- 2 years ago
Arianne’s is a world-class mining site and is the single largest greenfield deposit of phosphate. One major edge Arianne has is the deposit is igneous which allows it to produce a concentrate higher than 90% of the world’s phosphate, which is housed in sedimentary rock. This allows Arianne to produce a high-purity and low-contaminant phosphate concentrate ideal for use in batteries and fertilizer.
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NewsTranscript
00:00 - Hello everyone, this is Peter Granich.
00:03 I always remind you, this is not investment advice.
00:05 So always speak to a licensed financial advisor
00:07 before making any investment decision
00:09 and to read my disclosures on my website.
00:12 Well, since we last spoke to this gentleman,
00:14 a lot of good things have been happening
00:16 and I'm glad to welcome him back.
00:18 I'm speaking to Brian Ostroff,
00:19 the president of Ariana Phosphate.
00:22 Brian, welcome.
00:23 - Thank you, thank you for having me.
00:25 It's great to be back.
00:27 - Well, since we last spoke,
00:28 my audience is more than double
00:30 and certainly things have been happening.
00:31 But before we get to the latest,
00:33 since there are a lot of new people seeing this,
00:35 can you just spend a few minutes possibly
00:37 just explaining what the company's all about?
00:40 - Sure, absolutely.
00:41 So Ariana Phosphate, as the name would suggest,
00:45 we are a phosphate company.
00:48 We are currently developing our Lac Up Hall project
00:53 in Quebec, Canada.
00:57 The project itself is extremely large.
01:00 We've been at this quite some time.
01:03 This is a little over 10 years
01:05 and $100 million in the making.
01:08 So in the making, what I mean is today,
01:12 we are the largest greenfield phosphate deposit,
01:17 not owned by a major.
01:19 We make a very high purity phosphate concentrate
01:24 amongst the purest in the world.
01:27 And we are fully permitted shovel ready.
01:31 So just maybe going into a little bit more depth on that.
01:36 Phosphate, most widely recognized
01:41 for its use in fertilizers.
01:43 What is interesting is most of the world
01:46 just doesn't have enough phosphate.
01:49 So here in North America, we run a deficit,
01:52 South America, Western Europe,
01:54 a lot of areas of Asia.
01:56 And so we're all reliant on imports.
02:00 And those imports generally come from the Middle East
02:04 and North Africa.
02:06 Morocco is by far the largest,
02:09 as I always say, good address.
02:12 You know, sometimes a rough neighborhood.
02:15 There is also phosphate fertilizers
02:18 that used to come out of China.
02:21 But with the growth of the LFP business,
02:24 we'll come to that, I think, a little later on,
02:27 there is less.
02:29 And in terms of a good high purity phosphate,
02:31 similar to what an Ariane has,
02:34 really the only similar stuff is Russia.
02:37 And there again is your geopolitical problem.
02:41 So, you know, Ariane, again, being here in Canada,
02:45 very mining friendly jurisdiction,
02:48 you know, we're ideally situated
02:52 and being fully permitted,
02:54 I think, you know, in this day and age,
02:58 particularly in Western jurisdictions
03:01 where it becomes harder and harder to get,
03:03 I think is a huge plus.
03:06 And then I guess lastly,
03:08 I'll just touch on most of the infrastructure
03:11 that we require is already in place.
03:15 There's a hydroelectric dam,
03:18 30 kilometers away,
03:20 contracted with
03:21 the LFP.
03:23 That's gonna represent 75% of the power
03:26 for our operation.
03:27 So clean, green, renewable.
03:30 There's a heavy duty road network already in place,
03:36 heads down to the Saguenay River,
03:39 where we can then ship it.
03:42 So, you know, by and large,
03:44 we're in a good place.
03:47 It is a very big project.
03:51 So today, we, well,
03:56 couple of months ago,
03:57 we put out an updated CapEx on our project.
04:01 So you're looking at about a $1.5 billion build,
04:06 but at today's price,
04:08 and I wanna highlight this is not 43-101,
04:13 but if you were to go
04:15 and take a look at our bankable feasibility study
04:18 and run the math,
04:20 you'd be looking at gross profits,
04:23 again, at today's prices,
04:25 probably somewhere north of $600 million a year.
04:29 We've got a 26-year life of mine.
04:31 Subsequent drilling has shown
04:33 that we're pretty comfortable
04:36 that we can take this to 50 years,
04:39 again, not 43-101 at this time.
04:43 - So since we last spoke,
04:45 and I'll get to it in a second,
04:46 I think you had news that I,
04:49 we'd only need one hand in 40 years.
04:51 See, I've seen that similar,
04:53 but also people have to realize
04:55 there's another big market other than fertilizer.
04:57 So the news I'm speaking about is
05:00 two gentlemen have joined you
05:02 with tremendous background in your industry,
05:04 but they joined you by taking their compensation in stock,
05:08 not in money.
05:10 And the only way that's gonna be profitable for them
05:12 is they have to believe
05:14 that there's a real future for the company.
05:16 And I have to tell you that
05:17 I can't recall many times seeing that.
05:19 So A, can you tell us about that,
05:22 who they are and what it means to the company,
05:24 and also the other part of interest
05:26 for phosphate going forward?
05:28 - Sure, absolutely.
05:30 Yes, well, certainly we have had the pleasure
05:35 of welcoming a couple of gentlemen to Ariane.
05:40 So first that's Rafe Sully.
05:43 Rafe was the executive vice president of Nutrien,
05:48 that is the world's largest traded fertilizer company.
05:54 And amongst his roles at Nutrien,
05:58 he was the CEO of their nitrogen and phosphate businesses.
06:03 So obviously in that capacity,
06:07 Rafe knows a tremendous amount about phosphate operations,
06:12 what maybe the world looks like in the future.
06:17 And so he came and he joined us first as an advisor,
06:23 and then most recently he did join the board.
06:28 And I'll come back to maybe some of the ideas around that.
06:34 And then most recently, maybe about six weeks,
06:39 seven weeks ago, we had another ex-Nutrien fellow join us,
06:44 Mark Edinger.
06:47 So Mark worked with Rafe over in their phosphate group,
06:52 and he was in charge of selling the products,
06:57 what Nutrien made.
06:59 Now, as you had said,
07:02 both of them have taken their compensation
07:06 by way of options.
07:09 It's not an annual salary.
07:11 So I think that that gives a bit of a sense
07:15 of maybe what they're thinking
07:17 and what the opportunities are.
07:20 And with Rafe now being on the board of directors,
07:25 he does have to disclose his shareholdings.
07:30 And I will say that since he's joined up with Ariane,
07:33 he's actually bought about 2 million shares
07:36 in the open market.
07:37 So I know that phosphate is right now
07:42 a little bit of a niche commodity,
07:46 and a lot of viewers of this interview,
07:49 do they know all the details and that?
07:54 And no, and certainly it's out there for them to learn.
07:59 But I think the key takeaway is here are two gentlemen,
08:04 obviously extremely well-versed in the world of phosphate,
08:09 the macro, where they see the world coming.
08:12 No one put a gun to their head and said,
08:15 "You gotta go work with Ariane."
08:17 And this is something that they've done by choice.
08:21 So I guess since they're getting options,
08:24 you can't really view them as third-party validation.
08:28 But again, at the end of the day,
08:30 the fact that they come to Ariane,
08:33 should give investors, I think, some comfort
08:38 that guys who presumably know what they're doing
08:42 have chosen Ariane.
08:44 So maybe with that, we can touch a little bit
08:49 on perhaps what they see
08:51 and what they believe the opportunities are for Ariane.
08:55 - Yeah, I'm sorry.
08:58 I think people have to understand what you would have to pay
09:01 to bring people like that in the size that the company is now
09:05 to understand from the Ariane side
09:08 and what's incentivizing them.
09:10 It's not a paycheck.
09:12 So, and the only way they're gonna see anything
09:14 for their time that they're putting in
09:16 is the performance and the stock.
09:18 So in my mind, I don't think you could do better than that
09:22 in any type of thing.
09:23 I wish I can get some of the juniors
09:25 that could find people like that for the options
09:27 and bring them in.
09:28 Okay, so we all know, and there's a great argument
09:32 that the growth of need of general fertilizer
09:34 'cause of food issues in the world and all is important.
09:37 But the home run potential,
09:39 the grand slam potential is another market.
09:41 Could you just talk about that a little bit?
09:43 'Cause I think that's the bigger of the two pieces
09:47 that should interest people in the company.
09:49 - Absolutely.
09:51 And I think that what you're alluding to
09:56 is the lithium iron phosphate battery, the LFP.
10:02 And so, I'm just gonna take a brief step back in essence.
10:08 And I think this will explain why Ariane
10:13 really has some potential.
10:15 So today you can basically classify
10:20 phosphate into three products.
10:23 There's the material that goes into the dry bulk fertilizers,
10:26 the MAP and the DAP,
10:28 and that is absolutely the biggest segment of the market.
10:33 The next is the quality liquids,
10:37 and that's used in specialty fertilizers,
10:40 hydroponics, precision ag.
10:43 And lastly, there is that very top tier
10:47 of purified phosphoric acid.
10:50 And that's the material that goes into industrial uses,
10:54 beverages, food, but also now the LFP battery,
11:00 the lithium iron phosphate battery.
11:04 Now, without getting into the geology of it per se,
11:09 the quality of your phosphate concentrate,
11:14 in other words, what comes out of your mind
11:17 and gets turned into concentrate
11:19 is going to allow you to vary
11:24 what products you can target.
11:28 Now, that dry bulk market is a good market.
11:33 The stuff, the material there trades
11:36 for about $600 a ton for MAP and DAP.
11:40 Those good quality liquids that I had mentioned
11:42 are twice that, they're probably about $1,100, $1,200 a ton.
11:47 And the stuff for the PPA, the purified phosphoric acid,
11:51 is about $2,500 a ton.
11:54 Now, at the end of the day,
11:56 what you would like to do if you can
12:00 is try and target that upper tier,
12:04 but the nature of your phosphate
12:07 is going to determine whether you can or can't
12:10 and in what ratios.
12:12 So, you know, Ariane is very fortunate.
12:15 We have this igneous deposit,
12:17 makes a very high purity concentrate,
12:20 and we can target well over half of what's produced
12:25 into that high margin PPA,
12:28 with the rest being in the good quality liquids.
12:31 So I think that as the LFP business moves forward,
12:39 you're going to need more purified phosphoric acid.
12:43 And in order to get more purified phosphoric acid,
12:47 a lot of other companies that do have phosphate
12:51 and the ability to build that out,
12:54 in so doing, they will wind up producing
12:57 a lot more fertilizer.
12:59 And that's not necessarily something that you want to do.
13:02 If I'm Morocco, for example,
13:05 and I make my living selling phosphate
13:08 to the fertilizer market,
13:10 ramping up the purified market
13:13 and producing a lot more fertilizer
13:15 is going to kill the goose that lays the golden egg.
13:18 Now, in the case of Ariane,
13:20 we really can target this LFP market
13:23 without having to produce and compete
13:28 on the lower end products.
13:31 So, you know, I think that when guys like Rafe
13:38 and Mark look at our company,
13:41 understand our rock, understand what can be produced,
13:45 they really see the opportunity
13:48 and why we can target this fast growing market.
13:53 So let's talk very briefly about the LFP,
13:57 lithium iron phosphate battery.
13:59 It is one of the battery chemistries that is out there.
14:04 It's been out there for a long time.
14:08 Now, here in North America,
14:10 maybe it's really only over the last 18 months or so
14:15 that we've come to understand it
14:17 is guys like Tesla and Ford
14:21 and several other of the Western car makers,
14:24 you know, have said that they're looking to move over
14:26 the LFP.
14:28 And the LFP has a lot of advantages.
14:31 It's safer, there's no thermal runaways
14:34 that this thing's gonna burst into flames.
14:37 Your charging cycles are quicker.
14:40 You get many more cycles per life of battery.
14:45 And the materials that you require are, you know,
14:49 easier to source versus say things like cobalt,
14:54 even nickel is not an easy thing to mine
15:01 in an environmentally friendly way.
15:03 So you've got that.
15:05 And you know, what I think might surprise
15:08 a lot of your listeners is that the LFP today
15:12 is already over 30% of all batteries.
15:17 So this isn't some niche technology,
15:23 prove it to me, maybe it will work, maybe it won't.
15:27 It is already there.
15:29 And it is projected by the end of this decade
15:34 to be the most prominent of all
15:38 the lithium ion chemistries out there.
15:42 And another thing that's gonna push that demand for the LFP,
15:47 as good as it is for automobiles
15:51 and the transportation sector,
15:53 it is ideal for energy storage.
15:57 So as more and more people look to put solar panels
16:02 on their roof or kind of get off the grid
16:06 or less reliance on the grid,
16:09 if you capture that energy, you have to store that energy.
16:13 Because if you need energy when the sun's not shining,
16:16 what are you gonna do?
16:19 So it's actually projected that within the next few years,
16:23 the LFP for energy storage is actually gonna exceed that
16:28 for the transportation market.
16:31 So the demand that's coming is absolutely huge.
16:36 And that means there's a lot of potential.
16:38 Demand for phosphate as it is grows every single year,
16:44 agricultural demand, population growth, et cetera.
16:49 It historically has grown at a percent and a half to 2%.
16:54 Now, if you take a look at projections going out
16:59 with moderate growth in the LFP,
17:04 that demand is gonna go from about 2% annually
17:08 for the phosphate concentrate that you require
17:11 to 7%, 8% annually.
17:16 So it might not sound like a lot,
17:20 but if you have five years of 2% compound growth
17:25 versus five years of 8% compound growth,
17:29 five years out, that is an enormous, enormous difference.
17:34 And that is what we are heading into.
17:38 And I'll go one step further.
17:40 And I'm sorry, I'm not trying to complicate this,
17:45 but you will require the purified phosphoric acid
17:50 for the battery market.
17:54 And we've talked about in terms of phosphate,
17:57 what the growth is.
17:59 But today, in terms of purified phosphoric acid,
18:02 the material that you actually need
18:05 to turn your phosphate into to use it for the LFP battery,
18:10 that market today is about 950,000 tons a year,
18:16 maybe a million tons.
18:20 If you look at projections today,
18:24 you're gonna need an additional million to a million
18:28 and a quarter tons.
18:30 Okay, so we need to understand this.
18:32 This isn't a matter of demand growing,
18:35 doubling, quadrupling.
18:37 This is a matter of overall supply needs to double.
18:42 We need to build facilities.
18:47 This isn't demand, this is supply.
18:50 Someone is going to have to build this out.
18:55 And again, I think where Ariane can be a big winner in this
19:00 is because of the nature of our phosphate,
19:06 we can really target that PPA market.
19:10 So I think this is going to be big.
19:14 And I'll add on one last factor.
19:19 I'm sure a lot of your viewers,
19:22 they do watch the battery space, critical materials,
19:26 and they see that the West is starting to get serious
19:30 in terms of the stuff comes out of China,
19:34 we need our own sources,
19:36 we need to integrate our supply chains.
19:39 And with that, there is really a push to get these materials
19:44 from friendly jurisdictions.
19:48 Your viewers need to know that today,
19:51 over 90% of all LFPs come from China.
19:56 So as the West looks to get serious,
20:00 we've seen programs like the Inflation Reduction Act,
20:05 the Defense Production Act, Canada here,
20:09 we've definitely seen financial incentives
20:15 being put in place to build this stuff
20:19 and source the materials here.
20:21 So as I started by saying, Ariane,
20:25 we are amongst the world's largest,
20:28 amongst the world's purest, ideal for these LFPs,
20:34 fully permitted and here in North America.
20:38 So our ability to answer this market
20:42 that is going to be needed,
20:45 I would say that we have an inside track
20:49 and at the end of the day,
20:52 I think what both Mark and Rafe see is it's Ariane
20:57 that can be a big player in answering this.
21:04 For me, I'm very happy corporately,
21:11 we have a lot of ongoing discussions.
21:13 It was really only in March
21:15 that we had announced definitively
21:19 that our stuff does work in batteries,
21:21 that it has met spec from a couple of the battery companies
21:25 that we work with,
21:27 and that certainly acted as a catalyst in discussions.
21:32 So corporately, I'm very happy.
21:39 I have to say the stock's a bit of a head scratcher to me.
21:44 I know you don't bring in too many leaders of companies
21:48 that will sit here and say,
21:49 oh, our stock is wildly expensive,
21:53 but today our market cap, US dollars is,
21:58 well, I'm gonna keep this in Canadian dollars.
22:04 We're sitting at about a 65, $70 million Canadian market cap.
22:09 As I had said earlier, we've spent $100 million.
22:12 Anyone today that is looking to get
22:16 into a greenfield phosphate project
22:20 took us 10 years, $100 million
22:23 on what is arguably a world-class asset.
22:29 That's what someone else is going to have to go through.
22:32 We're already there.
22:34 And so an investor today can, in essence,
22:38 come in on this company at a value
22:43 of less than replacement cost
22:48 and get the comfort that some pretty knowledgeable guys
22:51 seem to think that there's a big opportunity here.
22:56 I think that really the missing piece here
23:01 is phosphate is the Rodney Dangerfield of commodities.
23:06 It just doesn't get any respect.
23:11 The fact that you will not be able
23:13 to feed yourself without it,
23:15 you would think would be enough
23:18 for people to pay some attention to it, but that's not.
23:22 So along comes batteries.
23:24 And we've seen all the hoopla around lithium,
23:29 cobalt, nickel, graphite.
23:32 And I'm not saying that that's not deserved,
23:35 but if you look at the valuations on those companies
23:40 and those early-stage exploration companies,
23:44 there are multiples of where Ariane is.
23:50 And I get it, no lithium, no LFP battery.
23:55 But guess what?
23:56 No phosphate, no LFP battery.
24:00 So I think that a lot of the big guys have done,
24:04 we've seen big deals in the space
24:06 with lithium companies and nickel.
24:10 I think that these battery guys are now coming along
24:15 and doing their homework on phosphate,
24:19 and they're going to see these things
24:24 that I've talked about.
24:25 I don't think the car companies
24:26 want to be in the fertilizer business.
24:29 So ultimately, I think they're going to want to do deals
24:31 with guys that can provide them phosphate
24:36 solely for their use.
24:38 So we'll see where it plays out.
24:41 - So you answered most of my last question I had for you,
24:45 which I'll still follow it up.
24:46 But one thing you just said to me is I think is clear.
24:48 If you bought into lithium plays for the battery part,
24:53 then you have to be buying into the phosphate part.
24:55 It doesn't make any sense
24:56 'cause one can't work without the other.
24:58 So here's the last part that I just wanted to ask you.
25:01 I was going to ask you generally,
25:03 where were governments and all in this
25:04 'cause of all the critical minerals,
25:06 the fact that you said comes off in China.
25:09 But correct me if I'm wrong, Brian,
25:10 but I thought I read something where Quebec in particular
25:14 has really put their hands on
25:16 and recognize these critical mineral needs.
25:20 If that is true, where do they fall in terms of phosphate
25:23 since this is in their backyard?
25:25 - That's a great question.
25:28 And you're right, Quebec, I would say,
25:30 has definitely been the forefront
25:33 of moving the battery business forward,
25:37 has been very open to investment and supporting investment.
25:42 We've seen deals here with General Motors.
25:46 I think that was announced about four months ago,
25:50 Ford recently, maybe about four weeks ago.
25:55 So the government is definitely there
26:01 to advance critical minerals battery initiatives.
26:06 I should mention that the government of Quebec
26:08 currently owns about 6% of Ariane
26:12 and certainly the fact that our phosphate
26:15 can be used in batteries,
26:17 we feel very comfortable that they will be there
26:21 to support whatever initiatives we find ourselves in
26:26 with a partner on the battery side.
26:29 - Well, this is the way I explained it.
26:33 I wasn't gonna say this, but I'm gonna say it anyway.
26:36 If I was still in the business of advising people,
26:39 what I tell them is buy the shares, put it in your drawer,
26:43 and maybe at Christmas, open it up
26:46 and you might even get Christmas in July one time.
26:48 It's just something that's, it's gonna be this,
26:51 and if you're successful, it's gonna be here the next day.
26:54 It's not gonna be something that's working up
26:57 as expiration more and more fines.
26:58 It's gonna go from standing at home plate
27:02 or on first base to third base or back around the plate.
27:06 That's what I think how you gotta approach it.
27:08 That's my personal view.
27:09 It's biased, but it's my view.
27:12 And look, I think that that's a very fair statement.
27:15 Look, my pedigree, my background.
27:19 Is in the small and mid-cap Russian
27:30 is a little bit of news, a little bit of news,
27:33 some good drilling, some good drilling,
27:35 and then you go from there.
27:40 So there's a constant flow of news.
27:43 For better or for worse, we are done with all of that.
27:46 It is drilled out, our metallurgy is proven out,
27:49 collaboration agreement with the First Nations,
27:52 permits, a couple of offtakes, like that is all done.
27:57 So I think what we are looking to accomplish in Arianne now
28:02 is to cut the deal.
28:05 A partner on the downstream PPA plant
28:09 or a final deal to get the mine built.
28:14 And so I don't think investors today
28:19 that there's gonna be some news next week
28:22 and a little more minor news two weeks from now
28:24 and what have you.
28:26 I think at this point, our plan is to approach
28:30 and put together that comprehensive deal.
28:33 One announcement, one and done.
28:36 And so again, today, look, our published NPV on the project
28:41 is $1.9 billion NPV US.
28:47 And so we've got, what, a $50 million US market cap.
28:53 So, you know, asymmetric is the word that comes to mind.
28:59 - Well, I say this and I do not want any indication,
29:05 I don't know anything, but what the first thing
29:07 that came to my mind to end this conversation is,
29:09 man, some entrepreneur and smart billionaire
29:11 running some electric vehicle company,
29:14 this makes a lot of sense for them.
29:16 Anyway, Ryan, thank you.
29:19 Again, I just wanna repeat, this is the type of story,
29:22 it's just one more step.
29:24 Now that step doesn't happen, it don't happen.
29:26 But if it happens, it happens in a huge, huge way.
29:30 Thank you for all your time, Brian.
29:32 - All right, thank you, Peter.
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