Historically, the European Union (EU) has relied on countries like China for its supply of critical raw materials, but companies like Leading Edge Materials (TSXV:LEM) are moving to shift the focus back on its own soil.
Case in point, the EU proposed the Critical Raw Materials Act (CRMA) in March 2023, which aims to boost supply of strategic raw materials that are crucial in advancing the EU’s move towards a sustainable, digital and sovereign future.
This comes as a move to shift supply away from China, which currently processes almost all rare earth elements. It is estimated that the country currently produces roughly 70 per cent of global production of rare earth elements, however there are three facilities in Europe that are and will be able to produce the materials – in Sweden, France and Estonia – which will effectively reduce China’s overwhelming grip on the permanent magnet industry.
Thanks to the act, Leading Edge Materials is in an opportune position to focus its efforts on critical materials in the EU and become a game-changer in the space. On that note, the company has a portfolio of critical raw material projects located in the European Union, including:
- The built and permitted Woxna graphite mine in central Sweden (only one in the EU), of which it has 100 per cent ownership
- Its 100 per cent Nora Karr rare earth element deposit in south-central Sweden
- The Bihor Sud nickel and cobalt project in Romania, in which it has a 51 per cent interest (with potential to increase to 90%) through a joint venture with a Romanian partner
Because of low graphite prices, the Woxna graphite mine has been under care and maintenance since 2015. This has allowed the company to focus on the Nora Karr project, and Bihor Sud projects, which will no doubt have a massive impact on bringing critical materials supply back to the EU.
Shifting the critical materials focus back to Europe
In an interview with The Market Herald Canada, Eric Krafft, CEO of Leading Edge Materials, said that Europe has until recently been comfortable outsourcing the mining and processing of materials from other countries such as China.
However, with the continent’s impressive geology, Krafft said there has been “a renewed interest” and strong sentiment for mining in Europe. With the CRMA proposed legislation, it also means that companies such as Leading Edge Materials have been able to plant their roots in Europe and explore and mine for materials “to a higher standard.”
Fabi Lara, founder of The Next Big Rush, explained to The Market Herald Canada that the shifting sentiment in Europe to mine for critical materials is unprecedented and positive for the industry overall, adding that what is consumed in Europe is also ideally to be produced to a larger extent in Europe.
In September 2022, for example, European Commission President Ursula von der Leyen explained that critical materials such a lithium and rare earths continue “replacing gas and oil at the heart of our economy.”
Still, however, there are time constraints when it comes to bringing a mining project to life in Europe, which can take up to 15 years but is something that the CRMA is looking to adjust.
The Norra Karr Project
Located in Sweden, the Norra Karr project had a PEA done in 2021, indicating it has a life of mine span of 26 years. The company stated the PEA indicates the value of the Norra Karr project vastly greater than its market capitalization (returning US$1.026 billion pre-tax 10 per cent NPV and 30.8 per cent pre-tax IRR)
The PEA also indicates that more than 60 per cent of total mined material is planned to be sold as products compared with less than 1 per cent in previously published PFS.
Some highlights of the Norra Karr project include the company initiating a Natura 2000 permit application process and a new mining lease application, the focus is currently on permitting with the project economics very robust.
The permit application process came following a ruling from the Supreme Administrative Court of Sweden in the Boliden Laver case which confirms that current legislation requires a Natura 2000 permit prior to the evaluation of a mining lease.
The company continues to protect its tenure over the project through the exploration license that covers the area of the mining lease application, which is valid until August 2026.
Through the Natura 2000 permit, Leading Edge Materials can benefit from authorities and other stakeholders evaluating the merits of the project based on its plans. The company can then move the project towards the next stages of feasibility development.
Over in Romania, Leading Edge Materials has been actively working on the Bihor Sud project. In 2018, the company entered into a joint venture agreement where it has 51 per cent ownership, with the potential to increase it to 90 per cent.
The project is in the upper Cretaceous metallogenic belt, part of the Tethyan Belt in a historic mining area with a number of historic mines, one being a significant uranium mine.
In June, the company released assay results from the project, highlighting assays of 30 per cent nickel and 4.7 per cent cobalt. At the time of the announcement, Krafft said the initial exploration results highlight the scale and high-grade potential of the project’s exploration license.
Krafft explained that the company notched an exclusive five-year exploration license for the project in 2022, which it has been actively exploring since, where there is extremely high cobalt and nickel mineralization.
“As far as nickel and cobalt go, I don’t think there’s anything like this, certainly in Europe,” he told The Market Herald Canada. Adding to this, Lara said the last time the company sent samples to the lab, it thought Leading Edge Materials was sending concentrates because the nickel samples were more than 30 per cent (nickel concentrate is usually around 20 per cent, Krafft explained).
Perhaps the most interesting aspect about the project is that several decades ago it had been previously mined for uranium although nickel and cobalt had been present on the property the whole time. Lara said the nickel and cobalt had been overlooked because it was only uranium that was being looked for.
In other words, the discovery of nickel and cobalt on the property has been beneficial for Leading Edge Materials as the shift to supply critical materials in the EU has become more pressing.
Krafft said that assays from line sampling are expected shortly. He also said another channel sampling program is underway, which means plenty of news flow will be coming from the project in the near-term that will keep investors engaged and interested.
“We will be doing a surface drill program and an underground drill program,” he said, but explained that there has not been a decision on which will be done first.
The management team
Eric Krafft, interim CEO and director
Eric Krafft is a private investor with business interests across a wide range of industries including natural resources that are positioned to benefit from trends of increased electrification, electric mobility and energy storage. Until 2006, Krafft was the managing owner of Trafalgar Shipping/ Dragon Maritime, a China-based dry bulk shipping operation.
Prior to this, he worked in corporate finance for DVB Bank AG, a German specialist transportation finance bank. Krafft also serves as non-executive director of Goviex Uranium, a Canadian public company, Krafft became a director and principal shareholder of Leading Edge Materials in 2020.
Daniel Major, director
Daniel Major is a mining engineer from the Camborne School of Mines in the UK and currently holds the position of CEO for GoviEx Uranium Inc. His career spans more than 30 years in the mining industry where he has established a solid track record, initially with Rio Tinto at the Rossing Uranium Mine in Namibia and later as a mining analyst with HSBC Plc, followed by JP Morgan Chase & Co. in London.
Major has also been chief executive and non-executive chairman of Basic Element Mining and Resource Division in Russia and held leadership positions in several Canadian-listed mining companies with exploration and producing assets in Canada, Russia and South America.
Lars-Eric Johansson, non-executive chairman and director
Lars-Eric Johansson has more than 30 years of experience managing Canadian mining companies on major stock exchanges in Canada and the U.S. Johansson has served as CEO and president of Ivanhoe Mines between 2007 and 2019 as well as CFO and executive vice president of Kinross Gold, Noranda and Falconbridge between 1989 and 2006.
Johansson has also held the position of chair of the audit committee for several issuers, including Harry Winston (later named Consolidated Diamonds) from 2003 to 2009, Golden Star Corp from 2003 to 2005 and 2007 to 2010 and, Canadian Solar from 2006 to 2019.
Johansson became a director of Leading Edge in 2020.
The investment opportunity
Leading Edge Materials is making waves in Europe as it moves to shift supply of critical raw materials away from China and into its own backyard.
In doing so, the company is well funded through options and warrants that are in the money for planned development initiatives over the next year or so and is focused on maintaining engagement with European Union (EU) industrial alliances to support the establishment of secure and sustainable EU value chains.
Right now, the company has a market capitalization of C$30 million and share price of $0.16, with 187 million shares issued.
As it moves forward with advancing its projects in Sweden and Romania in order to supply critical materials in Europe, Leading Edge Materials will be one company investors will want to keep their eyes peeled open for.
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