​Why Lomiko Metals is a Disruptor Among the Lithium Battery Players — Q&A with CEO A. Paul Gill

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Image via Lomiko Metals

When assessing the opportunities in playing the lithium battery boom, Lomiko Metals, Inc. (LMR:CA)(LMRMF) is one compelling anomaly investors are watching closely. Not only is the company a viable mineral explorer with promising graphite properties, but it’s also making strategic investments in the innovative technologies that’s fueling the demand.

On the exploration front, Lomiko owns two promising exploration projects in the La Loutre Property in Quebec, and the Vines Lake Project in British Columbia. Through its wholly-owned subsidiary Lomiko Technologies, the company has partnered with MegaHertz Power Systems Ltd. and SHD Smart Home Devices Ltd. to manufacture, distribute and sell a new Internet of Things-based device called the Spider Charger.

Equities.com recently caught up with A. Paul Gill, CEO of Lomiko, to discuss the strategic benefits of diversifying the company’s business to capitalize on both ends of the lithium battery spectrum, as well as updates on its two properties and technology partnerships.

EQ: It’s been a busy couple of months for Lomiko on both sides of the company. Starting first with the exploration side, the company announced in March that the drilling program in La Loutre resulted in a major discovery of near surface, flake graphite. As a result, the company now has an opportunity to define your proposal for a low footprint, open pit operation. What are your next steps for La Loutre now?

Gill: The next steps for La Loutre are graphite characterization and carbon purity testing, as well as metallurgical testing. These are all components leading up to the Pre-Economic Assessment (PEA) of the project. In addition to that, we will do an interim resource study by August 2017, which will allow us to study the geology of the entire discovery area and then plan our next few drill holes. The drill holes will allow us to set up another resource study probably at the end of 2017 or the beginning of 2018. That final resource will be the basis of our Preliminary Economic Assessment. The purpose of it all is to make sure that we have the highest grade possible that is reported in the PEA, because that reflects the viability of the project in the long term.

If you have very low costs and your material is very high-grade, and you get some ramp up in the pricing of graphite, then that’s a good time to report your PEA. What we want to do is make sure we're ready to report that PEA right at the time when graphite is moving. If we were to issue a PEA right now during a quiet graphite market, it would sit on the shelf and nothing would happen. So, what we want to do is make sure that we’re ready to report the PEA right at a time when graphite demand is gaining momentum. That’s when we want to get out there and have a very strong report that will get us a long way down the road to getting a partner to work on the project.

EQ: We know your team is extremely selective when looking at potential new projects. Can you tell us a little about the Vines Lake Project as well as how it positions you for exposure to the zinc market?

Gill: The zinc market doubled in the last year or so. We're very happy to see that kind of recovery. It leads into the conversation about infrastructure expenditures in the United States and elsewhere that are driving that price. People are gathering at the wagons, so to speak, and putting their supply lines together. Zinc is currently the fourth most widely consumed metal in the world after iron, aluminum, and copper. It has strong anticorrosive properties and bonds well with other metals. Consequently, about one-half of the zinc that is produced is used in zinc galvanizing, which is the process of adding thin layers of zinc to iron or steel to prevent rusting.

So, it's good times for all commodities that have industrial uses: copper, lead, zinc, silver and that part of the bull market. As such, it is a good time to be in the markets with a zinc property. It’s the same thing we see in the graphite market. As steel manufacturing increases, it draws down on the graphite supply —because that’s a component of steelmaking—which also drives the prices up. In addition to that, you have this perfect storm where you also have battery companies coming in and buying up graphite. So, I think that at one point you're going to see a crossover in that market.


The reason why we picked up Vines Lake is because it has the best of both worlds. We previously worked on Vines Lake and worked on the side adjacent to the Table Mountain gold mine. We know there are gold and silver prospects in that particular area, and that it is one of the least explored properties in the entire region. We further know that there's been 2 million ounces of alluvial gold extracted from that particular area, including a 73-ounce nugget that was found just down from our property. So, we know that this area contains high-grade gold. In fact, the veins that are on the Table Mountain mine are 18 grams per tonne and 23 grams per tonne, but they're small and not disseminated. We feel that we have the disseminated zinc and gold area under our claims.

EQ: Can you talk about your strategic approach to La Loutre and Vines Lake, including the team and personnel as well as how you allocate resources to each project?



Gill: We are looking for specific people with highly relevant experience that qualify as experts in the area of our properties. For La Loutre, we look for geological veterans that are experts in the Quebec region. What we're interested in is to hire those people when the projects really need the work. We don’t have full-time staff in Quebec all the time, but we do have partnerships and ongoing relationships. So, when we need those people, we schedule them in and do the exploration. This way, it’s not an ongoing cost to the bottom line. So, we try to run very lean and not have a lot of overhead in the company.

Vines Lake operates the same way. The same goes for any project. When we have a project ready to go up there, we will send our exploration team to the property with hired people to work on it. This is the best strategy for running a really tight balance sheet, so we’re not spending a lot of money on overhead or more office space or other things that are not essential to the operations of the company. That’s how we work. We want to be able to put as much as we can into the field where we feel there is going to be value developed, and that’s why we've been able to operate two or three different projects on an ongoing basis where many companies cannot.

EQ: Looking at Lomiko Technologies, can you talk about how your partnership with MegaHertz to develop the Spider Charger came about?

Gill: It’s actually pretty interesting. I sometimes get into conversations with people in technology, and I like to ask them questions about what they do and which markets they see as opportunities. That’s how we started investing in Graphene 3D Labs in the beginning. The genesis came from speaking with people that create small patches of graphene to sell online and asking, “What if you put them into a 3D printer?” That concept led to the launch of Graphene 3D Labs raising millions of dollars and it operating as a revenue-generating company today.

The same thing happened with MegaHertz. I saw them present on a product called the power converter. We had conversations about what they could do with this device that they created called the MCube, which they said could power a number of devices including the Spider Charger. However, they said it was a project that they simply weren’t able to finance. I thought it would be a useful device because it allows you to plug in multiple devices and still have a faceplate of a normal outlet plug so you can still plug in your lamp or what we call “IoT dummy devices”, which don’t communicate at all. It would also be able to have connectivity on the USB, which is an excellent situation. That’s actually how the partnership was born, through talking about one project and contemplating the “next billion-dollar investment” product.

EQ: For those interested and already following Lomiko, could you lay out some milestones to expect over the coming six to 12 months?

Gill: Absolutely. Number one, we want to move forward on all the different projects. So, look for us to make the requisite payment and go from 40% to 80% ownership on La Loutre. That’s definitely something we want to achieve. Look for us to start signing deals for the distribution of the Spider Charger. Also look for us to see more development with Graphene 3D. With this, we’re focused more on the distribution and the sales side compared to what we've been doing in the past, which was just creating patents and products. We've got to turn the corner into a commercially viable business model, so that we're making money as opposed to just spending money on development. That’s the exciting part right now and over the course of the next year at Lomiko.

EQ: Lastly, regarding the company's unique position, as a resource play and as a technology play, can you describe the grand vision of Lomiko and how these two segments of the company come together?

Gill: The ultimate goal is leaning towards vertical integration. We want to create opportunities in which we have a knowledge of where the minerals are extracted, and also an eye on where the minerals are going to be used in the end product. So, we want to be able to cover that entire value chain of the product. Once we're able to do that, we can see where the best returns on investment are at any given time. That understanding will allow us to recognize business shifts, as it’s inevitable that there will be pressures on the supply chain from the mineral side or chip side or on the inventory side, because products are flying off the shelf.

The bottom line is that if you create that value, you want to be able to capture it. That’s what we plan to do.


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