(Map of Leading Edge Materials Corp.’s European projects and IEA estimated growth in demand for graphite and rare earth elements from clean energy technologies in 2040 relative to 2020 levels). Image via Leading Edge Materials Corp. Click to enlarge.)
Critical raw materials are essential to the functioning and integrity of a wide range of industrial ecosystems and are directly linked to high growth technologies such as batteries, energy storage, permanent magnets for electric motors, and wind power that underpin the clean energy transition towards climate neutrality. They are economically vital but have a high supply risk.
Leading Edge Materials Corp. (TSX-V: LEM, OTCQB: LEMIF, Forum) is developing a portfolio of critical raw material projects located in the European Union, including two projects in Sweden - the 100% owned Woxna Graphite mine, as well as the Norra Karr Heavy Rare Earth (HREE) project.
A recent report
“Rare Earth Magnets and Motors: A European Call for Action” by the European Raw Materials Alliance (ERMA) identified six strategic action areas together with a set of 12 specific actions which could benefit the development of the Company’s Norra Karr project.
Leading Edge Materials’ Chief Executive Officer Filip Kozlowski sat down with Stockhouse Editorial to dig a little deeper ….
It sounds like there is a lot happening in Europe around critical raw materials. First, why don’t we start of with a brief background and introduction to Leading Edge Materials and your European projects?
Sure, very happy to. Leading Edge Materials’ strategy is entirely focused on critical raw material projects located in the European Union. Critical raw materials are determined as such by the European Union based on their economic importance and supply risk. They are directly linked to high growth technologies such as batteries for electromobility and energy storage and permanent magnets for electric motors and wind power that underpin the clean energy transition towards climate neutrality.
Our two main projects are located in Sweden, and we have worked on those for more than 10 years now. First, we have our Norra Karr heavy rare earth element project. It is one of the world’s most significant heavy rare earth projects, and the only one of its kind in Europe. The size of the deposit, the unusual enrichment of the most valuable heavy rare earths like dysprosium and terbium, extremely low radionuclide content and a location in south-central Sweden next to major freight routes directly linking to continental Europe makes this project a unique opportunity to securely supply sustainable rare earth materials into European industrial ecosystems.
Our other project located in central Sweden is the Woxna Graphite mine. It is a fully built and permitted mine and processing plant, with all associated infrastructure. It was built during the mid 90’s and our company brought it back into production in 2014. However, rather than producing a low value graphite concentrate product we chose to halt production and focus on the development of the required downstream process to produce a much higher value graphite anode material suitable for use in lithium-ion batteries. We recently announced a proposed 50/50 JV with Sicona targeting the production of advanced next generation silicon-graphite-carbon composite active anode materials using natural graphite from the Woxna Graphite mine.
We also have an early-stage exploration project targeting nickel and cobalt in Romania through a 51% owned joint venture, which can move up to 90% ownership.
Europe is really leading the charge to transition to a more sustainable society. With that comes an explosive growth in demand for the technologies that are required, such as electric vehicles. However, for the transition to be completely sustainable, Europe has realised that it can’t rely on third countries to source the raw materials needed for those technologies, China being the dominant factor. This is where projects like ours can play a real difference.
That is a great introduction. It sounds like you have a unique portfolio of projects in the right place. You have kept a low profile and I know most of our readers are not following your company, why is that?
So, Leading Edge Materials went through, call it a corporate reorganisation last year with the appointment of a new board of directors and me taking on the role of CEO. The biggest change was that we put in place a board of directors with a Swedish/European and project development profile to develop our projects forward more aggressively and align with European interests. We attracted Lars-Eric Johansson, who had recently resigned from Ivanhoe Mines to come on board as non-executive chairman, seeing our projects as unique opportunities for Sweden to contribute to Europe. In addition, Daniel Major being a seasoned mining executive together with Eric Krafft, the largest shareholder of the company, joined as non-executive directors.
Myself, being a Swedish citizen and living in Stockholm, I have a background in the financial industry but started working with Leading Edge Materials in 2017 to the point where I was offered the role of CEO. I know all the ins and outs of our projects and can efficiently manage our projects from our local base here.
During this transitionary period since last year, we have been extremely internally focused on progressing our projects and we have recently started seeing the results of that come to fruition with the release of two very positive preliminary economic assessment studies for the rare earth and graphite projects. In addition, we have an insider ownership of around 35% and have been well-funded by long-term supportive shareholders. However, seeing many investors have missed the opportunity we can offer, we are now looking to be more active in communicating what we are doing.
The company published a very positive PEA assessment in July 2021 for the Norra Karr project in southern Sweden. Can you give us some highlights?
Yes certainly, for some background, the recently released PEA was commissioned with the objective to minimize environmental footprint and maximize resource utilization.
By adding nepheline syenite, zirconium oxide and niobium oxide to our product list through flowsheet improvements we have changed the total saleable mined material to over 50% compared with less than 1% in the previous design of the project. We have opted to strictly conduct physical magnetic separation at the deposit site and move all chemical processing to an off-site industrial facility. This combined means there is no requirement for a wet tailings dam on-site anymore, a reduction in land-use footprint by around 80%, more than halving the water use and potentially removing all water discharges. These changes resulted in two fold project benefits, not only environmental gains but economic too, as the PEA reveals strong financials over a 26 year life of mine including pre- and post-tax Net Present Value (NPV) of US$1,026M and US$762M using a 10% discount rate and pre- and post-tax Internal Rate of Return (IRR) of 30.8% and 26.3%. The addition of by-products come with a new mineral resource of 110Mt at 0.5% total rare earth oxides, with a significant contained amount of the most valuable magnet rare earth oxides such as neodymium, praseodymium, dysprosium, and terbium.
Turning to the Woxna project in Sweden, some of the PEA highlights from June include the possibility of a Swedish operation producing battery-grade graphite anode material, using an existing graphite mine and concentrator in addition to a proposed value-add processing facility offsite, what would this mean for the company?
As a company this puts us on the map as a significant mine-to-battery anode opportunity. More importantly what it means for Sweden and the EU is that they could be a proud source of locally produced natural graphite battery anodes to emerging European battery factories, which is otherwise dominated by China. Announcements within the EU recently push the planned annual capacity of lithium-ion battery to more than 1,000GWh by 2030, equivalent to an approximate demand of 1 million tonnes of anode materials per year. This illustrates the vast demand that is emerging in the EU in a soon to come future, and it looks similar in other regions of the world. For our investors our vertically integrated strategy with an existing mine offers a direct exposure to this trend. The Woxna Graphite PEA has financial highlights that include a pre- and post-tax NPV of US$317M and US$248M using an 8% discount rate, and pre- and post-tax IRR of 42.9% and 37.4% over a 19-year project life.
You recently announced a 50/50 JV for the Woxna Graphite project with Sicona Battery Technologies. How does that fit in with the strategy of the project?
We found a shared vision with the team at Sicona, that vision being the sustainable development of better performing anode materials and disrupting the current Asian controlled supply chains. Sicona is commercialising innovative silicon-graphite-carbon composite anode and binder technology and materials that have been developed over the last ten years at the Australian Institute for Innovative Materials at the University of Wollongong. Due to its improved storage capacity, silicon graphite composite anode materials attract higher selling prices and are the next generation of high-performance materials attracting battery producers. The proposed JV will look at how to establish a production of these materials using natural graphite as a feedstock from the Woxna Graphite mine that we own 100%.
Well, those results and strategies for your two Swedish projects does offer a lot of opportunity. Outside of financial metrics, sustainability is becoming a key area of focus for investors. Can you discuss how you work in that area in relation to your projects?
It is a very important area for us and a key competitive advantage for our projects. Due to the simple fact of having our projects in Sweden, falling under some of the world’s most strict environmental laws, any production from here will be significantly more sustainable than most current alternatives. In addition, having access to hydropower and renewable electricity sources in Sweden for energy intensive processes that are required in our world of materials will greatly reduce the carbon footprint of our potential production compared with other parts of the world. We decided to formally demonstrate this through the commissioning of an ISO-compliant life cycle assessment study for the Woxna Graphite project and the results demonstrated a potential 90% reduction in carbon footprint for our planned Swedish produced graphite anode materials compared with existing Chinese sourced materials.
Alongside sustainability, resiliency of supply chains is becoming more important. In February 2021, ERMA brought together more than 160 stakeholders from industry, academia, research, national authorities, associations, and financial institutions to map out a strategy to secure access to rare earth elements for the European industry. How would this benefit LEM’s rare earth project?
We were thrilled when ERMA was established, heeding the calls from industry stakeholders such as ourselves, after years of hammering our constant challenges and predictions for the potential bottlenecks on the rise. The general objective for ERMA is to identify solutions to regulatory and structural bottlenecks as well as establish an investment channel to support the development of a secure and resilient value chain for rare earth magnets and motors in Europe.
As an active participating member of ERMA, we are very pleased to see the recent ERMA publication on rare earth magnets and motors which could directly support the development of our rare earth project. The report outlines action areas that relate directly to our Norra Karr rare earth project. Creating a level playing field to compete against Chinese competitors currently dominating the rare earth elements space, through proposed taxation incentives, tax shields and carbon border adjustment mechanisms. Raising awareness to all stakeholders and society about the importance of our renewable energy materials and that it can in fact be produced sustainably. Facilitating access to funding through a raw materials bridge fund of investments between €150-200m per year to secure bankability and de-risk projects.
We are also looking forward to the second ERMA action plan currently underway, which would be perfectly aligned with our Woxna Graphite project. This one is more specifically aimed at focusing on materials for energy storage and conversion, such as batteries, fuel cells, solar, hydrogen and any other alternative energy storage technologies.
Having covered your main Swedish projects, what about your early stage exploration project in Romania?
We have an exploration alliance with a local Romanian JV partner targeting exploration for high-grade nickel-cobalt mineralisation’s in the Tethyan Belt in a historic mining area. We currently own 51% but can move to 90% at certain milestones. The prospecting conducted thus far has been under a non-exclusive prospecting license which then led us to file an application for an exclusive exploration license which is now being evaluated. We are positively looking forward to the exploration work planned with our JV partner once the license is hopefully granted.
A solid investment case and platform for growth by the sounds of it in many ways. Can you tell our audience how they should view Leading Edge Materials as an investment case and where do you fit in relative to your peers in both the graphite and rare earth space?
Our portfolio of projects is offering investors direct exposure to some of the raw materials that are looking at the biggest demand growth over the next decade due to being critical to enable the green transition and electrification of society. Another unique aspect is the European location of our projects, seeing Europe is leading the charge in taking on the Chinese competition. With strong support from policy makers and industrial alliances, projects like ours are enjoying a positive tail wind to develop secure and sustainable alternatives of supply for European industrial ecosystems.
Our market cap is currently lower than most of our graphite and rare earth peers in Canada, Australia, and the UK. With an experienced Swedish/European board of directors and management in place, quality projects and clear plans forward we believe there is a good opportunity the market will open up their eyes to our opportunity as we deliver going forward. Insider ownership is around 35% and we have the support of long-term shareholders both in North America and Europe. Together with a significant number of warrants and options being in the money we are in a strong position to execute on our plans.
What can investors expect over the rest of the year and beyond from your company?
With the three projects, the foreseeable future should be extremely busy. On the Woxna Graphite front, we look forward to formalising the JV partnership with Sicona by jointly producing relevant trial amounts of our anode materials for customer testing that would trigger the decision for a stage 1 commercial demonstration plant to produce 500 tonnes per year of various advanced anode materials. For Norra Karr we are excited about using the new design of the project towards permitting of the mining lease and in parallel metallurgical test work of the new flowsheet to demonstrate the potential of the various products the project could produce. A granting of the exploration license in Romania would almost immediately launch an already defined exploration program. Electric vehicle growth, the green transition, is pushing up demand for our raw materials rapidly and supply constraints are emerging. Combined with supply chain disruptions this has started to have significant impact on market pricing of these raw materials. We are in the middle of this perfect storm and ready to capitalize on it.
For more information on the Company, visit
leadingedgematerials.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.