Categories: Base Metals
Topics: General Base Metals

Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF) CEO Filip Kozlowski on JV at Woxna & Exciting News in Rare Earth Space

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Leading Edge Materials – the very busy Filip Kozlowski. Filip, how are you this morning?

Filip Kozlowski: Hi, Gerardo, happy Friday. I'm very good.

Gerardo Del Real: Happy Friday to you as well. I mentioned that you've been extremely busy. Let's get right into it. Two big pieces of news that I want to cover. The first is the proposed joint venture plan for an advanced anode materials business. This of course centers around the Woxna Graphite plan.

And then the second piece of news that I really want to dig into and get your take on is this surprise announcement by GM and General Electric to study the rare earth supply projects for electric vehicles in Europe. This is something that we've expected, European battery and car makers to kind of lead and take charge for years. And it just hasn't developed at the speed that we thought it would happen. Out of nowhere, General Motors and General Electric decide that they're going to come into the region and throw their multi-billion dollar balance sheets behind this. I have to say, Phillip, and we've talked about this for a while, and I'm talking to my own book now because I'm a supporter of the company. There's not a lot of rare earth projects to look at in Sweden or Europe. If GE and GM are really looking, am I wrong?

Filip Kozlowski: No. It's a fantastic summary, Gerardo. I don't know what to say myself, but look, if one of these weeks we have a confluence of positive news for both our main projects in Sweden it's quite a nice note to end the week on, but let's talk with the Woxna Graphite project. This is something that we've worked on for a while, so it's very pleasing to come out and announce the plans that we have for that. What we're essentially doing is we have this graphite mine, and we're looking to upgrade that graphite material we've done a lot of work on upgrading that graphite material to your traditional Coated Spherical Purified Graphite material. As part of looking at various coating technologies, we came in touch with this Australian company called Sicona Battery Technologies, and started looking with them.

We've exchanged material with them. They've coated that material. We've tested that material in cells and it performed very well. That was the starting point of our discussions. And then eventually one thing led to another, and then the core competency and the know-how and the IP of Sicona is not on coating side. It's really on the silicone composite side. So the next generation of battery materials, and that, got us intrigued, cause that's something that we haven't had the capacity to look at, but obviously, looking forward into the future, that's where we want to be. Higher storage capacity, higher selling price, more importantly for our shareholders. So we started discussing that and, luckily, they were looking for partners around the world to establish manufacturing facilities and leveraging their IP and know-how, and that was pretty much a perfect match.

So we worked on hashing out the non-binding terms of this MOU heads of agreements. The key points that are worth considering is that there's a clear path to how to execute on this joint venture. How it’s envisioned, once it becomes incorporated, is that we do a 500 tonnes per annum stage one commercial demonstration plant. You and me, we've talked about the demonstration plant, the pilot plant we want to do, this is something much bigger. So 500 tonnes per year is the significant amount of material we're looking to go to that scale, to produce significant amounts of material, because we're... Now in Europe, we're looking at more than a terawatt, so 1,000 gigawatt hours of planned battery production capacity in Europe within the next 5-10 years, that roughly equals to a million tonnes of anode material. Where is that going to come from?

So we need more material to qualify with our customers. And then, the other thing, which is beneficial for the corporation with the combined 50/50 joint venture that they worked a lot on how to do the composite anode material. So not just looking at natural graphite and silicone, they’re working on natural graphite and synthetic graphite, putting that together and putting it together with silicone. And that gives us an opportunity to actually target higher volumes than what we have in the PEA for Woxna, we're limited by our production capacity, assisting processing plants, because we can essentially start looking at taking into 50 graphite. All of this makes it a bigger business and when you start looking down the road on the silicone composite side of things, that is a much more valuable material. So it gives us a higher selling point. We're having potential, if this joint venture goes forward for higher volumes or material coming out for that joint venture at higher selling prices.

When you talk about the relevance for us as a small producer in Europe, now having the IP, how for the next generation materials, it makes us more relevant when we engage in discussions with the potential customer. So the battery factories, in Sweden and Germany.

Gerardo Del Real: It's interesting to me, Filip, that if this joint venture proceeds as envisioned, there is an agreement to sell all of the graphite concentrate production from Woxna at an all-in cost basis, plus a 30% margin. So you're essentially guaranteeing yourself that margin it's built into the agreement. Assuming that things move forward the way you plan, correct?

Filip Kozlowski: Yes. Correct. To note, there's a cap on that, compared with the relevant pricing benchmark, but it makes it a very healthy business on the graphite mine side, which we own 100% of, and we own 50% of the joint venture, which is a bigger business. So it makes a lot sense. When you talk about graphite pricing, lately, we've seen very positive trends in terms of how graphite flake pricing is moving, especially in Europe. And this all comes back to what all of your listeners are reading about every day. There are global power crunch, the supply chain issues.

Look at any refined material out of China. They don't have electricity to power all the refinery plants, whether it's lithium, whether it's silicone or whether it's graphite all of these materials are going up in price, making a very strong argument for localized supply chain where that was what Sicona identified with us. And in addition, one of the reasons that Sicona we're really interested in talking with us was the thermal purification process, seeing how that material for much better than any other material that they tested in their Silicon composite. All things aligned, I'm very much looking forward to next steps on working on that.

Gerardo Del Real: Excellent, that's Woxna congratulations. I know a lot of hard work went into that. I first wrote a check for Woxna though, way back in, I want to say 2009 or 2010, so this is absolutely a milestone moment and hopefully everything proceeds as planned. Let's talk GM let's talk General Electric. Of course, you have the only world-class rare earth project there in Sweden, in Europe. GM and GE now are looking to make a significant inroad to developing their own rare earth supply chain. They want magnets, they want copper, they want steel and they want access. And we know that it's going to be an interesting road to get that access because there is not a lot of options and you have to be on the radar.

Filip Kozlowski: I think when we exchanged emails, around the Sicona news, on that announcement, that I'm so pleased to announce this news and then comes this news on the other side, out of the blue. And I'm as excited about that. It's not a new theme. Everyone knows this. There's a dependency on China for the magnet earths. So heavier rare earth elements, and everyone's been discussing this for the last 10-15 years. What can we do about it? We as a company, we have material. We identified that there's demand for it. And they see that there's a potential supply crunch on that material, but there hasn't really materialized any activity from downstream. Essentially, they need to get active in supporting the development of upstream.

And there's been a lot of discussions in Europe over the last 10-15 years, also within the European Raw Materials Alliance complex over the last 12 months. What can we do to support the upstream? And here come two major blue chip OEMs out of the U.S. and specifically mentioned North America, they want to establish secure, sustainable, resilient, local supply chains, but not only in North America, but also in Europe, General Motors, they talk about electric motors for their cars, General Electric, obviously, looking at the magnets for their wind generator, wind turbine generators and it's fantastic news. I'm very happy to see this commitment from downstream because that's where it needs to come from to validate the concept of.. We need to get actively involved in supply chains. We need to solve this problem, and eventually putting their money behind it. So, fantastic news and I'm hoping this makes a few rings on the water here in Europe as well.

Gerardo Del Real: Well, the share price has responded in volume and appreciation. I think, Leading Edge is significantly undervalued just with Woxna. If you add Norra Karr it's quite the opportunity. It's been that way for quite a bit, if we're going to be frank. But I think, now with the momentum overall in the space and it getting very specific to the region where your projects happen to be on top of the fact that you now have this joint venture announcement that you just published a lot of exciting news. Thank you so much, Filip. Anything else to add to that?

Filip Kozlowski: No, it's a perfect storm. You have the, you have the growing demand, you have the supply crunch and you have the political tailwinds, so yeah, very happy environment to work in.

Gerardo Del Real: Excellent. Filip, thanks for your time. Appreciate it. We'll chat soon.

Filip Kozlowski: Thanks, Gerardo. Have a nice weekend.

Gerardo Del Real: You as well.