FULL DISCLOSURE: This is sponsored content for First Phosphate.
The global effort to combat climate change has seen the rapid transition from a hydrocarbon-based energy economy to one using renewable-based energy systems – and the proliferation of electric vehicles and the batteries required to power them.
The pandemic, the Russian invasion of Ukraine, and rising geopolitical tensions between China and the western economies have further underscored the need to promote the development of domestic and strategically aligned supply chains and sources of raw materials. Many countries now have critical minerals lists and policies to incentivize domestic manufacturing of strategically important products, such as EVs, medical equipment, microchips, military equipment and components.
The North American EV industry requires production of the highest purity, ESG-compliant, ethically-sourced raw materials for battery manufacturing. And this product must also be consistent in quality, secure, and supply chain integrated.
In 2022, the United States introduced the Inflation Reduction Act, which provides for a tax credit of up to $7,500 on the purchase of a qualifying EV. As of April 18, 2023, qualifications for that credit require that at least 40% of the critical minerals found in the vehicle’s battery be sourced from the US or a country with a free trade agreement in place with the US. That percentage increases by 10% every year until 2027, when the credit requires that at least 80% of the battery materials are sourced in the US or via a free-trade aligned nation.
A number of factors could propel the Saguenay-Lac-St-Jean Region in Quebec to become the epicenter of North America’s expanding lithium iron phosphate (LFP) battery industry. Quebec is seeking to become a leading North American jurisdiction in the development of a vertically integrated EV industry hub, and offers multiple government incentives to attract investment into this sector.
In recent months, several major automobile makers, such as Ford and General Motors, have announced significant investments in the North American EV and battery industry. We’ve seen a rapid shift towards the use of LFP batteries to power their vehicles, due to their superior performance and safety characteristics.
LFP battery manufacturers require the highest-purity battery-grade phosphate to make high grade purified phosphoric acid (PPA), which in turn goes into the making of the highest grade LFP cathode active material. Currently, most of the world’s cathode active material is derived from sedimentary phosphate from China, which has a very low ESG threshold.
95% of phosphates are found in sedimentary rock and are used primarily in agriculture for fertilizers and animal feed, as well as food and cosmetics. 4% of phosphates come from igneous rock, which tends to have better purity. 1% of the highest purity phosphates are extracted from igneous anorthosite phosphate rock.
Why the Saguenay-Lac-St-Jean Region?
In a quirk of geology, almost all of the world’s known supply of igneous anorthosite phosphate rock is exclusively found within the world’s largest known igneous anorthosite phosphate-bearing structure in the Saguenay-Lac-St-Jean Region of Quebec – i.e. the high purity can enable the production of large amounts of LFP battery-grade advanced phosphate material from smaller deposits.
Already well-known for its world-class aluminum industry and other natural resources, the Saguenay area boasts a low-cost power infrastructure, an excellent road network, the Saguenay-Bagotville Airport, and a deep sea port. This port could easily facilitate the transporting of phosphate products to North America’s EV and LFP battery manufacturers through the great lakes, and to European destinations.
First Phosphate Corp. (CSE: PHOS) is the only private or public company that is 100% focused on becoming a major long-term supplier of LFP cathode active material to North America’s battery manufacturers. It has assembled a massive 1,500 square kilometre net smelter royalty free land position, located for the most part, 150 kilometres north of the existing deep sea Port of Saguenay. First Phosphate is ESG-driven, with a focus on delivering a critical supply of clean, high-purity, low-carbon-footprint battery-grade purified phosphoric acid. This can be used in the production of LFP cathode active material for the LFP battery industry.
The Saguenay-Le Fjord Chamber of Commerce and Industry (CCISF) sees the opportunity to establish Saguenay-Lac-St-Jean as the LFP Valley of North America. On May 26, 2023, it sent a delegation to the city of Skellefteå in northern Sweden on a fact-finding mission to investigate how a similar legacy industrial Nordic region, Skellefteå, attracted battery maker Northvolt. This allowed them to become the hub of Sweden’s green technology industry, as an important battery production valley.
The key element required garnering the support and commitment throughout the region towards upgrading the area’s infrastructure to support modern industry. Once Northvolt recognized that the commitment from the community was genuine, their decision was an easy one to make.
The primary advantages of the Saguenay-Lac-St-Jean region include:
- Excellent well-established infrastructure that can support all aspects of mining
- Experienced workforce and support services
- Commitment from all stakeholders, community, government, First nations
- Ease of transportation to North American battery and EV manufacturing plants
- Good transportation to the heart of the auto industry, due to trains from Alcan already transporting aluminum there
- World’s cleanest source of phosphate rock from igneous anorthosite
- Up to 90% of feedstock can be converted to purified phosphoric acid (PPA) for LFP batteries
- Value-added phosphate purification and LFP cathode active
- Material production anticipated at Port of Saguenay, Quebec
- Allows strict focus on LFP battery technology clients downstream
- Environmentally clean, circular advanced mining and refinement methods at full ESG standards with a low carbon footprint.
The Quebec Government’s Commitment
Saguenay has already received a $105 million commitment from the Quebec government to upgrade the deep-sea port and surrounding infrastructure. This enables the port to market itself as the next battery hub of Quebec, after Bécancour. First Phosphate has already secured a 700 acre site at the port, where they would eventually build a high-purity phosphoric acid plant capable of producing homegrown “green” cathode active material of the highest quality.
The above should go a long way towards creating a vertically integrated LFP industry in Saguenay. There is less risk to the government because the phosphate industry is still primarily supported by fertilizers and agricultural uses. A vibrant LFP industry could also serve to attract other companies and industries to the Saguenay region.
Wrapping it up
There is a serious North American shortage of battery grade phosphate. North American phosphate is depleting and existing reserves are at capacity for fertilizer. And importantly, existing sedimentary phosphate mines cannot economically produce large amounts of purified phosphoric acid to the ESG levels required for the battery industry.
First Phosphate may just become the building block for a North American LFP battery ecosystem that would become known as the Saguenay-Lac-St-Jean LFP Battery Valley.
FULL DISCLOSURE: First Phosphate is a client of Canacom Group, the parent company of The Deep Dive. Canacom Group is currently long the equity of First Phosphate. The author has been compensated to cover First Phosphate on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. We may buy or sell securities in the company at any time. Always do additional research and consult a professional before purchasing a security.