtake, or supply agreements, or developing relationships with these important end users, can you explain a little bit what that process is like, because I'll give you an example. I had a CEO of an unmentioned graphite company send me a message stating that, "Hey. They have high purity graphite, right now that I could order,” and I said, "Excellent. Where's your facility and how much can I order," and of course the next statement was, "Well, we actually source it from Brazil." When you're meeting with these end users, and you obviously have behind the scenes had conversations. How do those conversations, what do those conversations focus on? Is it reasonable to assume that if you aren't meeting the specifications that the end users require you to meet and you don't have sustainability in the way of product and quality, that there just simply is no shot at developing a relationship or an end user agreement with one of these groups. Is that correct?

Blair Way: Yeah. For sure. I mean, as you would expect, whether it's graphite or any other product, and again, maybe I'll use my potato analogy, if you're going to McDonald's and trying to sell them potatoes, but you don't have a potato farm, so they’re going to go, "Why you trying to sell me potatoes?" You want to grow potatoes. When you can grow potatoes and demonstrate that they're the right quality and you're able to produce them in the right specification, then they'll buy them from us.

It's again, for graphite it will be more complicated than making french fries from McDonald's, but it's the same concept. You have to be able to demonstrate that you have the products, that you can produce it consistently, and being able to bring over a box, a single box of french fries to McDonald's you know they're not going to place an order with you based on that small amount, they’re going to want to come and see your firm, they want to come and see your QA, QC procedures.

It's the qualification process has a large part to do with demonstrating that you have the product and it meets specification and ultimately it will be put into their production to test that it's suitable for their specific battery cells that they’re producing. They also want to see your production facility, they want to understand how you're taking it from the ground all the way to where it's put in a special bag to ship to their facility to make the anodes.

As you can well imagine, there's a lot of steps to get from the ground to the bag delivered to the anode manufacturer for these battery cell people. Those steps we have to work through each and every one of those steps, so someone saying they can supply it, that's a no brainer. Again, I can call up McDonald's and say, "Hey. I've got some great french fries for you." You know how they're going to respond.

To be honest many of the end users are large companies, like a McDonald's, so they have very clear procedures on how you can qualify to become a supplier. To become a preferred supplier you have to go through steps, and hoops and that's really what we're doing. It is going to take time, this is not a flash in the pan, I'll tell you next week we've got an order, it just doesn't work that way, and a lot of work, but the reward is that everyone else has got to go through that work, and they're way behind. Way behind the eight ball on that sort of process. We'll be at the head of the rank, so to speak, and we also have the benefit of having that production facility. Anyone else has still got to build the basic production facility, let alone the high purity strategy that goes along with it.

The high purity strategy is again not just me choosing to make a french fry of my choice in isolation, I've got to make it to the right shape and form and specification for the various end users. The end users do have variations in their spec, depending, the Europeans have a different spec, not huge, but it is a different spec to what you're seeing in North America and the same in China. It's a really interesting and technically challenging process, but it is also what we believe, going to be very rewarding, because it gets us to the pointy end of the business, where it is even more and more difficult for a new entry.

Gerardo Del Real: Excellent. Just to be clear as far as the qualification process goes, you have more than sufficient material to make through the entire process. Is that correct?

Blair Way: That's correct. We just need to keep working through it, and again that's not just one manufacturer of battery cells that we're working with, but we do try and coordinate some of those tests, so that they can be shared across a number of discussions. As we progress through these tests, and different batteries that we're going to be manufacturing with our material, our high purity graphite, those tests will start to diverge as one company will specify one type of battery cell that he manufactured and tested in a certain manner, and another company will specify another series of tests and processes that we have to put them through. But yes, certainly we have all the material.

We see no need that we will have to run the plant again, until we actually get a specific order for someone, and it may only be for a 100, 200, 300 kilos, or something, and we would then have to rationalize whether it makes sense to start the plant up for an order of that size. It probably will, because it just starts the wheels rolling, but certainly the material that we have in the shed is more than sufficient for what we need to do in the short to mid-term for this qualification process.

Gerardo Del Real: Excellent. Now, again, the focus of course is the Woxna Graphite Project, but Leading Edge Materials is a very interesting company, because I think there's key differentiators in that you have a portfolio of assets that in the future could be very, very valuable, strategically valuable in the sense that you have an early stage lithium project, you obviously have Norra Kärr, the Rare Earth Project. Can you talk a little bit about the portfolio and what the rest of that looks like outside of the Woxna Graphite Project?

Blair Way: Yes. Obviously graphite is our flagship and the result of that is that we're meeting with the battery manufacturer, battery cell manufacturers, and of course graphite is one of a number of commodities that they require, specialty materials, so during these discussions it's almost every time it comes up, well, graphite's great, and we're interested in that, but what about lithium, what about cobalt, what about nickel? These are all key materials that these battery cell manufacturers require, so we've taken it upon ourselves to also prepare our company for the future.

This burgeoning in market that's looming ahead of us, and there are naysayers and people saying it's going to be this big, or that big, or whatever, but there's little doubt that there's going to be pretty substantial growth. How big that growth is, we've yet to see, but we want to be prepared for the demand of the future, and that demand will be for lithium, cobalt and nickel, and our graphite. Obviously our graphite is the most advanced, so we can get first cab off the rank in that particular commodity or material, but having a lithium asset and working that, and de-risking it, so that we have that in our portfolio as well as cobalt.

Nickel is certainly more challenging, but we're constantly on the lookout scouring the European region, typically, because we are European centric and working with European markets. We have identified a number of assets, or potential assets that we over time will add to our portfolio. As the future demands, as these cell manufacturers dictate, we can then bring these sort of commodities and materials on stream to seek their requirements. It really is some strategic acquisitions that we're making right now in anticipation of future demand.

Gerardo Del Real: Excellent. Blair, I want to thank you so much for your time and for the clarification. Is there anything that you'd like to add? Something I missed, or something that you just want to emphasize that maybe I glossed over.

Blair Way: No. I think we probably covered all the key topics. I guess, just be careful what you read and be careful what you see in tweets, because there are often major type reactions. Again, level heads prevail in these times, and it's about the fundamentals, and if the fundamentals are there a tweet or a disparaging news story shouldn't have any impact to the sensible people, because they're able to understand the reason for participating in a company such as ours.

We believe our strategy is sound and our fundamentals are strong, and we will continue to follow this path and strategy to its, we believe, successful end and whether Donald Trump suddenly tweets that he doesn't like the color of the Swede's hair, or something like that. I just don't see that should have any impact. It may well. We just have to deal with those knocks as they come. As I say, I think it's important for people to always step back and take a look at the fundamentals, and what's changed. And a tweet or a single news story, generally is not capturing facts that will affect those fundamentals.

Gerardo Del Real: Excellent. Now, I'm assuming that people can go to leadingedgematerials.com and if they ever have a question, Blair, can they get a hold of you through the website?

Blair Way: Absolutely. I try to answer most questions personally, as time dictates, but that's often my late night activity is just going through messages. I do have a number of investors that contact us through the info email that is on the website. As I said, I do try to respond to all, sometimes the administrative stuff goes to other people, but I guess what I will call sensible questions, I'm quite happy to answer, unless someone wants to know what my favorite pudding is or something, I'll probably ignore that question. Yeah. Certainly, I'm happy to talk to investors. Ultimately the investors they're the boss, I work for them. We're building this company for them, so I'm happy to communicate.

Gerardo Del Real: Excellent. Blair, thank you so much for your time, and hopefully we have you back on soon. I know that behind the scenes you're very active on a number of fronts. I'm looking forward to seeing how the rest of the year develops for Leading Edge.

Blair Way: Thanks, Gerardo. We have an awful lot going on and I look forward to being able to share that news as we go, both through press releases and various interviews that we can do from time to time just to put some words to the story, because I think it helps people better appreciate the trajectory that we're on and why we're so confident with it.

Gerardo Del Real: Excellent. I look forward to visiting Sweden and the facility soon. Thanks again for your time, Blair. We'll chat again.

Blair Way: Thanks, Gerardo.