Categories: Energy
Topics: General Energy

Leading Edge Materials (TSX-V: LEM) CEO Filip Kozlowski on the World Class Norra Karr Rare Earth Project, Woxna Graphite Project & Critical Metals in the European Union

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Leading Edge Materials, Mr. Filip Kozlowski. Filip, a long time coming. How are you today?

Filip Kozlowski: Very good, Gerardo. Thanks for calling. Really nice to be in touch with you now.

Gerardo Del Real: It's great to finally connect. I say a long time coming because you and I are familiar with each other and we have been for years now. Leading Edge is a company that I've followed, frankly, since Flinders and Tasman merged assets in 2016. so you have a suite of critical raw material projects that I believe is top-notch, especially relative to the market cap and we'll go ahead and talk about that here in a bit. But before we get into all of that, can you give us a brief overview of Leading Edge Materials and then I want to get into your background, some of the management changes that were implemented recently and why that's going to be very consequential for shareholders as you advance the suite of projects that you have?

Filip Kozlowski: Sure, and I think you summarized it very well. We have a portfolio of projects directed at what is called critical raw materials, and the obvious common denominator is that the portfolio projects are located within the borders of the European Union. That's the core of the strategy and will become relevant when we talk about the management change as well. So we have the Norra Karr rare earth project, which is a heavy rare earth project. It's one of the most significant heavy rare earth projects globally. And we've been developing that for over 10 years for the most part underTasman Metals before the merger. We also have Woxna graphite mine, which was a part of Flinders which was restarted under the current ownership in 2014. Since then we've been working on developing the very high purity processing technology to actually make a graphite product that is suitable to the higher value markets, such as lithium-ion batteries, fuel cells, graphite for 5G implementation as well.

So those are our two main projects. And then we then have an exploration project for lithium in Sweden as well. we haven't done much work on that in the past, but we're looking to do more work there now, when we see lithium being more in focus again. The sort of I guess odd child in the family is our Romanian asset, which is still within the European Union, targeting nickel and cobalt. We just had to go there to find something interesting to look for cobalt and we're very much looking forward to that as well.

Gerardo Del Real: As far as the assets go, I want to start by talking about Norra Karr because it is a world class heavy rare earth project. You and I know that there is a lot of attention and capital stepping into the rare earth space and not just specifically rare earths, but critical metals. You have some very, very deep pockets that have a very vested interest in advancing an independent, critical metal supply chain in the US in Europe and elsewhere. And of course, the elephant in the room is that China controls the vast amount of the production for rare earths and the processing.

And so obviously that has some national security implications for regions across the world. And so while there's always been an emphasis on developing that critical metal supply chain, I don't believe there's been the structured platform and capital that exists now. So to that end, and before we get into Norra Karr, let's talk about the management. Can we start with your non-executive chairman and director, Lars-Eric Johansson, and then I'd love to touch on a few of the larger shareholders that are now very active and I think have their interests firmly aligned with shareholders moving forward.

Filip Kozlowski: Yeah, sure. I think what led to the management change and myself taking on the role that I am in now is a natural progression of the company towards the next phase of developing our projects. So where both Tasman and Flinders were founded by some very excellent and very successful Australian geologists. They were running the company from Australia. Whereas, all our projects are based in the European union, and it's not so much about exploration anymore. It's a bit more about the development of the projects and interacting with both local and European stakeholders, whether it's, local residents, high ranking European commissioners to promote the projects. And that is where this led to the change of the board of directors and myself stepping down as a director and taking on the role as the CEO.

So, having summarized that when you mentioned our non-executive chairman, our chairman Las-Eric Johansson is a Swedish citizen  lives in London, has a very successful career behind him in the mining industry, where over the last decade he was the CEO of Ivanhoe Mines, and now having stepped down from those roles, he was willing to share his experience and his network, seeing the potential  to, do something for the Swedish mining industry. Our two swedish projects, being unique in the sense that they could  provide a long overdue revitalization of the Swedish mining industry, where you take the critical raw material space as a stepping stone for doing something really relevant for the Swedishmining industry. So that's how we managed to attract him into our small company, which we have to confess that we are, and we're very happy about that. And the other than non-executive director is Daniel Major. He's the CEO of the uranium development company GoviEx listed on the TSXV and  is also based in the UK. And the third director is the largest shareholder of the company. He is a Swedish citizen, living in Europe. I'm not sure how common that is among the junior miners on the TSXV, but seeing a shareholder putting his name up there as a director and looking after his shareholding, in the best interest of all shareholders, keeping the board and myself as the CEO accountable for delivering on, what the shareholders need to see, some return on their investment. I think that's a very good structure. I mean, putting that board together with myself, three out of four are Swedish citizens developing Swedish projects. I think we're very much aligned there, geographically, and this was something that was sort of coming for a while, but where in this year 2020, which is a terrible year in terms of COVID and how bad it has hindered people to develop projects now that's a clear bonus of being located in the same time zone. So I can, I can drive up to the Woxna graphite mine in three hours to the north. And Norra Kärr two and a half hour drive south, In Sweden, whether you agree or not with that strategy, we haven't really had streets locked down. So everything has been working fairly smoothly I would say from an operational sense, when I look at it. So I think we have that platform, going from exploration to development and really getting deep into the interaction with potential partners, politicians and other public stakeholders and local stakeholders when having a local CEO. I have my office in Stockholm and even though we're a Canadian company, we have a pretty broad base now of European shareholders with a 50 50 split between North American and European shareholders at the moment. So, we're becoming more of a European company, but that is to the benefit of the North American shareholders as well.

Gerardo Del Real: And I'll do my best to put that as bluntly as possible. That's a long winded way, a very well put way, but a very long-winded way of saying that you and the team in place now have the connections and the network locally and regionally to advance the multiple projects that you have forward. Is that accurate, Filip? You, Lars-Eric, aren't a team that was brought together to take a sub 30 million Canadian market cap company into a 50 million market cap Canadian company, right? This is, in, some ways a legacy project for many of the people now involved in, and you're looking to grow this into, like you mentioned, the revival of critical metals mining in Sweden. Would that be accurate?

Filip Kozlowski: In the simplest form yes. One of the big criticisms that you'll always hear from the opposition to projects in Sweden or in the media is that here comes the Australians and  Canadians that want to take our mineral assets, it's not really the same argument anymore. I mean, we're Europeans, we're developing Swedish projects for Sweden and for Europe. And I think that goes a long way for building trust and confidence in what we're doing

Gerardo Del Real: Well put. Let's get into the projects you have,despite COVID and the delays that many companies have suffered. You've been very active. You've initiated a PEA on Norra Karr, you've hired consultants to carry out a PEA at Woxna. Can we start with Norra Karr and you correct me if I'm wrong, but I believe that Norra Karr will be the flagship moving forward, though Woxna is closely behind. Is that accurate just with the amount of importance that the European region is placing on an independent rare earth supply chain, is that accurate?

Filip Kozlowski: Yeah. I will take a step back as well. Having discussed the management change, another important aspect that happened over summer was the capital  raise as well with the new board and myself. So, we are well funded and started looking at, what can we do to start progressing these projects more aggressively? Coming back to your comment, which one is the flagship now, it's not really up to me to decide. You can see the  graphite mine being a brownfield where you're only developing the downstream processes. It's clearly a more mature project in that sense, and maybe the timeline is shorter.hen on the other hand, where we have the huge policy support and the real need, and the urgency to support projects is in the rare earth and the magnet supply chains. So, where it will end up, I'm not comfortable in sort of deciding that, but I think they're both very well positioned for what is happening because what we're seeing now in the European Union is this huge support for becoming more self-reliant on raw materials, right?

So, you've been, everyone's been able to follow Trump and executive orders and so on, but there's been a lot of work going on in the background and in the corridors  of Brussels for over a year. And we're seeing those things materialize now, up to somewhere where the European commission is talking about a strategic autonomy  for the European Union. And that's quite strong wording for normally quite conservative European politicians  These sort of things have been tried in the past as well, but this time it's a much stronger commitment where I would say beyond the point of return. There's such a commitment to this theme and it links back into all the stimulus efforts that's coming in towards revitalizing economies afterCovid and, agreeing to become carbon neutral by 2050, 2060.

It's just this huge theme, this major trend where there is much more longevity and much more commitment this time around, I would say. So what can I say about Norra Kärr.We identified, what do we need to do to start moving this project forward? Anyone that has been following the Norra Karr project is well aware of the strengths of the geographic location off the project and how close it is to infrastructure, but that has also been one of the challenges of the project being an area that is not that used to greenfield development of mining projects. So, on the one hand we see great support and great demand for the project to go forward. But at the same time, these challenges in terms of, can it be done in a sustainable way that doesn't impact the local environment too much.

So what we want to do there is really, the last PFS was done in 2016, clearly a lot of things have happened since then in terms of technological progress in the industry as a whole, in terms of new separation technologies being developed, testwork on the processing for our project. So, we want to take into account all of that work and all of that investment that has been done over the years. See what we can do with that. See how we can increase the resource efficiency of the project and by doing so, what can we do to minimize the local impact of the project, and by doing that, obviously it's a more sustainable project. And by having a more sustainable project it's going to be a higher probability of it going through the permitting process.

At the same time, more importantly, being able to attract the support of the public sector and get the European commission and the Swedish government saying, this is a project we want to support, you've done your part of the equation, where you've proven that you've limited the local impact, now it's supported from our side. So that's what we're doing there. And the press release is quite informative, I recommend anyone to read about it and what the potential is. Because, 65% of the material mined is a material called nepheline syenite in the PFS that was done in 2015, all of that went into the tailings facility. Whereas that could have some significant value in terms of a commercial product as an industrial mineral.

What we're doing now, as part of the PEA is defining now, how would the project look like if we don't treat that product as a waste but as something that we could sell and the associated, reduction in size of the tailings facility, the reduced operating costs of treating it as a waste, the potential byproduct credits that we could receive for it. So that's, the first and the next step that we want to define for the project. And we think that is going to be, should be a big step up for the project in terms of the local impact.

Gerardo Del Real: And what makes Norra Karr so special is the fact that it's one of the world's principal, heavy, rare earth projects. Correct? And, and this is critical, pun intended, for high strength, permanent magnet. So if the European union is going to pivot aggressively the way it has and have battery directives and have mandates for clean energy and electric vehicle development, you can't do that without the materials, correct?

Filip Kozlowski: Yeah. Very happy that you bring that up because, you know, rare earth elements are normally lumped together, but you have the heavies and you have the light rare earths and within both of those groups you have some that are more critical and some that are less critical, and some might even be waste as well. So I think that's a very important aspect. One of the big allures of the Norra Karr project is it's so heavily enriched with dysprosium  and terbium, which are some of the most valuable rare earth elements. You can see how the heavies are becoming more and more in focus. And this is one of those areas where even China is struggling to find supply of the heavy rare earth elements. So I think when you read news stories about China stockpiling, it's more commonly referred to the heavy rather than the light ones.

So I think that is an extra allure of Norra Kärr definitely, when you look at Europe, read about their plans, the European Commission wants to raise the capacity of offshore wind in Europe, 5 fold by 2030 and a 20 fold increase by 2050. Those heavies are required for those types of magnets that are in those wind turbines and in the electric motor that goes into a Tesla or electric Volkswagen. Guess it depends if you're in the US or Europe, whether you have an electric Volkswagen or a Tesla. 

Gerardo Del Real: By when do you expect the results of the PEA so that shareholders can see what the next steps are.

Filip Kozlowski: Yeah. So, I mean, we're moving back from a PFS to this PEA and I think one of the objectives with that is trying to move swiftly on this, being able to demonstrate what the potential is. I would say within the next couple of months, depending on how things go with COVID obviously. At the moment things are running smoothly using international consultants but they might have trouble  to travel and do site visits within the next couple of months. So it depends, but first quarter we will definitely come out with how that study looks like.

Gerardo Del Real: Before I ask you about Woxna I have to ask you about the misconceptions surrounding Norra Karr. I get emails often regarding the permitting status and I had one the other day that I shared with you privately, where a potential shareholder was worried about the uranium content and the fact that they believed that the project would never be permitted and licensed, despite the fact that it's licensed currently, because of the uranium content. Can you speak to that briefly? And then, I'd love to talk about Woxna for a bit,

Filip Kozlowski: And you're bringing up another very important point, which is another one of the big benefits with Norra Karr being one of the rare earth projects that has one of the absolutely lowest radionuclide contents by far. And this has always been mentioned and been identified but has never really been proven enough. So, from a geological standpoint, we know, what sort of content is in there, but as part of the processing waste, hasn't been well-defined enough. And, for a shareholder maybe that is not as important as it is for your local neighbor living in their summer house next to the project. We need to demonstrate very clearly through test work what that is.  So, you know, that's also an aspect that we want to demonstrate with this type of work. That's where we can do technical work with our consultants. We define really new conclusions and the potential of that through the process. We can then take those documents back to the local regulators, the local stakeholders, and clearly show them with scientific evidence that there's no risk with this. So that's what we want to do as well.

Gerardo Del Real: Excellent. Let's talk about Woxna. Woxna was for a very, very long time the focus for Leading Edge. And I think obviously the quality and the importance of the project is again, pun intended, critical for the company moving forward and a project that can greatly help benefit the European region in regards to supply. Can you talk about Woxna for a bit?

Filip Kozlowski: Yeah, absolutely. And, we come back to this, which one is the flagship or not between our projects. It's very hard to choose, one day you wake up and it’s Woxna , the next day it’s Nora Karr. So I don't think we prioritize and we love both those children and where Woxna has the big benefit from being a brownfield project. It’s one of the very few western world’s operational ready graphite mines. So, we've done a lot of work over the last years, developing a thermal purification process to purify our graphite to about 99.99% purity. It's a slightly different path from what is done at the moment with chemical purification done at all Chinese production. And do remember what Benchmark intelligence quite often reminds people about is that China controls 100% of the lithium-ion anode precursor material in terms of processing of natural graphite.

So talking about criticality, that's 100%, it's not 98%, like for rare earths, it's a 100%. So there's clear room for European supply to come online. The big benefit for thermal purification, which is becoming more obvious, is when you have the European Union talking about leveling the playing field against Asian supply of battery materials in Europe by life cycle analysis and putting a number on the carbon footprint of that production and sustainability. The benefit is quite clear when having 100% access to hydro-power, which is zero carbon footprint and with a very low electricity cost in Sweden. We have a huge benefit there, both in terms of our processing costs and in terms of our environmental costs. That is the main reason why we're going ahead with a PEA for the Woxna project, where I think what is important to understand is we're including the downstream processing where in the past our PEA was only done to include the graphite concentrate products. We're now including the downstream value added steps of milling, processing and thermally purifying that so we’re able to demonstrate, what's the economic potential here, and what's the operational potential here, what products can we produce? How much could we sell it for and how does this actually look like for an investor? So pretty similar as for Norra Karr, there's been a lot of work done over the last years. We're incorporating this in a technical report enabling us to have a document to show investors that this is what the project is about. This is what you can expect from the project going forward. So talking graphite, we haven't touched that much on the European Raw Materials Alliance, but maybe this is an opportune time.

So the European Raw Materials Alliance, which just launched a month ago and is pretty much building on a staged rocket where the European Green Deal was launched last year, deploying a trillion euros of investment into industrial ecosystems so they can become circular over the next 10 years. They realized that they need the raw materials and can’t rely on other regions, so how do you solve that? They launched an action plan on raw materials. And one of the bullet points in that action plan was to launch the Raw Materials Alliance where they essentially bring together the whole value chains that need these raw materials and try to identify ways that they can support development of raw material supply in the European union. There's already a number of measures that are looked at to implement. One is mitigating regulatory and financial bottlenecks. They're going to launch a raw materials investment platform to stimulate investment into key projects. They specifically mentioned that they're going to do a screening and identify projects that could be operational by 2025 and identify where they could support that. Another very important side of it is to promote public awareness and acceptance of raw material supply from Europe. So the primary focus of that raw materials Alliance is the rare earth and the magnet supply chains because that's where the European commission says there is the biggest urgency, but it's clear that this will spread over to a number of raw materials, supply chains, graphite being one, lithium being one cobalt being one. It is just this huge platform where you're supporting the critical raw materials industry in Europe for Europe.

Part of that there's a lot of stakeholder consultation process. Due to the uniqueness of our two projects we've been heavily involved in that. Coming back to the PEAs that we're doing for both the projects, we want to use those documents, both towards investors to demonstrate what the projects look like going forward, but as much we're doing it for those kinds of forums, which is almost as important, even for our shareholders, that we can demonstrate to potential partners and potential future customers, to the politicians, what projects we actually have and what timeline. So how does it look like, what's the investment case here? So that's what we're doing in that framework.

Gerardo Del Real: I know that you have a suite of projects in Romania that you are working to finalize licenses for, and I've already taken up 30 minutes of your time Filip so I want to, I want to bring you back to talk about those. And I know there's been some delays with the courts because of COVID. And I also know that you've done some work with the Bergby lithium project in the past. And again, I want to make sure that we chat about those, but I don't want to take away attention from your two flagships, let's call those Woxna and Norra Karr.

But before I let you go, I have to ask you about the new Chinese export restriction law, which everyone is anticipating the implementation of, which is I believe December the first, it seems like with the three and a half million that you raised Canadian in the summertime, the simultaneous PEAs on Woxna and Norra Karr, the platform now with the European raw materials Alliance and the mandate that is spreading across Europe and elsewhere. But for you strategically Europe is the main event there. I have to ask you about the implementation of that restriction law and what you see developing as a result of that. And obviously that leads into what sounds like a very, very important and critical time for Leading Edge in Q1 of 2021.

Filip Kozlowski: Yeah, for sure. It's been well talked about, and it’s one of these firm deadlines. This has been implemented and it becomes effective on the first of the 1st of December, it’s anyone’s guess what China will do, but it's a clear timeline on it. And I guess everyone's a bit nervous about that. What will happen? Having said that I couldn't see any less  support than is already here. The urgency is already raised in terms of the support that is being committed to this industry. And so I think, if there's anything happening, everyone is sort of more prepared now, but it's definitely causing some nervousness in the market and you can see the prices are moving up. You can see Chinese rare earth companies are moving up.

It's definitely one of these hot topics where the outcome is very much unknown, but it's something to keep an eye on. What happens is very much in the near term in two weeks time. So, as you mentioned, we have a platform in place and I'm super busy with everything going on, but it's a clearly defined path forward where  we have the management change, raised money and we're now deploying the money to the projects. We talked a lot about Norra Karr and Woxna. We're spending some small money to identify what can we do to progress the Bergby lithium project as well which has been very much under-explored even though it's a great discovery in the context of Swedish lithium. You mentioned Romania. Yeah. That's, I would say that's the one project where we've been impacted by COVID where we're waiting for the final judgment from the court. The courts are affected by COVID simple as that.

I think you have followed the company for longer than me, and I've seen a number of years where the sentiment was pretty poor in battery materials, and critical raw materials, but just being  part of this whole industry over the last six months, with the complete shift in sentiment, seeing Tesla getting  into the upstream of the lithium value chain, seeing European automakers getting involved in sourcing raw materials, seeing some of our competitors and their stock prices. You can see investors are coming back and there's definitely positive tailwinds in the industry. And I think we are definitely positioned well for that going forward.

Gerardo Del Real: You mentioned higher graphite and rare earth prices, several of the companies, and let me be frank many companies, which don't have a quarter of the quality of portfolio that Leading Edge Materials has have moved up, two, three, four fold here in the past couple of months, I suspect that the next several months will be justice favorable for Leading Edge. And again, you have multiple catalysts in the queue, so I'm really, really looking forward to the end of the year. And in 2021. Filip, I want to thank you for your time. Is there anything else that you'd like to add that we didn't cover?

Filip Kozlowski: No, thank you, Gerardo. This was long overdue as we started the call and I’m very much looking forward to the next time. And I think the most suitable time would be when we can start presenting some results from the studies. You know we'll have even more to discuss at that point, looking forward to that.

Gerardo Del Real: Excellent. Filip, thank you for your time. You have a good one out there. Stay safe.

Filip Kozlowski: Have a nice day Gerardo.

Gerardo Del Real: Thank you so much. All right, bye now.