Coffee with Samso Episode 82 with Paul Lock, Executive Chairman and Managing Director of Pan Asia Metals Limited (ASX: PAM) is all about taking advantage of a low cost structure to create a bankable lithium mining and processing project in Thailand.
When I first looked at Pan Asia Metals, I thought this was going to be another company with a great tungsten and lithium project. However, the lithium was lepidolite so perhaps that would not be in their favour. That was before talking to Paul Lock. After our coffee chat, Paul's insights have changed my views. I would say now that the company's strategy seems robust.
We have to bear in mind that the lithium and tungsten projects are themselves world-class grades. I have not seen any tungsten projects with that kind of grades nor interceptions. The lithium grades are consistent and from what has been presented, I do not doubt its future potential resources.
It is a very good idea to have the strategy to build a downstream processing business in the heart of South East Asia, (i.e. Thailand). Thailand is an automotive producer and it is in Asia. But as all economies are beginning to build their own strategies for the oncoming EV revolution, the idea of having Pan Asia trying to create a source of EV fuel in their backyard is a no brainer.
It has been fascinating how our coffee chat progressed as Paul shared his knowledge about the whole journey of the company. It gradually became apparent that there is actually a strong case for their strategy.
If you are at or near the low end of the cost curve, regardless of the commodity cycle, you should be making money and that is what you want in your project.
There is now a trend towards the downstream part of the sector and it was clearly highlighted in the recent Coffee with Samso with Rick Rule entitled, Commodities and Equities: Advice from Rick Rule. This is the space that is going to make the most value-add which makes the most sense.
Paul explains why having a project with the lowest cost structure is going to make more headway than those that are on the higher end of the curve. I recommend readers take a good look at this way of thinking. Remember, lithium is not a rare commodity, and it will all depends on where your market is that will determine one of your main cost inputs.
Chapters
00:12 Introduction - Why PAM
01:26 How did you get the projects?
02:56 Summary of the Tungsten and Lithium projects
06:17 The advantage of being within your end product market, geographically
09:06 The Critical Metal space of Tungsten
11:24 Lepidolite Chemistry
13:36 The Low Cost Structure Strategy
15:25 The Board Structure
17:44 Reasons for Buying PAM
19:02 Why Low Cost OPEX works
21:35 The EMH Case Study
23:50 Thailand wants an EV Industry
25:58 News Flow
29:23 Conclusion - Why Low Cost Structure is Important
PODCAST
About Paul Lock
Executive Chairman & Managing Director
Pan Asia Metals
Paul has been involved in minerals exploration in South East Asia since 2012, with his work in this region forming the foundation of what is now Pan Asia Metals.
Before Pan Asia Metals, Paul was a corporate adviser at Everspring Partners, a boutique Sydney-based advisory firm that he founded. Before Everspring, Paul worked in corporate advisory and leveraged finance roles at the Commonwealth Bank of Australia. Paul initially focused on corporate and single asset project finance in the resource sector before moving into leveraged finance for private equity initiatives and then into a corporate advisory role where he was sector agnostic and focused on generating corporate transactions.
Prior to banking, Paul worked for Rothschild & Co in Australia where he was a derivatives trader and a high yield bond investor focusing on a variety of asset classes, generally distressed or complex assets. Paul also had some involvement in structuring derivatives solutions for resource companies in conjunction with Rothschild’s corporate advisory team. Prior to Rothschild Paul worked for Japanese trading conglomerate Marubeni Corporation in the soft commodity trading division.
Paul graduated from Hale School in Perth, Western Australia, and has obtained the following academic qualifications: Master of Political Economy, University of Sydney; Master of International Studies, University of Sydney; Master of Commercial Law, Macquarie University; Master of Business Administration, Macquarie Graduate School of Management; and Bachelor of Business, Marcus Oldham College. Paul is an associate member of AusIMM.
About Pan Asia Metals Limited
Pan Asia’s strategy is simple. It seeks to secure exploration and development assets with the potential to be positioned in the lowest or a leading third of the cost curve and which positions the Company for downstream value-adding opportunities. Cost curve positioning is paramount in our decision-making, as assets positioned further up the cost curve are generally more difficult to finance and develop. Regardless of the size or grade of an asset, if finance cannot be secured then the asset is worth relatively little.
The opportunity to move downstream is also very important. In general, value-adding mine output will offer the Company better and more consistent profit margins and a larger footprint of customers, and exposure to new opportunities. Although at face value this may sound ‘optimistic’, for many specialty metals, including tungsten and lithium, value-adding can be easily incorporated into a feasibility study if the geology, geography and cost environment is right.
Setting geology and metallurgy aside, as these are naturally essential requirements to achieve a low cost curve outcome, this strategy can be achieved by identifying projects that:
are located in globally competitive cost jurisdictions. In Pan Asia’s case, Southeast Asia
are proximal to end user markets. In Pan Asia’s case, markets for all process inputs and outputs exist throughout Southeast and East Asia
are well positioned to take advantage of downstream development opportunities. In Pan Asia’s case, both tungsten and lepidolite style lithium can be value-added and the value-added output has application in markets throughout Asia
are strategically located in a key market with strong economic growth. In Pan Asia’s case, the growth profiles of many Asian countries are very strong
For many exploration companies it is not possible to contemplate activities past the mine gate due to geography, geology and or commodity, and/or their cost environment. In general, value-adding mine output will offer:
better and more consistent profit margins
a larger footprint of customers
exposure to new opportunities
Disclaimer
The information or opinions provided herein do not constitute investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not take into consideration, nor have any regard to your specific investment objectives, financial situation, risk profile, tax position and particular, or unique needs and constraints. Read full Disclaimer.
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If you find this article informative and useful, please help me share the information. I try and write about topics that are interesting and have the potential to be of investment value. It is not easy to find stories that fit those parameters. If you or your organisation see the benefit of what Samso is trying to achieve and have a need to share your journey, please contact me on noel.ong@samso.com.au.
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