This article is a sponsored feature from Mining.com.au partner Pan Asia Metals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Pan Asia Metals (ASX:PAM) is in an exclusive club – it’s the only advanced lithium project developer in Southeast Asia and is one of the few with a pathway to downstream value adding.
The emerging diversified clean energy company’s assets include 2 hard rock style lithium projects – the RK Lithium Project and the KT Geothermal Lithium and Hard Rock Lithium-Tin Project in Thailand. RK is Pan Asia’s main focus, with 2 individual ‘well-sized’ lithium prospects about 8km apart.
The region, and Thailand in particular, is an emerging battery and electric vehicle (EV) hub. It’s here that Pan Asia Metals has a Prefeasibility Study (PFS) underway at RK as it heads towards a pathway to early cash flow.
As Managing Director Paul Lock explains to Mining.com.au, Pan Asia is also one of the few companies with ‘big balance sheet partners’, albeit under memorandums of understanding (MoU).
As he clearly articulates to Mining.com.au – “everything starts with an MoU”.
This of course is how the company has now expanded its global presence with a foray into lithium-rich South America.
In late July 2023, Pan Asia signed a string of MoUs to break into a ‘world-class’ lithium district in northern Chile. It was the first step in an objective to create a large, long-term, and low-cost supply of lithium that complements its midstream lithium processing aspirations in Southeast Asia with the right lithium chemical processing partners in South America.
Lock says entering Chile via the Tama-Atacama Lithium Project – a compilation of 7 lithium prospects – was not done on a whim but is the fruits of labour from countless months of research and enquiry.
The catalyst for this new direction comes from simply reading the room – in essence, by assessing its global peer group. While many lithium exploration projects are underway, the MD says many look to be high cost, being clearly demonstrated in actual operating results.
On a pathway to early cash flow and production, Pan Asia is differentiating itself in the market. However, Lock affirms the company is staying true to its Asian roots and its exposure to Chile is complementary not contradictory.
“We’ve got big balance sheet partners in Southeast Asia and that’s our pathway to early cash flow. But our projects in South America are our pathway to long-term and volume growth in lithium chemicals.”
The MD adds, while this may appear to be a dual-track strategy to some, it’s actually a singular focus driven by one thing – lithium chemical demand.
“We’ve got big balance sheet partners in Southeast Asia and that’s our pathway to early cash flow. But our projects in South America are our pathway to long-term and volume growth in lithium chemicals“
“LCE (Lithium Carbonate Equivalent) consumption in 2040 is going to be nearly 10 times higher than in 2022, so as a company, you want to be positioned for long-term growth to put your foot on that.
From a strategic perspective, investors may find it confusing but if you want to be in a long-term growth market, you need to be securing good assets in environments with some sort of strategic advantage, that are potentially at the lowest point of the cost curve and where there’s potential volume there. And that’s what Pan Asia is doing.”
Chile: chosen path to growth
What exactly is it that Pan Asia is doing, then?
In terms of being ‘strategically placed’, South America is a no-brainer. Pan Asia’s stronghold is already cemented in Southeast Asia, so it makes strategic sense to look across the globe to diversify its future production potential.
Acquiring the Tama-Atacama Lithium Project comes from many hours of due diligence work. The catalyst was recognising the market fundamentals for lithium and how Pan Asia fits into the competitive landscape.
“It’s based on our view on the future demand for lithium,” the MD explains.
Pan Asia’s outlook for the sector is very much in line with most analyst forecasts.
For context, Pan Asia is on target to meet its strategic objective to build a 10,000 tonne per annum LCE plant with an initial minimum 10-year mine-life – the company’s stated objective in early 2022 before the release of its inaugural Mineral Resource at the RK Lithium Project. To meet the objective, in 2022 it engaged with Thailand government officials informing them that the company’s projects are being geared toward value adding across the entire value chain.
To say that 10,000 tonnes per annum LCE production is needed is an understatement, but this is where Pan Asia’s Chile strategy starts to make sense.
Recent analysts’ reports, for example, state LCE consumption in 2022 was about 700,000 tonnes. In 2030 that is forecasted to balloon to around 3.2 million tonnes – more than 4.5x higher. Then out to 2040 it’s nearly 10x higher, reaching an estimated 6.6 million tonnes.
“But the reality is, lithium is a major component of the global electrification and the renewable drive. So those sorts of statistics are what is driving us“
Lock notes: “The demand for lithium is massive. Some of that demand will be satisfied by sodium-ion batteries for lower end applications, by vanadium flow batteries, and similar for stationary storage applications. But the reality is, lithium is a major component of the global electrification and the renewable drive. So those sorts of statistics are what is driving us.“
Pan Asia’s midstream strategy has been successful to date and amid that, there’s been a recognition of the inherent need for supply certainty in the medium to long term.
The MD says this supply certainty is front of mind for the company’s partners and its projects in Southeast Asia can only supply so much feedstock — albeit this is expected to be low-cost. As a result, Pan Asia embarked to secure strategic assets that offer longer-term, higher-volume, low-cost supply opportunities.
Converging pathways
The MD explains that in many countries, the tipping point for EVs has already been crossed where the market has now started entering into mass consumer demand.
“There are several countries which have reached that. When we look at Southeast Asia, that’s our pathway to earlier cash flow, but just because of the geology and the nature of the ground there, we see ourselves being capped. We’re not going to be producing 50,000 tonnes of LCE per annum there, but ultimately that’s where we want to be.
Chile provides us that pathway to future growth. Some of our investors may be a little confused, thinking, ‘Oh, well, you’re a Southeast Asian company, how can you work in Chile?’ The reality is, we’re a people business. If we’ve got the right people and the right ground, we can operate in any jurisdiction. Whether I can speak the local language or not is really irrelevant. It’s whether my people understand the local jurisdiction.”
Entering Chile may be a change in jurisdiction but the company will always stay close to its Asian roots. A name change is off the table given the goodwill the company has generated over the years and strong brand recognition in Southeast Asia; however, Pan Asia Metals is in amidst of a rebranding.
Last week, the company hinted at the unveiling of its new logo, which symbolises dedication to innovation, sustainability, and having a unique position in the battery metals market. Updates on the change will be delivered at upcoming conferences – the Resource Connect Asia in Singapore on 5 October, as well as the International Mining and Resources Conference (IMARC) in Sydney from 31 October to 2 November, of which Mining.com.au is official media partner.
Branding aside, Lock says the most important aspect of Pan Asia’s communication to the market and its positioning is ensuring investors – retail and institutional – are clear on the direction ahead.
“Each project is different, but what investors are looking for generally is a realistic path to cash flow. And when they look at our partners, they can see that. So, PAM is not a $100 million dollar company, yet. Until we get to $100 million, we’re not on the radar (of institutional investors). For a lot of institutional investors, it’s just a cut-off point.
But the family offices and small institutionals we speak to, they’re looking at our partners, the business plan, the cost environment, and when they understand that they get pretty interested in what we’re doing. So, we do get a lot of inquiries from institutionals and they look at Pan Asia Metals a lot differently than they would say your typical mine gate concentrate seller. They’re two very different investment propositions.”
While any junior explorer will pontificate how undervalued they are, objectively one can see there are many lithium players in the market doing much less but are valued significantly more.
Pan Asia’s current market capitalisation is currently about $32.55 million. Yet this does not seem to reflect the value of its strategic partnerships with the likes of IRPC Public Company, its exposure to the battery metals hub of Southeast Asia (and now exposure to lithium-rich South America), nor its strategic position along the entire lithium value chain.
“If you just look at our market cap and what we’re doing, and the partners we’ve got, I can put my finger on a number of companies which are 5 to 10 times what we are with less“
“If you just look at our market cap and what we’re doing, and the partners we’ve got, I can put my finger on a number of companies which are 5 to 10 times what we are with less. So, what does it take to get there? I think we only really mentioned the IRPC MoU at the end of July, so it’s only a few months. The market has been a bit soft during this period,. It needs time to see what all this means.
But I think as we progress and they start to see what that means, we’ve got IRPC with a market cap of in US dollar terms of about $1.4 billion. Its key shareholder PTT, with 45% valued in US dollars at about $30 billion. And it’s 51% owned by the Thai government. And PTT has joint ventures with CATL (Contemporary Amperex Technology Co., Limited), Foxconn, and Gotion (Gotion High Tech Co. Ltd). I mean, that’s a pretty serious family of companies that we’re involved with.”
In June this year, Thailand’s investment agency approved a joint venture worth 36.1 billion baht (US$1.04 billion) between Taiwan’s Foxconn and Thailand’s PTT (PTT.BK) to produce battery electric vehicles.
A simple cursory look on the Australian bourse and one would tend to agree there is a valuation discrepancy among some lithium juniors and a large one at that.
Lepidico (ASX:LPD) essentially has a target to produce 5,000 tonnes of LCE – half of what Pan Asia’s early 2022 target was. Additionally, Lepidico has not brought on board global strategic partners, and with operations in Namibia, questions arise how its market capitalisation is $84 million – more than double Pan Asia’s.
Argosy Minerals (ASX:AGY) on the other hand has a market capitalisation of $267 million. Comparatively, its objective is to produce just 2,000 tonnes of LCE on a pilot scale to then expand to 10,000 tonnes of LCE. While Argosy also operates in South America, namely Argentina, Pan Asia has now emerged with one of the largest holdings in the region with a package of 7 projects speaking for 1,600km-square distributed south to north over a length of 290km.
Additionally, Pan Asia’s projects are strategically located – they are just 40km from the coast, 75km from a major population centre with a deep water port, and sit adjacent to the main highway and energy transmission lines running straight up the spine of Chile.
Lock adds: “When you work in these sorts of jurisdictions, you want to have really good partners and preferably you want to have jurisdictional protections through some sort of free trade agreement. And with that you want a team which understands your objectives and the jurisdiction. In Thailand and Chile, we have this.
Chile, for Pan Asia, presents the perfect pathway to future growth.
While the government in Chile does not seek to obtain a free carried interest in mining projects, there is scope for it to participate with a contributing interest but only up to 10%. This is at the election of the company as to whether it invites one of the government bodies to come on board in such a way.
And Lithium Power International’s (ASX:LPI) recent announcement regarding discussions with Chile’s Codelco would suggest the market mantra about asset ‘nationalisation’ was never on the table.
Staying on course
For Lock, that is just outside noise. Pan Asia Metals is staying the course in a new direction yet on the same path.
However, being in the right place means little if the asset is run-of-the mill and is not value accretive.
Pan Asia has secured the Tama-Atacama Brine-Clay Lithium Project in the South American ‘Lithium Triangle’, with the asset comprising 7 main areas that extend over 290km from north to south.
Lock says these projects demonstrate ‘significant’ lithium potential based on the assay values and by-product/pathfinders identified in surface sampling of salt and clay layers. Previous work has identified ‘highly elevated’ lithium in surface within 57 of 185 samples greater than 250 parts per million (ppm) lithium averaging 702ppm Li and ranging up to 2,200ppm. These are very high grades for a salar.
On 18 September 2023, Pan Asia reported ‘positive’ results from a review of historical seismic data for several prospects within Tama Atacama. The seismic data review focused on the Pink, Pozon, and Dolores lithium in brine prospects, primarily focusing on the Pink prospect.
Following the historical data review results, the belief is that the Pink prospect has ‘strong’ potential to host lithium brines at depth, as well as potential lithium clays near surface. Drilling will evaluate both brine and clay target zones.
This comes after Pan Asia discovered that seismic results confirm deep basin sediments between 400m to 600m thick, with historical groundwater investigations confirming shallow saline aquifers. Lock notes that saline groundwater zones correspond with the ‘highly’ elevated lithium-in-surface assays mentioned above.
However, the MD reiterates that Pan Asia’s focus on Southeast Asia and South America are not mutually exclusive. The company continues to cement its stronghold in Southeast Asia, while it embarks on delivering longer term value in Chile.
In Thailand, drilling has delivered ‘strong’ lithium and tin results at the BT lithium prospect, located 8km north of the RK Lithium Prospect in Thailand. Pan Asia is making solid progress with drilling at the BT lithium prospect, with 3 diamond rigs operating.
The company is also on track to deliver an updated Mineral Resource Estimate (MRE) for the RK Lithium Prospect and an inaugural MRE for the BT Lithium Prospect later this year. This will be followed up with preliminary Feasibility Studies and lodgement of mining licence applications either late this year or early 2024.
Lock notes that oftentimes the market needs reminding that as far as mining jurisdictions go, this part of the world is the place to be.
Thailand is rapidly transitioning to electric vehicles (EVs) and lithium-ion battery production and is expected to maintain its leadership position. Singapore, Vietnam, Indonesia, Malaysia, and India are also aggressively pursuing such green energy initiatives. These countries render the region one of the most strategic emerging EV-lithium battery manufacturing ecosystems globally.
Case in point – Asia generates nearly 60% of global auto production and more than 90% of global bike production. Recent policy settings in the region have been designed to retain that market share.
“At some point the market will start to work out that what we’ve got in Chile is pretty valuable too and just the option value itself is worth a lot. And it’s a pretty good story“
The MD adds: “So being positioned in Southeast Asia, which is one of the lowest cost environments globally, positions PAM uniquely in the market. We’re seeing a massive migration of Chinese, Korean, and Japanese EV producers and battery producers into the region, particularly Vietnam, Thailand, Malaysia, and Indonesia, and Thailand, where PAM is focused, it is the largest auto producer in Southeast Asia.
At some point the market will start to work out that what we’ve got in Chile is pretty valuable too and just the option value itself is worth a lot. And it’s a pretty good story. It’s not exactly a contrarian play or a step change in strategy, it’s building the foundations for a longer term strategy.”
Write to Adam Orlando at Mining.com.au
Images: Pan Asia Metals
