Categories: Energy
Topics: General Energy

Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF) CEO Filip Kozlowski on PEA & The Billion Dollar Norra Karr Rare Earth Project

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, how are you this morning?

Filip Kozlowski: Hi, Gerardo. Good morning. I'm very good. It's been a few sunny weeks here in Sweden, and we've had some excellent progress in terms of the company and the things that we have released recently. So yeah, very happy mood at the moment.

Gerardo Del Real: Let's get right into it. You're being a bit modest. The company has a market cap right now just over $37 million Canadian. And you just announced the PEA results for the Norra Kärr Rare Earth Project. The company now has two critical metals assets with combined NPVs well over a billion dollars, which of course is impressive. But even more impressive to me is the fact that the PEA that you just delivered, and we'll get into the details, is a lot more environmentally friendly than what was envisioned in the past. So let me read the headline, and then I would love for you to give us the details. The headline reads:

Leading Edge Materials Announces Positive PEA Results for its Norra Kärr Rare Earth Project With $1.026 Billion Pre-tax NPV of 10% And 30.8% Pre-tax IRR.

The PEA is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

I would love for you to first talk about the numbers around the PEA, the mine life, the Net Present Value, and then let's get into what's pretty significant to me, just how you minimized the environmental footprint of the project which we know is important as we move forward, right?

Filip Kozlowski: Yeah. So you mentioned the $1 billion here and the Woxna Graphite project is $317 million pre-tax, so together, $1.3 billion. So I think when we set out to do this PEA, there were two main objectives that we wanted to achieve. One was to completely redesign the project, and the main objective by doing that was to reduce the footprint at site. We've achieved that stellarly. If you look at some of the images that we started publishing in the press release and on our website, it's clear the magnitude of reduction of our impact, and then that's just the physical footprint that's changed. When you think of the fact that we removed the wet tailings, so the tailings, that really has been the biggest concern in the past about the project.

It's a completely different project. The reason why we've been able to achieve that is we've looked at resource utilization on the project, and we said it doesn't really make sense to only extract less than 1% of the material that you mine. It's a deposit that contains zirconium, hafnium, and niobium, and nepheline syenite, which is a fantastic industrial mineral. Why not look at valuizing those and start selling them, not treating them as waste, rather treating them as product? All of this together has resulted in this dramatically reduced footprint. We're moving the chemical processing offsite. So in the past, we were looking to shipping sulfuric acid to the site and processing there, and that would generate the chemical tailings that would go to the tailings dam.

Now we're looking to send the concentrate, the concentrate that carries all the rare earth elements, to an offsite facility. In the PEA we've used a location in Northern Sweden. It could be somewhere else in Sweden or in a neighboring country, but that's where all the chemical leaching and the extraction, the recovery of the rare earth elements will happen. So all in all, significantly reduced amount of waste and the reduced footprint at site.

The other thing, coming from the financial background which is quite close to me, is by adding more product, we're also increasing the revenue potential of the project. So this is PEA stage of our report, so we've been very conservative in terms of what value we assign to those co-products, being the nepheline syenite, the zirconium oxide, the niobium oxide, but there's clear potential there.

What's important about that is not only does it reduce the cost of actually extracting the rare earth elements, making us more cost competitive with the current Chinese supply, but it also makes a more resilient project because a large criticism against any emerging projects outside of China is that you're going to be dependent on whatever China does with rare earth pricing. Whether they manipulate it or whether it's through their control of the market, they can put any rare earth project out of the market by lowering prices there. However, if you have other products, you're not as dependent on that revenue to continue operation, so I think that's a very important point as well we've achieved.

Gerardo Del Real: Agreed. We know that the EU is laser-focused on establishing an independent critical metals supply chain. There's very few options on the rare earth side in Europe, Filip, and I got to believe that the life of mine being at least 26 years, right? You mentioned being conservative. I think that is conservative, but at least 26 years. That's got to bode well for future discussions about how Norra Kärr plays into helping contribute to a critical metals supply chain in Europe that's independent.

Filip Kozlowski: Yeah. Absolutely. Norra Kärr is the only project of its kind in the European Union, and clearly there's many eyes looking at it and seeing our plans going forward, seeing there's a path forward for how this can be a feasible and sustainable project, both from the sustainability side, but also from the economic side. We're very much looking forward to present this new plan for the project to those kinds of forums, like European Raw Materials Alliance.

You mentioned it's a 26-year life of mine as we based the economic model for the PEA, but we provided an unconstrained resource as well, which is about 100 million tonnes with the appropriate disclosures that you see. So it's a great deposit, and it could tip the balance overnight when in production for Europe to become more self-reliant. It's neodymium, it's praseodymium, but more importantly, the unique aspect of Norra Kärr, and I have to highlight that every time, it's the dysprosium and the terbium being the really critical rare earth elements, where even China is relying on imports from Myanmar to get their heavy rare earth concentrates, where we've recently had the supply chain disruptions. We've seen prices going up again over the last few weeks, so that makes us a very unique project in many aspects.

Gerardo Del Real: A lot of opportunity. I mentioned the market cap. I'll highlight it again. It's just over $37 million Canadian. Filip, it's clearly been a busy several years, but definitely, definitely a busy 2021 for you. What can we expect here moving forward?

Filip Kozlowski: So I think we've come to a point where... I became the CEO roughly 12 months ago, and we've now provided a platform really for how to move the project forward. So the new board of directors with Lars-Eric Johansson, Eric Krafft, and Daniel Major, and myself, it's been all about demonstrating the value of our project and showing what the plan is for it. So I think we've done a very good job in showing what the value and the potential and opportunity are in the project, and it's now all about how do we move that forward. It's in the middle of the summer. I'm supposed to be on holiday for this week, I'm not. But coming towards August/September, we'll start outlining the plans that we have for how to use these results to start moving the project forward again. So we're looking at a very busy autumn for the company, and don't forget we have the Romania project as well, where we've been waiting a long time for an exclusive exploration license, and hopefully that is something that will materialize as well in the future.

Gerardo Del Real: Excellent work, Filip. I'll let you get back to it. Thank you again for your time and the update, and I get the sense that we'll likely be talking about Romania here soon.

Filip Kozlowski: Thanks, Gerardo. Thank you very much. Take care.

Gerardo Del Real: Thank you, Filip.