Categories: Energy
Topics: Lithium Stocks

Q2 Metals (TSX-V: QTWO)(OTC: QUEXF) Executive Chair Keith Phillips on World Class 100% Owned Cisco Lithium Project

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chair of the board of directors for Q2 Metals (TSX-V: QTWO)(OTC: QUEXF), Mr. Keith Phillips. Keith, you are new to our audience. Q2 Metals most definitely is not. We have done very, very well with Q2. I couldn't be more happy to have you on. How are you today, sir?

Keith Phillips: I am wonderful and flattered you're having me on. Thanks for doing it.

Gerardo Del Real: Well, listen, let's get right into it. I read a research report here recently that put a price target on Q2 somewhere in the $9.50 area. And that was after giving consideration to the fact that the bulk of the resource there, the resource is in the inferred category.

And so, when I see the stock trading close to $3, I mentioned that we've already done extremely well with Q2 Metals, but I believe there's a lot of runway left. I got to believe that that may be a part of the reason why you joined Q2. But before we get into that part, I want to ask you about your background, because you have quite the pedigree.

Keith Phillips: Thank you, I guess. Is that another way of saying I've been around a long time, perhaps. So I was fortunate. I was investment banker for 30 years. The last 20, I spent focused on the mining industry. I worked with super large caps. I did important work for Rio Tinto, BHP, Vale, Barrick, Anglo America, et cetera, but migrated down market to the juniors where I had a lot more fun. I really enjoyed the entrepreneurial spirit.

So I did that for 30 years. And as I was leading that business, I was offered the opportunity to run what was then a very early stage lithium business which we named Piedmont Lithium. It was in the Piedmont region of North Carolina. And we built a business from a 30 million market cap to about a billion-three at the peak. We merged with a joint venture partner in Quebec called Sayona Mining to form Elevra Mining, which is now the biggest lithium producer in North America.

And, it was a great run for eight years through ups and downs in the market. And, so I left that last year. And one of the things I was following along the way was these drill results from this little company I'd never heard of before called Q2 Metals. And I was just amazed. So when I had the opportunity to get involved, I was very excited because it's such a special story.

Gerardo Del Real: Well, clearly the drill bit has continued to deliver, right? As spectacular as the results were when you first joined Q2, they've only gotten better. And so, outside of the potential for scale, which is now, we have a pretty clear peek through an early stage window at least. We don't have economic studies yet, but we'll get into that here in a bit. But outside of the drill results, was there anything else that said to yourself, "Hey, yeah, the company's done well, but there's a lot left here." Or was it just strictly about the drill results and the location there?

Keith Phillips: Well, you mentioned location, so that's important. So as I though about it, the drill results were just incredibly special. At Piedmont in Carolina, we were having intercepts of two, five, 10 meters of spodumene. And Q2 is having intercepts of 50, 100, 200 meters and beyond at spodumene. It's just mind-boggling.

Gerardo Del Real: Yeah.

Keith Phillips: The best results I'd ever seen, I literally put together my own a little bar chart of about the top five or 10 drill holes from every major spodumene player. And Q2, by far, has the best track record.

And I would add that it's relatively early in the drilling, which that doesn't mean the resource will get a lot bigger. It might. I don't know. I'm not a geologist, but it does mean that it's early. There's potential for that.

So what excited me was scale, which is important, grade, which is very good, and location. So Quebec's a good jurisdiction. I know it incredibly well, but Quebec's a big place, as you know. And where Cisco is pretty well located within Quebec, what you want is proximity to infrastructure, proximity to power, proximity to rail, proximity to the markets. Currently, all the material out of Quebec, most of it at least goes to China from the folks at Alevra. Some of it goes to Texas, to Tesla.

But right now, the plan is you're shipping this material around the world to where the converters are. So you need to get it to St. Lawrence Seaway one way or another. And Cisco is meaningfully closer to that transportation infrastructure than some of the other players are. So that's a big plus.

Team is terrific. It's young. It's young and early. And the story's new. And you mentioned valuation, and I don't know where Q2 should trade. I have my own points of view. I think Q2 remains undervalued. Stock's done really well, but I think it remains undervalued because it's a new story still. And I've been at a couple conferences where I meet really smart investors who cover the sector well, who have literally never heard of the company.

And so, it's new and young. And the more we keep putting out news and we delivered absolutely stunning maiden resource earlier this year, and we'll come out with a PEA in the second half of the year, I think will be terrific as well. And I mean, this is a very big resource. That should underpin very big production on an annual basis, with probably really attractive operating costs.

It's pretty exciting. It's very strategic, obviously. So, as a banker for 30 years, as really an M&A guy, it's really rare to have assets like this that everybody should want to own. I mean, one of the things I used to tell my board at Piedmont is if people didn't want to own our company, strategics, then that was kind of a problem. Maybe we didn't have the assets that would attract that interest. That's not the issue at Q2.

This is a totally world-class asset that will belong in any portfolio. It's one of the four or five biggest spodumene deposits in the world already. It's by far the biggest in the Americas, and it's in a great location, and it's got a really bright future.

Gerardo Del Real: Yeah. I have a running bet with a couple of people about whether or not Q2 makes it out of 2026 before getting taken out. So we'll see about that.

I got to ask you, what was your impression when you went on site and got to see Cisco? You mentioned at Piedmont having intercepts of five, 10, and 15 meters of good grade. And you're getting 50, 100, 150, 200, 240 meters over here, of just phenomenal, phenomenal grade. What was it like to actually get on site and look at the project firsthand?

Keith Phillips: First of all, Quebec's a big place, as I said. So right now a road doesn't go right to the site, but it goes close. So we take a helicopter in, and you fly in over this massive area and you see a drill rig over here, a drill rig over there. And you see the big outcrop where the helicopter initially landed a few years ago when they made this discovery.

And it's just a big, relatively flat, relatively straightforward, I would say, geography, terrain, to build a big mine on. And it's exciting.

And I think what's interesting is we have a really big land package. And I think the team is appropriately focused on converting this current resource to a PEA and then ultimately a feasibility study. And that makes all the sense in the world. I always wonder, and again, I'm a finance guy and not a geologist, but I always wonder, gee, I wonder if there's just an awful lot more there that hasn't been explored yet.

So, that's part of the program as well, and it's possible this will get even bigger. So it's fun.

Gerardo Del Real: Yeah, no, no, it's fun when you have the goods, right? You clearly have the goods. As far as the PEA goes, you mentioned being a finance guy, and you can definitely speak to this. What does that mean for Cisco and for Q2 to be able to have a PEA that we could finally start wrapping our head around numbers and putting numbers to tonnage, and what that could potentially be?

Keith Phillips: Yeah, it's important for a lot of people. I mean, I think when you think about advancing a project of this scale, it's going to take capital. And the earlier you are, the more that capital is public equity capital. Q2, Alicia and team has been very successful raising that capital. Did a nice financing earlier this year.

And the good news is we have all the money we need for quite a while, but it's a big project. So there's more drilling to do, there's more metallurgical test work to do, a lot of engineering to do, people to add to the team. And the more tangible you can make the project.

So in lithium, I can look at drill results and get pretty excited like I did with Q2. A lot of other metals, I'm not really as good at that, but I've kind of learned about spodumene. But it's something as a CEO for eight years, I kind of figured it out. But the average investor doesn't have that background and they struggle to interpret drill results.

It's pretty easy to interpret a resource and you put it on a bubble chart and you do tonnes and grade. And oh my God, this project is way off to the right. So that's kind of cool. And then, if you can add to that economics around an economic study, PEA, PFS, DFS, and if those economics are as attractive as I hope they will be, and it's too early to know, but they should be good. I mean, it's a big project. There should be synergies from economies of scale, from a CapEx per tonne perspective. The OpEx per tonne should be really competitive. No reason why it wouldn't be, it's better located than most of the projects in Quebec.

So, if you think about some of the others, we should have economics that are as good or better, but at a bigger scale. So, I'm excited about that. And then I think when people look at it and say, "Oh my goodness, this resource is that big, top five in the world, top four in the world," by far the biggest in Quebec and in the Americas, including South America, and the economics are going to be, probably, really good.

And then people can start to think then they could sort of look and say, "If the NPV is X. Given the stage we're at, there's more work to do, what does that mean? Where should we trade?" And I'm hopeful that the economics will be really compelling and people will look at that. It'll just give people that much more confidence to invest at higher prices, which I think generally comes.

You think about companies as a banker, we used to say companies at a PEA stage might trade at whatever multiple of NAV, net asset value. And in production, you should trade plus or minus one times NAV, one times your net present value. You're producing CapEx is spent. Earlier the stage, the lower the multiple, because there's more risk. But I don't think we're trading anywhere near where we belong if the PEA comes out the way I hope it does. But knock on wood, we'll see. But I'm hopeful.

And I think once we have those economics, people will be able to look at it and benchmark it relative to other projects. I think you'll see more big institutional investors take a look at the company. You'll see more serious research analysts take a look at the company. There's only two people actively covering us today. There are a lot of other analysts that cover lithium that should want to get on this story, and that'll help build everybody's confidence.

Gerardo Del Real: Yeah, I couldn't agree more. Clearly the company believes that, obviously you're down the development path, and obviously this thing can get a lot bigger. Whether there's a need for that or not is another conversation to be had. But clearly with you coming on, and then the two recent people that came on board, it looks like the company has prepared itself, obviously positioning itself to add as much value as quickly as possible.

Is that an accurate assessment of, I don't want to say the rush to bring in new talent and new skill sets and different sets of eyes, but it seems that way from a strategic approach, given the recent hires and given you coming on here in late 2025.

Keith Phillips: Yeah. I think the folks that have been added more recently are more development oriented. So you start with the story all about geology, and fantastic team, huge discovery, done a great job. Nobody could have done a better job with it.

And then you get to a point where they're geologists, they're metallurgists, they're mining engineers, and you kind of work your way along that path. We have to do more metallurgical test work so far, the met work looks really good. And ultimately somebody needs to take a look and say, okay, how big a mine should this be? And how should we mine it? What are the pros and cons of this and that? And where do you start? And with the scale, there's a lot of stuff to think about. That's typically the realm of engineers.

And for a lot of companies at this stage, including Piedmont where I used to be, most of that talent is contracted. So it's engineering consulting firms you work with and that's what we're doing. But we're building out our own team and it's really important that we do that.

And ultimately this is a big asset. And if we develop it on our own, which there's no reason we couldn't build a team to do that, we'll continue to add people and, kind of at scale. I'd say the company, as a new guy on the block, I've been there involved 10 months. I think that the company's just done a great job, obviously drilling, So the exploration. They've done a really good job from a, kind of local community government, First Nations relations, I think. And that's really critical everywhere, but especially in Quebec.

And so, I feel really good about that. And I think we're at the stage now where with a resource in 2026, a PEA in 2026, all of a sudden this goes from sort of the only people really knew about it were folks who paid close attention to the junior world, like yourself, or some folks in the lithium business. And now all of a sudden people are going to say, "This is really a completely tier one asset across commodities."

It's just one of these things I've personally never been associated with, as a principal, and it's really exciting to be. And I tell people on the team, you got to assume you'll never have this opportunity, an asset this good again. It's that good. So you got to really enjoy it and make the most of it.

Gerardo Del Real: Absolutely. No, look, VP of exploration, Sage McCallum has been absolutely spoiled in the sense that there's been two major discoveries associated with Sage now. And so, maybe there's a third one, but I know those are few and far between and it's been a heck of a run.

I have to ask you before you leave, Keith, look, North America, the US, Canada, seems hellbent on developing independent domestic supply chains, specifically and especially in the critical metal space. How do you see Cisco on a global scale, given the fact that, historically, a lot of the product has ended up in China and now there's a push and an effort to really diversify away from that. Where do you think, ultimately, Cisco product could end up?

Keith Phillips: Well, listen, at Piedmont, we were very focused on building an integrated business, including going downstream to build lithium hydroxide conversion. At the end of the day, the market kind of turned against us, and the capital involved at the time was prohibitive. So we kind of moved away from that.

But Rio Tinto has a downstream conversion business that they've acquired that's being constructed in Quebec. Tesla has their plants in Corpus Christi, Texas. There are a lot of other people with plans on the drawing board. And I don't have any doubt that in the medium and longer term, there will be sufficient/extensive conversion activity in North America, Quebec, but also the United States around the Gulf, et cetera. So that'll happen.

This is a big project. This isn't going to be in production next week or next year anyway. So it may be a good time.

Today, I mean the buyers, this is the reality is the buyers are mostly in China, but there are big plans on the horizon that big Korean battery companies and others are talking about building in places like Morocco, Saudi Arabia, Indonesia, Korea. So it's going to become an increasingly global business.

The last thing I'd say, I guess I'd say two more things. Number one, obviously we're in Quebec and Canada, and US-Canada relations are a little frosty today, but those are smoothing out over time for sure. And in the scale of a North American supply chain, I think Cisco is a uniquely strategic asset. It's the biggest spodumene asset by far. And the US doesn't have much in the way of spodumene. There are really two spodumene deposits, both in North Carolina, both one very high quality at Kings Mountain with Albemarle, but just not that big relative to, say Cisco.

And I think importantly, the US is hopeful and feels kind of reliant on emerging mineral sources like low-grade brine through DLE processing, or relatively low-grade sedimentary clay deposits. And no one has produced successfully at scale anywhere in the world from either of those types of deposits. And until it happens, I just think it's important to have a little bit of skepticism about it.

High-grade brine in South America and good spodumene in Australia or other places like Brazil and now increasingly Canada are just absolutely reliable sources of battery quality lithium. And I think people in Washington DC or in Ottawa, and big customers, the car companies, the battery companies, I know they're very focused on spodumene because they know how reliable it is and dependable it is. And I think Cisco is right at the center of people's thoughts now as we kind of roll forward.

Gerardo Del Real: Yeah. No, look, I couldn't agree with you more. I most definitely have enjoyed the chat. I really would love to have you back on once we get that PEA and talk numbers and what that looks like. And then, obviously talk about getting the resource more advanced and having studies that are more advanced. But I think the PEA will be a great benchmark, and I'm really looking forward to having you back on and coming back to it and discussing that. I think that'll be fun.

Keith Phillips: Well, listen, great to speak with you. I really enjoyed it. Thanks for your attention, and look forward to keeping in touch.

Gerardo Del Real: Sounds good, Keith. Keep at it. Appreciate the time. Thank you very much, sir.

Keith Phillips: Thank you. Bye now.

Gerardo Del Real: Sure.

Click here to see more from Q2 Metals